As we move into the final months of the year, credibility is on the line in many parts of the globe.
The United States knew its credibility with Middle Eastern allies would be at stake as Washington tried to distance itself from the region's most consuming conflicts, but it also had to do so in order to regain credibility with its allies in other sensitive areas, such the Russian and Chinese peripheries.
Russia, not happy with the United States creeping too close in its backyard, is now escalating its presence in Syria and potentially Iraq, attacking the credibility of the United States in leading the fight against the Islamic State while using that obtrusiveness to draw Washington into a serious dialogue.
Simultaneously, Moscow will keep the calm in eastern Ukraine, restoring its credibility among major European powers who would much rather negotiate with than confront the Russian bear.
Russia is playing a complex game with the United States this quarter, but Washington will not be coerced to the negotiating table. And as the United States reinforces its allies, the standoff with Russia will only deepen.
The credibility of the Chinese Communist Party is also at stake as the economic slowdown persists and as the limitations of Beijing's interventions become more apparent. Commodity prices will remain depressed as China contends with tremendous oversupply in the housing market, making a major boost in new construction unlikely before the end of the year.
Caught between an irresolvable migrant dilemma and a Greek bailout program that is sure to get snagged again when the reforms fall short, German Chancellor Angela Merkel will meanwhile fight to maintain her credibility at home. When the European Commission gives breaks to Spain, Italy and France for missing their budget deficit targets, the reform mandate from Brussels will be further compromised.
The credibility of two very troubled governments going into elections this quarter is already at an all-time low, but that does not mean either will concede power easily.
In Turkey, the ruling Justice and Development Party will be stuck with another hung parliament, prolonging the political limbo at the same time Russia is mucking up Ankara's plans for northern Syria. In Venezuela, the ruling United Socialist Party of Venezuela will do what it can to undermine the opposition vote at a time when the opposition still sorely lacks the energy to take to the streets.
This will also be the quarter when the biggest global climate change deal since the 1997 Kyoto Protocol will be signed, though its credibility will still be questioned. While the United States and Europe push for more aggressive emissions targets, developing countries will resist targets on overall emission levels, opting instead for targets on emissions intensity tied to GDP to avoid stymieing their economic development. A lack of enforcement, however, will reduce the deal's impact.
Read the region by region forecasts below:
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Europe
The main theme for Europe in the fourth quarter will be a recurring one: fragmentation. Indeed, the next three months will bring political and even territorial fragmentation to the Continent. The European Union will be dealing with three main issues, the migration crisis and political developments in Spain and Greece.
Germany will be increasingly hemmed in by domestic factors. Pressure from conservative forces within her government will force Chancellor Angela Merkel to continually seek accommodation. This will be the case, for example, with the migration crisis. On the one hand, Germany will introduce reforms to make it easier for refugees to join the workforce. On the other hand, it will toughen its asylum policies to slow the flow of refugees into Germany.
Conservative pressure will also be felt in Merkel's handling of the Greek bailout. Berlin will give Greece's new administration enough time to come up with a governing plan. However, Berlin will also push Athens to honor its bailout commitments and will be willing to delay the disbursement of money in the likely case the reforms calendar is not respected.
Merkel's position as chancellor is not under threat, but dissidents within her party will remain very vocal, forcing Merkel to seek the middle ground.
The Immigration crisis
The arrival of asylum seekers will remain problematic for Europe during the quarter, but measures by EU members to enhance land and maritime controls and colder weather will temporarily reduce the influx of migrants into the Continent. During the quarter, Europe will focus its efforts on measures designed to prevent people from entering the Continent, especially by seeking to cooperate with countries in the Middle East and Africa.
However, European efforts to prevent migrants from reaching EU territory will have modest success. The European Union will provide more funds for countries in the Middle East and North Africa. This will only be modestly effective: In countries such as Libya, there is not a central government to negotiate with.
The European Union's naval operation in the Mediterranean Sea will start boarding, searching and seizing vessels in international waters. This will increase the chances of violent clashes between EU forces and human traffickers. In addition, money will not be enough to keep migrants in countries like Turkey or Lebanon, where asylum seekers find legal barriers to work.
Under pressure from conservative forces at home, Germany will toughen its position on asylum, trying to become less attractive for asylum seekers. Access to asylum benefits will be made harder while repatriations will be made easier for certain groups (especially migrants from the Western Balkans). Sporadic border controls will remain in place across the Continent aimed at disrupting migration routes.
The Greek crisis
During the fourth quarter, the Greek government will introduce just enough measures to receive funds from its bailout program, but the entire schedule of reforms and disbursements of money will be delayed. Because of the general elections that were held in September, Athens postponed the approval of many of the reforms included in its bailout package. As a result, the creditors will probably delay their assessment of the bailout and the disbursements of money (both were originally scheduled for mid-October).
The creditors are likely to give Greek politicians some extra time to come up with a government program and a plan for reform. But several governments in Northern Europe, including Germany, the Netherlands and Finland, invested significant political capital in approving the Greek bailout and promised conservative lawmakers at home that they would keep constant pressure on Athens. This means that the lenders will have some patience with Greece, but pressure will return by the end of the year.
The delays in the reviews and disbursement of money will also delay the International Monetary Fund's decision on whether to participate in the program. The Greek government will push for debt relief, but the creditors will not make any concrete moves. Talks on debt relief will start during the quarter but will probably not bear any fruit before the end of the year.
After making substantial debt payments to the European Central Bank in July and August, Greece faces a somewhat calmer calendar of debt maturities for the rest of the year. This means that Athens can probably survive a delay in the disbursement of bailout money. However, Greece is not out of the woods.
The longer the implementation of the program is delayed, and the longer the disbursement of money is deferred, the greater the fear of a Grexit and the more political frictions within Germany are bound to escalate.
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