The balance of power is changing in the European Union’s three largest economies which could have significant implications for financial markets.
Germany has just turned the page on Angela Merkel’s 16 years of leadership, France is bracing itself for an uncertain presidential election in the spring, and Italy is anxiously waiting to find out whether Mario Draghi will leave his prime ministerial post.
“We may well be in for a rather profound ‘watershed moment,’ with significant positive implications for policies,” Erik Nielsen, group chief economist at UniCredit, said in a note to clients in December.
“The new German government will bring in significant reforms in Germany, if less headline-grabbing and straightforward then desirable, and it will, very likely, also facilitate reforms in Europe,” Nielsen said.
The newly established government has promised to decarbonize the German economy and to invest in digitalization. At the same time, its idea is also to follow a sound fiscal policy from 2023 onward, once stimulus to deal with the pandemic has been faded out.
These targets are likely to influence European discussions on how to update the fiscal rulebook — a topic that market players are following closely. The euro zone has had strict deficit and debt targets, but there has been a lack of enforcement of these rules. In addition, others question whether these targets are still valid in a post-pandemic world. How much governments will spend, and where, could have direct implications for the bond market.
The German economy should stage an impressive comeback as European growth champion 2022.
Analysts at ING
“Previous government stimulus plus the new government’s impressive investment policies will unfold in 2022 and lead to stellar growth performance,” analysts at ING said in a note in December.
The German economy grew 2% in the second quarter of 2021 and 1.7% in the third quarter, according to the national statistics office. In the whole of 2020, GDP dropped by almost 5%.
These numbers have been significantly impacted by the pandemic and supply chain issues.
“As soon as global supply chain frictions start to abate and the fourth wave of the pandemic is behind us, industrial production will strongly rebound, private consumption will start to pick up and investments will flourish and the German economy should stage an impressive comeback as European growth champion 2022,” he added.
In October, the International Monetary Fund projected a GDP growth rate of 4.6% for Germany in 2022 — this was higher than the estimates for France and Italy.
French voters are heading to the polls in late April. Incumbent President Emmanuel Macron has not yet announced his intention to run for a second mandate. However, he is currently polling first among all candidates.
But there is plenty of time for voter polls to change, even more so as new candidates formalize their plans for the presidency.
Eric Zemmour, an anti-immigration candidate, is seen as a threat to the likeminded politician Marine Le Pen. Meanwhile, the arrival of Valerie Pecresse to lead her center-right conservative campaign is also seen as a challenge to Macron, if he decides to run for a second term.
Nielsen described Pecresse as a “serious contender against the favorite, still undeclared, Macron,” if she makes it to the second round of the election. At the moment, she is polling fourth, after Macron and the two far-right candidates.
“Macron will therefore have to navigate an even narrower path to reform France, notably concerning pensions, the public service and the labor market,” analysts at ING said.
Nonetheless, a Macron victory would mean that France would still have a pro-European leader looking to work with Germany and Italy to reform the region.
In Italy and abroad, everybody wants to know if Mario Draghi will remain as the country’s prime minister —or if he will choose to be the next president instead. The latter would bring a fresh wave of political uncertainty given the fragmentation of the Italian Parliament.
“The bottom line is that the political equilibrium that has prevailed since Draghi’s appointment as PM is set to be shaken, if not broken, by the upcoming presidential vote,” Wolfango Piccoli, co-president of the consultancy firm Teneo, said in a note in December.
As president, Draghi would have less direct influence on Italian politics.
“Draghi would struggle to act on behalf of Italy vis-a-vis the EU from the presidential palace,” Piccoli said.
However, Italy would still have a pro-European president who would have a say in some of the measures that a new government may take.
If Draghi remains prime minister, his work “could be more complicated in the months ahead, depending on how the ruling coalition manages the presidential election process,” Piccoli noted.
Draghi is the head of a technocratic government, supported by the various political groups in the Italian Parliament. Without their votes, Draghi’s work could face obstacles when presenting new laws.
Nonetheless, “in this scenario, Draghi would almost certainly remain prime minister until elections in 2023, thereby securing Italy an unprecedented influence on key European policies next year while, possibly, leaving Italian politics somewhat less anchored over the longer term,” Nielsen added.
You can choose ancient trees or you can choose jobs, but only bad people opt for jobs — is the preferred mental construct of anti-forestry campaigners
Last year noisy blockaders descended on Fairy Creek on the south coast of Vancouver Island to stop loggers they claimed were laying waste to irreplaceable old growth forests. What the public did not see behind all the fireworks was a carefully laid advocacy strategy to burrow into the heart of government decision-making and bring about policies, not based on sound science, that will hurt working British Columbians. Forestry accounts for a third of British Columbia’s exports – triple both the tourism sector and also tech and film combined — and benefits at least 130 First Nations.
Thanks to freedom of information (FOI) requests, I have been able to piece together the story behind the story.
Responding to incidents such as Fairy Creek, B.C.’s NDP government commissioned a review. The first step was a report calling for a “paradigm shift” to protect old growth forests. Next came a deeper dive by an expert panel that resulted in some shocking news for the forest industry: timber access restrictions that could shutter as many as 20 sawmills and two pulp and paper mills, with up to 18,000 jobs being lost. Industry, First Nations and labour unions were furious. Last week, a financial markets analyst told an industry conference that British Columbia forestry is now seen as “uninvestable” due to the uncertainty.
Hundreds of pages of documents released under FOI reveal that the supposedly impartial expert panel was, in fact, constituted to exclude nearly all viewpoints except those closely aligned to a single organization, the Sierra Club, which has a longstanding axe to grind with the forest industry. The “Old Growth Technical Advisory Panel” was a joint project of environment minister George Heyman and forest minister Katrine Conroy. Correspondence reveals that it was mostly designed and managed by Heyman, who before becoming an MLA was executive director of Sierra Club BC.
Remarkably, four of the five appointees had strong, unmistakeable connections to the Sierra Club. A government official noted that the panel “does not include the full range of views that would be needed for decision making.” It was known that the panel would deliberately ignore “implications for industry; local community interest; First Nations interests and Indigenous knowledge.”
When the panel’s makeup was announced, a senior forestry official warned: “At a minimum, to be most effective, this Panel should have been comprised of ministry and external experts, in an equal and balanced collaboration that would most effectively deploy the depth of knowledge possessed by the government’s own staff.” Such advice was not heeded, and the appointees insisted their professional opinions not be questioned. Where the panel did seek outside views, only pressure groups aligned with the Sierra Club were invited.
It’s not difficult to imagine what the reaction would have been if members of this advisory group had previously volunteered their time to write a paper on the very same topic as the panel’s business, as three members of this panel had done, but for a forest industry association rather than the Sierra Club, and that association had then built an elaborate PR campaign around the work.
The individual who emerged as the group’s chief liaison with government, Lisa Matthaus, was not a technical expert at all but rather a former Sierra Club campaigns director now in a senior political operative job with Organizing for Change, an offshoot of MakeWay, the new name of Tides Canada, a longtime advocacy group, which rebranded itself in 2020 after complaining its anti-everything goals had been misunderstood.
Given all this, it was hardly surprising when the panel came back with recommendations that threaten to gut an entire industry. But if the scientific case for radically reducing access to forestry lands was so strong, why rely on such a cooked process? Founding the heralded paradigm shift on fragile legitimacy only risks hardening existing social polarization.
A zero-sum framing — you can choose ancient trees or you can choose jobs, but only bad people opt for jobs — is the preferred mental construct of anti-forestry campaigners. The enormous conservation strides B.C. has made since the 1990s “war in the woods” are ignored, confirming again that no amount of give and take is ever enough. It’s as if the culture wars raging in university humanities departments had shifted over to the science faculties, with ecologists who believe trees are altruistic beings who talk to each other clashing for supremacy over forestry scientists and professionals who must weigh many factors.
In the end, the insider moves of a narrow interest group snookered the provincial cabinet, MLAs, citizens, and the broader forestry community. Any hope for a balanced outcome now rests with Indigenous leaders, the only group with the political clout to go up against the environmental lobby.
Stewart Muir is a journalist and founder of Vancouver-based Resource Works Society. The full version of this article appears in the latest issue of The Forestry Chronicle, a publication of the Canadian Institute of Forestry.
In March of last year, Alberta Justice Minister Kaycee Madu was pulled over in the province’s capital and issued a ticket for distracted driving in a school zone.
A couple of days later, he phoned Edmonton’s chief of police, Dale McFee, to discuss the $300 ticket, which he eventually paid.
The ticket, and the phone call, only recently came to light thanks to the CBC. Things moved quickly after that; Mr. Madu defended himself by saying he didn’t phone Mr. McFee to protest the ticket, but rather to discuss the issue of racial profiling. Mr. Madu is Black. He also wanted to be assured he wasn’t being “unlawfully surveilled,” which some police in the province have been accused of doing.
This week, Premier Jason Kenney expressed “profound disappointment” in Mr. Madu for making the phone call, and asked him to “step back from his ministerial duties” while an independent investigation into the matter is carried out.
Mr. Kenney should have fired Mr. Madu on the spot.
There is almost no circumstance in which Mr. Madu, who is also solicitor-general and responsible for law enforcement in Alberta, could be returned to his cabinet duties, such is the iron-clad rule in politics that elected officials (particularly cabinet ministers) don’t interfere in the administration of justice at any level. It’s an automatic termination offence.
Mr. McFee, for what it’s worth, has corroborated the justice minister’s version of events; that he wasn’t calling to get out of the ticket but to discuss carding, an issue he has championed. And while I may have some sympathy for Mr. Madu on this matter, you do not pick up the phone and call the chief of police to have a conversation about it after getting a ticket.
In a different scenario, maybe the police chief interprets the call as subtle pressure and gets the violation ripped up. The fact that didn’t happen in this case is irrelevant. Cabinet ministers can’t appear to be using their office to exert influence or put their finger on the scales of justice in any way. Especially if you are the justice minister.
So while some will say Mr. Madu’s intentions weren’t malicious or corrupt, it doesn’t matter. He violated a sacred tenet of government. He may have found other means, or avenues, to have this issue addressed that didn’t involve him picking up the phone and calling the city’s top cop.
There is, however, another disturbing aspect to this whole affair: The question of what Mr. Kenney knew, and when he knew it.
As mentioned, the incident and phone call happened 10 months ago. According to veteran Alberta columnist Don Braid, it was widely known among members of cabinet and discussed in “jocular” terms. It seems inconceivable that if members of cabinet knew about this, Mr. Kenney didn’t also.
The Premier should make clear when he found out about the matter; was it only when the CBC story made it public? If Mr. Madu discussed the issue with colleagues, would he not also have notified the Premier’s office of what happened? I would think that most justice ministers in this country would notify their bosses when they have a run-in with police, regardless of how insignificant it was.
At the very least, it’s inconceivable that Mr. Madu’s own chief of staff wouldn’t have been told about it and then passed it along to the Premier’s office. No head of government likes nasty surprises. That’s one of the core rules of being in government, and especially cabinet. If there is a potential for some damaging information to come to light, you alert the top person.
That is why I am highly skeptical that Mr. Kenney only found out about this recently. He’s renowned for his micromanaging tendencies and his insistence that he not be the victim of any unpleasant surprises. It’s virtually impossible to believe he wasn’t aware of this story long before now.
This is, of course, just another illustration of the shockingly poor judgment that members of Mr. Kenney’s cabinet – and the Premier himself – have demonstrated over the past couple of years. Mr. Kenney’s nearly three-year reign of error has been enveloped by melodrama and controversy. At various times his response to the pandemic was atrocious. His response to most internal problems has been to deny and delay until he’s boxed into a corner and is forced to do something. There have been calls for his resignation both inside and outside his party.
Mr. Kenney has become the Boris Johnson of Canadian politics. Like the British Prime Minister, he seems to have put a foot wrong at almost every turn, and come to be seen as a bumbling, incompetent leader. And his handling of this latest imbroglio will do nothing to diminish that image.
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In the last few years the hideous state of our politics has often kept me up at night, but until recently I thought I was an outlier. Even when I’ve written about political despair as a problem for Democrats, I assumed it was something that applied to activists and base voters, the sort of people who go through their days silently cursing Joe Manchin. But a striking new study from Kevin B. Smith, chair of the political science department at the University of Nebraska, Lincoln, suggests the universe of people who find our politics a torment might be much larger than I’d realized.
“Politics is a pervasive and largely unavoidable source of chronic stress that exacted significant health costs for large numbers of American adults between 2017 and 2020,” writes Smith in “Politics Is Making Us Sick: The Negative Impact of Political Engagement on Public Health During the Trump Administration.” “The 2020 election did little to alleviate those effects and quite likely exacerbated them.”
Around 40 percent of Americans, he found, “consistently identify politics as a significant source of stress in their lives.” Shockingly, about 5 percent have considered suicide in response to political developments. Smith told me he was skeptical of that figure when he first calculated it, and still isn’t wholly sure it isn’t a statistical fluke, but it’s remained fairly consistent in three surveys. (After publishing results from the first survey a few years ago, he said, he got a call from someone who worked at a suicide hotline who reported experiencing an uptick in calls after the 2016 election.)
I’m fascinated by Smith’s work for a couple of reasons. The first is partisan. People from both parties reported that political stress during the Trump years has damaged their health, but Democrats have, unsurprisingly, had it worse. While Donald Trump was in office, they were able to turn their rage and fear into fuel, but I’m not sure how sustainable this is. The more politics becomes a pageant of infuriating Democratic impotence in the face of relentless right-wing spite, the more I fear people will disengage as a means of self-protection.
But I’m also interested the role politics plays in the disastrous state of American mental health, which is one of the overarching stories in the country right now. For all our division, there’s a pretty broad consensus that the country is, psychologically, in an awful place. According to a recent USA Today/Suffolk University poll, almost nine in 10 registered voters believe there’s a mental health crisis in the United States. The crisis expresses itself in all sorts of ways: in rising rates of youth suicide, record overdoses, random acts of street violence, monthslongwaiting lists for children’s therapists, mask meltdowns, QAnon.
I’ve long thought that widespread psychological distress — wildly intensified by the pandemic — contributes to the derangement of American politics. But maybe the causality works the other way, too, and the ugliness of American politics is taking a toll on the psyche of the citizenry.
Smith first surveyed a sample of around 800 people about politics and mental health in March 2017. As he wrote in a 2019 paper, he found fairly high levels of affliction: Besides the 40 percent who said they were stressed out about politics, a fifth or more reported “losing sleep, being fatigued, or suffering depression because of politics.” As many as a quarter of respondents reported self-destructive or compulsive behaviors, including “saying and writing things they later regret,” “making bad decisions” and “ignoring other priorities.”
At the time, he thought he might just be capturing the shock of Trump’s election. But his next two surveys, in October and November of 2020, showed similar or greater levels of misery. Now, those were also moments of febrile political activity; perhaps if Smith had surveyed people in 2018 or 2019, he’d have found less political angst. Nevertheless, his findings suggest that there are tens of millions of Americans who’ve felt themselves ground down by our political environment.
In some ways, this is surprising. Most people aren’t political junkies. The majority of American adults aren’t on Twitter, which tends to drive political news microcycles. Even in an election year, more people watched the 30th season of “Dancing With the Stars” than the most successful prime-time shows on Fox News, the country’s most-watched cable news network. As the political scientists Yanna Krupnikov and John Barry Ryan wrote in The New York Times, most Americans — “upward of 80 percent to 85 percent — follow politics casually or not at all.”
Smith doesn’t dispute this. But he speculates that even those who aren’t intensely interested in politics are still affected by the ambient climate of hatred, chaos and dysfunction. “What I think is going on is that politics is unavoidable,” he said. “It is essentially a permanent part of the background noise of our lives.”
Of course, the last thing a political scientist — or, for that matter, a liberal columnist — would tell you is that you should totally tune that noise out. It is depressing to live in a dying empire whose sclerotic political institutions have largely ceased to function; this is a collective problem without individual solutions. There’s an awful dilemma here. Any way out of the gloom of our current political situation will almost certainly involve even more politics.
If you are having thoughts of suicide, call the National Suicide Prevention Lifeline at 1-800-273-8255 (TALK). A list of additional resources is available at SpeakingOfSuicide.com/resources.
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