This month’s coverage of the Americas includes a new report on Argentina, where President Christina Fernández’s government is scrambling to limit the damage for a second sovereign default in 13 years. The report will discuss the implications of the setback for the economy, and for the Fernández administration’s broader policy program as the president’s FPV plots its strategy for the 2015 election campaign.

Thus far, the negative fallout has been minor, as the failure to make scheduled payments to bondholders is the result of legal roadblocks thrown up by a US court ruling in favor of a small group of creditors who refused to participate in a debt-swap arrangement engineered by Buenos Aires following a massive default in late 2001, rather than state insolvency. However, with the economy edging toward recession, the reserves position weakening, and the government focusing its efforts on finding a way to circumvent the court ruling, the potential for a sharp negative turn in market sentiment is clearly present. Our report will include a forecast of what to expect from the government on the policy front in that event.

Turning to the Middle East and North Africa, PRS will shine a spotlight on Iraq, where existing threats to national unity arising from sectarian and ethnic divisions have intensified greatly following the capture of a large swath of territory by armed extremists who have declared a new caliphate, the Islamic State, encompassing parts of both Iraq and Syria. International military support has already helped to halt the advance of Islamic State, but restoring central control over the nation will at a minimum require the formation of an inclusive government in Baghdad.

The task of pulling together a coalition that includes Shiite, Sunni, and Kurdish factions has been handed to Haider al-Abadi, a Shiite leader named to replace the controversial incumbent, Nouri al-Maliki, as prime minister. Abadi faces a daunting challenge, as the jihadist incursion has further heightened tensions between Shiites and Sunnis, and the occupation of the disputed city of Kirkuk by Kurdish military forces creates a potentially insurmountable obstacle to cooperation between Kurdish and Sunni parties in Baghdad. Our report will assess the prospects for establishing a stable government, while also examining the implications of less promising scenarios, including the disintegration of the Iraqi state.

Over in Asia, our report on Indonesia will analyze the political climate in the aftermath of a presidential election that was won, as expected, by Joko Widodo, the popular governor of Jakarta widely known as Jokowi. Although the Constitutional Court’s rejection of runner-up Prabowo Subianto’s claim to have won the election will at least temporarily discourage political meddling by the military, Jokowi could encounter serious difficulties if he follows through with his stated intention of rolling back a $16.5 billion fuel subsidy that poses a threat to the government’s financial health, a move that will face strong public opposition and could even test the loyalty of some of the new leader’s own party colleagues.

The report will also assess the potential for other policy shifts that might affect the business climate, including whether Jokowi’s government can make any progress on reducing corruption, a problem that has been highlight by several high-profile scandals involving members of the outgoing President Susilo Bambang Yudhoyono’s administration.

These are testing times for Angela Merkel, and our Western European coverage this month leads with an in-depth assessment of how her domestic and international policies are likely to affect Germany through to 2015. Under pressure on all fronts, from exporters rocked by retaliatory trade measures imposed by Russia in response to the EU’s tightening sanctions regime, and from ordinary voters disenchanted with immigration and other perceived failings, we assess whether the tide is turning within Europe’s institutional flag-bearer. Our report analyses the fallout from the recent election in Saxony, the most populous East German state, delivering parliamentary representation for the first time to an increasingly popular euro-sceptic party, AfD. We look at how this, and the presence of the Social Democratic Party within the Grand Coalition governing nationally, is influencing Merkel’s conservatives to find out what investors can expect in terms of policies and economic performance in the months ahead.

In Eastern Europe, our coverage this month includes an update on Bulgaria, where the collapse of the center-left minority government in July means that voters will return to the polls for the second time in less than 18 months in early October. Poll data indicates that Boyko Borissov’s GERB is on track to finish on top for the third straight time, but will again fall short of gaining an outright majority of seats. Given Borissov’s aversion to governing with a partner, his ability to form a viable government is open to question.

Several smaller parties are polling very close to the 4% minimum required to qualify for seats in the Parliament, making it difficult to predict exactly how many parties (and which) will be represented. It appears that the center-right Reformist Bloc will secure seats, providing GERB with a potential coalition partner that is both more moderate and more reliable than the far-right Ataka, which is in danger of failing to retain any of its seats. However, if Borissov rejects a formal partnership with the Reformist Bloc, and the latter refuses to enter into an informal relationship with a minority GERB administration, the formation of a new government may require the creation of a broad coalition headed by the center-left BSP.

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