The eurozone economy contracted in the third quarter. On Tuesday, October 31, Eurostat’s first estimate of gross domestic product (GDP) in the twenty countries of the single currency was -0.1%. This is in stark contrast to the United States, which grew by 1.2% over the same period.

"It’s almost becoming a universal law," François Geerolf, an economist at the Observatoire français des conjonctures économiques (The French Observatory of Economic Conditions), lamented. "With each crisis, the eurozone permanently loses a few points of growth to the United States." For the past fifteen years, Europe has been falling further and further behind, shock after shock: the eurozone crisis, the Covid-19 pandemic, the war in Ukraine... Since 2007, per capita growth on the other side of the Atlantic has been 19.2%, compared with 7.6% in the eurozone. A gap of almost twelve points. Before the pandemic, the gap was already ten points, and it has started to widen again in the last eighteen months.

Over 2023 as a whole, growth in the Eurozone is expected to reach 0.7%, compared with 2.1% in the United States, according to forecasts by the International Monetary Fund (IMF). Germany, in particular, is suffering, with a slight recession expected at -0.5%, while France should grow by 1%.

For Europeans, cities like New York and San Francisco have become extremely expensive, while American visitors to Europe are astonished by the low prices. "The average income of Americans is more than 20% higher than that of people living in the eurozone," pointed out Philippe Crevel, economist at Lorello Ecodata, a consulting firm. "The standard of living of executives 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 USA than in many European countries."

The main explanation for this growth differential can be summed up in two words, according to Geerolf: "Fiscal policy." During the pandemic, the US government supported households in a historic way by issuing multiple stimulus checks. Households were able to put some of this money aside and remain sitting on exceptional savings, which they haven't 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 US budget deficit in 2020 and 2021 was 14% and 11.6% of GDP, double that of the eurozone, at 7.1% and 5.3%, respectively.

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