AltAusterity Digest #60 August 9 - 15, 2018

The financial crisis in Turkey is causing fears that worsening conditions could spread to other countries. However, Turkey’s current currency crisis is more akin to the 1997 Asian financial crisis than to the debt emergencies of Greece, Cyprus and Italy. As the lira depreciates rapidly, private debtholders will struggle to service their debts, which are primarily paid in foreign currencies. Turkey has been one of the largest borrowers in global capital markets over the past few years, as central banks were encouraging borrowing.

France’s labor minister, Muriel Pénicaud, has been tasked with reforming the labour market towards a “Nordic-style labour model.” The model, sometimes referred to as “flexicurity,” involves increased abilities for companies to hire and fire, as well as offering greater training and support for workers to transition to new jobs. While the model is often portrayed as a win-win for business and labour, the balance between flexibility and security can often favour business. While Ms. Pénicaud has already been responsible for decentralizing industry-wide collective bargaining towards the company level, the flexicurity reforms may be met with more resistance.

The Ontario government has suspended salary increases for public sector executives. The freeze will impact those in management positions at school boards, universities, colleges and hospitals who earn $100,000 or more in a calendar year. While the previous Liberal government had included a new regulatory framework for executive pay increases, the Conservatives are more direct in their approach. The executive compensation freeze comes shortly after the public sector hiring freeze.

According to the U.S. Treasury Department, the U.S. government ran a $77 billion budget deficit in July. This compares with a $43 billion in July of last year, marking a 79% rise. Although revenues are up 1% over last year, the massive drop in corporate tax payments, and a spending increase of 4.4% - reflecting Congressional approval for increased military spending – have caused a sizeable fiscal gap. The Trump administration is projecting that the deficit will top $1 trillion in 2019.

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