Istalian President in SeluciaPresident of Istalia Aghar Yassen in emergency visit at AuroriaConsul al-Mutanabbi and representatives of the Senate receiving the Istalian delegationApril 4429 - As part of a broad reassessment of Selucia's foreign policy and treaty obligations, the Selucian Senate debated the Republic's
withdrawal from a number of treaties that are either de facto or de iure defunct or were seen by many Senators, particularly those affiliated with the Republican Party, as tying Selucian foreign policy too closely to the interests of other nations. One treaty under debate was the three century old
Treaty of friendship and cooperation between the Repubblica Istaliana and the Regnum de Selucia, establishing close bilateral ties between Selucia and Istalia. On the face of it the treaty does not impose any significant burden on either party and does not commit Selucia or Istalia to a particular foreign policy, pledging only to increase trade and reduce barriers for travel between the two nations and requiring the two parties to assist each other in case of war or natural disasters. However the Foreign Affairs Minister at the time, Republican Hiroto Yukimura, argued that Article IX of the treaty has an ambiguous meaning. The article states that "both nations agree to financially support their diplomatic and military staff on foreign soil", which most likely is a specific reference to the security and diplomatic staff attached to the two nations' embassies on the other's territory, as outlined in Article VIII of the Treaty. But former Minister Yukimura argued that, due to the article's ambiguity, it could conceivably be argued to commit the two nations to financially support each other's military and diplomatic staff on the territory of third parties, an interpretation he and many Republican Senators found objectionable. Although the proposal to withdraw from the treaty only received the support of little over a half of Republican legislators, with the remainder joining the current coalition in opposing the motion, the attempted withdrawal and the rhetoric behind it caused much concern in Romula. The President of Istalia Aghar Yassen reached out to the Selucian head of state requiring an explanation. Thankfully Consul Haider bin Talal al-Mutanabbi defused the tensions and the conversation between the two heads of state was reported as being cordial and friendly, and the Istalian President offered to visit Selucia to discuss the issues that led to the brief moment of tension. President Yassen
arrived in Auroria this month and met with Consul al-Mutanabbi in an emergency visit. In their joint press conference the two Majatran heads of state emphasized their mutual commitment to maintaining the bonds of friendship and trade between the two nations, and Consul al-Mutanabbi guaranteed that Selucia would for the time being remain party to the bilateral treaty, and no attempt to repudiate Selucian membership would be made until both nations agree on a new treaty. The official visit and the Consul's promise let the two nations' diplomatic staff breathe a sigh of relief. But the Consul's actions may have jeopardized his political position within the Republican Party, which following the last Senatorial elections has largely monopolized the right-wing and far-right vote, leading to the election of many Senators on the Republican ticket with weak institutional or ideological ties to the party. Throughout the current legislative term the party leadership, which includes Consul al-Mutanabbi, has faced a growing backbenchers' revolt which Princeps Senatus Iennifer Vinicia Opis has been struggling to contain. The Republican backbenchers accuse the Consul of betraying Selucia's foreign policy interests and of "kowtowing to the hegemonic designs of an imperialist nation". In an attempt at regaining control over the party and preventing its shift to the right Republican leadership is considering punitive measures against its backbenchers. It is possible that the warm reception granted to the Istalian president is designed not only to maintain close ties to one of Selucia's oldest friends, but also to signal to the more isolationist and anti-Istalian backbenchers that they do not control the party and that their views are not welcome by the leadership. Whether this will lead to a leadership challenge to al-Mutanabbi and Opis or to the defection of the new Senators to the re-founded Rexist Party will become apparent after next year's elections.
"Black Thursday" Hits SeluciaFinancial crisis affects Selucian economyAugust 4429 - The Majatran financial crisis known as
Black Thursday, caused by the Istalian stock market crash in the aftermath of uncertainty regarding Istalia's position towards the different Majatran supranational organizations has finally hit the Selucian economy. Economic growth is expected to slow to 1.3% by the end of the year, and the Auroria Stock Exchange halted trading for a full day on June 7 after a 10% drop the previous day. Many of the largest Selucian banks have reported losses. ILQ Bank, a joint stock company owned by cooperative banks reported a loss of SEN 1 billion for 4429 as a consequence of high risk investments, and PagusBank, Selucia's largest farming cooperative bank, lost 4.3 billion Nikan on investments and securitized products. The bank had continued to buy toxic assets while other banks disclosed losses, because the assets were cheap and the managers underestimated the severity of the crisis. PagusBank is owned by 29 million farmers and fishers through their producer cooperatives, and although the bank is still able to guarantee a return on the members' assets it is not able to pay a dividend this year, which will put pressure on a largely unprofitable farming sector. As the financial crisis worsens, Selucia's banking sector will have to face increased loan delinquency and diminishing deposits as members' incomes begin to decline.
However, the Selucian economy has a number of features that make it particularly resilient in times of crisis. In spite of the losses incurred by several large banks, no bank or credit union has yet required government recapitalization. In a series of reforms introduced since the 4380s the Selucian economy has adopted a cooperative model, whereby most industries and businesses are run by member-owned corporations, complemented by government-mandated monopolies in certain sectors and state-owned monopoly over the defense industry. Although the reform was highly controversial at the time, seen as responsible for a decline in Selucian economic growth and the cooperatives seen as less capable of raising capital, cooperatives have a number of advantages that make them particularly suitable during economic crises. As opposed to banks, savings and credit cooperatives tend to not freeze credit, have lower increases in interest rates, and are overall more stable due to their strong risk-aversion, making them an attractive alternative to traditional banks in times of economic turmoil. Because cooperative banks are owned by their members and not driven by profits or shareholder interests they have largely avoided riskier loans, and the greater scrutiny imposed by local credit unions over the decisions of their central institutions has resulted in more risk aversion, since any loan they offer to their members is another member's money. As a result Selucia's savings and credit cooperatives have not been significantly impacted by Black Thursday. They continue to have high liquidity and stable financing, and so far no credit union has required government recapitalization, although a number have benefited from recapitalization plans with the intention of retaining a growth rate in their lending in order to cope with the risky environment. Savings and credit cooperatives have also been more capable of reaching the poor. Roughly half of members live below the national poverty line, and since they also include higher income members they are able to provide affordable financial services to members while keeping costs low. This is a result of the membership structure of cooperative banking which incentivizes financial behavior distinct from that of traditional banks. In cooperative banks members, including both savers and borrowers, use the cooperative to recycle money from those that have it to those that need it without anyone outside gaining a profit. Savings and credit cooperatives are member-owned and member-controlled, meaning that the purposes of the cooperatives are aligned to those of the members, resulting in risk-aversion and higher trustworthiness. The most important aspect of banking cooperatives that makes them uniquely suited to lessen the impact of the crisis is that they can continue trading without the need for government bail-outs, providing an alternative to policies in other nations focused on increased public regulation of private banks. And it is not just savings and credit cooperatives that fare comparatively better during the current crisis. Selucia's entire cooperative economy has significant advantages during uncertain times, as cooperatives have a much higher survival rate than investor-owned businesses, can use member capital instead of bank borrowing to expand their businesses, and they can concentrate on employment creation, employee buyouts and rescues, lowering the cost of food and other essentials, and increasing the productivity of the members' businesses.
Princeps Senatus Iennifer Vinicia Opis introducing her financial reform proposal to the SenateNot long after the crisis started in Istalia the Senate introduced an additional reform that its proponents argue will be even more effective at combating the effects of the crisis in Selucia. The
Vinician Law on the Central Bank, introduced by Princeps Senatus Iennifer Vinicia Opis and expected to pass next month, is a radical and heterodox reform of the Selucian monetary system by introducing the concept of "Sovereign Money", which will nationalize all money in the Republic under the Central Bank. In short, the proposal will convert commercial bank deposits into Central Bank liabilities and will temporarily replace the gap on commercial banks' balance sheets with Central Bank loans, and commercial banks will as a consequence no longer be able to create money when providing loans. The creation of money and the granting of loans will then become distinct activities, and the former will become the exclusive privilege of the Central Bank, which will be the only institution permitted to create money, not only banknotes and coins but also electronic money and "interbank money". This reform will effectively abolish fractional reserve banking, the universal form of banking Terra-wide, and banks will only be able to lend money they administer in savings accounts or borrow it from the Central Bank. The bill also requires the Central Bank to implement "helicopter money" by transferring funds directly to provincial and municipal governments and even individual citizens. The proposal, its supporters argue, will make the financial system safer and less risk-prone, by centralizing the creation of money under the democratically-elected and accountable but institutionally independent Central Bank. But the proposal has many detractors, including the Governor of the Central Bank himself, who argued against experimenting with untried systems during a financial crisis, and that the Central Bank would lose its ability to carry out an independent monetary policy and will be subject to political pressure. The supporters of the reform counter by arguing that the Central Bank would in fact gain a wider degree of independence than under the current system, and that the decision to raise or lower interest rates, the main power of the Central Bank under the current system, is in itself a political decision and subject to political pressure. The long term consequences of this reform are difficult to predict, but it is likely that the reform would add an additional layer of uncertainty during already uncertain times.