I want to speak this evening about what may seem a rather dramatic subject--the end of Europe, by which I don't mean its disappearance from the map, but a fundamental transformation in the political and economic institutions of the European Union.

In order to illustrate my argument, I want to take you back very far in time. In fact, I want to take you back to the year 732. In Gibbon's Decline and Fall of the Roman Empire, in Chapter 52, Part 2, he describes what might have happened if the Muslim that had invaded across the Straits of Gibraltar and invaded Spain and then France in the year 711 had won what became known in the West as the Battle of Poitiers. So let me quote Gibbon, that much greater Oxford historian.

"A victorious line of march had been prolonged above a thousand miles from the Rock of Gibraltar to the banks of the Loire; the repetition of an equal space would have carried the Saracens to the confines of Poland and the Highlands of Scotland; the Rhine is not more impassable than the Nile or Euphrates, and the Arabian fleet might have sailed without a naval combat into the mouth of the Thames. Perhaps"--and here is the quintessential Gibbon--"perhaps the interpretation of the Koran would now be taught in the schools of Oxford, and her pulpits might demonstrate to a circumcised people the sanctity and truth of the revelation of Mahomet."

Some of you who know my work on empire may have anticipated that this evening I would talk about empire. Indeed, American empire is the subject of my forthcoming book. But I thought we'd done American empire last year in this very room. And so what I want to talk about instead is a different notion. It's a little neologism of my own. It's "impire," with an "i". It's about what happens when a political entity, instead of expanding outwards towards its periphery, exporting power, implodes--when the energies come from outside into that entity.

And I want to try and suggest to you that the face of Europe today and in the coming decades was unwittingly, or perhaps presciently, foreseen by Gibbon in that characteristically ironical passage. I want to try to suggest to you that the end of Europe is not merely an economic phenomenon but will in fact prove to be a cultural phenomenon. Europe will turn out to be not an empire in the sense that I think the United States is today--that is to say, an expansive geopolitical entity--not a rival or a competitor or a counterweight to the United States, but almost its antithesis, something that is drawing political energies into it, that is perhaps even being colonized by exogenous forces.

So that's my argument.

I think it's fair to say that Americans, if I dare to generalize, regard the European Union as a relatively serious institution. I think they see it as economically comparable, at least in scale, with the United States, with, after all, a combined gross domestic product that, by some measures at least, is very nearly equal to that of the United States. Indeed, given exchange rate movements at the moment, I suspect that when they work out the combined GDP of the EU for 2004 and compare it with that of the United States, it may come out slightly higher, even in current dollar terms. Americans see a strong European currency, belying the predictions of "Cassandras" that the euro would fail. They see, if they look closely, evidence that, at least by some measures, West European productivity is not far behind that of the United States. They see, perhaps above all, an equal in trade negotiations.

Nor is it only as an economic counterweight that Americans take Europe seriously. In simple demographic terms, the European Union is a larger entity than the United States and will be larger still with the accession of May the 1st of this year of 10 new countries. With its population of 450 million people, the Europe of 25 will be one and a half times larger than the United States.

Americans also detect in Europe a cultural challenge, perhaps even a cultural rival. It's not just that, like my sparring partner from last year, Robert Kagan, they detect in Europeans a kind of Venusian aversion to the exercise of military power as compared with the Martian--or martial--American preference for the use of force. They also see profoundly different attitudes towards, for example, the welfare state. And they detect--and I think with some reason--a certain hostility to the United States that has perhaps become more overt in the last few years than it was before.

Americans also see a political process, a constitutional process going on in Europe, which, at least for a time last year, seemed to suggest the emergence of a genuine federal United States of Europe. And although that constitution has been put on the back burner, the draft treaty for a European constitution--to give it its proper name--is not, ladies and gentlemen, by any means a dead letter. Those who look closely at the way the European Union works will recognize that, at least in legal terms, it already is a federal system in the American sense; that the European Court is in every sense the equal of the Supreme Court in the United States. It is the highest legal instance in Europe.

And then, if one looks at the small print of the draft constitution, one sees ways in which the federal or quasi-federal institutions of the EU are gaining in power. Were that draft treaty to be implemented, then the rules of qualified majority voting, which allow countries to have rules imposed upon them by a majority, would be extended to cover many more areas of European policy.

Viewed from Washington, Europe seems strong in diplomatic terms, too. Who could mistake the reality that at least some European powers are currently able to exercise at least a kind of disruptive influence on American power? The world is not really unipolar so long as the European Union enjoys the unique distinction of having two permanent members of the United Nations Security Council.

There are other respects in which I think Americans should take Europe seriously in the international sphere, and they're often underestimated. In recent years Europeans have contributed a great deal more in official aid to developing countries. They've contributed substantially more to peacekeeping missions organized by the United Nations. My future colleague Joseph Nye at Harvard talks about soft power, and detects a certain decline in the soft power of the United States. He might equally well, it seems to me, argue that the soft power of the European Union has been growing steadily and that as the world--if the Pew Global Attitude Survey is anything to go by--becomes more hostile to the United States, so, subtly and implicitly, it becomes more friendly to the European Union.

So whether you read Robert Kagan or the very different work that's been produced by scholars like Sam Huntington, John Mearsheimer, Charles Kupchan, it's clear that American thinkers take the European Union very seriously indeed. But what I want to do this evening is to suggest to you that they should not take it so seriously; that in fact the European Union--in all of these respects that I have just listed--is much less impressive on close inspection than it appears through a transatlantic telescope.

When we look closely at the way in which the European Union is evolving and try to set its evolution in some kind of historical perspective, I believe it becomes apparent that, far from approaching a kind of parity with the United States, whether in economic and cultural and political or in international terms, in reality the European Union is an entity on the brink of decline and perhaps ultimately even of dissolution.

Now, for the avoidance of doubt, I'm not saying that the European Union will disappear as an institution in our lifetimes. Institutions, in Europe particularly, tend not to disappear. They just decline in their power. Like, for example, today's Organization of Economic Cooperation and Development--once the prototype of a far larger post-Marshall Aid European union, today a harmless agency for gathering data and producing economic reports. And ladies and gentlemen, Europe is littered with such agencies, which once embodied grandiose plans--think, for example, of the Bank for International Settlements or the International Labor Organization. There's scarcely a European capital without the relic of some past plan for great greater European integration.

My suggestion is not that the European Union will vanish, but simply that its institutions are in danger of atrophying and that it, too, may one day be no more than a humble data-gathering agency with expensive but impotent offices in the city of Brussels and elsewhere.

Let me try to illustrate to you why I think this is. There are really three parts to my argument, one of which is quite obvious and I will deal with as swiftly as possible. And that is, essentially, to point out why so many of these signs of rapid integration and of approaching parity with the United States are false signs.

The second and more interesting part of the argument has to do with a fundamental historical insight into the way that the European Union or, to be precise, the process of European integration, has always functioned from its very inception until the present. I want to draw on the work of recent scholars, not all of which will be known to you, to suggest that there is a key to understanding the process of European integration, and that key can be summed up in a single phrase: German gravy.

Finally, having bored you near to unconsciousness with economics, I will soar away from such dry matter and offer a third cultural argument to the effect that Europe may not only experience a kind of institutional decline, but that its very culture is in itself authentically, and in the true sense of the word, decadent. So my conclusion will be as much cultural as economic.

First, the economics. In every year of the last decade but one--that was 2001--the economy of the United States has grown in real terms faster than that of the European Union. In every year but two out of the last nine years, productivity has grown faster in the United States than in Europe. If you look at the average of unemployment--and these are the standardized measures of unemployment that the OECD uses--you can see that on average over the last decade unemployment in the European Union has been double what it has been in the United States.

Why is this? I think there are two ways of explaining European economic under-performance in the past decade. One of them is that the labor market and indeed markets generally are less flexible than those of the United States. The other is simply that the monetary policy of the European Central Bank has been somewhat inept, or at least somewhat unbalanced, in the way that it has treated the different members of the euro zone.

The key point about economic under-performance in Europe is that it is principally, or at least predominantly, a German story. It is richly ironic that only 20 years ago scholars were warning that Germany--along, of course, with Japan--was going to surpass the United States among the world’s biggest economies. In truth, those of us who were living in Germany in the 1980s could see an impending economic crisis in that country, a crisis that German reunification temporarily postponed in an orgy of deficit finance and subsidized consumption.

Now we see the reality. There is a profound problem in the German economy that would be there whether the Bundesbank was still in charge of monetary policy in that country or not. The problem is worsened by the fact that, under the ECB, interest rates in Germany are probably around 100 basis points higher than they should be. And given that the German economy is roughly a third of the economy of the euro zone, an unhealthy Germany is an unhealthy European economy.

I want to add a little footnote to this story. If you look closely at man-hour statistics-comparing the productivity of, say, a Frenchman in a single hour with that of his American counterpart--there is in fact nothing to choose between them. As a worker, a Frenchman is just as efficient as an American. It's less true in the case of a German worker, but the difference is not huge. One of the biggest differences in economic terms between Western Europe and the United States has been an astonishing divergence in working hours. In the past decade or so, Americans have steadily worked more hours per year. In fact, according to figures from the OECD, the average American in employment works nearly 2,000 hours a year--and hours a year are a good measure of just how much work people are doing. The average German, ladies and gentlemen, works fully 22 percent less of the year.

Between 1979 and the present, the length of the working year grew in the United States. Or, if you want to put it in more conventional terms, the vacation shrank. Precisely the opposite happened in Europe. In Europe, working hours diminished, vacations grew. Labor participation also diminished. Fewer and fewer of the population actually entered the labor market altogether. And that in many ways explains that differential in GDP growth rates as well as anything I could suggest to you. It's a little hint of what I'm going to say in a minute, that this, I think, is more than just an economic phenomenon. In some ways it is a symptom of that cultural malaise in Europe that I want to see as a critical part of the end of Europe.

To put it very crudely, it is the work ethic itself that has declined and fallen. And it is, I think, noteworthy that the decline in working hours is most pronounced in what were once distinctly Protestant countries of northwestern Europe. Once.

I would, if time permitted, talk some more about the economic and political implications of European enlargement. I would, if time permitted, like to suggest to you that the acquisition of 10 new states, most of them in Central and Central Eastern Europe, does not necessarily portend great advantages either for those new member states or for the older member states of Western Europe. Let me merely point out that one respect in which Central European economies have coped with their relatively lower productivity compared with Western Europe since the ending of communist rule in those countries nearly 15 years ago has been by working longer hours. In fact, the Czechs are among the very few people in the world today who work more hours per year than the Americans.

My question, and it is a rhetorical one, though it may invite further comment--not least from my good friend Radek Sikorski, a greater expert in these matters than I can ever claim to be--but my question is, really, whether East Europeans who have discovered the benefits of economic liberty since the fall of the Berlin Wall may not find that liberty circumscribed by the mass of regulations and rules that emanates daily from Brussels.

I could also talk about the extent to which, despite the appearance of a greater European cultural identity, in reality, a certain fragmentation of European culture is still very evident in the many euro-barometer polls that have been conducted over the past years. It's clear that a sense of Europeanness, far from growing at the expense of national identity, has, if anything, suffered something of a decline in recent years.

I could, if time permitted, dwell on why it is that the draft constitution for a European treaty has been grounded, or beached, perhaps even sunk by recent political events in Europe. Some of you will be familiar with these stories; others will be indifferent to them. I would rather proceed at speed to the second part of my argument.

In other words, the conventional points that suggest an approaching European parity with the United States, be they economic, cultural, or political, are points which are at best arguable and, in my view, largely false.

But now let me broaden my argument. Let me introduce a certain historical perspective. I'm not, as anybody who has read the book Virtual History will know, an economic determinist or any kind of determinist. I do not, in fact, regard economics as in some sense the driving force of human history. But there are exceptions to that rule. There are certain processes that are primarily economic in their character. And I think it's true to say that European integration is one of those processes.

There's been some very good work on the history of European integration done recently. It hasn't been, I think, widely enough understood or received. Perhaps the most interesting work has been produced by the venerable British economic historian Alan Milward, but it's also been complemented by the young Harvard historian Andrew Moravcsik. Between them, working independently, they've arrived at a new interpretation--and I think it deserves to be called a new interpretation--of why European integration happened at all after the Second World War.

Instead of the conventional view that a few saintly figures, like Jean Monnet, realized a vision of European integration to prevent the recurrence of war in Europe and generally make everybody happier and better off, they argue that, beginning with the negotiations that produced the European Coal and Steel Community, the nation states of Western Europe made very limited concessions of sovereignty in the pursuit of the national economic interest---or, to be quite specific, in pursuit of the interests of well represented economic groups within their societies, principally heavy industry and small agriculture.

If one understands the process of European integration in these terms--essentially an economically driven set of deals between still largely sovereign nation states--one thing becomes abundantly clear. And that is, ladies and gentlemen, that from the very outset this process relied on what I rather crudely called a moment ago "German gravy." It was the Germans who, from the very word go, were prepared to subsidize the other parties in the process of European integration.

To give you just one example: The fundamental bottom line of the coal and steel community was that German taxpayers would prop up the inefficient coal mines of Belgium at the cost of hundreds of thousands of marks. In the same way, it was German taxpayers who paid the development aid to the French colonial empire, aid that was an integral part of the Treaty of Rome.

It's often forgotten that where the British saw a choice between empire and Europe, and dithered and hesitated about that choice, the French did what I always do whenever I see a choice. They said, "We'll have both, please." Not only did the French seek to retain their African empire and what was left of their Asian empire within the structures of the emerging European community, but, with a brilliant stroke of diplomacy, they insisted that the other five members that signed the Treaty of Rome should subsidize their colonies. And so it was that, in an extraordinary deal, Konrad Adenauer agreed to payments to French colonies that came very largely from German taxpayers. Likewise, the Common Agricultural Policy, which became the single largest item in the budget of the European community, was from its very inception underwritten by net contributions from German taxpayers. That was how it worked.

If you add up all the--to use the technical term--unrequited transfers that Germany has paid through the European budget since its inception, one of the most striking facts that I can offer you is that the total exceeds the amount that Germany was asked to pay in reparations after the First World War. It is more than 132 billion marks, the sum that the Germans in the 1920s insisted would bankrupt them if they paid it. Well, they finally did pay it. They paid it not as reparations, but as net contributions to the European budget.

And that, I think, explains one of the more striking findings of recent European survey data. Euro-barometer surveys show that there's a real discrepancy between what people think about the European Union relative, as it were, to the general good and what they think about the European Union relative to their own national good. And it's an almost perfect correlation. Countries that are net gainers, net recipients from the European budget, think that the European Union is quite good, but they think it's even better for their own country. Countries that are net donors to the European budget--and that principally means Germany, but also in some measure Britain--think that the European Union is okay for their country but is very good generally.

And this, it seems to me, takes us to the very heart of the political economy of European integration Let me tell you some simple percentages about the way the European Union works, to illuminate the fundamental imbalance between representation and taxation which is at the heart of the story of European integration.

Today, Germany accounts for around a quarter, a little under a quarter, of the combined gross domestic product of the entire European Union. It accounts for just over a fifth, 22 percent, of its population. It accounts for 16 percent of the seats in the European Parliament, and around about 11 percent of votes on the Council of Ministers, though that process of voting is, of course, under a process of reform. (In fact, if the draft treaty isn't enacted after enlargement, Germany's share of votes in the Council of Ministers will fall to 8 percent.) But if you look at net contributions to the European budget in the years 1995 to 2001, Germany contributed 67 percent.

So the Germans get between 8 and 11 percent of the decisive votes in the Council of Ministers, that is, the key decision making body of the European Union, but they contribute two-thirds towards the combined budget.

Now, that's all very well, ladies and gentlemen, if Germany is the fastest growing economy in Europe. But as I've already pointed out to you, it is today the slowest growing economy in Europe. It is, in fact, the sick man of Europe. And although the German economy is very large, it is far from clear why, when it has not grown at all in the past six quarters, that economy should continue to subsidize the economies of the smaller, poorer countries of Southern and now also Central Europe.

My estimation, ladies and gentlemen, is that the train is still running, but there ain't no gravy anymore. And as that reality gradually dawns, the process of European integration, which I believe has depended from its very inception on German gravy, is bound to come to a halt. Who, after all--who is going to pay for those, and I quote, "maximum enlargement-related commitments," to the 10 new member states which have been capped at 40 billion euros? The general assumption appears still to be that the German taxpayer will pay that money. I see no reason whatsoever why that should be the case. Indeed, the very smallness of the sum that has been agreed illustrates the way the German purse-strings are tightening.

But ladies and gentlemen, I didn't come here this evening to make a purely economic argument. What I've said I think is in fact a sufficient argument to explain the end of the process of European integration as we have known it up until this point. But I have one last argument to make that is not, in the end, an economic argument at all.

The fundamental problem that Europe faces, more serious than anything I've mentioned so far, is senescence. It's a problem that we all face as individuals to varying degrees, but from society to society the problem of senescence, of growing old, varies hugely. In the year 2050, which is less remote than it may at first sound, current projections by the United Nations suggest that the median age of the European Union countries, the EU 15, will rise from 38 to 49. The median age will rise in the United States, too, though less sharply. (I wish I had time to tell you about the problems that you are going to face, because then it would stop you feeling the complacency that you may have begun to feel this evening.)

The situation in the United States is not great at all in this respect, but it is--and I believe this is the most one can say--better than the situation of the European Union. The German population is projected to decline absolutely from 82 to 67 million between now and 2050. Falling populations will be a characteristic feature of the once globally dominant societies of Western Europe. An increase in retirement ages would help only slightly, but it is not an adequate answer to the problems that already beset the social security systems of Western Europe. The implicit liabilities of the German social security system at the moment are currently around about 270 percent of German GDP. There are problems with the social security and Medicare systems in this country--very serious problems indeed. But the problems in Europe are much worse, and they will bite politically much sooner.

There is only one way out for this continent, and that is immigration. There is an obvious source of youthful workers who aspire to a better standard of living. All around Europe there are countries whose birth rate is more than twice the European average, indeed, significantly more than twice. The trouble is that nearly all these countries are predominantly Muslim. Not only that, but there is, right next door to the European Union, in fact between the European Union and Iraq, a country that now has a very plausible claim to European Union membership. And that country is Turkey.

Turkey's per capita income is in fact, by some measures, higher than that of Hungary, Latvia, and Lithuania, all of which are about to enter the European Union--certainly higher than those Balkan economies that hope to be in the next, or next but one, wave. The arguments against Turkish membership--and the Turks have been pressing for some form of membership since the 1980s--are getting weaker and weaker. And you know the only one that is left? It's one most often heard among German conservatives, but occasionally it slips out of a French mouth, too. That argument is a cultural argument. It is the argument that Europe is fundamentally a Christian entity; that the European Union is a kind of latter day secular version of Christendom.

Ladies and gentlemen, I only wish that were true. The reality is--and it is perhaps the most striking cultural phenomenon of our times--that Western and Eastern Europe are no longer in any meaningful sense Christian societies. They are quite clearly post-Christian--indeed, in many respects, post-religious--societies. In the Netherlands, Britain, Germany, Sweden, and Denmark, less than 1 in 10 of the population attends church even once a month. A clear majority do not attend church at all. There are now more Muslims in England than Anglican communicants. More Muslims attend mosque on a weekly basis than Anglicans attend church. In the recent Gallup Millennium Survey of Religious Attitudes conducted just a couple of years ago, more than half of all Scandinavians said that God did not matter to them at all. This, it seems to me, makes the claim to a fundamental Christian inheritance not only implausible but also downright bogus in Europe. The reality is that Europeans inhabit a post-Christian society that is economically, demographically, but, in my view, above all culturally a decadent society.

They cannot, though they will try, resist forever the migration that must inevitably occur from south and from east. They will try. Indeed, they try even now to resist the migration that really ought legally to be permissible from the new member states to the old member states after May the 1st. Even that has become contentious. Increasingly, European politics is dominated by a kind of dance of death as politicians and voters try desperately and vainly to prop up the moribund welfare states of the post-Second World War era, but above all to prop up what little remains of their traditional cultures.

I understand Samuel Huntington is worried that Mexican culture is taking a firm root in this country and shows no sign of being dissolved into the traditional American melting pot. I read an alarmist article by him in Foreign Policy this week. Well, I have good news for him. Long before the mariachis play in Harvard Yard, long before that, there will be minarets, as Gibbon foretold, in Oxford. Indeed, ladies and gentlemen, there already is one. The Center for Islamic Studies is currently building in my old university a new center for Islamic studies. I quote: "Along the lines of a traditional Oxford college around a central cloistered quadrangle, the building will feature a prayer hall with traditional dome and minaret tower." It will open next year. I wonder what Gibbon would have said.

Thank you very much.