The World This Week

Our editors give us a breakdown of this week’s biggest news stories

United Kingdom: Ross Alexander Hutton

SAGE (the U.K. government’s Scientific advisory committee) increased its estimation of the coronavirus reproduction number to between 1.3 and 1.6 – indicating further exponential growth of the virus. However, a study by Imperial College London has signalled that the latest measures announced by the government are causing the growth in Covid cases to begin ‘levelling off’. Yet, the Prime Minister’s muddled response to a question regarding restrictions in the north-East of England caused widespread confusion – putting the progress of recent weeks at risk – as the messaging from Number 10 still lacks the clarity needed to prevent further lockdown restrictions. 

After cancelling last week’s autumn budget, tough decisions on the U.K.’s public finances are still lingering. Experts at the Institute for Fiscal Studies this week warned that the government is facing a consequential choice to either accept permanently higher spending – leading to public spending reaching the largest share of national income in more than a decade – or administer another round of austerity. Responding to speculation that the Bank of England is examining the operational considerations of negative interest rates, the Deputy Governor spoke out against such a measure as it would “be less effective as a tool to stimulate the economy”, given the implementation difficulties. 

Negotiating teams for the U.K. and the E.U. stepped aside this weekend for the video call between Boris Johnson and Usula Von der Leyen to “take stock” of the Brexit negotiations. Make no mistake the call was as much about optics as it was about a final push by the leaders to reach an agreement on the politically tough decisions of fishing rights and state aid. Behind the official communique, the dynamic of the talks is moving from policy gaps to the political willingness to ‘sell’ any potential deal. With neither side immune from political difficulties, the openness to concessions – gauged in the call on Saturday – will be consequential if a deal is to be sealed. 

Europe: Peter Hourston

Clashes between Armenia and Azerbaijan have erupted again over the disputed territory of Nagorno-Karabakh in the Southern Caucasus. It marks the most serious escalation of the conflict for several years, with more than 100 confirmed deaths among civilians and Armenian combatants. Azerbaijan does not release casualty figures, but their death count is believed to be at least as high. The dispute stems from the decision of the fledgling Soviet Union in the 1920s to move the majority-Armenian region into Azerbaijan. Conflict over Nagorno-Karabakh first arose in the early 1990s following the collapse of the Soviet Union when the ethnic Armenians declared themselves independent (with support of Armenia itself) with Azerbaijan fighting back. Today, the region is recognised as part of Azerbaijan, including by Armenia, which offers military and financial aid. This week, Donald Trump, Vladimir Putin and Emmaneul Macron issued a joint statement condemning, “in the strongest terms the recent escalation of violence . . . [and] call for an immediate cessation of hostilities between the relevant military forces.” However, both sides resisted attempts to bring a ceasefire with Azerbaijan being strongly supported by its close ally – and NATO member – Turkey. The region is of key geopolitical importance due to its natural resources and energy supplies. 

French President Emmanuel Macron offered proposals of mediation in Belarus following the disputed outcome of the Presidential election earlier this year. He also demanded that a “peaceful transition” should take place within the Eastern European country after he held talks with opposition leader Svetlana Tikhanovskaya in exile in Lithuania. Macron’s visit came as the EU imposed sanctions on individuals within the Belarussian electoral commission and security services who are alleged to have been involved in ballot rigging and repression of protestors. Other Western powers including the US, UK and Canada have also taken action through their own sanction regimes. The EU had been due to impose sanctions back in August but had faced internal opposition from Cyprus, who wanted support for measures on Turkey over energy exploration in the Eastern Meditterrrean. Meanwhile, Vladimir Putin clashed with Macron, attacking “pressure” on the government in Minsk.

Alexei Navalny gave his first interview since leaving hospital in Berlin following his attempted assassination with the nerve agent Novichok by the Russian state to the German newspaper Der Spiegel. He said he had a special affinity for German Chancellor Angela Merkel and to all Germans for the actions the country took to save his life. Navalny also asserted his absolute belief that Vladimir Putin was behind the attack but that he wanted to return to Russia to continue his opposition campaign.

Africa & Middle East: Camille Capelle

After decades of fighting in Sudan, a peace deal has been signed between the government and numerous rebel groups. The agreement has been endorsed by several countries and organizations including the EU and UN. However, the conflict cannot be considered ‘resolved’ until all of the main rebel groups sign, something which two major groups are still unwilling to do until their political demands are met. 

Although over the last months the lack of confidence that the Israeli people have in their President has become overly apparent, his government is starting to show the same. Asaf Zamir, Israel’s Minister of Tourism, has resigned from his position, citing a lack of trust in the President who he accuses of putting his personal issues before those of the state, especially in this time of crisis. 

In response to the drastic drop in oil prices since the beginning of the pandemic, Saudi Arabia has looked to revitalize other sectors in its economy. In an attempt to support its real estate market, the Saudi government has decided to vastly reduce tax on real estate transactions which they hope will encourage the population to purchase more properties. This is one in a series of efforts to alleviate the deep economic recession in which Saudi Arabia finds itself, with a shrinking economy and unemployment reaching 15.4% for the first time.

North America: Amelia Brown

President Trump is currently hospitalized with coronavirus. He and first lady Melania announced their positive tests on Friday, and Trump was moved to Walter Reed Medical Center later that day. The reports about his conditions has been confusing—chief of staff Mark Meadows told reporters on Saturday that, “the president’s vitals over the last 24 hours were very concerning, and the next 48 hours will be critical in terms of his care,” whereas doctors from his team had said he was doing “very well.” The virus has spread its way through the White House, with at least eight members testing positive, plus another three in the Senate. The three cases in the Senate (traced back for two of the Republican senators to Trump’s supreme court nominee announcement, and for the third to a lunch with the first two senators), has forced the Senate to adjourn any floor meetings until 19 October. This comes right as the next financial stimulus is being debated. The $1.6 trillion relief package put forth by the White House is significantly lower than what Democrat representatives had proposed earlier in the negotiations, which have been ongoing for months. Trump urged the Senate to, “work together and get it done,” in a Tweet from the hospital on Saturday. 

The Mexican Supreme Court has approved the President’s referendum on whether to put his five presidential predecessors on trial. While the government is touting the decision as a, “transcendental step towards the construction of a true democracy,” others are saying that the “blind loyalty” the president demands has finally gotten to the one government institution previously not under his control. President Obrador had said earlier this week that if the Supreme Court did not find his referendum constitutional, he would seek to change the constitution.  

On Thursday, Canada announced a C$10 billion infrastructure plan to help rebuild the economy, “while building a healthy, sustainable future for everyone,” Prime Minister Justin Trudeau said. The plan will see 60,000 people in work, and is spread over projects such as clean power generation and storage, broadband to under-served communities, zero-emission busses and charging, and other construction works. The money comes from a C$35 billion pot managed by the Canada Infrastructure Bank which Trudeau set up in 2017 and has done little since.  

South America: Annie Smith

El Salvador’s government has come under fire after an article from El Faro, citing a number of leaked government documents, alleged that special treatment had been given to gang members. The article from El Faro, a high-profile online journal, included allegations that President Nayib Bukele’s administration held secret negotiations with gang leaders inside jail, and later received benefits including fast food or a relaxation of harsh treatment while imprisoned in exchange for peaceful streets. The article also alleges that gang leaders ordered their members on the outside to reduce levels of violent crime in El Salvador’s communities, and that the Bukele administration sought the gang’s support in legislative elections next year. In response, President Bukele wrote on Twitter, “Show me one privilege, just one,” and denied the allegations.

The Guatemalan government is promising to break up a migrant caravan headed to the US, after thousands of Honduran migrants and asylum seekers began their caravan looking for work. More than 3,000 people from Honduras entered Guatemala on Thursday, without undergoing the required immigration and health checks implemented to prevent the spread of COVID-19. Honduras is one of the top countries of origin for migrants to the United States, though nearly 100,000 Hondurans were deported from the US in 2019. President Alejandro Giammettei of Guatemala told the nation this week, “The order has been given to detain all those who entered illegally, and return them to the border of their country. We will not allow any foreigner who has used illegal means to enter the country, to think that they have the right to come and infect us and put us at serious risk.”

Science & Technology: Paula Plechschmidt

Even though Google has been making concessions in its $2.1bn deal with Fitbit, rival makers of this kind of technology have been ramping up their opposition to the deal. According to these companies, Google’s promise to not use the health data collected from the Fitbits for advertising purposes for 10 years are not enough. Experts warn: “Unprecedented concerns arise when one sees that allowing for Fitbit’s data gathering capabilities to be put in Google’s hands creates major risks of ‘platform envelopment’, extension of monopoly power and consumer exploitation”. Despite these complaints, EU regulators are having a difficult time trying to find a way to justify blocking this deal and it looks likely that it will still go forward.

Mark Zuckerberg (Facebook), Sundar Pichai (Google) and Jack Dorsey have agreed to testify in thesecond Big Tech hearing of the year. This hearing will take place just six days before the US Presidential election and will focus on the liability protections of Section 230, data privacy and media consolidation.Section 230 “provides immunity from civil liabilities for information service providers that remove or restrict content from their services they deem ‘obscene, lewd, lascivious, filthy, excessively violent, harassing or otherwise objectionable, whether or not such material is constitutionally protected’”. Essentially, what this does is that it protects owner of any interactive computer services from liability for anything posted by third parties. This is something the hearing wants to focus on especially, as many politicians have recently been trying to amend this section in order to keep tech companies more accountable for the content release they are facilitating.

Finally, 6 months after the initial announcement, states in the United States are starting toimplement the tracing technology Apple and Google had developed in order to send COvid-19 exposure alerts. Both New York and New Jersey both released Covid-19 alert apps this week. This increases the number of states implementing this track and trace feature to 10. While late, this development indicates that momentum is starting to pick up in the USA towards Covid-19 safety, which is a promising outlook for a country whose president has just caught the disease.

Business: Tom Woods

Zuber and Mohsin Issa, two British billionaire brothers,purchased a majority stake in Asda this week from Walmart. The American retailer originally purchased the firm in 1999 and launched grand plans to shake up the UK’s supermarket industry, but struggled to achieve their goals, especially amidst emerging competition from German price-slashers Lidl and Aldi. It had thus been seeking a means to sell Asda for quite some time, notably attempting to push through amerger with Sainsbury’s last year. The Issa brothers, who acquired their fortune through their EG Group, which owns over 5000 petrol stations across Europe, labelled the deal as an “exciting opportunity”. Commentators aren’t so sure however, with Bloomberg’s Deirdre Hipwell remarking that “the world’s most competitive grocery market” is becoming an even more challenging field with the onset of the pandemic and Brexit complicating food security. The brothers partnered with private equity firm TDR Capital for the deal, while Walmart will maintain a minority stake in Asda.

TikTok has dodged a US government-ordered ban on downloads after a judge issued atemporary injunction. Although the court agreed that the government had provided enough evidence to show that China is a national security threat, it also stated that there was little to suggest that TikTok itself posed a risk and disagreed that taking it off app stores would be effective. TikTok’s lawyers presented a convincing case, arguing that getting rid of the app would violate First and Fifth Amendment rights as well as indicating ongoing negotiations for a US-based firm to purchase the US operations wing of the app. The US government meanwhile dismissed owner ByteDance as a “mouthpiece” of the Chinese Communist Party. This case is far from over, and the court will now take its time to mull over whether TikTok genuinely presents a threat to national security.

Theory: Cassi Ainsworth-Grace

Arecent blog post by the IMF explores the impact of the Covid-19 pandemic on global debt. Debt levels have soared to new heights, as governments across the world unleash stimulus packages to support struggling economic growth rates. In the post, the IMF forecasts that compared to the end of 2019, average 2021 debt ratios are projected to rise by 20% of GDP in advanced economies, 10% of GDP in emerging market economies, and 7% in low-income countries. Whilst many advanced economies will be able to continue to borrow, many other countries face constraints on their capacity to borrow further, as they face a high risk of a debt crisis. In addition, the IMFs findings report that these countries are in further trouble as they must consider the possibility of defaults, a capital flight to safe havens outside the country, as well as fiscal austerity as governments try to rein in spending despite the continuing recession.

The IMF’s post instead suggests that before waiting for a crisis to hit, the global debt architecture needs to be restructured. The architecture they refer to here is that of sovereign debt contracts, institutions such as the IMF and the Paris Club, and policy frameworks that allow for an orderly restructuring of debt. These reform options arepresented in a formal report published on the first of this month. The key suggestions they make include strengthening contractual provisions when debtors are struggling to repay, to improve the transparency of the debt and a country’s obligations, and finally agreement on a common approach to restructuring official bilateral debts. With such measures in place, a debt crisis could be averted before it even hits.

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