Welcome to Month 2 of Metaculus Mondays! Although none of our questions have resolved yet, one of our initial predictions on the spread of COVID-19 variants from the UK, South Africa, and Brazil in the United States is due to resolve by the first week of April. Another forecast which we are making this week of US troops in Afghanistan will resolve by May!
In this week’s volume, we are keeping in our past focus on Europe and the Middle East and forecasting the future of the Eurozone and the future of US troops in Afghanistan. Let’s begin.
Euro-Exit by 2025?
For our first question, we are answering whether any full Member State of the Eurozone leaves the Eurozone–by adopting a currency other than the Euro as their official one–before 2025.
The question resolves positively (aka, it counts as a full Member State leaving) “if a country starts the process of phasing out the Euro as its official currency before 2025,” which can either be a permanent or temporary phase out. It is not exactly clear what starting the process exactly entails, however we assume it to mean starting the actual process of swapping one currency for another rather than officially starting the process to determine how that change would look like, given the question further mentions either “replacing” or “introducing (or re-introducing) a national currency.”
In general, we find this question to be fairly well constructed and tackling a question that has clear geopolitical and financial importance. At the same time, having more clarity on resolution criteria would be ideal, since although we are making the assumption this question requires the process to start, the question also mentions that “a decision to temporarily leave the Eurozone for a fixed period...shall also suffice for positive resolution” which runs seemingly counter to “starts the process of phasing out the Euro.” Anyways, we’ll stick with our distinction for now and revise our forecast if we got this interpretation wrong later.
The median community forecast is 17% with a mean prediction of 21%.
To answer this question, we are looking at whether any of these following countries will drop the Euro in favor of another currency:
Typically the adoption of a new currency is triggered by domestic economic crises such as default crises. In these situations, a country’s ailing balance sheet prevents it from making its regular debt payments, which can often lead to increased currency issuances. These issuances in turn can result in not only rampant inflation and a balance of payments crisis, leading to a breaking of fixed exchange rates if that currency was fixed to another currency like the U.S. dollar.
As such, we feel that the most likely countries in the Eurozone to leave the Euro in the given time horizon are the countries with the lowest GNI (Gross National Income), as this measurement takes into account inflows and outflows of a country’s capital as well as GDP. While not a direct indication of being more likely to leave the Eurozone, we believe that the measure helps us identify which countries might be more likely to be put in a position where they have to leave at some point in the coming years.
Currently, there is no provision for a Member State from leaving the Eurozone. Should a Member State leave, it would likely occur under one of the following scenarios:
- Stay in the EU but leave the Eurozone following a “Disorderly Exit”
- Stay in the EU but be kicked out of the Eurozone (or temporarily removed)
- Stay in the EU and leave the Eurozone following the adoption of a Treaty Amendment which would allow Member States to leave
- Leave the EU and also leave the Eurozone (it is not necessary to leave the Eurozone after leaving the EU, however)
Disorderly Exit %
The first option is described well in a 2017 Europa briefing. A disorderly exit would happen if the European Central Bank would refuse to accept a country’s government bonds as collateral due to a sovereign debt crisis. In this case, the affected country imposes capital controls and a parallel currency. However, the report indicates why this is far from realistic:
There are doubts as to whether such an exit scenario is realistic: For example, a parallel currency would have to be printed secretly, the capital controls monitored perfectly, and the population forced to use the new currency. Even more difficult, however, is the question of who would be authorised to make such a decision without a democratic debate.
This is because as soon as an exit is publicly considered, a massive flight of capital begins since companies and citizens fear the devaluation of their assets. This requires an immediate reaction: Either the state blocks the transfer of money overseas and thus takes the first step toward leaving the currency union or it puts an end to the exit discussions and seeks greater support from the ECB.
- Likelihood: Low (1-4%)
Kicked Out %
The second option seems highly unlikely given a number of factors. First, there is no codified legal process to remove a country from the Eurozone. Steps would have to be drawn up in an ‘ad hoc’ manner to carry out such an act, and any Eurozone removal would become precedent for future members’ economic crises. Second is the EU’s move towards quasi-joint debt as a result of the massive COVID-19-catalyzed stimulus that entered the European markets over the last year. A country being kicked out of the Eurozone would negatively affect all of its members, as much of this debt is being allocated to the EU’s poorer members.
Finally, a country kicked out of the Eurozone would likely face severe economic turmoil in the short-term, potentially leading that country to ally itself with an enemy of the EU out of necessity. If there were going to be any removals from the Eurozone it would have happened before the COVID-19 pandemic because now the costs of removal are becoming too high for many EU members.
- Likelihood: Low (1-2%)
Treaty Amendment %
For the third instance, we firstly have to consider how long it takes for Treaty Amendments to be made and implemented. Based on Wikipedia’s list (don’t tell the teacher), the base-rate for implementation (meaning the time from when an amendment is signed to when it goes into legal effect) appears to be around 1.5 - 2 years, especially for major treaties–which enabling the departure from the Eurozone would certainly constitute. Incorporating drafting and passage within the European Council and passage by all national governments increases the base-rate by another year. None of this considers whether the EU would consider this amendment nor whether all national governments (such as, say, Germany and France) would agree to it, especially in a short period of time.
- Likelihood: Nearly impossible (<1%).
Leave EU, Drop Euro %
For the fourth instance, two things would have to come true: 1) A Eurozone Member State decides to leave the European Union, and 2) Upon leaving the Eurozone, this country decides to drop the Euro as their official currency. Although there is only one base-rate for activating Article 50 and leaving the EU, the time from referendum to actual departure is 3.5 years.
On the other hand, the adoption of a new currency can be relatively quick, putting the total base-rate time at roughly 4 years. Assuming a faster withdrawal (which, in practice is even more unlikely given that most other Member States share a large, important physical land border with the EU), it is still an extremely tight timeline. Besides the Netherlands, elections within the Eurozone member states begin earliest in late 2021 with most in 2022 and beyond which leaves very little time to create the political movement to leave the Eurozone before January 1, 2025.
- Likelihood: Nearly impossible (<1%).
Taken in aggregation, we therefore reach a 2-8% likelihood a country leaves the Eurozone before 2025. However, this analysis did not explicitly consider whether any of the Eurozone countries would want their own currency and could offer a competitive currency or to replace the Euro with an existing currency. The few countries that could provide their own relatively competitive, independent currency (such as Germany and France, for instance) have shown no indication nor would have any benefit in going back to their own currency.
Whereas countries who might want their own currency are unable to provide a currency that outside investors would frankly care about, in which case a Eurozone exit would be a huge self-inflicted wound. Possible in theory, yet highly unlikely.
In conclusion and on the balance of the above factors and scenarios, we forecast a 4% likelihood a full Eurozone Member State drops the Euro as their official currency before January 1, 2025–making it clearly unlikely from happening.
US’s Withdrawal from Afghanistan?
The second question we are tackling this week is whether the United States will still have troops in Afghanistan after May 1, 2021, the scheduled date of departure as outlined by the February 2020 Doha Agreement.
The question resolves positively if there are any U.S. military troops in Afghanistan on May 1, 2021. To resolve positively, the question will require a confirmation by “any official U.S. state organ.” The question does not appear to require this confirmation to be on May 1. Therefore, if the U.S. were to make a declaration before May 1 that troops were remaining in Afghanistan then the question would positively resolve if there were no new declarations by May 1.
We find this question to be an important one to forecast given the relative ambiguity of the outcome and the significance U.S. withdrawal would signal. At the same time, we are not entirely pleased with the phrasing of the question. For instance, we are implicitly assuming that if U.S.-contracted private forces remain in Afghanistan that the question would positively resolve so long as official DoD troops were out of the country. Furthermore, we are assuming this question resolves by EoD May 1 in Afghanistan but are unsure if that is the correct time-zone.
The median community prediction is 75% with a mean prediction of 77% chance US troops will still be in Afghanistan on / throughout May 1, 2021.
The Three Scenarios
We feel the three scenarios outlined by the Council on Foreign Relations are the most-likely outcomes by May 1st:
- The United States withdraws the remaining 2,500 troops by May 1
- The United States cites various Taliban violations from the Doha Agreement as a justification for pulling out of the accord completely and maintain an indefinite U.S. military presence to strike a completely new deal
- The United States asks the Taliban for an extension of the withdrawal deadline (most likely 6 months), citing the Taliban’s violations and delays in peace talks between the militant group and the Afghan government
Scenario 1 %
In 2013 NATO handed over security responsibility in Afghanistan to Afghan forces, a move which ultimately created a power vacuum in the region, paving the way for the Islamic State and other violent non-state actors to gain a foothold in the Middle East.
Given the events which followed the last United States’ troop withdrawal, after over a decade of conflict in Afghanistan, the United States is understandably concerned about creating another power vacuum this time around. As such, the first scenario is heavily predicated on assurances from the government of Afghanistan that peace and statecraft will follow the United States’ departure, and not further violence.
Achieving these assurances and negotiating the future of the Afghan state will likely be a very time-consuming endeavor, especially considering the number of actors participating in negotiations. Given these obstacles, we view this eventuality as unlikely. However, as an agreement has already been signed regarding the May 1st withdrawal date, we will calculate this likelihood as 100%, and use the two alternative outcomes as discounts against that score. This will ultimately help us arrive at an appropriate probability for this question.
- Likelihood: 100% - Probability of Scenario 2 - Probability of Scenario 3
Scenario 2 %
We find the second point to be highly unlikely for several reasons. First, given Biden’s disposition towards troop withdrawal (he was former President Obama’s Vice President during Obama’s troop withdrawal campaign and was against the troop surge) we feel he is not likely to announce an indefinite stay in Afghanistan, irrespective of violations of the Doha Agreement. The optics would be incredibly harmful for Biden and that orientation would also make further negotiations more difficult.
The Taliban may very well renege on some of their promises outlined in the agreement, but Biden has clearly demonstrated a proclivity for non-interventionist foreign policy, and we believe he is eager to leave the region as long as he can do it safely.
Finally, Afghan President Ghani wants a peace deal to be reached, and consequently he is not likely to take steps that could hurt that future. Moreover, it is also likely that the second scenario materializes as the third scenario, in that the Biden administration would move for an extension to the withdrawal deadline instead of making a move for remaining indefinitely.
- Likelihood: Highly unlikely (5%).
Scenario 3 %
The third scenario, which outlines an extension of the withdrawal agreement pending efforts by the Taliban and Afghan government to cease conflict, is the most likely outcome in our opinion.
In a letter written last week by Secretary of State Anthony Blinken to Afghan president Ashraf Ghani, Blinken writes that as the process continues, “...the United States has not ruled out any option” with respect to the troop withdrawal timeline. Blinken goes on to cite concerns about security in Afghanistan being the catalyst for a timeline extension, saying rather explicitly “I am concerned that the security situation will worsen and that the Taliban could make rapid territorial gains.” Although this letter in theory could be used to support the second scenario, given Blinken’s recent comments on US intervention we feel confident placing this evidence in supporting Scenario 3 to a much larger degree than Scenario 2.
Given Blinken’s concerns in the letter, which do not seem likely to be ameliorated in the near future, much less in the next two months, the Scenario 3 outcome seems quite likely especially when compared to the two aforementioned scenarios. Also, given the time constraints discussed earlier regarding the sheer number of countries and issues involved in negotiations, the time horizon on this question seems too soon to resolve positively.
- Likelihood: Likely (85%).
Based on the above analysis, we give a 90% likelihood that U.S. military troops will remain in Afghanistan on May 1, 2021–making it highly likely to occur.
Since this question will remain open for another week, we’ll be following these factors to determine whether to lower or raise our overall probability:
- What, if any, news comes out about the US' proposal for Turkey to host Afghan-Taliban peace talks.
- What, if any, developments come from the US' recent push for UN-led peace process.
- Any key developments in the region that could affect the prioritization of US withdrawal in the short-term.
- As well as any statements made by key figures in the US, Afghani, and Taliban leadership.
Metaculus and Forecast Scoring
On the most recent episode of the Global Guessing Weekly Podcast, we discussed the recent Metaculus Forecast Scoring “Controversy” and gave some of our preliminary thoughts on it. We plan to further examine this issue in the weeks to come and think about potential solutions. If you have any thoughts on the Metaculus scoring controversy, please tell us your comments either in the comment section down below or reach out to us on social media. We are still gathering our thoughts, so any feedback or input is appreciated!