Demetris Christofias spelled Dimitris Christofias, is a Cypriot former politician, the sixth President of Cyprus from 2008 to 2013. Christofias was the General Secretary of AKEL, the Communist Party of Cyprus, was the European Union's and Cyprus' first, so far only, Communist head of state, he won the 2008 Cypriot presidential elections in the second round of voting. Throughout the election campaign, he pledged to restart talks with Turkish Cypriots in order to find a solution to the Cyprus dispute and reunify the island, he has supported the closure of the British military bases on Cyprus. Demetris Christofias was born in Dhikomo in the Kyrenia District of Cyprus, in the area, under military occupation by Turkey since 1974, he received his secondary-school education at Nicosia Commercial Lyceum, from which he graduated in 1964. At the age of 14, he joined the progressive secondary-school students organisation, PEOM, at the age of 18, he joined EDON, PEO Trade Unions, AKEL. In 1969, at the 5th Congress of EDON, he was elected member of the Central Council.
Christofias spent five years in Moscow in the Soviet Union where he studied at the Institute of Social Sciences, Academy of Social Sciences, from which he received a degree in history. In addition to his native Greek, he speaks English. In Moscow he met his wife and returned to Cyprus and political life. Christofias married Elsi Chiratou in 1972 and they have three children: two daughters and Christina, he is an atheist, a public pronouncement unprecedented by a political leader in overwhelmingly Orthodox Cyprus. In 1974 Christofias was elected to the post of the Central Organising Secretary of EDON and in 1977 to the post of General Secretary, he served in the latter post until 1987. In 1976 he was elected as a member of the Nicosia-Kyrenia District Committee of AKEL, in 1982 – at the 15th Congress of AKEL – he was elected as a member of the Central Committee of the Party. In July 1986 Christofias was elected as an alternate member of the Political Bureau of AKEL. After the 16th Congress of AKEL, held in November 1986, he was elected as a full member of the Political Bureau, in 1987 he was elected as a member of the AKEL Secretariat.
In April 1988, following the death of Ezekias Papaioannou, he was elected as General Secretary of AKEL, a post he held until 2009. Christofias was elected as a Member of the House of Representatives for the first time in 1991 and was re-elected in the subsequent parliamentary elections of 1996 and 2001. On 7 June 2001, he was elected as President of the House of Representatives, he was re-elected as President of the House of Representatives in 2006. In his function as General Secretary of AKEL and President of the House of Representatives, he was a Member of the National Council, a supreme advisory body to the President of the Republic. Christofias was ex-officio chairman of the House Standing Committee on Selection and chairman of the ad hoc House Standing Committee on Rules of Procedure and of the Special House Standing Committee on Declaration and Examination of Property, he was president of the executive committees of the Cyprus group to the Inter-Parliamentary Union and of the Cyprus branch of the Commonwealth Parliamentary Association.
The first round of the February 2008 presidential election, held on 17 February, saw a close result between the three leading candidates—Christofias, Ioannis Kasoulides of DISY, the incumbent Tassos Papadopoulos—Christofias narrowly placing second with 33.3% of the vote, behind Kasoulidis with 33.5%. Christofias and Kasoulidis participated in a second round on February 24 for which Christofias received the backing of Papadopoulos's party, DIKO. Christofias went on to win the election with 53.37% of the vote. After his success he pledged to restart talks to find a solution to reunify the island. In addressing a jubilant crowd in the Cyprus capital Nicosia's streets the new president-elect said he looked forward to "substantial cooperation for the benefit of both communities". "Tomorrow, a new day begins. We will see many difficulties ahead of us; as of tomorrow, we unite our forces...to achieve the reunification of our country". Christofias was sworn in as President at a ceremony in the House of Representatives on 28 February 2008, vowing that "the solution of the Cyprus problem will be the top priority of my government".
Although proud to be a communist, he said. While much of the focus beyond Cyprus was on Christofias's communist background and education in Moscow, on the island voters were more concerned with a solution to Europe's longest running conflict—the island's partition since 1974. On February 29, 2008, Christofias proceeded to appoint his government. Christofias' first government was a coalition between his own party AKEL, Marios Garoyian's Democratic Party and Yiannakis Omirou's Movement for Social Democracy. Christofias started talks with Mehmet Ali Talat on the reunification of Cyprus as a bizonal federal state, but his hopes for Greek Cypriot approval of such a plan were soon scotched by the nationalists' victory in Northern Cyprus' 2009 parliamentary elections. On July 28, 2011, Cyprus's cabinet tendered its resignation bowing to political and public pressure after a massive munitions blast at Evangelos Florakis Naval Base on July 11 2011 threatened to force the island into asking for an EU bailout.
He was not aware that the power plant was next to the naval base though he drove past it each time to go to his village where he had his first job as a barista. President Christofias asked the peo
International Meeting of Communist and Workers Parties
The International Meeting of Communist and Workers' Parties is an annual conference attended by communist and workers' parties from several nations. It originated in 1998 when the Communist Party of Greece invited communist and workers' parties to participate in an annual conference where parties could gather to share their experiences and issue a joint declaration; the meetings are held annually, with participants from all around the globe. Additionally there are extraordinary meetings such as the meeting in Damascus 28–30 September 2009 on "Solidarity with the heroic struggle of the Palestinian people and the other people in Middle East". In December 2009, the communist and workers parties agreed to the creation of the International Communist Review, published annually in English and Spanish and has a website; the participants of the meeting have created a working group to address all aspects of organizing the meetings. As of May 2018, the working group is composed by communist and worker's parties of Brazil, Cuba, Czech Republic, Hungary, Iran, North Korea, Mexico, Palestine, Russian Federation, South Africa, Turkey, Venezuela and Ukraine.
The working group is in charge of defining the agenda for each meeting, as well as general organization. The 20th International Meeting of Communist and Workers' Parties, with the theme "The contemporary working class and its alliance; the tasks of its political vanguard – the Communist and Worker’s Parties – in the struggle against exploitation and imperialist wars, for the rights of the workers and of the peoples, for peace, for socialism", took place in Athens, Greece from 23 to 25 November 2018. The 19th International Meeting of Communist and Workers' Parties, with the theme "The 100th Anniversary of the Great October Socialist Revolution:the ideals of the Communist Movement,revitalizing the struggle against imperialistic wars, for peace, socialism", took place in St Petersburg, Russia from 2 to 3 November 2017 and in Moscow, Russia from 5 to 7 November 2017; the 18th International Meeting of Communist and Workers' Parties took place in Hanoi, Vietnam from 28 to 30 October 2016. The 17th International Meeting of Communist and Workers' Parties took place in Istanbul, Turkey from 30 October to 1 November 2015.
The 16th International Meeting of Communist and Workers' Parties took place from 13 to 15 November 2014 in Guayaquil, Ecuador. It was attended by 85 delegates representing 53 parties from 44 countries; the 15th International Meeting of Communist and Workers' Parties took place from 8 to 10 November 2013 in Lisbon, Portugal. The 14th International Meeting of Communist and Workers' Parties took place from 22 to 25 November 2012 in Beirut, Lebanon; the 13th meeting was held in Athens, from 9 to 11 December 2011 and was hosted by the Communist Party of Greece. Under the motto "Socialism is the future!", it was attended by 80 parties, while additional eight parties sent a message. The 13th meeting was held in Johannesburg, South Africa, from 3 to 5 December 2010 and was hosted by the South African Communist Party; the 11th meeting was held in New Delhi, from 20 to 22 November 2009 and was hosted by both the Communist Party of India and the Communist Party of India. It was attended by 89 participants representing workers' parties and 48 countries.
The 10th meeting was held in São Paulo, from 21 to 23 November 2008 and was hosted by the Communist Party of Brazil. It was attended by dlegations of 65 communist and workers' parties from 55 countries; the 9th meeting was held in Minsk, from 3 to 5 November 2007 and was hosted by the Communist Party of Brazil. It was attended by 154 representatives of 72 communist and workers' parties, representing 59 countries; the following table is a list of participants in each meeting. Key: x = participated – = did not participate o = observer m = sent message List of communist parties List of communist parties represented in European Parliament International Communist Seminar Solidarity Network of Communist and Workers' Parties Information Bulletin International Communist Review
The European Parliament is the only parliamentary institution of the European Union, directly elected by EU citizens aged 18 or older. Together with the Council of the European Union, which should not be confused with the European Council and the Council of Europe, it exercises the legislative function of the EU; the Parliament is composed of 751 members, that will become 705 starting from the 2019–2024 legislature, who represent the second-largest democratic electorate in the world and the largest trans-national democratic electorate in the world. It has been directly elected by the European citizens every five years and by universal suffrage since 1979. However, voter turnout at European Parliament elections has fallen consecutively at each election since that date, has been under 50% since 1999. Voter turnout in 2014 stood at 42.54% of all European voters. Although the European Parliament has legislative power, as does the Council, it does not formally possess legislative initiative, as most national parliaments of European Union member states do.
The Parliament is the "first institution" of the EU, shares equal legislative and budgetary powers with the Council. It has equal control over the EU budget; the European Commission, the executive body of the EU, is accountable to Parliament. In particular, Parliament elects the President of the Commission, approves the appointment of the Commission as a whole, it can subsequently force the Commission as a body to resign by adopting a motion of censure. The President of the European Parliament is Antonio Tajani, elected in January 2017, he presides over a multi-party chamber, the two largest groups being the Group of the European People's Party and the Progressive Alliance of Socialists and Democrats. The last union-wide elections were the 2014 elections; the European Parliament has three places of work -- Luxembourg City and Strasbourg. Luxembourg City is home to the administrative offices. Meetings of the whole Parliament take place in Brussels. Committee meetings are held in Brussels; the Parliament, like the other institutions, was not designed in its current form when it first met on 10 September 1952.
One of the oldest common institutions, it began as the Common Assembly of the European Coal and Steel Community. It was a consultative assembly of 78 appointed parliamentarians drawn from the national parliaments of member states, having no legislative powers; the change since its foundation was highlighted by Professor David Farrell of the University of Manchester: "For much of its life, the European Parliament could have been justly labelled a'multi-lingual talking shop'."Its development since its foundation shows how the European Union's structures have evolved without a clear "master plan". Some, such as Tom Reid of the Washington Post, said of the union: "nobody would have deliberately designed a government as complex and as redundant as the EU"; the Parliament's two seats, which have switched several times, are a result of various agreements or lack of agreements. Although most MEPs would prefer to be based just in Brussels, at John Major's 1992 Edinburgh summit, France engineered a treaty amendment to maintain Parliament's plenary seat permanently at Strasbourg.
The body was not mentioned in the original Schuman Declaration. It was assumed or hoped that difficulties with the British would be resolved to allow the Council of Europe's Assembly to perform the task. A separate Assembly was introduced during negotiations on the Treaty as an institution which would counterbalance and monitor the executive while providing democratic legitimacy; the wording of the ECSC Treaty demonstrated the leaders' desire for more than a normal consultative assembly by using the term "representatives of the people" and allowed for direct election. Its early importance was highlighted when the Assembly was given the task of drawing up the draft treaty to establish a European Political Community. By this document, the Ad Hoc Assembly was established on 13 September 1952 with extra members, but after the failure of the proposed European Defence Community the project was dropped. Despite this, the European Economic Community and Euratom were established in 1958 by the Treaties of Rome.
The Common Assembly was shared by all three communities and it renamed itself the European Parliamentary Assembly. The first meeting was held on 19 March 1958 having been set up in Luxembourg City, it elected Schuman as its president and on 13 May it rearranged itself to sit according to political ideology rather than nationality; this is seen as the birth of the modern European Parliament, with Parliament's 50 years celebrations being held in March 2008 rather than 2002. The three communities merged their remaining organs as the European Communities in 1967, the body's name was changed to the current "European Parliament" in 1962. In 1970 the Parliament was granted power over areas of the Communities' budget, which were expanded to the whole budget in 1975. Under the Rome Treaties, the Parliament should have become elected. However, the Council was required to agree a uni
Politics of Cyprus
The Republic of Cyprus is a unitary presidential representative republic, whereby the President of Cyprus is both head of state and head of government. Executive power is exercised by the government. Legislative power is vested in the parliament; the Judiciary is independent of the legislature. Cyprus has been a divided island since 1974 when Turkey invaded the north in response to a military coup on the island, backed by the Athens government. Since the internationally recognized Republic of Cyprus has controlled the south two-thirds, the Turkish Republic of Northern Cyprus, only recognized by Turkey, the northern one-third; the Government of the Republic of Cyprus has continued as the sole internationally recognized authority on the island, though in practice its power extends only to the government-controlled area. Cyprus operates under a multi-party system, with communist AKEL and right-leaning Democratic Rally in the forefront. Centrist DIKO and lesser parties form a coalition with the President's party and are allotted a number of ministries.
The Economist Intelligence Unit has rated the Cyprus as "flawed democracy" in 2016. The 1960 Cypriot Constitution provided for a presidential system of government with independent executive and judicial branches, as well as a complex system of checks and balances including a weighted power-sharing ratio designed to protect the interests of the Turkish Cypriots; the executive, for example, was headed by a Greek Cypriot president, Archbishop Makarios III, a Turkish Cypriot vice president, Dr Fazıl Küçük, elected by their respective communities for 5-year terms and each possessing a right of veto over certain types of legislation and executive decisions. The House of Representatives was elected on the basis of separate voters' rolls. Since 1964, following clashes between the two communities, the Turkish Cypriot seats in the House remained vacant, while the Greek Cypriot Communal Chamber was abolished; the responsibilities of the chamber were transferred to the newfounded Ministry of Education.
By 1967, when a military junta had seized power in Greece, the political impetus for enosis had faded as a result of the non-aligned foreign policy of Cypriot President Makarios. Enosis remained an ideological goal, despite being pushed further down the political agenda. Dissatisfaction in Greece with Makarios convinced the Greek colonels to sponsor the 1974 coup in Nicosia. Turkey responded by launching a military operation on Cyprus in a move not approved by the other two international guarantor powers and the United Kingdom, claiming that this was for the protection of the Turkish minority from Greek militias; the invasion is called "Cyprus Peace Operation" by the Turkish side. Turkish forces captured the northern part of the island. Many thousands of others, from both sides, left the island entirely. In addition to many of the Greek Cypriot refugees, many Turkish Cypriots moved to the UK. Subsequently, the Turkish Cypriots established their own separatist institutions with a popularly elected de facto President and a Prime Minister responsible to the National Assembly exercising joint executive powers.
In 1983, the Turkish Cypriots declared an independent state called the Turkish Republic of Northern Cyprus, an action opposed by the United Nations Security Council. In 1985, the TRNC held its first elections. In 1974, following a coup sponsored by the Greek military junta of 1967-1974 and executed by the Cypriot National Guard the invasion of troops from Turkey, the Turkish Cypriots formally set up their own institutions with a popularly elected president and a prime minister, responsible to the National Assembly, exercising joint executive powers. Cyprus has been divided, de facto, into the Greek Cypriot controlled southern two-thirds of the island and the Turkish-occupied northern third; the Republic of Cyprus is the internationally recognised government of the Republic of Cyprus, that controls the southern two-thirds of the island. Aside from Turkey, all foreign governments and the United Nations recognise the sovereignty of the Republic of Cyprus over the whole island of Cyprus. Turkey, which does not recognise the Republic of Cyprus, the Turkish Cypriot administration of the northern part of the island, do not accept the Republic's rule over the whole island and refer to it not by its international name, but as the "Greek Cypriot Administration of Southern Cyprus".
Its territory, a result of the Turkish invasion of 1974 and whose status remains disputed, extends over the northern third of the island. The north proclaimed its independence in 1975. In 1983, the Turkish Cypriots declared an independent "Turkish Republic of Northern Cyprus", which has never been recognized by any country except Turkey. In 1985, they adopted a constitution and held elections—an arrangement recognized only by Turkey. For information pertaining to this, see Politics of the Turkish Republic of Northern Cyprus; the Organisation of the Islamic Conference granted it observer member status under the name of "Turkish Cypriot State". The division of Cyprus has remained an intractable political problem plaguing relations between Greece and Turkey, drawing in NATO, of which both Greece and Turkey are members, latterly the European Union, which has admitted Greece and Cyprus and which Turkey has been seeking to join for over twenty years; the most recent developments on the island have included the reopening of the border between the two sides, the failure of an
Nicosia is the largest city and seat of government of the island of Cyprus. It is located on the banks of the River Pedieos. Nicosia is the southeasternmost of all EU member states' capitals, it has been continuously inhabited for over 4,500 years and has been the capital of Cyprus since the 10th century. The Greek Cypriot and Turkish Cypriot communities of Nicosia segregated into the south and north of the city in early 1964, following the fighting of the Cyprus crisis of 1963–64 that broke out in the city; this separation became a militarized border between the Republic of Cyprus and Northern Cyprus after Turkey invaded the island of Cyprus in 1974, occupying the north of the island, including northern Nicosia. Today North Nicosia is the capital of Northern Cyprus, a state recognized only by Turkey, considered to be occupied Cypriot territory by the international community. Apart from its legislative and administrative functions, Nicosia has established itself as the island's financial capital and its main international business centre.
In 2018, Nicosia was the 32nd richest city in the world in relative purchasing power. The earliest mention of Nicosia is in the clay prism of the Assyrian king Esarhaddon in 672 BC; this is a mention to the city-state of Ledra located on the site of Nicosia, the city is named "Lidir". The name Ledra and variations remained in use as late as 392 AD, when it was used in writing by Saint Jerome. However, that text refers the city as "Leucotheon", early Christian sources of this period are the first to use similar variations of the name Lefkosia; the origin of the name "Lefkosia" is considered by scholars to be a "toponymic puzzle". The name is recorded in the majority of Byzantine sources as "Leukousia", it is accepted in literature that the name "most probably" derives from the Greek phrase "leuke ousia". Nicosia has been in continuous habitation since the beginning of the Bronze Age 2500 years BC, when the first inhabitants settled in the fertile plain of Mesaoria. Nicosia became a city-state known as Ledra or Ledrae, one of the twelve kingdoms of ancient Cyprus built by Achaeans after the end of the Trojan War.
Remains of old Ledra today can be found in the Ayia Paraskevi hill in the south east of the city. Only one king of Ledra is known: Onasagoras; the kingdom of Ledra was destroyed early. Under Assyrian rule of Cyprus, Onasagoras was recorded as paying tribute to Esarhaddon of Assyria in 672 BC. By 330 BC, Ledra was recorded to be a small unimportant town, it is thought that the settlement was economically and politically dependent on the nearby town of Chytri. The main activity of the town inhabitants was farming. During this era, Ledra did not have the huge growth that the other Cypriot coastal towns had, based on trade. In Byzantine times, the town was referred to as Λευκωσία or as Καλληνίκησις. In the 4th century AD, the town became the seat of bishopric, with bishop Saint Tryphillius, a student of Saint Spyridon. Archaeological evidence indicates that the town regained much of its earlier significance in the early Christian period, the presence of two or three basilicas with opus sectile decorations, along with marbles decorated with high relief indicate the presence of a prosperous and sophisticated Christian society.
After the destruction of Salamis, the existing capital of Cyprus, by Arab raids in 647, along with extensive damage to other coastal settlements, the economy of the island became much more inward-looking and inland towns gained relative significance. Nicosia benefited from this and functioned as an outlet of the agricultural products from its hinterland, the Mesaoria plain, it further was at an advantageous position due to its ample water supply. As such, the town developed enough for the Byzantine Empire to choose Nicosia as the capital of the island around 965, when Cyprus rejoined the Byzantine Empire; the Byzantines moved the island's administration seat to Nicosia for security reasons as coastal towns were suffering from raids. From that point on it has remained as the capital of Cyprus. Nicosia was the seat of the Byzantine governor of Cyprus. Testimony as late as 1211 indicates that Nicosia was not a walled city at that point and thus that the Byzantines did not build a city wall, thinking that the city's inland location would be sufficient for defense purposes.
The Byzantines did, build a weak fort within the city. The economy under Byzantine rule consisted of the trading of agricultural goods, but the town produced luxury items and metalware due to the presence of the imperial administration. On his way to the Holy Land during the Third Crusade in 1187, Richard I of England's fleet was plagued by storms, he himself stopped first at Crete and at Rhodes. Three ships continued on, one of, carrying Joan of England, Queen of Sicily and Berengaria of Navarre, Richard's bride-to-be. Two of the ships were wrecked off Cyprus, but the ship bearing Joan and Berengaria made it safely to Limassol. Joan refused to come ashore, fearing she would be captured and held hostage by Isaac Komnenos of Cyprus, who hated all Franks, her ship sat at anchor for a full week before Richard arrived on 8 May. Outraged at the treatment of his sister and his future bride, Richard invaded. Richard laid siege to Nicosia met and defeated Isaac Komnenos at Tremetousia and became ruler of the island, but sold it to the Knights Templar.
The European Union is a political and economic union of 28 member states that are located in Europe. It has an area of an estimated population of about 513 million; the EU has developed an internal single market through a standardised system of laws that apply in all member states in those matters, only those matters, where members have agreed to act as one. EU policies aim to ensure the free movement of people, goods and capital within the internal market, enact legislation in justice and home affairs and maintain common policies on trade, agriculture and regional development. For travel within the Schengen Area, passport controls have been abolished. A monetary union was established in 1999 and came into full force in 2002 and is composed of 19 EU member states which use the euro currency; the EU and European citizenship were established when the Maastricht Treaty came into force in 1993. The EU traces its origins to the European Coal and Steel Community and the European Economic Community, established by the 1951 Treaty of Paris and 1957 Treaty of Rome.
The original members of what came to be known as the European Communities were the Inner Six: Belgium, Italy, the Netherlands, West Germany. The Communities and its successors have grown in size by the accession of new member states and in power by the addition of policy areas to its remit; the latest major amendment to the constitutional basis of the EU, the Treaty of Lisbon, came into force in 2009. While no member state has left the EU or its antecedent organisations, the United Kingdom signified the intention to leave after a membership referendum in June 2016 and is negotiating its withdrawal. Covering 7.3% of the world population, the EU in 2017 generated a nominal gross domestic product of 19.670 trillion US dollars, constituting 24.6% of global nominal GDP. Additionally, all 28 EU countries have a high Human Development Index, according to the United Nations Development Programme. In 2012, the EU was awarded the Nobel Peace Prize. Through the Common Foreign and Security Policy, the EU has developed a role in external relations and defence.
The union maintains permanent diplomatic missions throughout the world and represents itself at the United Nations, the World Trade Organization, the G7 and the G20. Because of its global influence, the European Union has been described as an emerging superpower. During the centuries following the fall of Rome in 476, several European States viewed themselves as translatio imperii of the defunct Roman Empire: the Frankish Empire and the Holy Roman Empire were thereby attempts to resurrect Rome in the West; this political philosophy of a supra-national rule over the continent, similar to the example of the ancient Roman Empire, resulted in the early Middle Ages in the concept of a renovatio imperii, either in the forms of the Reichsidee or the religiously inspired Imperium Christianum. Medieval Christendom and the political power of the Papacy are cited as conducive to European integration and unity. In the oriental parts of the continent, the Russian Tsardom, the Empire, declared Moscow to be Third Rome and inheritor of the Eastern tradition after the fall of Constantinople in 1453.
The gap between Greek East and Latin West had been widened by the political scission of the Roman Empire in the 4th century and the Great Schism of 1054. Pan-European political thought emerged during the 19th century, inspired by the liberal ideas of the French and American Revolutions after the demise of Napoléon's Empire. In the decades following the outcomes of the Congress of Vienna, ideals of European unity flourished across the continent in the writings of Wojciech Jastrzębowski, Giuseppe Mazzini or Theodore de Korwin Szymanowski; the term United States of Europe was used at that time by Victor Hugo during a speech at the International Peace Congress held in Paris in 1849: A day will come when all nations on our continent will form a European brotherhood... A day will come when we shall see... the United States of America and the United States of Europe face to face, reaching out for each other across the seas. During the interwar period, the consciousness that national markets in Europe were interdependent though confrontational, along with the observation of a larger and growing US market on the other side of the ocean, nourished the urge for the economic integration of the continent.
In 1920, advocating the creation of a European economic union, British economist John Maynard Keynes wrote that "a Free Trade Union should be established... to impose no protectionist tariffs whatever against the produce of other members of the Union." During the same decade, Richard von Coudenhove-Kalergi, one of the first to imagine of a modern political union of Europe, founded the Pan-Europa Movement. His ideas influenced his contemporaries, among which Prime Minister of France Aristide Briand. In 1929, the latter gave a speech in favour of a European Union before the assembly of the League of Nations, precursor of the United Nations. In a radio address in March 1943, with war still raging, Britain's leader Sir Winston Churchill spoke warmly of "restoring the true greatness of Europe" once victory had been achieved, mused on the post-war creation of a "Council of Europe" which would bring the European nations together to build peace. After World War II, European integration was seen as an antidote to the extreme nationalism which had devastated the continent.
In a speech delivered on 19
Financial crisis of 2007–2008
The financial crisis of 2007–2008 known as the global financial crisis and the 2008 financial crisis, is considered by many economists to have been the most serious financial crisis since the Great Depression of the 1930s. It began in 2007 with a crisis in the subprime mortgage market in the United States, developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008. Excessive risk-taking by banks such as Lehman Brothers helped to magnify the financial impact globally. Massive bail-outs of financial institutions and other palliative monetary and fiscal policies were employed to prevent a possible collapse of the world financial system; the crisis was nonetheless followed by the Great Recession. The European debt crisis, a crisis in the banking system of the European countries using the euro, followed later. In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in the US following the crisis to "promote the financial stability of the United States".
The Basel III capital and liquidity standards were adopted by countries around the world. Following is a timeline of major events during the financial crisis: February 20, 2007: The Dow Jones Industrial Average hit its peak level of 12,786. Existing home sales peaked this month and began to decline. April 2007: New Century, an American REIT specializing in sub-prime mortgages, filed for Chapter 11 bankruptcy protection; this propagated the sub-prime crisis, to banks around the world. August 9, 2007: BNP Paribas, a French investment bank, blocked withdrawals from two of its hedge funds – a clear sign that banks were refusing to do business with each other. August 2007: The Federal Open Market Committee began reducing the federal funds rate from its peak of 5.25% in response to worries about liquidity and confidence. December 12, 2007: The Federal Reserve instituted the Term Auction Facility to supply short-term credit to banks with sub-prime mortgages. February 13, 2008: The Economic Stimulus Act of 2008 was enacted, which included a tax rebate.
March 17, 2008: The Federal Reserve guaranteed Bear Stearns' bad loans to facilitate its acquisition by JPMorgan Chase. July 11, 2008: IndyMac failed. July 30, 2008: The Housing and Economic Recovery Act of 2008 was enacted. September 7, 2008: Fannie Mae and Freddie Mac were taken over by the federal government. September 15, 2008: Lehman Brothers went bankrupt after the Federal Reserve declined to guarantee its loans, causing the Dow Jones to drop 504 points, its worst decline in seven years; the same day, Bank of America purchased Merrill Lynch. September 16, 2008: The Federal Reserve took over American International Group; the Reserve Primary Fund "broke the buck" as a result of massive withdrawals from money market accounts. September 21, 2008: Goldman Sachs and Morgan Stanley converted themselves from investment banks to bank holding companies to increase their protection by the Federal Reserve. September 26, 2008: Washington Mutual went bankrupt after a bank run. September 29, 2008: The House of Representatives rejected the Emergency Economic Stabilization Act of 2008 instituting the $700 billion Troubled Asset Relief Program.
In response the Dow Jones dropped its largest single-day decline. October 3, 2008: Congress passed the Emergency Economic Stabilization Act of 2008. November 25, 2008: The Term Asset-Backed Securities Loan Facility was announced. December 16, 2008: The federal funds rate was lowered to zero percent. January 2009: The Big Three automobile manufacturers received a bailout from the TARP program. February 13, 2009: Congress approved the American Recovery and Reinvestment Act of 2009, a $787 billion economic stimulus package. March 6, 2009: The Dow Jones hit its lowest level of 6,443.27. The precipitating factor for the Financial Crisis of 2007–2008 was a high default rate in the United States subprime home mortgage sector – the bursting of the "subprime bubble." While the causes of the bubble are disputed, some or all of the following factors must have contributed. Low interest rates encouraged mortgage lending. Securitization. Many mortgages were bundled together and formed into new financial instruments called mortgage-backed securities, in a process known as securitization.
These bundles could be sold as low-risk securities because they were backed by credit default swaps insurance. Because mortgage lenders could pass these mortgages on in this way, they could and did adopt loose underwriting criteria. Lax regulation allowed predatory lending in the private sector after the federal government overrode anti-predatory state laws in 2004; the Community Reinvestment Act, a 1977 US federal law designed to help low- and moderate-income Americans get mortgage loans encouraged banks to grant mortgages to higher risk families. Reckless lending by, for example, Bank of America's Countrywide Financial unit, caused Fannie Mae and Freddie Mac to lose market share and to respond by lowering their own standards. Mortgage guarantees. Many of the subprime loans were bundled and sold accruing to the quasi-government agencies Fannie Mae and Freddie Mac; the implicit guarantee by the US federal government created a moral hazard and contributed to a glut of risky lending. The accumulation and subsequent high default rate of these subprime mortgages led to the financial crisis and the consequent damage to the world economy.
High mortgage approval rates led to a large pool of homebuyers. This appreciation in value led large numbers of homeowners to borrow against their homes as an apparent windfall; this "bubble" would be burst by a r