Futures of the European Economy

Dear reader,

Triggered by the #Russian #invasion of #Ukraine in the beginning of this year, Themis Foresight has embarked on a project in which we will develop #scenarios of the #European #economy in 2045. Together with my colleagues James Hoefnagels and Siv Helen Hesjedal I have prepared an analyis of interim findings of this project. This analysis is based on a survey among European #business #executives that we conducted in April and May, a #Futures Lab in late May, and a number of in-depth interviews with business executives, #politicians, #analysts and #foresight practioners across the globe.

You can download our full analysis for free by clicking on this link.

Our next steps in this project look as follows:

• We will repeat the spring survey and broaden it out to our LinkedIn community. We would appreciate if you took the time to answer four questions on challenges and opportunities posed by the current geopolitical shifts by clicking on this link.
• On 28 November we will conduct a second Futures Lab in Frankfurt, Germany, during which our #advisory #board members and select business executives will discuss the outlines of several scenarios for the European economy by 2045. Should you be interested in attending this session, please message me directly.
• We expect to finalize the scenarios by the end of this year and publish our results early next year.

The report

Our analysis discusses four likely and significant global shifts until 2045 that are relevant for positioning European business: contours of a new world order, their implications for global financial markets, futures of the European Union and innovation policies for businesses.

There are signals of shifts in global dynamics. Regionalization is becoming more important as the rise of China has opened up new viable cooperation options for many nations and regions in terms of trade as well as political bargaining. We have given examples of how non-Western nations bank on elevated bargaining power by not aligning themselves with either the West or China. The European economy today is heavily dependent on its ability to do trade with the U.S. and China and the narrative of a new Cold War is only conditionally useful when anticipating futures of global politics and trade.

In global financial markets, there is discontent with the way that the U.S. has weaponized SWIFT and several countries have started to diversify their international currency holdings. Business is concerned about politics directing capital flows and rising cost of capital. In Europe, this is particularly a concern for German businesses that still rely heavily on bank-lending as opposed to financing their investments on the stock market.

The futures of the European Union are intertwined with the level of unity. We showed in this report that there are three fundamental cultures that are tearing at the seams of the bloc: The traditional Western “integrative” culture; the Central European “nationalist” culture; and the Eastern European “expansionist” culture. While strong nationalist tendencies may act as roadblocks to further EU integration in the immediate future, stronger integrationist tendencies may re-appear over a longer time horizon.

Lastly, in the area of innovation, we argue that the economies that are capable of successfully innovating in the replacement of the raw materials of the fossil fuels era, and the combination of bits with atoms and molecules, will be capable of securing their incomes and ability to act globally for decades to come. Today, the EU is vulnerable to ceding its global political and economic position, which would result in a considerable economic downturn, political instability, and exodus of skilled workers and companies. We argue that European business can bridge the growing technological expertise gap by fully utilizing new regional dynamics. However, the old model of technology dependence is outdated.

We state in this report that political dynamics between nation states cannot be accurately predicted anymore but only be measured once they have been set in motion. The scenarios that will be published early in 2023 will explore different directions that such dynamics might take, and what needs to be done for the European economy to thrive.

Roadmaps for businesses

Themis Foresight is a business #thinktank and corporate foresight consultancy. Publishing reports like this makes up only a small portion of our activities. Our core business is the development of #roadmaps and scenarios for our corporate clients.

The current energy crisis in Europe and the #vulnerabilities and #uncertainties in #global and #local #markets triggered by #geopolitical shifts force businesses to review the #strategies that they have developed in the last two years. While #innovation remains a necessity for businesses to survive, rapidly shrinking margins necessitate a sober assessment of how to innovate and in what to #invest.

It may sound paradoxical to explore futures in a crisis situation where businesses are forced to "save the day": But anticipating futures is not a fairweather exercise. We discuss in our report that the premises on which many succesful businesses have been built in the past have started to disappear and will continue to do so. In the past 20 years, Europe's economy has relied heavily on cheap Russian energy, cheap Chinese commodities, free security provided by the U.S. and export of hightech to so-called developing nations. None of these premises exist anymore. Energy will remain expensive for as long as renewables cannot replace the old energy systems based on fossil fuels, China hasn't been a cheap commodity producer for well over a decade, American foreign policy and security come at a price and Europe has lost ground to hightech nations like China, the U.S. and several emerging global hightech hotspots. The coming years will feel like perpetual crisis for those who cannot anticipate the next big changes and align their business to these new premises. And then there are those who detect the chances in the cracks of the old system.

If you would like to discuss the implications of our report to your business, feel free to contact me or my co-founder Carina Stöttner .

with best regards,

Jan Berger