1 Europe’s gathering storm clouds (Mohamed El-Erian
in The Guardian) Dark clouds are lowering over Europe’s economic future, as
three distinct tempests gather: the Greek crisis, Russia’s incursion in
Ukraine, and the rise of populist political parties. Though each poses a
considerable threat, Europe, aided by the recent cyclical pickup, is in a
position to address them individually, without risking more than a temporary
set of disruptions. Should they converge into a kind of “perfect storm”,
however, a return to sunny days will become extremely difficult to foresee any
time soon.
As it stands, the three storms are at different
stages of formation. The Greek crisis, having been building for years, is
blowing the hardest. Beyond the potential for the first eurozone exit, Greece
could be at risk of becoming a failed state – an outcome that would pose a
multi-dimensional threat to the rest of Europe. Mitigating the adverse
humanitarian consequences (associated with cross-border migration), and
geopolitical impact of this storm would be no easy feat.
The second storm, rolling in from the EU’s east, is
the costly military conflict in Ukraine’s Donbas region. Further Russian
interference in Ukraine would present the west with a stark choice. It would
either have to tighten sanctions on Russia, potentially tipping western Europe
into recession as Russia responds with counter-sanctions, or accommodate the
Kremlin’s expansionist ambitions and jeopardise other countries with
Russian-speaking minorities (including the EU’s Baltic members).
The third storm – political tumult brought about by
the rise of populist political movements – poses yet another serious threat.
Energised by broad voter dissatisfaction, particularly in struggling economies,
these political movements tend to focus on a small handful of issues, opposing,
say, immigrants, austerity, or the European Union – essentially whomever they
can scapegoat for their countries’ troubles.
Given the EU’s fundamental interconnectedness – in
economic, financial, geopolitical, and social terms – the disruptive impact of
each shock would amplify the others, overwhelming the region’s circuit
breakers, leading to recession, reviving financial instability, and creating
pockets of social tension. Fortunately, the possibility of such a perfect storm
is more a risk than a baseline at this point. Nonetheless, given the extent of
its destructive potential, it warrants serious attention by policymakers.
2 Greece opts for referendum on bailout (BBC) The
Greek parliament has backed plans for a referendum on international creditors'
terms for a new bailout. The 5 July referendum was called by PM Alexis Tsipras,
who opposes further budget cuts. He urged voters to deliver a "resounding
'no'" to the package.
Eurozone partners have criticised Greece's
referendum announcement, and rejected its request to extend the bailout
programme beyond 30 June. Greece could default on a €1.6bn IMF repayment due on
that day. There are fears the country may leave the euro and that its economy
may collapse without new bailout funds.
Mr Tsipras's motion on a referendum easily won the
backing in the 300-member strong parliament, with at least 179 MPs voting
"yes" in the early hours of Sunday. His government had earlier
rejected the creditors' offer of a five-month extension to Greece's bailout
programme in exchange for reforms. On Saturday, eurozone finance ministers
rejected the Greek proposal for the bailout extension beyond Tuesday's
deadline.
When the Greek government thought it had made
substantial concessions at the beginning of the week, the creditors said it
simply wasn't enough. And while no-one can say for certain that Greece will
leave the eurozone, this is already uncharted territory.
3 Singapore’s lessons for America (Fareed Zakaria in
Khaleej Times) To help prepare for a trip there next week, I asked the
country’s deputy prime minister, Tharman Shanmugaratnam, what he regarded as
the country’s biggest success. I imagined that he would talk about economics,
since the city-state’s per capita GDP now outstrips that of America, Japan and
Hong Kong. He spoke instead about social harmony.
“We were a nation that was not meant to be,”
Shanmugaratnam said. The swamp-ridden island, expelled from Malaysia in 1965,
had a polyglot population of migrants with myriad religions, cultures and
belief systems. “What’s interesting and unique about Singapore, more than
economics, are our social strategies. We respected peoples’ differences, yet
melded a nation and made an advantage out of diversity.”
How did Singapore do it? By mandating ethnic
diversity in all of its neighborhoods. Over 80 per cent of Singaporeans live in
public housing. Every block, precinct and enclave has ethnic quotas. This is
what people mean when they talk about Singapore’s “nanny state,” and the
minister readily admits it. “The most intrusive social policy in Singapore has
turned out to be the most important,” he says.
This belief was at the heart of many of the efforts
of the US federal government in the 1950s and 1960s to desegregate schools and
to integrate neighborhoods — through court orders, housing laws, and executive
action. Those efforts were largely abandoned by the 1980s and, since then, the
data show an America that remains strikingly segregated.
Despite the fact that the Supreme Court ordered
school desegregation 61 years ago, schools have actually become more homogenous
in the last two decades. Secretary of Education Arne Duncan admits that today
“only 14 per cent of white students attend schools that you could consider
multicultural.”
Singapore is an unusual case. It is a small
city-state. It has its critics, who point to a quasi-authoritarian system.
Singapore can do things Western democracies cannot. It also has had its own
racial problems. All that said, I believe that Singapore is an example of a
diverse society that has been able to live together and that we could learn
something from. (To be sure, Singapore could learn some lessons from Western democracies
as well.)
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