It seems that something other than love is in the air once again, and things have gotten so bad that Paris officials banned all cars with even numbered license plates this past Monday. The reason is the shockingly high levels of particulate matter concentration (PM). PM is a “criteria” pollutant regulated by the EPA, and it is linked to possibly several hundred thousand premature deaths each year. In the US, however, the dominant source of emissions is coal-fired power plants, whereas the EU has a much bigger share of its passenger vehicles powered by diesel fuel. These diesel vehicles are much greater contributor to PM than the gasoline-powered vehicles common in the US.
From the AP story:
The safe limit for PM10 is set at 80 microgrammes per cubic metre (mcg/m3). At its peak last week, Paris hit a high of 180 mcg/m3 but this had fallen to 75 mcg/m3 by Monday.
I suppose the fact that it fell to 75 mcg/m3 is comforting, but that is still very high. As a basis for comparison, I picked a monitoring station from Los Angeles –one of the heaviest polluted urban areas in the US. The data are available at the EPA air trends site, which tracks every monitoring station.
Notice that the standard is the second-highest average for a 24-hour period, with the U.S. standard at 150. Also notice that the 75 mg/m3 that Paris returned to is still about as bad as it gets down in LA these days.
Thompson points us to a link that draws this conclusion: “Spain is doomed and Greece is toast.” Of course, last year we pointed to Michael Lewis’s similarly dire predictions for Greece, where he observes “the closer you look, the worse it gets.” He concluded Greece is simply incapable of reform in its current form.
The piece, like much of the news out of Europe these days, will both shock and annoy.
Here’s a taste:
As it is, the government will not itself accredit private colleges or universities, and a law passed in the last decade disqualifies anyone with a degree from a private university from being a college professor. Therefore, for instance, a faculty member at the American College who earned a an undergraduate degree there and then went on to Princeton, Harvard or Oxford for graduate work is not legally able to teach. One of the best colleges in the country has been placed under constant duress in this way.
Why would anyone try to close a highly successful college? Why would anyone want to take educational opportunities away from young people in a struggling economy?
Because Greek public universities and their professors act like a cartel. Making private universities essentially illegal and preventing their graduates from teaching increases enrollment at state universities and benefits the professors who work for them. Both of the main parties buy votes by protecting these professors’ jobs.
Sadly, the future doesn’t appear to be too bright for Greece. Unless you count watching the economy burn.
I predict that the euro will be a weak currency (one that will not retain its value against the dollar), and that it will not be a permanent currency. Ultimately, the euro will most likely be remembered neither as a textbook example of the social gains of properly defining the optimal currency area nor as the harbinger of global exchange rate stability, but rather as an illustration of the importance of fiscal discipline for monetary credibility, and as a monetary example of the tragedy of the commons.
European union will likely strengthen the attraction of the dollar as a numeraire and a store of value. Countries outside of Europe will continue to peg their exchange rates to the dollar. And when the European Monetary Union ultimately collapses, it will itself provide a positive shock to the real dollar exchange rate that will hurt countries that have pegged to the dollar. All of this is unfortunate from the standpoint of global macroeconomic stability—an example of how political constraints that limit rational policy and encourage public profligacy make the global economy less stable than it otherwise would be.
I think the euro is in its honeymoon phase. I hope it succeeds, but I have very low expectations for it. I think that differences are going to accumulate among the various countries and that non-synchronous shocks are going to affect them. Right now, Ireland is a very different state; it needs a very different monetary policy from that of Spain or Italy. On purely theoretical grounds, it’s hard to believe that it’s going to be a stable system for a long time.
If we look back at recent history, they’ve tried in the past to have rigid exchange rates, and each time it has broken down. 1992, 1993, you had the crises. Before that, Europe had the snake, and then it broke down into something else. So the verdict isn’t in on the euro. It’s only a year old. Give
it time to develop its troubles.
At any rate, Cowen’s point is that economists may have whiffed the financial collapse, but they seemed to hit the ball on the Euro.
The economic situation in Greece is downright gruesome, and I have to wonder how bad the social unrest is to become there. The principal source of my pessimism is a piece from last October where Michael Lewis essentially argues that the situation is hopeless:
But beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.
I saw a couple of updates to that unhappy picture this week. First up, James Surowiecki in the New Yorkergives an accounting of Greece’s rampant tax evasion, a point Lewis also makes rather starkly. Indeed, the Surowiecki piece reads like an Executive Summary of Lewis’s article, with each arguing that the social and cultural aspects in Greece are broken and are effectively impossible to fix.
The second piece is from Tyler Cowen in the New York Times, where he argues that the situation is pretty dire even without factoring in the social difficulties of implementing meaningful policy reform. Cowen’s piece discusses some of the difficult choices facing the EU, and reminds us that lurking in the background are the potentially large problems of EU members from Italy to Portugal to Spain. Cowen doesn’t have much hope, concluding that “There’s a lot of news on the way, but probably very little of it will be good.”