• Czech Republic – forceful FX intervention;
  • Hungary – record-low interest rates;
  • Latvia – a remarkable show of accountability;
  • Venezuela – novel ways of garnering dollars.

GERMANY:  There is still a risk that the formation of a Grand Coalition may run into difficulties. This will keep uncertainties high for the next couple of weeks.  Ultimately, though, a government is likely to be formed that will take domestic policies somewhat to the Left while keeping Germany’s stance toward the Eurozone on its familiar, conservative slant.

HONDURAS:  Even though the final results of the presidential elections have not been announced yet, there will be continued confrontation, with both front-runners claiming victory.  The economy will continue to drag its feet and the external accounts warrant watching.

INDONESIA: More interest rate hikes are in store as the most aggressive rate-tightening in eight years has barely dented the current-account BoP deficit and has not yet put a reliable floor under the rupiah. Economic growth is continuing to slow, but is still noteworthy, given the headwinds. Relations between Indonesia and Australia have soured abruptly over a spying scandal.

IRAN:  The nuclear deal that Tehran and the 5+1 Group reached is ill-conceived, practically unenforceable and, simply put, a bad bargain that is likely to get worse.  Iran will get much more sanctions relief than the White House admits.  The nuclear threat is not being eliminated and Israel and Saudi Arabia have reason for deep concern.

PORTUGAL:  Lisbon is eager to follow Dublin out of the straightjacket of its bailout program, but unlike the Emerald Isle it will not be able to make a clean exit without asking for a further contingency loan. Much will depend on the constitutional court, which could even force the government to ask for a second full-scale bailout.

SWITZERLAND:  The Swiss have voted overwhelmingly against an initiative that would have limited executive salaries.  The issue is not dead, but it will now be some time before it is taken up again. The cap on the Swiss franc’s exchange rate, meanwhile, will be preserved, even though the unit has not bumped up against it for more than a year.

TURKEY:  Membership talks with the European Union are on again, but are not likely to get very far. The “democratization package” of reforms unveiled by the government does not go nearly far enough. Reports of a foreign policy reset appear, at the very least, premature.

UKRAINE:  Now that Kiev has decided to end its quest for an historic new alliance with its Western neighbors and has abruptly halted plans for an imminent trade pact with the European Union, the mass rallies and riots triggered by the decision will not die down easily, but whether they can reverse it is questionable.

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