Σάββατο, 31 Δεκεμβρίου 2016

STRATFOR, Προβλέψεις 2017


"2017 Annual Forecast Preview is republished with permission of Stratfor." (επιτρέπουν αναδημοσίευση)

https://www.stratfor.com/forecast/2017-annual-forecast
και αποσπάσματα από το https://www.stratfor.com/forecast/2017-annual-forecast-europe/europe
(ελεύθερη περίληψη/μετάφραση with permission of Stratfor τα πρωτότυπα στο τέλος)



Στον "ανεπτυγμένο" κόσμο, η γήρανση του πληθυσμού και η μειούμενη παραγωγικότητα έρχεται παράλληλα με τεχνολογικές εξελίξεις και την υποκατάσταση του εργατικού δυναμικού που επιφέρουν. Η επιβράδυνση στην Κίνα εξελίσσεται και έχει την δική της δυναμική. Ο κόσμος προσπαθεί να προσαρμοστεί στην μείωση ζήτησης στην Κίνα και η Κίνα ανεβάζει την προστιθέμενη αξία στην παραγωγή της με στόχο την εσωτερική κατανάλωση, υποκαθιστώντας εισαγωγές της.  Αυτά θα έχουν αντίκτυπο στην διεθνή οικονομία για αρκετές μελλοντικές δεκαετίες.

Ένας αντίκτυπος είναι η άνοδος του εθνικισμού, κυρίως στην Ευρώπη και στις ΗΠΑ. Οι ΗΠΑ είναι η μόνη υπερδύναμη αλλά είναι "κουρασμένη". Ταράχτηκε το 2001, ανοίχτηκε σε πολέμους στον Ισλαμικό κόσμο και τώρα θέλει να ασχοληθεί με τα εσωτερικά της. Αυτή η αναδίπλωση ήταν κεντρικό θέμα στην εκλογή του Προέδρου Τραμπ:  Οι ΗΠΑ θα αποτραβηχτούν από τις διεθνείς υποχρεώσεις τους για να ασχοληθούν με την οικονομική τους ανταγωνιστικότητα και θα αφήσουν τους άλλους να ασχοληθούν με την δική τους άμυνα.

Αυτή η τάση ξεκίνησε και επί Ομπάμα. Η διαφαινόμενη διαφορά μεταξύ των δύο είναι ότι ο Ομπάμα αναφερόταν στην συλλογική άμυνα και στο εμπόριο σαν μηχανισμούς διατήρησης της παγκόσμιας τάξης. Ο Τραμπ θεωρεί ότι οι θεσμοί που διέπουν τις διεθνείς σχέσεις είναι στην καλύτερη των περιπτώσεων προβληματικοί και στην χειρότερη βλαπτικοί προς τα συμφέροντα των ΗΠΑ.

Αυτή η συρρίκνωση ωστόσο είναι πιο εύκολη στα λόγια παρά στην πράξη.  Οι οικονομίες είναι αλληλένδετες, πχ στην διασυνοριακή παραγωγή.  Μπορεί να υπάρξει ωστόσο περισσότερη ελευθερία για επιβολή περιορισμών στο εμπόριο με ην Κίνα ειδικά στον τομέα των μετάλλων.  Εμπορικός πόλεμος με την Κίνα μπορεί να τραβήξει τις ΗΠΑ στο πεδίο του Ειρηνικού.

Αλλά και ο χρονισμός δεν είναι ιδανικός. Ο Τραμπ θα θέλει να εστιαστεί σε εσωτερικά, και ο Xi Jinping θα θέλει να εδραιωθεί πολιτικά στο 19ο Συνέδριο του Κόμματός του.   Αυτό θα δώσει προτεραιότητα στην οικονομική σταθερότητα, παρά στις μεταρρυθμίσεις και μία συνέπεια θα είναι περισσότερο κρατικό χρέος και επενδύσεις και επικίνδυνη αύξηση του εταιρικού τους δανεισμού.

Θα είναι κρίσιμος χρόνος για την Ευρώπη. Η Γαλλία, η Γερμανία και πιθανώς η Ιταλία έχουν εκλογές. Όπως λέμε εδώ και καιρό, η Ευρωπαϊκή Ένωση, στο τέλος, θα διαλυθεί. Το ερώτημα είναι κατά πόσον οι εκλογές του 2017 θα επιταχύνουν αυτή την διάλυση.   Άσχετα με το ποιος θα επικρατήσει στις εκλογές, η Ευρώπη τείνει προς διάσπαση σε περιφερειακά μπλοκ. Αυξάνεται η πιθανότητα κατάρρευσης του τραπεζικού συστήματος στην Νότια Ευρώπη, όσο αμφισβητείται το μέλλον της ευρωζώνης.

Η Γερμανία και οι βόρειοι γείτονές της δεν βλέπουν θετικά την ρύθμιση του Ελληνικού χρέους και μάλλον θέλουν διακοπή της παροχής ρευστότητας από την ΕΚΤ. Η Ελληνική Κυβέρνηση θα πιέζει για ρύθμιση που μάλλον δεν θα υπάρξει.  Η Ελλάδα θα πιέζει για λιγότερη λιτότητα και μικρότερα πλεονάσματα.  Η παραίτηση της Ελληνικής Κυβέρνησης δεν αποκλείεται, αλλά δεν είναι πιθανή δεδομένης της αντιπολίτευσης και την μη εξασφαλισμένης επανεκλογής.

Η Τουρκία μάλλον δεν θα πετύχει την χαλάρωση που ζητάει με τις βίζες.  Θα συνεχίσει η διάσταση μεταξύ χωρών διέλευσης μεταναστών (Ιταλία, Ελλάδα) και χωρών προορισμού μεταναστών.

Οι εξελίξεις στην Ευρώπη είναι χρυσή ευκαιρία για την Ρωσία.  Η Ρωσία θέλει να διασπάσει την Ευρωπαϊκή ομοφωνία σχετικά με τις κυρώσεις σε βάρος της και θέλει να δυναμώσει την επιρροή της στις γειτονικές της χώρες. Η Κυβέρνηση Τραμπ μπορεί να θέλει ηπιότερες σχέσεις και αποκλιμάκωση στην Συρία, αλλά υπάρχουν όρια στην αποκλιμάκωση της διαμάχης. Η Ρωσία θα θέλει να ενισχύσει την άμυνά της και την πίεση από τον κυβερνοχώρο στην Μέση Ανατολή και οι ΗΠΑ θα συνεχίσουν να προσπαθούν να περιορίσουν την Ρωσική επέκταση.

Η Ρωσία θα συνεχίσει να παρεμβάλλεται στην Μέση Ανατολή και θα καλλιεργεί σχέσεις με το Ιράν όσο οι σχέσεις του Ιράν με τις ΗΠΑ χαλάνε. Η συμφωνία για τα πυρηνικά του Ιράν θα αμφισβητηθεί, αλλά το Ιράν και οι ΗΠΑ μάλλον δεν θα συγκρουσθούν στο Χορμούζ.

Θα αυξηθεί η ένταση μεταξύ Τουρκίας και Ιράν στην Συρία και στο Βόρειο Ιράκ. Η Τουρκία θέλει την δική της σφαίρα επιρροής και τον περιορισμό των Κούρδων και το Ιράν θέλει την δική του σφαίρα επιρροής. Το Ισλαμικό Κράτος μπορεί να αποδυναμώνεται στρατιωτικά αλλά θα συνεχίσει τρομοκρατικές δραστηριότητες στο εξωτερικό. Η Αλ Κάϊντα ανασυντάσσεται στην Αραβική χερσόνησο και την Βόρειο Αφρική.

Η τιμή του πετρελαίου θα ανακάμψει λίγο το 2017, περιοριζόμενη από την σχιστολιθική παραγωγή στις ΗΠΑ. Η Σαουδική Αραβία θα παρεμβαίνει στις αγορές για να στηρίξει την πώληση του 5% της Αράμκο το 2018. Η ανάκαμψη στο πετρέλαιο δεν θα είναι αρκετή για να σώσει χώρες όπως η Βενεζουέλα.

Το 2017 θα επιστρέψει ο πληθωρισμός. Οι κεντρικές τράπεζες θα ακολουθήσουν πιο σφιχτές πολιτικές.  Οι μέρες του άπλετου τυπώματος χρήματος τέλειωσαν και τα κρατικά έξοδα θα υποκαταστήσουν το τύπωμα χρήματος.

Η πιο σφικτή μονεταριστική πολιτική στις ΗΠΑ και το ισχυρότερο δολάριο θα επηρεάσουν αρνητικά χώρες όπως η Βενεζουέλα, η Τουρκία, η Νότια Αφρική, η Νιγηρία, η Αίγυπτος, η Χιλή, η Βραζιλία, η Κολομβία και η Ινδονησία (που χρωστάνε σε δολάρια). Η πίεση στο Γιουάν και μειούμενα συναλλαγματικά αποθεματικά θα αναγκάσουν την Κίνα να περιορίσεις εξαγωγές κεφαλαίου.

Οι αγορές θα είναι πιο ταραγμένες το 2017.  Οι ΗΠΑ αποσύρονται από πρωτοβουλίες παγκόσμιου εμπορίου και η Αγγλία από μία όλο και πιο προστατευτική ως προς το εμπόριο Ευρώπη.  Η Κίνα θα αναζητεί προμηθευτές και αγορές.

Η Ινδία είναι case study για τον υπόλοιπο κόσμο για οικονομία χωρίς μετρητά.

Ακολουθούν τα δύο πρωτότυπα

"2017 Annual Forecast is republished with permission of Stratfor."


The convulsions to come in 2017 are the political manifestations of much deeper forces in play. In much of the developed world, the trend of aging demographics and declining productivity is layered with technological innovation and the labor displacement that comes with it. China's economic slowdown and its ongoing evolution compound this dynamic. At the same time the world is trying to cope with reduced Chinese demand after decades of record growth, China is also slowly but surely moving its own economy up the value chain to produce and assemble many of the inputs it once imported, with the intent of increasingly selling to itself. All these forces combined will have a dramatic and enduring impact on the global economy and ultimately on the shape of the international system for decades to come.

These long-arching trends tend to quietly build over decades and then noisily surface as the politics catch up. The longer economic pain persists, the stronger the political response. That loud banging at the door is the force of nationalism greeting the world's powers, particularly Europe and the United States, still the only superpower.

Only, the global superpower is not feeling all that super. In fact, it's tired. It was roused in 2001 by a devastating attack on its soil, it overextended itself in wars in the Islamic world, and it now wants to get back to repairing things at home. Indeed, the main theme of U.S. President-elect Donald Trump's campaign was retrenchment, the idea that the United States will pull back from overseas obligations, get others to carry more of the weight of their own defense, and let the United States focus on boosting economic competitiveness.

Barack Obama already set this trend in motion, of course. Under his presidency, the United States exercised extreme restraint in the Middle East while trying to focus on longer-term challenges — a strategy that, at times, worked to Obama's detriment, as evidenced by the rise of the Islamic State. The main difference between the Obama doctrine and the beginnings of the Trump doctrine is that Obama still believed in collective security and trade as mechanisms to maintain global order; Trump believes the institutions that govern international relations are at best flawed and at worst constrictive of U.S. interests.

No matter the approach, retrenchment is easier said than done for a global superpower. As Woodrow Wilson said, "Americans are participants, like it or not, in the life of the world." The words of America's icon of idealism ring true even as realism is tightening its embrace on the world.
Revising trade relationships the way Washington intends to, for example, may have been feasible a couple decades ago. But that is no longer tenable in the current and evolving global order where technological advancements in manufacturing are proceeding apace and where economies, large and small, have been tightly interlocked in global supply chains. This means that the United States is not going to be able to make sweeping and sudden changes to the North American Free Trade Agreement. In fact, even if the trade deal is renegotiated, North America will still have tighter trade relations in the long term.

The United States will, however, have more space to selectively impose trade barriers with China, particularly in the metals sector. And the risk of a rising trade spat with Beijing will reverberate far and wide. Washington's willingness to question the "One China" policy – something it did to extract trade concessions from China – will come at a cost: Beijing will pull its own trade and security levers that will inevitably draw the United States into the Pacific theater.

But the timing isn't right for a trade dispute. Trump would rather focus on matters at home, and Chinese President Xi Jinping would rather focus on consolidating political power ahead of the 19th Party Congress. And so economic stability will take priority over reform and restructuring. This means Beijing will expand credit and state-led investment, even if those tools are growing duller and raising China's corporate debt levels to dangerous heights.

This will be a critical year for Europe. Elections in the pillars of the European Union — France and Germany — as well as potential elections in the third largest eurozone economy — Italy — will affect one another and threaten the very existence of the eurozone. As we have been writing for years, the European Union will eventually dissolve. The question for 2017 is to what degree these elections expedite its dissolution. Whether moderates or extremists claim victory in 2017, Europe will still be hurtling toward a breakup into regional blocs.

European divisions will present a golden opportunity for the Russians. Russia will be able to crack European unity on sanctions in 2017 and will have more room to consolidate influence in its borderlands. The Trump administration may also be more amenable to easing sanctions and to some cooperation in Syria as it tries to de-escalate the conflict with Moscow. But there will be limits to the reconciliation. Russia will continue to bolster its defenses and create leverage in multiple theaters, from cyberspace to the Middle East. The United States, for its part, will continue to try to contain Russian expansion.
As part of that strategy, Russia will continue to play spoiler and peacemaker in the Middle East to bargain with the West. While a Syrian peace settlement will remain elusive, Russia will keep close to Tehran as U.S.-Iran relations deteriorate. The Iran nuclear deal will be challenged on a number of fronts as Iran enters an election year and as the incoming U.S. government takes a much more hard-line approach on Iran. Still, mutual interests will keep the framework of the deal in place and will discourage either side from clashing in places such as the Strait of Hormuz.

The competition between Iran and Turkey will meanwhile escalate in northern Syria and in northern Iraq. Turkey will focus on establishing its sphere of influence and containing Kurdish separatism while Iran tries to defend its own sphere of influence. As military operations degrade the Islamic State in 2017, the ensuing scramble for territory, resources and influence will intensify among the local and regional stakeholders. But as the Islamic State weakens militarily, it will employ insurgent and terrorist tactics and encourage resourceful grassroots attacks abroad.

The Islamic State is not the only jihadist group to be concerned about. With the spotlight on Islamic State, al Qaeda has also been quietly rebuilding itself in places such as North Africa and the Arabian Peninsula, and the group is likely to be more active in 2017.

Crude oil prices will recover modestly in 2017, thanks in part to the deal struck by most of the world's oil producers. (Notably, no country will fully abide by the reduction requirements.) The pace of recovery for North American shale production will be the primary factor influencing Saudi Arabia's policy on extending and increasing production cuts next year. And though it will take time for North American producers to respond to the price recovery and to raise production, Saudi Arabia knows that a substantial rise in oil prices is unlikely. This means Saudi Arabia will actively intervene in the markets in 2017 to keep the economy on course for a rebalance in supply, especially in light of its plan to sell 5 percent of Saudi Aramco shares in 2018.

Higher oil prices will be a welcome relief to the world's producers, but it may be too little, too late for a country as troubled as Venezuela. The threat of default looms, and severe cuts to imports of basic goods to make debt payments will drive social unrest and expose already deep fault lines among the ruling party and armed forces.

Developed markets will also see a marked shift in 2017, a year in which inflation returns. This will cause central banks to abandon unconventional policies and employ measures of monetary tightening. The days of central banks flooding the markets with cash are coming to an end. The burden will now fall to officials who craft fiscal policy, and government spending will replace printing money as the primary engine of economic growth.

Tightening monetary policy in the United States and a strong U.S. dollar will shake the global economy in the early part of 2017. The countries most affected will be those in the emerging markets with high dollar-denominated debt exposure. That list includes Venezuela, Turkey, South Africa, Nigeria, Egypt, Chile, Brazil, Colombia and Indonesia. Downward pressure on the yuan and steadily declining foreign exchange reserves will meanwhile compel China to increase controls over capital outflows.

Calm as markets have been recently, steadied as they were by ample liquidity and by muted responses to political upheaval, they will be much more volatile in 2017. With all the tumult in 2017, from the threats to the eurozone to escalating trade disputes, investors could react dramatically. Asset prices swung noticeably, albeit quickly, in the first two months of 2016. 2017 could easily see multiple such episodes.

The United States is pulling away from its global trade initiatives while the United Kingdom, a major free trade advocate, is losing influence in an increasingly protectionist Europe. Global trade growth will likely remain strained overall, but export-dependent countries such as China and Mexico will also be more motivated to protect their relationships with suppliers and seek out additional markets. Larger trade deals will continue to be replaced by smaller, less ambitious deals negotiated between countries and blocs. After all, the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership were themselves fragments spun from the breakdown of the Doha Round of the World Trade Organization.

Economic frustration can manifest in many ways, not all of which are foreboding.  In Japan, the government will be in a strong position in 2017 to try to implement critical reforms and adapt its aging population to shifting global conditions. In Brazil and India, efforts to expose and combat corruption will maintain their momentum. India has even taken the ambitious step of setting its economy down a path of demonetization. The path will be bumpy in 2017, but India will be a critical case study for other countries, developed and developing alike, enticed by the efficiencies and decriminalized benefits of a cashless economy and who increasingly have the technology at their disposal to entertain the possibility.

"2017 Annual Forecast: Europe is republished with permission of Stratfor."

For Europe, political and economic risk is nothing new. For years, nationalism, populism, conflicting strategic interests, low economic growth and high unemployment have driven EU members apart. The eurozone has seen a variety of threats to its existence over the past decade, connected to issues such as high levels of debt, fragile banking sectors and growing Euroskepticism. But so far it has managed to survive them. In 2017, however, the eurozone crisis could enter a new, more dangerous stage as risk reaches its largest political and economic players. As it does, it will threaten the future of the institutions that govern the Continent in more profound ways than before.

The coming risk will be most pronounced in Italy, France and Germany. Nationalist forces have been building steam for years and will show their strength in general elections in Germany and France – and potentially Italy, if its government resigns before the end of the legislative session in mid-2018. And even if they fail to win some or all of these elections, the nationalists' popularity will nonetheless influence the decisions of their countries' leaders, furthering the political fragmentation of the European Union, increasing the demands for a return of sovereignty to national governments, and leading to more unilateral actions by member states. Uncertainty about political events in these core countries will also increase financial risk, especially in the banking sector.

And as it deals with these issues from within, the European Union will also have to deal with new issues from without – namely, the new global order that began the minute Donald Trump was elected. Questions over the reliability of NATO's security umbrella, not to mention recent terrorist attacks, will create opportunities for EU members to work together on security and defense. But growing Euroskepticism and domestic political considerations will prevent them from implementing economic and financial reform. Countries in Eastern Europe, meanwhile, will focus on regional and bilateral cooperation to try to show a united front against Russia.

Questions About the Future

What happens in France, Germany and Italy – the eurozone's three biggest economies – in 2017 will influence one another and indeed the entire currency union. The elections in France and Germany will test the Franco-German alliance, upon which the European Union was founded, and the economic duress in Italy will test the stability of the eurozone. Political tension will again develop between Northern and Southern Europe, which hold different views on the future of the eurozone.
France will be preoccupied with its elections for the first few months of 2017. During this time, the outgoing government will not introduce any significant reforms. The same cannot be said for the new government, regardless of who wins. Though most of the presidential candidates have similar stances on security issues – most, for example, support tough measures to fight terrorism and limit immigration – they differ markedly on economic issues. Voters will have to decide whether they want programs that will deregulate and liberalize the French economy or if they want added protectionism.

The presidential election, held in two rounds and scheduled for April and May, will show that a significant number of voters support anti-globalization and nationalist positions. This will affect France's moves even if the moderates win. The next government is likely, therefore, to be skeptical about free trade and focus on security and defense – and support plans to enhance both at the EU level. The president can be expected to introduce measures to limit immigration, to push Brussels to redesign the Schengen agreement and to improve the European Union's border controls. It will criticize the European Commission, even going so far as to demand that it scale back its responsibilities.

If moderates win, they will petition the eurozone to repatriate some powers to its constituent members (something that will clash with Germany's demands for a more apolitical administration of the common currency). The new government will probably also push for better relations with Russia. If the far-right National Front wins, the French government will probably introduce measures to limit the free movement of goods, people, services and capital throughout the European Union. It can also be expected to announce plans for a referendum on France's EU membership. 

And therein lies the problem for the European Union: The bloc has been breaking apart for several years, but without France – a founding member whose alliance with Germany was the basis for its very formation – its dissolution is likely irreversible. In the ensuing crisis, the union would fragment into smaller regional groups. Questions about the future of the eurozone would trigger a run on Southern Europe's banks and precipitate the collapse of the currency area.

Ahead of its own general election in September or October, Germany will try to keep the European Union united. But it will be difficult for Berlin to do so. The members of the ruling coalition, composed of center-right and center-left legislators, will try to distinguish themselves from one another before the vote, during which the government in Berlin will avoid making any significant decisions on EU issues. Conflicting national interests among EU members will also make consensus on EU reform difficult to find. (One of the few areas where Germany and its EU peers can find some degree of understanding, however, is defense and security.)

Significant EU reforms on financial or economic areas should not be expected. Germany and its northern neighbors will be even more at odds than usual with the south over the management of the eurozone, given the political pressures endemic to election seasons. The government in Berlin will remain skeptical about issues such as granting debt relief to Greece or allowing eurozone members to miss the European Union's deficit targets. Germany is also likely to conflict with the European Central Bank (ECB), especially if the economic case for quantitative easing continues to weaken. Germany and its northern neighbors will advocate the program's termination, though the ECB, in light of continued economic weakness in the periphery, may resist any effort to that end.
Security and immigration will feature prominently in the German electoral campaign. The general election will show that German voters are willing to support smaller parties on the left and on the right. This will probably lead to a more divided parliament and to difficult coalition talks. While the nationalists may perform well enough to get some members into the legislature, they will be excluded from coalition negotiations.

What could force Germany to take a more decisive role in the European Union, however, would be a victory by the Euroskeptic forces in France or Italy. If that happens, Berlin would try to preserve the bloc and reach an understanding with the rebel governments to introduce internal reform. But the government in Berlin would also hedge its bets by making plans with its regional allies in the event the European Union and eurozone do, in fact, disintegrate.

As for Italy, political uncertainty, low economic growth and high debt levels will once again raise questions about the future of the eurozone's third-largest country – and about the currency union as a whole. Italy's caretaker government will be weak, and early elections are probable. No matter who is in charge, the Italian government will push for flexibility on EU fiscal targets and demand solidarity from its EU partners to deal with the immigration crisis. The government in Rome will also be ready to act unilaterally and criticize the European Union to achieve its goals.

If Italy holds early elections, the fear of a victory by anti-establishment forces would hurt Italian banks, raise borrowing costs and generate pressure on the euro. A victory of the Euroskeptics would put Italy on a collision course with the European Union. The first reaction by Germany and EU institutions would be to accommodate the new government in Rome and prevent it from putting membership in the eurozone to a vote. In the long run, however, that kind of referendum will be difficult to avoid. In 2017, therefore, Italy will be one of the greatest risks to the currency area.

The Netherlands, one of the eurozone's wealthiest countries and an important player in Northern Europe, will hold a general election in March. As in other eurozone countries, Euroskeptic and anti-immigration forces there will have a prominent role, showing that discontent with the status quo is strong. Even in the likely case the Euroskeptics fail to access power, their influence will force the Dutch government to become more and more critical of the European Union, resisting plans to deepen Continental integration and siding with other Northern European countries in their criticism of events in the south. If events in France and Italy bring about the collapse of the eurozone, the Netherlands would react by continuing to work with Germany and other Northern European countries.
Elsewhere, in the European periphery, the minority government of Spain will be forced to negotiate with the opposition on legislation, leading to a complex decision-making process and to pressures to reverse some of the reforms that were introduced during the height of the economic crisis. Catalonia will continue to push for its independence as its government challenges Madrid in some instances, ignores it entirely in others, and negotiates with it when necessary. Even if negotiations to ease frictions between Madrid and Catalonia take place, the central government will not authorize a legal referendum on independence, and Catalonia will not abandon its plans of holding it. Tensions will remain high in 2017, but Catalonia will not unilaterally declare independence this year.
In Greece, the government will continue pushing its creditors for additional measures of debt relief, but because of the German elections there will be little progress on the issue. With debt relief temporarily off the table, Athens will demand lower fiscal surplus targets and will reject additional spending cuts. Relations between Athens and its creditors will be tense, but there should be room for compromise. The resignation of the Greek government is possible, albeit improbable, considering that the emergence of opposition forces in the country makes the outcome of early elections highly uncertain – and the government has no guarantee of retaining power.

An Eventual Understanding on the Brexit

In 2017, the debate in the United Kingdom will not be whether the Brexit should happen but how it should happen. The British government will be divided on how to approach the negotiations with the European Union, and the Parliament will demand a greater say in the process. The issue will create a constant threat of early elections, but even if such elections do come to pass, they would only delay the Brexit, not derail it. The government and the Parliament will eventually reach an understanding, however, and the United Kingdom will formally announce its intentions to leave the European Union.
Once the negotiations begin, the United Kingdom will push for a comprehensive trade agreement to include as many goods and services as possible – one that would also give the country more autonomy on immigration. This would involve either signing a free trade agreement with the European Union or agreeing on Britain's membership in Europe's customs union, an area where member states share a common external tariff. A transitional agreement to buy London more time to negotiate a permanent settlement will probably also be part of the discussion. London and the European Union will also negotiate the terms of the United Kingdom's withdrawal, including its EU budget commitments and the status of British citizens in the European Union and the status of EU citizens in the United Kingdom. Given the magnitude of these issues, not to mention the magnitude of the elections in France and Germany, several of the most important decisions will be delayed until at least 2018.

Many Divisions, Some Exploited

Countries of Central and Eastern Europe will circle the wagons to protect themselves from what they see as potential Russian aggression – and from the uncertainty surrounding U.S. foreign policy. Leading the charge will be Poland, which will try to enhance political, economic and military cooperation with its neighbors. It will also support the government in Ukraine politically and financially and will lobby Western EU members to keep a hard stance on Moscow by advocating the continuation of sanctions, increasing military spending, supporting Ukraine, etc. – a position the Baltic states and Sweden are likely to support. Unsure though Warsaw may be about the Trump administration, the government will still try to maintain good ties with the White House as it continues to defend a permanent NATO presence in the region. Countries in the region may even pledge to spend more on defense.

Not all countries will react the same way to this new geopolitical environment, of course. Hungary or Slovakia, for example, do not have the same sense of urgency as Poland when it comes to Russia, so their participation in pre-emptive measures could be more restrained.

Moscow's attempts to exploit divisions within the European Union will strain German-Russian relations. Germany will try to keep sanctions against Russia in place but will face resistance from some EU members, which would rather lift sanctions to improve their relations with Moscow. Germany will also defend cooperation on defense and security as a way to deal with uncertainty about NATO and Russia. The German government will continue to support Ukraine politically and financially, but not militarily.

In the meantime, Russia will exploit divisions within the European Union by supporting Euroskeptic political parties across the Continent and by seeking to cooperate with the friendlier governments in the bloc. Some countries, including Italy, France and Austria, will advocate improved relations with Russia, giving Moscow a better chance to break the sanctions bloc in the union. Some level of sanctions easing from the European Union is likely by the end of the year.

Stopping Migration at Its Source

There is only so much EU member states can do to stem the flow of migrants in 2017. In the Central Mediterranean route, Brussels will try to halt migrants from leaving Africa by cooperating with their countries of origin and by working with the primary transit states. But the difficulty in actually severing African migration routes and the absence of any viable government in Libya will limit the European Union's ability to halt the flow of peoples through the Central Mediterranean.



In the Eastern Mediterranean route, the European Union will keep its line of communication with Turkey open, its political differences with Ankara notwithstanding. European elections and internal divisions, however, will prevent the bloc from giving in to many of Turkey's demands, particularly the one that grants visa liberalization for Turkish citizens. A short window of opportunity on the issue will open in the first months of the year, but if no progress is made before Europe's electoral cycle begins in March in the Netherlands, the issue will be postponed for the rest of the year. Agreements on less controversial issues such as trade and funds will be somewhat easier to approve.

Aware of how unreliable their outside partners are, EU members will try to shield themselves as much as possible. They will continue to toughen their national migration laws, and to increase deportations, to discourage migrants from coming in the first place. Otherwise, the European Union can still tighten its border controls, but there will always be a debate – one waged between the countries of arrival (such as Italy and Greece) and the countries of destination (Northern Europe) – over Brussels' failure to develop a coherent migration policy.


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