Panic of 2006
The Panic of 2006 is the Sarzonian name for an economic recession that gripped the country after news reports of improper bidding practices by the Portland Iron Works caused investor confidence to decline. After a massive sell off resulted in the Portland Stock Exchange losing over 16 percent of its value, nations including the Grand Duchy of Hamptonshire, the Democratic Capitalist Republic of Pacitalia, the Democratic Imperium of Praetonia, and several others sold their stores of the Sarzonian dollar. They implemented the sell off to avoid having the Sarzonian economic slowdown negatively affect their countries. However, this sent the value of the Sarzonian dollar into a further decline until it ultimately reached $18 to the Pacitalian douro.
Losing confidence
The saga began when the Portland Iron Works bid nearly $1 trillion for the Manston Naval Works in an effort to secure the bidding over the Pacitalian naval company Marinoceta. PIW’s bidding stopped when a Guffingfordi company placed a bid well over $1 trillion, which led PIW to release a statement blasting Guffingford’s national socialist system of government. That plus a bid that was tens of thousands of percentage points greater than the value of the company being bid for drew immediate suspicions within the Sarzonian government, among others. Lieutenant President Nicole Lewis called for an investigation after personally calling Admiral Barbara Tucker, the CEO of the newly-expanded PIW to demand an explanation.
However, the story had only just begun with the call. The Portland Stock Exchange lost nearly 17 percent of its total value in one day of trading that has been referred to as Black Monday as the software that was designed to shut the day’s trading in the event of a five percent drop malfunctioned. News of the stock market crash led to drops in stock markets in Praetonia, Isselmere-Nieland, and Pacitalia, which then sold off their holdings of the dollar, precipitating a sharp decline in the dollar’s value. An investigation led to the malfunction in the software, which systems engineers worked to repair, but the police investigation into the cause of the malfunction is still in progress. In later days, the PSE closed down early by order of the exchange’s chairman when he exercised his prerogative to manually shut trading before another calamitous drop in trading value hemorrhaged value even further.
Government reaction
A Guffingfordi company incited further problems in the economy when it made a bid for a hostile takeover of PIW, which “made a bad situation about a thousand times worse,” according to a government official, who chose to remain nameless. In an effort both to calm nerves and to seize control of the recession before it exploded into a full-scale depression, the Incorporated Sarzonian Government announced that the Portland Iron Works would go under receivership. Thus, the company was essentially nationalised so the government could conduct a full audit of the company’s bidding practices and ensure that the company wasn’t further harming its reputation. However, instead of calming fears that the company would be run irresponsibly by the company’s management, foreign investors continued to dump the Sarzonian dollar as governments criticised the move as reactionary and undemocratic for a nation some considered among the world’s loudest champions for democracy.
The reactions led to Sarzonian incrimination for the actions of foreign governments, while some investors sold the Pacitalian douro and the Hamptonian kroner in a fit of nationalistic spite. Violence grew, leading to the burning of Pacitalian Trade and Industry Commission President Francesco Porantabano in effigy in front of the former Pacitalian embassy with protestors shouting “shut up.”
Eventually, the Sarzonian government activated state militias and President Mike Sarzo called for calm, although some say he did so belatedly. At a second protest in front of the embassy compound, Sarzo punched a protestor who was about to light set a Pacitalian flag alight in an event broadcast by Sarzonian News Network (SNN) cameras that quickly went worldwide.
Seaburg conference
Finance ministers and leaders from several nations affected by the Sarzonian fiscal crisis traveled to Seaburg, a Hamptonian capital, to discuss potential aid packages and solutions to what media outlets in Sarzonia were beginning to call the Panic of 2006. Nations attending the conference included Hamptonshire, Pacitalia, Isselmere-Nieland, Praetonia, Space Union and Azazia.
Hamptonian and Pacitalian officials pushed for a plan to tie the offer and delivery of foreign aid to Sarzonia to a conditional acceptance of tying the dollar to the kroner and the douro. Sarzonia would be denied even a penny of aid if the nation refused to accept that condition. Sarzonian government officials decried the proposal as a threat to Sarzonian sovereignty and news stories suggested a multi-partisan rejection of the measure on those grounds.
After a leak of the proposal hit the ISG, Deputy Senior Vice President and External Affairs Officer Grant Haffner, already highly unpopular in Pacitalia for past negative comments about the country and its government, blasted the proposal as “economic terrorism,” and said “we don’t negotiate with terrorists.” That act drew angry reprisals from both Pacitalian prime minister Constantino Sorantanali and Hamptonian Lord Protector Lord Philip Rosecrans, both of whom demanded apologies and retractions from Sarzonia and threatened to sever diplomatic and economic relations. Sarzo went on national television and apologised for the specific wording but stopped well short of an apology. He called Haffner's remarks "indefensible," but didn't retract them as Rosecrans wanted. Some observers are concerned that his words weren’t enough to calm the situation down. At the conference, further plans included a demand by Pacitalia that Sarzo allow a Presidential election, in direct violation of the Sarzonian constitution, and suggested tying in any receipt of aid to that condition.
