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.
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 Preševo 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.
We can also expect to see a more assertive Russia as it seeks to strengthen its foothold in countries formerly in its sphere of influence.
There will also be renewed interest in the Balkans as the E.U., China, and Russia compete for influence in the region in 2019. Growing Chinese presence, through infrastructure investments, including upgrading existing ports and expanding rail networks, in the Balkans will continue to raise concerns in Brussels. An essential element of Beijing’s flagship Belt and Road Initiative (BRI), non-E.U. member states in the Balkans such as Albania, Bosnia & Herzegovina, Macedonia, Montenegro and Serbia, received USD4.9 billion between 2016 and 2017 in Chinese investments. The E.U. will potentially use the prospect of accession as leverage on potential members for them to implement more robust screening of Chinese investments. This will have limited success in countries such as Serbia, which are still a long way from becoming members and have poor infrastructure, a key impediment to economic growth.
In 2019, we can also expect to see a more assertive Russia, not just in the Balkans, but also in Eastern Europe, as it seeks to strengthen its foothold in countries formerly in its sphere of influence, such as Moldova and Ukraine. This will be largely in response to political developments in 2018 which Moscow perceives as a threat to its influence, such as the potentially successful deal to resolve a decades-long name dispute between Greece and the Former Yugoslav Republic of Macedonia, raising the prospect that NATO will soon have a new member state in the Balkans. Any indication of interference in domestic affairs as well as accusations of Russian officials being involved in espionage in E.U. countries will lead to the expulsion of diplomatic staff, to which Moscow will respond in kind.
In Ukraine, the first round of a highly contested presidential election is scheduled on 31 March. The decision to impose martial law over the naval confrontation between Ukrainian navy boats and the Russian coastguard near the Kerch Strait on 25 November will likely lead to short-term political gains for the incumbent president, Petro Poroshenko. However, Poroshenko’s growing unpopularity due to his government’s failure to adequately tackle corruption, coupled with a lagging economy means that he is unlikely to be re-elected. Instead, Yulia Tymoshenko, the former prime minister, will probably be elected as Ukraine’s next president. While a significant military escalation between Ukraine and Russia is unlikely, relations will remain strained as the Kerch Strait incident and subsequent imposition of martial law mean that Ukraine’s next president will have little space to take a compromising or engaging stance towards Moscow. The routine violations of the 2015 ceasefire deal between pro-Russian separatist militias and the Ukrainian military will continue to pose a key security risk in Eastern Ukraine.
Low-probability, high-impact terrorist attacks will remain a key risk across the continent but particularly in Western Europe. As the terrorist attack on 11 December 2018 in Strasbourg showed, these will probably target well-attended symbolic events, and locations of historical or cultural significance in European cities. This threat will be compounded by the increasing risk posed by right-wing groups.