FACTBOX-Political, policy impact of credit crisis

Published: 15 Jun 2009 02:55:55 PST

June 15 - The credit crisis has caused political and economic change across Europe, the Middle East and Africa this year. Here are some of the major changes.

JANUARY 26:

* REYKJAVIK - The ruling coalition collapses under pressure from sometimes violent demonstrations that started after the currency and financial system crumbled three months earlier, forcing Iceland to seek a bailout led by the International Monetary Fund. It is the world's first government to fall as a direct result of the global economic slump.

-- The crisis pushes public opinion towards membership of the European Union; in May, the new government submits a proposal to parliament for Iceland to begin negotiations on membership.

FEBRUARY 20:

* RIGA - The government of Prime Minister Ivars Godmanis collapses because of Latvia's deepening economic slump and plunging opinion poll ratings.

-- On March 11, prime minister-designate Valdis Dombrovskis, a 37-year-old former finance minister, forms a new coalition government and pledges further budget cuts, needed to obtain aid from the IMF and EU. But the financial crisis worsens in late May as Dombrovskis struggles to win backing for the budget cuts and financial markets speculate the lat may have to be devalued.

-- On June 9, the five-party coalition government gives preliminary approval to a package of tax rises and spending cuts, agreed with unions and business groups, that it hopes will be enough to obtain the aid. The spending cuts are worth about 10 percent of gross domestic product over three years.

-- Dombrovskis on Friday hailed tough budget savings as preventing state bankruptcy and said a parliament vote on the cuts could be brought forward as the country seeks to avert crisis and possible devaluation.

FEBRUARY 23:

* UAE forced to seek federal help to pay its debts, the former Gulf boomtown of Dubai has been chastened by a financial crisis that has reminded the world that its rich, oil-producing neighbour Abu Dhabi holds the purse strings.

-- Dubai's move to sell $10 billion in bonds to the United Arab Emirates central bank alleviated worries it could default as investors bet the state would step in again to help the former boom town weather the downturn.

MARCH 21:

* BUDAPEST - Prime Minister Ferenc Gyurcsany says he is ready to step aside to make way for a new government to lead Hungary out of the economic crisis.

-- On April 14, parliament endorses Gordon Bajnai as prime minister, giving the political independent a mandate for austerity measures. He promises painful spending cuts as well as tax cuts to lift Hungary's waning economic competitiveness.

MARCH 24:

* PRAGUE - Prime Minister Jan Fischer takes over as head of a caretaker government on May 8 after the centre-right government of Mirek Topolanek loses a no-confidence vote in parliament.

-- The opposition had attacked the government on grounds of economic mismanagement. The Czech upper house votes to hold an early election by Oct. 15 which will decide between leftists promising to protect the poor and right-wingers who were forced from power in March. The two parties are level in opinion polls.

APRIL 22:

* LONDON - The Labour Party government announces a budget which estimates a record deficit of 175 billion pounds and forecasts the economy will shrink at its fastest rate since 1945. It raises the top rate of income tax to 50 percent from 40, reversing Labour's benign policies toward high earners.

-- Labour immediately falls four percentage points in opinion polls, which predict a Conservative landslide in the next election, due by mid-2010.

-- In June, Prime Minister Gordon Brown narrowly beats off a challenge to his leadership after several ministers resign.

MAY 11:

* SOUTH AFRICA - Recently elected President Jacob Zuma swears in a new cabinet that includes trade unionists and the head of the South African Communist Party. The cabinet also features business-friendly figures such as former finance minister Trevor Manuel, but it reflects a shift in focus toward helping millions of poor South Africans in the country's most difficult economic climate since apartheid ended 15 years ago.

JUNE 7:

* BRUSSELS - In elections to the European Parliament that focus more on the efforts of national governments to fight the economic crisis than on specific EU policies, voters hand major defeats to ruling parties of Greece, Spain, Britain, Ireland, Hungary and Latvia, where economic problems have been acute.

-- A record-low voter turnout of 43 percent in the polls suggests widespread apathy towards the EU, despite the bloc's efforts to coordinate policies toward the crisis and aid some of its weaker members.

JUNE 7:

* DUBLIN - The chairman of the Green Party, a coalition partner of Prime Minister Brian Cowen's Fianna Fail party, says Ireland's December budget -- the next major step in its effort to restore order to crisis-hit public finances -- could cause coalition strains.

-- Three days later Cowen wins a vote of confidence as widely forecast, but he is expected to remain under pressure from the junior coalition party and backbenchers as he implements tough fiscal measures.