Angela Merkel won’t allow the euro region to split because she understands that could cause “a dark age” by wrecking the bloc’s energy markets as oil supplies dwindle, said an adviser to the German chancellor.
Europe’s 500 million residents, the wealthiest market on Earth, have led the development of technologies in clean energy, transport and communications that can drive global growth that doesn’t rely on oil, said Jeremy Rifkin, a Wharton Business School professor who has advised Merkel for six years.
“I hope they pull this off, there’s no one else,” he said yesterday in Madrid of Merkel’s struggle to boost growth as part of Europe’s rescue strategy and preserve the single currency area. “If it splits up, we’re into a dark age.”
Rifkin argues that record oil prices in 2008 pushing up the costs of everything from food to clothing rather than the collapse of Lehman Brothers Holdings Inc. was the main cause of the financial crisis. The global economy won’t return to its pre-crisis growth until it moves away from fossil fuels because rising oil prices will continually hold down expansion, he said.
The global economy sputtered again this year after oil prices surged. The European Central Bank started buying Italian and Spanish government bonds to control the sovereign debt crisis on Aug. 8, three months after oil prices reached their highest since 2008. Stock markets slumped this summer, with the S&P 500 losing 17 percent from July 22 to Aug. 8.
Germany’s deployment of renewable energy, intelligent power grids and electric vehicles leaves it best-placed to lead the world economy beyond its reliance on fossil fuels, Rifkin said. His vision involves creating an “energy Internet.”
The EU has led the global battle to limit the greenhouse gas emissions that scientists say are almost certainly the cause of global warming, establishing the world’s biggest market for carbon-dioxide emission permits in 2005. That infrastructure, as well as the bloc’s targets for transforming its energy networks over the next 30 years, would likely be wrecked if the single currency area split, Rifkin said.
Merkel meets European Union leaders in Brussels on Oct. 23 as they seek a solution to the debt crisis that has brought the euro area to the brink of recession, according to Christian Schulz, an economist at Joh Berenberg Gossler & Co. in London.
“If the euro fails, Europe fails,” Merkel said yesterday. “But we shall not allow this to happen.”
The European Commission today recommended paying Greece the next installment of bailout loans as “soon as possible” so long as Prime Minister George Papandreou wins parliamentary approval for new austerity measures.
Global crude output likely peaked in 2006, the International Energy Agency says. Oil companies will have to spend trillions of dollars drilling in increasingly hostile environments such as deep waters in the Gulf of Mexico or the Arctic to meet demand, it said in its 2011 World Energy Outlook.
Merkel, Sarkozy, Zapatero
Rifkin, in the Spanish capital to speak today at a Rafael del Pino Foundation conference, has advised Merkel, French Premier Nicolas Sarkozy and Spain’s Jose Luis Rodriguez Zapatero that the global economy’s fundamental problem stems from the end of a growth model based on fossil fuels.
Sustainable expansion will only return when officials and executives can produce “the third industrial revolution,” the University of Pennsylvania’s Wharton School professor argues in a book of the same title due to be published next month.
The shift will involve harnessing Internet technology to manage a decentralized network of renewable power generators based in homes and offices, Rifkin said. Domestic hydrogen batteries and computer software will allow consumers to buy and sell power over a smart network, he said.
“This is the completion of the legacy Steve Jobs started,” he said, referring to the Apple Inc. chief who died on Oct. 5. Energy “collecting technologies are going to get cheaper and cheaper. They are following same cost curves as computers and phones.”
Rifkin has also advised executives at companies including Samsung Electronics Co., Citigroup Inc., McKinsey & Co. and Ford Motor Co. as well as the European Commission and the U.S. Department of Interior.