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The ‘Grexits’ of 2013

The ‘Grexits’ of 2013

This year brought fears of a "Grexit," a "fiscal cliff," and, yes, the "G-Zero," my own term for the U.S.-China nexus. What are the catchphrases that will tell the story of geopolitics next year?

ChiMils: You’ve heard of ChiComs? That’s the shorthand that U.S. government types use to describe China’s Communist leaders. But 2013 will remind us that China’s government is not the monolith many imagine — and that the country’s military sometimes runs its own games. The ChiMils, China’s military elite, have long been among the country’s most influential interest groups. But as the fifth generation of Communist leaders embarks on a complex and ambitious economic reform project, we’re likely to see the ChiMils stir up more trouble, to increase their budgets and assert a bit of autonomy.

Safe-haven curse: Downgrades be damned, the world keeps buying U.S. Treasurys because America, for all its faults, remains the safest port in a global economic storm. That’s good news — for now. But with no Europe-scale crisis to force U.S. policymakers to cut the deals needed to rebalance the country’s books, Americans may soon forget the first lesson of the recent subprime-mortgage debacle: The fact that they’ll lend you the money doesn’t mean you should borrow and spend it. Unwillingness by the two political parties to make the deal needed to get the U.S. fiscal house in order would prove a curse — for Americans and for those who hold the IOUs.

Sun-rise: Will 2013 bring a resurgence of Japanese nationalism? The return of former Liberal Democratic Party Prime Minister Shinzo Abe as party president and the rise to prominence of Osaka Mayor Toru Hashimoto, a populist provocateur, have already shaken up Japan’s politics, raising eyebrows around the region. Abe, in particular, has built popular support on calls for a new national assertiveness in relations with Japan’s neighbors. In a region with so much fist-shaking and no reliable referees, that won’t be welcome news.

No Grexit: In 2013, the Greeks, the Germans, and the all-important bailout troika (the European Central Bank, the European Commission, and the IMF), intent on bolstering their respective bargaining positions over the terms of yet more financial help for Greece, will all pretend that a Grexit is an acceptable outcome. But Greeks need Europe to help them avoid a true economic plunge, and the rest of Europe can’t risk the destabilizing impact of a Greek exit until other peripheral countries, particularly Spain and Italy, have moved a bit farther back from the precipice. That’s why, in the end, all sides will agree to do the minimum needed to extend Greece’s life in the eurozone.