1. Europe Faces a Post-Western World Hamish McRae Five great medium-term global shifts and … … their implications for the world of finance Three big questions about the future

2. Three big stories: globalisation … It has been said that arguing against globalization is like arguing against the laws of gravity. Kofi Annan

3. … the West’s burden of debt … I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office. Barack Obama

4. … and the pressure on Europe Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP, and has to finance 50 per cent of global social spending …. Angela Merkel

5. The presentation's structure First, a long historical perspective The structural forces changing the world … … and the shorter-term cyclical outlook A look further forward to 2030 and beyond Some implications for the future of Europe

6. This moment in world history The reversal of the Industrial Revolution The G20 is gradually replacing the G7 Asia is the principal source of global savings … … and of additional global demand China is now the second largest economy … … India the second largest investor in the UK

9. Four huge structural forces Demography – an ageing developed world The environment – concern continues and grows Technology – towards the level playing field Government – under great pressure in the West

10. Ageing societies are different Most of Europe is ageing fast Much of the emerging world remains young So there will inevitably be a shift of power … … and we can see it particularly in the UK Attitudes in the developed world will shift … … and be influenced by the emerging world

16. What does this mean for Europe? There are different patterns within Europe … … but Europe as a whole faces a challenge North America still has a positive outlook China benefits now; India's “sweet spot” is later Obviously: power shifts to Asia, though China will slow Less obviously: prizes go to those that adapt best

17. It’s good to be green The end of the oil era is a long way off, but … … uncertain energy supplies, coupled with … … huge demand from the US and China For Europe – the problem of Russia But “fracking” will buy us some time

21. What does this mean for Europe? One quick win: the value of a “green” reputation Some rebalancing of wealth and power to producers … … including the US and Canada Europe has to diversify its sources of energy Obvious beneficiaries: reliable raw material producers Less obvious: countries that are best at adapting

22. The revolution in technology It is (nearly) a global level playing field Communications technologies are universal … … and Europe has no technological advantage But technology gives Europe global reach … … as well as fostering global competition

26. What does this mean for Europe? Communications technology is universally available It is not quite a level playing field but a flatter one … … for there are new peaks of excellence … … including peaks in Europe Obvious issue: how does the “old” world compete? Less obvious: what do we learn from the “new” world?

27. Debt in the 21 st century There are some things only governments can do … … such as fight wars or rescue banks But huge pressures as debts and demands rise … … debt in the emerging world remains mostly low … … notwithstanding some concerns about China

30. What does this mean for Europe? The debt legacy for the G7 is massive … … and there is a particular problem for Europe All Western governments have to more effective … … using smarter regulation, not “tax 'n' spend” The emerging world carries a much lower burden … … as well as having faster growth

31. What happens next in the cycle? The recovery will remain a two-speed one … … despite some slowing in the emerging world Europe has to press forward on reform … … and will inevitably grow quite slowly Maybe the deep dip means a long growth run … … giving Europe time to make those reforms

33. IMF growth forecasts for 2015 US – 3.0 per cent UK – 2.5 per cent Canada – 2.4 per cent Germany – 1.6 per cent France – 1.1 per cent Japan – 1.0 per cent China – 7.3 per cent India – 6.4 per cent

34. A look forward to 2030 and beyond The BRICs model … … predicts China passing the US in 2027 … … and India around 2050 Shanghai/Hong Kong pass Wall Street But is this realistic and what might go wrong?

39. Outlook for Europe’s economy The North/South tensions will continue Eastern and central Europe will prosper … … once legacy issues are resolved Europe’s skill base is wonderful … … but its political base is weak … … and tensions over the euro are unresolved

40. Some key conclusions … The shift of power to Asia is inevitable … … and we in Europe must learn from it The West’s short-term outlook is troubling … … and it will be a two-speed global expansion But a rebalancing is both inevitable … … and you might say just

41. … and some key questions Is this analysis all too linear? Can China cope with its demographic barrier … … and its social and other challenges? Can India cope as the most populous nation? Can we preserve a freely-trading global economy? What are the pressures on the environment? How will the West deal with loss of leadership?

42. Europe Faces a Post-Western World Hamish McRae Five great medium-term global shifts and … … their implications for the world of finance Three big questions about the future