Germany Grows Tired of Leading Europe on Climate Change
By Christian Schwägerl and Gerald Traufetter 2/21/2010
For the Cancun climate change agreement to be effective, the European Union would have to further cut greenhouse gas emissions. Germany, though, no longer wants to be the model EU pupil and is asking others in the club to step up.
The atmosphere was jovial and party-like in Cancun, Mexico as the United Nations Climate Change Conference came to an end. Attendees from around the world clapped rhythmically and the host, Mexican Foreign Minister Patricia Espinosa, was glorified as a "goddess." Everyone was relieved that the meeting did not end in failure as the climate summit in Copenhagen had.
Now, though, the European Union faces several tough decisions -- and German Chancellor Angela Merkel is at the center of the wrangling. She no longer wants to play the role that the other 26 EU member states have come to expect of her -- Germany doesn't want to be Europe's leader on climate protection anymore.
Germany is the only country in the EU to have committed to reducing its CO2 emissions by 40 percent by 2020, relative to 1990 levels. Other countries in the club are appreciative of Berlin's pledge -- but none have followed the example. As a block, the EU has committed to reducing its emissions by just 20 percent, a target which includes Germany's ambitious reduction goals.
The climate summit in Cancun, however, upped the pressure on the EU to raise the common target from 20 to 30 percent. According to the Cancun agreement, only those countries which are signatories to the Kyoto Protocol must commit to emissions reduction targets -- to be reached by 2020. The European Union and other Kyoto countries vowed to follow the lead of the Intergovernmental Panel on Climate Change (IPCC), which has called for reductions of between 25 percent and 40 percent below 1990 levels. The US and China, which are not subject to the Kyoto commitments, escaped with vague targets. Kyoto Protocol signatories such as Japan, Canada, Australia and Russia have indicated that they will not intensify their CO2 reduction targets.
Economist Reimund Schwarze of the government-funded Climate Service Center in Hamburg feels that the EU has an obligation, if only from a computational standpoint: "Under the Cancun package, 30 percent is set for the EU, and perhaps it will even have to be substantially higher." Given the Cancun agreement, environment organizations believe that a solo effort of the part of the EU may even be the only way to reduce global CO2 emissions. They are calling on European leaders to increase the EU target in the spring. moreAnd when you look at the disaster in the making for the Euro, even small talk about doing right by the atmosphere seems wildly optimistic. No matter how committed Germany is to solving the essential problems of climate change, there are always the Pimcos of the world to deal with. And as we say around here, the Predators DO know how to wreck things.
'The Threat of Insolvency'
Bond Leader Pimco Sees Euro Zone in Danger
European leaders proudly announced agreement last week in efforts to save the euro. But Pimco, the world's leading investor in sovereign bonds, says that the measures are not enough. Some countries may have to temporarily leave the common currency union
German Chancellor Angela Merkel, as has been adequately documented, got what she wanted at the EU summit in Brussels late last week. European leaders agreed to the inclusion of a stability mechanism in the Lisbon Treaty -- one which allows for the possibility of private creditors sharing in losses should a euro-zone member state default on its debt.
Investors, however, have not reacted to the news quite as euphorically as European politicians had hoped they might. Indeed, Andrew Bosomworth, head of portfolio management for Pimco, the world's leading sovereign bond investor, says that the mechanism is not nearly enough and comes much too late.
In an interview with the conservative German daily Die Welt, Bosomworth said that the problem continues to be the fact that investors doubt that countries such as Ireland, Greece and Portugal will be able to pay back their debt.
"The result: Investors are trying to sell their bonds from the problem countries, but can't find any buyers other than the European Central Bank," Bosomworth said in the interview. "The interest rates are continuing to climb as a result -- for Spain, Italy and Belgium as well. That makes it more expensive for them to borrow, their debt increases and so does the threat of insolvency."
It is a problem that has faced Europe since spring, when the full extent of the debt problems facing Greece resulted in a mass sell-off of Greek state bonds. The European Union jumped in with a €110 billion ($145 billion) bailout and followed it up just a week later with a €750 billion fund to prop up the euro. That fund, however, has not stopped speculation that certain euro-zone countries will ultimately be forced into insolvency. Ireland became the most recent victim of such speculation this winter. more