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Five years ago, Greece’s sovereign debt problems nearly brought down the eurozone. In February 2010, the country found itself unable to pay its creditors and was forced to turn to the European Union (EU) and the International Monetary Fund (IMF) for aid. As a euro user, Greece was required under the Maastricht Treaty of 1992 to keep deficits below 3% of its GDP and to keep its public debt below a 60% ceiling. However, Greek political officials concealed the true state of their budget situation with the help of American investment bank Goldman Sachs. This allowed them to join the eurozone and borrow at low interest rates. When the true size of Greece’s debt was revealed, panic swept European markets, especially those of heavily indebted countries such as Portugal, Italy, and Spain. The fear was that if Greece failed to pay its debts that other indebted European countries, all of whom are euro members, would as well. To calm markets, the so-called Troika of the EU, the European Central Bank (ECB), and the IMF stepped in and funneled billions of dollars in loans to the Greek government. This assistance required painful austerity measures, which caused Greece to increase taxes and reduce public spending. The austerity measures have been very unpopular in Greece and two weeks ago, on January 25, the Greek populace elected the far-left SYRIZA Party, which opposes austerity. New Prime Minister Alexis Tsipras has vowed to not follow the conditions imposed by the Troika and is seeking a restructuring of Greece’s external debt. Analysts warn that SYRIZA’s position puts it on a collision course with powerful EU nations such as Germany and that Greece’s recent election might take it out of the eurozone.
This topic brief will explore Greece’s current economic problems, discuss the outcome of the recent Greek election, and how the country’s future debt negotiations may proceed.
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Two weeks ago on January 7, two gunmen stormed into the offices of Charlie Hebdo, a satirical French magazine, and proceeded to kill eleven people and a police officer. The gunmen, Cherif and Said Kouachi, were French citizens with Islamic beliefs and their grievance against Charlie Hebdo was the magazine’s cartoons of the Prophet Muhammad, who cannot be depicted per the tenets of the Islam. Over the next two days, French police tracked down and killed the Kouachi brothers, while one of their accomplices, Amedy Coulibaly was killed after taking a kosher supermarket hostage. Coulibaly killed four hostages and one policewoman before being neutralized. The string of attacks shocked the French public, with many seeing the attack on Charlie Hebdo as an assault on the country’s traditions of freedom of speech and expression. On January 11, an estimated 1.3 million people went into the streets of Paris to march against the violence, which included more than forty heads of state. The attacks have presented President Francois Hollande with an opportunity to bolster his reputation among French voters, which has eroded over the last year due to a sluggish economy. However, the attacks may serve to galvanize support for the French far-right, namely the National Front (FN), which has argued for immigration controls and against what they deem as the “Islamization” of France.
Two weeks ago, the North Atlantic Treaty Organization (NATO) ended Operation Enduring Freedom in Afghanistan. Beginning shortly after the September 11 terror attacks, Operation Enduring Freedom produced the fall of the Taliban government, scattered remnants of the al-Qaeda terrorist network, and attempted to provide protection and humanitarian assistance to the Afghan people. Operation Freedom’s Sentinel will replace Operation Enduring Freedom, with the United States leading a contingent of 13,000 foreign troops who will continue to provide training and intelligence services to Afghan security forces and support for counterterrorism operations. President Barack Obama has called for a drawdown of all American forces from Afghanistan by 2016, with only 1,000 remaining in a non-combat capacity. However, 2014 was the deadliest year on record in Afghanistan as more than 5,000 Afghan troops and 10,000 civilians were killed. Since the American withdrawal from Iraq in 2011 produced the rise of the Islamic State, opponents of the President’s drawdown plan argue that the same fate could befall Afghanistan, thereby erasing the gains that NATO troops made since 2001. New Afghan President Ashraf Ghani has also expressed hesitation about the withdrawal of more American and foreign troops from Afghan territory, warning last week that a future withdrawal should be based on mutual interests and not rigid timetables.
Since 1960, the United States has maintained an economic embargo on Cuba, an island nation just ninety miles off the coast of Florida. The embargo was an instrument of Cold War policymaking, as Cuba became a communist nation under Fidel Castro and seized American economic assets without compensation. Even after the Cold War ended, the United States maintained the embargo as a political instrument in hopes of weakening the Castro regime. However, in the 1990s and 2000s, the embargo came to be seen by other Latin American nations as an unjust extension of American imperialism and some pundits allege that the embargo came to isolate the United States from the rest of the Western Hemisphere just as much as the embargo isolated Cuba from the American mainland. Last week, President Obama announced that he was taking executive action to weaken the long standing Cuban embargo and that he would move to normalize relations with Cuba. The President’s action received bipartisan support from those who believe that the embargo harms America’s relations with other Latin American nations, yet also received bipartisan criticism for rewarding a dictatorial regime that abuses the rights of its citizens. The President’s actions have forced 2016 presidential contenders such as Hillary Clinton, Rand Paul, Jeb Bush, and Marco Rubio to weigh in on the issue and depending on how well the President’s normalization push goes, it could become a significant issue in the Republican presidential primaries and the 2016 general election.
Since June, the price of oil has plunged 40% on the international market in response to economic slowdowns in Europe and Asia and a glut of supply from the Middle East and North America. The falling price of oil, near $60 a barrel at the time of the writing of this brief, has been a boon for nations that import fossil fuels. It also provides much needed stimulus for consumer-driven economies such as the United States as people are able to take the money they would normally spend on high gas prices and direct it to other economic activities. However, the falling oil price has worked against some economies that rely largely on the proceeds from oil exports. Countries such as Venezuela, Russia, and Nigeria, among others, are now left wondering how they will react to the sudden fall of global oil prices and the decisions that they make could determine whether their current governments survive.
After existing for twenty months Israel’s coalition government has collapsed. Prime Minister Benjamin Netanyahu held a press conference last week to announce the firing of Justice Minister Tzipi Livni and Finance Minister Yair Lapid on the grounds that they were insubordinate and plotting behind his back. Livni and Lapid were the two moderate members of Netanyahu’s Cabinet and their dismissal removes their political support for his coalition, thereby necessitating that new elections be held. Israeli voters went to the polls to create Netanyahu’s existing coalition in January 2013 and now, in the Israeli tradition, they will head back to decide whether Netanyahu deserves a fourth term, which is the one defining issue of the race thus far. The elections are tentatively scheduled for March, with March 17 looking like the probable election date.