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Daily Brief: Kerry to Visit London, Brussels to Address Brexit Fallout

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June 27, 2016

Daily News Brief

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Kerry to Visit London, Brussels to Address Brexit Fallout

U.S. Secretary of State John Kerry will visit Brussels and London on Monday to speak with EU and UK leaders about the United Kingdom's vote to leave the regional bloc. Kerry called the vote "a decision that the United States had hoped would go the other way," but also said that leaders needed to carry out the will of the voters. The British pound continued to lose value (FT) while the investment bank Goldman Sachs predicted a recession (Reuters) in the United Kingdom and Moody's cut the country's credit rating outlook to negative (BBC). Meanwhile, the Labour party faces an upheaval following a wave of resignations (BBC) by shadow cabinet members protesting Jeremy Corbyn's leadership.


"The historic accomplishment of European integration launched in the wake of the second world war, which brought with it unprecedented stability and prosperity, is at risk. The Brexit vote comes in a context in which Europe is already reeling from low economic growth, Russian aggression in Ukraine, and an influx of refugees. Making matters worse is the likelihood that EU officials are more likely to threaten other countries not to follow the UK's lead than they are to address the EU’s flaws that in part fuelled the vote," writes CFR President Richard N. Haass for the Financial Times.

"Market analysts predict a sharp fall in UK growth over the next year, on the order of 1-2 percent lower, with some predicting an outright recession. At the same time, the rating agencies have signaled that they are likely to downgrade the UK. Uncertainty will be felt on investment most importantly, as well as consumer sentiment. Even if you are optimistic about the long-run future of the British economy outside the EU, the cyclical effects appear likely to be significant. The shock will drag European growth lower, adding to political strains on the union," writes CFR's Robert Kahn in this Macro and Markets blog post.

"The largest consequences will be for Europe — both for the reality and the idea. Britain’s vote will encourage populists elsewhere: Already, Euroskeptics in Sweden, France and the Netherlands have demanded a copycat referendum. Spain’s neo-Marxist far left is expected to win a quarter of the vote in Sunday’s election. Polls suggest that French voters are more skeptical of the E.U. even than British ones, a sentiment that will assist the far-right populist, Marine Le Pen, in next year’s presidential contest. Populist governments are already in power in Greece, Hungary and Poland," writes CFR's Sebastian Mallaby for the Washington Post


China's Top Diplomat in Vietnam Ahead of Maritime Tribunal Verdict

China's top diplomat, Yang Jiechi, arrived in Vietnam as the region awaits an international tribunal verdict that is expected to favor the Philippines in an ongoing territorial dispute in the South China Sea (Reuters). China has said forty-seven countries have offered to support its refusal to recognize the verdict.  

This CFR InfoGuide lays out China's maritime disputes.

TAIWAN: The Chinese government said it suspended its communication mechanism (Global Times) with Taiwan over President Tsai Ing-wen's refusal to recognize the "one China" principle.

CFR's Jerome A. Cohen discusses Tsai's win in Taiwan in this interview.


India Admitted to Missile Technology Control Regime

India became the thirty-fifth member (Hindu) of the Missile Technology Control Regime, which the country's foreign ministry said would support international non-proliferation objectives. The entrance comes days after China blocked India from entering the Nuclear Suppliers Group; China said (BBC)said India's membership should be contingent on it signing the Nuclear Non-Proliferation Treaty.

AFGHANISTAN: Fighting between militants from the self-proclaimed Islamic State and government forces left twelve security personnel and civilians dead in the country's east (RFE/RL), according to government sources. Local government representatives said that more than a hundred militants had been killed over three days in Nangarhar province.

CFR's Stephen Biddle discusses U.S. objectives in Afghanistan in this article for Defense One.


Report: U.S. Weapons Diverted by Jordanian Intelligence Operatives

Millions of dollars' worth of weapons shipped from the U.S. Central Intelligence Agency and Saudi Arabia intended to arm Syrian rebels were systematically stolen by Jordanian intelligence operatives and sold on the black market, according new report (Al Jazeera). U.S. federal investigators said they believe that some of those diverted weapons were used in a November attack on a police facility in Amman that killed five people, including two Americans.

IRAQ: Prime Minister Haider al-Abadi announced (WSJ) from the center of Fallujah that Iraqi forces had gained full control over the city in an offensive against the self-proclaimed Islamic State. A spokesman for the U.S.-led coalition that supported the Iraqi offensive with air strikes said there was more work to do before the city would be fully secured.


Dollar Shortage in Zimbabwe as Government Promises to Issue Bond Notes

Zimbabwean authorities imposed restrictions (FT) on several imported items as the country deals with a severe shortage of U.S. dollars, the dominant currency since it abandoned the Zimbabwe dollar during a hyperinflation crisis seven years ago. The government has promised to reintroduce a national currency through the printing of "bond notes."

MADAGASCAR: Two people were killed and at least eighty wounded in a grenade attack (DW) on a stadium in the capital city of Antananarivo during a celebration of a national holiday.


Turkey, Israel Restore Full Diplomatic Ties

Israeli Prime Minister Benjamin Netanyahu confirmed the full restoration of diplomatic relations (Al Jazeera) between Turkey and Israel at a press conference in Rome, saying it would have "immense implications for the Israeli economy." As part of the deal Israel will apologize for a raid in 2010 on a Turkish aid flotilla to Gaza and pay compensation to victims' families.


$5.4 Billion Expansion of Panama Canal Opens

An expansion of the Panama Canal was inaugurated on Sunday (LA Times). The new canal can accommodate ships carrying up to thirteen thousand containers; before the expansion the limit was 5,500 containers.

PUERTO RICO: Thousands of people protested in Puerto Rico's largest stadium on Saturday against a bill from Washington that will allow the island to declare bankruptcy in exchange for submitting to a federal oversight board whose members would have more power than the local government (LAHT). Puerto Rico is expected to miss $2 billion in debt payments due on July 1.

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