Guest essay by Eric Worrall
The unfolding Greek financial crisis is front page news. The repercussions – bank runs, unsustainable debts, deadlocked creditors – could easily lead to major consequences worldwide. However misconceived the Euro currency was, its downfall will be painful on a global scale.
How much of Greece’s current economic problems were caused by the made Hellenic dash into renewable energy? The answer, unsurprisingly, is most likely quite a lot.
Greece, like many small European economies, has placed a substantial focus on green energy, seeing it as a quick leg up into the big league – an easy way to attract generous funding from rich green neighbours like Germany. On paper it must have seemed a fantastic opportunity – build green energy infrastructure, using a mixture of easy finance and generous grants from Germany and other rich green neighbours, then sit back and profit from selling carbon credits, on the pan-European, or even a global carbon market.
The promised European carbon market never really manifested, thanks mostly to an embarrassing oversupply of carbon credits – a surplus which was created through a combination of domestic overissuing of carbon credits, and through clever gaming of the defects in the Kyoto accord.
The consequences for Greece of this economic miscalculation have been nothing short of tragic. With money in short supply, Greece has been forced to retroactively roll back generous carbon credits, which has undoubtably bankrupted local investors, and which likely contributed to a sense that investing in Greece is unsafe.
I’m not suggesting all of Greece’s financial problems are due to Greece embracing the false promise of green wealth. But the massive misallocation of resources and domestic green wealth destruction can’t have helped. Greece now stands on the brink of defaulting on a $1.73 billion IMF payment – a payment which Greece might have been able to afford, had they not been lured into squandering billions of Euros of borrowed money, on the empty renewable energy pipe dream.
Since the 2008 crash a majority of the Greece bailouts have not been used within the country but instead to prop up European banks. The Greek debt must be written off as it is a fraud.
Some basic fact checking reveals that (a) the Greek state provides little support for climate policy and (b) renewables are not particularly prominent in Greece.
http://www.res-legal.eu/search-by-country/greece/
http://www.eea.europa.eu/data-and-maps/indicators/renewable-primary-energy-consumption-3/assessment
The answer to Erik’s question is, therefore, no.
Yep, few of the luxury cars bought on the never never were in fact painted green.
http://greece.greekreporter.com/2014/04/21/greeces-repo-luxury-cars-to-be-raffled-to-taxpayers
Basic fact checking says that renewables are more prominent in Greece than Germany. In 2013, renewables were 15% of Greek energy and 12.4% of German. http://europa.eu/rapid/press-release_IP-15-5180_en.htm
In terms of Renewable energy per capita Germany is 1½ × Greece. Overall Greece has a higher proportion of RE in its energy mix, but German per capita energy is almost 2 × Greece’s. That’s still a lot of RE used by Greece.
As I understand it – Greece joined the Euro without truly meeting the necessary conditions (sufficient conditions are where the hole in the Euro project sits eg compared to the Fed that occasionally bails out say California there is no such mechanism in Europe so Greece with their massive debt and shrinking GDP are between a rock and a very hard place, never able to pay off what they owe and with no escape mechanism).
The global financial crisis of 2008 was triggered by sub-prime defaults and the associated rotten, opaque financial instruments like credit default swaps and rotten derivatives. But what we have faced since is the way in which the major governments, the IMF, ECB et al responded. That response was heavily biased towards austerity and bailing out failing banks, not jailing some of the prime movers etc. The choice was always between a hard landing and a soft landing. Growth suffered ie energy usage reduced etc. Now whether that was a simple by product of governments’ actions or factored into their decision making process who knows?
son of mulder
To describe Greece as not ‘truly meeting the necessary conditions’ for Euro entry must qualify for the Blogosphere’s biggest understatement of the day. It was widely known even at the time of Euro entry that the figures the Greek (and Italian) Government submitted bore no relationship to the economic reality, but a political calculation was made that they should be allowed to join.
It’s a good point you make that the Euro is not backed by sufficient political and economic union between the members for it to remain stable – there is too much power centralised between the German government and the ECB for things not to be run primarily in the interests of the German economy, which is obviously very different in make-up from the economies of the southern European states
U.S. bought Alaska. This may be a good time to buy a couple of Greek islands – or maybe Puerto Rico. How are renewables doing in Puerto Rico?
I didn’t know about the overprinting of carbon credits aspect. So, which came first? Overprinting money or overprinting carbon credits? Are they related? So many questions and so few answers.
Add on that organized crime got into the act an defrauded the carbon credit market of hundreds of millions.
Greece’s problem was that once they joined the Euro, overprinting money was no longer an option.
The traditional method for bankrupt countries to get out of debt was to debase their currency, and then pay off their debts with worthless money.
Isn’t it ironic that for many years, the “warmists” have warned us about a climactic tipping point, all the while they were ignoring an economic tipping point? The former hasn’t materialized and the latter is producing new consequences. It seems to me that economic collapse prevention trumps climate propheteers (profiteers?) – or should.
I believe economic collapse is viewed by the scientists cum policy wonks working in tax funded climate centers as a feature, not a bug.
Look at Spain. Unequivocally they destroyed their economy in search of renewables “leadership.”
“I’m not suggesting all of Greece’s financial problems are due to Greece embracing the false promise of green wealth. But the massive misallocation of resources and domestic green wealth destruction can’t have helped. Greece now stands on the brink of defaulting on a $1.73 billion IMF payment – a payment which Greece might have been able to afford, had they not been lured into squandering billions of Euros of borrowed money, on the empty renewable energy pipe dream.”
It would be nice if you could summarize the figures and the economic analysis which form the basis for your opinion. Then it might be possible to see if the magnitude of the investments into wind and solar power are likely to have had a significant negative effect on the greek economy.
I didn’t realize commenters could give homework assignments to those with posting rights on this blog. In that case: Please also analyze the misallocation effects of hosting the Olympic games and of other sums squandered by the government of Greece, using figures and economic analysis. Show your work.
I just think that such claims as presented in the post should be supported by some figures. Else it will be just the same kind of claims that we hear all the time about all kind of effects from increasing CO2 in the atmosphere.
Equivalency, if any, stops where the claimant invokes state control to correct the supposed causes of his claim, yes? The scientists cum politicos in tax funded climate shops always do both: claim and invoke state control sometimes implied often with the fictional “we.” If one concurs in the science bit and does not concur in the state control bit, he can still be subject to efforts to ruin by those oeople.
The Greeks have tripped up empires before. Ask the Persians. The Greeks delayed the entry of German want to be empire into Russia, allowing the Russian winter to complicate the invasion. The Ottoman Turk efforts were also complicated by the Greeks. It will be interesting to see how the Greeks complicate the Euro want to be financial empire.
Maybe someone else noted similar surge in Greek solar spending/investment, discussed in this 2013 Forbes post. http://www.forbes.com/sites/christophercoats/2013/03/19/whats-behind-the-sudden-solar-surge-in-greece/
Interested typo in optimistic sentence:
“Despite Greece’s clear and present challenges, some have begun to pain a more bullish picture of the country’s investment landscape, with special attention given to solar power.”
Good 1
In 1978 a friend who was a machinery dealer got an order for more than one million $ his bank told him get the money first as they do not pay,see nothing changes
I have the same policy for Europeans as I do with women in my life. They are always right no matter what. Not to mention I don’t care for the constant finger pointing Americans receive from other countries. Everybody is always an expert on everybody else’s problems. This has been the best policy for me so far.
What are the “Climate Cartels” gonna do about this?
http://ocean.dmi.dk/arctic/icecover.uk.php LOL
Imagine the disappointment that these reports are not going the other way! It must be kinda sad to be on the team that’s hoping for a poorer outcome.
I do remember the story last winter that Athenians were burning wood to heat their homes. First, the government increased taxes on heating oil, so people started burning diesel…
Yeah, this article sounds about right.
I might be in the market for one of their small islands. It could wind up being cheaper than a U.S. timeshare.
I have an English cousin who lives on one of the off shore islands.(Doesn’t own it) Last financial crisis I asked how he was, and as he receives his money from UK, he said he was OK.
As they always say: “Liberal Socialism is by far the best political system – until they run out of other people’s money”. The last UK Labour government was a good case in point – when they were kicked out of power, they even left a note saying: “sorry, there’s no more money left…..”.
http://news.bbc.co.uk/2/hi/uk_news/politics/8688470.stm
R
I am thinking of buying one of those Greek islands but only if I can then have it as a new country. I will then make it a place similar to the Caymans with a little chap called ”The Manager” sitting on an orange box outside of a hut that I will call ”A Bank”.I bet it will be overwhelmed with all of those Euros that are presently underneath Greeks mattresses!
Ghost wrote: “Water, rail and electricity should all be state-owned and controlled.” Is this because a crappy train ride drinking poor quality water (or expensive imported bottled water) after departing an ancient station with flickering light and surly workers, all funded with black box subsidies to hide true costs, and run by people with no incentive to improve or responsibility for bad outcomes, is essential?
Come on. New York isn’t that bad.
According to a family friend who visited Greece in the late sixties or seventies, they already were using solar panels for heating water. He added they would not be as successful in UK, especially Northern Scotland and the islands because of their winter and summer sun cycles being on the edge of the Arctic circle. I did read that council rates were not payable by some if they were attempting renovations. Lots were permanently renovating their homes. So – Greece should never had entered the EU and Euro and actually I suspect that the IMF are to blame too. At least the UK has been right not to change from sterling to Euro. National culture and mind sets in Greece do not meld well with the British or other European countries, but besides that I don’t wish them ill. And this referendum will pass the buck from the Greek government’s mismanagement to the EU and IMF. I don’t know how this will go down the wire for other countries we’ll wait and see.
I heard on TV that Greece owes around 5 billion in total. I mean that is not a lot considering that some countries owe a hellava lot more based on their Gross National Product and GSP of course might affect their trading status with the EU?
It’s a bit more than 5 billion
.
http://www.newsweek.com/greeces-debt-crisis-how-much-does-it-really-owe-348659
Greece is the redheaded stepchild of the EU.
wattsupwiththat.com/2011/06/25/eu-carbon-credit-trading-takes-a-dive-in-greece-they-cant-hardly-give-eu-carbon-credits-away/
Way back in 2008, Greece was caught not reporting how much co2 emissions they were producing, in order to obtain those pretty little carbon coupons that was being handed out. So the U.N. Climate Change Secretariat banned Greece from trading coupons.
Then soon after, private firms holding those worthless coupons scammed millions from the private sector, selling those worthless coupons.
Greece probably should have stayed away from the credit scheme after that. Instead, the EU let them back into trading.
Unfortunately for the Greeks, they got into the game too late, and that was about the time that Anthony Watts wrote the post I pasted.
We can’t blame the government officials of Greece trying to fleece the EU out of green money, but we can blame them for repeating the same mistake.
What we can hope for is certain carbon emitting industries to look for huge tax breaks, in order for Greece to get back on its feet and tell the EU to go to hell.
Thanks Joel. But the Greek government took on a lot of debt, now they are asking the people to not blame them but the IMF and EU. The situation in Greece is bad, doctors do second jobs to pay for their up keep because they are not subsidized. The days of the Ancient Greek are well and truly over. They’ve become a third world country now, with only the noble history to sustain them. Some ancient Roman writer said ‘Only the Greeks philosophize, the Roman’s don’t we are pragmatic’. I’d like to know where all these billions went too? Of course the people will vote to get out of the EU. One way of passing the buck from their government to the IMF and EU. (Who should take some responsibility in this situation).
If a country adopts “The Spanish Model” over renewable energy, it is a 100% certainty it will result in an economic disaster for that country.
The western world developed thanks to two things… cheap fossil fuel energy and capitalism … two things for which the world has not yet found better substitutes to replace them with.
Yet this is exactly what the UN is promoting … eliminating fossil fuel energy and replacing the economic model of the last 150 years (capitalism)… an impossible dream!!!!!!!!!
The Green Madness is only one manifestation of euro-sickness: Forced purchases of useless (made in Germany) junk payable by new, off-balance sheet debt. The absolute figures are not that large. Only €9 billion (about $10) for 5 GW of quite useless wind/solar nominal capacity, with zero or minimal real fuel savings, costing about €1.5 billion per year in inflated electricity bills (plus infrastructure costs). The numbers are not large compared to the 400+ billion outstanding debt, but the multiplier effect on the economy is large. Industry has left the country in search of cheaper power. Unpaid electricity bills are mounting. Somewhere down the line tourism will be affected (unless if you all love 300 ft windmills view from your hotel room). By the way, the annual cost of Unreliables is about the amount of the missed iMF repayment. Sad, and dumb. GREEN.
Monetary union meant that Greece and others could suddenly borrow at German interest rates ……which were far, far lower.
Greek rates were higher for a reason.
Same problem in 2007/09.
The Chinese miracle economy built up an enormous mountain of cash which had to go somewhere so after a worldwide shopping spree that snapped up every farm and mine available failed to sop up the mess, the Chinese began lending but at very low rates which were never raised no matter how hard the US Fed bleated (year in year out).
This Chinese money flooded the worlds banks continuously, overcooking the house markets in just about every country.
The Greek have changed the old text, written in the pyramids:
The Greek version is now:
Closed are the double doors of the Greek horizon, locked are its bolts