Analysts: Brexit may embolden populists in Eastern Europe

While Britiain's decision to leave the European Union should not have a major direct impact on the economies of Eastern Europe, including the Baltic states, a greater risk comes from the prospect of populist politicians becoming emboldened by the landmark Brexit vote, London-based economic forecasters Capital Economics said Monday.

"There are already signs that the UK’s vote to leave the EU is emboldening populist and anti-EU sentiment in Central and Eastern Europe (CEE). Given that the region is a major beneficiary from the EU’s budget, the economic incentives suggest a departure from the bloc is less likely than elsewhere. But the region would be threatened in the event of a broader fragmentation of the Union centred on Western Europe," Capital Economics said.

While pro-EU sentiment is generally stronger in Eastern Europe than elsewhere for a variety of reasons including large inpourings of structural funds and migrant labor working abroad, recent comments by politicians in Poland and Slovakia suggest an increasingly critical attitude to Brussels that populists might seek to exploit.

"Perhaps the more likely (and dangerous) threat to Central and Eastern Europe from the Brexit political fallout is a broader fragmentation of the EU centred on Western European economies. To start with, this would result in a smaller EU budget and lower structural funds being paid to CEE economies," said Capital Economics.

"All of this underlines the point we have made that the key is to focus on the political fallout on CEE, not the economic fallout."

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