Presentation by Charles Powell, director of the Elcano Royal Institute at the Seminar 'The European Union: What Kind of Global Actor? held from 25 to 26 February 2013 in Madrid (Spain) and organised by the institute. / Presentación de Charles Powell, director del Real Instituto Elcano, en el Seminario "The European Union: What Kind of Global Actor?", organizado por el instituto del 25 al 26 de Febrero de 2013 en Madrid (España).

1. European Global Strategy Project
Europe and the World in 2030
Charles Powell
European Union: What Kind of Global Actor?
Madrid, 25 February 2013

2. Europe and the World in 2030
EUROPE AND THE WORLD IN 2030
It is virtually impossible to predict what the EU and the wider world will
look like in 2030.
Fortunately, this is not what our governments have asked us to do.
Our aim is to identify the broad trends, drivers and shapers of change that
the EU should keep in mind when trying to define its strategic options.
The EU’s future global role will largely depend on its economic strength
and internal cohesion.
Unfortunately, even the task of predicting the EU’s relatively short-term
future development has been rendered almost impossible due to the depth
and breadth of the current financial and economic crisis.

3. Europe and the World in 2030
The 2008 crisis is already having a major impact of the EU, leading to:
1. Tension between debtor and creditor states. There is a growing cleavage between
core and periphery; the two have very different, often irreconcilable narratives
about the causes of the crisis, and how it should be dealt with.
2. Tension between Eurozone and non-Eurozone members (“Ins and Outs”). This is
generating concern about the EU’s ability to maintain minimum levels of internal
cohesion (as seen in debate about a separate budget for Eurozone).
It is also fuelling the debate in Britain about continued EU membership; it is
impossible to predict whether the UK will still be a member in 2030.
3. Growing concern about the EU’s political legitimacy. The crisis has raised fresh
doubts about the legitimacy of the EU’s decision-making process, particularly in
southern European member states.
This may even undermine democracy in the weaker debtor states, leading to the
rise of populist alternatives.

4. Europe and the World in 2030
4. The crisis is aggravating previously-existing centre-periphery tensions within
some member states: Scotland, Flanders, Catalonia.
5. More generally: the crisis has brought to the fore already-existing concern over
sustainability of our European socio-economic model.
• ageing populations; growing pressure on pension, health and welfare systems;
• high levels of unemployment and underemployment; due to dysfunctional labour
markets;
• inabilty to make best of our human capital: rigid education systems; innovations
discouraged;
• extreme energy dependence; absence of a common energy policy
• vulnerabilty to climate change;

5. Europe and the World in 2030
The EU’s short-to-medium term future will largely depend on how it manages
the current crisis
Different scenarios as defined by the AUGUR project (“Europe in 2030”).
1. Eurozone break up; collapse scenario
• Will lead to financial instability, and weaker European institutions.
• Impact: loss of 16% of EU’s GDP in the period up to 2030.
• Black Swan: ‘Grexit’ could cause eight times the collateral damage resulting
from the collapse of Lehman Brothers.
2. Struggling on; slow decline scenario
• Resulting from an attempt to maintain Eurozone intact without addressing long-
term problems of government finance, regional inequalities and unemployment.
• Economic convergence put on hold; political cohesion difficult to maintain;
• In this scenario: EU growth over 2010-30 would be 0.8% per annum.

6. Europe and the World in 2030
3. More favourable scenarios: a European renaissance
Might come in two possible formats:
a) a multi-speed Europe; Eurozone divided into several currency areas (North;
West, UK, South, East);
EU growth over 2010-30 would be 2% per annum.
b) towards a federal Europe: powerful central bank; central budget;
EU treasury.
Again, 2% growth per annum.

7. Europe and the World in 2030
In turn, the EU’s answer to the current crisis will depend on the broader
global context
The AUGUR project (“Europe in 2030”) identifies four different possible scenarios:
1. Reduced government
Marked by a decreased government role in the economy and a retreat from
multilateralism.
2. US-China accommodation (a G-2 world, if you will)..
Two biggest powers respond with interventionist policies in their own interests.
3. Regionalisation
A strengthening of regional groupings in Europe, North America and Asia.
Regional institutions and policies replace attempts at universality.
4. Multi-polar cooperation
Concerted transnational action to meet major global challenges.

8. Europe and the World in 2030
Conclusions
• EU’s future will depend on its own ability to respond; crisis could turn out
to be wake-up call we badly needed; conversely, could represent beginning
of end of European project.
• Just as important as what EU does, the global context in which it does it.

9. Europe and the World in 2030
Likely scenarios for Europe and the World
Global Contexts Scenarios for Impact EU Growth
Europe 2010-2030
Reduced
government EU break- up Loss - 16% EU
US-China GDP to 2030
accommodation
Reduced
government Struggling on EU growth 0,8 %
US-China per annum
accommodation
Regionalisation Multi-speed Europe EU growth 2% per
annum
Regionalisation
Towards Federal EU growth 2% per
Multi-polar Europe annum
collaboration
Source: Augur Project, FP7 2012

10. Europe and the World in 2030
Major Global Trends in 2030 *
Demographic Patterns
• The demographic arc of instability will narrow.
• Population growth will rise from 7.1 billion to estimated 8.3 billion.
• Economic growth may well decline in ageing countries.
• 60% of the world’s population will live in urbanised areas.
• Africa will replace Asia as region with highest urbanisation growth rate.
• Migration will increase substantially.
* Source: Global Trends 2030, National Intelligence Council, 2012

11. Europe and the World in 2030
Food, Water, Energy Nexus
• Demand for these resources will grow by 35%, 40% and 50%
respectively.
• Fragile states in Africa and Middle East will be most vulnerable to food
and water shortages.
• EU Energy dependence is extreme: 90% of the oil, 80% of the gas and
50% of the coal we consume.
• US energy independence in 2030: due to the unconventional (shale) oil
and gas ‘revolution’ will have significant geopolitical consequences.
• Tackling the problems pertaining to one commodity will affect supply
and demand for the others

12. Europe and the World in 2030
Individual Empowerment
Will accelerate due to:
• poverty reduction rapid growth of global middle class (up to 4.9
billion by 2030);
• greater gender equality;
• greater educational attainment (90% literacy in 2030);
• widespread use of new communication and manufacturing
technologies; health-care innovations;
Consequences: these changes will increase the autonomy of
individuals and powerful non-state actors vis-à-vis the state

13. Europe and the World in 2030
Diffusion of power
• World in 2030 will be diffusely multipolar (or ‘apolar’) and polycentric.
No country will be hegemonic power.
It will be ‘no one’s world’ (Charles Kupchan)
• There will be a change in the nature of power itself: power will shift
away from bureaucratic structures of sovereign states, towards
multifaceted and amorphous networks of non-governmental actors.
This process will be driven by rapid urbanisation and the ICT revolution.
• The world will experience the rise of regionalism as a vector of power,
reflecting an increase in regional trade. This regional cooperation will be
driven mainly by emerging powers (South Africa, Indonesia, Nigeria,
Egypt…).

14. Europe and the World in 2030
Shift of economic power to the East and South
By 2030, China will have become world’s major economic power and
also the country with largest share of material power (though still a very
distant second to US in military power);
But China will have to face major socio-economic and political challenges.
Key issue: how will it deal with a rapid increase in population ageing?
Will it become old before it becomes rich?
Also: how will it address welfare, energy security and environmental
challenges?
There is a real danger that China may be trapped in middle-income status.
Political uncertainty: China will pass the $15.000 per capita PPP
threshold in next five years. Currently, all countries with that income level are
free/partly free (FH).

15. Europe and the World in 2030
Shift of economic power to the East and South (cont.)
India’s population (1.5 billion) will overtake China’s (1.4 billion) by 2030.
Comparative advantage: will remain relatively young.
But other daunting challenges: rapid urbanisation, uncontrolled rural
urban migration and poverty.
Russia has dropped out of BRIC paradigm altogether.
Characterised by: ageing and shrinking population; absence of reforms;
centre-periphery tensions.
Russia’s future will largely depend on evolution of energy markets.
Major protagonists of this shift to the East and the South: rising
middle powers with greatest growth potential.
In particular: those that combine economic growth and political
stability. Turkey, South Korea, Indonesia, Mexico ….

16. Europe and the World in 2030
What impact will these and others trends have on role of the EU as a
global actor?
1. Growth in individual empowerment
• rise of global middle class is good news; will demand education,
cultural products, luxury goods, all of which EU can offer;
• may lead to a convergence of values; those of the EU?
• will ‘rise of the rest’ challenge this? Alternatives to democratic
model?
2. Diffusion of power raises spectre of fragmentation and instability;
mutipolarity may not strengthen multilateralism.
But let us not overlook potentially positive outcomes:
• EU is particularly well suited to a new “world of networks”; member
states good at cooperation between state and non-state actors;
• EU has unparalleled expertise in regional integration;
• EU is well suited to benefit from greater multilateralism.

17. Europe and the World in 2030
3. The neighbourhood
The EU will be facing an increasingly unstable neighbourhood.If EU is not
influential in its immediate neighbourhood, it will not be credible anywhere.
Difficulty: neighbourhood concept is expanding: we need to look out for
neighbours, but also our neighbours’ neighbours.
• Eastern Neighbourhood: uncertainty due to Russian prospects; a failing
petrostate?
• Arab awakening: mixed expectations. Egypt: a member of the ‘Next
Eleven? (Goldman Sachs) or radicalised and impoverished
Closely related to Arab awakening: what to do about Turkey?
Stalled negotiations are dangerous; given its growing economic importance
and regional protagonism, EU must offer something new: a virtual EU
membership.
Not a substitute for membership; rather, a framework for policy convergence
to supplement the accession process.

18. Europe and the World in 2030
4. Our only indispensable strategic partner: the US
Relative decline of US and EU means we will need each other more than ever.
Obama’s Asian ‘pivot’ is not incompatible with this; on the contrary, points to a
new division of labour.
We need something that will go beyond a mere Trans Atlantic Free Trade Area
(TAFTA); perhaps, a new Atlantic Community.
5. Global governance
EU needs to be modest, or at least realistic, about its ability to shape future
global governance.
Even speaking with a single voice will not always guarantee greater influence.
Big question, and hardest to answer: will the EU be able to contribute
effectively to a ‘new deal’ or ‘grand bargain’ between established and newer
powers?
Some consolation: in future, human development challenges will be more
prominent than traditional international security concerns.
This may allow the EU to display its greatest asset: its abundant normative
power (‘soft power’).