20th September 2019

Written by Javier Maquieira (Associate)

In the last daily briefing of the week, Javier Maquieira takes a look at Israel's political deadlock after Binyamin Netanyahu's main opponent, Benny Gantz, rejected the offer of a Netanyahu-led unity government.

Good morning,

In Spain, we often refer to election day as fiesta de la democracia (“the celebration of democracy”) to remember how callous four decades of dictatorship really were. Now that Spaniards are headed to the fourth general election in four years, it’s clear that we’re pretty much done partying. But elections aren’t what they used to be either. They’ve become more unpredictable and fragmentary, while the period of stable majorities seems to be far gone. This is something the embattled prime minister of Israel, Binyamin Netanyahu, is currently experiencing himself.

On May 30, Netanyahu decided to dissolve the Knesset and call for a second election seven days after the previous vote in an attempt to achieve the majority of which he had missed out on by just one seat. As it turns out, the longest-serving PM in Israeli history had his hopes too high, with his party, the right-wing Likud, finishing short by six seats in last Tuesday’s election.

Now Netanyahu’s options are shrinking as the deadlock continues. His main rival, the former general and leader of the centrist Blue and White party, Benny Gantz, is 0.77% ahead of the Likud party, while the alliance of Arab parties known as the Joint List is in third place. However, a coalition between Netanyahu and Gantz would still fail to achieve an outright majority.

Although the Israeli PM hinted at the possibility of joining a “unity government” with rivals he had vilified during his campaign in order to avoid a third election in less than a year, on Thursday Gantz rejected the idea of a coalition led by Netanyahu, who faces corruption charges in a couple of weeks.

While the makeup of the next government remains uncertain, Gantz is expected to take a different approach to Netanyahu, whose leadership showed a tendency to gravitate to the right and appeal to the ultra-Orthodox. As it happens, a less polarising administration calling for unity and consensus could take shape, appealing to the interests of a broad majority of Israelis, including those with a more secular outlook. Even Arab citizens are likely to enjoy greater representation, with the possibility of an Arab lawmaker becoming opposition leader for the first time.

What sets the Israeli deadlock apart from those in Spain and Italy is that these Southern European countries don’t have enemies across most of its borders, some of whom are on record as denying the state of Israel. Certainly, the country can’t risk celebrating endless fiestas de la democracia.

News

Today is expected to be the biggest day of climate demonstrations in the planet’s history, as climate activists join the third Global General Strike organised by school students and led by 16-year-old Greta Thunberg. Labour and humanitarian groups, environmental organisations and employees of some of the world’s biggest corporations also plan to participate in the rally. The UK government said yesterday that confidential documents relating to a Brexit solution had been shared with the European Union. The European Commission confirmed the reception of said documents, as well as the meeting between the EU’s chief negotiator, Michel Barnier, and Brexit Secretary Stephen Barclay taking place today. The Commission president, Jean-Claude Juncker, said his meeting with Boris Johnson this week was “rather positive” and that a new Brexit deal could still be reached by October 31. In an interview with CNN, Iran’s foreign minister, Javad Zarif, said that the possibility of a return to negotiations with the United States would not happen unless Washington provided full sanctions relief. Zarif also threatened with “all-out war” if the US and Saudi Arabia carried out military strikes against Iran and reiterated that Tehran had not been involved in the weekend attacks on Saudi oil facilities.

Business & Economy

The Bank of England forecast low interest rates for longer as a result of prolonged Brexit uncertainty. Policymakers warned that, although the UK would avoid falling into recession this year, Brexit and worries over trade are affecting the economy – a situation that could get worse in the event of a no-deal withdrawal from the EU, leading to weaker growth, higher inflation and a drop in the value of the pound. Ryanair’s pay report was passed by just 50.5% of the shareholder vote at its latest AGM in Dublin after an investor revolt over pay plans that could earn CEO Michael O’Leary £90m in bonuses. With the airline trading at lows not seen since 2014, shareholders are angry at a number of issues, including the lack of dividend payments since 2016 despite the growth in passenger numbers.

KPMG UK has shared restructuring plans to sack approximately a third of its 630 administrative assistants. Secretaries at the accounting firm are already seeking alternative work in other professional services firms, while some partners – especially in non-client facing roles – will now lack a personal assistant, forcing them to file their own expenses as part of the changes. The restructuring plans also include a title change for those secretaries who will keep their jobs to “executive assistant.” (£)

Markets

What happened yesterday?

London edged higher on Thursday as the Bank of England kept interest rates the same and the US Federal Reserve cut them further. The FTSE 100 was up 0.6% at 7,356.42, while the pound was up 0.1% against the US dollar at $1.2482 but lower versus the euro at €1.1302. Further to BoE warnings about Brexit-related uncertainty, investors eyed the latest retail data from the Office for National Statistics, which showed an unexpected 0.2% drop in the month of August as online sales slumped (-3.2%). In corporate news, British Gas owner Centrica (+1.10%) was amongst those gaining after it received an upgrade to “buy” at analysts Jefferies. IG Group shares (+10.27%) also surged after reporting flat first-quarter revenues, supported by expectations for a return to revenue growth in FY20. On the downside, the fashion chain Next (-5.67) closed in the red despite announcing a 2.7% increase in interim profits. Across the Atlantic, US stocks had a mixed performance following increasingly dovish comments from global central banks and investors’ hopes about trade talks between US and Chinese officials in Washington. The Dow Jones Industrial Average ended the session down 0.19% at 27,094.79, while the S&P 500 was flat, rising just 0.002% to 3,006.79, and the Nasdaq 100 added 0.17% to 7,901.79.

Whats happening today?

Interims

Applegreen

AGMs

Cadence Mineral Dwf Group Ig Group Holdings Liontrust Asset Management Manolete Partn. Petroneft SolGold Sysgroup

UK Economic Announcements

(09:30) Public Sector Net Borrowing

Int. Economic Announcements

(07:00) Producer Price Index (GER)

Columns of Note

Writing in The Guardian, political activist and author Richard Seymour maintains that the current crisis of polling stems from the fact that political outcomes aren’t easier to predict despite pollsters having more data than ever before. Seymore suggests that the reason for this is that polling firms are producing opinion rather than measuring it, relying on methodological assumptions that used to work when alternatives to the status quo were scarce. The author also signals that polling tends to become a self-fulfilling prophecy because of the power of numbers in shaping our desires and fears – a superstition, he argues, it’s high time we ignored.

Simon Kuper opines in the FT Magazine that centuries of stability and absence of traumas have made the UK careless about risk, as Britons have forgotten that history can hurt. According to Kuper, Britain has a uniquely untroubled relationship with its past that extends across all classes beyond the nostalgic elite. With an unwritten constitution risking abuse by unscrupulous rulers, Kuper concludes that a more likely outcome for Britain than 1930s Germany is Argentina, a country that went from being one of the 10 richest states on earth in 1929 to struggling with populism and economic turmoil. (£)

Did you know?

Douglas Tompkins, the founder of the North Face outerwear brand, died of hypothermia after a kayaking accident.

Parliamentary highlights

Today

House of Commons

No business due to prorogation. The House will next sit on Monday 14th October.

House of Lords

No business scheduled.