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Europe Underperforms
Daily Policy Digest

International Issues / Economic Freedom & Growth

Friday, September 20, 2002
While the U.S. economy was shrinking for three straight quarters in 2001, the economies of the 12 nations of the European Union slowed -- but never followed the U.S. into outright recession.

The contrast prompted some Europeans to proclaim the vindication of Europe's "third way" -- its blend of capitalism and socialism.

But that was premature. The latest figures indicate that EU nations lag the U.S. by almost every economic measure.

  • Over the last decade, annual EU economic growth averaged around 2.5 percent -- almost 1 percent less than U.S. growth.
  • Were that trend to continue, it would take Europe 29 years to double its gross domestic product -- whereas it would take the U.S. only 21 years.
  • That means the U.S. economy in 2030 would be $25.5 trillion versus $15.4 trillion for the EU -- a $10 trillion gap.
  • That $10 trillion is the size of the U.S. economy today.
Analysts point to a laundry list of things Europe could do to improve its performance: deregulate, cut taxes, knock down trade barriers and slash bureaucracy. Absent such reforms, Europe is condemned to play catch-up -- even as it falls further behind.

Source: Editorial, "Europe's Laggards," Investor's Business Daily, September 17, 2002.

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