eleven thirty am in the russian capital these are your r.t. headlines anger at austerity plans spills on to the streets of italy and spain with their governments preparing to tighten belts even further to calm markets and save the faltering euro meanwhile switzerland stuns the markets by pegging its franc that used to be a monetary safe haven to the euro currency. at least nine people killed fifty injured in a bomb blast near the high court in new delhi and preliminary reports suggest the schools were left in a suitcase near the building. and members of khadafi loyalists including his security chief leave libya for neighboring the share with the whereabouts of the

colonel himself still unknown this is concerns grow over what kind of regime could replace a. central russian city of jaroslav it turns into a global think tank is the world policy forum gets underway multiculturalism and global security among the issues on the table at the meeting. next peter lavelle and gas discuss the fate of the euro cross talk coming your way. please. liz. can you see. the low welcome across an archive you talk about is it time to write the obituary for the euro as

a single currency reels from one crisis to the next europe's politicians appear to be powerless in the face of a monetary union that is proving to be dysfunctional which started out as a monetary crisis and is now turned into a fiscal and political meltdown. you can see. across the fate of the euro i'm joined by rodney shakespeare in london he's one of the founders of the global justice movement also in london we have daniel didn't i mean he is a journalist and author and in princeton we cross to andrew moravcsik he's professor of politics and director of the european union program at princeton university's woodrow wilson school all right gentlemen this is cross-eyed it means i want you to jump in any time you feel like you want to say something but first let's take a look at the changing landscape of the european union crisis. it is a global reserve currency the only potentially viable alternative to the germany of the u.s. dollar and the single currency of the world's largest developed market of consumers

but ever since establishment as part of the master treaty critics have pointed to the lack of a single political entity it to oversee the monetary union something that in two thousand and eleven is increasingly becoming the mortal flaw for the euro and potentially the eurozone it represents the eurozone now rests on the shaky basis of a confederation of states that are committed to a monetary union retaining their fiscal sovereignty at a time of crisis that cannot work for heroes existential problem is that it's monetary side the only side that it has imposed as a single currency and a single interest rate on economies ranging from the basket case in greece to the german bastion of fiscal probity this means that italian or spanish exports don't get any cheaper and that interest rates go up the second germany sees inflation anywhere on the horizon children are lending one of the possible solutions is

a fiscal union or transfers it is quite obvious that a limit or for me to do. for the euro is coming through. and my guess is that at the end of the day it's hard to say when that will happen it will be dramatically. turns out the light on the euro. germany is currently at the center stage it faces the choice of either agreeing to some form of fiscal transfer or backing a year obama's share which involves a major jump in its debt servicing requirement the weekend has underlined the chancellor merkel's coalition could crumble if she goes any further than what she has done in terms of supporting cash strapped euro debtors and that leaves the euro and possibly the euro zone as the biggest threat to the global financial system national charney for across our team. ok running i'd like to go to you first in london are you writing the obituary for the euro right now because the the news

flow coming out about the this currency is just unbelievable and as we speak right now germany may be deciding maybe not today but the ultimate future of this currency. yes i do rightly arbitrary and this regards germany the national debt of germany related to its approach the mystic product is eighty three percent and that is higher than the similar percentage for the u.k. where i am france and spain and everybody knows that the next ones that go into crisis are spain france portugal and the u.k. but the german situation is actually worse and it's only maintained by the belief that it's rather more stable we're looking at something in which all the countries of europe are in debt which is unreliable if you take greece it's. its government debt is a percentage of g.d.p. was one hundred fifteen percent but it's result of the austerity measures it's gone

up to between one hundred sixty and one hundred seventy percent and it's rising and on top of this none of the academics none of the politicians under things like understand things like the shift from labor production to capital production and they don't understand that always putting money out at interest and not worrying all the case larry i really you know i thank you seriously are you afraid we are you're pretty bleak about me and you and i do you in princeton mind are you writing the obituary for the for the euro. i think it's too soon to write the admit you are for that you're we have to look at what's happened over the last couple of years this is an arrangement that was set up two decades ago by the europeans and to which they are fiercely committed they've committed almost a trillion dollars to defending the euro and they do it not because they are sentimental or not because they believe in some dream of

a united europe because it's in the interest of almost every country there germany likes this arrangement because it protects german banks because it protects german exports because germany is economically involved throughout europe and because the collapse of the euro would be a disaster for german business for german banks and ultimately for the same german taxpayers who we're talking about right now greeks would be hurt if the euro collapsed because they have to pay that debt back one way or another and if they if the currency collapses it will be even more difficult to pay back ok get your opinions are going to be going to finally interdependent one way or the other ok daniel i mean the line i mean if you just finish they're highly interdependent one way via ok but if it's in their interest i go to daniel but it's proving to be dysfunctional i mean how do you marry these two different things together because i mean the german. markel suffered an election defeat

a local election defeat in her country because people are saying we don't want to pay for the laziness of the greeks in the in the misfortunes of the portuguese and the spanish and the irish i mean i mean it's pure common sense ok. well i would like to add the battery to the euro but i don't think unfortunately we're positioned to do that yet because i think your in your introduction the person is quite right to say that you have an inherent contradiction within the euro zone where you have very productive countries like germany and relatively unproductive countries like portugal and greece and when you look them together we can obviously you create all sorts of economic problems and you create a system where both the southern europeans who are suffering austerity but also the northern europeans like germany benefit so for example if you look at average wages in germany they're more or less where they were twenty years ago so i quite understand why ordinary germans are unhappy about the eurozone and about their

economic circumstances i think the problem is that the european elite is absolutely determined to try and push through european integration even though people are benefiting from it and even though there's no democratic k'naan for it you know it really is i think this whole crisis is very interesting expression particularly for the people that really want greater union across stronger union a political union and that would also include a fiscal union this is the only way to a euro will be saved if they go to a united fiscal policy which would essentially destroy the sovereignty of every single member of the european union that's the only way this currency can be saved . yes but it would not save it because in fact the levels of debt are much too high you see behind the popular of the euro is the bigger problem of what is called the free market system which endlessly creates that does not put it into the real economy and the spreading out that is clept seeing on an even larger scale than in

fact europe and there is a certain arrogance behind those who promoted at the great universities in america like harvard and princeton where they claim that anything the free market does is for the benefit of everybody it's just not true i mean the united states for example as export did all its jobs on the grounds that this is suitable for everybody it's not the whole system is fundamentally collapsing and a part of that is the problems of the collapse of the euro ok and your ideas are salvo shot over your bow there do you want to reply. no it missed ok because we're not going baiting the we're not debating the airy abstractions of free market economics in fact this isn't a free market economics arrangement it's a particular monetary system and the fact is countries are now into this system so it would be extremely expensive to get out of it take the germans right the problem

merican faces is she is going to have to pay for the debts which german banks the money that german banks have lent to countries like greece one way or another so if the euro and euro tanks germany still has a problem of their own banks that have lent that money to greece right so germany is trying to manage a crisis in which it is interdependent with greece these other rabin's talking as if if we pulled out of the euro then germany could just traipse off would have to worry about anything but in fact america if you didn't have to pay greece would have to be bailing out of our own banks and we know from the united states that isn't any more popular than bailing out greeks ok dan daniel it's very interesting because you know the way that the perception of his in the media we're looking at sovereign countries with their sovereign debt i think andrew brings up a really good point it's really about saving all these tanks and a lot of very very wealthy people connected to political power in these countries.

writing what i do is saying is one sided with respect because there would be cost involved with unwinding the euro or withdrawing from the euro zone but i think they're also very high costs involved with maintaining the euro zone because you're maintaining a system which kind o. really be stable you kind of look greece and germany or portugal and germany together in the same economic system and one is very very productive and the other is to be unproductive you create all sorts of problems and the really remarkable thing about the euro is that it's having a crisis now but this last for so long i think it's only lasted for ten twenty years however long you want to measure it. because of we've had a relatively stable world economy over that period but now we're entering a period of more instability i think it could be very hard to maintain euro zone intact despite what the politicians once ok rodney what do you think about that i mean let's get

a worst case scenario is that we have to start kicking countries out like greece i mean you keep one country out of the whole house of cards falls apart right that's what we keep hearing in the media. well you may get a greek default but you may get it the other way round which is that germany unfilled and. possibly the benelux countries i'm not sure about that perhaps holland may pull out the other way round because you see the whole thing is going into crisis and it's a fundamental crisis which has actually been building for at least sixty years and that is not understood nor is understood it's the great shift in the way wealth is actually produced a result of these big factors but it's now in the euro and in europe and the politicians and in you that you us say this complete lack of understanding of how serious the situation is and there is not a free market if you look behind you let me jump in here we've got to say and after a short break we'll continue our discussion on the year old state with r.t.

. if you. want to. the worldwide manhunt for him lasted for fifteen years. one million euro award was promised for his capture. political mass murderer for the west. for minions are. generally the serbian army. here are slim and. none are cheap.

download the official anti allocation joe califano i pod touch from the i.q. exam still. life on the go. video on demand tease my old posts and r.s.s. feeds now in the palm of your. question on the dot com. can. welcome enter crosstime people about to remind you we're talking about the eurozone crisis. came. into i'd like to go to you in the context of this crisis here how much has the euro

made these economies more alike because they as we go through this crisis were it's pointed out just how different piece economies are if you look at the paid countries for example i mean it's still the disparities between them that was trying to the euro was supposed to. measure out and level out it hasn't done that and i think that's one of the thing that's this whole crisis has revealed. well this is where david has a very good point that the presupposition of the euro system from the start was it was supposed to lead to a convergence between the various european economies it hasn't done that and that means there's constant tension within the system and it's true whereas on the one hand european countries will go as far as they can to try to keep this system together because it is very much in their interest to do so and they will pay tremendous short term costs if this system breaks up but on the other hand it's true that there are structural costs that they're paying all the time because this

system basically isn't suited for the real economies they have so the question is whether this crisis can trigger domestic reform in countries like greece or spain or portugal and also perhaps in germany that will alleviate the situation and that's a question to which we don't yet know the answer daniel if i can go to you it's seems to me that as we get on this crisis moral hazard is there the slippery slope is there is it ultimately to save somebody banks or german banks and french banks the state is going to the european union itself a central bank stepped in and just saved the bank there but there's always going to be this temptation to finance your start to you know bait these countries because a lot of money could be made out of their debt very expensive debt i mean it's seems to me that no one is allowed to fail that's why the system will ultimately fail because no one is allowed to fall fall apart within it.

i think there are some vested interests involved and certainly the banks who put pressure on the respective politicians to clear them out when necessary but i think one reason why this discussion i'm talking general terms not about them think it's confusing is i would say there's not really one crisis there are three crises there's a financial crisis which is very obvious the kind of turmoil in the financial markets problems with the banks and so on there's an economic crisis which i think rodney was alluding to to some extent and there is a political crisis and i think ultimately the solution to the problem. is with the politicians but it's something they can't justify themselves it has to be a democratic process it has to be something which the ordinary people of the eurozone are involved in at the moment it's just a completely elite enterprise that is trying to impose solutions without really working out what people want from the whole process you know iranians very interesting life that they had going to jump in if i could just now to head if i could just add to what daniel said the real problem is that the it is thought that

the interests of that financially elite automatically then results in furthering the interests of main street and that is simply not true the financial elite now it controls a vast part of the economy and rips off the feast for its own purposes and in its actions does not actually forward can really come to be in the spreading of it really corny so there has to be a challenge on actually lete there has to be a challenge on the bankers and in practical terms they have to be made to go bankrupt as the only way of forcing a substantial reform reform if you find out you did you did you brought up an interesting go ahead i was going to ask you go right ahead. but that but that's crazy that's a nine hundred thirty scenario look nobody in any society likes a situation in which bankers are padding their coffers but at the same time there is the issue of systemic stability that banks go belly up and it can bring down the

whole economy that's what we learned from the one nine hundred thirty s. and that's what sensible people are worried about so policymakers are facing a very difficult situation here but the question is what's the solution for this problem and i don't think that any european policymakers think that the solution is something like fiscal union shuffling large amounts of of your o's from germany southward i think it's much more a question of whether or not there is the reform capacity particularly domestic reform capacity in countries like greece or italy or spain and last and to get their children eventually because it is a line these economists say other but it's just this really the biggest problem here is that you know we have a monetary union without a fiscal side i mean can a monetary union of this magnitude actually work without more coordination of fiscal policy and no that's not the problem the problem is not a monetary union without the fiscal side then else quite correct the problem is a monetary union without convergence of underlying social and institutional

structures of the economies which is a different thing and you're not going to override those differences between countries by shuffling money from one country to another instead you're going to have to question is whether countries are willing to make domestic constitutional commitments to make this thing work germans are not going to pay unlimited amounts of money ok keep greece afloat ok drive me jump in go ahead. peter peter's mindset is that there is only a little of the full needed and everything will be hunky dory he doesn't for example understand that he's own country unemployment is not nine percent it's least twenty to twenty two and it's forty percent upon a month's blacks and hispanics he's not saying that very fundamental. and as a result the euro is going into crisis as is the usa is going into crisis and all he talks about is a late street form and nothing is happening in the usa usa and the nothing is really going to happen in europe he doesn't see the fundamental problems in the

situation here and in the usa he's just in fact saying oh everything will get back into balance with a bit of reform when he's wrong and then you'll find out to you what it is what it means is made all right and you're jumping is crosstalk go right ahead no excuse me i did i didn't say anything of the sort everything i said had a question mark after work after it i'm actually agreeing with daniel that there is a severe tension within this system attention that might be impossible to overcome but if but european countries will try very very hard to overcome it because they have a tremendous interest in doing so and if they are to overcome the way they will overcome it is not by a fiscal union they may engage in things like euro bonds and so on but this is sort of an i.m.f. class kind of arrangement a major heavy lifting that has to be done to keep this system in place and evolves domestic reform and that's the point i'm making and it may or may not succeed

myself i mean creasing way pessimistic daniel of what is the element of democracy here because we had these elections in germany maybe this is the beginning of some wave a lot of people on the ground are saying this is the euro in principle maybe in theory we have an interest in but for a lot of people on the ground that's what it might getting out of it i'm paying taxes here to bail out some guy growing all of us in greece why should i be doing that i think that's a bit you know if it's real or imagined a lot of people feel that way that there's this incredible disconnect between the principle of the euro what's it supposed to do and how it helps the average person . yeah i think it's not just ordinary germans resenting people in greece or portugal i think there's much deeper than i think what you have is a huge gap between the euro elites if you want to call them that which are not just financial they're political the industrial country elites in general and the ordinary population because you have the elites of the different european countries

pushing through toward some kind of more unified integrated europe. parts doing it against the will of the people or thirty there's no kind of popular demand for that. so i think first of all that's not desirable because if you're a democrat you need to accept that will be people have a say in it and of course in these people are extremely cynical about the whole european project quite understandably because as i said they have already benefited from it it's not just the people in southern europe and suffered austerity in northern europe as well in the netherlands in germany they've also suffered a serious you're a long period right do you think about how democratic is it is the euro is the euro zone well the the german people. probably not in favor and the french are probably not and that that should probably not and the u.k. has kept out the real question is what daniel's hitting on it's about and he leaked

concepts in the late idea and in fact the mass of people have been sort of browbeaten into it as in the case for example of island where they had to vote twice. and make sure that they stayed in in the politics of it so i am with daniel that this is a question it's an elitist project and not one which ultimately is based in the size of the people and you know what i think everybody agrees that for this system to work it has to be reform that there is there enough time because you know we have to go we have to look at the master treaty in the lisbon treaty and and to see really what it was supposed to do what we can do we all know that between the ages and allow our countries to be bailed out because we see a process of there going on now let's say they go or we go back in a change that is are enough time for the year old to go on to work through this process as the democratic process and each individual nation state deals with this because it is as we speak right now the german constitutional court is dealing with this issue. well at the european level the

european union system has a reputation for being extremely bureaucratic and they're all those gnomes in brussels who muck up the works but in fact it's extremely sleek. over the past year and a half it's been a extraordinarily innovative creating new funds and creating new procedures and so on one reason is because the monetary system as opposed to other parts of the european union is in fact largely in the hands of the heads of state and government and the central bank which is a small group of people who can make decisions and they've actually been able to move quite quickly in the face of crisis so i'm not worried that they cannot do things technocratic way i'm worried as my other colleagues are that they won't be able to do things politically so it's true that if the german constitutional court or the german going to stop would have block something it would be difficult to do

i doubt that the constitutional court will do so because that's not their tradition the bundestag might but let's remember one thing and this gets back to the question of democracy right the germans have made away like bandits from the system the german german exchange rate is forty percent below what it otherwise would be which makes germany one of the great export nations of the world with a trade surplus all right it's a lot i'm afraid we've run out of time but it's let me say so let's do this program a year from now and see where the euro stands me thanks to my guest today in london and princeton thanks for viewers watching us here arche see you next time and remember prost rules. if you. want to.

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