EUROPE ON THE DEFENSIVE OVER DEFENSE

Back from Paris, President Trump wasted little time in heaping criticism on his French counterpart and erstwhile buddy, Emmanuel Macron. He pulled no punches—going straight for Macron’s low approval ratings and France’s unfair trade practices.


Most importantly, he also derided the French-led proposal – reiterated by Macron during this weekend’s WWI commemorations in Paris – to create an EU defense force to counter threats from the US, China, and Russia. The EU is unique today in its cooperation on almost every front except defense, a legacy of the costly conflicts of the 20th century. Macron wants Europe to compete not only economically, but also militarily, on the world stage.

So what is this proposal, and why is Trump, who has routinely called on EU nations to spend more on defense, angry about it?

The French president has already put into motion the development of a joint European military force capable of taking coordinated action abroad (think disaster response or strikes in Syria). So far, ten countries, including Germany and the UK, have signed up for the so-called European Intervention Initiative. The group, so the idea goes, would eventually offer an alternative to the US-dominated NATO alliance that includes most EU members.

Mr. Macron’s proposal is in part a product of his frustration with a slower-moving EU-led reform (known as “PESCO” or permanent structured cooperation) that’s aimed at integrating and coordinating defense capabilities across the Union. The program has the less ambitious goal of reducing widespread inefficiencies in European defenses—from the incompatibility of different countries’ systems to their prioritization of inefficient domestic defense firms—rather than enabling coordinated military action. Macron wants the EU to move even faster.

But in pushing for Europe to take on a larger responsibility for its own defense, Macron faces steep opposition both outside and inside the bloc.

The pressure from outside: Trump has called on France and other NATO allies to live up to their commitment to spend 2 percent of GDP on defense. But he’s wary of efforts to compete with the decades-old alliance—and he doesn’t like being labelled as a problem this force is intended to address. To counter Macron’s efforts, Trump could pressure like-minded allies in the EU who already oppose the French president’s proposal or threaten to lash out at France on trade, as he hinted yesterday on Twitter.

The pressure from inside: Within the EU, the reaction to Macron’s renewed call to bolster the continent's defenses has been mixed. As if on cue, German Chancellor Angela Merkel yesterday signaled support for Macron’s broad vision for a unified and independent European defense. But the devil’s in the details, and the establishment in Berlin is reluctant to rock the boat with a US that still retains 45,000 troops on German soil and whose nuclear umbrella provides the ultimate security guarantee. Elsewhere in Eastern Europe, particularly in Poland and the Baltics, US security guarantees help to deter a revanchist Russia. These countries aren’t willing to risk the ire of the US president to help the French.

For now, the creation of a “real European army” is merely a subject for debate, but Macron has made clear he intends to push that debate forward.

Facebook unveiled plans for a new cryptocurrency and payment system on Tuesday. It's called the Libra, and it's not-so-modest goal is to "reinvent money," and "transform the global economy" so that "people everywhere can live better lives." Ambitious much, Zuck?

This is a huge political gamble, but the rewards could be enormous. Here's a quick look at the tradeoffs:

The risks: Facebook is asking its 2.5 billion users — and government regulators — to entrust it with something that's vitally important to people everywhere and a power that governments jealously protect: access to money. And it's doing so at a time when trust in Facebook and other big Silicon Valley companies is at a low ebb.

Whether it's a concern that Big Tech has become too powerful or that it's not doing enough to protect privacy or put a stop to fake news, it's a heck of a time to launch a new techno-utopian project that could give Silicon Valley much more power — including the ability to track not just what people say they like but how they spend their money.

Mark Zuckerberg understands this — the Facebook founder is setting up Libra as a Swiss-based non-profit that will be governed by an "association" of 28 tech and financial companies and non-profits of which Facebook is just one member. He's also promising that Facebook will not mix personal data with payment information, and to cooperate with regulators.

But this will always be Zuckerberg's baby, and by launching Libra, he's painting a big new political bullseye on his own back.

The payoff: If Libra can survive the inevitable political and regulatory storm (and convince its billions of users that they can trust the underlying technology and financial stability of the new cryptocurrency) the upside could be enormous.

How enormous? The Libra website claims that more than 30 percent of the world's population — about 1.7 billion people — currently lack access to traditional bank accounts. Many more pay steep fees to transfer money using traditional payment services. Libra, by contrast, promises access to anyone in the world with a simple smartphone — and to make payments as inexpensive as sending a text message.

Plug those capabilities into a social network whose user base is roughly double the population of the biggest country in the world, and the results could be revolutionary — not just for billions of people who would gain new access to financial resources, but for Facebook's business model, and for central banks and governments that have traditionally sought to control the flow of money through their economies.

That would be a techno-utopian dream come true, but it's a power that governments won't willingly surrender.

Does the leader of Hong Kong appear weaker withdrawing the extradition bill?

Well as we'd say in Australia, "Is the Pope a Catholic?" Of course. This means that Carrie Lam's authority within the Hong Kong SAR is reduced and her standing in Beijing is reduced as well. But I think the bottom line is that China will resist any efforts to remove her from office, despite local pressure.

Is the US – China trade war coming to an end anytime soon?

Depends Dr. Bremmer on what your definition of "any time soon" happens to be. My prediction is simply this: once they get to the G20 meeting in Osaka Xi Jinping and President Trump will agree to reboot the negotiations process but then it's a question of the substance of the deal. My prediction is A) there will be a deal sometime between now and the end of the year. And secondly, the nature of the deal will be America yielding on the questions of tariffs to the Chinese and China yielding to the Americans on the amount that President Trump expects in the purchasing order of future American goods by the Chinese. That's my bottom line. Both countries need the economic outcome. Both countries therefore have a deep interest in securing a deal. Doesn't mean the end of the economic war however, technology reigns supreme.

If Willis's story on Tuesday about Argentina being plunged into darkness after a nationwide power failure didn't get you packing a flashlight and checking that your car has a full tank of gas, this one should. Over the weekend, the New York Times said anonymous US officials had revealed a US campaign to plant "potentially crippling malware" inside Russia's power grid "at a depth and with an aggressiveness that had never been tried before."

Quick thoughts:

This is a big provocation. It's the cyber equivalent of mining a harbor — an aggressive move that falls short of actual conflict but sends an unmistakable message: mess with us, and we'll mess you up.

The leak was probably intentional. The campaign fits with the new US strategy, launched under the Trump administration, of trying to deter cyber adversaries like Russia, China, and Iran from hacking its critical infrastructure. By disclosing the US campaign, US officials are effectively telling Russia (and by extension China and Iran), that they've got a loaded gun cocked and pointed at their economies.

That's dangerous. People — and governments — may not always behave rationally when a gun is pointed at their heads. Russia might be even more inclined to lash out. And unlike more conventional forms of conflict, cyber isn't a domain where the US can be sure it has an overwhelming advantage if push comes to shove.

It gets worse. The Times said US cyber officials described a "broad hesitation" to go into details of cyber operations against Russia with President Donald Trump because they feared he might cancel it or tell other governments about it. Among other things that are disturbing about this story, a lack of communication between the President and US cyber warriors could send mixed signals that further embolden US adversaries.

It's no secret that cyberattacks are becoming more commonplace. But where do most of them originate and what countries do they target most? The graphic above shows the most significant offenders and victims since 2006. Hackers in China, Russia, Iran, and North Korea account for three-quarters of all major attacks. Nearly a fifth of attacks, meanwhile, have targeted institutions or companies in the United States.

(At least that we know of: this chart highlights known attacks on government agencies, tech companies, and other operations that caused more than $1 million in economic damage. But many cyberattacks are never disclosed, and some countries are more transparent than others, so consider this a cross-section of a much bigger — and more disturbing — picture.)