Is the EU imploding?The Europe Question In 2016 - by Nouriel Roubini

At the cusp of the new year, we face a world in which geopolitical and geo-economic risks are multiplying. Most of the Middle East is ablaze, stoking speculation that a long 

Sunni-Shia war (like Europe’s Thirty Years’ War between Catholics and Protestants) could be at hand. 

China’s rise is fueling a wide range of territorial disputes in Asia and challenging America’s strategic leadership in the region. And Russia’s invasion of Ukraine has apparently become a semi-frozen conflict, but one that could reignite at any time.

There is also the chance of another epidemic, as outbreaks of SARS, MERS, Ebola, and other infectious diseases have shown in recent years. Cyber-warfare is a looming threat as well, and non-state actors and groups are creating conflict and chaos from the Middle East to North and Sub-Saharan Africa. 

Last, but certainly not least, climate change is already causing significant damage, with extreme weather events becoming more frequent and lethal.

Yet it is Europe that may turn out to be the ground zero of geopolitics in 2016. For starters, a Greek exit from the eurozone may have been only postponed, not prevented, as pension and other structural reforms put the country on a collision course with its European creditors. “Grexit,” in turn, could be the beginning of the end of the monetary union, as investors would wonder which member – possibly even a core country (for example, Finland) – will be the next to leave.

If Grexit does occur, the United Kingdom’s exit from the EU may become more likely. Compared to a year ago, the probability of “Brexit” has increased, for several reasons. The recent terrorist attacks in Europe have made the UK even more isolationist, as has the migration crisis. Under Jeremy Corbyn’s leadership, Labour is more Euroskeptic. And Prime Minister David Cameron has painted himself into a corner by demanding EU reforms that even the Germans – who are sympathetic to the UK – cannot accept. To many in Britain, the EU looks like a sinking ship.

If Brexit were to occur, other dominos would fall. Scotland might decide to leave the UK, leading to the breakup of Britain. This could inspire other separatist movements – perhaps starting in Catalonia – to push even more forcefully for independence. And the EU’s Nordic members may decide that with the UK gone, they, too, would be better off leaving.

As for terrorism, the sheer number of homegrown jihadists means that the question for Europe is not whether another attack will occur, but when and where. And repeated attacks could sharply reduce business and consumer confidence and stall Europe’s fragile economic recovery.

Those who argue that the migration crisis also poses an existential threat to Europe are right. But the issue is not the million newcomers entering Europe in 2015. It is the 20 million more who are displaced, desperate, and seeking to escape violence, civil war, state failure, desertification, and economic collapse in large parts of the Middle East and Africa. If Europe is unable to find a coordinated solution to this problem and enforce a common external border, the Schengen Agreement will collapse and internal borders between the EU member states will reappear.

Note EU-Digest: Europeans must keep history in mind when looking at the future - united we stand - divided we fail - There is no alternative.

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