The Week Ahead

The Week Ahead

Turkey holds referendum. G7 gathers for preliminary meeting. US charts course for Syria. Central banks decide interest rates. All in The Week Ahead.

Turkey’s referendum could dramatically alter the structure of government

On Sunday, Turkish voters will vote on a package of amendments to the country’s constitution to radically redesign the Turkish government. In the current parliamentary system, power is substantially vested in Parliament, with a prime minister and mostly ceremonial president (currently Erdogan). If the amendments to the constitution are approved, power will significantly shift to the elected president: the prime minister position will be abolished, the president will have the ability to appoint cabinet ministers, and the president will also have the ability to appoint half of the country’s top judges (with the remainder appointed by Parliament). The president could also declare states of emergency, dissolve Parliament, appoint all major civil servants, and issue decrees with the full force of law. It would also provide the opportunity for President Erdogan to serve until 2029.

Even with the controversial nature of the policy proposals (with support and opposition about even according to public opinion polls), the campaign itself has been mired in controversy: Turkish officials trying to campaign for support from Turkish expatriates were blocked in the Netherlands and Germany (leading Chancellor Merkel to be called a Nazi by Turkish officials), which may have indirectly led to the success of the Dutch ruling party in their own elections.

G7 preparation summit will bring together major developed nations

On Monday and Tuesday, Italy will host a preparatory meeting of G7 nations (US, UK, France, Germany, Japan, Italy, and Canada) ahead of the leaders’ summit in May. The foreign ministers meeting in Tuscany will likely ask U.S. Secretary of State Tillerson what the U.S. role on Syria will be after last week’s airstrikes.

This meeting will likely be difficult, as the administration still has not filled major positions at the U.S. State Department (2 undersecretary of state positions have not been filled, and the 6 regional bureau chiefs are all currently led by acting officials), meaning the U.S. policy apparatus at the G7 will be hobbled when coordinating with other G7 nations. One G7 official, speaking under condition of anonymity, noted in reference to negotiating with the U.S.,“we no longer know who to talk to. It is slowing everything down.” This issue could significantly limit the capacity of G7 nations to offer a united front not just on Syria, but Russia sanctions policy, counter-terrorism initiatives, global economic policy and climate policy.

The Italian government had also hoped to reaffirm the Paris climate accords, which could also be particularly difficult with the Trump administration and likely a source of friction for the G7 nations (particularly as some of them, like Germany, have already taken substantial steps to move in the direction of green energy).

US continues to redefine Syria policy

Last Thursday, the United States launched several dozen missiles from a U.S. naval ship to strike an airfield used for the Khan Sheikhun chemical gas attack that killed at least 70 people. This response has scrambled traditional party lines in Washington, though most party leaders on both sides have indicated a belief that the move was “appropriate” (Democrats, however, have repeatedly called for a formal declaration for the use of military force, an AUMV, be passed by Congress before the administration proceeds with further action). Many U.S. allies in the Middle East and Europe have expressed outright or cautious support for the targeted strike, though other nations tied to Syria have been direct in their opposition. The Russian government has already indicated that it intends to bolster Syria’s defense capabilities following the strike, and the Syrian government called the strike “reckless and irresponsible.”

This move represents a break from previous U.S. action: although the United States has been in a coalition to bomb ISIS targets in Syria, it has not (until now) taken direct military action against the government itself. Where this goes now is uncertain; just last week Secretary of State Tillerson indicated that the position of Bashar al-Assad as leader of Syria was to “be decided by the Syrian people,” with UN Ambassador Nikki Haley explicitly saying “our priority is no longer to sit and focus on getting Assad out.” After the strike, the US position on Assad’s future is murkier. Any administration statements in the coming days will be key to watch for the future of the region.

Canadian, Brazilian, and UK central banks meet, with major changes unlikely this month as countries move cautiously

This week, the central banks of Brazil, Canada and the UK will meet to set interest rates for their respective countries.  The three are at significantly different positions of economic growth, and their banks have acted accordingly.

Brazil has steadily reduced its interest rates from the October rate of 14% to 12.25% as of last month. There have been few indications Brazil will move aggressively this month (a slight decrease to 12% is possible, though it is equally likely to maintain rates this month), and is looking carefully at U.S. Federal Reserve decisions in the months ahead. The UK has been far more stable in its interest rates; after maintaining an interest rate of 0.5% since 2009 and following the Brexit vote, last August the Bank of England reduced its interest rate to 0.25%. It is not likely the BoE will make any sudden moves in either direction without some signaling to markets (particularly as Brexit negotiations will likely lead to market responses anyway). In Canada, the Bank of Canada has not made any major interest rate decision since 2015 (twice lowering rates, from 1% to 0.5%) when oil prices began to fall and Canada’s petroleum sector began to feel a substantial economic pinch.

Any major moves by stable economies (without an obvious domestic development) would likely signal that developed nations are growing concerned about the stability of the global economy.

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.

This edition of The Week Ahead was written by GRI Analyst Brian Daigle.

About Author