Macron stymies anti-EU movement but global geopolitical risk remains uncertain: Verisk Maplecroft

Despite the recent election of a new moderate French president tempering the anti-EU movement, today’s global geopolitical picture remains unstable with the buck stopping largely at the door of the White House, according to Verisk Maplecroft. In its latest Geopolitical Risk Outlook, Verisk Maplecroft said the election of Emmanuel Macron as French president has steadied the recent political shocks for now. However, it warned that Europe still has a battle on its hands to avert the continuing rise of anti-establishment parties. “France has for now defused the run of electoral bombshells that have buffeted geopolitical stability over the last year,” Verisk Maplecroft said. It added that support for Europe’s populist movement will be one of the main drivers of geopolitical risk, and change, over the next few years. Dr Florian Otto, head of Europe and central Asia at Verisk Maplecroft, said support for anti-establishment parties in Europe has grown over the past few years to set a long-term trend that is unlikely to be reversed. “Even without entering power, anti-establishment forces have sufficient critical mass to continue to shape issues from immigration, eurozone governance to the bloc’s trade relationships,” Dr Otto said. The report warned that the eurozone could still be at risk if change is not addressed in the next four years. “Europe now has a window of three to four years to make real headway in addressing the structural political and economic weaknesses that have provided the fuel for populist parties in recent years. Centrist and pro-European governments need to re-establish their credibility by progressing reforms and improving living standards. Otherwise the elections in 2021 and 2022 could ultimately bring the populist breakthrough markets have feared in recent months,” Dr Otto said. With elections due to be held by this time next year, Italy will be the next European country to test the rise of anti-establishment parties. Dr Otto said current support for Euro-sceptic parties in Italy exceeds 40%. He added that the complexities of Italy leaving the eurozone make the concept too remote, but the risk of panic by the public and investors could “deal a mortal blow to Italy’s weak banking sector”. Globally, the geopolitical outlook remains unstable with the report naming Donald Trump’s administration’s approach to foreign policy as “a major geopolitical wildcard” and a “lynchpin for geopolitical stability”. Verisk Maplecroft said President Trump has found few footholds in US domestic policy, “leaving foreign policy as the area where he can make his greatest mark”. Since Mr Trump took office, his approach to foreign affairs and trade has been erratic, although has been more measured than pre-electioneering suggested. Verisk Maplecroft said disruption to global trade has not materialised and the US-China trade deal quickly followed Mr Trump’s election. However, Verisk Maplecroft said unpredictability in foreign policy, including the recent bombing of an airbase in Syria, “has been a hallmark of the administration so far”. Verisk Maplecroft added that Russia has yet to show how it will deal with Mr Trump and his US administration, but does not expect this approach to last. “Moscow can be expected to revert to type and test Trump’s resolve in the foreign policy arena before long,” said the consultancy. Verisk Maplecroft’s report also highlights other measures taken by the US administration that have a less obvious impact on geopolitical risk, including a tighter monetary policy that will impact trade and investment in markets heavily reliant on US dollars. For the Middle East, the oil industry is at risk of the US administration’s ‘America First’ policy when it comes to developing domestic energy oil production, said Maplecroft. The report said the recent presidential election of Moon Jae-in in South Korea was a temporary stabilising force on geopolitical risk, but added that “at best [it will] keep tensions with North [Korea] simmering below boiling point and a nuclear solution will remain elusive”. Moon Jae-in has been credited for adopting a conciliatory approach to North Korea, but Verisk Maplecroft said he is unlikely to be able to achieve nuclear disarmament. “How patient the US will be as Kim Jong-un’s weapons programme progresses is the key variable,” Verisk Maplecroft said.

Macron stymies anti-EU movement but global geopolitical risk remains uncertain: Verisk Maplecroft

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