the current global economic crisis, its consequences, impact and the road to recovery
DESCRIPTION
José Juan Ruiz Gómez, Director of Analysis & Strategy, Santander Group, presented on the current global economic crisis, its consequences, impact and the road to recovery in Latin America, at Warwick Business School 02/06/2009TRANSCRIPT
Latin America 2009-2010:
No Paradise without Banks
José Juan Ruiz Chief Economist
División América Banco Santander May- June 2009
• Some facts before opinions
1
Latam 2010: Can you afford to miss 10% of World GDP?Latam 2010: Can you afford to miss 10% of World GDP?
1.1. Latam accounts for 9% World PopulationLatam accounts for 9% World Population: around 600 millions citizens. In 2050 in Latam will live 725 million people, equivalent to 60% OECDE population.
2.2. Latam accounts for 9% World GDPLatam accounts for 9% World GDP: 6.000 bill US $ PPP. This amounts to 40% Developing Asia GDP and to 20% all Emerging Countries GDP.
3.3. Latam GDP per capita is around 10.500 US $ PPP.Latam GDP per capita is around 10.500 US $ PPP. This is twice Developing Asia GDP Per capita and 74% Central and Eastern Europe GDP per capita.
4.4. Latam holds 6.4% of world wealth stock but 15% of world stock of Latam holds 6.4% of world wealth stock but 15% of world stock of natural resources.natural resources. Latam relatively lags in terms of “produced capital”- physical and human capital and in “intangible capital” – institutions, rule of law. - : in both areas Latam has 89% and 94% of world average-.
See annex for sources and definitions
1
In spite of that…Latam a real convergence failed storyIn spite of that…Latam a real convergence failed story
See annex for sources and definitions
34%
28%
25% 26%24% 24%
26%
31%
26%
23% 23%
21% 20%
22%23%
18%
21%
27% 27%
29%
32%
40%
35%
31%
29%
31%30%
31%
10%
15%
20%
25%
30%
35%
40%
45%
1980 1985 1990 1995 2000 2005 2009
Títu
lo d
el e
je
Failed Convergence: GDP Per capita US $ PPP USA=100Latam Brazil Chile Mexico
1Why? : Volatility and Institutional fragility
From 1980 onwards, 22 countries in LA have suffered either a financial sector crisis
or financial system distress and averted crises. In total: 46 episodes of financial
distress in 29 years: 1.6 crisis per year.
Number of Episodes Number of Countries Total4 3 123 3 92 9 181 7 7
Total 22 46
Source : Agustin Carstens, 2004. http://www.iadb.org/res/publications/pubfiles/pubS-192.pdf
1Some Message from Latam to the World?
Source : Agustin Carstens, 2004. http://www.iadb.org/res/publications/pubfiles/pubS-192.pdf
• Banking Crisis are lasting events and extremely costly in fiscal terms and in
GDP/welfare losses
1The impact of Banking Crisis on “economic values” tends to be lasting…
“The banking system will never take you to paradise, but it can bury you in hell in an afternoon.”
Julio Maria Sanguinetti Uruguay President
25%
21%
19,8%
21%
21% 21%
17%18%
15%
17%
19%
21%
23%
25%
27%
1998-2002 2003-2007 2004 2005 2006 2007 2008E 2009E
Argentina: Deposits to GDP
• Where do we stand today?
1Going South…but alive and ready to fight
The global crisis that began in advanced economies has sent severe shocks around the world, posing a test to the economies of Latin America and the Caribbean.
The good news is that during this decade the region has made itself more resilient to external shocks, by strengthening policy frameworks and reducing vulnerabilities in its public finances and financial systems.
These preparations mean that countries are now more able to respond to the external crisis, many for the first time, with active policies to boost output and employment and protect the most vulnerable groups.
This will help contain the damage from the global crisis and speed up the region’s recovery.
World Economic and Financial Surveys Regional Economic Outlook: Western Hemisphere
Stronger Fundamentals Pay OffMay 2009
http://www.imf.org/external/pubs/ft/reo/2009/WHD/eng/wreo0509.htm
1With a pretty sound financial system
.. both in absolute and in relative terms
2003 2006 2008 2003 2006 2008 2003 2006 2008 2003 2006 2008
Argentina 11,9 13,4 12,6 17,7 3,4 2,5 79 130 131 -23 14 14Brasil 9,6 9,9 9,5 4,1 3,5 2,9 172 180 171 21 27 20Chile 7,3 6,8 6,3 1,6 0,8 0,9 131 199 182 17 19 19Colombia 11,6 12,0 12,2 6,8 1,6 4,0 98 154 115 17 20 20Mexico 10,0 13,2 13,7 3,1 2,0 2,5 167 207 184 16 26 13Peru 9,3 9,5 8,7 14,8 4,1 2,2 67 100 147 11 24 31Uruguay 7,2 9,8 8,9 14,3 1,9 0,2 91 219 269 -15 13 10Venezuela 14,3 8,8 8,8 7,7 1,1 2,3 104 229 123 44 32 29
Latam * 9,6 10,2 9,9 4,4 2,8 2,6 157 182 169 18 25 19
China 3,8 5,1 6,1 20,4 7,5 2,5 20 34 115 14 21India 5,7 6,6 6,4 8,8 3,3 2,3 46 59 53 19 13 13Rusia 14,6 12,4 13,2 5,0 2,6 2,5 118 159 140 18 26 12
Polonia 8,3 7,8 8,2 21,2 7,4 4,4 53 58 6 23 22Czeck 5,7 6,0 5,7 4,9 3,6 3,1 77 58 56 24 23 24
Korea 7,0 9,2 8,3 2,6 0,8 1,1 84 175 155 3 15 15Indonesia 10,4 7,9 9,7 6,8 6,1 3,5 112 78 98 27 30 26
USA 9,2 10,5 9,6 1,1 0,8 2,3 140 135 85 15 12 3Japan 3,9 5,3 4,2 5,2 1,5 1,5 30 29 25 -3 9 3
* Weigthed by share on total stock of credit. Countries included are Argentina, Brasil, Chile, Colombia y Mexico
Bank Capital to Assets Non Performing Loans to Total Loans Bank Provisions to Non Performing Loans Return on Equity
IMF, Global Financial Stability Report
http://www.imf.org/external/pubs/ft/GFSR/index.htm
1With Central Banks which deliver credibility and low inflation
2008 Inflation Argentina Brasil Chile Colombia México Peru Venezuela LATAM
Santander 7,2 5,9 7,1 7,7 6,5 6,7 31,9 8,5%Morgan Stanley 7,2 5,9 7,1 7,7 6,5 6,7 31,9 8,5%JP Morgan 7,2 5,9 7,1 7,7 6,5 6,7 31,9 8,5%Goldman 7,2 5,9 7,1 7,7 6,5 6,7 31,9 8,5%
Average 7,2 5,9 7,1 7,7 6,5 6,7 31,9 8,5%
St. Deviation 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0%
2009 Inflation Argentina Brasil Chile Colombia México Peru Venezuela LATAM
Santander 6,2 5,0 1,1 4,5 4,3 2,8 36,4 8,4%Morgan Stanley 6,3 3,0 1,5 4,2 3,6 3,6 40,0 7,9%JP Morgan 6,0 4,3 2,0 5,0 3,5 2,7 35,0 7,8%Goldman 7,2 4,5 2,7 4,8 4,1 2,2 25,1 7,0%
Average 6,4 4,2 1,8 4,6 3,9 2,8 34,1 7,8%
St. Deviation 0,5 0,9 0,7 0,4 0,4 0,7 6,4 0,6%
2010 Inflation Argentina Brasil Chile Colombia México Peru Venezuela LATAM
Santander 9,0 4,5 3,6 4,8 3,9 2,2 34,1 8,2%Morgan Stanley 8,0 4,0 1,8 4,0 3,3 2,5 40,0 8,4%JP Morgan 10,0 4,5 3,2 4,5 3,4 2,0 35,0 8,2%Goldman 6,8 4,0 3,0 3,8 3,8 2,2 22,5 6,3%
Average 8,5 4,3 2,9 4,3 3,6 2,2 32,9 7,8%
St. Deviation 1,4 0,3 0,8 0,5 0,3 0,3 7,4 1,0%
1Basically sustainaible savings/investment patterns and high levels external assets
2009 Current Account (% GDP) Argentina Brasil Chile Colombia México Peru Venezuela LATAM
santander 0,0 -1,9 -2,4 -3,7 -3,5 -5,4 3,2 -1,8morgan stanley 0,8 -0,2 -3,3 -4,0 -2,5 -6,8 -2,6 -1,6jp morgan -0,1 -1,5 -2,8 -4,0 -2,5 -4,5 -0,5 -1,8goldman 0,9 -2,2 -3,2 -4,9 -2,7 -4,9 -2,1 -2,4
media 0,4 -1,5 -2,9 -4,2 -2,8 -5,4 -0,5 -1,9desv std 0,5 0,9 0,4 0,5 0,5 1,2 2,6 0,3
2010 Current Account (% GDP) Argentina Brasil Chile Colombia México Peru Venezuela LATAM
santander -0,3 -1,7 -1,5 -2,3 -2,9 -4,9 1,3 -1,7morgan stanley 1,1 -0,7 -2,3 -3,9 -2,2 -5,6 4,4 -0,8jp morgan 0,5 -1,2 0,0 -3,4 -2,8 -4,4 0,5 -1,5goldman 2,7 -1,9 -3,9 -3,9 -2,4 -4,6 -2,6 -2,0
media 1,0 -1,4 -1,9 -3,4 -2,6 -4,9 0,9 -1,5desv std 1,3 0,5 1,6 0,8 0,3 0,6 2,9 0,5
ARGENTINA BRASIL CHILE COLOMBIA MEXICO PERÚ URUGUAY VENEZUELA LATAM1993 13,8 30,6 9,6 7,9 25,1 3,9 0,8 9,2 100,91994 14,3 37,1 13,1 8,0 6,3 6,9 1,0 8,1 94,72001 19,4 27,8 14,4 10,1 44,8 8,8 3,1 18,5 147,02002 10,5 16,3 15,4 10,5 50,7 9,7 0,8 14,8 128,62007 46,2 180,3 16,9 21,0 87,2 27,7 4,1 34,3 417,72008 46,4 206,8 23,2 24,0 95,3 31,2 6,3 43,1 476,3
STOCK International Reservesen US$
1Reasonable Public Sector Accounts after strong Public Debt Deleveraging in
2005/2008
2009 Public Balance (% GDP) Argentina Brasil Chile Colombia México Peru Venezuela LATAM
santander 0,2 -1,1 -3,8 -2,2 -1,8 -1,7 -6,5 -2,0%morgan stanley 0,5 -5,0 -4,0 -4,5 -2,1 -1,7 -11,8 -4,3%jp morgan -1,0 -2,7 -4,5 -2,5 -2,5 -1,7 -6,0 -2,9%goldman 0,7 -3,5 -3,0 -3,0 -2,0 -1,7 -4,5 -2,7%
media 0,1 -3,1 -3,8 -3,1 -2,1 -1,7 -7,2 -3,0%desv std 0,8 1,6 0,6 1,0 0,3 0,0 3,2 1,0%
2010 Public Balance (% GDP) Argentina Brasil Chile Colombia México Peru Venezuela LATAM
santander -0,8 -1,7 -2,2 -2,0 -1,0 -0,4 -7,9 -2,2%morgan stanley 0,4 -4,0 -1,0 -4,0 -1,5 -1,5 -6,2 -3,0%jp morgan -1,0 -3,0 -1,0 -2,0 -2,5 0,2 -3,0 -2,4%goldman 0,2 -3,0 0,0 -2,0 -2,2 0,2 -5,6 -2,5%
media -0,3 -2,9 -1,1 -2,5 -1,8 -0,4 -5,7 -2,5%desv std 0,7 0,9 0,9 1,0 0,7 1,0 2,0 0,3%
% GDP ARGENTINA BRASIL CHILE COLOMBIA MÉXICO PERÚ URUGUAY 1990 44.8 14.8 46.5 177.9 ...1995 33.8 ... 17.8 13.9 40.8 49 22.32000 45 29.2 13.6 36.9 23.2 36.4 31.92004 126.4 31.4 10.7 46.4 23 40.1 74.62005 72.8 30.7 7.2 46.6 22.4 36.9 672006 63.6 31.3 5.3 44.9 23.3 29.8 59.3
Source CEPAL. Información revisada al 09/MAR/2009
Public Debt . Percent GDP
Our latest beliefs: Good macro and sounds banks pay dividends
Latin America's middle class
Adiós to poverty, hola to consumption Aug 16th 2007 | SÃO BERNARDO DO CAMPO From The Economist
Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle classnew middle class
• From Here to Where?
1
Fuente: Pär Österholm and Jeromin Zettelmeyer. “The Efects of External Conditions on Growth in Latin America”. IMF Working Paper, 2007.
Fuente: División America. Ver texto para detalles
Let’s imaging the external shock is partially reversed
Change since Jun 08 Impact % Contribution to GDP decline
World GDP Growth -4,9 -4,9 52%
Country Risk 345 -1,45 15%
Commodities -53% -4,2 44%
Yield Curve 112 1,1 -12%
Total Impact -9,5 100%
External Shocks and Latam GDO Growth.
Fuente: División America
196
200
203
194
199
205
212
195
198
202
185
190
195
200
205
210
215
2006 2007 2008 2009 2010 2011 2012
Recuperacion en V Recuperación en L
Step 1: USA Recovery. Real GDP 1980=100
Fuente: División America y JP Morgan
y = -94.866Ln(x) + 963.92R2 = 0.3186
0
200
400
600
800
1000
1200
31-Dec-2
002
27-may-0
3
16-oct-03
12-mar-0
4
04-Aug-2
004
29-Dec-2
004
20-may-0
5
13-oct-05
10-mar-0
6
31-jul-0
6
21-Dec-2
006
17-may-0
7
10-oct-07
06-mar-0
8
29-jul-0
8
19-Dec-2
008
14-may-0
9
01-oct-09
18-feb-10
08-jul-1
0
25-nov-10
14-abr-1
1
01-sep-11
19-ene-12
07-jun-12
25-oct-12
Riesgo País Recuperacion en V Recuperación en L tendencia
Step 3: Country Risk adjustment
Fuente: División America
8788
89
92
94
97
99100100
98
102
105
109
100
96 96 9798
y = 6.6517Ln(x) + 84.433R2 = 0.8805
80
85
90
95
100
105
110
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
PIB Recuperacion en V Recuperación en L Tendencia PIB
There is Growth in Latam !!
Fuente: División America
2009 GDP Growth Argentina Brasil Chile Colombia México Peru Venezuela LATAM
Santander 0.0 0.0 0.1 -1.0 -4.2 2.5 3.8 -0.5%Morgan Stanley -4.7 -4.5 -1.4 -1.6 -5.0 0.9 -4.0 -4.0%JP Morgan -3.0 -1.4 -1.5 -0.5 -4.0 3.5 -2.0 -2.0%Goldman -1.2 -1.5 -0.4 -0.3 -3.0 3.0 2.0 -1.1%
Average -2.2 -1.9 -0.8 -0.9 -4.1 2.5 -0.1 -1.9%
St. Deviation 2.1 1.9 0.8 0.6 0.8 1.4 3.6 1.5%
2010 GDP Growth Argentina Brasil Chile Colombia México Peru Venezuela LATAM
Santander 3.5 3.5 3.4 2.2 1.8 3.3 2.6 2.9%Morgan Stanley -0.1 0.5 0.9 0.2 0.2 0.7 -1.0 0.2%JP Morgan 2.0 3.0 3.2 3.0 3.4 4.7 1.5 2.9%Goldman 1.1 3.0 3.0 2.5 1.0 4.5 2.7 2.3%
Average 1.6 2.5 2.6 2.0 1.6 3.3 1.5 2.1%
St. Deviation 1.5 1.4 1.2 1.2 1.4 2.3 1.7 1.3%
In fact, a growing Latam is the central scenario for investors..
Fuente: División America
This is also our view..
5.9%
5.4% 5.5%
4.8%
0.9%
-4.3%
-2.5%
-1.3%-1.1%
3.9%
2.0%
1.2%1.4%
IV 2007 2008 I II III IV 2009 I II III IV 2010 I II III IV
LATAM: Crecimiento Interanual del PIB LATAM
Fuente: División America
With Brazil, Mexico and Chile playing a critical role in the next stage
6.1% 6.1% 6.3%6.8%
1.2%
-2.0%-1.3%
-2.8%
-3.5%
5.2%
1.6%1.1%
2.1%
3.4% 3.6%4.2%
3.7%
0.2%
-1.5% -1.7%
-1.0%
1.0%
3.0%
2.0%2.5%
2.9%
3.6%3.3%
2.5%
1.5%
-1.7%
-8.0%
-4.0%
-1.3%
-3.3%
3.9%
2.4%
0.4%0.0%
IV 2007 2008 I II III IV 2009 I II III IV 2010 I II III IV
LATAM: Crecimiento Interanual del PIB BRA CHI MEX
• What about Risks?
Fuente: División America
No always the worst happens: “No siempre lo peor es cierto”
A quien ya le ha persuadido
la apariencia de un engaño
tarde o nunca el desengaño
pondrá su queja en olvido
y más cuando el de su parte
tan poco hace por creer
que pudo o no pudo ser…
No siempre lo peor es cierto, 1649
Pedro Calderón de la Barca
Fuente: División America
Low External Financicng Risk: We are not anymore in Kansas!!!
Miles Mill US $ Argentina Brasil Chile Colombia Mexico Peru Uruguay Venezuela Latam
Bo c/C 2,8 -28,0 -4,8 -8,2 -25,1 -6,0 0,5 -6,2 -75,0
Amortization Debt 21,7 66,2 20,2 9,5 40,0 11,2 4,0 9,0 181,8
FDI & Capital outflows 10,0 15,0 5,0 4,0 10,0 2,0 1,0 10,0 57,0
FDI 1,0 20 8 6 15 5 1 0,5 56,5
Multilaterals pre-G-20 2,0 5,0 1,0 3,0 4,0 2,0 1,0 1,0 19,0
Short Term ( 33%) 5,4 21,9 8,2 2,3 11,6 4,2 1,2 1,7 56,6
Long Term 1,6 2,4 0,2 1,6 1,6 0,9 0,5 0,9 9,9
Stock Reserves 08 45,0 187,1 23,2 22,4 89,1 29,1 6,2 19,1 421,1
Use 33% 14,8 61,7 7,6 7,4 29,4 9,6 2,0 6,3 139,0
To G-20 -14,8 -61,7 -7,6 -7,4 -29,4 -9,6 -2,0 -6,3 -139,0
Latam external Financial Needs 2009
Gross Financing needs
FDI& "Normal Multilaterals"
Markets
Reserves & G-20
Gross Financing needs
FDI& "Normal Multilaterals"
Markets
Fuente: División America
Low External Financing Risk: We are not in Kansas anymore !!!
-10
-2
05
15 15
37
58
Argentina Venezuela Uruguay Chile Peru Colombia Mexico Brasil
Latam 2009: External Financing Risk. Billion US $ US $ -Minus sign: Net financiang needs
We do not see a Credit Crunch
Credito Brasil
TOTAL; 23.4
CONSUMO ; 18.5
EMPRESA; 23.4
0
10
20
30
40
50
60
ene-03
abr-03
jul-03
oct-03
ene-04
abr-04
jul-04
oct-04
ene-05
abr-05
jul-05
oct-05
ene-06
abr-06
jul-06
oct-06
ene-07
abr-07
jul-07
oct-07
ene-08
abr-08
jul-08
oct-08
ene-09
abr-09
jul-09
oct-09
% y
-o-y
Credito- Mexico
TOTAL; 1.0
CONSUMO ; -13.1
EMPRESA; 11.9
y = -0.0121x2 + 30.889x - 19709R2 = 0.486
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
ene-03
abr-03
jul-03
oct-03
ene-04
abr-04
jul-04
oct-04
ene-05
abr-05
jul-05
oct-05
ene-06
abr-06
jul-06
oct-06
ene-07
abr-07
jul-07
oct-07
ene-08
abr-08
jul-08
oct-08
ene-09
abr-09
jul-09
oct-09
Títu
lo d
el e
je
Credito- Chile
y = -0.0077x2 + 19.669x - 12590R2 = 0.7443
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
ene-03
abr-03
jul-03
oct-03
ene-04
abr-04
jul-04
oct-04
ene-05
abr-05
jul-05
oct-05
ene-06
abr-06
jul-06
oct-06
ene-07
abr-07
jul-07
oct-07
ene-08
abr-08
jul-08
oct-08
ene-09
abr-09
jul-09
oct-09
1. No Credit Crunch: el crecimiento del credito se desacelera a elasticidades r/PIB nominal en torno al 1 -1.5.
2. En el muy corto plazo cambia la composicion del Credito: de consumo a Empresas
3. Impacto sobre el crecimiento: + / neutral. El sistema bancario no es una remora
We do not see a Liquidity Crisis
2005 2006 2007 2008 2009 2009 2010
Argentina 44% 48% 53% 62% 72% 68% 66%Brasil 42% 42% 43% 46% 51% 53% 55%Chile 103% 102% 100% 94% 94% 94% 95%Colombia 69% 68% 78% 83% 78% 77% 76%Mexico 49% 55% 59% 64% 62% 61% 65%
Latam 50% 50% 52% 55% 58% 59% 61%
Ratio Liquidez: Credito/Depósitos
Ratio Liquidez: Credito/Depósitos
55%
61%65% 66%
76%
95%
0%
20%
40%
60%
80%
100%
120%
Brasil Latam Mexico Argentina Colombia Chile
We do not see a Credit Crunch.
4,3% 4,2%
3,7% 3,8%
5,9%
7,3%
6,3%
4,5%
126%
123%
119% 119%
90%
70%
80%
100%
60%
70%
80%
90%
100%
110%
120%
130%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2005 2006 2007 2008 2009 2010 2011 2012
tasa
mor
a
Morosidad y ProvisionesTasa Mora Provisiones/Cobertura
We do not see a Profitability Crisis
27.725
22.956
10.112
16.115
29.815
188.687
200.164
205.220
213.278
228.185R² = 0,830
180.000
190.000
200.000
210.000
220.000
230.000
240.000
8.000
13.000
18.000
23.000
28.000
33.000
2008 2009 2010 2011 2012
Latam : Profits & Capital Millones US $ ctes 2008
Beneficios ( eje derecha) Patrimonio neto ( eje izquierda) Polinómica (Beneficios ( eje derecha))
In Latin America POLITICS MATTERS
•High growth with Stability of Prices•It was "Governed" without the pressure of a "Crisis"•Congress accompanied the economic direction established by their presidents•After the 2005-2006 elections : strong partisan fragmentation, "center-left" policies
2003-2008: Virtuous Five Year Period
• Economic situation has deteriorated
• Leaders are under stress.
• Governments face the "Crisis" without too much popularity: hard political economy.
•In scenarios of "Crisis", economic answers subordinated to quality and autonomy of the
institutions
•The imminent electoral appointments exacerbates the intervention risks
Since middle of 2008
The economy faces a high Regulatory Risk. The economy faces a high Regulatory Risk.
The Biggest Risk? To Frustate hopes of the New Emerging Middel ClassThe Biggest Risk? To Frustate hopes of the New Emerging Middel Class
'Latinoamérica perderá entre 1,5 y 2,4 'Latinoamérica perderá entre 1,5 y 2,4 millones de empleos durante el 2009': OITmillones de empleos durante el 2009': OIT
En el 2008 número de desempleados en Latinoamérica fue de 15,7 millones de personas. ''Si estas proyecciones de CEPAL y del FMI se mantienen, entre 1,5 y 2,4 millones de desempleados se incorporaran'' a las filas de desocupación en Latinoamérica,
Jean Maninat, director regional de la OIT.
Latin America's middle class
Adiós to poverty, hola to consumption Aug 16th 2007 | SÃO BERNARDO DO CAMPO From The Economist
Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle classnew middle class
No Paradise without Banks and …
without Good Central Bankers..
Prudent Fiscal managers…
Experienced societies used to the hardship of adjustments
When austerity does not come easily
By Gideon Rachman Published: May 25 2009 19:12 | Last updated: May 25 2009 19:12
There was a moment, a few months ago, when sensible people in rich countries were considering pulling all their money out of the bank, buying gold ingots and hiding them under the bed. But now that the panic has passed, something less frightening and rather bleaker is beckoning. Welcome to the politics of austerity.
Across the developed world, unemployment, public debt and taxes are rising. When the global economic crisis first hit, it was natural to assume that the poorer and more recent democracies would be most vulnerable to a political backlash. Without the accumulated wealth or the welfare systems to cushion the blow, their populations looked vulnerable. Most countries in central Europe or Latin America only made the transition to democracy in the 1980s, so authoritarian nasties might still be lurking in the shadows.
But perhaps we are looking for trouble in the wrong places. It could be that it will be the richer democracies, such as Britain and the US, that find it most difficult to adapt to the politics of austerity.
We have learnt…
Now it is your turn.