It’s only Monday, so who knows what could happen, but at the moment this is looking like a pretty consequential week, isn’t it?
First there’s the Iran deal deadline, which is theoretically tomorrow but really Thursday, the last day a deal can be submitted to Congress before its “review period” under the Corker bill goes from 30 to 60 days. As to whether the negotiators will meet even the Thursday deadline (after which there’s no deadline left at the moment, so they could go on well after that), put me in the “believe it when we see it” camp. “Serious differences” remain, as they will, and negotiators are floating the possibility that talks may go past tomorrow; plus, there’s always the possibility of an 11th hour breakdown (either an actual breakdown or one that’s feigned for negotiating effect).
On the plus side, the two sides have apparently gone so far as to draft language related to US and EU sanctions relief, but on the minus side, the sticking point seems to be over the language of a UN Security Council resolution lifting its sanctions, as well as the mechanism for reimposing sanctions if Iran violates the agreement (which is an internal P5+1 issue as much as it’s a P5+1 and Iran issue). The Iranians are behaving in an odd way, talking openly about their plans to double oil exports once a deal is signed and yet simultaneously demanding that the UN arms embargo against it also be lifted as part of the deal. I’m no negotiator, but I’m not sure it’s a good idea to show your eagerness for a deal at the same time that you’re trying to leverage additional concessions out of the other side. You might see some kind of promise to discuss the arms embargo at a future date, but I have a hard time believing that the US (and if not the US, then France) will acquiesce to lifting it as part of this deal.
This week should also see some fascinating fallout from Greece’s clear “no” vote to more forced austerity on Sunday. Greece’s Finance Minister (well, ex-FM now), Yanis Varoufakis, resigned earlier today in what was probably an attempt by the Greek government to show its Troika negotiating partners (who apparently don’t like Varoufakis so much) that the vote doesn’t mean that Greece is walking away from negotiations or the Euro, just that it needs the other side to give a little on its Austerity Forever demands. There seems to be a lot of “hell no” sentiment floating around Europe to that idea, but that might be just the heat of the election talking. Interestingly, German Finance Minister Wolfgang Schäuble suggested last week that Greece could still remain in the Eurozone even with a “no” vote, perhaps via a “temporary” exit from the currency union, so I guess we may see if he’s right. Greek and Troika negotiators have a lot of work ahead of them.
“Most Interesting Economist in the World” Thomas Piketty gave an interview (in German) to Germany’s Die Zeit a few days ago where he harshly criticized austerity as “the idea of endless penance,” and compared it to Europe’s tradition of debt forgiveness. Specifically, Piketty hilariously explained to his seemingly incredulous interviewer that Germany really shouldn’t be lecturing other countries on the importance of paying debts, since the modern German economy is essentially built on a mountain of post-World War II debt forgiveness:
“When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: What a huge joke!” Piketty said in the interview, translated by the site Medium.com (though later taken down due to copyright concerns). “Germany is the country that has never repaid its debts. It has no standing to lecture other nations.”
Somehow I doubt that message is going to resonate in Berlin, but somebody needed to say it anyway.
By the by, keep an eye on Ukraine as the next country to get on the IMF’s bad side and to ask its bondholders to take a haircut, though they likely won’t find themselves in Greece’s position so long as they’re still in conflict with Russia.
This also promises to be an eventful (though not in a good way) week in Burundi, as presidential elections approach on July 15. Incumbent President Pierre Nkurunziza is still planning to run for an unconstitutional third term, and plenty of Burundians still seem very much not to want him to do that.
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