in the. broadcasting live direct from our studios and so the cost of this is our taste but it's the u.n. nuclear watchdog reports that iran could be developing the technology to produce weapons in its first public revelation of such claims but findings are raising worries that they might become a pretext for preemptive strike against tehran. over the lengthy standoff in a northern kosovo between serbs and nato back closer than poland's finally draws your attention and partly blames pristina for the trouble that some of the locals who don't want to live in self-proclaimed independent kosovo blend of their barricades into the scenery is part of everyday life. and as the financial fall of

rome looms closely the previously politically bulletproof prime minister finally agrees to go silvio berlusconi will resign only after parliament approves next year's budget cuts which the e.u. requires. and it's europe's deepening money late so that's on the minds of peter lavelle's guests up next as they ask if the euro can be fixed. q. hello and welcome to crossfire gang peter lavelle the hero of crisis without end eurozone leaders and national governments continue to be at loggerheads on how to rescue a currency that has an unpredictable future with clearly started out as a financial fiasco of the highest order is now

a political disaster with few if any positive outcomes. you can. see. crosstalk the prospects for the eurozone i'm joined by robert oulds in london he's the director of the bruges group also in london we have caro well i knew he is chief executive officer at the center for european policy studies and in minneapolis we cross the clare hill she's professor at the university of minnesota law school all right folks this is crosstalk i mean she can jump in anytime you want all right robert if i think go to you first thing you know we can talk about the financial nuances about this i think everybody that's been following the story knows basically that bit of the big numbers involved but you know that as we i thought last week everything had been decided i thought everything was going to be done you know close out a close a marco they had decided everything decided to fate of three hundred million people and now we find out well not really and even the national governments they're not

particularly sure what they want to do the french are just worried about their aaa rating and what's going on in greece now well maybe by the time this program airs we'll have a different scenario playing out there i hope point is it's a political fiasco more than anything else right now. well yes it is it's a political fiasco it's an economic disaster it's becoming a political disaster as well certainly to the case of greece and it's spreading to other european union countries such as italy disaster that has been predicted a long time ago before the single currency was actually born what is just being talked about many people knew it would end this way and so it's been long predicted and we're seeing it play out as we speak in this disaster so really it was predicted and really the answer to problems is to wind up the single currency which just doesn't work there might not be very easy to do clarify i can go to you i think one of the tragedies and looking at what's being played out with the the euro

crisis here is going into its second year here is that you know there seems to be so little political will in national governments because nobody wants to make the hard decisions ok because if you really push too hard for us terry you will be punished by the voters so it's this kind of kicking the can down the road as this crisis continues to snowball i mean amazingly so i mean ok the transfer for greece has been accepted but that's still very tentative because if you don't play by the rules you don't do the right thing you're not going to get any more and everybody's a loser i mean it why is this political crisis so paralyzing because it's like everyone sitting on the titanic arguing over the seating arrangement as we go right into this this the of the iceberg of this crisis. well thanks first i want to. run with you so everyone could predict it would this way i'm not quite sure what he

means by this but i see a lot of kicking in to the moderate if not the long term i don't think we're anywhere near and and i think to so many people are potentially so unhappy by any kind of major change because you have a bunch of beneficiaries of the system that just doesn't earn its keep and no surprise they're not willing to give it up but they have strong expectations that the stuff they've been led to believe is the case that is to say in the case of greece maybe not paying taxes or retiring early or characterizing hairdressing as a harrison has put pressure so they can retire even earlier then things like that or a sense of entitlement you get into a mindset where someone's trying to take away something that's yours and there's so many entrenched entitlement you know there you very very interesting point people you've read this is very interesting for a trial if i can go to you in london one of the things i find very interesting and what following this crisis is that you do see how corrupt

a lot of these national governments are because they have all of these clientele ism they have cronyism you have certain different differential attitudes towards the banking sector when everything's all going fine you know everyone can cover this all up but when you look at the italy for example in greece then you find out who really doesn't pay taxes and who doesn't have an interest in ever came taxes and who's taking responsibility in greece and italy at least as we speaking right now nobody really wants to be responsible. there was almost you will have to overcome the problem i mean i don't think let's say you generalize it so easily let it is so much corruption there may be certain countries where there is a huge problem but already you could compare spain and italy and say that spain for example is has a huge economic problem but this governance why it why it's probably a bunch better at minister than the previous italy for example certainly has huge problems which are being reviewed by the day greece we all know them by now but there are many other countries i would say the core of europe which are certainly

well run of course there is still some denial of the problem some hiding of the problems for example in the banking systems but this is the thing which we have known in europe since a long time let's say this is the national champions and sometimes no sufficient willingness let's say to recognize certain problems however i think that if you read for example be conclusion from the last two weeks ago or so from the european council you see there is a clear change and we are moving rapidly to a more federal model look for example there is a player statement of finger pointing to italy in the minutes of the council saying italy should happen to increase its retirement age to sixty seven years which is unprecedented this would never have happened in the past when you think about that robert because it seems to me that you know kind of reiterate is that and things are going fine when you when you can lie to get into the euro and everyone carries your weight but when a crisis starts hitting then people start looking after themselves more often and we see that why why would the northern countries of europe want to be having to

have to deal with because the kind of political corruption that we see in italy and greece maybe to some extent in spain also is that you know they're the ones paying for this continuation of a system that really needs to reform itself and there's no political will to do that because if you do that and you could out with some sense of entitlement i think claire was getting to. well there where do to the idea of political union within the e.u. and we've just heard it it's moving towards a federal structure but that will be creating another disaster the u.p.a. a new un is created problems but in a sense some procedures have beneficial crisis where they can use the problems of the euro has created in the in the eurozone crisis to create fiscal union in a sense an economic government for the whole of the you or the eurozone states that will be a disaster will have new people in northern countries which will be fed up with subsidising the southern countries and people in the south will be totally fed up

with the austerity measures being forced upon them by countries from in the north it will create serious divisions within the european union the the attempt to have great decentralization will store up trouble for the future is to be greatly alarming it's greatly alarming what's happening weekly how do you how do we deal with the convergence of of a unit labor cost as i think that's exactly what robert's going out to mean and it's been said over and over again is the german workers a lot different than a greek worker or you know it you know they're going to find that claire are now. going to require i agree with this i agree with robert with respect to the problem i suspect that i don't agree with i want respect for the solution that if the say. i think. there is there are intractable probably ultimately irreconcilable differences along both the financial aspects the economic aspects of the countries

the question you just well yes there are different practices different very strongly kind of love for. robert we think well this is so serious and so bad that we have to try to blow it out i am not sure what we should do but i don't think that realistically people. care for the moderate term and tell themselves they're not doing that ok if i go to you learning how long can the eurozone kick the can down the road and who's going to pay for it because as we're speaking right now you're getting so many different points of view i mean everybody agrees it has to be solved ok wow well that's a that's a great consensus but i mean there's still different ways of having you have to approach it considering last week apart everyone was told it was being wrapped up now that's not the case nor would we know what is who received this crisis for the last two years and if you compare it to two years ago we definitely made steps forward not a lot of things which are to be able to do well at least what is traditionally

changed what is structurally change the money's been thrown at the problem but what structurally is changed we've always been drawn to the wrong we have made we have made adjustments we have made decisions for so beachwear and imaginable i mean until two years ago for example of returns and when treaty for example it was said to have his new foreign policy on the bailout clause also now there is a barrier so that we need to have a third is to change the lisbon treaty law to have a more federal structure but we can also look at the conclusions from two weeks ago where they said look we need to have a separate eurozone grandchildren need to have the much stronger government of course truth have been decided much earlier i fully agree with this but you are we are somewhere i mean in the same situation as the united states was to the civil war in the mid nineteenth century i mean we are in a form of an economic. health turning out and the good. censor i said that we will start to have a more civil structure the key thing has delegated out there exceptions must dominate the sovereignty gradually move to the european level and it's no longer

nationals i want i was arguing the second part of the program rather to have a look at how we've elected go ahead robert jump to soften seamers not move to a center which is unaccountable which has been a cause of the disaster which is in unfolding power should be returned to the nation states with people but we've actually elected you can actually dismiss and look at elections and that will respond to the people's needs and respond to the different conditions of each individual country centralization in amassing power to brussels in the european union level will just create further difficulties for the future we see it's unfolding for the euro does not suit all member states and neither would a centralized economic government for the european union that will not be in our interest is just too different and too diverse and let's try some democracy and returning powers back to the nation state ok where you want to jump in there. can i ask robert well i'd like to ask robert a question which is to say i understand that he sees this is where we ought to be and i can certainly see the merits in that position i guess the two questions i

have is first robert do you in fact expect this to happen and if so what is the route by which it will happen one of the reasons i asked this question is because you know when i say kicking the can i'm fully mindful open accounts as well different things have happened different things are being contemplated creditors the chance of them taking you know fifty percent haircut all of this again very minor things larry and. we've been we've been only been here with our time here in this part of the program after a short break we'll continue our spirit to be on the euro stage with our g. q.

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and. you want to. welcome back to crossfire computer about we're having a very spirited debate about the crisis of the year old. ok. well robert doesn't happen too often on cross talk i think you're on trial do you want to answer claire's questions go right ahead. the nation states and countries can you even exit the european union if they so wish in fact most people in britain would actually favor that option and the euro can be dismantled just like the move was dismantled when the soviet union collapsed but countries can restore their common sense and that will actually be to their benefit it will free up their markets from being dominated by german german exports which benefit from the u. . oh because it favors their unit labor costs it will help their cause and gain

competitiveness just like when britain accepted the precursor to the euro the exchange rate mechanism which picked the u.k.'s company parent pound sterling to the door which mark when the u.k. left the event its economy grew after the concert was devalued the same would happen for germany and for italy would be an important part not the whole picture but an important part of those countries regaining competitiveness and beginning to grow again because that is the ultimate answer to the problems of the southern european countries is a distinct lack of growth. italy is next to no growth for a decade. serious recession if they were to leave the euro it would help and i can see in your face you want to answer clarabelle you are you satisfied with those outrageous. yes ok you know i understand that robert finds this desirable state of affairs. and i understand that all just to play of course we know a variety of routes to get to the place where rather wants to go but the question i

heard is the feasibility given the political climate and just as we were talking before about how people don't have political will how is the whole country that has expectations of paying very few taxes and getting a lot of government benefits how is that going to be changed around i also want to know the answer the question so many people having trenched interests that how would the endeavor work to say they have the people who believe or understand that this is the right way to go to in fact persuade people who are going to be massively hurt and dislocated by it to proceed in that direction you know i mean you're damned if you do damned if you do are a question i. first began to learn first let me go back and i think it's very interesting i mean what is the choice is really before the populations of the eurozone is it is it to save the currency or to save the union can you do both simultaneously or do you choose one and if i'm saying you choose the union you go

political union because only a political union can support a euro ultimately because you have a fiscal side i mean either you leave it all the way or the other direction you can't have this middle ground that they've had for the last decade. and that's what i said that's what i just mentioned a moment ago all it is a choice between national sovereignty and federalism and we need to accept that for certain decisions we have going for monetary union but not for economic union that things have to be decided at the center say for the seventeen not necessary for the twenty seven and no longer of the member state level for example if greece last week were to have voted in a referendum order to have passed over and left the choice to deplete citizens it would have meant that the greece greek citizens would have got a veto on economic governance within the euro zone which is almost unheard of that said there should be there couldn't be a feat or against it of course all member states can have all the solutions but if there is a majority deciding in a certain sense you have to go in a certain sense and that's what needs to worry about let's say but there is

a good thing of this crisis and say that you see we are clearly moving does that action also the little fellow these are allies you see anxious say you know you're losing their jobs there's a good side to this crisis. that is stone because we know that said. it's on the streets people we know and you say there's a good thing to these crises and that some political projects some political find fantasy held by a small political class. class they call greater interests to serve their own interests rather than protecting their own interests and they are the people that work in their countries that astounds me an astounding thing to say oh yes if you want to reply to that go ahead can i just say on that on that issue it's very simple to say we have to look back to the period nineteen ninety two ninety ninety four when you have a similar situation as we have to not now to not such a deep recession but also recession we had competitive devaluations for example in italy almost in spain and we have to look at the results and imagine ourselves if

this were to happen today let's say well it is what could be better yes or no if the euro breaks i'm not so this will be a disaster for many countries and primarily for germany the motor of economic growth in europe at the moment you know clarifying go do you mean and other element of all germany was. going to do you know what i want to go to choir here the thing is that i'm a lot of the great skeptics of the way the eurozone has been dealing with this is that really at the center of it all is the banks i mean it it's not saving countries it's not saving populations it's saving a banking class and when you have political elites that are so deferential to the financial system of the eurozone that's what's being bailed out that's what people are saving because you know the austerity the way it's being practiced in greece they're going to be in a gutter for a generation and it is going to get worse i mean the government in italy just survived a vote as we're sitting here talking and then you look at what's going on in france they're going to go down the path of austerity and i can no one can convince me how

that creates growth. well i mean they are sturdy problem is another kind of intractable pain on the one ahead and you know you'd kind of like to have governments throwing money at people so people could spend it on the other hand the people are not let's say we're turning it on taxes then say spending enough working hard enough and so the government is not getting enough of money that it needs to pay off its debts and then becomes less credit worthy and then. the borrowing costs go up so it's not you really clear the clear cut i ask you i mean absolutely even in this. kind of producing series if you could do that or the least should street level can't shoot but you can't do it the way the euro is set up now because just what you just said makes perfect sense but you can't do it and to do it do you have to have brussels decide the screening system in italy in the in the in the plumbing system in spain and that this is not something that's

going to happen anytime soon nor would it be popular the idea of the eurozone from my perspective on the one hand i can see many arguments for it and on the other hand i can see many arguments against it i think its inception there were many reasons to be skeptical but also be optimistic right now we're seeing a lot of the downside can they we capture the good side of this very very difficult call very complicated. and i mean robert feels very strongly that the euro is just i gather the whole zone bad idea we need to bring back national sovereignty and so on i can totally see the arguments for that i guess like main thrust here is that as a practical matter i'm more thinking about how to proceed just because it strikes me that nobody's listening to laura and maybe they should but i want to sort of focus my energies are trying to cobble together the best mechanisms that are in

fact real world. unfortunately peter as you say the banks they have way more power than they should you are way more solicitous to creditors than they should be and i completely agree with this certainly in the states that's been that feature of what's gone. on so it's a very social this is a rare it's socialism for the rich and capitalism for the poor car i'm going to let the banks off the hook here in new york the eurozone everything i've seen and maybe i'm just too much of a silly here and i used to be in investment banking ok it seems to me the banks are calling all the shots every step of the way and merkel is just saying what's the to the sarkozy saying what's the tune we're dancing to now because it's saving those banks that's what's most important isn't it. i'm not so sure about that so if you look at the conclusion of last week's g twenty cults all business so you can. catapult charge for globally systemic banks i mean it's an extremely important step forward again i say something difficult years ago i mean the government did it

against clearly against the lobby of the bank integrity which was certainly not a conference of all the wonderful people it's a very call log of the ratio of those they have lost their knowledge they will have only four this is the important bank's a much stronger character than mark which is a fact obviously but. many will want to be green with it was supposed to have come to fruition last week i mean i read it very carefully it was voluntary this voluntary that voluntary hero yes it is it's very clear and where is the money come from not very clear it all comes from taxpayers apparently what do you think about that robert the other day which is dropping kicking down the can they make somebody else pay for it did make these problems in the first place exactly in a large part of it until things are slowly arranged banks is actually to save president sarkozy's career he's got the french elections coming up and he doesn't want france to lose its aaa credit rating because i could well cost him the

election so that's a key driver news decision making. which will be placed by private lenders to greece that doesn't apply to the european central bank which is bought up greek debt it doesn't apply to the into the european union and it's given over so really it will still be paying money to the politicians and to the institutions of the european union but it's the private sector that would be taking taking the haircut is it's become known ok clarifying go to you and kind of maybe fuse this all together as we come to the end of the program here and we ate seems to me that democracy is so very much challenged right now in the eurozone because as we started our program here nobody really wants to take the lead and bring bad news because it was mentioned on this program and sarkozy has elections coming up here governments are teetering it's very a party this is where the you know the meat meets the metal here because you want to stay in power it's natural that anyone want to but you don't want to be the person that has you know it has to preside over a budget of paid. well

i mean i mean how do you get around how do you how to get around that how do you get around that because there's no leadership to say you know we have to do this no one wants to do that we started this is where we started the program and it just kicks the can down the road when it maybe we want to end on a series yet maybe we want to and i really believe you know ok people have some good ideas but they don't actually know the right thing even if they did they could get it passed and furthermore even if they didn't get it passed there be no way to know for sure that it was being carried out. how greece managed for everybody with respect or if not for everyone at least be able to take a position in a matter of the didn't get it in trouble but it had a lot of let's let it actually did what's in the world to stop people from being able to take the position that they are complying with various things away crack i'm afraid we've run out of here in america it's clear you have ended the program

on the bleakest note ever ok many thanks so much yesterday in london in minneapolis and thanks to our viewers for watching is here r.t. see you next time and remember rostock. can still.

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