Tom Streithorst
Banks all over Europe hold Greek debt
The euro, which has been falling for months, rallied yesterday as markets grew slightly more confident that Germany would bail out Greece. For years, the strong economies of Europe have insisted that no matter what, they were not responsible for the debts of other eurozone nations. However, this policy may be changing.
Is Greece Europe’s Fannie Mae? The US corporation, put into government conservatorship in the dark days of September 2008, flourished for years because of an implicit guarantee from the federal government. Markets took the guarantee seriously, allowing Fannie to borrow at preferential rates, only a few basis points over comparable treasury bills. Shareholders and management made out like bandits, exploiting their huge funding advantage over other financial companies. Even as Fannie became dangerously overleveraged, markets shrugged off the risk. They knew Uncle would come to the rescue should anything go wrong. Read more »
Stephen Nickell
During the second half of the 20th century, the average age of retirement fell in the developed world. At the same time, life expectancy rose. The consequences of these facts for pensions are obvious. If pensions are to keep pace with earnings, then funded schemes need ever-increasing contributions and unfunded, pay-as-you-go schemes require ever-increasing tax rates. Yet it was not until the 1990s that people woke up to this problem.
From the mid-1960s to the mid-1990s, the average age at which British men retired fell from around 68 to around 62. The equivalent ages for women were 66 and 61. The rate of decline was even greater in some European countries. But since the mid-1990s this trend has been reversed in Britain and many other countries—although not in all (notably France).
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Manneken Pis
As Prospect went to press, Gordon Brown was still fighting to install Tony Blair in the job of first full-time president of the European council. But Blair’s would-be assassins were emerging like the cast of an Agatha Christie whodunit. In Britain, William Hague told EU ambassadors that appointing Blair would be considered a hostile act by the Tories. And on the continent, Jean-Claude Juncker, prime minister of Luxembourg, held the smoking revolver.
Over the years, Juncker has rarely concealed his dislike for all things Anglo-Saxon—apart, perhaps, for the British banks which set up shop in his tax-haven principality. Juncker, a chain-smoking bon viveur who doubles as the Luxembourg finance minister, has been at the EU’s top table since 1995. A German and French-speaker with good contacts in both countries, Juncker has carved out a role much larger than the size of his nation warrants. Though Luxembourg has a population of just 450,000, it was the oil that greased the wheels of the Franco-German tandem.
As finance minister, Juncker once helped humiliate Brown, then chancellor. Brown had unwisely claimed that, while staying outside the euro, Britain would still be invited to meetings of ministers of the single currency states. But when the moment came, he was politely asked to leave the room. Brown later got one over Juncker, overturning proposals for a European commission savings tax directive.
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Prospect
Downhill all the way: futurology from PWC
With the Copenhagen conference looming, one question looks more urgent than ever: how can people in wealthy countries be made to understand the consequences of their lifestyles? Happily for eco-warriors, a solution has arrived from the most unlikely of sources: PricewaterhouseCoopers. The firm’s latest report on “the future of work” contains a hard-hitting piece of futurology. It’s 2020 when the real trouble starts: the year when “global warming changes the climate of Europe; as the snow on the Alps melts, skiers head to the US.” If that vision of escalating winter sports airfares doesn’t get the PWC partners swapping their Porsches for bicycles, nothing will.
This piece was first published in Prospect magazine on 21st November 2009.
Ivan Krastev
Above: the end of intimacy in the old eastern bloc
The revolutions of 1989, which saw communist governments toppled across eastern Europe, used to be considered among the continent’s most agreeable. The left praised them as an expression of people power and the victory of civil society against the state. The right celebrated them as a triumph of the free market and the free world. But the combination of the global economic crisis and the rise of political populism in eastern Europe is challenging long-held assumptions. The financial crisis has put neoliberal capitalism on trial and the claim that democracy is best at delivering growth has been shaken by the success of China.
The geopolitical gains from the end of the cold war now also look uncertain. Writing in the Observer in September 2008, the philosopher John Gray prophesied that “the upheaval we are experiencing is more than a financial crisis.” He argued that “the era of American global leadership, reaching back to the second world war, is over… a change as far-reaching in its implications as the fall of the Soviet Union.” And the EU’s declining global relevance is acknowledged even by Brussels. The revisionists’ hour has arrived.
The revolutions have always been celebrated for setting people free. But an alternative interpretation of the events of 20 years ago is gaining ground: that in 1989, the elites broke free. It is easy to dismiss this as a conspiracy theory. It is not, however, easy to ignore its political followers. In eastern Europe, populism—a political doctrine that pits the interests of “ordinary people” against the “elites”—is on the rise. Populists have held power in Poland, Slovakia and Bulgaria. But why should people be angry at their ruling elite, when these rulers have made them freer, wealthier and citizens of the EU?
Václav Havel wrote about the ordinary eastern bloc citizen in a 1978 essay, “The Power of the Powerless.” Havel imagined a greengrocer who places a sign in the window of the shop where he works. The sign reads “Workers of the world, unite!” Yet the greengrocer doesn’t care about the proletariat and its unity. The slogan was a declaration of loyalty to those in power, and a plea to be left alone by them. Since 1989, of course, the greengrocer has been free to take down the sign. But how else did he fare during the past 20 years?
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Jeremy Leggett
The world needs about 13 terawatts of power every year, a figure that will rise to about 20 terawatts by 2020. The amount of sunlight falling on the planet at any one time is around 120,000 terawatts—more than 9,000 times what we need. The case for solar power is simple: capture only a tiny fraction of 1 per cent of the sun’s energy and we could provide much more power than the world needs. Add a little energy efficiency and some renewable energy, and we can do it with ease.
Where to start? The obvious places are the parts of the planet that get the most sun already: deserts. With the right technology electricity could be transported from hot countries on gigantic international energy grids for use in cloudy countries. Most of us associate solar energy with solar panels, otherwise known as solar photovoltaics (PV). But another widely applied technology uses the sun to heat up fluids—in power stations, for example, to heat water to drive turbines—an approach known as concentrating solar power technology (CSP).
To supply all the electricity Europe needs would, in principle, mean capturing just 0.3 per cent of the light falling on the Saharan and middle eastern deserts, in an area smaller than Wales. Knowing this, a group of German industrial giants in July launched what may be the world’s largest solar project: a long-planned partnership of 20 finance and energy companies to build new African CSP plants, led by Munich Re, and including E.ON, Siemens and Deutsche Bank. Picture row upon row of curved mirrors with semicircular profiles, in glittering fields, scattered across the countries of northern Africa. The plan—dubbed Desertec—hopes ultimately to provide 15 per cent of Europe’s electricity needs, and aims to figure out how this can be done within the next two to three years.
Such a giant project will not be easy. The estimated cost, somewhere near a cool €555bn ($788bn), might seem a lot. But given that the International Energy Agency calculates that we need to spend $45 trillion on new energy systems over the next 40 years, it could represent good value. The real problem is getting the power back to Europe. The plan has backing from the European commission, whose Institute for Energy envisages a network of African CSP plants linked to Europe by a new high-voltage transmission grid, which could also capture energy from wind power from across Europe and western North Africa. Building such a grid, using overland lines and submarine cables, is technically challenging, but far from impossible.
With the grid in place, Desertec-type schemes could in the future even run entire nations on solar energy alone. One 2006 study calculated that all US electricity could be provided by covering 200 sq km with new solar plants. The plants would have to be in America’s sunny southwest, and power transmitted to the cooler north. This isn’t as inefficient as it sounds: electricity use is high in summer in the northeast, when air conditioning is needed, and this is just the time when solar generation is at its maximum in the US southwest.
All this would cost the US between $4.5-6 trillion in capital investment, at today’s prices. But at an oil price of $100 a barrel—to take a conservative estimate for the coming decades—the 13m barrels a day that the US imported in 2006 would cost almost half a trillion dollars a year. The “payback” on avoided oil imports would therefore come in just nine to 12 years, with coal and gas savings factored in.
In December 2007 three respected researchers published a plan in the magazine Scientific American that, by 2050, would see solar photovoltaic farms produce 3,000 gigawatts in the American southwest, plus some large Desertec-type solar thermal plants. Excess energy produced during the daytime would be stored as compressed air in underground caverns, which could then be used at night to drive turbines. With a new grid, such a plan could see solar electricity provide 69 per cent of the US’s electricity by 2050. And plans for just such a grid, known as the $10bn “green power express” (built to carry wind power in the first instance) were given funding during President Obama’s stimulus package in February.
When one understands the enormous scope that smart grids and energy storage have, it becomes easier to believe that a fundamental switch to solar and other renewables is possible. Yet challenges still remain. US domestic solar plans, in particular, have an advantage over rival European ventures like Desertec: political stability. A world that relied on foreign solar grids would need to be much less volatile than today, and multilateral institutions more robust. That could happen, of course, especially if the US and China synchronise their interests. But history suggests caution: rich nations will surely balk at replacing dependency on oil in sunny lands with solar from those same sunny lands.
Thankfully, photovoltaics works in cloudy countries too, generating energy right where it is needed, as any survey of rooftops in Germany now shows. We would be unwise to put all our eggs in one giant solar basket, as some of the more enthusiastic engineers appear prepared to. The good news is that we don’t have to.
Leo Hornak
Swedish cuisine has yet to sweep the rest of Europe
Sweden has taken the moral high ground again. In the same week that Italy’s handling of the G8 conference was condemned as ‘chaotic from start to finish’ and ‘without an agenda’, the Swedish prime minister issued a considered, heartfelt call to Europe to take climate change more seriously. Compared to the rest of Europe, Sweden is already a model of environmental restraint, with the world’s highest carbon taxes combined with impressively high GDP growth (until the economic crisis). They also have an inclusive welfare state, a near classless society and one of the highest standards of living in the world. And yet for all this, Sweden remains something of an enigma to outsiders. How many British, French or Italians could name a major Swedish politician or political party, for example?
As Jonathan Power argues in an exclusive online essay for Prospect, Swedish culture and society really is distinct from the rest of Europe in a number of crucial ways. From sexual habits to foreign policy, Power’s adoptive home is a place where the “pursuit of equality goes deeper,” with consequences both good and bad. Swedes marry later, work harder, travel less and pay more tax than the rest of us. Quite possibly they are happier too.
Jonathan Power
The European Union: the twentieth century's greatest achievement?
Since the European elections ten days ago, Europe has been going through a bout of navel gazing and introspection.
When every country has its own legislatures both national and local, what is the European parliament for? Why did so few of the electorate vote, less than ever before? Why did the east Europeans, only recently liberated from dictatorship, vote less than anyone else (with a couple of exceptions)? Why are the British talking as if membership of the Union is a yoke around their necks? In short, what is Europe?
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David Goodhart
Has Europe lost the plot?
Christopher Caldwell is a brilliantly cold-eyed observer of the pieties of European multiculturalism. His essay in this month’s Prospect—an adapted extract from his new book—is a meditation on what happened when mass immigration collided with Europe’s postwar liberal universalism and its playing down of national tradition.
The answer is, of course, a great deal of confusion. “The range of opinions that Europeans can express has narrowed dramatically in recent years,” Caldwell writes. “Have Europeans acquired manners or lost their liberties?”
He is not just sneering at political correctness, although there is some of that too, he is trying to understand where it came from. And unlike so much commentary in this area Caldwell, an American, has a truly pan-European eye on these events.
Weigh in with your thoughts below.
Mary Fitzgerald
Contrary to popular legend, Americans read and write more than Europeans
America may be moving to the left under Obama; indeed, as Newsweek put it, Americans are “all socialists now” and due to become “even more French” in the decade to come. Despite this, it’s still widely assumed, on both sides of the Atlantic, that Europe and America are essentially different—in their economies, societies and values. Americans have greater wealth inequality, pollute more and are much more religious, or so the logic goes.
This is a myth, argues Peter Baldwin—professor of history at UCLA and author of several books on the subject—in his essay for Prospect this month. It’s a myth that has long been politically expedient to play on—in Europe, the purveyors of anti-Americanism in Europe know that nothing unites like a common enemy, especially as Europeans are unable to agree on anything else. Meanwhile, being “too European” is a stick Obama’s right-wing opponents are fond of beating him with. But if one looks at the raw data on four key areas: the economy, social policy, the environment and—hardest of all to measure—religious and cultural attitudes, one sees, Baldwin says, that “Europe and the US are, in fact, parts of a common, big-tent grouping—call it the west, the Atlantic community, or the developed world.”
More interesting still, if one removes the predominantly black urban underclass (dealt an atrociously bad hand by history and by the racism that prevails today) from the crime, poverty and education stastics, American and European societies become even more indistinct. As Europe assimilates more and more immigrants, this is something Europeans would do well to take note of…
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