May 21, 2012
FOR those who stopped paying attention to Europe's debt crisis, the latest reminder hit with shocking force. The Australian sharemarket has lost $110 billion, all off 2012's gains, this month. Our dollar has ''plunged'' to its lowest level this year. Markets, which reacted in shock when the Greek and French governments became the 18th and 19th to fall in the 27-member European Union, fear a break-up of the euro. Much of the news is certainly bad, but not all of it. Many nightmare scenarios are based on dubious premises.
The dominant mood is uncertainty, which markets hate. The global financial crisis and recession offered textbook lessons in the crippling power of uncertainty. Once panic sets in, it defies rational decision-making. That makes it hard to see through the gloom, to recognise that only when Europe's crisis is brought to a head will political and financial leaders be forced to confront decisions that have been avoided or deferred since 2008. In passing, it is notable that even the fall in our dollar, a source of relief for thousands of Australian businesses, has been reported in negative terms. So too has been the softening of high oil prices, which had only recently been a threat to economic growth.
Europe has big decisions to make: whether to persist with austerity policies that appear only to have driven nations back into recession, and whether the 17 euro members remain locked into a common currency that deprives them of key stabilisers - such as currency revaluations to boost cost-competitiveness - that would otherwise reflect huge disparities in their financial and economic circumstances.
While shifting political sands alarm the markets, it is not as if the Franco-German ''Merkozy'' alliance restored economies by insisting on austerity and rejecting any exits from the euro as a threat to the whole European project. Only now may that difficult creature, democracy, have forced the European Union to consider rational alternatives to three years of policies that have led to double-dip recessions. Voters may be right in demanding growth policies to create jobs and end recessions, rather than cut debt first. It's a lot easier for governments to pay off debt when economies are growing.
There appears to be no easy way out of the depths of the financial hole Greece dug for itself, with a gross government debt of about 160 per cent of GDP likely to rise as the economy shrinks. However, Greece's economy is small. The big problem is Europe's exposure to the debt contagion, and the lack of an agreed mechanism for leaving the euro.
A few prominent economists have dissented from austerity policies and the do-or-die defence of the euro. Of an end to austerity regimes and a euro break-up, Nobel laureate Paul Krugman wrote last week: ''This would be a 'dangerous' development if that strategy were working, or even had a reasonable chance of working. But it isn't and doesn't; it's time to move on.'' Krugman and others observe the contrast in fortunes of euro nations in recession and recovering Iceland, ''which was ground zero for the financial crisis but was able to respond by devaluing its currency''. Breaking up the euro would be ''an answer that makes more sense than almost anyone in Europe is willing to admit''.
Former Treasury secretary Ken Henry says he never saw how the euro could work without a genuine fiscal union - countries still run budgets quite independently. Britain, which refused to be part of the euro, is perversely offering advice on preserving the eurozone, ''or we are in uncharted territory, which carries huge risks for everybody'', said Prime Minister David Cameron.
Fundamentally, the challenge is fear of the unknown. The European consensus and the ideological certainties that underpinned it have been shattered, forcing governments and markets to confront the realities of policy failure and find fresh solutions. Despite all the panic, that is a ray of hope.
AS WE have noted before, just as there can be as many law-abiding cyclists as there are drivers or pedestrians, the converse all too readily applies. The roads (indeed, footpaths, at times) have their fair share of cyclists who do not respect the fundamental rules or courtesies. As The Saturday Age reported, one such miscreant, travelling at speed through a red light outside the Melbourne Town Hall, almost struck a city councillor, Ken Ong. For Cr Ong, who is also the head of Melbourne City Council's planning committee, enough was enough: he has called for a speed limit of 20km/h for cyclists in the CBD.
Although we sympathise with Cr Ong over his near-miss and appreciate his understandable wish to make the CBD a safer place for the 800,000 visitors who flock there each day, it must be said that the practical difficulties of introducing a speed limit for cyclists outweigh the theoretical benefits of his plan. For one, how would this limit be enforced? Even Cr Ong admits he is not sure. Also, how would the cyclists themselves know how fast or slow they are going, since most bicycles are not equipped with speedometers? It makes more sense, as the council proposes, to introduce a blanket 40km/h limit for all motor vehicles in the CBD.
Perhaps the answer lies, as Cr Ong himself says, in education rather than enforcement. As Melbourne adapts more and more to transforming itself into a bicycle-friendly city - a process that has the council's strong support - the need for some cyclists themselves to learn some elementary road etiquette is gaining traction. As The Age reported just over a year ago, a Monash University Accident Research Centre report found cyclists were running CBD red lights at an alarming rate: at one intersection, 13 per cent of cyclists filmed ignored the red light.
Good road manners can also be broadened beyond the kerbstones to include pedestrians. As we reported at the weekend, Operation Road Runner, a recent five-day police operation in the city aimed at improving the behaviour of vulnerable road users, fined more than 270 pedestrians but just 40 cyclists.
In the end, respect for the law and others on the road is a matter of individual responsibility. Imposing speed limits for cyclists would, like the registration of bicycles proposed this year by a safety advocacy group, be cumbersome, time-consuming and largely unmanageable. As Operation Road Runner's leader, Senior Constable Shane Wright, told The Age, ''Everyone needs to be educated to learn they are not the only person on the road.''