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THE SALON

The Salon is ONW's weekly gathering place where three of Canada's brightest and most respected political strategists - Rick Anderson, Anne McGrath and Richard Mahoney - come together to analyze national issues affecting Ontario.


Anne McGrath:

The Cyprus bailout has been the most recent example of the economic crisis in Europe. I wonder about the kinds of restrictions that are placed on countries requiring bailout money. The mantra of austerity doesn't have a lot of credibility amongst economists and it doesn't appear to be working either.

 

Rick Anderson:

There were not many restrictions placed upon Cyprus by the EU/ECB/IMF troika. The only significant one is that Cyprus find a way to match the 10 billion Euros contributed externally (by the EU/ECB/IMF) with about 5 billion Euros through one form or another of domestic restructuring, the form of which was up to Cyprus to decide. To try to protect the interests of offshore depositors (and its banks) Cyprus almost made the terrible mistake of taking this out of the hides of small INSURED depositors, their own citizens. In the end, the pain fell where it must, on the banks who had managed themselves into illiquidity and on their large UNINSURED depositors. Messy, but there's no other fair way to do this...

 

Richard Mahoney:

Anne's point about the restrictions is an interesting one. If the austerity imposed upon the country in crisis is too severe, the public in those countries will rise up and reject the imposition of that austerity. That happened in Greece. As Rick points out, the idea that insured depositors would pay the price for a nation or banking system risky behaviour is crazy, dangerous, and for a beleaguered public, fighting words. I am sure that anyone who has savings here in Ontario or elsewhere was happy to see that idea hit the trashcan.

 

Anne McGrath:

Yes, Richard is right that the idea of the banking levy is what captured most attention outside of Cyprus. It just seemed so extreme and unfair. That said, I think that responses to economic crisis have to have some strong elements of fairness and much of the austerity measures worldwide lack transparency, logic or fairness.


Rick Anderson:

I don't really see the Cyprus story as an "austerity" story, nor an economic crisis in the usual sense. This was a product of what Forbes politely described as "sparse financial regulation and light corporate taxes" making "Cyprus a cash-stash haven for wealthy foreigners and businesses." Russian deposits in Cyprus banks were bigger than the entire GDP of Cyprus. And with that money, the banks made the error of buying Greek debt. The insured losses were so big that they threatened the financial collapse of the Cyprus government. And, now, the restructuring (aka bubble bursting) will leave offshore depositors wondering if they should put money in Cyprus banks, a good question they should have asked themselves sooner. The answer will mean a sharply reduced domestic banking industry, but that's not because of austerity per se, it's because it was a bubble to begin with. The deeper question for the EU - and the bigger threat to financial stability across Europe and reaching around the globe - is the same one raised repeatedly over the past couple of years: can Europe really share a currency with countries that have such divergent regulatory and fiscal policies?

 

 Richard Mahoney:

The other interesting point about the Cyprus bailout/financial crisis is the idea that a financial crisis in tiny, distant Cyprus could have an impact on Canadians and Ontarians. "Contagion" is what the economists/analysts call it. The world's economies, currencies and banking systems are so interconnected now that it is literally impossible for our economy not to be impacted by financial crises even a half of a world away. This became apparent in Paul Martin's early days as Finance Minister in the mid-Nineties, when the Mexican peso crisis caused financial panic here. This lead Martin and other leaders to form the G-20 to get a global response to these crises, for our protection. Cyprus is the latest example of the nostrum that we live in one global financial village.


Anne McGrath:

On another topic, for those who thought that Idle No More was a blip, the recent walk to Ottawa by northern Cree youth was an eye-opener. The support for the walkers culminating in a 3000-strong welcome on Parliament Hill was inspiring and reminded people of the strong impact and presence of aboriginal issues earlier this year. I don't know if Idle No More will be sustained or stay as strong, but they have had an enormous impact and it would be prudent for the Prime Minister's Office to keep this file at the top of the list and make some concrete gains.


Rick Anderson:

I certainly do not see Idle No More as a blip, but I do see it as a (welcome) clarification of the basic questions here. There are those - Idle No More et al - who believe that First Nations' problems can be solved with the somewhat contradictory demand to (i) "leave us to manage our own affairs" and (ii) give us ever more money to do so. On the other side of the question are those who believe in both self-governance and self-sufficiency, and who are looking for practical solutions based around education, entrepreneurship, and economic development. It's the classic debate between a social-welfare model and a democratic capitalist model, and it is long overdue.

 

Richard Mahoney:

The thing I find remarkable about the walk of the journey of #Nishiyuu is this: six young men living on the shores of James Bay had a strong desire to make a statement about their place in the world. They reached over the heads of the politicians and media, who largely ignored them, and marched 1500 km to Ottawa. With a positive message about inclusion and opportunity. And most of our leading politicians didn't know what to do with that energy. I think it is the kind of energy that a leader needs to embrace, celebrate. That kind of commitment can only help us deal with our sad history and our inability on all sides to do something dramatic about it. It's time for our government to put itself out there and at least try. They, and we, deserve better.

 

Anne McGrath:

I agree that the response of federal politicians will be important. First Nation leaders have been warning for years (maybe even decades actually) of the simmering anger amongst their youth. They worried and warned that frustration with limited or no progress on critical issues would boil over and possibly result in violence. This March has been a superb illustration of a respectful, peaceful, democratic intervention to advance issues of basic living conditions such as housing, water, and education. Federal political leaders need to accept the challenge.

 

Rick Anderson:

Richard is right, you have to admire the young people who made the trek, no question. What they deserve for their effort is for someone to talk honestly with them, instead of using them as a backdrop for the usual political games. The key for young First Nations individuals is not completely unlike that of other young Canadians: take your education seriously, complete it, get a skill that make you employable, and get a job, including starting your own business or moving to find a job if that's what it takes.

Don't let people tell you there's a tooth fairy: that's a path to the welfare trap we know too much about. I hope at least some of the politicians they meet with do talk to them honestly, and help them find better ways to accomplish those things than we have seen to date.


Richard Mahoney:

This failure was put in the sharpest relief by the embarrassing juxtaposition of our Prime Minister welcoming Pandas arriving on a private jet, rather than embracing a group of passionate young people celebrating their Cree origins and exercising their Canadian citizenship. What a missed opportunity by our PM to embrace and celebrate them and their commitment. It could have been a way to break through the logjam of negotiations and conflict and show openness, acceptance and effort. I wish he had done so.


You can follow The Salon's strategists on Twitter:

Rick Anderson: @RickAnderson

Anne McGrath: @OttawaAnne

Richard Mahoney: @RicMahoney

About The Salon (Anderson, Mcgrath, Mahoney)

Rick Anderson is former senior advisor to Reform Party Opposition leader Preston Manning; Anne McGrath was Chief of Staff to the late NDP leader Jack Layton; and Richard Mahoney, former Liberal advisor to Rt. Hon. Paul Martin.
Posted date : March 27, 2013

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