A well-known economist explains how, equal in 2008, before the great crisis, the economies of the European Union and the United States evolved completely differently. After the crisis, Americans grew steadily, while Europeans plateaued and went into decline.
New York impresses in all chapters. PHOTO Constantin Ciobanu
Economist Andrei Caramitru notes that the economy of the European Union is stagnating and even going backwards, while across the Atlantic, the economy of the United States of America seems to be on the upswing.
“Why is Western Europe collapsing economically and the US growing massively? The situation is already unbelievable. Germany is twice as poor (GDP/capita) as California. France, Germany and western countries are comparable to or below the poorest rural embittered states in the US now. Although the US and Europe were flat in 2008. And the US has accelerated its growth now – while Western Europe is in recession. So the differences will be massively amplifiedsays Caramitru.
The causes of the gap
He also explained why Europe was so far behind the United States of America. The old continent accepted for many years to be dependent on Russian gas, then went overboard with a Green Deal that drove prices to unprecedented levels and suffocated its economies. In contrast, the United States of America acted as it should: it kept a balanced energy mix and knew how to exploit its resources that Europe either does not have, or does not exploit and keeps buried so that it does not rain. Instead, the EU imports them from other markets at huge prices, not caring how much others pollute to bring them to the surface with primitive technologies.
“The reasons are simple: energy, international trade, the financial system, technology, macroeconomic policy. On energy – the US has invested heavily in fracking and has become the largest global producer of oil and gas. Western Europe shut down production (mines, nuclear, everything) and relied on Russian gas which is now gone. The US is energy independent – Europe is not. The US has cheap energy – Europe does not“, he explains.
However, there are other reasons why the EU is in trouble, while across the Atlantic things are on the chart. Europe has become dependent on goods from other parts of the world to a much greater extent than the United States. And the fact that China's economy is going through a turbulent period backfires against the Old Continent, in general, and the European Union, in particular.
“On international trade – the US is actually a closed system (along with Canada and Mexico) – it imports and exports very little with the rest of the world. Europe is not totally dependent on Germany's colossal exports to China. So – when there is a shock like now with China, which is actually in a mega recession – and it is possible to have an open conflict with them – the economy of Germany and therefore of Europe suffers colossally (because you lose an enormous market)”.
adds Caramitru.
All the big tech companies are in America
Also, the United States of America has huge and much better capitalized banks than the big European banks, the latter being much smaller than those across the Atlantic.
“Financial System – The US has several mega banks and huge funding through the stock market / investment funds. In Europe – there are no large pan-European banks, each country has its own system, small and weak banks. And we don't have large financial markets or investment funds like the US. So there is no funding, we have no way to cope with the dynamics in the US”says Caramitru.
In terms of technology, things are just as clear here. Americans have huge companies, much more prosperous than European ones.
“In the US there is Silicon Valley and all the big technology companies. Europe actually has nothing, zero. And the situation is catastrophic – in Germany they don't even have developers and the state system still works on a fax basis. Macroeconomic policy – in the US recovery is done through large programs at the federal level. Europe, on the other hand, imposes constraints on national budgets, the EU budget is minimal (1% of GDP compared to 20% of the US federal budget), it cannot actually carry out programs financed at EU level”he adds.
In conclusion, Western Europe seems doomed to decline, and Europeans seem numb and unable to react to American protectionism.
“In this situation – with the USA becoming very aggressive in the economic area (policy of reindustrialization and attracting companies from all over the world with colossal financial aid) and having so many advantages – Western Europe cannot do anything. It is doomed to total decline“, he explains.
The economist has a recommendation for Romania, a country whose economy is closely linked to the big European economies, Germany, France and Italy, and any problems they have are transmitted, through the economic contagion effect, here.
“We need to connect to the economies that have positive development, not negative (ie – connect to the US and Asian countries that are growing). Let's not become dependent on the economic chains of Western Europe“, concluded Andrei Caramitru.
