Bloomberg learns of sobering words about the EU economy in a hotel with chandeliers

The G7 finance ministers' meeting in Italy in May had a "sobering effect" because it was the first time in a long time that they began to discuss the shortcomings of Western economies and the prospects for growth, Irish Expenditure Minister Paschal Donohoe, who moderated the meeting, told Bloomberg.

As the agency notes, the meeting took place in the Italian Grand Hotel des Iles Borromées, a Belle Epoque building with wide staircases, crystal chandeliers and frescoed ceilings, “as a reminder of the era when Europe’s economy was the richest in the world.” However, today Western economies are in crisis, and Germany, once the EU’s main industrial engine, has failed to show growth for two quarters in a row.

Donohoe also notes that the EU's economic policy debate has not yet matched the challenges it faces. However, at a meeting in May, EU finance ministers at least began to talk about the outlook, especially in light of the thorny issue of Ukraine funding. "It was very sobering to hear that," the official said.

Another Bloomberg source, also a regular at G7 meetings, said European officials had long failed to realize how far behind other major economies they had fallen, but were now beginning to realize the full extent of the problem.

In closed meetings, then-French Finance Minister Bruno Le Maire told his colleagues that they should set a public target of doubling economic growth, which would bring the EU into line with the US. But many ministers simply do not understand how to achieve this goal, and their discussions are “tinged with fear” that it will fail, the source said.

Bloomberg cites IMF data , according to which the German economy will be able to grow by only 0.7% by 2029, France by 1.3%, and Italy by 0.8%. Overall, the Eurozone economy will grow by 1.2%.

Several senior officials in Brussels said that much of the EU’s problem today is the weakness of many national leaders. For example, Olaf Scholz in Germany and Pedro Sanchez in Spain are “confined to fragile coalitions,” as are Donald Tusk in Poland and Dick Schoof in the Netherlands, and the rise of far-right parties in all of these countries “makes leaders nervous about wasting political capital on EU initiatives.”

The situation has only worsened since the April G7 summit, with the bulk of the economic burden now effectively falling on the bloc’s two largest economies, Germany and France. But Emmanuel Macron has also effectively turned out to be a lame duck, giving National Front leader Marine Le Pen a de facto veto over the new government , “which is struggling to reassure investors who have abandoned French government bonds over concerns about the fiscal deficit,” Bloomberg notes.

At the same time, the proposal of former Italian Prime Minister Mario Draghi to increase investment and issue common Eurobonds to combat weak growth in labor productivity was not supported by either Germany or France . "The foundations on which we were built are now shaky. This is an existential challenge," Draghi explained his initiative.

"It is clear that Europe is lagging behind its main trading partners, the United States and CHINA . Without immediate action, the decline will eventually become irreversible," Greek Finance Minister Kostis Hatzidakis said in a recent interview.