What to worry about in ’18

I SEE that our old friend Nostradamus is predicting world war, doom, fire and brimstone for 2018. Normally I’d worry; but the old boy been doing this on and off for the past 60 years, so let’s wait and see what really unfolds this year. Mind you, the aged seer of 1555 provides plenty of spinecreeping material as the New Year unfolds.

Here are some areas to keep an eye on in 2018 before you buy your next five-year diary.

In Korea, Kim Wrong-Un is playing a blinder. Suddenly he’s come over all lovey-dovey with South Korea. Given North Korea’s track record, we know exactly what is going on. It worked for his homicidal father and grandfather. First, talk tough; generate a crisis. Scare the hell out of nervous, prosperous South Korea with blood-curdling threats of war. Then, when things get dangerous and Uncle Sam threatens dire retribution, make cooing noises, offer talks, peace, eternal happiness and false promises of cooperation. Result? South Korea, weeping with gratitude, begs her ally not to be beastly to her neighbours in the North. Peace and harmony reign. Once again the PRNK has bought time to continue its bedrock policies: first, the survival of Kim and his gang; second, Little Rocket Man can perfect his ICBMs.

Kim knows that the US can fry his rockets on the launcher and hack them out of the air. But South Korea pleads “moderation” while Japan looks on appalled and starts to re-arm. Washington remains sceptical about Pyongyang’s latest stunt, knowing that it is intended to drive a wedge between Seoul and the US. A spokesman explains: “We remain focussed on our . . . campaign designed to bring Kim Jong-un to the table for meaningful negotiations. America’s policy remains the complete, verifiable, irreversible denuclearisation of the Korean Peninsula.”

A similar challenge is unfolding in Iran. When the great “I am” [aka president Obama] revealed his ground-breaking deal to lift economic sanctions in return for an end to Tehran’s nuclear programme, the narcissistic professor was fooling himself and the rest of us. Obama was taken for a sucker by the mullahs, who trousered the released billions and continued their nuclear programme uninterrupted. Obama did nothing; to admit he’d been conned would show that “the smartest man in the room” wasn’t. So Iran has continued its expansionist policies unchecked.

Now Iran’s aggressive policy is the most significant development in the Middle East since the defeat of the Ottoman Empire. Shi’ite Iran is entrenched in Syria and is now trying to take over Lebanon. The problem for 2018 is that Washington hasn’t decided how to counter Tehran’s growing regional power.

America could support indigenous forces, mainly Sunni, who oppose Iranian domination. But the strategic threat of Iran demands a continued US military presence in the region and military aid to Sunnis in Syria and Iraq, plus worried Saudi Arabia. It will also require greater support for Israel and Jordan. Iran’s emboldened radical regime is intent on a regional power grab to dominate the Middle East and destroy Israel. So an IranianIsraeli conflict looks a distinct possibility as Iran muscles in on Lebanon.

But Tehran has problems of its own. Some of the grievances behind the recent wave of protests in Iran, such as disappointment with the economy, will remain beyond the government’s power to change. Unstable food prices, decreasing purchasing power and high rates of unemployment will continue to infuriate Iran’s sorely tried citizens. And any crackdown will probably set off more unrest in the future.

But there are other global challenges for 2018. The biggest potential disaster for China would be war between America and North Korea. If that happened, millions of North Korean refugees would flood into China, causing a huge economic burden. The Chinese government has already started quietly to build refugee camps near the border.

China itself poses a risk to the world economy. Party leader Xi Jinping has declared that financial security is vital to national security. If it goes wrong, China’s shadow banking system — secretive, complicated, contagious and unstable — could devastate the world’s second-biggest economy, leading to a screeching halt in bank lending. Out-ofcontrol Chinese loans are a ticking time bomb.

Beijing admits that the huge and potentially risky loans hidden in “shadow banking” makes the economy’s accumulation of debt and bad loans highly dangerous. The worry is that there may be unknown bad loans in the financial system. Any big default will bring down many banks; and with Chinese “shadow debt” at $18.5trillion, this risks collapsing the international banking system.

China’s partner Russia is likely to have a happier 2018, as its economy is expected to achieve moderate growth of about 1.6 per cent in 2018, despite the sanctions imposed by America and the EU over the Kremlin’s military intervention in eastern Ukraine and the annexation of Crimea.

Putin is widely regarded as a strong leader and as real incomes increase, business confidence is growing with low inflation, unemployment dropping and a stable oil price. Households are expected to buy more to take advantage of improved credit conditions. This economic upturn has attracted investment and reduced the budget deficit. Unless Putin embarks on any military adventures the Kremlin faces a potentially better 2018.

Not so the EU; 2018 could well be the year that reveals the inbuilt contradictions of the eurozone. With Eurosceptic parties leading the polls, many experts fear that the Italian elections in March will become a new crisis point.

But the real threat to the EU comes not from Brexit but from money. The EU is slowly becoming aware of the enormity of the loss of Britain’s budget contribution. The result is that European governments are gearing up for a fight over funding this 13-billioneuro black hole. Countries that pay in more than they get out of the EU budget are expected to refuse to pay more to make up the difference, making cuts inevitable. The budget talks will be vicious, according to senior officials. “This is going to be a bloodbath. We don’t have any more cash to finance any extras,” warns a senior EU official. Contributors Austria, Denmark, Finland, the Netherlands and Sweden are flatly refusing to pay any more. France and Germany are also reluctant to make extra payments.

Southern, central and east European countries dependent on EU regional funding are desperate to avoid cuts. Deprived regions, such as Andalusia in Spain, are demanding the EU “creates a fund for areas especially affected by Brexit” if funding is lost.

It’s not just a north-south split either: many central and east European countries are already questioning Brussels’ high-handed diktats about immigration, and Poland has already been threatened with sanctions for failing to toe the Brussels line. The EU is cracking apart under stress. Far from achieving Juncker’s dream of “ever closer union” and a “United States of Europe”, Brussels will be lucky if it can retain the EU’s dodgy eurozone.

So look out for an entertaining drag-out fight in Brussels as an almighty budget row between the Commission and the EU nations strengthens Britain’s hand in Brexit talks.

Closer to home the runes for 2108 are much clearer. The prospect of a Cyprus two-state solution is now a real option, because the planned hydrocarbon drilling by the Greek Cypriots, ignoring the rights of Turkish Cypriots, yet again demonstrates South Nicosia’s arrogant belief that they are the island’s only legitimate owner.

The TRNC has warned that this inflexible stance of the Greek Cypriots had rendered any solution based on political equality impossible and that the “option of negotiating a two-state solution could arise”. But, whatever happens, Ankara’s enforced Turkification of the TRNC, mosques, madrassas and all, looks set to continue, to the dismay of Turkish Cypriots.

Oh — and Brexit? I’ll leave that to Stephen Day . . .