Balance of Power: When Does Europe’s Cool Become Complacency?

Germany’s election campaign is anything but raucous, and after years of political turmoil in Europe, that may be no bad thing.

From Greece, the refugee crisis, and anti-EU populism in Austria, France and the Netherlands, Europe has had more than its share of instability. Not any more, as the focus of volatility shifts to the U.S. under Donald Trump and North Korea’s nuclear belligerence buffeting Asia.

Take Brexit, which just six months ago was seen as portending the EU’s demise. Unsurprisingly, leaving the bloc dominates debate in the U.K., but it has barely featured in the German campaign and, according to Italy’s Europe minister, isn’t even a top 3 priority.

The region’s economy is meanwhile poised for its fastest expansion in a decade, and even the much-derided euro is on a roll, soaring past $1.20 and pushing for parity with the British pound.

Yet the upbeat outlook risks complacency, not least in Italy, where the EU-skeptic Five Star is topping polls ahead of elections next Spring. In Germany, lingering anger over the refugee crisis might yet be underestimated, so much so that fresh elections cannot be entirely discounted if Chancellor Angela Merkel can’t form a working coalition. Just imagine how that would hurt investors’ view of Europe’s stability.

The stars of the European Union.
Photographer: Jasper Juinen/Bloomberg

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Global Headlines

Miami flees Irma | Hurricane Irma is on a collision course with Miami after devastating a chain of Caribbean islands, triggering mass evacuations in South Florida and threatening to become the most expensive storm in U.S. history. With Houston still tallying Harvey’s devastation, the twin storms risk overwhelming Washington, where Congress is poised to send an initial disaster aid package to Trump for his signature today.

More Fed candidates | Janet Yellen and Gary Cohn face competition from at least half a dozen others to be the next Federal Reserve chair, Craig Torres and Jennifer Jacobs exclusively report. The field, which is wider than the two-horse narrative that has taken hold on Wall Street, includes former Fed Governor Kevin Warsh, Columbia University economist Glenn Hubbard and Stanford University professor John Taylor. 

Trump’s unlikely allies | The president’s campaign to isolate Kim Jong Un is finding support in places that have often borne the brunt of his criticism: Mexico and China. The U.S.’s southern neighbor gave North Korea’s ambassador 72 hours to leave, while people familiar with the matter told Bloomberg’s Tom Schoenberg that data from Chinese mobile-phone maker ZTE was helping authorities build cases against other firms for doing business with Kim’s regime.

Pakistan’s key to power | As a scandal threatens to dislodge the Sharif family from power, the ruling party is seeking to bolster its support with soaring infrastructure spending in the northeastern heartland of Punjab, home to more than half the nation’s people. As Iain Marlow and Chris Kay report, The Pakistan Muslim League is facing a close election next year, which could fuel anti-U.S. sentiment — that spiked after Trump said Pakistan still harbors terrorists — and accelerate a pivot toward China. 

Acquiescing on Assad? | Saudi Arabia may be the latest country to give up on regime change in Syria and accept Russia’s campaign to shore up President Bashar al-Assad, Henry Meyer and Glen Carey report. While a shift would be a fresh blow for rebels who have seen Damascus regain control of much of the country over the past two years, Russia hopes it will unite them and lead to substantive peace talks.

And finally ... Here’s one tempest Trump may be glad to see. An outbreak of severe geomagnetic storms could cause North Korea to put off any planned missile tests this weekend, said Lance Gatling, an aerospace consultant with Nexial Research in Tokyo. While missiles are generally shielded against radiation, the solar flares can cause data loss and equipment damage.

Solar eruption that hit Earth’s magnetosphere in 2003.
Source: Solar & Heliospheric Observatory/NASA via Getty Images

 

— With assistance by Kathleen Hunter, and Karl Maier

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