As Europe navigates the complexities of economic disparity in 2025, the cost of living has emerged as a defining factor in shaping the continent’s future. With data from a recent Euronews report , we dive into which countries are the cheapest and most expensive, exploring how these trends could transform a nation into a developing country within Europe.
Price Level Insights
According to the Euronews analysis, price levels across 36 European countries are measured using price level indices based on purchasing power parities (PPPs). These indices reveal a dramatic range: Switzerland tops the list as the most expensive at 184% of the EU average, while Turkey is the cheapest at 47%—a staggering 3.9-fold difference. Within the EU, Luxembourg leads with prices 51% above the average, while Bulgaria and Romania lag at 57%.
Category-Specific Variations
The report highlights significant disparities across categories. Alcohol and tobacco prices in Ireland soar to 205% of the EU average, compared to Bulgaria’s 69%. Restaurants and hotels in Denmark reach 148%, while Bulgaria again records the lowest at 53%. These variations underscore how lifestyle costs shape economic perceptions and living standards.
The Cheapest Nations: A Path to Development?
Countries like Bulgaria, Romania, and Turkey, with price levels well below the EU average, offer a lower cost of living that could attract investment and migration. Bulgaria’s affordability—57% of the EU average—pairs with a productive workforce, where hourly labor costs are just €11, as noted by economist Filippo Pallotti. This low-cost environment could foster industrial growth, potentially elevating these nations’ status. However, low wages and limited productivity in non-tradable sectors (e.g., hospitality) might hinder long-term development unless paired with infrastructure and education investments.
Romania mirrors this trend, with similar price levels and a burgeoning tech sector. Yet, the absence of income data in these indices masks whether residents can truly afford a higher quality of life. Turkey, outside the EU, benefits from a 53% lower cost base, but political instability and currency fluctuations pose risks to its development trajectory.
The Expensive Giants: A Burden or a Strength?
At the other end, Switzerland (184%) and Luxembourg (151%) reflect high productivity and wages—€55 and €50 per hour, respectively. Pallotti explains that gains in tradable sectors like tech drive economy-wide wage increases, even in less productive areas like real estate. This high-cost model supports a high standard of living but could deter businesses seeking lower operational costs, potentially slowing growth if not balanced with innovation.
Denmark and Ireland, with price levels at 148% and 205% for specific categories, face similar challenges. Their high costs reflect strong economies but may strain lower-income households, pushing some toward cheaper neighbors like Poland or Hungary.
Economic Divergence Within the EU
The cost-of-living gap could widen economic disparities among EU members. Cheaper nations like Bulgaria and Romania might see an influx of businesses and workers, boosting their GDP but straining public services. The Euronews report notes that incomes aren’t factored into price comparisons, meaning high-cost countries like Luxembourg might still offer better purchasing power, while low-cost Bulgaria’s residents struggle despite lower prices.
Migration and Labor Market Shifts
Affordable living could trigger internal migration, with workers moving from high-cost Germany or France to Bulgaria or Romania. This shift might alleviate pressure on Western labor markets but could lead to brain drain in Eastern Europe, where skilled workers seek better wages elsewhere. The EU’s free movement policy amplifies this dynamic, potentially reshaping regional economies.
Policy Implications
The European Commission may need to address these disparities through targeted subsidies or infrastructure funding. High-cost nations might push for harmonized price controls, while developing countries could demand wage support to match their lower costs. Failure to balance these could fuel tensions, challenging the EU’s cohesion.
Beyond the Numbers
The establishment narrative paints high-cost countries as prosperous and low-cost ones as underdeveloped, but this oversimplifies reality. Productivity gains in Switzerland or Denmark don’t guarantee sustainability if debt or aging populations erode their edge. Conversely, Bulgaria’s low costs could be a springboard for growth if leveraged with modern technology and education—factors Pallotti identifies as key to productivity. The lack of income data in the Euronews report leaves a critical gap, suggesting that raw price levels alone don’t define development.
A Developing Future?
As of July 2025, Europe’s cost-of-living landscape reveals a continent at a crossroads. Cheaper countries like Bulgaria, Romania, and Turkey hold potential to evolve into developing economic hubs, driven by affordability and strategic investment. Meanwhile, high-cost leaders like Switzerland and Luxembourg must innovate to maintain their edge. For EU member states, the challenge lies in managing these shifts to prevent divergence, ensuring that cost of living becomes a catalyst for growth rather than a divider. Stay tuned as this economic saga unfolds!
