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Lessons From Europe
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After 10 days of fruitless negotiations, the Rio summit produced ‘The Future We Want' — a hefty tome of platitudinous blather. On the other side of the Atlantic, European leaders pulled an all-nighter to reach an agreement to avert the collapse of Spanish and Italian banks. The reason one failed and the other succeeded, even if temporarily, was the imminence of the danger they were seeking to avert. European leaders haggled through the night because failure would have initiated the collapse of the euro. The Rio summiteers went home subdued but not sensing a Damocles's sword hanging over their heads. At stake in both summits was the need for partial surrender of sovereignty for the greater good.
Since 2010, European leaders have held 21 summit meetings to tackle the mushrooming financial crisis without touching its root causes. It was a fundamental error to have launched a common currency without fiscal or political union. In the absence of a powerful European institution to enforce basic discipline about members' debts and inflation levels, the continent's economies have drifted apart. Recently, former Italian Prime Minister Romano Prodi, European Commissioner at the time, revealed that his attempt in 2003 to penalise Germany and France for exceeding the agreed limit of 3 per cent budget deficit was shot down by the member countries. Since then, government debts have grown, bringing the euro zone to the verge of collapse.
It has been clear for some time that to save the single currency, the euro zone needed to retrofit its economies with common fiscal policy and governance. But as most electorates have shown a distinct dislike for faceless bureaucrats in Brussels deciding their budgetary allocation or tax rates, leaders have continued to tinker with bailout and austerity measures. An end of the line of sorts was reached last week, when two of Europe's large economies — Spain and Italy — were threatened with banking collapse. At the all-night joust in Brussels, leaders agreed to rescue the afflicted banks in return for ceding the national banks' autonomy to regulators from the European Central Bank. In a roadmap presented before the summit, euro zone leaders proposed to gradually bring national budgets and taxes under Brussels' control. Acceptance of such a radical surrender of national sovereignty remains a long shot, but the fight over the compromise has underlined the high stakes involved.
The stakes at Rio were no less clear but they lacked the drama of an impending bank collapse. The message from a plethora of scientific studies by the United Nations as well as the US and other governments and institutions is clear: the global average temperature since 1900 has risen by about 1.50F and depending on the level of greenhouse gas emission, it is projected to rise by between 2 and 11.50F by the end of this century.
The impact of that small rise is being felt in droughts, extreme weather and wildfires around the world, growing steadily in intensity. Scientists have warned that the heat wave currently scorching parts of the US will become a common occurrence as the world continues to warm up. But for most political leaders, climate change is a faraway threat and the measures to mitigate the slowly developing danger — by replacing fossil fuel with clean energy — is too expensive and politically too risky. Blaming others and calling on other countries to step up to the plate is easier than taking measures that require taxing carbon, painful lifestyle changes and sacrifices by all.
Imagine that Nasa's Near-Earth Object programme identified a giant asteroid headed towards the earth. It is not far-fetched to assume that concerns about national sovereignty and political gain would be set aside and scientists of all nations would be galvanised to devise a way to deflect the impending doom. In contrast, the danger posed by global warming is an abstract projection that lacks immediacy.
The success of the Brussels summit showed that nothing concentrates the mind more than not having any options. How to convince politicians that climate danger may not be immediate but the only option to prevent irreversible changes is to act now?
The author is director of publications at the Yale Center for the Study of Globalisation, and Editor of YaleGlobal
(This story was published in Businessworld Issue Dated 16-07-2012)