In September 2024 Mario Draghi, the former president of the European Central Bank (ECB) presented a report on Europe to Ursula von der Leyen, head of the European Commission:
The Future of European Competitiveness – A Competitiveness Strategy for Europe.
On 26 July 2012, then ECB President Mario Draghi gave the so-called “whatever it takes” speech, which now is widely considered as the turnaround point in the European sovereign debt crisis.
Shortly after, the European Central Bank (ECB) announced the details of its outright monetary transactions programme (OMT) tool.
Draghi said in a speech to the European Parliament last September "Of all the major economies, Europe is the most exposed to these shifts. We are the most open: our trade-to-GDP ratio exceeds 50%, compared with 37% in China and 27% in the United States.
We are the most dependent: we rely on a handful of suppliers for critical raw materials and import over 80% of our digital technology. We have the highest energy prices: EU companies face electricity prices that are 2-3 times higher than those in the United States and China."
German Finance Minister Christian Lindner (L) and Vice-Chancellor Robert Habeck
The Draghi report splits the German government and receives pushback from the Netherlands. Mario Draghi’s call for the EU to issue joint debt to finance key investments has deepened the divide in Germany’s coalition government and received strong criticism from the Netherlands.
In November Linder was fired from the government.
7 ways the US is beating Europe
Christine Lagarde, president of the ECB: Journalist: "But we have been talking about this project for the past 15 years. And when Mario Draghi’s report was published, Germany immediately opposed common borrowing. Is Europe really capable of reacting?
"We have been talking about a capital markets union since the time of Jean-Claude Juncker (President of the European Commission from 2014 to 2019), and little progress has been made. The Letta and Draghi reports are a wake-up call for Europeans, a warning. The assessment is severe but fair and provides specific recommendations.
It suggests that all Europeans should gear up and be ready to give up a bit of sovereignty to ‘combine the best,’ to paraphrase what Paul Valéry once said. But what gives me hope is the engagement of all European institutions in the capital markets union. The ECB’s Governing Council is firmly engaged as well. We must use this momentum."
Journalist: "In 2020, the plan for a collective European loan of €750 billion was a major step forward. Four years later, less than half of the loan has been allocated. Should we see this as another example of European slowness?"
The Dutch Ministry of Migration has announced that border controls will be introduced along land borders with other EU Schengen area countries and on certain flights within the Schengen zone starting December 9.
These six-month border controls are part of a broader immigration policy shift proposed by the right-wing coalition led by Geert Wilders’ Freedom Party (PVV), known for its anti-immigration stance.
The rich countries' immigration boom has created housing crises.
'The GDP gap between Europe and the United States is now 80%'
"As after every crisis, Europe has been stalling since Covid-19, observes" Arnaud Leparmentier, Le Monde's correspondent said from in New York.
General government gross debt per cent of GDP
Germany at 62.7% is in a position to boost its economy.
In Germany, the federal government and the 16 states are obliged to balance their books and are practically prohibited from taking out extra loans.
No other G7 country has such strict limits on new borrowing.
The rules are enshrined in the Basic Law, i.e. the German constitution, and apply — with minor differences — both at the federal level and in the 16 states (known as Länder).
The ifo Institute said in October: "In October German Banks More Reluctant to Lend It is becoming more difficult for companies in Germany to obtain new loans. In September, 29.2% of companies in ongoing credit negotiations reported restraint on the part of banks. In June, that figure was only 21.3%. “Banks are gradually increasing interest rates on loans and are more reluctant to grant them,” says Klaus Wohlrabe, Head of Surveys at ifo."
Article 109 of the Basic Law, paragraph 3, states: "The budgets of the Federation and the Länder shall, in principle, be balanced without revenue from credits." This means the state may only spend as much money as it takes in, primarily from taxes and levies.
This requirement is known colloquially as the "debt brake."
"The debt brake became legally binding for the federal government in 2016 and the states in 2020. However, in 2014, the then Federal Finance Minister Wolfgang Schäuble (CDU) was already able to present a balanced budget for the first time in 45 years. The term "black zero" was coined to mark Schäuble's achievement and became a political slogan, because expenditure and income balanced each other out.
However, the debt brake is not absolute, at least not for the federal government. While an outright ban on debt applies to the federal states, the federal government is permitted net borrowing amounting to a maximum of 0.35% of economic output.
An example: Germany's gross domestic product amounted to around €3.88 trillion ($4.25 trillion) in 2022, meaning the federal government would have been allowed to take on around €13 billion in additional debt."
Gross Domestic Product per capita in 2023, by member state from Statista(in thousands of euros)
US versus Europe
Patrick Artus is currently an economic advisor at Natixis. At the same time, he is Professor of Economics at the Paris School of Economics (PSE).
Between 2010 and 2023, the cumulative growth rate of GDP reached 34% in the United States, compared with just 21% in the European Union and 18% in the eurozone. This measure of GDP in volume does not depend on changes in exchange rates.
Currently, the euro (€) is the official currency of 20 out of 27 EU member countries which together constitute the Eurozone, officially called the euro area.
60 years of United Kingdom, Germany, France, Italy, and Spain
The Research Department at the Federal Reserve Bank of St. Louis (FRED) has said that "perennially, the five largest economies in Europe have been the United Kingdom, Germany, France, Italy, and Spain
"The order in which we mention them has significance: This is how they rank when we look at them in terms of real GDP per capita, as in the FRED graph above."
FRED is Federal Reserve Economic Data: Notice that the ranking has not changed in over 60 years, except for the most minor and temporary deviations.
This period covers major economic events: the integration of these economies into the Economic Union, oil price shocks, the opening of Eastern Europe, and more recently a financial crisis, Brexit, Covid-19, and a war in Ukraine.
This ranking differs from the ranking of these economies by their total real GDP, as in the FRED graph below.
First, Germany has a population significantly larger than the others, noting here that Germany encompasses East and West Germany before reunification in 1990 for these statistics.
Second, the largest European economies have followed quite different demographic trajectories, leading to significant implications for the size of their economies:
Notice how the UK was initially first and temporarily dropped to fourth, while Italy was second before suffering a significant slowdown that has brought it down to fourth.
