The third side of the triangle is, of course, low growth itself, which threatens to condemn the whole continent to a decade of high unemployment. The deficit reduction and bank stabilization we need to see cannot become entrenched without economies which generate trade, jobs, and growth. Yet, suffering from anemic levels of growth, Europe is slipping further and further down the world league – not acutely but chronically, which is more serious and much harder to reverse.
Today, European unemployment is stuck around 10 percent, with youth unemployment rising above 20 percent and as high as 40 percent in Spain. And it cannot come down fast. Europe now has a trend rate of growth which is almost one-half that of the United States and one-quarter that of China and India. Once, Europe represented half the output of the world. By 1980 this had fallen to one-quarter. Now it is less than one-fifth – just 19 percent. Soon it will be little more than a tenth – 11 percent by 2030 – and then it will fall to 7 percent.
By 2050 – less than four decades from now – the European economy could be smaller than that of Latin America. If European growth continues to run so far behind its competitors, then by mid-century it may be as small as Africa’s.
Yet Europe is only half as well equipped as America to export our way to growth. Despite Germany’s success in China, only 8 percent of our exports (in contrast to America’s 15 percent) go to the eight fastest-emerging market economies, what are now called the growth generators, that will account for the majority of future growth.