By Marcus Walker 

ROME -- During the past decade, the European Union has often entered a new year beset by warnings that it faces an existential crisis.

Its ability to muddle through must have impressed all but the most determined doomsayers, however, because few politicians or pundits are calling 2019 a make-or-break year for the bloc.

That doesn't mean all is well.

"The challenges on the policy side couldn't be greater," says Catherine De Vries, political scientist at the Free University of Amsterdam. "There's reason to be concerned."

The EU's challenges include a wobbling economic recovery, social divisions fueling populist and nativist insurgencies, and a fragmenting political landscape. Parts of Europe are still dealing with the legacies of the financial and migration crises. Other countries are deviating from the model of liberal democracy -- based on checks and balances and the rule of law -- which the EU was supposed to help promote.

The good news for the EU is that despite all those problems, the organization looks set to survive, thanks to the strong attachment of most Europeans outside the U.K. to remaining members. The bad news is that the EU has much to do to restore Europeans' confidence that it can deliver its main promises: to spread prosperity and democracy, and find solutions to common problems, via common institutions.

Europe's economic upturn has sputtered in recent months. Economists expect only modest growth in 2019. However, unemployment in the euro currency area has dipped below 8%, the lowest level since before the global financial crisis. Consumer and government spending are expected to keep the expansion alive,despite weakness in industry thanks partly to global trade tensions.

Inflation remains too low for the European Central Bank's comfort. The euro is still an incomplete currency union, leaving weaker members vulnerable to capital flight, as Italy's recent financial strains showed. French President Emmanuel Macron's proposals to underpin the euro with a stronger political and fiscal union have petered out thanks to resistance from Germany and a group of North European countries. But the words "European economic crisis" belong to the past, at least for now.

The U.K.'s political rumpus over how, and whether, to carry out its departure from the EU this spring has highlighted the rest of the bloc's strong commitment to staying in.

"The EU is much more united in the face of Brexit than anyone expected," says R. Daniel Kelemen, professor of European politics at Rutgers University in New Brunswick, N.J. "There's no indication of a domino effect. Public support for the EU and the euro is up," he notes.

Europe's migration crisis has stabilized but hasn't been solved. According to United Nations data, Mediterranean crossings by refugees and other migrants from the Middle East and Africa declined 89% in 2018 from their peak in 2015, when more than a million people crossed the sea to Europe in search of safety or a better life. But even today's slower inflow is enough to maintain political tensions between European countries over who should take in asylum seekers.

Antiestablishment parties, rising since the financial and migration crises, are expected to make further gains in May's European Parliament elections. Far-right and nationalist parties have mostly dropped talk of leaving the EU or the euro, because it isn't popular. Nowadays they're vowing to change the EU from within.

The EU establishment's latest boogeyman is the prospect of a pact led by Matteo Salvini, Jaros av Kaczyński and Viktor Orbán, respectively the dominant politicians in Italy, Poland and Hungary, who share hostility to European centrists and non-European migrants.

But the nationalist camp is divided on key issues. Italy wants other EU countries to take some of its migrants. Poland and Hungary adamantly refuse. Nationalists all support closing off the migration routes in Africa and the Middle East -- but so do virtually all EU policy makers these days. Nationalists also have clashing instincts and interests when it comes to Russia, the U.S. role in Europe, and where the EU should spend its funds.

Despite such differences, far-right gains could change the tone in EU politics, says Cas Mudde, a political scientist at the University of Georgia. Established center-right parties, such as German Chancellor Angela Merkel's Christian Democrats, are looking to cooperate with some of their nativist challengers at EU level in the hope of taming them. If taken further, says Mr. Mudde, "this would mean stagnation, some return of national powers, and virtually no further integration, except around immigration and counterterrorism."

Europe's traditional center-right and center-left parties are also losing votes to upstart liberal and green parties, as well as to the far-right and far-left. The next European Parliament could be as fragmented as many national parliaments have become, requiring unwieldy coalitions to get anything done.

EU nations' surprising unity in dealing with Brexit has shown their commitment to maintaining the bloc. But critics say the EU is failing to deliver on a key promise of the post-Cold War era: to promote liberal democracy and the rule of law throughout Europe.

Mr. Orbán has steadily transformed Hungary into a hybrid of democracy and authoritarianism in which the ruling party reshapes the media, judiciary, electoral system, and other laws and institutions to effectively entrench its dominance. Hungary's defiance of EU norms has encouraged emulation, including by Poland's ruling nationalists.

Concerns about corruption, political pressure on judicial systems, and the weakening of independent institutions are also rising in Romania, Malta and Greece.

"The rule-of-law crisis is now the most pressing one," says Mr. Kelemen.

Mr. Walker is the Rome bureau chief of The Wall Street Journal. He can be reached at marcus.walker@wsj.com.

(END) Dow Jones Newswires

January 20, 2019 09:32 ET (14:32 GMT)