The Federal Republic
1. 1975-1983
After the declaration of independence of the Federal Republic of Pharos on June 1st 1975, a provisional government was formed, lead by Lors Chiftelov and Orum Kalger, the federal constitution analysts, to prepare the unified country for elections. The election system of the new constitution, provided for a 150-seat Parliament, 100 seats given proportionally to all parties and the other 50 to the parties that would gather more than 10% of the people's vote. No less than 16 political parties took part in the 1st elections held on September 2nd 1975. Almost seven million voters elected the 1st Federal Parliament. Although the conservatives (National Party) were the first party, taking 31% of the vote and 63 seats, the four social democrat and socialist parties (Social Democratic Party, Democratic Union, Union Party, Labor Party) had a total 42% and, aided by the votes of leftist parties such as Lyg, National Agricultural Party and National Monteneros Party, elected 65 year-old diplomat Kon Gorov from Deltalene,CON as 1st President of the Federal Republic.
Pharos had prospered during the course of the cold war, amassing considerable currency reserves in foreign banks. The new government, decided to put the funds into a general renovation of the economy aiming mainly in modernizing the production of ores and oil, renewing the fishing fleet, developing technology and industrial infrastructure as well as helping towards a general modernization of agriculture. These actions were aimed at keeping Pharonians' standard of living as high as it had become during the prosperous post-war years. The government's fiscal policy was strictly Keynesian, and their aim was to create the necessary industrial infrastructure for a prosperous developed country. It was considered essential to keep unemployment down to an absolute minimum and to protect the export industry through currency manipulation (the Pharonian franc - 1ff - was introduced in January 1976 replacing the English pound) and other means.
The Socialist government took an anti-British attitude during the Iceland-Great Britain third Cod war, concerning fishing rights in North Atlantic. The Icelandic government demanded an extension of its fishing limits from 50 to 200 miles, a demand followed by the Gorov administration as well. Although many people in Pharos felt closer to the British cause, the government had different views on the matter. By mid-1976 civil protests were a daily phenomenon in Hilvar and other major cities as things seemed to get out of hand, with the three nations deploying their fleet and British war ships clashing with Pharonian and Icelandic coast guard vessels trying to protect the fishermen's boats. Events took a more serious turn when Gorov threatened closure of the U.S.-manned NATO base in Atalia island, which in the military perception of the time, would have severely impaired NATO's ability to defend the Atlantic Ocean from the Soviet Union. In the end the British government agreed to have its fishermen stay outside of Iceland's and Pharos' 200 mile (370 km) exclusion zone without a specific agreement, but the government's status was already hurt. To stop the unrest Kon Gorov resigned and proclaimed federal elections for January 1977.
The election result was a disaster for the socialist coalition and a triumph for the National Party as it gathered 38% of the popular vote and a near absolute majority of 73 seats. A new President, National Party's 54 year-old leader Limmar Kordon, a charismatic politician, writer and economist from Terminus,AUR was elected by the votes of the conservatives and the greens (Pharos Ecologic Movement). Kordon's government set in motion market liberalization policies, privatizing a number of small and large companies. Economic stability increased and previously chronic inflation was drastically reduced. The government continued with the free market policies, privatizing two commercial banks and the state-owned telecommunication company. Corporate incomes tax was reduced to 18% (from around 50% at the beginning of the decade), inheritance tax was greatly reduced and the net wealth tax abolished. The coalition government remained in power for eight years earning a second term after a relatively successful election in 1981.
In parallel with the economic changes, the new government passed a constitutional change in 1984, giving the ASO its proper authorization and power and also changing the federal electoral system, dividing the country into 150 constituencies, where each constituency elects one MP by the first-past-the-post system of election (a generic term referring to an election won by the highest polling candidate). The new constitution was voted in a referendum by 69% of the people. Limmar Kordon stepped down from National Party's presidency taking a position in the ASO and the country went into an election process with the new system on June 1985. The National Alliance (NATAL) - a coalition of National Party, National Democratic Front, Sood Alliance of SPR, Christian Democratic Party and National Democratic Union - won the elections with 38% of the total vote and a clear majority of 78 seats. The socialist coalition Central Union(CU) - consisted by the Social Democratic Party, Democratic Union, Union Party and Labor Party - came a close second with 35% of the total vote but only 63 seats, due to the new system, while the greens - PEM and AOEM in Aurora - almost doubled their power but only casted 7 seats. Lyg, although with a raised percentage from previous elections managed only 2 seats. In the President election, the Parliament voted for Limmar Kordon's successor in the leadership of the National Alliance, 55 year-old lawyer Eltrend Crang of Parietal,DIA .
2. 1985-2005
The situation in Pharonian economics was getting worse in late 1980's as a mini recession hit the island. A bursting real estate bubble caused by inadequate controls on lending combined with an international recession and a policy switch from anti-unemployment policies to anti-inflationary policies resulted in a fiscal crisis. In the 1989 elections, National Alliance came first with 34% of the vote and 70 seats and Eltrend Crang, was re-elected president. Although the socialists did not gain any power - they came second with 32% and 60 seats- the 1989 election marked the formation of the Union of Popular Forces (UPF) - a coalition of National Agricultural Party (NAP), National Monteneros Party (NMP) and Constitutional Movement (CM), a party seeking the restoration of the old election system - that were reorganized to co-op with the new system and managed to elect 3 MP's, capitalizing the people's discontent, mainly in rural areas. The extreme right party Neu Dritt (ND) also managed to elect 1 MP, while the Lyg party also increased its power.
By the 1990s, the Pharos economy's terms of trade began to decline. This was largely due to the decline in export receipts from the United Kingdom and the European Union, which in 1975 took 65.3 percent of Pharos' exports and by the year 1990 this had fallen to 26.8 percent. Since 1984, government subsidies including those for agriculture had been eliminated; import regulations had been liberalized; exchange rates had been freely floated; controls on interest rates, wages, and prices had been removed; and marginal rates of taxation reduced. Tight monetary policy and major efforts to reduce the government budget deficit brought the inflation rate down from an annual rate of more than 8% in 1989. The deregulation of government-owned enterprises in the 1980s and early 1990s reduced government's role in the economy and permitted the retirement of some public debt, but simultaneously massively increased the necessity for greater welfare spending and had led to considerably higher rates of unemployment than were standard in Pharos in earlier decades.
In the 1993 elections, the Radical Alternative Forum (RAF), as the UPF was renamed, gathered most of the voters who protested for a change in federal politics. The National Alliance suffered a major defeat - down to 30% and 56 seats - while the Central Union elected 54 MP's. In third place the RAF - most small parties joined forces to combat the first-past-the-post system - reached a near 20% and 29 seats, having the key role in the President election. The new Parliament voted in a close, stormy election process for the administration and most of RAF votes went against Eltrend Crang and his liberal policies, electing the Social Democratic Party leader, 67 year-old engineer Keer Centrik Gray of Schottegut,CEN as Pharos President.
The new administration started almost immediately a series of reforms aiming to stabilize the economy towards a more social model. In 1994 the anti-monopoly act was introduced, stating that "every property, company or line of work, the character of which tends to become or is a monopoly or cartel, will come to the sovereignty of the federal government". With this act strategic areas of the industrial sector, such as petroleum sector (Atlantic Ridge Petroleum, ARP), hydroelectric energy production (Pharos Hydro Power, PHP), the largest Pharonian Bank (PNB) and telecommunications provider (TelePro), that had been partly privatized by the Crang administration came back under federal control. An increase in taxation and foreign imports were also introduced. On the other hand the Gray administration embarked on a number of social democratic reforms aimed at flattening the income distribution, eliminating poverty, ensuring social services such as retirement, medical care, and disability benefits to all, and putting more of the capital into the public trust. They also improved agriculture, mining and fishing by giving special benefits to small collective farmers, synchronizing the mining industry and helping the struggling fish industry public bank loans.
On 26 September 1993, the Pharonian Parliament put to a referendum the question whether Pharos should join the European Union. The proposal was turned down with a slim margin. The Gray administration proceeded to negotiate a trade agreement with the EU that would give Pharonian companies access to European markets and entered the European Economic Area in 1994. Although much of the highly divisive public debate about EU membership turned on political rather than economic issues, it formed economic policy in several important ways:
• Both politicians and the public came to terms with the fact that Pharos' economic development was dependent on taking advantage of its comparative advantage by specializing in certain areas for export and relying on import for everything else. This has had a significant effect on Pharos' agricultural policy, which has been reshaped to address population patterns rather than self-sufficiency.
• The proceeds from oil revenue could not fuel private or public consumption if Pharos were to sustain its prosperity when oil reserves run out.
• In order to participate in European markets, Pharos has had to open its domestic markets to European imports. Although some pricing and distribution issues (e.g., alcohol and automobiles) remain unresolved, Pharos' consumer, capital, and employment markets are increasingly approaching those of Europe in general.
In the 1997 elections, National Alliance regained some of its power, but once again the coalition of the socialists, Lyg and RAF elected Gray as president for 4 more years. The Gray administration continued its social policy with more vigor, under the master guidance of Alav Halfstein - the president behind the President, as people named the Finance minister of Gray, the famous economist from Nobel. Soon after the re-election, the taxation laws were reformed, with an aggressive policy in progressive taxation, a new value added tax of 25% in cars, alcohol, tobacco products and various kinds of benefits and a raise of the low rate (mainly for food products) from 7% to 14%. The primary purpose of these tax reforms had been to raise revenue for public expenditures; but it was also viewed as a means to achieve social objectives, such as redistribution of income, reduction in alcohol and tobacco consumption, and as a disincentive against certain behaviors.
Against the backdrop of the Pharonian referendum to not join the European Union, the Ministry of Industry, headed by Ducem Tentas moved quickly to establish a national energy policy, after new vast oil and gas reserves were found south of Alma. Pharos decided to stay out of OPEC, keep its own energy prices in line with world markets, and spend the revenue - known as the "currency gift" - wisely. The Pharonian government established its own oil-company, ARP, and awarded drilling and production rights to Pharos Hydro Power (PHP). The Atlantic Ridge Oil Well turned out to present many technological challenges for production and exploration, and Pharonian companies invested in building capabilities to meet these challenges. Alma became the land-based staging area for the offshore drilling industry. The emergence of Pharos as an oil-exporting country raised a number of issues for Pharonian economic policy. There was concern that much of Pharos' human capital investment had been concentrated in petroleum-related industries. Critics pointed out that Pharos' economic structure was highly dependent on natural resources that do not require skilled labor, making economic growth highly vulnerable to fluctuations in the demand and pricing for these natural resources. The Government Pension Fund of Pharos was introduced by the Gray administration in 1999 as a part of several efforts to hedge against dependence on petroleum revenue. Also in the following years the federal controlled PHP and PMAP developed an innovated system that would resolve the island's energy demand: a field of underwater turbines placed 300 meters under the center of the core of the Gulf Stream, obtaining in this manner the equivalent of 500 GW - the system was fully deployed in the early 2000's.
Keer Centrik Gray stepped down from the political scenery in 2000 due to matters of health - he died on January 3, 2007 from cancer - and in the 2001 elections Central Union established an almost clear majority of 71 seats in the Parliament. Following the refusal of Halfstein to step in as President, the socialists and RAF voted for Stanel Amadiro, the 69 year-old politician from Nobel, formerly Centralia prime minister for 12 years (1988-2000) as new Pharos President. There was continuing debate over the role of the public sector in Pharos' economic development. Although there was broad consensus that Pharos should pursue a mixed economic model, there was a persistent ideological schism between those who favor free market forces vs. socialist mechanisms. Because of the oil boom since the 1990s, there had been little extensive government incentive to help develop and encourage new industries in the private sector. As a result, the public sector grew as a percentage of the overall economy. Highly progressive income taxes, the introduction of value-added tax, and a wide variety of special surcharges and taxes made Pharos one of the most heavily taxed economies in the world. Pharos thus became one of the most expensive countries in the world, as transportation costs and barriers to free trade had caused this disparity, but in recent years, Pharonian policy in labor relations, taxation, and other areas have contributed significantly. The high cost of labor and other structural features of the Pharonian environment caused concern about Pharos' ability to maintain its cost of living in a post-petroleum era. There was a clear trend toward ending the practice of "protecting" certain industries and making more of them "exposed to competition". In addition to interest in information technology, a number of small - to medium - sized companies have been formed to develop and market highly specialized technology solutions. The ideological divide between socialist and non-socialist views on public ownership had decreased over time. The Amadiro government sought to reduce its ownership over companies that require access to private capital markets, and there was an increasing emphasis on government facilitating entrepreneurship rather than controlling (or restricting) capital formation. A residual distrust of the "profit motive" persisted, and Pharonian companies were heavily regulated, especially with respect to labor relations. There were also a number of political issues having their origins in ecological concerns, including the refineries at Attalia and the hydroelectric power plant of the Del Rey River at Schottegut.
3. 2005-2021
In the midst of this environment, as well as a personal-life scandal of President Amadiro that socked the Pharonian society, the 2005 elections brought an end to the socialist rule for 12 years. The Lyg party that maintained neutrality over most of the past election processes, voted against the socialists this time, as did some RAF Mp's, mainly from Centralia's and Columbia's National Monteneros Party. In the closest election since the 1993 Keer Gray election, the Parliament voted 65 year old Jan Fenekin, the National Democratic Party leader from Parietal, DIA as new Pharos President. The new Conservative government of Jan Fenekin made a small turn from previous years with a policy of stimulating the stagflated economy with tax cuts, economic liberalization, deregulation of markets, and measures to curb the record-high inflation (13.6% in 2004).
Finance minister Onum Golein set in motion many reforms while backing traditional Socialists concerns such as social security, high taxes and the industrialization of natural resources. By the late 2000s, Pharos had paid off its foreign debt and had started accumulating a sovereign wealth fund. Since the 1990s, a divisive question in politics has been how much of the income from petroleum and ores production the government should spend, and how much it should save. The Pharonian trade surplus for 2008 reached approximately US$80 billion. With an enormous amount of cash invested in international financial markets, Pharos had financial muscles to avert many of the worst effects of the financial crisis that hit most countries in the fall of 2008. As most western countries struggled with burgeoning foreign debt, Pharos remains a nation of stowed-away wealth, financial stability and economic power to meet the challenges of the worldwide economic crisis. In spite of the crisis, Pharos still runs a 9% state budget surplus, being the only western country to run a surplus as of 2009. In 2007, the Fenekin administration sold one-third of the state-owned oil company ARD in an IPO. The next year, the main telecom supplier, TelePro, was listed
on Nobel Stock Exchange. Since 2005, economic growth has been rapid, pushing unemployment down to levels not seen since the early 1980s (unemployment in 2007: 1.3%). The international financial crisis has primarily affected the industrial sector, but it is unlikely that unemployment will surpass 3.5% in 2009-2010. Pharos is among the least affected countries of the international economic downturn.
In June 2009 election, National Alliance led by a young generation of politicians, the Generation-X as they came to be known, made a land-slide victory over Central Union, taking 74 seats in the new Parliament, an almost absolute majority, electing 49 year old Janov Pelorat as Pharos President. The new administration almost immediately focused on the world-wide economic crisis and its effect on Pharonian economy. Foreign Policy Magazine ranks Pharos last in its Failed States Index for 2009, judging Pharos to be the world's most well-functioning and stable country. The Pelorat administration won a land slide reelection in 2013 with 83 parliament seats.
Continued oil and gas exports coupled with a healthy economy and substantial accumulated wealth lead to a conclusion that Pharos will remain among the richest countries in the world in the foreseeable future.
In 2021 Sivena Venabili led Central Union to Federal victory after 4 consecutive Natal administrations and was voted President of Pharos.