Europe 2045: Summary

Europe 2045 is written as a report from October 2045, looking back on how the continent recovered from a run of crises that occurred in 2027: political gridlock, social unrest, energy shortages, growing unemployment and economic stagnation.

The problems facing Europe today have already been diagnosed: too little investment, expensive imported energy, fragmented capital markets, slow growth, a growing dependence on AI models and software from across the Atlantic and intense trade competition from China.

From our present vantage point, the radical reform necessary to deal with these issues while preserving or even enhancing the European social model feels very far away. In the Europe 2045 scenario, Europe’s elites, backed by the wider public, manage to carry it through.

How We Got Here: 2008–26

Europe understands its problems but fails to act on them.

Austerity. After a brief emergency stimulus following the 2008 financial crisis, Europe turns largely to austerity, and public investment falls. China instead invests heavily and comes to lead the world in clean energy and electric vehicles.
Energy. Russia’s full-scale invasion of Ukraine in 2022 ends the era of cheap Russian gas, upon which much of Europe’s industry has depended for decades. When America and Israel’s war with Iran closes the Strait of Hormuz in 2026, Europe is still dependent on imported fossil fuels.
Paralysis. In 2024 Mario Draghi, a former president of the European Central Bank, sets out a plan to revive Europe’s economy. Few dispute his diagnosis, but a year later only about one in ten of his recommendations has been implemented.
AI. When large language models take off in the early 2020s, the most capable AI models, and most of the money and computing power behind them, are American. In America, young workers in the jobs most exposed to AI are already finding fewer openings, and Europe risks bearing the costs of automation while the gains go elsewhere.

Crisis and Reform: 2027–45

A crisis forces a new political settlement and a programme of reform.

2027: Crisis. A freezing winter and soaring gas prices bring rolling blackouts. By the summer, southern Europe is on fire. Washington forces Europe’s most important chipmaking suppliers to stop doing business with China, and Beijing retaliates by holding back rare earths. An emergency summit ends without agreement.
2028: Turin. The Commissioner, as the report calls her, argues that Europe must do “whatever it takes” to emerge from the crises and deal with its fundamental problems. She is made president of the European Commission. At a congress in Turin, she asks for permanent common borrowing, a European public investor, a flexible way to bring in other middle powers and an end to the national veto. The delegates agree that where the treaties cannot be changed, the countries willing to act will build outside them. The result is the European Strategic Investment Authority (Esia).
2029–33: Building. Esia has the money but struggles to get projects approved. Special European Zones (SEZs) let regions work with it directly, and skilled workers from North Africa help fill labour shortages, paving the way for closer integration. Europe builds its own AI system, ModelEU, on top of a Chinese model, which causes a scandal but proves good enough for most European companies and institutions. An environmental disaster in Estonia almost ends the SEZ programme.
2034: Madrid. Automation brings mass lay-offs, and investors start to doubt Esia’s debt model. A summit in Madrid takes investment out of the deficit limits in return for concrete pledges to bring debt down later. Companies that receive public support through the SEZs must give the public a share, held by a new European Sovereign Wealth Fund. New taxes fall on land, large inheritances and excess profits.
2035–39: Expansion. A trade deal with China reopens supplies of rare earths and eases access to Chinese components. Britain joins most of the single market without rejoining the EU, and the arrangement becomes the model for Europa+, a looser coalition of partner countries. After leaks about hidden fortunes in Liechtenstein, Europe cracks down on tax havens but offers lower rates on capital invested in strategic industries inside Europe. A new service scheme requires every young European to spend a year in public service, often in another country.
2040–45: Crash and continuity. A second American AI crash causes a short recession in 2040, and public debt peaks at 111% of GDP. The European Parliament gains direct authority over the wealth fund and the investment priorities. The Commissioner falls in 2041 and her successor cuts spending, but the institutions survive. By 2045 Europa+ links 23 partner countries to the EU, with a total population of nearly a billion people.

Europe in 2045

In real terms, GDP per person is about 45% higher than in 2026 and the typical household’s income about a third higher. Electricity is cheaper and low-carbon, emissions are 93% below 1990 levels and the gap between rich and poor has narrowed. There are costs, too: more than 16m people have had to change occupation because of AI, and there are new arguments over who holds power in Europe.

For more on the model, see the methodology page.