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The recent US security policy document offers a misguided assessment of the European Union. The document asserts that unrestrained immigration and so-called "progressive" agendas represent an existential risk to European civilization. Yet, this argument is based on a fundamental misinterpretation of the situation. The actual danger facing the EU is not societal but economic and technological backwardness.

A Glaring Growth Gap Between the US and Europe

Statistics reveal a stark picture. From 2008 and 2023, American economic output grew by 87%, compared to a paltry thirteen and a half percent growth for the EU. During this time, EU GDP per capita dropped from 76.5% to just half of the American figure. Strikingly, even the poorest US state now has a greater average income than several leading European economies like France and Italy.

Currently, roughly half of the global 50 largest technology firms are US-based, while a mere four are European.

The Technological Deficit: A Critical Question

This widening disparity is driven by stronger efficiency gains in the United States, largely due to technological innovation and higher total factor productivity. The landscape of global tech leadership is overwhelmingly US-centric. In the last five decades, hundreds of American startups have scaled into enterprises valued at more than ten billion dollars, versus just 14 in the European continent.

This gap raises a pressing question: In the race for tomorrow's sectors like semiconductors, AI, and quantum computing, what is Europe positioned? Experts widely concede it is essentially a two-horse race between the United States and China, with European nations starting at a significant disadvantage.

Underlying Factors of Europe's Technological Lag

A number of major factors explain this technological divide.

• Financing Ecosystem: The United States has a far deeper and agile network for financing new ventures. Europe has yet to establish a genuine capital markets union, a factor that caps the growth potential of new firms.
• Bureaucratic Hurdles: Complex and divided regulation hamper European business. A US startup can launch a service under a single regulatory framework to access a consumer base of over 330 million. The EU, despite a bigger population size, is divided among 27 different national systems, creating huge internal barriers.
• Mindset Differences: Attitudes toward risk-taking vary greatly. In some EU nations, a startup's collapse was once met with stigma, whereas in the US, it is often seen as a valuable lesson.
• Defense Spending: The US benefits from a tightly woven academic-military-industrial complex. Europe's long-term lack of spending in military capabilities has weakened its capacity for breakthrough innovation.

A Path Forward: Grounds for Cautious Optimism

Despite these challenges, one can find causes for optimism. Policymakers are growing more conscious of the existential challenge and have started to advance serious reform. Key reports on EU competitiveness and the internal market highlight the necessity of major reforms.

With the right policies and regulatory reforms, these assets could support much higher degrees of business-led breakthroughs.

The continent retains considerable strengths: skilled human capital, top-tier schools and universities, and premier research institutions. Alongside a vast domestic consumer base and high savings rates, these elements have the potential to unleash a surge of venture creation.

Importantly, even if the EU does not become the leader in developing next-generation tech, it can still dramatically increase economic output by implementing and tailoring innovations from other regions.

A Critical Juncture

Europe now stands at a decisive crossroads. To paraphrase a famous line, decline often happens "slowly, then all at once". So far, Europe's slide in innovation has been gradual. However, without bold steps to tackle its deep-seated problems, today's slow erosion could turn into a sudden and irreversible decline in global economic relevance.