Italy: New Roman
Also: Ukraine, the US, China, the EU, Tibet, and Argentina.
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ITALY. New Roman
Giorgia Meloni is at an apogee. Can it last?
Italy’s prime minister hosted G7 leaders in Italy’s south Thursday. The pope and several non-Western leaders will also attend. Punches were thrown on the floor of parliament over a contentious measure to expand regional autonomy.
INTELLIGENCE. Meloni hosts the G7 from a position of strength. Not just the only woman, or the sole beneficiary of Sunday’s EU election, she stands out as the group’s most popular leader. Yet her coalition partners pose risks. Her regional affairs minister, Roberto Calderoli, a leader of the increasingly irascible Northern League, provoked a fight with a deputy from Puglia, where the summit is being held. His bill has been accused of further dividing Italians.
FOR BUSINESS. Only united in 1871, Italy remains split between the industrial north and the less-developed south. GDP per capita in Lombardy, Calderoli's constituency, was €44,400 in 2022, close to that of Germany. In Puglia, it was €21,600, less than Portugal. Unless Meloni can “level-up” the south, the region will remain dominated by the broadly progressive Five Star Movement, the insurgent winner of the 2018 election, as Meloni's Brothers of Italy was in 2022.
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UKRAINE. UNITED STATES. On borrowed time
A ten-year agreement may not survive so many months.
Joe Biden and Volodymyr Zelensky signed a ten-year security deal on the sidelines of the G7 summit Thursday. Zelensky said the deal, alongside a $50 billion G7 loan, was "historic" but asked “for how long the unity in the world will remain?".
INTELLIGENCE. The agreement is designed to lock in US support, regardless of who wins the election, but Zelensky is right to question its longevity. The G7’s “loan”, which is essentially a grant, as it will be repaid from the interest of Russian assets deposited in Europe, could likewise bounce. It’s unclear if relevant laws will allow the interest to be taken in this way, or whether such actions will stand up in court. A date for the first payment has not yet been set.
FOR BUSINESS. As questions continue over the West’s support for Ukraine, it’s actions against Russia are clearer. Fresh sanctions on financial institutions have shaken Russian banks, forcing the Moscow Exchange to suspend dollar and euro trading. Yet while the paper impact appears dramatic for now, Russian traders are already bypassing these currencies. And in the long term, it may only serve to accelerate Russia’s shift to China and a yuan-based system.
CHINA. EUROPEAN UNION. Tire-kicking
Beijing’s retaliation to proposed EU tariffs may be limited.
Beijing said it had the right to take the EU to the WTO over proposed tariffs of up to 38% on electric vehicles. The European Commission said the final amounts would be determined after an anti-subsidy investigation is complete.
INTELLIGENCE. The proposed tariffs are designed to protect European carmakers, but with German firms in particular specialising in combustion engine vehicles and enjoying lucrative joint ventures in China, the move could backfire. Proving subsidies or market dumping at less than the cost of production could also be difficult, as could achieving EU unity on the tariffs, not to mention the 2035 emissions deadline spurring the EU to protect its EV sector.
FOR BUSINESS. Beijing won’t likely strike back until it knows the exact nature of the tariffs and has a better sense of EU policy direction, following the decimation of green parties in the European Parliament and a strong showing on the right. And even if it wants to retaliate, the sector it would usually target with extra duties – agriculture – could hurt Chinese consumers amid a local heatwave and global bird-flu crisis that may raise the costs of grain and poultry.
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CHINA. TIBET. Buddha and pest
The Dalai Lama continues to annoy Beijing.
A congressional delegation will meet the Dalai Lama in northern India next week, the Tibetan government in-exile said Thursday. The Buddhist leader will then visit the US for surgery. Congress passed the Resolve Tibet Act on Wednesday.
INTELLIGENCE. The moves are symbolic, and routine, but symbolism and memory are all Tibet has and the moves will rankle China despite neither Joe Biden nor Donald Trump meeting the Dalai Lama in office – a break from previous White House tradition. Though the Dalai Lama is 88, he continues to cause Beijing trouble by appealing to a Western audience wider than those concerned with cross-Strait politics or the plight of the Muslim Uyghur minority.
FOR BUSINESS. With star power (Richard Gere remains chair of the International Campaign for Tibet) and cross-cultural charisma, Tibet is a cause of bipartisan appeal across much of the world’s legislatures, even if governments are unwilling to do anything about it (Canada’s parliament passed a similar, toothless motion on Tibet this week). Tibet’s independence will never be given away. At the source of Asia’s key rivers, it is too geopolitically important.
ARGENTINA. Buenos dias
A mostly good day for Javier Milei.
Local stocks rallied Thursday as a substantial part of the president's reform package passed the senate. Using the vice president's casting vote, measures to cut the deficit, promote foreign investment and privatise state firms were agreed.
INTELLIGENCE. The globe-trotting Milei can now continue his victory lap with confidence as he travels to meet G7 leaders and attend Switzerland’s peace talks on Ukraine. But with fires still burning outside Argentina’s congress, an opposition-controlled legislature can still complicate his plans should they deem it necessary to keep the peace. Argentina’s history of protest is a colourful feature of its democracy, but also a reliable impediment to lasting reform.
FOR BUSINESS. Milei has won the battle, but not the war. Inflation fell Thursday for the fifth month to 4.2% monthly, but annually it’s at 276.4%. Milei has scored a political win, but his economic shock therapy has been diluted. China has renewed a $35 billion currency swap, but a London court has rejected Argentina’s appeal against paying foreign hedge funds $1.5 billion. Argentina is favourite at Copa América 2024, but Lionel Messi won't play at the Olympics.