Greek and Turkish Cypriot leaders continue reunification talks. Japanese Premier meets with Argentine President to improve economic ties. OPEC meets to discuss oil deal. German right-leaning parties flesh out their future. All in The Week Ahead.
Greek and Turkish Cypriot leaders continue reunification talks
On Monday, the Greek and Turkish Cypriot leadership will resume reunification talks in Geneva, Switzerland. Talks last week had been broken off in part to prevent entering the security summit without a final determination on territory and reclamation of lost home and property for Greek Cypriots previously living in Turkish-controlled Cyprus.
Negotiations began when the Turkish Cypriots elected reformer Mustafa Akinci and committed to finding a solution in concert with Greek Cypriot leader Nicos Anastasiades, who had also sought a solution. A number of complex issues remain to be resolved, including the position of the Turkish military in Northern Cyprus, the return or compensation to those who lost property following the 1974 Turkish invasion, the Turkish Cypriot’s declaration of independence, the structure of a newly federal Cyprus and the size of federal zones, and the position of the UK in a federalized Cyprus.
The UN, which has facilitated talks between the two parties, has encouraged recent developments, though the position of Turkey as negotiations continue remains a big question mark. Typically the Turkish government has encouraged a more conciliatory approach to the Cyprus question to improve relations with the European Union, though domestic instability and an EU consumed with its own problems could remove the natural incentives for Turkey to support reconciliation between Turkish Cyprus and the Cypriot Republic. Should the Cyprus question be resolved, this could remove a number of headaches for Turkey and the EU, particularly in terms of NATO. Turkey has frequently clashed with the EU on non-NATO EU member state Cyprus, and this has made it difficult for the EU and NATO to act more collaboratively.
Japanese Premier meets with Argentine President to improve economic ties
On Monday, Japanese Prime Minister Shinzo Abe will meet with Argentine President Mauricio Macri in Buenos Aires to discuss improved economic ties. This meeting will dovetail with a few other international meetings Prime Minister Abe is conducting up and down the Western Hemisphere, including the first international visit to President-elect Trump and the APEC summit in Peru. Both the Japanese and Argentine governments are likely moving to bolster their economies through trade as their domestic economies remain stagnant or difficult.
In Argentina and Japan, both countries with major economies and outward-looking heads of state, President Macri and Prime Minister Abe will accelerate their push against the rise of protectionism that has begun to take hold in other major countries, particularly the United States and the UK. Last week, President Macri met with Canadian Prime Minister Justin Trudeau to deepen trade relations between the two countries and further integrate their relationship both economically and politically. Prime Minister Trudeau also gave advice on how to resettle Syrian refugees. The election of Trump to be President of the United States is likely to accelerate processes to strengthen trade ties between relatively open economies without major right-leaning or left-leaning populist movements, particularly those with recent elections. Concerns about a recession or international crisis could speed up moves to protect domestic economies in places without a populist threat, as appears to increasingly be the case in countries like Canada, Japan, Australia, and Argentina.
OPEC meets to discuss oil deal, may discuss U.S. developments
On Monday, the Organization of Petroleum Exporting Countries’ technical committee is set to meet in Austria to discuss implementation of a September oil supply deal, which is set to reduce between 32 and 33 million barrels a day of production. The deal set oil prices up, though it has since fallen to below $47 a barrel. In early October it was nearly $54 a barrel. Implementation across the board may be difficult, and will require the coordination from adversaries Saudi Arabia and Iran, while cash-strapped countries like Venezuela desperately hope for a production cut to raise oil prices and revenues. If successful, this deal would end a 2-year period of essentially pumping without limit.
This also will likely represent an opportunity by the OPEC member states, which stretch from Ecuador to Indonesia, to discuss the likely impact of the new U.S. President-elect on the energy sector and global economic stability. On the energy sector front, many expect the new administration to ease energy regulations and promote Canadian pipeline construction from the Alberta oil sands to the Midwest and Mountain West, which will likely accelerate oil production in both the United States and Canada which could further reduce oil prices and fill the gap trying to be established by the Algiers deal. On the global stability front, there are plenty of reasons for OPEC countries to be apprehensive. The president-elect’s Middle East policy has been nearly non-existent and frequently contradictory; European security appears at risk with ambivalent discussions of NATO; and relations with Russia and China could alter the calculus and embolden a number of countries in OPEC.
German right-leaning parties to flesh out parties’ future
On Thursday, Bavarian Premier Horst Seehofer, leader of the Christian Social Union (CSU), will brief the German media on his views of the future of the CSU with Chancellor Angela Merkel’s Christian Democrats (CDU). Seehofer has consistently criticized Chancellor Merkel’s policy towards Syrian refugees, and has hinted that his party may not be as willing to support the CDU heading into 2017 federal elections.
The CDU has experienced losses at the provincial level throughout 2016: in March it lost 18 seats in Baden-Wurttemberg, 6 in Rhineland-Westphalia, 12 in Saxony-Anhalt, and 8 in Berlin. It also fell to third place, behind right wing party AfD, in Mecklenburg-Vorpommern in September. If the CSU detects structural weaknesses within the CDU due to the insurgent AfD, it may begin to distance itself to protect its own domestic position. Should the CSU fail to support the CDU, this could make Chancellor Merkel’s election to a 4th term in 2017 more difficult, and divisions within the center-right could lead to a resurgence from the far right. Should the major French and German political parties fail to subvert the far right elements within both countries, this could further destabilize the major Western economies and portend increasing market volatility among the G7 member states.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Week Ahead is written by GRI Analyst Brian Daigle.
