While there has been much discussion about EU competitiveness since the Draghi report was released in late September, it is important to remember that the shocks since the Great Financial Crisis. For example, we can look at the growth between the US and EU surrounding the pandemic and see the strong difference in economic behavior.
The US saw a negative pandemic shock, but the real GDP jumped back quickly to trend. The EU also came back to trend albeit in a more muted fashion given the slow GDP prior to the pandemic. What is truly noticeable is the slow gain in productivity but again this is from a slow trend prior to the pandemic. See "An Investigation into the Economic Slowdown in the Euro Area".
Much of the difference in growth and productivity has to do with the composition of the EU economy relative to the US. First, there is a heavier emphasis on manufacturing which has been hurt by the slowdown and impacted by higher interest rates. Second, the EU has been hurt by the strong energy shock from the spike in natural gas prices from the war between Ukraine and Russia. Third, the EU is more sensitive to trade with China. This differential may not be an innovation problem but an economic composition problem.
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