The US National Intelligence Council has a distinctly unflattering forecast of Europe’s future in its Global Trends 2025 report.

The finest US intelligence analysts conclude that, according to current trends, the European Union is in danger of being left behind as “a hobbled giant distracted by internal bickering and competing national agendas”. The title of the section says it all: “Europe: Losing Clout in 2025″.

What do they think EU leaders should do to avert the onset of continental mediocrity? Slash pensions and health benefits. Coordinate defence budgets. Agree on foreign policy. Stop buying so much gas from Russia. Let Turkey in. And the difficult part is….

Europe: Losing Clout in 2025

We believe Europe by 2025 will have made slow progress toward achieving the vision of current leaders and elites: a cohesive, integrated, and influential global actor able to employ independently a full spectrum of political, economic, and military tools in support of European and Western interests and universal ideals. The European Union would need to resolve a perceived democracy gap dividing Brussels from European voters and move past the protracted debate about its institutional structures.

The EU will be in a position to bolster political stability and democratization on Europe’s periphery by taking in additional new members in the Balkans, and perhaps Ukraine and Turkey. However, continued failure to convince skeptical publics of the benefits of deeper economic, political, and social integration and to grasp the nettle of a shrinking and aging population by enacting painful reforms could leave the EU a hobbled giant distracted by internal bickering and competing national agendas, and less able to translate its economic clout into global influence.

The drop-off in working-age populations will prove a severe test for Europe’s social welfare model, a foundation stone of Western Europe’s political cohesion since World War II. Progress on economic liberalization is likely to continue only in gradual steps until aging populations or prolonged economic stagnation force more dramatic changes—a crisis point that may not hit before some time in the next decade and might be pushed off even further. There are no easy fixes for Europe’s demographic deficits except likely cutbacks in health and retirement benefits, which most states have not begun to implement or even to contemplate. Defense expenditures are likely to be cut further to stave off the need for serious restructuring of social benefits programs. The challenge of integrating immigrant, especially Muslim, communities will become acute if citizens faced with a sudden lowering of expectations resort to more narrow nationalism and concentrate on parochial interests, as happened in the past.

Europe’s strategic perspective is likely to remain narrower than Washington’s, even if the EU succeeds in making reforms that create a “European President” and “European Foreign Minister” and develops greater institutional capacity for crisis management. Divergent threat perceptions within Europe and the likelihood that defense spending will remain uncoordinated suggest the EU will not be a major military power by 2025. The national interests of the bigger powers will continue to complicate EU foreign and security policy and European support for NATO could erode.

The question of Turkey’s EU membership will be a test of Europe’s outward focus between now and 2025. Increasing doubts about Turkey’s chances are likely to slow its implementation of political and human rights reforms. Any outright rejection risks wider repercussions, reinforcing arguments in the Muslim world—including among Europe’s Muslim minorities—about the incompatibility of the West and Islam. Crime could be the gravest threat inside Europe as Eurasian transnational organizations—flush from involvement in energy and mineral concerns—become more powerful and broaden their scope. One or more governments in Eastern or Central Europe could fall prey to their domination.

Europe will remain heavily dependent on Russia for energy in 2025, despite efforts to promote energy efficiency and renewable energy and lower greenhouse gas emissions. Varying levels of dependence, differing perspectives on Russia’s democratic maturity and economic intentions, and failure to achieve consensus on Brussels’ role are hampering nascent efforts to develop common EU polices on energy diversification and security. In the absence of a collective approach that would reduce Russia’s leverage, this dependence will foster constant attentiveness to Moscow’s interests by key countries, including Germany and Italy, who see Russia as a reliable supplier. Europe could pay a price for its heavy dependence, especially if Russian firms are unable to fulfill contract commitments because of underinvestment in their natural gas fields or if growing corruption and organized criminal involvement in the Eurasian energy sector spill over to infect Western business interests.

November 21, 2008 2:21am in Europe, Foreign policy | Comment