Looking ahead to

challenges and
opportunities

Looking ahead to challenges

and opportunities

Guido Bichisao
European Investment Bank

Marco Mora Diaz and Elisa Pizzi

Deloitte
Looking ahead to challenges
and opportunities

Guido Bichisao
European Investment Bank

Marco Mora Diaz and Elisa Pizzi

Deloitte
© European Investment Bank, © Deloitte, 2019
All rights reserved
All questions on rights and licensing should be addressed to [email protected]
Photos: © Shutterstock, gettyimages, EIB Photolibrary

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 Looking ahead to
challenges and
opportunities

Introduction (abstract)
In a constantly changing and globalising world, “Europe is a force to be
reckoned with”.1 Nonetheless, the various challenges affecting the world
obviously impact the European Union from an economic, environmental,
demographic and technological point of view. The European Union has an
opportunity to position itself as an assertive player worldwide, but to do this,
is it time for the EU to change its approach as it heads toward 2030? The EU
has a chance to enhance its political will and to develop what Jean-Claude
Juncker coined “Weltpolitikfähigkeit”, i.e. “the capacity to play a role as
a Union in shaping global affairs”2.

Mega-trends observed at EU level and on a global scale include, among

others, fragmentation and external competitiveness, climate change,
security and migration, and technological transformation. To turn challenges
into opportunities, the European Union proposes and implements solutions
aimed at boosting investments, fostering international cooperation and
development, and promoting technological innovation, while addressing
social challenges such as climate change.

Within this context, what are the possible outcomes that are likely to be
observed at EU level in the period up to 2030? A secular transformation is
occurring and the lack of political will may prevent the EU from becoming an
assertive player worldwide. The European Union has the chance to take on
social and political responsibilities and to embrace change as an opportunity
to shape the future of humanity positively at both EU and international level.
In this context, the ultimate goal of the EU should not be to take power but
rather to enhance social responsibility.

1
Authorised version of the State of the Union Address 2018 (2018), “State of the Union 2018. The Hour of European Sovereignty”,
available at: https://ec.europa.eu/commission/sites/beta-political/files/soteu2018-speech_en_0.pdf
2
Idem

 5
 The challenges faced by the EU, as well as
the future opportunities that the Union can
embrace, include financial and economic
development, security and migration,
technological transformation
and the environment.

6
 Looking ahead to
challenges and
opportunities

This article builds on the presentation “Horizon 2030: Looking ahead to

challenges and opportunities”, delivered by Guido Bichisao during the
Deloitte event “EU conference: The changing landscape of Europe –
embracing transformation with innovation”, which took place on
18 January 2018 in Luxembourg. It aims to present in a comprehensive and
concise way the challenges currently faced by the EU as well as the future
opportunities that the Union can embrace as regards the issues that are at
the top of its agenda. The main topics that will be tackled in the article are
i) the financial and economic landscape, ii) security and migration,
iii) technological transformation, and iv) the environment. The conclusion
will discuss possible scenarios that the EU is likely to experience up to 2030.

The EU facing challenges within the global context

At the global level, multilateral systems such as the G7 and the G20, the USA,
and emerging countries in Africa and Asia play a crucial role in shaping
international relations and diplomacy.

Nowadays, the USA is slowly moving from the role of a champion of

multilateralism and a key player in shaping global trade and international
political relations to a country focused on “America first” and primarily
driven by its own interests. In the past decade, a booming economy led to a
profound change in Africa while in Asia, China is playing an increasingly
important role, not only from an economic point of view but also
diplomatically and multilaterally. The country has also strengthened its
relations with its neighbours in Asia, and it is the host of the six-party talks
aiming to end the North Korean nuclear programme3.

3
Jeffrey A. Bader (2005), “China’s Role in East Asia: Now and the Future”, available at: https://www.brookings.edu/on-the-record/
chinas-role-in-east-asia-now-and-the-future/

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Within this context, the EU has a chance to position itself as an assertive
player facing both internal and external challenges, and turning these
challenges into opportunities to be embraced from both a political and
economic point of view.

Currently, the EU is facing an internal political transformation following Brexit

and the rise of populist and extreme right parties in several Member States.
From an economic point of view, despite widespread economic recovery,
EU Member States and European banks still face a number of challenges
arising from the economic and financial crisis4. Other challenges include the
ongoing migrant and refugee crisis and the threat of terrorism, as well as the
problems of resource wastage and climate change. In addition, new
technologies are being increasingly expected to play a crucial role in shaping
the daily lives of citizens worldwide, impacting our way of working in the near
future. However, the development of European digital infrastructure and
technologies, the provision of e-government services to citizens and the
implementation of policies enabling citizens to make the most out of digital
technologies remains a challenge for EU policy makers.

The financial and economic landscape

When considering the financial and economic landscape at EU level, the
present challenges faced by the Union include i) external competitiveness,
including the internationalisation of SMEs, and ii) the presence of an
infrastructure gap, as well as iii) access to finance and the new shadow
banking systems (Blockchain, Fintech, Crowdfunding).

European Central Bank (2017), “Europe’s economic recovery: challenges and opportunities for the banking sector”, available at:
4

https://www.ecb.europa.eu/press/key/date/2017/html/ecb.sp170524.en.html

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 Looking ahead to
challenges and
opportunities

Nowadays, the world’s fastest growing economies are located outside Europe,
i.e. in Asia, the Middle East and Africa. In an effort to help EU businesses
penetrate foreign markets, the EU is organising missions to a number of
countries with fast-growing economies5. The aim of these visits is to help
companies and SMEs in the EU internationalise their activities and to
foster cooperation with emerging markets in fields such as industrial
innovation, key enabling technologies and access to raw materials.

Infrastructure is essential for sustained economic growth, competitiveness

and social progress and it is crucial for governments to make the most of their
existing infrastructure assets6. Governments, however, tend to invest in and
build new infrastructure and neglect the need to modernise existing
infrastructure. According to the World Economic Forum, the global
infrastructure investment gap amounts to about 1.4% of global GDP7. At EU
level, reducing the investment gap is one of President Juncker’s priorities.
To overcome the current investment gap in the EU, the European Fund for
Strategic Investments (EFSI) was launched jointly by the EIB and the European
Commission to mobilise private investments, targeting, in particular, projects
that are strategically important for the EU. The key sectors that EFSI covers are
i) strategic infrastructure, ii) education, research, development and
innovation, iii) renewable energy and resource efficiency, and iv) support for
small and medium-sized businesses.

Access to finance is a key factor in supporting innovation and growth, for

which the EU has developed specific instruments entrusted to the EIB.
Lending, blending and advising are the principal activities of the EIB,

5
European Commission (2013,) “Missions for Growth: EU businesses benefit from emerging markets”, available at:
https://ec.europa.eu/growth/content/missions-growth-eu-businesses-benefit-emerging-markets-0_en
6
World Economic Forum (2014), “Strategic Infrastructure. Steps to Operate and Maintain Infrastructure Efficiently and Effectively”,
available at: http://www3.weforum.org/docs/WEF_IU_StrategicInfrastructureSteps_Report_2014.pdf
7
World Economic Forum, “Introduction: The Operations and Maintenance (O&M Imperative: The Global Infrastructure Gap”, available
at: http://reports.weforum.org/strategic-infrastructure-2014/introduction-the-operations-and-maintenance-om-imperative/the-
global-infrastructure-gap/

 9
which provides clients with sophisticated tools to blend financing with
additional sources of investment such as structured finance, guarantees,
project bonds, InnovFin products, and trust funds. The European
Investment Advisory Hub is the EU’s response to the need for a better
investment environment: a joint initiative by the European Commission and
the European Investment Bank under the Investment Plan for Europe, the
Hub offers a single access point to a 360-degree offer of advisory and
technical assistance services with the aim of strengthening Europe’s
investment and business environment.

However, much more is needed to make Europe a vibrant economy,

attracting talent and fostering adequate innovation.

The proposal for the new post-2020 Multiannual Financial Framework will
entail a set of legislative proposals defining future EU spending programmes
and taking into account i) the lessons learned from evaluations of existing
programmes, as well as ii) stakeholder’s views collected through a series of
consultative activities8. At the core of the discussion remains the question of
how to allocate effectively the scarce resources available to the EU budget,
while balancing national priorities with a European vision, creating the
conditions for a revived economy able to compete with new emerging
players. The technical question linked to the relative importance of
centralised financial instruments rather than decentralised instruments as
well as an EU Treasury can be best answered by defining the mechanism
which would most effectively channel the money where it is most productive.

European Commission (2018), “EU budget for the future”, available at: http://ec.europa.eu/budget/mff/index_en.cfm#debate
8

10
 Looking ahead to
challenges and
opportunities

Lending, blending and advising are the

principal activities of the EIB, which provides
clients with sophisticated tools to blend
financing with additional sources of
investment.

 11
Security and migration
Terrorism, the influx of immigrants and external demographic pressure are
the main challenges related to security and migration that the European
Union is currently addressing. As possible solutions to the above-mentioned
threats, the Union puts forward development cooperation with third
countries, the implementation of the External Investment Plan and the
promotion of European Economic Diplomacy.

Through the Economic Resilience Initiative, the EIB, in close cooperation

with EU Member States, the European Commission and other partners, is
aiming to deploy additional financing to support the capacity of economies
in the Southern Neighbourhood and Western Balkans regions to tackle the
challenges deriving from forced displacement and migration. The ultimate
goal is to boost economic resilience in the above-mentioned regions
through investments in infrastructure and the private sector, and through
the creation of jobs.

While economic resilience is the most important instrument for coping with
demographic trends, its deployment requires a long period of time. In order
to address the pressing threat of terrorism, the main role of the European
Commission in this context is based on the PREVENT and PROTECT strands.
In this regard, the European Commission has developed policies aimed at
preventing terrorist attacks and improving the management of their
consequences. In December 2016, the European Commission adopted a
package of measures to strengthen the EU’s capacity to fight the financing
of terrorism and organised crime, delivering on the commitments made in
the Action Plan against terrorist financing of February 20169.

European Commission (2016), “Security Union: Commission adopts stronger rules to fight terrorism financing”, available at:
9

http://europa.eu/rapid/press-release_IP-16-4401_en.htm

12
 Looking ahead to
challenges and
opportunities

Turning to the promotion of development cooperation, the Sustainable

Development Goals (SDGs), coordinated by the United Nations with the
support of the OECD, aim to make a tangible impact on the lives of citizens
worldwide. The 2030 agenda of the Sustainable Development Goals (SDGs)
encompasses economic, social and environmental aspects including, for
example, topics such as ending poverty, zero hunger, gender equality, clean
water and sanitation, and climate action.

Making a crucial contribution to the achievement of the UN’s SDGs, the

External Investment Plan (EIP)10, adopted in September 2017, fosters
cooperation between EU Member States and third countries. Building on the
success of EFSI, the EIP streamlines the use of financial instruments outside of
Europe, reinforcing the impact generated by the EU in its international
economic activity. The European Fund for Sustainable Development is an
innovative instrument worth several billion euros for boosting investments in
EU partner countries in Africa and the European Neighbourhood, with a view to
mobilising sustainable public and private investments. The ultimate objectives
of the EIP are to contribute to sustainable development and job creation, and
to unblock bottlenecks to private investment by addressing the risks.

When considering the role played by European Economic Diplomacy, the

launch of “Missions for Growth” between 2009 and 2014 by Antonio Tajani,
European Commission Vice-President at that time, is an important example
of what the EU can do. “Missions for Growth” involved around thirty
missions carried out with the purpose of helping EU enterprises do business
abroad, particularly in emerging markets, while enabling them to take part
in political meetings with local authorities, as well as to organise business-
to-business exchanges11.

10
European Union, “EU External Investment Plan”, available at: https://eeas.europa.eu/sites/eeas/files/4_external_investment_
plan_3pg.pdf; European Commission “EU External Investment Plan’, available at: https://ec.europa.eu/commission/external-
investment-plan_en
11
European Parliament, Florence Bouyala Imbert (2017), “In-depth analysis. EU economic diplomacy strategy”, available at:
http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/570483/EXPO_IDA(2017)570483_EN.pdf

 13
Security and migration are fundamental challenges facing Europe for the
foreseeable future. Demographic trends, the exponential increase in
mobility, globalisation, and cultural differences are all raising questions on
how to be prepared for a changing reality whereby Europe is not as central
as it used to be.

Technological transformation
A technological transformation is occurring in the European Union and
internationally. It includes the development of artificial intelligence and new
approaches to infrastructure design. Technological transformation also
implies challenges for public and private actors, and for citizens. The use of
technology facilitates our daily lives but it also harbours challenges such as
the need for governments and enterprises to modernise their IT infra­structure
or the need to overcome professionals’ and consumers’ lack of confidence in
technological transformation and to cope with the emergence of new jobs.

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 Looking ahead to
challenges and
opportunities

At EU level, the European Commission promotes initiatives and activities to

help public authorities, professionals and consumers make the most of the
technological transformation, notably with respect to:

• I ndustry 4.0: a fourth industrial revolution, under the title Industry 4.0, is
transforming economies, jobs and society through the diffusion of smart
and connected technology. This pervasive shift is possible thanks to the
integration of digital and physical technologies across all areas of business,
production, mobility and communications. The fourth industrial
revolution poses risks, but also offers opportunities for new products and
services, better ways to serve customers, new types of jobs and new
business models12.

• Smart cities: another interesting example that shows the ways in which
technologies affect our daily lives. A smart city collects and uses open data
to drive its decision-making and to improve the ability of governments,
businesses, non-profit organisations, community groups, universities and
hospitals to serve its residents13. In particular, smart cities trends affect six
specific areas through the use of technology: the economy, mobility,
security, education, living conditions and the environment.

• e
 Health: the European Commission’s Digital Market Strategy includes
telemedicine and digital health and care with a view to promoting
interoperability and standards within the EU for the benefit of patients,
health professionals, health systems and industry14. In particular, the
eHealth Action Plan15 fostered by the European Commission provides

12
Deloitte Insights (2018), “Industry 4.0: Are you ready?”, available at: https://www2.deloitte.com/insights/us/en/deloitte-review/
issue-22/industry-4-0-technology-manufacturing-revolution.html
13
Deloitte, “Building the smart city with data, digital, and design. Smart city 2.0: Examples of the second wave in smart city
transformation”, available at: https://www2.deloitte.com/us/en/pages/public-sector/articles/smart-city-big-data.html?nc=1#
14
European Commission “eHealth: Digital health and care”, available at: https://ec.europa.eu/health/ehealth/overview_en
15
European Commission (2012), “eHealth Action Plan 2012-2020: Innovative healthcare for the 21st century”, available at:
https://ec.europa.eu/digital-single-market/en/news/ehealth-action-plan-2012-2020-innovative-healthcare-21st-century

 15
 a roadmap for delivering better eHealth services to both consumers and
workers in the field thanks to the use of technologies and devices.

• e
 Education: in January 2018, the European Commission adopted the
Communication on the Action Plan on Digital Learning. The latter defines the
ways in which the EU can help individuals, educational institutions and
education systems make the best out of digital technologies for teaching
and learning16.

• S
 ecuring networks and information: this is a growing challenge for the
European Union and, to this end, the European Commission has promoted
a number of initiatives. As an example, in September 2017, the Commission
adopted a cybersecurity package that includes and promotes new
initiatives to further improve cyber-resilience and response in the EU.
Moreover, the Commission is putting forward a proposal to set up an
EU certification framework with ENISA, the European Union Agency for
Network and Information Security, at its heart17. Cyber-dialogues with third
countries are also continuously promoted to reinforce the principles of
due diligence and state responsibility in cyberspace.

While many efforts have been devoted to the challenge, the transformative
impact of the technological revolution will be pervasive in our lives and the
way we work. How the EU and its Member States embrace this revolution
will have fundamental effects on the role Europe will play in the international
economy and on the well-being of its citizens.

16
European Commission, “Digital Learning & ICT in Education”, available at: https://ec.europa.eu/digital-single-market/en/policies/
digital-learning-ict-education
17
European Commission , “Cybersecurity”, available at: https://ec.europa.eu/digital-single-market/en/policies/cybersecurity

16
 Looking ahead to
challenges and
opportunities

A fourth industrial revolution, under the title

Industry 4.0, is transforming economies, jobs
and society through the diffusion of smart
and connected technology.

 17
The environment
Climate change, resource wastage and increased urbanisation are the main
challenges facing the European Union in the foreseeable future.

To counteract climate change on a global scale, in December 2015, at the

twenty-first Conference of the Parties to the United Nations Framework
Convention on Climate Change (UNFCCC) – also known as the Paris Climate
Conference or COP21 – 195 countries adopted the first universal and
legally binding global climate agreement that promotes a global action
plan aimed at avoiding dangerous climate change.

The EU committed to continue supporting climate action to reduce emissions

and build resilience to climate change impacts in developing countries18. The
EIB is the biggest single multilateral financer of projects aiming to fight
climate change. In 2017, the EU bank invested more than 27% of its total
financing in projects related to this cause. Over the period 2016-2020, the EIB
is expected to invest EUR 100 billion in this area19.

The EU’s 2030 policy perspective as regards climate change ultimately

aims to make the EU’s economy and energy system more competitive,
sustainable and low-emission, while ensuring affordable energy for
consumers and increasing the security of the energy supply. It also proposes
a new governance framework based on plans fostered at national level for
competitive, secure and sustainable energy.

The target is to reduce EU domestic GHG emissions to at least 40% below the
1990 level and to achieve energy savings of 30% by 2030. The 2030 targets
can be regarded as milestones of the Roadmap to reach the goal of a

18
European Commission, “Climate action. Paris agreement”, available at: https://ec.europa.eu/clima/policies/international/
negotiations/paris_en
19
European Investment Fund (2018), “EIB group tackles investment gaps in innovation and development”, available at:
http://www.eif.org/what_we_do/news/2018/eib-group-2017-results.htm.htm

18
 Looking ahead to
challenges and
opportunities

competitive and low-emission economy in 2050. According to the Roadmap,

the EU should cut its emissions to 80% below 1990 levels by 2050 through
domestic reductions alone. The transition to a low-emission economy
concerns sectors such as power generation, industry, transport, buildings
and construction as well as agriculture.

Two new funds, namely the Innovation Fund and the Modernisation
Fund, will support the industry and power sectors in their transition to a
low-emission economy. The Innovation Fund aims to extend the existing
support for the demonstration of new technologies to breakthrough
innovations in industry, while the goal of the Modernisation Fund is to
facilitate investments in modernising the power sector and wider energy
systems and boosting energy efficiency in ten lower-income Member States.
Free allocations will also be available to modernise the energy sector in the
lower-income Member States20.

Much progress has been achieved over the last few years but more is
needed. Not only is it a global responsibility to mitigate the effects of climate
change but it represents a fundamental challenge for the EU to become
gradually less dependent on externally generated energy and to rely more
on its own renewable, green sources.

20
European Commission, “Climate Action. Revision for phase 4 (2021-2030)”, available at: https://ec.europa.eu/clima/policies/ets/
revision_en

 19
 Whereas the future is uncertain and will
certainly generate losers and winners, the
upcoming radical changes require the EU
and its Member States to embrace a
shared responsibility to promote
our well-being in the new world.

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 Looking ahead to
challenges and
opportunities

Conclusion
“No-one is stronger alone. In an interconnected world, it is absurd to think
that we can achieve success in delivering global development and prosperity
if we don’t work together”, President Hoyer said in January 201821. Working
together means creating the appropriate eco-system to address common
problems, with a view to identifying workable solutions based on the
premise that everybody needs to do their part.

In the current changing environment, the European Union has an

opportunity to become an assertive player at the centre of the policy-
making that drives the global context, while continuing to represent the
largest economic area. Many initiatives have been tabled and are being
discussed, but more are needed to face all the future challenges.

The European Union is at a crossroads where it must decide the role it wants
to play in taking responsibility for the coming changes and their implications.
Last year, President Juncker tabled a set of options ranging from a status
quo approach to very ambitious common objectives. The debate is indeed
centred on an appropriate balance between the protection of national
interests and collective responsibility.

On the one hand, the complexity of the international context and the
increasing speed of change, leading to a significant re-allocation of
resources across social actors, have led many countries to advocate more
national autonomy to better protect their interests and slow down the pace
of change.

21
European Investment Fund (2018), “EIB group tackles investment gaps in innovation and development”, available at:
http://www.eif.org/what_we_do/news/2018/eib-group-2017-results.htm.htm

 21
On the other hand, the acceleration of technological change, the emergence
of new powers such as China, demographic trends and the importance of
universal challenges such as climate change cast doubts on the
effectiveness of a national approach for equipping our economies for the
reality of the future.

President Juncker’s State of the Union Address in 2018 indicated that:

“Europe can no longer be a spectator or a mere commentator of international
events. Europe must be an active player, an architect of tomorrow’s world.”22
At the same time, national elections have supported political parties that are
more defensive with respect to national interests.

While the future is uncertain and will certainly generate losers and winners,
the upcoming radical changes require the EU and its Member States to
embrace shared responsibility to promote our well-being in the new world.
Constructive dialogue ultimately provides the basis for sound governance
whereby the key question is not so much related to securing the most
resources but rather how to best allocate them. The suggested approach for
the EU to position itself as an assertive player is to embrace change and to
consider change as an opportunity, thus leading by example.

Ultimately, Horizon 2030 will be driven by the EU’s capacity to allocate its
resources where the generated impact is the most effective for managing
the unavoidable social, economic and cultural change.

Authorised version of the State of the Union Address 2018 (2018), “State of the Union 2018. The Hour of European Sovereignty”,
22

available at: https://ec.europa.eu/commission/sites/beta-political/files/soteu2018-speech_en_0.pdf

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Looking ahead to challenges
and opportunities

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