Zakaria: Four hot spots to watch in 2012
Students and the unemployed take part in a protest against austerity cuts and lack of jobs on November 17, 2011 in Naples, Italy.
January 5th, 2012
10:58 AM ET

Zakaria: Four hot spots to watch in 2012

By Fareed Zakaria, CNN

At the start of 2012, here are the four countries we all need to watch closely: Italy, Iran, Pakistan and North Korea.

Let me explain:

Italy: Linchpin of the euro

The most important country to watch in 2012 is Italy. Italy needs to successfully institute reforms that give the markets confidence. It needs to do more than just deal with its budget deficit and debt - it needs to reignite growth. For the past ten years, the Italian economy has not grown at all.

If Italy manages to stimulate economic growth, it will send a very positive signal to the markets. Italy’s new Prime Minister Mario Monti is bravely and boldly advocating longer work hours and the reform of archaic laws that have made Italian businesses unproductive and uncompetitive.

If Monti succeeds, it will vindicate Germany’s strategy, which has been not to bail out the eurozone countries, but to instead pressure them to reform. Germany knows that the only solution to the crisis of Europe’s Southern economies is for them to become more competitive.

If that starts to happen, two things follow: First, the markets will place less pressure on these Southern European countries because it will be clear that their reforms are working. Second, the Germans will become increasingly willing to accept what would be, in effect, a secret bailout. Germany will not back Eurobonds, which are a public bailout, but it would be willing to let the European Central Bank and the Bundesbank quietly ease a lot of the pressure on the Southern European economies.

Italy’s success is of paramount importance because it has the potential to stave off - or even alleviate - the eurozone crisis. On the flipside, if Italy fails, it is equally significant because the markets will likely start substantially raising Italian interest rates.

Read: Can Italy be saved?

Of the Southern economies, Italy’s actions will have the greatest impact on the rest of Europe. Italy has to refinance $500 billion euros worth of debt in the next 18 months. Even the Germans don’t have the checkbook to bail them out. So if the markets lose confidence in Italy, it’s difficult to see how the euro can survive in its current form.

Keep your eye on Italy because this whole game is going to be played in Rome over the next year.

Iran: Acting out of weakness

The next country to keep your eye on is Iran. There’s a tendency when we look at Iran to say, “This country is so powerful; it’s so strong; it’s on the march.” But actually what’s happening in Iran is the exact opposite: Iran is acting out, because it feels weak. (Read my column on this topic in this week's TIME Magazine.)

Internationally-imposed sanctions have hit Iran’s economy quite hard, effectively forcing the government to cut subsidies and make reforms that are very unpopular at home. The Iranian regime is clearly straining under enormous external pressure, which has led to deep divisions within their political establishment.

Read: Fareed Zakaria's reflections on his visit to Iran.

President Mahmoud Ahmadinejad used to be the favorite candidate of Supreme Leader Ali Khamenei. Now the supreme leader has put forward the idea of dispensing with the presidency entirely. The ruling elite is in flux. In addition to the president and the supreme leader, you have the old guard of people like former President Akbar Rafsanjani and reformers like former President Mohammad Khatami and presidential candidate Mir-Hossein Moussavi. It’s within this context that you have decisions being made both about the nuclear program and about dealing with Western sanctions.

Iran’s behavior reflects these internal divisions. First, Iran said it was going to block the Straits of Hormuz and that it would be “as easy as drinking a glass of water.” Then that was disavowed almost a day and a half later. Iran later made suspicious claims about its nuclear program. And Iran began testing missiles that are not, in fact, particularly threatening. These actions collectively convey an impression of weakness and internal division.

Read: A post-American world in progress.

Meanwhile, Iran’s big international play, which has been the propping up of Syria, is going very, very badly. The Syrian government seems to be running out of money and support. Syria will probably bleed slowly rather than suddenly collapse, but none of it looks very good for the regime in Damascus.

Now one shouldn’t take too much comfort in Iran’s weakness because countries that are weak can cause as many problems as countries that are strong. The continued pressures building on Iran indeed seem pretty dangerous.

Pakistan: An uncivil government?

Country No. 3 to look at is Pakistan, which remains more unstable than people realize. You have a civilian government that is now operating in name only. The president is often not even in Pakistan anymore. He’s often in Dubai where he can immediately receive medical treatment. He also, conveniently, happens to have a house there, just in case something were to happen in civil-military relations in Pakistan. In other words, if there were some kind of a soft coup by the military (there will not be any kind of formal coup), he’s going to be spending a lot more time in Dubai than in Islamabad.

Read: Pakistan, friends without benefits.

In addition, you have a breakdown in the relationship between the United States and Pakistan. The Pakistanis are basically moving to a post-American strategy in Afghanistan, asking themselves how to retain influence once the United States goes. Pakistan’s path to influence in Afghanistan is the Taliban. So all of that means that there is a possible confrontation with the United States; there is a possible confrontation with India; there is a possible confrontation with Afghanistan. And all this is happening while the Pakistani economy is in freefall.

North Korea: The black box

North Korea is the fourth country to watch, only because the truth of the matter is that none of us knows what is going on there. Nobody really understands the regime. Nevertheless, you’ve got to assume that this is very complicated transition. You have a completely untried, untested guy who is clearly the face of the regime (he is the non-threatening figure everybody else can rally around). That will work for a while. But the question is whether or not there are internal rivalries that might break out in the future.

Read: North Korea's moment of truth.

The possible eruption of internal rivalries is one of those events that may have a low probability of happening, but if it does indeed take place, it will have a very high impact. If there were an unwinding of the North Korean regime, it would have huge repercussions for South Korea, China and the U.S. If there were a kind of collapse and sudden integration with the South, it would put tremendous pressure on the South Korean economy and would bring the United States and China into direct military confrontation, because at that point you’d have 40,000 U.S. troops on China’s border.

North Korea is one hot spot where you can’t do much, and you really just have to hope for the best.

These are my top four hot spots of 2012.

What’s on your radar and why?

Post by:
Topics: From Fareed • Iran • Italy • North Korea • Pakistan

soundoff (347 Responses)
  1. John

    I have great appreciation for Pakistani – Army, ISI and even politicians – They are able to run terrorist organizations so effectively – everybody knows that but no-body is able to do any thing. They are considered the ally of US to fight against Terrorists. But actually they are the generator of the Terrorism – The more fun is everybody knows it.
    Even Osama Bin Laden was found here. I bet 80% of the world terrorists will be found in Pakistan.

    But poor countries like Libya – blamed of blowing of plane – Actually Pakistan harbors number of terrorists who have hijacked, blown and even killed passengers are living free,
    Iraq – WMD – they had nothing while Pakistan has WMD and not only that it has exported to North Koreas and other country and now Iran are blunt of the World.

    Pakistan is able to get out without any impunity. Not only that instead of getting sanctions they milked US for $20 billion dollars and world even more.

    We should respect Pakistan capability of fooling the world and taking advantage of it.

    January 7, 2012 at 12:19 pm | Reply
  2. John

    I have great appreciation for Pakistani – Army, ISI and even politicians – Pakistan is able to run terrorist organizations so effectively – everybody knows that but no-body is able to do any thing. Pakistan are considered the ally of US to fight against Terrorists. But actually they are the generator of the Terrorism – The more fun is everybody knows it.
    Even Osama Bin Laden was found here. I bet 80% of the world terrorists will be found in Pakistan.

    But poor countries like Libya – blamed of blowing of plane – Actually Pakistan harbors number of terrorists who have hijacked, blown and even killed passengers are living free,
    Iraq – WMD – they had nothing while Pakistan has WMD and not only that it has exported to North Koreas and other country and now Iran are blunt of the World.

    Pakistan is able to get out without any impunity. Not only that instead of getting sanctions they milked US for $20 billion dollars and world even more.

    We should respect Pakistan capability of fooling the world and taking advantage of it. Look the the capabilities of their leaders. I have not found a single country whose leaders capability of fooling the world is as good as Pakistan.
    Kudos to you

    January 7, 2012 at 12:23 pm | Reply
  3. Kerry

    We can only hope that the US will have the good sense to elect a president who can skillfully manage the hot spots around the world as well as domestic issues at home, a large order to fill.

    January 7, 2012 at 12:44 pm | Reply
  4. Gabriele

    As to Italy. We are doing our very difficult and burdensome job, others are merely talking in Europe – full stop. Of course we are paying for the mistakes made by everybody in Italy in the last 20+ years. But, to be clear about bail outs. Germany or any other EU country has not paid a single Euro. So please, do not say the Germans are paying for everybody, please. Actually the have gained the most from the Euro. Regards.

    January 7, 2012 at 12:49 pm | Reply
  5. A Simple Swede

    @Kerry: Do not forget what you Americans look at the most, he better have the sense to love God also. :P

    January 7, 2012 at 1:02 pm | Reply
  6. John

    I have great appreciation for Pakistani – Army, ISI and even politicians – They are able to run terrorist organizations so effectively – everybody knows that but no-body is able to do any thing. They are considered the ally of US to fight against Terrorists. But actually they are the generator of the Terrorism – The more fun is everybody knows it. Even Osama Bin Laden was found here. I bet 80% of the world terrorists will be found in Pakistan. But poor countries like Libya – blamed of blowing of plane – Actually Pakistan harbors number of terrorists who have hijacked, blown and even killed passengers are living free, Iraq – WMD – they had nothing while Pakistan has WMD and not only that it has exported to North Koreas and other country and now Iran are blunt of the World. Pakistan is able to get out without any impunity. Not only that instead of getting sanctions they milked US for $20 billion dollars and world even more. We should respect Pakistan capability of fooling the world and taking advantage of it.

    January 7, 2012 at 4:13 pm | Reply
  7. shin hyesuk

    [youtube=http://www.youtube.com/watch?v=zXKV78VERio&w=640&h=390]

    January 7, 2012 at 5:49 pm | Reply
  8. Wini Biara

    On my radar is Iraq.
    I live in Europe but visit my parents in Iraq frequently and hear aweful stories about the youth in the generally liberal Kurdish region becoming suddenly more and more religious and angry at the west. I don't know where this recent hatred is coming from, but I know the Kurds used to appreciate the West including America especially after the fall of Saddam.
    Suddenly all the girls are covering their heads and at the University's scienctific debate classes only few dare to speak up against fundamentalism.

    On top of it, soon the troops will leave and the decreasing security, decreasing quality of education and decreasing work morale of the Iraqi people will result in more poverty and anger.

    I am unimaginably thankful for my European passport and the fact that I don't have to stay in Iraq. What kind of a person would I become under such pressures?

    January 7, 2012 at 6:48 pm | Reply
  9. sam samuurai

    I could not agree with you more, but you forgot about Isreal and Palestine, Isreal and Negev, Isreal and Lebonan, Isreal and Iran and US non recource loans to Isreal while US and its citizens are on the depth of starvation and begging for survival from Chinese, who are sitting there wiating patiently until they own USA lock stock and barrel to pull the net while Isreal will sit and watch loaded with US cash and WMD and not raise a hand to help us.

    January 7, 2012 at 8:57 pm | Reply
  10. Squabbles

    I think you should call your program "American Public Square" since all you talk about is America.

    January 8, 2012 at 8:04 am | Reply
  11. ;;;;;USA must attack Iran now

    USA, UK, FRANCE, GERMANY THE NATO must attack Iran now before it is too late.
    USA must help mojahedi khalq opposition group who are stationed in Iraq,. help the Iranian Kurds up north more than 7 million Kurds in Iran, help Arabestan Sunni region in Iran with more than 9 million Sunni who are repressed by those evil Iranians, help the Assyrian christens in Iran, the Iranians Turks blossh, and many other repressed minorities , Isolate Iran, freeze their assets, also embargo china and Russia \if the deal with them, destroy their electronic by viruses, don't allow them to come to USA AND CANADA , ATTACK THE TERRORISTS HEZBOLLAH AND SYRIAN BASHAR AL KALAB THE EVIL HANDS OF Iran IN THE REGION. Iran is a paper tiger as soon as the tomohak start flying and get red of their command and control their navy peace and the radars then the sky is control by USA make it 24 hours non stop hit until the surrender attack them, from turkey, Afghanistan the gulf, the red sea the Arabian sea and the Arabian gulf. If Obama attack Iran he will win the election too.Help Iraqi Sunni to counter attack the Iranians group in Iraq, the world will be in peace with our those majoos thugs and the dark evil empire of Iran must demise.

    January 8, 2012 at 3:07 pm | Reply
  12. Anti_Fareed

    Fareed, why isn't India on your radar? You should take a good look at the mirror and take a wiff at yourself so that you never forget where you come from.

    January 9, 2012 at 6:57 pm | Reply
  13. vistarian

    America's national debt ballooning sensation, creating the greatest financial tsunami never seen before – would make USA the hottest spot for 2012 .... and beyond. And Pres Obama would be glad he had nothing to do with it.

    "It's the Republicans, stupid".
    ,
    The evidences were clear for all to see , yet many chose to be myopic, and racists to see them. And so 2012 would see the same questionable politicians who thought wrongly that they could resolve the national debt problem. They wouild be spending more instead. And liokely be fighting more foreign wars.

    So, how high you think the national debt could go up to? How about a dizzy US$25 trillion by 2020?

    So this is the hottest spot in 2012, and for the next 10 years even !!!

    January 10, 2012 at 12:41 am | Reply
    • vistarian

      ..... and as for many of you who are wishing for China's economy to fall off a cliff, I have this to say DREAM ON! And get real about your own country's insumountable financial problem instead of boasting about America's myth of being the greatest going forward.

      But dont get me wrong about America. It was a great couintry, consistently coming out with new innovations and inventions – and enabling US to make trillions from them. The biggest threat to America's economy is the old guys who should have retired together with their old mindsets – and allow younger and smarter Americans to run this country instead.

      You cannot teach an old dog new tricks. Its a fact!

      January 10, 2012 at 1:03 am | Reply
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