Euro-luck: Every year, around 300 billion euros of European savings go to finance the American economy

12:30 22.04.2024 •

Huge hole in European finances…

European Union leaders debated a new “European Competitiveness Deal” aimed at helping the 27-nation bloc close the economic production gap with Chinese and American rivals amid fears the region’s industries will otherwise be left behind for good.

China, the U.S. and the European Union are the three largest economies in the world, but the EU’s share has diminished over the past 30 years. Europe is now feeling pressure amid U.S. and Chinese efforts to support investment in domestic production through subsidies and tax breaks, particularly in renewable energy and green technology.

Before the summit in Brussels, the former president of the European Central Bank, Mario Draghi, said the EU did not pay enough attention to “external competitiveness as a serious policy question” and insisted Europe’s biggest economic rivals “are no longer playing by the rules.”

Leaders heard a proposal for an EU-wide effort to subsidize industrial companies in response to the Biden administration’s support for investment in environmentally friendly technology through the Inflation Reduction Act, and to China’s subsidies for electric cars and solar panels.

The proposals, contained in a report from former Italian Prime Minister Enrico Letta, are in response to widespread concern that U.S. subsidies, which favor domestic production in the U.S., are drawing investment from Europe and threatening the loss of industrial jobs on the continent.

“Competitiveness means prosperity for our citizens,” Letta said. “We’re in danger of falling out of touch. There is no time to waste. The gap between the European Union and the U.S. in terms of economic performances is becoming bigger and bigger.”

According to his report, gross domestic product per capita in the U.S. increased by almost 60% from 1993 to 2022, while in Europe the increase was less than 30%.

“Today we invest less in digital and advanced technologies than the U.S. and China, including for defense, and we only have four global European tech players among the top 50 worldwide,” he said. “We are lacking a strategy for how to shield our traditional industries from an unlevel global playing field caused by asymmetries in regulations, subsidies and trade policies.”

“There is a need for more investment,” said European Council President Charles Michel, who chairs EU summits. “What is fundamental is to act in order to put in place the capital markets union. And also to increase the capacities of the European Investment Bank to invest in strategic sectors.”

French President Emmanuel Macron backed Michel’s statement and rued the fact that those savings end up in the U.S. rather than boosting the bloc.

“Europe has more savings than the United States of America,” Macron said. “And every year, around 300 billion euros of these savings go to finance the American economy.”

The EU has a population of 450 million and is home to some of the world's biggest economies including Germany and France.

But while less than 15 percent of personal savings remain in US bank accounts, nearly a third of the 35 trillion euros of European savings are untouched.

German Chancellor Olaf Scholz echoed Macron on the need for progress.

"European companies must be able to benefit from the economies of scale offered by such a large European internal market if we want to progress in terms of growth, competitiveness and successfully complete... the green and digital transition," Scholz said.

But from artificial intelligence to solar panels, from computer chips to batteries, the EU is fast losing ground on innovation to other global powers.

Official EU data shows the bloc's economic stagnation has lasted more than 18 months. While the United States grew by 2.5 percent and China by 5.2 percent in 2023, Eurostat data last month showed the EU economy grew by only 0.4 percent.


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