Palestinians in the Gaza Strip protesting against the accord
Mourad Kamel

The accord to normalize relations between two Arab countries and Israel is a major diplomatic victory for U.S. President Donald Trump, who has made good on a pledge to bring a breakthrough to Middle East negotiations just before his bid for reelection in November.

Still, the fast-moving events of the last month — culminating with Tuesday's signing ceremony at the White House of what's being called the "Abraham Accords' — are above all a sign that real change may be on the way to the region. Israeli Prime Minister Benjamin Netanyahu noted that it took Israel 26 years between the second peace agreement with an Arab country (Jordan) and the third last month with the United Arab Emirates, but only 29 days to seal its fourth, with Bahrain last Friday. In a video posted to his Twitter profile, Netanyahu promised "there will be more" Arab countries that follow this path.

Whether that "more" will include Saudi Arabia, Washington's most important Arab ally and economic partner in the region, is the next big question. Despite promising not to normalize relations with Israel until a peace deal is agreed between Palestinians and Israelis, it is in the Kingdom's interest to see that Israel is normalizing relations with other Gulf states.

What's bringing former foes together, of course, is a common enemy: Iran. Riyadh and Tehran have been in a longstanding battle for regional dominance, including numerous proxy wars in the region: Syria, Yemen, Iraq and even Lebanon. The two countries represent the two main denominations of Islam : Sunnis (Saudi Arabia) and Shias (Iran). Even though they share the fundamental beliefs and practices of Islam, the divide, which is 14 centuries old, originated over the question of who would succeed the Prophet Muhammad as leader of the Islamic faith.

What's bringing former foes together is a common enemy: Iran.

But what is shaking up the region today is not only religion, but questions of global influence. Zvi Bar'el, a columnist for Israeli daily Haaretz, noted that last Friday's deal announced with Bahrain has an important military component. "Bahrain is an important part of the Persian Gulf's strategic defense against Iranian influence," he writes. "It hosts a U.S. Navy base with around 6,000 service members, and could serve as a launch pad for attacks on land and sea threats from Iran."

The first deal with UAE announced in August was particularly notable for the Emirates influence (and independence) in the Gulf region. But Bahrain's overture may have even more long-run significance for what comes next. "Bahrain's king, who is entirely dependent on Saudi Arabia — to which it is linked via a 25-kilometer causeway — received a Saudi "license" to move forward with normalization" writes Bar'el. "Crown Prince Mohammed is demonstrating for Trump his power to build the Arab mantle for the president's Middle East peace plan."

Netanyahu, Trump and foreign ministers of Bahrain and UAE at Tuesday's signing ceremony — Photo: White House

Another sign that Saudia Arabia may be preparing the terrain for its own deal with Israel was visible last spring — on television sets. Two drama series broadcast during Ramadan in Saudi Arabia, which featured Israeli characters, appeared to be a prime example of the Kingdom using "soft power" to get its population ready for a new era in the region where Israel is now regarded as a partner. In Exit 7, one of the actors asserts that the Palestinians are the real "enemies'" who insult the kingdom "day and night", despite decades of financial aid, while featuring a friendship between a Saudi and an Israeli through an online video game. The second series, Oum Haroun, follows the life of a Jewish community in a Kuwaiti village in the 1940s. Both formats were produced by the MBC Group, under the control of the Saudi government, and scored high ratings during Ramadan, even as they were lambasted by some on social media.

As for the Palestinian National Authority, which remains an unrecognized state by the international community, the smiles and signatures on the White House lawn are largely seen as bad news. Ahmad Majdalani, Minister of Social Affairs of the Palestinian Authority, called it a "stab in the back," a metaphor that has circulated in the region ever since another peace deal, between Egypt and Israel in 1979.

Now all eyes will be on whether Saudi Arabia keeps its promise to normalize relations in Israel only if there's a peace deal with the Palestinians. If the Saudis decide not to wait, it could be the mother of all back-stabbings.

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Economy

European Debt? The First Question For Merkel's Successor

Across southern Europe, all eyes are on the German elections, as they hope a change of government might bring about reforms to the EU Stability Pact.

Angela Merkel at a campaign event of CDU party, Stralsund, Sep 2021

Tobias Kaiser, Virginia Kirst, Martina Meister


-Analysis-

BERLIN — Finance Minister Olaf Scholz (SPD) is the front-runner, according to recent polls, to become Germany's next chancellor. Little wonder then that he's attracting attention not just within the country, but from neighbors across Europe who are watching and listening to his every word.

That was certainly the case this past weekend in Brdo, Slovenia, where the minister met with his European counterparts. And of particular interest for those in attendance is where Scholz stands on the issue of debt-rule reform for the eurozone, a subject that is expected to be hotly debated among EU members in the coming months.

France, which holds its own elections early next year, has already made its position clear. "When it comes to the Stability and Growth Pact, we need new rules," said Bruno Le Maire, France's minister of the economy and finance, at the meeting in Slovenia. "We need simpler rules that take the economic reality into account. That is what France will be arguing for in the coming weeks."

The economic reality for eurozone countries is an average national debt of 100% of GDP. Only Luxemburg is currently meeting the two central requirements of the Maastricht Treaty: That national debt must be less than 60% of GDP and the deficit should be no more than 3%. For the moment, these rules have been set aside due to the coronavirus crisis, but next year national leaders must decide how to go forward and whether the rules should be reinstated in 2023.

Europe's north-south divide lives on

The debate looks set to be intense. Fiscally conservative countries, above all Austria and the Netherlands, are against relaxing the rules as they recently made very clear in a joint position paper on the subject. In contrast, southern European countries that are dealing with high levels of national debt believe that now is the moment to relax the rules.

Those governments are calling for countries to be given more freedom over their levels of national debt so that the economy, which is recovering remarkably quickly thanks to coronavirus spending and the European Central Bank's relaxation of its fiscal policy, can continue to grow.

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive.

The rules must be "adapted to fit the new reality," said Spanish Finance Minister Nadia Calviño in Brdo. She says the eurozone needs "new rules that work." Her Belgian counterpart agreed. The national debts in both countries currently stand at over 100% of GDP. The same is true of France, Italy, Portugal, Greece and Cyprus.

Officials there will be keeping a close eye on the German elections — and the subsequent coalition negotiations. Along with France, Germany still sets the tone in the EU, and Berlin's stance on the brewing conflict will depend largely on what the coalition government looks like.

A key question is which party Germany's next finance minister comes from. In their election campaign, the Greens have called for the debt rules to be revised so that in the future they support rather than hinder public investment. The FDP, however, wants to reinstate the Maastricht Treaty rules exactly as they were and ensure they are more strictly enforced than before.

This demand is unlikely to gain traction at the EU level because too many countries would still be breaking the rules for years to come. There is already a consensus that they should be reformed; what is still at stake is how far these reforms should go.

Mario Draghi on stage in Bologna

Prime Minister Mario Draghi at an event in Bologna, Italy — Photo: Brancolini/ROPI/ZUMA

Time for Draghi to step up?

Despite its clear stance on the issue, Paris hasn't yet gone on the offensive. That having been said, starting in January, France will take over the presidency of the EU Council for a period that will coincide with its presidential election campaign. And it's likely that Macron's main rival, right-wing populist Marine Le Pen, will put the reforms front and center, especially since she has long argued against Germany and in favor of more freedom.

Rome is putting its faith in the negotiating skills of Prime Minister Mario Draghi, a former head of the European Central Bank. Draghi is a respected EU finance expert at the debating table and can be of great service to Italy precisely at a moment when Merkel's departure may see Germany represented by a politician with less experience at these kinds of drawn-out summits, where discussions go on long into the night.

The Stability and Growth pact may survive unscathed.

Regardless of how heated the debates turn out to be, the Stability and Growth Pact may well survive the conflict unscathed, as its symbolic value may make revising the agreement itself practically impossible. Instead, the aim will be to rewrite the rules that govern how the Pact should be interpreted: regulations, in other words, about how the deficit and national debt should be calculated.

One possible change would be to allow future borrowing for environmental investments to be discounted. France is not alone in calling for that. European Commissioner for Economy Paolo Gentiloni has also added his voice.

The European Commission is assuming that the debate may drag on for some time. The rules — set aside during the pandemic — are supposed to come into force again at the start of 2023.

The Commission is already preparing for the possibility that they could be reactivated without any reforms. They are investigating how the flexibility that has already been built into the debt laws could be used to ensure that a large swathe of eurozone countries don't automatically find themselves contravening them, representatives explained.

The Commission will present its recommendations for reforms, which will serve as a basis for the countries' negotiations, in December. By that point, the results of the German elections will be known, as well as possibly the coalition negotiations. And we might have a clearer idea of how intense the fight over Europe's debt rules could become — and whether the hopes of the southern countries could become reality.

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