Can the European economy overcome that of the US?

A few weeks ago, the recent Nobel Prize, Daron Acemoglu raised in the Financial Times a future dystopian of USA associated with the presidency of Trump. In the article, the author hypothetically claimed that the European economy will exceed in size to the American towards 2030.

We can all surprise such a statement. We have been reading (and writing) for years about the decline of Europe and on the great strategic advantages developed by the US in recent decades, above all, linked to productivity and innovation. Now, in the past weeks, historical events are taking place, in the light of which, we believe that it is relevant to ask ourselves the question that opens this article: even without being the base scenario, under what hypothesis could Europe’s GDP overcome that of the US?

Let’s start with simple numbers. He American GDP It is from some 28 billion dollars Corrientes, while the euro area He ascends to some 16, that of the European Union (which includes seven non -members of the euro zone), to 19,6. If we add 3.4 billion from the United Kingdom, 0.9 from Switzerland, 0.5 of Norway, and 0.3 of other smaller European countries, not EU members or former members of the USSR, we obtain a total of 24.7 billion, a significantly lower figure than that of the US.

What could change in the future? To answer this question, it will be necessary to analyze economic growth of both economic blocks and also try to glimpse the future of the euro dollar exchange rate, since it affects a lot when calculating the production of an economy in dollars.

If we analyze real growth, the US have clearly overcome Europe in the past. Until very recently, the country grew at an annualized rate close to the 3%, In front of 1% European. However, its growth has been favored by two short -term factors (apart from more structural ones). On the one hand, American consumers promoted it by reducing its savings rate to levels close to 3.6%, against historical average of 6%. On the other, the growth was also favored by the tax deficit from the US, which approached the 6%at risk of reaching 8% if Trump wants to impose.

In recent dates, the relatively bizarre Trump tariff ads have made a dent in consumer’s confidence, which has proceeded to reduce its consumption, increasing its savings rate and braking growth. The US economy could grow this year slightly above 1,5%, That if you can avoid a technical recession. In addition, if at any time the market restricts financing, the huge US fiscal deficits, added to its bulky public debt, would force the country to increase income or reduce expenses, which would further stop GDP. On the other hand, factors such as the expulsion of immigrants (which contribute to GDP) at the rate of half a million per year, the drastic reduction of new migratory flows, taxes in the form of tariffs and the growing doubts about the institutional quality and the empire of the law in the US can further reduce future growth.

In Europaconsumers currently save much more than the historical average. For example, in the euro zone the savings rate is 15% in front of one Historical medium of 12%. As consumer confidence recovers, the reasonable thing is that this rate is reduced, which will accelerate economic growth. And if in the US the fiscal situation points to future risks, in Europe we can expect otherwise: the recent historical stimuli approved by Germany and the EU in infrastructure and defense involve a volume three times higher than the funds executed during the Covid crisis. These factors could lead to the European economy to grow above 1.5% from 2026. In other words: in a year we could find an unusual event, and that Europe could grow more than the US, especially if the reforms proposed by the Draghi report are partially adopted.

The least expected growth in the US and the largest in Europe has translated into a recent depreciation of the dollar against the euro and the pound, something that could be intensified in the future. Depreciation could also be produced by other ways, such as the increase in reserves in euros by central banks to reduce dollars dependence, given the current geopolitical situation, or the search for gold as a refuge value to the detriment of the dollar. If we observe exercises that compute fundamental values ​​of the currency through the estimation of the exchange rate that would cause US and German goods and services to cost a similar amount (adjusted purchase power), the calculations of the FMI and of World Bank They place this level in 1,37compared to the current type of 1.09.

Well, if the factors reviewed lead to the US growing in 2025 slightly more than Europe both in terms of real growth and inflation, and assuming (a) the inflation of both blocks converge since 2026; (b) Europe grows between 2026 and 2030 half point than the US in real terms for the arguments used above; and (c) the dollar is depreciated annually 2.5% to levels of 1.25 in 2030, then, for that year, the US GDP would amount to 35.8, compared to 35.9 in Europe. If the US inflation in that period was higher than the European possibly translates into more bulky dollar depreciations.

To follow the bizarre, the touchstone: Invite Canada to join the European Union to face the expansionist tendencies of the southern neighbor. That would add others 2.1 billion dollars, Advaring the overtaking to 2028, something that surely would be very funny in the White House.

Octavio Paz He wrote: “What unites Europe is a passivity to destiny. Old world nations have consecrated their immense energies to create a prosperity without greatness and to cultivate a hedonism without passion and without risks. Hence the fascination of their crowds for pacifism.”

The massive rearme that is coming, the fate of Europe … and to recover at least the aspiration to the economic throne.