With crashing oil prices and slower growth in China dominating the debate at the World Economic Forum, it’s easy to forget the risks a bit closer to home.
With the economy seemingly on the mend, Europe has found itself on the back burner this year.
But there is little room for complacency.
Yes, growth is back but it is patchy and anemic at best.
The European Central Bank is still under pressure to show it has more tricks up its sleeve, and companies have learned the hard way they can’t keep promising that Asia will make up for the lack of demand at home.
Among the big risks this year are events that could be out of Europe’s own control.
And top of the list: fear of a dreaded British exit — or Brexit — from the European Union. Martin Sorrell, CEO of WPP, said Wednesday that voting to leave Europe would mean Britain “jumping into a big black hole.”
If the U.K. does decide to leave this year, not only would the block lose a hefty chunk of GDP — and one of its biggest paymasters — it will also be weakened in free trade talks with the United States.
Europe without one of its biggest members may also undermine the smaller currency area — the eurozone — just as it has faced down its worst crisis since its inception.
The pressure will be on for Germany and France to act quickly to keep the rest of the block together.
And yet, the leaderships of those countries look uncertain.
Facing steep criticism for accepting a million migrants, German Chancellor Angela Merkel’s political future is looking far less certain than it was when she won her third term in office in 2013.
In France, following the Paris attacks of 2015, the far right has become more vocal.
Security will remain a risk and curbing the flow of refugees from war torn parts of the Middle East will continue to be on the agenda for 2016.
This year, Davos will give leaders a chance to discuss such issues informally ahead of February’s big EU summit.
When it comes to the economy, 2016 will see more pressure piled on ECB chief Mario Draghi. Having already deployed his “big bazooka” to little effect, economists will be asking what more he can do to keep Europe from stagnating as the central bank makes its first policy decision of 2016 this week.
All in all, Europe is on the mend. Some CEOs even say they are optimistic about its prospects because growth will come from such a low base.
The message for the Davos crowd gathering half way up the mountain this year: there’s still a steep climb ahead.
