Third Quarter 2017

POLITICAL RISK IN EASTERN EUROPE - OVERVIEW

Photo: Getty Images

 

The outlook in Eastern Europe remains precarious as the region grapples with internal and external threats. Going into the third quarter , the most significant development is the fracturing of the European Union provoked by the UK’s announced departure. This could have an immense impact in Eastern Europe, where many states have bet on the survival of the union for their stability and prosperity. For the moment, the EU faces a range of potential scenarios although the trajectory is not promising. At a minimum, the EU’s waning influence will lead to a further rolling back of the free market in Central Europe while the effective suspension of EU enlargement will weaken external pressure for reform in the Western Balkans. In a more extreme scenario, in which the EU and the euro zone collapse altogether, Eastern Europe would face a severe external shock that damages growth and potentially leads to the disintegration of fragile multiethnic states in the Balkans.

 

Other risks are growing. The most serious of these is the ‘New Cold War’ between the West and Russia. In late December, fighting intensified once again in Ukraine, the key battleground between the two sides. Further afield, both Russia and NATO are rapidly intensifying pressure on one another in the form of new military deployments and political pressure on states in their common borderland.

 

Meanwhile, a spate of terrorist attacks across Western Europe, most recently in Germany, has raised the level of threat to the east, not only in the Balkans where Islamist radicals have had a presence but also in countries without a historical problem with radical Islam such as Poland and Hungary. The influence of the Middle East is also having an effect on Eastern Europe and the Balkans via Turkey, whose internal divisions and external challenges are compelling it to assert its growing power beyond its borders. In particular, Turkey holds the key to whether the migrant crisis, which has already radicalised politics in Central Europe, now escalates. Meanwhile, the influence of China is becoming ever deeper, with positive effects in the short term that are balanced by greater risks in the longer term.

 

After a brief hiatus in early 2017, civil unrest is also again on the rise, not only in the Balkans, which has experienced periodic tubulence, but also Belarus and Poland, where a profound social cleavage that cannot be solved in the political institutions is now playing out of the streets.

In the meantime, the key variable facing the region will be the policy stance adopted by  the Trump administration. After expectations of a reset in relations with Russia, senior figures are now apparently more inclined to uphold the status quo and, indeed, to enforce American influence even more emphatically than the Obama administration.

 

Timothy Less

Director of Nova Europa

 

I'm a paragraph. Click here to add your own text and edit me. I’m a great place for you to tell a story and let your users know a little more about you.

Nova Europa

Tel: +44 1223 233 919

E-mail: enquiries@novaeuropa.co.uk

© Nova Europa Risk Consulting