George Osborne on the €uro crisis: Right diagnosis; wrong prescription
Osborne says that the €uro crisis is doing huge economic damage, not least in the UK. And in my view, he’s right. So he says it’s urgent for the eurozone to proceed to full fiscal (and therefore political) integration. But there, I fear, he’s wrong. And I’m not alone. My namesake the excellent economist Roger Bootle takes the view that a €uro break-up would be the first step to recovery. Of course it would result in short-term chaos, but would that be much worse than what we have now? Ask the Greeks and the Spanish.
And in the medium-term, as national currencies recovered fair value, real economic recovery could begin, ushering in growth and jobs. It could be like “Golden Wednesday” when Britain left the ERM in 1992. Recovery started right there and then.
Just now the media are rejoicing about the Spanish bail-out, although there’s a big question whether €100 billion will do the job. But there’s an even bigger question: why do they expect that merely pulling bankrupt banks back from the brink will, by itself, kick-start economic recovery? It won’t.
The only way that Greece and Spain and the other €uro-Med countries will get back in the game is to have competitive currencies. Within the €uro, their exports and their labour markets can never recover competitiveness. So the message for George is this: The €uro is the problem, not the solution. It is a universal bankruptcy machine. Any plan that fails to dismantle the €uro will fail to achieve recovery.
Brussels (and Berlin & Frankfurt) have a choice. Either they dismantle their beloved single currency, in as orderly a way as they can manage. Or the markets will do it for them, in a very disorderly way indeed. Piecemeal bailouts are not the answer.
Ambrose Evans-Pritchard on the €uro débâcle
“The EU machinery (European Financial Stability Mechanism, EFSF, and European Stability Mechanism, ESM) exists largely on paper, a €500 billion declaration of intent … bureaucrats should not take it upon themselves to force sovereign democracies to their knees … All we know is that the current policy is hopeless”.
On June 11th, we saw markets surge with optimism following the €100 billion Spanish bank bail-out. By the end of the day, and into June 12th, we saw them crash back. “He marched them up to the top of the hill, then he marched them back again”. One step forward, two steps back for the €uro.
There’s a pattern here. Earlier bail-outs seemed to last for months, or at least weeks, in terms of restoring sentiment and encouraging the markets. Now they’re dismissed within hours. The €uro is like a drug addict who finds he always needs a bigger fix than last time to get the same high.
Financial Times: The people want an EU referendum
FT 21st May 2012 Page 2
30% want to stay in EU
46% want to leave
26% don’t know
As this ComRes poll in the Financial Times shows, both Labour and the Tories are under pressure to clarify their position before the 2014 Euro elections when the UK Independence Party hopes to build on the 16.5% vote share and 13 seats it secured last time.
The UKIP factor is particularly threatening to Mr Cameron. Yesterday’s poll found that 10% of those who had voted Tory in 2010 had already decided to switch to UKIP, and a further 26% were ‘seriously considering’ doing so. Apologies for not including a link to the results — the FT online is behind a pay wall.
What the Germans are saying on Greenery
Germany Fears De-Industrialisation
As a result of Germany’s green energy transition, electricity prices are exploding. Consumers and businesses are paying the price while Germany faces gradual de-industrialisation. Economists estimate that the cost of the green energy transition will total 170 billion Euros by 2020. This is more than double what Germany would have to write off if Greece were to withdraw from the monetary union. “The de-industrialization has already begun”, the EU Energy Commissioner Guenther Oettinger has warned. —Handelsblatt, 23 May 2012
Chief Inspector of Constabulary
For all I know, Tom Windsor, proposed by the Government as the new Chief Inspector of Constabulary, may well be an excellent chap, a capable lawyer and a great administrator. There may be an excellent case for bringing in an outsider with a new perspective and an alternative view. If, as I understand, one of his key tasks is to review the performance and activities of police forces, then a man from outside the police force may have a much more objective view. A former Chief Constable would smack of poacher-turned-gamekeeper, and might be too inclined to favour his former colleagues, and to overlook any
Spanish practices that may have crept in. So far, so good.
But given that the government is already at loggerheads with the police over funding, staffing levels and a range of pay-and-rations issues, is it the smartest thing just now to poke them in the eye and create a second front? Or is it just downright reckless and thoughtless? The Coalition has made a series of errors of judgement and created an impression of losing touch and losing the plot. This looks rather like another unforced error.
A New Deal for Carers
The government’s plan to offer a new deal to carers is, on the face of it, both good policy and good politics. Just one catch: who pays for it? The Coalition is rather too fond of placing new obligations on local authorities without thinking enough — or at all — about how those obligations are to be funded.
Letter to Geoffrey Lean – Telegraph environment correspondent
Here is a copy of the letter I wrote to Geoffrey Lean in response to his recent article in The Telegraph – I find it astonishing that despite the ruinous costs of wind energy — not to mention the fact it is ineffective, requiring serious backup — so many intelligent individuals continue to suggest wind as a serious answer to Britain’s energy security.
I am very disappointed that you keep banging the drum for wind, in spite of emerging evidence that wind power fails to deliver significant reductions in CO2 emissions, and is vastly expensive. Have you not seen the magisterial study by Professor Gordon Hughes of Edinburgh University (GWPF Report 7), which shows that even on the most generous assumptions, the combination of wind and the necessary conventional back-up results in nugatory emissions reductions (and perhaps none at all), and involves capital costs nine to ten times higher than combined cycle gas? Have you seen that Dieter Helm of Oxford University (an advisor to DECC) has said that UK/EU climate mitigation policies have failed, and that we should rely more on gas? Or Lord Smith of the Environment Agency, who says that wind and nuclear cannot fill the gap, and (also) that we need more gas?
Do you simply dismiss the views of these respected figures?
You dismiss the need for conventional back-up by a casual reference to existing spare capacity (as does, for example, Green MEP Claude Turmes). But in the UK, where we are closing down both nuclear and coal plants this decade, we need all the existing capacity we have plus a great deal more, if we are to keep the lights on. So if as the government proposes we want 30% of electricity from wind, we will need a similar volume of gas capacity in addition to provide the back-up. Are you aware that the through-cycle gas plants needed for wind are only around half as efficient as combined cycle, which would be the preferred stand-alone option? So they produce nearly double the emissions per KW.
Or that gas back-up will be buying spot-market gas at peak times and at peak prices, and be hugely expensive? Or that these gas plants, run intermittently, will never recover their initial investment, and will therefore very likely not be built at all?
You say that wind is “the cheapest alternative”, but this is nonsense if you cost the full system of wind plus back-up. Prof Hughes’ paper shows that the cost-per-ton of emissions reductions, through wind, even on very generous assumptions, is a massive £270 per ton. Even from a green viewpoint, you should see that this is a disaster — if we want to cut CO2 emissions, there are much cheaper ways (or put it the other way, for the same money, you could achieve vastly bigger reductions).
You should know that our (preposterous) emissions reductions targets could be achieved more quickly, more cheaply and more securely by a combination of gas and nuclear, than by renewables. You comment on the increasing price of gas, yet the shale gas revolution has halved power costs in America, and will soon reduce prices globally — even given our government’s reluctance to engage with the technology.
Finally, you may be right that many people do not oppose wind power. I put it to you that this is because they have no idea of the true costs. You would do a great service to Telegraph readers if you would present a more balanced view of the economic and ecological disaster represented by our obsession with wind power.
ROGER HELMER MEP
Wind farms are completely useless
In the letter above, I refer to Gordon Hughe’s paper on wind farms (pdf). Hughes is Professor of Economics at the University of Edinburgh.
I was hugely impressed by it. I had always realised that wind power was much more expensive than the wind industry pretends. But I hadn’t realised that the capital costs of wind plus back-up was up to ten times that of gas alone, nor that the net savings of CO2 were so derisory — or depending on circumstances, possibly zero.
You may not have time to read all 39 pages — it gets a bit technical in parts — but if not, and if you have any interest in climate and energy issues, please at least read the two-page Executive Summary.
Hague hints at Syrian intervention
We are all appalled at the dreadful things going on in Syria. Foreign Secretary William Hague is now “refusing to rule out military intervention”, and we all know where that leads.
No matter how compassionate and high-minded his objectives, Hague needs to pause and think, and perhaps read Luke 14:31: “Or what king, going to make war against another king, sitteth not down first, and consulteth whether he be able with ten thousand to meet him that cometh against him with twenty thousand?”
We need to count the cost. Britain can no longer afford to be the world’s policeman. We have had three recent interventions in the Middle East which have been hugely expensive in terms of blood and treasure, and have achieved very mixed results.
Many British voters (and the mothers of our soldiers) will be saying “Oh no, not again”.
BBC3’s “Free Speech”
My new assistant, Alexandra Swann, appeared on the panel of BBC3’s “Free Speech” on the 16th May. Free Speech is an hour long live youth debate program, a sort of youth Question Time, designed to engage young people in the most important political discussions of the day.
Alexandra appeared alongside Cherry Healey, who presents BBC3 documentaries, Jamal Edwards, one of the country’s most successful entrepreneurs, and Kojo, an up-and-coming DJ and comedian. Topics up for discussion were legalisation of drugs, why young black men find it so difficult to find employment, private education, and sexism in rap music.
It was a tough crowd and Alexandra was booed when introduced as “a rising star of UKIP”, but I think she did very well and by the end she had the audience cheering, especially after her Libertarian but rational answer about whether or not we should legalise drugs. You can watch Alexandra on BBC iplayer or visit her website.
The TPA’s “Make Argentina Pay” Campaign
There is a campaign underway by The Taxpayers’ Alliance called “Make Argentina Pay”. It calls on the British government and World Bank to stop lending substantial sums to Argentina, which in 2001 presided over the largest structural default, in terms of loan agreements with the international community and private creditors, in the entire history of mankind. World Bank loans to Argentina currently stand at $16.2 billion, and because Britain is a major shareholder in the World Bank, we are underwriting £200 million of loans to a country that makes open military threats against the Falklands.
Argentina’s despotic government refuses to provide investors and the international finance community with accurate figures to shed light on its financial status and economical health, which surely should be known if the world continues to lend such gargantuan sums in this economic climate. Yet Argentina remains a recipient of international loans and is a member of G20, despite owing the world billions. Why is the international community letting Argentina get away with this and why on earth is Argentina not honouring its debts?
Not content with economic ambiguity, threatening the Falkland Islanders’ right to self determination, a refusal to negotiate that is confrontational in itself and a habit of reneging on debts, Argentina have recently seized — sorry, “nationalised” — the Spanish oil firm Repsol YPF. The Bow Group has recently written outlining why these factors amount to a strong argument for Argentina’s removal, or at least suspension, from the G20.
There is an e-petition that I would urge you to sign, calling for an end to British taxpayers’ money being used to support World Bank loans to Argentina. It can be found here.
Growth and jobs
Wallace (& Gromit) look-alike Ed Miliband has dampened talk of an EU referendum, “insisting that a referendum should not take priority over the eurozone’s economic problems”. He said that instead, “we should concentrate on growth and jobs”.
But Ed — a key reason why we want to get Britain out of the EU is because Brussels regulation is a massive drag on growth and jobs. Getting out of the EU would demonstrate our commitment to growth and jobs. To a large extent, that’s the whole point of it.
A trip to Strasbourg
MEPs often moan about the difficulties of getting to Strasbourg. Yesterday was unusually bad, but not entirely untypical. I set off from just south of Bristol (where I’d had a stop-over with an old friend) at 8:00 a.m., for Birmingham airport.
The flight, due out at 1:40, was delayed by an hour, so instead of arriving in Frankfurt around four, it was five when I got there. The car for Straz had long gone, since an earlier MEP with whom I should have shared had demanded he wait no longer.
(Before you ask, it was the rotund and highly-regarded German Elmar Brock, and arch-Federalist EPP member). So the car didn’t leave until 7:00 p.m., and I arrived at the parliament around 9:00