To be European is to experience fine cuisines, walkable cities and constant nagging about the many ways in which your economy is falling behind America’s. In recent years weighty reports bemoaning Europe’s lagging productivity have become a literary genre in their own right. So news in recent weeks that America’s government debt had passed $40trn, raising questions about how long bond-market types will keep funding its persistent budget shortfalls, have been greeted in some European quarters with a degree of Schadenfreude (or whatever the Greek equivalent is). This is a continent that knows a thing or two about spiralling debt crises, after all. How refreshing it might be if the tables were turned, and Europeans could be the ones making recommendations about how politicians in Washington should be running their economic affairs.
Indeed, Europe looks at first glance to be in markedly better fiscal shape than its transatlantic rival—a rare case in which economic data seemingly favour the old continent. The total debt pile of governments in the European Union amounts to a mere €15.7trn ($18.2trn), in an economy not much smaller than America’s (Europeans are poorer but there are more of them). Two decades ago both places had debt-to-GDP ratios of around 65%. Now America’s has swollen to over 120%, and the IMF thinks it will be north of 140% by 2031. Europe’s is at „just” 83%, and its future is essentially flat—still in vaguely prudent territory. But Europeans tempted to subject those stateside to sermons about economic management (does America need a Draghi report of its own?) should hold their fire. For though America has the bigger debt, Europe has the bigger debt problem. America’s advantages include the world’s reserve currency and a growing economy. Europe’s disadvantage can be summed up in one word: France.
