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WEEKLY POLITICAL COMPASS

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Exploratory talks about a “traffic light” coalition are likely ahead in Germany. Huawei’s chief financial officer has returned to Canada. Meanwhile, Japan’s ruling party will hold its leadership election, Turkey’s parliament will return from its summer recess, Brazil’s president has tested negative for Covid-19, and South Africa’s ruling party will launch its manifesto.

WHAT TO WATCH

Germany

Yesterday’s Bundestag elections ended with heavy losses for parting Chancellor Angela Merkel’s party. As the Christian alliance CDU/CSU is beginning to realize the magnitude of its defeat, exploratory talks for a “traffic light” coalition between Olaf Scholz’s Social Democrats (SPD), the Greens and the center-right Liberals (FDP) are becoming more likely. However, a failure of negotiations should not be ruled out until the very end of the process. Despite great expectations over recent weeks, there is no obvious majority for a departure from the overall mantra of sound fiscal policy.

US/Canada/China

Huawei Chief Financial Officer Meng Wanzhou returned to Canada after nearly three years under house arrest in Canada. She and the US Justice Department reached a deferred prosecution agreement that allows her to avoid extradition. In response, the Chinese government promptly released Michael Spavor and Michael Kovrig, who had been convicted of espionage and sentenced to prison in apparent retaliation for the Meng arrest. The prisoner exchange ends an ordeal that had been a major source of tension between the three countries.

ON THE HORIZON

ASIA

Japan

The ruling Liberal Democratic Party (LDP) will hold its leadership election on 29 September, with the winner set to become Japan’s next prime minister. Grassroots choice Taro Kono looks unlikely to get enough support from his parliamentary colleagues to secure an overall majority and avoid a second- round run-off, with his likely opponent another former foreign minister, Fumio Kishida.

EUROPE

Romania

On 28 September, the Constitutional Court is set to issue a ruling whether the motion of no-confidence in Prime Minister Florin Citu’s (National Liberal Party, PNL) government has been filed legally. If the court greenlights the motion, the vote would be held within five days after the ruling (most likely next week). Then, Citu’s future as prime minister would hinge largely on the opposition Social Democratic Party (PSD), which had previously pledged to back the motion but could still change its stance. Citu is also facing an increasing pressure to step down over the mishandling of the pandemic, soaring energy prices and other domestic scandals.

Turkey

Parliament is set to return from its long summer recess on 1 October with a heavy agenda awaiting lawmakers, including the ratification of the Paris climate deal. The restart of parliamentary work will also shed light on whether the government intends to reform the electoral law and lower the threshold to enter parliament from 10% to 7%.

LATIN AMERICA

Brazil

President Jair Bolsonaro tested negative for COVID-19 this weekend, following positive tests by several members of his delegation to the UN General Assembly, including health minister Marcelo Queiroga. He will spend the week of his 1,000th day in government traveling the country to inaugurate federal public works in pro-government constituencies. The week starts with a full-day session in Congress on Monday to analyze 39 presidential vetoes, including an increase of Covid-19-related expenditures. The House plenary may vote on the administrative reform if prospects of approval improve significantly. The week will also see the mobilization of leftwing movements for the anti-Bolsonaro protests scheduled for 2 October.

Peru

The government is entangled in another controversy after Prime Minister Guido Bellido threatened to nationalize the consortium that operates the Camisea natural gas field. The threat risks undoing Finance Minister Pedro Francke’s recent efforts to reassure investors that an anti-market shift is not on the cards. Francke last week ruled out expropriations. He also revealed that the respected Central Bank (BCR) governor Julio Velarde has been formally invited to stay on in his role and that proposed tax measures for the mining sector will be designed with help from the International Monetary Fund (IMF). Francke’s plan is to obtain special decree powers from Congress this week in order to pass the new tax measures. That will require dialogue and compromise in Congress – something that this administration has struggled to achieve, and that Bellido’s declarations could torpedo.

MIDDLE EAST AND AFRICA

South Africa

On 27 September, the ruling ANC launches its manifesto to a limited, pandemic compliant gathering in Tshwane. On 29 September, the Electoral Commission of South Africa (IEC) will publish the final lists of parties and candidates that will contest the 1 November municipal elections. The party threatens to fall below the 50% threshold at the national level for the first time and, like in 2016, may lose control of key cities, including Tshwane and Johannesburg.

Zambia

Zambia will host a technical staff visit from the International Monetary Fund (IMF) from 27 September until 1 October. President Hakainde Hichilema ‘s has just completed a widely publicized and successful trip to the UN General Assembly, which included meetings with the Biden administration, IMF and World Bank at the highest levels. At home, cabinet has reportedly approved a “concept paper” on the 2022 national budget and medium-term expenditure framework. With the budget to be presented around late October, hopes are high that Zambia will make steady progress towards an IMF deal.

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WEEKLY POLITICAL COMPASS

Exploratory talks about a “traffic light” coalition are likely ahead in Germany. Huawei’s chief financial officer has returned to Canada. Meanwhile, Japan’s ruling party