Latvia No Austerity Success

Jeffrey Sommers & Michael Hudson Cross posted from the Financial Times by permission of the authors Michael Hudson and Jeffery Sommers: a distinguished professor at the University of Missouri-Kansas City and associate professor at the University of Wisconsin-Milwaukee respectively, who have both advised members of Latvia’s government on alternatives to austerity. They are also contributors to the forthcoming book by Routledge Press: The Contradictions of Austerity: The Socio-Economic Costs of the Neoliberal Baltic Model. Austerity’s advocates depict Latvia as a plucky country that can show Europe the way out of its financial dilemma – by “internal devaluation”, or slashing wages. Yet few of the enthusiastic commentators have spent enough time in the country to understand what happened. Its government has chosen austerity, its ...

Will Iceland Vote “No” or commit financial suicide?

A landmark fight is occurring this Saturday, April 9. Icelanders will vote on whether to subject their economy to decades of poverty, bankruptcy and emigration of their work force. At least, that is the program supported by the existing Social Democratic-Green coalition government in urging a “Yes” vote on the Icesave bailout. Their financial surrender policy endorses the European Central Bank’s lobbying for the neoliberal deregulation that led to the real estate bubble and debt leveraging, as if it were a success story rather than the road to national debt peonage. The reality was an enormous banking fraud, an orgy of insider dealing as bank managers lent the money to themselves, leaving an empty shell – and then saying ...

Hudson on Capital Controls in FT today

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Michael writes on currency speculation in today's Financial Times - Capital controls will follow the weak dollar. It is well worth registering to this excellent news source. Two weeks ago Brazil moved to deter speculators from pushing up its currency, doubling the tax on foreign investment in its government bonds. Last week Thailand acted on similar lines by no longer exempting foreign investors from paying a tax on its bonds, with the Thai finance minister warning of more to come. As the dollar falls and developing nations see speculators push up their exchange rates, other countries are also discussing more stringent restrictions. A damaging age of capital controls seems likely. Read more at the FT.

Latvia’s Third Option

Neither Devaluation nor Austerity, but Tax Restructuring A shortened version was published in today's Financial Times. As Europe’s banking crisis deepens, Greece’s and Spain’s fiscal crisis spreads throughout Europe and the US economy stalls, most discussions of how to stabilize national finances assume that only two options are available: “internal devaluation” – shrinking the economy by cutting public spending; or outright devaluation of the currency (for countries that have not yet joined the euro, such as Eastern Europe). The Baltics and other countries have rejected currency depreciation on the ground that it would delay EU membership. But as most debts are denominated in euros – and owed mainly to foreign banks or their local branches – devaluation would cause a sharp jump in ...

Iceland can refuse debt servitude

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Financial Times Olafur Ragnar Grimsson, Iceland’s president, has created uproar with his decision to block legislation that would have repaid €3.9bn ($5.6bn) lost by British and Dutch savers in a failed Icelandic bank, triggering a referendum that the government is expected to lose. The initial response by credit rating agencies was to downgrade Icelandic bonds, as if Iceland were repudiating its debts, Argentina-style. But opponents of the bill have no intention of reneging on their legal obligations. At issue is what the relevant European law says should be done – and, more to the point, what should have been done on October 6 2008, when Gordon Brown closed down the UK operations of Icesave, an online subsidiary of Landesbanki, Iceland’s second-biggest bank. ...

Why Iceland and Latvia Won’t (and Can’t) Pay the EU for the Kleptocrats’ Ripoffs

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Financial Times (shorter version) Global Research Can Iceland and Latvia pay the foreign debts run up by a fairly narrow layer of their population? The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only toward those who ran up these debts – Iceland’s bankrupt Kaupthing and Landsbanki with its Icesave accounts, and heavily debt-leveraged property owners and privatizers in the Baltics and Central Europe – but also toward the neoliberal foreign advisors and creditors who pressured these governments to sell off the banks and public infrastructure to insiders. Support in Iceland for joining the ...

Iceland’s debt repayment limits will spread

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Financial Times an Iceland and Latvia pay the foreign debts run up by a fairly narrow layer of their population? The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only towards those who ran up the debts – Iceland’s bankrupt Kaupthing and Landsbanki, with its Icesave accounts, and heavily geared property owners in the Baltics and central Europe – but also towards the foreign advisers and creditors who put pressure on these governments to sell off the banks and public companies to insiders. Support in Iceland for joining the EU has fallen to just ...