World order may fragment following Ukraine conflict, Public debt is a casualty of war for the West, and more

Russia-Ukraine war could end with use of nuclear weapons

The Ukraine war has now lasted for two months and there is no end in sight. The longer it lasts, the greater the threats to global realities become.

Following the debate about Russia’s violation of human rights in the UN Human Rights Council, Russia was thrown out. But so what? In one way the UN increasingly resembles the League of Nations. At the end of the first world war, the victors decided to punish Germany and imposed heavy reparations. To avoid future wars, they set up the League of Nations.

It lost credibility when Mussolini invaded Ethiopia in 1935, as it could not stop the aggression. The UN is in a similar situation. The expulsion of Russia from the Human Rights Council is a pointless gesture. The UN structured itself based on an inequality between nations, with five permanent members of the security council (P5) having greater power than the rest of the world’s nations. The P5 are above international law. Russia remains among the P5, so why would it bother about the Human Rights Council?

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Public debt is a casualty of war for the West

Effects will be felt for many years to come

As the ancient Greek playwright Aeschylus observed, the first casualty of war is truth. Leaving aside for now the most dreadful casualties – human life, health and dignity – the second casualty of any war is public finance. This is particularly the case for western countries, whose average public debt-to-gross domestic product ratio had already reached levels comparable with the end of the second world war during the Covid-19 crisis. These levels are a way above the World Bank’s famous ‘tipping point’ (public debt-to-GDP above 77%) where public debt endangers economic growth.

So now we have a war on our hands, and countries are more financially stretched than they were two years ago. Although the West is not directly present on the battlefield, things are likely to get worse.

There will be a further deterioration in public budgets and generally greater indiscipline. In Europe specifically, countries can expect relaxation of fiscal rules and constraints (a move that has already been made) and more batches of pan-European debt. The €750bn Next Generation EU pandemic emergency measure was supposed to be the exception, but it might easily become the rule in times of crisis.

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