Last week’s blog covered the importance of new media to empower people to overthrow dictators in the Southern Mediterranean in a process known as the Arab Spring. Undoubtedly, this is a novel phenomenon in global affairs. Whereas before dictators could cut out opposition through crack-downs, they are now less able to stifle opposition as the internet is so hard to control. So, how does the outlook for democracy look in the twenty-first century?

Interesting statistics have emerged from a recent study by Freedom House’s called “Freedom in the world 2012″, which identified a “pattern of protest and repression” in the Arab world and then further afield, for example in China and Russia. Overall, it found that there are 87 free countries, 60 partly free countries, and 48 not-free countries in the world. While 12 countries made progress towards democracy, 26 did not. Certain Arab countries such as Tunisia and Egypt have improved, but even more launched retaliatory crackdowns on dissent, such as Syria. Serious declines were also noted in Central and Eastern Europe, in places such as Hungary. The results look mixed, but the document concludes that “the events of 2011 have presented more hopeful prospects” than 2010.

During the last decade, the magnitude of the IT revolution underway through the internet was often compared to the launch of the printing press by Gutenberg in the 15th  Century. I wondered at the time whether this was an exaggeration, but now I see that it is not.  One example of how social interaction has been revolutionised is Facebook, which was launched in 2004 and now has more than 800 million users, fifty percent of whom log into Facebook on any given day.  It has a truly global reach, using over seventy languages with approximately 80% of its users outside the U.S. It is of note that 350 million of its users access Facebook through mobile devices (where they are lucky enough to have a connection!). To truly understand the global reach of Facebook, a Facebook intern found in December 2010 that if you track the friendships between Facebook users across the world, you get a map of the globe itself (see below).

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With Saturday 14th January marking one year since the ousting of President Ben Ali in Tunisia, we should take a moment to reflect on what the “Arab Spring” has achieved in the past year. We have seen the ousting of Hosni Mubarak in Egypt, Colonel Muammar Gaddafi in Libya and Yemen’s President Ali Abdullah Saleh. But democracy has not spread as far as one might have thought, giving rise to soul-searching debates across the Southern Mediterranean and the Arab world about what political developments will happen next.

What has happened so far?

The power of the internet to instigate political change in this situation has been clear from the outset (see my blog of 25th February). Protesters harnessed the power of social networking websites such as Facebook, Twitter and Skype to organise themselves and put huge pressure on autocratic regimes. They have also been able to bypass traditional state control of media, and to communicate with the outside world in situations where foreign journalists have limited access. Some estimates suggested that in early 2011, 40-45 tweets per minute were coming from Egypt and 30-35 tweets per minute from Syria and Lebanon to spread their message, often written in English for international consumption, and putting international pressure on their speakers.

Initial optimism in the West about the potential spread of democracy in Arabia has been offset by worries about the rise of political Islam. On 10 December, the Economist asked “Is the Arab spring turning into a bleak midwinter?”. In Egypt, the mild-mannered Muslim Brotherhood is currently the clear frontrunner for the elections underway, and in Tunisia and Morocco, similar groups have already won elections. Islamists are also dominant players in Libya, Syria, and Yemen. But the Economist warns that our own suspicions of political Islam should not stop us from supporting democracy across the region. It says, “So far, the version (of political Islam) emerging as predominant seems relatively benevolent. We should grit our teeth and cautiously welcome it”.

How successful has the West been in its help?

Indeed, Western support has been crucial to the unfolding of events over the past year. In the case of Libya, Europeans have taken the lead, with a prominent role taken by Prime Minister David Cameron. Meanwhile, America was more in the background in helping the military intervention of NATO which led to the successful capture of Gadaffi in October after months of civil war.

Has the European Union been able to make a substantive contribution to these events? The answer so far is yes, through focussing on the “3 Ms”: Money, Mobility and Markets:

• Money:  In addition to over €153 million of humanitarian aid (together with its Member States), the EU has undertaken to make available up to a further €1.2 billion to the European Neighbourhood for the period 2011-2013, created more flexible support programmes and facilitated the granting of loans by European financial institutions.
• Mobility: the EU has decided that more access should be given for university scholarships and ‘mobility partnerships’ (including visa facilitation) but not for permanent migration;
• Markets: the EU aims to improve market access as well as the progressive integration of the economies of these partners to participate in the EU single market.

The added value that the EU brings in this situation, coordinating European countries with this type of aid, is of considerable importance.

What next?

First, it is envisaged that more will be done to coordinate aid at the EU level. In its budget proposals for the period 2014-2020, the European Commission recommends to allocate more than €18.1 billion to support the 16 partner countries of the Neighbourhood (both East and South), which represents a 40% increase compared to the financial support of the period 2007-2013. This will be crucial to ensuring that there is stability in the region. But how this money will be spent remains open for debate.

Second, at the beginning of 2012, it is clear that  the process started by the “Arab Spring” is far from over, as countries continue to find their feet and people find their voice. Developments in Syria are very worrying with the death toll now over 5,000, and questions are being asked about how the international Community intends to respond. William Hague recently commented “we’ve agreed the oil embargo, with the European Union, and many other sanctions…But we are not contemplating, at this stage, military intervention” (see The Times on 13th January). But this is not the only issue: the broader question of the Middle East question still remains unresolved, and European sanctions have been placed on Iran which is building up its nuclear capacity. Noone can tell where this will end.

Last but not least, the indicators mentioned above point to continuing instability which can only be strengthened as the ICT Revolution increases the autonomy of individuals and powerful private actors, challenging traditional sources of power. Oppressive regimes are likely to be weakened as efforts to control citizens’ online world are likely to be circumvented by technological innovation. We have already seen the explosion of mobile telephony in Africa, protests against Vladimir Putin in Russia, and calls for a Chinese “Jasmine Revolution”.

Wael Ghuonen, a Google executive who helped set up a Facebook site at the start of the Arab Spring, sets his mind against confrontational tactics (see the Times, 13th January). Instead, he highlights the importance of navigating a middle way, saying that “We have to see our country stable, “We have to see our country stable, but not at the price of democracy, not at the price of human rights. People are not angry with the revolution, they are angry at certain actions done by some revolutionaries.” He added, in typical upbeat mode: “There’s no progress that’s going to happen through pessimism.” No doubt 2012 will be an interesting year as the taste for freedom spreads and democracy is on the march.

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This week, the Government has announced its decision to give the green light to the first phase of HS2 to be completed by 2026. The high-speed line is intended to decrease journey time from London to Birmingham from 1 hour 24 minutes to 49 minutes and with its Y routes to Manchester and Leeds will cost a total of £33 billion. Reaction in the press has been mixed, with The Times calling for “full speed ahead”, while the Financial Times calls it “a white elephant from top to bottom”. On the basis of environmental considerations, the lack of a convincing business case, and above all the total absence of any strategic vision for an overall transport strategy, I am still in the FT camp. Why is this the case?

First, it is environmentally damaging. Transport Secretary Justine Greening has said that tunnelling or cutting could be used to mitigate the impact on the environment, with only 1.2 miles of the line in the Chilterns (which is an Area of Outstanding Natural Beauty) to be above ground. However, Steve Rodrick, Chief Officer at the Chilterns Conservation Board, has said that “the tunnels could also affect drinking water supplies and the health of our rivers. The scale of environmental damage to this nationally-protected area would still be huge and unacceptable” (see the Buckinghamshire Advertiser on 10 January).

Second, the lack of a strong business case for the project is worrying. There is little sense that the Government has done an assessment of best value for money in terms of infrastructural improvement. The Financial Times leader on 11 January commented that the predicted advantages of the project are “less substantiated than one would hope”, because benefits to passengers are overstated. As the Daily Mail rightly commented “in an era of smartphones, laptops, Blackberrys and iPads, people work on trains anyway…The entire premise of HS2 is based on ignoring the fact that time spent on a train is not wasted”. As I suggest argued in my blog on 9 December, it would be much more forward-looking to ensure that scarce resources were used to ensure total coverage for access to mobile and broadband across the UK as a whole.

In this age, it is no surprise that examples of new high-speed rail on the Continent do not bode well either. The Dutch high-speed rail line which opened two years ago had to be saved from bankruptcy with a £250 million government bail out. Trains are running up to 85% empty, and it is losing £320,000 a day. This is the closest equivalent to HS2, with the Netherlands having a dense network of conventional rail services and relatively short distances between major cities. Yet, the Daily Telegraph has said that “the Dutch line has better prospects than the British one”, because flat countryside meant lower construction costs than drilling through the Chilterns, and the UK line has less prospect of significant international travel along it.

Looking to the Continent leads me to my third and most important objection, which is the complete lack of an integrated transport strategy in the UK (see my blog of 7 July). In France, Italy and Belgium, railways run alongside motorways allowing more coordination between road, rail and air. Why has more thought not been given to running a route up the M1 or the M40 - the original proposal of the Conservative Party? It is astounding that there is no thought to run HS2 past Heathrow until at least 2030. The Conservative Transport Trust has said that “only an HS2 alignment via Heathrow interchange, located on the Great Western Main Line as close as possible to the airport, and providing direct connections between high-speed rail, classic rail, Crossrail, the motorway network and Heathrow, can provide the connectivity that the UK requires” (see The Times on August 10 2011).

Looking at all of this, it is no surprise that already 100,000 people have signed a petition against HS2. Eighteen councils oppose the project, and one of them, Aylesbury Vale, is preparing a case for judicial review. There is still hope that the Government will amend its approach and have an integrated transport system with a coordinated rail and airport strategy and not try to plough a furrow through lines of Conservative supporters without any thought to the national best interest.

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In statements by some politicians in recent months, one could assume that they had forgotten that we are in the most serious economic position since the 1920s. It cannot be put better than in the Economist, which commented on 10 December that “in 2008 the world dodged a second Depression by avoiding the mistakes that led to the first. But there are further lessons to be learnt…the crisis in Europe looks eerily similar to the financial turmoil of the late 1920s and early 1930s, in which economies fell like dominoes under pressure from austerity, tight money and the lack of a lender of last resort”. All those taking decisions, whether in the UK or on the continent, need to remember this central observation.

After the last European Union Council on 8-9 December, some questions arise about where we are headed next:

What was the outcome of the European Council?

Reporting to the European Parliament in Strasbourg on Tuesday 13 December, the President of the European Council observed that there was a remarkable degree of consensus on the content and objectives but more discussions took place on the legal instruments necessary to implement them.

Not only was an agreement reached to make additional resources of up to 200 billion euro available to the IMF, but, more importantly, a new fiscal compact with new fiscal rules was agreed. Member States will transpose the new agreement into their national legislation at the constitutional or equivalent level. Key elements of this new approach include a requirement that Member State budgets must be balanced in structural terms, building on the Stability and Growth Pact.

The intention is to make this fiscal compact binding through an intergovernmental treaty to be signed by early March. All countries, except the UK, have given their approval to this course of action, but a few, such as Sweden and the Czech Republic (not members of the eurozone) may have problems.

Is this sufficient to prevent the euro from collapsing?

As the dust settles from the European Council last week, it looks very much as though the reaction, similar to that after previous European Councils, is setting in where expectations before the Council were too high with respect to what was actually decided. Jeremy Warner made a typical comment in The Daily Telegraph on Tuesday, saying that “the summit’s failure to come up with anything remotely credible to address either the single currency’s existential crisis or the gathering economic slump”.

Countering this pessimistic view is a more optimistic one given by German Chancellor Angela Merkel to the Bundestag on Wednesday, where she underlined that “…if we consistently move towards a fiscal and stability union, if we actually complete the economic and currency union… then what I have always stated as our goal since the beginning of the crisis will come to pass”(see BBC News). This echoed her comment on 2 December that, “The path ahead is long and it is difficult but it is the right path for the joint good of a strong Germany in a strong European Union”.

The key to the euro’s survival, I suspect, not only lies in these disciplinary rules being fully applied by all eurozone Member States; it will also rely on whether the European Central Bank President, Mario Draghi, considers that the measures taken by Member States give him sufficient room for manoeuvre  to intervene more in the bond markets. From the outside, this looks as if it is a race between the tortoise and the hare (but, remember, the tortoise won!).

Did the UK take the right approach?

In the run up to the summit, the UK Government consistently supported need for fiscal integration of the eurozone (even if we are not members of it) - see David Cameron’s speech in the House of Commons on Monday. Indeed, the consequences of a collapse of the euro would be horrific for Britain, Europe and the global economy. Comments by London Mayor Boris Johnson that the euro is “a project that is intellectually, morally and democratically bankrupt” show his opportunistic nature rather than his capacity for loyalty and straight thinking (see the The Daily Telegraph on Monday).

As things turned out, David Cameron had no choice but to use the veto. But, as we have now learnt, submitting a detailed protocol the day before the European Council, asking for the restoration of unanimity in some aspects of financial services affecting the single market, was never likely to be accepted by the others - the more so as it had been the pride of place for Margaret Thatcher in agreeing to the single market through qualified majority voting to promote UK financial services. Not one of the finest hours for the Foreign Office!

An interesting twist was revealed by the European Commission during the debate in the European Parliament. During the European Council discussion, it had tabled a clause which said that “any measures adopted by the Council and applying to the euro area only, must not undermine the internal market including in financial services nor constitute a discrimination between the euro area Member States and the others”. Could it be that this general approach might give better protection to the City than the detailed protocol originally suggested?

What next for Britain?

David Cameron could not have been clearer in his speech in the House of Commons of his determination for Britain to remain in the EU, not least because of the millions of British jobs which would be put in jeopardy should we withdraw. And yet, despite the very unstable economic conditions we find ourselves in today globally, this does not seem to stop many in the Conservative Party from arguing vociferously to open up a big debate on repatriation or complete withdrawal from the EU after a referendum.

One point of clarification to be made to those arguing for significant repatriation of policies such as the Common Agricultural Policy and the Common Fisheries Policy, is that we are already out of the two other major EU initiatives, the Schengen area and the euro. If we start asking for more exemptions of this nature - so that in the words of some we can become more like Switzerland - this will encourage other EU Member States to suggest that we withdraw under Article 50. After all, what is the point of belonging to a club if you do not participate in any of its activities?

A more sensible approach is to see how to improve EU competitiveness by campaigning for the alteration or removal of those directives which have an pernicious effect on business, and in particular on SMEs, such as the working time directive or the agency directive. Could such an approach be successful? It might be so, judging by the comments by José Manuel Barroso when speaking to the European Parliament on 13th December:

“It is indeed very important that member states agreed a fiscal compact, but let me say that this is not enough. The problems in the euro area are not only fiscal, but also financial. And above all, problems related to lack of competitiveness. We need to restore growth and promote employment! The commitment to fiscal discipline is indispensable for Europe, but the reality is that structural reforms for competitiveness and growth enhancing measures are the key to restore not only the confidence of investors, but also, above all, the confidence of our citizens.”

Last Thoughts

Given that we are in a situation similar to that of the 1930s, the last thing we need to do in Europe is to indulge in narrow-minded nationalism which will lead to a proliferation of barriers running across the continent. Perhaps Josef Ackerman, the CEO of Deutsche Bank, had something like this in mind in his speech on 23 November in Brussels, when he said that,

“I am convinced: A united Europe is our only chance to retain influence in the 21st century, economically, politically and culturally. Each European nation individually today already is too small to shape its own destiny – and given demographic and economic trends they will lose even more power over time. Only a united Europe will be able to actively participate in the making of global rules, as individual nations we will be relegated to the ranks of rule-takers. And only as a united Europe will we stand a chance of preserving our prosperity. So European integration is no longer primarily about peace. It is about self-determination, the freedom to choose and the power to design – and ultimately about the ability to safeguard our prosperity, identity and liberty.”

In the months ahead, to resolve this impasse resulting from the European Council, we will needto see if there is an effective way to provide the guarantees needed to protect the City from developments in the eurozone.  Mr Jacek Rostowski, the Finance Minister of Poland, claimed in The Times on 13th December that the stand-off would not continue for long. He said, “My guess is that within not too long a period of time, the compromise that was not achieved on Friday morning will be achieved, probably at the time when the intergovernmental treaty is brought into EU law”.

Last, and perhaps not least, on the subject of referenda and the need for British participation in decision-making, we need urgently to wake up to the fact that a referendum has actually been proposed to take place in Scotland before 2015 by Alex Salmond, the SNP leader, to determine whether Scotland should become independent from the UK. This is, in my view, more menacing to the future of our country than a referendum on any eventual treaty change in the European Union. Let’s hope more people voice their concern about this subject in 2012.

This blog will resume on Friday 13th January 2012. In the meanwhile, wishing you a very happy Christmas!

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The focus this week has been on preparations for the European Council in Brussels today and whether there will be agreement on the need for limited treaty change to strengthen the eurozone and stabilize the volatile markets. In this blog, I want to return to one of the recurring arguments put forward by those who want the UK to leave the EU, by arguing that the EU creates high levels of regulation and tax, making it uncompetitive. They say that leaving would free Britain to concentrate on growing markets like China and India.

While many would agree that some of the older directives, such as the working time directive, should be altered or withdrawn, it is worth recalling that Member States such as Germany manage to export manufactured goods to the BRICs more effectively than we do despite being fully affected by EU regulations (see my blog of 11 November).  This is because they are better at imbedding new technologies into existing products. As the Economist said on 24 November, “In the early 1980s about 6m people [in Britain] worked in manufacturing; today the figure is barely 2.5m…Germany’s much-lauded Mittelstand companies have succeeded through foresight and by specialising in the unglamorous business of making parts for complex final products.”

This week, Eric Schmidt, Executive chairman of Google was in Brussels speaking at the first Innovation Summit. He informally reminded some MEPs of the recent McKinsey Report which showed that the digital economy creates 2.6 jobs for every job lost, and also pointing out that mobile connectivity can help stimulate growth. He said that in the coming years, the real wealth creation will come from the interaction of mobile, local and social: most successful new innovative start-ups will include these elements.

At the Innovation Summit, Mr Schmidt gave some pointers as to how Europe’s future need not be one of crisis - but one of innovation. He outlined an agenda focusing on how governments can identify “smart problems” and steer entrepreneurial energy in a productive direction through:

• Education: “We need to invest in training a new generation of smart problem-solvers, and encourage innovative methods for teaching and learning.”
• Copyright and other Internet issues: Europe should  implement a regulatory framework which fosters cloud computing and other innovations.
• Patents: Europe should avoid following the U.S. lead on patents because Europe is “still light years ahead of us!”.
• Culture of entrepreneurship: Governments should provide support and investment for world-class clusters of innovation, like the UK government’s Tech City initiative in East London.

But is anybody in the Government from the top down listening? The Government still wants to spend billions on a high speed railway which will do little to generate thousands of jobs. This week, not only has an extra £500 million been announced for building a tunnel underneath the Chilterns, but Attorney General Dominic Grieve said there was “great uncertainty as to what the future might hold” for locals near the line because suggestions that a later feeder route or “spur” could be built linking the line to Heathrow airport is likely to cause a long-term “planning blight” (see The Daily Telegraph of 5 December). A much better idea would be to invest more in digital infrastructure.

On top of this, the Government’s Autumn Statement includes provisions for urban broadband fund to create up to 10 “super-connected cities”, but does nothing for the many rural areas which are still internet “non-spots”. Hundreds of thousands   of small companies are unable to be fully competitive in an interconnected world because they simply cannot get a quality connection (see my previous blog). A constituent of mine from Milton Keynes recently emailed me to say that it takes him over 15 minutes to read 2-3 emails, and that his wife cannot connect to her university courses because their internet connection is too slow. This is simply unacceptable in the twenty-first century.

Why can’t the Government see the writing on the wall? Perhaps because it is digitally written.

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As background to the European Council scheduled for 8th/9th December, European leaders are seeking to agree on an agenda to strengthen the euro through improved fiscal discipline in the Member States. This is needed not only to give confidence to the markets but also to find a way to keep debt under control in Member States, which according to  recently published estimates for 2010, is around $13.2 trillion (in comparison, the US national debt was recently estimated to be $15 trillion). According to recent remarks by both German Chancellor Angela Merkel and the UK Chancellor George Osborne, Europe is likely to have several years of austerity ahead to put its house in order.

In addition to this debt dilemma, a fundamental question for which people are seeking an answer is: where does growth come from to provide the jobs? An unexpected ray of transatlantic light came from the recent EU/US Summit in Washington on Monday which brought together US President Barack Obama, European Council President Herman Van Rompuy, and President of the European Commission José Manuel Barroso. This summit provided the opportunity to discuss and review the issue of debt on both sides of the Atlantic, but it also, to some surprise, produced a joint statement calling for the development of an agenda across the Atlantic to stimulate growth and jobs in key emerging sectors and technologies. So, where did this idea come from and is it serious in its intent?

Following meetings organised by the Transatlantic Policy Network (TPN) in Washington D.C in July (see my blog of 15 July), TPN produced a document called “Toward a Strategic Vision for the Transatlantic Market” in October. This indicated that “a commitment by the United States and the European Union (EU) to such a bold program would signal to global financial markets that both transatlantic partners are committed to promoting growth and jobs and to boosting the global economy in its time of need”.

Unexpectedly, the European Parliament took up this idea with alacrity approving a Resolution on a “New trade policy for Europe under the Europe 2020 Strategy” on Tuesday 27th September (see my blog of 30th September). In Paragraph 16, it suggests that:

“the European Union and the United States both work to develop the evolving, comprehensive ‘Transatlantic Growth and Jobs Initiative’, which would include plans for the removal of remaining non-tariff barriers to trade and investment by 2020 (‘the transatlantic market’), and that they take steps towards zero-tariff levels in some product areas, as proposed earlier this month by the US Chamber of Commerce; maintains that such an initiative should be included on the agendas for forthcoming meetings of the Transatlantic Economic Council (TEC) and for the EU/US Summit;

Is this serious? Will the Transatlantic Economic Council (TEC) be able, or be willing to implement such a statement? It certainly seems so, given that no other EU/US Summit for the past decade has tasked a high-level working group involving the U.S Trade Representative as well as his European Counterparts to “develop a transatlantic agenda to stimulate growth and create jobs in key emerging sectors and technologies”. Its specific mandate is to consider options in areas such as:

• Conventional barriers to trade in goods, such as tariffs and tariff-rate quotas;
• Reduction, elimination, or prevention of barriers to trade in goods, services, and investment;
• Enhanced cooperation for the development of rules and principles on global issues of common concern and also for the achievement of shared economic goals relating to third countries.

The EU-US Summit fact sheet explains that “upon completing its analysis, the Working Group will also consider and recommend the practical means necessary to implement any policy measures identified. These could include a range of possible initiatives, from enhanced regulatory cooperation to negotiation of one or more bilateral trade agreements addressing the issues above. The Working Group will provide an interim update to Leaders on the status of its work in June 2012. It will issue a report with findings, conclusions, and recommendations to the Leaders by the end of 2012″. This has a good chance of being implemented as all the major business groups on both sides of the Atlantic are preparing to feed into the preparation of this document.

The last question is: why is this important? The answer is we are still living too close for comfort to the conditions of the 1930s, when the Smoot-Hawley Act came in and triggered protectionist measures in the American markets, which triggered a range of other protectionist measures. So, working collectively across the Atlantic to promote jobs and growth at this juncture is a crucial step by having people working on removing barriers rather than erecting them.

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We are now at a critical juncture in the development of the European Union. Decisions are being made about whether we go forwards with the European project with further integration, fiscal discipline, and limited treaty change, or whether, as some commentators have suggested, we are about to see the collapse of the euro and the gradual unravelling of the EU. The Prime Minister has added his voice to this debate, saying at the Lord Mayor’s Banquet a few days ago that, “Now is the chance to ask: what kind of Europe do we actually want?”.

Trying to predict what will happen is never an easy task. There are many examples of events which were not foreseen - such as the fall of the Berlin Wall in 1989, the collapse of Lehman Brothers in Autumn 2008, or even the “Arab Spring” earlier this year. Equally, there are predictions which never came true - for example, Herman Kahn’s prophesies in a Hudson Institute publication written in the 1960s for the year 2000, predicting that people would be living in underwater domes due to overcrowding on land. Nevertheless, even if specific events and their timing are impossible to predict, it is possible to identify long-term trends and possible outcomes. These would be helpful to learn and discuss in our national debate about the kind of EU we would like to develop.

As regular readers of this blog will know, I have consistently looked at diverse aspects of long-term trends, identifying those which would have relevance to the UK and the rest of the European Union (see my previous blogs on global governance 2025, and the need for strategic thinking in Britain). The last time I referred to this was on May 27th, when I commented on the launch of the US exercise identifying Global Trends 2030 and noted then that there was a document in preparation on Global Trends 2030 within the EU institutions that would be taking place in November in Brussels.

Earlier this week, nearly a hundred experts met in Brussels to discuss the first document on Global Trends 2030 prepared in the context of the evolving European Strategy and Policy Analysis System (ESPAS). This draft document was drawn up as a result of wide consultation both within the European Union and the world outside, with visits of experts involved to such countries as China, India, Russia and Brazil. The successful outcome of the conference was helped not least by strong ongoing support and advice from the US through the National Intelligence Council, who are leaders in this field. This was also an occasion to continue the work started in Virginia in May to build an international community of Global Trends experts and strategic foresight practitioners.

Initial reactions to the document indicated that many thought it was an optimistic appraisal of the next twenty years. In its analysis, the document identifies three major trends underway running up to 2030 with possible implications set out below:

• A move towards a Common Humanity but a Growing Expectations Gap: Increasing interdependence, mediated by the information and communication revolutions, will contribute to a growing sense that citizens everywhere share a common humanity.  The empowerment of individuals and non-state actors, particularly civil society organisations, will result in increased civil society pressure for direct participation in the political arena.

• Greater Human Development but Poverty, Climate Change, and Scarcity: Abject poverty is likely to continue to decrease and increasingly affluent societies driven by a burgeoning middle class will emerge in Asia and Latin America. However, overall inequality will tend to increase. Climate change will have serious consequences that will directly challenge living standards and public safety by exacerbating water and food scarcity. Tensions over raw materials may also cause conflict and require new forms of crisis management.

• Polycentric World but a Growing Governance Gap: The world of 2030 will have a plurality of actors, and no single world power will play a hegemonic role. This will generate greater freedom of manoeuvre for all international actors and give middle powers a more prominent role on the world stage. But this will be accompanied by an economic power shift toward Asia, where over half of the world’s population will be concentrated by 2030. Greater awareness of the global nature of the world’s citizens’ topmost concerns will lead to a greater demand for shared solutions.

What next? This conference constituted the end of a two year pilot project exploring the feasibility of establishing ‘an inter-institutional system identifying long-term trends on major policy issues facing the EU’. Now, with the budget line approved in the 2012 Budget, this exercise is to be continued over the next three years as a preparatory action, with the following two aims in mind:

• To establish a fully-functioning ‘European Strategy and Policy Analysis’ System (ESPAS), by the end of 2014, based on a proposal from the European Commission, in accordance with Article 49 of the Financial Regulation, to provide the system with a permanent legal base;

• To submit a report to the incoming Presidents of the EU institutions in 2014 on the specific challenges and policy options that may arise for the period 2014-19.

Although it is undoubtedly difficult to build systems which are inter-institutional in nature and independent in operation, there now is a real opportunity for the EU to build up a strategic and policy analysis framework. This will enable us to be significantly better equipped to deal with an uncertain future and to build partnerships across the world in the hope of building a more positive future for the coming generations.

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Once again, debates in Strasbourg this week have highlighted the fast moving agenda in European politics. Speeches on economic governance from the President of the European Commission, Jose Manuel Barroso, and from the European Council President Herman Van Rompuy, illustrate that there has been a fundamental change in the quality of the democratic process lying at the heart of the European Union. This debate was of interest in particular in that both speakers noted their reluctance to precipitate limited treaty change without substantive thought beforehand.

What is more surprising is not just the content of these speeches, but the fact that there was no comment on them in our national political debate about Europe. Sometimes it seems as if we in the UK are outsiders looking in at the European debates, whereas we are and have been full members of the European Union for nearly forty years. Why is it that there seems to be such reluctance in the British media to report what is happening within the EU institutions?

A major missing link in communication comes from the lack of both formal and informal connections between members of the European Parliament and members of the Houses of Parliament. In former times, dual membership of the European Parliament and national parliaments was feasible, but it is no longer possible today. It is rare to see members of the House of Commons come to Brussels; yet this does not seem to stop them from commenting at every stage on European policies and the European institutions. But, should these linkages now be strengthened?

Such a lack of linkage would be totally understandable should the powers of the European Parliament still be as they were when the Rome Treaty was signed in 1957, but a remarkable qualitative change has occurred since then. The European Parliament has gone from having no budgetary powers, to being an equal partner with the European Council in deciding the EU Budget (see table below). It has also gone from having no legislative authority, to having “co-decision” with the European Council on the vast majority of EU legislation, ranging from public health to consumer protection. Furthermore, the European Commission and the European Council are now constantly supervised by the democratically elected representatives of the European people through the activities of the European Parliament.

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This week, as we remember the sixty million people who gave their lives in the two World Wars of the last century, it is important to take a moment to pause and to think about how far Europe has come since 1945. As I commented in my blog this time last year, “Learning from the historical cataclysms we have had across Europe …we must continue to work together for a prosperous, stable and outward looking European Union… to find ways and means of solving our challenges together” (also see my blog of 12 March 2010 on the five advantages of UK membership of the EU). Looking forwards, are the benefits of being in the European Union likely to grow or to decline?

The international order will look dramatically different by 2030. Recent studies have shown that unless the US and the EU enjoy a new renaissance, the world economy in 2030 will clearly be centred on East Asia, with China as the central hub. More worryingly, a shift in trade and economic flows from the Atlantic to the Pacific may result in the marginalisation of Europe. The influence of countries within the European Union will depend on them finding ways to deal with pressing issues such as shrinking demographics and economic governance, as well as the extent to which Europe can achieve policy-making coherence and consensus.

With the obvious need for close cooperation, it is surprising that many in the UK are talking about repatriating powers from the European Union or leaving the EU altogether. As this debate picks up before possible treaty changes, the argument which is put forward more than others was the one recently raised by Tim Montgomerie. Commenting in The Times of 7th November, he stressed that “If our economy is to flourish in the years ahead it cannot remain chained to a European model where levels of tax, regulation and protectionism are crippling competitiveness”.  A new report from Open Europe published on 9th November says that “we estimate that EU social law currently costs UK business and the public sector £8.6bn a year and that cutting the cost of these regulations by 50% could result in a boost in economic output equivalent to the creation of 140,000 new jobs in Britain”.

Yet these figures are a drop in the ocean compared to the amount of money the UK could be generating were it to be as competitive as Germany in trade of goods. Whereas the UK made EUR 3.755 billion in exports to China in January - June 2010, Germany generated EUR 25.183 billion in the same period. European regulation is clearly not holding back the economies of other countries in the EU and so cannot be the sole cause of all our difficulties. In the past decade, Germany has dramatically increased its share of EU trade in goods with all the BRICs (Brazil, Russia, India and China), while the UK share has stayed the same or even decreased in some cases  (see pie charts below). Most shocking is the case of India, where Britain’s share of was 29% in 2000, and has now gone down to 13%. Meanwhile, Germany’s share increased from 15% to 25%.

*figures on trade in goods from Eurostat 2000 - 2011

On the basis of the pound decreasing by around 30% against the euro over the last decade (see my last blog), it would have been reasonable to expect that the UK percentage share of EU exports for trade in goods to the BRICs would have increased. This has not happened. From the figures above, there is no Eldorado for the UK through disengaging from the EU to improve our prospects with the BRICs

Jeremy Warner offers a better explanation in The Daily Telegraph on 7th November, saying that “too many UK businesses have been content to look inwards and live on the back of slowly growing domestic demand. The vast bulk of private sector employment in the UK comes from small businesses. Many find themselves ill-equipped to seek external sources of demand”. He says that if the rest of the UK economy adopted the outward-looking outlook of the City, then “the UK would thrive as never before”.

China, European Union, Multi-polar world - 1 Comment »

Set out below, I have addressed five questions being asked following the European Councils of 23rd and 26th October. In my answers, I have provided links to basic information concerning the result of the last European Council as well as two speeches which were made by the Presidents of the European Commission (Mr Barroso) and the European Council (Mr Van Rompuy) during the European Parliament debate on Thursday 27th October.

What was the outcome of the last European Council?

In response to the document a “Roadmap to stability and growth” presented by Mr Barroso to the European Parliament on 12th October, the European Council meeting in Brussels reached the following conclusions along five fronts:

• Forceful action by all governments to ensure sustainable public finances;
• A sustainable solution for Greece;
• A sufficient firewall in all other member states against contagion;
• Restoration of confidence in the European Banking sector; and
• Better governance and stronger integration in the Euro area.

These conclusions were debated immediately following the European Council at the European Parliament in Strasbourg on 27th October where Mr Barroso and Mr Van Rompuy gave speeches. Of particular interest was Mr Van Romuy’s comment that “Sometimes I hear complaints that markets don’t give democracies the time we need to get things approved. There is some truth in this. But I am deeply convinced the markets will give us the time we need when they see a clear direction and a clear determination.”

How likely is the Euro to collapse?

Very unlikely. In a recent article in The Daily Telegraph, Jeremy Warner set out a list of reasons for the euro’s steady increase in strength against the dollar since 1999, including China’s wish to diversify its foreign exchange reserves away from the dollar towards the euro. Another way of illustrating the euro’s strength is to look at the chart below which shows the pound has declined vis à vis the Euro by more than 30% over the last decade, remaining fairly stable over the past 12 months.

From figures available in the Financial Times on 24th October, the fiscal deficit for the eurozone is estimated at -4.1 percent (-8.5 per cent for the UK and -9.6 per cent for the US). This shows that what we are experiencing is not a euro crisis but a banking crisis in the eurozone where supposed discipline like the Stability Pact has not been observed by Member States (both big and small). As former Prime Minister of Spain, Jose Maria Aznar wrote in The Times in July, “The lesson of this crisis is that countries must be prepared to accept the conditions which apply to the euro, not only when they first join, but later on, by strictly adhering to the criteria needed to keep it in good order”.

Will the current crisis in Greece scupper the deal?

Mr Aznar’s comments certainly apply in the context of Greece. Although tough decisions have been taken by the Greek government in recent months to bring its financial situation under control, much is still to be done. What has been agreed with a write-off of 50% of its debt is a real effort by EU Member States to help its financial position. Whether in or out of the eurozone, the country will have to deal with the consequences of the profligacy of previous Greek governments for a long time to come.

What has come as a shock and surprise to everyone is the Greek Prime Minister’s call for a referendum, of which no one had any indication at the European Council meetings. Whatever means is decided eventually by the Greek Government to endorse the package, decisions are rapidly needed for all concerned. The global markets depend on it.

Will Germany’s role be decisive for the EU’s future?

Yes. Unlike what some commentators have suggested, the chances of Germany pulling out of the euro are very close to zero. Germans see that Europe is vital for their stable and prosperous future, with Angela Merkel warning on 26th October that “…Nobody should believe that another half century of peace in Europe is a given - it’s not. So I say if the euro collapses, then Europe collapses. That can’t happen” (see The Daily Telegraph).

To her credit, what Mrs Merkel has done, is to bring the Bundestag along with her in two successive large majority votes (the last vote was to expand the powers of the euro zone rescue fund and measures designed to reduce bank risks). Is the Bundestag ready for more Europe? Yes, by the looks of the recent CDU Draft European Programme to be approved later this month.

Will there be an EU Treaty change?

Most probably. As the President of the European Council, Herman Van Rompuy told the European Parliament on 27th October, “limited Treaty change” is likely to take place. He said that “My intention is that first we discuss the ‘what’ before we discuss the ‘how’…Treaty changes take time, whereas an immediate financial crisis can only be dealt with by other, swifter means”.

Any changes agreed are likely to include really tough disciplines for all countries of the eurozone, which is essential for stability and greater growth.  The Treaty changes will probably be negotiated following the French presidential elections in May 2012, concluding by June 2013 before the German Bundestag elections.

Future blogs will deal with the UK’s evolving relationship with the European Union and how to improve democratic accountability in EU institutions.

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