Europe’s Competitiveness Trap
European policymakers are obsessed with national “competitiveness,” and genuinely appear to think that prosperity is synonymous with trade surpluses. But economic growth, even in traditionally export-led economies, is driven by productivity growth, not by the ability to capture a growing share of global markets.
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LONDON – A flawed understanding of what drives economic growth has emerged as the gravest threat to recovery in Europe. European policymakers are obsessed with national “competitiveness,” and genuinely appear to think that prosperity is synonymous with trade surpluses. This largely explains why Germany is routinely cited as an example of a strong, “competitive” economy.