The year 2011 will be remembered for the European debt crisis and its impact on the global economy, but also for its hard consequences on everyday life. The crisis began in 2007 and is without precedent in post-war economic history. Europe is living its darkest economic days since the 1930s.

Due to the growing importance of the topic and due to the diffusion of social media platforms, in recent months there has been a proliferation of “economic blogging” (and tweeting). Opinion, thoughts and reactions abound online trying to make sense of what future awaits the Eurozone.

Considering VAT increases, along with salary, pension and benefit cuts, some basic goods are becoming less affordable. Indian blogger Deepankar Basu wrote on the indian economic website Sanhati:

These [austerity] measures reduce expenditure and increase taxes in order to reduce government deficits. Cutbacks in government spending and increases in taxes, at this particular moment, however, amount to the worst possible policy stance, reducing aggregate demand even further, and pushing the economies deeper into recession.

Sovereign debts, junk ratings: protests take to the street

Camp site at Puerta del Sol, Madrid, Spain. Photo by Julio Albarrán, republished under a CC License.

The crisis is perceived to have started within three countries - Ireland, Greece and Portugal - but quickly spread to Spain and Italy.

Since the international rating agencies gave their assessments (ratings) for each national solvency (the ability to pay public debt) it seemed they “held the wand” over the Eurozone’s future. This power over the fate of each state provoked strong debates all over Europe, with many questioning the legitimacy of their analysis.

In Portugal, for example, there was a strong commotion and reaction when the independent American financial analysis firm Moody's called Portuguese debt “junk debt”.

But the core of the protests occurred in May. It all started in Spain with the 15M movement, mainly coordinated by the youth organization Democracia Real Ya [es], which was extremely active online and organized massive demonstrations against corruption, unemployment, and a political structure allegedly favouring a two-party system.

The acampadas born in Plaza del Sol in Madrid quickly “infected” other Spanish cities, such as Barcelona, Sevilla and Malaga. In a few weeks other movements became active in other European Countries and globally, later the Occupy Wall Street movement.

"#campmap for "#worldrevolution" - More than 600 demonstrations and camp outs were ignited in solidarity with Spanish protesters by the end of May, 2011.

Some, including mainstream media [es], soon made connections between the the so-called Spanish Revolution and the Arab Spring.

Como si se tratara de la plaza Tahrir, en Egipto, escenario de las protestas populares[es]. El caldo de cultivo del derrocamiento de Hosni Mubarak. Esto es distinto pero puede ser el embrión de algo. Quién sabe.

Solidarity to the Spanish movement came soon from Greece, which has been the first European Union country to taste the sting of IMF/ECB austerity since 2010. Particularly in Greece the anti-austerity protests have been strongest. In June there were peaceful protests and gatherings at Syntagma (Constitution) Square, and when protesters planned to surround the House of the Parliament the day for which the vote for the Mid-Term Austerity Programme had been scheduled, there were violent clashes with the police.

Protests and demonstrations continued over the summer especially in Spain and Greece. But only the big reforms and the austerity plans widely adopted in “PIIGS” countries (Portugal, Ireland, Italy, Greece and Spain) late in the autumn marked a turning point of the European debt crisis.

“Blood and Tears”: the austerity recipe

The pressure of the financial markets and recommendations coming from European Commission urged some governments to adopt  so-called austerity measures aimed at eliminating unsustainable budget deficits. Recipes seem to have some common traits across countries: cuts on social spending and social services, additional taxes, VAT increases and salary cuts with citizens paying for the crisis.

In Spain the intense social debate over the economic recovery plan led to new protest in September when the #reformazo (#bigreform) was announced. Spain, and later Italy, decided to introduce constitutional changes to limit public spending (budgetary stability). In turn, there were protests throughout the country organized by the assemblies of Puerta del Sol and by the entire 15M movement against what Real Democracy Now! has called the Financial Coup D'État.

Runner statue mocked up as a rioter. Photo courtesy of the Athens indignants' multimedia team, licensed as CC BY-NC-ND 3.0

In Greece in October there was an unprecedented protest during the ‘Ochi Day‘ (No Day) Parade since Greeks were angry for the relentless and ineffective austerity measures, culminating in the “haircut” deal negotiated by banks and European politicians, which many fear signifies the beginning of a new foreign “occupation” of the country.

The impact of the austerity recipes have been particularly severe in Greece where suicides and criminality are mounting, and where social and health assistance is becoming more and more expensive. The reportedly high cost (that can reach 1000 euros) for childbirth in public hospitals is only one example of adverse social impacts of the current crisis.

But there are also chronicles of the victims of the explosive cocktail of the housing bubble, the financial crisis, and high unemployment rates. Thousands of families are now without homes. A large campaign started in Spain against housing speculation, to stop evictions and relocate families to unused buildings.

Mobilizing on the streets and the Internet

Apart from economic issues and their implications for the people of European countries, democratic participation and citizenship rights occupy the public debate. The massive participation in protests and demonstrations against austerity measures - both online and in the streets - was something new on the European political scene.

Many, such as in Portugal, have pointed out there was an alternative to the top-down measures imposed by EC, IMF and ECB so that the Iceland’s practice of direct democracy became a model. Since Iceland refused an international bailout, many argued that there could be a different solution for the current crisis than ten years of severe budget restrictions to bail out bondholders.

But there was also another issue that emerged in recent months, since there have been crucial changes of government in three European countries. While in Spain the change was due to early elections, the new prime ministers in Greece and in Italy were chosen by the head of state, without any popular approval.

The resignation of Silvio Berlusconi in Italy was particularly important not only for the country, but for the whole European Union, since the country needed to calm financial markets in order to keep interest rates on sovereign debt under control. After the “Party for Berlusconi's resignation” soon Italians and Europeans involved in the crisis had to face the ugly reality they have to live with.

As Europe’s financial woes intensify, austerity reigns, the crisis deepens and economists are forecasting an (unprecedented?) recession, maybe 2011 will be remembered as a “lost year” of the European economic history.

This page is part of our special coverage Europe in Crisis and 2011 on Global Voices.

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In the same week in April that former Portuguese Prime Minister Jose Socrates announced the need for an international financial bailout to pay for its public debt of 80 billion Euros, Icelanders went to the polls to reject tax payers participation in the “Icesave” bank bailout deal.

Though Iceland’s practice of direct democracy, renunciation of an international bailout and economic recovery in two years has not been properly covered by the Portuguese mainstream media, bloggers are analysing and getting inspired by the story.

Reykjavik Protest, 2008. Photo by Kristine Lowe on Flickr (CC BY-NC-SA 2.0)

Clavis Prophetarum [pseudonymn], from the blog Quintus, tells why he thinks Iceland’s “brave resistance to the political-financial complex that ademocratically rules the European Union nowadays” is being ignored [pt]:

A opção islandesa não serviu os interesses dos bancos europeus, logo estes têm todo o interesse em que se não fale dela nem que esta possível via chegue aos ouvidos dos cidadãos.

Quando em 2007, a Islândia foi o primeiro país europeus a soçobrar perante a crise mundial, declarando bancarrota por causa da falência do seu maior banco muitos desconsideraram o impacto de tal crise alegando que se tratava apenas de um pequeno país com pouco mais de meio milhão de habitantes e que seria facilmente “socorrido” por um empréstimo do FMI. O problema foi que na Islândia a “ajuda” do FMI foi levada a referendo e… derrotada.

He adds that in Portugal also, “the solution for the current crisis cannot rely on ten years of severe budget restrictions to keep the banks that have greedily and unbridledly lent us money”.

The national ballot is just one of the “lessons” [pt] for Portugal and the rest of the European countries to learn from Iceland, as the online news platform i reports [pt]. The people have also organized sit-ins in front of the Parliament demanding the fall of the conservative government, have taken those responsible for the crisis to justice - including the former prime minister Geir Haarde whose trial started last Monday, September 5 - and a new crowdsourced constitution is in the works.

“Do you think that we in Portugal should do the same that you do?”

In a video by Miguel Marques, a group of Portuguese citizens ask Icelanders about their social mobilization:

How did the unions in Iceland took [sic] position and saw [sic] themselves as players in the movements of the resistance against the debt crisis in Iceland and all over europe? (…)

How are you Icelanders organizing yourselves to make a better future for you?

(…) What’s happening now? What are you still doing? What are you struggling for and what do you think is worth fighting for, like the constitution? Is this constitution really separating the powers - economical, political, religious? How do you think it will help? What things do you want the constitution to help change? (…)

What are you doing now? The popular movements… are you still gathering? Are you organized in small groups? Did people split like the four of them who were elected? Do you have small groups of interests?

(…) Whether you people in Europe, and us here in the south, if we could find a way to get together and get what’s wrong with the whole of the system, capitalist system of course? How can we actually create a network of help in which we could actually propose a whole new system for Europe and beyond? Go Iceland people!

For Miguel Madeira, from the blog Vias de Facto [pt], “the relative Icelandic success is more the result of popular mobilization than of ‘new governments'”. In a comment [pt] to his post, Fernando Ribeiro starts by highlighting the fact that in Iceland there was no need for “violent clashes” and considers that whereas “in Greece, Ireland and Portugal the political class didn’t - and will not - consult the voters it represents when making such important decisions as falling back on the European fund”. It is important to:

requerer abertamente mais democracia na hora das tomadas de decisão fundamentais, e ultrapassar o argumento caduco da democracia liberal em que a democracia representativa funciona assim mesmo.

Icelanders are not only demanding more democracy but also taking part in “the ultimate affirmation of participatory democracy. (…) Democracy 2.0″, through a new crowdsourced constitution to be debated in the Parliament in October. Paula Thomaz from Carta Capital sums up the process [pt]:

a discussão para a nova [constituição] islandesa se dá através de vídeos do Youtube em tempo real, que mostram os debates do Conselho; fotos no Flickr; pequenas frases no Twitter; no site oficial dos temas (em islandês e em inglês); e no Facebook é que as ideias estão abertas para discussão.

To wrap up a thorough analysis on Iceland’s response to the crisis, in an opinion article [pt] originally published in the website Noticias do Douro and widely shared online, engineer and public servant Fernando Gouveia, writes:

Se isto servir para esclarecer uma única pessoa que seja deste pobre país aqui plantado no fundo da Europa, que por cá anda sem eira nem beira ao sabor dos acordos milionários que os seus governantes acertam com o capital internacional, e onde os seus cidadãos passam fome para que as contas dos corruptos se encham até abarrotar, já posso dar por bem empregue o tempo que levei a escrever este artigo.

This page is part of our special coverage Europe in Crisis.

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In Mexico, Irma Eréndida Sandoval heads up a laboratory to document corruption and research the best transparency policies. “Laboratorio de Documentación y Análisis de la Corrupción y la Transparencia” at UNAM, the Autonomous National Mexican University, is one of the most prestigious institutions in Latin America.

In Iceland, parliamentarian Birgitta Jónsdóttir is promoting the Icelandic Modern Media Initiative, a proposal to create a global safe haven for investigative journalism in Iceland that would improve freedom of expression and transparency worldwide by protecting watchdog groups and whistleblowers from libel censorship.

It is important not only approve good laws to promote transparency and openness but also protect a free country from becoming less transparent. An activist from Germany, Franziska Heine, initiated the most successful e-petition in German history, aimed to prevent a law which would give the German police the right to create and maintain censorship lists with websites to be blocked by German ISPs. It was signed more than 134,000 times. Franziska is part of the anti-censorship movement and is engaged in several activities and organizations which fight against surveillance, data mining, censorship and other threats to civil rights.

But good laws and proactive citizens are not enough; tools are also important to enable women around the world to take action and promote transparency. Margarita Padilla, an IT engineer and the former director of the magazine Mundo Linux is making a difference. She creates and maintains systems with a social approach and also promotes openness with her website Sin Dominio.

Mercedes de Freitas from Venezuela is the Executive Director of Transparencia Venezuela, the local chapter of Transparency International and is former Ashoka Changemaker Fellow for her work in promoting civic participation to increase government accountability.

These are surely just a few examples of women around the world who are using technology to challenge corruption, improve the performance of institutions, and create better policy to engage citizens and hold public officials accountable. As a recent article by Alexandra Starr notes, both the fields of technology and government have long excluded women from participation despite their impressive track record for approaching both policy and technology with more realism and tact than their male counterparts.

Software companies and parliamentary buildings around the world are still mostly dominated by men, but this is changing quickly thanks to a new generation of women technologists, activists, and politicians. I would be remiss to not highlight the work of our female researchers and research reviewers who, it must be said, have proven themselves to be the hardest working members of our team on the Technology for Transparency Network.

Renata Avila, who wrote the profiles of all of the women above, is a lawyer, human rights activist, the country lead of Creative Commons Guatemala, and the director of Primer Palabra. She has worked with the Rigoberta Menchu Tum Foundation, Harvard University, the Public Voice, and Women in International Security. Twitter: @avilarenata.

Sopheap Chak is a graduate student of peace studies at the International University of Japan. Meanwhile, she is also running the Cambodian Youth Network for Change, which mobilizes young activists around the country. She was previously advocacy officer of the Cambodian Center for Human Rights (CCHR) where she helped lead the “Black Box Campaign” to fight against police corruption in Cambodia. Twitter: @jusminesophia.

Rebekah Heacock is currently a master's candidate at the Columbia University School of International and Public Affairs, where she studies the intersection of ICT and development and edits SIPA’s blog, The Morningside Post. She previously lived and worked in Uganda, where she co-developed and directed a series of conferences on post-conflict development for American and African college students. Twitter: @rebekahredux.

Manuella Maia Ribeiro is a recent graduate of Public Policy Management from the University of São Paulo, Brazil. Since 2007 she has been researching how governments can promote transparency, accountability and participation through the use of information and communication technologies. Twitter: @manuellamr.

Namita Singh is a researcher and consultant focused on participatory media. She studied mass media and mass communication at Delhi University and has a Master of Arts in Social Work from the Tata Institute of Social Sciences in Mumbai. Namita will soon begin her Ph.D. research in the UK on the processes and impact of participatory video. Twitter: @namitasingh.

Carrie Yang is a a postgraduate student studying new media at the Chinese University of Hong Kong. The focus of her research is on citizen journalism and new media product development. She studied English at Guangdong University of Foreign Studies in Guangzhou, China. Twitter: @Carrie_Young.

Sylwia Presley is a blogger, photographer and activist who is passionate about social media marketing for the non-profit sector and social media for social change. She has organized numerous events including Barcamp Transparency UK last summer in Oxford, which she hopes will be replicated in other European countries this year. Twitter: @presleysylwia.

Aparna Ray is an independent qualitative research consultant by profession who is keenly interested in people, cultures, communities and social media/software. She writes both in English and Bangla, (the latter being her mother-tongue), and covers the Bangla blog world on Global Voices. Twitter: @aparnaray.

Laura Vidal is a Venezuelan studying Science Education in Paris, France. She blogs at Sacando la Lengua about languages, literature and interactions in society, and deeply believes in the uniqueness and importance of every culture, and in the study of them as a mirror to our own.

Do you know other women working in the fields of technology and transparency? Please link to their websites, blogs, and Twitter accounts in the comments section below!

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Bubbles

The global effect of the bursting of the bubble economies in the developed world was sudden and devastating. For example, Jamaica’s dollar-earning bauxite industry has shed hundreds of jobs already because of the downturn in US car production.

In Bangladesh, the housing bubble is tied to the reliance of the country to the remittances sent by overseas workers. Now that migrant workers are returning home because of mass layoffs in Europe and US, the property boom in Bangladesh has come to an end:

The diaspora Bangladeshis have sent remittance of almost 6.5 billion US dollars in 2007. There is no doubt that remittances are good for a country's economy. But it is the sad truth that most of these remittances are used in investing in unproductive assets like lands and apartments. Because liquidity chases assets, those diaspora workers will certainly want to invest in a secured asset.

A huge sum of money is going after a tiny piece of land among limited land resources. So we have created our own bubble (like dotcom bubble). Everybody knows how the prices of lands and apartments shot up. The remittances are responsible for it.

Cambodia is also experiencing a property bubble. South Koreans are Cambodia’s biggest investors. Since South Korean businesses have been badly hit by the financial crisis, many of them have already pulled off their real estate investments in Cambodia.

Meanwhile, the Caribbean financial crisis originated in part from the sharp drop in methanol and real estate prices. In Antigua, the face of bank fraud is U.S. billionaire Allen Stanford who has been charged with investment fraud. Stanford has considerable investments in the Caribbean.

For many months, the Brazilian government has claimed that the local impact of the economic crisis is only minimal. But recent reports have shown that Brazil is now the second most affected country by the crisis. Blogger Luiz explains why Brazil’s economy is vulnerable:

Sim, o Brasil tem um mercado interno, mas não vive só dele. Vive, também, da exportação de seus produtos. A crise atingiu não apenas os Estados Unidos, mas também a União Européia. Dois grandes mercados brasileiros. Reduziu o crescimento na China, outro mercado importante.

Romania’s lending bubble is familiar because it is almost the same credit bubble which burst in other rich nations.

Political Cartoon by Sacrava from Cambodia

Bailouts

Many companies which asked for a bailout from governments were financial institutions. The response of some governments was to nationalize these money-losing firms. Bank nationalization schemes have been enforced in some countries like Iceland and Kazakhstan. Trinidad and Tobago banks were rescued not just by their government but also by governments from neighboring countries.

Is nationalization a wise economic decision? Should bankrupt companies receive government assistance? The opinion of bloggers is divided:

Barbados Free Press criticizes the lack of transparency concerning the decision to bailout the banks in the region:

How much will Barbadian taxpayers eventually be on the hook for? Good luck finding out the truth because the amount of taxpayer money and concessions being given by Trinidad, Barbados and other countries is being kept secret from the taxpayers.

Barbados Underground, reacting to the renewed government involvement in the financial sector, notes that this unorthodox thinking should generate a healthy debate:

If in fact, “national financial institutions,” enhance the capacity of a national government to respond to crises in the financial services sector, the question may well be, not whether a country can afford a “national financial institution,” but whether it can afford not to have one. Such a perspective goes against my many years of training, but economic orthodoxy has been found so sorely lacking in this crisis that I am open to new ideas. New answers often require new questions and a willingness to engage in fresh open minded debate.

Streetwise Professor from Russia disagrees that failing banks should be revived by the government:

These are companies that should have been euthanized. No, let me correct that. They should have been terminated with extreme prejudice. Instead they are being revived, and pushed into doing the kinds of things that created the financial crisis in the first place.

This politicization of these large financial institutions makes their continued reliance on the government inevitable. Soft budget constraints are addictive. More bad loans will pile up, making these firms even less able to survive in the marketplace without government assistance.

Even poet dergachew from Kazakhstan is afraid that the nationalization of business enterprises will be counterproductive:

I am not a politician, but nothing positive will eventually happen in result of nationalization of big business that takes place in our country now. Sure, the government remains the only capable market player because it accumulates income from extraction of minerals, but a priori it is well-known fact that business people run a business better, than the government.

In Jamaica, blogger Jamaica Salt suggests a bailout for the country’s rum industry because of declining tourism activities:

It is indeed a sorry state of affairs. Usually in times of downturn, alcohol sales increase as people look to drown their sorrows! But I imagine that the dent in tourism to Jamaica is largely to blame for the decreasing sales figures of rum.

Political Cartoon by Sacrava. A Big Fat Cat, AIG

Stimulus plans

To assure the public that something is being planned or done to revive the economy, governments around the world are drafting various economic stimulus packages.

Hungary will implement a tax reform. Taiwan has signed a controversial trade agreement with China and several Southeast Asian nations. Hiring street sweepers is part of the Philippine stimulus plan. Mongolia has unveiled a 1.5 trillion tugrik stimulus plan (USD 980 million) – but critics claim the program is only intended to cover the budget deficit. Malaysia has recently launched its second stimulus program. Named as mini budget, this stimulus plan has generated a lot of discussion and also criticism in the country.

Sean's Russia Blog notes that Russia is relying on “gunpowder economics” for its version of a stimulus plan:

Feeling the pains of economic crisis? Can’t find a suitable place for expanding market share? Don’t fret. There is one sure fire way to keep those exports up. Sell more weapons.

China’s central government has announced a four trillion yuan stimulus package (USD 570 billion dollars). Below is the coverage of the stimulus plan:

The four trillion yuan is going to be spent on 10 categories, among them welfare investment such as housing for low-income, health-care system and education, also infrastructure-building such as new railways, roads and airports. Specially, aid to post-earthquake reconstruction in Si-chuan is mentioned in the agenda. Equally notable is the subsidy for farmers and an explicit announcement to increase the price of state food purchase from farmers.

But some bloggers are worried that corruption and poor infrastructure projects will cause the failure of the stimulus plan.

In Cambodia, it is the opposition which is suggesting a stimulus package. Predictably, the government rejected it. The stimulus hopes to realize the following:

- Setting up mechanisms to support and stabilize agricultural prices in order to protect farmers' revenue and living conditions
- Investing in human resources by increasing spending on education, training and health
- Building infrastructure that Cambodia lacks most (roads, railways, water-control and irrigation systems, housing for the poor)
- Works to protect the environment and to restore the ecological system that has been disrupted nationwide, including replanting trees and dredging lakes and rivers
- tax cuts and reduction in fees for the use of public services including road tolls and the electricity price
- Special social allowances for the poorest segment of the population
- Loans with reduced interest rates for small domestic entrepreneurs and the needy.

Adolfo from Brazil, enumerates his stimulus proposal:

O Brasil tambem tem anunciado seu pacote, eu vou fazer a minha parte e sugerir um pacote tambem: que tal o governo brasileiro diminuir o imposto de renda? Operacionalmente o procedimento eh bem simples, basta devolver R$ 1.000 para cada contribuinte. Que tal esse pacote? Ele pelo menos tem o merito de devolver o dinheiro para quem ja pagou muito mais, e em nada distorce os incentives futuros em relacao ao risco.

There are bloggers who reject the wisdom of “stimulucrats”. John Quiggin from Australia shares this negative view on implementing a stimulus:

If you believe that the economy is like a swimming pool, and that no matter how big a splash some shock (such as the collapse of the financial system) might make, the water in it will rapidly find its own level, then you will agree that there is no need for, or possible benefit from, the stimulus package.

Adolfo from Brazil believes the government intervention in the economy is more dangerous:

Para a economia brasileira mais perigoso que a crise internacional são as recentes medidas anunciadas pelo governo. Os recentes anúncios de aumento do gasto público podem perfeitamente fazer estragos na economia. Ou seja, se o governo brasileiro ficasse calado e nada fizesse estaríamos a salvo. O problema é que o governo insiste em querer intervir na economia.

He explains why a bigger public spending will hurt the taxpayers:

Da próxima vez que você ouvir alguém pedindo por um aumento do gasto público lembre-se que isso implica em menos dinheiro no seu bolso, isso implica em menos dinheiro para as empresas investirem, implica que cada vez mais você dependerá dos favores do governo, e cada vez menos de seu próprio esforço e habilidade.

The quote from Bangladesh was an English translation provided by GV Editor Rezwan. The Portuguese translation was provided by GV Editor Paula.

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Hungary

Antal Dániel of Central Europe Activ wrote this on Oct. 13:

After major banks and insurance corporations were bailed out by European government, Hungary has become the first member state of the EU the receive a bailout offer from IMF with the support of EU’s Ecofin. Hungary looks to be the most fragile member of the Union in the global financial crisis. […]

The Hungarian blogger believes that “the current economic situation is a result of a political crisis”:

[…] In the 2002 election campaign, both the then-ruling centre-right and the centre-left campaigned with the promise to give back more to the people from Hungary’s economic success between 1989 and 2002. The two major parties, right-wing Fidesz and the Socialist Party have outbid each other with spending promises and tax-cut promises. […] The Socialist Party has kept much of its incredible promises, driving up budget deficit to a 10% record. Sadly, a similar bidding came in the 2006 elections that the Socialists won narrowly. The Socialist Partly leader, Mr. Gyurcsány has admitted afterwards that his party lied to the voters, which made his later austerity measures rather unwelcome by the Hungarian people. […]

To overcome the crisis, Dániel concludes, “Hungarian voters […] will have to force their major parties into more rational public finance promises and policies.”

Eva Balogh of Hungarian Spectrum wrote this about the Hungarian opposition's inadequate response to the crisis:

[…] Let's start with the leaders of SZDSZ. Once again, they seem to be out of touch. […] They talk as if the Hungarian government's most important task would be “reforms.” Reforms that ended, according to them. And therefore, isn't it wonderful that they left the coalition? As if today, mid-October 2008, when the whole financial world is teetering on the brink of collapse these so-called reforms will make or break Hungary. […] Meanwhile, these petty squabbles weaken the government's efforts to keep the country's economy in balance and avoid panic. It's important to pass the budget and move on. Because there's going to be a lot of hard work ahead.

Then there is Fidesz's chief, [Viktor Orbán]. He tried to explain to a group of important business leaders yesterday that Hungary's economic problems would be solved within three months if there were early elections and he became prime minister. He would turn the economy around. Alone, in Hungary. Of course, the problem is that in a global economy no country is an island. One way or another Hungary will be affected. Less so on the front lines than some other European countries because Hungary's banks are not awash in toxic paper and Hungary was not the favorite destination of currency traders and hedge funds. But the first signs are already here. Opel's sales are down, so the Hungarian Opel factory will be closed “for a while.” However, Orbán claims that his economic team is ready with all the answers: drastic tax cuts, less bureaucratic handling of tax collection, decrease of bureaucracy and corruption, a smaller parliament, well organized public administration, and better handling of finances. Laughable? No, under the current circumstances this small-mindedness shows a lack of vision.

What is even more worrisome is that Viktor Orbán thinks in black and white when it comes to the root of the current crisis. He is certain that “liberal economic policy” is the cause of the problem and he spoke enthusiastically about those countries where democracy is not exactly in full bloom: China, Russia, some of the Islamic countries. Those are the successful ones, not the liberal democracies in the West. […]

In a follow-up post on the Hungarian politicians' response to the financial crisis, Eva Balogh wrote about “a seven-point list of demands” put forward by Fidesz - and PM Ferenc Gyurcsány's “twelve-point plan”:

[…] The fact that this twelve-point plan has the blessing of the president of the Hungarian National Bank will certainly give it weight. And it includes most of Fidesz's demands. […]

Will the plan help ease the fallout of the global financial crisis? Who knows? Real damage has been done to the credit markets, and there will undoubtedly be a spillover into the global economy. How deep, how long is anybody's guess.

Edward Hugh of Hungary Economy Watch explained “why Hungary is not the next Iceland”:

[…] The longer term financial and economic future of Iceland is rosy, once they weather the present storm, and learn some belated lessons. I wish I could say the same about Hungary. […]

[…] Iceland is a young country, almost reproducing itself in terms of children, and with a rapidly expanding population of working age. Hungary on the other hand is a comparatively old country, with a rapidly ageing population, where each generation is about two thirds of the size of the previous one, and where the potential workforce and total population are now in long term decline.

This is why Iceland - even though it has gone to a huge excess - can sustain a much higher level of “leveraging” into the future than Hungary can, and why in the longer term Iceland is certainly no Hungary. I do not say any of this to criticise Hungary, or its citizens, but really out of a deep seated concern about the future of a country that I do care about. […]

At A Fistful of Euros, Edward Hugh wrote about the International Monetary Fund's “readiness to offer financial and technical help to Hungary”:

[…] The EU has said it welcomes the intervention. Under the circumstances there really was little else it could do. This would now appear to set a precedent, and the Hungarian case may well be followed by the Baltics, Bulgaria and Romania in pretty short order I would say, looking at the speed with which things are happening. […]

Estonia, Latvia, Lithuania

One day later, Edward Hugh continued his “IMF receivership” roll call at A Fistful of Euros:

[…] Meantime a growing number of countries now seem to be at risk of following Iceland and Hungary into the arms of the IMF, with the Baltic republics of Estonia, Latvia and Lithuania now looking particularly vulnerable, according to a warning from the International Monetary Fund itself yesterday.

[…]

In my view the threat to the Baltic financial systems is real, as is the threat to the Bulgarian and Romanian ones. Action, of some form or another needs to be taken, and soon. Latvia and Estonia are now in deep recessions, and Lithuania, while still clinging on to growth, can’t be far behind. Basically it is hard to see any revival in domestic demand in the immediate future, which means these countries now need to live from exports. But with the very high inflation they have had it is hard to see how they can restore competitiveness while retaining their currency pegs to the euro. […] So better get it over and done with now I would say, and take advantage of the shelter offered in the arms of the IMF. […]

At Latvia Economy Watch, Claus Vistesen provided a thorough analysis of the situation in the Baltic states:

[…] But while the current crisis is pretty much a generalised global one, if there is one region where the crisis is making its presence more acutely than elsewhere, that place is Eastern Europe, and among the ranks of the regional casualties high on the list come the three Baltics countries, Estonia, Latvia and Lithuania. That this is the case should not really strike us as so strange. On many occasions since the credit crisis went global back in the summer of 2007 many analysts (including yours truly) have been flagging the risk of a hard landing in Eastern Europe. This unfortunate situation has now by and large materialised and the only question which really arises is how hard is “hard” going to be? A couple of recent tentative signs suggest that the big eye of the credit crunch, not unlike Sauron with his glance toward Frodo et al., is fixing Eastern Europe fast in its gaze.

[…]

Ultimately however the immediate challenge for the Baltics at this point in time is damage control and more specifically how to wriggle themselves out of the current vice of dependence on credit inflows at the same time as the economy needs to restore competitiveness. […]

[…] What is critical for the Baltics at this point is consequently that the current economic downturn is managed in such a way to minimize the risk of a collapse of the financial system as foreign banks shut down operations. Whether this entails the maintaining of the Euro peg is a difficult question to answer. One thing is pretty certain however and this is that the kind of wage and price deflation needed to correct the imbalance would be a disaster for any political leadership.

Of the three economies Latvia clearly seems to be the most vulnerable to a rout, and given the proximity of the economies sudden unexpected events in one country could easily spread to the others. Here is to hoping that it does not come to that. […]

Ukraine

Next on the “growing list of Eastern European countries” lining up for IMF's support is Ukraine (see this Oct. 14 post at A Fistful of Euros).

As Edward Hugh pointed out in his earlier in-depth review of the political, social and economic situation in the country, Ukraine “is far from being alone in having banking, stock market and credit crunch problems at this point in time (but here, of course, there is no strength or consolation to be found in company).” Below are some of the more general points from Hugh's post:

[…] The current events in Ukraine may well take some observers by surprise, since the general impression has been that the economic performance has been solid and GDP growth has been strong in recent years, and this has given the impression that the underlying reality was sound, which it basically hasn’t been. The country has been bedevilled by constant infighting, while at the same time a combination of strong migration of Ukraine workers to external destinations and very long term low fertility has meant that the country endemically suffers from acute labour shortages as the population both ages and declines comparatively rapidly. Hence, in my view, the absurdly high levels of inflation we have been seeing.

Nevertheless, real GDP has grown by 7.5 percent a year on average since 2000, in line with other CIS countries, and indeed that rate has been higher than in most other transition economies: whether or not this growth was built on sand is what we are now all about to find out. […]

Peter Byrne of Abdymok began his post on the current “banking mess” in Ukraine with this piece of street wisdom (RUS): “Decent people in Kyiv always have cash on them.” He continued:

[…] [National Bank of Ukraine] chief vololdymyr stelmakh said on oct. 10 that it will take at least two weeks to calm the situation in ukraine’s finance and banking sectors.

fat chance. […]

Serbia

Finally, there is Serbia on the list of “those in the IMF sick ward.” Here's yet another one of Edward Hugh's explanations at A Fistful of Euros:

[…] So, to be clear, Serbia is not an “emergency case”, like Hungary for example - although it should be noted that the Hungarian government are stating that they are not an emergency case like Iceland, who are themselves not an emergency case, like Ukraine, for example, who are in no way to be considered as being in need of support in the way in which, let us say, Latvia is. And Latvia according to Prime Minister Ivars Godmanis is not any kind of case at all, and certainly not one to be compared with Serbia.

Well, make of all that what you will, but one thing is for sure, and that is that experts from the International Monetary Fund are going to have a role in drafting Serbia’s 2009 budget. […]

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In this podcast I talk with Atillah about the movement's use of the Internet in their organising activities.

Some useful links:

No Smelters in T&T web site
Rights Action Group blog
Smelta Karavan web site
Saving Iceland - web site of anti-smelter allies in Iceland

Portrait of Atillah by caribbeanfreephoto
Other images courtesy Atillah Springer

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