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Four scenarios for Europe: the conclusion

Economic Comment

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To overview page future scenarios for Europe

  • The dismantling of European integration or parts thereof may involve high costs
  • The ‘further integration’ scenario is the most attractive from an economic point of view, but this requires the further transfer of powers to European level
  • The ‘disintegration’ scenario involves by far the most economic damage and this will be felt rapidly
  • The ‘two-speed’ scenario also involves costs in the short term, but the core union will on balance be better off over time
  • It is important that there is openness regarding the economic advantages and disadvantages when making decisions

The upshot of the above is that the dismantling of all or part of European integration may involve high economic costs. In the ‘further integration’ scenario, cooperation increases across the board. This will on balance be beneficial in economic terms, although this scenario also involves financial costs in the form of support to other Member States and possibly losses on support previously provided. The political cost will be less national autonomy. This will indeed be transferred to Europe in several areas, a process that currently enjoys scant popular support. Whether political support for this will return if the economy clearly improves is debatable.

The ‘disintegration’ scenario is extremely expensive in economic terms and many of its effects could occur rapidly. The potential political advantage of this scenario in the form of a return to full autonomy for the Member States will thus be at extremely high cost in terms of growth, unemployment and capital losses. At the same time, over time it may turn out that the political gain is also disappointing, since small countries simply have to take account of the rest of the world.

The costs of the ‘two-speed’ scenario, although still substantial, will be less than in the ‘disintegration’ scenario. This applies mainly to the countries in the core eurozone, which will benefit from a deepening of cooperation. Their economies will perform better over time and will be less hindered by the failure of countries that remain outside the core euro to keep up. This latter group, free from the yoke of the euro, will find it increasingly difficult to continue their relationship and it will also be increasingly difficult for them to join the core eurozone over time. In several countries, the political ‘gain’ of increased autonomy will overshadowed by a growing awareness that the problems that they face are not due to ‘Europe’, but to their own policy failings. In most cases however, this awareness will come too late.

Of course, there are other potential scenarios. The actual outcome will fall somewhere between the extremes we have described above. The one thing that is beyond doubt in our view is that developments in the coming years will move along the axes of ‘more or less Europe’ and ‘more or less cooperation’.

Table 1: Overview of the economic consequences for the Netherlands in each scenario
Table 1: Overview of the economic consequences for the Netherlands in each scenarioSource: Rabobank

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Author(s)
Wim Boonstra
RaboResearch Global Economics & Markets Rabobank KEO
+31 6 5128 1405
Martijn Badir
RaboResearch Netherlands Rabobank KEO
+31 88 726 7864
Elwin de Groot
RaboResearch Global Economics & Markets Rabobank KEO
+31 6 1389 2916
Carlijn Prins
RaboResearch Netherlands Rabobank KEO
+31 6 1929 6455
Daniel van Schoot
RaboResearch Netherlands Rabobank KEO
+31 88 726 7864
Maartje Wijffelaars
RaboResearch Global Economics & Markets Rabobank KEO
+31 6 2257 0569
Nic Vrieselaar
RaboResearch Netherlands Rabobank KEO
+31 6 2216 2257

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