New York City-based political risk consultancy Eurasia Group on Tuesday published its annual risk prognosis, saying that Germany and the rest of the EU are poised to remain stable despite increasingly threatening risks across the globe.
"Germany must regain its footing after a tumultuous electoral season, Italy will face a contentious election and President Emmanuel Macron's war on vested interests won't become any easier in France," said Eurasia Group in its report.
Read more: Beginning of the end for Germany's Angela Merkel?
Since September's federal elections, German Chancellor Angela Merkel's Christian Democrats have yet to form a government after talks collapsed with the Greens and the pro-business Free Democratic Party (FDP). Despite signs pointing towards a grand coalition with the Social Democrats, the process has dragged on at a sluggish pace.
"The German polity will pull together and recover from its recent jitters – at least for the next few years ... European politics will continue to keep us busy in 2018, but the eurozone should have yet another modestly encouraging year," the group said.
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Angela Merkel: Conquerer of political rivals
'Kohl's girl' leaves moniker behind
Longtime Chancellor Helmut Kohl gave Merkel her first cabinet post and facilitated her rise. After losing the chancellorship in 1998, his onetime acolyte turned her back and that of their Christian Democratic Union (CDU) on him. Merkel, then CDU secretary general, said Kohl, who had accepted a cash donation from sources he refused to reveal, had hurt the party. The CDU moved on without him.
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Angela Merkel: Conquerer of political rivals
Gerhard Schröder - end of a political career
Merkel was Chancellor Gerhard Schröder's undoing in the 2005 election, though his own vanity was also to blame. His Social Democrats (SPD) finished one point behind her conservative CDU/CSU alliance. On TV with Merkel and other party heads, Schröder insisted Germans had made clear they wanted him to stay. The others rebuffed his apparently absurd claim. She became chancellor. He quit politics.
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Angela Merkel: Conquerer of political rivals
Frank-Walter Steinmeier - ever the partner
Frank-Walter Steinmeier had been Germany's foreign minister, serving under Merkel, for nearly four years when the Social Democrat challenged her in the 2009 election. Many people said the SPD's heavy defeat was because of his lack of a popular touch. But he bounced back and in 2013 returned as the country's top diplomat, again with Merkel as the boss. He became Germany's president in March 2017.
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Angela Merkel: Conquerer of political rivals
Günther Oettinger - out of the way
Eliminating competitors doesn't always mean forcing them off the political scene. Merkel dispatched her party colleague and potential rival Günther Oettinger, premier of the state of Baden-Württemberg, to a top job in the European Commission in 2010. Oettinger had no track record in EU politics and even then was known for sticking his foot in his mouth. He is on his third position as commissioner.
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Angela Merkel: Conquerer of political rivals
Roland Koch - left out in the cold
Roland Koch was known in some parts for his friendship with the Dalai Lama, in others for collecting millions of signatures to catapult the government's plans for dual citizenship. The state premier of Hesse was part of a clique of CDU men who never anticipated Merkel's rise, and then were sure they'd outlast her. Koch waited in vain to be offered a job in Berlin. In the end, she outlasted him.
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Angela Merkel: Conquerer of political rivals
Christian Wulff - an unfortunate president
Christian Wulff wasn't Merkel's first pick for president, but left in a pinch when Horst Köhler resigned in 2010, party leaders wouldn't to agree to Ursula von der Leyen, now defense minister. The choice of Wulff, the CDU state premier of Lower Saxony who had been rumored to be unhappy in his position, came as a surprise to him, too. He resigned over corruption charges and was later acquitted.
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Angela Merkel: Conquerer of political rivals
Peer Steinbrück - right man, wrong time
Merkel had reached the peak of her career by the time the SPD decided Peer Steinbrück should run against her in the 2013 election. She was unchallenged in her party and had come to dominate managing the euro and debt crisis in Brussels. Steinbrück, a finance minister under Merkel and ex-state premier of North Rhine-Westphalia, had the expertise to be chancellor, but he had little chance.
Author: Nancy Isenson
The Brexit challenge
However, the group's outlook on the UK's formal process to leave the EU was dim. While EU leaders announced their decision to advance
talks on the bloc's post-Brexit relationship with the UK in December, questions remain on how that might look.
The forecast also suggested that domestic politics may continue to undermine Prime Minister Theresa May's Conservative government, including on Northern Ireland, where a fringe party remains key to her political survival.
Read more: 2018: The year of Brexit decisions
May "could lose her job over her management of the Brexit process," Eurasia Group said.
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Brexit negotiations: What are the key issues?
Phase I: The Brexit
EU leaders agreed to negotiating guidelines during a summit in April that divided the talks into two phases. The first phase seeks to "settle the disentanglement" of Britain from the EU. Since talks began on July 17, negotiators have focused on three core issues: the "Brexit Bill," citizens' rights, and the Irish border.
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Brexit negotiations: What are the key issues?
The "Brexit Bill"
Brussels says London needs to continue paying into the EU budget after it leaves. The current budget expires in 2022 and EU officials want Britain to cover pensions and spending for EU loans and projects that it had committed to before triggering article 50. London has said it will honor its commitments, and both sides have reportedly agreed on a final bill of around £50 billion (€67 billion).
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Brexit negotiations: What are the key issues?
Citizens' rights
The EU has said its citizens' rights in Britain is the "first priority" in the talks. It has proposed that the 3 million EU citizens currently in Britain and the 1.1 million British citizens in the EU keep their rights after Brexit. But that arrangement would give the EU's highest court, the ECJ, jurisdiction over EU nationals in Britain, an outcome British officials have said they want to avoid.
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Brexit negotiations: What are the key issues?
The Irish border
Both sides have expressed their desire to avoid the return of a hard border between the Republic of Ireland and Northern Ireland. However, Britain's commitment to leaving the EU Single Market and Customs Union makes it difficult to avoid that. British and EU officials would need to monitor goods crossing the border to ensure they adhered to each other's separate customs rules.
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Brexit negotiations: What are the key issues?
Phase II: The post-Brexit relationship
Talks can only proceed to phase two if the EU deems that "sufficient progress" has been made on phase one issues. According to EU guidelines, phase two talks should identify "an overall understanding on the framework for the future relationship" for the period after Britain has left. Major issues in this phase are set to be trade, immigration, and security.
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Brexit negotiations: What are the key issues?
Trade
Theresa May has said Britain will leave the European single market, the bloc's free trading area, and the EU customs union, which sets a common EU tariff to third-country goods. Britain could then negotiate its own free trade deals and restrict EU migration. London also wants a new EU-UK trade deal, but with only 18 months left for talks, there is little time to negotiate one.
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Brexit negotiations: What are the key issues?
Immigration
May has also vowed to control EU migration into Britain after Brexit. However, some British lawmakers are wary that a sharp drop in immigration could lead to shortfalls in key sectors, including health, social care and construction. The EU has warned that single market access is out of the question if London decides to restrict the ability of its citizens to live and work in Britain.
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Brexit negotiations: What are the key issues?
Security
Recent terror attacks across Europe including a string in Britain underline both sides' support for continued security cooperation after March 2019. But access to EU institutions such as Europol and programs such as the European Arrest Warrant require compliance with EU laws. Whether Britain will still be compliant after it leaves is unclear. (Author: Alexander Pearson)
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Brexit negotiations: What are the key issues?
Transition period
Theresa May envisages a two-year transition period after March 2019, when Brexit talks conclude, and March 2021, when, supposedly, a new UK-EU trade deal comes into effect. How Britain will look during this transition remains unknown, but Brexit hardliners are unlikely to accept the UK remaining bound to the European Court of Justice (pictured) and paying its full share of the EU budget.
Author: Alex Pearson
Italy at a crossroads?
Meanwhile, while Italy is headed into a tumultuous election that could witness the populist Five Star Movement, which has campaigned on leaving the eurozone, gain power, it is unlikely to translate into a major shift on Italy's relationship with the EU or the economic union.
"Italy risks coming out of its election season with a weak coalition government or even an outright radical eurosceptic one, but in neither case will the country's economy fall apart. Nor will the Italians opt to leave the eurozone or the EU."
Read more: Italy passes controversial electoral law over populist objections
For the risk consultancy, the major risks lie beyond Europe's borders, and as such, are unlikely to have as profound of an impact on the bloc. However, the outlook was significantly dim for international relations and geopolitics.
"If we had to pick one year for a big unexpected crisis – the geopolitical equivalent of the 2008 financial meltdown – it feels like 2018. Sorry."
