Europe - The Slow Agony

The slow agony is a name for what happens to Europe if it keeps making the choices it has made for the past quarter of a century. A former head of the European Central Bank used the phrase in a 2024 report on European competitiveness. What it describes is a European economy that keeps growing more slowly than the American one, year after year.

In 2008 the European Union’s economy was larger than America’s, at 16.4 trillion dollars against 14.8 trillion. By 2025 the American economy was about 29 trillion dollars and the European economy was 19.5 trillion. The gap of 10 trillion dollars did not exist in 2008, and it now exceeds the economies of Japan, Germany, and the United Kingdom combined. The 2024 report said Europe needs 800 billion euros of new investment every year to stop falling behind. That is roughly double what it cost to rebuild Europe after the Second World War. A year after the report, 11.2% of its recommendations had been carried out.

Core takeaways

• In 2008 the European Union’s economy was larger than America’s. By 2025 it was 10 trillion dollars smaller, and the gap is projected to reach 15 trillion by 2030.
• The euro was built without the three conditions its founding theory required. After the financial system stopped working in 2008, Europe cut spending and raised rates while America spent, and Southern Europe lost a decade and many of its young people.
• Europe closed its reactors, banned drilling, and bought Russian gas. When that gas stopped, European gas prices rose more than 1,000% and the factories that ran on it began to close.
• No European Union company worth more than 100 billion euros has been founded from scratch in 50 years. Venture money, pension rules, and 27 separate legal systems keep pushing founders out.
• America added 53 million people between 2000 and 2025 and took the skilled immigrants. The Union added 22 million, its birth rate fell to 1.34, and its working-age population is projected to fall by 64 million.
• Europeans work fewer hours than Americans and keep their savings in banks rather than in stocks. The 2024 report wrote down what to change, and each change needs 27 governments to agree.

How big the gap is

In 2008 the European Union produced 16.4 trillion dollars of goods and services and the United States produced 14.8 trillion. European leaders spoke openly of the euro replacing the dollar as the reserve currency, and European newspapers wrote of the American model collapsing under its own excess. By 2025 the American economy had reached roughly 29 trillion dollars and the European economy sat at 19.5 trillion. The 10 trillion dollar gap exceeds the economies of Japan, Germany, and the United Kingdom combined. Germany’s output per person is now roughly that of Oklahoma, and France has fallen below Arkansas.

The gap is projected to widen. The International Monetary Fund’s long-term projections of late 2025 put the American economy at roughly 40 trillion dollars in 2030 and the European economy at roughly 25 trillion, so a gap of 10 trillion in 2024 becomes 15 trillion by 2030. The Eastern European countries that joined the Union in 2004 keep converging. The Western and Southern countries that produce most of the bloc’s output keep stagnating. By 2050 China and India together are projected to be larger than the United States, Europe, and Japan combined.

The four choices

Each time a decision came, Europe took leisure over output, precaution over speed, fragmentation over unity, and dependency over independence. America took the opposite each time, by luck and instinct more than by plan. Neither set of choices was wrong in the abstract. The European set stops working when the world changes, and the world changed. Europe was the birthplace of modern industry and modern science, and in less than a generation it was passed by the country that fought a revolution against it.

The euro

In the 1990s a group of European finance ministers merged 11 national currencies into one, the largest bet in European economic history. The franc, the Deutsche mark, the lira, and the peseta were withdrawn. Greece had not met the entry requirements and was waved in 3 years later. The euro was born in 1999. The plan was that a continent-sized currency would make Europe a peer of the United States in finance, end the money lost to exchange, hold inflation down through a central bank in Frankfurt modeled on the German one, and serve as a symbol of unity.

The economist whose paper founded the theory of shared currencies won the Nobel Prize for it. He had warned decades earlier what a shared currency needs. The countries using it must be structurally similar. Workers must be able to move freely between regions. A central authority must be able to move tax revenue from booming regions to struggling ones. The eurozone at launch had almost none of that. German and Greek labor markets had almost nothing in common. A Portuguese welder could not move to Finland, because the welder did not speak Finnish. No European tax authority could take money from Germany and send it to Greece. The warning was that the euro, as designed, would amplify shocks rather than absorb them, and the warning was ignored.

For 10 years the currency seemed to work. Cheap German credit flooded the south. Greek households took mortgages at German rates. In 2006 Spain was starting more houses a year than Germany, France, and Italy combined. Irish banks grew to 10 times the size of the Irish economy.

What each side did after 2008

In September 2008 the global financial system stopped working. The United States responded fast and at scale. Congress passed 475 billion dollars to recapitalize American banks within 3 weeks. The Federal Reserve began buying mortgage bonds in bulk. By early 2009 an 831 billion dollar stimulus was law, and the United States ran a budget deficit equal to 10% of its economy in a single year. Europe did the opposite. Germany, remembering the hyperinflation that destroyed the Weimar Republic, demanded austerity. Its chancellor insisted that European governments cut spending, raise taxes, and shrink deficits during a financial panic. The Federal Reserve bought trillions in bonds. The European Central Bank raised interest rates in 2011, in the middle of a debt crisis.

Greek government debt, understated for years by a series of Greek finance ministers, was revealed to be massive. Borrowing costs for Greece, Spain, Portugal, Ireland, and Italy spiked to levels that made their debts impossible to pay. None of the five could print its own currency. The only option left was internal devaluation: cutting wages, pensions, and public jobs until the domestic economy shrank enough for exports to compete again. Greece took three international bailouts. Between 2010 and 2014 its economy shrank by 26%, the longest peacetime recession of any developed economy on record. Youth unemployment reached 59.5% in Greece and 56.4% in Spain. Educated young Southern Europeans, many of them speaking three languages, left for London, Berlin, Amsterdam, Dubai, Singapore, and Miami. Italy’s economy in 2026 has still not returned to its level before the crisis. Italian real wages are lower than in 1990, and Italy is the only G7 country where workers earn less than their parents did 35 years ago. The American economy finished its recovery by 2012 and then grew faster.

Energy

In the early 2000s, in the shale basins of Pennsylvania, Texas, and North Dakota, small oil and gas companies learned a new method. They pumped water, sand, and chemicals into rock 2 miles underground, which cracked open shale that earlier drillers had written off. A Saudi oil minister said the Americans would never get it out at a profit. By 2015 the Americans had quadrupled natural gas production and tripled oil production. By 2018 the United States was the world’s largest oil producer. By 2023 it was the world’s largest exporter of liquefied natural gas, ahead of Qatar and Australia. American gas production went from 18 trillion cubic feet a year in 2005 to nearly 38 trillion in 2024. In 2024 the benchmark American gas price averaged $2.21 per million BTUs, the lowest in American history adjusted for inflation.

Europe made the opposite choices. In 2011, after the Fukushima accident, Germany’s chancellor announced the phase-out of every German nuclear plant, and Germany banned hydraulic fracturing across most of its territory. A former German chancellor left office in 2005 and joined the board of Russia’s state gas company within weeks. His successor approved the Nord Stream pipeline, a direct underwater gas link from Russia to Germany that bypassed Poland and Eastern Europe. By 2021 Germany depended on Russia for 55% of its gas, 35% of its oil, and 50% of its hard coal. 10 European Union countries depended on Russia for more than half of their imported gas. On 24 February 2022 Russian tanks crossed into Ukraine. 3 days later Germany’s chancellor pledged 100 billion euros to rebuild the German military and committed the country to weaning itself off Russian energy. European gas prices rose more than 1,000% at their peak. Industrial electricity in Germany and France rose to three times American prices. In September 2022 the Nord Stream pipelines were sabotaged by an underwater explosion, and no country has claimed responsibility. In April 2023 Germany’s last three reactors, Isar 2, Neckarwestheim 2, and Emsland, were shut down on the chancellor’s orders.

The higher prices reached the factories next. BASF is the largest chemical company on Earth and runs the largest integrated chemical complex on Earth at Ludwigshafen, with 39,000 employees, and for 70 years its operation turned cheap Russian gas into ammonia and fertilizer. In 2023 it began shutting its plants one by one, closed 11 plants, and announced that its next 10 billion dollar complex would be built in China. Norsk Hydro closed its Slovakian aluminum smelter in September 2022, European aluminum output fell by more than 1 million tons in a year, and the continent lost roughly half its smelting capacity. Yara cut 35% of its European ammonia production, and Europe, which fed the world for centuries, began importing fertilizer. Volkswagen employs 600,000 people worldwide, and in September 2024 it announced the first German plant closures in its 87-year history, with 35,000 German jobs to go by 2030. Bosch cut 22,000 jobs and ThyssenKrupp 11,000. In Sweden, Northvolt had raised 15 billion dollars to be Europe’s answer in batteries, and in November 2024 it filed for bankruptcy protection in a Delaware court, wiping out 700 million dollars of Volkswagen’s money and 900 million of Goldman Sachs’s in one filing.

Technology and the money for new companies

In 2000 Europe had a chance in technology. Nokia made 40% of the world’s mobile phones, supplied a quarter of Finland’s growth between 1998 and 2007, and was worth more than 300 billion dollars. Alcatel, Ericsson, and SAP were European, and SAP was then the third largest software company on Earth. Skype, founded in Estonia and Sweden, was the dominant service for calls over the internet. Two Irish brothers from a village of 600 people were building Stripe. 25 years later Stripe is headquartered in San Francisco. Skype was sold to Microsoft in 2011, and Nokia’s phone division went to Microsoft in 2013 for a fraction of its old worth. Arm, the British chip designer whose designs power 95% of smartphones, trades in New York. The British lab that built the chess computer that beat the human champion was bought by Google in 2014. Spotify and Klarna, both Swedish, list in New York. The 2024 report stated that no European Union company worth more than 100 billion euros has been founded from scratch in the last 50 years. In the same 50 years the United States produced Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla.

Europe’s largest technology company is ASML, the Dutch maker of the lithography machines that print the most advanced chips, worth roughly 566 billion dollars. Nvidia, as of April 2026, is worth 4.5 trillion, which is about eight ASMLs and twice the whole German DAX index. Apple alone is worth more than the whole French CAC 40. The seven largest American technology companies together exceed 18 trillion dollars, and the European Union’s whole economy is 19 trillion. In 2024 American venture capitalists put roughly 250 billion dollars into American startups and European ones put roughly 45 billion into European startups, five to six times less. American pension funds put almost 2% of their assets into venture capital, and European ones put 0.01%.

European technology rules also held back new companies. The 2018 data protection law was written to protect Europeans from corporate data collection. A peer-reviewed study found it cut venture deals led by American investors in Europe by more than 20%, because the giants could afford the compliance costs and the startups could not. The Digital Markets Act followed in 2023 and the Artificial Intelligence Act in 2024. Of the 7 companies designated as digital gatekeepers, 6 are American and 1 is Chinese, and 0 are European. The Union has 27 governments, 24 official languages, and 27 legal systems. An American software company reaches 335 million consumers on day one under one legal framework, and a founder in Austin deals with one legal system. A company founded in Berlin has to cross 27. The International Monetary Fund has calculated that the internal barriers of the single market equal a 45% tariff on goods and a 110% tariff on services. Between 2015 and 2024, 57% of European startup founders who relocated chose the United States.

Universities and who was let in

Harvard’s endowment is 53 billion dollars, Yale’s 41 billion, Stanford’s 37 billion, and Princeton’s 34 billion, and the top 20 American endowments average 18 billion each. Oxford and Cambridge hold roughly 8 billion pounds each. Continental universities are funded by governments with tuition capped by law, and have nothing at that scale. The American National Institutes of Health has a budget of 47 billion dollars a year. The European Research Council, funding research across 27 states, has 2.3 billion euros. 15 of the top 20 universities in the world are American. Continental Europe has 2 in the top 21, and neither Italy nor Spain has one in the top 100. American universities spend roughly 35,000 dollars per student a year and continental ones less than 10,000 euros. In the 2024 visa year 1,177,000 international students studied at American universities and contributed 55 billion dollars. A 2022 study found 55% of American unicorns had at least one immigrant founder. The heads of Nvidia and Microsoft were born abroad.

Europe takes in millions of migrants too, of a different composition. In 2015, at the peak of the Syrian war, more than 1.3 million people applied for asylum in the Union in a year. Germany took roughly 890,000, mostly from Syria, Afghanistan, and Iraq, and its chancellor said “we can do this.” 78% of unemployed immigrants in Germany lacked any vocational qualification, against 38% of unemployed native Germans, and the German apprenticeship system that turns teenagers into electricians and welders is almost closed to anyone without near-native German. Immigrant children underperform on European tests at rates that have not improved in a decade. The politics followed. In 2016 the United Kingdom voted to leave, on migration above all. Alternative for Germany, founded as a fringe anti-euro party in 2013, became the second largest party in the Bundestag in 2025 and won Thuringia outright in September 2024, the first such win since the Second World War. Italy elected its first far-right prime minister since Mussolini. The Sweden Democrats became Sweden’s second largest party. The Freedom Party, founded by a former SS officer, won Austria with almost 29%. The skilled immigrants went to America. Europe took the humanitarian caseload. A hundred thousand Indian engineers on American work visas, each earning 200,000 dollars, built some of the most valuable companies on Earth. Most of the asylum seekers who arrived in Europe after 2015 could not speak a local language or enter the regulated labor market, and most serious peer-reviewed studies find that they have been net fiscal costs.

Births and the size of the workforce

The European Union’s fertility rate fell to 1.34 births per woman in 2024, the lowest ever recorded on the continent. Italy sits at 1.18, Spain at 1.0, Malta at 1.01, and every member state is below the replacement rate of 2.1. Italy is on track to lose 12 million people by 2070. Its median age is 49, and 156,000 Italians left in a single year. Germany’s population grew by 0.1% in 2024, entirely from immigration, because more native Germans died than were born. America’s rate, at roughly 1.68, is higher and also falling, and American immigration keeps growing the country. The United States added roughly 53 million people between 2000 and 2025 and the Union added roughly 22 million.

Eurostat projects the Union’s working-age population, people from 20 to 64, falling from 262 million in 2025 to 198 million by 2100, a loss of 64 million workers. In Italy the retiree-to-worker ratio could reach 90%, which is nine retired Italians for every 10 working ones. Every European welfare state, pension system, and health system was built on a young workforce supporting an old one, and that assumption is ending. American Social Security faces a shortfall within a decade too. America holds 335 million people under one government, one currency, one capital market, one language, one tax system, and one military command.

Hours, pay, housing, and savings

The young are doing worse than their parents did at the same age. A software engineer at Google’s Munich office, working on the same code as a counterpart in Mountain View, earns 40 to 50% less once stock is counted. A young doctor in Paris earns roughly a third of one in Boston. Spanish youth unemployment was still 25.3% in 2024. In France 33% of people aged 60 to 64 work, against 61% in Germany, so the French retire early and keep the young out to make room. A studio in central Paris costs more per square foot than most of Manhattan. Amsterdam, London, Dublin, Munich, and Stockholm are among the most expensive housing markets on Earth against local income. Zoning, land rules, and rent control stopped building while the capitals grew through the 2010s. Barcelona announced a total ban on short-term rental licenses by 2028, because its own citizens could no longer afford the city.

The treatment of business failure differs as well. A bankrupt French entrepreneur takes nine times longer to recover legally than an American one. The American president’s companies filed for bankruptcy protection six times and he was elected twice, and a French entrepreneur with six filings would be barred from running any business. American startups give every engineer stock options, and European ones, legally and culturally, do not, under labor contracts so protective that the employer hesitates to hire. The average American worker logs 1,811 hours a year. The German logs 1,341, about 470 fewer, which is roughly 10 weeks a year, and the French, under the 35-hour week written into law in 2000, log about 1,490. Productivity per hour in Germany and France is often competitive with America. Europeans take the difference as vacation rather than output, and vote to keep it that way.

Since 2000 the S&P 500 has returned roughly 500% with dividends. The Euro Stoxx 50 has returned roughly 0% in price terms over the same 25 years, and the Italian index is still below its 2000 peak. 58% of American households own stocks, through retirement accounts that pour part of every paycheck into equities. In Germany about 20% do, and in Italy the figure is closer to 15. European savings sit in bank deposits and government bonds. Europe’s own fund industry estimates that European households forfeited 1 to 2 trillion euros over 11 years by not investing in equities. American public markets are now about five times the size of European ones, at 65% of global market value against 12%, and Europe runs 27 national exchanges and 35 listing venues with no unified capital market, every attempt since 2015 having failed.

What Europe is doing now

Europe remains one of the wealthiest regions on Earth, with a life expectancy of about 82 years against 79 in the United States. Norway’s sovereign fund reached 2.1 trillion dollars in late 2025, about 340,000 dollars for every Norwegian. Poland is projected to pass Japan in output per person by 2030. Ireland’s tax strategy made Dublin the European base for half of American big tech, and Switzerland remains among the most innovative economies anywhere. After the 2022 invasion Europe began to rearm, faster than at any time since the Cold War. By 2025 all 32 NATO members met the 2% of GDP target agreed in 2014, Poland spent more than 4%, and Germany amended its constitution in March 2025 to lift the debt brake for defense. Rheinmetall’s shares rose 15-fold between February 2022 and late 2025.

The politics are not coordinated. France has had five prime ministers in under two years and its debt was cut to the lowest rating in its history. Germany’s governing coalition collapsed in November 2024. Italy’s prime minister is stable mostly because her opposition is more fractured. Spain’s government depends on separatists whose leaders are in some cases fugitives. The European Parliament’s latest election delivered historic gains to parties that want to dismantle the project. The Commission’s president has proposed a competitiveness compass, a savings and investments union, and a single corporate legal regime for technology companies across all 27 states. Every one of those proposals needs the unanimous agreement of 27 governments.

Artificial intelligence is the next contest, and on the current figures it is already decided. In 2024 American private investment in artificial intelligence was 109 billion dollars and European Union investment was under 10 billion. The American Stargate project, announced in January 2025, committed 500 billion dollars over 4 years, and 400 billion of it was secured by October 2025. France announced 109 billion euros in February 2025. 70% of the world’s foundation models since 2017 were built in the United States, and three American cloud companies control more than 65% of Europe’s cloud market. The AI Act was restrictive enough that by late 2025 the Commission was drafting a digital simplification package to roll parts of it back.

The 2024 report wrote the prescription down: common European borrowing at continental scale, a capital markets union, simpler rules, unified defense procurement, electricity at American prices, selective high-skilled immigration, and an admission that the welfare states were built for a population pyramid that no longer exists. Asked a year later whether the recommendations would be adopted, its author said he was very pessimistic.

What the model bought and what it costs

The European model delivered shorter working weeks, longer holidays, and stronger safety nets, and Europeans voted for it every time. What those comforts cost was slower growth, lower wages, and a smaller share of the economic future. The cost matters now because the conditions those choices assumed have ended. Under those conditions America paid for Europe’s defense, Russia sold cheap gas, China bought the exports, and artificial intelligence was a problem for later. Whether the continent adapts or drifts will be decided in Berlin, Paris, Rome, Warsaw, and Brussels in the next few years. The signs so far are mixed.

How to practice this

1. Check a claim about an economy’s size against its output per person. Germany’s output per person is now roughly that of Oklahoma. Notice whether a large total is hiding a low figure per person.
2. Before joining a shared arrangement, list the conditions it needs to work. The euro needed similar economies, workers who can move, and a shared treasury. Notice which conditions are missing on the day it starts.
3. Count how many separate approvals your plan needs before it can reach anyone. A company founded in Berlin has to cross 27 legal systems. Notice whether the count, rather than the idea, is what slows you down.
4. Check what happens to your work if one supplier stops. Germany took 55% of its gas from Russia, and the supply ended in a single week. Notice which parts of the work stop with it.
5. Compare hours worked against output per hour before judging a gap in results. A German works about 470 fewer hours a year than an American. Notice whether the gap comes from hours rather than from productivity.
6. Check where your savings sit. 58% of American households own stocks, against about 20% of German households. Notice the difference between what a deposit paid and what an index returned.

Related pages

• The Indictment of Europe holds the three charges brought against European history and whether any is true of Europe alone.
• Socialism - The Calculation Problem holds the American version of the same distortions, housing, healthcare, and education bent where government shapes the market.
• Britain - Poorer Than Mississippi holds the same quarter century of choices for one country outside the euro.
• Mass Immigration - Cohesion holds who gets let in and whether they can live under the same rules, which is where the skilled-against-humanitarian split on this page lands.
• Per Capita holds the division from a total to a rate, which the Oklahoma and Arkansas comparisons run on.

Open questions

• The account calls every European choice a choice and every American one an accident or an instinct. Which American choices were choices, and which European ones were forced?
• Productivity per hour in Germany and France is called competitive with America. If Europeans traded hours for vacation and voted for it, what is the measure on which Europe lost? Who decides that output was the right one?
• The report’s prescription was 11.2% implemented in a year. Which items moved, and which stalled on unanimity?

Sources

• Front Page, Europe Is Failing… (YouTube, published 2026-06-26, 41 min 42 s). https://www.youtube.com/watch?v=fBDgTXNyS3c. Read from YouTube’s auto-generated captions. Every figure on this page is as given there. People it names, kept out of the body: Mario Draghi, whose 2024 report on European competitiveness supplies the slow agony, the 800 billion euros, the 11.2%, the 100-billion-euro-company statistic, and the prescription; Angela Merkel, the German chancellor who demanded austerity, phased out nuclear power, approved Nord Stream, and took in the 2015 asylum applicants; Gerhard Schröder, who joined Gazprom’s board; Olaf Scholz, who pledged the 100 billion euros for the military; Robert Mundell, whose paper on shared currencies warned against the euro’s design; Barack Obama, who signed the 831 billion dollar stimulus; Viktor Orbán; Giorgia Meloni; Geert Wilders; Pedro Sánchez; Ursula von der Leyen; Emmanuel Macron; Friedrich Merz; Donald Trump, whose companies filed six bankruptcies; Elon Musk, Jensen Huang, and Satya Nadella as immigrant founders and chiefs; the Collison brothers of Stripe. Studies it points to without naming: the peer-reviewed study on GDPR and venture deals, the 2022 unicorn founder study, the German analysis of unemployed immigrants’ qualifications.
• No position from the owner on Europe is on record as of 2026-09-06.