Germany and Greece leaders meet to talk about economic concerns. Singapore hosts summit on rubber prices. Brazil waits to hear central bank address. The French far right hope for strong election results. Nigeria prepares for presidential elections. All this in the Weekly Risk Outlook.
Merkel and Tsipras Meet in Germany
On Monday German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras will hold talks on the euro and Greek-German relations in Berlin.
The talks seem to be perfectly timed. Both bilateral relations between Greece and Germany as well as the ongoing Greek bailout negotiations have become increasingly tense.
The emergence, last week, of a 2013 video of current Greek Finance Minister Yanis Varoufakis suggesting Greece default on its debts and “stick the finger to Germany” has not helped advance either relations or negotiations.
Comments from Prime Minister Tsipras have been somewhat contradictory on Greek debts as well; he has simultaneously indicated that Greece will not implement recessionary measures, but that it will be able to repay its debts (which the German government argues is impossible).
The Greek government has further inflamed tensions by suggesting the German government is responsible for the payment of significant World War II reparations, making relations between the Greek and German finance ministers even more testy. Although it is possible that a breakthrough may occur during Monday’s meetings, the past several months of negotiations and extensions suggest that the issue will continue to be drawn out.
Rubber Summit Explores Price Trends for Major Manufacturing Commodity
Tuesday will see Singapore will host the 2-day World Rubber Summit 2015. With this year’s thematic focus being “Productivity and Sustainability for Tomorrow’s Market, What Drives It?,” both producers and major consumers will explore the broader issues that affect the global rubber industry.
The conference will review the outlook for global prices, as well as supply and demand trends. Rubber prices have fallen dramatically since 2011 from nearly $3 a pound to $0.78 per pound, reflecting the collapse of most major commodities.
This has taken a toll in Asian markets (which accounts for over 90% of production), particularly Southeast Asia (Thailand, Malaysia and Indonesia) which collectively accounts for over 65% of global rubber production.
Brazilian Central Bank President Delivers Monetary Policy Address
Brazilian Central Bank President Alexandre Tombini will speak to the Brazilian Senate Economic Affairs Committee on Tuesday about the future of the Brazilian real.
Brazil has been one of the select few major economies not to considerably reduce interest rates in the past few months, even as the Brazilian Central Bank deals with troubling inflationary trends.
With the Brazilian real falling 10% against the U.S. dollar in March and breaking the psychologically significant benchmark of 3 reals to the dollar (it currently stands at 3.22:1), there have been justified concerns from neighboring economies (particularly Argentina) of contagion that could envelop other struggling Latin American economies.
Brazilian economic publication Valor Economico has indicated five issues President Rousseff and the Brazilian Central Bank will have to address in order to get Brazil out of its current macroeconomic slump: 1) contain the unsustainable level of inflation (currently projected to reach 8%), 2) consolidate support among the coalition partner PMDB in the Congress to provide a legislative bulwark in favor of reform, 3) reduce the fallout from the Petrobras corruption scandal by enacting major corruption reforms, 4) address Brazil’s power crisis, caused in part by overly ambitious government interventionism, and 5) respond effectively to the water crisis that has gripped major cities like Sao Paolo.
This represents an extremely difficult task for President Rousseff and Mr. Tombini to address, and may prove too much to right Brazil’s fiscal and economic ship in the near-term.
Regional Elections Could Herald the Rise of the French Far Right
On Thursday, France will hold the second round of regional and local elections (having also voted on Saturday), the last major series of elections before the 2017 presidential elections.
MEP Marine le Pen is expected to emerge with much stronger footing for a 2017 presidential bid if her party, the far right populist National Front, performs well this week. (Although criticized for being Islamophobic, fiercely protectionist, and backward, the FN maintains significant and growing support in France.)
A series of hypothetical matchup polls conducted in January placed support for le Pen in the 2017 presidential election at the top of most lists, and her recent attempts to moderate the tone (if not the message) appears to indicate an attempt on the FN to appeal more widely to the French electorate without relinquishing support for populist policies (such as withdrawal from the EU, the reintroduction of the death penalty, and opposition to trade agreements).
Should the National Front perform well in this week’s elections, this will provide the FN with a broad base of elected officials to forcefully advocate the policies of the FN, rail against the perceived failures of mainstream political parties, and campaign for a le Pen presidency in 2017.
Postponed Elections in Nigeria to be Held on Saturday
President Goodluck Jonathan, in office since 2010, hopes to retain his position with Saturday’s presidential elections.
Though originally scheduled for February 8th, the Independent National Electoral Commission moved the presidential elections to March 28th and regional elections on April 11th in response to security concerns from the Boko Haram insurgent group.
President Jonathan and his electorally dominant People’s Democratic Party will be pitted against former military dictator and All Progressives Congress coalition candidate Muhammadu Buhari. Recent polls have placed the two candidates neck-in-neck, as each tries to assure voters that he will provide both the security sought by Nigerians terrorized by the Islamist group Boko Haram.
Both Jonathan and Buhari have presented themselves as the leader to bring stability to the oil giant, as economic concerns, which are quite significant and could lead to further division in the country, take a backseat in this election.
The GRI Weekly Risk Outlook (WRO) provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, the WRO presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Weekly Risk Outlook is written by GRI analyst Brian Daigle.
