Europe in 2050

Olivier Blanchard interviewed by Tim Phillips

Olivier Blanchard 00:01

The world is not the same as it was five years ago, or 10 years ago. We’re under attack from the US, and we’re under a different type of attack from China. This is the moment to do something.

Tim Phillips  00:18

Welcome to another of our podcasts, recorded at the Paris School of Economics CEPR Policy Forum 2026. I’m Tim Phillips. “Is Europe in Economic Decline?” That was the provocative title of a recent article by Paul Krugman that ignited a furious online debate among economists, with some contributions from my guest today. We can argue about how we measure decline or prosperity, or what Europeans and Americans value differently, but today many Europeans are not feeling optimistic about the future. So, what can policy do to change that? That’s the inspiration behind Europe 2050, an ambitious call from CEPR for ambitious ideas about how to transform Europe’s economy in the next quarter century. Olivier Blanchard of MIT and Peterson Institute, and Paris School of Economics, and CEPR, of course, is one of the ambitious economists who is leading it. He joins me now. Olivier, welcome back to VoxTalks Economics.

Olivier Blanchard 00:41

Happy to be here.

Tim Phillips  01:06

Olivier, what is the crisis that is prompting an intervention like Europe 2050?

Olivier Blanchard 01:32

First, let me say this is a joint project with four leaders, so I think it’s fair to mention them: Beatrice Weder di Mauro, Enrico Letta, who had a famous report last year, and Pascal Lamy, who was at the WTO. So, we decided that there was really a need for a project like this. There were two motivations. The first one is we were getting tired of the whole discussion being, how do we react to the tweet that Trump had last night, or this morning, or whatever. An incredibly short-sighted view of how do we react, with Europe being in a defensive mode. Somebody has to do that, maybe not us, but some policymakers have to think about how we react to tweets. But we thought that as economists we should be more ambitious. So, the second motivation — the main motivation — was that, as you said in your intro, there is a sense of gloom and doom in Europe, right? The notion that the world is basically going to be a G2 world with the US on one side, China, and then the middle powers. And I think many of us — many people — think of middle powers as European countries. And that’s wrong. And so, our view was it should be a G free world in which Europe exists. And we thought there were very good reasons to be optimistic, in the sense that, if you look at where we are today, Europe actually is an impressive construction, right? You have 27 countries which have spent centuries — millennia — fighting each other, killing each other, and who have agreed to work together. They are all democracies, and like all democracies, are not perfect, but they are democracies. They respect human rights, they believe in the rule of law most of the time, not always, but typically. And going back to the debate between Krugman and Aghion on productivity growth, and so on. Yeah, we may not be doing great, but we’re rich. So, it seems to me that there’s a place in the world for a strong Europe, as a place where there is democracy, rule of law, and so on. And let’s think about where we are, where we would like to be — so somewhat of a utopia, but a realistic utopia in a way — we had to choose how far on the horizon to look at. So, if you do 28, well you’re really limited in what you can hope to do. If you do 2100 you can be very ambitious, but somewhere somebody else will have to defend the results. And we thought 2050 — which is roughly 25 years — was long enough that you could think about the whole structure of the European Union of Europe, and close enough that you could actually think about how it might look.

Tim Phillips  02:18

And what’s it going to deliver? What’s its goal?

Olivier Blanchard 04:32

What it’s going to deliver is first the vision thing, which is what is the goal? Where do we want Europe to be in 2050? We want it to be strong, what does it mean? Strong militarily, strong economically, strong socially, strong politically, hopefully. But all these are specific dimensions that we can try to think about. So, that’s step one. Step two is where are we today? Things are good, but things are not perfect, so there are a lot of potential obstacles. So, taking stock of where we are today, and then thinking about how do we get to the goal. What are the changes we have to make? Now, what’s going to come out of this is not something like the Draghi report. Draghi had a clear goal, which was to say exactly what do we do with these sectors. Here, what we have done, so just talking about the plumbing, we have thought about all the dimensions that I talked about. We tried to think about experts and policy makers, and we sent a lot of invitations to write short pieces, five to fifteen pages. Where do we want to be, and how do we get there? Very specific measures that we could take. We sent about 50 invitations. I was expecting 30 to come back, I think we got 48. Yes, I think it’s an important signal, which it indicates that there is a perception among this fairly large group that there’s something to be done, that it’s worth it. Now, a footnote, if I may, which is that then I sent an email thanking people very much and saying, well, give me one or two paragraphs about what you might say, so that we can organize things. And I got the paragraphs, but it’s clear that we’re all kind of feeling our way. It’s not as if somebody said, “Well, I mean, there are fast things to do and let’s do it, and, no, I’m going to think about it.” I think this is interesting. So, the answer to your initial question, is it’s not going to be a Draghi-like report. It’s going to be kind of a box of tools, a box of ideas, some of them will never happen, some of them might be picked up. I’ve been asking people who believe that Europe should be a federation, and I’ve been asking people who think that Europe should go away from it. We’re going to get all these views. I hope it will be a very useful document. First, it will be more or less 50 pieces, and then a stock taking piece by us. Where it goes, I do not know. Europe has a role to play. And I really like the idea of there are these two countries which are not behaving well. China is clearly different, and are going to be different, and the US – we can hope that it goes back to some kind of sanity but cannot be sure. It looks as if Europe, as a whole, not just 27 individual countries, can really fill the role of a serious player in the middle. A trusted, the competent player. So that’s what will happen.

Intermission  07:48

If you go to cepr.org you can find “Europe 2050: Geometries of Peace, Power, and Prosperity”. As Olivier says, the project is led by Olivier Blanchard, Pascal Lamy, Enrico Letta, and Beatrice Weder di Mauro. There you will be able to find the first set of policy papers and Vox columns. We’ll put a link to Europe 2050 in the show notes too.

Tim Phillips  08:19

I’m quoting from your manifesto here that you published at the CEPR, it says rather than starting from what’s politically possible, we propose starting from the end. Now, Fukuyama popularized this idea in development that countries want to get to Denmark, that they want to achieve a sort of a distant goal without necessarily thinking about the plumbing, as you called it, and therefore that makes it unattainable. Is there a danger you might be getting to Denmark?

Olivier Blanchard 08:49

I mean, I think you need the vision, but you need the plumbing. You can’t say, “Let’s be Norway, right? Yeah, you have to say, “Okay, what is it that they do? And maybe we have to change this flow, and so I think the plumbing, it’s a bit derogatory, but measures are very important. Take an example, the governments of Europe. Europe, as perceived by the people in Europe, as it works today. When I mean Europe, I really mean the European Union, but plus, right, because one of the big issues is if we accept more countries, which I think we should, then we have to think about the rules in this more than 27 countries. But let’s talk about the European Union. So, I think the first issue is people do not feel European, you and I do.

Tim Phillips  09:35

Which is ironic because I’m British.

Olivier Blanchard 09:37

Well, well, you know.

Tim Phillips  09:38

By 2050 we might be back in. 

Tim Phillips  09:39

Part of the goal is you’re back in.

Olivier Blanchard 09:41

But people do not think of themselves as European. So, we have to find ways, both clearly communication, but more than that, how can we basically get people to understand the European project? So, this means maybe just to take something which is probably not realistic but gives an idea, why not have a president of Europe elected by universal suffrage, for example, right? So that’s one thing to explore, is it crazy, or can it work? I mean, it would clearly have to have support from many countries to start. We don’t want the French to be running a French, and so on, so on. But people at this stage, when you talk about the European deputy, they don’t even know their names, and many of them have strange names, and so on. So, we have to do something, but there are many other dimensions. I mean, another one is — Orbán was an issue. So, we have 27 countries, and all of them are democracies, but not all governments are pro Europe at this stage, most of them are. I think at this stage we can say all of them are in some form, but you know, we’ll get another Orbán surely, maybe even in my country. So, we have to think about unanimity rules. We have to think about this term, coalitions of a willing, which is that maybe we have to give up on unanimity, maybe on some things, climate, taxes, and so on. The countries which want to do it, do it together, so that the European Union is a vision, but there is a number of projects that people can relate to, and that we can achieve, even if some country doesn’t want to do it. When you’ve said this, you raise all kinds of issues, and do we need unanimity for some things? Yes, we do. Coalitions of a willing – it’s good, but I mean, you know, is Europe going to be a set of seven coalitions of a willing on seven topics? Does it make sense? How do they relate to each other? But I think that’s what we’re hoping to think about, or to have people think about and see how we can do that. There are examples, I mean, you know, Schengen is a very good example, right? In which not all the European countries are in, all the European Union countries are in, and some non-European Union countries are also in. So, this is very much a coalition of a willing, and it’s not perfect, because immigration is a very tough topic, but it was put in place, and it works. The issues raised by Draghi, which is that by this discussion on the level of GDP that comparing the US to Europe, so we know that we’re doing okay. Again, we’re rich in terms of levels, whether we’re as rich as the US or not, it’s very difficult to actually come to a conclusion. We consume very different bundles, but productivity growth is running at 1% less than the US, and if you look over 25 years, that’s a fairly substantial amount. We know that we are not at the frontier in some sub fields, and so the question is, what do we do at those margins? What is preventing us from being as productive as the US? Again, we have a size, people say, well, the US is spending trillions of dollars economically, we have roughly the same size. So, I think there we have to identify what is preventing small firms from becoming big, importance of a capital markets union, and so on. But again, the goal is very clear. We would like to have productivity growth at roughly the same rate as the other guy.

Tim Phillips  13:15

You mentioned capital markets union, that’s been discussed for a couple of decades now, so almost as long as the distance until 2050. Shared debt has also been…. we’re gonna have to deal with these issues.

Olivier Blanchard 13:31

Look, you know, we understand why it is that Europe is not like the US or like China. It is 27 countries. Again, they have fought each other in many cases, but they have different cultural backgrounds, legal backgrounds, political backgrounds. They have different sets of lobbies. Nearly any project is going to take time. Some countries are not going to want to do it, and we see it on trade, where some countries are more willing to go along because they are more exposed to the US, and so on. So, I think it’s still important to say this is the direction in which we want to go. Capital market union is well defined and keep pushing. Why is it that we do it now? I don’t know, but one reason is the world is not the same as it was five years ago, or 10 years ago. We’re under attack from the US, and we’re under a different type of attack from China, this is the moment to do something. And you know, you can think of some dystopian scenarios in which we don’t do it, and then we become middle power countries. So, I think the moment is important, and you know, there’s this old cliche that you are basically procedural reactions to crisis, and I think maybe it doesn’t – it’s not a crisis with the same intensity today, but it is a really important moment, and in those moments you get somewhere.

Tim Phillips  14:52

Are you thinking about this as a top-down reorganisation of Europe? Because many of these things just involve changing the rules. Or is there a bottom-up element?

Olivier Blanchard 15:07

You’d have to be clear on what you mean concretely by bottom up. I mean, clearly the countries have to agree.

Tim Phillips  15:13

Yeah.

Olivier Blanchard 15:14

To what? It’s not going to be decided by Brussels. A set of decrees, right? That’s very clear. So, it has to be a discussion. I don’t have a sense that it’s unidirectional. Brussels may propose, but I find that Brussels — because it is trying to not antagonize countries — tends to be very shy, and I’m hoping that some governments are more willing to just push, and then the discussion takes place.

Tim Phillips  15:42

And they will be willing to push if they felt that their domestic voters would vote for these things.

Olivier Blanchard 15:49

So that’s where you have to, well, it could be in some cases that you explained that it’s really needed for the national economy, but we have to change some rules. But in general, yes, I think maybe this is the biggest challenge. We have to convince people that Europe is a thing. At this stage, at least I see it in France, European elections, they don’t care, it’s too distant, it’s too far. So, anything we can do to make Europe closer to people and to get politicians, some politicians, to strongly endorse this European project, not ours, but one. I think it is needed.

Tim Phillips  16:27

Do you think you’re going to get from these — 50 perhaps — pieces, ideas that we haven’t already heard in Draghi and Letta and other reports before?

Olivier Blanchard 16:39

I hope so. I hope so, and I think so. Just to take an example, one contribution, which came yesterday, so it’s not yet on the web page, it’s by Gérard Roland, who is in Belgium and a political scientist more than an economist. And he asked a very good question, which is, it takes a long time to do anything in Europe, because you have 27 countries and they come, they argue, and you go back, and then you try again. And it’s in the nature of the process, of a decision process. And it’s probably a good thing. But sometimes you actually need to take a decision. Mr. Trump takes a crazy decision, or tweet, or Putin decides to invade Poland, right? Having 27 countries meet and then decide doesn’t work. So, that particular contribution says: can we put in place something which basically works when there is that kind of decision? So, he thinks about how it can be prepared. How you set up an institution, which can be ready if needed. You decide when it is going to give the power to actually take decisions. And you think very hard about when it stops. So, that you don’t get a dictator at the open level, and I’ve never heard this before, right? I mean, maybe you have?

Tim Phillips  18:06

Well, it’s a very difficult conversation to have, given the foundation of the European project.

Olivier Blanchard 18:11

Right, but we all agree that again, if Trump put back 200% tariffs, it would be better to have one person discussing. In Ukraine, it would be better if there was one person. And if Putin invades some Eastern European country, it would be better to be able to react quickly. So, thinking about how you can have an institution which works slowly most of the time, but quickly some of the time, is an idea which I think hasn’t been explored. Maybe it goes nowhere, maybe it’s impossible, but again, I think that’s a kind of contribution. Another contribution is a very, very nice piece by a Ukrainian economist called Yuriy Gorodnichenko. And he wrote a piece on why Ukraine can be a major — good — addition to the EU. His theme is Ukraine is like California 50 years ago. And he’s very convincing, with 15 pages showing all the dimensions in which Ukraine can help. Again, I’ve not heard this in that form, so yeah, I’m optimistic.

Tim Phillips  19:16

In your manifesto, you say that Europe has pressed the snooze button when crises have come up over the last 10 years. What happens if Europe carries on pressing that snooze button?

Olivier Blanchard 19:28

Well, then we get the dystopian scenarios. There’s something going on on the social media called Europe 2031, which is not our project, which is basically a dystopian fiction. But unfortunately quite plausible fiction of how the US could destroy Europe through AI. It’s very well done, and it shows exactly why it is that we need to do it. So, if we continue to push the snooze button, then the future is dystopian. I think, in the manifesto, we list 10 of them, but Covid, and all that, and we’ve done things, I mean, again, in reaction to Covid, we did a few things, this time it’s a bit slow. But if we can help with the margin, then all the best.

Tim Phillips  20:16

Olivier, thank you.

Olivier Blanchard 20:17

It was a pleasure.

Outro  20:24

Voxtalks economics is a Talk Normal production. The assistant producer is Megan Bieber, and our editor is Andrei Zagarion. Next time on Vox Talks Economics, as heatwave after heatwave hits Europe and North America, we take a break from our PSE forum reporting to ask what difference signing up to net zero has made.