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Visions 2020

Joaquín Almunia, Agnès Bénassy-Quéré, Antonia Colibășanu, Luis Garicano, Jonás Fernández, Eduard Soler i Lecha

The purpose of this piece is to gather reflections from top policy makers and high-level experts regarding the key forces which will shape 2020 and beyond.

The word that best describes in Europe the foreseeable economic developments in 2020 is “mediocrity”

Joaquín Almunia (Chairman of CEPS and former Vice-President of the European Commission)

Growth will continue to be weak, barely above 1%, but without recession risks. The weakness of the industrial sector, investment and external demand will be compensated by the service sector and also by employment creation.

The ECB seems incapable to add new stimulus and fiscal policy – that should take over – is currently griped by Germany’s reluctance to use its spending room for manoeuvre. Only a decrease of its exports due to a worsening of the trade wars and if the risk of recession reappears, Berlin could let go the reins of its public finances.

Nothing seems ready to act as locomotive to boost Europe’s economy. The initiatives announced by the new EU authorities, such as the Green Deal, will not have an imminent economic impact. Instead, there is a risk that this scenario could worsen. We will need to watch carefully the relations between the EU and the UK after Brexit, the possible reopening of the Italian political crisis or new trade tensions with the US or China.

What can we expect from the next decade?

Agnès Bénassy-Quéré (Professor at the Paris School of Economics and Non-Resident Fellow at Bruegel)

It is always tempting to consider round numbers as turning points. We know too well what the last decade has represented for the European Union – a succession of financial, economic, social and political crises; which in turn triggered important reforms of economic governance. So what can we expect from the next decade? Hopefully three things. First, that the new Commission will be successful in prioritizing the energy transition as a way not only to deliver carbon neutrality in 2050, but also to reflate the European economy and re-energize its citizens around a common existential objective. Second, that the Europeans will organize themselves better than during the previous decade in order to protect its more vulnerable citizens against the side effects of integration, digitalization and now artificial intelligence and the energy transition. Third, that the EU Member states will re-unite around the objective of reaping the benefits of being part of a large, wealthy area that can make its voice heard in international fora and follow its own route in terms of social, environmental, competition and tax policies, as well as protect its security.

A view from Eastern Europe: predictions for 2020

Antonia Colibășanu (PhD, associate lecturer at Bucharest University of Economic Studies)

"The most important and stringent problem that is left for the EU to solve in 2020 is that of Brexit. Even if the Brits have their own mind made up, a big decision needs to be made on the British divorce – and, as in the case of all big decisions within the EU, unanimity is needed. So, the decision will have to satisfy the Germans on market access, Luxemburg on financial issues, the Irish on border issues and the Spanish on Gibraltar, to name just a few in the EU that will likely have to do some “deep thinking” over anything relating to Brexit. That is difficult to say the least – anytime in history.

2020 is also the first year in office for the EU Commission. The accommodation period will likely be short – not only due to the current political and economic problems of the EU and its members but also because of the fact that the newly reformed multiannual financial framework will be negotiated this year. For Eastern Europe and the Balkans, this process will show, one more, proofs for the EU commitment to the EU bordering and the neighboring regions (or its no-commitment).

The other element that will pose more challenges for Europe (EU and non-EU members alike) is the increasingly important role Turkey plays for the region. Ankara no longer feels satisfied with its “Western ally” status – it seeks to grow its influence in the Middle East and the Balkans and negotiates directly over the migration crisis, reaching out to Germany directly. While its economics is still weakened, the political game Turkey is playing poses new risks and asks for the EU position on security and trade matters both. As Turkey resets its relationship with the West (the Western Europe and the U.S. both), it is the Balkans and Eastern Europe – the border zones, that will feel the growing tension."

3 economic challenges that will top the EU agenda in 2020

Jonás Fernández (Member of the European Parliament and S&D Coordinator for the Committee on Economic and Monetary Affairs)

The launching of the European Green Deal will dominate the agenda of the Commission and will condition the work of a good number of committees of the European Parliament. The definition of a green investment program, the creation of a fund for a fair transition and the establishment of a border tax against carbon emissions will be on ECON’s agenda. Furthermore, our committee will also focus on a new finance and sustainable package to foster the adaptation of the economic structure to the climate challenges. The goals are very ambitious and require a great deal of responsibility considering the obvious challenges that involve managing the transition.

On the other hand, the pending reforms to complete the monetary union are still on the agenda. The Banking Union is still not finished, awaiting for the deposits insurance and the backstop, which requires a reform of the ESM that is still pending. Moreover, the monetary union still misses an automatic stabilizer, which could be part of the eurozone budget (BICC should assume a stabilizing function), the European unemployment scheme proposed by Ursula von der Leyen or instead giving visibility to the regulation of the previous Commission to establish a stabilizing instrument for investment. The three options are on the agenda and should take shape this year.

Lastly, the tax agenda is urgent. Europeans deserve to recover fiscal sovereignty, largely lost due to globalization. We can only act collectively in tax matters through the EU. Negotiations at the OECD and discussions for a consolidated and common base for corporate taxes will continue on the agenda of The Council.

3 challenges that will top the economic agenda of the EU in 2020

Luis Garicano (Head of the Ciudadanos delegation in the European Parliament and Vice-President of Renew Europe)

In the context of the political economy of the EU, the greatest challenge are the necessary structural reforms to prevent the euro having again the crisis it has already had, to avoid the vicious circle between banks and sovereign bonds we’ve seen in the past, and to make sure that the political economy of the eurozone is solid.

The very much needed structural reforms have been paralyzed for four years. Some parts of the Banking Union were developed, but little more has been addressed. The challenge of the new Commission and European Parliament is to revive this debate, promote these reforms and try to develop and apply them.

More specifically, the key element on the agenda is, firstly, the promise by the Commission President to create a European Unemployment benefit reinsurance scheme; secondly, the need to conclude the Banking Union, with a European deposit insurance and a common insurance asset for the eurozone. Lastly, another big challenge: the need to find instruments to fund the necessary reforms to fight climate change and to ensure that the EU has the right budget to accomplish its greatest ambitions in these areas.

The world in 2020: 10 issues that will shape the global agenda

Eduard Soler i Lecha (Senior researcher, CIDOB (Barcelona Centre for International Affairs)

The single most relevant political event of 2020 will be the US elections in November 3. So far, multilateralism has been one of Trump’s victims. In 2020 the UN commemorates its 75th anniversary and the WTO is facing a major crisis. In Europe, Ursula von der Leyen and Josep Borrell promised a more geopolitical Europe. This requires leadership, direction, resources and allies. Brexit will become a reality, Macron has outlined a geopolitical vision that is not shared by many of its partners and Germany will assume the rotating EU presidency in the second half with the negotiation of the EU budget as the main challenge. The areas where Europe will act geopolitically are those were the Union still feels strong: trade, climate and a neighbourhood that has become wider to include the entire African continent. Globally, the tension between the US and China is the major driving force, with technology becoming the new frontier of power. Finally, ordinary people have also become a major global player as shown in 2019 with the simultaneous protests all across the world or with the strength of the movements to stop climate change. 2019 was the year of protests and 2020 will be the moment to respond to them.

Read CIDOB’s report: The world in 2020: 10 issues that will shape the global agenda 1

1https://www.cidob.org/en/publications/publication_series/ notes_internacionals/n1_220/the_world_in_2020_ten_issues_that_will_shape_the_global_agenda