The EU plays hardball with Italy. Despite rumors to the contrary, the EU and Italy did not reach a deal yesterday on Italy’s revised budget proposal – and they don’t seem likely to reach one today. According to Italian newspaper Corriere della Sera, the European Commission wants Italy to shave another 3 billion euros ($3.4 billion) off the current budget before it signs off. The problem is that it took the Italian government quite a bit of politicking to come up with a revised budget that lowered the deficit target to 2.04 percent from 2.4 percent. Corriere della Sera also reported that Italy’s economy minister told commission Vice President Valdis Dombrovskis that the Italian government probably could not bring the deficit any lower than 2.04 percent because doing so could jeopardize its ability to implement a universal basic income and decrease the retirement age. So the EU is asking yet another member state to introduce austerity to combat slumping economic growth. Why is the bloc, with a total gross domestic product of almost $18 trillion, making a big deal out of 3 billion euros in government spending? The only answer that makes sense is that this isn’t about government spending; it’s about Brussels asserting its authority. It’s a move that, in the long run, could cost the EU far more than 3 billion euros.
In pursuit of “peace with honor.” The Afghan Taliban and U.S. held talks yesterday in Abu Dhabi, along with representatives from Pakistan, Saudi Arabia and the United Arab Emirates. A delegation from the Afghan government was reportedly also in attendance, but the Taliban denied they had attended any meeting with Afghan officials and said they would not attend one even as talks continue today. Pakistan, which is trying to get out of the doghouse with the U.S., is touting its role in the talks. One unnamed official told Voice of America that just having Afghan and Taliban officials “in each other’s vicinity” meant these talks were of greater consequence than previous ones. The framework for a deal is starting to emerge, and reports suggest that the Taliban are being pushed to announce a six-month cease-fire, while the U.S. is being pushed to announce a deadline for withdrawing its troops and forming a new interim government in Kabul that includes the Taliban. Contrary to reports in Pakistani media, the U.S. is in no rush to get a deal done, but it very much wants an agreement. It seems all sides do now.
German pessimism. The Munich-based Ifo Institute for Economic Research’s business climate index fell for a fourth consecutive month to its lowest point in more than two years. Business sentiment was negative in both the manufacturing and service sectors of the economy, and the Financial Times reported that the chief economist at Dutch financial services company ING said the index could be a harbinger of disappointing fourth-quarter GDP growth figures in Germany. Most consensus estimates expect GDP growth to rebound after 0.2 percent contraction in the third quarter. We normally wouldn’t include a business index in the Daily Memo, but Germany normally isn’t on the verge of recession. Amid signs of volatility in the global economy, wavering business sentiment in Germany and whispers that the rebound in the fourth quarter won’t materialize as expected are worth noting.
- Poland officially reinstated Supreme Court justices forced into early retirement.
- The Mexican government announced the minimum wage will increase 16 percent in much of the country and double in areas along the northern border.
- Ukraine’s military intelligence has noted changes in the structure of Russian forces along the Ukrainian border, according to news agency Interfax-Ukraine.
- According to Turkish newspaper Yeni Safak, 24,000 Turkish soldiers and Free Syrian Army fighters are preparing to attack Syrian Kurds east of the Euphrates in northern Syria.
- A cease-fire went into effect in the hotly contested port city of Hodeida in Yemen. Reports of breaches have already emerged, though a senior Houthi leader insisted the group has abided by the terms of the deal.
- Japan’s Cabinet approved new national defense program guidelines, including plans to convert Japan’s largest warship – a helicopter destroyer – into an aircraft carrier capable of launching F-35B stealth fighters.