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Top Risks of 2011: In Pakistan, things fall apart

By Ian Bremmer and David Gordon

Pakistan is experiencing a near perfect storm of political, economic, and social crises, and the Pakistan People's Party-led government is not equipped to manage the fallout. A full-on military coup like the one that brought Pervez Musharraf to power in 1999 is unlikely in 2011, but the government's ineptitude and a worsening security situation across the country could fuel still more unrest, encouraging the army to play a more direct and active role in the country's politics. President Asif Ali Zardari will fight any bid by the army to remove members of his inner circle from power, and even if the military were to install a technocratic administration, it would struggle to reverse the effects of years of weak governance.

Zardari and Prime Minister Yusuf Raza Gilani face challenges on multiple fronts. Gilani is focused on rebuilding the ruling coalition and fighting a Supreme Court and media set on undermining Zardari and other senior PPP members. This political battle will continue to distract the government from addressing pressing problems, like the need for structural reforms to slow the expansion of a fiscal deficit that leaves the government little room to invest in much-needed development projects. It's hard to get accurate statistics on inflation and unemployment, but both are high enough to arouse widespread public anger. Food prices are a particular source of anxiety. Severe flooding has created emergency conditions. The government will continue to struggle to hold together a fractious parliamentary coalition.

The government has no political control in the unstable Federally Administered Tribal Areas and Khyber Pakhtunkhwa (the new name for the Northwest Frontier Province). Nothing new there, but the bigger worry is that instability is spreading to the heart of the country and the provinces of Punjab and Sindh. Both have been relatively isolated from the turbulence of the tribal areas, but militants have been increasingly encouraged by the Pakistani government's weakness and the success of allies across the border in Afghanistan. The governor of Punjab, Salman Taseer, was assassinated in Islamabad just three weeks ago. Social upheaval is generating a surge in crime (including kidnappings, extortions, and robberies), protests, and other forms of unrest in Pakistan's large cities --especially Karachi. Further social and ethnic turmoil in the heart of the country might push the military to argue that urban unrest and terrorism are undermining national unity -- and that political change has become an urgent necessity.

These risks have clear implications for U.S. troops across the border. Following a sharp spike in the number of U.S. boots on the ground in Afghanistan, U.S. gains, though limited, are real. But they aren't sustainable without a much more stable Pakistan that can limit the militants' room for maneuver. That will require a political sea change in Karachi, and that's not in the cards for 2011.

On Wednesday, we'll examine Top Risk no. 9: Mexico, where the government's battle against drug cartels continues.

Ian Bremmer is president of Eurasia Group. David Gordon is the firm's head of research.

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