ESADEgeo Daily Digest, 12/09/2018

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Politico – David M. Herszenhorn / Rumble with Hungary exposes EU divisions

  • Yesterday in Strasbourg, senior EU officials lambasted Hungarian Prime Minister Viktor Orbán for trampling democratic freedoms and undermining fundamental rights. Orbán fired back, accusing the guardians of the EU treaties of hypocrisy, abuse of power, and violating Hungary’s national sovereignty.
  • The debate in the European Parliament on Tuesday focused on whether to initiate Article 7 disciplinary proceedings against Hungary. The Parliament will vote on Wednesday, shortly after European Commission President Jean-Claude Juncker’s State of the Union speech.
  • Even some major leaders of Orbán’s political family, the center-right European People’s Party (EPP), said they would vote in favor of Article 7. Manfred Weber, the leader of the EPP group in Parliament, said he would vote in favor.
  • In reality, the Article 7 process — even if supported by the required two-thirds of Parliament — stands no chance of success. To suspend Hungary’s voting rights would require a unanimous vote by all other EU nations, and Poland – which is facing its own Article 7 proceeding – will stand in the way.

BBC / Russia launches biggest war games since Cold War

  • Russia has launched in Siberia “Vostok-2018”, its biggest military exercise since the Cold War, involving about 300,000 service personnel. The last Russian exercise of similar scale was in 1981. The scale of Vostok-2018 is equivalent to the forces deployed in one of the big World War Two battles.
  • China is sending 3,200 troops to take part in “Vostok-2018″, with many Chinese armoured vehicles and aircraft. Mongolia is also sending some units.
  • As Beijing has become embroiled in a tit-for-tat trade dispute with Washington this year, Russia has become an increasingly important trade partner and is now China’s ninth largest. President Putin and President Xi are said to get along – Xi has even called Putin his “best, most intimate friend”.
  • NATO Spokesman Dylan White: “Vostok demonstrates Russia’s focus on exercising large-scale conflict. It fits into a pattern we have seen over some time: a more assertive Russia, significantly increasing its defence budget and its military presence.”

Financial Times – Nouriel Roubini / Is the next financial crisis already brewing?

  • The global expansion is likely to continue this year and next because the US is running large fiscal deficits, China is continuing stimulative policies and Europe remains on a recovery path. Yet by 2020, there are several reasons why conditions for a global recession and financial crisis may emerge.
  • Not only will the current US economic stimulus have gone away by 2020, but a modest fiscal drag will push growth below 2 per cent. Other US policies, like restrictions to migration while the population is ageing, will also be detrimental.
  • Then there are trade frictions with China, Europe and Nafta countries, which will increase even if they fall short of a full-scale trade war. Their effect will be to slow growth and increase inflation.
  • What will Trump do in 2020, an election year, when growth stalls below 1 per cent and job losses start? The temptation will be to create a foreign policy crisis, and the only feasible target would be to provoke a military confrontation with Iran, which would trigger a stagflationary geopolitical shock.
  • Unlike a decade ago, once the next economic and financial downturn occurs the policy tools available to reverse it will probably be less effective.

Project Syndicate – Kemal Derviş / A fragmented multilateralism?

  • Trump’s attacks, coming after the failure of the Doha Round, may lead to the end of a functional World Trade Organization. But the debate about the WTO’s fate is part of a wider discussion concerning multilateralism, which includes the United Nations, the G20, and the IMF.
  • Three alternative “systems” appear to be possible. The first is a system dominated by bilateral deals, in which international rules and international law are absent. The second alternative is the current system, in which countries use global multilateralism to enforce common rules.
  • Finally, one can envision a system in which the attempt to establish global rules is abandoned, but regional or like-minded country groupings formulate their own sets of rules. This “fragmented multilateralism” would not leave much room for global institutions.
  • A strongly fragmented system would increase subsidiarity, but ultimately it would be unable to deliver the sought-after global public goods and benefits. In short, there is no substitute for global rules and standards that are required to confront the world’s existing and emerging challenges.

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. The summaries above may include word-for-word excerpts from their respective pieces. 

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