2018 Global Risk Forecast - Europe

Europe faces a multitude of challenges in 2018, not least the disruptive influence of Russia, particularly in the Balkans, as well as preparations for the U.K.'s exit from the E.U. in the midst of political turmoil in large member states such as Germany and Spain. The threat of terrorist attacks, both from Islamists and far-right extremists, will remain the major security risk. europe and asia section of world map The E.U.'s negotiations with the U.K. will continue ahead of the latter's exit from the block in 2019, but progress is likely to be slow given the political deadlock in Germany and the turmoil over Catalan independence in Spain. Britain's Conservative government is deeply divided over what it seeks to accomplish from the negotiations; whether to maintain the status quo desired by entrenched financial interests and big businesses, even at the expense of being subject to E.U. rules the British cannot directly influence a vassal state, according to Foreign Secretary Boris Johnson or conversely to accept third country status, thereby wrenching the U.K. out of the zero-tariff trading system. A2 Global warns that the risks of the latter scenario are mounting, because any residual powers conceded to the E.U. will be presented as neo-colonial by large sections of the British press. Also read: Theresa May, isolated but irreplaceable Though Germany is likely to avoid early elections, centre-right Chancellor Angela Merkel will be in a weakened position if she forms another grand coalition with the centre-left SPD, which will demand costly concessions, such as the abolition of private health insurance and a raise in state-funded pensions, if it is to enter into another Merkel government. Spain will remain distracted by the chaos wrought by the Catalan independence referendum, outlawed by the Spanish constitutional court. While the U.K.'s own volatile domestic politics will prevent it from taking the upper hand in Brexit negotiations, the E.U. side is also likely to split between countries willing to make concessions to Britain to preserve the economic status quo, and those who view the integrity of the E.U. itself as being paramount.

A2 Global does not predict that Italy will leave the Euro in 2018, though the currency is highly unpopular among Italians and Lega Nord opposes it

  Italy's general election could prove to be the greatest European upset of 2018. The anti-establishment M5S, led by former comedian Beppe Grillo, consistently polls ahead of other parties, reaching around 27 per cent. However, A2 Global assesses that it is unlikely to be able to form a government even if it does maintain its approval rating in the election, because the party opposes coalitions. The far-right Lega Nord is currently polling at 15 per cent, and could conceivably form a coalition government with independent candidates and a right-wing party, Fratelli d'Italia. Any government led by Lega Nord would be highly Eurosceptic, inflaming divisions within the European Union. That could create major problems for the Euro currency zone, of which Italy is a part. However, A2 Global does not predict that Italy will leave the Euro in 2018, though the currency is highly unpopular among Italians and Lega Nord opposes it.

Russia will continue its attempts to influence politics in European countries, focusing particularly on Latvia's parliamentary elections in 2018

  Russia will continue its attempts to influence politics in European countries, focusing particularly on Latvia's parliamentary elections in 2018. Ethnic Russians constitute around a quarter of Latvia's population, and traditionally vote for the SPDS, a left-wing party that advocates closer relations with Russia. The Balkan countries face a mixed picture. Macedonia is reaching political stability after a crisis-ridden two years. The centre-left government will continue to push for integration with Western Europe, to Russia's irritation. Serbia and Montenegro will also continue their long path towards E.U. membership; Montenegro's long-time leader Milo Đukanović will almost certainly run in the presidential elections in 2018 after a brief political hiatus. A2 predicts a low turnout for Bosnia and Herzegovina's general election, which is unlikely to solve the long-running deadlock in the country's complicated political system. Russia's presidential election in 2018 will yield no surprises. Despite opposition activist Alexei Navalny's publicity-friendly protests, Vladimir Putin will return for a fourth presidential term. A2 Global predicts that opposition protests will be held in major urban centres, particularly the western city of Saint Petersburg, which is traditionally more liberal than the capital Moscow. Russia will also host the Fifa World Cup this year, one of the most-watched sports tournaments in the world. As football fans flock to the country, violence is likely on a number of fronts from homophobia, racism and transphobia to terrorism. Also read: The Fifa World Cup in Russia: A poisoned chalice The key security threat that Europe faces in 2018 is terrorism. Major terrorist attacks are likely, particularly against countries that have a military role in the Middle East and Muslim countries of Africa. Tourist attractions and transport hubs will be key targets, and open, pedestrianised areas are particularly vulnerable if they are not protected by physical barriers. Far-right extremism will also continue to rise, and though such groups currently have lower capabilities than jihadist cells, it is possible that lone-wolf style assaults, probably targeting prominent individuals, will occur in 2018. Read the full 2018 Global Risk Forecast here