Europe must prepare for worst-case scenarios
Recent global shocks, including the COVID-19 pandemic and Ukraine war, have impacted Europe perhaps more than any other continent. So much so that the period since 2020 is now sometimes seen as a new time of troubles.
However, even bigger political and economic shocks may be to come during the rest of the decade. This view was outlined on Tuesday by Belgian Prime Minister Alexander De Croo, whose country currently holds the EU’s rotating presidency.
Following Donald Trump’s victory on Monday in the Iowa Republican caucus, De Croo warned that, “if 2024 brings us ‘America First’ again, it will be more than ever Europe on its own.” However, he went on to say that Europeans “should not fear that prospect. We should embrace it by putting Europe on a more solid footing — stronger, more sovereign, more self-reliant.”
What De Croo highlights here is the need for the EU specifically — and possibly Europe at large — to use 2024 to plan ahead for what could be another tumultuous period. With regard to Trump, there are concerns in Europe that, if he gets a second term as US president, he could try to withdraw the country from NATO, which underpins European security, and end its support for Ukraine in the war against Russia.
There is a need for the EU to use 2024 to plan ahead for what could be another tumultuous period
However, the range of economic and political issues of concern goes well beyond Trump, meaning key European decision-makers are looking ahead to a more holistic range of issues in the period to 2030. This period covers not only the next term of the European Commission, but also the next UK parliament, the US presidency, a Russian presidential term and also the current term of Chinese President Xi Jinping.
In thinking through these 2030 scenarios, the core uncertainties likely to have the most impact in shaping Europe’s future at a genuinely historic time are at least twofold. A first key question is whether the geopolitical context will worsen or improve for Europe in the period to 2030. Following Russia’s 2022 invasion of Ukraine, much depends on the future foreign policy not just of Moscow, but also other nations, including the US and China.
A second question is whether the EU and Europe more broadly can boost their economic competitiveness and close the growth gap with the US. In 2008, the EU’s economy was larger than that of the US: $16.2 trillion versus $14.7 trillion. By 2022, however, the US economy had grown to more than $25 trillion, whereas the combined EU and post-Brexit UK economies had only reached $19.8 trillion. As Christian Ulbrich, the CEO of global real estate services firm JLL, has said: Europe’s “wealth is melting away at rapid speed” and there is a pressing need for key reforms.
Much uncertainty remains about the overall fortunes of the EU in the years ahead and it is particularly hard to ascertain the future economic trajectory of the bloc. What is for sure, however, is that the geopolitical context outside of Europe is unlikely to improve significantly from where it is today — and it may even grow significantly worse. This is probable, whether or not Trump wins the 2024 US presidential election.
The geopolitical context outside of Europe is unlikely to improve significantly from where it is today
In today’s increasingly multipolar world order, the revisionist powers of Russia and China are flexing their muscles. This worries many politicians and, only last month, German Defense Minister Boris Pistorius warned of the possibility of further Russian aggression in Europe by 2030. International Monetary Fund Deputy Managing Director Gita Gopinath added that the world is heading toward “cold war two.”
Much more uncertain, however, is whether Europe will be able to recover its competitive economic advantage vis-a-vis the US economy and other world powers in the next five years. This may be possible if the shocks of recent years are not repeated, but there is a significant chance of further turbulence, especially in a more challenging geopolitical context. The problem, as Francois Geerolf of the French Observatory of Economic Conditions asserts, is that, “with each crisis, the eurozone permanently loses a few points of growth to the United States.”
But it remains possible that the next few years could see a combination of faster European economic growth and a more challenging international context. This might give rise to a type of “Fortress Europe” scenario, in which stronger economic growth provides significant new resources to pursue strategic autonomy, which would help enhance EU security. This could include an embryonic EU military — a key project championed by European Commission President Ursula von der Leyen when she was German defense minister.
However, it is also plausible that, by 2030, a more challenging international context is combined with stagnating European economic growth. This might see the EU lack the huge financial resources needed to pursue an expensive strategic autonomy pathway.
Taken together, the period to 2030 will therefore be another highly uncertain one for Europe. While the continent can hope for the best, it urgently needs to build resilience to prepare for the worst so as not to get caught off guard by the economic and political perils that may lie ahead.
- Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.