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tv   [untitled]    October 28, 2011 7:30am-8:00am EDT

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welcome back this is our live from moscow here's a recap of all our top stories colonel gadhafi son reportedly agree so how themself over to the international criminal court in exchange for his safety for some leaders in the west so that means they're going to the old regime could get a very public area. the french president says allowing greece into the euro was a mistake after even readers hammered out a deal to stave off a debt crisis brightening to the gulf the entire euro zone hopes are now pinned on asia as europe's bailout fund boss heads to china to ask for help. at russia's legendary bolshoi theater really over this in its grease overbore with a grad call on friday six years of massive renovation were marred by countless delays scandals allegations of corruption. next our debate show cross-talk and rich
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peter lavelle and his guests try to find a scenario that could help greece stay in the euro zone that's next an artsy. live. in. the. billowing welcome to cross talk i'm peter lavelle when is a deal really a deal your leaders say they have a plan to cope with greece's sovereign debt problems and to build a firewall against italy's looming crisis the devil it would appear is to be found in the details. to take you. live. to cross talk of the eurozone crisis i'm joined by marshall are back in
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gander he is a global portfolio strategist at madison street partners and a fellow at the economist for peace and security in milwaukee we have jeffrey summers he is an associate professor at the university of wisconsin milwaukee and in london we have any myer he is a senior visiting fellow at the london school of economics all right gentlemen this is crosstalk that means you can jump in anytime you want and i very much encourage it but first tell us how we got to this point on a wing and a prayer. a date with destiny to sort out the years that imbroglio was set three weeks ago by nicolas sarkozy and anglo-american then it was delayed by three days and on the third day it came through after marathon talks which ran until four o'clock in the morning under the new plan greek debt will be back to one hundred twenty percent of g.d.p. by two thousand and twenty with greek debt holders taking haircuts up to fifty percent to four hundred forty billion euro will be used to provide risk insurance needing that after a second one hundred thirty billion greek bailout and other is for ireland and
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portugal it could provide up to one trillion in firepower to deal with future crises the plan was laid out by engel merkel ahead of wednesday's talks. well it's a good to see a little about them because all of tonight's discussion will be that. when it's capacity will have a great effect on the prevention of contagion and this deterrent impact must be great enough. become global markets in the lead up to this week's euro zone summit could be interpreted as confidence that the new leaders will pull something off to save the day but after two years of failing to come to grips with the greek debt contagion risk and other e.u. economies in a banking system that is grossly under capitalize there's been a growing sense of impatience even beyond europe successful resolution of the current european crisis matters deeply to us here in the united states because our country has no bigger no more important economic relationship than we have with europe with a weak u.s. economic rebound still in its nascent stages and the chinese economy is slowing the
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sheer enormity of a new failure by that you to come up with something workable after failing for nearly two years was the specter behind the politicians and officials still arguing in the small hours but this plan will be scrutinized like no other for weaknesses which markets will exploit as well as the political torture of its creation with the dow's for a meeting over how it will stand over the long term but i supposably surprising to see something different after two years i wouldn't be surprised at all jeffrey if i go to you first and then milwaukee how do you look at this plan that they came i hammered out with and finally after two years of wrangling over because the the only thing i got out of it is a lot of. grease lost all of its sovereignty so what's your take on the great deal that was made the european leaders have come to. i think your characterization is quite right peter and in fact i'm quite concerned for the greek people because the greek people are going to have to continue to believe in order for this agreement
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to work for instance we already know that they are going to have to privatized some fifty billion euro serve assets and with this latest agreement they're going to have to prioritize an additional fifteen billion euros on top of that so essentially what we see is a transfer from the public sector to the private sector and to my mind what is this continued cycle of collection of rents from the public so contrary to the classical economic tradition where we make things more efficient i think what we're going towards is a system where we see increasing inefficiency rather than greater efficiency so my hopes are high for the future of this agreement viability and for the. good it will do for the great people ok hearing if i'm going to you in one in what was once resolved has anything been resolved because again we're looking at it very carefully and it looks like there's a lot of there's a voluntary element to it i mean when you banks now want money when banks forego
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money i don't understand and i was in investment banking at one time it seemed so we were article to be voluntary. yeah well the thing is you have to look at this new from two perspectives from the political and from an economic angle if you look at it from a political angle you must look i mean against a backdrop of very reluctant decisions over the last eighteen months or two years or so one has to say this was in political terms a step forward in economic terms as you rightly characterize it are still a lot of loose ends i mean one of the things is the rule of three hakka for the banks i mean the reason why it's voluntary is that politicians don't want any c.d.'s to get but obviously that's one of the cruxes some really said they said that the. market interest of some of the banks actually triggered the c.d.'s because it shows against losses so there's still a lot of details to be hammered out so from an economic point of view i think it is still there still some way to go from a political point of view he showed the resolve to really tackle how the problem i
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think this is a ride that even if small step in the right direction ok marshall what's your take on all of this here i mean has anything really been resolved or is it just point out this is more of a political ploy right now to calm the markets and they're still biting their nails trying to figure out where to get this extra trillion euros for the for the stabilization fund i mean who's going to pay for that big news no one right and it's not written down where that money's going to come from that's a lot of money is going to be the german taxpayers. well it will be a number of the tax payers and first of all i agree totally with just characterization the whole trajectory of policy over the last couple of years in europe has been a nightmare it's been one case of fiscal austerity after another and you know you have the situation where it's like a dog chasing its own tail the the the troika has continued to bend more and more cuts of countries like greece the economy continues to deflate into the ground which means it's impossible to meet its targets which means they get punished even
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further and greece is not the objective here i mean greece is being used as an example of what can happen if the perp if the so-called fiscal deviants like italy and portugal don't fall into line so it's it's highly immoral it's bad economics and as forward to being voluntary on the part of the bankers i mean it's voluntary just as if you know i had someone stick a gun to my head in the past week or something and i agreed to it i mean there's only been true about is having said it's just a tool to ensure that these credit default swaps don't get triggered these are frankenstein play products that shouldn't be allowed anyway so it's a form of plaquenil and in any case the whole notion of haircuts it seems to me that you know we're looking at the problem the wrong way around the pair cuts are coming because the bonds are distress and the bonds are distressed because you have this need to have national solvency you have to deal with the issue of national sovereignty first and then if you can deal with that then the bonds become traded at less to stress levels and at that point you don't need as many haircut so that
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the cure is wrong and the punishment misconceived is well it's a terrible program ok henning if i go back to you in london i mean it seems to me this is compromise sovereignty i mean greece is the example here greece just wrote off its sovereignty economic sovereignty for you know who knows in a decade and is this is is this is this what people signed up for because we need to speed better to have restrictions leave the euro zone because our other countries and other public during this great contraction would be saying we're the only way we can get through this this euro seems to have only been controlled by a small group of people in brussels it would have to lose all of their sovereignty to keep that currency i mean that's the xti ergo when you look at what happened here yesterday. yeah i mean first of all i think it's a very important point to this in tangle the economic strategy from what was actually decided yesterday i completely agree the repeated those of us territory they are not going to going to help in order to put any of the european countries
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on a sustainable trajectory so i mean greece is really and solvent for quite some time and people have known this and this newborn help unless it is accompanied by a different economic strategy that would allow the country to adjust its competitive situation adjust its public private sector and all the sort of things that really have to be just increase while it is growing. it is shrinking of the economy increase a shrinking by i think five and a half percent this year alone this is just it will not be possible and it will be a democratic backlash as well as for greece or any country actually leaving the euro i don't think this would be a good idea neither for greece nor for any of the other european countries in the euro zone for the simple reason i mean none of the long long benefits of being in the common currency void now i mean there are obviously syria economic problems but the reason the interest the euro in the first place are still there second thing is obviously you have to reconstruct the euro zone ok i don't there were some major
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institution will mistakes night and these have to be rectified and as long as greece can go back on to a growth rejects three i think there's a just in the necessary adjustment can be made within the euro zone ok good point angela or too little made you one thing that bothers me on this program is that we're all agreeing with each other here that's not what this program is all about jeffrey if i go to you one of the things i think is really interesting is that maybe the only thing they could achieve what they achieved yesterday is the stop the rot of the of the eurozone but where is the a plan for growth because we have how can you have growth with austerity it doesn't make any economic sense to me at all i mean when you look at unemployment rates increase and in spain we will cope cutting budgets is not going to stimulate growth it's simply impossible. well peter at the risk of not being a contrarian perhaps you are going to be i agree and feel we do have a big problem here it's as if it's as if we have a case of gang green on the head and we think we're going to cure the patient by decapitating. this absolutely it's not going to produce the beneficial outcomes
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that they are intensified and. again i thank you you've really really hit the bull's eye here we have a system whereby growth has been halted how are we going to meet these projected g.d.p. our targets under these austerity regimes in which there is not sufficient capital to launch europe not to mention the perfidy of europe on a trajectory of growth i mean i just think this is all very very funny this for you before the break i mean on top of this is saying here isn't and then paying off even more debt in a time of austerity i mean where is the just where is the growth to pay for these future debts again it doesn't make any sense you know we're very it's a very it's a very simple truth without generating growth this is the ability argument is not on board the thing is the proponents of if you say you cannot spend your way out of the crisis well one thing is you can't cut your way out of the crisis either you
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will have to generate growth and growth these investment so spending is not just consumption and just putting money down the drain it's about investing in the right industries in the right services and making greece grow again that's the only way to reduce or titian alongside our gentlemen we go to a short break and i'll actually break we'll continue our discussion on the eurozone state park. and discover it's p.c. to. communicate with the while under. test yourself and become free.
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see what nature can give you. the mission free critique should be free comes for charges free arrangement free. free. free. download free broadcast live video for your media project c.e.o. don carty dot com. and. welcome back to prosecute all of us to mind you we're talking about the crisis of the eurozone. ok.
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ok marshall and dan brown i could go to you one of the things i mean looking out of the commentary that's come out since since the deal was agreed to at least it's tentative form is that there's an enormous amount of skepticism we've heard that on this program here but then we have the euro officials and some you know central bankers and things i just say yeah we're going to it looks like it's going to work you know if we have a political commitment now all the things you hear from politicians that we all get tired of by the way i mean why is there such a disconnect there between we have the populations we have media expert media coverage doesn't think it's going to work the only thing that seems to work is a small group of people that sit down in brussels behind closed doors. well there there in their own little bubble i mean look this is fundamentally not a democratic project i mean this is government by technology it's always been like this you know the people the whole modus operandi of the european union has been you know we'll keep asking the questions and when there is democratic recourse if they don't get the answers they like then they'll just keep asking the question to until they do get the answer so what people's wishes you know that's never come
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into it i mean that look the the whole of. the common currency project that was never submitted to the german people for example by referendum at least you know meter all did it in france and it barely won rights to speculate another referendum again that it might lose this time but certainly if you don't carry along the vast majority of the public with you you have no kind of democratic legitimacy but you know they obviously enjoy these nice little beaners they get every few months in places like nice or lisbon and you know they all get very nice salaries and they completely insulated from the reality of what most people are experiencing on a day to day basis and plus they have this this disgusting crony capitalists like alliance with the bankers this bailout of greece is effectively you know it's all been decided a way to minimize the damage to the financial sector to build a whole universal banking or which is has been in grace in europe it's completely misconceived and put the politicians won't attack that and that's not just a problem of the european union you see that all over the world if i go to you in
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london what about the moral hazard here i mean when you said you know we have this stabilization fund you know it is very impressively they can facilitate looking at any kind of a possible default i mean it's just moral hazard right there because it just sends the wrong message that if you do get in trouble we have the money to protect you is that the thing that we should be doing right now. well there are two things here obviously the moral hazard issue will have to be addressed institutionally that's why i think once whatever the result lucian through this immediate crisis is going to be the next two or three years will be characterised by intensive debate within the euro zone and the european union as a whole as to how to reconstruct the euro zone in order to make it more sustainable and offers me you know normal capital is ruled has been shocked i mean if you invest in something the interest rate is also part of the compensation for the risk you take and the you know the more hazard argument is apparently there you know you
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invest and if it goes wrong the taxpayer picks up the bill i think everybody sees that having clear limits to this and the one thing that's going to do i mean if the banks really take a whack at a fifty percent now on the on the greek bonds and we have to recapitalize this will shift the focus of the debate back from the deflection really on to sovereign debt back onto the banking sector because if you're being honest not much has been reformed the last three years or so there were there is a debate you will still have to lead and have to do something about jeffrey why don't we did it change gears here i mean one of the thing and i remember we spoke at another program about this i mean why doesn't the european leadership and maybe for once in a while ask the permission of the people of the european union i think despite the polling go down fiscal union as well that way you know if you avoid all these problems of course you throw sovereignty out the window but i mean is it really a choice now between the euro and sovereignty because we've seen greece was the folk first to be put on the altar and sacrificed. well you are right i mean it is
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like a sacrifice but i would go further and say that this is kind of like an irish marriage in which the priest has told the paired couple that they need to stick it out because that's how bad it is and that they are not going to be consulted regarding the future of this this bond. is just unsustainable in its current form you're absolutely right and i think peter that we actually need to even have a broader and larger discussion and one which would require engaging the public and that is that the real fix to this is just fiscal union i think we need true banking reform and use of the term reform unlikely i think the banking industry needs to be treated as a public utility they have absolutely terrorized. our north atlantic economies whether it's the united states or much of the european union and the results have been an absolute catastrophe we're going to literally have a lost decade if not the last two decades unless we change this unless we stop this
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rent extraction from the real economy the banking sector it doesn't matter what we do in terms of the political. looks like a nice change i think you know we go merkel and sarkozy different speaking that language it all jeffrey marshall if i go to you back you and other people are going to have to push them there maybe you know occupy everywhere is we've been through on this program marshall i'm going to you we continue with the fiscal union because that's really one of the only ways out of a logical way out not a political one that's a totally different question if you want to save this currency you have to have a fiscal side in it it's where we're headed to europe and that's that's been the. you know that's that's been that's been the fundamental problem since the inception i mean you've had this this weird military half way house where you've had a common currency with no political union and you know those of us that criticize
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it from the start we were kids have been you know dollar general it's a little englanders and and frankly you've had historic examples of this in the past particularly here in the u.s. you had the articles of confederacy in the early united states history and you have the confederacy of the u.s. south during the civil war and both of them had the same kind of characteristics are a minimalist fiscal structure and very very powerful powers that left at the state level so it became economically this functional and ultimately collapse so you're right you have to move towards some sort of a political union the problem is this is being asked of the of these leaders in the space of weeks you know you're trying to force institutional changes on such a rapid rate when you know the country clearly aren't ready for it and in any case we have to ask what kind of a fiscal union is it going to be is it going to be like germany's so-called stability culture is it going to be really united states of germany under the guise of being the united states or europe or is it going to be something very different the omens today suggest that you're getting some weird form of. economics where the
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germans basically allow the whole of europe to be deflated into the ground they buy the assets on the cheap by writing the check and that's certainly not the kind of you don't it states of europe that i think most people want i was in dublin a few weeks ago and the notion right now the united states of europe absolutely terrifies them because they feel that this is going to be dominated by the germans and they're seeing what the germans are doing to the greeks and they figured if their next meeting if i can go to you this whole germany question i think it's a shame because you know the germans are damned if they do damned if they don't it's a very interesting situation that they found themselves in. yeah i think well first of all i think it's wrong to talk about the united states of europe because that leads to a comparison with the united states of america which is a wrong analogy in many respects the european union comes from a completely different kind of development and i think you know we don't we're not doing anybody afraid i'm just trying to make superficial comparisons have a united states of america fiscal union yes but the question is obviously what it what it means an openly fiscal union is not a matter of now no it's
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a moral yes it is also a matter of development and evolution in this so i think i think it's absolutely important as the other speakers have also stress that we have a more public debate and take a people with us and that has been has been neglected over recent decades i have to say but i think that's a trajectory that's going to you it's going to happen and the other thing is i think you already pointed to a very important for the and that's going to actually open in the european union it's the eve seven same place that you ten and the city of london versus banking regulation it's going to be one of the big problems that will divide the eats and maybe lead by the u.k. it looks like they're becoming one so you believe they're of the known euro countries within the european union and the the euro zone countries which have different economic interests so that's a full time to be watched and ok marshall you want to jump in there go ahead. i guess i just want to interject you can call it whatever you want i mean i use the united states of europe as it's shorthand to connote fiscal union not because i want to see you use the u.s. as a model you know in fact if i was to choose
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a better model i would say the canadian or training camp of federalism probably are but it's a peer i mean in the united states of europe to clarify it's just a shorthand for the kind of fiscal union that you were talking about but clearly i don't think the american model is the right one either jeffrey again let's take a look at what the taxpayers have to do here with what i find really interesting is when you look at these huge numbers being thrown around and they're looking good going out over twenty twenty twenty forty things like this i mean it's a straight a sustainable because ultimately it's the taxpayers that have to pay for this and no one asked them for their permission to do this and no one asked them to put them into debt for decades maybe if not for a generation i mean this is going to have some very severe political consequences because we've already seen it going across europe. well absolutely and again referencing a prior discussion that we had i think that this isn't terribly fictitious i mean this is absurd to speak about their kids out in terms of projections of what g.d.p.
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is going to be but more all for we need to get back to this discussion of even development in europe because ultimately this is what we're talking about we don't have a unified continent we don't have a unified levels of economic development and consequently we're going to require different sets of policies for different parts of europe we cannot have uniformity across a continent which is not unified in terms of its level of development so for instance in the periphery we're going to require or we're going to need tolerance for say higher levels of debt and also we need to figure out a way for nations to currently do with their poor hit by doing and that is to. create credit for the purpose of investment in their countries currently we have a system whereby we are forcing all of these nations to go to the private banking. markets in order to raise capital this increases their cost plus making
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economic growth and investment a more expensive proposition and leave me to me when you're almost out of time here i hear you i want to go to you in london if we needed to if we make a program yes oh year from now on this exact topic what do you think the condition of the euro will be. i mean we all seem so great that we need to grow sort of gene order to alleviate the problems but i think as opposed to some of the other speakers i think the imbalances that we see within the euro zone and not just in terms of development and also i can on the balance of trade imbalances that have to be addressed i think we can do it is i mean if you read all right generally we agree more all around the time you started this program on a wing and a prayer we'll see if it stays that way year from now many thanks and i guess today in london denver and in milwaukee and thanks to our viewers for watching us here are to see you next time remember. to.
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