• Iceland – a CB warning of private-sector repayment risks;
  • Norway – a new government stronger than it seems;
  • Paraguay – a generally positive economic picture;
  • Slovenia – threats to the government and its attempts to avoid an international bailout.

AUSTRIA:  Efforts are underway to form another Grand Coalition in the wake of the elections. The economy has been moving sideways, but is now starting to show signs of life. It will be helped by an official stimulus program as well as stronger exports.

EGYPT:  Trying to placate conflicting interests, the US has decided on a partial freeze of aid. The result is that everyone concerned is angry and Washington is suffering a further loss of influence in Egypt and the region. The longer-term economic challenges are enormous and unlikely to be resolved in the absence of political stability.

PAKISTAN:  A new loan agreement with the IMF should suffice, for now, to avert a threatening BoP crisis. In the political arena, a peaceful presidential transition is being followed by a similarly peaceful change at the helm of the armed forces. The new military leader will help influence critical relations with the United States and India.

PORTUGAL:  The country’s Eurozone partners are not showing much interest in easing the economic targets set under the bailout program. Even if they yield, Lisbon’s chances of regaining adequate market access to exit this program on time are fairly slim. The ruling Social Democrats took a beating in local elections.

RUSSIA:  With the economy growing more slowly than officials had anticipated, the government is aiming for budget cuts over the next two years and is ready to try a new policy to spur growth. Meanwhile, Putin is not making much progress in realizing his vision of a Eurasian economic union.

SAUDI ARABIA:  The interests of the Kingdom and the United States, closely aligned in the past, are drifting apart, with likely long-term consequences. The lessening US dependence on Middle Eastern oil has a part in this. The near-term outlook for the Saudi economy is positive, both internally and externally.

SWEDEN:  The government has unveiled a stimulus package in the budget for next year that is clearly aimed at enhancing its re-election prospects. The economy is not in recession, but it has slowed recently and the administration is trailing in the public opinion polls.

SWITZERLAND:  Even though there is no crisis now, the CB has made it clear that it intends to keep the exchange rate cap on the CHF for quite a while longer. At the same time, regulators are investigating private banks for possible FX rate manipulation, with an eye on putting an end to any such activity. A compromise tax deal with the US is causing an upheaval in the financial sector.

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