Executive Summary

The first chapter of this year’s report reviews the politico- economic conditions and outlook, which is unusually uncertain in Europe at the moment. In 2019, the United Kingdom looks on its way to crashing out of the European Union, while the other large member countries (France, Germany, and Italy) are all experiencing serious politico-economic problems, and the European Parliament election campaign will feature strong nationalist and populist voices. Fragmentation and a tendency towards disintegration are also emerging within member countries. Europe is becoming increasingly similar to the late Habsburg Empire: a powerful example of problems arising in multinational, multi-linguistic and multi-ethnic integrated economic entities. To understand why and what the implications may be, the other three chapters of this year’s EEAG report look inside countries, where a great deal has been happening in addition to European integration, and outside Europe, where powerful economic and geopolitical challenges have shaken specific European countries and sectors. One chapter discusses the role of technological and trade developments in shaping country performance within Europe, and studies how, in specific cases, policy reactions and reforms have or have not dealt adequately with the resulting challenges. The next chapter shifts the focus from national policies to the European level, highlighting how international finance could help EU member countries face shocks and a rapidly changing global environment, and how some countries may instead try and break out of what they perceive to be unfair constraints in an incomplete European integration framework. The final chapter considers a fast-changing global environment’s implications for the European Union, focusing in particular on whether and how policymakers should deal with China’s emergence as a leading power in science and technology.