Brexit has set a hungry cat among the financial pigeons of the City of London. No one yet knows what kind of access to the European Union’s single financial market UK-based firms will have, and Prime Minister Theresa May’s call for a general election to be held on June 8 has further clouded the picture, at least in the short term. But there is a nagging assumption that things cannot remain the same, and that there will be a price to be paid for leaving the EU. So UK-based financial services firms, especially those that have chosen London as their European headquarters precisely in order to secure access to the whole EU market from one location, are reviewing their options. Indeed, regulators are obliging them to do so, by asking how they will maintain continuity of service to their clients in the event of a “hard” Brexit. (May’s government prefers to talk of a “clean” Brexit, but that is semantics). Rival European centers have spotted an opportunity to claw some of this business back to the continent (or to Ireland). Other governments have long resented London’s dominance. It was galling to have to acknowledge that the principal center for trading in euro-denominated instruments lay outside the eurozone.
The world needs the European Union now more than ever. Despite recent crises and the hard blow dealt by the Brexit vote, the EU may well be the world’s best line of defense against today’s most serious threats: isolationism, protectionism, nationalism, and extremism in all forms, all of which are once again growing in Europe and beyond. The key to enabling the EU to meet this potential – to save itself and the world from catastrophe – is for member states urgently to adopt a “European Union first” mantra. Unlike the “America first” credo embraced by US President Donald Trump, such a mantra would not be an exercise in damaging unilateralism. On the contrary, it would compel member states’ governments to look beyond narrow national interest, defend openness and multilateralism, and confront head-on the exclusionary political forces that have lately been gaining ground. It would drive member states to consolidate the EU, thereby enabling it to overcome the challenges it faces and help preserve the international order.
According to the 2016 Democracy Index almost one-half of the world’s countries can be considered to be democracies of some sort, but the number of “full democracies” has declined from 20 in 2015 to 19 in 2016. The US has been downgraded from a “full democracy” to a “flawed democracy” because of a further erosion of trust in government and elected officials there. The “democratic recession” worsened in 2016, when no region experienced an improvement in its average score and almost twice as many countries (72) recorded a decline in their total score as recorded an improvement (38). Eastern Europe experienced the most severe regression. The 2016 Democracy Index report, Revenge of the “deplorables”, examines the deep roots of today’s crisis of democracy in the developed world, and looks at how democracy fared in every region.
US President-elect Donald Trump’s incoming cabinet now includes retired generals, plutocrats, and people who would abolish the very departments they will lead. But it is still unclear how Trump will actually govern, which has become a source of growing anxiety for the rest of the world.
Despite an improved global economic backdrop, mounting uncertainties will weigh on companies in 2017—especially given the election of Donald Trump as US president. Two surprising and contradictory events took place in early November, with important ramifications for business in 2017. First, the Paris Agreement on Climate Change entered law, sooner than many foresaw as recently as a year ago. Shortly after this, Donald Trump, an avowed climate-change sceptic, was elected US president. This report, which brings together our 2017 forecasts for six industry sectors, is not primarily about Mr Trump. However, as the surprise result sinks in, it is clear that his administration could bring huge changes for all six industries: automotive, consumer goods and retailing, energy, financial services, healthcare and telecoms.
Although it might seem theoretically possible to cherry pick a number of sectors and negotiate trade agreements for specific domains, there is considerable linkage between the sectors. It has taken a quarter of a century to negotiate the single market as it exists today and could take nearly as long to renegotiate a new arrangement on a sectoral basis. The practical problems of negotiating agreements that cover the majority of our trade would not only take years but the uncertainty thus generated would hold back investment and damage the economy. Whether the UK is inside or outside the single market, EU regulations cannot be avoided if Britain wishes to trade with the European Union. What can potentially be decided is the form of compliance, either though EEA rules, FTA equivalence or firms individually complying with standards for their exports. The more regulatory independence the UK tries to carve out, the more difficult it is likely to be for British firms to export to the EU without facing trade barriers. The broader economic impact of having more restricted market access also has to consider secondary effects. Industries such as real estate could be affected if the landscape for foreign direct investment changes. Furthermore, foreign investment into key British industries such as manufacturing may also be affected by restricted access if investors end up having less certainty in the ability of their assets to generate income domestically and abroad.
As right-wing movements have mounted increasingly strong challenges to political establishments across Europe and North America, many commentators have drawn parallels to the rise of fascism during the 1920s and 1930s. Last year, a French court ruled that opponents of Marine Le Pen, the leader of France’s National Front, had the right to call her a “fascist”—a right they have frequently exercised. This May, after Norbert Hofer, the leader of Austria’s Freedom Party, nearly won that country’s presidential election, The Guardian asked, “How can so many Austrians flirt with this barely disguised fascism?” And in an article that same month about the rise of Donald Trump, the Republican U.S. presidential candidate, the conservative columnist Robert Kagan warned, “This is how fascism comes to America.” “Fascist” has served as a generic term of political abuse for many decades, but for the first time in ages, mainstream observers are using it seriously to describe major politicians and parties.
Europeans will not only have to get used to Trump; they will have to look at the world through different eyes. Alone again. Since World War II’s end, Europe has looked at the world through a transatlantic lens. There have been ups and downs in the alliance with the United States, but it was a family relationship built on a sense that we would be there for each other in a crisis and that we are fundamentally like-minded. Donald Trump’s election as US president threatens to bring this to an end – at least for now. He believes more in walls and oceans than solidarity with allies, and has made it clear that he will put America not just first, but second and third as well. “We will no longer surrender this country, or its people,” he declared in his one major foreign-policy speech, “to the false song of globalism.”