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Peter Foster: Saving Kyoto And The Euro By Friday

The foundering this week of not one but two experiments in megalomanic government pretension — the Kyoto Protocol and the European superstate — should provide cause for reflection about the limits of government. Instead, what we are seeing is desperate attempts to paper over the yawning policy cracks.

Both the Durban Kyoto meeting and the eurozone summit are meant to unveil new master plans on Friday. Neither is likely to have much credibility, since most of the details will be “to follow.” The difference is that Durban is about proposing unworkable solutions to what may well be a phantom problem, whereas the euro crisis is both genuine and immediate.

Standard & Poor’s threat to downgrade both eurozone countries and the European Financial Stability Fund provided an unwelcome advanced verdict on sketchy schemes outlined this week by German Chancellor Angela Merkel and French President Nicolas Sarkozy. The “Merkozy” plans involve tough talk but problematic implementation. There would be tighter fiscal discipline for all 27 EU members, or maybe just the 17 in the eurozone. This discipline would have the teeth of sanctions, but those sanctions would require weighted voting of members. Bizarrely, Merkozy agreed that those forced “haircuts” for Greek bondholders were a terrible idea. Inevitably, they weren’t very forthcoming about the real reason: How can you suck bond investors into basket cases unless they know they’re going to be bailed out? (Shh. Don’t tell taxpayers.)

Sounds a little morally hazardous, doesn’t it? Meanwhile, finger wagging at countries to be truthful about their deficits — or else — seems to rank up there with Dean Wormer putting Animal House on double secret probation.

Another rather significant problem with no-soup-for-you ultimatums is that the financial crockpot is pretty depleted. Germany continues to resist the European Central Bank getting further into either the buying bad debt or printing bad money businesses, but now there are suggestions that the ECB might do so if politicians promise to cross their hearts and hope to die. Both Germany and France appear to have buried the idea of jointly secured eurobonds, although the new European Stability Mechanism, which will be accelerated but still not slouch onto the scene until the middle of next year, will be nothing but a sinkhole for bad debt.

The present crisis is not in fact the flowering of an unrecognized flaw but the natural consequence of the redistributionist eurocratic dream: buying ever-expanding allegiance with ever-greater access to taxpayer money. The suggestion that Germany knew they would be on the hook but had aspirations to achieve via a common currency what they failed to do via the Wehrmacht is outright barmy. The Germans look more like guilt-ridden mugs.

It is surely significant, meanwhile, that eurocrats and their political servants should also be the most enthusiastic to pursue the ultimate bureaucratic dream: a vast co-ordinated plan to control the weather by controlling the global economy. This even though the dream has wreaked nothing but havoc in Europe, from collapsing emissions trading schemes through cratering alternative energy subsidies to spreading fuel poverty.

At Durban, Europe remains the only developed group still ostensibly committed to a new comprehensive treaty, although even it is now demanding a road map down which to kick the climate can. Canada has announced it is not interested in joining a successor to Kyoto, and received strong support for its green-policy skepticism in this week’s devastating report from the Ontario Auditor-General about Queen’s Park’s reckless and expensive lurch for green-energy “leadership.”

In the United States, too, Kyoto is dead. Green groups scored a big victory over jobs by holding up approval for the Keystone XL pipeline, but climate change isn’t going to be much of an issue in the presidential election, except when the Republicans bring up Solyndra.

The negotiating position of both the United States and Canada — which is as practical as it is tactical — has been that there is no point coming to comprehensive agreements unless fast-developing big countries, in particular China, sign on. They knew that China would never do so, although this week the Chinese appear to have been having some fun with their allegedly pivotal position (or trying to avoid blame) by claiming that they might be prepared to make some commitments after 2020, provided their trading rivals cough up more “clean development” aid, and continue both to hobble their own industries and subsidize the purchase of Chinese wind and solar products. A desperate eurocracy might be prepared to go along with such Potemkin policies, but nobody else is likely to.

Historian Niall Ferguson posited the notion of “Chimerica” because of China’s reliance on American product markets and the U.S. dependence on Chinese funding. The Europeans have already tried to float the balloon that China might fund Europe too, but the Chinese are smart enough to know a sinking ship when they see one, whereas the United States is still a monument to capitalist ingenuity.

It is highly unlikely that we will now see a new Frankenstein stitch-up called “Cheurope,” or perhaps “Eurina,” based on China’s exploitation of eurocratic policy desperation to keep the global climate scare — and its political potential — alive. One big question is whether the euro will go the way of Kyoto. If it does, the consequences will be genuinely scary, although ultimately salutary, as long as the lesson — the limits of government competence — are learned.

Financial Post, 7 December 2011