Europe vs the US: the poles have reversed
10 JUL, 2025
By Enguerrand Artaz Artaz
For a long time, Europe acted as a scarecrow for investors: lack of political clarity, anaemic growth, an indecisive central bank, uncontrolled regulation, and vague objectives... in short, nothing to stir up enthusiasm. Meanwhile, the United States had everything going for it when it came to attracting global capital: robust growth, thriving innovation, entrepreneurial incentives, strong institutions, and a transparent Federal Reserve... a perfect cocktail that led to a heavy concentration of global investment flows into US assets, reaching its peak at the end of 2024.
Since then, in just a few months, the economic poles have dramatically reversed. In Europe, a German fiscal policy revolution has revitalised growth potential, offering rare economic visibility as the region begins correcting years of underinvestment. The ReAarm Europe investment plan strengthens these prospects, and other countries may soon follow. By cutting interest rates to neutral levels, the European Central Bank (ECB) has removed its monetary brake. It is now expected to pursue expansionary policy, with a clear and predictable course. The post-Brexit era of political fragility appears to be behind us. Furthermore, the European Commission's new “competitiveness compass” signals awareness of the burden of overregulation, and a willingness to reverse course. While issues remain – notably the political and economic uncertainty in France – Europe is regaining its footing.
Meanwhile, the United States is experiencing a deterioration in visibility. After two exceptional years, growth risks are skewed downward amid slowing consumer spending and a weakening labour market. The erratic trade policy of Donald Trump, combined with uncertainty around its effects on growth and inflation, weighs heavily. The recently passed One Big Beautiful Bill (OBBB) may worsen inequality in an already deeply divided nation. Additionally, concerns have arisen over the erosion of institutional checks and balances, and the Federal Reserve’s independencehas been challenged. With a reliance on short-term data and leadership succession battles looming, the Fed’s communication will remain unclear. As public deficit levels surge, pressure on US Treasury bonds could intensify. Despite the ongoing strength of the tech sector, the US – like the dollar – has lost its shine as a safe haven for global investors.
What might have seemed unthinkable a few years ago has now become a reality. In a world where market uncertainty is a given, economic visibility is both scarce and highly valued. And right now, Europe is where it’s found.
