Divided U.S., Not Covid, Is the Biggest Risk to World in 2021, Survey Finds

(Bloomberg) -- With the global economy still in the teeth of the Covid-19 crisis, the Eurasia group sees a divided U.S. as a key risk this year for a world lacking leadership.

“In decades past, the world would look to the U.S. to restore predictability in times of crisis. But the world’s preeminent superpower faces big challenges of its own,” said Eurasia Group President Ian Bremmer and Chairman Cliff Kupchan in a report on the top risks for 2021.

Starting with the difficulties facing the Biden Administration in a divided U.S, the report flags 10 geopolitical, climate and individual country risks that could derail the global economic recovery. An extended Covid-19 impact and K-shaped recoveries in both developed and emerging economies is the second biggest risk factor cited in the report.

Biden will have difficulty gaining new confidence in U.S. global leadership as he struggles to manage domestic crises, the report said. With a large segment of the U.S. casting doubt over his legitimacy, the political effectiveness and longevity of his “asterisk presidency,” the future of the Republican Party, and the very legitimacy of the U.S. political model are all in question, it added.

“A superpower torn down the middle cannot return to business as usual. And when the most powerful country is so divided, everybody has a problem,” said Bremmer and Kupchan.

The report lists the following as top risks in 2021:

The report warns that the pandemic and its broad impact will not vanish once vaccination becomes widespread. Uneven recoveries, variance in vaccine access and stimulus plans that fall short will push up debt levels, leave workers displaced and fuel opposition toward incumbent leaders.

For the U.S., this will increase the polarization that fed support for Donald Trump. For emerging economies, the debt crunch could lead to financial troubles, the report said.

Some concerns are more likely to be “red herring” risks that have been overplayed, the report adds. These include relations between Biden and “Trump’s fellow travelers” such as Turkey’s Recep Tayyip Erdogan, Brazil’s Jair Bolsonaro, the U.K.’s Boris Johnson and Israel’s Binyamin Netanyahu. The Biden administration will engage on shared interests and leaders will adapt to the new status quo, the report says.

Fears over a global backlash against U.S. big tech and an Iran-U.S. confrontation are also seen as lower risks.

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