LI News Special Edition: Global Financial Crisis
Liberals worldwide respond to the financial crisis
As the emerging financial crisis creates a climate of uncertainly worldwide, this special edition of Liberal International's E-News offers an overview of the reactions from liberals across the world and provides an opportunity for LI members to share their reaction with other members of the international liberal family. Advocating a broad spectrum of liberal thought, it aspires to promote liberal principles in a critical time for economic freedom, which according to the founding document of LI, the Oxford Manifesto (1947), has a directly effect on political liberty: “The suppression of economic freedom must lead to the disappearance of political freedom. We oppose such suppression, whether brought about by State ownership or control or by private monopolies, cartels and trusts. We admit State ownership only for those undertakings which are beyond the scope of private enterprise or in which competition no longer plays its part”.
The following are comments from liberal leaders, Prime Ministers and Ministers of Andorra, Argentina, Belgium, Bulgaria, Canada, Costa Rica, Denmark, Finland, Germany, Hungary, Iceland, Italy, the Netherlands, Romania, Senegal, Slovenia, Sweden, Taiwan, and the United Kingdom.
“The market economy is the most successful economic system which the world has seen. This historic fact has not changed because of the weaknesses of the system which we have seen in the crisis of the financial system. If your engine does not work properly you try to repair or replace it. You don't throw away the car.”
- Otto Graf Lambsdorff, Honorary President of Liberal International
“The financial crisis confirms my prior beliefs. Whatever amount is involved, 1000 billion, 10.000 billion, the crisis cannot find a solution only in the West. We have never seen a worldwide crisis that was solved purely in a financial manner. Today, if we look at all the money we are going to inject, why is that? To support the banks. That money comes from somewhere. It comes from budgets, and budgets come from the people. It is not going to solve unemployment, and will not help investments to create jobs.”
- Maitre Abdoulaye Wade, LI Patron, President of Senegal and leader of LI full member Parti Démocrate Senegalais
“Denmark's government is prepared to take the necessary steps to secure calm and stability in the domestic banking system…There is need for a solid and stable economic policy to ride out this storm…The government is prepared to take the steps necessary to secure calm and stability in the Danish banking system,” emphasized Rasmussen after announcing the government-backed unlimited guarantee on deposits in banks in the country. Denmark would seek discussions with European Union partners to strengthen the regulation of the international capital markets.
- Anders Fogh Rasmussen, Prime Minister of Dennmark and leader of LI full member Venstre
“Romania cannot be completely isolated but at the same time I can state clearly that Romania doesn't have any problem as far as the banking system is concerned or that Romania will certainly not face any similar effects as those you have noticed in the US. Nevertheless, whereas many EU countries will enter a crisis and because the exports directed to EU Member States account for 70% of the total Romanian exports, it is possible to notice a decrease in exports and consequently also in economic activity. For the next year we foresee an economic growth rate for next year well above the European average, probably around 6% compared to a great level of 9% for this year. Romanian authorities have prepared a series of measures similar to those adopted in other EU Member States to prevent a banking system crisis if this will prove to be necessary, but we do not think about implementing these measures for the time being. Romania has a far stricter surveillance of the banking sector as compared to other countries and this has positive effects because it helped us avoid unpleasant events that other countries have faced so far.”
- Calin Popescu- Tariceanu — Prime Minister of Romania, leader of LI full member Partidul Nacional Liberal
Finnish Prime Minister and the leader of the LI full member Keskusta, Matti Vanhanen, expressed his view on the current state of affairs in Finland related to the global financial developments: 'We have no indications that Finnish banks have these kinds of credit-related problems, but that alone does not render us immune to a negative impact on economic growth from the postponing of investments.”
-Matti Vanhanen, Finnish Prime Minister and the leader of the LI full member Keskusta
'From the perspective of a small country, the global financial crisis is a given, something you can barely affect. But we can learn from it how to prevent in the future such a vast domino effect, basically by consolidating our market economy on the basis of the real economy and the production of real value. Democracy and the market economy are definitely the best system to ensure freedom for all. Even in moments of shock, we must guarantee the future of our irreplaceable economic and political environment.'
- Juli Minoves, Minister, and LI Vice President, Partit Liberal d'Andorra
“At this time of widespread economic instability, Canadians are rightly worried for their savings and value of their RRSPs, for their mortgages, their household finances and their jobs. Canadians expect their government to offer more than assurances that all will be well. They expect action. A new Liberal government will be ready to take swift action, including an Economic and Fiscal Update within 21 days of swearing-in, to protect the hard-earned savings of Canadians and to create and preserve jobs… This contrasts with the do-nothing approach of Prime Minister Stephen Harper who characterizes any suggestion of action by the government on behalf of the people as panic. If a broad-based consensus exists for such a change, we will be able to implement it within the first few days of being sworn-in rather than waiting for months to make the change”
-Stéphane Dion, leader of LI founding member, the Liberal Party of Canada
ALDE Group Leader, Graham Watson, called on his liberal colleagues to ensure that the financial crisis does hold back the free movement people and capital, which would undermine the EU Single Market. “What this crisis does demonstrate, is what happens when freedom is confused with the absence of rules. I have argued over the years that an open market is a regulated market”,
- Graham Watson, ALDE leader in the European Parliament
“The responsibility for the financial crisis rests with the Federal Government of the United States of America. The market punishes the players that do not play according to its rules. None of the entities in trouble played by the rules of the market. On the contrary, they assumed risks that a person with common sense would have never taken. Why? Because the Federal Government of the USA is protectionist and a lousy regulator; always running to rescue the big players. The problem is big government and mistaken public policies of the Reserve Bank of the USA. The market has shown it. Now the losses will be socialized, which means that the invoice of those wrong public policies will be paid by all the citizens.”
- Otto Guevara, President of LI cooperating organisation RELIAL and Leader of Movimiento Libertario, Costa Rica
“This is a day of reckoning for the British economy…There can be no doubt that today marks a fundamental shift in the way we view banks, and in turn, the obligations banks have to the public must change for good. They must serve the public interest as well as their own commercial interests…We also need wider changes to help ordinary families: a cut in interest rates, tax cuts for those on low and middle incomes and a significant overhaul of the regulations governing the banking system…Today we have seen a national response [the £50 billion government bailout]…but it is clear that what is also needed is international agreement on a new regulatory framework…Any long-term solution must be global.”
- Nick Clegg MP, leader of LI founding member, the Liberal Democrats (UK)
“The free market functions well if the rules of the game are well-established. One of the most important instruments in assuring that these rules are working properly is financial oversight by the state. The failure of this oversight in the United States is for a large part the cause of the crisis on our hands. Fortunately, oversight is better established in the Netherlands and Europe, though not good enough as we have witnessed in the takeovers of some of our own banks.”
- Mark Rutte, leader of LI Full Member VVD (Netherlands)
“Ideologically [the decision of the Belgian government to inject billions to bail out two of the countries largest banks] might not have been the preferential decision, but it was the best. If Fortis bank had ended up in trouble, 1.6 million people would have suffered. We had to choose the lesser of two evils. We do have to think about how we could redefine the rules of the game. Liberalism is not the same as the law of the jungle.”
- Bart Somers, leader of LI full member Open VLD (Belgium)
“During the last two years, due in part to improved government criteria, 180 000 people previously excluded from the labor force have managed to get a job. In the past they were categorized, for example, as long-term unemployed people or were under early retirement schemes. This has improved the fiscal conditions of Swedish state finances, which are on very solid ground. Therefore, during this economically uncertain time, we are better poised to respond to the challenges than many other countries”
- Maud Olofsson, Deputy Prime Minister and Minister for Enterprise and Sweden, Party leader of LI full member Centerpartiet (Sweden)
“In this situation, stability and calmness are the two most important things. If someone suffocates, you should provide him/her with some air, but in order to do that, you should first make him/her calm down. This is the situation with economy, too. It would be a mistake to handle a crisis of such size only on a national level. Today, European politics can do a lot for finding adequate, joint and quick answers in economy policies, preventing panic reactions. In Hungary, we liberals think that the answer for the present crisis is a more ambitious decrease of the state deficit and a tax reduction speeding up the economy. Therefore, SZDSZ (Alliance of Free Democrats) submitted a so-called Budget Ceiling Act to the Parliament, which limits lavish state spending and is able increase the economy's security and entrepreneurial freedom, at the same time.'
- Dr János Kóka, Leader of the parliamentary group of LI full member Alliance of Free Democrats, Hungary
“The crisis is almost a catastrophe. To date, the magnitude of the crisis is enormous, and the most important and the worst thing is that it has neither been completed nor can someone predict when it will end. Speaking figuratively, if the eye of the hurricane is in the States, then Europe is the periphery. In Bulgaria, the effect will be just like an echo, but a very important one. The banking system in Bulgaria is stable and is not threatened by the world financial crisis. It cannot have short nor midterm liquidity risks. The savings of the citizens are guaranteed and any kind of threats towards them are excluded. The stability of the Bulgarian currency is out of any doubt, just as the public finances.
- Jordan Tzonev, Vice President of LI full member Movement for Rights and Freedoms and Chairman of the Committee for Economic Policy in the Bulgarian Parliament
“Argentina will not face the current crisis in the same way as most of its neighbours on account of its low exposure to mortgage loans. Ironically, the lack of credit and loans has now become a relative safeguard for this country. One need not go further than the figures: Argentina's credit vs. GDP is about 14% whereas Brazil's is about 80%. On the other hand, that figure is about 130% for the United States. However we will see a worldwide slowdown in trade and growth, and that will affect Latin American economies that are heavily dependant on high commodity prices. In addition, the region will see increased tariffs and barriers raised to fend off cheap surplus production coming from Asia, no longer required in the US and European markets.”
-Julián martín Obiglio - Diputado Nacional of LI observer member RECREAR, Argentina
“International finances are heavily interlinked. Hence, it is logical that the financial virus has rapidly spread from the USA to all the developed economies in the world. The global economic crisis will certainly influence the Slovenian economy as 71% of the GDP is based on exports. We are certainly dependent on the amount of the exports, in particular to Germany, Austria, France and Italy as our major trade partners. In light of the forecasted recession, it can easily happen for the Slovenian economic growth to be halved in 2009. I am afraid that the world economy is witnessing such a fall of liquidity that the lowering of the interest rates of the central banks and the financial injections on the market would not change the suspiciousness of investors. There is a need for a combined monetary and fiscal policy that would include a mixture of reduced interest rates by the central banks and more expansive fiscal policies of the state. Of course, attention should be paid to the inflation rate.”
- Dr. Matej Lahovnik, MP from LI observer member ZARES and former Economy Minister
Leader of Progressive Party of Iceland has criticized the Icelandic government for not taking enough measures to fight inflation, further stating that the government was not doing anything significant to help home owners and strengthen the economy. “...it is necessary to drop the policy rate considerably, from 15 to five percent, before Christmas” said Ágústsson. He also stated the the Progressive Party, along with the opposition is willing to work with the government to right the economy.
- Gudni Ágústsson, Leader of LI full Member Progressive Party of Iceland
“The current financial crisis is a global problem that requires a coordinated solution, governments must act fast and work together to restore confidence in the system, so as to avoid the sudden collapse of output in the U.S. and Euro zone that may trigger a global recession. The global financial system needs an overhaul, banks need to recapitalize and the past excesses must be allowed to unwind. The development of the banking sector in Taiwan lags behind those in the west, and therefore has relatively less exposure to the risky financial derivatives that created the liquidity and gave rise to the crisis. However, the continued outflow of foreign capital from the share market, the downturn of the housing market, and the gloomy outlook of the global economy have increasingly putting strain on the banking sector, and in turn on the small and medium enterprises that are the backbone of the Taiwanese economy. The challenge ahead is by no means insurmountable, but the government must refrain from the urge of postponing the necessary adjustments. It simply risks turning a manageable liquidity problem into a protracted full-scale recession'
- LI Full member DPP, Taiwan
“For Liberals it is not the best of times given the massive state interventions in the economy but better spend today than spend even more tomorrow...and it is a paradox to watch Gordon Brown calling for a European plan of action having fought for years against the UK joining the Euro, or Bush reaching out to G8 partners after 8 years of unilateralism, and indeed our Finance Minister Giulio Tremonti who goes from euro-skepticism to euro-enthusiasm in a blink...the best position Liberals can have today is to insist on saying that this is not a market failure but a failure in setting up and implementing credible monitoring, control and sanction mechanisms...”
- LI observer member Radical Italiani (Italy)
Reacting to the Special Edition of the LI-News, the following statements have been submitted to Liberal International. Further statements can be sent to Valerie Oliveira (valerie@liberal-international.org).
The Estonian parliament is going to discuss 2009. state budget on 16th of October. Government of Estonia sustained the balance of budget without raising taxes any further and taking a substantial loan. 'It would be utterly irresponsible to rely on measures with a positive effect only in short term,' Silver Meikar, MP said. 'Estonian will overcome the credit crunch by examining closely its expenses and economizing its policies.'
- Silver Meikar,MP, LI Vice President and Treasurer in the LI Bureau, Estonian Reform Party
“Even if it might have been predictable for several months already, the financial crisis that seems to further spread day after day has surprised us because of its amplitude, its rapid spread, and the enormous measures taken to change its effects…Developing countries, with more modest resources, seem saved for the moment. In the case of Morocco, for example, the banking system is quite closed, in which credit remains framed. On account of the fact that the economies most impacted (US, Europe) are the most open and therefore the most liberal, certain commentators do not hesitate to see a 'liberal failure' in this crisis. To support their line of argument, they regard the measures taken by the States as a return to the interventionism. However, to me, it seems that it is not liberalism that is at fault here, but irresponsible behavior, like the ease in credit granting, speculation, and profits being disconnected from real sources of wealth.”
-Mohand Laenser, Leader of LI Full Member Mouvement Populaire in Morocco:
After the European Parliament approval of the report for the future structure of the financial market supervision, the so called “Lamfalussy framework”, Daniel Daianu, MEP spoke on behalf of the ALDE Group: “In my view, the root cause of this crisis is an inadequately regulated financial system. Mortgages are not toxic per se; badly constructed securities based on them are toxic. The packaging/repackaging of financial products can be toxic and bring opacity to markets. Reward schemes that make behaviour irresponsible and misleading quantitative models are also toxic. Extreme leveraging is risky. Not to address these problems would be totally wrong.' Daianu finally made clear: 'Introducing and enforcing proper regulations and supervision does not mean bringing in socialism; but rather improving the market economies we live in.'
- Daniel Daianu, MEP, ALDE Group, Partitul National Liberal, Romania
When addressing the missed chances for the European commission to lead the way in the EU rescue procedures of the financial crisis, ELDR President, Annemie Neyts, stated: “Once more, Commission President Barroso preferred to wait and see what the member states would do. Once more, he missed the opportunity to put his Commission in the driving seat of EU affairs”.
- Annemie Neyts, ELDR President
En reponse a la question: Le gouverneur de la banque centrale belge s'est inquiété récemment des conséquences économiques négatives que pourrait avoir la crise politique sur l'économie. Partagez-vous ces craintes ?
'J'ai rappelé le gouverneur à ses activités de banquier central. Ce n'est certainement pas à ceux qui portent la politique monétaire et économique du pays de tenir des propos alarmistes. Mon gouvernement est démissionnaire mais continue de gérer les affaires courantes. Si le budget 2008 n'est pas voté en temps, l'Etat continuera de fonctionner avec des 12ème provisoires sur la base de la loi de finances de l'année précédente. Ce qui ne fera faire des économies par la force des choses. Et l'euro nous protège : notre monnaie n'est plus affectée par les crises politiques comme autrefois. Nous n'avons pas à soutenir le franc belge !'
- Didier Reynders, ministre belge des Finances - Mouvement Reformateur