with the news makers. are sure is that so much of the next mayor isn't limited in ca she's in the money for life very saving the euro in the financial and political costs of doing so is it all worth it there's a euro project need a serious rethink should there be. to talk about it without a lot from moscow to recover now the top stories of thousands of pakistanis are voicing fury at the scale of civilian deaths caused by u.s. drone attacks americans are also alarmed over the possible use of technology on a home soil or for surveillance on. the fate of many anti-government activists in georgia remains on that night after a brutal police crackdown families fear they may never see their relatives again after they were detained around two weeks ago. and that the greek government is a starting a new austerity drive aimed at securing

a new international financial lifeline orders and that massive public protests that economists warn at rallies and other e.u. states could follow it and get the greece is once again being bailed out. and as greece structured the credibility of the euro even further next cross-talk debates what solutions there could be to the single currency crisis and even if the project is worth saving thanks for watching. you can. follow me and welcome to cross talk i'm peter lavelle saving the euro in the financial and political costs of doing so is it all worth it there's a euro project need a serious rethink should there be a two tier year old system and can the politics of the euro serve the interest of all in this currency zone. can.

you crossed out the year was by ability i'm joined by andrew moravcsik in princeton he's professor of politics and director of european union program at princeton university in washington we go to shares raymond she's a professor of international business finance and international affairs at the george washington university and in madrid we cross to philip bags he is an associate professor at king juan carlos university he's also author of the tragedy of the euro ok folks this is crossfire that means you can jump in anytime you want and i very much encourage it but first let's look at a short report on the plight of the euro. the trials and tribulations of a currency or the euro and those discontents no matter how you cut it or count there are no easy solutions when it comes to resolving the euro crisis the financial costs are high and long term and the political costs are probably even

higher ever since greece exposed the weakness of the entire euro project politicians and central bankers have been up loggerheads the single currency was always going to depend on member states exercising fiscal discipline and boosting their competitiveness to achieve convergence this is always been the theory behind the euro but it's reality has played out differently on the ground we can't just shoot solidarity and say that these countries can't continue as before we can't have a common currency but some get lots of acacia time until there's very little work in the long running is not on the side of the hero greece was a test case only to be followed by ireland and portugal and now probably spain european elites one another bailout on harsher terms while greece is asking for more funding on easy terms something is going to have to give and one of those political discontent will arise as well reform and pain are in there in equal measure doesn't happen in the us to the second world war but the longer you.

necessary evil. the more costly it is there's going to be the costs are easy to see in predict if germany gets its hardness this whole way of forming the eurozone there will be more entire staring riots across the continent if the greeks get their way that is easy terms and easy money then there could be a tea party revolt in germany that could see the euro implode. for too long european governments turned a blind eye to weaknesses at the heart of their project today politicians have found just enough resolve to avoid immediate disaster given the events of the past year it is an open question whether the populations of the eurozone have much more patience with the currency but does not serve all equally. across our team. ok to start off i think go to philip in madrid here i'd like to read a few more words from anglo merkel she said we don't have a problem with the euro as such it is

a stable currency particularly because of the the dollar it is quite strong sometimes too strong for us as an exporting country i'm nation we have problems with certain member states in their debts is that an understatement for you or is it accurate and looking at the condition of the euro. i would say it's an understanding that they're sort of the euro system and it's so it's it needs to distract from the problem is that we have several independent governments that can use one central banking system to. to finance the deficit and this person centers for politicians to have to finance these deficits that you buy a central banking system thereby externalizing the costs of price inflation to other countries so i think that it's from the root the system is bad. all right all right shares and if i go to you in washington are you that

pessimistic i mean we were i'm reading in the press right as we could do this program here that sixty or seventy billion more dollars could be funneled into to greece ok that's on top of already what's been put in there i mean is this money well spent because you know it is recent such a small part of the eurozone but they want to save it ok why don't we cut the eurozone just cut its losses right now and because you know we're going to have other countries following suit i mean i want to talk about the slippery slope later in the program but is this project worth saving and can it be saved well i don't think they have a choice they have to save it too much political investment has gone into this project they've gone too far you can't just go back and reintroduce national currencies at this point the market will hammer these countries so they have to spend the money there's no choice ok if i can go to you andrew i mean that's a lot of money to spend here i mean i mentioned in my introduction why can't we go to a two tier system i mean some countries are in this not up to speed their economies

are not in st and the integration is not in sync go ahead. well i'm inclined to agree with your hair as there are enormous common interests in keeping this system together because it's not just germany versus greece german greece are on the same side in the sense that it's germany and france that lant much of this money to greece so if greece goes belly up a lot of banks in germany go up so they need to work together the question is whether there is a middle solution between just shuffling more money from germany to greece and cutting them off ok it's interesting. right go ahead philip should go ahead ahead go. i think you should not think so much in terms of beggar with countries but more in terms of the political elite and the citizens so of course the political elite of france and germany and greece want the euro to

continue and of course most of the banking system that the german banking system the french speaking system it has lent to. banks and the greek government but it's not and maybe also some export us export us want to continue but for german consumers this is another in and pick spirit is not a very good deal with the demarc. they could import cheap or auto companies could import need for resources cheaper they could be patient cheaper and we we could buy vacation in houses much cheaper. so they are now losing then it would be better to raise the difference in the conflicts in these terms the political and bankers versus they come and takes payoffs and consumers cheers and if i go back you know in washington when it was things age i mean if i could just interject hearing it i mean philip really does bring up a good point i mean if you agree or disagree with him

a lot of these bailouts are about banks bailing out banks isn't it i mean are they thinking more about their friends and making sure they get a return on their investment eccentric cedric versus the average person in the street about having a job are paying higher taxes etc etc i mean it seems to me that that's the two tier thing here banks saving banks saving economies is the second after thought. let me let me jump in here i think that it's a little more than that you know in crisis you know yes banks bail out other banks it's the i.m.f. or it's other banks bailing out banks but this is this is a little more serious you're talking about precipitating in a conclusion across into spain probably and then who knows where else and so is trying to avoid another crisis situation which then not is this a little bit higher up than just banks bailing out banks we're trying to prevent a financial crisis to repeat itself of what happened last spring and that will affect not only europe it will affect us here in the united states as well ok and

remember it's kind of a slippery slope here because this is what's happening i mean there is this tendency you know well i'm in trouble i have pirate all this money i lied about it especially in the case of greece and now we need help so germans will come out and pay for it i mean we see this time and again. so here's the question cher assad's right you have to bail out the banks if there's one thing we learn from the last couple of years and from the great depression it's that if you don't bail out the banks then everybody in society is going to pay on the other hand philip is right they don't want to stick the whole bill on the german taxpayers so the key to the solution to this problem is to find a way for german creditors and french creditors to oss oatcake a haircut or to pay some of the costs of settling that that problem which is the whole issue of restructuring this debt in the medium term in such a way as to make it sustainable so that's what i was talking about before but we

need to find some sort of a solution in between just cutting the greeks off and bailing them out down the slippery slope as you say you need to find something where the greeks and the germans but not just the taxpayers also the banks share the cost of resolving the crisis it's interesting you say bill do you think banks want to share the cost of resolving this crisis because then they'll just go to the i.m.f. ok i mean you keep going up the ladder to get more money to you to maybe start off real reform in the euro zone. yeah of course and things have have been shifting probably some essence from the financial crisis on who until now to attend central banks and the taxpayer of the b. has bought or are already more than one hundred billion euros of up assets from banks of. covered bonds from german banks but also the government owns part of

these government bonds on and i don't think that bailing out banks is really the best solution because of it creates a moral hazard problem which has brought us to a large extent in the financial crisis in the first place that people thought would make us thought they would be bit odd if they would have probably a lot of government but still available let me jump in here so you're saying don't be allowed to make what would happen then if the banks want to build up how would you suspect the euro zone if it wasn't of course the problem of the financial system would. who would collapse at least the banks that i am in bed share shape and then there might be better ways to put them on a stable ground again of course shareholders would lose everything and then let me jump in radio this is like head to landrieu jump in go ahead. but this is the this is the kind of radical thing we want to avoid i mean many even if it were true in

retrospect that regulating banks and offering to bail them out created a moral hazard here we are we're in a situation where people have made these loans and we don't want to mortgage all of the economic prosperity of society now and some kind of a neo liberal experiment we've lent the money and we now want to avoid as she has rightly said a kind of contagion effect that brings down entire economies into a scenario like the great depression but the key is that banks which will benefit from an orderly restructuring of this rather than some kind of apocalyptic collapse need to share in the i'm not i'm not very appealing to look to her and i don't and let me jump in here after a short break we'll continue our discussion on the euro crisis stay with r.t. .

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the euro and its prospects led to kick. start living. ok andrew i'd like to go back to you before we went to the break we're talking about whether to bail out banks or not but there seems to be so many bailouts going on in the europe euro zone is it really having a positive impact because we see that contains and spreading not contract and everyone's talking about spain now and then italy's on. the head. no i'm not arguing for bailing out banks i'm arguing for avoiding the need to endlessly go down the slippery slope of bailing out banks and the way to do that is to move toward orderly restructuring think about the way that latin american debt problems were addressed in the one nine hundred eighty s. the one nine hundred ninety s. between the u.s. and latin american countries what happened was people negotiated a restructuring of the debt american banks took fifty cents on the dollar sixty

cents on the dollar for some of that debt paying their share for having made imprudent debts and in exchange for that latin american countries got i.m.f. money or got increased private money it's that kind of sharing of the costs between . german and french taxpayers german and french banks and greek. banks and society that needs to take place right now that's not going on and that's the middle solution between just shuffling money around on the one hand and cutting off countries from the eurozone on the other to which we need to struggle she decided i ask you in washington i mean how much more austerity is that entailed because well you know we look at these nice words reform restructure and all that but on the ground is austerity and it really is stinging i was in greece not long ago and that austerity is really quite obviously just someone just visiting for a few days i mean to what point is it politically viable or there's a bit of

a go ahead. i think they're going to need a lot more austerity you know you talking about it least another decade of a lot of pain let me just backtrack here in terms of this miller ground there we've been talking about andrew they have a middle ground in principle it's a relatively simple they have a huge federal pot of money was a useful bail out so they have to establish setting keep it there but they also have to have oversight of the countries that they have bailed out which is where they're leaning towards so there is you know sort of calls for a eurozone finance minister now to oversee these countries that have been bailed out and have fiscal oversight over them and that's a uniquely european way about going things and they're probably going to end up doing that ok phil so there's i mean just another step towards moving away from sovereignty and for these individual states where it will be brussels and frankfurt going to tell everybody else what to do with here economies ok you have to do this business and a lot more pain is going to come your way and you know what there's nothing you can

do about it. you know this is a dangerous the most dangerous of the euro that the euro produces this crisis through its incentives. in this crisis of in use for most and for those asian what's this that step forwards towards the center of government sent us from suppose to in brussels so this is. the problem that i don't i don't think it will come between with it's a good idea though it would be in any case justified to make german or french taxpayers pay for greek deficits or to bail out german banks. i think we could through you're with me in a moment a little bit ok go ahead gerry jump and go ahead this is the way this program works . i'm jumping at i mean i mean what did you expect you know you allowed greece to come into the big boys club on both sides you know of course we were not sure if

they're going to behave fiscally are not and the greeks understood that they're playing with the big boys you know and they have to stand on their own this is an opportunity when they joined the euro twelve years ago for them to clean up their house and they chose to have an extended party instead and now they're paying the consequences for everyone's paying the consequences for it ok why should. taxpayers pay the confort consequences for it i think germany when we were all essentially should pay the cost for don't grant and are you starting to cost for a not ok they should pay the cost for a number of reasons one reason is because the german exchange rate is lower than it otherwise would be because they're in the euro and germany benefits from that witness their enormous trade surplus which is almost as large as that it was you know they should they benefit from it because german banks are kept solvent because as we all agree all three of us german banks would go belly up bringing about what philip himself called an economic crisis or collapse in germany without it and they

should pay for it because german banks lent the money and made that the loans and should pay some of the cost and once again i'm not arguing. and i don't think anybody ought to be arguing for a purely taxpayer funded bailout the taxpayer should trip pay some of it but most of it should be covered by banks creditors who lent them money accepting the last them one dollar per dollar of debt owed that's what happens in normal and i imagine if your engines we're not talking about some enormous european sovereignty shift we're talking about normal international practices for resolving the crises and that's what should be applied in europe go ahead philip jump in go ahead what i don't see the more i room invited german taxpayer foot should be liable for any action that some german bank did so i think that the i didn't read it the owners

you know various ways to get it and and i think it's the myth it's the myth that the low exchange rate makes makes it any richer i mean if germany would have stayed if you don't have it much push is empowered to put its goods from the eurozone from from our i would say they are losing by this it might be that some export of what and my point is what we need is you should use this moment to do reform or through reform with the financial system that this could should not happen again like a one hundred percent because then that would it would make all of these high bits and deficit and possible cherries or do you want to jump in there go ahead. yeah i do want to jump i think philip is forgetting that when the german taxpayer is elected the german government which signed the maastricht treaty which created the euro and allowed also in the end greece to enter the euro zone. this is a legal obligation and i'm not advocating taxpayer is going to simply hand over

their money clearly there's a lot more to it as andrew has mentioned but there is a legal obligation here they allowed them when they got married to the greeks and now there's no divorce do you think what what what what is a vote a german vote in one thousand nine hundred why would you responsible for any action that is government or why would you be responsible for the signing of them must be to. actions i don't see this responsibility philip you have a philip you have a terrible you have a double standard here and you say to the greeks that they're responsible for whatever their government did even if it wasn't in the interest of the country but when it comes to the germans and their government there's something that you say maybe it's true is not in the interest of their their population then all of a sudden the population is not responsible for it why everybody is result every government is responsible for its actions in the modern world and if the actions are those that don't turn out in the long run to be in the interest of the country well then you have to just take it well or maybe it was

a misunderstanding i didn't didn't want to say that the greeks would be responsible for their governments for i actually would recommend. to the forward on their government that ok here's what i don't know this could be my next question why don't the greeks just do it ok just just say we we don't belong at the adult table we screwed up we lied through our teeth or german friends on our italian friends and our friends knew it but you know will we lied so we're going to have to start from scratch and we're going to leave how would that impact the entire euro project . well here's the here's the catch this still this same playing adult at the table and so they're trying to behave by all the rules that adults play by at the table they can't leave if they leave the euro zone they'll be in the dark ages for the next fifty years their only future lies within the euro zone and basically the germans and the french amongst a few others are going to essentially have control over their fiscal house for the next decade because of this bailout if you know things go down the road

legislatively as they are seeming to to have fiscal oversight over the bailed out countries so they're going to be supervised as all teenagers are joining in and out table and you see the greeks are going to be in the gutter friedly into mr no matter what they do they'll be in the gutter for at least a decade or a half century but you could be in the gutter for a long time all right i'm going to switch sides here so i can argue and share it with terrorism against philip because i don't believe a gold standard is appropriate for the modern world but the reason i don't believe a gold standard appropriate for the modern world is because i don't think you can impose on countries too much austerity and too much outside control so if the middle solution proves to be impossible if the german banks won't pay if the german taxpayers won't pay if the greeks want to just and you can't negotiate that middle solution that shares and i think would be the best solution then i think it's better for the greeks to get out and default because it's really not possible to

adjust within the confines of the e.m. you without using depreciation without using independent monetary means alas you have the cooperation of the international system so if we can't get the middle solution then it's interrelated to understand weaker countries should get out of the euro we should go to a two tier system cheers i go ahead. andrew yeah andrew there's a big difference been defaulting on this particular loan and getting out of the euro zone you know defaulting is an option but they'll probably restructure look when the first loan was given out last spring four hundred ten billion euro everyone everyone knew that there's no way the greeks are going to pay this back it was simply a matter of when would be the most appropriate time to restructure this when the markets are calmer because we don't want to instigate another scare so we already knew the restructuring was coming everyone knew this and so we here we are back at the table trying to restructure this debt you know default is an option i don't

think they want it yet but leaving the euro zone is not an option ok good greeks and we will last word of the program what's the future of the euro well it depends certainly on boards for efficiency too and what population story really penned off with the drum roll nation people would be subservient to their government and not protest and if the big parties want to see them see you and if the people want to lose and are more goads or if there's my view tea party wootton as you indicated before and of course also in the countries of that i was thirteen measures. if they are willing to go forward with austerity measures or if there would be. a budget with the long run out of time here we could have seen a lot more many thanks my guest today madrid washington and in princeton thanks to our viewers for watching us here our feet see you next remember crosstalk.