Reuters blog archive
Investors have spent months looking askance at Turkey’s corruption scandal and Prime Minister Tayyip Erdogan’s response to it – purging the police and judiciary of people he believes are acolytes of his enemy, U.S.-based cleric Fethullah Gulen. But it appears to have made little difference to his electorate.
Erdogan declared victory after Sunday’s local elections and told his enemies they would now pay the price. His AK Party was well ahead overall but the opposition Republican People's Party (CHP) appeared close to seizing the capital Ankara.
Turkey's lira has climbed in early trade to its strongest level in two months on the basis that at least there is political continuity. But any rally could prove short-lived with the battle between Erdogan and Gulen likely to deepen and a gaping current account gap already making the economy vulnerable to any financial market turmoil, of which there has been plenty.
"From tomorrow, there may be some who flee," Erdogan declared last night.
The longer-term question is whether the premier is emboldened to run for the first directly-elected presidency in August or change party rules to allow him to run for a fourth term as prime minister in next year's parliamentary election. So far all roads still lead to Erdogan.
For European markets, Germany’s March inflation figure is likely to dominate today. It is forecast to hold at just 1.0 percent. The European Central Bank insists there is no threat of deflation in the currency area although the euro zone number has been in its “danger zone” below 1 percent for five months now.
Having appeared to set a rather high bar to policy action at its last meeting, this week the tone changed. Most notable was Bundesbank chief Jens Weidmann, normally a hardliner, who said printing money was not out of the question although he would prefer negative deposit rates as the means to tackle an overly strong euro.
G7 leaders didn’t move the dial far last night, telling Russia it faced more damaging sanctions if it took any further action to destabilize Ukraine.
They will also shun Russia’s G8 summit in June and meet ”à sept” in Brussels, marking the first time since Moscow joined the group in 1998 that it will have been shut out of the annual summit.
There were some other interesting pointers. For one, the G7 agreed their energy ministers would work together to reduce dependence on Russian oil and gas. Could this lead to the United States exporting shale gas to Europe? A committee of U.S. lawmakers will hear testimony on Tuesday from those who favour loosening restrictions on gas exports.
Another crunch week in the East-West standoff over Ukraine kicks off today with Barack Obama in the Netherlands for a meeting of more than 50 world leaders at a nuclear security summit in the Netherlands. There, he and his fellow G7 leaders will hold separate talks on Ukraine.
Obama upped the ante on Vladimir Putin last week with sanctions that hit some of his most powerful allies and strayed firmly into Russia’s banking and corporate world. The EU acted more cautiously but is looking at how financial and trade measures would work, getting ready in case Putin escalates the crisis further.
from Ian Bremmer:
In a western democracy like the United States, we assume that the best time for a leader to accomplish something is in the first year of his first term. The election has just ended, the opposition is still scattered, and the legislative mandate is intact. Everybody still talks about Franklin Delano Roosevelt’s first 100 Days for a reason.
In authoritarian governments, like China’s, it’s supposed to be different. Steering such a large bureaucracy takes time, as all the moving pieces catch up with one another. What matters is minimizing risk surrounding the transfer of power, and then engaging in a slow buildup of consensus. And yet, Xi Jinping is proving the conventional wisdom wrong. After just six months at the helm, Xi is already clearly on track to accomplish far more than his predecessor Hu Jintao.
from Ian Bremmer:
Earlier this summer, as I watched the Pope attract millions as he toured Brazil, I noticed how rare the scene was. Here was a man in control of an embattled institution, and he had somehow rallied his troops. By going back to the basics of Catholic belief—embracing humility, supporting the downtrodden, asking for sacrifice— as well as pushing the envelope (with his more progressive stance on homosexuality, for example), Pope Francis had begun to rehabilitate the church. It was viable leadership: the kind that motivates, inspires, and unites.
This is becoming increasingly rare. We live in a world where no single country or group of countries can provide dominant, sustainable global leadership—G-Zero, as I call it—and that’s in large part because so many countries lack solid leadership at home. As I look around the world, I see only three leaders of major countries that, like the pope, are managing to squelch opposition, carve out a more impactful role for themselves, and undertake difficult reforms, all while leveraging their popularity and consolidating their strength.
from Ian Bremmer:
In 2008, before the financial crisis had even reached its nadir, Rahm Emanuel famously said: “You never want a serious crisis to go to waste.” Emanuel’s quote became the conventional wisdom for crisis management, even if the idea is age-old: John F. Kennedy Jr. famously pointed out that the Chinese word for “crisis” is composed of two characters, one for “danger” and one for “opportunity.
Nearly five years after the global economic meltdown, we can now look at the world’s major powers and assess how well they’ve responded to their various crises. Three categories emerge. Who took advantage of crisis? Who never really had a true crisis? And who is letting crisis go to waste?
from Ian Bremmer:
Recently, it seems no developing country is safe from sudden, unexpected protests. In Brazil and Turkey, empowered middle classes pushed back against perceived governmental injustice; protests erupted, and leaders’ approval ratings dropped precipitously. In Egypt, the economic picture was as ugly as the political one, and the military’s ouster of President Mursi has fomented conflict and instability.
China may look like a candidate for the type of protests currently sweeping the developing world. Not only is a newly empowered middle class demanding better services and more accountability from government -- growth has also tapered off in recent quarters. Don’t hold your breath. At least for the time being, China is well-positioned to navigate such challenges far better than its emerging market competitors.
from Ian Bremmer:
As protests sweep the developing world and Europe struggles through an austerity hangover, China and the U.S., relative to their peers, look like the best in class. They are both comfortable with their modest growth rates (compared to their norms of the past decade), and insulated from the kind of social unrest we are seeing in Egypt, Turkey or Brazil. But both countries have a deeper intractable challenge that will, in the longer-term, get worse. What’s interesting is that they’re the inverse of each other: in the U.S., wealth and private sector interests capture the political system. In China, politicians capture the private sector and the wealth that comes with it.
The U.S.’s struggles with lobbying, pork-barrel spending, and the corporate sector’s general overlord status in Washington are well documented. Campaign finance reform is long past. Corporate personhood is well-entrenched. Super PACs are ascendant. A representative democracy is being crowded out by a capitalist one.
from The Edgy Optimist:
This weekend, President Obama and China’s new leader Xi Jinping will meet at a retreat outside of Los Angeles. The two men are scheduled to spend six to seven hours covering a range of issues that confront the two countries, from the increasingly fraught issue of hacking and cybersecurity to what to do about an evermore unpredictable and rogue North Korea. The summit was arranged only recently, almost impromptu and more casual and low-key than the pomp and circumstances state visits of the past decade. That should in no way, however, obscure just how important the meeting is.
Rarely in history has an emerging power met an existing power without mayhem and conflict ensuing. China today is clearly emerging, with an economy that will soon be larger than the U.S.’s, though the income of Chinese citizens will remain far behind their U.S. counterparts for many years to come. In spite of recent stumbles, the U.S. remains the only country with global reach both economically and militarily.