WASHINGTON – If you look at mainstream media, the news is that slowly but surely “Europe is back”. With a degree of optimism bordering on lunacy, we are told by many analysts and commentators that Europe’s economies are doing so much better, these days.
Europe is back
Yes, we are talking about a Eurozone growth rate for this year that may go beyond 1%. Can you imagine? More than 1% growth? Unheard of.
Well, this is Europe’s “New Normal”. A new normal in which debt to GDP ratios are now close to 100% in most countries, while in Italy the national debt climbs to 125% of GDP and in resurrected and officially “saved” Greece it is close to 180%. This is the new normal of structurally high unemployment (above 10%) with peaks around 25% in Spain and Greece. Not to mention catastrophic youth unemployment (about 30% or higher) in most of Southern Europe.
And yet, notwithstanding this rather dismal picture, the news is that things are essentially back to normal or getting back to normal.
Deluge of cash into high-tech startups?
Case in point an FT front page title encouraging readers to get to the story on page 9 says: “A deluge of cash – Venture capital is pouring into Europe’s tech start-ups”. “Deluge of cash”? Now here is a story. If the authoritative FT writes a special report on an explosion of venture capital supporting new high-tech enterprises in Europe, there must be something really important going on.
Well, no, there isn’t. And it is clear that there is no revolution when you read the article. It is true that now there is a lot more venture capital supporting European tech ventures. In the digital sector there has been an increase from $ 4bn a year in 2010 to $ 7.7 bn in 2014. This is indeed almost double.
However, compared to the $ 160bn invested in the US, of which $ 70 bn have been invested just in Silicon Valley, this is nothing. And yet the EU economy is just as large as America’s, (about $ 18 trillion).
The difference is that there is very little innovation in Europe. The long FT survey describes only a couple of major success stories. And some experts and practitioners quoted in the long article expressed strong skepticism about Europe’s chances to become a real high-tech hub.
And yet, while the actual news is not that good, the FT editors thought that it would be OK to dress up a not so interesting story about Europe’s so-so high-tech companies with a teaser that announces a “Deluge of cash”. As a minimum this is a distortion.
Lamentable record in innovation
The WSJ is more realistic. In a piece titled “Post Bailout Risks Loom for Eurozone Investors” (July 23, 2015), we read that: “Europe’s lamentable record in innovation and startups means a lack of fast-growing new companies with big investment plans”. Got that? “Lamentable record in innovation and startups”. No mention here of any “Deluge of cash”.
Look, economic affairs reporting is not an exact science. But both papers cannot be right on the truly significant issue of innovation in Europe. The macro statistics about growth, public debt and unemployment support the WSJ: Europe’s economies are stagnating.
Unless we want to cling to our hopes and say that the FT is right because it is anticipatory. Its reporters have identified below the horizon transformative trends in Europe that others have yet to grasp.
Look, it would be great if this were true. It would be great to witness a European economic renaissance. But it is not there.
And preposterous headlines that announce the massive capitalization of high-tech revolutions, when there is little evidence of anything truly significant underway, are very unhelpful.