In the wake of Cyprus, the euro can survive

Everyone hold your breath... and then chill out and have a Easter egg.

This weekend you should spend as much time as possible holding your breath or crossing your fingers. Storm clouds are gathering throughout Europe and the downpour could begin as early as Tuesday. First of all there is the ongoing Cypriot tragi-comedy; tragic for innocent islanders and retirees who just saw the island as a nice place to keep their savings and see out their days, comedy with regard to the performance of the Troika; judge, jury and executioner in the form of the European Central Bank, (ECB), the International Monetary Fund and European Commission.

Secondly, there is the Italian political imbroglio, which this week descended into chaos as Grillo, the leader of the neo-anarchist Five Star Movement, called M. Bersani and Berlusconi something almost unprintable and Bersani said, “only an insane person would want to govern this country, which is in a mess and faces a difficult year ahead”, following his failed attempt to comply with the President’s request to form a government, raising the likelihood of months of uncertainty and new elections. Rumours abound of a possible credit rating downgrade over the weekend.

Thirdly, Slovenia is quietly imploding and nudging its way onto traders’ screens. The political situation is not much better than Italy’s and the banking system has bad loans equal to 20 per cent of GDP. These resonances caused its government bond yields to soar this week, following the Cypriot "solution".

Along with these near-term, possibly explosive threats, the Eurozone has to continue to cope with the slow-burn problems of Spain, which is failing to meet deficit reduction targets and, perhaps most frighteningly, France’s slowdown. Throw in the chasm opening up between President Hollande and Chancellor Markel and the Euro’s prospects may seem dire.

Notwithstanding all of the above, I remain cautiously, but resolutely certain that the Euro can survive, at least for the foreseeable future - meaning the next three years, say.

If we have learnt nothing else over the last few years it should be that the political will to ensure its survival is enormous and that the ECB is prepared to almost totally divorce itself from its Bundesbank heritage to play its part. Witness the protest resignations of two senior Bundesbankers from the ECB since the crisis broke. Merkel will masterfully persuade the German people to provide just enough largesse to southern Europe, without enraging her populace beyond breaking point, she will probably bend just enough on austerity to satisfy Hollande’s calls for growth, and after the elections she will probably even support the issuance of joint and several Eurobonds, which put all nations on the hook to the same degree. Finally, this Thursday, Draghi will give a masterful performance at the post-ECB meeting press conference, in an echo of his famous "whatever it takes" speech last year.

Cyprus can become a tragic memory, Italy is rich and will survive, Slovenia is small, and Spain and France will slowly respond to growth enhancement. Meanwhile, the US will surprise us all with its outperformance this year, once again acting as an economic locomotive.

So, let your breath out and have an Easter egg, if that is your fancy.

Look at these lambs. They're not worried about Cyprus. Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.