Four scenarios for Europe: the conclusion

The upshot of the above is that the dismantling of all or part of European integration may involve high economic costs. In the ‘further integration’ scenario, cooperation increases across the board. This will on balance be beneficial in economic terms, although this scenario also involves financial costs in the form of support to other Member States and possibly losses on support previously provided. The political cost will be less national autonomy. This will indeed be transferred to Europe in several areas, a process that currently enjoys scant popular support. Whether political support for this will return if the economy clearly improves is debatable.

The ‘disintegration’ scenario is extremely expensive in economic terms and many of its effects could occur rapidly. The potential political advantage of this scenario in the form of a return to full autonomy for the Member States will thus be at extremely high cost in terms of growth, unemployment and capital losses. At the same time, over time it may turn out that the political gain is also disappointing, since small countries simply have to take account of the rest of the world.

The costs of the ‘two-speed’ scenario, although still substantial, will be less than in the ‘disintegration’ scenario. This applies mainly to the countries in the core eurozone, which will benefit from a deepening of cooperation. Their economies will perform better over time and will be less hindered by the failure of countries that remain outside the core euro to keep up. This latter group, free from the yoke of the euro, will find it increasingly difficult to continue their relationship and it will also be increasingly difficult for them to join the core eurozone over time. In several countries, the political ‘gain’ of increased autonomy will overshadowed by a growing awareness that the problems that they face are not due to ‘Europe’, but to their own policy failings. In most cases however, this awareness will come too late.

Of course, there are other potential scenarios. The actual outcome will fall somewhere between the extremes we have described above. The one thing that is beyond doubt in our view is that developments in the coming years will move along the axes of ‘more or less Europe’ and ‘more or less cooperation’.

Baarsma, B.E. & D. van Schoot (2016), Vrijhandel blijft middel om welvaart voor allen te creëren, Het Financieele Dagblad, 4 November 2016

Berg, M. van den (2016), Naar een maatschappelijk verantwoord handels- en investeringsregime, esb.nu, 28 November.

Boonstra, W.W. (2012), Conditionele Eurobonds als overgangsregime, Economisch Statistische Berichten, 2 March 2012, pp. 134 - 137

Boonstra, W.W. (2016a), Breaking up is hard to do, Rabobank Special.

Boonstra, W.W. (2016b), De voor- en nadelen van Eurobonds, Rabobank Special.

Groenewegen, J. & N. Vrieselaars (2016), Is the Netherlands nex(i)t , Rabobank Special.

Groot, E. de (2016), EU exit contagion risk, Rabobank Special.

Jonung, L. & E. Drea (2009), The Euro: It Can’t Happen. It’s a bad Idea. It Won’t Last. US Economists on the EMU , 1989 – 2002, European Economy Economic Papers, No 395, December.

Lane, P. (2012), The European Sovereign Debt Crisis, Journal of Economic Perspectives, 20(4), pp. 47 – 66.

Loman, H. & M. Wijffelaars (2016), The eurozone – completing the monetary house eurozone, Rabobank Special.

Mundell, R. (1961), A Theory of Optimal Currency Areas, American Economic Review, 51(4), pp.657 – 665.

Roberts, R. (2016), When Britain went Bust, OMFIF Press.

Shambaugh, J.C. (2012), The Euro’s Three Crises, Brookings Papers on Economic Activity, Spring 2012, pp. 157 – 231.

Smit, H. (2016), De Nederlandse land- en tuinbouw heeft groot belang bij de EU, Rabobank Special.

Teulings, C.N., M. Bijlsma, G. Gelauff, A. Lejour & M. Roscam Abbing (2011), Europe in Crisis, CPB Boek 4, published by Uitgeverij Balans, 14 November 2011.

Van de Hei, L. & L. Treur (2016), SME financing in the Netherlands: an increasingly diverse landscape, Rabobank Special.

Wijffelaars, M. & H. Stegeman (2014), European Commission kijkt toe terwijl Europe uit balans blijft, Rabobank Special.

Wijffelaars, M. (2014), Europese begrotingsregels: feit of fabel?, Rabobank Special.

Download the full report in PDF-format