Editor's Note: The following is reprinted with the permission of the Council on Foreign Relations.
Standard and Poor's downgraded Italy's credit rating, surprising global investors and adding to fears of contagion in the European financial crisis (Guardian). S&P reduced Italy's sovereign debt rating from A+/A-1+ to A/A-1, stating the country's growth prospects were fading despite planned government reforms. Italy is the latest member of the eurozone to suffer a downgrade this year, following Spain, Ireland, Greece, Portugal, and Cyprus.
The downgrade of Europe's third largest economy fed a decline in Asian markets and a fall in the euro (DeutscheWelle). Italian Prime Minister Silvio Berlusconi dismissed the news, claiming the decision was political and did not reflect reality.
The S&P action is likely to increase fears in the European banking system (FT), whose shares have been under heavy strain for several months. Several large French and German banks have heavy exposures to Italy.
On Monday night, U.S. President Barack Obama spoke with German Chancellor Angela Merkel about the expanding financial crisis (IrishTimes), agreeing that "concerted action" was necessary. Obama is also expected to address the crisis with British and French leaders who will be in New York for the UN General Assembly.
In this op-ed for the Financial Times, CFR's Sebastian Mallaby discusses the reaction of the European Central Bank to the eurozone financial crisis and the reluctance of Germany to support sovereign bailouts.
PIMCO's Mohamed A. El-Erian discusses the potential policy responses of emerging-market countries (Project Syndicate) to Western financial contagion, including "turbo-charging" internal demand or sustaining trade surpluses and safeguarding reserves.
In this op-ed for the Wall Street Journal, CFR's Benn Steil and Paul Swartz look at the dangers of the ECB's ever-deeper forays into fiscal policy and credit allocation.
Yemen Crackdown Enters Third Day
Yemeni forces continued their crackdown on protestors in the capital of Sanaa, killing at least two in a third day of bloodshed (Reuters). The violence marks another escalation in an eight-month clash between the regime and activists backed by soldiers who have defected.
CFR's Ray Takeyh says the Arab Spring has created a unique opportunity for the United States and Europe to achieve their maximalist objectives in the Middle East without resorting to force.
TURKEY: U.S. Secretary State Hillary Clinton pressed Turkey to repair its relationship with Israel (RTT) ahead of the opening of the UN General Assembly in New York. Turkey expelled the Israeli ambassador early this month over a UN report on a Gaza-bound aid flotilla.
Japan to Investigate Cyber Attack
Japanese officials instructed its largest military supplier, Mitsubishi Heavy Industries, to investigate a cyberattack (Reuters) on its digital infrastructure, claiming the company may have breached contracts by avoiding a probe.
SOUTH KOREA: Nuclear envoys from South and North Korea met in Beijing in hopes of restarting six-party talks on Pyongyang's nuclear disarmament (Yonhap). But questions remain as to whether North Korea will accept "pre-steps" demanded by South Korea and the United States before negotiations resume.
This CFR Task Force Report identifies the primary elements of an internationally coordinated response to the threat posed by North Korea, including denuclearization of the Korean peninsula and attempting to resolve rather than simply manage the nuclear issue.
SOUTH AND CENTRAL ASIA
Rising Death Toll in Himalayan Quake
Rescuers continue to struggle with landslides and monsoon conditions after a 6.9-magnitude earthquake in a remote Himalayan region that includes India, China, and Nepal (al-Jazeera). At least sixty-three people have died and thousands of homes destroyed.
AFGHANISTAN: A report released by the Open Society Foundation examines the impact of U.S.-led kill/capture missions or night raids in Afghanistan, claiming that such tactics feed public and political blowback.
Targeted killings have become a central component of U.S. counterterrorism operations around the globe. Despite pointed criticism over transparency and accountability issues, analysts say the controversial practice seems likely to expand in the future.
Zambia to Vote for President
Zambians are set to vote in elections (Herald) that include president, parliament, and local government. Analysts are predicting a victory for incumbent president Rupiah Banda, but the election remains tight.
SUB-SAHARA: A report by The Lancet predicts that no country in sub-Saharan Africa will meet its Millennium Development Goals to dramatically reduce deaths by 2015. However, Rwanda and Botswana were applauded for "substantial acceleration" in dealing with child mortality in the past decade.
An End to 'Don't Ask, Don't Tell'
The law allowing openly gay persons (BBC) to serve in the U.S. military, a repeal of "Don't Ask, Don't Tell," went into effect today. Congress voted last year to repeal the law, which was introduced in 1993 under the Clinton administration.
ECUADOR: A U.S. appeals court reversed an order halting the enforcement of a multibillion-dollar judgment against Chevron (FT). In February, an Ecuadorian court found Chevron liable for oil pollution in the Amazon.
Russia Condemned over Yukos
The European Court of Human Rights denounced the Russian government for its handling of the Yukos oil company (al-Jazeera) bankruptcy in 2006, which included the jailing of former top executive Mikhail Khodorkovsky–who was viewed as chief rival to then-president Vladimir Putin.