The eurozone suffers from multiple structural limitations, in particular a lack of raw material resources, low levels of education and skills, and insufficient investment in new technologies and research and development (R&D).

The lack of raw material resources translates into a large trade deficit in energy – 2.2 points of gross domestic product (GDP) by the end of 2023 – and in minerals and metals – around 0.2 points of GDP – and, consequently, a competitiveness problem. Energy prices in Europe (around €30 per megawatt-hour) are almost four times higher than in the US, prompting companies to relocate to countries where commodities are plentiful and energy cheaper, such as the US.

The second structural limitation is the poor performance of the education and vocational training system. The latest survey by the OECD's Programme for International Student Assessment (PISA, 2022) shows a wide gap in overall scores (math, reading, science) between Japan (533 points), South Korea (523) and even the UK (494) and the eurozone (481). The same applies to scores on the Programme for International Assessment of Adult Competencies (PIAAC) survey.

When comparing OECD countries, high PISA and PIAAC scores are associated with high employment rates and rapid productivity gains. The employment rate is lower in the eurozone (67.2%) than in Japan (79%), Sweden (78%) and the UK (76%), and productivity gains are lower there (+ 5% from 2010 to 2023) than, for example, in the US (+ 20% from 2010 to 2023).

Negative correlation

The eurozone's third structural limitation is weak investment in new technologies and R&D spending. In 2022, the level of investment in new technologies was 3.7% of GDP in the US versus 2.7% in the eurozone, while R&D spending was 3.5% in the US and 2.3% in the eurozone. These two discrepancies between the US and the eurozone explain at least 0.5 points of the productivity gains gap between the former and the latter, and the very low increase in manufacturing productivity in the eurozone (9% in 20 years, between 2002 and 2023, versus 71.6% in the US).

We could add demographics to the list: The working-age population (aged 15 to 64) will grow by 0.15% per year in the US between 2024 and 2030, while it will shrink by 0.62% per year in the eurozone. However, there is a negative correlation between changes in the average age of the working-age population and productivity gains: The aging of the working-age population, with the decline in the number of new entrants to the labor market, also contributes to the decline in productivity gains.

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