Eyes north to Greenland

November 25, 2008

Today is the day of Greenland’s referendum on wresting more powers from Denmark, in a move that is seen as a precursor to full independence for the Arctic island.

Greenland flag

A yes vote would see key economic powers move from Copenhagen to the Greenland Parliament and decrease Greenland’s dependence on the annual block grant of 472 million euros it receives from Denmark.

Greenland would also take control of its oil resources and mineral wealth, although the current referendum deal leaves the possibility of a Danish share when annual oil revenue exceeds $12.6 million. Estimates say north east Greenland might have around 30 billion barrels of oil and gas. Climate change is making access to those resources much easier and cheaper. One report quotes a Greenlander looking forward to having a wine industry in the near future!

Greenlandic would be recognised as the country’s official language. It is spoken by the vast majority (around 50 000) of the population.

There are only around 57 000 people in Greenland. Around 39 000 are eligible to vote in the referendum.

A ‘yes vote’ is widely expected. It is said that about three quarters of the voters are already decided on voting for more autonomy.

The expected change in autonomy will then be implemented on the 21st June 2009; the day instigated a few years after devolution in 1983 as the National Day of the country. It also voted that same year to leave the EU in a referendum, having previously joined as part of Denmark.

The First Minister of Greenland, Hans Enoksen, supports the ‘Yes vote’.

He expects that with more fiscal autonomy the demand for full independence will increase.

“Agreeing on self-rule is the only road forward,” he said, pointing out that “the Greenlandic people have wished for many years to be more independent.”

He set out his timetable for full independence:

“Greenland will be independent in 12 years … for my 65th birthday.”

Other politicans share this broad timescale. Lars Emil Johansen, one of two Greenlandic members of the Danish parliament, says he dreams the day will come by 2021, in time for the 300th anniversary of Denmark’s colonisation of Greenland.

“Of course we can be the masters of our own destiny and fly on our own wings”

His advisor Hans Jakob Helms agrees:

“Home rule was a compromise,” Helms said. “It’s a simple fact that home rule has reached its limit and there’s a need for more room for self-government.”

Around 300 years of a political union? The parallels with Scotland and the rest of the UK are striking. And similarly to the planned 2010 referendum in Scotland, the Greenland referendum is also non-binding. However the Danish Government will respect the wishes of the Greenlanders.

And like Scotland, Greenland has its own Unionist doubters of independence.

The Greenland Democratic Party are against further devolution – they are campaigning for a ‘No vote’ – and against full independence:

Palle Christiansen, the political spokesperson of the Democrats, who are part of Greenland’s opposition, warned against hurrying the process, noting that ‘self-rule brings with it more than just oil revenues.’

Christiansen cited the administration of judicial affairs as just one area which would incur major costs on the Greenlandic government.

And a minority of members of the Siumut Party have openly dismissed talk of independence, much to their party’s disgust:

“Greenland will never be an independent state,” Finn Lynge recently stated, much to the dismay of his Siumut party, which is part of the government coalition and strongly in favour of a “yes” vote in the referendum.

Its not great times for the government coalition. It may be falling apart under scrutiny from the Greenland Audit Commission, which might result in the referendum result becoming a springboard for a subsequent snap General Election in the country.

“There are only between 50,000 and 60,000 of us living here in geographically and climatically extreme conditions. With such a tiny population it is impossible to provide the human contributions needed to turn Greenland into a modern and independent state,” Finn Lynge said.

Greenland has many social problems like alcoholism and a high suicide rate.

“No one can build an independent state on heavy drinking”, Finn Lynge has stated.

So will the Unionists win the day?

Will the credit crunch and the example of their neighbour Iceland’s financial troubles persuade the Greenlanders to vote against further powers for their Parliament?

We’ll all need to wait and see.

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Rankings and levers

October 12, 2008

Newspapers have been quoting the survey by the World Economic Forum in which business leaders have been rating the solvency of world banks.

The rankings however were compiled just before the recent £50 billion bail-out by the UK, the nationalisation of the Icelandic banks and the larger US bail-out.

The website has the co-authors interviewed from the 3rd to the 7th of October. The report itself was published on the 8th October.

RANKINGS

1. Canada

2. Sweden

3. Luxembourg

4. Australia

5. Denmark

6. Netherlands

7. Belgium

8. New Zealand

9. Ireland

10. Malta

11. Hong Kong

12. Finland

13. Singapore

14. Norway

15. South Africa

16. Switzerland

17. Namibia

18. Chile

19. France

20. Spain

21. Barbados

22. Bahrain

23. Slovak Republic

24. Brazil

25. Estonia

26. Austria

27. Panama

28. Mauritius

29. Kuwait

30. Qatar

31. United Arab Emirates

32. Trinidad and Tobago

33. Senegal

34. Israel

35. Portugal

36. Iceland

37. Cyprus

38. Botswana

39. Germany

40. United States

41. Lithuania

42. Peru

43. El Salvador

44. United Kingdom

45. Greece

46. Benin

47. Costa Rica

48. Malawi

49. Guyana

50. Malaysia

51. India

52. Puerto Rico

53. The Gambia

54. Montenegro

55. Mexico

56. Croatia

57. Czech Republic

58. Jordan

59. Ghana

60. Suriname

61. Brunei Darussalam

62. Latvia

63. Saudi Arabia

64. Kenya

65. Jamaica

66. Honduras

67. Zambia

68. Burkina Faso

69. Slovenia

70. Sri Lanka

71. Pakistan

72. Philippines

73. Republic of Korea

74. Romania

75. Thailand

76. Madagascar

77. Colombia

78. Cote d’Ivoire

79. Italy

80. Bulgaria

81. Hungary

82. Cameroon

83. Georgia

84. Oman

85. Tunisia

86. Paraguay

87. Nigeria

88. Armenia

89. Morocco

90. Dominican Republic

91. Bolivia

92. Malia

93. Japan

94. Tanzania

95. Moldova

96. Bosnia and Herzegovina

97. Poland

98. Nicaragua

99. Venezuela

100. Uruguay

101. Guatemala

102. FYR Macedonia

103. Syria

104. Albania

105. Nepal

106. Mozambique

107. Russian Federation

108. China

109. Uganda

110. Serbia

111. Egypt

112. Ukraine

113. Vietnam

114. Turkey

115. Bangladesh

116. Azerbaijan

117. Taiwan, China

118. Ecuador

119. Mauritania

120. Mongolia

121. Indonesia

122. Zimbabwe

123. Tajikistan

124. Kazakhstan

125. Cambodia

126. Burundi

127. Chad

128. Ethiopia

129. Argentina

130. East Timor

131. Kyrgyz Republic

132. Lesotho

133. Libya

134. Algeria

Yes. That’s right.

The UK lies behind Peru and El Salvador.

Now given this report was a survey of the world’s economists whose advice our banks were no doubt taking; should we believe it?

Are the UK’s banks really behind Peru, El Salvador and Senegal?

Or is it an accurate representation that is slightly out of date, compiled as it was slightly before the bail-outs?

That must depend on whether you believe the bail-outs will work.

If reports are to be believed the Royal Bank of Scotland is next in line to be nationalised tomorrow. If that happens then there will be further pressure on the remaining UK bank’s to be nationalised too. The banking sector could be picked off one by one by the market and the taxpayer forced to pick up the tab.

On that Iain Dale post there have already been comments about the English taxpayer bailing out the Scottish bank.

It must be a pity, to all those who carp, that Scotland is not already independent.

An independent Scotland with a similar oil fund like our neighbour Norway could be similarly insulated from these turbulent times.

It would also have the economic levers to maintain its economy best, not just for the South-East of England as remains the case today. Remember Eddie George, the former Governor of the Bank of England: Unemployment in the north is a price worth paying for affluence in the South!

Although the credit crunch is global, take a look back at those rankings.

Sweden, Luxembourg, Denmark, Belgium, Netherlands. All small countries lying in the top 10.

Even Ireland, who have recently guaranteed all deposits in their banks, are sitting 9th.

The argument that Scotland is too small to be financially unstable is farcical! I don’t hear anyone saying that Denmark is too small and should be run from Berlin. (Not since the days of Adolf Hitler and the Second World War anyway!)

As countries large and small struggle with the credit credit crunch from the U.S. and Russia down to Iceland with its 300 000 population, this population argument of independence must be seen to be invalid. Iceland, with a population slightly smaller than North Lanarkshire, isn’t exactly Miramont Gardens in Pimlico!

Passport to Pimlico

What matters now is that we take the right decisions to get out this mess.

Those decisions may be different for each country. They may even be different for England, Scotland, Wales and Northern Ireland.

That’s why its important key economic levers are devolved away from Westminster.

Otherwise the Eddie George syndrome will hamper ‘the North’ recovering for years.

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Arc of prosperity

May 31, 2008

The credit crunch. Soaring oil prices. Soaring utility bills. Soaring food bills.

One of the worst affected countries is the UK, but probably the most affected country is Iceland.

Now Iceland is regularly hailed by the SNP as part of the Arc of Prosperity, one of an arc of Scotland’s neighbouring countries that always seems to be doing rather better than us, outstriping the UK economy by miles.

One of the SNP’s goals is for Scotland is to join that Arc of Prosperity and better its economic growth rate. Obviously they claim independence would be the best route to achieve this; it gives Scotland full fiscal control over its own economy.

(Other countries in the Arc of Prosperity:-

Norway. Population 4.7 million
Denmark. 5.4 million
Finland. 5.3 million
Ireland 4.3 million
Sweden 9.1 million

All apart from Sweden have populations in size similar to Scotland; and all have had sigificantly higher economic growth than Scotland and the UK for many years now.)

So whats happened in Iceland? With the country performing so well economically and with a population of only 300 000 people, the banks wanted and got foreign investment. The Icelandic Government even loosened its fiscal policy before the 2007 election. Foreign capital poured into Iceland.

Now when the U.S. subprime mortgage market collapsed and started the credit crunch, foreign investors panicked and the money dried up. Some wanted their money back. All this has devalued the Icelandic kröna and forced the Icelandic bank to set interest rates at 15%. The country is now suffering the worst effects of the credit crunch I mentioned at the start.

Compare this with the U.S. They too are suffering the credit crunch, but are still receiving massive foreign investment. Why? Because they have a vast consumer-led population (around 304 000 000, around 1000 times bigger than Iceland’s). Hence the dollar has weakened recently; but relative to the Icelandic körna isn’t so bad and interest rates arent so bad.

One rate to look at is the current CDS rates of banks. These are Credit Default Swaps, basically a measure of how much insurance the bank needs for its debt. The higher the number the worse off the bank.

For example, when the Northern Rock was nationalised its CDS was at 295. [18 Feb 2008]

CDS have been increasing throughout the banking sector however. The US Bank Bear Sterns was bailed out by the US Government with a CDS of 720. [Mar 2008]

Other March 2008 CDS of banks were:-

Lloyds TSB 133
Barclays 170
HSBC 145
Bank of Scotland 235
Alliance and Lecicester 342

but the British banks were nothing like the Icelandic banks:-

Landsbanki 610
Kaupthing 856

Iceland, with a small population; for years one of the best economies in the world. It made a mistake relying on too much foreign capital. And when that foreign capital ran into problems, so did it. Its tough for the Icelanders, having being used to the good life for years, and now feeling the worst effects of the credit crunch. The credit crunch may be global but Iceland are feeling short term consequences of their own mistakes. Yet had the U.S. subprime mortgage market held up it may have never mattered.

Thats why the Icelandic government is now thinking of joining the Euro. The Euro is strong and the Eurozone – those countries that use the Euro as their currency – is now the biggest economy in the world, after the dollar weakened in March 2008. The Eurozone has a population of 320 000 000 people and is expected to grow as other European Union countries meet the criteria for membership.

So then what of the Arc of Prosperity? Is it in financial ruins?

Iceland may be in trouble now but remember they started from an economic base much higher than the UK or Scotland. Their problems are all relative, and will probably only result in a decline in economic growth for a couple of years, before resuming their position back near the top of the world’s economies. Even if these problems do continue then they always have the Euro to fall back on if needed, although their fishermen probably won’t like joining the EU.

What’s more another Arc of Prosperity country – Norway – has just given them 1.5 billion euros to shore up the Icelandic economy. And if Norway can afford to bail out other countries in the midst of a global credit crunch then the Arc of Prosperity can’t be doing that badly.

The Arc is better placed than most to ride out the credit crunch. I’m sure Gordon Brown and Alistair Darling will try their best for the UK.

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