Mario Draghi, the former Jerome Powell of the European Union, was tasked with writing a detailed report on the economic competitiveness (or lack thereof) in Europe.
His findings are striking.
Here are some facts and figures that stood out:
Across different metrics, a wide gap in GDP has opened up between the EU and the US, driven mainly by a more pronounced slowdown in productivity growth in Europe. Europe’s households have paid the price in foregone living standards. On a per capita basis, real disposable income has grown almost twice as much in the US as in the EU since 2000.
Europe is stuck in a static industrial structure with few new companies rising up to disrupt existing industries or develop new growth engines. In fact, there is no EU company with a market capitalisation over EUR 100 billion that has been set up from scratch in the last fifty years, while all six US companies with a valuation above EUR 1 trillion have been created in this period.
The EU is entering the first period in its recent history in which growth will not be supported by rising populations. By 2040, the workforce is projected to shrink by close to 2 million workers each year.
EU companies still face electricity prices that are 2-3 times those in the US. Natural gas prices paid are 4-5 times higher.
Draghi offers some solutions for closing the competitiveness gap by reducing barriers to innovation, increasing investment in certain areas and establishing an education curriculum that facilitates technological breakthroughs.
Here’s one solution Draghi didn’t offer — more air conditioning.
The world is getting hotter.
Europe is the fastest-warming continent, with average temperatures rising at double the global average.
Look at this chart from Torsten Slok:
I knew AC wasn’t a big deal