but selfie sticks are a no no. concerns about historic artwork in the white house not for safety reasons. i'm antonio mora. for latest news, head to aljazeera.com. be are rayray suarez is up next. >> mousse greece didn't pay its bill due this week some $2 billion. its banks are closed atms are empty, and it's not close to clear what happens next. some 11 million people a struggling economy and uncertain future in europe's common currency. greek drama - it's the "inside story".

[ ♪ music ♪ ] welcome to "inside story". i'm ray suarez the greek prime minister elected when his country's economy was cratering, with a promise to reject austerity, now is ready to accept terms he once rejected. the change of heart and tone coming after his country missed a key debt payment, off the banks closed and lines the frightened citizens stretched down the sidewalks hoping to grab cash before the money ran out. john psaropoulos in athens. >> greeks have been caught in a 2-pronged strategy. at the end of tuesday they decided to capitulate write to creditors and accept the deal on the table on saturday. the creditors said that deal is

no longer available to them unless there's a referendum result giving a positive direction to the eurozone authorities in the sense that greeks want to remain within that eurozone. so by the end of wednesday, alexis tsipras, the greek prime minister, was forced to stick to his guns on the referendum and continue to schedule it for next sunday rather than cancel it something that his deputy prime minister said 24 hours earlier was possible and advise greeks to vote no. the irony, the contradiction is that on the one hand the greeks said they will accept the saturday deal from their creditors. on the other hand they have asked voters to vote against it. joining me from aspen colorado is niklas burns, a professor of diplomacy and international relations at harvard university. his long career in public service includes four years as the u.s. ambassador to greece.

great to have you with us. you've been watching as the eurozone ties itself in knots over greece you were in athens as the new currency was faced in. did greece belong in the euro in the first place? >> i think in many ways it did. greece was one of the poorest countries in the european union, the economy was developing in the 1990s it was a time of greater confidence certainly about the development of the economy and international investment and the greeks worked hard to convince the european union that they should be a member of the eurozone. the story deteriorated after that, with all the problems resulting in the last 10 years, with inability to collect taxes, inability to stick to reform programs inability to impose a coherent economic policy and the results is massive debts, 240 billion euro owed to the e.u. and a kallam attous situation

where the greek government harks unfortunately, i think, miscalculated in handling its creditors, including angela merkel, and the e.u. >> was the decision to include greece as much political as it was economic to show europe that the euro was not just a club for wealthy northern countries, but like the e.u. itself, the euro was going to embrace north and south and east and west. >> i think that was a big part of the european project as it was developed in the 1990s. certainly after mastric, they wand a single currency as many members in the e.u. as they could. u.k. and sweden didn't join. i think part of the rational was to unite the north and south part of europe the prosperous countries like the netherlands, germany and finland with those

that struggled economically such as greece. greece had an economy based on shipping agriculture and tourism. it doesn't have - greece does not have the natural economic advantages that others do and it's small - 11 million people in an economy at best that is 3% of the g.d.p. of the overall european union. >> here we are, the stage is set for the referendum, coming this weekend. is it at this point worth the struggle for the various stakeholders for greece to stay in the eurozone? is it worth it for greece what remains for them to do? is it worth it for the rest of the eurozone itself? >> well i think you have heard consistently from angela merkel the most powerful politician in europe and the european union, that she does prefer that greece stay in the eurozone if that is possible. then europe doesn't risk the unknown of what happens for the first time when a eurozone member leaves what might be the

impact globally on markets and the impact on others in the european union. greece has been a net recipient of aid, infrastructure aid, development aid - massive infrastructure aid over the last 10-15 year, and for the greeks to leave is a shot in the dark. it's a gamble. if they go back to the drachma, the currency greece had before it entered the eurozone it's a big gamble as to whether or not the greeks can sustain a new currency, defend the currency under a renewed central bank, whether that may further the depression in which greece falls, and greece lost about 25% of its gross domestic product in the last five years, and has 50% youth unemployment little foreign investment coming into the country, and your reporter accurately described the tension on the streets of athens and other greek city and most greek

citizens feel helpless to go into a greek currency is a gamble. most greeks want to stay in the us eurozone, and stay in the european union. >> we are looking at a country that feels impoverished by the terms set for its remaining in the euro it's less able to pay its debt by conforming to the requirements for staying in the euro. >> well the greeks took on - previous greek governments - about 240 billion in debt. if you are a member of a club or organization, you are responsible to repay those. you raised the larger point here. it unrelenting continued austerity the continuing economic policy as is the greek economy. when the new government came in they had an opportunity to begin

that dialogue and debate within the european union, because there are other countries wondering if austerity is the right way to go. instead of focussing on that, they antagonise the germans, and the united states and greece is left with the greek government with few friends, if any, sticking up for it in the european union, because they have not given coherent reforms to their creditors, and not been a consistent partner. it looks to be an erratic performance, a government where no one in the knt held senior posts. they are relatively young, hard left radical in their orientation, and in saying nice things about vladimir putin in russia, in questioning whether the west should sanction vladimir putin over ukraine, and

asking germany for world war ii repatriation, they have antagonized their creditors. there are a number of tactical mistakes by the new greek government that accounts for the lack of trust that you see. you are right, ray, this issue of austerity is a larger issue that ought to be debated within the entire european union. >> ambassador niklas burns joining us from aspen colorado a referendum has been planned for july 5th and is recommending people vote againsts a package for sustaining greece saying there's no hope for invest juniors, consumers and depositors is the best course to accept the terms or start over, leaving them poorer and just as deep in debt. stay with us, it's "inside story". >> al jazeera america, weekday mornings.

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be their last chance? >> i have to do my 100 percent best so i don't end up in a place like this again. you're watching "inside story". i'm ray suarez. greek drama. this time on the programme the latest poll shows most greeks in a move to reject a financial package offered by greece's creditors. the government plans to let them vote. will the banks open monday morning. joining me now in washington is william cline, a senior fellow at the peterson institute for national economics, and george a senior fellow and director of the center for monetary alternatives at the cato institute. given the way the table is set right now, you get a bunch of

macro economists money guys into the room elected officials into the room how do you make a settlement where the politics work and the economics work? >> i wish i knew how to do that. perhaps i could run for prime minister of greece if i knew. but what i - i know what you don't do. you don't shop the odds by holding a referendum where you recommend that people vote to leave the eurozone. if what you really are looking for is some accommodation in order to stay in the eurozone. that certainly is a bad way to go about negotiating. i think that there are things that clearly could have been negotiated. there was a need to have serious discussion about austerity, and what that meant, and whether there were some more palatable forms of austerity that the

greeks could more easily accept. and in return there was plenty of room for discussion of accommodation through restructuring of a debt. so-called haircuts where the creditors would not ask to be repaid what they certainly could no longer hope to be repaid. all those things i think, might have happened under different circumstances, and with a different greek government in place. i think that government - the government of alexis tsipras really precluded negotiations that would have taken place otherwise william klein, there has been an abrupt and serious contraction in the size of the greek economy. people are a lot poorer a lot more people are out of work. they are spending less money, shops are closing. is that a country enabled to pay its debts? >> they were actually turning the corner last year and the

private forecasters saw growth of 2% this year. those forecasts came down to zero, and if they were done today they'd say less than zero, because of unnecessary populist confrontation of the government. they had basically situation where the debt that they have overstates the burden of it because it's basically very low interest, it's owed to the european governments, it's paying 1.5% interest and there was room for reduction of that interest. i think the imperative to make a populous break with the past got them into more trouble, where they could have been turning the corner. >> how does this happen. yes, they were playing fast and loose with the facts. yes they were keeping two sets of books. they were doing a lot of wrong things in the first decade of this century. once caught the situation is

what it is greece owes a certain amount of money, how do we end up with them owing more a smaller economy, all things in the wrong direction, yet they owed more than in the first place. a lot of people are reading the papers wondering how this happened. >> people look at the debt to g.d.p., the ratio. that has gone up. but the - basically what happened was that they cut the debt that they owed to the private sector by about a half right. the - that whole exercise required recapitalizing the banks, and because of the decline in g.d.p. the debt

looks bigger relative to the g.d.p. that debt is misleading. it's not debt at a market interest rate, it's debt at a conassistal interest rate. and -- concessional interest rate. the other countries in the same situation - ireland, portugal italy and spain have turned the corner. they are getting growth debt ratios are coming down. indeed the burden of the greek debt in the plans is about the same as the burden in those countries, you have to pay about 4% of g.d.p. in interest. and so as i say, i think it's an unnecessary deterioration of the situation. it got to the point now, because of this animosity, that you have the leaders of spain and italy saying look a no vote is a vote to leave the euro. you leave the euro and suddenly you have a huge

depreciationiation of the currency, the drachma, the private businesses get in the bankruptcy, they owe debts. i think the situation is worse by politics in recent months. >> but politics, i mean to get into the euro you had to have elected governments. these were all functioning demack rahsies and syriza that -- democracies, and syriza, the party in greece is a backlash to the parties that got them in in the first place. you can under why the greeks did what they did, to some extent? >> to some extent yes, but the problem in part is the european authorities themselves contributed to this kind of outcome, profile by doing what merkel has been doing recently by saying by hook or by crook we'll keep the eurozone together. if you take that stand, you invite governments of indebted

countries to do what greek did, which is to gamble on the possibility of continued ipp fuses and continued compromises to a gas that itself is no -- to a government that, itself is not prepared to take steps to get its fiscal house in order. it was a big gamble. it looks hike it may not pay off at this -- looks like it may not pay off at this point. finally the e.c.b. is drawing a line in the sand that perhaps if will not cross. but, for several years now they have not been able to maintain such a line and resist crossing it. if they called the bluff of the heavily in debited states before making it clear that the fact that they might leave the euro was not going to itself guarantee further infusions, that may put a stop to the whole process.

the politics in greece went in a direction that caused them to make one more desperate attempt to take the ech hospital im. >> stand by gentlemen. should greece leave the euro? whether they stay or go will the euro have to change. are greece's problems going to cause problems around the world. stay with us, it's "inside story".

a day in a life in athens where it's the norm to have to hurry up and wait in line for hours to get your money, and

you are limited to withdrawing 60 euros, or around $67 a day. welcome back to "inside story". i'm ray suarez, greek drama this time on the programme. william cline and george from cato are with me. william cline, is it worth the pain? you described it earlier, how complicated it would be to get out of the euro is it worth it for the eurozone, or greece to do what is necessary to keep greece in the family. >> yes it's worth it for greece because for the eurozone, what we were afraid of in 2012 was contagens of italy and spain, if greece were out. that's been overcome because the european central bank made it clear that it will stand behind the countries that are having the business in order. >> since it didn't happen in the other countries, did it lessen

the downside risk of cutting greece loose? >> yes indeed. that's why the primary loser would be greece if greece were to - i don't think people recognise that the eurozone pays 3% of greece's g.d.p. annually in assistance. all the budget deficits they take that as regular revenue. that would disappear. so in order to meet the bills, they would be not in a good situation. i think the whole question - the greek people - what i hope is that the public basically votes yes, that they - i think they'll be sufficiently traumatized after several days of not getting money out of the banks, that they'll say this is playing with fire. the only sensible thing to do is to vote yes. there you have the situation, what does alexis tsipras do if the referendum comes out yes. some say he'll resign.

i'm not sure he has to resign. he can say, well the public spoke. i understand the public not wanting to take this risk. >> the finance minister today said exactly that. that if the vote is yes, the government will take that as a mandate to move ahead with the time offer that the european creditors made. >> it could be a political ploy to place the blame elsewhere than on their own shoulders. >> does the euro have to change? if the weaknesses have been exposed by the crisis greece used to inflate its way out of these problems fiddle with the interest rate exchange rate. you can't do that when you are in the euro and they have been handcuffed. >> i think the euro has to change, but i thing it has to change in the direction of being, in a sense, more handcuffed as it was originally supposed to be. a member of the euro was

supposed to be based on a growth and stability pact limiting how the member states could run, so they wouldn't get in fiscal dire straits. also it was supposed to not ever start to buy up the sovereign debt of member states under any circumstances, particularly if they got into trouble the the whole idea was to prevent member governments doing what greece has done from holding the union hostage, saying if you don't give us more euros, we'll quit. >> some discipline has to be exercised on the part of the authorities running the european system. >> and the richer countries too, right. >> yes absolutely that's how the euro was supposed to work. what they need to do is indeed change the euro and try to get it to work the way it was supposed to early. i don't know if they'll be able to do it the next time around after everything experienced

than they were before. it remains to be seen. that's what would need to happen to prevent this occurring again. >> could this knock a little froth off the top of american recovery, does united states producers suffer if the euro goes to another year of instability. >> well, it struck me there were 77 members with a larger population of greece. greece had 80% of the population in greece itself. greece's g.d.p. is 3% of the euro area g.d.p. isn't it bizarre that we have been fixated on greece for the last several months. i think that what we are going to find is that there is not as much shock waves to the rest of the world economies to europe. whatever happens to greece so

the question becomes how much pain is greece going to inflict on its own self. >> a weak euro is good for exporting countries in europe. not so great in united states which is competing in other places. depend who you are. not everyone in europe is an exporter, and not everyone in the united states is an importer or an exporter if they are all different people affected in opposite way i think the real fact is that a greek - that the present crisis is a greek crisis and a euro crisis it's not a world economic crisis. for the europeans bent on keeping the eurozone together it's a crisis because their political agenda is threatened, and that called for having a common currency in europe, and there were all kind of reasons for that. the u.s. is less involved in

that problem george selgin is director of interest for financial alternatives, william cline is a senior fellow at the senior institute for national economics. thank you both. i'll we back with a final word on drachmas dramas and greece's plunge. stay with us - it's "inside story".

not all that long ago many of the countries in the euro were not democracies, latvia slovakia spain, estonia - there was a triumphant move for the knew zone new countries could submit themselves to the discipline of the euro fiscal

tart, not run big deficits or carry too much government debt. keep inflation in check. greek was a democracy - after all, it invented the word. it doesn't mean it could adhere in the discipline. and it couldn't do what it used to do cheapen the currencies debate, and afreedom act foreign investment. after it emerged greece had not been playing by the rules, it was obvious the euro could change some things about countries, but not everything. now that greece was in a deep hole and hundreds of billions were to be paid it's not clear how much poorer greeks would have to get before it becomes clear they really can't pay. thank you for joining us we are "inside story", see you next time. i'm ray suarez.

the egyptian government vows to grabbing down on armed groups after a series of attacks against the military across the sinai peninsula hello there. welcome to al jazeera. also on the programme - 18 killed by rebel shelling in yemen as the u.n. warns the country is on the brink of a humanitarian catastrophe. >> president obama announces renewed diplomatic ties with cuba urging congress to lift the trade