Risk aware

We are experiencing an unprecedented crisis in the EU at present. While the debt crisis appears to have abated, a refugee crisis has blown up. Do you think there is an EU solution to the refugee crisis?

If the question is whether Europe itself can stem the tide of refugees flowing from Syria, the answer is no. Syria is a mess right now, and will continue to be for the foreseeable future. Obviously, France is more motivated than ever to take the fight to ISIS following the Paris attacks, but defeating ISIS will require a troop commitment and unity of mission that has so far proved elusive to the Western alliance. The underlying problem remains: every single actor that's involved in the fighting over there has its own set of priorities, and its own set of overlapping allies and enemies.

Will the EU be able to come up with a unified response to the migration crisis? That's a much more interesting question. The current migration crisis is the greatest threat that the EU has ever faced, much bigger than the financial crisis. People have been talking about "two Europes" for years now, fixating on the divide between the "core" and "periphery" economies. The migration crisis has shown that the real divide that threatens Europe is politics, between pro-EU establishment politicians and their euro-sceptic, populist counterparts. And recent events in Paris will deepen that divide.

What do you think the EU (and its member states) will do to address the problem?

They will probably do as much as their individual politics will allow them to do. Look, what Europe is good at is kicking the can down the road, extending problems and muddling through them. And it's worked for the most part, particularly in cases like Greece. For a variety of reasons, that's not an option with this migration crisis. Germany has already tried to take the lead on the issue and declared itself open for refugees, but the rest of Europe has pushed back hard against them. They need to go back to the drawing board, but the longer they wait, the more pressing the problem will become, making it harder to solve. And we must remember that winter is coming. The pressure to find a solution to the refugee problem will become more intense as the temperature drops across Europe.

After having been out in the cold for a while, more authoritarian leaders in democracies such as Hungary and Israel and in less democratic countries like Turkey, Russia and Belorussia seem to have gained in influence recently. Why? Do you think we are seeing a new dawn for more authoritarian leaders?

Because the world is an increasingly chaotic place, and authoritarian leaders provide some semblance of structure and order. Individual personalities obviously play a part here as well. But are we seeing a new trend of quasi-democratic authoritarian leaders? Probably not. The really worrying trend is the rise of extremist politicians on both the right and the left, especially in Europe—and Paris will now add more fuel to this fire.

As a keynote speaker at SKAGEN's New Years Conference in January you will elaborate on "Top Global Risk for Investors". Now, roughly a month before Christmas, what do you see as the greatest global risk(s) investors are facing?

The greatest risk is obviously the continued Syrian migration crisis and its spillover into European politics. Another major risk is the fragmentation of the Sunni bloc in the Middle East, and in particular Saudi Arabia's waning influence. Part of this has to do with falling oil prices, which means that Saudi Arabia has nowhere near the influence it had just a couple years ago. The Iran nuclear deal has also unshackled Iran, Saudi Arabia's long-time rival in the region, making it more assertive in the various conflicts brewing in the region. A renewed Saudi-Iranian rivalry has significant destabilizing potential. Third is China. After years of hearing that "China is rising", it's safe to say that it's officially risen. The Chinese have realized that they must transition from an export-driven economy to a consumer-driven economy. This creates more volatility for the entire global economy--we've already seen how it's hit commodity exporters. Investors will need to brace themselves for more changes on the horizon.