Narcissus

The European illusion of prosperity

Caravaggio – Narcissus, 1594/1596

For years now, talk of Europe being “in a good place” has circulated among officials and central bankers. Press releases and policy statements repeat the mantra with near-religious conviction. But as any honest look at the facts reveals, the continent’s economy is much closer to a dangerous flat spot—a limbo where growth is elusive, labor markets stagnate, and optimism masks underlying trouble. The numbers tell a different story than the one policymakers want to believe, and understanding why requires looking past the headlines and into the substance of what’s actually happening beneath the surface.

Recent data paints a picture of a continent caught between complacency and crisis. Employment growth has steadily declined, GDP advances are barely discernible, and consumer confidence remains brittle. Across the Atlantic, the United States faces similar headwinds. In Asia, China’s investment engine has stalled. Even Switzerland, long regarded as a haven of economic stability, has contracted sharply. These aren’t isolated problems in different regions—they’re symptoms of a synchronized global slowdown that official rhetoric has consistently downplayed.

European Employment Growth Trending Toward Stagnation

Employment Change YoY In the Euro Area decreased to 0.50 percent in the third quarter of 2025

The most troubling signal comes from Europe’s labour market, where employment gains have flattened to historically dangerous levels. Eurostat’s preliminary estimates show employment ticked up just 0.1% quarter over quarter in the third quarter of 2025, while year-over-year growth reached only 0.5%. This matters enormously because history has taught us a clear lesson: European employment rarely drops below 1% annual growth without a recession following shortly. It happened in 2008, in 2001, and during the double-dip slump of 2011–2012. The pattern is consistent enough that it functions as a reliable warning system.

When employment growth reaches what economists call the “flat beverage curve”—that dangerously narrow zone where jobs are neither being created nor destroyed en masse, but genuine opportunity stagnates—the economy enters treacherous territory. Young people, typically the first to suffer, see no meaningful improvements in their job prospects. Wage growth stalls. Social stability begins to erode. Yet current growth rates suggest Europe is already approaching or has already reached this critical threshold.