E3G

Europe in the World: Summer Briefing

By Chris Littlecott

Europe’s Challenges

Europe does face economic challenges: high levels of long term unemployment in some sectors and places, greater global economic competition and faster change, an aging population and tightening environmental and resource constraints. Of these unemployment receives the most publicity, but is potentially the easiest to address. The majority of European countries have low unemployment rates, and few economists in Europe think there is any fundamental reason why Europe cannot create more jobs into the medium and long term.

Europe is not alone in facing such challenges. All other major countries face similar or greater structural stresses. Even the USA and China will have rapidly aging populations in the next 15 years. The stabilisation of global population at 8-10 billion is a positive development in the face of high levels of global poverty and environmental limits that have already been breached. Europe benefits by being one of the first to stabilise its population, as its ability to trade and invest with fast growing economies increases incomes and eases the pension burden.

European leaders need to stop dwelling on perceived weaknesses and assess the reality of our relative strength. The USA has runaway deficits and inefficient health care policies, which have helped destroy the competitiveness of some of its major industries. At the same time as we are fretting about the increasing external power of emerging economies such as India and China, they are debating the growing threats to their internal stability from rising social inequality, critical water shortages, health pandemics, and endemic corruption. Even the largest economies are vulnerable unless they learn to collectively manage a world characterised by an unstable climate and resource constraints.