Israel, Palestine: Losing hearts and minds.
Also: the Balkans, Poland, Ecuador, Australia and New Zealand.
ISRAEL. PALESTINE. Losing hearts and minds.
Any victory will come at severe reputational cost.
Over 1 million have been displaced since Israel began its bombing of Gaza, the UN said on Sunday. The US deployed a second aircraft carrier to the region on Saturday as Israel prepared for a ground invasion, so far delayed by bad weather.
INTELLIGENCE. Like any state, Israel will prioritise security over standing. And after the events on 7 October, it will be willing to pay a steep reputational price to eliminate the threat of Hamas. Israel will judge, in the short term, that its neighbours will begrudgingly respect strength over clemency, but the killing of thousands of Palestinians will destroy any chance of true normalisation, which over the long term remains essential to Israel’s safety in the region.
FOR BUSINESS. Israel’s moves against Gaza and Hamas will not just damage ties with the Muslim world, but reignite the Boycott, Divestment and Sanctions movement in the West. Since 2005, BDS has had little bearing on the Israeli economy, with an estimated 95% of Israel’s exports being business-to-business. And in exceptions like SodaStream, the impact has been short-lived. That said, growth in emerging Israeli markets like Dubai will be harder to achieve.
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THE BALKANS. Putting the band back together.
Domestic politics will hold back regional progress.
Leaders from Albania, Bosnia, Kosovo, Montenegro, North Macedonia and Serbia prepared to meet with EU officials on Monday to discuss accession to the bloc. Serbia's president on Friday called snap elections for 17 December.
INTELLIGENCE. Since the breakup of Yugoslavia, Brussels has dangled EU membership to the Western Balkans as an incentive for stability and reform. Yet for many Balkan republics, nationalist politics, corruption, and Russian influence have gotten in the way. There’s no reason to expect a breakthrough at this year’s meeting of the ‘Berlin Process’ on EU enlargement. Indeed, recent flare-ups between Serbia and Kosovo will make the job even harder.
FOR BUSINESS. An additional impediment is Belgrade’s snap election, its third in three years. The polls are ostensibly being held in response to petitions issued after two gun massacres in May, but President Aleksandar Vucic also needs an excuse to reset worsening tensions with Kosovo and mollify concerns over ethnic Serbs in the Muslim-majority republic. Tensions between Muslims, Serbs and Croats in Bosnia and Herzegovina also cloud the outlook.
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POLAND. PiS in the wind.
Minor parties will determine who forms government.
Both the incumbent Law and Justice (PiS) and the opposition Civic Coalition (KO) claimed victory late Sunday as exit polls gave PiS 36.8% of the vote – the most for a single party – but KO a better chance of forming a coalition.
INTELLIGENCE. In a repeat of Spain's election, where a campaign drift to the right saw centrists move to the left, Poland could be without a clear winner for weeks or even months. PiS will get the first shot at forming government, but the result is a repudiation for the populist party, which has tried to drown out a scandal over visa fraud with nationalist attacks on Ukraine and Germany (and to outflank the far-right Confederation Party, which also did poorly).
FOR BUSINESS. Should KO emerge winner in the legislature, an awkward relationship will ensue with President Andrzej Duda, a PiS ally, but good relations will likely be restored with Brussels, Berlin and Kyiv. Nationalism sells well in Poland, and KO leader Donald Tusk is of the centre-right. But KO is also expected to adopt more liberal social and economic policies, which in turn should help release €110 billion in EU funds, frozen due to rule of law concerns.
ECUADOR. Now for the harder part.
A new president faces severe social and security challenges.
Daniel Noboa, a centrist businessman, won 52% in Ecuador's run-off election on Sunday, defeating his socialist rival. Six Colombians charged with murdering another candidate in August were killed in a prison “event” on 6 October.
INTELLIGENCE. Campaigning in a bulletproof vest, Noboa takes charge of a divided and increasingly dangerous country. Once a relative haven, Colombian gangs have moved into Ecuador, whose ports are used to transport drugs to the US and beyond. Noboa will need to continue his deposed predecessor's campaign against the cartels, yet also try to more delicately manage a polarised electorate and National Assembly, which is dominated by left-wing parties.
FOR BUSINESS. Ex-president Guillermo Lasso, Ecuador's first conservative leader in two decades, was impeached by legislators in May; a move he used to trigger the election. But Lasso’s socialist rivals are back in the Assembly and could make a similar attempt on Noboa, which may limit his pro-business policy options. Noboa will be compelled to move fast, particularly as Ecuador’s crimewave worsens and activists allege illegal holdings in offshore tax havens.
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AUSTRALIA. NEW ZEALAND. Southern, cross.
Economic anger looms behind two progressive defeats.
60% of Australians across 80% of seats voted against a constitutionally enshrined indigenous 'Voice' to parliament on Saturday. A coalition of right-wing parties won New Zealand's vote on Saturday with a 23-point swing against Labour.
INTELLIGENCE. Australia has a high bar for referendums. New Zealand's two-term government was tired. But the size of the swings was a shock. Aboriginals are Australia's most disadvantaged group, but the vote against the Voice may have been less about them than a perception Canberra favoured symbolism over the economy. The swing in New Zealand was less a backlash to now-distant COVID-19 policies than a failure to deliver on cost-of-living concerns.
FOR BUSINESS. Many large Australian firms backed the Voice. Some had principled reasons, but as virtue-signalling, it backfired. Qantas’s backing coincided with a pricing and deceptive conduct scandal, leading its chairman to resign. Anti-elitism coloured New Zealand’s vote. The National Party is historically seen as business-friendly but will need to govern with populist allies. Wellington’s pragmatism on China won’t likely change, but the rhetoric may seem sharper.