Europe: Once a Powerhouse, Now an Aging Giant Facing Decline

Europe, once an economic titan, has been on a gradual decline. It reached its peak in the last century, but now, crisis after crisis, the continent faces significant challenges. The population is ageing, and its competitive edge is slipping away. Once-dominant industries, like the German automotive sector, are slowly eroding, with no new European giants emerging to take their place.

To add to this, no European startup has surpassed the €100 billion mark in the last 50 years. And since 2008, 30% of the EU's unicorns (startups valued at over $1 billion) have left the bloc. It's a grim reality, which is why the EU last year tasked the former Prime Minister of Italy and ex-president of the European Central Bank, Mario Draghi to find solutions to reverse this trend. His report was released last week, providing some stark insights.

Draghi’s warning is clear:

“We’ve known for a long time that Europe’s growth has been slowing, but we’ve chosen to ignore it. Now, conditions have changed. Global trade is down, and China’s growth has significantly slowed. Moreover, China has become less open to us and now competes with us in every aspect of the global market. We've lost our main supplier of cheap energy—Russia—and for the first time since World War II, we have to rebuild our defense capabilities. The investment required for all of this is immense. Investment must increase by around 5 percentage points of GDP to levels last seen in the 1960s and '70s.”

What is the solution you may ask?

Good question, Draghi is advocating that the EU increase investments by approximately €750 to €800 billion annually. Yes, that’s €800 billion every year. While this figure is staggering, let’s assume the EU finds a way to secure these funds. Would that be enough to solve all its problems? Well, it's unlikely.

You see, money isn't Europe's problem. It's much deeper than that. In fact, only two places in the world— the U.S. and China—are wealthier than Europe. So, what's really holding Europe back? The truth is, Europe seems to be stuck in the past. It’s as if it’s lost its vision of the future.

Once the powerhouse of the last century, Europe has struggled to capitalize on the full potential of the digital revolution, clinging to outdated industries and traditional sectors that are rapidly being overtaken by modern, more cost-effective alternatives.

Take China's electric vehicles, for example— they're making serious inroads into Europe’s once-dominant automobile industry, and it’s only the beginning.

Then there’s the looming issue of an ageing population.

Europe is the oldest continent in the world, with an average age of 42.

Compare that to Asia and South America, where the average age is 31, or Africa, where it’s just 19. This means Europe’s workforce is shrinking, becoming less dynamic and less productive than the younger, more energetic regions of the world. Despite its massive head start, Europe is struggling to maintain its edge.

And to make matters worse, Europe is plagued by internal discord. The EU, which consists of 27 member states, has only 20 countries that use the common currency, the Euro. Also, countries like Hungary, led by Prime Minister Viktor Orbán, frequently block the EU's efforts to present a united front. Even wealthier nations like Germany are hesitant to engage in joint projects, reluctant to cover the costs for poorer member states. So, with all this division and hesitation, how can Europe ever hope to pull together and save itself?

The hard truth is that it may not be able to. Europe's decline could be well underway, and the EU appears powerless to stop it.

As Draghi starkly put it,

the people of Europe should brace themselves for “slow agony".