Opinion

Ian Bremmer

The Cyprus takeaway: More phony crises to come

Ian Bremmer
Mar 27, 2013 20:05 UTC

Now that the crisis in Cyprus has passed, we can finally admit the obvious: The “crisis” it provoked did not deserve the attention it received. Cyprus makes up a fraction of one percent of the European Union’s GDP and it’s a backwater for sketchy Russian dealings. If Cyprus had drowned in a sea of Mediterranean debt, the Eurozone would not have gone under with it.

But what a story! The news was dominated by theatrics: a plane filled with 1 million Euros, last-minute deals in danger of falling apart, and failed emergency meetings in Moscow. But behind that global drama, all the Cypriot political parties supported staying in the Eurozone, and the German government remains committed to the sanctity of the monetary union. How was Cyprus going to deal the Eurozone an existential blow?

Nor will the painful bailout parameters in Cyprus prove a rule going forward, despite ill-advised warnings to the contrary from the president of the Eurogroup. One moment Jeroen Dijsselbloem is saying that Cyprus could be a model for future European bailouts —and markets take a nosedive. A few hours later he reneges on his remarks, saying: “Cyprus is a specific case with exceptional challenges which required the bail-in measures we have agreed upon yesterday. Macro-economic adjustment programmes are tailor-made to the situation of the country concerned and no models or templates are used.”

Cyprus was not Greece (or Italy, or Spain) Redux. Nor have the bailout terms set a precedent for future crises in the Eurozone’s periphery. It was a sideshow.

But that sideshow is still telling. It spoke to the new reality in the Eurozone: For anything to get done, it has to first generate an unnecessary crisis. There are so many moving parts to European Union bureaucracy that the only way to create action is with dire threats and tight deadlines. Most sane people now understand that the Eurozone is not going to fall apart, so Germany has to ring the alarm more loudly than in the past if it hopes to force change. In the absence of imminent crisis, the only way to implement deep, structural change is by harnessing the pain that market forces can inflict.

2013′s top 10 political risks

Ian Bremmer
Jan 8, 2013 16:18 UTC

It was a close call at times, but we made it through 2012. Now we’re set to encounter a new set of risks ‑ but not in the world’s advanced industrialized democracies, which are much more resilient than feared. This year, with the global recession on the wane, attention shifts back to emerging markets, the economies that are usually the ones that pose the most political risk. You can read the whole report from my political risk firm, Eurasia Group, here, but an executive summary of this year’s top 10 risks, in video and text, is below:

10.) South Africa: Africa overall looks like it will continue its recent growth. But South Africa, one of the continent’s most complex and important economies, is floundering. Its dominant political party, the African National Congress, is resorting to populism to maintain its base among the urban and rural poor. That means more state intervention, more labor unrest and more assertive unions. We’re not predicting a fundamental political crisis, but the country is moving along a path that offers little reason for optimism.

9.) India: We’ve all read the predictions that India is poised to become the world’s next infinite-growth country. Not so fast. Despite initial optimism, the 2009 election hasn’t freed Prime Minister Manmohan Singh to reform the country as anticipated, with the tough choices continually being kicked to the next parliamentary session. (Americans should find this familiar.) Corruption continues to reign, and as we’ve seen in the rape protests of the past few weeks, there are fundamental cultural issues that India has yet to resolve. As general elections draw closer, the government’s ability to execute robust economic policies will decline even further.

The three 2012 themes that matter most

Ian Bremmer
Dec 27, 2012 15:47 UTC

2012 – the year of the primary, the election, the Diamond Jubilee, the superstorm, the flying dictator, the escaped dissident, the embassy attack, the empty chair, the tech protest, the Olympics, and dozens of other stories already forgotten. It was a busy year and a terribly volatile one, too. Which of these stories will actually matter five years from now? By my count, three:

1)     China rising

2)     The Middle East in turmoil

3)     Europe muddling along

They’re the good, the bad, and the ugly of 2012.

The Good: For the sake of our listless global economy, thank goodness for China’s rise. The country’s Commerce Minister is promising that China will hit its GDP growth target of 7.5 percent for the year. (In the first three quarters of 2012, it grew 7.7 percent.) China’s ability to power through the financial crisis provided global markets with much-needed energy, and its momentum, despite the crisis in the Eurozone, a key trade partner, has helped limit the damage. If it wasn’t for the resilience of the world’s second-largest economy, we’d all be a lot worse off.

The Bad: In 2012, almost every key story in the Middle East has gotten more complicated and more dangerous. Syria, Israel, Gaza, Iran, Jordan, Iraq, Yemen, Egypt. Israel has become increasingly isolated within the region, facing Palestinian rockets, a nuclear-driven Iran, and the prime minister of a former ally dubbing it ‘a terrorist state’. Egypt’s president pulled off a power play, and the Syrian nightmare deepened. Iraqis struggled to build a new society in the wake of U.S. withdrawal, and (supposedly allied) Afghans killed a record number of U.S. troops before they could reach the exits. When the Arab Spring first began to take shape, many observers hoped it would be just that – a rebirth. But you can’t spin it now. It’s bad and getting worse.

Democracy doesn’t make miracles for Greece or Egypt

Ian Bremmer
Jun 27, 2012 15:25 UTC

For months now, the world has been waiting for the results of the momentous elections in Greece and in Egypt. In Greece, it was hoped that citizens would reject candidates who called for the breakup of the euro zone, or a Greek exit. In Egypt, the stakes were simpler, but larger: It was hoped that the election itself wouldn’t be a sham and that the country’s people would get their first true taste of the power of democracy.

It felt like everyone was holding their breath for the results in these two troubled countries, but it turns out neither country had the “disaster election” that some pundits feared. No, what both countries had was a “kick the can” election: For very different reasons, neither Greece nor Egypt is going to transform into a flourishing, liberal, fiscally sound nation overnight. And the task of governing in either country, therefore, is no big prize to either Greek Prime Minister Antonis Samaras or Egyptian President Mohammed Mursi. A lot of chips have to fall in their favor before they can even begin to get beyond the basic duties of simply showing up to work in the morning and keeping the lights on in government. But again, each country’s situation is different and bears a different explanation of the reality on the ground. Let’s take Egypt, with its internal threats to stability, first.

While the election of Mursi, the incoming Egyptian president, is a signal achievement that goes a long way toward instituting a tradition of civil rather than military rule, he alone will not get the economy to stand on its feet. The Egyptian tourism industry, its most important, has been absolutely crushed. The economy is in a shambles as the thread that was holding it together – Mubarak’s dictatorship – has been pulled from the fabric of Egypt, and the country is a long way from convincing anyone that it has recovered. While Mursi was the better choice for Egypt, he comes from the Muslim Brotherhood, basically a civic organization with no experience or expertise in macroeconomic management. The brotherhood is an important social organization: It’s a lot of things to a lot of people in Egypt, but it’s not an incubator of technocratic economic thinking or governance. That’s what the country will need to get back on its fiscal feet.

The good, the bad and the global economy

Ian Bremmer
Jun 18, 2012 12:37 UTC

Everyone knows the world’s economies are becoming ever more intertwined, but we’re only just starting to understand the ripple effects.

Welcome to the new global economy: One guy sneezes, and someone else gets a cold. That’s what we’re seeing in the slowdown now happening in the U.S., in Europe and in emerging market countries all around the world. Barring some kind of radical decoupling, the tight correlation in fates between these economic titans is a phenomenon we had better get used to, and understand, because it’s not going away. Indeed, this fact by itself – that our world is operating more and more like one big system every day – is not all bad news. However, a word of caution: Where interconnectedness yields benefits, it also creates pitfalls. Let’s look at a few examples of how this global system is actually working in our favor.

First, take the recent drop in U.S. Treasury yields. This is the more important macroeconomic story in America right now. Can any politician, with a straight face, continue to claim that getting the Simpson-Bowles recommendations passed into law was any kind of imperative for Congress or the president? The continual driving down of lending costs for the U.S. has made a mockery of credit-rating agency warnings and any perceived threat that a downgrade once held for the U.S. economy. Indeed, it takes some of the air out of the big debt-ceiling showdown that is set to take place between Democrats and Republicans in January 2013, when the $110 billion-dollar budget reduction is set to take automatic effect. It becomes increasingly hard to argue that reducing the deficit is priority number one to getting the country back on track when the cost of lending is so incredibly cheap and when the world’s investors are telling the U.S. they want more, not less of it.

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