After five years of financial crisis, the European record is in: northern Europe is sound, thanks to austerity, while southern Europe is hurting because of half-hearted austerity or, worse, fiscal stimulus. The predominant Keynesian thinking has been tested, and it has failed spectacularly.
The starkest contrasts are Latvia and Greece, two small countries hit the worst by the crisis. They have pursued different policies, Latvia strict austerity, and Greece late and limited austerity. Latvia experienced a sharp GDP decline of 24 per cent for two years, which was caused by an almost complete liquidity freeze in 2008. This necessitated the austerity that followed.
Yet Latvia's economy grew by 5.5 per cent in 2011, and last year it probably expanded by 5.3 per cent, the highest growth in Europe, with a budget deficit of only 1.5 per cent of GDP. Meanwhile, Greece will suffer from at least seven meagre years, having endured five years of recession already. So far, its GDP has fallen by 18 per cent. In 2008 and 2009, the financial crisis actually looked far worse in Latvia than Greece, but then they chose opposite policies. The lessons are clear.
A successful stabilisation programme must appear financially sustainable so that it can restore confidence among creditors, businesses and people. Usually, a sound stabilisation programme can revive economic growth within two or three years, as Latvia's did. A few rules of thumb need to be followed. Latvia did them all; Greece not at all.
To regain confidence fast, reforms should be front-loaded. In 2009, Latvia carried out an arduous fiscal adjustment of 9.5 per cent of GDP, 60 per cent of the total needed, while Greece foolishly tried to stimulate its economy.
In a severe crisis, it is much easier to cut public expenditures than to raise revenue. Moreover, taxpayers think the government should tighten its belt when they are forced to do so. Cuts in public spending accounted for two thirds of the Latvian fiscal adjustment.
It decreased government expenditures from a high of 44 per cent of GDP in the midst of the crisis to a moderate level of 36 per cent of GDP this year. Latvia has kept a flat personal income tax now at 21 per cent and a low corporate profit tax of 15 per cent.
Greece, by contrast, maintained high public expenditures of 50 per cent of GDP in both 2010 and 2011, when it was supposed to be pursuing austerity. It should cut its public spending to 40 per cent of GDP to become financially sustainable.
Then the Greek crisis would end. An advantage of sudden and sharp cuts in public expenditures is that they can't be even, as some items can't be cut. Therefore they drive reforms.
The Latvian government was hit hard at the stifling bureaucracy that swelled during the preceding boom. It fired 30 per cent of the civil servants, closed half the state agencies, and reduced the average public salary by 26 per cent in one year.
It prohibited double-dipping by officials, who had earned more in fees from corporate boards of state-owned companies than in salaries. The ministers took personal wage cuts of 35 per cent, while pensions and social benefits were barely reduced. The cuts prompted deregulation, and Latvia enjoyed a boom in the creation of new enterprises in 2011.
By contrast, Greece has allowed clientelism and corruption to thrive. During the purported austerity, the socialist prime minister George Papandreou increased the number of civil servants by 5,000 from 2010 to 2011, because they were his power base. Transparency International ranks Greece the most corrupt country in the EU.
A serious financial crisis requires international emergency funding. Latvia received substantial credits from the IMF, the European Union and neighbouring countries. Altogether, the committed funds amounted to 37 per cent of Latvia's GDP in 2008, but Latvia used 60 per cent of the credits committed.
In late December it paid back all its IMF loans almost three years earlier than necessary because it can borrow more cheaply on the market. Its six-year bond yields have plummeted to 1.7 per cent, while the Greek 10-year bond yields are 11 per cent.
In May 2010, Greece received far more help than Latvia did but its stabilisation programme was neither credible nor executed. The Greek public debt has been excessive, and it remains so after two substantial, yet insufficient, debt reductions. The government needs to seriously cut its spending, reduce its bureaucracy and prosecute corrupt leaders.
Recently, the IMF warned that cutting government spending had more negative effects than previously thought. But the fund focuses on one single year. What really matters is how quickly a crisis can be resolved and the long-term growth trajectory, as Latvia shows so elegantly.
Last June, the IMF's managing director, Christine Lagarde, went to Riga to celebrate Latvia's success. Now, however, the IMF complains that Latvia has cut social spending too much. Unemployment remains the main concern, but it has fallen substantially from 20.7 per cent in early 2010 to 13.5 per cent in the autumn of last year. Latvia is undergoing a major structural change, as an oversized construction sector has collapsed, and new manufacturing companies are expanding. Real adjustment takes time.
Anders Aslund is a senior fellow at the Peterson Institute for International Economics. He is the co-author with Valdis Dombrovskis, the prime minister of Latvia, of How Latvia Came through the Financial Crisis.
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
What can you do?
Document everything immediately; including dates, times, locations and witnesses
Seek professional advice from a legal expert
You can report an incident to HR or an immediate supervisor
You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline
In criminal cases, you can contact the police for additional support
The five pillars of Islam
VEZEETA PROFILE
Date started: 2012
Founder: Amir Barsoum
Based: Dubai, UAE
Sector: HealthTech / MedTech
Size: 300 employees
Funding: $22.6 million (as of September 2018)
Investors: Technology Development Fund, Silicon Badia, Beco Capital, Vostok New Ventures, Endeavour Catalyst, Crescent Enterprises’ CE-Ventures, Saudi Technology Ventures and IFC
Spare
Profile
Company name: Spare
Started: March 2018
Co-founders: Dalal Alrayes and Saurabh Shah
Based: UAE
Sector: FinTech
Investment: Own savings. Going for first round of fund-raising in March 2019
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
Killing of Qassem Suleimani
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
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UK's plans to cut net migration
Under the UK government’s proposals, migrants will have to spend 10 years in the UK before being able to apply for citizenship.
Skilled worker visas will require a university degree, and there will be tighter restrictions on recruitment for jobs with skills shortages.
But what are described as "high-contributing" individuals such as doctors and nurses could be fast-tracked through the system.
Language requirements will be increased for all immigration routes to ensure a higher level of English.
Rules will also be laid out for adult dependants, meaning they will have to demonstrate a basic understanding of the language.
The plans also call for stricter tests for colleges and universities offering places to foreign students and a reduction in the time graduates can remain in the UK after their studies from two years to 18 months.
How has net migration to UK changed?
The figure was broadly flat immediately before the Covid-19 pandemic, standing at 216,000 in the year to June 2018 and 224,000 in the year to June 2019.
It then dropped to an estimated 111,000 in the year to June 2020 when restrictions introduced during the pandemic limited travel and movement.
The total rose to 254,000 in the year to June 2021, followed by steep jumps to 634,000 in the year to June 2022 and 906,000 in the year to June 2023.
The latest available figure of 728,000 for the 12 months to June 2024 suggests levels are starting to decrease.
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
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Read more about the coronavirus
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Result
Arsenal 4
Monreal (51'), Ramsey (82'), Lacazette 85', 89')
West Ham United 1
Arnautovic (64')
Coffee: black death or elixir of life?
It is among the greatest health debates of our time; splashed across newspapers with contradicting headlines - is coffee good for you or not?
Depending on what you read, it is either a cancer-causing, sleep-depriving, stomach ulcer-inducing black death or the secret to long life, cutting the chance of stroke, diabetes and cancer.
The latest research - a study of 8,412 people across the UK who each underwent an MRI heart scan - is intended to put to bed (caffeine allowing) conflicting reports of the pros and cons of consumption.
The study, funded by the British Heart Foundation, contradicted previous findings that it stiffens arteries, putting pressure on the heart and increasing the likelihood of a heart attack or stroke, leading to warnings to cut down.
Numerous studies have recognised the benefits of coffee in cutting oral and esophageal cancer, the risk of a stroke and cirrhosis of the liver.
The benefits are often linked to biologically active compounds including caffeine, flavonoids, lignans, and other polyphenols, which benefit the body. These and othetr coffee compounds regulate genes involved in DNA repair, have anti-inflammatory properties and are associated with lower risk of insulin resistance, which is linked to type-2 diabetes.
But as doctors warn, too much of anything is inadvisable. The British Heart Foundation found the heaviest coffee drinkers in the study were most likely to be men who smoked and drank alcohol regularly.
Excessive amounts of coffee also unsettle the stomach causing or contributing to stomach ulcers. It also stains the teeth over time, hampers absorption of minerals and vitamins like zinc and iron.
It also raises blood pressure, which is largely problematic for people with existing conditions.
So the heaviest drinkers of the black stuff - some in the study had up to 25 cups per day - may want to rein it in.
Rory Reynolds
Cultural fiesta
What: The Al Burda Festival
When: November 14 (from 10am)
Where: Warehouse421, Abu Dhabi
The Al Burda Festival is a celebration of Islamic art and culture, featuring talks, performances and exhibitions. Organised by the Ministry of Culture and Knowledge Development, this one-day event opens with a session on the future of Islamic art. With this in mind, it is followed by a number of workshops and “masterclass” sessions in everything from calligraphy and typography to geometry and the origins of Islamic design. There will also be discussions on subjects including ‘Who is the Audience for Islamic Art?’ and ‘New Markets for Islamic Design.’ A live performance from Kuwaiti guitarist Yousif Yaseen should be one of the highlights of the day.
Read more from Aya Iskandarani
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
ZAYED SUSTAINABILITY PRIZE
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The five pillars of Islam
Ireland (15-1):
Ireland (15-1): Rob Kearney; Keith Earls, Chris Farrell, Bundee Aki, Jacob Stockdale; Jonathan Sexton, Conor Murray; Jack Conan, Sean O'Brien, Peter O'Mahony; James Ryan, Quinn Roux; Tadhg Furlong, Rory Best (capt), Cian Healy
Replacements: Sean Cronin, Dave Kilcoyne, Andrew Porter, Ultan Dillane, Josh van der Flier, John Cooney, Joey Carbery, Jordan Larmour
Coach: Joe Schmidt (NZL)
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
The%20specs
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UAE currency: the story behind the money in your pockets
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SPECS
Mini John Cooper Works Clubman and Mini John Cooper Works Countryman
Engine: two-litre 4-cylinder turbo
Transmission: nine-speed automatic
Power: 306hp
Torque: 450Nm
Price: JCW Clubman, Dh220,500; JCW Countryman, Dh225,500
Killing of Qassem Suleimani
About Karol Nawrocki
- Supports military aid for Ukraine, unlike other eurosceptic leaders, but he will oppose its membership in western alliances.
- A nationalist, his campaign slogan was Poland First. "Let's help others, but let's take care of our own citizens first," he said on social media in April.
- Cultivates tough-guy image, posting videos of himself at shooting ranges and in boxing rings.
- Met Donald Trump at the White House and received his backing.
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
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Zayed Sustainability Prize
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The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
Result
6.30pm: Al Maktoum Challenge Round-3 – Group 1 (PA) $65,000 (Dirt) 2,000m; Winner: Brraq, Ryan Curatolo (jockey), Jean-Claude Pecout (trainer)
7.05pm: Handicap (TB) $65,000 (Turf) 1,800m; Winner: Bright Melody, James Doyle, Charlie Appleby
7.40pm: Meydan Classic – Listed (TB) $88,000 (T) 1,600m; Winner: Naval Crown, Mickael Barzalona, Charlie Appleby
8.15pm: Nad Al Sheba Trophy – Group 3 (TB) $195,000 (T) 2,810m; Winner: Volcanic Sky, Frankie Dettori, Saeed bin Suroor
8.50pm: Dubai Millennium Stakes – Group 3 (TB) $130,000 (T) 2,000m; Winner: Star Safari, William Buick, Charlie Appleby
9.25pm: Meydan Challenge – Listed Handicap (TB) $88,000 (T) 1,400m; Winner: Zainhom, Dane O’Neill, Musabah Al Muhairi
