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Notes for Sofia: The EU, Global Warming and the Current Economic Turmoil

English Pages, 10. 12. 2008

Thank you for the invitation to come here again. I remember quite vividly the positive atmosphere here, in the same hall, a few years ago. I was here in November 2004 – just after the Czech Republic’s EU accession – and spoke about the EU. A lot has changed since that time. Bulgaria entered the EU and by now has certainly made its own first experiences with the membership. I assume (and hope) your expectations were not excessive and didn’t cause a big expectations-reality gap to arise.

I am visiting your country in the moment of our preparations for the EU presidency which we take seriously and will be able – I am sure – to organize it in a standard way. I would also like to say very explicitly that for us the EU membership has no alternative. Recent, rather insensitive reactions to some of our views on the Lisbon Treaty, which were coming from the old EU countries, reminded us – to my great regret – of our non-democratic past. We both – the Czechs and the Bulgarians – have to insist that no one is the owner of the EU, not to speak of Europe. 

As I said – and again I hope I speak on behalf of both our countries – our active participation in the European integration process has no alternative. Yet the forms and the methods of EU arrangements have many variants. To take one as sacrosanct, as the only permitted and politically correct one, is unacceptable. The right of Czech and Bulgarian people to say “yes” or “no” to the European Constitution, to the Lisbon Treaty or to any other similar document must be guaranteed. 

Not only that. This guarantee represents – for me – the untouchable substance (or meaning) of Europe. Everything else can be put into question. The attacks on those who dare to say “no” to the attempts to accelerate the deepening of the EU, which is the essence and aim of the Lisbon Treaty, are attacks against the true nature of Europe. Nobody denies the success of the 50 years of European integration, of liberalization, of opening-up, of removing of all kinds of barriers, of getting rid of protectionism. The question is how many Brussels-imposed rules and how much pan-European regulation is necessary, helpful and productive.

Economists usually discuss these issues by means of both microeconomic and macroeconomic arguments. Microeconomically, we should think about it in terms of public vs. private goods and ask how many public goods really exist at the continental level. There are nowadays in my view many EU competencies dealing with issues which do not deserve to be solved at the European level and some of them are not public goods at all. I see it as a big problem. Macroeconomically, we should decide whether the degree of homogeneity of this nominally integrated European space is so high that it requires institutions like common currency and, eventually, common fiscal policy or other policies of that kind. I don’t find the existing level of “European” homogeneity so high to justify such solutions.

The only possible conclusion, however, is that these questions should remain open to discussion. The discussion mustn’t come to a halt.

This time, I came to your country to be present at the launching ceremony of the publication of the Bulgarian edition of my book Blue, not Green Planet which opposes the current global warming dogma. I am very glad that after the Czech, German, English, Dutch, Russian, Polish and Spanish editions, there is one in your language.

Like many climatologists, I do believe that climate on Earth has been much the same as at present for the last ten thousand years and that the current warming is well within the range of what seems to have been a natural fluctuation over that period.

There may be currently some mild warming taking place but an imminent climate catastrophe is out of question. There aren’t any data that would indicate such danger. If we correctly discount the future we’ll discover that an eventual problem in the years to come will be too small for the present generation to worry about. 

Heavily biased propaganda we have been subject to in the last years should be challenged and my book is trying to do just that. The question in its subtitle – What is Endangered: Climate or Freedom? – has a clear answer. It is freedom and, I would add, prosperity which are endangered. The likely magnitude of man-made global warming is so low that it will not be discernible against the background of natural variability in the climate record. Freedom and prosperity are, however, endangered.

The new, for some people unexpected phenomenon is a world-wide economic and financial crisis. I am pleased to say that – until now – the Czech banking and financial sector is relatively quiet. It has not been overexposed to bad loans in the last ten years, which helps. We are also lucky not to have the Euro. The Czech crown isolates us – in some respect and to some degree – from the world economy and we hope that we can avoid falling into the financial crisis. 

We cannot isolate ourselves, however, from the visible slowdown, if not the outright fall of the whole world economy and especially from the recession in the countries of our main business partners. Our last three years’ average GDP growth ranging between 6% and 7% has come to an end. How fast it will fall, we do not know. Surprisingly, as a side remark, the data for the last quarter showed an acceleration of our GDP growth (as compared to the previous quarter), which is very unique. Our trade balance is still in a solid surplus.

As regards the world economy, it will take – in my understanding – several years to return to something I would call normal economic growth, provided it won’t be halted forever by the acceptance of the irrational environmentalist’s dogma of man-made global warming. This is something I consider quite probable, but that’s another issue.

Assuming it will not materialize, it’s most likely that the world will return to the era of positive economic growth in due time – with or without Mr. Sarkozy, G20 summits, costly rescue packages masterminded by Mr. Paulson and Mr. Bernanke and other similar initiatives. It is like dealing with a flue. We have a saying in our country: it takes a week if you see a doctor and seven days if you do nothing.

As an economist turned politician, I am afraid of something else. The crisis will be used (and misused) – as it has always been the case – for the undermining of basic institutions of capitalism, of free markets, of Ronald Reagan’s–Margaret Thatcher’s deregulation and supply-side revolutions, of the institutional changes of our post-communist era which were based on radical liberalization, deregulation and privatization. That is the real danger we face. The business cycle cannot be avoided.

It is our task to protect free markets against attack from irresponsible politicians. When I look at the current Czech government and the Czech central bank, I do believe that in this respect the Czech Republic will be on the more rational side. I hope the same is true for your country.

Thank you for your attention.

Václav Klaus, Speech at the University of National and World Economy, Sofia, Bulgaria, December 10, 2008