Wednesday, March 31, 2010

The greatest moral conundrum of our time … until the next one

What a great headline and interesting commentary on Global Warming. Thanks Sue for the article.


The greatest moral conundrum of our time … until the next one
March 31, 2010

Comments 136

Last year, we were told, the most important issue for the country - for the planet - was greenhouse gas emissions. This meant the Senate had to pass the government's carbon pollution reduction scheme.

It was so urgent it had to be legislated before the end of the year, and before the summit in Copenhagen.

We were led to believe if the Senate refused to pass the legislation there would be a double dissolution of Parliament. The Liberal leader, Malcolm Turnbull, warned this would lead to a humiliating election defeat for the Coalition. Kevin Rudd declared climate change ''the great moral and economic challenge of our time''.

Now the legislation has become less important than getting 30 per cent of the GST from the states so the government can rearrange financing in the hospital system. Can a momentous moral challenge fizzle out like this? Or are you beginning to suspect all the crisis was politically driven?

I was thinking about this on Saturday night during Earth Hour - when people are urged to turn off their lights to show they support reducing greenhouse gases and saving the planet. Four years ago newspapers ran front-page pictures of Sydney in darkness as people everywhere switched off their lights and contemplated the impending doom that fossil fuel electricity would bring upon us. Earth Hour did not attract such prominent coverage this year. Most front pages ran with pictures of the formula one grand prix in Melbourne - a gas-guzzling, high-octane car race that is shown on millions of plasma screens guzzling electricity all around the world. It is hard to think of anything less devoted to renewable energy and carbon reduction.

The Victorian and NSW governments are so concerned about gas emissions they are competing against each other with taxpayers' money to get future rights to host the event.

What amazes me is the way this greenhouse campaign can be switched on and switched off as quickly as the lights during Earth Hour. And for the moment the government has decided to switch it off so we can all get back to talking about health funding.

Our monthly Anglican newspaper broadly reflects the prevailing progressive left opinion. In the December issue, in the lead-up to the government's self imposed timetable for securing the emissions trading legislation, it ran four extensive articles on the need for action over climate change. It published no contrary views.

In fact, the Copenhagen summit was given more column inches than Christmas, which is quite an achievement for a religious newspaper. But the issue has hardly registered in the newspaper since. Even though nothing has happened, the urgency has gone out of the campaign.

The activists from NGOs who flew to Copenhagen to get urgent action on carbon emissions have gone back to their previous causes. This doesn't mean they are insincere - on the contrary. It's just that their enthusiasm can be heightened or lessened with adroit management from the political professionals running the government's election year agenda.

I watched this issue elevated in the lead-up to the 2007 election, when it was used to illustrate how the Howard government was old, tired and out of touch. It was brought to fever pitch late last year to wedge the Coalition.

Without any immediate political target, it lies dormant. But I expect it will be back for the election - probably in an attack on the Coalition's policy on direct abatement measures. Which is why the public is entitled to get a little cynical. You never hear Rudd arguing for an emission trading scheme as if he really believes it is ''the great moral and economic issue challenge of our time''. He raises it, he drops it, it comes and it goes - like all the other issues of the regular media cycle.

Those scientists who made exaggerated claims about the Himalayan glaciers undermined trust in the science behind global warming. And those politicians who made exaggerated claims about their policy proposals have undermined trust on the political issue. It would have been better to be honest enough to admit the uncertainties, and acknowledge the downside of their policy. As it is, Earth Hour has become an apt metaphor for their tactical approach - a time to spread darkness, rather than illumination.

Peter Costello is a former federal Liberal treasurer.

Tuesday, March 30, 2010

Greece bail out ! We have not learned from the past.

From the book this time it is different " Eight centuries of financial folly" An empirical study and database of financial crisis. From the preface.

"From 1800 until well after World War 2 Greece found itself virtually in continual default of its sovereign debt obligations"

The book discus's that many countries that have previously been in default end up in the same place again as the lending is justified as "this time it will be different". How many times have we heard that before? I wonder if that is why there is a saying "Beware of Greeks bearing gifts"?

Europeans Agree on Bailout for Greece.

From left to right: French President Nicolas Sarkozy, Spanish Prime Minister Jose Luis Zapatero, Greek Prime Minister George Papandreou and German Chancellor Angela Merkel arrived for a working session of the EU summit at the European Council headquarters in Brussels on Thursday.
.BRUSSELS—Leaders of the 16-nation euro zone, bridging sharp philosophical divides that tested the decade-old currency bloc, backed a deal under which they and the International Monetary Fund would jointly bail out Greece should the country's debt troubles intensify.

The agreement won't immediately trigger a Greek rescue, but it lays the groundwork for both the first intervention by the IMF in a euro-zone country and a major relaxation of the tight restrictions on country-to-country bailouts that have been a feature of the currency union since its birth. The accord suggests Greece's financial travails are forcing the euro zone further along a path to greater economic coordination that has been resisted by national governments.

France gets on board for a possible Greek aid package as a senior Chinese central bank official criticizes the handling of the Greek debt crisis.
.The European Union has been riven for weeks by disagreements over how to handle the troubles with Greece, which is running heavy budget deficits and struggling to refinance its hefty debt.

Germany, Europe's largest economy, made the IMF's involvement a condition of its own participation in any Greece bailout. Voters and lawmakers in fiscally frugal Germany are loath to open their wallets to bail out more free-spending peers, and the IMF would absorb a chunk of the cost. France saw turning to the IMF—normally a route for developing nations—as an embarrassment to the wealthy bloc, but it dropped its objections in exchange for Germany's agreement to lay out explicit arrangements for a rescue.

Only one western European nation—Iceland, in 2008—has received aid from the IMF since 1976, when the U.K. took a humbling loan from the fund.

French President Nicolas Sarkozy and German Chancellor Angela Merkel hammered out the compromise here Thursday just hours before a meeting of all 27 EU nations. Under the terms of the deal, EU nations would direct any bailout—and provide a majority of its funding through direct loans—and the IMF would play a supporting role. The Franco-German accord was backed later in the evening by all 16 members of the euro zone.

Mr. Sarkozy said the agreement "represents an insurance policy for Greece, allowing it to implement the courageous reforms that it has entered into without being penalized by speculation and irrational behavior by the markets."

In unusually frank acknowledgments, EU leaders said the inclusion of the IMF was a practical necessity. "It was the only way to reach consensus," European Commission President José Manuel Barroso said.

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The Source: The Road to Moral Hazard Analysis, video, more
.The European portion of the aid for Greece wouldn't be automatic, the text of the accord said, and would come only as a last resort, in the vaguely defined event that "market financing is insufficient." Greece has more than €20 billion ($27 billion) in debt coming due in April and May, and Greek officials hope they'd be able to get access to at least that much.

The Franco-German compromise gives Greece long-sought specific assurances of European aid—but also preserves for Ms. Merkel a veto over pulling the trigger: Euro-area countries must agree unanimously before dispensing any aid, according to the agreement.

Greece has argued for weeks that the interest rates of more than 6% that it must pay to borrow money from bond markets are unacceptable. Prime Minister George Papandreou has been pressing his EU peers to help reduce Greece's borrowing costs.

But a senior German official said high borrowing costs wouldn't be enough to trigger the package. "'Insufficient' [market financing] should not be understood to mean 'uncomfortable' or 'burdensome,'" the official said.

"The fact that the euro group and the IMF are saying that they are guaranteeing that they will not abandon Greece should be enough to lower spreads," EU President Herman Van Rompuy said.

European Central Bank President Jean-Claude Trichet continued to voice reservations about a prominent IMF role in a Greek rescue. "If the IMF or another body exercises responsibilities in place of the Eurogroup or governments, this would obviously be very, very bad," he said in an interview with Public Senat television. Later, Mr. Trichet described himself as "extremely happy" that the euro zone reached a deal.

After his initial comments were reported, the euro slipped below $1.33, touching new 10-month lows, a sign that the leaders' agreement may not immediately restore financial-market confidence in the euro zone.

Loans from EU countries would be at rates high enough to prod Greece to raise money in the capital markets, according to the agreement, which gave no figures and said nothing about the size of any financing package. The IMF, which lends under its own rubric, would almost certainly provide better terms for its tranche. The IMF on Thursday declined to comment.

Earlier Thursday, several European leaders, including Spanish Prime Minister José Luis Rodríguez Zapatero, the prime minister of the Netherlands and the finance minister of Austria, had signaled they'd be open to a joint EU-IMF plan.

While aid is deeply unpopular in Germany, others, like France and Luxembourg, which regard the euro as the bloc's greatest creation, see defending the currency's stability as an end worth paying for.

The Greek turmoil and Europe's slowness to stem it have raised questions about the currency's future.

Euro-zone countries have struggled for more than a month to figure out the means of providing aid, after saying, vaguely, in February that they would do something if necessary.

There is no instruction manual for rescuing a euro-zone country nearing default, and the EU's treaties contain provisions restricting countries from assuming their troubled peers' obligations.

Those provisions were installed at the common currency's birth largely to placate Germany, which worried that it might one day be pressured to use its hard-won economic muscle to help a less-frugal peer.

Precisely that situation came to pass this year when it became clear Greece, saddled with mounting debt and deficits, might not be able to refinance its heavy debts.

.Germany, reluctant to risk its taxpayers' money for financially wayward Greece, held out against aid. But it signaled last week that it would lend support to a last-resort system of loans from stronger countries to Greece. Its price: The IMF had to be involved, too.

A month ago, that was anathema to many on the continent—particularly the French, who saw it as an admission that the euro zone couldn't handle its own affairs. Luxembourg premier Jean-Claude Juncker, president of the council of euro-zone finance ministers, called the idea of IMF involvement "absurd," hypothetically comparing it with the U.S.'s turning to the fund for a bailout of California.

But in a sign of Germany's economic sway over the bloc, Berlin got its way.

Ms. Merkel, before leaving for Brussels Thursday morning, told the German parliament that she was in favor of an aid plan that "in an emergency" would include both loans from EU countries and "substantial" help from the IMF.Ms. Merkel, before leaving for Brussels Thursday morning, told the German parliament that she was in favor of an aid plan that "in an emergency" would include both loans from EU countries and "substantial" help from the IMF.

Ms. Merkel also said that after Greece's debt woes have abated, the euro zone must reopen EU treaty negotiations to impose tough new measures and sanctions to prevent such problems in the future.

"We've seen that the euro zone's current instruments are inadequate," Ms. Merkel said.

Greece's government deficit hit nearly 13% of gross domestic product last year, way over the 3% limit prescribed by euro-zone rules. Its debt was 113% of GDP, against a 60% limit. Years of efforts by EU officials to nudge Greece into changing its ways have had little effect.

Ms. Merkel said she supported German Finance Minister Wolfgang Schäuble's proposal for a European Monetary Fund, and the power to exclude profligate countries from the common currency bloc—both radical new measures that would require a lengthy ratification process and the approval of all 27 EU member states.

"I will also champion the necessary treaty changes," Ms. Merkel said.

The troubles in Greece, which represents just 2% of the EU's economy, have weighed heavily on the common currency. The euro is off about 7% against the dollar since the beginning of the year.

—Andrea Thomas and Adam Cohen contributed to this article.