Ten trends for 2012

Looking into their ECFR crystal balls, our regional analysts and national offices have identified a series of trends that we think might – perhaps – shape Europe, its neighbourhood and the wider world in 2012.

We’ve outlined ten that we think have a good chance of happening, and one that is widely predicted but that we think won’t come to much. If nothing else it has made us think differently about what might happen in 2012, but this is designed to start a wider conversation so please email us at press@ecfr.eu with your own predictions for 2012 and we will gather the best in a blog post in the New Year. After all, if 2011 is anything to go by, the rule is that nothing is quite so unpredictable as the near future.

Have a good holiday season!

1. A "European Clash of Civilisations":
   Although the real cause of the crisis is the structural flaw of designing a single currency without a common treasury, Northern Europeans have tended to explain the euro’s problems as a clash between a fiscally-responsible north and an irresponsible south. Southern countries, on the other hand, feel betrayed by what they see as the limited and conditional solidarity of the north – which they see as part of the problem. They feel they have contributed to Germany's success during the last decade by buying German exports such as cars. France, meanwhile, is caught in the middle – the equivalent of what Huntington called a ‘torn country’ (like Turkey in the conflict between the West and Islam). It wants to be part of the north – which is where power is shifting – but finds itself in danger of becoming part of the south.
   The facts do not always support this cultural reading of the crisis – for example it was the rule-worshipping Germans that broke the Stability and Growth Pact, while the Spanish abided by its provisions – however, like Huntington's original thesis, it risks becoming self-fulfilling, leading to solutions which may not make sense in economic terms – such as simultaneous austerity by all, which Keynesians argue leads to stagnation.
2. Germany rediscovers that it’s a European country:
   Contagion spreads, emerging markets that have been the drivers of the world economy (and Germany’s exports) start to falter, and Germany finally feels the full impact of the crisis. The undersubscribed bond auction of November and the threat of a downgrade from AAA sets a pattern that changes the debate in Germany, opening the door to both Eurobonds and the ECB as a full lender of last resort.
3. A British Europe without Britain:
   As Britain exits stage left, Europe starts taking on many of the characteristics that London fought so long and hard for (alongside elements of greater federalism) – a greater role for national governments and parliaments; a wider Europe that goes beyond the original core; liberal structural reforms of southern economies; the relative loss of power of central institutions like the Commission. Britain’s self-marginalisation – which started with John Major’s opt-out at Maastricht in 1991 – could risk coming structural as the UK’s divided coalition struggles to reconcile its two goals of seeing the euro succeed and managing Tory eurosceptic backbenchers, who are likely to push for an in-out referendum.
4. China is forced into a financial G3 to safeguard the value of its reserves:
   For all the talk about a power shift to the East, something has been lost. 43% of China’s exports go to Europe or the US, and more than 90% of its foreign currency reserves are in dollars or euros. For all the speculation about China’s leverage over the US, and about its potential ‘white knight’ role with distressed European member states, the truth is that China needs Western markets and fears for the value of its global savings. In 2008-9 and again in November 2011 Western central banks (the ECB, Federal Reserve, Bank of England and Bank of Japan) which saved the global economy from a liquidity crunch. Europe is lining up €200 billion at the IMF, and the US is signalling a willingness to top this up. As the world’s number one public creditor, China can look towards a G3 with its debtors for a cooperative solution, or may have to watch helplessly as the debtors create liquidity and reduce the value of their debt.
5. The Russian Scramble for Europe(an banks):
   Despite pressures for political liberalisation and economic modernisation (as seen in December’s election results and consequent street protests), the return of Putin sees a creeping Brezhnevisation of Russia and a reassertion of stultifying authoritarianism. In response, mobile capital flees and looks for safer havens in Europe – in particular assets that need injections of capital from outside – and Russian money joins Chinese money in the new Scramble for Europe.
6. The remilitarisation of Europe:
   Europe’s soft power has taken a battering in the current economic/political crisis, while Libya and the potential for trouble with Syria/Israel/Iran show that a coherent military answer still has real value in a multipolar world and post-American Europe. As austerity bites deeper, governments across Europe finally accept that their choice is ‘share it or lose it’ – and opt for sharing. With Putin threatening to ratchet up the rhetoric and doubts grow over the reliability of the US’s defence commitment to Europe, France and Britain may find themselves discreetly offering to extend the Anglo-French nuclear umbrella to their European partners.
7. China discovers competitive politics while reinforcing authoritarianism:
   Competition heats up in Beijing ahead of the replacing of seven out of ten Politburo Standing Committee members (the top table of Chinese politics). The competition focuses on issues such as economic development, for instance with rivals championing either the Chongqing or Guangdong model and their profound implications for China’s future trajectory. At the same time, social tensions and conflicts within Chinese society are answered in a familiar way – with authoritarianism.
8. The re-Atlanticisation of Turkey: As Ankara discovers the limits of its regional strategies, faces possible turmoil over Iran, discomfort with neighbours and former allies such as Syria and Israel, and the slowing down of the economic growth that has fired its recent renaissance, Turkey is forced to rethink. However it is not to Europe that it turns, but across the Atlantic to the US. One key trend is the development of a foreign policy focused on regime change in other MENA countries – for instance when Erdogan announced a political response to Syria (including sanctions) that was coordinated with the US more than Europe. The US withdrawal from Iraq is driving up Turkish stock as a key regional ally in Washington.
9. The Domesticated Brotherhood:  
   The Muslim Brotherhood becomes the most convenient and useful partner for the West in the new Middle East, especially and counter-intuitively for the US. The Brotherhood proves to be a rather unchallenging, soft and politically domesticated movement, as long as Western powers don’t push it on certain civil liberty and Israel-related issues (even then, it doesn't push the envelop on Israel). For its part the Brotherhood sees the West is grateful to it for challenging the SCAF, and an ally in unseating Assad in Syria.  It prefers to consolidate power rather than bring about further and deeper revolution. (There is however the danger that faltering economies drive such regimes to more radicalism – if they can’t eat bread, let them eat sharia – and perhaps a more forward-leaning push against Israel, which sets limits to cooperation.)

10. A perfect Iranian storm: 
    Although Iran and conflict involving Iran has tended to be the dog that didn’t bark in previous years, there is a potentially toxic combination of forces lining up for 2012. Firstly we have a hard-line Israeli leadership that has set its own unique red lines regarding Iran’s nuclear programme. Secondly, there is the ever-more erratic behavior from an Iran that fears the region is turning away from it (there are the problems in Syria, and Hamas moving more into the regional Muslim Brotherhood fold and even cutting deals with Israel). Thirdly, there are ever more brazen ‘covert’ ops against Iran, provoking Iranian responses. Fourthly, the US withdrawal from Iraq could ease both over-flight options for any attack and fears of blow-back against US forces. Finally, the US electoral cycle will make the administration reluctant to appear weak on Iran or in disagreement with Israel. These factors could lead the current Netanyahu government – spurred on by encouraging noises in the Gulf – to think that this is the best time to force America's hand by striking.

And one that won’t:

The Youthquake doesn’t happen:
Europe’s young bear the brunt of austerity and recession, protest noisily, but fail to make an impact on mainstream politics. Pitching tents, founding single issue groups like the Pirate Party and liking things on Facebook doesn’t translate to the kind of voting power enjoyed by Europe’s pensioners, who are busy pulling up their drawbridge.