A recent policy brief from ECIPE investigates why the European Union's productivity growth has consistently lagged behind the United States. The authors argue that this gap, evident since the 1990s and widening despite some bright spots in Eastern Europe, stems from structural deficiencies in the EU economy. Key factors identified include lower EU investment in R&D and intangible capital, slower business dynamism, and less attraction of foreign direct investment compared to the US. To reverse this trend, the brief recommends that European policymakers should prioritize increasing R&D spending, investing in digital infrastructure and intangible assets, revitalizing the single market, and fostering a more competitive business environment. Ultimately, the analysis aims to pinpoint areas for improvement to help the EU achieve stronger productivity and economic growth.

#MEGA - Make Europe Great Again

The European Commission's "EU Competitiveness Compass" outlines a strategy to revitalize Europe's economic standing by addressing innovation gaps, promoting a joint path for decarbonization and competitiveness, and reducing strategic dependencies. This communication identifies longstanding structural weaknesses hindering the EU's growth, particularly in productivity and technological advancement compared to global competitors. To counter this, the Compass proposes a new competitiveness model centered on innovation-led productivity, supported by actions across three key pillars and horizontal enablers. These include fostering a thriving innovation ecosystem, ensuring a competitiveness-friendly green transition, and enhancing economic security through diversified partnerships and reduced reliance on vulnerable supply chains. Ultimately, the document serves as a strategic guide for the EU to regain its economic dynamism, safeguard its social model, and assert its global influence in a challenging geopolitical landscape.

#MEGA - Make Europe Great Again

This IMF working paper investigates the causes behind Europe's lagging productivity growth compared to the United States. Through firm-level analysis, the authors identify performance gaps in both leading and young, high-growth European companies. The paper highlights smaller market sizes and limited access to equity financing as key obstacles for larger firms, while skill shortages and insufficient venture capital hinder the development of startups. Ultimately, the study suggests that deeper market integration and national reforms aimed at resource reallocation and human capital enhancement could revitalize Europe's productivity.