The Fall of Europe
Europe is not collapsing in a single dramatic rupture. It is steadily losing the capacity to generate new wealth while still living off the capital, institutions, and cultural inheritance built by earlier generations. Political leaders across much of the continent have treated expanding public spending, multiplying rules, and assertions of moral superiority as substitutes for productivity, fiscal solvency, and social cohesion. The bill for that substitution is now arriving.
Recent unrest illustrates the fraying. On 24 October 2026 France recorded roughly 410,000 demonstrators and more than 1,300 arrests, with thousands of businesses looted and historic buildings damaged. Similar outbreaks of looting and arson struck Milan, Rome, and Barcelona. Authorities linked elements of the violence to radical groups. The deeper problem is not any single protest but the gap between the taxes extracted and the basic security and opportunity delivered. When governments collect half or more of national income yet struggle to protect shops, streets, and public buildings, their claim to legitimacy erodes.
Fiscal numbers make the constraint concrete. In the second quarter of 2026, public debt stood at 139.9 percent of GDP in Italy, 119.1 percent in France, 110.2 percent in Belgium, and 101.4 percent in Spain. France's public spending reached 57.3 percent of GDP in 2025 with a deficit of 5.1 percent. For a single worker on the average wage, the tax wedge exceeded 50 percent of labour costs in Belgium and approached 50 percent in France, well above the OECD average. High debt and high taxation leave less room to respond to shocks and transfer the cost of present benefits onto future taxpayers. The political incentive to promise more while deferring the financing has been well understood for decades; the results are now visible in the balance sheets.
Demography compounds the pressure. The EU fertility rate fell to 1.34 children per woman in 2024, with Spain at 1.10. By early 2025, 22 percent of the EU population was aged 65 or older, and pension spending already equalled 12.3 percent of GDP in 2023. Net immigration has slowed the overall population decline, yet increasing the number of residents is not the same as increasing the number of net taxpayers. Employment, language acquisition, and economic self-sufficiency determine whether newcomers strengthen or strain the system. Family policy that merely celebrates higher fertility while housing, childcare, and labour-market barriers remain high will not reverse the trend.
Productivity and innovation lag behind. The European Commission's 2026 competitiveness assessment placed EU hourly productivity at 78.5 percent of the US level. Venture capital as a share of GDP was roughly one-tenth the American figure. A substantial share of European-originated unicorn companies have relocated headquarters to the United States. Switzerland and Sweden still rank near the top of global innovation indices, showing that capability remains. What is missing is the regulatory and tax environment that turns that capability into growing firms that stay and scale.
Energy policy has added a further drag. Electricity prices for the EU's energy-intensive industries were more than twice those in the United States in 2025. Germany's nuclear phase-out, completed in 2023 after decisions spanning Social Democrats, Greens, and a centre-right government, removed firm low-emission capacity while electrification was simultaneously promoted. The resulting costs and intermittency risks have not yet been matched by the cheap, reliable alternative that was promised. Imports of Chinese electric vehicles and batteries raise parallel questions about the real environmental and strategic footprint of the transition.
Integration and social order present parallel tests. In 2025, 45.3 percent of non-EU citizens living in the EU were at risk of poverty or social exclusion, against 18.2 percent of nationals. The United Kingdom spent around £4 billion supporting asylum seekers in 2024–25, including more than £2 billion on hotels. These figures are not arguments against any immigration; they are arguments for measurement by employment, civic participation, and fiscal contribution rather than by declarations of intent. Parallel legal systems or movements that subordinate civil law to religious authority are incompatible with the equality of women and freedom of conscience that define the liberal order. Citizens of every background are entitled to protection against those who would impose orthodoxy.
The cumulative effect is a slow transfer of relative advantage. An economy that raises the cost of production and innovation loses ground to places that do not. The Americas, North, Central, and South, already contain research centres, engineering firms, and resource endowments capable of capturing more of that shift, provided they avoid replicating Europe's fiscal and regulatory habits. Embraer in Brazil, INVAP in Argentina, medical-device exports from Costa Rica, and mineral-processing opportunities across Latin America illustrate existing capacity. Realising it requires legal certainty, education that produces skills, infrastructure delivered without endless permitting delays, and governments that control crime. Someone else's decline does not automatically create prosperity elsewhere.
Europe retains extraordinary assets: skilled populations, capital stock, universities, and a residual commitment to the rule of law. Those assets make the current trajectory more, not less, the responsibility of successive governments that preferred to manage inherited wealth rather than create new wealth. The postwar expansion of the welfare state required a growing productive base; the base is no longer expanding fast enough. The cultural and demographic inheritance is likewise being drawn down faster than it is renewed. The fall is not yet complete, but the mechanisms that produce it are already in plain view.
