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Donald Trump's national security strategy offers a flawed assessment of Europe. It claims that unrestrained immigration and what it terms "progressive" policies pose an existential threat to the continent's identity. However, this perspective is based on a serious misinterpretation of the situation. The actual danger facing the EU is not cultural but economic and technological lag.

The Stark Growth Gap Separating Europe and the US

The data paint a sobering contrast. Between 2008 and 2023, American economic output surged by 87%, while a paltry 13.5% growth for the European Union. During this period, European income per person fell from 76.5% to just half of the American figure. Remarkably, even the poorest US state now has a greater average income than major EU nations like Italy and France.

Currently, roughly 50% of the global top fifty tech companies are American, while a mere four are from Europe.

The Innovation Deficit: A Critical Problem

This widening economic gap is driven by stronger productivity growth in the US, largely due to technological innovation and better use of resources. The scene of global tech dominance is overwhelmingly US-centric. In the last fifty years, hundreds of American startups have scaled into companies valued at over $10bn, versus only fourteen in Europe.

This gap prompts a pressing question: As the competition for future industries like AI, semiconductors, and fusion energy, where does Europe positioned? Most analysts concede it is largely a contest between two between the US and China, with European nations starting at a clear disadvantage.

Root Causes of the Continent's Technological Lag

A number of major factors explain this technological divide.

• Financing Ecosystem: The US boasts a far deeper and more dynamic system for financing new ventures. The EU still lacks a true capital markets union, a factor that caps the scale of emerging companies.
• Regulatory Fragmentation: Complex and divided rules hamper Europe. A US startup can launch a product under one set of laws to access a consumer base of hundreds of millions. The EU, despite a larger population, is split among 27 different national systems, creating huge market obstacles.
• Mindset Differences: Views on entrepreneurial failure differ sharply. In parts of Europe, business failure was historically viewed with stigma, whereas in the US, it is often seen as a badge of experience.
• Defense Spending: The United States enjoys a deeply integrated academic-military-industrial complex. The continent's long-term lack of spending in defense has eroded its ability in breakthrough innovation.

The Road Ahead: Reasons for Hopefulness

Despite these challenges, there are causes for optimism. Policymakers are growing more conscious of the severe threat and have started to propose serious reform. Key reports on European competitiveness and the internal market point to the need for major changes.

Given appropriate incentives and rule changes, Europe's strengths could support much higher degrees of business-led breakthroughs.

Europe still possesses significant strengths: high-quality workforce, top-tier schools and universities, and world-class research institutions. Alongside a large internal market and substantial household savings, these elements could unleash a surge of venture creation.

Importantly, even if Europe does not become the leader in creating next-generation tech, it can still significantly increase economic output by implementing and tailoring advancements from elsewhere.

A Critical Juncture

The European Union now stands at a critical moment. As the saying goes, economic erosion often happens "gradually and then suddenly". To date, the continent's slide in innovation has been steady. However, if it fails to take decisive action to tackle its structural weaknesses, today's gradual weakening could turn into a rapid and permanent decline in world influence.