Europe’s big problems in 2020.
https://www.politico.eu/article/europe-big-problems-in-2020-climate-change-finance-brexit-china-iran/
As the calendar clicks over into January 2020, POLITICO’s editors predict the major tensions that will shape the coming year. Spoiler: The outlook isn’t rosy — and Brexit isn’t done yet.
Europe goes Chinese
If you can’t beat ’em, join ’em. Protectionism will no longer be a dirty word in EU policymaking. After free-trading Britain leaves the EU, France and Germany will quickly shunt Brussels toward an industrial policy based on state support, central planning and European champions.
That will include vetoes on big Chinese buyouts in Europe and European governments excluding Asian companies from public contracts, as the EU picks its next generation of home-grown corporate winners in sectors such as electric vehicles, hydrogen and health care. Expect attempted mega mergers in telecoms and other stone-age industries.
Liberal nations (the Swedes and Dutch) and big recipients of Chinese investment (Greece and Portugal) will lambast the Franco-German industrial juggernaut for hypocrisy. But Paris and Berlin will be deaf to their complaints. It’ll be a much-trumpeted leap back to the supposed glory days of post-World War II reconstruction — and the results will be underwhelming.
A new financial crisis
The tectonic plates of the world’s financial system are building up tension and are overdue for a slip. More than a decade — a typical interval between panics — since the last crisis, protections are more or less in place against a recurrence of those events. But the next crisis is always different, as financiers like to say.
Finance officials and economists look with wary eyes to China’s shadow banking system. Alternative sources of credit, away from conventional banks, have boomed along with the economy. Officials have not taken the measure of the phenomenon with any degree of confidence. As China’s economy wobbles, that credit looks shaky. Even a small uptick in losses can wipe out lenders with thin financial cThe truce in Trump’s trade offensives has been a taken with a sigh of relief. But the peace, and China’s economy, is fragile. Any political misstep could set off fresh hostilities that would dim growth prospects.
This comes while warning lights are flashing red on the control panels of market watchdogs and analysts. Several classes of stocks and bonds are trading at high prices. Those two forces together are ready to shake the financial world in 2020
Brexit gets (even) dirtier
Post-Brexit trade talks between the U.K. and the EU will turn ugly in 2020 as Prime Minister Boris Johnson pushes for the freedom to diverge from EU rules.
With the U.K. now all but certain to leave the EU on January 31, that leaves the really hard question — what kind of relationship the U.K. wants to have with the EU — to be solved in a punishingly tight timetable by the end of December.
Anyone expecting Johnson to ditch his hard Brexiteers and go for a trade deal with close alignment with the single market and EU customs union should think again. He and his closest aides are serious about wanting to diverge from EU rules — particularly in areas like financial services and artificial intelligence. And he is banking on France and Germany blinking over trade in food and cars to give him a better deal than they’re offering now.
One factor is whether he will tear up his pledge not to extend the transition period beyond December 31, 2020. If Johnson wants to avoid the political embarrassment of breaking his word on an exit date again (remember that “die in a ditch” promise), he will have to take a hit on the terms he accepts — or face the economic shock of leaving without a trade deal.
Expect the U.K.-EU trade talks, like every European crisis, to go down to the wire in December 2020 as everybody plays a colossal game of diplomatic chicken.
The climate agenda boils over
Atmospheric levels of carbon dioxide will hit yet another record in 2020. There will be no sign that the global increase in temperatures is being brought under control.
The effort to clean up is exposing deep fissures between the greener West of the Continent and the coal-dependent East.
Against that backdrop, Commission President Ursula von der Leyen’s promise to face the climate challenge will dominate the EU calendar — affecting everything from financial regulations to chemicals rules, airplane taxes, pollution standards for cars and the bloc's trading relationships with the rest of the world.
The political muscle behind her so-called Green Deal program means that big chunks of it will get passed — but it’s going to cause some serious fights this year.
One is likely to be within the European Commission. Frans Timmermans, the Dutch Socialist Commission executive vice president in charge of the Green Deal, bears the political responsibility for pushing through the program, but the purse strings are controlled by a rival executive vice president — Valdis Dombrovskis from the European People's Party.
The other is within the bloc itself. The effort to clean up is exposing deep fissures between the greener West of the Continent and the coal-dependent East. Poland says it can’t meet a goal to become carbon neutral by 2050, and that’s going to force the EU to cough up lots of cash to try and get the Poles and their allies on side. But there is no sign that Warsaw plans any kind of a radical (and very expensive) transformation of its economy.
Technology takes control
2020 will be the year that Europe ditches its precautionary approach to new technologies.
As the bloc eyes an industrial policy worthy of outperforming global rivals, it will be forced to confront the reality that a softly-softly approach to artificial intelligence, driverless vehicles and other futuristic technologies is no longer compatible with economic ambitions.
Experts say a host of artificial intelligence systems are already in use across health care, education, employment and criminal justice without appropriate safeguards or accountability structures. Driverless trucks are already operating across the bloc’s public roads, albeit under limited controlled trials. Aerospace giants like Airbus and Boeing, tech companies like Uber and even McDonald’s are betting big on drone deliveries and air taxis.
Even European governments are already embracing facial recognition technology — disregarding major privacy and civil liberty concerns.
Brussels will be forced to wake up to Iran’s bloodshed
Tehran’s leadership and the Revolutionary Guards will become even more desperate to cling on to power through 2020 as they lose the last vestiges of popular support. The massive welfare and subsidy schemes that held the Islamic Republic together will unravel as American sanctions bite harder. Without a dramatic (and unlikely) recovery in oil revenue, Iran’s leaders know they are facing the battle of their lives and will resort to repressive fear tactics.
Brussels will have to stop its love-in with Tehran and should worry about what might come next. Like the fall of Communism in eastern Europe, we will see big cracks in the Iranian elite. Sensing the threat to Supreme Leader Ayatollah Ali Khamenei, many oligarchs within Iran’s highly corrupt upper echelons will fear the collapse of the whole edifice that keeps them rich, and will be studying the mechanics of an internal coup and a deal with the West.
Warsaw-Brussels relations at breaking point
Poland’s ruling Law and Justice (PiS) party will push ahead with its deep reforms to the country’s judicial system — sparking yet more tension in the fraught relationship with Brussels.
Incumbent President Andrzej Duda, a PiS ally, is ahead in opinion polls, but presidential races have surprised in the past.
Despite winning the 2019 parliamentary election, PiS is fighting for its political life in this year’s presidential vote. Incumbent President Andrzej Duda, a PiS ally, is ahead in opinion polls, but presidential races have surprised in the past. If he loses, then the radical changes brought about by PiS leader Jarosław Kaczyński would be blocked — killing his revolutionary effort to remake the country.
That's prompting the government to undertake a final push to bring the judiciary more firmly under political control. Brussels is warning that such steps could violate EU treaties by undermining judicial independence. But Warsaw isn’t listening.
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