The week got off to a shaky start, with the elections in Greece portending an unstable pro-austerity coalition facing a motley assortment of fringe parties (comprising communists and fascists), and France opting for the socialist candidate, François Hollande. Markets initially reacted without much fuss, as it looked like Angela Merkel would hold her ground on stimulus measures, and was even content with Greece leaving the Eurozone. Yet as the week wore on, and as Merkel’s meeting with Hollande loomed ever-larger, it seemed she was trying to build in some space for negotiations into her public stance. Meanwhile, Greek banks, seeing the writing on the wall, began preparing contingency plans for eventual exit from the Eurozone. Markets lost ground as the tide of bad news continued to roll in. Yet for all the political sturm und drang, the dread austerity policies in Europe are less austere than most reports will have you believe.As a stunned, senescent Europe staggered about looking for solutions, the Middle East remained at its customary low boil. Israeli early elections were called off, as Netanyahu’s Likud party managed to form a coalition with the opposition Kadima, a development which could be a mixed blessing for the US policy in the region: an easier path forward with the Palestinians, and more of a chance of war with Iran. Tensions between Israel and Egypt were reported to be at an all-time high, though open conflict continues to be a real loser for both sides. The International Crisis Group released a report which gave full-throated support to a view that most knowledgable observers of the Middle East have long held: the chances for the peace process working are vanishingly small. (The telltale signs of stress over this failure are easy to read in Palestinian PM Salam Fayyad’s mannerisms these days.) And Hamas officially declared that it would stand aside side in case hostilities erupted between Israel and Iran.Israel wasn’t the only focus in the region. Via Meadia noted an uptick in speculation that Jordan may be next in line for Arab Spring upheavals. Intrigue in Iraq notched up a level, as Interpol issued a warrant for former Iraqi Vice President Tariq Hashimi, a man whom current PM Maliki has accused of running death squads. As the United States continued its stern war of words with Assad, Turkish PM Recep Erdogan seemed to signal support for Syria’s rebels, indicating that Turkey may be edging closer to a more activist policy in that conflict. And China and Iran are managing to get around the sanctions regime that the United States and its allies are pushing, mainly by setting up a temporary payments clearing system through Russia—an example of how overuse of a tool can encourage clever and counterproductive workarounds from one’s adversaries.Other stories of note this week:
- America’s Asian pivot can get complicated, and the China-Philippines standoff is an excellent case study of its perils.
- Nevertheless, China’s economic rise is anything but inexorable. The commentariat would do well to internalize this lesson.
- We followed developments the recall election in Wisconsin, noting how the story isn’t neatly tracking with the blue NY Times-approved narrative. It’s a key story we’ll watch going forward.
- Mitt Romney is still a bit of a cypher as a candidate. He must introduce himself to the electorate, or his opponents will do the job for him.
- It’s worth continuing to point out that the Libyan intervention is costing North Africa dearly in terms of stability.