The World This Week

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

United Kingdom: Ross Alexander Hutton 

Prime Minister Johnson was intriguingly photographed observing the changing of the guard in Washington: out went the former reality TV-star and real estate tycoon (add to the list former President) and in came the steady hand of Joseph R. Biden, Jr. In the midst of the coronavirus crisis, Johnson’s pause to witness the inauguration of President Biden serves as a reminder of just how important Whitehall views the ‘special relationship’ with Washington in securing Britain’s place in the world. There will no doubt be relief that after a “bumpy” 4 years, there is a more familiar, conventional and predictable occupant of the Oval Office. Whether it be working closely with NATO or returning to the Paris climate accord, the signs of a strengthening western alliance will be a source of optimism in Whitehall – yet, tempered by the fading hopes of a quick bilateral trade deal

Even though the elephant in the room of Brexit looms large and will be an initial – perhaps, even lingering – strain on relations, Biden’s famed empathetic nature and reputation of bi-partisanship in the U.S. Senate will give Johnson reason for hope that a strong and reliable relationship can be restored. President Biden’s immediate focus will be on the domestic crisis and divisions in America before he deploys the authoritative diplomatic statesmanship of the office which he now serves. Both leaders must recognise the chance to embrace a forward-looking and pragmatic relationship capable of understanding the realistic opportunities and limitations of their joint common agenda”.

Of course, Johnson’s domestic inbox is rather full. Britain entered 2021 under yet another draconian lockdown as it struggled to grapple with the more transmissible and more deadly variants of the coronavirus. Fears are running high that lockdowns are not curbing the spread fast enough to protect hospitals from exceeding capacity coupled with hopes of a speedy vaccine rollout. Even with the R-number falling to between 0.8 and 1, the chief medical officer warned that the U.K. is at an “extremely precarious point” as speculation of more restrictions is rife in Whitehall. Current restrictions are expected to last until at least March since the crisis will worsen before it improves. So, for now, one must stay at home, protect the NHS and save lives.  

Europe: Peter Hourston

Russian opposition leader Alexi Navalny, who returned to Moscow this week and was immediately arrested by the authorities, has urged his supporters to protest against the government, “Don’t be scared,” he said. “Come out on the streets: not for me but for yourselves and your future”. EU leaders condemned his 30-day detention with the Baltic states of Lithuania, Estonia and Latvia leading calls for the bloc to impose sanctions on Russia if he is not released. The US State Department released a lengthy statement which urged the Kremlin to “fully cooperate with the international community’s investigation into the poisoning of Aleksey Navalny and credibly explain the use of a chemical weapon on its soil.” This suggests a tougher approach with President Putin from the new Biden Administration, as the statement also added that the US would “stand shoulder-to-shoulder with our allies and partners in defense of human rights – whether in Russia or wherever they come under threat.” However, Russian Foreign Minister Sergei Lavrov said Western condemnation only served to “divert attention” from a crisis in liberal democracy.

The inauguration of Joe Biden as the 46th President of the United States was generally welcomed with relief by EU leaders. German Chancellor Angela Merkel suggested that there would be “much more scope for political agreement” with the new administration than with its predecessor but cautioned that “there will also be arguments about how best to do things for our two countries.” Merkel also raised the long-contentious issue of how much responsibility Europe would need to take on for its own security, which was a key point of clash between the Trump Administration and NATO, as Washington argued for European allies to spend more on defence. “Europe will on the whole have to take on more responsibility, both in military and diplomatic terms,” she said. A likely critical figure in the future of transatlantic relations emerged this week as Armin Laschet, prime minister of North Rhine-Westphalia, was elected as leader of Germany’s Christian Democrats. A possible replacement for Merkel after September’s federal elections, he is seen as generally continuing her policies, but has come under criticism for past comments he has made on foreign policy, such as doubting the responsibility of Russia in the Salisbury chemical weapons attack against Sergei and Yulia Skripal.

President of the European Central Bank Christine Lagarde announced on Thursday that the main stimulus and interest rate policies would remain unchanged. However, she argued that “holistic and multi-faceted” approach demanded flexibility in monetary policy as a new wave of coronavirus infections hits the continent. Lagard also stressed the need to prevent “a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation.” Although the ECB remains confident of Eurozone growth of 3.9 per cent, some analysts questioned the Lagarde’s approach with Carsten Brzeski, global head of macro research at ING commenting, “According to Ms Lagarde, the assessment of financing conditions was not driven by a single indicator, but by a holistic approach, including bank lending, credit conditions, sovereign and corporate yields. Are you any smarter? We’re not.”

Asia Pacific: Satyajit Mohanan 

American Markets Give A Thumbs Up:

Asian stocks rose to new record highs on Thursday, tracking markets in the United States as investors hoped for more economic stimulus from newly inaugurated US President Joe Biden to offset damage wreaked by the COVID-19 pandemic. Kay Van-Petersen, global macro strategist at Saxo Capital Markets said that Democratic control of the Senate “increases not just the probability of more fiscal [stimulus], but the magnitude”.

India to be the second worst-hit economy in South Asia:

India is likely to suffer the second highest GDP contraction among all South East and Asia Pacific economies in FY21. If the estimated 8.1 per cent growth contraction in the Philippines makes it the highest among the subset. Likewise in Pakistan, growth may shrink 1.5 per cent in FY20 due to monetary and fiscal tightening prior to the outbreak. In Bangladesh, which relies on manufacturing and exports, recovery may be particularly modest with export growth remaining weak, especially in the ready-made garment sector. According to the World Bank, India’s growth rate may recover to 5.4 per cent in 2021, as the rebound from a low base is offset by muted private investment amid financial sector weaknesses.

Africa & Middle East: Camille Capelle 

Biden’s inauguration brings a return to pre-Trump era policies on immigration. Most importantly for people in many African and Middle Eastern countries, as one of his first acts as president, Biden has revoked the so-called ‘Muslim Ban’ which placed unprecedented restrictions on immigration from most majority-muslim countries. The sudden resurgence of interest in American visas marks a pronounced shift from the 79% drop in immigration visas between 2017 and 2019. As well as opening the door to new applicants for immigration to the United States, Biden has also issued the order for applications rejected under Trump to be reviewed although, for some, the opportunity comes too late. 

Protests and civil unrest are on the rise in Tunisia, where the people are demanding the social justice and reforms they were promised 10 years ago after the removal of the undemocratic leader Ben Ali. The worsening socioeconomic situation in Tunisia, which has only been exacerbated by the global pandemic, has heightened the people’s discontent with the government. Cyclical political instability is also to blame for the overall inefficiency of the government, with no cabinet lasting over a year since 2011. On top of this, Tunisia’s fiscal deficit reached 11.5% of GDP, prompting warnings from the IMF for specific measures to be taken. 

Thursday’s suicide-bombing of the market in Baghdad which killed 32 people has been claimed by members of ISIL. It is said to be the biggest bombing in Iraq since 2017 when ISIL was officially defeated in the region. As well as the tragic human cost, the event highlights the serious potential consequences of the US military withdrawal under Trump, as Iraq struggles to address these security threats. ISIL claims that the bombings were aimed at Shiite Muslims in Iraq. 

North America: Amelia Brown 

After a tumultuous, to say the least, beginning of the year for politics in the US (Capitol riots, Trump’s internet ban and second impeachment), President Biden and Vice President Harris were sworn in on January 20th. In just the first few days in office, President Biden has signed dozens of executive orders, many of them reversing one’s the former Trump administration had enacted. Big ones include: the US rejoining the Paris Climate Agreement, stopping the US withdrawal from the World Health Organization, mandating masks on federal land and transport that cross state lines, acceleration of vaccination and PPE production/distribution, among others. Orders to increase food stamps, unemployment benefits, eviction freezes, and vaccination production come just as the virus passes one full year in the US, and cases continue to outpace vaccination. Although hospitalizations in areas have started to decrease following a spike after the holidays, death and daily cases remain nearly as high as in the worst stages of the pandemic early last year. 

Another one of President Biden’s executive orders, stopping construction of the the US section of the Keystone XL pipeline, has drawn criticism from its Canadian counterpart. The pipe was supposed to carry oil more directly from  Alberta to join the pipelines in Nebraska, but was steeped in controversy since its proposal in 2010, as the pipe was planned to go through Native reservations in both the US and Canada, causing environmental concerns. Canada’s energy minister and Prime Minister have both said that Canada must ‘respect’ the decision to nix the KXL pipeline, but politicians in the Alberta province resent the federal government’s acceptance of the backing out of the deal. 

South America: Annie Smith 

As Brazil begins utilising its two million AstraZeneca COVID-19 vaccines, protests continue over President Jair Bolsonaro’s handling of the pandemic. Most recently, the country’s surge in infections and hospitalisations has led to hospitals reaching capacity in the Amazonas state, and in Manaus, the SPA do Alvorada Hospital warned on Friday that its oxygen stock would run out within minutes, requiring donations from other facilities to power ventilators. Also on Friday, Manaus suspended its vaccination roll-out for 24 hours to review its distribution plan, leaving just 34 percent of its 56,000 health professionals vaccinated as the city reaches a breaking point.

The Honduran Parliament is in the process of approving a bill which would make it nearly impossible to legalise abortion in Honduras. Under the new measures, Congress would require at least three-fourths of its membership to modify its abortion law. The country has one of the strictest abortion laws in the world, banning abortion under all circumstances including rape or increst. If the new laws pass, Honduran legislation would recognise a fetus with the same legal status as a person.

Venezuelan President Nicolas Maduro has spoken out after the inauguration of US President Joe Biden, hoping to improve Venezuela’s relations with the United States. In a televised statement on Wednesday, President Maduro said, “We must tell the United States: We want to improve our relations, to make it one of respect, of mutual acknowledgement, a relationship with a future.” The statement comes after President Trump severed relations with Venezuela, including issuing sanctions against its socialist government, imposing an oil embargo, and refusing to recognise Maduro’s 2018 re-election.

Business: Tom Woods 

Italy’s Prime Minister Giuseppe Conte has threatened to sue the two leading COVID-19 vaccine manufacturers over reductions in the number of vaccines being delivered to EU countries. Mr Conte claimed that AstraZeneca had committed a “serious contractual violation” by reducing the number of doses given to Italy in the first quarter of this year from 8 million to 3.4 million. It is further expected that the number of doses provided by BioNTech/Pfizer will drop by 29% this week. This is disappointing news for EU countries already lagging behind much of the world in their vaccination efforts. While the UK is one of the global leaders in vaccination efforts, having vaccinated over 10% of the adult population, countries such as Italy and Spain’s efforts have been more sluggish, having only recently broken the 1-million-person mark. The companies have attributed the delays to complications in the manufacturing process at their European plant.

2020 was a good year to be CEO of a top US bank, as demonstrated by the recent revelation that Morgan Stanley’s chief executive James Gorman received a 22% pay rise. His salary jumped from £27 million in 2019 to a whopping $33 million for 2020, justified by the company as the result of a “record year” which saw the firm’s stock leap by 34%. The bank made two highly successful deals in 2020, acquiring the electronic trading platform ETrade and investment manager Eaton Vance. His package eclipses that received by JPMorgan’s chief executive Jamie Dimon, who earned $31.5 million in 2020, the same rate as in 2019.

Theory: Cassi Ainsworth-Grace 

In a recent article, The Economist attempted to calculate the worldwide economic cost of the Covid-19 pandemic. Their calculations found that the cost is approximately $10.3 trillion in lost output – the goods and services that our global economy could have produced had the pandemic not hit. They separated this cost into regions. $2 trillion will be lost in the euro area and $1.7 trillion in America. India will see the biggest loss for developing countries, at $950 billion, and China will suffer a smaller loss of $680 billion. However, the World Bank predicts that this cost will not be limited to 2020 and 2021, but will have a long-lasting impact on the growth potential for the world economy for many years to come.

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