A tottering Europe and nature's externalities

The effects of last week's Icelandic volcano are still being felt across Europe. And I'm not (merely) talking about bummed Barcelona players arriving home from defeat at Inter de Milan. Airlines and travellers across the continent and beyond are primarily affected. Many travellers are complaining of airline practices and seeking damages for refusing to pay their stranded passengers' bills. Outside though, in the business community mother nature's effects are heavily felt in lost production and capital. Economists are predicting major losses in the GDP of recovering economies, although I am sceptical of their gross exaggerations. Nonetheless, the volcanic event demonstrated nature's strong, and increasingly, role in world economies. Nature itself is not traditionally considered an actor, certainly not a "rational" one, but it does have legal recognition (e.g. fault doctrine for 'acts of God') and will necessitate preventive actions among nation states.

Meanwhile, Europe's economy is still fragile. Despite the bailout to Greece, the euro faces uncertain prospects from competition with other currencies. In real economic growth, forecasts for the UK, France and other nations are dim with nominal growth in 2010. I think the volcanic eruption and its ensuing economic effects demonstrate how unsteady the European financial and economic systems are. Slight shocks to the system - such as a natural event - have strong repercussions. The continent lacks a coordinated air safety and security mechanism to deal uniformly with such disasters. Tackling the broader economic issues remains a larger task.