Europe will not disintegrate and will remain a great power in 2030, but the key question is whether the EU will punch its collective weight in the future, says a recent US intelligence report which draws three possible scenarios for the Union – decline, collapse or renaissance.
The 160-page report published on 7 December by the US National Intelligence Council is called “Global trends 2030: Alternative worlds”.
The stakes are high both politically and economically for Europe and the EU’s future is “very uncertain”.
“Although there is no consensus on the region’s future shape or role, our experts agree that it will not resemble today’s Europe,” reads the report of the NIC, which provides long-term strategic planning for the American intelligence community.
On top of the current eurozone crisis, the European economy is suffering from “enormous structural woes,” the report says. It says productivity has been declining compared to other developed economies in the last 15 years; spending on R&D remained low; European governments had “grown very large” relative to their economies; and there was a trend towards an increased age imbalance between working and non-working citizens.
Beginning in 2010, EU leaders have been introducing reforms and new instruments to address the eurozone crisis, but more integration probably will be required to overcome the debt crisis and address structural problems, the authors write.
According to the report, a genuine “leap forward” in integration would imply massive transfers of sovereignty to central authorities, with the accompanying loss of autonomy which is increasingly unpopular with European publics.
Three scenarios are outlined for Europe and its international role in 2030.
The report stresses that a collapse scenario has a low probability of occurring, but would prompt international risks.
“In this scenario, domestic firms and households respond to indications of an imminent currency regime change by rapidly accelerating withdrawal of euro deposits from domestic financial institutions. Following contagion to other member states and economic damage to the core countries, the euro would be the first casualty,” authors point out.
An unruly Greek exit from the eurozone could cause collateral damage, eight times bigger than the Lehman Brothers bankruptcy, provoking a wide-ranging crisis for EU’s future, the US analysts write.
Such a scenario would immediately see the EU insitutions as a “collateral victim.” Meanwhile, the single market and freedom of movement across Europe would be jeopardised by the reinstatement of capital and border controls.
“Under such a scenario, severe economic dislocation and political fracture would lead to a breakdown in civil society. If the collapse were sudden and unexpected, it would very likely trigger a global recession or another Great Depression,” the report says.
EURACTIV asked the European Commission to comment on the report about the magnitude of a hypothetical Greek exit from the Eurozone.
Spokesperson Simon O’Connor answered by quoting Economic and Monetary Affairs Commissioner Olli Rehn who recently said that “anyone who is still contemplating such a scenario is seriously behind the curve”.
In a slow decline scenario, Europe manages to escape from the worst aspects of the current crisis, but fails to undertake the necessary structural reforms, the reports’ authors argue.
“As member states endure years of low economic growth, they stick together in order to avoid major political and economic disruptions. EU institutions hang on, but public discontent remains high. The euro survives, but it does not rival the dollar or the yen,” reads the report.
Given years of low economic growth, Europe’s international presence is diminished and countries would re-nationalise their foreign policies.
According to the third scenario, European leaders agree to a “federalist leap.” People support such a step, given the imminent risks involved maintaining the status quo.
A more federal Europe is seen as taking shape with only a core group of eurozone countries with some choosing to opt out or adopt a wait-and-see policy.
“Over time, despite the existence of a multi-speed Europe, the single market would still be completed and a more united foreign and security policy agreed upon with enhanced elements of European democracy. European influence would increase, strengthening Europe’s role and that of multilateral institutions on the world stage,” the US authors write.
Diffusion of power
Regarding the rest of the world, the report says there will not be any hegemonic power. Power will shift to networks and coalitions in a multipolar world.
By 2030, Asia will have surpassed North America and Europe combined in terms of global power, based upon GDP, population size, military spending and technological investment.
China alone is seen as the country with probably the largest economy, surpassing that of the United States a few years before 2030. In addition to China, India and Brazil, regional players such as Colombia, Indonesia, Nigeria, South Africa and Turkey will become especially important to the global economy. Meanwhile, the economies of Europe, Japan, and Russia are likely to continue their slow relative declines.
But the shift in national power may be overshadowed by an even more fundamental shift in the nature of power, the report says.
“Enabled by communications technologies, power will shift toward multifaceted and amorphous networks that will form to influence state and global actions. Those countries with some of the strongest fundamentals – GDP, population size, etc. – will not be able to punch their weight unless they also learn to operate in networks and coalitions in a multipolar world,” the report adds.
A future of scarcity?
The US analysts say that mankind is not necessarily headed into a future of scarcities, but policymakers and their private sector partners will need to be proactive to avoid such a future.
That is what’s going to happen: Demand for food will rise at least 35% percent by 2030 while demand for water will soar 40%. Nearly half of the world’s population will live in areas experiencing severe water stress. Fragile states in Africa and the Middle East will suffer, but China and India will too.
“Many countries probably won’t have the wherewithal to avoid food and water shortages without massive help from outside. Tackling problems pertaining to one commodity won’t be possible without affecting supply and demand for the others,” the report insists.