2009-12 Esthursian financial crisis
The 2009-12 Esthursian financial crisis, often colloquially referred to as the Einarsson crash or bankers' crash in Esthursia, was a severe economic recession that occurred in Esthursia between Q1 2009 and Q1 2012. Financial deregulation pursued by previous governments, particularly those of the 1980s under William Greenwood's monetarist reform package, encouraged banks to both target low-income housebuyers with predatory lending, and increasingly take part in excessive risk-taking, a situation which was exacerbated by a deepening government cutback to spending (and public sector wages), and industrial disputes which became widescale by the General Strike of 2010-11.
The Esthursian economy had been in relatively rapid growth during the mid-2000s, however by 2006-7, the Harding government had executed a large-scale austerity programme, and perceptions of stalling wages, faltering public services and rising inequality all contributed to an increasingly disrupted economy as a result of industrial action; inflation also began to rise during the 2000s, and reached 4% by the mid-2000s, adding further pressures on households and the societal situation. In 2009, the centre-right Forethane Isaac Harding resigned to recover from a cancer diagnosis, and was replaced by a more hardline successor, Tharbjorn Einarsson; his appointment crashed the stock markets, and his first budget in early 2010 caused a more extensive and deep shock, further worsened by the backlash by trade unions and government opposition to the matter. In 2010, defaults on housing also reached decades-high peaks, while financial legislation was initially laxed in an effort to spurn the economy back into growth; instead having the opposite effect of prolonging and deepening the damage inflicted.
Esthursia underwent a significant sociopolitical and economic shift as a result of the financial crisis, especially as the existing Conservative government's decision to cut budgets was followed by a large-scale bailout of failing banks, which proved heavily unpopular with the voting public; this unpopularity destabilised the government to the point of resignation, and the Social Democrats have since been in power for thirteen years, winning the January 2011 Esthursian general election in a landslide under contemporary leader John Largan. Since the crash, fiscal policy moved away from austerity, and the initial bailout package was revised to nationalise or mutualise a large portion of the banking sector, spurning the rise of civic banking in 2010s and 2020s Esthursia. Esthursian economic thinking and policies also underwent a shift away from monetarism, successive Social Democrat governments have increasingly pursued left-wing, big-government and redistributive policy, and the Conservative Union dissolved in 2019, with its largest contingent moving towards the political centreground as a direct result of the fallout post-2011.
Background
Following the resignation of James Seddon in 1980, and the subsequent defeat of his Social Democrat government in 1982, William Greenwood was elected partially on the back of a popular platform of economic liberalisation, including the weakening of trade unions, reduction of the state's size, and financialisation of the economy. A relatively rapid deindustrialisation of the economy took place, leaving some regions - such as Mellingtonshire - highly deprived compared to Weskerby and Brantley, while the size of the manufacturing sector shrank significantly (although not below comparator nations) in this time. Banking as a sector, alongside law and administration, expanded exponentially as a result of liberalisation of laws, including the removal of barriers between risk-averse and risk-taking sectors.
In the 1990s, attempts to renationalise privatised entities and regulate the finance sector occurred slowly and incompletely under the returned Social Democratic government, and by 2000, the Social Democrats had adopted many monetarist policies and much of the Conservatives' economic platform. As such, this monetarist consensus deepened in the early 2000s upon the rise of conservative-liberal Conservative Union Forethane Isaac Harding, who promised to modernise the economy, and initially saw positive economic indicators, culminating in his election landslide in 2006.
