Israel, Palestine: A break in the cycle.
Also: North Korea, Germany, Nigeria and Canada.
ISRAEL. PALESTINE. A break in the cycle.
A deal for an exchange of hostages and a brief ceasefire.
Israel and Hamas agreed on Wednesday for a brief pause in fighting and the release of hostages and prisoners, following negotiations involving the US and Qatar. Benjamin Netanyahu promised to resume fighting after the pause..
INTELLIGENCE. In an unusual show of coordination, Israeli Prime Minister Netanyahu, Hamas leader Ismail Haniyeh, and Joe Biden all talked up a deal prior to the announcement. The arrangement involves a four-day pause, the release of 50 of the approximately Israeli 240 hostages, and the release of 150 Palestinian prisoners. For each further 10 hostages released, Israel said it could grant an extra day’s ceasefire. International observers welcomed the news.
FOR BUSINESS. While Netanyahu and his war cabinet have pressed for Hamas’s destruction, accusations that the government is pursuing this at the expense of hostages have been increasing. Despite opposing a ceasefire just days ago, pressure from families is likely to have swayed Netanyahu to re-balance priorities, at least temporarily. But the deal is unlikely to appease those within government, and the public, who want him to resign once the war ends.
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NORTH KOREA. Third time lucky.
Pyongyang succeeds in its third attempt at a satellite launch this year.
North Korea claimed a successful spy satellite launch on Tuesday. The US, Japan and South Korea condemned the launch as a violation of UN Security Council resolutions. Japanese residents in Okinawa were told to take shelter.
INTELLIGENCE. South Korean and Japanese officials said they detected the launch but have not yet confirmed whether the satellite is operational. Launching a spy satellite has been a key goal of Kim Jong-Un to counter what he sees as increasing Western threats to the DPRK. While North Korea had been aiming for an October launch, South Korean officials said the postponement was likely due to a delay in the delivery of Russian technological assistance.
FOR BUSINESS. A satellite launch has become one of the key pillars of cooperation between Russia and North Korea. Vladimir Putin publicly pledged to help Kim in September. And while the Kremlin has denied arms cooperation, few believe it. Seoul immediately said it would partially suspend a 2018 military deal with Pyongyang. Meanwhile, South Korea intends to launch its own spy satellite by the end of November, in partnership with US firm SpaceX.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
GERMANY. NIGERIA. Abuja Hallelujah.
Berlin locks in a multi-source energy deal.
Nigerian and German companies signed two energy deals on Tuesday including a renewable energy pact and a gas export deal. Nigeria will export more liquified natural gas to Germany in exchange for German investment in renewables.
INTELLIGENCE. The renewable energy deal aims to harness $500 million in investment in green power and bring more Nigerians into the formal economy. Under the gas export partnership, Nigeria will provide Germany with around 850,000 tonnes of natural gas annually from 2026, rising to 1.2 million tonnes. Nigeria wastes around 300 million cubic feet of gas daily due to poor processing facilities. It is hoped the deal can reduce this wastage.
FOR BUSINESS. Germany is still recovering from the effects of Angela Merkel’s nuclear phaseout and the decrease in access to Russian gas. Imports are down around 18% year-on-year, but half of all households still rely on gas for heating. Meanwhile, Germans are preparing for a first winter without nuclear power; the last reactor closed in April. Wholesale power prices are 160% above 2019 levels, and total generation has declined each of the past four years.
GERMANY. BUDGETKAMPF. Go fund me.
The Scholz-led coalition is reeling after a constitutional court decision.
Germany’s finance ministry on Tuesday imposed a spending freeze on all government agencies, following the decision last week of the country’s top court which ruled a plan to re-purpose €60 billion of COVID-19 funds as unconstitutional.
INTELLIGENCE. The crisis leaves Chancellor Olaf Scholz scrambling to find funds to meet existing commitments. It will further destabilise the already-strained coalition and dent popularity among Germans who see a balanced budget as a core government responsibility. The pain might get worse. The court’s decision could see further challenges to a series of special funds set up to circumvent the country’s ‘debt brake’ restricting its deficit to 0.35% of GDP.
FOR BUSINESS. For a country stereotyped for thrift, the debacle smacks of incompetence. Support for Scholz’s coalition is languishing at 34% but with the far-right Alternative for Germany and far-left Bündnis Sahra Wagenknecht rising in the polls, the government is not expected to call an early election, which is otherwise not due until October 2025. Unless the debt brake is lifted, major projects like funding for chip factories and green steel, could be cancelled.
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CANADA. Higher for longer.
The mid-year fiscal update reveals a longer period of deficit spending.
Canada released its mid-year fiscal update on Tuesday, revealing that deficit spending will be higher than forecast, and debt is predicted to reduce more slowly than previously expected. This year’s deficit is predicted not to change.
INTELLIGENCE. The latest figures are fodder for those arguing Ottawa’s spending has been reckless in an inflationary environment. But while the Trudeau government is under pressure to reduce spending as inflation remains high, the public wants concrete measures to tackle the cost of living. The most recent inflation figures showed a slight drop, but this was almost entirely driven by a drop in petrol prices. Housing, in particular, remains at eye-watering levels.
FOR BUSINESS. To fund the higher deficit, the government plans to issue an additional $71 billion in bonds and treasury bills beyond what was projected in the March budget. There are also billions for new housing to tackle an entrenched lack of affordability, including money for developers and social accommodation. But any new measures for supply will likely take years to have an effect as decades of underinvestment and high migration take their toll.