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As 2018 comes to an end, the European Union is heading to 2019, facing several key risks; both economical, as well as geopolitical. Let’s have a look at those factors,
- The single biggest risk facing the European Union is the Brexit, where one of its key members, the UK is set to depart. After several rounds of discussions, and negotiations, as well as verbal political agreements, a no-deal Brexit scenario is still very likely, which would be extremely volatile for the stock markets in the region, as well as around the world, and would be crushing for both euro and the pound.
- Another key risk, which just popped its ugly head in 2018, and in 2019 it could grow into a much bigger storm; protests within the Eurozone such as the yellow-vest protests in France, which clearly threatens the current establishment’s plan for further integration within the Eurozone, which is of utmost importance for the longer run survival for the Union. Protests like these, which is stemming from widening wealth gap, income inequality, and rampant migration threatens the very structure of the EU. Protests would largely be negative for the EU.
- The EU is facing its parliamentary election in 2019, in the month of May. Currently, the pro-EU parties hold the majority in the EU parliament in Brussels, but a lot has changed since the last election and the pro-EU, pro-migration parties have been under retreat over the past two years. This election could see significant changes within the EU parliament, which is likely to influence the policies adopted by the EU.
- President Trump’s policies are also major threats for the EU, at least economically. The cost has significantly increased for the EU, as the United States reduced its funding for the United Nations, Palestine, as well as its aids towards several developing nations, exited the TPP negotiations, as well as the Paris Climate Accord. Sanctions on Iran and the EU’s attempt to save the Iran nuclear agreement could become a major contentious issue between the EU and the US, as well as bilateral trade negotiations.
- The European Central Bank is expected to raise rates this year in years. While the rates would still remain very accommodative even after more than one hike this year, the financial markets could react with increased volatility in the euro-based pairs, and in the bond market.
