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The Week Ahead

The Week Ahead

Tesa May to deliver Brexit speech in Italy as talks with EU stumble. UN General Assembly meets. German elections likely to keep Merkel in power. Saudi Arabia embraces tech reform. All in The Week Ahead.

Theresa May delivers Brexit speech in Italy as talks with EU stumble

This Friday, British Prime Minister Theresa May will deliver a speech in Florence to discuss the progression of Brexit and the vision she has for a post-Brexit arrangement between the UK and the EU. This follows last week’s postponement of the most recent round of negotiations between the UK and EU on Brexit. The May spokesmen have been cagey on what exactly she intends to say, which is likely due to the three players in this saga with frequently contradictory goals: the hard Brexiters principally in May’s Conservative Party who desire a totally clean break from the EU; the soft Brexiters and those opposed to Brexit entirely that wish to maintain cohesion with the EU which includes most businesses; and EU negotiators who must contend with the EU block’s goals and desire to not discuss any post-Brexit arrangement without addressing every issue leading up to Brexit.

One of the things EU Brexit negotiators will be looking for in this speech is whether the May government intends to follow through on its “divorce bill” to pay for EU budgetary requirements — the May government has waffled on this issue, contesting both the bill itself as well as the estimates offered by EU negotiators. Equally as likely — if not more likely given rumors the speech won’t address the divorce bill —  is a more ambivalent speech calling for some maintenance of the status quo in a transitional arrangement, given her precarious majority in Parliament.

UN General Assembly meets

This Tuesday, the UN General Assembly General Debate will convene, with the theme “Focusing on People: Striving for Peace and a Decent Life for All on a Sustainable Planet.” Already, side discussions are slated to discuss climate change, with one meeting scheduled for Monday between White House advisor Gary Cohn and a slate of representatives from other major economies. In addition, the continued plight of the Rohingya in Myanmar with over 350,000 fleeing to Bangladesh in the past 2 months — which has been cited by multiple sources as ethnic cleansing — will be discussed among UN members, making Aung Sang Suu Kyi’s absence from the Assembly debate notable. President Trump is also slated to hold a meeting on Monday on reforming the UN, including strengthening the Secretary-General again. He is also slated to criticize the level of contribution the US is providing to the UN, which is likely to ruffle feathers. The presidents of Russia and Mexico are not expected to attend, denying the ability of one-on-one discussions between the US president and either of his counterparts.

German elections likely to keep Merkel in power

On Sunday, voters will head to the polls to elect Germany’s next Chancellor and members to the 630-member Bundestag. It will represent the first election since Chancellor Angela Merkel’s decision to let in nearly 900,000 Middle East refugees. It will also represent the first opportunity for Alternative for Deutschland (AfD) to contest seats at the national level after securing seats at the state level.

From March until now, the main opposition party SPD has steadily lost support while support for Merkel’s conseravtive CDU/CSU has risen. Polling from last week placed the conservatives with around 37% support, while the SPD remained 14 points down at 23%. Far-left Die Linke was at 10% while the far-right AfD was close behind at 9.5%. As a result, the likely outcome is for the CDU/CSU to emerge with a commanding lead, followed by the SPD and left and right leaning parties vying for 3rd place. The shape of a Merkel coalition may end up similar to the current “grand coalition” between the CDU/CSU and SPD, or a coalition between the CDU/CSU and some smaller parties such as the FDP and Greens.

Merkel is likely to lock out the AfD from any coalition: a current government minister last week called the AfD manifesto unconstitutional, and a leaked email from an AfD leader calling for  “genetic unity” has sent tremors throughout mainstream German political parties on left and right. Blocking the AfD would prove similar to moves by the Dutch, Italian, and British governments in past instances to keep out far-right political parties from coalitions, even at the expense of ideological preferences.

Saudi Arabia embraces tech in sign of further reforms

This week, the Saudi Minister for Communications and Information Technology will permit WhatsApp, Skype, and Viber to operate within the kingdom after the video calling apps were blocked by the Saudi government in 2013. Included in this arrangement is an agreement that these companies will provide quarterly reports of customer complaints, while government agencies will heavily monitor the three sites. The agreement between the tech companies and the Saudi government is part of a larger initiative called Vision 2030, which aims to improve technology in the Kingdom and move the country to a more digital society. Crown Prince Mohammed bin Salman’s initiative to diversify the Saudi economy on the government’s terms has run into some challenges, although it looks to the UAE as a model for technological and social liberalization without political mobilization. In addition to consumers being able to rely on these services, businesses operating in Saudi Arabia will be able to operate more smoothly in an international context. The UAE still blocks Skype and has given indications it will continue to do so.

The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.

This edition of The Week Ahead was written by GRI Senior Analyst Brian Daigle.