by Manuel Alvarez-Rivera: San Juan, Puerto Rico
Estonia will be holding a parliamentary election on March 4, 2007, with advance voting taking place on February 19-23. The election will be the fifth legislative poll since 1991, when the country, along with neighboring Latvia and Lithuania, recovered its independence following fifty-one years of annexation by the Soviet Union. But voters in the smallest and northernmost of the three Baltic republics didn't need go to the polls to choose members of the country's 101-member unicameral Parliament, the Riigikogu, since on February 26-28 they were able to cast electronic votes, or e-votes, using Internet-connected personal computers equipped with an ID card reader.
E-voting also allows voters to change their vote by re-voting electronically, or by voting in a polling place. In either case, only the last vote cast by the elector will be counted, and any previously cast e-vote shall be deleted.
Internet voting was introduced in Estonia for the first time in the 2005 municipal elections. However, only 1.85% of the voters - 0.88% of the electorate - cast an electronic vote in the event, whereas 3.4% of the electorate cast e-votes in the 2007 parliamentary election, according to preliminary figures published by Estonia's National Electoral Committee.
Members of the Riigikogu are elected for a four-year term of office by universal suffrage and proportional representation (PR) in twelve multi-member constituencies, where electors vote for a specific candidate within a party list. Nonetheless, the overall distribution of parliamentary mandates is determined on a nationwide basis: Riigikogu seats are apportioned among parties polling at least five percent of the vote (electoral coalitions are not allowed since 1999), according to a modified form of the largest average method, which replaces the traditional d'Hondt divisors (1, 2, 3 and so on) with the series 10.9, 20.9, 30.9, etc. This procedure, mathematically equivalent to elevating the number of votes polled by each qualifying party to the power 1.111111... - 10 divided by 9, that is the reciprocal of 0.9 - and then distributing the seats according to the standard d'Hondt rule, favors the largest parties at the expense of the smaller ones: simply put, the increase brought about by exponentiation becomes larger as the number of votes increases.
In practice, the application of this unusual formula hasn't had much of an impact in the composition of successive Estonian legislatures: compared to the traditional d'Hondt method, the larger parties have usually picked up between one and three extra seats each, while smaller parties have lost no more than one seat apiece.
The five percent threshold and the modified PR rule notwithstanding, Estonia's post-independence party system has been characterized by a high degree of fragmentation and volatility, and the country has been ruled by a succession of shaky coalition cabinets which have lasted on average just over a year in office - a problem common to all three Baltic republics during both their present and preceding periods of independence. Nonetheless, center-right governments have been the norm in post-independence Estonia, except from 1995 to 1999, when the now-defunct, center-left Coalition Party was the country's dominant political force.
The results of the last Riigikogu election, held in March 2003, gave some tentative indications of increasing party stability. In the election, the minority center-right coalition government of the Estonian Centre and Reform parties that had been in power since the beginning of 2002 managed to improve its parliamentary standing, in stark contrast to the 1995 and 1999 legislative elections, when the incumbent parties at the time were soundly rejected at the polls. Nonetheless, the ruling alliance ended up being replaced by another center-right coalition comprised of the new, anti-corruption Res Publica, the Reform Party and the People's Union. However, the new government, headed by Juhan Parts of Res Publica, lasted only two years in office: in March 2005 it lost a parliamentary vote of confidence and was subsequently replaced by yet another right-of-center coalition government of the Centre Party, the Reform Party and the People's Union, led by Andrus Ansip of the Estonian Reform Party.
The ruling coalition went on to poll strongly in municipal elections held later that year, but Res Publica (Latin for "Public Matter"), which had emerged as the second largest party in the 2003 legislative vote (when it tied with the Centre Party as the largest parliamentary force), fared poorly and subsequently merged with an older conservative party, Pro Patria Union. As a result, there are now only five parties represented in the Riigikogu: Union of Pro Patria and Res Publica, Estonian Centre Party, Estonian Reform Party, Estonian People's Union, and the Social Democratic Party.
Like neighboring Latvia, Estonia has a sizable number of ethnic Russian inhabitants (as of 2006, just over a quarter of the country's declining population), but many of them do not have Estonian citizenship and cannot vote in parliamentary elections. In the 2003 Riigikogu election, the largely Russian-speaking Estonian United People's Party (now the Constitution Party) fell below the five percent threshold and lost its legislative representation. As in Latvia, the integration of what remains a significant Russian minority continues to be a major problem that has called the attention of Amnesty International. This issue also has foreign policy repercussions: Russia routinely accuses Estonia of discriminating against ethnic Russians, and relations between both countries remain tense, all the more so since Russia stubbornly clings to the fiction that Estonia (along with Latvia and Lithuania) voluntarily sought annexation to the Soviet Union in 1940.
Despite frequent cabinet upheavals since regaining independence, Estonia has consistently pursued a foreign policy strongly oriented towards the West in general and the European Union (EU) in particular. In light of its poor relations with Russia - not to mention the painful memories of the 1940-91 annexation to the U.S.S.R. - it came as no surprise that Estonia eagerly pursued membership in the EU as well as the North Atlantic Treaty Organization (NATO), securing both in 2004.
Likewise, Estonia has re-oriented its trade towards the West, forging a particularly strong relationship with neighboring Finland - a country with whom Estonia shares a linguistic affinity, as the Estonian and Finnish languages are closely related. Although the Estonian economy has been performing strongly in the years since independence, the country remains among the poorest members of the European Union.
All the same, Estonia has become the first country in the world to hold a national legislative election using the Internet as a means of voting - a high-tech initiative that may be a harbinger of things to come.
Update
Estonia's National Electoral Committee reports complete preliminary results of the March 4, 2007 Riigikogu election were as follows:
Reform Party - 153,044 votes (27.8%), 31 seats
Centre Party - 143,518 votes (26.1%), 29 seats
Pro Patria and Res Publica Union - 98,347 votes (17.9%), 19 seats
Estonian Social Democratic Party - 58,363 votes (10.6%), 10 seats
Estonian Greens - 39,279 votes (7.1%), 6 seats
Estonian People's Union - 39,215 votes (7.1%), 6 seats
Estonian Christian Democrats - 9,456 votes (1.7%), no seats
Constitutional Party - 5,464 votes (1.0%), no seats
Others - 3,527 votes (0.6%), no seats
Voter turnout stood at 61%, up from 58.2% in the 2003 parliamentary election.
The Estonian Reform Party of Prime Minister Andrus Ansip emerged as the election's big winner, increasing its parliamentary representation from 19 to 31 seats and displacing the Centre Party - which picked up an additional seat - as the country's largest political force. However, the Union of Pro Patria and Res Publica suffered a major setback, losing sixteen seats with respect to the overall total won by its component parties in 2003 (when they ran separately); nonetheless, the merged party retained significant electoral support.
In all, six parties are represented in the new Riigikogu: Reform, Centre, the Pro Patria and Res Publica Union, the Social Democrats (who increased their representation from six to ten seats), the People's Union (who lost seven of their thirteen seats) and the Estonian Greens, who secured parliamentary representation on their electoral debut.
Although the Reform-Centre-People's Union coalition government won re-election with an enlarged legislative majority, the ruling parties didn't form another government, due to differences between Reform and the Centre Party over Estonia's flat tax system. In April 2007 - one month after the election - incumbent Prime Minister Ansip formed a new center-right coalition government composed of his Reform Party, the Pro Patria and Res Publica Union, and the Social Democrats.
Thursday, March 1, 2007
Subscribe to:
Post Comments (Atom)
Special Feature, The German Economy At A Glance
Welcome to the Global Economy Matters Blog. Below you will find the normal chronological blog posts. But first here is our Monthly Special Feature which in January 2008 focuses on Germany. Here you will find charts which provide background data on the German economy. We hope these will be of some help to the first time reader here, making it easier to contextualise, assess and get to grips with the general argument being presented on the blog. The big question which arose concerning the Germany economy in 2007 was whether or not the new found dynamism in German economic activity constituted some form of remaissance, and formed part of a global decoupling process whereby a sustainable recovery in domestic demand was taking place. Analysts on this blog never really accepted this view. The key question and central enigma associated with the German economy is really why domestic demand should have remained so congenitally weak over such a considerable period of time.
Since this phenomenon is also to be observed in the the two other societes with very high (circa 43) population median ages - Italy and Japan - we postulate that demographics and population ageing processes offer some part of the explanation here.
Basically what we can observe as societies move above the 40 median age mark are a number of stylised facts. Weakness in domestic private consumption would be one of these, absence of consumer credit driven property booms would be another, growing pressure on the national debt as the elderly dependence ratio steadily rises would be another, and growing dependence on export growth for sustaining GDP growth would be the central feature of the whole edifice.
We hope you will find the background data presented here useful in assessing the argument which we are presenting on this blog, which is basically that a key component in the longer term growth stagnation from which Germany is suffering has its roots in the underlying demographics. Basically and in the long run (possibly with a 30 year lag) fertility does matter. Please click on thumbnails for better viewing.
What follows is a very rough and ready attempt to describe in broad brush strokes how the contemporary German economy actually works. First off, and as is well known, German society is ageing, and at the same time the German population has started declining. Not only is Germany's median age rising, the proportion of the population in the key 25-49 age group is now falling.
As can be seen from the chart this crucial age group touched its highpoint in 1997/98. This could be thought of as the moment of maximum capacity for the German economy since it includes the crucial 25 to 40 household-former, first-time-homebuyer group. In terms of credit expansion, it is this group which drives a significant part of internal demand.
The age group also includes another important group, the 35 to 50 years one. This group drives an economy in productive terms, since these are the prime age workers. If you think of a society as a 100 metres sprint athlete, then there is an age when this athlete is at the maximum of his or her running potential, an age after which each time they can only run the 100 metres more slowly.
Well a society is the same in terms of its collective economic potential, without addressing underlying issues either through fertility or immigration, it can only move forward more and more slowly. Consumption becomes flat, and GDP growth - gioven the external dependence - fragile.
Private consumption has hovered pretty close to the 60% mark for many years now, while government consumption - after moving sharply upwards as a total share in the first half of the 1970s has subsequently remained pretty constant, moving around the 19% of GDP mark. The big difference has been in the importance of fixed capital formation (GFCF) which reached from 1975 to 2000hovered around the 22 - 24% of GDP mark.
Prior to 1975 GFCF was at a much higher level, while post 2000 it has dropped substantially And So what we can see is that the year between, say, 1975 and 2000, when GFCF remaind a more or less constant share of GDP, constituted - to use the language of neo-classical economics - the constant growth period of the German domestic economy.The years prior to 1975 were the convergence, or "catch-up" years
And especially the 1960s, after Germany finally broke out of the destruction and devastation of WWII - while the years after 2000 constitute what the neo-classicists would call the "balanced growth period", although as we can see, it isn't very balanced, and there certainly isn't a steady state.
2008 Forecasts: There is a consenus at the present time that the German economy is slowing. Where there is no real consensus is over the rate at which it is slowing and where and when it will settle. It is clear that GDP growth in 2007 will be below the heady 3.1% annual rate achieved in 2006. The OECD last December revised their 2007 German forecast down to 2.6%, and their 2008 one down to 1.8%. The IMF in their October World Economic Outlook forecast growth for 2007 at 2.4%, slowing to 2% in 2008. Morgan Stanley's Elga Bartsch, while optimistic that the German economy will whether the credit crunch better than most (and here she may well be right) is somewhat more sanguine, putting 2008 growth at 1.5%. In general though I rather doubt her overview that "Germany could well be on the way to becoming the new growth locomotive in Europe." and especially her suggestion that "the phase of underperformance in terms of GDP growth, which has plagued Europe’s largest economy for years, is clearly over." Unfortunately, what we are arguing on this blog is that Germany's GDP growth rates since the mid 1990s are not some special kind of "underperformance", but what can be expected from a society with a rapidly rising median age which is increasingly dependent on exports rather than domestic consumption for growth.
The EU commission in it's November 2007 forecast was also convinced that the German economy was now on a "solid growth path", forecasting 2.5% growth for 2007 and 2.1% for 2008.
I personally will be very surprised if we see growth in the region of 2% for the German economy in 2008, and I even consider the 1.8% from the OECD and 1.5% from Morgan Stanley still on the high side given the extent of downside risk. Basically the reasonably favourable depreciation rules which currently apply to German investment have been changed as of 1 January 2008, and we might reasonably expect to see some sort of impact on investment comparable with the negative shock which hit private domestic consumption following the VAT rise on 1 Jan 2007. In addition all the indications suggest that German consumption will continue to be weak in 2008. So if consumer consumption is at best flat, governemnt consumption equally so, and investment and construction weakening, we are simply lefy with export growth, and here the outlook is definitely more negative in 2008 than it was in 2007. The Spanish economy (one important German customer) is visibly wilting by the day, as is the UK (another big customer), but it is to Eastern Europe we must look for the biggest impact on German exports of any correction in 2008. Just one data point should suffice, Germany exports roughly the same value of goods to the Czech Republic (and more to Poland) as it does to China. This means that Geramny is proportionately not that exposed to any slowdown in China, but hugely exposed to any sudden shift in growth and demand in the East of Europe.
So I would say, that on current data, 1% growth in Germany in 2008 look a reasonable estimate at this point, but that this needs to be taken to mean with considerable downside risk. Germany is now tremendously dependent on what happens elsewhere, and until what does actually happen elsewhere becomes clearer it is difficult to be more precise on Germany.
The only apparent bright spot on the horizon is employment, but I am dubious that in the context of Germany's ageing workforce this will work through as some are hoping, as I expain at some considerable length in this post here. My opinion is that Germany will enter recession at some point during 2008, and that we may well have 2 consecutive quarters of negative growth. The continuing high euro will maintain pressure on German exports, and high oil and food prices will maintain pressure on the inflation front, at least in the first half of 2008. The ECB will probably switch stance towards rate reductions at some point, but since, as Elga Bartsch among many others so eloquently argues German internal consumption and investment are not especially dependent on credit conditions, easing from the ECB may not have as much impact as one would hope for.
Key Posts For Understanding The Present Path of the German Economy
Is The German Economy Heading For Recession in 2008?
Employment and Unemployment in Germany January 2008
Germany Economy, What Price the VAT Effect Now!
The German Economy, Employment, Export Shares and Age Structure
Structural Aspects of German Export Dependence
Does NeoClassical Steady State Growth Really Exist?
0 comments:
Post a Comment