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From Versailles a message of no austerity
Eurointelligence
There seems to be more evidence that the oil price shock in 2008 may have been at least in part responsible for the recession. FT Deutschland quotes from a Bundesbank study that apart from the financial crisis, the sharp rise in oil prices was an important contributing factor for the recession. For Germany, the costs of energy imports to from 1.8% of GDP in 2004 to 3.4% in 2008. The shock would have been much harder had it not been for the appreciation of the euro and the increase in energy saving and efficiency. The Bundesbank report also explained that the auto crisis in the US was caused in part by an oil-price induce switch to smaller and medium sized cars, which are mostly produced outside the US.
(19 June 2009)
Submitted by EB contributer Driller.

The Green Bank (PDF)
John D. Podesta and Karen Kornbluh, Center for American Progress
Financing the transition to a low-carbon economy requires targeted financing to encourage private-sector participation
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The debate over energy legislation begins in earnest in Congress this week and the stakes couldn’t be higher. The United States is falling behind in the space race of our generation — building long-term economic prosperity powered by low-carbon energy. China’s stimulus package invests $12.6 million every hour in greening its economy, for a total of $220 billion, twice as much as similar U.S. investments. Meanwhile, during the most recent economic expansion the average American family paid more than $1,100 a year in rising energy bills for U.S. policies that favor fossil fuels.

The choice is clear: continue with more of the same energy policies or transition to a clean-energy economy that creates millions of good jobs here in the United States and moves us off our dependence on foreign oil.

The creation of a new Green Bank could lead to the steady and reliable creation of clean-energy jobs and would be a crucial element of the transition to a clean-energy economy. Working in partnership with the private sector, a well constructed, public Green Bank would open credit markets and motivate businesses to invest again. It would enable clean-energy technologies—in such areas as wind, solar, geothermal, advanced biomass, and energy efficiency—to be deployed on a large scale and become commercially viable at current electricity costs.

Designed along the lines of the proposals in this memo, a Green Bank is a critical part of an integrated strategy that would begin to build a strong foundation for broad-based economic growth and prosperity while allowing our nation to lead the world in the transformation to a global economy powered by low-carbon energy. An integrated clean prosperity strategy requires several elements that other nations are successfully pursuing, among them: putting a price on carbon, requiring utilities to replace some of their carbonbased energy resources with renewable energy, and jumpstarting investments in clean energy and efficiency.
(May 2009)

Holding together
Economist print edition
IN THE mid-1980s Rolling Stone magazine published an essay by P.J. O’Rourke, a conservative American humorist, with the splendid title “Among the Euro-Weenies”. In it the author poured scorn on Europe, an annoyingly fractured continent with its “dopey little countries”, “pokey borders”, “itty-bitty” languages and “Lilliputian” drinks measures. The mosaic of countries made the visitor feel claustrophobic: “You can’t swing a cat without sending it through customs,” he complained.

He will not have been aware, or cared much, that plans were already in train to give “Europe” the continental scale it so painfully lacked, as well as a currency that would rival the dollar. In 1986, the year of Mr O’Rourke’s visit, the European Economic Community (as the European Union was then known) expanded from 10 to 12 countries, with the addition of Portugal and Spain. Its members had spent most of the 1970s erecting non-tariff barriers to internal trade, and the early 1980s battling over who should pay for its joint budget (a fight which, to be fair to the others, Britain started). With that settled, there was a fresh desire to make progress towards a genuinely open free-trade block.

...So far the euro has brought neither greater prosperity nor political union. Job-creation improved but productivity increases slowed, leaving the region’s trend growth rate much the same as before EMU. In its early years the euro fell against the dollar, but it has since more than made up for its early losses. It has quickly established itself as a global currency without becoming a true rival to the greenback’s status. For much of the euro zone’s first decade Germany, its largest economy, was in the doldrums, but after a long period of wage restraint its export industries started to lift the economy. Spain, Greece and Ireland proved more dynamic, each enjoying a consumer boom.

All seemed well until the present financial crisis struck. This reawakened worries about the imbalances that have built up inside the euro zone. Germany’s huge current-account surplus is matched by big deficits elsewhere, particularly in the Mediterranean countries that German policymakers had been so keen to exclude from joining. It remains an open question how these will be resolved.

From the website:
The euro area, sorely tested by the financial crisis, has survived intact and is likely to expand further, says John O’Sullivan (interviewed here)
(11 June 2009)