More ominous news from the German economy. The country’s DAX index declined 3.5 percent yesterday. The index, which is highly exposed to changes in exports and the automotive industry, is seen as the primary equity measure for Germany. 2018 is shaping up to be the index’s worst year since 2008, having dropped by 20 percent since a record high at the beginning of January. The bad news doesn’t end there. Official government statistics show that October’s industrial output fell 0.5 percent, well below expectations of 0.3 growth, with manufacturing, energy and construction sectors all contracting. Volkswagen announced plans to cut $3.41 billion in operating costs by 2023. This will include discontinuing certain models and laying off an unspecified number of employees – all to ease the transition to electric car-making. We already knew that the German economy contracted in the third quarter. Analysts still expect a rebound despite these discouraging indicators, but a recession can’t be ruled out entirely.

Oil and OPEC. The much anticipated OPEC meeting failed to produce an agreement on production cuts and deferred the issue of production cut exemptions for Iran, which has already slowed output because of U.S. sanctions. Interestingly, OPEC wants non-member states to cut production, too, covering about a third of what would be taken offline – a tacit admission that OPEC no longer controls price and production as it once did. Obviously it will be difficult to make non-member states such as Russia and the U.S., which have no obligation to OPEC, comply.

Venezuela’s president looks for lifelines. Nicolas Maduro has again been seeking help from some of the usual suspects: Russia and Turkey. Moscow agreed to invest $5 billion in Venezuelan oil production and $1 billion in mining, particularly gold. It’s a nice gesture, but it won’t meet Venezuela’s immediate financing needs, and it doesn’t come close to fixing the oil industry, which needs more than $5 billion in repairs. Arguably more beneficial is the 600,000 tons of wheat Russia pledged to Venezuela, which relies on imports to satisfy about 60 percent of its domestic consumption. Turkey also said it would invest in Venezuelan gold mining – which makes sense, considering that the Maduro government has prioritized gold extraction to raise government revenue and pay off debt. Still, these agreements are better thought of as financial transactions for Russia and Turkey than efforts to strengthen the Maduro regime.

In search of restraint in the Balkans. Kosovo’s efforts to create a formal army have put every nation in the region on edge. Jens Stoltenberg, the head of NATO, said the move is ill timed and contrary to the view of many NATO members. Russian Foreign Minister Sergey Lavrov called for the full implementation of the peace agreement. Albanian President Ilir Meta implored Serbia and Kosovo to resolve their differences diplomatically, though he noted Albania would not support border changes. Serbian President Aleksandar Vucic has tried to allay concerns, saying that the situation was tense but unlikely to result in war. Maybe he’s sincere, but the Balkans is the Balkans, where even small conflicts can ignite much larger ones. The formation of a regular Kosovar army is a case in point. It wouldn’t materially change the armed forces’ size or capabilities, but it would be deliberately antagonistic, an intentional step toward one of Serbia’s red lines.

Honorable Mentions

  • The Iranian government will increase public workers’ wages by 20 percent. The country’s accumulated 12-month inflation stands at roughly 35 percent.
  • France is bracing for more protests this Saturday and will have 89,000 police ready to manage the fallout.
  • Ecuador wants to renegotiate better terms for its debt with China and remains open to other sources of financing, including the International Monetary Fund.
  • Heads of state from Russia and Greece expressed an interest in implementing joint energy, industrial and infrastructure projects.
  • Moldovan President Igor Dodon said the country’s association agreement with the EU does not reflect Moldovan interests. He also said he will correct the situation.