Enemies Foreign and Domestic

The EU is in trouble. Not because of Brexit, the shockwaves have largely dissipated, the UK invoking article 50 and coming to a deal to leave the EU is priced in. No, the EU is beset by a combination of internal and external problems and potential issues. Some self-inflicted, others foreseeable but not ones the EU can influence.

Some of these could lead to the break-up of the EU, others would weaken it further and in combination with another would lead to the break-up of the EU. The EU is not some permanent part of the geopolitical landscape, no more than the USSR was.

Presented below, in no particular order, and by no means exhaustive, are some of the potential shocks coming towards the EU.

Internal Shocks

Next Slowdown/Recession

There will be another slowdown, or even recession, in the global economy over the coming decade. Whether caused by a trade war between China and the USA, caused by a war disrupting the flow of oil through the Straits of Hormuz, or caused by the global economy overheating and needing to take some excess supply out of the equation. There will be a recession, as mature economies, the EU is going to be hit. When it is, the financial markets are going to take a long look at Italy, Spain, Portugal, Ireland, Greece, and France. If they are found wanting (whether their banks or their sovereign debt), there will have to be a massive response from the ECB and the EU to save the countries involved and by implication save the Euro. There could be an effort to force the weakest and most truculent members (I’m looking at you, Athens) out of the Euro. Very rapidly the Euro could unravel, taking with it any semblance of solidarity between the members of the EU.

Probability: Certain

Impact: High (Depends on response)

Hungary

Viktor Orban is a man on a mission, to save ‘Christian Europe’. His opposition to the influx of refugees and migrants won’t destroy the EU, Hungary is now, and will only ever be, a minor player on the EU stage. But the influence it can bring to bear on the rest of Eastern Europe the part of the EU that remains young and relatively rapid growing means the EU should beware. He has changed the constitution to suit himself and is not afraid of standing up to the EU on refugees. A confrontation between Hungary and the EU wouldn’t lead to Hungary leaving or being forced out (despite the wish of some on the left to invoke Article 7 and suspend voting rights) but it could lead to solidarity in Eastern Europe against the demands for sovereignty to flow ever closer to Brussels.

Probability: Med-High

Impact: Low

Marine Le Pen

If Marine Le Pen is elected president of France the EU would almost certainly become an ex-union, pining for the fjords.  A fascist in control of one of the pillars of the EU, one who openly suggests a return to the Franc and leaving the EU, would lead to a crisis within the EU that would be almost impossible to contain. There wouldn’t be time to hold a referendum on membership of the EU/Euro before countries on the periphery, and maybe Italy also had been forced by the bond markets to leave the Euro. France would likely vote to remain in the EU in any referendum, but there wouldn’t be much of one to remain a member of.

Probability: Low-Med

Impact: High

Five Star

The Five Star movement could form, or influence, the next, government in Italy. Less likely to form a government as they explicitly refuse any alliances. Scope for a referendum on the Euro and the EU is limited and would take time, the bond markets wouldn’t wait for a referendum and would abandon Italy (with a staggeringly high public debt and already fragile banks). The ECB would be forced to step in for a country with a government actively hostile to the Euro. Not pretty.

Probability: Low-Med

Impact: Med

Alternativ für Deutschland

Alternativ für Deutschland will not be part of the next government in Germany. I think. If they were, the impact would again, be instantly catastrophic for the EU. Representation in the Bundestag is highly likely, however, and would influence the debate within Germany.

Probability: Vanishingly Low

Impact: High

Russophile Fillon

François Fillon is likely to be the next president of France. His economic policies would have a huge impact on the country (if they could be passed, given the Gallic preponderance for riot and protest). But his stance on Russia could lead to protests from the east. He’s a Russophile and would likely attempt to weaken sanctions on Russia, Eastern Europe (largely) wants Russia contained. They can likely be mollified but if sanctions were weakened it would be a signal that the EU was still a club for the core and not for the East.

Probability: High

Impact: Low

 

External Shocks

And the shocks to the EU that could come from outside the block, ones the EU can have very little influence on.

Algeria

The certain (and apparently imminent) death of Abdelaziz Bouteflika will lead to turmoil in Algeria. Whilst the military may be able to contain the unrest, it is far from impossible that another civil war would break out – mirroring Syria but with far easier access to the EU. The resultant wave of refugees would make their way to France heaping enormous pressure on the EU. France would be compelled to intervene militarily in the former colony and would likely call for aid, the UK would likely stand behind France – the rest of the EU, not so much.

Probability: High

Impact: Med

Syria

The civil war continues. Assad seems likely to win, crushing and gassing resistance with the aid of the odd Russian jet that can actually land on the Admiral Kuznetsov. Further escalation seems unlikely, the most likely scenario is Assad’s fist tightening around Syria. The worst outcome for the EU would be another flare-up, leading to a fresh wave of refugees flooding through Turkey. Turkey has belatedly stopped the flow but this is not guaranteed to continue. More refugees would exacerbate issues with Hungary, France, and AfD. More of a proxy problem than an actual issue.

Probability: Low

Impact: Med-High

Turkey

There are dozens of issues around Turkey, from the government’s hostility to Kurds and Kurdish independence, to the masses of Syrian refugees that Erdoğan loves to use as a threat, to the cancellation of talks for Turkey’s EU membership, to Erdoğan cosying up to a revanchist Russia. A change in the status of Kurds within Turkey would lead to a wave of Kurds heading for Germany, where the huge population of Turks would lead to some spectacular clashes. Erdoğan is likely to use Syrian refugees as a bargaining chip to extract further concessions from the EU. The EU has paid the Danegeld before, they won’t be rid of him now.

Probability: ¯\_(ツ)_/¯

Impact: High

Baltic States

Commitment to NATO never used to be an issue that came into question, maybe of France, but of the USA? Now, with Donald Trump, it is likely that the US will think twice before responding to Article 5 being invoked by the Baltic States if they’re invaded by Russia. Not so much because of Trump’s ties to Putin, but because he doesn’t see them as worth defending. Lithuania and Latvia both come far below their target for defence spending (about 1% of GDP, target is 2%), Estonia behaves with 2%. Putin isn’t likely to invade, or even to send the little green men as he did to the Crimea. But any move on the eastern front of NATO would need to be met with overwhelming force by NATO. Why is this an EU problem? Because the EU relies on NATO for defence. If NATO can’t provide a response than the EU must. Germany most of all must raise their defence spending and throw off their history to become the regional power the EU needs them to be. Failure to respond to the annexation of a member state would be catastrophic.

Probability: Low

Impact: High

Trump

He could say Gibraltar should be part of Spain. He could grope Angela Merkel. He could withdraw from NATO. The cancellation of TTIP is now all but certain. Who knows what Trump could do, but he’s certain to have an impact on the EU before the planet is destroyed. And by impact, I don’t mean something pleasant.

Probability: ¯\_(ツ)_/¯ (Depends on his blood sugar that day)

Impact: ¯\_(ツ)_/¯ (Likely nuclear winter, who knows)

 

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