Archive for April, 2009

EU fisheries warning on climate change

Monday, April 27th, 2009

If you want a flavour of the political challenges we face in dealing with global climate change, then take a look at European fisheries. It’s a disaster area! We should heed the warnings it sends.

For year after year political expediency has triumphed over the evident need for drastic action to save a vital resource from almost complete destruction. The indisputable need to curb fishing effort and allow the recovery of fish stocks has been consistently defeated by short term pressures.

The European Commission’s recent green paper on European fisheries has a note of desperation about it.  It’s a discussion paper, designed to prepare the way for an incoming Commission to devise a new EU policy by 2012. Its analysis shows that up to now the common fisheries policy has been a complete failure.

It’s been known for more than 30 years that many fish stocks in Europe’s waters are in danger. That now applies to 88 per cent of species. According to scientists nearly a third of those species have dropped below the “sustainability” level at which the stocks could regenerate even if they were now to be effectively protected.

It’s a disgraceful story. Apparently 93 per cent of the cod fished from the North Sea is caught before it can reproduce.  Large quantities of fish are dumped dead into the sea (“discarded”) because quotas have been exceeded. The Commission reckons that the subsidies which several member states give their fishing industries amount to more than the value of the fish which they catch, as well as maintaining a fishing capability which is too great for the resource. Some of us are paying twice, as consumers and taxpayers.

A common policy operating across many jurisdictions ought to be ideal for fisheries. After all, fish can’t read. They don’t recognise national boundaries. They breed in one area and mature in another. Only common action can deal with a major threat to the resource. Yet this common policy has worked in an entirely negative way as ministers vie with each other to defend their quotas in Brussels and hold back from applying strict controls at home.

I know one shouldn’t underestimate the difficulties faced by national governments. They have to confront their fishing constituencies, provoking serious political backlash, disorder and blockaded ports. But surely after 30 years . . .  Paradoxically, every year’s failure to act foreshortens the future of the industry.

The green paper considers a separate policy for coastal fishing. This would apply within the 12 mile limit and would have a strong regional and social element. A policy of much stricter controls would be applied to the deep sea fleet, together with a substantial cut in capacity. This divide-and-rule approach might take off some political pressure from fishing communities, although it is not easy even now to keep the big boats away from relatively rich coastal fisheries – or to keep smaller vessels from deeper waters.

A specific policy for coastal fisheries might have the added benefit of fostering the creation of conservation areas where fishing is banned altogether. Where such areas have been designated in close consultation with local fishermen, for instance in specific areas off the Scottish and Spanish coasts, there has been a significant increase in stocks of many species – an indication that something can be done.

So where should the authority lie for implementing an effective common fisheries policy? The present system of ministerial bidding in the Council has palpably failed. The Commission could maybe do the job through a management committee system, as it suggests in its green paper, and take detailed decisions itself.  The blame for tighter controls could then be laid on “Brussels”, but the Council will be reluctant to delegate power in this way. Another possibility, also suggested by the Commission, is for the fishing industry itself to take more responsibility.

It is clear that something must be done if European consumers are to continue enjoying fish from European waters and indeed if Europe’s  fishing industry is to have any future at all. This is a major challenge of sustainability, a crisis which requires the same sort of political leadership and the courage to confront special interests which will be essential in developing an effective policy on climate change.

Trichet adopts a measured pace

Monday, April 20th, 2009

Don’t pile up new decisions, but execute what has already been decided. That’s the basic approach of ECB President Trichet as expressed in Sunday’s interviews with Japanese newspapers. He thinks the policy-makers have done what it takes to restore global growth, but, he warns, it won’t happen until 2010.

Some commentators had complained that the ECB did not cut enough when it reduced interest rates by a quarter per cent early this month to 1.25, but Trichet is keen to keep his powder dry. He talks of a measured pace. Another quarter per cent is possible in May, together with other “non-conventional measures”.

So what measures are they? Money markets are apparently waiting with bated breath to see whether the European Central Bank resorts to buying up corporate debt and government bonds to release more liquidity on to European markets.

This process of so-called quantitative easing, already introduced by the Bank of England and the Fed, could have some sensitive political overtones for the ECB. Where should they target the action?  Do they buy up Portuguese, Irish, Greek and Spanish bonds to help the weakest national markets, or concentrate on the biggest economies such as Germany which act as drivers for the EU as a whole? Or maybe they can buy up bonds issued by the European institutions like the EIB.

These quandaries nicely illustrate the complexities of the eurozone, where measures necessary to support the general eurozone interest could benefit one member country more than others.

Trichet has argued that ECB action to boost liquidity has already had an impact, reducing euro interest rates below those of the dollar and relaxing constraints on borrowing. He is not in favour of more dramatic action.

It seems that we are now moving into a new phase of this crisis, where governments must struggle to fight the fires of recession, the social unrest and political turbulence which come with rising job losses and soaring budget deficits, but can really do little more than hold on while world trade picks up again (desperately important for Germany, for instance) and confidence returns.

Europe can be pleased with G-20 outcome

Friday, April 3rd, 2009

Let’s accentuate the positive! The G-20 meeting in London did achieve a much wider consensus and more far-reaching decisions than most people thought possible.  Merkel, Sarkozy, Barroso and Obama all said so. The summit was also remarkable for its recognition of the realities of a changing world economy and the ability of its disparate players to make common cause.

The G-8 is dead: long live the G-20. It would be good to think that this bodes well for an effective global response to climate change in the run-up to Copenhagen.

The Europeans could feel quite pleased with themselves. The conclusions of the London meeting delivered many of the aims which had been set by the EU spring summit and the EU finance ministers in preparation for the London meeting.

But beware of the fudge. As is usually the case on these occasions, the billions and trillions which appeared in the communiqué were not all they seemed, as the FT nicely demonstrated in its graphic. For instance, the $250bn figure to support trade finance apparently relates to the amount of trade supported rather than the cost of underwriting it, which is put at $25bn; and the much hyped extra funding for the IMF comprises some money already committed from Japan and the EU and greater borrowing in the future. The IMF will be selling some of its gold bars as well.

Will this be enough to support the economies of central and eastern Europe?

On the other hand the programme to increase the role of the new global economies in the IMF and World Bank is a recognition of the need for change, while a commitment to avoid trade restrictions provides a valuable sheet anchor to restrain protectionist pressures in difficult times.

The Merkel-Sarkozy positioning in advance of the summit and President Sarkozy’s threat to walk out were intriguing. Their pre-summit initiatives were no doubt an assertion of their independence and a way of distancing themselves from the US, particularly important for both leaders given the public resentment against an American banking system which had precipitated the crisis in the first place.

German opposition to pumping more cash into the economy along the lines advocated by Gordon Brown reflected long-standing German fears of inflation, while President Sarkozy’s threat to quit made great news coverage for him at a time when he is battling deep unpopularity at home – and just as France becomes a full member of NATO. He was able to show himself as the scourge of Anglo-Saxon capitalism.

In fact the London conclusions on financial regulation appear to fit neatly with the EU agenda agreed last month.  President  Barroso has already outlined the timetable for action.  A beefed up global Financial  Stability Board will be a valuable counterpart to the proposed EU risk assessment bodies. The European Commission will be pleased to become a member of the FSB.

Tax havens were President Sarkozy’s final battleground, aimed particularly at the 60 per cent of hedge funds which he claimed were registered in these territories. He wanted instant publication of the OECD name-and-shame list, but ran up against Chinese opposition related to the position of Hong Kong and Macao. It was President Obama who brokered a deal in the margins of the meeting, as Sarkozy himself acknowledged.

“The era of banking secrecy is over” said the final text. Let’s now see how quickly those EU countries which have still to implement the tax standard (Austria, Belgium and Luxembourg) can be persuaded to agree.