European policymakers, economists, and politicians are in desperate need of a reality check—an awakening that brings them back down to earth and forces them to finally make effective, objective, and intelligent decisions. Something that has been missing for years.
Take a moment to look at the Bloomberg chart and let the data sink in.
The chart shows the expected contribution to global economic growth from a group of eleven countries. The largest contribution comes from China, which probably won’t surprise anyone. But the rest of the top six is rounded out by India, the United States, Indonesia, Russia, and Turkey.
Europe is represented solely by Germany, which, despite being the world’s third-largest economy (according to Bloomberg data), will contribute less than 2 percent to global growth in the coming years. Other European countries like the United Kingdom and France are nowhere to be seen.
Still think we’re relevant?
And yet, if you live on the “old” continent, you could easily be fooled into thinking we still matter. Sure, we have issues with competitiveness, defense, energy, immigration, innovation, climate, war, regulation, technology, and aging demographics—but only a pessimist would dwell on that.
Based on the hard numbers, it makes little sense to assume we’re still in the game. It’s no coincidence that Europe is increasingly being left out of economic think tanks, international summits, and peace negotiations. You don’t need a layer of political spin to understand that if you’re not growing, you’re no longer part of the conversation.
That may sound negative—and I often get criticized or even laughed at for writing things like this—but these are the facts. Why would China care about Europe, especially when it can easily conquer markets with products that are just as good but far cheaper? Just compare a few Chinese electric cars to those from Volkswagen and BMW.
Tone it down
Here’s another striking detail: four of the top six countries have publicly expressed—under the Fed’s rather laughable label of “a small number of countries”—a desire to move away from the US dollar. The fifth, Indonesia, has also made it clear from time to time that a little less dollar-dependence wouldn’t be such a bad thing.
In my view, Europe would be wise to shift more focus inward. From what I see in my fund management work, the level of regulation is beyond excessive. In many EU countries, it’s no longer even possible to build enough housing for their own populations—and don’t get me started on energy security.
Then there’s “whatever it takes” Draghi, who has written hundreds of pages about the total lack of competitiveness and innovation. I can still hear him pleading: “You can’t say no to everything. Do something!” And when I look at charts showing China’s CO₂ emissions, I genuinely wonder where our sense of reality has gone. Is this “shoot yourself in the foot one more time” policy really so wise?
Think realistically
While I appreciate the ECB and Lagarde’s ambition—in the spirit of “think big”—to explore whether the euro could become the world’s new reserve currency, maybe it’s time we also take a long, hard look in the mirror. Things are still pretty good here overall, but it’s delusional to think we won’t be overtaken—on both sides—by countries with very different views on how an economy, or even a society, should function. Rather than denying this, it would be far more productive—and realistic—to develop a strategy for how to deal with it.
Jeroen Blokland analyzes striking, current charts on financial markets and macroeconomics. He also manages the Blokland Smart Multi-Asset Fund, which invests in equities, gold, and bitcoin.