![]() The EU may seek to develop a common and coherent approach, as it recognizes China as a systemic rival and economic competitor but also as a cooperation partner. One area where the EU is likely to implement this approach is in Europe’s relationship with China. Policies will focus on leveling the playing field for European companies at home and abroad, reinforcing action against unfair trade practices and producing critical goods in Europe and reducing dependency on non-EU supply chains. In addition, the EU will seek to balance the need for strategic supply resilience while remaining competitive and open to multilateral trade with foreign parties. This will likely include a review of trade and investment policies, as well as a new industrial strategy focused on green and digital capabilities. Throughout 2021, the EU can be expected to sharpen policies and regulation to rebuild a post-COVID-19 Europe that is more open, strategic, and autonomous politically and economically. Since a new European Commission took office in 2019, it has committed to creating a stronger Europe by being ambitious, strategic, and assertive globally it remains to be seen if internal resistance to this idea can be overcome. In 2021, Europe can look to attempting a leading role in the international community. But the previous US administration’s policies and COVID-19 have exposed EU dependencies on supply chains for critical products and forced Europe to reevaluate the fragility of the single market, pivoting to protect employment and industries. Historically, the EU relied on American leadership in global affairs. The EU’s relationship with the US fundamentally changed during the past four years. Financial institutions can be expected to shift their focus, from raising liquidity in order to meet short-term capital requirements to mitigating and managing credit risk on their obligors. This calls for another year of close cooperation between fiscal and monetary authorities. However, high public debt also means crowding out private debt and limiting financing opportunities.Įuropean fiscal policy remains prominent during the pandemic recovery, but the monetary policy of central banks must continue to support the public and private sectors until the economic recovery is complete. Debt servicing and raising funds will be a key concern, as cutting or raising taxes will likely slow the recovery and stimulate political backlash. While Europe’s developed economies can absorb rising debt amid ultra-low interest rates, sovereign credit risk is on the rise. On an individual country level, governments are under pressure to continue fiscal policies of extending financial support for severely affected industries, such as hospitality, airlines, retail, and small to midsize enterprises. The pandemic has increased economic and social uncertainty in Europe, pushing EU leaders to approve €1.8 trillion in financial aid to rebuild a post-COVID-19 Europe. Political Risk Map 2021: Pandemic Recovery Complicates Risks for Europe Papua New Guinea(English) Papua New Guinea(English).New Zealand(English) New Zealand(English).United Arab Emirates(English) United Arab Emirates(English).Saudi Arabia(English) Saudi Arabia(English).South Africa(English) South Africa(English).Nederland(Nederlands) Netherlands(Dutch).Netherlands(English) Netherlands(English). ![]()
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