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Council on Foreign Relations Daily News Brief
February 14, 2013

Top of the Agenda

Top of the Agenda: Eurozone Economy's Contraction Fuels Recession Worries

Official data for the fourth quarter of 2012 showed on Thursday that Europe's economies shrank at their fastest rate (FT) since the global financial crisis hit four years ago, with both strong and weak countries falling short of expectations. News of the 0.6 percent (WSJ) quarter-on-quarter drop hit the euro, which fell 1 percent against the dollar and whose strong appreciation has fueled fears that a nascent recovery for the bloc may have stalled. Germany reported one of the most worrying figures for its economy, which contracted by 0.6 percent on the quarter, marking its worst performance (Reuters) since 2009.


"Financial markets have been betting on a recovery. But the recent strength of the euro will hinder that. The euro area is likely at best to experience a feeble upturn, which may further fray political backing in southern Europe for the harsh policies imposed by creditor countries as a condition for official help," writes the Economist.

"The early signs for 2013 are a little more encouraging, but a number of member countries have some way to go, with Spain, Portugal, Italy and Greece all struggling with tough government spending cuts. This means unemployment will likely continue worsen in these countries, creating a growing divergence between Southern Europe and a slowly recovering German economy," writes Ilona Billington for the Wall Street Journal.

"Industrial production for the end of the period (December) grew, and there have been some more encouraging signs in business surveys this year. That probably owes much to the improvement in financial markets that followed the European Central Bank's statements about its readiness to intervene. But even if these really are signs of stabilization, the eurozone is a long way from either a convincing economic recovery or a solution to its financial crisis," writes Andrew Walker for the BBC.



Japanese Economy Shrinks

Japan's economy remained stuck in recession (AP) late last year, shrinking 0.4 percent for the third straight quarter due to feeble demand at home and overseas. The government reported Thursday a worse-than-expected 1.9 percent growth figure for 2012.

NORTH KOREA: China started radiation monitoring following North Korea's latest nuclear test (Yonhap), although so far no signs of radiation have been detected in the region.

CFR's Scott Snyder outlines the cost of North Korea's defiance in this blog post.



Francois Hollande in India to Push Trade

French President Francois Hollande began two days of talks in India in a bid to boost trade (Bloomberg) as the European economy continues to wither. Hollande and Indian Prime Minister Manmohan Singh pledged greater cooperation in defense, nuclear energy, and aerospace, although there were no breakthroughs on two pending deals totaling $20 billion.

PAKISTAN: Six militants believed to be suicide bombers were killed (PakistanToday) when police countered an attack on a police station in Bannu, Pakistan.

This Crisis Guide traces Pakistan's evolution and its competing influences.



Iranian Official Killed in Syria

The Iranian embassy in Beirut said that a senior commander in Iran's Revolutionary Guard was killed (al-Arabiya) by armed terrorists while travelling from Damascus to Lebanon. Meanwhile, Hezbollah, Iran's ally in Lebanon, blamed Syrian rebels for the death.

CFR's Elliott Abrams discusses Hezbollah fighters in Syria in this blog post.

BAHRAIN: A teenager was killed during a protest (al-Jazeera) in Bahrain marking the second anniversary of the country's crushed pro-democracy uprising.



Zimbabwe Referendum Set

Zimbabwe set a March 16 date for a referendum on the proposed new constitution (SWRadioAfrica). The vote would be followed by elections, expected to be contested by Prime Minister Morgan Tsvangirai and President Robert Mugabe, who has been in power since independence in 1980.

KENYA: Nineteen victims of alleged police brutality (CapitalFM) during Kenya's post-election violence in 2008 have sued the state in an attempt to charge senior government officials with murder, crimes against humanity, and mass displacement.



Pope Hints at Seclusion

Pope Benedict XVI, who announced his unexpected retirement earlier this week, has hinted he will withdraw into seclusion (BBC) after stepping down at the end of this month. The eighty-five-year-old pontiff cited worsening health and old age as the reason for his resignation.



Chavez Receiving 'Complex' Treatment

Venezuelan Vice President Nicolas Maduro said that ailing President Hugo Chavez is receiving "complex and difficult" medical treatments (Businessweek), marking the first new health update since January 26, when a minister revealed he had overcome a lung infection from surgery.

ARGENTINA: A New York federal appeals court agreed to hear additional arguments (MercoPress) from parties involved in the court's decision requiring Argentina to pay $1.33 billion to bondholders.



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