First and foremost there is a disconnect between the EU and their own citizens. This disconnect comes in many forms; from the economy, to the wider political agenda, to immigration, there seems to be a deterioration of trust and support that threatens a wide variety of EU identity.
Firstly, the European Commission projections assume that, between now and the middle of the century, 50m new migrants will come into the EU. An influx of this size is likely to cause more political strain. Immigration has been an issue simmering on the surface for years within the European Union. Although the establishment seem to have kept it at bay until now, mounting levels of immigration will only add more pressure to the obstinate and disconnected leaders.
Additionally, the EU working-age population is set to decline in the EU every year between now and 2040 (at approximately 0.4 per cent per annum). Such a decline in working population will only result in a reduction in projected employment levels and working hours from the 2020s onwards, thereby reducing the contribution of the supply of labour to GDP growth.
The consequence will be that in order to maintain pre-financial crisis GDP growth rates, the EU will need to double its pre-crisis productivity rate.
This is a monumental challenge, made all the more difficult because the costs of an ageing population will put greater upward pressure on already high levels of public spending and taxation across the EU, thereby undermining the incentive to work, save, and invest.
The economy will struggle to cope should pressures in countries like Italy continue to rise as they currently are. Italy faces the prospect of three decades of lost growth, the internal contradictions of euro participation have exacted a huge cost, epitomised in the so-called Italian death cross, when rising non-performing loans are plotted against declining nominal GDP relative to trend.
If the EU continues on its current trajectory, it is likely we will see yet another banking crisis.
Then of course there is the issue of defence, which has only just been even further highlighted by the recent NATO conference. The EU’s share of the global population has fallen from 15 per cent at the time the Treaty of Rome was signed in the 1950s, to just seven per cent today, and is projected to be six per cent in 2030. Power is projected by economic, demographic, and military supremacy.
The economic and demographic challenges facing the EU are compounded by its unwillingness to project military power.
The priority for the EU needs to be re-establishing trust and support from their own citizens but also the wider world, rather than an expanding political agenda.
Should the EU not address this, then they face the biggest threat to their existence, the domino effect. When all of the above issues combust then you will only find country-after-country follow the UK’s lead. This in many ways explains what is being viewed as an uncompromising stance on Brexit; the EU is scrambling just to defend its own existence. But the EU needs to redirect its efforts.