welcome back time for look at the headlines now breaking silence julia sun speaks from his current sanctuary an ecuadorian embassy in london saying the proceedings against him have been deliberately today to allow the u.s. to construct a prosecution case over leaked cables. fifteen of the world's top banks are left reeling after rating agency moody's slashes their credit scores. and battlefield on the airwaves relations between russia and syria become the target of mainstream media as outlets get excited over false reports of richie eight and massive joint war games. next guests discuss whether the single european currency is going to

become a thing of the past. so. well with. science technology innovation all the least of melanin still around russia we've got the huge earth covered. and. stood. alone and well human cost time to put on the euro crisis the never ending tragedy of the european union where to the problems come from and just anyone have any solutions. and you can. start.

to discuss this i'm joined by a gusto carlos lopez he is director for the global indicators and analysis department of the world bank also we have just kept our chalk he is an economist and we have tom conway he's principal at to teach reinsurance consultants international ok jeff if i could go to you first. when you when we look at the euro crisis today there's been much thought put into what could go wrong because it seems to me that we have nineteen emergency meetings nineteen. and everybody keeps looking over the cliff and we keep hearing a solution is in sight and then we have another emergency meeting when told it went so wrong. i think there are. two factors that have to play that one is political and the other one is economic the political one is that i think we have to keep in mind that democracy is a very slow process by stuff

a nation and european union is is maybe to a democratic force on good which plays adversely most people would say it's the world versus now i don't think so i still don't think so at least during the outbreak of the crisis that was definitely the case so meeting at the meeting as you said decisions that the markets were expecting were not coming up who said one word money for the markets is it working for the people like this one of the things i always hear with the markets thing but when i say people i'm not a i'm not a great fan of markets that people understand it because i think when it comes to signaling that there are always two ends of the emitting ends and the deceiving and the seeming out of the markets so what i was going to say the people i get to receive back whenever there's a problem in communication everybody assumes that the meeting party is faulty with the parties to blame but i think a lot of the times the markets get all the wrong signals because the perception about situations befall the short side so that's a process to be prominent in the days of also so perception. when you think come

from the perceptions that this is a political problem that european political elite tanja overcome are they afraid of their people are they afraid of being voted out because eleven governments last two years have been voted out and. i think that we are underestimating the little bit of difficulties of. basically getting seventeen countries in the euro area to essentially move to a much higher level of integration and to develop institutional mechanisms that will be necessary you know to support the euro area along with some basic. just think a little bit from a historical perspective right we're coming out of several centuries of national sovereignty where basically the local power you know was the national government right but now we live in the age of globalization and the age of interdependence and in the age of one global economy these seventeen governments are essentially trying to work out a new way of doing business in the context of these new realities and it is not off

easily that's one life to find but that the clock is ticking right now the clock is ticking and as we heard earlier in the program the markets are baking decisions ok there it just sit there juxtaposed right now i don't see them in sync i mean as we speak right now the leave the vultures are circling around spain ok right now we already saw it with a greece ok and we have a government in greece we who is making the decisions the government leaders the people the markets. i think that in terms of what needs to be done you know to ensure this is thing ability to go to area very much the focus is on much not just a government but a group of governments who are you know trying trying to come together and trying to develop this issue and making mechanisms about what actually allowed them you know to introduce the innovations that are necessary to ensure the sustainability of the area tom it was never supposed to happen this crisis right was never

supposed to happen we just should be more and more prosperity and people are going to retire earlier and earlier and everyone was going to be rich to go to vacations in greece oh i have been really didn't work that way it never got and never does but what i'm what i'm trying to when i'm trying to get out is that we're all talking about what needs to be done in that's a fiscal side of this monetary union a federal side of this the european union but not the ones ever correct me if i'm wrong gentleman as europeans ever voted for that they never voted for such things it was all. no we're not going in that direction we can do it with just monetary you that's a blatant false right there you can't do it without a federal so while the monetary union is in some ways a union and in some ways mad and you've got to just how is the problem of eventually you have to go back to the fundamental flaws in the original structure

of the euro. supposedly it's a single currency but in actuality. it's a currency mainly or all that is any each individual country because the sovereign governments of each country are soley responsible for the bonds they issue so what you will get at the same time this is what got greece ok is it if you have your own currency you can default you can devalue you can do it and start over again but the euro is a straitjacket you can't do that in the argument just winning the argument is made because you can't do that you surrender your sovereignty and it's somewhere in berlin it's somewhere in brussels it's not at home well. in some ways that's true but in saying that there's no way out i think i wonder there is ways out and there's history on earth i mean if you look back ten or twelve years to the time

that argentina had their pay so late to the dollar and it was pretty obvious for at least two years prior to the dealing that it was going to happen you could see it in the argentine bank structure where they were paying eight or ten percent interest on peso accounts and two percent interest on dollar accounts even though the peso in dollar language what happened and they dealing. i mean basically you had an immediate devaluation of the bad. as i recall the patient went down to two and a half to the dollar overnight we had some inflation and basically inflation is nothing but an additional tax on you because even one solver in state you can't do that in the european union you can't you can't do with one country at a time ok and it was this the no i mean operator discrete ok that's. it was never

contemplated aside but now that the push else comes to the shove maybe you should start thinking about that as well one always say there are ways out yes the ways out but there's a cost significant cost attached to each way out so i think what you have is the one at this moment is they're trying to calculate these costs as best as they can and they will choose the lower cost so i personally think lending greece out or any country is going to be hurting the zone and they couldn't see the mess the. precedent has been set if they're exactly as if you know you know as they always are you cut it out you're no going to be able to avoid the who's next question that's number one because people will say the markets will say at least if greece is out why spade why is portugal then why is a set of so these weak links will always be questions and greece i think can be maintained in the union but that has to get the course which i suppose well nobody is safe and even germany a lot of people think that germany's safe with germany is not because when you look

at the share of germany's get and d.'s in the episode for example they're in excess of ten billion dollars when you look at the problem conti g.d. i put for you the e.c.b. it's in excess of six hundred billion euros and l.t.l. is one chilean fuel and one third the e.c.b. is buddhist one not that i contingent liabilities of jordan money they haven't but serialised concealable these so the situation actually these quite difficult to cope with deal with but yet. that i always thought that we asked on the stand that there is a senior legal of political party a little bit of a goose if i go to you you know the germans merkel really likes to hit the wrist of the of the greeks of the spaniards and anybody the weak links in the euro zone but germany has been the greatest beneficiary of the euro and has every interest in keeping it it just wants to control the rules of engagement with the currency that's a couple of things first of all you said earlier that you know you surrender yourself

or and feed the brussel and i don't think that's quite accurate you know used to render your sovereignty to a broader multinational super national body in which you have a boat. actually i think you are some own kind of board of a small boat on the board of the european central bank and you know you have basically sitting around the table representatives from all this whole the members of the euro area. and they have a voice and they have a vote so i think it's important to about that no one's right because otherwise you know you get this this perception that this is basically a show run out of brussels which i don't think that is the case you know again i come back to my original point these countries are trying to come up with some kind of collective decision mechanism in which you know they are truly truly represent the cup so if you europeans want more of europe or less of europe now because you know he the more you have to get the more crisis you get ok well you

could make that argument maybe for the man on the street the woman on the street might say in particular if you're unemployed that's true and you know when you talk about the population i mean the population is natural to my objectives and so the question is you know has the majority of the population favor this or that and a lot of the recent goes to say that. many of the boats are coming out against. ending the powers of the european union by its magic by a ninety two town vote it might be fifty three to forty seven which would be considered a landslide so i mean it's it's an ongoing issue and different people have waited things differently in their own mind yes but i mean a lot of people that have waited who did not come out with a solution been voted out of office ok and of the people that usually come in well less of europe all of the info and for in france i think is saying he wants more of

europe but it has to be done more equally more as an equal partner balancing out the germans so more this is not a cozy merkel cozy relationship even if it's was good for friends. i think there's a more fundamental problem of working which is that even before the crisis i think european union as a union had the following problem the outage so-called huge opinion didn't feel the emotional attachment to the union the way say an american that the united states might get i think that's in good times such deficiencies and such roles are basically kept on the cops but on the cover but when tough times heat you ok i'm not very important no gentlemen we're going to go to a short break and after returning from a break we'll continue our discussion on the euro crisis stay with r.t. . and you can. still.

get to the. business meeting on a global scale. hundreds of deals billions in investment. the international economic forum in st petersburg own party. well see british scientists i. sometimes write things with. markets why not. come to. find out what's really happening to the global economy with mike stronger for a no holds barred look at the global financial headlines tune into cars a report. and if you

still. want to. welcome back to cross talk i'm here to labelle to remind you we're discussing the implications of the euro crisis. and you can. start. tom if i can go back to you. do you think. the majority of europeans want to become part of what could be called the united states of europe. i think in their outlook it varies by country i mean for instance the smaller countries particularly the eastern european the emerging countries in eastern europe basically want to be a part. at least the european union to get the benefit of free movement

labor cost advantages that they can take care of. trade be decision makers what state you come from and you and i come from colorado oh i know i was brought up in colorado but i call myself a california who has more weight in the united states in the federal union of the united states well rado of california and today's market for the next. coming all action this fall colorado and truly has more weight because it's considered a swing state oh ok go anywhere where a question a trick answer you know what i mean here i come from rhode island ok come from luxembourg. are they more procurable then greeks. i doubt i'm not sure but i doubt it's i wouldn't even i mean if it's different based on conspiracy basis again that's a problem i mean the nature of the problem doesn't go away. that feeling of the

motion of attachment to the union as a european i don't see it that i've never seen it that actually but as i said during good times you don't feel that too much but do it in best times it just plays out as a cd is political so that's the stability of the union and that's exactly what's happening at this moment so i think that i think that having a bit of a historical perspective on this is quite useful you know if you think about the twentieth century we had to all the wars that involved you know huge conflict a collapse economic collapse and destruction from you know between european powers right we have more from baron to a point where basically the way the europeans resolve their issues are a little committee meeting and working groups and essentially you know peaceful coexistence right here on this it will be but i take they're all pretty awful you know one hundred times better than better than a war and it wasn't so long ago right but actually we have talked at the very beginning you raised the issue of the design of the euro area and if you remember

when the euro was introduced there was actually a gentleman's agreement between the members of the european union called the girls on a stability pact right but whereby they would actually keep their budget deficits below three percent a good leader into germany broke first and they waived their also debt levels under sixty percent of g.d.p. right i think what was missing a point and perhaps because they were not ready for it yet where actually binding mic. isn't right such as exist in the area of monetary policy and i think that this crisis essentially is moving europe kicking and screaming in that direction shifted if i can go to you and. i like what i got so i just say i agree with his history of historical analysis completely but you know at least the last thirty years there's been another came being kicked down the road and that's called damps it's rolling it over rolling it over well let's look at the demographics i mean we have a lot of people a lot of elderly people they've got are getting very cushy cushy social services in

retirement the envy of the world i would point out the envy of americans for sure ok but you can't keep kicking that can now because the bill finally arrived. actually at the break of the crisis in one of my writings on a lot of course i had claimed that even in the absence of this financial crisis you look at some point would have had a fiscal crisis because of the pensions that there was on stage so add on top of that the fiscal crisis and the fiscal that he kept zation the financial sector it's you that you need then taken into account what happened in the united states ok so huge that problem now and the bad thing about it is not the stock of that per se but when you look at the difference between the growth rate foreseeable that you would have versus the real rate at which they would have to bottle that rate exceeds the growth rate which means your debt dynamics has become unsustainable by default so you have to be very very austere on the fiscal front which could be self-defeating you know that's. a sturdy create growth for me that's the big

question. there is one interesting counterexample in the european union which is sweden you know that sweden. already ten fifteen years ago incorporated into their place called policy the notion of sustainability they basically said the following we are an aging population if we want to be able to pay our pensions on monday in our safety and. it broadly in the same terms for future generations as we have it now we have to begin to accumulate budget surpluses and leading up to the crisis in two thousand and eight if you just look at the historical data we've been consistently year in and year out a budget surplus. twice because they understood that they did not wish to become corrupted by the market is what has happened to some of the countries in the european union. the only country in the european union which actually has seen its debt levels come down since two thousand and eight is sweden so we don't there on a totally different path low on declining debt levels why because the politicians

long noble understood that we have to live within our means we have to have that means have a very interesting point in it and it's something that politicians are terrified of i think a lot of people don't want to confront but tom says. the people of the european union particularly in the euro zone have to accept that for the next ten or fifteen or twenty years you're not going to live better that you may live for and can that is that politically tenable what politicians are going to come out and say you know we're going to live poor for the next twenty years vote for me it doesn't work we don't have the poor i don't think that well there's always a deficit there's a growth deficit but i mean if. if growth is that four percent a one there so here is only a flat right well ok except for sweden it's so principally because it's live in this the fastest growing economy in europe right now ok all right i'll take your point can you hear me and it can be european union emulate sweden and how long

would it take it would and would it be voted it would people vote for it was slow to get about the democratic deficit i don't think these dynamics change overnight i mean the police don't have much time jackie does that's the problem that exact problem i mean the swedes are not the smartest people in utica i mean i'm sure that our people are spotless you feel but probably it was even feasible to come up. with such bold and they couldn't come up with i mean nobody or can say cycling is a bit of it of course so that a certain policies to be pursued that ends but the feasibility of those overseas becomes a big question mark about something that one of the things we need to do is we need to shift the focus of the debate in europe at the moment it is too much focused on on basically day to day to school management right now what spread i'm i going to be able to show my bed tomorrow that's the big question in the minds of policymakers at the moment for politicians politicians policymakers and so as though i don't know if it's because you can you be you can be a policy maker in survive government ok but politician but the point is the point

is that it is the fault the debate over the last year or so you know has been over when we focus on fiscal sustainability and we need to shift it you know to grow the reform efforts more institutional reforms let me give you an example if you're a greek budding entrepreneur right and you would if you want to set up a company in greece it is much more difficult but it isn't russia believe it or not it takes far more procedures and it is far more costly than bureaucracy does your phases and for america to get started it is pretty overwhelming that this we do in the doing business report that the world bank it comes out very very carefully so if you don't is going to go on a higher growth profile you know as part of a strategy to get out of the crisis it has to prove competitive know they have to begin to do this sort of things which the swedes have been doing for the last fifteen years that way ok tell me one of the issues you know we've heard over the last couple of years is that germans ingrates are not the same people it's totally of the same gene pool we're told they're geographically in the school abroad scheme

of things pretty close together but they're very different people and what we've heard about sweden it seems feasible that kim is we going back to a one size fits all approach i don't know and i think it's too pessimistic to say there are a general population will not accept cutbacks in social programs i mean if there. the question is except some cutbacks and i don't mean cutbacks maybe on the monthly payments but maybe a longer working life remember sixty five was settled on back in the one nine hundred thirty s. when the average life expectancy was like sixty nine cents or you were on a planning on and on average four years worth of payments now they are bridge life expectancy is eighty ok well what's the difference here the difference is people that are sixty five can continue to work and why should they retire while it's nice

to retire liberty rights really nation that you play in but if you understand and most people when it's really presented properly understand you either accept or maybe you don't get any pension when you retire because there won't be any money left then it's a different matter i work i spent my working career. before i took my first retirement. with a dutch company ok now the netherlands back in the eighty's and ninety's had a very very beneficial social program it was not financed by day it was being financed by gas exports from a large gasket that the government received all the revenues from under deciders the lead gas deposits are basically ran down ok to the point where the money's coming in and sufficient to continue the social program they come out ok

given what about people that don't get anything is europe lost a generation of young people you think. i mean if you're if you're spanish. of course i mean you're not even talking about what you know what the swedes do for merkel's monetary policy or if you're not even even close to thinking about that except for maybe being in great. board. dissolute. i think that is some inevitable loss is said it just points to something else which i think is dishonest part of the school at first with visibility interesting i think non-linear added to follow sense from turkey and turkey was called in a deep crisis of their own in two thousand and one but what we were called in that crisis per capita g.d.p. was about two thousand dollars it was so when the administration said fights and belts the belt was very thought of anybody we thought that it was but when you're caught in a crisis like greece when you enjoyed a very joyful life for more than ten years work out there going to one thousand

euros you want to say i have a job in here thank you very much for participating in this program and thanks to our viewers for watching again our team can remember crosscut for. students to.