FRANKFURT, Sept 23 (Reuters) – The European Union could narrow its productivity gap with the United States by a third if it had an equivalent number of large companies, according to the European Central Bank (ECB). The ECB advocates for reforms that would facilitate the growth of businesses in the EU.
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European policymakers are working to address the EU's economic underperformance compared to the US, which hosts many of the world's largest firms and is at the forefront of artificial intelligence development. Studies indicate that EU workers produce 20% less output per hour than their US counterparts, a disparity that did not exist in 1995.
Research from the ECB shows that aligning the distribution of large and small firms in Europe with that of the US—without altering the productivity levels of each firm type—could reduce the productivity gap by approximately one-third. Large firms, defined as those with at least 250 employees, generate an average of €86,800 in value added per worker each year, while smaller firms with fewer than 10 employees produce less than half that amount.
The ECB also noted that Europe's lower productivity is due to factors such as reduced innovation, fragmented regulations, and underdeveloped capital markets, all of which hinder company growth and international competitiveness. The central bank supports the proposed "EU Inc" framework, which aims to create an EU-wide corporate law regime to lessen barriers to cross-border business operations.
This framework is modeled on Delaware's corporate laws in the US and would establish a single legal structure across the EU, superseding the existing 27 national company laws and numerous corporate forms. The ECB stated that "EU Inc. has the potential to strengthen competition, innovation, and productivity growth," thereby supporting the EU's Single Market.
(Reporting by Francesco Canepa; Editing by Andrew Cawthorne)