European Central Bank (ECB) Executive Board member Isabel Schnabel stated in a speech at an economic conference in Vilnius, Lithuania, on November 13, 2026, that the true challenge facing the European economy is not mere decline, but a lack of ‘economies of scale’ to translate research and innovation into powerful growth engines. Presenting detailed data on the income gap with the U.S. and growth imbalances within the eurozone, Schnabel called for the introduction of a ’28th regime’—a single regulatory framework that would allow regional companies to operate seamlessly across all 27 member states.
Reinterpreting the Income Gap with the U.S.: “Reflecting Differences in Working Hours and Inequality Structures”
Schnabel shared a micro-structural analysis regarding the phenomenon where real GDP per capita in the European Union (EU) remains lower than in the U.S. Statistical data shows that U.S. workers work approximately 40 more days per year than their eurozone counterparts. If one assumes European workers provided the same labor hours as those in the U.S., two-thirds of the real GDP per capita gap—or 21%—would be immediately resolved. In other words, a significant portion of the income gap is a result of institutional and social choices favoring longer vacations and shorter work weeks, rather than a lack of productivity.
Furthermore, while the top 10% of income earners in the U.S. account for approximately 37% of post-tax national income compared to 27% in the eurozone, Schnabel emphasized that Europe has chosen quality of life—including higher social security, equitable income distribution, and longer life expectancy—at the cost of the concentrated growth seen in the U.S. ICT sector. However, she acknowledged that since the growth rate of hourly labor productivity in the eurozone has relatively slowed over the past 30 years, long-term productivity improvement must remain Europe’s top policy priority.
Growth Reversal in Southern Europe and German Stagnation
The speech also shed light on structural shifts within the eurozone using specific figures. Schnabel analyzed that Southern European countries such as Spain, Greece, and Portugal, which suffered from austerity and high unemployment during the financial and fiscal crises a decade ago, have now emerged as new pillars of growth, recording potential growth rates exceeding the eurozone average. For instance, Spain has taken the lead in the transition to renewable energy, lowering wholesale electricity prices and positioning itself as a core hub for energy-intensive future industries.
Conversely, the German economy has experienced severe stagnation, with real GDP per capita declining by 0.5% from 2019 to 2024. Schnabel pointed out that Germany’s slowdown is a mismatch rooted in weak domestic consumption and investment rather than just a decline in export competitiveness. Germany’s current account surplus significantly exceeds the optimal level of 1.2% of GDP, and she diagnosed that capital from both large corporations and ‘Hidden Champions’ is increasingly flowing abroad instead of into domestic investment.
Urging Stimulus of German Domestic Demand Through Bold Public Investment and Structural Reform
To overcome these structural limitations, Schnabel emphasized the need for bold fiscal spending and deregulation. She evaluated the German government’s recent large-scale public investment policies—aimed at infrastructure expansion, the green and digital transition, and strengthening defense capabilities—as the correct steps to stimulate domestic demand and expand supply capacity.
She added that because Germany still possesses a powerful industrial base, holding nearly half of the world’s ‘Hidden Champions,’ a combination of appropriate public investment and groundbreaking administrative simplification could entice private capital back into the country and create positive spillover effects for the entire eurozone.
The ‘28th Regime’: A Proposal to Overcome Limits of the Single Market
Schnabel emphasized that what Europe lacks is not excellent technology, talent, or research results, but the ‘scale’ to grow these into large-scale enterprises. While the EU produces more academic papers than the U.S. and sees countless startups founded every year, these firms often falter because they cannot grow into global giants due to regulatory frameworks fragmented across 27 individual countries.
As a radical solution, she actively proposed the introduction of a ’28th regime’—a single legal framework that exists alongside the existing 27 national legislations, allowing regional companies to apply the same rules to business operations across the entire 27-country market. She predicted that establishing a single rulebook would dramatically improve corporate financing and cross-border operations, helping to build an independent ‘Made in Europe’ brand.
Source of the Presentation and Key Arguments
The major analyses and policy proposals from this speech were released as a full transcript on the official European Central Bank (ECB) website on November 13, 2026. As these remarks represent the policy diagnosis of an individual Executive Board member based on one official ECB release, whether this leads to actual legislation by the EU Commission or at the member-state level remains to be seen based on future discussions among stakeholders.
- Date and Location: November 13, 2026, Vilnius, Lithuania (Bank of Lithuania Economic Conference)
- Key Quantitative Data: Two-thirds of the U.S.-EU income gap is attributable to a difference in working hours of up to 40 days per year; Germany’s real GDP per capita fell by 0.5% between 2019 and 2024.
- Major Policy Proposals: Introduction of the ’28th regime’ as a single legal framework to overcome the fragmentation of 27 countries; expansion of public fiscal spending for domestic demand and investment in Germany.
Official Source:
– Official ECB Speech Disclosure: https://www.ecb.europa.eu/press/key/date/2026/html/ecb.sp261113~3883f1f187.en.html