Insights

Circle graphic Circle graphic Circle graphic

Der Kingmaker, the debt ceiling and Lithium in coalition

Policy preview: ending the debt ceiling?
The US’ debt ceiling is among the most despised institutions of US politics, from the perspective of the Democratic Party. The ceiling formally institutes a limit on how much the US government can borrow – but in practice it has never done so, having been consistently raised since its introduction just over 100 years ag, even in the 1990’s when then-president Bill Clinton managed to run a rare surplus.

The ceiling is once again in the news after the Republican Party refused to support raising it in a procedural vote on 27 September. The ceiling was of course consistently raised under former president Trump, when Republicans controlled the Senate, and it was formally suspended for two years in August 2019. While this may well have avoided its politicisation during the COVID-19 pandemic, the vast government spending rapidly required by the initial response to the virus highlighted the potential risks in retaining such a limit.

Democrats argue that the Republican Party politicises the limit every time that it is out of power, pointing to the government shutdowns that resulted from refusals to raise the limit when Barack Obama was president and former Republican House Speaker Newt Gingrich’s 1995 move to separate the increase from the annual budgetary process. But at the same time the Democrats have been wary of publicly calling for its elimination, which could be perceived by voters as embracing fiscal irresponsibility.

Treasury Secretary Janet Yellen has warned that failure to raise the ceiling could lead to a formal default, declaring this would push the US back into recession. Federal Reserve Chair Jerome Powell – who former president Donald Trump nominated to replace Yellen in that post – has made the same point.

Republican Senate Majority leader Mitch McConnell has used the latest standoff to say that the buck stops with the Democratic Party this time, given the party’s control of both houses of Congress and the presidency. He is correct in that the Democrats can use the budget reconciliation process – which would override the Republican ability to filibuster such a vote – to eliminate the debt ceiling. Yet the Democrats are seemingly unwilling to open the 2022 budget resolution to do so, which could galvanise opposition to increased spending from centrist Democratic Senators Joe Manchin and Kirsten Cinema, already engaged in a standoff with their own party over a US$3.5 trillion social policy and US$1 trillion infrastructure bill.

The Democratic Party may therefore have an interest in allowing a brief crisis over the debt ceiling even as they control all branches of government. Previous shutdowns have failed to significantly affect domestic political trends. McConnell’s relationship with Trump and the less fiscally cautious wing of the party that has been so ascendant since his 2016 election victory is strained, with Trump reportedly seeking to stoke a leadership challenge among Republican Senators. Despite McConnell’s declarations, the intricacies of Senate parliamentary process are not of interest to most American voters.

Strange as it may seem, if Democrats are hoping to lay the blame for any fallout at McConnell’s feat, in hopes it will engender an environment in which they can finally push through the debt ceiling’s abolition in 2022.

“Democrats have every tool they need to raise the debt limit. It is their sole responsibility”. Senate Minority Leader Mitch McConnell

Power play: Der Kingmaker
Germans went to the polls on Sunday, and the election appears to already have a likely winner. The leader of the Social Democratic Party (SDP), Olaf Scholz, is look set to be the next Chancellor. However, the two smaller parties he will need to support his governing coalition will have to find a lot of compromise.

The SDP won the most seats in the election in a disappointing night for the Angela Merkel’s governing Christian Democratic Union (CDU).

The party sitting closest politically to the two largest parties, the SDP and the CDU, and thus natural coalition partners in the next government is the FDP, whose leader Lindner has been described as a ‘kingmaker’ who must choose the next leader of the Republic.

However, a coalition made up of the CDU, FDP and Greens, is politically implausible. The CDU suffered a heavy defeat on Sunday, losing a quarter of its support compared to the last election in 2017. Their leader is already facing calls to resign from within his own party, and is no longer a serious contender for the Chancellery.

The most likely outcome is a ‘traffic-light’ coalition between the Greens, the SDP, and the FDP. The SDP will need to form a coalition with these parties in order to form a government. But while the Greens favour statist intervention, the FDP is more aligned to a laissez-fair economic doctrine, preaching faith in markets to solve the climate crisis.

So while Lindner may no longer the ‘kingmaker’ – with little tangible choice over who will be the next Chancellor – more significant may be areas where the Greens and the FDP can find common ground. Whereas the Greens and SDP largely align on economic policy, the FDP support significant tax cuts and adherence to the debt brake. Division over climate issues such as the future of the car sector, Nord Stream 2 gas pipeline, and how to best protect households from the impact of climate policies, may prove to be sticking points.

However, early signs suggest compromise is possible – the Greens and FDP already have entered negotiations between themselves to better enable them to present a united front. To give just one example, Lindner has called for a state investment fund, separate from the federal budget, borrowing and invest with higher returns. The Greens may well see this as the route to climate infrastructure investment without having to increase national debt to unacceptable levels.

Perhaps Lindner will not be kingmaker, with Scholz apparently already Chancellor-in-waiting. But the success of Germany’s next government will depend on how much compromise can be reached by the FDP and the Greens – and early signs are promising.

“For me, it is always important that I go through all the possible options for a decision”.

Chancellor Angela Merkel

Dollars and sense: Lithium in coalition
Germany’s Green Party is all but certain to enter its next government after the 26 October elections – having come in third, both the first-place Social Democrats (SPD) and the runner-up Christian Democratic Union (CDU) have they want to discuss forming a coalition with the party. Any realistic coalition other than a renewed CDU-SPD grand coalition, which both have said they wish to avoid, would require the Green’s participation. The Green’s environmental agenda has been embraced by both as well, but one major question facing any new coalition will be how they balance environmentalism and NIMBYism.

Pollsters reported that more Germans identified climate change as their primary concern going into the elections, rapidly overtaking COVID-19 as the summer progressed. The German auto industry has also undergone a rapid shift to supporting the electric transition for the sector as well, spurred on by Tesla’s development of a ‘gigafactory’ outside Berlin – something the outgoing grand coalition pushed for. The CDU’s chancellor candidate, Armin Laschet, even met with Elon Musk in mid-August, seeking to brandish his parties green credentials.

Incidentally, Laschet posed a question to Musk that said gets to the heart of Germany’s green agenda: “hydrogen, or electric?”. Musk laughed it off, endorsing the later (on which he has staked his company) wholeheartedly but that such a question could still be posed in German politics highlights the quiet discomfort many at its peak express with regards to a core aspect of the transition: the supply of lithium batteries.

Demand for lithium has grown exponentially over the past decade, but Europe has repeatedly failed to develop its own sources. Plans for lithium mining in Portugal collapsed in April, and while the UK has made some very early tentative progress towards exploiting its own lithium, post-Brexit competition and EU rule-of-origin and tariffs mean that integrating European auto manufacturing with UK battery production is unrealistic at present.

Despite the enthusiasm for the green agenda, the Green Party has been at the forefront of opposition to lithium mining. At the European level, the party has fiercely opposed the US$2.4 billion Rio Tinto led Jadar mine project in Serbia over concerns it will degrade the local biodiversity and agricultural fertility and in solidarity with local protests.

Whatever coalition is formed in Germany, it will have to deal with the reality that Berlin risks being left behind if Europe remains without a significant local lithium supply. Otherwise, its auto industry risks being left behind.

“We have to think of where the raw materials come from… but we want to further develop and expand electro-mobility here in Germany, particularly with the production of batteries”. Annalena Baerbock, co-leader of the Green Party

Posted in UncategorisedTagged in , , , , ,

Boundary review blues? A (r)evolutionary framework and Dutch days

Policy preview: boundary review blues
Britain is overdue for a parliamentary constituency boundary review. Two efforts to do so since 2010 were both ultimately abandoned, following opposition from both sides of the floor and amid the tumult of the 2016 Brexit vote and its aftermath. In 2021, however, the process is due to get off the ground, with potential major implications for the next general election.

The groundwork for the new boundaries has already been laid by the Parliamentary Constituencies Bill 2019-2021, which received Royal Assent last December. It abandoned previous plans to reduce the number of MPs from 650 to 600 and set the boundary review to be completed by mid-2023, on the basis of registered electorates from last December. Constituencies aim to be within 5 per cent of 73,393 voters, meaning that more than half of the current parliamentary constituencies will have to be redrawn.

This work is to be undertaken by the Boundary Commission, which is non-partisan. Nevertheless, the moves are certain to raise opposition from affected MPs and parties. These tensions may play out in relation to the centrifugal sentiment prevailing in parts of the UK, particularly Scotland, which is set to lose at least one, more likely two, of its 59 MPs. Wales may lose as many as eight of its current 40 seats (though the constituency of Ynys Mon / Anglesey was enshrined as a protected constituency in last year’s Parliamentary Constituencies Bill).

The redistribution of seats around urban-rural divides is likely to have the most significant impact on the political fortunes of the Conservative and Labour parties. While the continued trend towards urbanisation and growing population in London and other major cities may help Labour where new seats are created, population shifts in other areas may help the Conservatives. A number of so-called ‘Red Wall’ seats won by Prime Minister Boris Johnson in the 2019 election, in many cases bucking decades of consistent Labour victories, are areas that have seen population decline. While this means some seats may fall by the wayside entirely, the geographical footprint of the remaining constituencies is likely to expand, picking up rural and less-populated areas, where historically voters have been more Conservative-leaning.

Although Johnson has also vowed to do away with the Fixed-Term Parliaments Act, his sizable majority means that it is more likely than not that the next election will only be held after the new seats come into effect.

Dollars and sense : A (r)evolutionary framework
In February, Zambia became the first country to request that it be allowed to restructure its debt under the so-called Common Framework. The nation’s fiscal and economic challenges are not new, and it had already fallen into default last November, setting the stage for a clash between its private creditors and China, by far Lusaka’s largest creditor, over how to make Zambia’s debt sustainable. The International Monetary Fund also started talks with the Zambian government last month, further complicating the picture. But it is the test of the Common Framework that will have the most far-reaching implications.

The Common Framework of the Group of 20 Nations is one of the various initiatives that governments have taken over the last year to help one another through the Covid-19 pandemic. The first major such effort – also organised through the G20, with the support of the IMF and World Bank – is the Debt Service Suspension Initiative (DSSI). This was launched last March and has seen debt repayments to the G20 creditors from 45 developing countries suspended, with a further 28 countries eligible for such relief.

The DSSI has been so significant because China has agreed to take part, although it had historically refused to cooperate with the informal grouping of mostly Western creditors known as the Paris Club. There has been significant concern in recent years over Beijing’s use of ‘debt trap diplomacy’ following its assumption of control of the Hambantota port in Sri Lanka, strategically located in the Indian Ocean, in 2017, but fears that the pandemic would see it seek to escalate such efforts have so far proven unfounded.

The Common Framework was announced at last November’s G20 Summit in Saudi Arabia and builds on the DSSI by establishing a unified set of rules for how sovereign nations’ debts such be restructured. Though the summit was held largely virtually due to the pandemic, supporters of the framework have insisted that support for it among G20 members is strong and unified. They will have to be for the framework to succeed. There has never before been lasting international agreement on sovereign debts, despite repeated attempts to set up a sovereign bankruptcy court. is Zambia presents a strong early test case for the Common Framework.

Private holders of Zambia’s bonds have telegraphed that they hold a blocking share of the debt, which could hinder any restructuring. They have demanded the terms of Chinese debt restructuring be disclosed before agreeing to any of their own. The Common Framework should enable this, although Beijing has demurred from publicly stating how its loans to Zambia are even constituted. If the Common Framework can even make moderate progress in bridging this gap, however, it may prove a key tool in government bankruptcies, particularly in the developing world, going forward.

Power play: Dutch days
Dutch voters go to the polls on 17 March, following the resignation of Prime Minister Mark Rutte’s government in January, prompted by the revelation that it wrongly accused thousands of families of welfare fraud. However, Rutte’s People’s Party for Freedom (VVD) has only built its lead in polls in subsequent weeks. 35% of voters appear poised to vote for the VVD, up from the 21.3% it received in 2017. Only Geert Wilders’ far-right Party for Freedom (PVV) is also above 20 per cent in the polls, and then just barely, but as with other previous Dutch elections, most other parties have ruled out considering a coalition with the PVV.

Rutte therefore appears set to head another government, almost 11 years after he first became prime minister. With German Chancellor Angela Merkel not standing for re-election as chancellor in Germany’s federal elections, expected on 26 September, Rutte is poised to become the elder statesman of the European Union.

If Rutte’s VVD performs as well as current polls predict, it will have its choice of coalition partners, but the most natural allies would be those with whom he formed the previous government and who have overseen the interim cabinet in the run-up to the current vote. These are the liberal D66. centre-right Christian Democratic Appeal (CDA) and centrist Christian Union. Some polls indicate the CDA will win enough votes to open up the possibility of a two-party coalition between the VVD and CDA. The centre-left and left are unlikely to play a major role at all, with the Dutch Labour Party (PvdA) a shadow of its former self, having never recovered from the global financial crisis and Eurozone crisis.

Heading a unified centre-right government would set the stage for a more conservative agenda, and if past evidence is any indication, Rutte would likely seek to carry this over into his unofficial role as Europe’s elder statesman (and formally on to the European Council, which guides the EU’s policy agenda). Rutte’s governments had traditionally been allies of the British in their opposition to the idea of ‘ever closer union’ while the UK was still an EU member. More recently, he led resistance to the ‘coronabonds’ mutualising EU debt amongst members, and if a government of only his centre-right allies, would further increase support for Dutch leadership of the ‘Frugal Four’ within the EU. With Merkel set to leave the scene, and Rutte set to secure his position, Europe’s leadership itself may soon be changing to a more cautious tack.

Posted in UncategorisedTagged in , , , ,

Putting the green in German, the future of working from home and New York’s next star?

Policy preview: putting the green in German
“Germany is Europe’s heart.” Yanis Varoufakis, former Greek Finance Minister

German voters are set to go to the polls by 26 September, in elections that have garnered significant attraction because Chancellor Angela Merkel will not be the lead candidate of her Christian Democratic Union (CDU) for the first time since 2005. At the helm of various coalitions in that time with the centre-left Social Democrats (SPD) or the libertarian-leaning Free Democrats (FDP), Merkel’s coalition deal-making has been an underappreciated feature of her political nous. Her successor as party leader Armin Laschet also has shown the necessary coalition-building skill to be an effective premier, brining in the FDP to form a regional government in North Rhine-Westphalia following the state’s 2017 vote.

However, if polls are accurate, the September election will throw up new coalition possibilities heretofore unseen in German politics at the federal level. The reason for this is two-fold, first the rise of the Alternative for Germany (AfD) party, which all other parliamentary German parties have placed a ‘cordon sanitaire’ over that is unlikely to be lifted anytime soon. The second factor is the rise of the Green Party, which has sapped votes from both the CDU and the SPD. In many polls in now leads the latter and could well become the second-largest party in the Bundestag come October.

The Greens will have clear environmental demands. However, less attention has been paid to the fact that the Green Party is expressly in favour of the further mutualisation of European borrowing and has little regard for the ‘Black Zero’ policy of balanced budgets that held throughout so many Merkel governments until the COVID-19 crisis. In fact, the speed with which Germany has abandoned both this domestic borrowing policy and its reticence to mutualised European debt marks a profound paradigm shift not just in German politics, but for all of Europe.

Whether the Greens negotiate with the CDU and its more-conservative Bavarian sister party, the Christian Social Union (CSU), or with the SPD, as to forming a coalition, expect it to demand an explicit endorsement for further European financial federalisation, and for stimulus packages inspired by the recent Biden Administration package. The latter is a more natural coalition partner, though it would likely require the pair to at the least also bring in the FDP or the Left, more likely both, a daunting challenge. A Green-CDU coalition is therefore more likely, but for this to be successful it would have to cast off the remaining vestiges of Euro-trepidation that marked previous Merkel governments.

Dollars and sense: the future of working from home
“If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.” US President Ronald Reagan.

For many readers in the UK, and much of the rest of the Western world, it has been over a year since daily attendance at the office place was expected. Some have enjoyed the comforts of home; others eagerly await escaping its confines. How and when to support, advocate, and demand a return to the office remains a politicised question, and one on which no consensus has yet emerged, even in the UK where half of all adults have now had at least one dose of the COVID-19 vaccine.

It is little surprise that there appears to be growing demand for guidance or an answer on what the future of work-from-home will look like. The scale and the extent to which last year’s normal becomes ‘the new normal’ will have major ramifications not just for individual employers, but for public transportation and its finances, for the values of commercial prime real estate, and even for graduates coming out of university, amongst many others.

There is, however, no one-size-fits-all answer for how to reincorporate office life into the work routine for those able to work-from-home. As it is judged safe to do so, individuals keen to return to the office will begin to do so – in some places, particularly the United States – this is already well underway. Others may well seek to retain their home offices a while yet, and some even seek to make them permanent. There had been a slow trend of increased work-from-home practices in recent years already, the pandemic simply gave it the mass testing needed for acceptance, rather than hesitancy to become the standard.

That is not to say that we are entering a work-from-wherever-one-likes world. Taxes so often based on residency and place of employment will complicate the dreams of many would-be digital nomads. In that same vein, expect governments to institute programmes aimed at maximising the benefits of the increased number of people seeking to work from home. These will very from country to country, but examples ae already appearing on the horizon. In Spain where rural depopulation has been a trend for decades, discussion is already underway on how to incentivise some employees to stay outside the cities. In the UK, government minds are aflutter with discussion over how to link the benefits of increased work-from-home with its ‘levelling up’ agenda.

One certainty is that work-from-home numbers will increase, even if the extent is unclear. But even small changes on the margins can reshape the economy.

London has a workforce of 5.2 million, whereas Birmingham, the UK’s second largest city, has just half-a-million. If just one in five working Londoners, spends one day a week working outside London, it will be the equivalent of distributing all of Birmingham’s work force across the country. Governments will be keen to ensure they can manage the distribution of that pie.

Power play: New York’s next star?
“I don’t care who does the electing as long as I get to do the nominating”. William ‘Boss’ Tweed, former head of New York’s ‘Tammany Hall’ political machine

The last year has proven to be one of extreme turbulence for New York Governor Andrew Cuomo. Initially hailed on the left side of the US political aisle, and even on occasion by Republicans for his stewardship of the COVID-19 pandemic in his state, now facing bipartisan calls for his resignation over sexual harassment allegations. His great rival, fellow Democrat Bill de Blasio, saw his presidential campaign flop even before the first primary – and he will be replaced in the November New York mayoral election. De Blasio is all-but-certain to carry one of the lowest-ever approval ratings for a New York mayor on his way out of office.

While Cuomo has vowed to fight on, and at the end of March brokered an agreement in the State Legislature to legalise cannabis – a move many have correctly identified as a ploy to make good on an often discarded campaign pledge to regain some popularity – he may well still be forced to give up plans to run for a fourth term as governor in 2022.

New York needs a new political star. It has a long tradition of creating such creatures, even before it served as a springboard for Donald Trump’s rise to celebrity and then politics. Trump’s departure from the city predated De Blasio and Cuomo but was solidified when he announced he would move to Florida after his presidency, with the threat of state criminal investigations and his family’s unpopularity amongst the city’s social elite key factors in pushing him out. The pull of New York City on the state means that anyone looking to find their way up in state politics is likely to have to come from the left of the aisle, as with Cuomo and De Blasio.

Alexandria Ocasio-Cortez goes some way to filling the gap, though her profile is more national than regional given she how she has used her seat in the House of Representatives to campaign for a left-leaning progressive agenda. The New York City mayoral election provides the most natural proving ground for any aspirant-star, and former presidential candidate Andrew Yang has eagerly seized the mantle. He holds a narrow, but steady, lead in the polls for the 21 June Democratic primary.

Yang may well prove to be the man of the hour. However, one of his closest competitors is Scott Stringer, currently New York’s Comptroller, known for his mastery of the Democratic Party machine. The primary vote will be the first to determine the winner through ranked-choice voting. With some 50% of voters still undecided according to the latest vote, and Stringer’s experience in local organising, he may well prove victorious. A weakened Cuomo would be little match for a victorious Stringer, whereas Yang has little experience with the local Democratic Party. New York may soon be Stringer’s oyster.

Posted in UncategorisedTagged in , , , , ,

The forthcoming filibuster fight, leaseholds and cladding and Israel’s once-and-future kingmaker

Policy preview: the forthcoming filibuster fight
The US Senate’s ability to only corral 57 votes to convict Donald Trump on impeachment charges on 13 February highlights the incredibly high bar needed to pass major legislation, with 60 votes in the Senate required to end the filibuster. There have been repeated tweaks to Senate rules over the last two presidencies – with Democrats doing away with the filibuster for most judicial appointments when Barack Obama was president and Republicans expanding this to include Supreme Court nominees under Donald Trump. The legislative filibuster, however, has remained in place, despite attracting far more controversy than all others combined, with both parties fearing that the other will ram through legislation as soon as it retakes narrow control of Congress and the White House.

Now that Democrats have precisely that narrow control, the Biden administration has been muted on calls to end the filibuster. Moderate Senate Democrats such as West Virginia’s Joe Manchin, Arizona’s Kyrsten Sinema and even California’s Dianne Feinstein have pledged to retain the filibuster, so although the Democrats could technically jettison the rule with just a majority vote, there is not yet a path to do so.

Progressive activists, many of whom have long campaigned for the filibuster’s abolition, have remained surprisingly quiet over the matter to date. But that belies the strategy they have adopted to seek to push the change through. Amongst left-leaning and Democratic activist circles in Washington D.C., efforts are underway to revive a bill first introduced to the previous Congress – dubbed House Resolution 1, or HR1 – and to use its passage as a cri de cœur to abolish the filibuster once and for all.

Democrats easily passed HR1 in 2020, but Republicans who still held the majority barred it from even being considered in the Senate. The bill is essentially a wish list of Democratic party goals: regularised mail balloting, expanded voter registration, campaign finance reform and reforming the uber-partisan and increasingly controversial congressional redistricting process. After the dust settles on Trump’s impeachment, and once Biden’s administration is in place, Democrats will reintroduce the bill. It may be packed with even more radical – but broadly popular – sweeteners, such as authorising a pathway to statehood for Washington D.C. and Puerto Rico, in an effort to show that while such legislation polls extremely well, it cannot get through the Senate while the filibuster remains.

Later this year – either in the summer or, more likely, the autumn – Democrats will push the package, not in an effort to bring Republicans on board, but to convince the aforementioned Senate holdouts to abandon the filibuster. If they succeed, it will radically reshape US politics forever. If – as is more likely than not – they fail, the opening of a rift within the Democratic Party may finally create room for moderate Republicans to emerge as leaders of the opposition after four years of being stifled by Donald Trump.

Dollars and sense: leasehold and cladding challenges
The lockdowns and government policies announced in the wake of COVID-19 make clear that real estate and housing remain at the core of Britain’s economy. Estate agents’ offices have been one of the only non-healthcare or essential service industries to remain open throughout the latest lockdown, and the stamp duty holiday announced by Chancellor Rishi Sunak has helped drive transaction volume to a 13-year high, despite the pandemic. Two key pillars of housing policy, however, have proven politically contentious and vexing to the government, though by tackling them together it may just find a pathway forward.

First is the issue of cladding, which has become something of a national scandal as thousands of buildings were found to contain hazardous or non-standard material in the investigations launched after the Grenfell Tower tragedy in 2017, which left 72 dead. Second is the issue of leasehold reform, something the Conservate Party has dabbled with since even before Margaret Thatcher’s Right to Buy reforms were launched in 1980. Proving it can be done, Scotland has effectively eliminated leaseholds over the last two decades.

The government has set in motion processes to address both issues over the last few weeks. On 11 February, the government announced £3.5 billion in funds to remove unsafe cladding from buildings over 18 metres high, and a loan programme for flat-owners in shorter buildings aimed at capping the cost of refurbishment work at no more than £50 per flat per month. On 7 January, Housing Secretary Robert Jenrick announced a plan to allow leaseholders to extend their leaseholds by 990 years, up from 90 for flats, and 50 for houses, at zero ground rent.

The overwhelming majority of flat-owners, and particularly those in multi-family houses, i.e. those affected by the issues with cladding, are leaseholders, not freeholders. Aiming to smooth the process, the government’s leasehold reform also includes a policy of abolishing calculations of ‘marriage value’, which had aimed to reflect the greater combined value of a freehold held with a leasehold. The right to extend without ground rents aims to counter the recent trebling of many such charges at recently developed leasehold properties and incentivises leaseholders to extend by lowering their annual costs.

The millions living in properties affected by cladding issues have argued the government’s new repair fund is insufficient, and that it fails to reflect higher insurance costs they have had and will continue to bear as repair work is underway. There are already quiet rumblings of what more can be done.

One suggestion that appears to be gaining traction is for the government to buy out freeholds and transfer them to non-profit companies, allowing leaseholders to obtain a proportionate interest in them when they extend their lease. Taking on the cost of doing so for properties affected by cladding, or at least those uncovered by the current fund, may just provide the government with an opportunity to make major progress on leasehold reform and mitigate the cladding issue’s ability to further disrupt real estate markets, particularly for new builds.

Power play: Israel’s once-and-future kingmaker
Israelis go to the polls on 23 March, the country’s fourth election in two years. The vote is widely seen as yet another referendum on Prime Minister Benjamin Netanyahu, who has narrowly held on through the last three votes by forming ever-shifting coalitions, most recently with the Blue and White Party of Benny Gantz, who had vowed before the last election never to countenance such a government and lost most of his own allies in agreeing to the coalition.

Netanyahu has received plaudits for his management of relations with Israel’s Arab neighbours and getting the Trump Administration to recognise the annexation of the Golan Heights and Jerusalem as Israel’s capital. He heads into the vote on the back of arguably the world’s most successful COVID-19 vaccination programme to date. However, he is also embroiled in a long-running corruption scandal and has faced allegations of putting his interests before the nation’s. Netanyahu’s Likud Party is expected to win the most seats, but current predictions show the conservative parties he has traditionally aligned with well short of a parliamentary majority. Gideon Saar, who unsuccessfully challenged Netanyahu for the Likud leadership in 2019, quit the party last year and his New Hope party goes into the elections as one of Netanyahu’s strongest challengers. Yet even if the Saar-Netanyahu split can be healed, seat predictions suggest they will be short of a majority.

Netanyahu’s fate may therefore very well be determined by another jilted former coalition partner, Avigdor Lieberman. A Russian immigrant and former nightclub bouncer, the populist Lieberman has often been dubbed ‘Israel’s Trump’. He has vowed never to sit in a government backed by the Arab Joint List, but also bitterly opposes the military service exemptions for the ultra-Orthodox and has arguably become Netanyahu’s fiercest public foe despite previously serving as his deputy prime minister, foreign minister and defence minister, among other posts.

Lieberman’s refusal after the March 2020 election to join a coalition led by Netanyahu or back the only other viable alternative – a Blue and White-led government backed by the Joint List – forced the brief and tempestuous marriage between Netanyahu and Gantz. Burned by the experience, Gantz’s party is at risk of falling out of the Israeli legislature altogether in the next vote and certain not to countenance renewed support for Netanyahu.

Although Lieberman’s Yisrael Beiteinu party is expected to only win seven or so of the Knesset’s 120 seats, expect Lieberman to dominate coalition discussions. His positions may just prove sufficiently intransigent as to force yet another election.

Posted in UncategorisedTagged in , , , , ,