tv [untitled] October 14, 2011 3:31am-4:01am EDT
carful as we have lights here in our team time now for some heated debate and cross stuff with peter lavelle. wealthy british science says it's not time to write. margetts weiner scandal. find out what's really happening to the global economy is a report on r.t. . and. welcome to cross talk i'm peter lavelle the euro crisis it is a high noon moment for a eurozone looking to stave off another recession while juggling indebted sovereigns flimsy banks and the specter of economic crisis in the mediterranean
this has many seen the worst does this currency have a future. and you can. get crosstalk here old jitters i'm joined by john gaunt in london he is chief executive of vote u.k. out of e.u. also in london we have andrew louis co he is director and principal of europe economics and in dublin we go to jeff madrick he is senior fellow at the roosevelt institute and author of age of greed the triumph of finance and the decline of america in one nine hundred seventy s. to the present all right gentlemen this is crossfire that means you can jump in anytime you want and i very much encourage it but first tell us about this ongoing almost endless crisis there have been quite a few meetings but not much progress the global economy is emerging from one of the roughest squares yet with intense market volatility fueled by the fear that policymakers cannot contain the spreading crisis and that this europe remains mired in that song due to the absence of political will power to avert euro zone's and
disintegration this is the most serious financial crisis we've seen at least since the one nine hundred thirty. if not ever now we're having to deal with very unusual circumstances devising a rescue plan that would pull the monetary union at of a meltdown has so far been met with gridlock and resulted in political stalemate among the governments of europe the need for unanimity has significantly slowed the process with countries that odds over the need to recapitalize the banks and the source of the funds to make it happen germany is ready to recapitalize the banks and we need unitary criteria we are under the pressure of time and we need to take a decision quickly but so far germany and france have been unable to find common ground over how to recapitalize with the letter insisting on the use of the four hundred forty billion hero european financial stability facility and recently opposition from arguably less prominent players like finland and slovakia has
threatened to throw any progress made on the issue into reverse all those has time and again highlighted the key issue behind the squabbles in my personal view we need to make significant progress towards political unity within the executive branch and into parliament with us leaders now saying the hero's own risk as the biggest single impediment to an economic rebound the alarm bells will ring louder until the plan is unveiled and the upcoming weeks after kicking the can down the road for nearly two years the next could blow up in the face of the global financial system perhaps we'll see more in the upcoming days thank you very much for that russia and i go to andrew first in london here we had sort of cozy and merkel meeting not too many not too long ago and they said they're going to come up with a solution by the end of this month here why the solution can they possibly come up with after i've been talking about it for two years watching this. currency crisis just continue to spiral out of control. one of the problems we have here is that
almost every solution proposed over the past few months has been a variance of the same basic theme which is that somehow germany should become responsible for all of the debts of the eurozone and in particular they should become responsible for the debts of italy and portugal and greece and other countries within the euro zone now that just seems to me to be a silly idea or a nonstarter on this any reason why the german should feel that they should have responsibility particularly for italian debts that were accumulated from long before the euro even existed all of the schemes are opposed to variants on this theme so the idea of having a huge stability fund of two trillion euros or leveraging the existing much smaller funds up to two trillion or maybe printing loads and loads of new money euro bond or all of those four kinds of ideas are variants of the same debt sharing theme so they are a nonstarter the way that you should be going here is first of all to be seeking to address some of the fundamental problems in the euro zone banking sector by
imposing losses on the lenders for the banks the people who lent money to the banks particularly in spain and in ireland and then dealing with the problems in portugal and italy by having a system of transfers over time an extension of an existing system called the e.u. structural funds which would allow you to send money off each year just to raise the growth rates of those countries a little bit and finally accepting that greece really doesn't have a future in the euro zone so greece needs to be out there i mean cyprus leaves you bring up a very good point here and if i go to john here i mean the whole world except for a few leaders in the e.u. and some greek politicians have a long ago agreed the greece will default on its debts and we still keep kicking the can down the road here i mean why isn't it why is it we just they just take a huge haircut and just move on ok because after two years of watching this continue down the road everyone just has to pay more and more and more go ahead.
well it's not the end prisoners clean new clothes isn't it someone's going to shout out the emperor is naked somebody is going to shout out greece is already in default it is absolute nonsense as you say that they continue to kick the can down the road greece is bust it's time for greece to leave the euro zone's time for greece to be able to take back the drachma and devalue itself will then you know to use a cliche go on holiday there again and help them rebuild their economy but i mean as you say every man cat dog and woman knows full well that greece is already finished greece has got to go they've already got folks at haven't they in effect why our leaders are ten reasons why i have to just don't grow some and realize that in my case and let's just get on and move on all right jeff in london dublin you want to jump in there you know. i'm always stunned by the utter insensitivity of these kinds of comments just let them go as if we're not talking about real people
as if we didn't set up a situation in which it was a very easy for greece to borrow it in which we did not set up a situation in which or germany indeed benefited from that the anger on the part of your two guests it's quite it's quite sharp and stunning to me and the lack of a sense of obligation to greece which indeed i was excuse me indeed me here are saying and i'll shut off i would kill myself to hold on a second he wasn't agreed the british people who went into this he was certain guilty man who took us into this folly we stand outside the euro zone anyway because we've not got the euro but let's let's understand this this pain here in the u.k. as well we're not responsible for greece is problems that mature yeah well i don't know so i'm not i'm never really learned a serious human and you have always whether we wanted to hear how you are you have your very area to decided to try greece's economy to the economy of germany there.
the guilty men know all the old nervous systems of all great country all right jeff you want to reply no they just the fact is sir and i'm i'm not going to use that kind of the kind of language this man uses i mean he's entitled to say whatever he likes on whatever channel a lifestyle like to have a somewhat more civilized discussion out of a country such as civilised as soon as britain i'm not a big fan of britain's current was staring economic side there but the idea that you can talk with such. such insensitivity about a nation and its people just stuns me the idea that you're a jew what you said paul even more money. should not just go ahead jeff please finish what. i would love to hear my ideal of your moderator to i'm trying to master go ahead jeff the idea that you can talk yeah yeah i hear you the idea that you can talk in these terms and with no sense of moral obligation and with no memory no historical memory of the difficult periods especially after world war two
and which you're of found itself and so little historical memory about the value of the common market and the idea of throwing nations out when trying when things get rough is it difficult to save greece yeah you bet it's difficult to save greece and maintain it in the eurozone can greece take a substantial haircut yeah do do we need a substantial maybe even fifty percent haircut yeah can greece develop have a primary surplus next year the numbers suggest they can of course the debt load is very big and has to be cut. out radically but the idea of saying that they're going to cut their currency by fifty percent or two thirds and somehow they'll just bounce back because you guys are going to go visit them and spend money there is just. it's as hard for my dad i'm jeff greason. i know you wish you are sensitive
and kind but i did and anger and i did andrew on this i mean there's there's the moral hazard issue here i mean nobody wants to see the great people suffer i mean i think we'd all agree on that there but there is the moral hazard issue of you continue to throw money into greece to try to save an economy that most people leave is already bankrupt then you have the other pigs lining up to say will do the same for us i'm not trying to be insensitive fair to say you does the system work or not and i guess you go ahead and jump in let me just go ahead and do this you haven't said much in the program go ahead. yes it's not it's not the germans the germans didn't force the greeks to borrow money so the greeks chose to borrow these these monies themselves and it's turned out they were unable to pay and of course there were french and german and other banks have lent money to greece and they'd be the participants that would actually lose out when the greeks defaulted i am not suggesting that actually the greeks were particularly benefit by default and i just think it's inevitable that they will do so that they will default and they will
exit from the euro at this stage i think things have gone beyond the point of helping them if the if the euro zone or thirty s. heads made more sensible decisions a couple of years ago i think it would have been possible to have a haircut for the greeks and then for the rest of the eurozone to have lent the money to keep them in the euro i just think that that's not really a possibility anymore i think it's also important to understand what the difficulty is and coming up with some alternative solutions at this stage because you have to appreciate two things first is that the euro zone or thora t's are terrified of the possibility of an unraveling of the whole euro zone project because if you go back to nine hundred ninety two and then there were you have found that there was an thing called the exchange rate mechanism a kind of fixed exchange rate regime in europe and as countries gradually started to drop out so the italians dropped out and the british and others eventually the whole thing came to bits so that even countries like france in the end which had been thought to be absolutely core and inviolable members in the end came under pressure they fear that you would find that the whole euro zone unraveled if you
started to let people leave the other thing about this is that the reason why they didn't have the greek default back in two thousand and nine was because really most of the sovereign debt by allowed was just banking sector by another name and so once they start accepting that you get a default by the greeks and then you'll get a cascade of losses of various banks around europe we've already had some banks go bust earlier this week for example quite a large bank in the in belgium called dexia which has actually foreign currency foreign currency obligations much larger even than the state of greece so. this is all you would highlight show me john barrow we're going to a short break and after that short break we'll continue our discussion on the heroes stay with r.t. . and if. you want to.
discover is. communicate with the wild. test yourself and become free. see what nature can give you. a very warm welcome to you this is your news today protesters on the walls. leads in canceling the chances to get a book for example the status of the human experiment is exploding with. programs in this rap music or dick's knows the book is really trying to make sense of global
economy and it's all came towards us financial templates the research scrambling to maintain our confidence in long kids and taking on the critics want to be seen trade imbalances risks to keep emissions close to collapsing and some like loan foreclosed homes. to fail so we play banks again sealevel like thing is us crashing timonen smashed ceiling team claims it's like ultimate in a closet in streaks the argument construction on just programs increase the total economy. ok. and. welcome back to crossfire computor all of your mind you were talking about the possible death of a currency. and you can. see.
ok i'd like to go back to jeff in dublin there's a lot of talk about the european financial stability facility and possibly pumping it up to two to three trillion euros now what is the logic of going into so much debt to pay off debts i mean at what point does it become viable because and also can ask the same when i can ask the same question about austerity i mean how can i stared bring prosperity go ahead. yeah well i agree that austerity in the in the cases of the countries for the most part with one or two exceptions who are following it is not going to bring prosperity but debt following debt is a long standing idea i mean you've got guys like badgett of the economists you've got our charles can goldberger who are probably the best history of busts you've got you can interpret keynes in minsky this way always they say when things begin to unravel there comes a point where you have to say you have to throw debt overwhelming force to
stop the bleeding now what's happened in europe and i think you're to the two other gentlemen agree with this is they just drag this on and on for structural reasons for. e.u. structural reasons but also because they just didn't want to face the fact and also i think it was alexander who said the private lenders have to take a hit when they've been trying to avoid that obviously in france and other places they have not gotten their private lenders to take a hit now we face this in the u.s. as you all know under the bush administration with paulson and geithner and so forth and we have our tarp we had our f.d.i.c guaranteeing all kinds of debt we had our federal reserve dramatically expanding its balance sheet now that stopped the crisis i don't think it was implemented and all that well because it did not get the banks lending again it did not change management it did not and serious
conflicts of interest we have in america but there you have a pretty darn good example of some people who don't i don't always admire coming together and i think people forget it's so easy to forget history what a risky step they took and how many people like you just now ask how are we going to solve this problem by throwing debt after debt and in fact they did they did solve the problem well i mean i will lot of people would say the problem isn't solved at all. it is a very courageous case actually a hot political potato and the debt ceiling john if i can go to you if i could let me finish this well no i'm sorry if i go to john in london i mean i agree i agree with jeff in principle i mean it's keynesian economics ok but i mean who pays for this debt it goes back to what we were saying earlier in the program i mean why should germans have to pay for the mistakes of the greeks i think that's what a lot of people are asking that question on point zero zero zero zero zero zero american friend in dublin was talking about the united states of america hand how
they try to solve their country's problem now i agree the preacher they haven't really solved have that because of the present problems that the states are suffering but that was one country we never asked to be in the united states of europe i mean here in britain in the united kingdom well still eurozone crisis got to do with us but we're still bailing out these paid countries and then when you look at germany for example why should germany be bailing out greece you know grew in greece first joined you know did they tell the whole truth about their balance sheet twenty percent and i just did it in the state within the year you where you could ask that same question and he has while you're not really a spanish well you know honestly i am foreigners to these nations ok germany's economy is here and if you did enormously by x. exports to these nations can i just finish this point apparently you gentlemen don't understand american history or history very well we have had time and again conflicts in trying to unite this country going way back maybe the history precedes
you both the fact is that there are quiet because you are you you have to you know this is still here listen a minute is a choice just a try just a story and therefore union if you are as i do know my history is moderately to stop to stop to stop the crisis at that moment that they didn't proceed as i said if you would listen to me that they didn't proceed well enough along that they didn't adopt adequate keynesian stimulus that. as for the issue but they did succeed in staunching that crisis at that moment give them credit for that right now we're going to now and really want to understand how the problem is. going to enjoy. your time going and you have the floor go ahead it's not it's not keynesian economics for the germans it's not keynesian economics for the germans to take on italian debts i think i think we need to get this discussion beyond greece because the reality is that greece is going to i mean greece has already agreed to default greece is going to have
a full scale default within within weeks certainly by march so that's not even the issue anymore the issue that markets are interested in is how the is how and whether they're going to keep italy in the euro whether they're going to keep the whole euro together and so did the greek thing needs to be off the table so the real issue here is how do you get enough growth in italy for italy itself to service you sound debts or if you can't do that do you have to have the germans take on the italian debt or have the italians default i think it's just a ridiculous idea that germany should accept trillions of euros of debts that arose before the euro zone even existed and that's nothing to do with keynesian economics that's like some other country taking on some of body else entirely taking on responsibility for their beds the way of getting back growth within italy is of course partly to do with structural reforms and so on it's also though i think there have to be some transfers some monies will have to be sent from germany to the european union and the european union will then spend those monies in italy italy fundamental situation isn't that bad it's not that heavily indebted country
in the aggregate it has a bit of government debt obviously but in fact by the middle of the twenty ten's even italian government debt is projected to be lower than that in the united states so the united states situation is in many ways actually worse than that of italy because the united states not only has quite high government debt but it has enormous levels of household indebtedness and the americans haven't in any way address that problem through the top it all that they did was that they retired to the moment of having to make a decision about these things. what you do when you when the governments intervene in these ways is at best they puts off the problem until later out worse they go the way of ireland and they find that the government then takes on so much that itself that the government goes broke and the reality for a number of countries within the within the european union is that they face that danger with in your opinion perhaps the most egregious examples are spain and ireland and the united kingdom but places like belgium and to me in from the u.k. as well so we know what we need to have is a solution that deals with the banking side crisis on the one side deals with the
gross growth and competitiveness. and do i think what you're getting at here is you're getting at here is actually finding a solution and not something to start again jeff if i go to you what are some of the structural issues they need to address if they really want to fix this currency because if you don't have a fiscal side in the monetary side we've seen what's happened ok enormous amount of irresponsibility going on entirely do go ahead. i don't entirely disagree with alexander i am a little taken aback however by this idea that it's not some have it's not fair to germany to take over we're not talking about fairness and we're trying to stop a major crisis where's try and we're talking about practicality we're talking about where there has to be done even at a cost but let me let me say something about the american economy because because i'm a little disturbed by that this idea that somehow you'll cut debt america has to cut its debt and therefore it will solve its problems the obama administration did
expect to grow faster and debt did not was not going to rise at this level according to their forecast they got it wrong what are they trying to do now well keep in mind we have a lot of taxing ability in america as you guys well know we're almost the lowest tax country in the world if we get the economy back on track we can begin to raise taxes and cover that that in fact you may not know this but the obama plan which i don't like because it was mostly tax saving cut government cuts not revenue increases down the road but it will get dead down to the level around the level of stabilized and around the level of seventy to seventy five percent two thousand and thirty two thousand and twenty five that's when we have begin to have big health care problems and believe me a lot of us are talking about that so this is casting americans in the same light as these other problems is pretty whacky on the other hand i do agree with alexander's analysis of italy he is talking about a united fiscal policy in the u.a.e. e.u.
which i do believe is necessary the idea of throwing greece to the dogs i find i frankly find. pretty obnoxious going to let it fall for a major haircut one way or the other people are going to take a loss john if i go to you if we want to talk about having a greater fiscal side to the the euro the euro then you're going to have a lot more political control centralized with someone in brussels in frankfurt in some place because that control spending and spending has a political price tag attached to it go ahead. well well of course but that control isn't actually going to be in brussels it's going to be front for because it's the germans are going to be paying for it's a bit like when island were bailed out normally when one goes into an election and you go into the booth it's the old story you know it's the economy stupid well if you're in your country and your own politicians are actually controlling your economy what is the point in voting it actually did huge people their democratic rights and actually that's the way we're heading isn't it because the germans will
dominate this because they are the ones who are going to bail out because they're the ones who haven't had this rapid expansion and reliance on credit the rest of the eurozone nations of that and that's where it comes to play and it's all right for our friend in dublin to talk about the united states but look at the level of debt mess let's look at the fact that they could well default themselves will certainly look like they might have done just a few weeks ago so we told we take lessons from them but they obviously think nicely states over four years on your way here we are not there you know we're actually like you're on your own who is really doing and we've waited ten proudly i want to show you here i want to hear the last word on this program go ahead ender. i think there's any all the distinction in the world between an arrangement in which either the germans accept that they have responsibility for italian debts and then the italians get to spend as they like or the italian the germans lend money to the town and then tally italians what they have to sell and so on and of those arrangements is a nonstarter the only way that this can work is if the germans send money to europe
and europe then collectively on the parts of the eurozone which is going to have to be its own country will then spend money in italy and other places so it's not a matter of germany dominating anything it's a matter of a new country called europe coming into existence ok. general you have what you want to do with that but the responsibility will be yeah i generally agree with that lead to remember that the responsibility will be germany's as the strongman of the modern era and we've all of the time here thank you very much gentlemen a lot more it is going to share many thanks to my guest today in london and in dublin and thanks to our viewers for watching us here r.t. see you next time and remember rostock rule. anything. you want.
activists claim soldiers in northern syria are turning against the regime but the government says they are just armed gangs posing a threat to the public. not. the occupied together anti-corporate protest movement that began in the your goes intercontinental with demonstrations being planned in cities across the globe. spain's credit takes a hit from international rating agencies while neighbor portugal prepares for top of the steering measures with people accusing the government of working for the rich. this is r.t. coming to you live from moscow i'm marina joshie welcome to the.
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