With important exceptions, such as Italy and Greece, the European economy has finally largely recovered from the financial crisis, and is actually growing slightly faster than the US economy at the moment. However, Europe is not out of the woods yet. Two items that strategy consultancies need to ensure their corporate and government clients have high on their lists of top risks that could quickly derail this fragile recovery are "Grexit" and "Frexit" (respectively, a Greek or a French exit from the single European currency).
The British decision to leave the European Union and the American election of Donald Trump have dominated headlines and discussions of government and corporate strategy in Europe as they have the world over, and have been a boon to many types of consulting, from strategy to geopolitical risk, with some consultancies even setting up dedicated teams of experts on these topics. However, these issues are no longer risks; they are realities. By no means do I wish to downplay the profound significance of these events, but I do think that, when it comes to the future of the European economy, consultants should strive to help their clients stay focused on scenarios that still retain "risk" status (i.e. it is unknown whether or not they will occur). Part of a consultant's job as a strategic adviser is to keep her clients focused on the long term and the big picture, a role that is all the more important given the dramatic political events unfolding on an almost daily basis.
The long-term impact of Brexit is unknowable, but will probably be profound and, on balance, a net negative for both sides. In the near to medium term, however, while there are still plenty of unknowns when it comes to the details, we actually have a remarkably clear picture of what the high-level narrative is going to be, for at least the next two years. As for the Trump administration, for all the uncertainty and speculation about rising protectionism, isolationism, and geo-political realignment it has generated, we should not overestimate the impact of US government policy on the European economy. The fate of the European economy will be determined largely by events and decisions within Europe.
