Restoring EU competitiveness

With the advent of the digital revolution in the 1990s, productivity growth in the EU began to slip behind that in the US and other leading trading partners. This trend has undermined the comparative ability of European firms to compete and to provide rewarding jobs and a high standard of living. Low comparative productivity and misallocation of investment, alongside many structural weaknesses, help explain why the global crisis hit Europe so hard, and why EU-wide recovery still presents such a challenge. Since 1990, the inflation-adjusted absolute GDP per capita gap between the EU and US has increased by more than 50%. In absolute terms, the GDP per capita of EU regions has diverged since 1990, not converged. Productivity growth in the EU has trailed the US since the mid-1990s and was hit harder during the crisis than in other regions.