Trend Relative decline of the EU economy and a widening productivity gap with the United States

Summary

Despite its size, the EU's weight in the world economy has been shrinking over the long run even as its membership expanded. The EU and the United States were of similar size when the Union was formally launched in 1993, but the gap widened from the late 1990s, narrowed briefly in the mid-to-late 2000s and has been widening again since the 2010s. Over the same period China grew from about 3 percent of world output into a rival of the EU in size. The report traces the divergence with the United States mainly to slower productivity growth, which it identifies as the main constraint on the EU's long-run growth capacity. Weaker capital accumulation, lagging ICT and digital services, and a fragmented single market and financial system that makes it hard for innovative firms to scale are cited as the causes.