Does Russia Really Want to Resume Death Penalty?

As 2009 comes to an end, the clock is ticking for Russia’s constitutional court to reach a decision on capital punishment. The moratorium on the death penalty is currently due to expire with the dawning of the New Year.

A shot to the head was how Russia used to deal with violent crime

It’s a problematic issue, or so the opinion polls would suggest. Recent surveys say that up to 80 percent of Russians are in favor of a return to state-ordered execution, a practice which has been kept at bay for the past decade by a legally-binding document.

The 1999 moratorium on the death penalty was a condition for Russia to become a member of the Council of Europe. And although the Council would have preferred complete abolition, it agreed to the suspension while waiting for Moscow to commit ratifying a protocol which would completely proscribe capital punishment. But this, the Russian Federation has failed to do so far.

What’s more, the constitutional court attached a condition of its own to the moratorium. It stated that no tribunal in Russia would be allowed to hand down a death sentence until such time as jury trial – abolished in 1917 by the Bolsheviks – had been introduced in all regions of the federation.

With Chechnya, which is currently the only remaining republic not to use jurors, on the edge to adopt the practice in a few weeks time, Russia has a decision to make. It can go for extend the moratorium, reintroduce the death penalty or do away with it once and for all.

Mixed opinions

Which way the court will decide is anything but clear. Although many officials and experts addressing the hearings earlier this week spoke out against a resumption of judicial killings, some made cases in favor.

The Ria Novosti news agency reported Communist lawmaker Vadim Solovyav as saying the abolition of capital punishment could “contribute to the growth of criminality in Russia.” And he is not the only one to think that way.

But that line of argument holds little sway with the abolitionists. Friedericke Behr, Amnesty International researcher on Russia said such thinking is poorly-documented: “Research in many countries has shown that having a death penalty makes no difference to crime rates.”

Any decision to reintroduce the death penalty will not go down well in Strasbourg

Even so, President Dmitry Medvedev does not appear to be in a hurry to do away with it. His representative to the constitutional court, Mikhail Krotov, said the Kremlin supported “a stage-by-stage abolition of capital punishment.”

Exactly what that means is unlikely to be revealed before the court rules afresh in the coming weeks. But the pure fact that such masked statements are being thrown about is cause enough for concern, says Allison Gill, Director of Human Rights Watch Russia.

“The signal is that Russia is still holding back from putting itself in with the requirements of the Council of Europe,” Gill says. And that, she believes, stems from a reflex among Russian policy-makers to want to sign up to international and European institutions without wanting to fully commit to them. “I think there is an instinct on the part of certain Russian politicians to maintain a position of Russian exceptionalism,” she said.

Different is not always good

Only being different on this particular issue could have substantial implications for Moscow’s relationship with the Council of Europe. Russia is the only country which has not ratified protocol 6 – the abolition of the death penalty – and has frequently cited public opinion as the reason.

But in a country not renowned for curving to public pressure, such reasoning doesn’t really echo. “If the government has a political will to abolish the death penalty,” Gill said, “they could make a convincing case to the Russian public.”

At present the polls claim one in eight Russians would back the eye-for-an-eye way of thinking. Yet Friederike Behr says surveys on capital punishment are often manipulated from the outset.

“It’s all in the way you ask the questions,” she said, adding that the mention of publicly exposed vicious crime motivates the public to grant pollsters the kind of statistics they have been publishing in the past weeks.

Paradox polls

Russian police fail to inspire a sense of security in the population

Allison Gill agrees that such surveys cannot be taken as gospel, not least because the same public that flies the flag for state-ordered execution is deeply critical of the system which passes the sentences.

“On the one hand, Russians might be in the majority pro-death penalty, but on the other hand they also mistrust their own law enforcement system and their courts,” Gill said. “They don’t think they’re going to get a fair hearing.”

And some clearly don’t. As Behr points out, Russia has got it wrong on many occasions. “People have been sentenced to death and have been executed and then found to be not guilty,” she said. “There are people here who were on death row when the moratorium was introduced and who were then released later on because they were found to be innocent.”

It’s the age-old argument which applies to any state that still sentences its criminals to death, but it seems particularly pertinent in a country where so many people have so little faith in the justice system. As Allison Gill asks “how can that justice system be responsible for handing out the ultimate penalty?”

(Sources: RIA Novosti, Amnesty International, Human Rights Watch)

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Sustainable Cities for Freedom and Environment (3)

The city and its operation

Previous articles outlined the way to configure cities in order they become sustainable or not. Sustainability depends on the city functionality itself as well – the aim of this third article.

Adam Smith in his invisible hand hypothesis stated that market optimizes the distribution, enabling better allocation of resources without public intervention. It can also operate by creating unwanted situations to market players (cases of monopoly, cartels, lack of coordination, etc.) and then worsening the social scene.

For instance, the decision to travel by private car instead of using public transport can outcome the worst case scenario. In this direction, several investigations have revealed that it would take less to London bus users – as in any other city – than motorists to move from one place to another if there were less cars. Hence the idea of Mayor Livingston of an expensive access to London downtown by private car in order to provide greater flexibility to surface and underground public transport.

Urban planning is therefore absolutely essential for coexistence and progress. Consequently, European citizens from the early nineteenth century claimed to eliminate obstacles (walls down!). They claimed broaden their cities, which became progressively constrained by sea, hills, and old walls – now absolutely unnecessary, with severe communication problems, crowding and hygiene.

In this context, it was clear to Ildefonso Cerdà when designing the Eixample (urban expansion) of Barcelona that the city should be open, cosmopolitan, outside connected by well done road and rail networks… But above all, it had to be habitable for citizens. The city would grow in small islands: city blocks chamfered, with large inner garden patios, thus uniting the best of countryside life with the advantages of the city. Even then, many Barcelonans turned these courtyards into dedicated warehouses, small factories, and even buildings.

The Cerdà’s pioneering urban planning (1860) through areas, gardens and building expansions – quite different from the internal reform of Haussmann (1852) in Paris – is our daily bread. Managements of urban municipalities generally deal with this responsibility. They have to operate with long-term vision – avoiding short-termism that under-sizes capabilities and services with serious further quicken consequences. In this direction, planning must address a number of priority issues on water, air, noise, energy, waste, health, housing, and transportation.

Cleaner Water
Human intervention in water availability has quantity and quality implications as water used in cities floods back to environment, thus closing a cycle already enforced. Thus, sewage without any treatment, returning to their natural environment, creates serious pollution of rivers and aquifers. To avoid such an issue, the European Water Charter (1968) marked a series of objectives that have been largely completed in the EU-15 – while it remains outstanding work in some of the new 27 Member States of the Union.

In addition, water consumption has to be rationalized: in most large cities, a cubic meter of clean water is less expensive than a Coke at a bar, then increasing produced waste. Consequently, it is essential to charge water waste, starting with a low prices block about 60 liters a day – subsequently changing basic allowance – and then becoming gradually more expensive.

Air
The topic is most evident in cities where sustainability is not shining for its excellence. The most valuable asset – what we breathe 24 hours a day – is consumed in very inadequate conditions. The air of London in the mid 1950s, with frequent smog waves, became suffocating. Following these situations a clean air policy arose, with the first laws, specifically British, in 1955. European Countries came after with further regulation mechanisms.

In summary, the most essential is to ensure clean air, with sensors networking and a very long series of measures that would not exceed the allowable cap, forcing the phasing out of most harmful emission sources.

Noise
Everyone agrees – starting with psychologists and psychiatrists – that noise is one of the environmental factors that affect most the quality of life. From small discomforts, more or less anecdotal, to levels of irreversible disorders in the human mind.

Definition of noise is well known:

“The sound, or set of sounds that are perceived by human beings, and that alter the acoustical medium within they normally move.”

…with the additional peculiarity that everything depends on the inevitability of impact also. Regarding the latter, a noise is obliged to be heeded, and even foreseeable at the time – as when a summer storm occurs, or when the passage of a train at a fixed time takes place, or when children voices arise from the playground in the courtyard of a school near you – and then the sound waves seem justified, and the trouble is diluted. Not at all when the roar of an uncontrolled neighbor turntable in its 50 watts comes to you, or when it deals with crying on Friday night in usually quiet streets, on these occasions everything just become the most detestable.

Among the most aggressive acoustic dealings, the continuous traffic of suburban highway (along with hundreds of miles of noise barriers) should be condemned – and what about major arteries within metropolitan area, and even in the formerly quiet streets in ancient downtowns?  In these ways, some motorists “do their best” traveling at full speed – as if they were in Silverstone. And it is certainly no less remarkable ambulances, day or night roistering circulating, carrying patients or not, whose sirens wailing penetrate your eardrums at completely unnecessary noise levels.

But most of all, among the most inconvenient and unnecessary noises, the urban cleaning must be pointed: the unpleasant scavenging machines in the vicinity of 100 dB, apart the absurd beep when they reverse or their stressful light pollution – equipments that go together with by “air gun carriers’”, top-mask and earplugs outfitted, raising dust clouds in the din with a volume of noise just about unbelievable – especially when you compare with the very human scavengers who still survive. All these issues must be fought, and there are many resources to do so, starting with the municipalities – now the main causing actors of noise.

Otherwise, cities as microcosm would become unsustainable.

Related posts:

>>Sustainable Cities for Freedom and Environment (1) – An Overview on Urban Developmental Evidences
>>Sustainable Cities for Freedom and Environment (2) – Prospects, Proposals and Local Agenda-21

The US economic revival just (provisionally) around the corner

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The US economy yesterday offered a robust data that, at least temporarily, allowed closing the world’s largest economic downturn since the Second World War.

Budget deficits, 2001-2010, by EU region · Déficit presupuestario 2001-2010 por región UE (Source: Ronan Lyons Economic Analysis, Oct. 16, 2009)

American GDP growth in the third quarter was 3.5% after four consecutive quarters’ drops. The positive data was expected by analysts, but the strength of the US economy stunned – and pleased – the world stock markets and particularly the Dow Jones index, which rose above 2%. The turnaround from the Q2 (-0.4%) suggests that the incentive plans of the U.S. government, an interest rate of 0% practice, the takeoff of the upturn in private consumption and housing are sufficiently solids to undertake corrections in a few months which would put the economy outside the ICU. If so, we would not be far from a very modest increase in interest rates by the Federal Reserve, an assessment that, sooner or later, should be followed by the European Central Bank, especially if consolidating the growth in Germany and France. In the case of Spain, data also released yesterday show the fifth consecutive quarter of economic decline, although it is true that the deterioration has been moderating in the last three quarters we have moved from -1.9% (Q1) and -1.1% (Q2) to -0.4% in Q3. We are, according to the Bank of Spain, in an “incipient recovery” that entails a great deal of risks: the worst unemployment rates, intolerably increasing next to18.2%, deficit escalating close to 10% of GDP and an upward  lack of credit to businesses and individuals.According to the latest figures in relation to countries under the Excessive Deficit Procedure (EDP) of the European Commission, the general government deficit of the euro area lay at 6.1% of GDP in 2009.As a result, the EU-15 public debt the will increase as of 69.3% GDP in 2008 to 78.4% in 2009. By 2010, however, it is expected to further increase on average 6.6% of GDP.At disaggregated level, most euro area countries in 2009 recorded a deficit exceeding the 3% of GDP, while all euro zone countries will infringe the maximum allowable deficit in 2010, according to latest IMF estimates.

Thus deficit cuts jump out over 0.5% per year, mostly in countries with higher deficits.

And what are these countries? Ireland, Greece and Spain showed the highest euro area’s gap budget, both in 2009 and 2010. In particular, Ireland’s public deficit will reach a rate close to 13% of GDP, according to recent estimates. Greece exceeds 12%, while Spain recorded a deficit of 9.5%, along with the IMF.

In 2010, these three countries will continue to be leaders in fiscal imbalance: Ireland (13.3%), Spain (12.5%), while Greece will approach 10%, given its public accounts inaccuracy, only just admonished by the Eurogroup Chairman Jean-Claude Juncker.

A pedagogy on carbon tax

Carbon tax on the way back to Welfare Economics

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Designing a tax for everything that contaminates incites people to preserve environment, the atmosphere in particular, which is in serious danger. The idea is to penalize polluting energy in transport, housing and personal consumption. Every time we consume less fuel but this is not enough to achieve the goals set at the last conference on climate change: hence the idea to programme a compulsory tax (to be paid per tonne of fossil fuel issued). This in order that the world decrease to half the emissions of greenhouse gas (2050) and limit Earth warming to 2 degrees – which causes climate change.

Global warming due to greenhouse gases from the combustion of carbon dioxide is 49,000 million tons of CO2 emissions. Enough is enough, this must be punishable. Its effects could lead to an overall increase of 3% of the temperature within approximately 100 years. The cost of global warming is estimated at 5,500,000 million (Nicholas Stern) [1]. While the concept of a tax on CO2 emissions comes from Arthur Pigou (Economics of Welfare) [2] who, in 1920, first established the polluter pays principle.

Now …

• Should we tax the product itself or the energy consumed?
• What about taxing imported products?
• How do we avoid the risks of inequality?
• What can we do with the tax revenue?

The solutions adopted by each country are different.
France, with about 50,000 million of environmental taxation laid up, shows a certain delay. The structure of French environmental taxation is so unwise by voluntarism emphasis that it will not generate benefits in the sense of net contribution or revenue – but only more taxes on water, on garbage, on the consumption of hydrocarbons (TIPP) which are not reversed in any improvements (infrastructure, citizen responsibilization); on the contrary, it is the umpteenth patch covering the phenomenal public deficit hole. The pedagogy turns into a demagogic fatalistic verbiage as to mislead the common man – because it ignores the virtues of consensus that in all the surrounding countries is originated in the parliamentary debate, which is where popular sovereignty revives up and where such taxation should be decided, not in the halls of the presidential palace – a very usual symptom in the French Republic whose skin politicians refuse to change. These rates represent 3% of GDP … thrown away. Unless considering France as the cleanest country in Europe thanks to its huge nuclear program, which on the contrary converts this country in less safe by the obvious potential for nuclear incidents due to its atomic central park and may involve in quantity of radioactive wastes concerned – the highest per capita in the world. The rhetoric continues, forward flight, too. The only positive point is that hydroelectricity accounts for 93% of energy resources … with the aggravated disadvantage that the driving force’s the nuclear cell. Who do we kidding? If the decrease in CO2 emissions must involve the breakneck growth of the nuclear beast, then where do we go? Stripped from one mouth to feed another.

Moreover, the tax on CO2 emissions in a country is not really quantifiable to impact CO2 emissions at the global level. Global policies are needed to internalize environmental costs and act on the behaviour of firms and households. That is the healthier principle. France is wrong in the way of carrying it out: confusion over the extent rate itself (cheerfully going from 20 to 32 for up to 100 euros / TN emitted by 2030, then left who can say where?) over the exemptions, over its operation. The increased cost of living is set: estimated at 10% the additional costs of household heating in French homes by 2010, from 5 to 10 cts. for a liter of fuel at the pump now. Another consequence is that the tax, as is, will ruin the remaining local industry (current bleeding is the largest ever seen in France) and as usual,  only a few (large) groups will afford to face such additional costs in the midst of an industrial desert. Who will invest in a country that overtaxes 100 euros each emitted CO2 TN? As for the wicked 35h law, nor study or reflection has been implemented and no effort tryed to coordinate with other European countries. The devil is in the details, French say …

The topic of compensation is often talked about, but what about inequality between consumers? What to do with the € 8,000 million that the government is supposed to enter through the concept (e.g. fatten the coffers of the ministry of finance)?

Swedish pedagogy against French demagogy
Other countries as Sweden have also established a carbon tax, even more substantial, but with a very different modus operandi: e.g. Swedish tax implies a graduated scale for companies that invest more in technological innovation to improve production processes in CO2 emission – now that is pedagogy. It’s bad times in terms of economic crisis situation but action is credible in Sweden and demagogic in France where nobody knows whether the tax will be redistributed or yet another ‘neutral’ tax – that is, outside of Pigouvian incitement, which has the favour of Prime Minister Fillon.
Because the environment policy can not be summarized to raise the level of taxation or implementing new taxes, unless you’re old tricks again and increase unemployment and public debt. Two years back here it was the bonus / malus tax on car CO2 emissions (an onerous  marketing device that ruined much of the automotive industry, with a fall of 40% of French production, forcing car manufacturers to abandon the profitable manufacture of sedans to engage in small cars’ on which the profit margin is zero or nearly zero), last year was the tax on diapers for newborns turn, this year it is the time of a tax on CO2 emissions … a joke (or better yet, a shortsighted policy).
The temptation to tax the super profits of the oil industry (Ségolène Royal) would only have negative repercussions in the pocket of the consumers. Better a tax that changes that behaviour and not simply going to fatten the coffers of the state and its lifestyle. Report and well communicate with citizen, having a little patience not changing everything at a stroke or by decree.
Taxation reforms are essential throughout our countries. We talk about tax incentive and not subsidies e.g. car industries so that they manufacture a kind of cars that they would have made anyway. Let’s face green taxes; it is just and necessary, but mostly to help us getting out from the unending virtual crisis of rampant capitalism, far from the real economy. No green custom duties at European borders, a trend advocated by some, in their eagerness, to lead us into a new protectionism; but rather concentrating on comprehensive policies, at least in Europe, better globally. It is useless to establish national policies not coordinated with the rest of countries, giving way to protectionist policies more or less latent: have a look on the global trade drop of 12%, if you want to add more crisis to crisis just add the perversion of protectionism to all the difficulties we face today. The environment is a global public good. To be honest we do not know how to deal with externalities steadily i.e. when China or Brazil pollute, they do not so in their respective territories only but in the entire world. Enforcing tariffs however is theoretically a nice building, but in practice it is just about regression. Also do not forget that China’s censure is unfair: the PRC is making genuine efforts to drastically reduce pollution in its industries – and it still does not occur in most of developed countries.

One of the biggest questions is to identify what the US attitude will be. So far the US had no concern on the Kyoto Protocol; the position is changing but it all depends on the type of changes that comes about there. Scenarios abroad are in my opinion: the role of the G20, the Doha WTO round re-launch and the climate meeting in Copenhagen. All three turn around the same concern: the need for global economic governance to meet challenges.

Pedagogy missing in the US and UK.
The increasing size of speculative capital flows, mainly in US and UK, is the pending business. I mean speculative capitals and hot money outflows are bigger now than a year ago – in the worst moment of financial-mortgage crisis. Hot money is tossed into the emerging economies as the first symptom relief crops up. Thus, the central bank of China is increasingly doomed to buy huge reserves to support a sick dollar (thus some $ 70,000 million per month, are beyond the circuit of productive investments in order to prevent the US currency to collapse again), deflecting precisely investment in productive economy. That is, in essence, we have not yet altered the global imbalances, and even we are somewhat higher than before the crisis. The issue of executive bonuses and allowances is less significant than the required dismantling of the opacity in the banking investment -something impossible in the most key European financial center, the City of London, since the future PM Cameron opposes to it. This, in US terms, is yet unimaginable. So far the best indicators of the City and NY – queues at the best restaurants – behave well as table reservations vary from 2 to 3 months … bonuses, windfalls, luxury cars, stratospheric contracts are just around the corner again. To pin a button: flows exchanged in the derivatives markets reached a record of vertigo – almost 10 times world’s GDP. So how can David control Goliath?

To be continued …

.

[1]  The Stern Review on the Economics of Climate Change is a report on the impact of climate change and global warming on the world economy. Written by economist Sir Nicholas Stern, commissioned by the UK government, the report was published in October 2006. The report represents a milestone by becoming the first government report commissioned by an economist rather than a climatologist.

[2] Arthur Pigou is considered the founder of welfare economics and the main precursor of the environmental movement to make the distinction between social and private marginal expenses and advocate for state intervention through subsidies and taxes to correct market failures and internalize externalities. Welfare Economics is his most emblematic book.

Sustainable Cities for Freedom and Environment (2)

Prospects, Proposals and Local Agenda-21

The first part of the analysis did consider the cities’ future –an analysis on ancient and current cities in a world becoming increasingly overpopulated.

This time we look after the portfolio of proposals on sustainable ages about the so-called Local Agenda 21. I would stress the importance of the issue, its impact on the social debate: while the 19th century witnessed social debate focused on class struggle, the latter part of the 20th century has been polarized on the ecological risks –which are no longer tied to a specific place of origin but their nature, pose a threat to all forms of life on the planet. That was precisely the widespread thesis at Stockholm-72 by Barbara Ward and Rene Dubos in their book ”Only One Earth”. With themes already raised earlier, in 1972, by Philippe Saint Marc in his unforgettable book “Socialisation de la nature” (Socialization of Nature, now exhausted, even in French).

In other words, the ecological risks are above classes, to the point that, even sarcastic tone has been said that “poverty is hierarchic, while smog is democratic”. The ultimate consequence lays on the social dynamics of ecological threats that has overcome the traditional debates on income or social position – fighting the global warming, the Kyoto Protocol and the future Copenhagen Protocol.

In 1993 the Expert Group on the Urban Environment and the European Commission launched the first phase of the Sustainable Cities Project for the period 1993-1996, in order to (1) contribute to further reflection on sustainability, (2) encourage a wide exchange experiences and (3) circulate best practices of local sustainability. In the long term, the idea of making recommendations on local and regional issues of Member States and the European Union itself. This, in line with what was requested in 1991 at a resolution of the Council of Ministers of the EC.

Once constituted, the EGUE worked over three years in developing a European Sustainable Cities Report, with the help of Euronet, who played the role of scientific and technical secretariat. The EGUE was organized in a number of specialized committees on:

• Social integration
• Mobility and urban access
• Planning and public spaces
• Dissemination (i.e. Distribution of projects between the public)
• Sustainable Social Systems
• Leisure, tourism and environment quality
• Technical management of cities
• Holistic urban management
• Urban Regeneration (Rehabilitation of neighborhoods and housing)

With so many nuances in plain view, the Report group focused on the relationship between institutional and environmental aspects in order to estimate the chances of local governments. Somewhat transcendent, against the attitude of state or semi-federal lands, as German Länder, Spanish Autonomous Communities and most of regional governments that hold so much power and sometimes behave as new centralist outbreaks. These bodies take up often resources more than anything needed by cities for multitasking – that anyone but they must assume, mostly in extremis.

The above circumstances require a thorough review of public policies to make them less authoritarian, rational and supportive, bearing that as a result of the ecosystems theory, the city is a complex whole, characterized by continuous change and development processes. In this approach, aspects such as energy consumption, waste generation, traffic and public transport are relevant.

But the EU obviously was not the only to deal with the issue and some experiences deserve to be stressed by far. Beginning with 1987, when eleven European cities (that number has grown to fifty so far) founded the Healthy Cities Programme for the World Health Organization OMS/WHO, intended for improving health conditions and interactive environment.

Furthermore in 1990, the United Nations Centre for Human Settlements – Habitat (UNCHS), started its own program of sustainable cities, aiming to provide developing countries with better systems for planning and environmental management.

Also in 1990, representatives from more than 200 local authorities around the world founded the International Council of Initiatives on Local Environment (ICLEI), promoting sustainable future, while counting with the sponsorship of the United Nations Environment Programme (UNEP). The ICLEI, which is based on the UN HQ in New York, is a local network for exchanging experiences, disseminating best examples of environmental do. ICLEI also promotes the Model Communities Program of Local Agenda 21 – a matter under discussion shortly below.

In August 1991, 130 cities have signed the Toronto Declaration on World Cities and Environment committed to develop sustainable development plans –incidentally, Canada, with Toronto and Montreal, is one of the most active countries on the issue at hand.

Meanwhile, in May 1992, 45 cities participate in the World Urban Forum – relied to the United Nations Conference on Environment, signed the Commitment of Curitiba (Brazil) in defense of sustainable urban development. A document outlining the guidelines for action to follow when developing plans for sustainable development, always in collaboration with authorities and citizens.

Likewise, the scheme of Urban Management UNDP (United Nations Development based in Nairobi) and the World Bank (1993) should be mentioned.

To complete the list of proposals made on sustainable cities, a mention is necessary conc. the Urban Program OECD (1994), aimed to improve knowledge on ecosystems in urban areas, evaluate examples of good work, and measure the effectiveness of local authorities policies and other public institutions, private or volunteer at various levels of government. Within the Urban Program, the Ecological Cities Project deserves specific mention in this analysis (will shape a further article).

In the same line of initiatives for sustainable cities, the EU Member States committed themselves at the Lisbon European Council in June 1992 to develop national plans of implementation of Local Agenda 21. An action plan born in the United Nations Conference on Environment held in Rio de Janeiro in 1992 (Earth Summit) and later developed at European level in the Aalborg Charter where the fundamental notes of the process of Local Agenda 21 were adopted:

• Sustainability, as an idea of preservation of natural capital. This requires that the consumption of natural resources, water and renewable energy does not exceed the capacity of natural systems to replenish them – and the speed at which we consume nonrenewable resources do not exceed the rate of replacement by sustainable renewable resources. Environmental sustainability also means that the rate of emitted pollutants does not go beyond the regeneration capacity of air, water and soil on which they work. Environmental sustainability also means the maintenance of biodiversity, public health and air quality, water and soil at levels sufficient to sustain human life and welfare, as well as the flora and fauna.
• Working within ecosystems, with regards to their capacity, and always linking the systems created by humans with natural ecosystems, and taking them as management models.
• Citizen participation. Sustainable development means making important decisions between conflicting objectives and major changes in the way of life of communities and therefore can not be imposed from above.

The collaboration of citizens is a direct consequence of the principles of partnership and shared responsibility in terms of:

• Acceptance and social support to the Plan.
• Assumption of commitments and responsibilities on the part of society.
• Acceptance of certain actions and proceedings which entail some sacrifice in the population, it was an overall context would be difficult to raise and take politically.

Anyhow, the impact of Local Agenda 21 has not reached its potential, which is enormous. In a way, because the municipalities fear citizens who might assume progressive grasp on cities – that is, jeopardizing hierarchies.

Sustainable Cities for Freedom and Environment (1)

An Overview on Urban Developmental Evidences

Matters of environment and nature conservation are to be considered when planning and developing construction projects.

The policy approach on sustainable cities is essential because in the process of urban development there can be no operations as often happened in the past, improvised, or at the mercy of powerful real estate groups, without taking into account the most basic in terms of sustainability. Then there is the new context, revealing that in 2008 more than half of the 6,700 million human beings, in a trend of (still) population growth living in cities, so that the quality of life for most inhabitants of the earth depends on whether or not those cities are sustainable. Moreover, in 2050 there will be 9,000 million inhabitants in the planet – 70 percent of them will be urban.

There is no civilization without cities, because since humans became sedentary in the Neolithic, human settlements began to better provide satisfaction to the needs of their communities. And over time, these early settlements became towns, centers of attraction and stimulus for social mobilization as well as for commercial exchange of ideas, and personal relationships. Ultimately, as stated by Marsilio Ficino in the fifteenth century, the city is not made only of stone but also and above all, human beings organized to co-exist indefinitely.

In this direction, the city is “the place of a particular human group,” according to historian Marc Bloch. As the philosopher Claude Lefort, in an essay on urban civilization in Europe, explained well how, at the end of the Middle Ages – then next to coming into the Renaissance – European cities formed broad areas of trade and freedom.

On that path slowly and around the birth of the market, an emerging social class, the bourgeoisie was creating a new order in Europe that would eventually undermine the feudal power: serfs emancipating from the masters found protection in urban habitat increasingly free. The expression of this change is summarized by Max Weber, “town air makes free.”

That freedom of the city, as Lefort writes, means the dissolution of personal dependence ties of feudalism, and the possibility, therefore, to change one’s condition: promoting work, the capacity of initiative, education and other opportunities. This direction (urban development as a critical element of progress in Europe) explains the significant leap forward, which the Renaissance involved for a great number of issues.

The improvement of former European cities did contrast with what happened elsewhere, e.g. Chinese cities, which became the nucleus of the bureaucracy and the mandarin feudal organization, which of course did not prevent the Celestial Empire becoming the greatest world power for centuries – something often ignored by the prevailing Euro centrism. But the gaps above mentioned prevented China from setting up a large middle class and therefore they avoided the necessary industrial revolution to operate there in the eighteenth century.

From an everyday approach, the city can be qualified as a place to live, grow, work, study and live together in society; thus – according to Roberto Camagni – becoming significant sets, autonomous socio-economic entities. In this regard, management and improvement of quality of life for residents requires a specific spatial planning; on vital issues such as infrastructure, urban planning, public transport, landfill management, solid waste collection and energy management , CO2 emissions, and always transcendental subject of the marginalization of certain social groups.

Prevention through environmental impact assessment (EIA)

In the direction above pointed, the sprawl of cities tends to set conurbations (Giddens dixit) or megalopolis, as happened in the United States firstly with San-San (San Francisco / San Diego), Chipitts (Chicago / Pittsburgh) or BosWash ( Boston / Washington). On the other hand, the provision of advanced services, the concentration of scientific and technical qualifications, and expertise of the workforce and the existence of large consumer markets as well, have a decisive influence on the emergence of new international centers (international hubs) that operate on a continental scale and in some cases even worldwide. Providing distinction between knowledge hubs (knowledgehubs), capital cities (established capitals), or new capitals (re-invented capitals).

From the viewpoint of conceptual development, urban sustainability is based on the definition, widely accepted that it was first built in the Brundtland Report, World Commission on Environment and Development, 1987:

Sustainable development is one that meets current needs without compromising the ability of future generations to meet their own problems.

Another complementary definition, offered by the IUCN – World Conservation Union (Environment Program of United Nations and World Wide Fund for Nature, 1991) pointed that:

Sustainable development means improving the quality of life with respect to the limits of ecosystems.

More specifically, sustainability involves a number of essential criteria:

• There is no infinite growth with finite resources: it is necessary to acknowledge limits to the expansion in material terms, in order to prevent the destruction of ecosystems and the overall deterioration of the biosphere.

• In production, you have to incorporate such damages to the biosphere as costs, treating, at business and government as particularly sensitive part of the profit and loss account, or budgets, respectively.

• It requires the systematic use of environmental impact assessment (EIA), for reasons that can be summarized by “prevention is better than cure”.

• It is important that government admin and private organizations have their respective environmental budgets, where evaluate annually the ecological balance – to assess whether or not they are generating natural capital reductions.

• The development model must be ecological, permeating all sectoral intervals as patterns of respect for nature.

Biblio:

Marc Bloch, La Société féodale (Feudal Society), Albin Michel, Paris, 1998.

Claude Lefort, L’Invention démocratique (The Democratic Invention), Paris, Fayard, 1981.

Claude Lefort, Europe as an urban civilization, Revue ‘Esprit’, Paris, 2004

Max Weber, General Economic History, Cosimo, New York, 1986

Roberto Camagni, Economia Urbana, Barcelona, 2005

Obama Drives a Valuable Shift in the US Defense Policy

No need to search for obscure reasons or ulterior motive when scrutinizing the change in direction introduced by President Obama in the US defense policy after President’s refusal to install the so-called missile shield. The expected partial deployment on European territory was one of the pillars of Bush’s failed strategy against international terrorism.

Obama’s resolution involved several decisions of domestic and foreign policy, all high draft. On the one hand, the strong US defense industry will not feel aggrieved, since this is not about trying to cut off a program that would produce significant benefits, but to transform the land-based missile defense system installed on other naval platforms. The technical explanations do little to the case except to deny the accusation that the US and its allies could be defenseless against a suspected terrorist attack with missiles.

The adopted solution presupposes a more thorough risk assessment, dismissing the idea that Iran is able to hold mid-term long-range missiles and reduce the anticipated missile threat from shorter range. The fact that the current US Secretary of Defense Robert Gates, who was also in charge during the Bush administration, supports and implement this change in strategy, is a smart move by Obama. The US President skillfully – and to the surprise of many who did not understand his decision– maintained R. Gates at the same position –the very same that had fully supported the failed military strategy of the former president.

Russia expressed rapidly and unambiguously its favorable opinion about this amendment and countries most directly concerned which are Poland and Czech Republic shall cover up that Europe defense is a common issue that affects all countries rather than a result of bilateral agreements of some of them with the American superpower – in order they appease their peculiar and atavistic fears towards Russia, however reasonable their historical reasons may seem.

Nor should it surprise that the new Secretary General of NATO – an alliance that since the Soviet Union collapsed is looking for a suitable place in the global system of supranational military organizations – is enthusiastically pointing to a new strategy that does not see an almost mandatory enemy in Russia but an appropriate and necessary ally, by which NATO can continue to keep alive, despite all previsions – a treaty that was precisely born to fight today’s new ally.

Subsequently, Mr. Rasmussen, in his first public comments of some significance since in August he took over from NATO, suggested combining missile defense systems of US, NATO and Russia into a single one. However, when asked about specifics of the plan he did not know how to respond and referred to further clarification of the military leaders –quite understandable since the NATO HQ itself was surprised by the swift and unexpected decision by the US president.

Obama, therefore, takes firmly the helm of US foreign policy. He will face a tough offensive from his political rivals. Senator McCain already warned the decision as a “serious error” that “potentially undermines US leadership as perceived in Eastern Europe”. The most obsessive US right wing – the very same which identifies traits of socialism and even communism in Obama’s plan to extend health coverage to every citizen – will go on with its campaign of denigration, with the helpful support from the most extreme republicans.

Obama definitely buries the former US policy, which divided Europe with the invasion of Iraq – one might remember the shameful pamphlet to support Bush policy, signed by many conservative European leaders, including Berlusconi, Aznar and Barroso, together with the joint efforts of three Eastern European countries, significantly Poland and the Czech Republic. The ensuing releasing in the Wall Street Journal allowed the most US reactionary forces to contempt the “old Europe” (led by France and Germany), who opposed the war, while praising the “new Europe” – the latter, whilst supporting Bush’s illegal adventure, showed a mixture of servility and excitement to establish a special relationship with the American superpower, that is trying to came closer to develop relationships with influential people (UK), in sum expecting benefits, as Jeb Bush, the dreadful brother of the former US president, who ruled his fiefdom in Florida, decreed when visiting Madrid: “This relationship between the United States and Spain will provide benefits that cannot be imagined today.”

The way Obama has to pass through is easier said than done and he will need all his personality resources to face opposition from the social sectors – within and outside the US –who worshiped Bush and still share his reactionary ideology and highlight his disastrous decisions.

ICTY tryes to silence a troublesome whistleblower: Florence Hartmann guilty of contempt

The International Criminal Tribunal for the former Yugoslavia (ICTY) convicted Hartmann of contempt to the court Monday for disclosing confidential information in a genocide case. She was sentenced to pay a fine of 7,000 Euros.

Florence Hartmann prosecuted to have disclosed the existence of confidential decisions made by the Court of Appeals in the Milosevic case.

Florence Hartmann accused the court of ‘trying to silence the truth’.

Florence Hartmann was found guilty of breaching the court’s rules when she disclosed the contents of two appeals chamber decisions from the Slobodan Milošević case in a 2007 book as well as an article she wrote in 2008.  She has been fined 7,000 euros.

Hartmann was spokesperson for the International Criminal Tribunal for the former Yugoslavia’s (ICTY) Prosecutor Carla del Ponte between 2000 and 2006.

The court dismissed her argument that the information she realeased had already been put in the public domain by the tribunal.

The court said the fact that Hartmann spent six years in the capacity of the spokesperson of the Prosecutor meant that she was well aware of what the confidentiality of a decision entailed.

The Chamber further argued that Hartmann’s conduct could deter sovereign states from cooperating with the Tribunal in providing evidence in the future.

“This…impacts upon the Tribunal’s ability to exercise its jurisdiction to prosecute and punish serious violations of humanitarian law as prescribed by its mandate,” Judge Bakone Justice Moloto, presiding, said.

“Public confidence in the effectiveness of protective measures, orders and decisions is vital to the success of the work of the Tribunal.”

The French journalist was the first former employee to stand trial for contempt before the International Criminal Tribunal for the former Yugoslavia (ICTY) in The Hague.

Her case was filed under the same number as that of Slobodan Milosevic. But Hartmann refused to sit on the same chair as the tribunals regular suspects since her case was not about war crimes.

Hartmann had publicly accused the UN war crimes tribunal of “trying to silence the truth”.

The tribunal argued that she “knew that the information was confidential at the time disclosure was made, that the decisions from which the information was drawn were ordered to be filed confidentially, and that by her disclosure she was revealing confidential information to the public.”

Hartmann covered the 1990s Balkan wars as a correspondent for the French newspaper Le Monde. She thereafter became spokeswoman for the former chief war crimes prosecutor Carla del Ponte from 2000 to 2006. She then published a book, “Peace and Punishment: The Secret Wars of Politics and International Justice”.

In 2008, Hartmann wrote an article entitled “Vital Genocide Documents Concealed” that was published by the Bosnian Institute.

In her publications Hartmann wrote that the Hague prosecution was allegedly unhappy with the tribunal’s decision to accept Serbia’s request to have some portions of the state archive documents considered in closed sessions. The judges in the Milosevic case allowed Serbia to censor parts of evidence that was made public. She believes that it was precisely those pieces of evidence that were key in determining Serbia’s responsibility for the genocide in Bosnia.

Hartmann argued that it was thanks to the Tribunal’s collusion with Serbia in the suppression of this crucial piece of evidence, that Bosnia was not able to draw upon the latter in its case against Serbia for genocide at the International Court of Justice (ICJ), leading to Serbia’s acquittal.

Far from punishing the perpetrators of genocide in the former Yugoslavia, the Tribunal has helped to shield them, Hartmann said. She accused judges of the Appeals Chamber, headed by former Tribunal President Fausto Pocar, of being “accomplices in manipulation organized by the authorities in Belgrade, so that the International Court of Justice, which heard the Bosnian genocide lawsuit, would be made to make the same mistakes the Hague Tribunal made”.

Her book has received broad coverage, and it kicked off a storm in the Balkans even before translations became available in early November 2007, with local politicians using it to attack the ICTY’s legitimacy. A month after the publication, she received a letter from the tribunal reminding her of her administrative and legal obligations to respect its confidentiality rules.

Related Posts: Tables Turned: Former ICTY Spokeswoman now before The Hague Court

In France, debt and loans, as usual

In late June 2009, before the French Parliament convened in Congress at Versailles, President Nicolas Sarkozy announced the launch of a government bond issue aimed at individuals and not just at banks. It was “intended for finance investment for future”.

President Sarkozy's take office in May 2007

Here are my personal views on borrowing through French records.

Revenue, resources and bond issues

Initially, it sounds appropriate to consider the key differences between “revenue” and “resources” for a private company or a State, as well:

• The “revenue” is the annual turnover achieved by a company or the overall taxes collected by a state, from which “expenses” or “charges” are deduced to calculate the yearly profits or the balance due, if that event.

• The “resources” are made up of new loans and profits (if positive); they ensure financing the company or State needs, i.e. the refund of loan encountered, investments… and the potential deficit.

This recall of vocabulary may well figure out some evidence often mishandled by a regularly empty and specious political rhetoric:

1. A sound financial management should start from the deficit. Deficit comes from too low revenue or too high expenses, in order to deduct the amount of resources to find with the view to finance this deficit and to meet other needs. Doing otherwise, ie fixing the deficit depending on resources that could be gathered, is a rash fool policy!
2. If the financial markets have enough capacity to lend resources to the company or the State, there is no need to have a bond debt directly from individuals –which is always done in costlier conditions: individuals expect an interest rate higher than which is offered by banks (or they look ahead for a tax benefit). Alternatively, placing the bond debt with hundreds of thousands of people is inevitably more expensive than with a few dozen banks.

It may be decided –for purely reasons of corporate communication or political view– to borrow a modest annual funding requirement from individuals, although it is far more expensive. For instance, Electricité de France-EDF –a public energy supply company– borrowed €2 billion from the French individuals on a yearly overall bond debt of € 10bn roughly. And the State, through the voice of the president himself, plans to borrow round about € 10bn from individuals on an annual basis program loan of € 150bn…140 of which are made by markets, which could easily go up to 150.

Time is gone since the financial markets did not have enough capacity to accommodate the needs of some important EDF or public bonds in the 1980s: the Lepercq’s loans during the post-war years, the Pinay’s in 1958 or Giscard’s in 1965 then in 1973 could still appear justified. On the contrary, the Balladur bond debt in 1993 was no longer acceptable and that of Sarkozy in 2009 will not either: their sole function is political, in spite of the extra financial cost.

Claiming that such borrowing “brings new revenue to invest” [1] is a nonsense: we merely substitute an expensive outline of financing by another costlier. If by this we mean that the state will increase its capital spending proportionately to the amount of resources provided by this particular loan, we have to admit that the State has decided to increase the budget deficit as much –which points to an inveterate laxity again.

Finally, the insistence that the resources of this bond debt will only finance “productive” expenses is simply childish: the remaining loans will finance more widely the unproductive expenses –as it is true how money is “fungible.” Both in private companies as in the state budget, the pre-allocation of resources is a figment of mind.

Rigor, laissez-faire and Euro

After recovering from the late 1990s, which enabled France to qualify for the Euro, the period 2002-2008 has witnessed a creeping deterioration of the fiscal deficit and external accounts, which in total is equivalent to that of early years of François Mitterrand in 1981-1982. Although any turnaround plan equivalent to that of 1983 has come back on course, while public debt has doubled since then and despite the defiant words required in this regard on the campaign trail …

The truth of the matter is that, first, the external obligations linked to the risk of French franc crisis disappeared with the creation of the Euro. Conversely, the French government refused the forced substitution of “Maastricht criteria” (the deficit accounts should not exceed 3% of GDP) as evidenced by the constant postponement of the date of return to balance (in 2010, then 2012, then 2015…) –more often than not since the election of President Sarkozy in 2007…

In 1983, by denouncing the policy of restraint, the Communists and some Socialists in the movement of Jean-Pierre Chevènement, elaborated a scholarly quibbling about the difference between the “chosen” (or “virtuous”) deficit, which “prepares the future” by the investment, and “suffered” deficit that would increase the debt [1].

The same retractions are now ran again in President Nicolas Sarkozy’s preach and his finance minister Christine Lagarde, in an attempt to evade European strain of returning to financial balance by making a scholarly distinction between structural, crisis and activity support deficits.

These quibbles were no more selected in 1983 by the fiscal authorities (President François Mitterrand and his Finance Minister Jacques Delors) than they are today by European leaders, responsible for the accuracy of fiscal policies of each State acceding to the Euro. At the most, the neo-lax of 2009 will try to delay a little the maturity date of austerity policy –such as lax did in 1982 when they delayed it a year. Even though it is pleasant, in the meantime, to spot their discourse converging with those of former radicals as Marchais, Chevènement and so…

The financial reality will retrieve its rights within a year or two –let nature reclaim! Then the economic recovery will allow European authorities to require a reorganization of the French management of public finances. As a result, France would then be punished by an increase of 3 percentage points of VAT orthrough the social tax called CSG. As Germany did in 2005, when its situation deteriorated as that of France, a situation that led Chancellor Schroeder to take corrective measures (that French President Chirac had refused to endorse). Predictable in the short term, this increase would also bridge the gap of current € 30 billion in Social Security; whose mere existence, next to deficit of state budget, should be an intolerable scandal for those who have campaign saying that the debt was unsustainable, and its transfer to future generations unjustifiable.

The future government bond is a substitution “resource”, an undeniably ordinary one. As it does not represent a new “revenue”, which can only come from taxes that will inevitably join to cost savings in order to balance the public budget in the mid term.

French version over here.

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[1] Nicolas Sarkozy veut rassembler autour de l’emprunt, Le Monde, 23 June 2009

Fighting bank recidivism

From Martin Wolf’s analysis in Financial Times.

It would take little for banks to have hands free again. What emerges from the crisis is a system even worse than the one who had caused it. The bank rescue lets the banks free hand to remake the same mistakes. It is urgent to raise prudential ratios.

Henri Cartier-Bresson · Shanghai (Run on Bank)

The panic of autumn 2008 now tends to fade. However, the period during which it is possible to draw lessons and make changes is nearing completion. Without radical changes, another crisis is inevitable. It could even happen much sooner than we think.

Never again? This is probably asking too much. But avoid “it” happening again quickly is crucial. Financially, politically and morally, governments cannot afford repeating this crisis in the short term: the lives of so many people can again be sacrificed to the whims of a few irresponsible.

So far, what emerges from the present crisis is a financial system even worse than that which had provoked. The survivors form an oligopoly of financial monsters too big and too interconnected to fail. And they won. Not because they are necessarily the most healthy institutions, but because they are the ones who received the largest support. One can easily imagine how they will behave when you consider all the devices that encourage risk taking.

What should we do? The most common response recommends tinkering some regulatory safeguards. You’d better worry about aligning the deck chairs on the Titanic: perfectly futile.

The proposals recently put forward by the US Treasury would fall partly into this category. Now the financial system must be protected from its own clumsiness at managing risk. In addition, it will not change it by external control, but only by redefining the system of incentives and bonuses.

The starting point must be the famous “too big to sink”. We need a credible system capable of dismantling huge financial institutions if necessary. The proposals are more attractive to look at the “good banks” in which creditors, in want of warranty, become shareholders. It would be easier if, as proposed by President Barack Obama and as demonstrated Mervyn King, governor of the Bank of England, a regulated institution was obliged to submit a plan for orderly stop its activities.

However, bank failures are like buses: you do not see one for hours and suddenly there came a half-dozen at once. The authorities cannot credibly promise that they would be willing, at a systemic crisis, to accept the failure of all affected establishments. This would lead to a particularly serious panic. The “too big and too interconnected to sink” is indeed a reality. And it is because, as recently remarked Andrew Haldane, from Bank of England – his speech “Rethinking the Financial Network” is available on Bankofengland.co.uk – the financial system is a network increasingly tight.

If institutions are too big and too interconnected to sink, and no satisfactory structural solution can be found, then we must identify alternatives.

The most obvious would be to raise considerably the amount of capital required and to pay greater attention to liquidity. Today, major financial institutions operate virtually with no capital: in the United States, the average debt ratio of commercial banks was 35 to 1 in 2007; in Europe, it was 45 to 1. This allows shareholders to play all out with results that we previously witnessed.

Let financial institutions being managed by the interests of shareholders who provide only 3% of funds intended to be loaned, is pure folly. To align the interests of managers with those of shareholders is even more insane. Given their current capital structure, major financial institutions have a real incentive to play with taxpayers’ money.

How much equity would be reasonable for systemically significant institutions? The answer is: “Much more than today.”

Moreover, the risk that capital needed could be exposed should not be evaluated based on banks models, which are unreliable. Shareholders’ funds should be at least 10% of assets. In the U.S., there was a time when it was much more.

More important capital equities might be a good way to internalize negative externalities – and more precisely the risks – generated by an institution in respect of the rest of the system. Ideally, therefore, the capital requirement might be correlated to the weight of systemic schools, as recommended in the latest annual report of the Bank for International Settlements (BIS). Moreover, these requirements should be calculated based on all the activities derived from fully consolidated accounts.

As part of a financial system much better capitalized, it is also relatively easy to implement a system of macro-prudence, while the required capitals increase during booms and decrease during decline periods.

Again, the higher the proportion of shareholders would be important the less would be worrying to see the bonuses of managers aligned with theirs. Even then, as it is the taxpayers who bear the residual risk, regulators should exercise control over the premiums paid to managers.

Two problems remain. First, transition. Secondly, level of regulation.

Regarding the first point, requiring now more significant capital ratios would jeopardize the recovery of the economy. It is better to imagine a long transition period, stretching perhaps over a decade.

For the second point, it is obvious that we cannot let the so-called “shadow banking system” operating outside any capital constraint if some entities are systemically significant –as we got evidence with funds acting on the money markets.

In addition, capital equity requirements might be imposed in all significant countries. The United States is powerful enough to urge a movement in this direction –by requiring any foreign bank operating in their territory to be properly capitalized.

The conservative method of small steps, not radicalism, is today the most risky option. What must first apply this radicalism? The answer is obvious: the system of premiums and bonuses, of course.

Will the European Union come through crisis ?

Spain has passed from rating ‘AAA’ ‘to rating ‘AA’, after Standard & Poor’s, the 1st international rating agency (IRA), lowered its assessment of long-term debt; so she did with Greece, Ireland and Portugal. This is the first time that the S&P financial rating drops for Spain in 30 years.

What is under consideration?

From the French side, on the one hand, what is at issue is the structural weakness of these economies. Beyond a snide comparison with the food and the stars of the Michelin guide, this decision might have serious consequences for the countries concerned and for the future of the European Union. Because the differences between European states today are so important that each country acts without consulting others, and in addition, the principle of subsidiarity seems more often invoked than solidarity.
However, the shock wave of the financial crisis has reached the credit of the States themselves. To put it clearly, some countries cannot afford to borrow financing their reflation plan.
During the first half of 2009, in addition to the degradation in rating of several countries by the IRA, Ireland has appealed the intervention of the IMF, the Eastern countries have called for help to historical Member States, and the pound sterling fell on the foreign exchange market.

Alternatively, many well-informed specialists consider that the announced downturn due to the financial crisis is greatly exaggerated [1]. Most of banking operators have dealt with serenity and the European Commission forced restructuring of banks that received state aid to encourage further integration of the sector within the EU single market.

A Special Report on the Euro Area [2] published in The Economist pointed how the Euro has brought however, an irrelevant achievement.

“The ECB has fulfilled its remit to maintain the purchasing power of the Euro. Since the currency’s creation, the average inflation rate in the Euro area has been just over 2%. Fears that the Euro would be a “soft” currency have proved unfounded. It is unquestioningly accepted at home and widely used beyond the Euro area’s borders.”

Even if the Euro has not made possible significant gains in productivity or GDP, it has unquestionably engendered greater stability.

What can the Europe Union do to face this?

Despite the bad omens of some analysts, the current crisis shows how the Euro area is not at a critical stage of its existence yet.

Then again and despite of a single currency, there is no economic policy, no budget, no solidarity. Spanish government on top and, to a lesser extent French as well, believe that, to be able to attest its usefulness, the EU might directly help the most vulnerable States by financing reflation plans mutually beneficial.

Oddly, countries that are now complaining of the burden of the Euro are those that once mainly benefited from their membership to it. Thus:

“[The Spanish economy] grew at an average annual rate of 3.9% between 1999 and 2007, almost twice the Euro-zone average and much faster than in any of the currency area’s other big countries…Unemployment fell from close to 20% in the mid-1990s to just 7.9% in 2007.”

Too much at once, as the prosperity met with prices and unit wage costs getting higher, both of which are now particularly painful in the context of recession. Aided by a strong currency, its current account deficit has risen to 10% of GDP. Same for Greece, Italy, Ireland and Portugal. As the report [2] explains

“The main hazard for investors in high-inflation countries—that a steady loss of domestic purchasing power will drag the currency down—is eliminated in a fixed-exchange-rate zone.”

The consolidation of the Euro area needs to move up a gear in terms of political ambition and economic governance. Economic governance, the word is dropped, and it is on everyone’s lips.
Does the 10th anniversary of the European single currency will be marked by the bursting of the Euro area, as some economists fear?
What is involved in crisis management by Europe: politics or money? The lack of economic government, or the absence of a common currency?
In other words, will the EU survive to the crisis?

As indicated earlier, prestigious analysts point that the  consequences of the so-called recession are important, but that its context has been exaggerated too. [1].

Alternatively, for The Economist, leaving the Euro zone is inconceivable:

“The costs of backing out of the Euro are hard to calculate but would certainly be heavy. The mere whiff of devaluation would cause a bank run: people would scramble to deposit their euros with foreign banks to avoid forced conversion to the new, weaker currency. Bondholders would shun the debt of the departing country, and funding of budget deficits and maturing debt would be suspended.” [2]

Therefore, borrowing costs would increase considerably, which could induce a wage-price spiral. Inflation and currency stability would be precarious at best. Thus,  it is not surprising that in most European member states, citizens surveyed remain strongly in favor of the euro. Additionally, those who are about to join, remain more convinced to do so:

“As emerging economies they are prone to sudden shifts in foreign-investor sentiment, which makes for volatile currencies, so exchange-rate stability holds considerable appeal for them.” [2]

Romania and most Baltic countries have already ask the EU and the IMF for help to avoid a loss of investor confidence. Poland is also vulnerable to exchange rate because many of its loans are denominated in foreign currency, and it should join the Euro in 2012.

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[1]  ‘EU cross-border banking will survive crisis’, Paul Taylor, The Guardian, July 27 2009.

[2]  ‘Holding together’ – A special report on the Euro area. The Economist, June 11 2009.

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