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US President Joe Biden subsidizes his economy. In Europe, on the other hand, the economy is in a crab state.
For many, 2023 will feel like a recession, IMF chief Kristalina Georgieva predicted last October, and she was right. The whole world is affected, but especially Europe.
Over the past decade, the EU has fallen further behind the US economically, technologically and militarily.
There, the economic engine is actually going backwards. And the loss of importance of the old world continues, according to a current analysis by the renowned think tank European Council on Foreign Relations: “In the last ten years, the EU has fallen further behind the USA economically, technologically and militarily.”
A look at the overall economy shows that the gap between the US and Europe is widening. The near future does not promise any improvement either: the most important indicators for the euro zone point to a deterioration in the economy. Industry is increasingly losing interest in investing, and high energy costs and persistent inflation are putting Europe at a blatant competitive disadvantage compared to China and the USA.
Europe is aging
In addition: Europe is getting older and an old society inevitably loses productivity. For the economist Daniel Kaufmann from the University of Neuchâtel, this is crucial: “On the one hand, more people in a country mean more consumption. On the other hand, there are also more people on the labor market. That’s why you observe that an economy with a lot of immigration and high population growth also grows faster.”
This applies in particular to the US economy. you grow. While the governments in the euro zone mess around with economic policy, US President Joe Biden is making a big splash. He is working at a horrendous pace to restructure the local economy, it is supposed to become greener. A rain of money is expected to fall on companies investing in semiconductors and green technologies in the USA. In addition, there are tax breaks for practically all sectors.
Internationally an unfair competitive advantage
Economist Kaufmann speaks of massive state intervention in the private sector. One might almost think that Europe was surprised by the determination of the Americans. «Until now, such subsidies were viewed critically in a relatively liberal world trade system. The domestic economy is then supported with subsidies that represent an unfair competitive advantage on the international stage. That was taboo. Biden broke it.”
The economic development in the EU and in Germany is one of the most important indicators of whether the Swiss economy is doing well or not.
According to Kaufmann, Switzerland’s most important trade relations are in the euro zone: “Economic development in the EU and in Germany is one of the most important indicators of how the Swiss economy is doing. Of course, you can partially compensate for this with exports to the USA. But Germany has an important role for Switzerland and that’s why you can never fully compensate if the economic development in Germany is bad. » These are not good prospects for the Swiss economy.
It remains to be seen whether the Atlantic will catch up with Biden’s Green New Deal. Because government interventions in the billions come at a price: the USA is indebted and the country will have to reduce this debt at some point. Economically, this should be possible, as economist Kaufmann says. But: «It is a political problem. Republicans disagreed with raising the debt ceiling. This has led to political unrest, which in turn has led to economic unrest.”