A substantial slowdown in economic growth has been observed in many European countries over the last 10-15 years. In the same period an opposite movement has taken place in other OECD economies, most notably in the United States. Building on recent empirical analysis, it is argued in this paper that the low rates of GDP growth in Europe are the result of insufficient labour utilisation as well as a notable slowdown in labour productivity. The latter reflects in part a lack of capital accumulation, not so much in the relative size of physical capital accumulation but rather in the insufficiency of investment in ICT as well as in human capital and R&D, and especially a considerable deceleration of total factor productivity. The role played by regulatory conditions, both in the product and in the labour markets, is emphasised as a possible important factor in curbing innovation and in making it difficult for innovative European enterprises to grow, if and when successful.