Europe's income growth moved east

The American shorthand says that Europe stopped growing. It did not. Over the two decades to 2024, real adjusted household income per person rose by 134% in Romania, 95% in Lithuania and 91% in Poland. The largest gains in the European Union were concentrated in countries that entered the period much poorer than the west.

This is a household measure, which matters. GDP can grow without leaving families much better off, and it can flatter economies where multinational accounting is unusually large. Eurostat starts instead with income after taxes and cash transfers, then adds social transfers in kind such as publicly provided health care and education. It adjusts for inflation and population. In other words, the chart is closer to the resources people can actually use than a league table of national output.

The EU aggregate rose by 22%. That is respectable, not spectacular. The country ranking explains why a single European average conceals so much. Latvia, Estonia, Slovakia and Hungary also recorded gains above 60%. Germany rose 24%, France 21% and Spain 11%. Greece and Italy were the only countries in the comparison to finish lower than in 2004, down 5% and 4% respectively.

Poorer countries often grow faster because they can adopt existing technologies, attract capital and move workers into more productive firms. This chart cannot tell us how much of the catch-up came from EU membership, domestic reform, investment or migration. Nor does a national average show who received the gains. Romania’s 134% increase began from a low base; it does not mean Romanian households are now the richest in Europe.

But starting low does not make convergence automatic. The European project is often judged from Paris, Berlin and Rome, where the recent record is much less convincing. Look from Warsaw, Vilnius or Bucharest and the same period appears different: a large income gap proved movable.

That should change which countries Europe studies. The west remains the continent’s productivity and capital centre, but it does not have a monopoly on lessons. The next growth programme should ask what helped eastern households catch up, and why those mechanisms stopped working in Italy and Greece.