The EU's cat-herder-in-chief fails to move the markets where he wants

Mario Draghi strained to have an effect, but to no avail.

Unfortunately all rather boring really – and not a little bizarre. Whilst S. Draghi seemed to be straining every sinew to give the impression that the market simply was not understanding the full significance of his message to the members of the Governing Council to "expect key interest rates to remain at present or lower levels for an extended period of time", he just couldn't quite get the market to play ball.

He could hardly have dropped more hints that we should be expecting rates to stay were they are, or move lower, for many, many quarters. He stressed (twice) that the ECB's Deposit Rate, could go lower, even though it is currently zero. He stressed that liquidity would remain ample, and if it didn't, he'd see to it (presumably with another Long Term Refinancing Operation, LTRO)

He even borrowed the Bank of England's assertion that "the current market pricing of rate hikes is unwarranted". Getting a little desperate, maybe, he emphasized the pathetic growth in money supply, and that lending by banks in the periphery was still very weak.

Despite all his efforts, futures markets remained steadfastly rooted to the spot by the time he finished, stubbornly refusing to extend their timescale for rate hikes, however he may insist they should. The euro weakened a little initially, but then recouped some of its losses – which may have been caused by a strong dollar anyway.

Perhaps the problem is that markets know he has the most unenviable role in major central bank leadership – he needs to be an Olympic-level Cat herder. Everything is compromise, mixed with liberal amounts of bowing and scraping to the Bundesbank. Therefore the markets are screaming "show us the money!" – until he actually cuts rates, or adds another LTRO, or firms up his forward guidance with depressingly distant economic thresholds, investors remain very sceptical of the current, "words are easy" form of forward guidance.

Finally, what about publication of ECB meeting minutes? They couldn't even reach a decision on this-Mr Draghi announced an intention to publish more specific information on decisions taken by the GC, but, the discussion is at an "early stage". The ECB board is to make proposal in the Autumn. Yawn.

Look for some, (but surely not all!), of these actions next month or in October.

Mario Draghi, the chief cat-herder of the EU. 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.