Conference Presentation, Panel
The Future of the United Kingdom and the European Union
Milken InstituteMichael Klowden, Stephanie Flanders, Alan Houmann, Jo Johnson, Mikhail Khodorkovsky, Lord Mandelson, Peter Mandelson
- Current political dynamics and personnel changes, including potential departures in Europe by the end of 2019, are predicted to upend or shorten economic cycles and disrupt structural economic management.
- Brexit vote outcomes and the UK financial services sector are expected to face significant risks, including a projected 6% contraction under the government's deal and the necessity for the UK to align closely with European financial standards.
- Political uncertainty regarding Brexit is forecasted to extend well into the following year, potentially requiring an Article 50 extension that pushes timelines into the period of European Parliament elections.
- The European Parliament elections are anticipated to result in a more fragmented landscape with populist and nationalist forces gaining up to 30% of seats, potentially diverting policy focus from economics to social issues, migration, and family matters.
- European cohesion is expected to face testing as the EU transitions from defending the status quo to implementing reforms, while internal dynamics between an "integration core" and a "fragmentary outer circle" remain difficult to predict.
- The Kremlin is viewed as having a vested interest in maintaining European disunity to leverage energy monopolies and mitigate sanctions, with concerns raised about the potential for a Russian military adventure to address domestic political ratings.
- US-Europe relations face headwinds from potential threats to car imports and a failure to strengthen the WTO, which may hinder wider liberalization negotiations and the US administration's impact on European disintegration.
- Business planning critical paths for subsidiary creation and client access may change significantly unless Brexit is resolved extremely quickly, while the long-term UK-EU relationship could remain in abeyance with adverse conditions for business.
- Monetary policy normalization combined with political fragmentation could cause Italy's debt sustainability issues to reach a critical point, and European defense spending might increase due to US unilateralism, though this is not guaranteed.
- Analysts expect a divergence in future European governance where a majority of senior government members may privately doubt Brexit's value, even if they cannot admit it, while the EU Commission and Council engage in "buck-passing" regarding economic changes.
- If a second referendum occurs, British MEPs may need to take their seats around July 2nd to maintain legislative influence, and the US administration is predicted to actively foster European disintegration rather than integration in the short to medium term.
- While some successors to Chancellor Merkel may voice negative positions regarding the Nord Stream 2 pipeline and President Putin, there is a possibility that the current trajectory could eventually strengthen Europe's commitment to the multilateral system and NATO.