2019 Global Risk Forecast - Europe & Russia
Voters across the E.U. will vote for their representatives in the European Parliament against a backdrop of crises ranging from the influx of migrants to the U.K. having voted in 2016 to leave the economic and political bloc. In the U.K. itself, uncertainty over Brexit is set to remain a prime business risk.
Europe - A defining and challenging year ahead
The forthcoming European Parliament (E.P.) elections in May will mark a defining moment for the European project. While E.P. elections held every five years to elect 705 members of the E.U.'s only directly elected institution have historically not gained much attention, the outcome of the 2019 election will in many ways be a crucial one. The elections will follow a series of crises both internal and external in nature ranging from the large influx of migrants into the continent, to the decision by voters in the U.K. to leave the E.U. in the June 2016 referendum. The European Union Eurosceptic parties will make significant gains, capitalising on growing concerns over immigration. Given that voters usually vote on national issues and many see the elections as a way to express discontent with mainstream, generally pro-E.U. parties, this will also add to growing support for anti-E.U., far-right parties, such as the France's Rassemblement National (formerly known as Front National), and Italy's Lega. While mainstream political parties will suffer losses in the election, these will be most felt by social democratic parties, such as the SPD in Germany and the P.S. in France. The European People's Party (EPP) a grouping of centre-right and conservative parties will probably remain the largest in the E.P. but be short of an absolute majority. While a strong performance by eurosceptic parties in the elections will alarm E.U. officials, the many diverging interests these have, and in some cases contrasting ideological differences, ultimately means that they will struggle to form a united bloc in parliament. The U.K. faces another tumultuous year as the date the country is officially set to exit the E.U. 29 March approaches fast. Uncertainty over Brexit will remain a key business risk as political figures in the U.K. struggle to bridge differences and reach an agreement on the U.K.'s future relationship with the E.U., increasing the likelihood of a no-deal withdrawal. Parliament's rejection of the draft withdrawal agreement brokered between the U.K. government and the E.U. means that Prime Minister Theresa May will seek further concessions from Brussels to bring forward a deal that parliamentarians can accept. If the unpopular backstop plan remains in an amended agreement, the DUP a Northern Ireland unionist party upon which Theresa May's government relies for a majority and hardline Conservative Party Brexiteers are unlikely to support such a deal. This will probably also be the case if the government manages to obtain concrete assurances from the E.U. that the backstop, effectively an insurance policy that would maintain an open border between Ireland and Northern Ireland if the U.K. leaves without an all-encompassing agreement, will be time-limited. A further rejection by parliament of any amended deal brought forward by May's government will increase the likelihood that she will resign, triggering a leadership contest within the Conservative Party. The election of a prominent Brexiteer will increase the prospect of a no-deal Brexit, while a leader with more moderate views on Brexit is likely to try and seek further concessions from Brussels, potentially proposing a referendum on an amended deal and remaining in the European Union. Concerns over the impact of a no-deal Brexit combined with a series of alarming reports on the implications of such a scenario, means that Conservative Party members are unlikely to support a potentially uncompromising hardline Brexiteer as the next leader. Calls to hold a second referendum will continue to intensify in the immediate aftermath of the 15 January vote. Downing Street will also probably seek to reach an agreement with the E.U. on extending the 29 March deadline, which would postpone the U.K.'s exit from the bloc until a later stage. Read more: Can Theresa May's high stakes Brexit gamble pay off? The Balkans and Eastern Europe Intercommunal tensions in the Balkans will remain high over a proposed deal between Kosovo and Serbia that would see the two countries exchange territory along ethnic lines. Under the proposed deal, which would also pave the way for Kosovo's independence, parts of northern Kosovo where ethnic Serbs are a majority will be given to Serbia. In exchange, the Pre-evo Valley in southern Serbia, where a majority of ethnic Albanians live, will join Kosovo. Russia's long-standing opposition to Kosovo's independence means that while it may publicly express support for any agreement that helps resolve the impasse, it will probably attempt to delay or block the deal. Meanwhile, protests in Serbia and Kosovo will continue, mostly in response to political developments in the region.