EU Criticism & US Views: What Trump Misses

Greece, Spain and Portugal. These three countries have won the title of “Economy of the Year” awarded by the weekly “The Economist” for four years. It is easy to notice that they also have in common their location in southern Europe and their membership in the euro zone.

The British weekly selects the best economy of the year from among nearly 40 countries belonging to the Organization for Economic Co-operation and Development (OECD), which are relatively highly developed. Five criteria are taken into account:

• change in real GDP,
• two price stability indicators,
• change in employment level
• and the economic situation on the national stock exchange.

This year, Portugal was the best performer, but Spain, which won in 2024, remained in fourth place. Greece, which won the title of “Economy of the Year” in 2022 and 2023, placed sixth, ex aequo with the Czech Republic. Poland rounds out the top ten, ahead of France.

For comparison, the USA took only 17th place in The Economist’s ranking, just behind Italy – a country that has been a European laggard for years – and just ahead of Germany. A year earlier, the USA was three points lower. Great Britain, for which Brexit was supposed to be an impulse for development, found itself again at the end of the third ten.

The British weekly’s summary is more of a fun, original way to sum up the past year than a reliable analysis of the condition of OECD economies. Nevertheless, it casts doubt on the narrative – popular thanks to Donald Trump – about the superiority of the American development model over the European one.

The US president’s diagnosis that Europe is doomed to “civilizational decline” due to mismanagement was picked up by Eurosceptic politicians throughout the EU, including in Poland.

“Norway, Iceland, Switzerland, Liechtenstein do not belong to the EU. These countries are doing very well outside the collapsing EU. Great Britain is also doing better. It is worth fighting hard for Polish interests and defending sovereignty in the EU. And betting on an alliance with the US. There is always an alternative,” wrote Janusz Kowalski, a PiS MP, who has been arguing for years that Poland is losing out on EU membership.

We recently wrote at money.pl that Britain has not regained its vigor after leaving the EU, but has sunk into stagnation. Former Brexit advocates increasingly admit this.

“I was part of a small group of Economists for Brexit. We argued, in good faith, that disentangling ourselves from the EU – through greater freedom to shape economic policy – would unlock the long-term potential of our economy. Nine years later, we can’t pretend that things have turned out the way we wanted” – Ryan Bourne, an economist from the libertarian Cato Institute, said in The Times at the end of October. He rejected the thesis popular among Brexit supporters that it is still too early to draw clear conclusions about the effects of this decision.

But what about the EU itself? Is it really “collapsing” as a result of its “anti-development model”, as geopolitician Krzysztof Wojczal recently wrote on X? Although the European Union as a whole has not shortened the development gap with the US for several years, it has not significantly increased it either.

It is not EU membership that is holding European countries back. The belief of some Europeans that this is not the case comes partly from the problems of the largest EU economies, which are not related to EU policy, and partly from a superficial interpretation of the data.

For example, According to the International Monetary Fund, last year the gross domestic product of the entire European Union was 34 percent higher. lower than in the United States, while a decade earlier it was only 10%. lower. In the 1990s, the countries that make up the EU today had a combined GDP greater than the US. Per capita income in the EU was almost half of that across the Atlantic last year, while a decade ago it was 35%.

However, this data paints a false picture. Comparing the GDP of countries using different currencies requires converting them into a common unit, usually – as in the example above – the dollar. Meanwhile, the exchange rate of the American currency against the euro has been in an upward trend for most of the past two decades, which only to some extent reflected the better economic situation in the USA. This only changed at the beginning of 2025.

Therefore, as the IMF forecasts, at the end of this year, the European Union’s GDP will be, when converted into dollars, 31%. smaller than the GDP of the United States, and by the end of 2026 by 29%. smaller. Exchange rate fluctuations also explain why in the past the EU had a higher GDP than the US.

To eliminate the impact of exchange rate fluctuations, the GDP growth paths of individual countries can be compared in national currencies. And yes, Taking into account the IMF’s forecasts for 2025, the US gross domestic product will increase in real terms (at constant prices) by almost 27% over a decade. The European Union’s GDP will increase by just over 18 percent, but that of Germany and France will increase only by 7.6 and 12.1 percent, respectively.

These differences cannot be explained by different demographic trends. In the years 2015-2025, the USA will see GDP growth by 19% per capita, while France will grow by 8.5% and Germany by 4.6%. So the difference is equally big.

However, there are also countries in the European Union that are developing significantly faster than France and Germany. And it’s not just about Ireland, whose national accounts are inflated by the profits of international companies registered there, or about Poland, which is at a lower level of development.

The real GDP of Denmark and Portugal at the end of this year will be almost 23%. bigger than a decade ago, Spain by almost 22%, and the Netherlands by over 20%. Calculated per capita, this will mean an increase in real income in the range of 13%. (Netherlands) up to 19 percent (Portugal). These results are slightly worse than in the USA. At the same time, there are many countries outside the EU that are at a similar level of development, but are doing much worse. In addition to the already mentioned Great Britain, there are also Australia, Japan and Canada.

The very fact that the development trajectories of EU economies can be so divergent suggests that it is not EU membership and the alleged excess of regulations that comes with it that is a development barrier for some of them. In recent years, what differentiated the economic situation in Europe was, among others, the degree of dependence of countries on supplies of energy raw materials from Russia and the role that exports played in their economies.

However, it is difficult to dispute the fact that the EU as a whole – mainly due to the largest economies – has been developing slower than the USA in recent years. How did this affect the size of the so-called transatlantic gap, i.e. the difference in the level of development between European countries and the USA?

As we mentioned, converting GDP per capita into one of the existing currencies obscures the picture rather than clarifying it. We must also take into account the fact that due to exchange rate fluctuations, the purchasing power of this single currency varies significantly in individual countries. Comparisons free from these shortcomings are achieved by converting GDP into one currency, but not at the market rate, but at a synthetic rate.compliant with the purchasing power parity (PPS) standard.

The GDP per capita in the European Union in 2024 calculated in this way was approximately 27.5%. lower than in the USA (this can be understood as meaning that the average income of an EU resident allowed him to buy 27.5% fewer goods and services last year than the average income of a US resident). In 2019, just before the COVID-19 pandemic, this difference was 25.5%. Previously – for example in 2014 – GDP per capita in the EU was 32 percent higher. lower than in the USA, and at the turn of the century by almost 40%. lower.

The transatlantic gap was shrinking, among others. due to the rapid growth of the least developed EU countries, such as Poland. But some of the “old EU” countries also developed faster than the US or at least kept pace with them. For example, GDP per capita in the Netherlands in 2024 was – taking into account purchasing power parity – only 3%. smaller than across the Atlantic. At the turn of the century, the difference exceeded 10%.

Denmark was also shortening the distance from the USA. The per capita income of Germany and France in 2019 was 8 and 22 percent, respectively. lower than in the USA. Since then, both countries have become relatively impoverished, but only slightly.

But the difference in per capita income, even with purchasing power parity maintained, is also not the best measure of the development gap between EU countries and the US. This is due to different social conditions. Europeans, per capita, produce fewer goods and services because they work less. And this is not a reflection of the high level of unemployment or low level of professional activity, which could indicate weak demand for employees, but a matter of preferences. In some EU countries, for example, part-time work is popular, allowing you to combine private and professional life.

In terms of GDP per hour worked (again maintaining purchasing power parity) – which is a standard measure of labor productivity – the most developed EU countries practically do not lag behind the USA.

For example, in Germany in 2023, the average employee produced goods and services worth just over 3% per hour. lower than the average US worker. In Denmark, GDP per hour worked was even higher than across the Atlantic.

What is most important, however, in the longer term, the USA did not lag behind Europe in terms of productivity. Even Italy, a textbook example of a country that has stagnated in development, has maintained productivity at around 20 percent for two decades. lower than the US.

All this does not mean that concerns about the prospects for the EU economy are unjustified. The awareness that the EU development model has hit a wall is quite common among EU leaders. Suffice it to say that Mario Draghi’s famous report on “the future of Europe’s competitiveness”, published last year, was commissioned by the European Commission.

Draghi, former president of the European Central Bank, argues in the report that in recent years, the transatlantic productivity gap has indeed begun to widen. However, this is almost exclusively a reflection of the fact that the EU has missed the “digital revolution” associated with the spread of the Internet.. Testimony to this state of affairs is the fact that none of today’s leading technology companies was established on the Old Continent.

What’s worse, in Draghi’s opinion, there is a risk that the EU will also miss another technological revolution related to the development of artificial intelligence.

Why does Europe not keep pace with the US in the development of new technologies that have become the driving force of productivity growth? Eurosceptics claim that the culprit is the EU bureaucracy, climate policy and – echoing Trump – the ideological blindness of European leaders, whose decisions are guided by political correctness and not the interests of their countries.

Draghi, like the authors of other similar studies, sees development barriers elsewhere. This includes: underdevelopment of the European capital market and persistent regulatory differences between countries, which limit the potential of the common European market. Another obstacle is insufficient cooperation in such key areas as energy. It is easy to see that removing these barriers requires greater EU integration, not less.

Grzegorz Siemionczyk, chief analyst of money.pl