By European Commission, 2011

The Europe 2020 strategy incorporated three potential growth paths to which the scenario development of this study was incorporated: globalization, demographic change, climate change, Secure, sustainable and energy and social polarisation.

Sustainable recovery

In this scenario, Europe is able to make a full return to the earlier growth path and raise its potential to go beyond. Economic output will rise highly by 2020 and policies are enabled to react to the challenges facing European regions accordingly due to high revenues. On the other hand, institutional and structural reforms will not happen as fast as the crisis indicated because the crisis effects could be relatively quickly overcome. Europe will maintain and consolidate its role as a driving force in knowledge economy to overcome the loss of employment in the production sector to emerging industrialised countries. To compensate for competitive disadvantages with emerging players that have fewer restraints in resource use, the business environment, especially for SMEs, will be improved in order to develop a strong and sustainable industrial base.

Sluggish recovery scenario

Europe will have suffered a permanent loss in wealth In this scenario and start growing again from this eroded basis. The economic growth levels will reach the pre-crisis levels, but overall there will be a permanent gap compared to the former output levels. The freedom of designing far-reaching policies will be restricted. To keep the recovery going, forces will be concentrated into innovation and knowledge so as to keep the global competitiveness of Europe on pre-crisis levels. Europe will maintain its wealth and its role as a driving force in knowledge economy but will still be threatened by emerging countries.

Lost decade scenario

In this scenario, Europe will have suffered a permanent loss in wealth and potential for future growth. Until 2020 the pre-crisis economic growth levels cannot be reached again, which makes the financial manoeuvring room for policy makers to respond to upcoming challenges more restricted. Nonetheless, efforts will be made to foster innovation and knowledge economy, yet a number of neighbouring and overseas economies will slowly but steadily erode Europe’s global competitiveness. Europe will contend hard to keep pace and can only compete by retaining high productivity levels while simultaneously tapering off income and social security levels. Many regions will therefore take their fate into their own hands and look for alternatives to growth.

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