In this edition of the Economic Brief, we examine three pressing themes shaping the global economic narrative: the erosion of traditional safe havens in financial markets, the widening productivity gap between Europe and the United States, and the regulatory trade-offs that could define Europe’s future.
Debasement: a crisis of confidence in safe havens
For over a year, financial markets have shown signs of what analysts call the ‘debasement trade’, a growing distrust of assets historically considered safe during turbulent times, such as US Treasuries and the dollar. This shift reflects deeper doubts about governments’ ability to honour their debts and could mark a new chapter in the international monetary system, which has relied on the dollar’s dominance since the end of the gold standard in 1971.
Gold and foreign exchange
Sources: IMF, Accuracy
Key symptoms of this trend include:
- a weaker dollar, down more than 10% since early 2025;
- a steepening of sovereign yield curves, signalling long-term risk concerns;
- rising prices for safe-haven alternatives like gold and even certain cryptocurrencies.
There are structural causes behind these symptoms. We could cite the strategic shift by the US, leveraging its dominance to exert pressure on rivals; the growing scepticism towards fiscal policies in advanced economies; or even the emergence of a multipolar world, raising fears of instability rather than balance.
While cyclical factors and the tech-driven market boom still provide continuity, the Trump administration’s stance amplifies this rupture. The transition is underway, but some turbulence and misread signals are to be expected.
Productivity: the transatlantic innovation gap
Recent research from the Federal Reserve underscores a stark reality: if the UK, France and Germany had matched the US pace of innovation embedded in investment since 2000, their productivity would be 30–100% higher, and GDP up by 4–11%. The gap is not about investment volume but its technological quality and the speed of adoption, areas where Europe lags structurally.
Real GDP per capita
Hourly productivity
Sources: FED, Accuracy
Why? Analysts point to:
- regulatory constraints that slow entrepreneurial agility;
- labour protections that raise the cost of failure, discouraging risk-taking and radical innovation;
- R&D redirected towards mature products, limiting breakthrough advances.
The Draghi Report (2024) reignited debate on competitiveness, but the challenge remains: how can Europe adapt its social model to meet the need for flexibility and innovation?
The regulatory dilemma: productivity vs democracy?
Calls for deregulation are growing louder, especially from the tech sector, which frames rules like the EU’s AI Act as barriers to progress. Yet, these regulations serve critical purposes, from safeguarding individual freedoms to preventing undesirable technological excesses.
Europe faces a delicate balancing act: if it loosens regulations too much, it risks undermining democratic safeguards; if it maintains their rigidity, it risks falling further behind in productivity and competitiveness.
Ultimately, Europe may be structurally bound to slower growth unless it finds a way to reconcile innovation with its core values.