19 December 2018

Daily Memo: Buyer’s Remorse in Britain, Protests in Europe, US-Turkey Ties

All the news worth knowing today.

Buyer’s remorse in Britain. Pressure has been mounting for a second Brexit referendum ever since the first, but now that there’s a clear picture of what the Brexit deal looks like, the pressure is overwhelming. With that in mind, it should come as no surprise that The Guardian and The Sunday Times have reported that members of Prime Minister Theresa May’s inner circle are hatching a plan for a second vote. According to the plan, the House of Commons would hold a series of votes on various outcomes, including another referendum. It’s doubtful that any of the votes would command a majority, but the hope is that a referendum would get close enough to justify another attempt. If all goes according to plan, the blame for the Brexit’s potential failure would shift from May’s government to the Commons. The problem is that no one knows what would be on the ballot. One plan is to make it a choice between May’s deal and no deal, but once the lid is off it will be hard to avoid making Remain an option as well. Whatever happens, at least half the United Kingdom’s voters will be angry, and it will likely take years for the nation to heal.

Protests throughout Europe. In Hungary, more than 15,000 people in Budapest rallied against contentious labor reforms, leading to minor clashes with police. In Georgia, several thousand opposition supporters were blocked by police from disrupting the inauguration of President Salome Zurabishvili. In Brussels, some 5,500 protesters marched against a U.N. pact ratified last Monday aimed at fostering cooperation on migration. In Serbia, thousands of demonstrators took to the streets of Belgrade for the second week to protest a crackdown on opposition parties and the media, including the beating of an opposition party leader a week ago. They are calling for nothing less than the resignation of President Aleksandar Vucic and his government. Meanwhile, nearly 70,000 protesters turned out for the fifth consecutive weekend in cities throughout France, despite a series of concessions put forward by the government last week. The protests are getting smaller in size, but the protesters’ demands are growing more ambitious. There are now widespread calls for a referendum system that would give citizens a more direct role in policymaking. This is all just a sign of more to come in 2019 as economic stress becomes more acute.

The U.S., Turkey and the Middle East. Turkish Foreign Minister Mevlut Cavusoglu said the Trump administration is drawing up plans to extradite Fethullah Gulen, the Turkish cleric living in self-imposed exile in Pennsylvania whom Ankara has accused of orchestrating the failed 2016 coup in Turkey. The fact that the announcement came from the Turkish side means this item needs to be interpreted with a fair degree of skepticism; Ankara has a habit of touting “agreements” that the U.S. promptly refutes. Still, seemingly inconsequential issues such as these have more profound effects because they can shape how Turkey will conduct itself in the Middle East: Cavusoglu recently said that Ankara would be willing to work with Syrian President Bashar Assad if he won a credible election, and Iraq’s Kurdistan Democratic Party has reportedly formed a joint operations command with the Turkish army in Iraqi Kurdistan to fight against Turkey’s rebel Kurdistan Workers’ Party.

Europe vs. Chinese telecoms. On Sunday, Handelsblatt reported that Germany plans to lower the threshold for launching national security probes into purchases of strategically important German firms by non-European companies. A foreign purchase of just a 10 percent stake in a German firm will now trigger an investigation under the new rules, down from 25 percent. France and Norway are reportedly mulling a similar move. The prospective changes follow an announcement from France’s Orange SA that it wouldn’t use gear from Chinese telecom giant Huawei to build out fifth-generation wireless networks and similar decisions from firms in the United Kingdom, Australia, New Zealand and Japan. Germany’s Deutsche Telekom AG then signaled that it would follow suit. A united front among advanced economies would be a real problem for China’s tech ambitions.

China says everything is fine, thanks. Beijing has reportedly ordered authorities in Guangdong province, an export powerhouse, to stop releasing their own purchasing managers’ index for the manufacturing sector. The National Bureau of Statistics will now produce all PMIs, according to the order. It’s a logical move for the central government to tighten its control over narratives about the state of the economy, as exporters bear the brunt of the trade war with the U.S. It may also relate to Beijing’s efforts, so far largely successful, to crack down on fabricated provincial data – a widespread issue causing real problems for Beijing’s governance. As with nearly all moves ostensibly intended to help Beijing micromanage its way through crisis, this one carries considerable costs. A decrease in data transparency, for example, will only deepen investor uncertainty and heighten the risk of capital flight when China cannot afford much of either. Then again, a flood of poor economic data would also carry these risks. Bottom line: Beijing increasingly finds itself choosing between bad options.

Honorable Mentions

In an historic split from Russia, Ukraine picked the head of a new national Orthodox church.
Italy’s coalition government has agreed on the new budget it will propose to Brussels, which rejected the one submitted in October.

Sri Lanka’s president reinstated ousted Prime Minister Ranil Wickremesinghe.
The cease-fire reached last week over Yemen’s strategic port city of Hodeida will begin Tuesday, according to representatives from the Iran-backed Houthi rebels and the Saudi-backed government. Fighting continued over the weekend.

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