On the face of it, Davos doesn't seem to make much sense. For business and political leaders who are increasingly mistrusted by the public, cloistering themselves in a luxurious mountain redoubt for a week seems like a good way to sharpen the perception that they are far removed from the interests and concerns of their constituents. And in a world of ever-proliferating global forums -- TED and Google Zeitgeist for the techies, Clinton Global Initiative for the high-minded policy and business types, the list goes on -- the World Economic Forum (WEF) has a bit of an identity problem. Aside from the invigorating alpine freshness, the good skiing, and the chance to meet Charlize Theron, is there any reason to come here? And does what happens here still matter at all?

Yes. For why, see my Foreign Policy piece here on why Davos is more than just a ski camp.

Today, The Call presents our top risks for 2013. Click HERE for Eurasia Group's complete report.

1. Emerging markets -- The era of emerging market abundance is finished. As the United States and Europe slowly regain their economic footing, the political risk focus will return to the emerging market world, where differences among the largest players will become more obvious. Slower growth and rising expectations from larger and more demanding middle classes will create public pressure on governments, meaning that emerging markets -- including the increasingly suspect BRICs -- should no longer be treated as an asset class for outsized growth. Consideration instead should shift toward which developing country governments have enough political capital to remain on track to a more advanced stage of development.

2. China vs. information -- China's new leadership faces many challenges in 2013, most importantly the state's growing inability to control the flow of ideas and information across borders and within the country. Until now Beijing has been largely effective in isolating online discourse to focus on discrete issues without culminating in real challenges to the government's decision-making or policy. But every corruption scandal and example of official malfeasance makes the next event more difficult to navigate, and the risk is that a broad-based social movement for change will gain momentum in China in 2013, distracting the government from its domestic and foreign policy priorities and potentially weakening investor confidence in the stability of the mainland market.

3. Arab Summer -- We are far beyond the Arab Spring, and an Arab Winter, where dictators rebound and consolidate power, has not materialized. Instead we are approaching an Arab Summer, whereby the region will witness radicalized movements -- both sectarian and Islamist -- playing a much more important role. As outside powers look to avoid direct involvement in the region's risks, local powers -- Iran, Turkey, Saudi Arabia and others -- will compete for influence and play out their rivalries. At the center of this lies Syria, whose civil war now has implications that extend far beyond the humanitarian. Syria has become a proxy conflict for Shiite and Sunni powers, as well as a magnet for jihadists, increasing the geopolitical risk overall and sparking further insecurity throughout the region, most notably in Iraq, Jordan, and Turkey.

4. United States -- Every silver lining has a dark cloud. While the fiscal cliff was averted, the process by which the deal was reached casts a large shadow over hopes that the election might create a more conducive environment for cooperation, and dysfunctional American politics will weigh on both the U.S. economic recovery and President Obama's legislative agenda. This is not about a politically induced new recession, let alone a major financial crisis. But political uncertainty over corporate taxes and a series of noisy brinkmanship episodes will generate a modest but real drag on growth.

5. JIBs (Japan, Israel, Britain) -- These are the three current global trends that matter most: China is rising, the Middle East is exploding, and Europe is muddling through. Set against a G-zero backdrop, the structural losers of these trends are the JIBs (Japan, Israel and Britain): countries influenced most directly and problematically by changes now underway in the geopolitical order. All three countries are now in a similar position for three reasons: their special relationships with the United States are no longer quite as important; they sit just outside the major geopolitical changes underway, without the means to play a constructive role; and key domestic constraints in all three countries (political, social, historic, and otherwise) make it particularly difficult for them to respond effectively to the challenges posed by a shifting global order.

6. Europe -- There will be no grand implosion, but the muddle-through approach to crisis management carries risks of its own. The eurozone is headed for neither breakup nor resolution, and in 2013 the risks shift from a threat of financial crisis to a loss of momentum in creating the institutional and policy frameworks for a redesigned union. The weak economic outlook and the politics of crisis-fighting will also remain sources of uncertainty. Simultaneously, euro-skepticism is on the rise and resistance to reforms is increasing in the face of protracted austerity and few prospects for an economic turnaround.

7. Asian geopolitics -- In 2013, geopolitical risk will continue growing in East Asia in a new and potentially more dangerous way. Facing increased nationalism in China and Japan, the United States will look to play a larger role, giving oxygen to the hedging strategies of many regional states seeking closer American ties. Territorial disputes over the East China and South China Seas will also create new friction, and at risk overall is East Asia's decades-long distinction as a zone where positive-sum commerce and economics trumps zero-sum geopolitical tension.

8. Iran -- The significant risk in Iran this year is not the one everyone's thinking about. A strike on the country's nuclear program is unlikely, but biting sanctions, other forms of international pressure, and leadership tensions make Iran less predictable and heighten the stakes of an ongoing shadow conflict with Israel and the United States -- one with the potential to rattle markets and put upward pressure on oil prices.

9. India -- India in 2013 will be one of the prime examples of the intrusion of political factors into what had until recently been seen as a long-term economic success story. The country's dysfunctional politics and looming elections feed the risk of an economic shock, and in 2013 the ability of the government to implement robust economic policies will decline even further, perpetuating India's "stalling or falling" outlook.

10. South Africa -- In aggregate growth terms, Africa as a whole looks to be on a trajectory to continue its recent position of positive performance. But in South Africa -- one of the continent's largest and most sophisticated economies -- the outlook is far less rosy. Populism, spearheaded by the ruling ANC party, is on the rise, and it is hard to see any real movement on labor, education, and budgetary reforms. Coming retrenchments in mining will almost certainly spur another bout of labor unrest, which has the potential to spread into other sectors as well. Taken together, all these factors increase the risk of further credit downgrades.

In addition to these, Eurasia Group's red herrings for 2013 include:

The geopolitics of energy -- 2013 isn't the year to get overly concerned about geopolitical risk spiking energy prices. For one thing, most of the Middle East risk in the coming year isn't about energy -- it's about everything else -- and the energy revolution happening in the Western Hemisphere will be a boon for consumers across the globe. 

Global protectionism -- The G-20 can afford to agree on protectionism because there's less of a threat here than meets the eye. The trend in fact is toward hints of competitive trade liberalization, especially within the European Union, which is generating a strong internal consensus on the need for a new major transatlantic economic cooperation package.

Radicalism in the developed world -- Many fear the growing gap between rich and poor will instigate class warfare and cause significant instability across the developed world. We think not. For much the same reason that emerging markets are the top risk this year, it's the underlying stability of advanced industrialized democracies that will come through in 2013.

European separatism -- There is no doubt that there are very real separatist pressures building in Catalonia and in Scotland, and national unity remains fragile in Belgium. However -- as much as we all would love to watch Barca field its own team in the World Cup -- there is almost no chance that any of these issues will grow into an actual crisis leading to separation in 2013.

? - North Korea -- Sometimes, you just can't know what's happening, and with North Korea in 2013 that's really the case. In the face of a sudden leadership transition in the world's most totalitarian state -- now run by an untested 28-year-old -- it's almost impossible to assess whether North Korea is becoming more stable. All signs point to the country remaining a perilous bet, but what causes trouble and when? It's hard not to lose sleep over it, but at the same time working harder to assess what exactly is going bump in the night doesn't feel very purposeful. Sorry.

Over the next three weeks, we'll be posting more ideas and information on each of these risks.

Eurasia Group's weekly selection of essential reading for the political risk junkie-presented in no particular order. As always, feel free to give us your feedback or selections @EurasiaGroup or @IanBremmer. 

Must-Reads

1. "Al Qaeda 3.0: Terrorism's Emergent New Power Bases"
Bruce Riedel, The Daily Beast

In a world where international governance is breaking down, leaders are focused more on domestic than on foreign policy challenges. This trend extends to al Qaeda, an organization transitioning from global to local goals.

2. "India's African ‘Safari'"
Sudha Ramachandran, The Diplomat

We hear a lot about the US and China's conflicting investment approaches in Africa, but there's precious little written on Africa's fourth largest trading partner: India. With trade increasing by a factor of 17 over the last decade, India-Africa relations are becoming much more interesting. 

3. "How Crash Cover-Up Altered China's Succession"
Jonathan Ansfield, New York Times

How will Beijing's leadership manage the challenges that come with an era of more open information? What will the rest of us learn about the Chinese leadership's taste in cars, clothes and once-hidden power politics?

4. "Merkel's mastery of politics"
Michael Fry, The Scotsman

Is Angela Merkel the most talented politician in the world?  Her domestic political tactics shed light on her policies with regard to the Eurozone and beyond. 

5. "A free-trade agreement with Europe?"
David Ignatius, The Washington Post

Though still on the drawing board, the Trans-Pacific Partnership has far-reaching security and economic implications for North America and the Asia Pacific region.  Progress on an Atlantic equivalent seems beyond the horizon. But is an ‘economic NATO' already in the planning stages? 

6. "The mother of all worst-case assumptions about Iran"
Stephen M. Walt, Foreign Policy

Would a nuclear Iran carry "shattering geopolitical significance?" This piece overstates its case at times, but it's a question that demands consideration.

The Weekly Bonus:

"Floating Housing (And Golf Courses) For Post-Climate-Change Island Paradises"
Co.EXIST blog, Fast Company

In a G-Zero world, don't expect political leaders to tackle climate change. An ineffectual climate summit meeting in Doha this week makes that all the more obvious.  If climate change continues unabated, the Maldives will end up underwater.  The government knows it, hosting a cabinet meeting on the ocean floor in full scuba gear in 2009, and inquiring about land purchases abroad. But even the most daunting risks come with opportunities, however whimsical they may seem.

By Naz Masraff

With civil war in Syria, turmoil in Gaza, Arab Spring aftershocks, and the still simmering conflict over Iran's nuclear program competing for headlines, it's easy for outsiders to overlook another of the region's most intractable ethnic conflicts-Turkey's internal battle with Kurdish separatists. This story deserves attention, because it remains the primary security threat inside the region's most politically modern and economically dynamic country.

First, some background. In 2010, Turkey began secret talks with the Kurdistan Workers' Party, a militant group better known by its acronym PKK. But in the run-up to June 2011 elections, Prime Minister Recep Tayyip Erdogan brought them to a halt. Erdogan's Justice and Development Party (AKP) won those elections, securing nearly half the popular vote and a third successive term in power, and the newly emboldened prime minister has since adopted a relentlessly hardline attitude on Kurdish questions with a pledge to use Turkey's military to crush the PKK.

Since the beginning of 2011, several thousand Kurdish nationalists have been arrested on charges of PKK membership. In October, public prosecutors in Ankara launched a judicial investigation into the pro-Kurdish Peace and Democracy Party (BDP).

In July, the PKK launched a new phase in its 28-year insurgency, intensifying attacks on Turkey's security forces and working to create "no go" zones in designated areas in the mountains near Turkey's border with Iraq. The stated goal is to intensify pressure on Turkey's government to introduce greater Kurdish language rights and to cede many of the powers of the central government to local Kurdish authorities in southeast Turkey in a process Kurdish nationalists call ‘democratic autonomy.'

The PKK scored territorial gains in August and early September and have held on to some of them, and it's clear that the PKK is now stronger than at any time since the 1990s.

Military activity has slowed since mid-October when the mountain passes along its main infiltration and supply routes became blocked with snow. But the PKK then continued its progress by launching a series of hunger strikes inside Turkish prisons, beginning in September with 63 Kurdish inmates. The number of hunger strikers quickly grew to nearly 700 people, including seven members of parliament. Strikers demanded an end to the ban on the use of Kurdish language in courts and as the primary language used by teachers in schools in the predominantly Kurdish southeast. They also called for respect for Kurds' democratic rights and an end to the isolation of PKK founder Abdullah Ocalan, who has been incarcerated on the prison island of Imrali since 1999. In late October, Kurdish nationalist organizations began staging protest rallies across the country, triggering clashes between demonstrators and police, and fights between ethnic Kurds and Turkish ultranationalists in western Turkey. Turkish media, wary of antagonizing the government, downplayed the growing violence-though a few incidents injured too many people to ignore. 

Turkey's government was slow to react, at least publicly, and downplayed the strikes. Speaking in October during a visit to Germany, Erdogan insisted that only one of the hunger strikes was authentic and that others were mainly "for show."

Behind the scenes, however, Turkish officials knew they had a growing problem to contain. The PKK now appears to have won concessions on the right of Kurds to defend themselves in court in their native language-that's expected to be adopted in parliament soon-and a step has been taken to eliminate  Ocalan's isolation, in part by granting his family a visit. This brought an appeal from Ocalan to halt the hunger strikes, and on Sunday, they came to an end.

Yet, the risk of violence continues, and the turmoil in Syria has complicated matters further. Syrian forces have withdrawn from Kurdish areas in northern Syria, creating a de facto autonomous Kurdish regime over the past few months, and PKK leaders can exploit this power vacuum. For the moment, Turkish authorities want to avoid direct military involvement in Syria's troubles, but a sustained wave of PKK attacks on Turkey's security forces from inside Syria might still change their minds.

If the longer-term underlying issues fueling Kurdish separatism can be resolved, it is only with a comprehensive political process. Yet, Turkey's government -- like governments around the world -- is unwilling to negotiate with militants while they continue to launch attacks. This is particularly the case as Turks may go to the polls as many as four times in the next three years, including for a referendum on the constitution, as well as for local, presidential, and parliamentary elections. On the eve of these polls, the government is likely to adopt increasingly nationalistic rhetoric, shying away from taking steps to resolve the Kurdish issue through democratic means.

In short, the hunger strikes have ended, and the protests may die down. But there will be no peace in Turkey's southeast until the two sides can compromise their way toward a lasting political settlement.

Naz Masraff is an analyst in Eurasia Group's Europe practice.

By Famke Krumbmüller

The results of the closely watched Dutch elections are broadly positive, signaling a shift toward centrist policies, and making it unlikely that the new government will throw up roadblocks to management of the ongoing eurozone crisis. Pre-vote concerns that a government led by the Socialist Party (SP) could have weakened the Netherlands' support of the conservative northern camp led by Germany are now moot.

The People's Party for Freedom and Democracy (VVD -- also known as the liberals) secured a strong plurality in the lower house with 41 seats, up 10 from the previous parliament and the largest number of seats the party has ever controlled. The Labor party (PVDA) took second place with 39 seats (up nine). The Socialists (SP) remained steady at 15 seats, but most other parties saw their seat tallies decline sharply. The far right Party for Freedom (PVV) headed by the flamboyant Geert Wilder lost nine seats, down to 15, the centrist Christian Democratic Appeal (CDA) lost eight seats for a total of 13, and the Green Left took three seats (down seven). The centrist Democrats 66 (D66) boosted their total by two, taking 12 seats in the new parliament.

The results likely make formation of a new government easier than had been anticipated. The expectation prior to the vote had been that one of the three major parties (VVD, SP, or the PVDA) would negotiate support from centrist parties to stitch together a working majority. Mark Rutte's VVD is likely to again form the basis of a coalition, but it will have to work with the PVDA in order to govern. But the VVD may add one or two other smaller parties in an effort to make legislative approval in the senate easier. A VVD-PVDA coalition would control 80 of 150 seats in the lower house, but only 30 of 75 seats in the senate. The CDA and D66 are the probable candidates, with the CDA somewhat more likely given that its 11 upper house seats would secure a comfortable majority in the senate. But the CDA's reduced vote tally has eroded its negotiating leverage and one option is that a VVD-PVDA coalition negotiates CDA support in the senate only, rather than formally bringing it into the government. That scenario -- with only two parties in the coalition -- would make policymaking simpler, though a third party may reduce tensions between Labor and the Liberals.

The key signpost for future policy trends will be the cabinet formation process. Both Rutte (VVD) and Diederik Samsom (PVDA) know they need to form a stable government as quickly as possible, but the two parties must also work through a potentially acrimonious policy agreement process. In the end, future policy is likely to be somewhat more balanced between the left and right than it currently is and the next government could have the political wherewithal to approve needed and painful domestic healthcare and housing reforms. Nonetheless, with Rutte in line to return as prime minister, a high degree of continuity is likely. A long government formation process (which is common in the Netherlands) could be a signal of tensions though, and the agreement will signal how stable such coalition will be. Rutte's likely return as prime minister also signals that the coalition government will be pro-European and that it is likely to support ongoing fiscal rectitude, though the PVDA may push for some measures to stimulate growth.

Famke Krumbmüller is an associate with Eurasia Group's Europe practice.

By Mujtaba Rahman and Willis Sparks 

It's not easy to unseat an incumbent U.S. president. In 80 years, only Ronald Reagan (1980) and Bill Clinton (1992) have done it, and while it's too soon to say how close the current race will be, it's clear that Republican challenger Mitt Romney lacks the ease, warmth, and charisma of these two remarkable political talents. Mitt Romney needs a boost. 

Given that U.S. economic data points to a recovery that doesn't appear on the verge of either a surge or a sharp reversal, the most obvious risk for the Obama campaign is a substantial market meltdown in Europe in September or October, one that sends Wall Street into a tailspin and generates consumer and investor fears that the U.S. economy is again headed in the wrong direction. Though Europe's markets may well endure a rough ride this fall, a substantial meltdown is unlikely. But given the likely timing, it's a risk that both candidates are thinking about.

For now, President Obama is winning. Despite historically high unemployment and continued consumer anxiety over the state and direction of the U.S. economy, current polling in the states likeliest to decide the election gives President Obama several credible paths to victory. Judging by their spending habits, the two campaigns and their allies believe the race will be decided in Ohio, Florida, Virginia, North Carolina, Colorado, Nevada, Iowa, New Hampshire, and perhaps Wisconsin. Romney will have to win six or seven of these nine states to earn the 270 electoral votes needed to win, and only in North Carolina does he enter the fall with a clear lead.

Given the country's intense current partisanship, party faithful on both sides are likely to vote in large numbers this November, and the outcome of a close election will depend on the choices of genuinely independent voters, a group that represents about 10 percent of those likely to cast ballots. This is, by definition, the least ideological segment of the U.S. electorate, and these voters are most likely to vote based on perception of the president's competence and on confidence in his leadership rather than on fidelity to a defined set of social and political values. That is why, though he remains the favorite, President Obama remains vulnerable to external events over which he has little direct influence.

Which brings us to Europe. The autumn to-do list facing Eurozone leaders is daunting. They must agree on another broadly unpopular bailout for Greece, manage volatility in Spain and Italy, and create a credible new Eurozone-wide bank supervisor to make future crises both less likely and less costly to manage when they occur. They must also agree on a concrete and detailed plan to address the Eurozone's original design flaws, and they must do all this with jittery investors watching their every move.

Why is the fall likely to be an especially volatile time? Greece will return to center stage in September, given the additional financing needs that have been created by poor growth, a bureaucracy slow to implement promised reforms, and the possible extension of fiscal targets. Creditor countries are not eager to help, and they may demand that Greece's government enact reforms before help is provided, leaving Greek officials caught between an increasingly angry public and the expectations of those who can help. In the meanwhile, warnings from creditors -- designed to keep pressure on Greek officials -- will keep markets on edge. Also in September, we can expect a ruling from Germany's constitutional court on whether the Eurozone's proposed bail-out fund-the center piece of Eurozone leaders' response to the crisis-is legal.

Then there is the trouble in Spain. Current yields on Spanish debt reflect market expectation that the European Central Bank (ECB) stands ready to backstop Spain. That's an overly optimistic assessment, because ECB President Mario Draghi has detailed the pre-conditions for the bank's help, and those conditions have not yet been met. To satisfy Draghi's requests, the Spanish government must first make use of sovereign-backed bailout mechanisms in conjunction with a reform program. But unless and until market pressures force him to, Spanish Premier Mariano Rajoy is unlikely to ask for help, increasing the risk of market turmoil.

Also this fall, the European Commission is due to propose plans for a single pan-Eurozone supervisor, part of a deal agreed by Germany in June that will pave the way for direct recapitalization of Spanish banks instead of an indirect path through Spain's government. But many controversial issues remain, not least the separation of national from EU-wide supervisory powers and a decision on whether all Eurozone banks will be covered or whether some countries, especially France and Germany, can negotiate exemptions. Without this measure of reassurance, lenders may again drive rates dangerously high.

Even if agreements on all these issues are reached with a minimum of friction, there is no guarantee that the creation of a supervisor will be enough to shore up vulnerable banks, provoking new anxieties and more market pressure on the bloc's weaker economies.

Will all these potential problems generate enough fear in September and October to send European, and then U.S. markets, reeling? Probably not. But the risk is real, and the timing is ominous. You can be sure that the Obama and Romney campaigns will be watching closely.

Mujtaba Rahman is an analyst in Eurasia Group's Europe practice. Willis Sparks is an analyst in the firm's Global Macro and United States practices.

By Naz Masraff

The recent move to breathe new life into Turkey's stalled EU accession process is unlikely to have much effect beyond providing Ankara with a minor domestic and international public relations boost. On 17 May, Turkey's EU minister and chief negotiator Egemen Bagis and European Commissioner for Enlargement Stefan Fule launched what they dubbed a positive agenda for EU-Turkish relations. The agenda introduces new mechanisms for communication, including specific working groups, intended to accelerate Turkey's compliance with the acquis communitaire in eight chapters, including two that are blocked for political reasons. But the efforts are insufficient to counter the underlying structural problems impeding Turkey's now long-stalled EU accession.

Turkish authorities have not opened any new chapters of the EU acquis since 2010; talks on 18 of the 34 chapters cannot move ahead because of political issues and open ones cannot be provisionally closed. An important obstacle continues to be Turkey's failure to move on politically difficult reforms needed to bring the country's laws in line with European standards, especially on the judiciary and fundamental rights. Bagis's statements suggesting that Turkey would be in full compliance with the EU acquis by 2014 are largely political rhetoric with little substance.

Cyprus is a huge stumbling block. U.N. Secretary-General Ban Ki-moon has decided not to call a follow-up international conference on Cyprus because there has been no advance since the January talks on the issue. This makes it impossible for the conflict to be resolved before July, when the Republic of Cyprus (RoC) government assumes the EU presidency. Turkey will freeze its relations with the EU presidency for six months in protest, though contacts with the European Commission and the European Parliament will continue.

The RoC's exploration for hydrocarbons in the eastern Mediterranean has exacerbated its contentious relations with Turkey. Turkey claims some areas included in the RoC's new licensing round for further explorations extend onto Turkey's continental shelf, and that any revenues must be shared with the Turkish Republic of Northern Cyprus (TRNC). While the dispute is not likely to escalate into a military conflict, Turkey may continue its gunboat diplomacy, further intensifying tensions. Turkey is now also considering fallback options including pressing other Muslim states to recognize the TRNC.

The new agenda may not result in major advances on EU accession, but it will give the Turkish government some advantages. Ankara can secure public recognition from the EU and boost its domestic popularity even when minor steps are taken. The effort also has bureaucratic advantages, providing another way for both the Turkish Ministry for EU Affairs and the European Commission's Turkey desk, the largest desk operating under the Directorate-General for Enlargement, to justify their existence.

Naz Masraff is an associate with Eurasia Group's Europe Practice.

By Antonio Barroso and Mujtaba Rahman

Francois Hollande's May 6 victory in one of France's tightest presidential elections ever will have few implications for the EU's management of the eurozone crisis. Hollande is taking shape as a pragmatist who will follow reason on the European front, as signaled by the candidates he's likely to put in important positions in France's new government.

The president-elect claims he has already selected the new prime minister, who will be revealed on May 15 after Hollande takes office. Socialist Party (PS) leader Martine Aubry and long-time socialist politician Jean-Marc Ayrault are the most likely candidates, although a surprise choice (for example Hollande's campaign director Pierre Moscovici) is not completely out of the running. Aubry's selection -- who the majority of the French left support, according to opinion polls -- would hint at a more leftist course for Hollande's government. Ayrault's nomination, however, would imply policy pragmatism. The former minority leader in the National Assembly would likely be better able to build consensus among the many leftist factions in parliament, especially if the government must adjust policies to match the challenging economic situation.

Michel Sapin, a socialist, is frequently mentioned as the candidate most likely to take the crucial post of finance minister. Sapin, who has already served as finance minister, is a close ally of the president-elect and helped draft Hollande's economic program. Another possible choice is Jerome Cahuzac, a socialist former president of parliament's finance committee who actively supports austerity and deficit reduction. Both men would make a good finance minister, given their experience and their commitment to a balanced budget.

But Hollande's victory will not fundamentally change how the EU is managing the ongoing eurozone crisis, though there will likely be some changes around the margins. Hollande's desire to introduce some focus on growth in the fiscal compact is easy for German Chancellor Angela Merkel to accept and there are already tentative signs that Berlin will support such efforts. Hollande's objective of securing a capital increase for the European Investment Bank (EIB) also is unlikely to prove controversial. But the biggest obstacle to growth -- moving away from regressive agricultural payments toward greater use of structural adjustment funds in the EU budget -- is actually more difficult for France to overcome than it is for Germany. Also, Hollande's pledge to seek a change in the European Central Bank's mandate is a non-starter. Such a change requires all 27 member states to agree, but it will face stiff opposition in Germany, where it is perceived as a French strategy to inflate away debt.

Antonio Barroso and Mujtaba Rahman are analysts in Eurasia Group's Europe practice.

By Antonio Barroso

With the survival of "Merkozy" at stake, German Chancellor Angela Merkel has inserted herself into the French presidential election on behalf of her eurozone partner, President Nicolas Sarkozy. It's not just because a Francois Hollande victory would make finding a new pithy nickname for the German-French duopoly difficult (though it would be a challenge -- "Hollmerk?" "Merkande?") Or because it has become trendy for like-minded political figures to support each other in races across national boundaries within the EU.

Merkel views the preservation of her partnership with Sarkozy as an important element in the timely resolution of the eurozone crisis, despite their rocky start, numerous disagreements, and natural rivalry. The devil that Merkel now knows well, and has spent considerable capital cultivating, is preferable to the devil she doesn't know, and can only speculate about -- a socialist who, while pro-European, has bashed the financial sector, disparaged austerity, and promised to maintain social spending. There are too many uncertainties in a Hollande presidency for Merkel to sit idly by in Berlin as Sarkozy continues to trail significantly in the polls ahead of the April 22 first-round vote.

That's why Merkel has actively stumped for Sarkozy, tying German conservatism to its French counterpart. The alliance between the German and French leaders is not just a personal bond, forged through the crucible of the eurozone crisis. Merkel believes she now has a partner in Sarkozy who shares her beliefs about the currency bloc -- and will push those interests (which also happen to be Germany's interests) in Brussels. After all of the painstaking negotiations and one-on-one meetings, she's not about to start all over again.

Hollande's political party, his campaign statements, and the fragility of the eurozone have many observers worried that a Hollande presidency would put France -- and the eurozone -- into greater danger. Some view Merkel's visible and vocal support of Sarkozy as validation of this viewpoint. But there are a few reasons why a Merkel-Hollande partnership would not be the market-rattling, eurozone-damaging outcome that many predict.

As wary as Hollande might be about austerity, or about the German model, his ability to take the EU in his ideal policy direction is limited. Why? Because the markets are on Merkel's side. Hollande only has so much room to maneuver before the markets punish France with higher borrowing costs, which would in turn threaten the integrity of the eurozone's bailout fund and its continuing efforts to prevent contagion. The pro-European Hollande does not want to preside over a new ugly chapter in the eurozone crisis.

It's also important to distinguish between what is campaign fodder and how Hollande would govern. Yes, Hollande has criticized the fiscal pact that Sarkozy, along with 24 other European leaders, agreed to in order to harmonize budgetary policies in member nations. But when Sarkozy is making his ability to lead France during an economic crisis a central campaign issue, Hollande has to find a way to distinguish himself. Hollande also can't proclaim the virtues of austerity -- and what is inherently a conservative fiscal policy -- as the leader of France's socialist party. Under the pressure of governing one of the eurozone's two major players, Hollande's policies are unlikely to differ drastically from Sarkozy's.

So is Merkel expending too much energy to stump for her favored candidate? Not necessarily. Hollande's socialist leanings, his reluctance to alienate his core voters, and his lack of a personal relationship with Merkel all suggest that decision-making between the two powers, and the eurozone as a whole, would be slower with Hollande as president. These ingredients are also the makings of a difficult personal relationship between the two leaders. And if there is one thing that markets have taught the eurozone, it is that dawdling in decision-making can be nearly as painful as making the wrong decision. The importance of Merkel's ability to pick up the phone, call Paris, and hear a familiar voice on the other end of the line should not be discounted. She doesn't have the luxury of time to cultivate another ally in the Elysee Palace.

Antonio Barroso is an analyst in Eurasia Group's Europe practice.

On Friday night, I co-keynoted the annual NYSE dinner with my friend, Morgan Stanley economist and Yale lecturer Steve Roach. It was a convivial group of about 40 CEOs, big listed companies, mostly American and European. Even against backdrop of a failing merger with deutsche bourse, the event went very well. Steve arrived, a little late, and quite shaken. He had just participated in an Open Forum event, a program that runs parallel with the WEF at Davos. He knew there might be trouble when he saw all the police outside. There were about 150 anarchists demonstrating, organized around the high school auditorium (it seats 1,000), who immediately started chanting and yelling -- and rushed the stage towards the end of the event. Security hustled him out the back, downstairs, through the kitchen, and into the dark…where he sped off. You have to give Steve credit -- he rallied pretty well within his friendlier confines of the Hotel Belvedere. But this was a Davos first.

Later that night, I went to the Google party, where all eyes were on the dance floor. Google had installed a "green dance floor" that showed how many watts were being created by the thumping Davos troops. Two points on that. 1. It's not entirely clear to me that this was a group you want to be boogieing down in front of, and 2. That has to be the most farcical pseudo green display since Vice President Gore offset the emissions from his 20-room Nashville mansion. It was a fun party though.

The party also let me spend some time with Circle of Blue co-founder and director J. Carl Ganter, who leads an organization filled with some of the smartest folks on global water scarcity/impact that you'll find. I always try to link up with them for a few moments to pick their brain on a topic that stands to take on increasing importance in the years to come. That's the great thing about Davos: It's a reasonably good bet that pretty much anybody you bump into on an abstruse topic is one of the best in their field. There was a sizable Circle of Blue cohort in attendance, wearing little silver/blue pins on their blazers (the only ones I consistently noticed doing that other than the Japanese delegation), and they always seemed to be moving together in a coordinated clump. At the Google party, though, Ganter's shirt was completely soaked. Not exactly the display I expected from the water scarcity folk.

Saturday morning, I had a host of CEO meetings lined up back-to-back, with a table reserved at the "forum lounge" for the occasion. It was a week of productivity in 2 1/2 hours -- that's the single biggest draw that Davos consistently provides and the most important reason people come. The 30 minute meeting is the standard at Davos; an hour tends to be looked at with suspicion. But for the folks with too many handlers, that can mean 15+ meetings in a day, which seems pretty inhumane.

Saturday night was the big banquet. But my annual tradition is to grab a small group of friends that look at global politics…and head up the funicular to a cozy little restaurant overlooking the village. Rule #1: Casual dress. And rule #2: If you mention a book you've written or are writing, you do a shot. I love that rule. Many fell victim before we headed back down for the after party once the banquet was winding down. And in a strange twist of fate, getting stuck on the funicular had all the elements of a horror movie -- but without the grisly finish. It was a welcome opportunity to share a last quiet conversation before the bustle of the after party and a long trip home. Davos -- exhausting yet exhilarating as always.

When I got to my Davos hotel room, I was greeted by two gifts. One was to be expected: greetings from the CEO of Nestle along with boxed chocolates. Thoroughly Swiss and thoroughly appreciated.

The second? The most politically controversial gift I have ever received.

The Heydar Aliyev Foundation, run by Azerbaijan's First Lady Mehriban Aliyeva, supplied guests with a CD set, dubbed the Voices of Garabagh. It wasn't until I opened up the package and read on that I saw what it was driving at. It was a statement regarding the Garabagh region between Azerbaijan and Armenia, delivered from a starkly one-sided point of view:

"Unfortunately the conflict ignited as a result of unfair territorial claims brought against Azerbaijan. The occupation by Armenian invaders of Garabagh… [has] turned the bright representatives of the Mugham art into internally displaced people… grief, sorrow, and melancholy is being felt today in their performance."

The package was giftwrapped in cellophane, so it was sure to be missed by any personnel intent on keeping such subjective perspective out of the hotel rooms. You have to hand it to this Azeri organization for so craftily injecting their thoughts into the summit. The takeaway: Davos truly is the biggest annual global political event -- and you can't underestimate how far actors will go to get their message heard on the global stage.

There are, of course, more technological and readily available avenues for communication that are boosting the reach and immediacy of messages around the world. This is a theme I'll continue to discuss in conjunction with global democratic trends.

Mugham melancholia notwithstanding, I have yet to make time for the CD itself -- Davos has done its best to keep me busy. And I'll do my best to keep you posted.

We've talked about the need for new models of global governance as we explore this transition period at a forward-looking Davos summit. Let's delve deeper and unpack the trend toward regionalism that we're already seeing, as highlighted in the WEF's Global Agenda Council report.

As I've discussed, old institutions are increasingly ineffectual when it comes to supplying global leadership. We have institutions that are relics from the post-WWII era -- including the IMF and the U.N. -- that haven't kept up with the evolving threats they are tasked with addressing. More recently, G20 collaboration among world leaders proved fleeting, limited to financial crisis response.

At the same time that institutions are waning, a global power vacuum is undermining the ability for any nation or durable alliance of nations to set the international agenda on their terms. Diminishing international coordination of all kinds comes precisely when the need for it is at a premium, with more challenges that transcend borders than ever before: climate change, cyber-threats, and the proliferation of nuclear weapons, to name a few.

So how do these global trends tie into a rise of regionalism?

We're witnessing a sweeping return to geography as a primary organizing principle for international politics. A nation's regional placement will increasingly determine its friends and enemies, trading partners, and policy objectives. Countries are already gelling in new ways on a regional level -- or at least attempting to -- as they fill the void left by global institutions with more granular coordination within limited spheres of influence. This will extend beyond nations to institutions, as regional bodies pick up some of the slack from their obsolete global counterparts. They will be organized in their region's self-image, promoting and reflecting narrower interests that contribute to the ascendancy of neighborhood governance.

But this isn't just sliced and diced global governance in keeping with the old model. We won't merely see localized globalization, where the free flow of information, goods, and people plays out regionally instead of globally. More importantly, we'll see how the degree of cohesion in each region -- and what exactly these nations cohere around -- will differ around the world.

Some groupings are more formalized -- the European Union is the most formal and mature integration of states. There's significant institutional capacity at a regional level. Others will be more informally arranged, such as Eurasia, where sheer power dynamics drive cohesion. This is also a more coercive arrangement, where Russia acts as a local hegemon that imposes integration on unwitting neighbors that may or may not benefit but don't always have the capacity to hedge against it.

Likewise, the rallying points that produce coordination of all stripes -- formal or informal, voluntary or coercive -- will be different all over. Every region will have a unique mix of security, energy, economic, political, cultural, and religious concerns that inform the process. We see the Middle East operating largely along sectarian lines, with the Arab League and GCC serving as regional forums and Sunni-Shia conflicts informing regional politics. The EU coheres more along economic and political lines. Asia splits between two opposing trends: economic integration with China, and political/security integration between the United States and China's neighbors as they look to offset it. Eurasian states integrate with energy and security at the heart of it.

The rise of regionalism isn't a good development for the broader challenges that global institutions can't handle in the first place. After all, even the most integrated region cannot address climate change without a broader coalition of support. Bottom line: regional governance beats none at all. But it will leave a mess of important problems unsolved.

Ian Bremmer is president of Eurasia Group and author of End of the Free Market: Who Wins the War Between States and Corporations?

I'm headed to Davos tomorrow for the annual meeting of the World Economic Forum, where the discussion is sure to be provocative -- and a bit more forward-looking than in recent years. Since the financial crisis first shook the global economy in 2008, these summits have focused mainly on the meltdown's market impact and its implications for policymakers. As aftershocks ripple across the eurozone, its troubles will remain a high priority topic. There just isn't much new to say about them -- though there will be much speculation on how short-term solutions play out. The forecast is for more muddle-through as Europe's leaders take halting, painful steps toward austerity and closer fiscal union.

But on a more macro level, we'll see plenty of willingness here to change the tune.  I wouldn't quite call this the first recovery summit, but we're seeing signs of life in the U.S. economy, solid growth numbers in China, and we've put a cap on the security-driven 9/11 era with the killing of bin Laden, the crippling of al Qaeda, the end of the Iraq War, and a scheduled troop drawdown from Afghanistan.

So if global politics are no longer consumed with responses to 9/11 on the security side and the financial crisis on the economic front, this year's gathering will have room to address broader drivers of international governance and the global balance of power in years to come. Thus the Davos theme: "The Great Transformation: Shaping New Models." I look forward to getting plenty of perspective from my work as moderator for several upcoming discussion panels and to unpacking this idea piece by piece in posts to come.

To kick off, let's unveil the themes sure to be most hotly debated. The growing gap between rich and poor will play a huge role. The issue already stands to provide the U.S. 2012 elections with both text and subtext, and an Occupy Davos movement will soon echo through the summit press coverage. How this divide compares to other sources of global tension -- sectarian divides, nationalistic ones, and the demographics of age and immigration -- will make for charged debate. The future of democracy versus its various alternatives will also take center stage, along with juxtaposition of the relative merits of free market and state capitalist economic models.  A discussion of the Arab Spring's impact on the state of democracy -- or perhaps just the stability of states in general -- is sure to surface.

And, yes, Europe's travails will cling to the top of the charts, though the eurozone itself will survive 2012 in one piece. I strongly suspect we'll see positive signs from the meetings here, probably in the form of some announcement of (incremental) support for the periphery and a modest upswing in optimism that the Greeks make it through their next funding deadline on March 20. We can expect a lot more market volatility. We're not headed for a cure, but nor are we headed over a cliff. That alone will give us plenty to discuss.

Then we'll leave Davos as we arrived -- with a new set of urgent questions that defy simple answers.

BTW, I can't forget to thank Newt Gingrich for stirring the political pot with that win in South Carolina. I fully expect shrewd questions about this from befuddled foreign friends. I only hope I can provide some semi-satisfying answers.

Ian Bremmer is president of Eurasia Group and author of End of the Free Market: Who Wins the War Between States and Corporations?

Today, The Call presents our top risks for 2012. Click HERE for Eurasia Group's complete report.

1. The End of the 9/11 Era -- It was a truism of globalization: economics drives markets, and national security drives geopolitics. No longer. Following the 2008 financial crisis, the killing of Osama bin Laden, the withdrawal of U.S. troops from Iraq, and an end date for the war in Afghanistan, politics and economics will overlap almost entirely in 2012. Political officials around the world will worry mainly over economic risks -- the eurozone crisis, the strength of U.S. recovery, and China's evolving role in the global economy in 2012. Market players, in turn, are anxious mainly about political decisions, especially those that will be made in Europe, America, and China this year, as shortsighted leadership from virtually all the major geopolitical players generates policy stalemate and uncertainty.

2. G-Zero and the Middle East -- The inability/unwillingness of major powers to bolster the region's balance of force will generate greater turbulence across North Africa and the Middle East as unresolved religious, sectarian, and ethnic tensions threaten more unrest. The lack of a viable regional security framework, continuing protests, autocracies at risk, and enormous challenges facing newly democratic regimes will add to the potential turmoil. As this dynamic plays out in Syria, Egypt, Iraq, Libya, Yemen and Bahrain, regional heavyweights -- Saudi Arabia, Iran, and Turkey -- will generate friction as they vie for proxy influence.

3. Eurozone: the rollercoaster ride rolls on -- In Europe, it's not the breakup of the Eurozone we need to fear in 2012 but the "reactive incrementalism" that could spin beyond the control of political officials. The uncertainty and volatility we saw in 2011 has only just begun.

4. United States: right after elections -- Once the votes are counted in November, lawmakers will take up the $5 trillion worth of tax and savings decisions that must be taken in the final nine weeks of the year. Investors face uncertainty about their taxes and government contracts as well as about the broader impact of lawmakers' choices on economic growth.

5. North Korea: implosion or explosion -- The world's most opaque nuclear-armed state enters a year of uncertainty as the battle for power and influence within the regime gathers force.

6 - Pakistan: turmoil, spillover -- The end of the 9/11 era threatens neglect of other hotspots, and none is more combustible than Pakistan, a terrorism-plagued, nuclear-armed power burdened with an unpopular civilian government, a meddlesome military, politically motivated judges and an increasingly dangerous security environment. The expected withdrawal of thousands of U.S. troops from Afghanistan this year will fuel regional competition for new influence.

7. China: trouble in the neighborhood -- The Obama administration's recent emphasis on Asia will embolden China's neighbors to take more assertive positions with Beijing. Rising nationalism in China, its ongoing political transition, and the leadership's unwillingness -- perhaps inability -- to resolve internal debates about the country's role in the world suggest Beijing is especially likely to meet provocation with provocation in months to come with both naval and economic muscle.

8. Egypt: a transition in trouble -- Egypt faces the risk of political disintegration this year as anger builds between military and civilian political forces, both Islamist and secular. Egypt's base-line stability, its economic recovery, and its broader regional influence will suffer.

9. South Africa: populism ascendant -- The struggle for leadership of the ruling African National Congress will slow the pace of both policy and economic growth at a time when the eurozone crisis already weighs heavily on South Africa's trade and currency.

10. Venezuela: a no-win election -- The country's big political story this year is October's presidential election, which incumbent Hugo Chavez, if healthy enough for a vigorous campaign, is likely to narrowly win. But the outlook for economic and political stability is bad no matter the election result. Should Chavez die or abandon the race, the deep fissures between the Chavista movement and the opposition could stoke violence.   

In addition, Eurasia Group identifies four red herrings, the big stories we don't believe will happen in 2012.

Fallout from the 2012 political transitions -- In 2012, we'll see political transitions in the U.S., China, Russia, and France, countries that together represent nearly half of global GDP and four-fifths of the UN Security Council. But there's surprisingly little at stake in the outcomes for geopolitics and the global economy.

Eurozone breakup -- This is probably the single most overrated risk of 2012. The political will to maintain the eurozone remains strong among all the major political parties in the core Eurozone states, almost across the board in the European periphery and, just as importantly, among eurocrats in the ever-growing European bureaucracy. And there's no effective political mechanism for a Eurozone breakup.

China's hard landing -- There are signs of overheated growth in China, but the state has the tools and resources to manage short-term trouble, and it will pull out every stop to prevent a serious slowdown, especially during a major political transition.

Mayan apocalypse -- Just isn't happening. And if it does, well, sorry.

Over the next three weeks, we'll be posting more ideas and information on each of these risks.