Der Spiegel: The Delusions of the euro-zone

"The Lies that Europe's Politicians Tell Themselves" is the apt title of Armin Mahler´s Der Spiegel article about what Angela Merkel and the other leading European politicians have been doing in the wake of the euro-zone crisis.

Almost all the leading political figures in Europe, including e.g. former German chancellor Helmut Schmidt, current chancellor Merkel, the head of the Euro Group Jean-Claude Juncker, have repeatedly stressed that there is no crisis of the euro, only a debt crisis in some of the euro-zone countries:

If it were only that simple. Unfortunately, it isn't. Simply put, without a common currency, Greece's problems wouldn't have spilled over into Spain and Italy. And, without this risk of contagion, politicians and central bankers wouldn't be staggering from one crisis summit to the next, ever driven by the fear that the currency union might break apart.
Without the euro, Greece could recover more easily. It could devalue its currency and thereby make its national economy competitive once again.
Indeed, without the euro, Greece wouldn't have ever gotten into this calamitous situation in the first place. The fact that it was a member of the currency union was the only thing that allowed the country to borrow money at such favorable rates and get itself up to the neck in debt.

Nevertheless, not one of the currency union's founding fathers will admit that it was poorly designed. The currency union brought together countries that weren't compatible economically simply because it was opportune politically. It replaced the currency exchange rate, the standard mechanism for balancing out differences between national economies, with the principle of hope. Now, the common currency was supposed to make the economies align themselves with each other, practically automatically.
In reality, however, the differences between the economies of the euro-zone countries became larger rather than smaller. The so-called "Club Med" countries benefited from the low common interest rate. They lived beyond their means and they consumed more than they could afford -- to the detriment of their already weak ability to compete.

The lies and delusions of the failed European leaders will according to Mahler in the end lead to this:

In the end, the currency union will shrink. Greece and possibly even other countries will have to abandon the euro in order to be able to get back on their feet with the help of their own, significantly devalued, currency.
The euro saviors and their citizens must finally face the uncomfortable truth. Under current conditions, the euro will fail economically because the differences between euro-zone countries are too great.
But new conditions that would give the euro a firm economic foundation are almost impossible to implement due to political factors. In any case, they can definitely not be put in place quickly enough to combat the current crisis.
Indeed, the would-be euro saviors are suffering from yet another delusion: that they are able to buy all the time they need, without any limits.

Read the entire article here


PS

Merkel, Sarkozy and the others are obviously hoping to be able to postpone the crucial decisions until after they have left the scene, but that hope may be another delusion.

Champagne: “The last 10 years have been excellent due to the global warming"

Whatever you think about global warming, there is a good reason to uncork a bottle of good champagne this New Year´s Eve:

Champagne is entering a third great phase of sales success according to Pierre-Emmanuel Taittinger.

Pierre-Emmanuel also spoke of the positive benefits from climate change on Champagne production when addressing those at the masterclass, which was held in London’s Vintner’s Hall, and organised by the Institute of Masters of Wine.
“The last 10 years have been excellent due to the global warming,” he said, referring to the Champagne harvests.
In fact, such has been the quality of the grapes, he added that Champagne’s non-vintage category should be classed as multi-vintage.

Read the entire article here

Happy New Year 2012!

The US-led shale gas revolution ends Russia´s plans to dominate the European energy market

It is now become increasingly obvious what is behind Vladimir Putin´s recent outbursts against shale gas: The US-led shale gas revolution has already put the government controlled Gazprom on the defensive. Gone are the days when Putin and his henchmen thought that Russia would be able dominate the European, and indeed the global energy markets through Gazprom and Nord Stream.

The latest proof of the completely new situation is the fact that the development of Russia´s gigantic arctic Shtokman gas fields has again been delayed. Gazprom and its Norwegian and French backers had counted on exports from Shtokman to the United States, but the sharp increase in the U.S. shale gas production means that there is no market in the US for Russian gas. And when Poland and other countries get their shale gas production going, it will be not be profitable to pump expensive Shtokman gas to Europe either. In the long run even exports to China are questionable when China begins to seriously exploit its own shale gas resources.

Gazprom and its European partners are now hoping to get tax breaks for their expensive Shtokman project. However, not even subsidies and tax breaks will make drilling in the difficult arctic environment profitable, when there is more than enough unconventional gas on the world markets.

Here is just one example of what the shale gas revolution means for the US:

 The stats on domestic natural gas are also eye-opening. Recoverable natural gas in North America is estimated at 4.2 quadrillion — or 4,244 trillion — cubic feet. At the current rate of consumption, that’s enough natural gas to power North America for the next 175 years. And it means that our continent has more robust gas reserves than Russia, Iran, Qatar, Saudi Arabia, and Turkmenistan — combined. Roughly 272.5 trillion cubic feet of that total are in the United States. … In the late 1990s, pundits were predicting a sharp uptick in natural gas prices due to a decline in reserves. Just a few years later, American production actually increased dramatically. The reason? Human imagination bred breakthrough technological innovation. Developers built new extraction tools, making it economical to tap into reserves buried in shale and other tight rock formations. (Forbes.com, Robert Bradley)

The reality of Durban: India will not sign any legally binding agreement

The celebrated Durban "agreement" is clearly a "road map" to nowhere. India is definitively not intent on signing any legally binding agreement to reduce its CO2 emissions:

India will not sign any legally binding global agreement for emissions reduction, as the country needs to eradicate poverty through economic growth, Environment Minister Jayanthi Natarajan said today.

"There is no question of signing a legally binding agreement at this point of our development. We need to make sure that our development does not suffer," Natarajan said in Rajya Sabha.

She was responding to clarifications on her December 21 statement in the House after she returned from the United Nations Climate Change Conference at Durban early this month.

Seeking clarification, Leader of the Opposition Arun Jaitley said if India was made legally bound to cut emissions, the country's economic growth would suffer.

Natarajan said, "Our emissions are bound to grow as we have to ensure our social and economic development and fulfil the imperative of poverty eradication."

Read the entire article here

Poverty eradication as an imperative is clearly the only sensible policy for India. And it should be supported by the rich industrialised countries.

Celebrating the New Year the Russian way

We are fast approaching the time for all the exciting head of state New Year´s speeches. Russia´s outgoing president Medvedev was the first to deliver his speech. The speech has been very well received in Russia, with almost 1 million hits within 24 hours of appearing on the Internet.

The big question is now, whether the tiny president will Join Roman Abramovich and his 300 guests for the traditional New Year´s party on the Caribbean island of St Barts. The background of Medvedev´s speech suggests that he may already be there.

This year Roman Abramovich, the billionaire Russian oligarch, plans to eclipse his previous New Year's Eve celebrations by spending more than £5 million on his 300 guests.

Rock band the Red Hot Chili Peppers will play at the exclusive event, held at the Chelsea football club owner's £58 million estate on the Caribbean island of St Barts.

The estate near Gouverneur beach was previously owned by US banking tycoons the Rockefellers and has a number of swimming pools, pavilions and beach bungalows.

Guests have been told to wear "island chic" at the event, which will run from 10pm until 4am, with partygoers retiring to a fleet of super-yachts in the marina at the end of the evening.

Last year, Demi Moore, Rosie Huntington-Whitely, Stephanie Seymour, Ellen DeGeneres and Star Wars creator George Lucas were among dozens of famous names on the invitation list.

Read the entire article here

PS

One would hope that Gerge Lucas is on Abramovich´s guest list also this new year´s eve, because it could be the last New Year´s Eve party for him:

"George Lucas sits down and seriously proceeds to talk for around 25 minutes about how he thinks the world is gonna end in the year 2012, like, for real. He thinks it.

 

The dramatic impact of the shale gas revolution in the US

A new IHS Global Insight study about the dramatic impacts of shale gas production in the United States should be compulsory reading for European decision makers:

 As recently as 2007, it was believed that the country would soon need to import large volumes of liquefied natural gas (LNG) for domestic consumption. Instead, shale gas production has more than doubled the size of the discovered natural gas resource in North America--enough to satisfy more than 100 years of consumption at current rates.

A key reason for the shale gas industry's profound economic impact is its high "employment multiplier"--the indirect and induced jobs created to support an industry. For every direct job created in the shale gas sector, more than three indirect and induced jobs are created, a rate higher than the financial and construction industries, the report finds.

Here are some of the report´s key facts:

• Shale gas had grown to 27 percent of U.S. natural gas production by 2010; it is currently 34 percent and will reach 43 percent in 2015 and more than double by 2035 to 60 percent
• In 2010, the shale gas industry supported more than 600,000 jobs; by 2015 the total will likely grow to nearly 870,000 and to more than 1.6 million by 2035
• The shale gas contribution to the U.S. gross domestic product (GDP) was more than $76.9 billion in 2010; in 2015 it will be $118.2 billion and will triple to $231.1 billion in 2035
• Over the next 25 years, the shale gas industry will generate more than $933 billion in tax revenues for local, state and the federal governments
• Savings from lower gas prices, as well as the associated lower prices for other consumer purchases, equate to an annual average addition of $926 in disposable income per household between 2012 and 2015, and increase to more than $2,000 per household in 2035 on an annual basis

Read the entire article here

Compare this with the truth about "green" jobs in the U.S. and Europe.

The New Year 2012 could finally bring a solution to the eurozone crisis

A look into the crystal ball finally offers some good news for the battered eurozone:

(picture provided by the EU photo service)

2012 could be the year when the leaders of the European Union find out the real reason behind the ongoing eurozone crisis:

It´s global warming, stupid!

The real PIGS of the Mediterranean

The troubled PIGS (Portugal, Italy, Greece and Spain) are all in the warm southern part of the European empire (EU). It is common knowledge that people become lazy if it is too warm to work. That is exactly what has happened in the ever warming PIGS zone. However what is completely new, is that a new study by the Spanish International Environmental Studies Authority (SIESTA) now has found a clear correlation between laziness and spending. This confirms a vicious circle: The warmer it gets, the lazier people become, and the lazier you are, the more you are inclined to spend (particularly other peoples´ money).

Footnote: For some unknown reason, this correlation does not seem to apply to the Irish.

The important findings of the SIESTA study will finally enable the next EU summits to take decisive action in order to save the euro from the abyss. The SIESTA researchers have suggested one possible solution, which is said to be seriously considered in Brussels; to redirect the € billions of EU climate change "mitigation" aid to the PIGS zone, instead of, as is the case now, giving the money to dictators and corrupt governments in some of the worst countries in Africa.

               A mini documentary on the impact of global warming in Spain

EU climate change commissioner Connie Hedegaard could not be reached for a comment. She is reported to be critical towards the policy change. However, it is rumoured that her boss José Barroso, a member of the PIGS zone, has already told her to shut up.

The Bulgarian Barroso

The Bulgarian Barroso

During the last days of the Annus Horribilis 2011 for the eurozone, our thoughts go to the eurocrats in Brussels, who have had to forsake even their cherished Christmas parties in order to keep the dream of a succesful euro alive:

"We are in sort of eternal crisis mode, so there's no time for Christmas parties," said another EU official working on euro zone debt issues who said he had worked every weekend since mid-November. "Normally, it would be all over by this time of year. It would be very quiet, but everything's changed."

And the Commission never sleeps. Even on Christmas day there is one brave lady, hidden somewhere in the myriad of corridors of the Commission´s Berlaymont building, who is "working at full steam" in order to save Europe from the abyss:

Kristalina Georgieva will take up the office of President of the European Commission Jose Barroso during the Christmas season. “I will be Barroso for Christmas,” EU Commissioner for International Cooperation, Humanitarian Aid and Crisis Response said smiling. It turns out that instead of getting in the Christmas mood she will be working at full steam from the Christmas Eve till the first days of the New Year and will be Commissioner on duty for the entire European Commission.
“In any crisis there’s just one recipe for a way out – to stay united and to act with resolution,” the Bulgarian EU Commissioner said commenting the ranking of the major events in 2011 by Darik Radio where the economic crisis in Europe topped the list. “Looking ahead one can clearly see that the coming year will be tough, but we will see the light very soon,” she said assuredly.

How assuring it is to know that the Bulgarian Barroso is there, ready to "act with resolution" if needed!

The only thing that makes one a little bit worried is that there is no information on whether there is a holiday stand-in also for the President of Europe, haiku Herman van Rompuy. Is there perhaps a Romanian Rompuy?