Economic stagnation, political instability, and public dissatisfaction in Europe’s core are painting a troubling picture. Germany and France, historically the eurozone’s twin pillars, are faltering under the weight of sluggish growth, fiscal challenges, and growing political unrest. These signs of distress echo the precursors to the 2008 global financial crisis, raising the question: could another global crash be on the horizon?
Political Turmoil Reflects Economic Strain
Chancellor Olaf Scholz’s defeat in Germany’s snap election and President Emmanuel Macron’s struggles to pass a substantive budget highlight the political repercussions of economic stagnation. With hard-right and hard-left parties gaining traction, voters are clearly disenchanted. While France is not “the new Greece,” the symptoms of deeper structural issues are hard to ignore.
The European Central Bank (ECB) is better equipped now than during the last crisis, with tools to intervene in the bond markets. But that safety net doesn’t address the underlying malaise. As seen before 2008, early warning signs are often overlooked—and history has a habit of repeating itself.
The Eurozone’s Unfulfilled Promise
The euro was supposed to unite Europe economically, fostering growth and narrowing the gap with the United States. However, 25 years after its launch, the eurozone’s design flaws have become glaringly apparent. A “one-size-fits-all” currency imposed on economies with diverse needs has yielded slow growth and widening disparities.
Germany, once the locomotive of European growth, now faces a stalled economy, no larger than it was before the Covid-19 pandemic. France fares little better, averaging less than 1% annual growth over the past five years. These stagnant economies struggle to fund postwar social welfare systems designed for an era of robust growth and favorable demographics.
Structural Challenges Exacerbate the Crisis
Falling birthrates, an aging population, and increased defense spending—partly driven by the Russian threat—have tightened fiscal constraints. Meanwhile, governments are under pressure to cut benefits and raise taxes, a combination that fuels voter resentment. Macron’s clashes with parliament over budget cuts underscore how politically perilous these measures can be.
Moreover, Europe’s industrial inertia compounds the issue. Germany has been slow to transition from its fossil-fuel-dependent auto industry to digital and green technologies. Similarly, Europe as a whole has lagged behind the US in fostering innovation and dynamism. Former ECB President Mario Draghi’s recent report identifies Europe’s investment shortfall and “middle-technology” trap as critical issues but offers few actionable solutions.
Is “More Europe” the Answer?
Each step toward greater European integration—from the 1985 single market to the 1999 euro launch—has coincided with weaker economic performance. Yet proponents of the EU often argue that these disappointing outcomes stem from incomplete integration. Draghi’s recommendation for a top-down, EU-wide approach to competitiveness reflects this mindset, but evidence suggests otherwise.
Voters are increasingly skeptical of “more Europe.” Mainstream parties are losing ground to populists who advocate for national sovereignty and reduced EU interference. It may be time to consider whether “a little less Europe” could provide the breathing room necessary for member states to address their unique challenges.
A Gathering Storm?
The global financial crisis of 2008 didn’t materialize out of nowhere; it was preceded by clear warning signs in emerging markets. Today, the warning signs are in Europe’s core. Political instability, economic stagnation, and structural flaws in the eurozone’s design are creating conditions ripe for turmoil.
The stakes couldn’t be higher. Without decisive action to address these issues, Europe risks being caught in a storm that could reverberate across the global economy. The time to act is now, before these tremors escalate into a full-blown crisis.