hello and 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 and the devil it would appear is to be found in the details. to cross talk of the eurozone crisis i'm joined by marshall are back in denver 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 pending myer he is a senior visiting fellow at the london school of economics are a gentleman this is cross talk that means you can jump in anytime you want my 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 that u.s. debt imbroglio was set three weeks ago by nicolas sarkozy and merkel then it was delayed by three days and on the third day it came through after marathon talks which went 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 of up to fifty percent of the four hundred forty billion euro e.-f. s.f. will be used to provide risk insurance meeting that after a second one hundred thirty billion greek bailout and other is for ireland and portugal it could provide up to one trillion in firepower to deal with future crises the plan was laid out by engle merkel as head of one. stace talks well it's

a good to see a lot about the goal of tonight's discussion will be that the f.s.f. with its capacity will have a great effect on the prevention of contagion and this to terence impact must be great enough. the calm global markets in the lead up to this week's eurozone summit could be interpreted as confidence that leaders would pull something off to save the day but after two years a failing to come to grips with the greek debt contagion risk and other e.u. economies and the banking system that is grossly under capitalized there's been a growing sense of impatience even beyond europe the 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 sheer enormity of a new failure by the e.u. 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 dallas remaining over how it will stand over the long term but i suppose it be surprising to see something different after two years i wouldn't be surprised at all jeffrey if i go to you first and milwaukee how do you look at this plan that they came out 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 bleed in order for this agreement to work for instance we already know that they are going to have to privatized some fifty billion euro zone of assets and with this latest agreement they're going to

have to privatized 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 not high for the future of this agreement it's viability and for the. good it will do for the greek people ok henning if i go to you in london well what was resolved has anything been resolved because again when looking at it very carefully it looks like there's a lot of there's a voluntary aliments to it i mean when do banks not want money when banks forego money i don't understand that i was in investment banking at one time it seems so we logical to me voluntary. yeah well the thing is you have to look at this data

from two perspectives from a 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 as one has to say this was in political terms a step forward in economic terms as he rather characterize it there are still a lot of loose ends i mean one of the things is the voluntary 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 crux of the releases is that the detail in my paid interest of some of the banks actually to trigger the c.d.'s because it's insurance 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 whites to go from a political point of view showing the resolve to really tackle the problem i think this is a ride's 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 they're going to get this extra trillion euros for the for the stabilization fund i mean who's going to pay for that big there's no right and it's not written down where that money's going to come from that's a lot of money it's going to be the german taxpayers now. well it will be a number of the tax payers and first of all i agree totally with jeff's characterization that 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 ban 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 further and greece is not the objective here i mean greece is being used as an example of what can happen if the 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 and asked me for something and i agreed to it i mean there's nothing voluntary about is having said it's just a tool ensure that these credit default swaps don't get triggered these are frankenstein type products that shouldn't be allowed anyway so it's a form of blackmail 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 the hair cuts are coming because the bonds of distress in the bonds are distress because you have this issue of national solvency you have to deal with the issue of national solvency 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 haircuts so that the cure is wrong and the punishment misconceived is well it's a terrible program ok anyway 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 but to me greece is just wrote off its sovereignty economic sovereignty for you know who knows and a decade and is this is is this is this what people signed up for because we need to be better to have greece just leave the eurozone because other countries and other public during this great contraction going to be saying we're the only way we can get through this this euro that seems to have only been controlled by a small group of people in brussels is going to 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 disentangle 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 on a on a sustainable trajectory so i mean greece's been insolvent for quite some time people have known this and steve won't help unless it is a company 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 as in greece while it is growing even see if it's shrinking if the economy in greece are shrinking by i think five and a half percent this year alone there's adjustment will not be possible and there will be a democratic backlash as well as for greece or any country actually leaving the euro i don't think that this would be a good idea neither for greece nor for any of the other european countries in the euro zone for a simple reason i mean one of the long long term benefits of being in the common currency voigt now i mean there are obviously syria economic problems but the reason to interest the euro in the first place still that second thing is obviously we have to reconstruct the euro zone ok there are some major institutional mistakes might these have to be rectified and as long as greece can go back on to a gross rejects three i think there's adjustment a necessary adjustment can be made within the euro zone ok if you were too little

maybe your the thing that bothers me on this program is that we're all agreeing with each other here and that's not what this program is on our jeffrey if i go to you one of the things i think is really interesting is that maybe the only thing they can achieve what they achieved yesterday is to stop the rot of the of the eurozone but where is the a plan for growth because all 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 in greece and in spain we will cut cutting budgets is not going to stimulate growth it's simply impossible. well peter at the risk of not being the contrarian that perhaps you want me to be i agree with you 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 them that's absolutely it's not going to produce the beneficial outcomes that they are in tessa painting we again i think you have 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. a targets under these austerity regimes in which there is not sufficient capital to launch europe not to mention the periphery of europe on a trajectory of growth i mean i just think this is all very very fine if i go you want for the break here i mean on top of this what jeff was saying here is that 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 rivera is a very it's a very simple truth without generating growth this is stated but it's the argument is not on board difficulties the proponents of started to say you cannot spend your way out of a debt crisis well one thing is you can't cut your way out of the crisis either you will have to generate growth and growth these investment 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 really resolve the issue in the long term are gentlemen we go to a short break and i'll actually break we'll continue our discussion on the eurozone state. to the. tune on a trip to a. pesticide any more children can live without ever opening the paper. the laws of physics no longer apply. don't be afraid to take my hand and enjoy the ride on technology here.

the legacy that survived the russian revolution and i see more. the most showing is by looking more splendid than the din for over a century. the grand decorum czarist times this dazzling the audience again after a six year week. long awaited resurrection of the bolshoi theatre. on t.v. . and.

welcome back to cross talk you know all about your mind you were talking about the crisis of the eurozone. ok marshall in denver i'd like to 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 like this say yeah we're going to it looks like it's going to work you know there's that 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 do ok we have that populations we have media expert media coverage this one thing is going to work the only people it 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 tech knockers see it's always been like this you know the the the whole the whole modus operandi of the 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 did until they do get the answer they like so what people's wishes are you know that's never come into it i mean that look the the whole euro 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 and i suspect they had another referendum again that they might lose this time but certainly if you don't carry a lonely the vast majority of the public with you you have no kind of democratic legitimacy but you know they they obviously enjoy these nice little beano they get every few months in places like nice or lisbon and you know they all get very nice salaries and they're 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 and the this bailout of greece is effectively you know

it's all being designed in a way to minimize the damage to the financial sector to build a whole universal banking model which is has been embraced in europe it's completely misconceived and but the politicians won't attack that and that's not just a problem of the european union you see that all over the world and if i go to you in london i mean what about the moral hazard here i mean when you set up you know we have this stabilization fund you know it is there you know we can facilitate looking at any kind of 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 did two things here obviously the moral hazard issue will have to be addressed institutionally that's why i think once whatever the result lucian to this immediate crisis is going to be the next two or three years will be characterised by intensive debates 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 office lee you know normal capitalism rules have been shocked out of the window i mean if you invest into something the interest rate is also part of the compensation for the risk you take and the you know the moral hazard argument is obviously there you know you invest and if it goes wrong the taxpayer picks up the bill i think everybody sees that there have been clear limits to this and the one thing it'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 what have to be recapitalized 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's a debate you would still have to meet and have to do something about jeffrey why don't we didn't change gears here i mean one of the thing and i remember we spoke on 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 when they just bite

the bullet and 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 first first to be put on the altar and sacrificed. well you are right i mean it is 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 the bad it is and that they are not going to be consulted regarding the future of this of this bond. it's 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 poor than just a fiscal union i think we need true banking reform and using the term reform a light 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 last two decades unless we change this unless we stop this rent extraction from the real economy by the banking sector it doesn't matter what we do in terms of the political. union when we look trying to change the thing coming out markel is not a cozy darrent speaking that language at all jeffrey marshall if i go to you back to you and then every other people are going to have to push them there maybe you know occupy everywhere is we've been through 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 but i want to save this currency you have to have a fiscal side it we have to chew your food 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 halfway house where you've had a common currency with no political union and you know those of us that criticize it from the start we were cues to being you know dollar german it's a little englanders and and frankly you've had historically examples of this in the past particularly here in the us you had the articles of confederacy in the early united states history and you had the confederacy of the us 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 left at the state level so it became economically dysfunctional and ultimately collapse so you're right you have to move toward some sort of a political union and 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 at such a rapid rate when you know the countries 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 a united states of 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 germans basically allow the whole of europe to be deflated into the ground they buy the assets on the on the cheap by writing the check and that's certainly not the kind of united states of europe that i think most people want i was in dublin a few weeks ago and that 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 figure that they're next you know it any if i can go to you this whole germany question really 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 bridges the wrong analogy many

respects the european union comes from a completely different kind of development and i think you know we've done are not doing anybody a favor just trying to make superficial comparisons with united states of america fiscal union a yes but the question is obviously what it what it means and obviously fiscal union is not a matter of now no tomorrow yes it is also a matter of development and evolution in this i think i think it's absolutely important as the other speakers of also stress that we have a more public debate and take the people with us and that has been has been neglected over recent decades i have to say about i think that's the trajectory that's going to you know it's going to happen and the other thing is i think you already pointed to a very important folder and that's going to actually open in the european union it's the e.u. seventeen plus the e.u. ten and the city of london versus banking regulation it's going to be one of the big problems that will divide the e.u. ten maybe led by the u.k. it looks like they have a kind of wants to be the leader of the non euro countries within the european union and the the euro zone countries which have different economic interests so

that's a fault line to be watched i thought ok marshall you want to jump in there go ahead . yes i just wanted to interject you can call whatever you want i mean i use the united states of europe as it's a shorthand to connote fiscal union not because i want to use the u.s. as a model you know in fact if i was to choose a better model i would say the canadian or strained example of federalism probably are would be vastly superior i mean 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 or let's take a look at what the taxpayers have to do here what i find really interesting is you look at these huge numbers being thrown around and they're looking good going out over to twenty twenty twenty forty things like this i mean it is it's a spate of sustainable because ultimately it's the taxpayers that have to pay for this and no one asked them for their permission to do this 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 is entirely fictitious i mean this is absurd to speak about decades out in terms of projections of what g.d.p. is going to be but more all for we need to get back to this discussion of an even development in europe because alternately 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 what they're prohibited by doing and

that is to. create credit for the purpose of investment in their countries a currently we have a system whereby we are forcing all of these nations to go to the private banking. markets and order to raise capital this increases their cost us making economic growth and investment a more expensive proposition if you leave me to me you know when you're almost out of time here i have you i want to go to you in london if we needed to if we make a program this year from now on this exact topic what do you think the condition of the euro will be. i mean we all seem so agreed that we need to grow so the gene order to alleviate the problems but i think as opposed as some of the other speakers i think the imbalances that we see within the euro zone and not just in terms of development at all so i can only can balance the side imbalances that have to be addressed i think we can do this i mean if you read all right gentlemen we bring you all of the time here we started this program on a wing and a prayer will save its face now

a year from now many thanks and i guess the day in london denver and in milwaukee and thanks to our viewers for watching us here are to see you next time remember. anything. illegal. under the ill. will to eat.

back. six years later lovers to wait for the landmark to return vale its first full month to six years of massive service. allowed by the

bolshoi and the crowd gathered watching that take the bull get underway everyone enjoying. all the. night. and also in the program this far as nato packs up its libya mission to help kill colonel gadhafi is key son could blow the whistle on deals the west wants to bury if he gets his day in court. and letting greece it was a mistake the french president doesn't hold back on his beleaguered euro colleagues of three leaders sign off another massive rescue deal. hello it's a pm friday night here in moscow you're watching our. first tonight is taken six years of refer delays.