Since the inception of the Euro, the economic disparity between the United States and the Eurozone has nearly tripled. In 1999, when the Euro was introduced, the US economy exceeded the Eurozone by 11% in purchasing power parity. However, this gap has now expanded to 30%. Even on a per capita basis, the United States is significantly outpacing Europe. As of 2022, the average American’s real income, in purchasing power parity terms, was 35% higher than that of the average European, marking an increase from 27% just before the 2008 financial crisis.
Undoubtedly, several factors contribute to the dominance of the United States. These include structural advantages such as lower government funding costs relative to growth, reduced energy expenses, a substantial lead in technology, and more favorable demographics. The US government, with its extensive and liquid sovereign debt market, has the ability to spend its way out of economic downturns and prevent lasting negative effects. In contrast, Eurozone countries face limitations in fiscal capacity due to the risks of sovereign default and redenomination.
The US also enjoys lower power prices, thanks to its abundant natural gas resources, particularly advantageous in the current context of energy and geopolitical uncertainty. Despite dependency on foreign suppliers for some critical raw materials, the US possesses ample reserves of essential resources like coal, copper, lead, iron, timber, bauxite, and uranium, crucial for driving the green transition. Additionally, being home to the world’s most dominant tech companies gives the US a substantial edge, as these companies have superior access to early-stage financing, international talent, and are outpacing most European counterparts in research and development as well as patent applications.
Learn more here: https://www.allianz.com/en/economic_research/publications/specials_fmo/2024_01_24-US-Eurozone.html
