The eurozone is entering another crisis phase as Spanish bond yields (interest rates) rise dramatically. The euro fell to one of its lowest levels in quite some time on Friday as investors begin to think that the Spanish government will have to be bailed out. in order to prevent the collapse of its banking system. Large protests are scheduled for today in Spain, and it appears as if Germany is very reluctant to intervene to address the crisis in confidence. The markets will be wastching what happens in Spain this weekend very carefully.
The weakening of the Assad regime continues and the world is now beginning to worry about what comes after him. We have a very slim idea of the configuration of forces in the Syrian opposition, but we do know that, in a situation of disarray, the most organized group usually wins power, regardless of its strength on the ground. The balance of power in the Middle East hangs in the balance, and Iran has the greatest amount of power to lose (followed by Hezbollah). Thus, we would expect Iran to exert the greatest effort in supporting the alternative to Assad. Israel has the most to lose from an Iranian success.
We will all have to update our vocabulary to include the Senkaku/Diaoyu Islands (along with the Falklands/Malvinas) as Japanese/Chinese tensions increase over control of the islands. The Japanese are exercising some interesting diplomatic tools to assert their control over the islands, but the Chinese don’t seem to be buying the tactic.
Source: The Economist, 14 July 2012
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