We highlight the dramatic degree of the shifts taking place in world GDP and trade and include fresh projections of what world trade patterns might look like in 2020, should the trends observed over the past decade to continue. We also show the resulting shift in trade relationships for many key countries. European member states tend to have quite different trading partners’ profiles, and this heterogeneity is quite likely to become more pronounced with time. This, in turn, suggests a significant challenge for the effective functioning of the euro area and weakens the original rationale of its creation.

All in all, our main message is confirmed that trade patterns are shifting and that EU countries, and in particular those of the euro area, are trading less and less between themselves while increasing their export reliance on other markets. This in turn corroborates our view that, going forward, the trade-related benefits of EMU will become less evident and that a strengthening of the EMU architecture will be needed to shore up against asymmetric macroeconomic shocks.

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If our projections to 2020 are broadly right, then many established frameworks for the running of the world economy and its governance are not going to be fit for purpose, and will need to change. The global monetary system itself, and global organisations such as the IMF, G7, and G20 are going to have to adapt considerably if they want to remain legitimate representatives of the world order. The alternative is their relegation to irrelevance.

Vir: Jim O’Neill & Alessio Terzi, Bruegel