culture is the so much coming at me i'm going to. block the music. your leaders say they have a plan to cope with me to sovereign debt problems and to build a firewall against italy's. the same issues. couldn't take three. four judges three. major months three. three stooges priests. three blanquita cullum videos for your media projects a free media hard time. a very warm welcome to you this is your news today protesters on the bolts since they have. been cancelled

a good chance to get with the status of the human experiments. to misrepresent the words it goes to the basilica to try local economies and it's all changed things as financial temples. to maintain our confidence in long kids and. wants to be seen trade imbalances with the nations close to collapsing in some close. to fail circlet balance again feel like things in us crash. just like the clubs and in street the sports mail just programs increase the total economy. the official tea allocation job i phone the i pod touch from the i.q. jumps to. cianci life on the.

video on demand keys mind bold colors and features now in the palm of your. machine on the. com. to. follow in welcome to cross talk i'm peter lavelle when there's 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 moving crisis and the devil it would appear is to be found in the details. to cross-talk the eurozone crisis i'm joined by marshall are back inventor he is a global portfolio strategist at madison street partners and

a fellow at the economist for peace and security in milwaukee we have jeffrey summers he is an associate professor at the university of wisconsin milwaukee and in london we have any myer he is a senior visiting fellow at the london school of economics all right gentlemen this is crosstalk that means you can jump in anytime you want i very much encourage it but first marcia tell us how we got to this point on a wing and a prayer a date with destiny to sort out that years that imbroglio was set three weeks ago by nicolas sarkozy and angle a miracle and then it was delayed by three days and on the third day it came through after marathon talks which went on till four o'clock in the morning and the new plan greek debt will be back to one hundred twenty percent of g.d.p. by two thousand and twenty which we've said holder is thinking haircuts of up to fifty percent the four hundred forty billion euro will be used to provide risk insurance needing that after 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 engel merkel ahead of

wednesday's talks. well it's a good business law but 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 deterrent impact must be great enough. become global markets in the lead up to this week's eurozone summit could be interpreted as confidence that e.u. leaders would pull something off to save the day but after two here is a feeling to come to grips with the greek contagion risk in other e.u. economies and a banking system that is grossly under capitalized there's been a growing sense of impatience even beyond europe successful resolution of the current european crisis not is 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 any 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 so arguing in the small hours but this plan will be scrutinized like no other for weaknesses which markets will exploit as well as the political torture of its creation with the dowser meeting 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 in milwaukee how do you look at this plan that they came i hammered out we're in finally after two years of wrangling over because the the only thing i got out of it is a lot of. greece 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 euros 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 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 by ability and for the. good it will do for the greek people ok hearing if i go to you in london 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 element to it i mean when do banks not want money when banks forego money i don't understand i was in investment banking at one time it seems so we largely call to be voluntary. yeah well the thing is you have to look at this new

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 or so one has to say this was in political terms a step forward and economic terms as he rightly characterize it there's still a lot of news and i mean one of the things is the voluntary hakka for the banks i mean the reason why it's one in three is that politicians don't want any c.d.'s to get but obviously that's one of the cruxes you see really is in the details in my pretty interest of some of the banks actually to target the c.d.'s because it shows against losses so there's still a lot of details to be hammered out so from an economic point of view i think it is still there still some way to go from a political point he's showing the resolve to really tackle the problem i think this is a ride that even if small step at the other actions 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 the athlete news no right and it's not written down where that money's going to come from that's a lot of money is going to be the german taxpayers. well it will be a number of the tax payers and first i agree totally with just characterization the whole trajectory of policy over the last couple of years in europe has been a nightmare it's been one case of fiscal austerity after another and you know you have the situation where it's like a dog chasing its own tail the the the troika has continued to demand 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 that 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 so-called fiscal deviants like italy and portugal don't fall into line so it's it's highly immoral it's bad economics and as forward to being voluntary on the part of the bankers i mean it's voluntary just as if you know i had someone stick a gun to my head in and asked me for something and i agree with you there's only one tree but it's having said it's just a tool to 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 big haircuts are coming because the bonds are distress and the bonds are distressed because you have this issue of national sovereignty 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 we don't need as many haircuts so that the cure is wrong and the punishment misconceived is well it's

a terrible program ok heading 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 in a decade and is this is is this is this what people signed up for because we need to be better to have restricted leave the eurozone because other countries and other public during this great contraction to be saying we're the only way we can get through this is your road it seems to have only been controlled by a small group of people in brussels it's going to lose all of their sovereignty to keep that currency i mean that's the it's the 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 repeat of those of austerity 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 has been insolvent for quite some time

and people have known this and steve won't help unless it is accompanied by different economic strategy that would allow the country to adjust its competitive situation adjust its public private sector and all these sort of things that really have to be just increase while it is growing. it is shrinking with the economy in greece are shrinking by i think five and a half percent this year alone this adjustment will not be possible and there will be a democratic backlash as well as for cory's 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 and the euro zone for a simple reason i mean none of the long long term benefits of being in a common currency and all and void now i mean there are obviously it's a real economic problems but the reason the interest you're in the first place are still there second thing is obviously you have to reconstruct the euro zone ok i don't there were some major institutional mistakes made and these have to be rectified and as long as greece can go back on to a grocer directory i think there's a trust and

a necessary adjustment can be made within the euro zone ok to put into words a little your own thing that bothers me on this program is that we're all agreeing with each other here that's not what this program is all about jeffrey if i go to you one of the things i think is really interesting is that maybe the only thing they 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 increase and in spain 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 we have a case of gang green on the head and we think we're going to cure the patient. capitated them this absolutely is not going to produce the beneficial outcomes that they are intense appealing. again i thank you you've really really hit the bull's

eye here we have a system whereby growth has been halted how are we going to meet these projected g.d.p. 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 many thanks for the break here i mean on top of this what you're saying here is that and then paying off even more debt in a time of austerity i mean where is the just we're just the growth to pay for these future debts again it doesn't make any sense you know we're very it's a very it's a very simple truth without generating growth this is the inability argument is not employed and i think the proponents of the say you cannot spend your way out of the crisis well one thing is you can't cut your way out of the crisis either you will have to generate growth and growth needs investment so spending is not just consumption i'm just putting money down the drain it's about investing in the right

industries in the right services and making restructure again that's the only way to really resolve this in the long term all right gentlemen we're going to a short break and i'd like short break we'll continue our discussion on the eurozone state. join us on a trip to a magical land where pesticides anymore for school children can live without ever opening the paper. and the laws of physics no longer apply and where big can always be things are still be afraid to take my hand and enjoy the ride on

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welcome back to crossfire if you know about to mind you were talking about the crisis of the eurozone. can. live. ok marshall and dan brown 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 and then we have the euro officials and some central bankers and things like this say yeah we're going to it looks like it's going to work you know if we have a political commitment now all the things you hear from politicians that we all get tired of by the way i mean why is there such a disconnect there between we do ok we have the populations we have media expert media coverage doesn't think it's 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 not proceed it's always been like this you know the the the the whole modus operandi of the european union has been you know we'll keep asking the questions and when there is democratic recourse if they don't get the answers they like then they'll just keep asking the question did until they do get the answer 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 for repair lee one i suspect if they had another referendum again that they might lose this time but certainly if you don't carry along the vast majority of the public with you you have no kind of democratic legitimacy but you know they 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 capitalist like

alliance with the bankers that this this bailout of greece is effectively you know it's all being decided a way to minimize the damage to the financial sector there's a whole universal banking model which is has been great in europe it's completely misconceived there and but the politicians hold to tack that and that's not just a problem of the european union you see that all over the world any if i go to you in london what about the moral hazard here i mean when you set up so you know we have this stabilization fund you know it just facilitate we can facilitate looking at any kind of good possible default i mean it's just moral hazard right there because it just sends the wrong message that if you do get in trouble we have the money to protect you is that the thing that we should be doing right now. well there are two things here obviously the moral hazard issue will have to be addressed institutionally and that's why i think once whatever the result lucian through this immediate crisis is going to be the next two or three years will be characterised by intensive 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 obviously you know normal capital is rooted in shock though the window i mean if you invest in something the interest rate is also part of the compensation for the risk you take and the you know the 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 that's going to do i mean if the banks really take a whack at a fifty percent now on the on the greek bonds and will 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 is a debate you would still have to lead and have to do something about jeffrey why don't we did it change gears here i mean one of the thing and i remember we spoke at another program about this i mean why doesn't the european leadership and maybe for a once in

a while ask the permission of the people of the european union when peace by pulling go down fiscal union as well that way you know if you avoid all these problems of course you throw sovereignty out the window but i mean is it really a choice now between the euro and sovereignty because we've seen greece was the folk first to be put on the altar and sacrificed. well you are right i mean it is like a sacrifice but i would go further and say that this is kind of irish marriage in which the priest has told the paired couple that they need to stick it out because of bad it is and that they are not going to be consulted regarding the future of this gone. 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 is poorer than just a fiscal union i think we need true thank you for using the term reform unlikely

i think the banking industry needs to be treated as a public utility they have absolutely terrorized. our north atlantic economies whether it's the united states or much of the european union and the results have been an absolute catastrophe we're going to literally have a lost decade of the last two decades unless we change this unless we start this rent extraction from the real economy by the banking sector it doesn't matter what we do in terms of the political. union really looks like a nice change do you think i mean we know merkel and sarkozy they aren't speaking that language at all geoffrey marshall i go to you back to you and then every other people are going to have to push them there and maybe you know occupy everywhere if you've been through this program marshaled 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 in it. 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 hardware house where you had a common currency with no political union and you know those of us who criticize it from the start we were queues of being you know dollar german it's a little englanders and and frankly you've had historic examples of this in the past particularly here in the u.s. you have the articles of confederacy in the early united states history and you had the confederacy of the u.s. south during the civil war and both of them had the same kind of characteristics are a minimalist fiscal structure and very very powerful powers left at the state level so it became economically it's functional and ultimately collapsed so you're right you have to move towards some sort of a political union but the problem is this is being asked of these leaders in the space of weeks you know you're trying to force institutional changes on such

a rapid rate when you know the country clearly aren't ready for it and in any case we have to ask what kind of a fiscal union is it going to be is it going to be like germany's so-called stability culture is it going to be really united states of germany under the guise of being united states of europe or is it could be something very different the omens today suggest that you're getting some weird form of. you cannot mix with 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 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 could repair next. 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 which is

a wrong analogy in many respects the european union comes from a completely different kind of development and i think you know we've done really nothing 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 an obviously fiscal union is not a matter of now no it's a moral yes it is also a matter of development and evolution in this so i think i think it's absolutely important as the other speakers of also stress that we have a more public debate and take a people with us and that has been has been neglected over recent decades i have to say but i think there's a trajectory that's going to you it's going to happen and the other thing is i think you already pointed to a very important folder and that's going to actually open in the european union it's the e.u. seventeen plus that you 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 full time to be washed ok marshall you want to jump in there go ahead. i guess i just wanted to interject you can call whatever you want i mean i use the united states of europe 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 bet on all i would say the canadian or strange example of federalism probably are would be vastly superior i mean the united states if europe is 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. jeffrey again let's take a look at what the cac speyer is have to do here with what i find really interesting is you look at these huge numbers being thrown around and they're looking good going out over twenty twenty twenty forty things like this i mean it's just a sustainable because ultimately it's the taxpayers that have to pay for this and no one asked them for their permission to do this 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 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 or for we need to get back to this discussion of an even development in europe because ultimately this is what we're talking about we don't have a unified continent we don't have a unified levels of economic development and consequently we're going to require different sets of policies for different parts of europe we cannot have uniformity across a continent which is not even a thought 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 the countries currently we have a system whereby we are forcing all of these nations to go to the private banking . markets order to raise capital this increases their costs thus making economic growth and investment a more expensive proposition and believe me if you mean you know what you're almost out of time here i hear you i want to go to you in london if we needed to if we make a program yes year from now on this exact topic what do you think the condition of the euro will be. i mean we all seem so greedy but need to grow sort of geno it's alleviate the problems i think as opposed as some of the others because i think the imbalances that we see within the eurozone and not just in terms of development i don't so i can i can but it's the fight imbalances that have to be addressed i think we can do this i mean if you read all right gentlemen we dream all of the time you're starting this program on a wing and

a prayer we'll see if it stays that way year from now many thanks and i guess a day in london denver and in milwaukee and thanks to our viewers for watching if you darkie see you next time remember rostock. case.

will come through the joining us punish trip to a magical land where pesticides are just a new more for school children to live and learn without ever opening the paper book or einstein's theory and the laws of physics no longer apply and where big can always be figured still be afraid to take my hand and enjoy the ride on technology update here on r.g.p. .