A clear mandate in Greece. Greece has a new prime minister, now that the New Democracy party captured 39.8 percent of the vote in the country’s general elections Sunday. (Syriza, the party of outgoing Prime Minister Alex Tsipras, captured 31.5 percent.) New Democracy’s 39.8 percent vote share will give it 154-158 seats in a 300-seat parliament – thanks to a quirk in the Greek electoral process – or, in other words, an outright majority to follow through with promises to cut taxes, attract investment and generate new jobs. Even so, new Prime Minister Kyriakos Mitsotakis faces an uphill battle, to put it mildly. The Greek economy is still 20 percent smaller than it was in 2009. Unemployment is hovering at around 18 percent. Its debt-to-GDP ratio is over 180 percent, and it’s supposed to be paying off debt incurred by its 2015 EU/IMF bailout until 2060. Bailout monitors are already scheduled to arrive in Athens this week to review Greece’s recent lack of progress during the election cycle, according to the Financial Times, and they won’t be impressed by Mitsotakis’ margin of victory.
Political intrigue in Turkey. On Saturday, we mentioned that Turkish President Recep Tayyip Erdogan fired the Turkish Central Bank’s governor without giving a reason. Since then, Erdogan has offered a window into his reasoning: “We told him many times to lower interest rates … he did not do what was necessary.” So much for Erdogan’s continued insistence on the central bank’s independence. That was apparently enough for former Turkish Deputy Prime Minister Ali Babacan, who announced his resignation from the ruling Justice and Development Party. He is the latest major Turkish politician rumored to be involved in launching a new political party to challenge Erdogan’s stranglehold on Turkey’s top office. We’ve been keeping an eye on both potential Erdogan backlash and on another nosedive for the Turkish lira, and it seems as though the two are not just in play; they may well be inextricably linked.
Ukraine wants to talk to Russia. You read that right. Ukrainian President Vladimir Zelensky took to Facebook to address Russian President Vladimir Putin directly, insisting that the two should meet in Minsk to “discuss who owns Crimea and who is not present in Donbass.” Zelensky also said the talks should be mediated by U.S. President Donald Trump, British Prime Minister Theresa May, German Chancellor Angela Merkel and French President Emmanuel Macron. Interestingly, the U.S., one of the would-be mediators, is reviewing a formal request from Ukraine to purchase military equipment through the U.S. Department of Defense Foreign Military Sales program, according to the U.S. Embassy in Ukraine. (Ukraine has received weapons from the U.S. in the past but not through this program.) A Russian presidential spokesman said the Kremlin is considering Zelensky’s offer, and it’s easy to see why it’s doing so cautiously.
German economy watch. German industrial output increased by 0.3 in May, hardly a silver lining considering Friday’s data showing a 2.2 percent drop in factory orders. But most of the headlines this morning are not about the slowdown in German manufacturing but about another raft of restructuring for Deutsche Bank, which announced yesterday that it will leave the global equities-trading business. In practical terms, that means Deutsche Bank will be eliminating some 18,000 jobs. We’ve been concerned about Deutsche Bank’s position for a few years now, but must admit that Deutsche Bank and the German economy have been more resilient in the short term than we expected. It’s not yet time to sound the alarm, but some of the structural issues we’ve pointed out are certainly revealing themselves.
Light at the end of Taliban’s tunnel? Talks in Qatar among some 50 Afghan delegates and 17 Taliban officials began yesterday and will continue through the end of today. U.S. and Taliban officials paused their own talks to support the intra-Afghan dialogue. The U.S. envoy to the Taliban said those talks, which will resume on Tuesday, were by far the “most productive session” he has had with the group. And while the situation on the ground in Afghanistan has not changed in any meaningful way to suggest progress, the fact that the Taliban is talking with the Afghan government is a step forward, as is the optimism of the U.S. envoy.
Iranian enrichment. After weeks of threats, Iran announced that has enriched uranium to 4.5 percent – well above the 3.67 percent enrichment level stipulated in the 2015 nuclear deal. A spokesperson for the Atomic Energy Organization of Iran said that if countries party to the agreement were not able to satisfy Iran’s demands, Iran would increase the number of centrifuges and pursue 20 percent enrichment in 60 days. The U.K., Germany and France all criticized Iran’s move, but the French government noted that it would not trigger the nuclear deal’s dispute resolution mechanism for a week, during which it would try to get all parties talking again. It’s hard to see what another week will amount to in the grand scheme of things, and there is little to suggest that U.S. policy is going to be affected by Iran’s recent actions.
- Norway will mediate talks between Venezuela’s government and the political opposition in Barbados at an undisclosed time this week.
- Turkey’s energy minister says a second Turkish drillship will begin drilling for oil and natural gas in the Eastern Mediterranean this week.
- South Korea says its coast guard had to fire 249 warning shots to ward of a swarm of Chinese fishing boats illegally fishing in South Korean waters. China has expressed “serious concern.”
- South Korea’s finance minister said Japan should lift export restrictions on key manufacturing technology components announced last week. Samsung’s vice chairman is in Japan to urge Japanese business leaders to call for the same.
- Germany said it would not deploy ground troops in Syria despite a U.S. request to do so.
- Protests in Hong Kong on Sunday were relatively subdued. Protesters claimed their numbers exceeded 200,000, but police said peak turnout was just 56,000.
- The Russian government has reportedly approved plans to construct a toll highway that would connect China to Europe via Kazakhstan, Russia and Belarus.