Tuesday, February 7, 2017

Political Changes Coming To Europe As War Preparations Increase



Shock Poll Shows Merkel Losing Chancellorship If Elections Held Today; JPMorgan Stunned



Overnight we reported that Germany's default swaps spiked to the highest level since Brexit as a recent poll showed that Merkel's lead in the polls had slid to multi-year lows ahead of Germany's elections later in the year, provoking some concerns that a formerly unthinkable "tail risk" outcome was becoming more likely. However, according to new data unveiled today, Merkel's headaches are only just starting, because in a brand new poll released this afternoon, the CDU would get 30% of the vote, while the suddenly resurgent SPD would get 31%. This means that the SPD's new head, Martin Schulz, would enter any coalition talks as the leader of the largest party, hence becoming Chancellor, leading to a stunned reaction by JPMorgan.

In a note released this afternoon by JPM's Greg Fuzesi, the strategist writes that following the recent resignation of Sigmar Gabriel as leader and chancellor candidate of the SPD, there has been much attention on how his replacement Martin Schulz would perform. Having spent most of his career in the European Parliament, most recently as its president, and being relatively unknown in Germany, this is not easy to predict. In his first major TV interview, he was recently pressed to explain how exactly he differs from his predecessor Gabriel and also from Chancellor Merkel, and what his focus on fairness would mean in practice. This was not entirely straightforward for him.

Nevertheless, opinion polls were beginning to show a bounce last week and this appears to be continuing. 
This afternoon, a new opinion poll from INSA showed the SPD gaining further support and overtaking the CDU/CSU for the first time in many years. If elections were held now, the INSA poll suggests that the CDU would get 30% of the vote, while the SPD would get 31%. This means that Schulz would enter any coalition talks as the leader of the largest party, hence becoming Chancellor.









Far-right National Front leader Marine Le Pen promised to take France out of the EU and Nato as she kicked off her presidential campaign in Lyon over the weekend. 
Le Pen told supporters on Sunday (5 February) she would give France its freedom back, and said: "Financial globalisation and Islamist globalisation are helping each other out. Those two ideologies aim to bring France to its knees."
In a manifesto published at the beginning of the two-day rally Le Pen listed 144 "commitments" to France.
She promised to leave the eurozone and the integrated command structure on Nato. 
Le Pen also vowed to hold a referendum on EU membership unless European partners agree to roll back integration to a loose coalition of nation states with neither a single currency nor a border-free area. 
She also pledged to put taxes on imports and on job contracts of foreigners, lower income tax and the retirement age. 
The manifesto called for certain rights, like free education and social housing, to be reserved to French citizens, and promised 15,000 more police and to expel irregular immigrants. 
“What is at stake in this election is the continuity of France as a free nation, our existence as a people,” Le Pen told her supporters.
In a trademark policy she also lashed out at what she called Islamic fundamentalism. She told her supporters it was a "yoke" France could no longer live under, saying no dignified French person could accept veils, mosques and street prayers. 
Le Pen hopes to cash in on the populist political momentum and to score on Trump-like upset win in May.









Three Chinese warships sailed near the contested Senkaku Islands Monday, apparently sending a message to the U.S. just two days after President Trump’s defense secretary visited Japan and vowed to defend the islands.

The ships sailed within Japan’s territorial waters some 12 nautical miles off the islands in the East China Sea, roughly 140 miles northeast of Taiwan, a U.S. defense official told Fox News.

On his first overseas trip as defense secretary, Jim Mattis, speaking in Tokyo, said China “has shredded the trust” of countries in the region by building up man-made islands in the South China Sea. He also said the U.S. commitment to protect Japanese territory applied to its islands in the East China Sea.

Mattis later called for all regional disputes over territory to be handled peacefully during a press conference alongside his Japanese counterpart, Minister of Defense Tomomi Inada.
The Chinese, who also lay claim to the Senkakus, call the uninhabited islands the Diaoyus.
Japan has laid claim to the islands since the late 19th-century. China has claimed the islands since the end of World War II.
“I made clear that our long-standing policy on the Senkaku Islands stands. The U.S. will continue to recognize Japanese administration of the islands,” Mattis said. “As such, Article 5 of the U.S.-Japan Security Treaty applies.” Article 5 commits the U.S. to defend Japan or its territories if attacked.


The sailing of the Chinese warships close to the contested islands followed a series of other recent provocations in the region.  

China has flown nuclear-capable bombers around other contested islands, including the Spratly Islands, six times this year. The latest flight took place on Sunday, according to the official.
In late November, China flew a pair of nuclear-capable bombers around Taiwan for the first time.








US military hardware, including M1A2 Abrams battle tanks and Bradley infantry fighting vehicles, have arrived in the northern Estonian town of Tapa as part of continued US efforts to counter the alleged Russian threat.
More than 50 units of US military equipment, including four battle tanks and 15 infantry fighting vehicles, were delivered to Tapa, the Estonian Defense Forces said in a statement. The personnel of the Charlie Company of 68th Armored Regiment's 1st Battalion from the US Army 4th Infantry Division arrived in the town two days earlier, on January 30.
The company commander, Captain Edward Bachar, said that the US troops would take part in the Estonian Independence Day parade. Earlier, Bachar also said that his company would begin its expert marksmanship training this week. 

The unit would replace a paratrooper company of the 173rd Airborne Brigade's 503rd Infantry Regiment, which was deployed to Estonia in September. The paratrooper company would then go back to its permanent base in Italy. 

"The movement of equipment and troops into and around Europe marks the beginning of a continuous rotation of armored brigade combat teams from the United States as part of Operation Atlantic Resolve," the US Defense Department said in a statement, commenting on the move.


"Atlantic Resolve is a demonstration of continued US commitment to collective security through a series of actions designed to reassure NATO allies and partners of America's dedication to enduring peace and stability in the region in light of the Russian intervention in Ukraine,” it added.



















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