Algeria’s ‘system’ hangs tough
Algeria seems headed down a road already taken by other resource-rich authoritarian countries like Venezuela. Low oil and gas prices have made it harder for a crony oligarchy to buy off the public with subsidies and benefits. Their latest expedient to stave off reforms is to use the central bank to fund a government stimulus program, but that only delays the day of reckoning.
Russia breaks its social contract
In two decades of rule, Russian President Vladimir Putin has ensured stability by offering Russians an implicit social contract – a modest but secure social safety net in exchange for carte blanche in politics. Now, the country’s deepening financial and demographic crisis has put an end to this, forcing the government to make plans for increasing taxes and raising the retirement age by as much as eight years. No matter how cleverly handled, these austerity measures could trigger a serious backlash.
Opinion: Italy at risk
Italy’s new left-right government is a political experiment that could turn out in one of two ways: either a disguised version of business as usual, or a complete disaster. Many observers assumed that Lega leader Matteo Salvini would manufacture the disaster on purpose to take Italy out of the euro. Now, it appears more likely that the financial crisis – if and when it comes – will occur by accident rather than design.
Think of the unthinkable
For nearly two decades, the EU’s common currency system has worked wonders for internal trade. The euro has strengthened Europe’s financial position in the world. However, many government and EU leaders, and the European Central Bank have colluded in circumventing the system’s key safeguards. Today, the unmanageable levels of sovereign debt threaten to tear up the eurozone and trigger state bankruptcies.
Russia’s new government shows tensions beneath the surface
It has become clear that Russian President Vladimir Putin’s reelection means another term in office for Prime Minister Dmitry Medvedev and his government. To some, the lack of new faces shows the regime is headed for a period of inertia and stagnation. This view is understandable, but it is wrong.
Opinion: The United States should rein in the global tax bureaucrats
President Donald Trump was right to disrupt the G7’s efforts to promote “fair, progressive, effective and efficient tax systems.” The goal may seem innocuous, but it is quite the opposite – favoring large, intrusive governments at the expense of individual economic freedom. One of the most damaging proposals to create a global tax bureaucracy is the Base Erosion and Profit Shifting (BEPS) project – a pet scheme of the OECD.
The European Semester: More power to eurozone governments
The sovereign debt crisis prompted a raft of new EU regulations overseeing member states’ fiscal and budgeting processes. At first, the rules gave a lot of power to the European Commission, but eurozone governments now tend to use the coordination process to place themselves above the Commission and the peripheral member states. There is still no credible institutional backup, however, against debt contagion.
EU budget plan offers progress and pitfalls
The European Commission is finally taking steps to trim unproductive spending in areas like agriculture in its budget framework for 2021-2027. But while the new emphasis on fighting waste is promising, the fiscal plan also contains troubling proposals. One of the most disturbing is to reduce cohesion payments to countries that violate European "values," based on the arbitrary interpretations of the Commission and a few powerful member states.
Opinion: Where is Italy headed?
For two months, Italy’s Five Star Movement and its leader Luigi Di Maio have tried to assemble a cabinet with the mainstream parties of the center-right (Silvio Berlusconi) or center-left (Matteo Renzi). So far, they have failed. But those who assume Italy is doomed to return to the polls underestimate the capacity of Italian politicians for compromise – especially since a weak government suits nearly everybody.
New narratives emerging on EU finances
The European Union’s inflexible budget process – constrained by seven-year Multiannual Financial Frameworks (MFFs) – has left the bloc almost incapable of handling major crises. The resort to ad hoc solutions over the past decade has only made the situation worse. Now, reformers are considering new revenue sources, and even more revolutionary steps such as EU taxes or a separate eurozone budget.