After a relative calm following the at least temporary resolution of the Greek crisis in the summer of 2015, Europe will have to once again contend with quite a build-up of political uncertainties.
The main is Britain's referendum on 23 June. Even though it is not our central scenario, a win for the Brexit is altogether plausible. It is true that, institutionally speaking, nothing would change overnight (the treaties call for a negotiation of the exit terms that may last up to two years). In addition, initially at least, governments and central banks in both the UK and the eurozone would busy themselves speaking out about their determination to take the necessary steps for the separation to happen in an orderly fashion. However, in light of the scale of long-term risks (encouragement provided to eurosceptic forces in other countries leading to an incentive for the other Member State to limit concessions made to the UK, major question marks raised about the reorganization of the financial services market, including the status of the London financial hub, while the free trade of goods would very likely be preserved), we cannot rule out the possibility of a major uncertainty shock. Then, only decisive measures could contain it: on the eurozone side, it may take a quantitative and qualitative leap in matters of unconventional monetary policy and/or economic integration policy measures moving toward greater federalism. Coming to an agreement on such measures is not impossible, but the road will be a hard one.
Bear in mind that the Brexit (or at least the uncertainty before the referendum) could very well coincide with the resurgence of other outbreaks of political stress. The first involves Spain where, if no government has been formed by 2 May, new elections will be held on 26 June (with, once again, the risk that they will not result in a clear majority, in a context marked by a large slippage of government finances relative to targets). A second one concerns Greece, which is, again, struggling to reach an agreement with its creditors (eurozone and IMF), themselves divided, although it needs to obtain the funds to make significant repayments to the ECB on 20 July. We could add Portugal to the list; should it lose its last investment-grade sovereign rating, its debt would, in theory, become ineligible for the ECB's purchasing programme (the DBRS agency is due to review the country’s rating on 29 April). These situations are not endangering the eurozone's existence: for now, Spain is protected by the ECB's action; Greece has lost its appetite for showdowns, but may, conversely, play on its role in the refugee crisis and Germany's determination to control it; and there could probably be a workaround for Portugal's debt. However, this mix of topics could complicate the issue of eurozone Member States coordinating in the face of the Brexit, and, from the international markets' viewpoint, worsen the general perception of the European political environment just that much more. Still, the worst is not certain, and if these treacherous late Spring/ early Summer shoals can be successfully navigated, the second half of the year should have a clearer horizon.