Tuesday, January 5, 2016
Roubini: Europe’s disintegration could be biggest threat of 2016
NEW YORK (Project Syndicate) — 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 nonstate 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 euro EURUSD, -0.3131% and monetary union EURUSD, -0.3131% 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 U.K. 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 U.K. — cannot accept. To many in Britain, the EU looks like a sinking ship. .....................(more)
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics