Donald Trump’s new US National Security Strategy, released in December 2025, depicts Europe less as Washington’s dependable partner and more as a weakening ally whose internal choices could erode its capacity to act.
The document argues that “uncontrolled” migration and policies derided by US officials as “woke” could leave parts of Europe “unrecognisable” within two decades, and questions whether some European countries will retain the economic and military weight to remain reliable allies.
That framing has met resistance in European capitals, but it has also revived an older argument about what, precisely, is driving Europe’s relative decline. In a recent Project Syndicate column, the economist Nouriel Roubini contends that the central problem is not cultural politics but Europe’s lag in technology, productivity and growth.
Roubini’s starting point is comparative performance since the global financial crisis. Between 2008 and 2023, US GDP rose by 87 per cent, while EU GDP increased by 13.5 per cent, according to calculations based on World Bank data. On a per-person basis, he argues, the gap widened sharply: EU GDP per capita fell from 76.5 per cent of the US level in 2008 to 50 per cent in 2023.
How that gap is measured matters. The IMF has cited EU GDP per capita at around 72 per cent of the US level when adjusted for purchasing power parity, a method that reduces distortions from price and exchange-rate differences. Some researchers also argue that parts of Europe compare more favourably with the United States when productivity is measured per hour worked rather than per person. Even so, few dispute that the United States has pulled ahead on headline growth and in several technology-driven sectors.
Roubini also disputes the idea that migration is uniquely destabilising Europe. Eurostat estimates that, as of 1 January 2024, 9.9 per cent of the EU population was born outside the EU, with a further 17.9 million residents born in another EU member state. In the United States, Census-based figures put the foreign-born share at nearly 14 per cent in 2022. The figures do not resolve political arguments over integration, but they complicate claims that Europe’s exposure is categorically higher than America’s.
The more consequential divide, in Roubini’s account, is technological. He notes that roughly half of the world’s 50 largest technology firms are American while only four are European, and that the United States has produced far more start-ups that scaled into large listed companies over the past half-century. The implication is that Europe’s ecosystem is struggling to translate research capacity into globally dominant firms, particularly in frontier fields where the United States and China set the pace.
Why has Europe found it harder to scale? One explanation repeatedly cited by the IMF is fragmentation inside the single market. IMF research has argued that remaining internal barriers operate like a tariff equivalent of about 44 per cent for goods and 110 per cent for services — a proxy for the costs imposed by regulatory and administrative obstacles across borders. The logic is straightforward: a young firm can address a vast, comparatively uniform US home market quickly, while an EU business often confronts 27 legal and regulatory environments, different licensing regimes and uneven enforcement.
A second constraint is capital. European firms remain more dependent on bank lending, with a smaller and more nationally segmented venture-capital market than the United States, according to IMF analysis of the competitiveness gap. For technology companies whose value is often tied to intangible assets and rapid scaling, this difference can shape whether they remain regional players or become global platforms.
Roubini also links innovation to defence-related research and procurement. The argument is not that Europe lacks scientists or engineers, but that spending patterns have often failed to generate the same spillovers into dual-use technologies that the US defence sector has historically produced. The debate has sharpened as NATO’s spending goals shift. NATO says allies agreed at the 2025 summit in The Hague to invest 5 per cent of GDP annually on defence and security-related spending by 2035, with at least 3.5 per cent earmarked for core defence requirements.
European institutions have, in parallel, begun to articulate an overhaul agenda. Mario Draghi’s report on the future of European competitiveness, published by the European Commission in September 2024, argues that Europe must increase investment, close innovation gaps and strengthen industrial capacity. Enrico Letta’s April 2024 report on the single market calls for deeper integration and fewer internal barriers to allow firms to scale across the bloc.
Trump’s security strategy has brought these questions into a more abrasive political frame, but the core economic issue is older: whether Europe can raise productivity and generate globally competitive technology firms while sustaining its existing social and fiscal commitments. Roubini’s warning is that the contest is being decided less by culture than by output, investment and innovation — variables that remain, largely, within Europe’s own policy reach.
