GO
Loading...

Euro zone's 2014 pressure point—politics

The euro zone debt crisis may be have eased in the markets this year, but analysts have told CNBC that 2014 could bring disturbance on a political front.

Gilles Moec, co-head of European economic research at Deutsche Bank expects France to be a focus for concern, with any bold plans to restructure its struggling economy being stifled at every turn.

Data from the INSEE National Statistics confirmed on Tuesday that gross domestic product for France was just 0.1 percent in the third quarter, compared with the second quarter. Meanwhile, the Netherlands - recently downgraded by ratings agency S&P - posted 0.2 percent growth for the quarter, beating estimates.

(Read More: Italy makes last-minute 2014 budget dash)

Hollande's approval rating for December rose by two percentage points, to 22 percent, from a month earlier, according to Reuters who quoted a recent poll by research firm Ifop. This is the first uptick since August, and is an improvement on the Socialist leader's 15 percent figure in another survey in November, the news agency said, which was a post-World War Two record low.

"My guess is there will be a surge of anti-European/populist parties in France," Moec told CNBC Tuesday in regards to May's elections for the European Parliament. "It would be a very, very complicated political gamble for (President Francois) Hollande to try to force more European integration into an increasingly restless public opinion."

Following the financial crash of 2008, European nations have been busy restructuring and rebalancing their economies. Substantial sovereign and bank debt led the euro zone to fall into a prolonged recession in 2011 as the extent of its problems became fully aware.

(Read More: Why 2014 will be a 'year of economic growth': Trichet)

To help bolster the euro zone's economy, Mario Draghi, the president of the European Central Bank (ECB) has kept interest rates low and used cheap-rate long-term loans to pump liquidity into European lenders and promised to do "whatever it takes" to save the currency bloc.

Meanwhile, the euro zone's leaders have put in train a "banking union" so that the region's shaky financial sector will no longer be a drain on government finances. Politicians have also hinted that political integration could follow a banking union, bringing the euro zone together further still.

While European governments continue to form closer bonds, fringe politics have also seen a rise. Current polls point gains for Eurosceptic groups across the continent including the U.K. Independence Party and the Party of Freedom in the Netherlands.

(Read More: Soviet-style scare? Extreme predictions for 2014)

Nick Spiro, head of Spiro Sovereign Strategy, believes political disintegration of the euro zone will be a major theme of 2014.

"The rapidly deteriorating politics of economic reform in Europe are sowing the seeds of the next crisis: a crisis of economic and political governance in which Europe's single currency area is unable to integrate more closely," he said in a research note on Monday.

"We believe 2014 will be the year when the political crisis which lies at the heart of the euro zone's troubles starts to adversely affect market sentiment towards the bloc as investors belatedly come to terms with the fact that persistent and growing divergences between the periphery and the core are undermining the so-called 'euro recovery' story."

JPMorgan's base case scenario - as detailed in a report on December 10 - projects that support for potentially anti-Europe parties would remain near current levels for at least two years before beginning a gradual, modest decline.

(Read More: How the 2020s could see Europe put the US in the shade)

"We think the likelihood of a wholly unreformed and explicitly euro-antagonistic party entering government anywhere in the region is low," analysts Alex White and Malcolm Barr said in the report.

"However, these models predict sustained and ongoing political pressure on the mainstream that will make the ongoing journey of structural reform difficult for at least the next few years."

By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81

Contact Europe: Economy

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More*