| On Jan. 28 Sir K. Dwight
Venner, governor of the Eastern Caribbean Central Bank,
presented the 2009 Eastern Caribbean Currency Union
Economic Review in an address broadcast by 29 participating
media houses in the region. Sir Dwight began by noting
that the start of 2009 was marked by what could be called
the most significant financial and economic disruption
in the advanced economies since the Great Depression.
In it, the United States suffered through a precipitous
drop in growth and experienced increasing levels of
unemployment. Major banks and other financial institutions
either failed or were bailed out by the government,
including the vital auto industry.
The impact of the
global financial downturn on the Eastern Caribbean
Currency Union was primarily felt in the decline in
the number of visitors and in overall tourism receipts.
Foreign direct investment also fell because of the
credit crunch, as well as remittances from Caribbean
nationals living in advanced economies.
According to Sir Dwight,
the Eastern Caribbean Central Bank is estimating a
contraction in the currency union of approximately
7.4 percent in 2009, mostly due to shortfalls in the
tourism and construction sectors. More locally, the
currency union had to deal with the collapse of the
British American and CLICO insurance companies and
a significant run on the Bank of Antigua. The latter
crisis spawned a joint meeting of the OECS Authority
and the ECCB Monetary Council by the Prime Ministers
and Ministers of Finance on Jan. 15 and 16 in 2009
to craft a cogent response. The Council met again
in July 2009 to review and follow up on decisions
made in January.
As a result of Monetary
Council meetings, five indigenous banks collaborated
in the successful rescue effort of the Bank of Antigua.
In addition, a subcommittee of the Monetary Council
was initiated to address the insurance-related issues.
Other areas of concern involved initiatives by the
G20 and OECD to impose new restrictions on offshore
financial centres. This could have a negative impact
on the level of foreign investment and possibly harm
relations between the Currency Union and their major
trading partners.
A separate issue involves
legislation on the regulation of the credit union
sector to stability. Two Monetary Council subcommittees
have been established to address those two areas of
concern.
Lastly, a task force
established by the OECS Authority, working alongside
the OECS Secretariat and member countries crafted
a new treaty based on the original Treaty of Basseterre.
The new treaty was signed by heads of governments
at a formal ceremony on Dec. 29, 2009.
The most critical
lesson learnt by the financial crises of 2009 was
the power of collective action, given that the Currency
Union comprises a number of very small states with
limited fiscal space and regulatory resources.
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