Financial Times: Why there is large gap between the US and European economies?

According to a report in the Financial Times, there are deep-rooted problems in Europe’s economy that make it lag behind the pace of rapid growth in the United States.

The report suggests that more European companies are harnessing AI may help address these problems.

The use of modern technology remains limited in Europe, according to Isabel Schnabel, an executive at the European Central Bank.

It says the Eurozone has lost about 20% of its productivity compared to the United States since the mid-nineties, due to the continent’s failure to exploit digital technologies such as cloud computing, software and applications.

European companies are very small and restricted by regulations, preventing them from taking full advantage of the new technology.

Companies with more than 250 employees account for about 60% of private sector jobs in the United States, while in the European Union this percentage drops to between 12 and 37%.

If Europe’s major economies had outpaced US growth between 1997 and 2022, GDP per capita would have been on average about $13,000 higher.

Europe’s poor economic performance is worrying policymakers, especially after the growth gap between Europe and the United States worsened after multiple shocks from the coronavirus pandemic and the conflict in Ukraine.

The US GDP has turned out to be more resilient to these shocks, prompting many European companies to move their activities there with Europe’s high energy costs and attractive US subsidies for green energy and clean-tech projects.