Rabobank: “The Global Institutional Architecture Is Collapsing”

Monday, December 2, 2019
By Paul Martin

by Michael Every of Rabobank
Mon, 12/02/2019

It’s December, and the start of the season of good will to all and peace on earth. Not much of that about, of course.

In the UK, the election has been interrupted by the terrorist attack at London Bridge, which both sides are naturally playing politics with in different ways (The Left is soft on terrorists vs. police underfunding and foreign policy, etc.); the latest opinion polls suggest Labour continues to make up some ground but remains well behind, but London Bridge may perhaps see that impetus stalled. Let’s see if the imminent arrival of US President Trump tips the scales, as President Obama did on Brexit, or if he can hold off on commenting as protocol dictates.

In Germany, Angela Merkel’s coalition partners the SPD have just elected new leadership, and they have veered to the left, hardly a surprise against this global backdrop, but likely accelerating the eventual collapse of the current government and opening up questions about what any new one could look like. Instability, or at least uncertainty, at the heart of the Eurozone is certainly not going to be welcome to investors – yet could it herald an imminent fiscal shift?

Tomorrow and Wednesday will also see the 2019 NATO summit, again in London, where the world’s largest military alliance will get together and try to decide what it is for and if it still has a purpose. Trump continues to put pressure on all members to spend the pledged 2% of GDP to keep it a fighting force vs. Russia, and perhaps China(?): relatively few do or show they even want to (e.g., Germany). He’s is also going to bring up Huawei and 5G to discuss. President Macron of France has called NATO “Brain dead” due to the absence of US leadership–I thought it was leading?–and has suggested it should shift from seeing Russia or China as potential enemies and refocus on terrorism: does France keep its nuclear deterrent to deal with events like London Bridge? President Erdogan of Turkey, the second-largest contributor militarily after the US, has no problems making friends with Russia and China–he is buying Russian weapons now–but has publicly called Macron “Brain dead” too. And Jeremy Corbyn, who would of course be the UK PM in under two weeks if the polls are wrong or misleading, has stated that NATO should be used to fight inequality: bomb the rich? Or spend as much on defence as he is pledging on everything else to rebuild British (defence) industry and provide quality jobs? It should make for a remarkable meeting one way or another: at the very least, it will be a world-class exercise in papering-over-cracks.

The Rest…HERE

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