[RED DEMOCRATICA] CFR.org Daily News Brief, May 25, 2010

 

May 25, 2010 View this newsletter as a web page on CFR's website. EXECUTIVE SUMMARY - Global Markets Tumble over Europe, N. Korea - Clinton Pressures China on N. Korea - U.S. Frustration Grows on Oil Spill - EU Plans Bank Levy to Prevent Failure Top of the Agenda: Global Markets Tumble over Europe, N. Korea Global stocks fell and the euro continued to decline Tuesday amid growing concerns about Europe's budget shortfalls (NYT). Markets in Europe were down at least 2.5 percent, and Spanish and Italian indexes were down nearly 4 percent. The Dow Jones industrial average fell 1.2 percent Monday; the S&P 500 index fell 1.3 percent; and Tokyo's Nikkei average fell 3.1 percent to its lowest close since November. Some analysts think the euro will slide to parity with the dollar. The EU's 1 trillion dollar financial bailout package and a bond-buying program by the European Central Bank mostly stopped spreading yields of eurozone government bonds. But interbank lending is under increasing pressure, and the euro has continued to weaken. Political tensions between North and South Korea added to the market's downward spiral (WSJ). Analysis: In the Financial Times, Wolfgang Munchau writes, "Investors have good reason to treat the eurozone in the way they should have treated subprime CDOs." In the Moscow Times, Daniel Gros says although the European Council created a task force to establish concrete proposals for reforming the monetary union, EU leaders can't answer the question of whether that framework will work, and so financial markets will continue to doubt the euro's long-term stability. In this roundup, six experts discuss the potential impact of the eurozone's debt problems on the United States. MIDDLE EAST: Sunni Arab MP Killed in Iraq Bashar Mohammed Hamed al-Agaidi, a member of the Sunni-backed Iraqiya bloc of former Iraqi prime minister Ayad Allawi, was gunned down (WashPost) in front of his home in the northern city of Mosul. He is the first elected parliament member to be assassinated since the disputed March elections. Israel: The office of Israeli President Shimon Peres strongly denied that Peres, as Israel's defense minister, offered to sell nuclear warheads to South Africa (NYT) in 1975, as reported by the Guardian. PACIFIC RIM: Clinton Pressures China on N. Korea U.S. Secretary of State Hillary Clinton stepped up pressure on China (AP) to back international action against North Korea for the sinking of a South Korean warship, calling peace and security on the Korean peninsula "a shared responsibility" between Washington and Beijing. The United States, South Korea, and Japan have displayed solidarity in response to ramped-up tensions with North Korea, but China needs to be more active in crisis diplomacy, says CFR's Sheila Smith. Thailand: Thailand's criminal court approved an arrest warrant (NYT) on terrorism charges for the fugitive former prime minister Thaksin Shinawatra. SOUTH AND CENTRAL ASIA: Afghan Forces Arrest Attack Planners Afghanistan's intelligence agency arrested a group of Taliban (Quqnoos) it said was behind last week's Kabul attack that killed twenty people. Pakistan: The United States is pushing Pakistan to mount an offensive in North Waziristan, where the Times Square bomb suspect reportedly trained, but the region's convoluted web of militant groups will complicate the task (LAT). AFRICA: Ethiopian PM Touts Election Win Ethiopian Prime Minister Meles Zenawi urged the international community to respect his landslide election win (Reuters) and said foreign forces could not overturn the outcome, after an EU observer said the election was marred by the ruling party's use of state resources. Somalia: Somalia's al-Shabaab rebels said their next target, after capturing the north of the capital, is to seize the presidential palace (DailyNation). AMERICAS: U.S. Frustration Grows on Oil Spill Federal and state officials questioned whether the government should take over (WSJ) the handling of the Gulf oil spill in congressional hearings, as the government's lead crisis manager said there was little that federal authorities could do but let BP try to stop the oil flow. Jamaica: Intense fighting erupted as Jamaican security forces hunting alleged drug lord Christopher "Dudus" Coke stormed his stronghold in Kingston (AP). EUROPE: EU Plans Bank Levy to Prevent Failure The EU plans to unveil a proposal to tax banks (FT), putting the proceeds in national funds to insure against future financial failures. Saving the EU requires a plan to allow fiscally weak member countries to fail, as well as painful lifestyle changes and some loss of national sovereignty, says Daniel Gros, director of the Centre for European Policy Studies. TRANSNATIONAL: European LIBOR Continues to Rise The interbank lending rate for European banks--a sign of mutual trust--has continued to rise (WSJ) compared to interbank lending in the United States and Asia, suggesting lenders worldwide are increasingly nervous about the risks ahead for European banks.

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