ESADEgeo Daily Digest, 14/09/2018

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The Guardian – Larry Elliott / ‘The world is sleepwalking into a financial crisis’ – Gordon Brown

  • Former UK Prime Minister Gordon Brown has warned that, after a decade of stagnation, the global economy is now moving into a decade of vulnerability, as the big problems of 2008-2009 remain unresolved.
  • “We are in danger of sleepwalking into a future crisis,” Brown said. According to him, the cooperation that helped avoid a second Great Depression had been replaced by a world in which countries had retreated into nationalist silos.
  • “In the next crisis a breakdown of trust in the financial sector would be mirrored by breakdown in trust between governments. There wouldn’t be the same willingness to cooperate but rather a tendency to blame each other for what’s gone wrong.”
  • Brown said there is less scope to reduce interest rates than a decade ago, no evidence that finance ministries would be allowed to cut taxes or increase public spending, and no guarantee that China would be as active in providing stimulus.

Financial Times – Edward Luce / America’s gaping McCain-shaped hole

  • Many of the world’s most pro-American populations are Russia’s neighbors. “[John McCain] represented something we idealized about America,” said Giorgi Margvelashvili, Georgia’s president. Now that McCain is gone, it is unclear which US public figure will champion their cause.
  • For Georgia, the dream of EU and NATO membership is as far away as ever. The country even appears to be sliding into oligarchy, as many of its neighbors are.
  • Across the region an ugly phrase is now heard: “Erdoganization”, referring to any country once in the west’s orbit but now taking steps to fend for itself.
  • Georgia is offering itself as a logistics hub for China’s Belt and Road Initiative linking Asia to Europe. Instead of being the west’s democratic gateway to Eurasia, Georgia threatens to become a vector in the opposite direction.

Foreign Policy – Salem Salomon & Casey Frechette / Corruption is wasting Chinese money in Africa

  • From the 1960s on, China supported anti-colonial and anti-apartheid movements across Africa. Today, some see China as a neocolonial power eager to plunge African nations into debt, stripping their resources and their sovereignty.
  • Others, especially African leaders, see China as a flexible partner willing to engage, with parity, where no one else will. Chinese loans for infrastructure projects come with interest rates far lower and repayment terms far more flexible than those offered by the IMF and other multilateral lenders.
  • China may have an overarching Africa policy. But on the ground, China is engaged in a diverse set of bilateral ties, with the benefits for African countries driven in large measure by how well their leaders defend national interests.
  • Chinese funders often seek out projects targeted at elite comfort instead of public good, perhaps in part because they fit a model of de facto bribery found in China’s local politics.
  • China’s presence in Africa could ultimately be a force for tremendous good, liberating nations through industrialization, but only if the opportunities it creates aren’t diverted by the greed of elites or the whims of corrupt leaders.

Euractiv – Tajana Štriga / Is Croatia ready to join the eurozone?

  • Croatia’s possible entry into the eurozone has become the subject of much talk among economic and political leaders over the past two years. In essence, Croatian citizens have already adopted the euro, as they have long decided to keep most of their savings in the single currency.
  • Most citizens still remember hyperinflation and trust the euro more than the domestic kuna currency, yet they fear a decline in living standards will be inevitable once Croatia formally adopts the single currency.
  • Numerous opponents of the euro like to use the argument of monetary sovereignty. Realistically, however, the option of weakening the kuna in times of recession has been extremely limited due to the high level of indebtedness in foreign currency.
  • The elimination of the foreign exchange risk associated with the kuna against the euro would be the main benefit of joining the eurozone. Furthermore, Croatian interest rates would approach the levels of those in the eurozone, which would mean lower loan interest rates.
  • In a report released in May, the European Commission concluded that Croatia has fulfilled almost all the criteria for entering the eurozone. Although the date of Croatia’s entry has not been determined yet, it is realistic to expect it within four years.

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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