to cross-talk austerity measures around the world i'm joined by people in london she is president and founder of principal us asset management also in london we have fragged his close phillip a as he is a senior lecturer in international business at the university of kent and in new york we cross to dimitri papa dimitrios he is the executive vice president of bard college our focus is crosstalk rosen a fact that means you can jump in anytime you want me to if i go to you first the new york can austerity bring back prosperity because we have unemployment is on the increase particularly in the euro zone and that the prospects for employment are pretty bleak how can you have prosperity when there's so much unemployment and people would say austerity creates unemployment because of the loss of jobs in the public sector. blindness stary the.

decline in moment or a decline in the economy is not the right medicine clearly perspective it economic when there is an increase in demand an increase in demand if you doesn't come from the private sector you need to come from the public sector so therefore when one talks about it you want to not be as general to suggest that can bring prosperity clearly in unemployment rate of over eight point three percent as it is in the united states cannot happen by itself on the by the private markets unless the forecast showing that the economy actually will grow but the growth doesn't come automatically and we have seen that in europe as well where there would be in the soudan tier southern economies in europe or even in some of the northern economies france and also germany is actually experiencing some decline in trends

ok people what do you think about that i mean i mean we see a sturdy. with a vengeance in europe and we can go to southern europe all the way up to germany the french are be experiencing it as well how can what is this the right formula and dimitri says it's not the right for me and to bring us back to prosperity because a lot more and more people are just being a misery. yeah well i think look the bottom line is it's really interesting people won't agree to us territory or comply with us if things are getting better you kind of need to be in bad times to get people to understand how serious a debt problem is and that it needs to be addressed i mean nobody was interested in addressing the debt problem during the boom it's only during the bust the people start to understand why but it is true that austerity doesn't alone create price prosperity what does create prosperity are small entrepreneurs and this is really important two thirds of the net new jobs in all industrialized economies are

created by companies that employ less than fifty people now when government is shrinking this actually does create some opportunities for the private sector and new york city recently announced that they can't afford to keep the public buildings clean anymore so they privatized the contracts so some private company got a five million dollar contract i'm all for that but does it create prosperity overnight no and doesn't create prosperity by itself definitely not it's what creates it is innovation and change but the fact is that when you have spent and you earn you can't make your way back to prosperity until you fix your debt problem that's one of the reasons we can't fix the debt problem by adding more debt to it it just pushes the problem into the future so it's not the key to growth that doesn't make growth happen but you also can't have sustainable growth if you don't do it ok if we're sailing because what do you think about that what is to formulate and where does austerity play in all of this here dmitri things we're doing at the wrong time

it's very very interesting observation what do you think. well i think i think both speakers had some points were very very important yes dimitri made the point about growth and obviously we need to always remember that that is not just an absolute number is basically as a proportion of their gross national product of its country and then i think people mention one word which is really really crucial which is innovation i think what we're seeing though at the moment and the main problem that we're seeing at the moment is the austerity is not equally distributed amongst the different parts of the population so effectively you get some people paying more than others without necessarily deserving than and the other thing is you you you apply austerity always on telly and this is going back to what people said about innovation you apply instead of your design dolly you achieve nothing the government will still need to build infrastructure the government will still need to educate people because that's that's the basic role of the government and this is how the through

the upgrade of human capital you can actually create people that small and medium enterprises can then employ and innovate and create new knowledge and take the economy forward so i think the problem is not as simple as you know we need to spend more money or we need to allow small small or medium enterprises to to growth i think what we're lacking at the moment is two things these fair distribution of austerity measures that's one and the second thing is the strategy direction which i don't see that happening anywhere in the world at the moment we're all talking about cuts which is fine yes we need to sense all governments need to send a signal to the different markets financial markets primarily who look like they don't need the world at the moment but on the other hand you need to think how you spend your money in the more effective and more efficient way and where you spend your money is the key question that we need to address i think that's a key question we go back to dimitri's that's a painfully ok people go here but that's a political decision that's very interesting it's

a political decision not necessarily just a common sense go ahead. but that is the point that all these decisions are general and that's why i want to follow on from the comment to say look austerity is one way and which a state defaults and the real issue here is the burden of debt is so enormous that human beings can't bear the pain of paying it off so what are the ways in which a default can occur well you can do the argentine style we'll just never pay back and you don't have to do us terribly or you can do it the greeks are doing which is well we'll pay you back but a little later and a little less that's the haircut option we're going to see a lot of that in europe the third is austerity the state to fall so new the citizen makes you pay more taxes makes you work harder makes you retire later all that stuff doesn't pick up your rubbish anymore the fourth option is inflation and that's what the u.k. is doing and i would argue that's how the u.s. is going to vote on its debt ultimately and then the last option is devaluation which you may or may not be able to do depending on the situation but the point is

a stair it is only one way of achieving a default and so it is correct you have to think where does the burden of pain fall on the citizens depending on each of these choices and that is a political decision dimitri you want to jump in there go ahead. but you know i think that it is a very loaded word and i think it's very difficult for us to determine how do we define the. horizontal list is that the appropriate measure to apply it one has to determine why is it that you were brought to the position to apply osteria do you know it was stated in the united states is different on those thirty degrees h. or greece does not have its own currency hardly being the united states it has its own its own currency so there's one k's to be made greece could default the united states cannot default so there is a difference between between those two also when we're allowed to increase we have

to. find actually why and how did you increase it's not easy to suggest that somehow or other since all the counters in the euro zone were allowed to borrow the banks were allowed to borrow at the very low interest rates and pile up on on government debt which was then a little bit higher so they can make their profits this is not all to turn out and say well we allow this to happen but now it's time that the party's over and therefore the population has to pay for that ok do it or a clearly a very significant back to london frankly because i think what's really interesting here is that the greek situation of kosovo it's like going on in the united states is that the greeks have just lost their sovereignty i mean like it or not it's burned in frankfurt and brussels they're vanishing their economy and this is something that's really

a stark departure from what people thought the european union is supposed to be about go ahead the problem the problem is that germany and france are not managing the greek economy they're just managing the greek dead and over the last over the last couple of days i haven't heard anything about how we can return the economy to growth we're still looking at very some very deep recession figures for they're going to come in for the rest of the year last night the indication was that the economy will sink another five percent until the end of this year and someone made the scenario about the return integrals in twenty thirteen which i don't necessarily see happening and the just the indication that germany and france are going to create this new fund where all the money that they're giving to greece are going to go in order to pay that the. basically the greek debt off instead of money being spent on the economy to develop the infrastructure it's there not managing the greek economy there's nothing and that's i might's i might be provocative here

but that's all. the monetary fund. people if i go to you i mean that's what i mean you're right you should go ahead dimitri and i will go to the break i had you yes i think i think you should know that greece does not have an industrial base that is basically a consumption economy so you're absolutely correct the one hundred thirty billion euros are going to be used to actually roll over the dead already exists and there are forty two and need to do anything in terms of the growth stop missing the growth path for the greek economy to grow so you're right in two thousand and thirteen is a pure fantasy to expect the greece is going to grow it is not possible for greece to actually step to to actually develop. surpluses so they can actually service instead the debt is going to be very high and it's not going to be salvaged with this new bailout plan a paper fine go to you can you know ok great all right before i could before we go

to the break here paying off the debt let's be clear it's paying banks ok and this is they're getting a primary residence and this is this saving the banks and the banking system i mean the average person in the right has nothing to do with the average person in athens . correct and that is why there won't be enough for greece to default they have to actually exit the euro and get control of the cards seeing all right we're going to go to assure you we're going to go to a short break here and after that show break we'll continue our discussion on austerity stay with our teeth. and.

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welcome back to crossfire by peter lavelle to remind you we're talking about austerity in troubled times. dmitri in new york i'd like to go to you i'd like to read a quote from angela merkel she said in this crisis we have reached a whole new level of cooperation we have arrived at a sort of european home affairs europe is domestic policy that's a remarkable statement because that's that that's a very incredible political statement because we're talking about fiscal and political union to the max now because greece has lost its sovereignty at law it's lost its economic decision making ability and if trends continue others call the small countries within the euro zone will also follow suit. this may be

a remarkable political statement but not an inspiring statement cause i think that with one talks about it fiscal union or one has to be able to understand what this means the united states of europe need to be thought as the united states of america you know just as america has a center of fiscal fiscal agent that's called the united states treasury that does not exist in europe what exists in europe is that every county cannot have a budget deficit above the three percent and to also furthermore from now on every continent in the euro zone should not even have three percent reduction have a constitutional amendment that it should be even much lower than that even a one percent except in some difficult times this is not what i would call the fiscal union this is it is not possible for every member of the eurozone group to create surpluses so that it is possible to then the euro the euro

zone to be in a and even keel based on the definition of. america believes and president sarkozy made a major fan stay with you when you were on if i can say with you in new york of any but when countries join the european union i'm sorry the eurozone they didn't sign up to this kind of economic policy at all did they i mean this is turning into a straight jacket i mean people didn't vote for this they voted to have a common currency the end we're talking about you know you're right it was incorrect because the euro bejo is a euro project is an incomplete project you cannot have a monetary union without the fiscal union and along the same lines in the united states and you can have a political union or you know the powers that is created the euro zone was germany germany and france in the names of francois mitterrand. and also john

chancellor kohl knew the project was incomplete and they expected that those who would follow them will complete the project but what do instead we saw is the development of tremendous imbalances between the into the eurozone countries you does not possible to expect the german you will always have a surplus unless of the counters such as greece and portugal have deficits ok and therefore this is how we created the let me growth padron let me jump. in here i mean people i mean we just heard that other countries would follow the it would follow the political union thing but people didn't vote for that i find that inherently undemocratic and that giving people a choice ok i mean what happens when they go in the next going comes in greece are they going to vote against the the this austerity package right if they are go ahead of course they are and not only in greece we already hear echoes of this in

france this is where francois hollande the leading member of the opposition who looks likely to win the next presidential race and france is already saying why do we have to have this us there at eight and i think this is the key you can see the leaders signing up for it because the exchange is clear in germany you give me the cash to survive given my debt problem i'll give you my sovereignty but will the public actually comply will they agree to accept the pain of this us territory and will they agree to submit the most important sovereign aspect which is your first school your budget to technocrats in brussels that are not answerable to your population through a ballot box so i think that although there are many europeans who would like to see a united states of europe there are many who would not and this question is what did we all signed up for the issue today is that the debt burden is so severe that people. will sell their sovereignty for cash right now but will they actually

deliver what germany has expecting and i fear that we're going to have a meltdown have a breakdown because even though they promised they're not going to deliver. also in london i mean i do see what is the political will right here because it seems to me and pippa is absolutely right you know merkel just wants to win the next election without a cozy is praying he's going to get in and then we'll worry about it then i mean it's kicking the can down the road to keep taking it down because the politicians have no political will they have no. fortitude to really deal with this issue because again the at the end of the day it is bailing out banks the bankers get paid everybody else gets screwed. well the issue goes back to what we started our discussion on which is the political will and it's interesting the latest couple of comments because we need to bear in mind that kindly greece and spain and italy story they have governments that are not necessarily democratically elected technocratic prime minister they both have prime ministers who were technically

imposed by germany and france and i'm not sure that if we were having an election tomorrow their results will be that you know the greeks would like mr kopper the most as a prime minister and the would like mario mongers a prime minister you might have a very different result there and it looks like there is a trend developing in some other southern european countries like spain and portugal we've seen the results of the elections in spain that's completely changed what was happening in the prime minister role so i think having him having a union means that you need to think about all your members and you need to be inclusive and at the moment the problem with european union is that although initial stages in its inception was going to be an inclusive union giving to the less developed member states opportunities to develop sort of structural funds

through their financing that's the commission of the law established back in the eighty's and we now move to a union which is basically dominated by two if not one country doing whatever they want keeping the common currency low because we need to put that into the equation germany right now has significant exports because the current see the euro is a is a is a local and hear them ok guys i've got to go deutsche mark i'd like to go to people here it's an old car and see it's a long car and see actually four of the four of the four germany are going to very high current super bowl. golding greece and ireland ok to go there's a difference that was a sort of activity difference you know i want to say here just be really provocative here and i don't want to be mean spirited at all but it looks like the germans won the second world war in europe but what do you think about that well look i think i think that there are a lot of people who are going to look at it that way i think the fundamental issue

here is that this is the end of the social welfare state in europe outside of germany not because people are choosing to end it but because they have run out of money to pay for it and i think the critical social question that confronts each of these countries individually is what will be the new deal between the citizens and their state about what is the state going to deliver because the state is not going to be able to deliver retirement at the old age it is not going to be able to deliver the pension benefits that everybody had expected and it's not going to be able to deliver the same size of the civil service that's going to shrink and so these are massive domestic political social questions personally being american and free market i think this is in one way a very very important episode in history the end of the social welfare state in southern europe is going to give a blast of oxygen to the entrepreneurial class which i welcome but it's

a massive social dislocation and therefore we have to understand this can be very known but you know if you go through but you have no choice if you have no money ok dimitry jump in there it's a very interesting thesis we just heard but you know but do you know that it's not the end of the world through as they do in germany or even friends is on the end of the well everywhere if we're imposing on greece and portugal and ireland if that is not what the eurozone or european union supposed to be united states in the united states of america new york sends a lot more tax dollars to the federal treasury receives in terms of government expenditures on life. delaware in the in the opposite direction he receives a lot more than you'd sense to the federal treasury so you cannot have a euro zone with with only one power to dictate the terms of the game so clearly one's ones the governments begin to understand these as you say there is

an intellect and the ideological shift if you look at the last polls in greece you will see that the left has been gaining as well as the altar right now this is not a healthy situation and i am sure that you will see the same thing in portugal and you will see alternately the same thing in as you're seeing in france for the socialist actually present their kid to gain support against mr sarkozy who did it has no idea what a european leader was spectacular leadership is supposed to be ok so clearly you will see it on full transformations that would to be taking place interesting frank is close and in london again do what dmitri had to say following on paper is fascinating because what we have is the center the middle dropping out everywhere and we have going to extremes i mean this whole currency crisis and debt is creating a really intense political crisis as well because people are looking for written

answers that have not been usually considered in the center. well when people are looking for answers the problem is that in greece for example people are looking to demonstrate their way that they did these like the government the current government so effectively you don't seem forward thing happening because the left or their right wing parties have a solution to offer it's basically evolved i guess the current government and against the current situation so the problem with with all of these southern european countries any goes back to you know what these are strategy as what what is the politicians that are the g he's all right what is the alternative and we've we've talked about a common fiscal policy and european union the key question for me there is who's going to be responsible for that are we going to establish a treasury in brussels are we going to give more power to brussels are we going to increase the democracy deficit that we already have i mean in your eyes anyway to

many more questions we have time to answer i want to make all yes or still only make all of my guests it today in london and in new york and thanks to our viewers for watching us here r.t. see you next time and remember cross talk. to. people in the.

lol. syria brushes off fresh arab league initiatives targeting the assad regime while washington is thought to be the bring up for military action. thins approves proposed new new austerity measures as the city explodes with rage or protests to say to stand out of national sovereignty to foreign interests. tainted by association the ethics old london's twenty twelve olympic games are undermined by a controversial sponsorship deal with the chemical giant the infamous disaster which claimed tens of thousands of dollars in india.

on. twenty four hours a day this is o.t. . the mascot swiftly rejected a brand new arab league package of initiatives on syria the proposal backs the opposition and calls for a joint arab un peacekeeping force in the country. reports now from cairo where the league was meeting tightening the sanctions which are already in place aborting the observers mission which was halted earlier. and of course bringing in peacekeepers u.n. peacekeepers these are the three main points which the arab league has come up with during their meeting and the arab league has also called. backing for a position in fact they all rallied their support just for the opposition there is also the so-called saudi arabia draft resolution which may be discussed at the u.n. general assembly in new york on monday and there are reports that this resolution isn't that much different from the.