President Emmanuel Macron on a visit to French troops in Mali © ABACA/PA Images
President Emmanuel Macron on a visit to French troops in Mali © ABACA/PA Images

Macron election lowers eurozone risk

22 May 2017

Emmanuel Macron’s election as president in France meant Europe dodged a bullet when it came to geopolitical risk, but the Trump administration unpredictable’s foreign policy continues to be a global “wildcard”.

Verisk Maplecroft’s Geopolitical Risk Outlook said Macron’s election meant France had temporarily “defused the run of electoral bombshells that have buffeted geopolitical stability over the last year”.

However, the popularity of anti-establishment parties in Europe mean the respite brought about by Macron’s election could be short-lived.

Maplecroft said key EU powers had four years to reform and prevent the possible collapse of the eurozone.

“Strong support for Europe’s populist forces will remain one of the primary drivers of geopolitical risk over the next years,” said the report.

“European centrist governments will have to carry out painful reforms to address popular discontent before the next major election cycle begins in 2021.

“If they don’t, anti-establishment parties have the potential to seize the political initiative in key countries such as France, the Netherlands and Italy.”

If these parties began to seize power in major European states, the days of the eurozone could be numbered.

Elsewhere, the election of Moon Jae-in as South Korean president helps minimise global risk, though his win would at best keep tensions with the North simmering below boiling point, Maplecroft said.

While Moon Jae-in is likely to adopt a more conciliatory approach to North Korea the report said he is unlikely to achieve a major breakthrough on nuclear disarmament.

Overall, there is little cause for optimism in the region as North Korea is likely to continue to hold out the prospect of talks to extract economic benefits and buy itself time without any major progress being made.

Meanwhile, Donald Trump’s unpredictable foreign policy is now the “lynchpin for geopolitical stability”.

“This is especially the case as he struggles to stamp his authority on the domestic front, leaving foreign policy as the area where he can make his greatest mark,” said the report.

On the positive side Trump hasn’t followed through on some of his more controversial trade pledges, quickly signing a trade deal with China and toning down NAFTA reform.

The growing dominance of pro-business advisors in the White House also lessens the risk of trade volatility.

However, foreign policy unpredictability was reflected in the bombing of the Shayrat Airbase in Syria, which raised the possibility of tension between the US and Russia.

And Washington’s tighter monetary policy will restrict global credit conditions.

Many emerging markets are at risk of greater political instability including Turkey, South Africa and Venezuela. 

Middle East oil producers also remain exposed to the risk that greater US production will keep prices low, limiting their ability to stem popular discontent through social spending.

Iran and Kuwait face major challenges on this front, though Saudi Arabia is likely to be most affected.

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