The Europe Question in 2016
NEW
YORK – At the cusp of the new year, we face a world in which
geopolitical and geo-economic risks are multiplying. Most of the Middle
East is ablaze, stoking speculation that a long Sunni-Shia war (like
Europe’s Thirty Years’ War between Catholics and Protestants) could be
at hand. China’s rise is fueling a wide range of territorial disputes in
Asia and challenging America’s strategic leadership in the region. And
Russia’s invasion of Ukraine has apparently become a semi-frozen
conflict, but one that could reignite at any time.
There is also the
chance of another epidemic, as outbreaks of SARS, MERS, Ebola, and other
infectious diseases have shown in recent years. Cyber-warfare is a
looming threat as well, and non-state actors and groups are creating
conflict and chaos from the Middle East to North and Sub-Saharan Africa.
Last, but certainly not least, climate change is already causing
significant damage, with extreme weather events becoming more frequent
and lethal.
Yet it is Europe that
may turn out to be the ground zero of geopolitics in 2016. For
starters, a Greek exit from the eurozone may have been only postponed,
not prevented, as pension and other structural reforms put the country
on a collision course with its European creditors. “Grexit,” in turn,
could be the beginning of the end of the monetary union, as investors
would wonder which member – possibly even a core country (for example,
Finland) – will be the next to leave.
If Grexit does occur,
the United Kingdom’s exit from the EU may become more likely. Compared
to a year ago, the probability of “Brexit” has increased, for several
reasons. The recent terrorist attacks in Europe have made the UK even
more isolationist, as has the migration crisis. Under Jeremy Corbyn’s
leadership, Labour is more Euroskeptic. And Prime Minister David Cameron
has painted himself into a corner by demanding EU reforms that even the
Germans – who are sympathetic to the UK – cannot accept. To many in
Britain, the EU looks like a sinking ship.
If Brexit were to
occur, other dominos would fall. Scotland might decide to leave the UK,
leading to the breakup of Britain. This could inspire other separatist
movements – perhaps starting in Catalonia – to push even more forcefully
for independence. And the EU’s Nordic members may decide that with the
UK gone, they, too, would be better off leaving.
As for terrorism, the
sheer number of homegrown jihadists means that the question for Europe
is not whether another attack will occur, but when and where. And
repeated attacks could sharply reduce business and consumer confidence
and stall Europe’s fragile economic recovery.
Those who argue that
the migration crisis also poses an existential threat to Europe are
right. But the issue is not the million newcomers entering Europe in
2015. It is the 20 million more who are displaced, desperate, and
seeking to escape violence, civil war, state failure, desertification,
and economic collapse in large parts of the Middle East and Africa. If
Europe is unable to find a coordinated solution to this problem and
enforce a common external border, the Schengen Agreement will collapse
and internal borders between the EU member states will reappear.
Meanwhile, austerity
and reform fatigue on the eurozone periphery – and among non-eurozone EU
members such as Hungary and Poland – is clashing with bailout fatigue
in the core. Populist parties of the left and right – with their shared
hostility to free trade, migration, Muslims, and globalization – are
becoming more popular throughout Europe.
Syriza is in power in
Greece; a leftist coalition is in office in Portugal; and the Spanish
election could lead to significant political and policy uncertainty.
Virulent anti-migrant, anti-Muslim parties are becoming more popular in
Europe’s core, including the Netherlands, Denmark, Finland, and Sweden.
In France, the far-right National Front came close to winning power in
several regions earlier this month, and its leader, Marine Le Pen, may
do well in the 2017 presidential election.
In Italy, moreover,
Prime Minister Matteo Renzi is under attack by two anti-euro populist
parties that have risen in opinion polls. And Chancellor Angela Merkel’s
leadership is now under threat in Germany, following her courageous but
controversial decision to allow almost a million asylum-seekers to
enter the country.
In short, the
distance between what Europe needs and what Europeans want is growing,
and that gap could spell deep trouble in 2016. The eurozone and the EU
are facing multiple threats, all of which call for a collective
response. But what we are seeing is its member states increasingly
adopting a national approach, thus undermining the possibility of
Europe-wide solutions (the migration crisis is a tragic case in point).
Europe needs more
cooperation, integration, risk sharing, and solidarity. Instead,
Europeans appear to be embracing nationalism, balkanization, divergence,
and disintegration.
Nouriel Roubini, a professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics,
was Senior Economist for International Affairs in the White House's
Council of Economic Advisers during the Clinton Administration.
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