The eurozone entered economic contraction in the third quarter. On Tuesday, October 31, the evolution of the gross domestic product (GDP) of the twenty countries of the single currency was evaluated as a first estimate at − 0.1% by the statistical institute Eurostat. The contrast with the United States is striking: this country experienced growth of 1.2% over the same period.
“It almost becomes a universal law, laments François Geerolf, economist at the French Observatory of Economic Conditions. With each crisis, the euro zone permanently loses a few growth points compared to the United States. » For fifteen years, the European dropout has grown shock after shock: euro zone crisis, Covid-19 pandemic, war in Ukraine… Since 2007, growth per capita across the Atlantic has been 19.2%, while it reached 7.6% in the euro zone. That’s a gap of almost twelve points. Before the pandemic, the gap already reached ten points, and it has started to widen again over the past eighteen months.
Over the whole of 2023, growth in the euro zone should reach 0.7%, compared to 2.1% in the United States, according to forecasts from the International Monetary Fund (IMF). Germany, in particular, is suffering, with a slight recession expected at −0.5%, while France is expected to grow by 1%.
Now, for a European, cities like New York or San Francisco have become extremely expensive, while American visitors to Europe are surprised at the low prices. “The average income of Americans exceeds that of residents of the Eurozone by more than 20%, underlines in a recent note Philippe Crevel, economist at Lorello Ecodata, a consulting company. The standard of living of executives there is much higher than that of their European counterparts. American tourists are particularly sought after because of their abundant purchasing power. The average retirement, taking into account retirement savings, is much higher in the United States than in many European countries. »
Unbridled American fiscal policy
The main explanation for this growth differential can be summed up in two words, according to Mr. Geerolf: “fiscal policy”. During the pandemic, the US government provided historic support to households by issuing checks. Households were able to set aside part of this money and remain sitting on exceptional savings, which they have not quite finished spending. As a result, more than half of current growth comes from consumption. On the European side, support was also generous during the pandemic, but not at the same level: the American budget deficit in 2020 and 2021 was 14% and 11.6% of GDP, double the euro zone, respectively at 7, 1% and 5.3%.
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