Published: 17/11/2020

For the next three decades, the European Union is likely to be internally divided as never before, relying on a zombie economy and struggling with growing conflicts between generations and social classes.

The EU’s losing its dominant position in world trade involves the risk of lagging behind in the global technological race. The pandemic has shown the Europeans’ dependence on external services for remote working and e-learning or cloud computing. One example is the market in smartphone operating systems, 99.4 per cent of which is controlled by two US firms: Apple and Google. Should the situation continue, it will undermine Europe’s position and threaten its internal security. Imported applications and devices will facilitate spying on and access to our data as well as content control.

Europe divided as never before

The European Union is at risk of becoming increasingly divided into the winners and losers of integration. The first wave of the pandemic showed the North-South divide in Europe. In 2021–2022, the value of grants to be received by Spain, Italy, Portugal and Greece under the Recovery and Resilience Facility will be EUR 110 billion – more or less equivalent to the total amount allocated to the other 23 EU Member States in the period in question. In the future, the polarisation of growth rates of GDP per capita may weaken the euro area. On the other hand, an increasing problem will be the dualism of the labour market that may deteriorate the availability and quality of services and lead to social conflicts related to migration policies and the development of the silver economy caused by growing demographic stratification.

‘Economic convergence and socio-economic cohesion are one of the most important treaty objectives of the European Union. However, the Coronavirus pandemic is another crisis which highlights the strong polarization of EU economies and societies. One of the greatest challenges ahead of Europe is finding answers to these increasingly articulated differences, both between countries’ development paths and differences in quality of life between social groups within countries. The temperature of the public debate around Brexit and the negotiations on the post-pandemic recovery and reconstruction program shows that these differences can fuel strong conflicts within the EU’ explains Paweł Śliwowski, the head of the strategy team of the Polish Economic Institute.

A zombie economy and a failed European Green Deal?

Fiscal stimulus packages entail significant risks as they may become permanent economic policy components. Should such a scenario materialise, accompanied by continued growth in public debts and balance sheets of central banks, it may affect the risk appetite of businesses, thus hindering innovation essential to further economic development. In such a case, it may be impossible to achieve climate neutrality. As shown by the experience of the corona crisis, the main threat to the implementation of the European Green Deal can be a dramatic rise in the costs of achieving climate neutrality or the attainment of the objective at the expense of a degraded environment.