In Brief – N.17 – July 12, 2015

Greece’s financial default will likely have consequences on largest European economies such as France, Italy and Germany. Beyond financial considerations, the high cost that mostly worries governments will be political. In Spain with Podemos and in France with the Front National, radical political change has never seemed so possible.

Russian President Vladimir Putin reiterated his support to Syria and his counterpart Bashar Al-Assad. More significant has been him saying Turkey, Saudi Arabia and Jordan “are ready to make their contribution to fighting the evil that is the Islamic State (ISIS).”

French companies and Economy Ministers were spied by the NSA for years. The US intelligence agency allegedly described France’s economy as being “in shambles”. There has been none strong public diplomatic and political response from the French government. Public opinion discontent skyrockets.

China “tous azimuts”. Chinese Premier Li Keqiang has paid a milestone official visit to France where he saidthe two nations should strengthen strategic mutual trust and push forward the development of the bilateral relations.”

In anticipation of an accord with the P5+1, Iran has already witnessed improvement of its trade and investment trends. According to official sources, Iran non-oil exports, a priority of President Hassan Rouhani, have grown and Iran’s trade balance for Q1 2015 has turned positive.

By late summer 2014, with interest rates having declined further, it appeared that no further debt relief would have been needed (by Greece) under the November 2012 framework, if the program were to have been implemented as agreed,” said an IMF report that questioned PM Alexis Tsipras’ policy.

An accord between Iran and the P5+1 is near, according to diplomatic sources from China, Russia and Iran. A same stance seems not shared by western country for now. There have been real advances but there are remaining questions that need answers, analysts said.

The US economy can still be improved. President Barack Obama said the latest jobs report for the US is “good,” but there is still more work to do “get folks’ wages and incomes to keep going up.”

Security threat intensified in Egypt where the military announced it has killed within 5 days around 250 jihadists in the Sinai. Most of them allegedly belonged to ISIS.

According to an Iranian source, “technical annex” and the final text of the UNSC resolution are the last steps before the announcement – “very likely”, the source said – of an historic agreement over Iran’s nuclear program. However, it seems more negotiation is necessary.

“The ECB now faces an awkward choice,” about Greece, following the “no” referendum to the Troika plan, said 2008 Nobel Prize-winning economist Paul Krugman. “If it resumes normal financing it will as much as admit that the previous freeze was political, but if it doesn’t it will effectively force Greece into introducing a new currency,” he explained.

Russia, China, Argentina, European parties like Podemos, FDG and Front National have all welcomed the 61% of “no” votes in Greece’s referendum that thus strongly rejected the Troika’s plan. Most of the euro area’s political leaders still support Germany’s uncompromising stance of austerity.

“What we call the Greek crisis is but the general inability of the Eurozone to a find a permanent solution to a self-sustaining debt crisis. In fact, this is a European problem, and not a Greek problem exclusively,” Greek PM Alexis Tsipras told MEPs.

The slowdown in productivity has added to concerns about the long-term economic outlook. But new OECD research shows that policy reforms can revive the diffusion of innovation and make better use of human talent to clear the path for higher and more inclusive productivity growth.

The West allegedly wants to keep active the embargo on weapons exports to Iran within the framework of an agreement over Iran’s nuclear program that is yet to be reached. It seems however that the GCC would be outspending Iran on arms with a factor of 13.

Here is something that should not make continental Europe happier. The UK government has cut corporate taxes rate from 20% to 18%. France’s and Germany’s are 33% and 29.65% respectively. Russia announced $80 billion trade surplus YTD while sanctions against Russia over Ukraine have cost Europe much so far.