EU warns on 'wealth gap'

Europe has been slow to adopt new technology

Unless Europe quickly learns to innovate and adopt new technologies, its standard of living will fall ever further behind the US, the European Commission has warned.

Erkki Liikanen, European Commissioner for Enterprise, said that average wealth per head in the EU was just two-thirds of that in the US.

This gap is the widest since the 1960s.

According to a report from Mr Liikanen's department, European industry has insufficiently invested in new technologies, despite the fact that they have become vastly cheaper in recent years.

The resulting failure to innovate has dented average productivity per European worker, while US firms have become more efficient.

Corporate investment in information technology is equivalent to 2.4% of Europe's economic output, compared with a US figure of 4.5%, Mr Liikanen said.

Image problem

Mr Liikanen's competitiveness report follows a period of soul-searching in Brussels, where officials are troubled about Europe's somewhat old-fashioned image.

Erkki Liikanen: Worried about wealth gap

The economic slowdown, accompanied by heavy lay-offs among some of Europe's most venerable companies, has exacerbated the situation, the commission feels.

Until recently, the layer of large and medium-sized manufacturing firms, especially highly concentrated in Germany, were viewed as the motor of Europe's economy.

But some economists now worry that these firms are incapable of delivering enough efficiency gains to power a world-beating surge in the standard of living.

Labour problems

In the meantime, widespread poverty and unemployment in Europe, especially at its fringes, mar its otherwise prosperous air.

Despite EU plans to fight joblessness, the continent is still way off the target of an overall employment level of 70%.

In the US, a far higher proportion of the population is in the labour force.

And because of their generally higher level of relevant skills, US workers are roughly one-third more productive than the EU average.

Getting riskier

A connected piece of research from Mr Liikanen's department gave some encouragement.

According to the so-called Enterprise Policy Scoreboard, Europe is becoming more entrepreneurial - the image of entrepreneurship has improved, and an increasing percentage of the population claimed to be willing to take business risks.

But compared with the US, a gap still yawns.

Mr Liikanen said that 70% of Americans have considered becoming self-employed, compared with only half of Europeans.

Many Europeans are put off setting up businesses by the looming mountain of red tape that firms are believed to face, Mr Liikanen said.