World Economy Faces Third Challenge in Five Years
After the financial crisis caused by failing U.S. mortgages and the European Union’s (EU) sovereign debt troubles, the world economy is now facing a third obstacle to its growth: the slowdown in emerging markets. The annual meeting of the International Monetary Fund (IMF) and the World Bank in Tokyo this past weekend showed disagreements among world finance ministers and central bankers over how to handle the issues: some called for stimulus, others for more austerity, and nations like Russia and Brazil asked the EU to contain its crisis and the U.S. to reach an agreement before hitting the so-called fiscal cliff. Brazilian Finance Minister Guido Mantega blamed injections of cash by the U.S. Federal Reserve and the European Central Bank (ECB) for artificially strengthening Brazil’s currency, the real, making its exports less competitive, a complaint that was echoed by Russia and Switzerland. Fed Chairman Ben Bernanke denied this was the case. Meanwhile, analysts pointed out that emerging economies are much too reliant on exports, and advised that they refocus on their domestic markets.
Portugal’s Tough Budget, Greece’s Deepening Troubles
Portugal’s government presented today its budget for 2013, heavy with tax increases designed to meet the deficit targets it set with its creditors in exchange for a €78 billion ($101 billion) bailout package. The announcement came as demonstrators gathered outside the parliament, and after a month of protests against the austerity measures. The plan will save Portugal €5.3 billion as the cabinet outlined a new income tax of four percent for all salaries and an extra 2.5 percent for those who earn €80,000 and above. Car owners will see their driving tax raised to 10 percent from 1.3 percent and electricity tariffs will also be increased. Meanwhile, Greek authorities admitted their negotiations with the European Union (EU), the European Central Bank (ECB), and the International Monetary Fund (IMF), the so-called troika, were unlikely to result in a parliamentary approval of €13.5 billion in spending cuts before mid-November, which may once again delay the payment of the next €31.5 billion tranche of the bailout package granted to Greece. A potential default has never seemed closer as the nation could run out of money by the end of November. Greek Prime Minister Antonis Samaras had hoped to have settled the matter before the next EU summit, due to start on Thursday.
Syria: UN Envoy Calls for Temporary Ceasefire
After a trip to Iran this weekend, United Nation’s Envoy to Syria Lakhdar Brahimi called today for Iranian officials to convince Syrian President Bashar al-Assad to implement a temporary ceasefire for the Muslim holiday Eid al-Adha, pausing a 19-month conflict that has already claimed 25,000 lives. Speaking in Iraq, he also asked for the country to use its influence in the matter. Iraqi Prime Minister Nuri called for a “speedy political solution” to end the civil war. Meanwhile, U.S. officials and Middle Eastern diplomats said the flow of arms coming from Saudi Arabia and Qatar that is destined to Syrian rebels is in fact falling in the hands of the jihadists who have hijacked the conflict. This is causing concern that the politics of minimal interference followed thus far by western nations may not result in a democracy, should Assad’s regime fall. It also calls into question any policy that favors sending arms to Assad’s opposition as the lack of organization and cohesion among secular rebel groups has become obvious.
U.S.-Israel Joint Missile Defense Exercise Is Warning to Iran
The U.S. and Israel announced they will start their largest joint air and missile defense exercise yet at the end of this month, a three-week effort that is largely thought to be a message to Iran and American voters before the November 6 presidential election. The U.K. and Germany are also set to participate in the “Austere Challenge” operation, which will gather as many as 3,500 U.S. troops and 1,000 Israeli soldiers. Israel has been calling for weeks for the U.S. to draw “red lines” to dissuade Iran from pursuing its nuclear program, which the Islamic nation says is peaceful. Meanwhile, the European Union (EU) approved today a new set of sanctions designed to further cripple Iran’s economy, also in retaliation to its nuclear program. The EU agreed to ban financial, commodities, and energy trade, and made other types of transactions more difficult. Iran’s economy is already suffering, with accelerating inflation as its currency, the rial, lost 40 percent of its value against the dollar in the past few weeks. Despite this toughening stance, U.S. exports to Iran have risen by a third this year, led by grains, milk, and medical equipment, as humanitarian efforts increase, the Census Bureau said today.
Obama Under Pressure to Perform in Next Debate
U.S. President Barack Obama is under pressure to improve his performance at his second debate with Republican Presidential Candidate Mitt Romney, which is due to take place tomorrow in New York. The first debate showed a passive Obama aggressively confronted by Romney, slowing the momentum of the President’s campaign. The candidates, who are likely to face foreign policy questions, are preparing for a town-hall format, with members of the audience directly addressing them. This may require both participants to spend more time explaining their proposals while toning down their attacks on one another. The event will be a chance for Romney to question Obama on Libya after four Americans were killed last month during an attack on the U.S. consulate in Benghazi, and for Obama to show more passion.