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Viewpoint
Following the end of the "traffic light" coalition, Federal Chancellor Olaf Scholz has submitted a request to the president of the Bundestag for a vote of confidence in the Bundestag.
Faced with a political impasse preventing action on acute economic and geopolitical challenges, the German parliament will hold a vote of confidence in Chancellor Olaf Scholz’s government on Dec. 16. Based on an agreement among the main parties in the Bundestag, lawmakers will deliver a vote of “no confidence,” paving the way for snap elections on Feb. 23.
We asked Eurasia Group expert Jan Techau to explain what set off this chain of events and where it is likely to lead.
What has prompted this vote of confidence?
The chancellor called the vote after long-simmering tensions finally brought down the ruling coalition of Scholz’s Social Democrats, the pro-business Free Democrats, and the Greens. There are big ideological divides among these three parties, and it was never an easy marriage. Initially, they could paper over these divides with money for each party’s pet projects. But a little over a year ago, the Constitutional Court struck down large parts of the 2024 budget, saying they were financed with an illegal repurposing of unused pandemic-relief funds. That set up endless negotiations and finally a showdown over the 2025 budget, which ended with Scholz firing the finance minister, the Free Democrats’ Christian Lindner, and the subsequent collapse of the coalition agreement.
So, it sounds like fights over spending priorities are the main issue shaping German politics?
They are a symptom of a broader economic crisis that has undermined competitiveness, growth, and tax revenue. The country has high labor and energy costs and a high reliance on exports, especially to China. For a long time, China bought nearly everything that Germany produced, from machinery to cars and chemicals. But China has developed its own industries and is no longer just a customer but increasingly an aggressive competitor making many of the same goods. To put it simply: Germany is a high-cost country reliant on exports whose main customer no longer wants to buy all its stuff.
How are geopolitical issues shaping the domestic debate?
All these economic problems come at a time of mounting geopolitical challenges. Donald Trump’s election victory in the US is expected to bring increased pressure on Germany and other European countries to harden their stances against China. Trump could force Germany to choose between its economic reliance on China and its security reliance on the US. At the same time, you have the war in Ukraine and Russia’s hostility to Germany and the rest of the West that has prompted significant – and very costly – efforts to rebuild Europe’s defense capabilities.
What seems like the most likely outcome of the February elections?
The conservative Christian Democrats, led by Friedrich Merz, have a substantial lead in the polls. It seems unlikely that any other party will be able to close the gap by Feb. 23. They will need to form a coalition government (one-party parliamentary majorities and minority governments are very uncommon in the German system), probably with the Social Democrats and maybe a third party as well. One key watchpoint will be the performance of the two extremist parties, the far-right Alternative for Germany and the far-left Sahra Wagenknecht Alliance. They have no prospect of entering government this time around, but if they obtain a combined one-third of the seats in the Bundestag, they could block legislation requiring changes to the constitution, which needs a two-thirds majority. Such a blocking minority could hamper the next government’s ability to implement a forceful reform agenda.
What is the reason for the conservatives’ strength?
There are two factors. The first is that voters’ number one concern at the moment is the state of the economy. This issue has traditionally favored conservatives, who are seen as more competent in this realm. The second is the collapse in the popularity of the three parties of the ruling coalition amid a widespread sense of crisis and malaise. They have recovered a bit recently, but at one point the approval ratings of the three parties combined were at about the same level as those of the conservatives.
Assuming a conservative-led government emerges, what does that mean for domestic policy?
If the Christian Democrats form a coalition with the Social Democrats, they will have to jettison many conservative ideas. The German system is geared toward stability and continuity, an approach that has worked extremely well, though the downside is that it’s hard to make big changes when needed. The question is whether the current crisis is big enough to force change. I expect an overhaul of the so-called debt brake, a strict limitation on government borrowing that has restrained policymaking. But beyond that, a raft of politically difficult measures are needed to deregulate industries and lower labor costs to restore German competitiveness. We’ll see if the next government can deliver.
How about foreign policy?
There would certainly be more engagement with the EU. The Christian Democrats pride themselves on being the pro-EU party of Germany in the tradition of Konrad Adenauer and Helmut Kohl. My guess is that the next government will remain reluctant to embrace the proposals for common borrowing backed by some other EU countries. Still, it could be more supportive of other joint initiatives. Merz had been more hawkish in his rhetoric toward Russia but has recently toned it down because he knows there are a limited number of votes he can win with this approach. Regardless, foreign policy will be a somewhat lower priority for the next government than getting the economy going again.
Edited by Jonathan House, Senior Editor at Eurasia Group.
Viewpoint: G20 leaders grapple with global inequality in Trump's shadow
A member of the cleaning crew walks past a G20 Summit sign outside the Museum of Modern Art, the venue of the G20 summit, in Rio de Janeiro, Brazil, on Nov. 14, 2024.
Amid geopolitical tensions fanned by wars in Europe and the Middle East and Donald Trump’s reelection in the US, world heads of state will gather in Rio de Janeiro for the G20 Leaders’ Summit from Nov. 18-19. They will discuss proposals to combat global inequality and climate change and try to agree on a common position toward the conflicts in Ukraine and Gaza in a carefully worded closing statement. Following the summit, Brazil’s Luiz Inacio Lula da Silva will host China’s Xi Jinping on a state visit in Brasilia, where the two will announce a series of partnerships in trade and investment.
We sat down with Eurasia Group expert Julia Thomson to learn more about this year’s G20 Summit.
What items would you highlight on the agenda?
Brazil, which holds the G20’s rotating presidency this year, tried to keep divisive geopolitical issues out of the subject matter meetings held in preparation for the summit, allowing for the approval of communiques with policy recommendations on a wide range of issues. I think those related to global inequality, a priority issue for the Brazilian presidency, are likely to get the most attention when the heads of state meet. There are two main proposals: the creation of a new tax on the super-wealthy and the new launch of a Global Alliance Against Hunger and Poverty.
There is not much consensus yet about the tax – what the rate would be, how it would be levied – but the Brazilian presidency considers it a victory to have gotten the issue on the agenda and thinks the proposal can be fleshed out in the coming years. With the Global Alliance Against Hunger and Poverty, Brazil aims to export ideas such as the Bolsa Familia program of cash transfers that have been successful at reducing hunger in Brazil. Thirty-one countries have already signed on to the initiative and another 27 have asked to join.
What impact will Trump’s election have on the summit?
The impact will be greatest on the discussion of climate and sustainability policies, another one of Brazil’s priority areas. Brazil and other emerging market countries have been pressing for assistance in financing climate change mitigation efforts from the wealthy industrialized countries that bear more responsibility for the carbon emissions causing global warming. That already fraught conversation will become much more difficult with Trump, a noted climate skeptic, poised to assume the presidency of the world’s largest economy and second-largest carbon emitter next year. I understand that Lula has been updating his planned speech at the summit to reflect this reality. A silver lining for Brazil is that South Africa, another leading global south country, will assume the G20 presidency next year, so the work done this year on this issue will likely continue.
What do you expect G20 leaders to say about the conflicts in Ukraine and Gaza?
Drafting the final communique, which will have to mention these issues, will obviously present some challenges. There are stark divisions among G20 members about the wars in Ukraine and Gaza. So, the most likely outcome is some vague language about the desirability of peace, as in previous years.
Outside of the G20 agenda, what else do you expect from this gathering of world leaders?
Lula will meet with US President Joe Biden on the sidelines, though Biden’s lame-duck status limits the potential for important outcomes from their conversation. European Commission President Ursula von der Leyen will be at the summit, which creates the opportunity to advance the discussions on a trade pact between the EU and the Mercosur bloc of Latin American countries, which is expected to be finalized in the coming months. But there will be much more focus on Xi Jinping’s follow-up state visit to Brasilia. Chinese officials are expected to announce a slew of investments in sectors of the Brazilian economy ranging from satellites to logistics and infrastructure. Xi will be arriving in Brazil after a stop in Peru to attend the APEC Leaders’ Summit and the inauguration of the Chancay port, which is majority-owned by a Chinese company. There are plans to link this Pacific Ocean-facing port to Brazil to open up a lower-cost trade route to China.
So, it sounds like Lula is expecting some good outcomes. Will that help him politically?
There was more optimism at the beginning of the year, when Lula and his team did not foresee a Trump victory and there was this idea that geopolitical conflicts could have eased by now. Still, Brazil sees hosting the G20 as good for its foreign policy agenda, offering the opportunity to dialogue with the world’s main economies. Brazil sees itself as a non-aligned country striving to maintain good relations with the US, China, and Europe.
Edited by Jonathan House, Senior Editor at Eurasia Group.
Sculptures seen on the street before the 31st Asia-Pacific Economic Cooperation Economic Leaders' Meeting on Nov. 12, 2024 in Lima, Peru.
Global leaders are descending upon Peru this week for the 2024 Asia-Pacific Economic Cooperation Forum amid an increasingly conflict-ridden world — and just a week after American voters reelected Donald Trump to the US presidency. The year’s meetings are focused on critical economic and environmental challenges, as well as the need to bolster bilateral and multilateral ties in the Asia-Pacific region. With outgoing President Joe Biden meeting up with Chinese President Xi Jinping at APEC, GZERO reached out to Eurasia Group expert Gabriela Vasquez Madueno for her take on what to watch at the event.
What is APEC, and why does it matter?
The Asia-Pacific Economic Cooperation, a forum of 21 economies from across the Pacific Rim focused on promoting sustainable economic growth, trade, and investment in the region, is convening its Leaders’ Meeting this week in Peru. The gathering brings together economies that represent nearly 40% of the world’s population, almost half of global trade, and approximately 60% of global GDP.
While APEC’s formal economic impact remains limited, it is still significant as a platform for diplomatic engagement and bilateral and multilateral cooperation. It provides space for growing economies such as Indonesia and Mexico and major powers like the United States and China to engage and collaborate on issues ranging from climate change and sustainable development to the digital economy.
APEC takes a consensus-based approach, which means all members have an equal voice, and it relies on voluntary commitments and capacity building – rather than treaties – to achieve its goals. So, again, its impact remains limited. APEC, however, is a useful forum to build consensus on topics that may, in the future, become binding commitments in other fora or in trade agreements. It’s also worth noting that APEC is one of few multilateral forums, apart from the WTO, where Taiwan is recognized as a separate economy. This unique status allows Taiwan to participate in global economic discussions and engage with other member economies, including China.
What are the themes for this year’s APEC meetings?
This year’s theme, “People, Business, Prosperity,” focuses on finding innovative solutions to the region’s most pressing challenges. Resilient growth has been a priority. The summit this week aims to promote inclusive and interconnected growth, address the informal economy by utilizing digital platforms for better economic integration, and prioritize resilient growth in the face of global challenges like climate change and food security.
Members are working to facilitate trade and investment in the region by contributing to the development of the Free Trade Area of the Asia-Pacific agenda. They have also defined low-carbon hydrogen policy frameworks to support regional energy transitions and initiatives to prevent and reduce food loss and waste. Participants are putting forward several initiatives to promote sustainable and resilient finance, as well as an exchange of policies aimed at utilizing digital platforms to integrate the informal economy and boost economic integration.
What are the main challenges of APEC?
The recent US election and the pending potential shift in foreign policy under Donald Trump has cast a long shadow on proceedings this week. As such, the US has taken a less active role in the present APEC event, as the next administration will prioritize bilateral discussions over multilateral ones. There will be little room for further integration considering the change of administration, as it is believed the Trump administration will prefer negotiating directly with individual states, rather than working through regional groups. Also, Trump’s threat of tariffs will cause APEC economies to fret.
This future shift creates uncertainties within the forum and potentially undermines its effectiveness in the coming years.
Additionally, the growing geopolitical rivalry between the US and China further complicates discussions and potentially impacts the overall agenda. Other member economies are finding themselves caught in the middle, forced to navigate the competing interests of these two major powers. Beijing, for its part, will use the summit to build its attraction among non-US member countries, some of which are feeling anxious about a Trump presidency, by offering unilateral concessions over tariffs and visas, among other measures.
So this event is a crucial test of the prospects for regional cooperation and global economic stability given today’s geopolitical tensions.
What to watch from this year’s APEC
The 2024 APEC Economic Leaders' Week is hosting several significant bilateral and multilateral meetings. Key leaders, including US President Joe Biden and Chinese President Xi Jinping, are going to be on hand for the event. Biden and Xi are set to meet at APEC, a White House source said Wednesday, and both men will then head to Brazil for the Group of 20 summit.
Xi’s inauguration of the $3.5 billion Chancay port – the largest project China has invested in Latin America in recent years – during his visit to Peru reflects China’s presence in the region. This poses a challenge for the White House in South America, where China's geopolitical influence has continued to grow. Xi, with Trump 2.0 looming, will likely emphasize Beijing’s ability to serve as the region’s free-trade champ, presenting China as a counterweight to the tariff controls being threatened by Trump.
All eyes will be on any potential meetings or informal conversations between US and Taiwanese officials, particularly between US President Joe Biden and high-level representatives from Taiwan, such as the head of TSMC.
In addition to political leaders, several prominent CEOs are in attendance at APEC. These include Jamie Dimon of JPMorgan Chase, Karan Bhatia of Google, and Shou Zi Chew of TikTok. The latter’s presence is particularly interesting given the ongoing risk of being federally banned in the US because of its resistance to selling itself.
We’ll be watching for any major developments or announcements from APEC – and for signs of the forum’s potential strength in the years to come.
Climate activists project a message onto the Embassy of Azerbaijan ahead of COP29 climate talks, in London, on Nov. 7, 2024.
Donald Trump’s election victory last week will loom large in the minds of delegates at this year’s UN climate conference (COP29) in Baku, Azerbaijan. The government, corporate, and civil society representatives meeting from Nov. 11-22 will be forced to reckon with the return of the climate skeptic who withdrew the world’s largest economy from the Paris Agreement during his first administration. We asked Eurasia Group expert Herbert Crowther how the prospect of Trump’s return to office will affect COP29 and UN efforts to mitigate climate change more broadly.
What has Trump’s attitude generally been toward climate concerns?
Trump was largely dismissive of climate change as a pertinent economic or political issue during his first administration. Though not prominently on display during the recent US election cycle, his attitude toward the issue has not changed since his first term – which will likely become more evident when he takes office next year. He will almost certainly move to scale back programs to develop new low-carbon technologies championed by President Joe Biden’s administration, including those created by the Inflation Reduction Act. That will put more burden on state and local-level officials, who helped fill the climate policy void during Trump’s first term and kept the US energy transition moving forward.
How will Trump’s election affect the mood at COP29?
Trump’s election will significantly dampen the atmosphere at COP29, both in terms of negotiating priorities and broader sentiment among negotiators. Trump’s election will make it harder to reach a consensus on ambitious new targets, particularly for climate finance. Delegates will not regard any commitments made by the outgoing Biden administration as very credible; consequently, other governments will be more reticent to make ambitious promises of their own. In terms of broader sentiment, many negotiators will already begin turning their attention to where the COP process will go next year when Trump takes office and likely withdraws the US from the Paris Agreement again (Biden’s administration rejoined the agreement). The COP process has been largely focused on advancing the key Paris aim of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.
Given this context, what COP29 objectives are likely still feasible?
One area where negotiations can still likely move forward involves the so-called Article 6 rules for the sale and purchase of carbon emissions credits. Talks around Article 6 have resumed this year after their very public breakdown last year at COP28. They will not be dramatically altered by the US election result and are still trending in a positive direction. For the issue of carbon market rules, the US has stuck to a negotiating position that is more aligned with that of emerging markets, meaning it is not a hurdle to reaching a deal in Baku.
What objectives are not?
Negotiations on assistance from developed economies to emerging market economies to finance climate change mitigation efforts is likely an area that will suffer the most at COP29 as a result of Trump’s victory. There was already limited room for consensus on a new umbrella target for global climate finance – the so-called New Collective Quantified Goal, or NCQG. Trump’s election will likely move the conversation even further away from targets like the $1 trillion in annual climate finance deployment that many emerging markets had been pushing for. Another important topic that will be affected by Trump’s election is the next round of country-level climate plans – the so-called nationally determined contributions, or NDCs. By next February, all parties to the Paris Agreement must submit new plans covering their emissions goals until 2035. With Trump’s election and a worsening outlook for agreements at Baku, more of these plans are likely to present cautious targets, which bodes poorly for medium-term efforts to combat climate change.
Where does the COP process go from here?
A second Trump administration will almost certainly withdraw from the Paris Agreement again. Though the COP process already survived one US absence during Trump’s first term, the global climate policy environment faces greater challenges today. The timeframe to meet targets is shorter, and tensions have intensified between industrialized and emerging markets over who bears the most blame for climate change and should pay for mitigation efforts. Many US states, corporations, and financial institutions will remain relevant players at COP and will continue to push the US energy transition forward, but they will not be able to compensate fully for the lack of federal policies. Meanwhile, the US absence will place greater pressure on China and the EU to assume more of a leadership role in COP and shoulder greater financing commitments. This year’s conference will provide some early signals about that, but 2025 — especially the buildup to COP30 — will be the real litmus test.
Edited by Jonathan House, senior editor, Eurasia Group
Supporters of Georgia’s pro-Western and pro-EU opposition groups hold a joint final campaign rally ahead of the upcoming parliamentary elections in Tbilisi, Georgia, on Oct. 20, 2024.
The Eurasian country and former Soviet republic of Georgia – not the southern US state – is at risk of tilting back into Moscow’s sphere of influence. All eyes will be on the Oct. 26 election to see if the ruling Georgian Dream party – which has slowly shifted the country’s alignment away from Brussels and toward Moscow in recent years – retains control after these crucial parliamentary elections.
We spoke with Tinatin Japaridze, a Georgian-born regional analyst at Eurasia Group, about what’s at stake.
What is the pre-election atmosphere like in Tbilisi?
The atmosphere is simultaneously charged with anticipation and significant uncertainty about the election outcome. Political and social polarization has reached profound depths. The ruling Georgian Dream and the four main opposition coalitions appear disconnected from the majority of the public, who are increasingly feeling political fatigue toward the electoral process, even though many understand that the stakes are incredibly high.
What are the main issues for voters? Is Russia’s invasion of nearby Ukraine having an impact?
Since last spring, tens of thousands in Tbilisi have rallied in support of Georgia’s European future and against Russia’s ongoing aggression. Georgia, a former Soviet bloc country, is facing a critical choice – it can either move forward toward Europe or find itself reverting back toward Russia. It cannot pursue both paths at once. However, in rural areas, the decision is less clear-cut. While most recognize that the “European idea” is essential for Georgia’s growth and progress, this understanding often fails to address the immediate “bread and butter” needs of those living outside the few major cities.
The Georgian Dream, the ruling party, has been in power since 2012. Are they expected to win this election? What accounts for its enduring success?
A landslide win for the Georgian Dream is out of the question, and gaining a constitutional majority in the parliament seems very unlikely. That said, the ruling party is widely expected to garner more votes than any single political party – but probably not enough to avoid the need to form a coalition government with the opposition, which is a reality that neither side is prepared to accept. The “us vs. them” mentality will likely dominate amid deep-rooted interpersonal and intra-party tensions, significantly diminishing the prospects for collaboration between the two sides. Over the past year, as the ruling party started to gear up for what was clearly going to be the most competitive election it has faced since the Georgian Dream came to power in 2012, Russia has increased its support through official rhetoric and positive assessment of the ruling regime’s role in stabilizing relations with Moscow. There have also been thinly veiled, pro-Kremlin disinformation campaigns that have permeated the state-controlled media outlets.
Do you expect any unrest/violence around the election? A smooth government-formation process?
The days following the election will be pivotal in revealing the broader landscape, particularly because both sides will likely dispute unfavorable results. This is expected to lead to chaos, instability, and mass protests. Earlier this spring, up to 200,000 Georgians took to the streets in response to the Georgian Dream’s reintroduction of the controversial foreign agent law. If the election results, which may or may not become available on the night of Oct. 26, are unfavorable for the ruling party, the government and its security services are expected to attempt another violent crackdown. In the event of the Georgian Dream’s defeat by the opposition, a peaceful transfer of power is highly unlikely.
What will the election mean for the country’s relations with the West and with Russia?
The extent to which the West recognizes the election as free and fair will play a significant role here. If the international community rejects the results and the ruling party blatantly steals the vote, Tbilisi could experience increased isolation from the West. This would leave it more vulnerable to direct interference from Russia and increased involvement from China. By the same token, for the West, losing Georgia means losing its foothold in the South Caucasus, a situation neither the US nor Europe is prepared to accept. Western partners will use both incentives and deterrents to prevent Georgia from falling entirely under Kremlin influence.
Soldiers from the Rwandan security forces are seen near the Afungi natural gas site in Mozambique on Sept. 22, 2021.
Mozambicans will head to the polls on Wednesday, Oct. 9, amid improving prospects for ending an insurgency in the North of the country and completing several lucrative natural gas projects. Frelimo, which has ruled Mozambique for most of the period since it gained independence from Portugal in 1975, is expected to comfortably win the parliamentary and presidential elections.
We spoke with Eurasia Group expert Ziyanda Stuurman to learn what concerns are animating voters and how the next government will deal with the country’s challenges.
What are the main issues in these elections?
As in many other countries, the cost of living in Mozambique has really gone up in recent years. In the aftermath of the pandemic, inflation peaked in September 2022 and has eased since then, but prices and borrowing costs have remained high. Many people have struggled to get access to locally produced food, an issue that has been exacerbated by several cyclones and hurricanes. Moreover, the country was forced to seek assistance from the IMF in 2022 and agreed to a program that required it to slash its public wage bill, resulting in deep salary and benefit cuts for doctors, teachers, and other public employees.
How about the insurgency in the North – has that factored into the campaign?
I would say the worst of the insurgency in Cabo Delgado is probably behind us, after peaking between 2017 and 2019. With the assistance of foreign troops sent by several neighboring countries, the government has made strides in stabilizing the situation, and the candidates for president are now talking about what they would do to put an end to the insurgency. The region is the site of several large LNG projects that have the potential to turbocharge the Mozambican economy, but that were halted by their foreign operators when the fighting came too close in 2021. The average Mozambican wants to see the benefits from these projects, which have been talked about for their potential to catalyze growth for at least a decade.
Frelimo appears likely to hold on to power – how do you explain its enduring dominance?
Following a period of civil war from 1977 to 1992, Frelimo won the country’s first-ever democratic elections in 1994 in a fairly close contest with the opposition group Renamo. Since then, however, Renamo has splintered, and no new party has emerged capable of strongly challenging Frelimo. The ruling party has been able to acquire decades of governing experience that have conferred a strong incumbency advantage – an advantage that it has leaned into in undemocratic ways. It has been credibly accused, especially in more recent election cycles, of manipulating election results.
What will be the most important tasks for the next government?
Ending the insurgency and boosting the economy. Bringing long-lasting peace to Cabo Delgado is important not just for the resumption of the gas projects, but for the socio-economic development of what is probably the country’s poorest region. Daniel Chapo, Frelimo’s presidential candidate, has promised to enter peace talks with the remaining insurgents, who are thought to number 300 at most, down from a high of 2000 at the peak of the conflict. On the economic front, as the country waits for the new gas projects to come online, it will need to stimulate investment in the country’s main economic sectors – agriculture, mining, and light manufacturing.
So, who are these insurgents, and why have they been so difficult to root out?
It’s kind of a mixed bag. Some of them are former leaders and members of separatist movements in Tanzania, some are connected with the Islamist group Al-Shabab that was active in Somalia, and the majority are disaffected locals who feel excluded from public services and economic development. They have financed their operations with illicit activities such as kidnappings for ransom, particularly in the south of the country and the capital Maputo. They’ve been difficult to root out because the terrain in Cabo Delgado and its neighboring provinces is heavily forested and difficult to penetrate for the government forces, who lacked the necessary capacity to effectively fight in these conditions. In mid-2021, a group of neighboring countries, including South Africa and Rwanda, dispatched several thousand troops to support the Mozambican forces. The foreign mission has been scaled back this year but many of the troops remain.
What is the status now of the LNG projects in Cabo Delgado and what is their importance for the country’s development?
The two biggest projects are run by Total and Exxon, and Total CEO Patrick Pouyanné has been quite vocal recently about the company’s commitment to its Cabo Delgado venture. He is planning to visit Mozambique at the end of the month to meet with the next president, so it really sounds like Total is on the cusp of announcing a resumption of construction, probably by early 2025 at the latest. Still, it would take a couple of years before the facilities are ready to start producing gas. The situation of the Exxon project is somewhat different. I expect it will also resume, though it might be scaled back somewhat. The two projects have the potential to generate an estimated $50 billion in combined revenue over their lifetimes, which would be transformational for a country whose annual economic output is currently about $16 billion.
Edited by Jonathan House, Senior Editor at Eurasia Group.
Supporters react during an election campaign rally for Sajith Premadasa, leader of the Samagi Jana Balawegaya (SJB) party, ahead of the presidential election, in Colombo, Sri Lanka September 18, 2024.
On Sept. 21, Sri Lanka will hold its first presidential vote since the spectacular economic meltdown of 2022, when the pandemic-scarred country defaulted on its massive debts, imports dried up, and widespread shortages of basic goods developed. Images of angry protesters invading the luxurious estates of the president and prime minister appeared on television screens around the world.
Following a government shakeup, new President Ranil Wickremesinghe negotiated a bailout with the IMF that helped to stabilize the situation. He is asking voters this weekend for another five years in office to continue the work of rebuilding the economy, but the tough terms of the IMF program have undermined his support.
We asked Eurasia Group expert Rahul Bhatia what to expect from the upcoming election.
What are the main issues for voters? Is the IMF program a campaign issue?
Economic issues have naturally taken center stage in the election as Sri Lanka continues its fragile recovery. While shortages of everyday essentials such as food, fuel, and medicines have subsided, there is still widespread discontent over the increased cost of living and reduced welfare programs. The IMF bail-out mandated austerity measures such as tax hikes and subsidy cuts, which have increased hardships for many Sri Lankans.
As a result, most candidates are campaigning on promises such as cutting taxes, raising the salaries of government employees, providing subsidies for low-income groups and farmers, and lowering fuel and electricity prices. None of the frontrunners have opposed the IMF program in principle, but most have promised to renegotiate it.
How far has the economy come since the crisis of 2022?
The economy returned to modest growth in the second half of 2023, and inflation, too, has eased to normal levels from its peak of nearly 70% at the height of the crisis. Nevertheless, economic output declined by 9.5% over 2022 and 2023, and it will take time for it to return to pre-crisis levels. About one-quarter of the population still lives below the poverty line, as the economic crisis and subsequent austerity measures have disproportionately affected low and middle-income families. Overall, Sri Lanka’s economic situation remains precarious, and it will need a stable government to complete its recovery.
Who are the frontrunners in this election?
Amid a field of 38 contestants, there are four clear frontrunners: the incumbent Wickremesinghe, opposition leader Sajith Premadasa, the leftist Anura Kumara Dissanayake, and Namal Rajapaksa, scion of the Rajapaksa family that once dominated the island's politics but has been largely discredited by the economic crisis. (Then-president President Gotabaya Rajapaksa fled the country after angry protesters invaded his residence in July 2022.) This means the presidential election will effectively be a three-way contest between Wickremesinghe, Premadasa, and Dissanayake.
What are they offering?
Veteran politician Wickremesinghe is campaigning on steering the country out of its worst economic crisis in modern times. Meanwhile, Premadasa and Dissanayake have sought to exploit the unpopularity of his austerity measures and have promised to ease the burden for Sri Lankans. They have also leveled charges of corruption against Wickremesinghe.
Premadasa comes from a well-known political family, but Dissanayake was a marginal player in Sri Lankan politics until recently. His popularity has risen rapidly over the last three years on the back of the protest movement that ousted Gotabaya Rajapaksa and an effective grassroots campaign. While Premadasa enjoys the support of the country’s Tamil minority, Dissanayake has captured the imagination of the youth.
What are the challenges the next president will face keeping the recovery on track?
To retain the IMF’s support, the government will have to reach a budget surplus, which could prove challenging given the welfare measures the candidates have proposed. The next president will have to balance improving the everyday lives of Sri Lankans and reducing the country’s debt burden.
The next president will also face a parliament dominated by the Rajapaksa-led Sri Lanka People’s Front, which was elected in 2020. Premadasa and Dissanayake, in particular, would find it difficult to pass legislation without a parliamentary majority. Both would thus likely call for parliamentary elections before the end of the year as one of their first actions.
Will these elections reverberate beyond Sri Lanka’s borders?
Given Sri Lanka’s towering debt obligations with foreign creditors and strategic location in the Indian Ocean, many countries have a vested interest in the island nation’s political and economic stability. India would prefer a Premadasa or Wickremesinghe presidency, though it has indicated it would work with any of the four frontrunners. Apart from political stability, New Delhi will prioritize limiting China’s influence on the island—a concern the US and Japan share. It will also seek to bolster connectivity between India and Sri Lanka and push the next president to grant the Tamil provinces a degree of autonomy.
China continues to have a sizeable economic footprint in Sri Lanka, but its influence has waned with that of the Rajapaksas. Former president and prime minister Mahinda Rajapaksa and his brother Gotabaya were close to Beijing and oversaw a range of Chinese infrastructure projects on the island, partially contributing to its debt problems (China still accounts for about half of Sri Lanka's bilateral debt). Nevertheless, Dissanayake is thought to have close ties to China, and if he becomes president, it could allow China to regain some of its influence.
Edited by Jonathan House, Senior Editor at Eurasia Group.