Foreign affairs

By Michael Peel in Bangkok

Gen Prayuth Chan-ocha

Gen Prayuth Chan-ocha Copyright: Getty

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How stable is Saudi Arabia?
Saudi Arabia’s new monarch King Salman takes over at a time of unprecedented challenges in the shape of regional chaos as well as a sharply falling oil price. Gideon Rachman is joined by Roula Khalaf and Simeon Kerr to discuss how stable the kingdom is.

Since the onset of the global financial crisis, the European Central Bank has been desperate to funnel cash into the eurozone’s financial system, in the hope this would boost investment and growth.

Yet, despite steep cuts to interest rates and several rounds of cheap loans to banks, the eurozone is still struggling to get enough investment projects off the ground. Last week, the ECB launched an ambitious programme of quantitative easing aimed at prompting banks to lend more by lowering the interest they receive on government bonds.

But what if Europe’s investment problem was not the result of a shortage of liquidity? Read more

A former colleague on the FT (no names, but he now runs the UK’s Office for Budget Responsibility) used to muse that a useful all-purpose headline for any story about an emerging market economy was “[Insert Name Of Country Here]: Structural Reform?”

Putting “Greece” into that formula after Syriza’s resounding victory in Sunday’s election, where do we stand? Every pundit in Europe is retailing some version of the insightful observation that it is all about whether Syriza — and its leader, Alexis Tsipras, Greece’s new prime minister (above) — can be induced to do enough structural reform to buy the fiscal leeway and debt relief it wants.

The problem with this view is that “structural reform” is a crude and unhelpful term. Read more

The triumph of the anti-austerity Syriza party in Greece’s general election has put back on the table the vexed question of what to do with Athens’ debt. Economists tend to disagree over how sustainable this burden really is: some point to the sheer size of the liabilities, saying Athens will never be able to pay them back. Others emphasise the favourable conditions which the Greek government has secured on official sector loans in two rounds of restructuring: these include heavily subsidised interest rates and a lengthening of the average maturity of the debt, which now stands at 16.5 years, double Italy’s or Germany’s.

One figure on which everyone tends to agree, however, is that Greece’s public debt is 177 per cent of gross domestic product, the highest level in the eurozone. Well, everyone but a private equity group and a number of accountants, who think the relevant figure could be as low as 68 per cent. Read more

Australia Day is typically when prime ministers attract positive headlines by doling out honours to people promoting good causes. But Tony Abbott, the gaffe-prone holder of the office, provoked a storm of controversy on Monday by awarding the country’s highest honour – knight of the order of Australia – to Prince Philip, the Duke of Edinburgh.

“I don’t get the priority the government had in nominating him,” said Bill Shorten, Labor leader. “It’s a time warp where we’re giving knighthoods to English royalty.” Read more

Davos is full of security barriers and screening to keep out intruders who might threaten the world’s leaders of governments and companies, but one managed to sneak through without a badge – the common cold.

By the end of the week of events at the World Economic Forum, many of the attendees were complaining of a streaming nose, a cough, and a nasty headache. The “Davos apocalyptic cold” was how one sufferer described it darkly. Read more

Uber screengrab

You cannot book an Uber car in Davos. That is no surprise, given that most World Economic Forum delegates prefer to take their own chauffeured limousines or the WEF’s free shuttle service. More surprising is the absence of Uber the company. I have heard it cited constantly this week – both in formal sessions and in informal conversations between participants – as an example of disruptive innovation. Uber also seems to have fielded a representative for every conference I’ve attended over the past past year. Not this one.

 

 

 

 

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I moderated a fascinating debate on corporate governance on Saturday on the following question: Has shareholder value maximisation failed as a source of long-term wealth creation and social benefit? Before starting the debate, I asked for a vote on the question. At that stage 70 per cent voted “Yes” and 30 per cent voted “No”. So the overwhelming majority voted that shareholder value maximisation had indeed failed. This was astonishing, I thought, given the nature of the participants in Davos.

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(c) WEF

Holding the World Economic Forum in a ski resort in the Alps sounds like an eccentric decision. In fact, the choice of Davos as a location for the WEF is very clever. It is such a pain to get here that once the delegates are in Davos, they feel compelled to stay. If the WEF took place in a big city, there would be a lot more flitting in-and-out. Read more

If you want to get a sense of where power is shifting in the business world, tracking the Davos parties is a good place to start. A decade
ago it was the banking bashes which were the glitziest and coolest gigs in town. On Friday night, however, the hottest ticket in Davos was a midnight party organised by SalesforceRead more

Regulation is needed in the global art market because it is vulnerable to money laundering, tax evasion, trading on inside information and price manipulation, an FT Weekend lunch in Davos was told. Read more

The proposals by David Cameron, the UK prime minister, to criminalise forms of encryption that would block intelligence services from reading messages from terrorist suspects have been criticised in Davos by a group of Harvard professors. Read more

There is no doubt what the big issue is at the World Economic Forum on Thursday – the European Central Bank decision on quantitative easing.

An early panel with a largely-US cast list was supposed to discuss the likely rise in US interest rates this year from zero. The panel was titled “ending the experiment”. But the experiment of trying to get people to talk about anything other than Europe lasted, according to my calculations, about 10 minutes. The rest of the hour was devoted to Europe and whether QE would work. Read more

Here’s one prediction if Alexis Tsipras and his radical left Syriza party win Sunday’s Greek parliamentary elections: 595 women with mops and rubber gloves are going to be very happy.

They are cleaners whom the outgoing government, led by Antonis Samaras of the centre-right New Democracy party, fired from their jobs at Greece’s finance ministry as part of its effort to cut public expenditure and root out clientelism.

The cleaners’ dismissal caused a right old uproar in Athens. Mr Tsipras, terming their treatment typical of callous measures adopted to please Greece’s EU and International Monetary Fund creditors, has promised to reinstate them.

Everyone I’ve met this week in the Athens political world is sure he will do exactly what he says. Long live the revolution! Read more

Greece’s parliamentary elections on Sunday are set to put in power the nation’s most leftwing government, led by the radical Syriza party, and its youngest prime minister, 40-year-old Alexis Tsipras, since the second world war.

But some familiar names and faces will survive Syriza’s expected victory. Despite six years of economic slump, and despite the reappearance of serious concerns about Greece’s ability to stay in the eurozone, the old Greek political order is not about to be swept away in its entirety. Read more

Hungary’s Viktor Orban has long been criticised for his war against the country’s troubled banks – since 2010, he has imposed Europe’s highest bank tax, introduced financial transaction levies and has forced banks to pay out billions of euros in compensation to borrowers for mispriced foreign currency loans.

But as the SNB decision to scrap the ceiling on the Swiss franc on Thursday sent the forint sliding a record low against the franc on currency markets, Mr Orban’s policies came in for some rare praise. Read more

Turkish President Recep Tayyip Erdogan (R) and Palestinian President Mahmoud Abbas shake hands in front of 16 soldiers in historic garb at the presidential palace in Ankara (Getty)

The average foreign dignitary visiting Ankara might not expect to encounter an honour guard of 16 men resembling extras from a sword and sandals epic and lining the staircase of a gargantuan presidential palace.

So when Mahmoud Abbas, the Palestinian president, was confonted this week by the spectacle of the 16 soldiers in historic Turkic garb, even some Turkish officials confessed they initially thought the resulting images were the work of photoshop.

It was one of the more surreal sights to emerge from Turkey in recent times and has led to much hilarity on social media. But there was a point and purpose to the unusual costumes and their appearance may contain clues to Turkey’s direction of travel under President Recep Tayyip Erdogan, Mr Abbas’s host and the country’s paramount leader. Read more

France has been through a traumatic period following a spate of terror attacks that killed 17 people, which led to a wave of demonstrations by millions of defiant citizens in response. In the latest edition of the FT World Weekly podcast, Gideon Rachman is joined by Hugh Carnegy, a former Paris bureau chief, and Michael Stothard, one of the FT correspondents who covered the aftermath of the attacks, to assess the wider impact of the events and discuss whether France can ward off the forces of polarisation.

The biggest risk to the world over the next decade is that of international conflict, says the World Economic Forum’s 10th edition of its global risks report, which is published today in the run-up to the shindig of global policy-makers and business people in Davos next week.

“Twenty-five years after the fall of the Berlin Wall, the world again faces the risk of major conflict between states,” said Margareta Drzeniek-Hanouz, WEF lead economist. “Today the means to wage such conflict, whether through cyberattack, competition for resources or sanctions and other economic tools, is broader than ever.” Read more