##exit, the political risk for the continent is that referendums may mushroom across europe in a tug - of - war between populist forces and the political establishment and elites. brexit has the potential to unleash centrifugal forces, leading perhaps to a breakup of the euro, especially if such a referendum were to be held this time in a major eurozone country. perhaps such a referendum is more likely in a southern eurozone country. of course, democracy is the very foundation of our civilisation, but sometimes even wellintentioned initiatives can produce unintentional consequences ( as we have seen with the uk vote ). the public not only in europe ( but also on this side of the little pond ) seems to have lost confidence in the political and economic establishment to come up with visionary solutions that are also pragmatic and improve things for most people. in 2017 we will be celebrating 60 years of european integration. europe has emerged as a standard - bearer of freedom, democracy, the rule of law. so we should not be complacent about populist parties using the refugee issue as a key fear factor for european voters and turning it into a major campaign theme to tell the eu to keep out of migration and human rights issues. it is particularly worrying to see member state governments turning the eu into the enemy for domestic purposes. the agreed - upon migrant relocation scheme is founded on solidarity, the very basic principle of european integration that has helped the eu become the major trading bloc around the world that is has become. point number 3 : duality and the way forward for the eu the theoretical debate about the eu ’ s post - brexit future has seen three predominant scenarios : an eu that falls apart / disappears, an unchanged eu that continues to muddle through trying to cope with its underlying problems or an eu that integrates further, or at least some member states moving forward, some others choosing to stay back. one idea that has circulated a lot in the context of the brexit debate – which i concur – that a balance between national sovereignty and european solidarity and prosperity may be found in duality, i. e. two “ europes ” coexisting in a broader european construct, independently from one another. one would be a political union ( either taking the form of a federal state or a confederation of nations ) to complete the emu and beyond, which is the vision of the eu ’ s founding fathers (

not resolved with a european parliament that maintains two seats : a real seat in brussels and a symbolic seat in strasbourg, costing the eu, and thus european taxpayers, €114 million per year. the eu is perceived as a sclerotic and costly organisation that fails to adapt to the changing circumstances in a world of rapid upheavals. at the same time, persistent austerity policies – quite often ill - designed – adopted in southern european countries increase the rejection of the european project even in countries such as greece or even italy, which had always been pro - integration and where public opinion was always in favour of the eu. in addition, it has long been argued that the european union remains a ‘ market without a state ’. this quote perhaps summarises the debate on european integration over the last 40 years at least. the most frequent complaint regarding the way the eu works is that it is governed by an elite of unelected technocrats through several independent european institutions and bodies 1 / 5 bis central bankers'speeches ( including the ecb ). in light of the above issues of democratic deficit and accountability, europeans are increasingly disenchanted with the eu, as shown by the rise of populist, authoritarian parties. support for populist political parties with eurosceptic credentials has been rising, that is, parties which are by nature more eurosceptic and less oriented towards reforms, which of course the south badly needs. as a result, this is a major downside risk to debt sustainability in this part of the euro area. point number 2 : mushroom of referenda and political contagion for continental europe, brexit represents a shock to the institutions and norms that underpin markets, albeit different from the euro break - up fears of 2012, the global financial crisis of 2008 or the bursting of the high - tech bubble of 2001. the origins of previous financial crises can be located in multiple factors that are linked with the financial system and the economic cycle, respectively : imbalances in trade or capital flows between eu member states ; a combination of decades - long excessive borrowing, risky investments, and lack of transparency in the financial sector ; and the speculative mania around the shares of so - called “ dot - com ” companies and the subsequent collapse of the speculative bubble. the risk is not financial contagion, like in 1998. instead, it represents a contagious political development. no matter whether we have a full - blown or a light br