EU: A Conflicted Future?

While the powers that be at the top of the EU push for ever more federal policies, such as an EU defence force, populist parties continue to push for national independence. There’s a highly unlikely, but increasing chance that the UK may not have to negotiate an exit strategy or invoke Article 50 if the next 2 years bring further European election shocks that cause the EU to break up in disarray.

Athena’s forecast
Start year: 2016
Likely Tipping point: 2025
Likely End year: 2050
Likely Impact $: Billions
Likelihood: 75%
Regions affected: The World
Most affected sectors: Government, Financial Services, Manufacturing, Energy, Security, Aerospace and Defense, Construction, IT, Food and Agriculture, Environment, Retail, Healthcare, Science

What is changing?

Renewables

  • By 2020, the EU has promised to facilitate investments in Africa that will increase the renewable electricity generation capacity of at least 5 GW.
  • EU countries are on track to meet their 2020 targets for renewable energy and emissions cuts but could fall short of ambitious longer-term goals.
  • Utilising ICT enabled manufacturing methods to promote a circular economy, and implementing smart buildings could help the EU meet its 40% reduction target by 2030.
  • Environmentalists are now worried that the European Commission will continue pushing biofuels in the form of an “incorporation obligation” requiring minimum amounts of ethanol to be blended in automotive and aviation fuels.
  • EU laws requiring member states to use at least 10% renewable energy in transport will be scrapped after 2020.

Automotive

  • The global automotive eCall market is expected to grow at an exponential pace owing to mandatory legislation passed by the EU and Russia.

Data

  • Ensuring cross-border data flows within the EU will reduce costs for consumers and businesses using the Internet of Things by eliminating the need for firms to invest in pointless data centers in multiple countries.
  • The European Union’s General Data Protection Regulation is due to come into force on 25 May 2018 and will see companies fined up to 4 per cent of their global turnover for breaches.
  • Post-Brexit, the U.K. could join the U.S. on the list of countries whose laws do not satisfy the E.U. as being “safe” for data storage and processing.

Middle East

  • The EU will become even more absorbed in the conflicting tactics and strategies in Syria that have so tied up the other major participants.
  • Foreign and security policy will become more extensive including a stronger control of the EU’s external borders and most likely a more conservative European response to the refugee crisis.

Finance

  • The flight to safety away from the epicentre of this British-EU divorce will push capital away from the region and toward key safe-haven markets including the U.S.-especially treasuries-and to Japan.

Implications

Union

  • Court case over EEA membership could leave UK out of EU but inside Single Market.
  • Quitting the EU will probably see Britain leaving the European customs union.
  • There is a less than 50 per cent chance that Britain will negotiate a new relationship with the EU in two years and that a transitional deal will have to be struck first.
  • There is a real fear in some capitals that Therese May will try and turn Britain into ‘Singapore in the North Atlantic’, undercutting the EU with lax social, fiscal and environmental policies.
  • Some foresee a serious risk of the Article 50 talks breaking down and of Britain pursuing a very hard, WTO-rules-only, exit.
  • France, Germany and Italy are hoping that Britain’s decision to quit the bloc will remove a barrier to deeper cooperation.
  • Renzi’s resignation could open the door to early elections next year and to the possibility of an anti-euro party in power in Italy.
  • Italy is the third largest economy in the EU and the risk of its possible exit from the union is starting to send jitters through the market.
  • The result of Italy’s referendum could be a catalyst for the break-up of the EU itself.
  • France and Germany both have general elections next year and Italy in 2018 at the latest.
  • Ultimately the baton for reform within the EU will be handed back to Berlin.
  • A new EU trade impact study confirms the catastrophic impact that upcoming trade deals could have on the EU beef sector, unless tariff-rate quotas on imports are imposed, especially the one being negotiated with the EU Latin American Trade bloc Mercosur.
  • Turkey could join SCO with Russia and China instead of EU.

Climate change

  • Brexit will force the European Union’s remaining 27 countries to spend billions of Euros on cutting carbon emissions deeper to compensate for the UK leaving.
  • European Union will probably fail to reach its target of spending one-fifth of its €1-trillion (US$1-trillion) budget on climate action in 2014-20.

Security

  • Europe could respond credibly to a threat to peace in a member country or in a neighboring country of the European Union.
  • European defense needs a paradigm change in line with the exponential increase in global threats and the volatility of our neighborhood.
  • Creation of EU defense structures will only lead to division between transatlantic partners at a time when solidarity is needed in the face of many difficult and dangerous threats to the democracies.
  • Britain will veto measures to build an EU army in favour of the existing NATO alliance as long as it remains a member of the union.
  • EU-28 relations with Russia might be reviewed as Russia is seen as an important partner in coping with the tensions in the Middle East and by extension the refugee crisis and the threat of terrorism.

Financial Services

  • European economies could be damaged if their access to the City of London is disrupted after Britain leaves the EU.

Migration

  • Turkey is threatening to let refugees enter the EU.
  • devolved immigration policy upon exit from the EU could hand regions the power to determine the right level of inward economic migration given their skills needs.

Questions

Learn more

Find more sources and forecasts on Shaping Tomorrow, some of which were used in this Trend Alert, or ask us for our ready-made and free, in-depth PowerPoint report or more detailed GIST briefing on this or any other topic of interest to you.

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About this Alert: robot generated from verbatim forecasts and questions auto-extracted from the Shaping Tomorrow database of articles, reports and PowerPoints and supplemented with quantitative and graphical analysis by the robot. Time to compile and produce – 60 minutes.

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