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Analysis

#GLF19 | "Europe is under pressure"

What role for the European economy in a changing world? What dynamics? What forces are involved?

The day after the tragedy, it is difficult not to talk about Notre Dame. The skeleton and its smoking ruins. It is obviously tempting to see it as a symbol of the situation in Europe. What I would like to stress above all and let you think about is that in the 13th century, we had men with a life expectancy of 25 years who were able to build an edifice that lasted 9 centuries. Today, we have a life expectancy of 85 years, but we build buildings that have life expectancies of 20 to 25 years.

What will be at stake in the reconstruction of the Notre Dame is our country and our civilization's ability to not behave as annuitant of this heritage but instead to assume the role of stewardship and take responsibility for its conversion.

In 2017, we had favorable momentum for France and Europe with spectacular improvement in the economic situation, growth above 2% in the euro zone, lower unemployment, renewed investment and reduced risk through the election of Emmanuel Macron.

Two years later, the situation is unfortunately the opposite. There is a fairly marked economic slowdown and a sharp rise in political risk with two trends: the rebirth of identities in the form of collective and aggressive passions about religion or the nation. And the populist movements that result from it.

As for Europe, we have faced a whole series of events and upsets: Brexit, the European election, the succession of Mario Draghi, Italy's prospects for development and American sanctions.

What is its economic outlook?

Globalization has reversed. We avoided a major global deflation in 2018, but the rescue of banks was at the expense of the middle classes. We have lost the citizens of democracies. Today, the growth cycle is at the end of its course, even if it has been artificially prolonged in the United States by tax cuts.

Financial risk is growing: $250 billion in public and private debt and bubbles that have been rebuilt. Geopolitical and political risks are on the rise with the confrontation between China and the United States and the rise of populism in democracies.

It is clear that the reversal of the world will continue with the rise of the southern middle classes, which are important customers for you, and the shift of capitalism towards Asia. Asia-Pacific now accounts for 50% of global GDP.

We have four major cycles coming to an end: the cycle of the West's monopoly over world history, the cycle of US leadership, 45's end to world order and the end of liberal globalization. This does not mean that globalization will come to an end, but it will be restructured into large regional blocks.

Europe is under pressure. It is under pressure from the American Empire with technologies, the extraterritoriality of American law and the dollar; from the Chinese Empire with exports and debt dependence; from the Russian Empire with a military arsenal, cyber-attacks and support from populist forces in European countries.

Europe is becoming an economic adjustment variable in this struggle between the great empires. Concretely: 1% growth in Europe compared to 2.6% in the United States, 6.2% in China and 7% in India. In addition, the Chinese market is closing with the Made in China 2025 strategy and the technological war with the United States.

Europe was the leading communications market in 2000. Today it has lost everything. We only have 12 European companies left in the top 100 global capitalizations; a decade ago that figure was 28.

It is a continent that is politically and strategically vulnerable. Europe remains a target of Jihad and is a challenge for democratures that seek to weaken it. It is a fragmented Europe, with regard to the management of the euro, migrants and liberalism. There are extremely strong dividing lines within this European Union.

Nevertheless, this union maintains all its purpose and important assets. In the days of the Empires, no European country was the right size to try to impose itself. By 2030, Germany will be the only European country among the world's top ten economic powers.

Secondly, there are global risks in the age of universal history: digital, climatic and security risks that can only be addressed collectively. And today’s Europe has its own values: the management of capitalism, solidarity, rule of law and moderation. It also has assets in terms of human resources, universities and infrastructure, its large market of 500 million inhabitants after Brexit, its European constitutional state and freedom of movement.

Free movement is a fundamental asset for the hospitality industry. It must be protected by implementing policies that preserve Europe's sovereignty and - in fiscal, digital, trade and monetary terms - make it possible to invent a sustainable economic and social pact and, at the same time, to ensure security. However, the European Union was not made for security. Since the failure of the European Defense Community in 1954, we have bypassed politics and strategy through law and the market.

Is this impossible for Europe?

It is clear that the results of populist attempts are unconvincing. Brexit has sucked the United Kingdom into a black hole. Populists brought Italy back into recession and Spain, with Catalan independence, woke up the Far Right with Vox.

The coming years will be decisive for Europe. Intergovernmental Europe will be important and the Europe of the euro zone with the key issue of the succession of Mario Draghi. The development of the major countries will be important, particularly of Germany with Merckel. But Germany can only move in a more European direction if France can solve its own problems.

It is a Europe of concrete policies including the large market, the Schengen area, travel, security and the response to the root causes of populism. The causes are the destabilization of the middle classes through globalization, the digital revolution and insecurity.

The main challenges are whether or not Europe exits history and the preservation of a model of freedom, which is a model that has founded many of the values of your industry.

Notre Dame represents the 13th century, the Renaissance of Europe. In the 13th century, Europe lagged behind the Muslim and Chinese worlds. Yet it is Europe that invented capitalism, the modern state and, in the long run, democracy. It did so by rediscovering its ancient roots and building on the values of Christianity. Europe is capable of inventing a new enlightenment and a new intellectual and moral birth.

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