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  1. 1. ISA Region Report West Europe July 2010 Edition Name Here
  2. 2. Table of Contents Current Events: Economic Outlook: • Recent Political Events • Economic Overview • Recent Economic Events • GDP Growth Forecasts • Other Recent Events • Keys to Regional Economic Growth • Inflation Forecasts Political Outlook: • Regional Exchange Rate Forecasts • Labor Force Overview • Regional Political Overview • Foreign Investment Outlook • Recent Elections or Government Changes • Key Regional Economic Issues • Upcoming Elections • Regional Economic Risk Outlook • Key Regional Disputes or Conflicts • Potential Conflicts • Regional Military Outlook Demographic & Environmental Outlook: • Key Regional Political Issues • Population Overview • Regional Political Risk Outlook • Population Characteristics • Development of Leading Urban Centers • Key Demographic Issues • Key Environmental Issues • Regional Demographic and Environmental Risk Outlook Name Here
  3. 3. Current Events and Recent Changes Overview Name Here
  4. 4. West Europe: Recent Political Events and Changes Key Political Events and Changes: • Early parliamentary elections in the Netherlands proved to • Polls taken in many European countries indicated a definite be highly inconclusive, with no single political party winning shift to the political right across Europe, with support for right- more than 31 seats in the 150 seat parliament. The liberal wing parties growing across the region. VVD party won the largest number of seats (31) in the election, followed closely by the Labor Party (30). Notably, • There were major protests across Europe against the the far-right Party for Freedom that is led by controversial austerity measures being undertaken by many European politician Geert Wilders finished in third place, winning 24 governments to deal with the growing debt crisis in Europe. seats in the parliament and calling for a position in the next coalition government. After the election, Prime Minister • Finland’s parliament choose Mari Kiviniemi to become the Balkenende resigned as the head of the Christian country’s next prime minister, replacing Prime Minister Matti Democratic party after they suffered a crushing defeat in Vanhanen who resigned due to his need for leg surgery. these elections. • Ireland’s Prime Minister Brian Cowen and his government survived a no-confidence vote in the parliament following • Belgium’s early parliamentary election was dominated by criticism of his government’s handling of Ireland’s banking separatist parties in the Flemish area of the country, led by crisis. the New Flemish Alliance that won 17.4% of the vote and 27 seats in the 150 seat parliament. Other Flemish separatist • A deal between the United States and the Swiss bank UBS parties also won a significant share of the vote, with the far- regarding suspected tax cheats was approved by the Swiss right Vlaams Belang winning 7.8% of the vote and 12 seats parliament, but could yet be delayed by a number of legal in the parliament. proceedings. • Belgian preparations to take over the rotating six-month presidency of the European Union in July 2010 were severely impacted by the collapse of the previous coalition government that forced these early elections to take place. Name Here
  5. 5. West Europe: Recent Economic Events and Changes Key Economic Events and Changes: • The German government unveiled a $100 billion (80 billion • The British government unveiled a new austerity budget that euro) deficit reduction program that will cut many social will cut public spending in a number of sectors, while raising welfare programs and make major reductions in defense the country’s value-added tax (VAT) rate from 17.5% to 20% spending. in 2011. The aim is to eliminate Britain’s structural deficit within five years. • The French government’s plans to raise France’s retirement • Ireland’s GDP grew by 2.7% on an annualized basis in the from 60 to 62 led to protests and strikes in Paris and other first quarter of 2010, the first positive growth in Ireland since cities in France. This was part of a series of austerity late 2007. measures by the French government that were designed to tackle that country’s growing debt problem. • Two new reports into the banking crisis in Ireland in recent years criticized the Irish government’s handling of the crisis • Spain’s parliament approved a $18.3 billion (15 billion euro) as well as Ireland’s financial regulation system. austerity package. • Finland remained in the grips of its long recession as GDP • In Italy, the government enacted new measures to crack contracted by 0.8% on an annualized basis in the first quarter down on tax evasion in Italy that is estimated to cost the of 2010. government $122 billion (100 billion euro) a year. • A new study revealed that Denmark had the highest tax-to- GDP ratio in the European Union. Name Here
  6. 6. West Europe: Other Recent Events and Changes Other Key Events and Changes: • British oil giant BP’s future was called into question following a massive oil spill at a deepwater oil rig owned by BP in the Gulf of Mexico. BP admitted that it was ill-prepared for such a disaster and it faced the prospect of massive cleanup and recovery costs as well as the potential for crippling lawsuits in the United States. • Sweden’s parliament narrowly approved a plan to replace all ten of Sweden’s existing nuclear reactors with new ones. However, the center-left opposition announced that they would rescind this law if they win September 2010’s national election. • In Belgium. police raided a number of raids on properties belonging to the Roman Catholic Church as part of an investigation into the sexual abuse of children by members of the church. These raids were condemned by the Vatican. • In Spain, the Senate approved a bill that would ban the wearing of the burqa in Spain by a margin of 131 to 129. • Portugal’s Nobel Prize-winning author Jose Saramago died at the age of 87. Name Here
  7. 7. Regional Political Outlook Name Here
  8. 8. Belgium: Most Recent Elections Parliamentary Election – June 2010 Summary of the Last Elections: Results: Belgium held early parliamentary elections after another coalition government collapsed due to linguistic disputes in 2010. • This election was held just one month before Belgium assumed the rotating six-month presidency of the European Union. Parties that advocate greater autonomy, or even independence, for the Flemish area of Belgium dominated the election in the Flemish region. • The New Flemish Alliance won the largest number of seats in the parliament in these elections. • In addition, the far-right Vlaams Belang won 12 seats. In the French-speaking area of the country, the left-wing Socialists were the big winners, gaining 26 seats in the parliament. • As a result, the Socialists were in a strong position giving the unwillingness of most Walloon parties to work with separatist parties in the Flemish area of Belgium. Source: National election authority 8 Name Here
  9. 9. Netherlands: Most Recent Elections Parliamentary Elections – June 2010 Summary of the Last Elections: Results: Early parliamentary elections took place in June 2010 following the collapse of the Labor-led coalition government earlier that year. • The previous government collapsed due to a dispute over the Netherlands’ participation in the US-led mission in Afghanistan. • This election was dominated by the economic crisis in Europe as well as the issue of immigration. In these elections, parties on the political right performed extremely well. • The People’s Party for Freedom and Democracy (VVD) won the largest number of seats in the parliament (31). • Meanwhile, the anti-immigration Party of Freedom led by Geert Wilders performed very well, finishing in third place Source: National behind only the VVD and the Labor Party. election authority • The big losers in this election were the Christian Democrats and the Socialists, with both parties suffering major losses at the hands of the Party of Freedom and smaller parties such as the Democrats 66. 9 Name Here
  10. 10. United Kingdom: Most Recent Elections Parliamentary Elections – May 2010 Parliamentary Vote: Seats Won Parliamentary Vote: Share of Vote Source: National election authority The Conservatives won the largest share of the vote in May 2010’s parliamentary elections, but failed to win an overall majority of the seats in the parliament. As a result, the Conservatives were forced to form a coalition government with the centrist Liberal Democrats, who finished in third place in the election. 10 Name Here
  11. 11. Greece: Most Recent Elections Parliamentary Elections – September 2009 Summary of the Last Elections: Results: Prime Minister Costas Karamanlis and his center-right New Democracy party were ousted from power in 2009’s early parliamentary elections. • Prime Minsiter Karamanlis called for these early elections half way through their term in office as the government had struggled to maintain its majority in the parliament in the months before the election. The center-left PASOK won the 2009 elections by a healthy margin, winning 160 of the 300 seats in the parliament and 43.9% of the popular vote. • Meanwhile, the New Democracy party won just 91 seats in the parliament and just 33.5% of the popular vote. • Unlike in many other European countries in recent years, smaller parties failed to make major gains at the expense of Source: National the country’s two dominant parties. election authority The 2009 election took place during the worst recession in Greece in 16 years. • PASOK ran on a platform of boosting government spending to pull the economy out of its recession, a sharp contrast to New Democracy’s austerity measures that were not popular with Greek voters. 11 Name Here
  12. 12. Portugal: Most Recent Elections Parliamentary Elections – September 2009 Summary of the Last Elections: Results: The governing Socialists were re-elected in September 2009’s parliamentary elections, but lost their parliamentary majority in the process. • The Socialists won 36.6% of the vote and 96 of the 226 seats in the parliament, 18 seats short of a parliamentary majority. • The center-right Social Democrats finished second, winning 29.1% of the vote and 78 seats in the parliament. • Smaller parties such as the Democratic and Social Center – People’s Party (CDS-PP), the Left Bloc and the Democratic Unity Coalition all made gains at the expense of Portugal’s larger parties. The economy was the dominant issue in the 2009 election, as Portugal was in the midst of the global economic crisis when the election took place. Source: National • The Socialists campaigned on a platform of major public election authority works in order to keep unemployment from rising too far during the crisis. • Meanwhile, the Social Democrats called for a series of economic reforms to be used to boost private-sector investment in Portugal. 12 Name Here
  13. 13. Germany: Most Recent Elections Parliamentary Elections – September 2009 Summary of the Last Elections: Results: Germany’s 2009 parliamentary election resulted in a clear victory for German Chancellor Angela Merkel, whose center-right CDU-CSU alliance crushed its Social Democratic rivals. • The center-right CDU-CSU alliance made small gains from its 2004 triumph, this time winning 33.8% of the vote and 239 of the 622 seats in the parliament. • Meanwhile, the liberal Free Democrats led by Guido Westerwelle recorded major gains by winning 14.6% of the vote and 93 seats in the parliament, enough to allow them to join the CDU-CSU in a new coalition government. • Other smaller parties such as the Left Party (76 seats) and the Greens (68 seats) also made significant gains in this election. • The only party to lose seats in this election was SPD, which saw its share of the vote fall from 34.2% to just 23.0% and its Source: National number of seats fall from 222 to just 146, its worst election authority performance since the Second World War. The election was highlighted by the strong gains made by Germany’s smaller parties. • The country’s traditional leading parties (the CDU-CSU and the SPD) combined to win less than 57% of the popular vote for the first time in history. 13 Name Here
  14. 14. Norway: Most Recent Elections Parliamentary Elections – September 2009 Summary of the Last Elections: Results: The country’s center-left coalition government was returned to power in the September 2009 parliamentary elections. • The Labor Party and its coalition partners, the Socialist Left Party and the Center Party, combined to win 86 of the 169 seats in the parliament. • Meanwhile, the far-right Progress Party once again performed well, winning 23% of the vote and 41 seats in the parliament. • Despite the global economic turmoil in the months proceeding the election, there were no major changes from the results of the previous election in 2005. The victory by the center-left coalition government represented the first successful re-election bid by a government in Norway since 1993. • The Labor Party had campaigned on a platform of being the safest bet to lead Norway through the global economic crisis. • Immigration was also a key issue in the election, with the Progress Party calling for a tightening of the country’s immigration regulations. Source: National election authority 14 Name Here
  15. 15. Luxembourg: Most Recent Elections Parliamentary Elections – June 2009 Summary: Election Results: Prime Minister Juncker and his CSV party were the big winners in Luxembourg’s 2009 parliamentary elections. • The CSV increased its number of seats in the parliament from 24 to 26, despite the major impact of the global financial crisis on Luxembourg’s economy that has been led by the CSV. • The personal popularity of the prime minister was the key factor in the CSV’s strong showing in 2009. The CSV’s two major competitors, the center-left Socialists and the center-right Democratic Party, both lost seats in this election. Source: National • The Socialists lost ground to the Greens and to smaller election authority leftist parties such as The Left and the Communists in their southern strongholds. • The Democratic Party suffered from a change in leadership and a lack of confidence in the party to deal with the economic crisis at the time of the election. As usual, the 2009 elections in Luxembourg resulted in another victory for the CSV, who have led nearly all post-war governments in Luxembourg. Moreover, there were no major shifts in voting patterns, despite the impact of the economic crisis in Luxembourg. 15 Name Here
  16. 16. Austria: Most Recent Elections Parliamentary Elections – September 2008 Summary of the Last Elections: Results: The Social Democrats won the largest share of the votes in the early parliamentary elections that were held following the collapse of the grand coalition between the Social Democrats and the People’s Party in the summer of 2008. • The Social Democrats won nearly 30% of the popular vote, while the People’s Party slumped to less than 26% of the vote. • Meanwhile, the Greens failed to win as many seats as had been predicted in the pre-election polls, winning slightly less than 10% of the vote. However, the story of the 2008 election was the huge success by Austria’s two main far-right political parties, the Freedom Party and the Alliance for Austria’s Future. • The Freedom Party, the leading party on Austria’s far right Source: National in recent decades, made a major resurgence in the 2008 election authority election, winning 18% of the popular vote. • Meanwhile, the Alliance for Austria’s Future, led by former Freedom Party leader Joerg Haider, won 11% of the vote, giving the far-right a total of 29% of the votes in this election. 16 Name Here
  17. 17. Italy: Most Recent Elections Parliamentary Elections – April 2008 Summary of the Last Elections: Results: Silvio Berlusconi and his center-right alliance won a comprehensive victory in April 2008’s early parliamentary elections. • The center-right alliance won 340 of the 630 seats in the Italian Chamber of Deputies and 171 of the 315 seats in the Senate, a solid majority in both houses. • In addition, Berlusconi became prime minister of Italy for the third time. This strong showing was the result of a strong performance by the former prime minister’s People of Freedom party as well as by their right-wing Northern League allies that advocate greater autonomy for northern Italy. • The defeated center-left alliance, led by the Democratic Source: National Party of former Rome Mayor Walter Veltroni, had been election authority damaged by the continuing poor performance of the Italian economy under the recently-ousted center left government as well as the deteriorating situation in southern Italy where organized crime continues to dominate the region. • This led to the creation of the 62nd new government in Italy since the end of the Second World War. 17 Name Here
  18. 18. Spain: Most Recent Elections Parliamentary Elections - March 2008 Summary of the Last Elections: Results: The governing Socialists were re-elected to another term in office in March 2008’s parliamentary elections. • While the Socialists failed to win a majority of the seats in the parliament, they aligned themselves with centrist regional parties to form a majority. • The Socialists won 169 of the 350 seats in the parliament, 15 seats more than the People’s Party. Under Prime Minister Zapatero, the Socialists once again ran an effective campaign. • Prime Minister Zapatero remained popular before the election, despite signs that Spanish economic growth was in the process of slowing sharply. • Moreover, the prime minister was the clear winner in two nationally televised debates with People’s Party leader Source: National Mariano Rajoy in the weeks before the election. election authority The 2008 parliamentary election highlighted that fact that Spain was becoming a two-party political system. • The largest two parties won 323 of the 350 seats in the parliament. • Regional parties won only 27 seats in the parliament, their lowest amount ever. 18 Name Here
  19. 19. Key Regional Disputes in West Europe Greece and Turkey •Key Issues – The division of Cyprus is the leading flashpoint at the moment, but issues such as control of the Aegean Sea also loom large as potential disputes. •Outlook – Relations will remain cordial as long as Turkey is seeking to join the EU. If Turkey is turned away by the EU, relations between these two rivals will deteriorate swiftly. Spain and Morocco •Key Issues – Spain controls a number of islands and enclaves along the coast of Morocco. Morocco is the main source of illegal immigration into Spain. •Outlook – This dispute has the potential to grow into something far more dangerous, as evidenced by the near conflict over the tiny island of Leila (Perejil) in 2002. Moreover, illegal immigration from Morocco to Spain will also increase, adding more tensions. Gibraltar •Key Issues – Spain continues to dispute the United Kingdom’s control over Gibraltar, at the mouth of the Mediterranean Sea. •Outlook – Relations between the UK and Spain will remain friendly, despite Spain’s demands for a return of Gibraltar. However, most people in Gibraltar do not want to be a part of Spain, so another solution is likely. Name Here
  20. 20. Regional Military Outlook Balance of Power in the Region Total Military Spending (US$ bil.) Europe’s military strength in relation to the rest of the world has been declining for most of the past century. USA • Today, Europe’s leading countries have only a fraction of the Russia military power of the United States and are being outdistanced by China as well. UK France Of the larger European powers, only Britain and France have the ability to project military power outside of Germany Europe. Italy • Low levels of defense spending have resulting in Germany and Italy having far less military power than these two Turkey countries. Spain Netherlands Outlook Source: SIPRI Belgium Calls for a more independent European military force will grow, but differences in foreign policy among the leading 0 100 200 300 400 500 European powers will inevitably weaken any such force. • Meanwhile, the military strength gap between the US and Europe will widen significantly as European defense spending will remain far smaller than that of the US. • Furthermore, the gap between Europe and the countries of the North Africa and the Middle East is terms of military power will shrink, raising political risk levels in the long-term future. Name Here
  21. 21. West Europe: Political Risk Outlook Current Political Risk Ratings: Political Risk Outlook: Risk Measurements • As a region, West Europe enjoys some of the world’s lowest political risk levels. Internal Conflict Extremist Influence • This is largely the result of Europe’s shrinking world Less Central Authority power and the increasing unity of the continent, especially in the economic field. Regional Conflict Global Conflict • Furthermore, all West European countries are Terrorism established democracies with some of the world’s 0 1 2 3 4 5 6 7 8 9 10 most stable governments. Low Risk………………High Risk • There is little likelihood of an increase in these • ISA Risk Ratings political risk levels in the near-term. – 0.0 to 1.9 = Low Risk – 2.0 to 3.9 = Low to Moderate Risk – 4.0 to 5.9 = Moderate Risk – 6.0 to 7.9 = Moderate to High Risk – 8.0 to 10 = High Risk Name Here
  22. 22. Regional Economic Outlook Name Here
  23. 23. West Europe Economic Overview West Europe remains a crucial component of the global economy. • The region remains a world leader in a Source: ISA number of manufacturing and service Economic Forecasts, industries. – Germany is the world’s third-largest developed economy and a leading exporter of manufactured goods. – The UK remains a center of finance and other service industries. The past fifteen years have witnessed a relative stagnation of the economy. Size of the circle • Key economies such as Germany and Italy indicates the size have seen little economic growth. of the economy • Europe trails the US or Asia in many high- tech industries. Per Capita GDP at PPP Without major economic reform, Europe will continue to lag behind North America in terms of economic growth, entrepreneurship and high-tech industries. Moreover, demographic change is a growing concern for Europe’s future, necessitating major economic reform. However, the populations in most countries are resisting reforms. Name Here
  24. 24. West Europe’s “Big Five” Economic Growth Outlook Source: ISA Economic Forecasts, national statistics Economic growth slowed sharply over the two years as all major European economies entered into a deep recession. Looking ahead, growth will remain slow in Europe’s largest economies over the near-term, with long-term growth likely to be slightly below 2% on the average. Name Here
  25. 25. Scandinavian Economic Growth Outlook Source: ISA Economic Forecasts, national statistics Scandinavian economic growth slowed sharply over the past 18 months as the global financial crisis had a major impact on exports from this region. Moreover, growth will remain weak over the near-term as export growth continues to decline. Name Here
  26. 26. Benelux Economic Growth Outlook Source: ISA Economic Forecasts, national statistics The Benelux countries each recorded improvement in their GDP growth rates in 2006 and 2007, although these remained below the levels of the late 1990s. However, this growth collapsed in 2008 and 2009 as the global economic crisis had a massive impact on the regions financial sector. Name Here
  27. 27. The Rest of West Europe Economic Growth Outlook Source: ISA Economic Forecasts, national statistics Greek economic growth will be negatively impacted over the longer-run by the debt crisis in that country. Meanwhile, Switzerland and Austria will continue to experience sluggish economies over the near-term. In Portugal, economic growth will remain low, even after the region’s overall economic recovery. Name Here
  28. 28. West European Economic Growth Summary Key Factors Europe’s largest economies have struggled to record consistent growth over the past two decades. Working-age populations across the Europe remains region are shrinking as a percentage incapable of matching of the total population. US (or Chinese) economic growth rates High taxes and bureaucratic red-tape in the near term are hampering the growth of new without major reforms. businesses in most countries. The austerity measures enacted across Europe will be a further drag on growth in West Europe. Europe’s social welfare structures have given Europeans a high standard of living, but at the cost of hampering economic growth and severely jeopardizing the welfare of future generations of Europeans. Economists and many governments are aware of the need for reform, but most populations are resistant to changes in the welfare systems. Name Here
  29. 29. West Europe’s “Big Five” Inflation Outlook Source: ISA Economic Forecasts, national statistics High food and energy prices in recent years have led to higher inflation rates in most major European economies. However, inflation rates fell dramatically in 2009, raising fears of a prolonged period of deflationary pressures in most large European economies. Name Here
  30. 30. Scandinavian Inflation Outlook Source: ISA Economic Forecasts, national statistics Inflation rates rose sharply across Scandinavia in 2008, due mostly to high energy prices. However, deflationary pressures emerged across Scandinavia in 2009 as energy prices fell and the recession cut deeply into demand levels. Name Here
  31. 31. Benelux Inflation Outlook Source: ISA Economic Forecasts, national statistics Inflationary pressures in the Benelux rose in 2008 due to the high price of oil that year. However, inflation rates fell sharply in 2009 as demand levels receded. Inflation rates will rise again later in the forecast period, but will remain below pre-crisis levels. Name Here
  32. 32. The Rest of West Europe Inflation Outlook Source: ISA Economic Forecasts, national statistics Switzerland will battle with deflationary pressures in the coming months, while Austrian deflationary risk will also rise in the coming months. Portugal and Greece will see further reductions in their inflation rates, with long-term deflationary pressures likely to be present in Portugal. Name Here
  33. 33. West Europe Key Exchange Rates Against the US Dollar (1 US$ = Local Currency) Source: ISA Economic Forecasts, OANDA Name Here
  34. 34. West Europe’s “Big Five” Unemployment Source: ISA Economic Forecasts, national statistics Unemployment levels have risen in most of Europe’s largest economies in the wake of the global financial crisis. With the region’s labor markets remaining highly rigid, these high levels of unemployment will remain in place over the next two to three years. Name Here
  35. 35. Scandinavian Unemployment Source: ISA Economic Forecasts, national statistics Unemployment rates rose sharply in 2008 and 2009 as companies cut staff as export growth slowed sharply. Thanks to economic diversity and the large number of small businesses starting in this region, unemployment rates will nevertheless remain far below the European average. Name Here
  36. 36. Benelux Unemployment Source: ISA Economic Forecasts, national statistics The Walloon region of Belgium suffers from high unemployment that will grow as that region’s heavy industry-based economy continues to deteriorate. Elsewhere in the Benelux, unemployment has risen significantly over the past two years. Name Here
  37. 37. The Rest of West Europe Unemployment Source: ISA Economic Forecasts, national statistics Greek unemployment will soar in the coming years. Portugal and Ireland have seen sharp increases in unemployment in the past few years, and these high rates of unemployment will remain in place over the forecast period. Switzerland and Austria will maintain lower unemployment levels over the remainder of the forecast period. Name Here
  38. 38. Foreign Investment in West Europe’s “Big Five” Source: UNCTAD Each of Europe’s largest economies, tries to balance the need for foreign investment with the desire to keep domestic companies under domestic control. Foreign investment levels rose in most of Europe’s largest economies in the years before the recent global economic crisis. Name Here
  39. 39. Foreign Investment in Scandinavia Source: UNCTAD As the center of Europe’s IT and telecommunications industries, Scandinavia has been a major recipient of foreign investment in recent years. Sweden has received the bulk of this foreign investment in recent years. Name Here
  40. 40. Foreign Investment in the Benelux Source: UNCTAD Luxembourg is one of the largest “recipients” of foreign investment, though this consists mostly of financial transfers and little actual investment in the country. Elsewhere, both the Netherlands and Belgium are very open to foreign investment and are often used as the location of non-regional companies’ European headquarters. Name Here
  41. 41. Foreign Investment in the Rest of West Europe Source: UNCTAD Switzerland remains a major center for foreign investment and has attracted numerous foreign companies in the sectors of pharmaceuticals, chemicals and finance. Elsewhere, other West European countries are struggling to attract FDI in the face of growing competition from countries such as the Czech Republic and Hungary. Name Here
  42. 42. Regional Foreign Investment Source: UNCTAD European FDI inflows are greatly influenced by intra-European foreign investment, resulting in extremely high FDI figures for the region. Nevertheless, the region is clearly one of the three main destinations for foreign investment (North America and East Asia are the others), with northern Europe leading the way. Name Here
  43. 43. The Automotive Industry in West Europe West Europe is one of the three pillars of the global automotive industry. • Germany is the world’s third-largest producer of automobiles and automotive components. – German firms such as Volkswagen, DaimlerChrysler and BMW sell their vehicles throughout the world. The European car market is currently in a major downturn and faces an uncertain future. • Changing demographics will lead to stagnant automotive sales in the future. • Asian manufacturers are aiming to repeat Source: PwC their North American success in Europe. European automotive companies will continue to expand their presence in growing automotive markets such as North America and China in order to offset the long-term stagnation of the West European automotive market. Name Here
  44. 44. West Europe: Economic Risk Outlook Current Economic Risk Ratings: Economic Risk Outlook: • West European economic risk levels are much higher than those of North America, though they remain below the global average. • With most countries in the region in dire need of economic reform, these risk levels are not likely to fall at any time in the near future. • Moreover, a number of short-term risks, such as the weak US dollar, are also pushing economic risk levels Low Risk………………High Risk higher. • ISA Risk Ratings – 0.0 to 1.9 = Low Risk – 2.0 to 3.9 = Low to Moderate Risk – 4.0 to 5.9 = Moderate Risk – 6.0 to 7.9 = Moderate to High Risk – 8.0 to 10 = High Risk Name Here
  45. 45. Demographic and Environmental Outlook Name Here
  46. 46. West Europe Population Trends Total Population Working-Age Population 400,000,000 250,000,000 350,000,000 200,000,000 300,000,000 250,000,000 150,000,000 200,000,000 100,000,000 150,000,000 100,000,000 50,000,000 Source: US Census Bureau 50,000,000 Source: US Census Bureau 0 0 2000 2010 2020 2030 2040 2050 1950 1970 1990 2010 2030 2050 Working-Age Non-Working-Age Population growth has slowed in recent years, resulting in the population of West Europe peaking within the next 15 years at just below 400 million people. Afterwards, the population will begin to decline, with these contractions gaining momentum in the second half of the 21st century. Name Here
  47. 47. West Europe Population Trends by Country Total Population Regional Population Growth Source: US Census (2000-2050) Bureau 400,000,000 350,000,000 Benelux Source: US Census Bureau 300,000,000 France 250,000,000 Scandinavia 200,000,000 UK 150,000,000 Germany 100,000,000 Italy 50,000,000 0 Spain 1950 1970 1990 2010 2030 2050 Others Germany UK France Italy -20% -15% -10% -5% 0% 5% Spain Benelux Scandinavia Others West Europe is undergoing a major demographic shift as birth rates remain low across the region and people live longer. This will result in major population declines in Spain, Italy and Germany, with the rest of the region witnessing population stagnation. The end result will be the need for major economic and immigration reforms. Name Here
  48. 48. West Europe Ethnic Composition No single ethnic group dominates Largest Ethnic Groups West Europe. German The Germans occupy the heart of Europe, but have seen their territory French shrink in the 20th century. Italian Southern European ethnic groups English will shrink due to some of the Castillian world’s lowest birth rates. Dutch History has blurred the ethnic Source: CIA differentiations in many countries, Portuguese such as France and Italy. Others Non-European ethnic groups such 0 25,000,000 50,000,000 75,000,000100,000,000 as Arabs, Berbers and Turks are growing in number in Europe. The ongoing population decline in West Europe will have a major impact upon the region’s ethnic composition, with non-European ethnic groups comprising an ever greater share of the region’s population. Name Here
  49. 49. West Europe Religious Composition The Roman Catholic Church is the Largest Religious Groups dominant religion in many areas of West Europe. Europe’s leadership of the Roman Roman Catholic Catholic Church is under threat from Lutheran Latin America and Africa. Anglican Protestant groups are predominant Other Protestant in many areas of Northern Europe. Muslim Orthodox Immigrants from North Africa and Jewish Turkey are resulting in a rapid Source: CIA expansion of Islam in Europe. Other or none 0 100,000,000 200,000,000 300,000,000 Many European countries have a state religion that has close historic ties to the country. Religion continues to wane in Europe, as fewer Europeans attend religious services than at any time in recent history. The most vibrant religions are the small or growing groups, such as Islam and various Protestant groups. Name Here
  50. 50. West Europe Language Composition German is the language with the Largest First Languages most native speakers in West Europe. German English is easily the most spoken second-language in the region and English is growing in popularity. French French has lost its leading position Italian in Europe to English, but remains the second most studied language. Spanish Dutch The 15-member EU has 11 official languages, but that number grew to Portuguese Source: CIA 19 languages in May 2004. Others Many European-based languages 0 25,000,000 50,000,000 75,000,000100,000,000 are now heavily influenced by other regions that use these languages. The popularity of English will continue to spread in Europe, despite the best efforts of the supporters of other European languages to promote the use of their languages. With a multitude of languages hampering communications, this will prove to be a very beneficial change for Europe in the long-run. Name Here
  51. 51. Largest Cities in West Europe Source: World Gazetteer West Europe contains some of the world’s most crowded regions, with metropolitan areas increasingly merging into larger agglomerations. The three main population centers of the region are London, Paris and Germany’s Rhine-Ruhr region that contains the cities between Cologne and Dortmund. Name Here
  52. 52. Key Demographic Issue in West Europe Population Decline and an Aging Population West Europe has a low birth rate, combined Elderly Population in West Europe with one of the world’s longest life expectancies. Source: US Census • This is resulting in a major imbalance 120,000,000 Bureau between the size of the work force and that of the non-productive segments of European 100,000,000 society. 80,000,000 – The effects of this will begin to be felt in the near future and will require massive 60,000,000 economic and social reforms. 40,000,000 West Europe’s elderly population is also growing rapidly. 20,000,000 • The number of Europeans over the age of 65 0 will grow from 64 million today to 110 million 2000 2025 2050 by 2050. 65-69 70-74 75-79 80+ Despite repeating warnings, most European governments have yet to enact meaningful reform designed to prepare their countries for the dramatic demographic shifts ahead. A key needed reform is an extension of the retirement age in Europe, for without this, Europe’s work force will decline significantly and social systems will run out of money. Name Here
  53. 53. Top Environmental Issues in West Europe Many countries in West Europe are among the largest users of nuclear power in the world. • Belgium and France are two of the three countries in the world most Nuclear Power reliant upon nuclear power for their energy supplies. • Germany and other West European countries have promised opponents of nuclear power that they will eliminate its use in the future. Europe’s leading industrial areas such as the Ruhr Valley in Germany and the Midlands in the UK are undergoing major transformations. • Major protects are underway designed to reduce the damage done Industrial Pollution by more than a hundred years of industrial activity. Many areas of West Europe have been impacted by severe flooding in recent years. • Floods have caused much damage in Germany, Italy, Belgium and Flooding elsewhere. • A warmer and wetter climate over the past decade has been the cause. Europe’s small area and large concentration of people and industry has resulted in the region having less original forest land and wildlife than any other region. However, environmental awareness has grown significantly, placing Europe at the forefront of current attempts to improve the planet’s environment for future generations. Name Here
  54. 54. Key Geographic Issue in West Europe The Threat of Climate Change Increasing rainfall has resulted in massive flooding in many areas of Europe. • With most of the region’s major cities located along major waterways, this threat of severe damage is magnified. Europeans fear that the prospect of climate change will have a major impact upon the future of the region. • For example, the heavily populated areas of the Netherlands and Belgium are located in very low-lying areas that are prone to flooding. • Agriculture is also at risk from major climate change. Europe has been at the forefront of the climate change issue because of the potential impacts such changes would have upon the region. Name Here
  55. 55. West Europe: Demographic and Environmental Risk Outlook Current Risk Ratings: Demographic Risk Outlook: Risk Measurements • Europe’s aging population is one of the greatest threats facing the region, but immigration remains Natural Disasters highly unpopular in most countries. Environmental Risk Age-Characteristic Risk Migration Social Issues 0 1 2 3 4 5 6 7 8 9 10 Environmental Risk Outlook: Low Risk………………High Risk • Europe continues to recover from the environmental • ISA Risk Ratings deterioration of the past centuries, but many risks – 0.0 to 1.9 = Low Risk persist. – 2.0 to 3.9 = Low to Moderate Risk – 4.0 to 5.9 = Moderate Risk – 6.0 to 7.9 = Moderate to High Risk – 8.0 to 10 = High Risk Name Here
  56. 56. Summary Name Here
  57. 57. Future Outlook Summary Demographic and Environmental Outlook • Europe’s low birth rate and growing resistance to immigration will result in a rapidly aging population when the size of the working-age population begins to shrink. • Spain and Italy will face the most severe shortage of working-age people in the future. • Environmental awareness will continue to grow across Europe, improving the regions environmental despite the heavily population and industry concentrations in many areas. Political Outlook • The changing of the guard among Europe’s more powerful political leaders in recent years has led to major changes in the positions of key countries with regards to European and international policy. • Attempts to further political integration within the European Union will meet greater resistance as countries such as Britain and France seek to maintain relatively independent foreign policies. • Immigration will remain one of the most contentious issues in West Europe in the coming years and the rise of more far-right parties will force governments to take a harder line on the immigration issue. Economic Outlook • Economic growth will be extremely low over the near-term due to the global financial crisis and a sharp downturn in export growth. • This slowdown in economic growth will cause unemployment rates to begin rising once again. • The euro will weaken gradually against other major currencies as it remains over-valued, despite its recent declines. Name Here
  58. 58. ISA Region Report West Europe July 2010 Edition Name Here