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New British Conservative Party leader Rishi Sunak waves outside Tory HQ in London.
Can this man save the UK?
On Tuesday, former Chancellor of the Exchequer Rishi Sunak became the UK's prime minister after winning the Conservative Party leadership race. But he takes over from lettuce loser Liz Truss amid turbulent times — and faces historic challenges in steering the country out of its current mess.
First, his premiership is hardly a win for diversity. Yes, Sunak, the son of Indian immigrants from East Africa, is the UK’s first non-white and non-Christian British PM, which says a lot about Britain’s changing demographics. (The "official" Twitter account of Larry the Cat, the resident feline at No. 10 Downing St, welcomed his new Hindu boss by wishing everyone a happy Diwali.)
But it's also clear that prominent Tories urged Sunak's only declared rival, former defense chief Penny Mordaunt, to drop out so the contest would be decided by MPs, not rank-and-file Conservative Party members. Indeed, the Tory base — overwhelmingly middle-class, old, and white — rejected Sunak in favor of the paler Truss when the pair battled to replace the disgraced Boris Johnson last summer. Don't be surprised if at least some are not happy about a man of color running the country without their blessing.
Second, right out of the gate Sunak will have to sign off on very unpopular measures to rescue the economy. On Oct. 31, Chancellor Jeremy Hunt — whom the new PM will likely keep in place — will announce a fiscal plan full of tax hikes, spending cuts, and welfare reforms needed to plug a 40 billion pound ($45.18 billion) hole in state coffers. That’ll make it even harder for Brits already grappling with a cost-of-living crisis and sky-high energy prices to get by.
Sunak — an economics wunderkind, ex-finance minister, and Goldman Sachs alum — knows that some belt-tightening is unavoidable to pay for things like subsidizing the cost of soaring electric bills. But voters are less patient and might resent austerity coming from a super-rich leader who married into sumptuous wealth. They won’t care if the markets like Sunak’s economic gameplan if they can’t pay to heat their homes or feed their families.
Third, Sunak will struggle to fix the structural problems created by Brexit. Leaving the EU has made it harder for British companies to do business in what used to be their biggest market. The pandemic aggravated the Brexit fallout by creating widespread shortages, which Johnson and Truss blamed on the post-Brexit trade agreement with Brussels that ruled out a “hard” border between Northern Ireland, which is part of the UK, and the Republic of Ireland, an EU member state.
Sunak will face an early test of his Brexit vs. biz credentials on Tuesday, when the House of Commons starts debating a bill that aims to repeal some 2,400 pre-Brexit laws originally drafted to comply with EU regulations. While passing the bill would be a disaster for UK firms that still trade with the bloc, striking it is a non-starter for hardcore Brexiteers.
What's more, although the Tories enjoy a comfortable majority in parliament, less than 40 hard-right rebel MPs could tank Sunak’s agenda by voting down anything they don't like — as Johnson found out multiple times during his tenure as prime minister.
But there's a silver lining: Eurasia Group's top Europe analyst Mujtaba Rahman believes Sunak’s premiership "is very good news for the ability of the UK to rebuild market confidence now and for relations with the EU." He predicts Sunak won't start the trade war with Brussels his predecessor was itching for and will only scrap the EU laws that make sense for British businesses.
"With the backing of 200 out of 357 Tory MPs,” Rahman says, “Sunak is as well-placed as any candidate to begin efforts to unite the party and give them a period of stability — and maybe even the possibility to recover some of their poll deficit against Labour." In other words, maybe, just maybe, Britain’s new PM could avoid an opposition landslide in 2024.
British PM candidate Rishi Sunak walks next to his campaign headquarters in London.
It's Rishi
Former Chancellor of the Exchequer Rishi Sunak is set to become the UK's next prime minister as the only candidate with support from more than 100 MPs in the Conservative Party leadership race.
Sunak's only declared rival, former defense chief Penny Mordaunt, bowed out right before the 2 pm BST deadline on Monday when it became clear she wouldn't meet the threshold and after many of her supporters urged her to make way for Sunak. The former finance minister will take over from Liz Truss, who threw in the towel last Thursday after the markets — and even the IMF — soured on her plans to cut taxes to stimulate the economy without spending cuts to balance the budget.
Sunak has his work cut out for him: steer the UK through a looming recession in the coming months, aggravated by a cost-of-living crisis and an energy crunch made worse by Russia's war in Ukraine. On the foreign policy front, he'll likely be less combative with the EU, stay the line on Russia-Ukraine, and get tough(er) on China. If he does a decent job, the Tories have a shot at stopping the opposition Labour Party from winning an absolute majority in the next parliamentary election, which should be called sometime in mid-2024.
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A combination picture shows Chinese leaders Xi Jinping, Li Qiang, Zhao Leji, Wang Huning, Cai Qi, Ding Xuexiang, and Li Xi.
What We’re Watching: Xi the all-powerful, Sunak the frontrunner, Shoigu the (nuclear) warmonger
All the secretary-general’s men
As expected, Xi Jinping was "re-elected" to a third term as secretary-general of China's ruling Communist Party on Sunday, a day after its 20th Congress wrapped up in Beijing. (The tightly scripted event had a bit of drama when his predecessor, Hu Jintao, was escorted out for “health reasons” as Xi looked on.) More importantly, the CCP unveiled its new seven-member Politburo Standing Committee, now made up entirely of Xi loyalists.
Who's in and who's out? The biggest name — other than Xi himself — is Shanghai party boss Li Qiang, who walked onto the red carpet in the Great Hall of the People right after Xi, which means he's now No. 2 in the CCP hierarchy and will likely be appointed premier in March. Li will replace current Premier Li Keqiang (no relation), who who retired before reaching the mandatory age of 70 and was removed from China's top decision-making body. Interestingly, Li Qiang was promoted by Xi despite having no nationwide executive experience and bungling Shanghai's COVID lockdown earlier this year. He’s been entrusted with running the economy at a time of the slowest growth China has seen for decades — in no small part due to Xi refusing to budge on zero-COVID.
What does this mean for Xi and for China? It's "a clean sweep for Xi allies and a consolidation of power unseen since the Mao era," tweeted Eurasia Group senior China analyst Neil Thomas. In other words, China's leader will be entirely surrounded by yes-men until the next party congress in 2027. On the one hand, that'll allow Xi to double down on policies that he thinks are ultimately good for China, such as "common prosperity" to make economic growth more equitable. On the other, Xi will be on the hook if things go south — as they famously did the last time China was under tight one-man rule.
Sunak leads race to replace Truss
Britain’s Conservatives are off to the races — again — this time to replace outgoing Prime Minister Liz Truss. Former Chancellor Rishi Sunak announced Sunday his second run for the top job and has already clinched the support of almost 180 MPs, well over the 100-MP threshold set by the Tories. In a last-minute twist, he won’t face off against his old boss Boris Johnson, after the ignominiously ousted PM unexpectedly dropped out of the race. Sunak’s only declared rival is now former defense chief Penny Mordaunt, who barely has 25 MPs supporting her but hopes some Johnson fans will switch to her side. Still, the UK seems to be going through its own It’s the economy, stupid moment of truth: ratings agency Moody’s downgraded Britain’s economic outlook from “stable” to “negative,” citing instability and high inflation. And in a rare show of bureaucratic discontent, Whitehall officials called out the upcoming spending cuts by Chancellor Jeremy Hunt — the UK’s fourth finance minister in as many months. The way things are going, there might be a fifth chancellor soon after Oct. 31, when Hunt delivers his “Halloween Speech” to unveil his new fiscal plan to the House of Commons — or is it the House of Horrors?
Is Russia playing “dirty”?
The lines of communication are open, but the topics are grim. On Friday and Sunday, for the first time since May, US Defense Secretary Lloyd Austin spoke with his Russian colleague Sergei Shoigu. Their topics of discussion were red lines and nukes, with the Biden administration seeking information on what might provoke a Russian nuclear attack in Ukraine. In weekend discussions with NATO counterparts, meanwhile, Shoigu flagged that Ukraine might be planning to use a “dirty bomb” — a conventional blast containing radioactive material. Russia’s state-owned news agency said the purpose would be to accuse Russia of using weapons of mass destruction and to turn the world against Moscow. The US National Security Council rejected the allegations as “transparently false.” Kyiv also pushed back, noting that it has no such weapons. “Russians often accuse others of what they plan themselves,” Ukrainian Foreign Minister Dmytro Kuleba said. President Volodymyr Zelensky warned that the allegations mean “Russia has already prepared all this” and encouraged the world to push back in the “toughest possible way.”This article comes to you from the Signal newsletter team of GZERO Media. Sign up today.
UK Prime Minister Liz Truss resigns.
UK's Liz Truss resigns
There have been jokes about whether UK Prime Minister Liz Truss could outlast a head of lettuce. But who’s laughing now? The newly installed British leader announced on Thursday that she’s resigning, unable to fulfill the promise of a low-tax, high-growth strategy for getting the post-Brexit economy moving. Truss noted that her government had delivered on reducing energy bills and cutting national insurance fees. But given the energy and economic crises — UK inflation hit a whopping 10.1% in the latest figures — and Russia’s war on Ukraine, which she said “threatens the security of our whole continent,” her plan for growth is untenable. Truss will stay on in the post, much like predecessor Boris Johnson did, until a replacement is found. A Tory leadership contest will come next, but any hopes for immediate solutions to the UK’s mounting crises have been dashed.
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Tony Blair on Liz Truss & a post-Brexit UK on the brink
Despite sky-high inflation and a plummeting pound, the UK’s newly installed PM Liz Truss has introduced tax cuts — requiring a lot more government borrowing — that she says will boost the UK’s sluggish growth rate.
This approach, which could result in the Bank of England increasing interest rates even more to tackle inflation, is ruffling feathers in Westminster and negatively impacting markets around the globe. On the sidelines of the UN general Assembly, Ian Bremmer sat down with former UK Prime Minister Tony Blair on GZERO World to discuss Britain’s economic woes and recent change in leadership.
“I think it's going to be a very uncertain period over the next year or so,” Blair said. “And I talk to a range of different people about this, which is always a problem when you're trying to make economic policy in government, and no one agrees with each other.”
The two discussed whether this controversial approach of using tax cuts to spur growth might succeed in pulling a post-Brexit UK away from the brink.
But Blair believes growth depends upon more than tax cuts. “Personally, I think the big questions around growth, long term, for Britain are around the technology revolution, infrastructure, and education.”
Catch the full interview on GZERO World with Ian Bremmer, airing on US public televisionbeginning on Friday, Sept 30.
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Conservative Party leadership debate between Liz Truss and Rishi Sunak
Is Truss pulling away?
The race to become the UK’s next prime minister has reached a crucial moment.
Though one new poll suggests Rishi Sunak may have cut into her sizeable lead, Liz Truss is still considered the likeliest choice to win the nationwide vote of Conservative Party members to lead the party and serve as PM, at least until the next national elections. A crucial endorsement from former rival Penny Mordaunt has boosted Truss still further.
The final result won’t be announced until September 5, but Sunak knows this week will be critical for the outcome. “Conservative Party voters tend to send their ballot papers back as quickly as possible,” says Eurasia Group’s top Europe analyst Mujtaba Rahman, and senior party officials hoping for cabinet posts can shape voter perceptions of the race with early endorsement of the likely winner – as former leadership rival Tom Tugendhat and Defence Secretary Ben Wallace have recently done. Many of the 160,000 Conservative Party voters, looking ahead to August holidays, may stop paying attention after this week’s head-to-head debate. “Unless Sunak can use public appearances this week and a televised debate on Thursday to slow her momentum,” Rahman says, “Truss looks to be headed for Number 10 [Downing Street].”
The frontrunner: Truss is a talented political veteran who has served as both post-Brexit international trade secretary and foreign minister. Her supporters say she’s “Boris without the baggage,” a team player untainted by the scandals that brought down outgoing prime minister Boris Johnson. Her critics claim she’s a politician without principle. During the 2016 Brexit referendum, she voted for the UK to remain within the EU, but the opportunity to serve in Johnson’s government led her to become a hardline Brexiteer.
That ideological flexibility has so far served her well in this race. “Though she’s the UK’s longest continuously serving cabinet minister,” Rahman notes, “Truss has managed to present herself as the change candidate while casting Sunak as the status-quo option.”
Sunak’s slide: The eldest son of Indian immigrants, best known for serving as Chancellor of the Exchequer, Britain’s chief financial officer, isn’t giving up. His backers say many voters remain persuadable. One recent poll has him well within striking distance, and Truss can still help by committing an unforced error or two.
Though he’s attacked Truss’s crowd-pleasing promises of tax cuts in a time of already high inflation as “fairytale economics,” he’s now proposed tax cuts of his own, though more modest and rolled out over several years. Sunak has also begun to echo her condemnations of “woke nonsense” to broaden his appeal among culture war conservatives. He continues to insist he’s more likely than Truss to lead the Conservative Party to a national election victory.
If Sunak can’t boost his poll numbers soon, he’ll likely face pressure from party heavyweights to quit the race and endorse Truss for the sake of party unity. So far, he shows no signs of searching for a graceful exit, but the sense of urgency within his campaign continues to rise.
UK Foreign Secretary Liz Truss (L) and ex-Chancellor of the Exchequer Rishi Sunk (R).
Britain’s next prime minister
UK Conservative Party MPs voted on Thursday to advance Rishi Sunak and Liz Truss to the final round of balloting for leadership of their party.
Some 160,000 party members around the country will now vote by mail to decide which of these two will serve as the UK’s next prime minister, at least until the next national election. The result of the vote won’t be known until Sept. 5.
On Monday, the two candidates will have their first head-to-head debate as the race enters the homestretch.
Who is Liz Truss? Truss is a political veteran who has served as both post-Brexit international trade secretary and foreign minister. She has “campaigned openly as the Continuity Johnson candidate,” according to Eurasia Group’s top Europe analyst Mij Rahman. Her country-first nationalism suggests she’d drive a hard bargain with the EU on the Northern Ireland Protocol issue, for example.
That’s why, Rahman says, Truss is “the candidate the EU least wants to win.” Like most of the rivals she’s overcome to reach this point, Truss has also called for tax cuts to stimulate the UK economy.
What do her supporters say? She’s “Boris without the baggage,” a talented true conservative untainted by the scandals that sank outgoing Prime Minister Boris Johnson.
What do her critics say? She’s a politician without principle. During the 2016 referendum for the UK to remain within the EU, she warned that Brexit meant “more rules, more forms, and more delays when selling to the EU.” Then the opportunity to serve in Johnson’s government persuaded her to become a hardline Brexiteer.
Who is Rishi Sunak? Sunak is best known for serving as chancellor of the Exchequer, Britain’s chief financial officer, during the pandemic. He directed heavy spending to help struggling individuals and businesses and to boost the UK’s flagging economy. Sunak is the eldest son of Indian immigrants and a symbol for many of a modern, multi-racial Britain.
What do his supporters say? Sunak’s reputation as a capable technocrat makes him more likely to win a national election by winning over moderate voters made uncomfortable by the Conservative Party’s lurch to the nationalist right in recent years. His principled stand that tax cuts should be delayed until the UK is on firm economic footing demonstrates that he puts the country first.
What do his critics say? Sunak is a backstabber and political opportunist. Though fined for involvement in Johnson’s lockdown scandals, he was among the first to signal no-confidence in Johnson’s government by resigning his post when he thought it would boost his chances of becoming prime minister.
National elections outlook: To this point, the candidates have competed for votes among their Conservative Party colleagues in parliament. Now they must win the hearts and minds of their party’s rank-and-file nationwide.
The winner of this party leadership contest, who will immediately become the new prime minister, must quickly prepare for national elections that will test the Conservative Party’s ability to win voters from beyond its reliable base, an electorate traumatized by inflation and economic weakness.
There are big differences between Conservatives and other voters. The Conservative Party membership is 63% male. More than three-quarters of its current voters supported Brexit. Some 56% live in London and England’s southeast versus 20% in the north of England and just 6% in Scotland.
Early polls suggest Truss opens the race with a sizeable advantage. “Sunak must turn the tide quickly,” Rahman notes. “Members get their ballot papers in the first week of August, and many will vote early.”
With Monday’s debate (9 pm BST on BBC), the six-week sprint to lead the party is on, and both candidates have a real chance to win.
What We're Watching: Draghi's departure, Russian annexation plans, two-way race for British PM
Draghi throws in the towel
Italy's embattled Prime Minister Mario Draghi finally stepped down on Thursday for a second time in a week, hours after winning a vote of confidence in the upper house of parliament on Wednesday evening. This time, President Sergio Mattarella didn't reject his resignation but asked him to continue as caretaker PM, presumably until a fresh election is held.
The vote of confidence was partly hijacked by mass abstentions from three of the top parties in his coalition: the populist 5-Star Movement, the far-right Lega, and the center-right Forza Italia. The no-shows broke Draghi’s hopes of keeping together a strong majority, and in the end he kept his promise to stay on as PM only if he held the coalition together. That was impossible since both Lega and Forza Italia wanted to ditch 5-Star, which they blame for the government’s collapse after rejecting Draghi's energy crisis relief plan.
The PM's departure puts an end to 18 months of a fragile unity coalition government, and ushers in a period of deep uncertainty for Italy and Europe at a critical time. Inflation and energy costs are both surging, and Draghi didn't have time to pass the reforms necessary to unlock EU pandemic relief funds. Also, the next government might be led by the Euroskeptic far-right party Brothers of Italy, out of the coalition and whose leader Georgia Meloni celebrated the exit of "Super Mario".
Russia wants more of Ukraine
The US has feared for months that Russia aimed to annex Ukraine’s eastern Donbas region. But having already seized much of the Donbas, Russian Foreign Minister Sergei Lavrov said Wednesday that Moscow also intends to gobble up the Kherson and Zaporizhzhia provinces in southern Ukraine, along with a “number of other territories.” American officials now believe Russia plans to illegally swipe sovereign parts of Ukrainian territory by introducing the ruble and forcing residents to get Russian passports — a new twist on Vladimir Putin’s 2014 playbook in Crimea, where the Kremlin held a bogus referendum on "joining Russia” prior to annexation. Since peace talks with Kyiv collapsed this spring, Putin likely thinks the odds of a negotiated settlement are slim, so he might as well take as much of Ukraine as he can before the Ukrainians get enough Western weapons to mount a counteroffensive. That would allow Putin to link Crimea by land to the Russian mainland and could boost his popularity at home. But there's a big downside: he’ll need to spend lots of troops and rubles on pacifying hostile populations and propping up battered economies.