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Four scenarios for Europe: Introduction of the scenarios

Economic Comment

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To overview page future scenarios for Europe

  • The base scenario, which we also call ‘muddling through’, offers scant prospect of significantly better times
  • There is a real danger that the lack of cooperation between Member States will result in the EU falling apart
  • Even if cooperation between Member States improves, there are still various directions in which Europe could go
  • Accordingly, we have defined three other future scenarios for Europe besides the muddling through scenario. These are: ‘further integration’, ‘disintegration’ and ‘two-speed’

The rest of this article will first of all present four scenarios, generated mainly on the basis of expected developments in the coming years (2017 – 2021), since we think that the most important political decisions that determine the future of our continent will be made during this period. The story lines are constructed on two axes, firstly ‘more or less cooperation’ and secondly ‘more or less Europe’. The figure below shows this in graphic form. The ‘muddling through’ scenario (below right) shows the present situation. It describes a world in which the EU strives to maintain its current status in a situation where cooperation between Member States is becoming increasingly difficult due to deep-seated differences of opinion on many issues. The ‘disintegration’ scenario (below left) shows a development in which cooperation between the Member States continues to deteriorate, while the trend towards ‘less Europe’ continues unabated and the European institutions gradually break up. In the ‘further integration’ scenario (above right), cooperation between the Member States improves and there is general agreement to transfer further certain powers to the European level. In the ‘two-speed’ scenario, cooperation between the core Member States improves, but at the same time it is decided to return more powers to national governments where possible and to turn the European Commission into an executive body (more than it currently the case). In this ‘two-speed’ scenario, some Member States may leave (controlled) to go their own way, outside the Eurozone, but still as a member of the EU and part of the Single Market.

We are aware of the limitations of this analysis. While Europe is large and important, developments in Europe play out in a much larger global context, in which developments in the United States and China significantly affect economic developments in Europe as well (Rabobank, 2016). However, although developments outside Europe are also important, we believe that the choices of the European population and its leaders will have the greatest effect on our future prosperity, certainly in the long term. This is not only because the lion’s share of our international trade is also with the rest of the EU, but also because the trade agreements of its member states with the rest of the world are arranged through the EU. For this reason, world trade outside the EU would also suffer if the world’s largest trading block, the EU, were to disintegrate. This is why the rest of the world is only mentioned in our scenarios to a limited extent.

Figure 1: Four scenarios for the future of Europe
Figure 1: Four scenarios for the future of EuropeSource: Rabobank 

What are scenarios?

The scenarios described here are not predictions or expectations. They are also not an à la carte menu. They are four story lines developed to extremes, whereby each scenario describes qualitatively and in general terms what the world could look like if these developments continue unchecked. They are not detailed calculations, rather they are conceptual frameworks to encourage ‘out-of-the-box’ thinking and provide some kind of order in these turbulent and uncertain times. The scenarios also focus mainly on the economic consequences; the political advantages and disadvantages of the developments we describe is outside the scope of our analysis.

The way in which readers can use the scenarios varies for each target group. Business owners can identify the quadrant in which Europe is situated on the basis of developments they observe and which way it is going. They can use the scenarios as a factor in the determination of their business strategy. Citizens can use the scenarios to get a better idea of the economic costs and benefits of the various options for Europe put forward by the politicians and make a better-informed decision when casting their votes. Developments in the financial markets will vary sharply in some of the scenarios, so this is also relevant to investors. Policymakers and politicians will have a conceptual framework for a better understanding of the economic consequences of their choices for the future of European cooperation and thus avoid decisions involving unnecessarily high costs.

We now turn to the four scenarios. The main items of attention and economic consequences for the Netherlands of each scenario are briefly described in a box. This is followed by an analysis of the potential economic transmission channels whereby these may occur and any policy options available to policymakers to adjust the situation. We finish with a few conclusions.

Contributors

The following persons contributed to this document: Martijn Badir, Wim Boonstra, Elwin de Groot, Carlijn Prins, Daniël van Schoot, Harry Smit, Nic Vrieselaar and Maartje Wijffelaars.

Editorial: Barbara Baarsma and Wim Boonstra (final editing).

Graphic design: Maartje Wijffelaars, Christel Frentz

All authors work as researchers at RaboResearch.

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Author(s)
Wim Boonstra
RaboResearch Global Economics & Markets Rabobank KEO
+31 30 21 62666
Martijn Badir
RaboResearch Netherlands Rabobank KEO
+31 30 21 62666
Elwin de Groot
RaboResearch Global Economics & Markets Rabobank KEO
+31 30 21 69012
Carlijn Prins
RaboResearch Netherlands Rabobank KEO
+31 30 21 60033
Daniel van Schoot
RaboResearch Netherlands Rabobank KEO
+31 30 21 62666
Nic Vrieselaar
RaboResearch Netherlands Rabobank KEO
+31 6 2216 2257
Maartje Wijffelaars
RaboResearch Global Economics & Markets Rabobank KEO
+31 30 21 68740

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