ESADEgeo Daily Digest, 16/01/2019

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The Guardian – Peter Walker / How does a no-confidence motion work, and what’s next for May?

  • After Theresa May’s historic defeat yesterday over her Brexit deal, the Labour party tabled a no-confidence motion in the government, which will be debated today.
  • If Labour were to win (which will most likely not be the case) there would not be an immediate election; instead, there would be a period of 14 calendar days in which the government could seek to regain the confidence of MPs, or else another government could be formed.
  • If no government can gain the confidence of MPs, then parliament will be dissolved, with the standard 25 working-day gap needed before the election is held.
  • If May manages to survive the no-confidence motion, she said she will immediately start talks with both Tories and people in other parties “in a constructive spirit” to seek a deal that could win the support of the Commons.
  • The Guardian – Editorial / The Guardian view on May’s Brexit deal: it’s over, but what’s next?

Financial Times – Martin Wolf / Marking the euro at 20: the eurozone is doomed to succeed

  • As the Euro turns 20, we should reflect on a difficult experience that raises big questions. First, was it a sensible idea? The Euro has helped maintain the deep integration of the single market, but yoking together countries with such different economic institutions and behaviours was always risky.
  • The Euro has survived because the costs of break-up, or even departure by individual members, look terrifying. It has also done so because, in the depths of the crises, policymakers – in particular Mario Draghi and Angela Merkel – did enough to keep it alive.
  • Yet surviving is not the same as surviving well. Instead of generating convergence in living standards, the euro has allowed divergence. Inflation has been persistently too low, making adjustment of relative costs very difficult.
  • Will the Euro survive? The answer is likely to be: yes, although the eurozone is not and most likely will never be an “optimal currency union”. What is needed are changes aimed at creating a “good enough” union. If complacency sets in, the currency will not succeed — and might not even survive.

Project Syndicate – David Lubin / How US monetary policy has tamed China

  • The drift toward a more assertive Chinese foreign policy under Xi Jinping has been evident. But recently there have been signs that China might be having second thoughts about its ability to keep “striving for achievement” (Xi’s foreign-policy slogan).
  • An easy explanation for the latest Chinese shift toward retrenchment is President Trump, who has applied his own brand of assertiveness to the US-China relationship, with the apparent support of the entire American political class and much of Europe’s, too.
  • But China’s current caution also owes much to the fragility of its economic performance. The progressive tightening of US monetary conditions over the past five years – which has caused the China-US interest differential to narrow – has undeniably helped to suck dollars away from China, causing the country to lose reserves and self-confidence.
  • The next time Trump feels like excoriating Fed Chairman Jerome Powell for tightening monetary policy too quickly, he might pause to consider the role that higher US rates and a stronger dollar have played in taming China. A dovish Fed is a gift to Beijing.

Foreign Policy – Keith Johnson / Club Med: Israel, Egypt, and others form new natural gas group

  • Countries around the Eastern Mediterranean took a potentially important step toward realizing their dreams of boosting energy production with the creation Monday of a forum joining Israel, Egypt, Cyprus, and other neighbours to develop their new natural gas discoveries.
  • The Eastern Mediterranean Gas Forum has notable absences, including Syria, Lebanon, and especially Turkey. Ankara’s repeated opposition to energy exploration off the coast of Cyprus, which Turkey views as disputed waters, has cast a cloud over the development of natural gas discoveries in the region.
  • Even with the creation of the new organization and increased energy exploration, the Eastern Mediterranean has a long way to go to truly become the kind of energy hub that many in the region and in Brussels hope to see (as an alternative to importing gas from Russia).
  • Grandiose plans, such as a pipeline snaking across to southern Europe via Crete, keep colliding with political and economic realities. Liquefied natural gas costs a lot more than natural gas shipped through a pipeline, and Russian gas is especially cheap. That explains why Europe’s dependence on Russian energy is actually growing.

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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