Europe's Missing Trillions

In partnership with

Pioneering medicine starts with investors like you.

Cizzle Biotech is transforming lung cancer detection with a patented, 95% accurate blood test. By joining our raise, you’ll gain ownership in a company backed by partnerships with Bio-Techne and Moffitt Cancer Center. You can build your portfolio with a stake in a medical breakthrough.

Join the Raise

^{Read the Offering information carefully before investing. It contains details of the issuer’s business, risks, charges, expenses, and other information, which should be considered before investing. Obtain a Form C and Offering Memorandum at invest.cizzlebio.com}

The news for Europe keeps getting worse. The French government has collapsed, plunging the EU's second-largest economy into turmoil. France's political upheaval in December offered yet another glimpse of the fractures within European affairs. Meanwhile, Germany is under pressure, with Volkswagen workers striking hard.

In my view, Europe is already in a crisis mode. The former model is over, and if we continue following the classical agenda, we will be out of the market. The EU is now fighting for survival, struggling to keep pace with the US and China.

Had the European economy grown as fast as the American economy over the past couple of decades, it would have generated an additional €3 trillion of income every year. That is roughly equivalent to the GDP of France being routinely added to the economy. Europe needs a digital-era economy with companies capable of challenging those from China and the US. Without that, the region risks being unable to afford its own security in a world where it is no longer guaranteed.

This is a tense moment for the world, and Europe is at its center. One of the most consequential figures in global economics, Mario Draghi, sounded the alarm in September. He warned that Europe’s economic position was very weak.

This morning, Draghi delivered his long-awaited report on what Europe must do to regain its competitiveness. A highly respected economist, Draghi is the former president of the European Central Bank during one of Europe’s most difficult times. He also led Italy through a similarly challenging period. Today, he is a figure people look to in times of trouble.

His report highlighted how the US and China are innovating rapidly. Draghi warned that Europe needs to invest hundreds of billions of euros more each year to compete and possibly survive. The “Draghi Plan” sparked conversations about Europe’s future. But this comes amid other pressing global challenges, including Trump’s policies, China’s dominance, the war in Ukraine, and the war in the Middle East.

If Europe stays on its current trajectory, it could account for less than 10% of global GDP by 2050. This would mean a much-diminished role for Europe in the global economy. Increasing productivity is one potential solution. Productivity doesn’t mean making people work harder—it means ensuring that the same amount of work generates more value.

To understand this, consider one of Europe’s most iconic industries: Italy’s olive oil business. The industry is worth billions of euros, and Prime Minister Giorgia Meloni's government wants it to grow to help reduce Italy's massive debt burden. Many olive oil producers have used post-pandemic EU aid to upgrade their machinery, which could improve productivity.

However, while important, olive oil production is not as productive as developing semiconductors or solar panels, two industries prioritized by the US and China years ago. Europe has failed to integrate frontier technologies into its economy in ways that could boost incomes and efficiency. As a result, Europe is poorer and less competitive compared to the US.

Estimates suggest the EU economy is now 18% smaller than it could have been, representing a shortfall of about €3 trillion. One reason for this is the lack of massive investments in transformative industries. Europe struggles to translate cutting-edge technologies into successful businesses. Unlike the US and, to some extent, China, Europe lacks strong venture capital markets and faces heavy regulatory burdens.

Europe prides itself on regulation, seeing it as a blueprint for others. But excessive regulation has stifled growth. The result is a continent lagging behind other global players.

In the tech world, the combined value of America’s largest companies now rivals the GDP of major economies. If their combined valuation were a country, it would have the third-largest GDP globally, after the US and China. This highlights the widening gap between Europe and the US in the digital era.

Take the automotive industry as an example. Electric vehicles are fundamentally digital-era products, yet Volkswagen, Europe’s biggest carmaker, did not prepare for the electric vehicle revolution. Instead, Tesla and later Chinese companies took the lead.

Volkswagen’s struggle is emblematic of Germany’s industrial challenges. The company is now planning to close up to three factories, which could lead to tens of thousands of job cuts. Germany’s neighbor, France, faces different challenges. High debt and wide deficits have left France financially and politically deadlocked.

France’s deficit, which represents the gap between government spending and tax revenue, is far above the EU’s 3% GDP limit. This increases the risk of a potential debt crisis, as investors become apprehensive about buying French debt. In December, French debt risk was at its highest level since 2012, during the height of Europe’s debt crisis.

Germany, on the other hand, faces an employment crisis. It is running out of workers to sustain the industries that made it an economic powerhouse. These challenges in France and Germany impact the entire EU. Without these two economies doing well, the rest of Europe struggles.

Mario Draghi warned that Europe is too reliant on traditional industries, too unproductive, too uncoordinated, and too risk-averse. Political divisions among EU nations make it difficult to enact the sweeping changes needed to remain competitive.

One indicator of Europe’s struggles is the euro's performance against the US dollar. The euro has trended downward and reached parity with the dollar a few times. A weak euro undermines Europe’s geopolitical weight, making it harder to compete on the global stage.

A falling euro could also embolden populist politicians who oppose the currency, raising the risk of a Brexit-like event. Germany’s far-right AFD party, for instance, has considered campaigning to leave the euro.

Despite the challenges, experts, including Draghi, stress that change is possible. Europe has a long history of excelling in precision engineering and high-quality manufacturing. Industries in Northern Italy, Southern Germany, and Switzerland remain competitive in producing high-quality technological goods. These strengths could play a key role in Europe’s future.