Top Risks 2016 - Eurasia Group

We first wrote about the G-Zero five years ago. It’s now fully upon us, and the unwinding of the US-led geopolitical order will accelerate in 2016. There is growing political division in a year with a presidential election in the United States and a foundational political crisis for Europe. Russia, in decline, is led by an increasingly combative—and resurgent—Vladimir Putin. China is becoming far more powerful, but with a foreign policy that reflects primarily economic (though still strategic) national interests.

The results are clear. The Middle East is the most vulnerable to a geopolitical leadership vacuum and is heading toward conflagration. There are six failed states across the broader region (Afghanistan, Iraq, Libya, Mali, Syria, and Yemen) and more refugees than ever recorded. ISIS has become the most powerful terrorist organization in history. Oil economies are under strain. All of this will get worse in 2016.

Europe will feel much of the pain—in economic costs, security vulnerability, and political blowback. The United States, at the twilight of Barack Obama’s administration, will mostly stick to its knitting, since the western hemisphere remains insulated from the lion’s share of geopolitical instability. In Asia, despite having many of the world’s strongest national leaders, helping manage these problems is not a priority

This all means a dramatically more fragmented world in 2016 with more intra-, inter-, and extra-state conflict than at any point since World War II. And yet drawing the major powers into military battle against one another—World War III—is virtually unthinkable (recent comments from Pope Francis notwithstanding). The world’s four largest economies—the United States, China, Japan, and Germany—are all deeply reluctant to accept responsibility for crisis management. Only the Germans are affected directly by this turmoil, and they still have plenty of reasons to duck the fight.

And so, in 2016, conflict intensifies. Last year, investors recognized growing uncertainty but remained more focused on the economic improvements: a US economy in recovery and Europe coming out of recession. That’s unlikely to last, as geopolitical risk shakes the global order.

The transatlantic partnership has been the world’s most durable and significant alliance, underpinning the global economic order and bolstering peace and stability (such as it is) for nearly seventy years. It was the cornerstone for the international architecture that has mattered most—NATO, the Bretton Woods accord, the United Nations, the World Trade Organization, the IMF, and the World Bank. But it is now weaker, and less relevant, than at any point since the Marshall Plan. In 2016, the transatlantic alliance will be a hollow one.

 Foreign policy has arguably become the most important issue in the American election, and yet the transatlantic relationship isn’t on the agenda. The United States will turn inward during this highly contentious race, encouraging European leaders to further question US leadership, commitment, and values at a moment when they’re focused mainly on their own political futures. That might recede a bit under a more activist, next US president. But the path is set—Europe is divided, vulnerable, and maximally insecure. Governments are going their own way, a trend most obvious in new alignments of Europe’s three major powers in new (and opposing) directions.

East versus West, old versus new, and core versus periphery. Europe’s divisions are nothing new. They’ve defined Europe’s challenges for decades. But in 2016, they will reach a crucial point as an identity crisis emerges between open Europe and closed Europe—and a combination of inequality, refugees, terrorism, and grassroots political pressures pose a fundamental challenge to the principles on which the European Union was founded. - Read More at the Eurasia Group

Top Risks 2016 - Eurasia Group - More

The top 10 risks to the world in 2016 - the ailing trans-Atlantic partnership is number one - Telegraph