Riksbank chief urges Europe to close productivity gap with US for economic growth

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Europe Urged to Narrow Productivity Gap with US to Avoid Growth Loss

In a recent interview with the Financial Times, Erik Thedéen, governor of the Riksbank in Sweden, emphasized the urgent need for Europe to close the productivity gap with the United States to prevent missing out on potential growth opportunities.

Thedéen pointed out that while Sweden’s economy has outperformed the Eurozone in the past six years, it still lags behind the US primarily due to weaker productivity growth. He highlighted the importance for European policymakers to address this issue to stay competitive in the global market.

The debate on how Europe can enhance its competitiveness against major rivals like the US and China has been gaining momentum. The productivity growth in the US has been significantly stronger than in Europe, with a nearly 60% increase compared to around 20% in the Eurozone and 35% in Sweden since 2000.

The Riksbank’s decision to cut interest rates for the first time in eight years further highlights Europe’s divergence in monetary policy from the US. While the Federal Reserve has indicated a delay in rate cuts, the European Central Bank is likely to start cutting rates soon.

Business executives and policymakers in Europe are increasingly concerned about the widening productivity gap with the US. Nicolai Tangen, head of Norway’s $1.6tn oil fund, noted that Europe is less ambitious, less hard-working, and more risk-averse than the US.

Thedéen emphasized the importance of improving productivity in countries like Norway, Sweden, and Denmark to sustain high wages and solid growth. However, successful policy proposals to reverse the decline in productivity growth since the 2008 financial crisis have been limited.

As the US economy continues to perform strongly, Thedéen warned that the productivity and growth gap between the US and Sweden could widen further, posing a significant challenge for the Swedish economy. The Riksbank’s monetary policy decisions will play a crucial role in addressing these concerns and maintaining stability in the region.

Team@GQN.