The European economy is deteriorating and leaders across the continent are being booted from office in favor of a new generation of politicians. Rising tensions in the Middle East and uncertainty over leadership changes in emerging markets worldwide are adding to investor concerns.
Tina Fordham, Senior Global Political Analyst at Citi, is out with her mid-year outlook, presenting all of the bank's views on all of the biggest political risks emanating from the world's key hotspots over the remainder of this year and into 2013.
With key elections ahead, unresolved conflicts that continue to roil entire regions, and rising nationalist sentiment in major world economies, investors will want to stay abreast of developments on the international political scene.
Russia is still protesting Putin's recent rise to the presidency
The last time Russia staged protests as big as the ones over Vladimir Putin's recent re-election to the presidency, the Soviet Union collapsed.
Fordham notes that protests have continued longer than most had expected them to, writing that "softening oil prices and plans for restrictions on free speech signal the possibility of a sustained period of tensions ahead, as Russia’s newly-energised middle class may seek to continue its challenges to the regime."
Source: Citi
France's new Socialist government is characteristic of the new Europe
Eight of the nine eurozone countries that have had elections in the last year and a half (including France) have ejected incumbents from office. And France, like others, did it on anti-austerity campaign platforms. Fordham says the impact that the success of that strategy will have on future eurozone elections is is significant.
Fordham writes that "as pro-austerity and pro-bailout sentiment in the 'soft core' also weakens, we believe tensions between Germany and other eurozone member states could increase."
Source: Citi
Greece could become a 'critical fragile state'
Even if Greece leaves the euro, Fordham says it would probably still be on E.U. life support as a "critical fragile state" for a long time anyways.
Fordham cautions, "More broadly, amid the sharp reversal of living standards, growing evidence of social dislocation, including hunger, homelessness and the risk of violent disruption in Greece is also a cause for concern." And it could go beyond just Greece.
Source: Citi
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