The Russian offensive in eastern Ukraine commenced late Monday following missile strikes against military targets in western Ukraine and preparatory artillery fire strikes against Ukrainian forces in the east. Russia has spent the past two weeks reinforcing and resupplying its forces in the Donbas region in preparation for this moment. Ukraine had also resupplied and reinforced its ground forces in the east to the best of Kiev’s ability. These efforts have attracted Russian attention, as was made apparent by the missile attacks on military targets deep in the Ukrainian rear areas like Lviv. Disrupting the flow of war supplies from outside Ukraine has become a high priority for Russia, a lesson learned the hard way earlier in the conflict. The supply routes coming from Poland and other NATO nations into Ukraine are going to be targeted more as the offensive in Donbas is now getting underway.
Russian Foreign Minister Sergei Lavrov has confirmed that a new phase of the war has begun. During an interview with India Today, the diplomat said, “This operation in the east of Ukraine is aimed as it was announced from the very beginning to fully liberate the Donetsk and Luhansk republics.” When he was questioned about the growing rhetoric over nuclear weapons, Lavrov blamed the Ukrainian government, and specifically Volodymyr Zelenskiy for fueling false allegations.
The IMF (International Monetary Fund) is modifying its forecast for global economic growth over the next 24 months as the ripple effects of the conflict in Ukraine continue to expand. When the war started in February, 2022, economies around the world hadn’t yet fully recovered from the COVID-19 pandemic. Now these recoveries will be hampered by the war, jeopardizing growth in nations mainly across Europe and Asia. Naturally, Russia and Ukraine are feeling the most direct and immediate effects of the war.
The People’s Republic of China is sharpening its rhetoric on the possibility of any future attempt by Taiwan to secure independence. Chinese defense ministry spokesman Wu Qian issued the following statement at a press conference held Thursday: “We are seriously telling those Taiwan independence forces: those who play with fire will burn themselves, and Taiwan independence means war.” Quian also spoke of recent Chinese military activity that’s taken place in close proximity to Taiwan as being “necessary actions to address the current security situation in the Taiwan Strait and to safeguard national sovereignty and security.”
The United States responded with a statement of its own. Pentagon press secretary John Kirby said, “We find that comment unfortunate and certainly not commensurate with our intentions to meet our obligations under the Taiwan Relations Act.” This was the Biden administration’s first public statement on China-Taiwan relations, which have seen tensions rise in the past few years with China not ruling out military action to retake the island, which it considers a breakaway province and not a sovereign nation-state.
The responding statement by the Biden administration was rather inconspicuous and does not support the more direct expectations on the new administration with regards to China. The Biden administration is expected to keep pressure on China over a number of issues from human rights to Hong Kong, and Taiwan as well as trade disputes. Relations between the United States and China are deteriorating at a rapid rate and closer ties between Washington and Taipei have added fuel to the fire.
Taiwan’s economic resurgence is also serving as a thorn in Beijing’s side. In 2020, Taiwan’s GDP grew faster than China’s for the first time in thirty years. This is mainly due to Taiwan gaining early control of the COVID-19 virus and enjoying a phenomenal export performance. Official data is expected to be released on Friday and is expected to show Taiwan’s GDP growth at 2.55% for 2020 compared to China’s 2.3% increase. Not a significant difference between the two figures but enough to affect tension between the two nations.
A German economist is warning that another European financial crisis could be on the horizon. Dr Lars Feld, who sits on the German Council of Economic Experts, believes Italy could be ground zero for a new crisis at a time when the Eurozone is particularly vulnerable. Italy’s economy is shrinking at the same time it is dealing with government debt, and a banking crisis. A recession is all but guaranteed at this point, and the nation’s financial credibility is in question right now. In an interview with the British Broadcasting Company, Feld said “The banking system in Italy is not as safe as we might hope for. There is the potential for contagion, in particular, from the Italian banking system to other banking systems.”
Feld’s warnings are certainly not falling on deaf ears. Italy has been a concern for years, going back to the days following the 2008 global financial crisis. Unfortunately for Rome, and Brussels, no solution was ever put forward which effectively dealt with the Italian problem. As a result, Italian debt has skyrocketed while economic growth has been minimal at best.
EU intervention is not probable at this time. Brussels feels such a move could bring on a major financial meltdown across Europe. Italy is in the unique position of being too big to fail, yet simultaneously too big to save. To make matters more complicated, Rome and Brussels have been at a political standoff over Italy’s economic mess. The present Italian government is resisting EU oversight and this does not appear likely to change at any point soon.
Italy is not the only worry for the Eurozone. Germany’s economic expansion is slowing down immeasurably. The German government’s forecast for economic growth has been revised. Berlin now expects a grown of 0.5 percent, down from the 1.5 percent forecast earlier this year. Global competition has intensified, and Germany is responding slowly to the new challenges.
With EU parliamentary elections coming later this week, the economic concerns are sure to be on the minds of at least some voters when they go to the polls.