CIA gives grim warning on European prospects

THE CIA has predicted that the European Union will break-up within 15 years unless it radically reforms its ailing welfare systems.

The report by the intelligence agency, which forecasts how the world will look in 2020, warns that Europe could be dragged into economic decline by its ageing population. It also predicts the end of Nato and post-1945 military alliances.

In a devastating indictment of EU economic prospects, the report warns: "The current EU welfare state is unsustainable and the lack of any economic revitalisation could lead to the splintering or, at worst, disintegration of the EU, undermining its ambitions to play a heavyweight international role."

It adds that the EU’s economic growth rate is dragged down by Germany and its restrictive labour laws. Reforms there - and in France and Italy to lesser extents - remain key to whether the EU as a whole can break out of its "slow-growth pattern".

Reflecting growing fears in the US that the pain of any proper reform would be too much to bear, the report adds that the experts it consulted "are dubious that the present political leadership is prepared to make even this partial break, believing a looming budgetary crisis in the next five years would be the more likely trigger for reform".

The EU is also set for a looming demographic crisis because of a drop in birth rates and increased longevity, with devastating economic consequences.

The report says: "Either European countries adapt their workforces, reform their social welfare, education and tax systems, and accommodate growing immigrant populations [chiefly from Muslim countries] or they face a period of protracted economic stasis."

As a result of the increased immigration needed, the report predicts that Europe’s Muslim population is set to increase from around 13% today to between 22% and 37% of the population by 2025, potentially triggering tensions.

The report predicts that America’s relationships with Europe will be "dramatically altered" over the next 15 years, in a move away from post-Second World War institutions. Nato could disappear and be replaced by increased EU action.

"The EU, rather than Nato, will increasingly become the primary institution for Europe, and the role Europeans shape for themselves on the world stage is most likely to be projected through it," the report adds. "Whether the EU will develop an army is an open question."

Defence spending by individual European countries, including the UK, France, and Germany, is likely to fall further behind China and other countries over the next 15 years. Collectively these countries will outspend all others except the US and possibly China.

The expected next technological revolution will involve the convergence of nano, bio, information and materials technology and will further bolster China and India’s prospects, the study predicts. Both countries are investing in basic research in these fields and are well placed to be leaders. But whereas the US will retain its overall lead, the report warns "Europe risks slipping behind Asia in some of these technologies".

For Europe, an increasing preference for natural gas may reinforce regional relationships, such as those with Russia or North Africa, given the inter-dependence of pipeline delivery, the report argues. But this means the EU will have to deal with Russia, which the report also warns "faces a severe demographic crisis resulting from low birth rates, poor medical care and a potentially explosive Aids situation".

Russia also borders an "unstable region" in the Caucasus and Central Asia, "the effects of which - Muslim extremism, terrorism and endemic conflict - are likely to continue spilling over into Russia".

The report also largely en dorses forecasts that by 2020 China’s gross domestic product will exceed that of individual western economic powers except for the US. India’s GDP will have overtaken or be overtaking European economies.

Because of the sheer size of China’s and India’s populations their standard of living need not approach European and western levels to become important economic powers.

The economies of other developing countries, such as Brazil, could surpass all but the largest European countries by 2020.

From the report:

Could Europe Become A Superpower?

According to the regional experts we consulted, Europe’s future international role depends greatly on whether it undertakes major structural economic and social reforms to deal with its aging work-force problem. The demographic picture will require a concerted, multidimensional approach including:

• More legal immigration and better integration of workers likely to be coming mainly from North Africa and the Middle East. Even if more guest workers are not allowed in, Western Europe will have to integrate a growing Muslim population. Barring increased legal entry may only lead to more illegal migrants who will be harder to integrate, posing a longterm problem. It is possible to imagine European nations successfully adapting their work forces and social welfare systems to these new realities; it is harder to see a country— Germany, for example—successfully assimilating millions of new Muslim migrant workers in a short period of time.

• Increased flexibility in the workplace, such as encouraging young women to take a few years off to start families in return for guarantees of reentry. Encouraging the “younger elderly” (50-65 year olds) to work longer or return to the work force also would help ease labor shortages. The experts felt that the current welfare state is unsustainable and the lack of any economic revitalization could lead to the splintering or, at worst, disintegration of the European Union, undermining its ambitions to play a heavyweight international role.

The experts believe that the EU’s economic growth rate is dragged down by Germany and its restrictive labor laws. Structural reforms there—and in France and Italy to lesser extents— remain key to whether the EU as a whole can break out of its slow-growth pattern. A total break from the post-World War II welfare state model may not be necessary, as shown in Sweden’s successful example of providing more flexibility for businesses while conserving many worker rights. Experts are dubious that the present political leadership is prepared to make even this partial break, believing a looming budgetary crisis in the next five years would be the more likely trigger for reform.

If no changes were implemented Europe could experience a further overall slowdown, and individual countries might go their own way, particularly on foreign policy, even if they remained nominal members. In such a scenario, enlargement is likely to stop with current members, making accession unlikely for Turkey and the Balkan countries, not to mention long-term possibilities such as Russia or Ukraine. Doing just enough to keep growth rates at one or two percent may result in some expansion, but Europe probably would not be able to play a major international role commensurate with its size. In addition to the need for increased economic growth and social and welfare reform, many experts believe the EU has to continue streamlining the complicated decision-making process that hinders collective action. A federal Europe—unlikely in the 2020 timeframe—is not necessary to enable it to play a weightier international role so long as it can begin to mobilize resources and fuse divergent views into collective policy goals. Experts believe an economic “leap forward”—stirring renewed confidence and enthusiasm in the European project—could trigger such enhanced international action.

Last year Schroeder tied to sell the abandoned Hanau plutonium processing plant to Red China.

Schroeder is also courting a VW / China deal, which may actually have gone through, I'm not really sure. If americanbychoce 2 is reading this, he'll probably know.

The dropping of the weapons embargo to China is an EU goal at this time, not just Germany, although Schroeder did make that goal an issue in his latest China visit, I believe.

I think the EU sees China as a remedy to their current economic doldrums. The weapons part worries me, however.

Bush will meet Schroeder in February, I think, Chirac will visit the White House in the spring according to another report I saw in the European media. The US can't afford to have NATO countries sell weapons (and possibly the technology) to China. Perhaps the upcoming meetings will address this.

longjack

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