exactly help us there on the russian capital top stories now diplomats reveal who could replace kofi annan as an international envoy to syria and foreign minister he me who has personal links to julian a country that used to being involved in smuggling weapons to the syrian rebels. and the twenty children forced to live in catacombs in central russia by an islamic sect have been sent off and it is. close egypt briefly reopens its crossing to gaza but i need to let palestinians back to the blockaded region that is gaza remain sealed off from vital aid routes self to board advance. things up to date for the moment i'll be back with a news team with more for you in half an hour from now in the meantime as promised we cross over now to our washington studios the capital account.

good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are headlines for thursday august ninth two thousand and twelve back in may we were talking about lessons from spain bankia bailout and other problems emanating from that country which led us to this. wall we are all in spain the big question will we see a stag's it perhaps before gregg's it. well we haven't but can we now add brings it to the list the latest addition to the euro exit speculation family has been making the rounds on various recent headlines so does this mean anything or is this just the next catchy phrase coined by the media obsessed with suffixes we'll get the skinny from economist constant and from ireland plus today

is the unofficial five year anniversary of the credit crunch five years ago today the dow fell nearly four hundred points as france's largest bank b.n.p. poppy bah announced it was halting three funds with exposure to u.s. subprime mortgages now this triggered a credit freeze as global banks stop lending to each other central banks intervened the next couple of years are history will take stock of where we are today if we're looking at any kind of repeat and why or how it could be different this time plus brazilian central bank employees strike. are we on to something what kind of central bank activities could possibly be halted by worker protests will muse over the possibilities let's get to today's capital account.

it's been a little while since we've conquered this subject matter so let's take stock of the eurozone crisis and what's just come out britain's trade deficit hit a record high in june reportedly delivering a blow to the hopes of u.k. authorities were looking for an expert led recovery this as a so-called briggs it threat seems to be making an appearance in more headlines greece for its part its jobless rate reached a new record at twenty three point one percent in may according to l. stat unemployment in greece is reportedly more than twice the average rate in euro zone countries plus analysts say italian technocrat prime minister mario monti. excuse me that wasn't a cause he's a technocrat i just actually i'm sick he is really stepping up to germany and ways once unthinkable in a fight to save italy which is deep in recession but what is the real breakdown of

the crisis right now when you put it this way. the good. the bad. well let's bring constantine to help us sort out this ugly mess he's an economist and coeditor of this book what if ireland defaults and he's going to help us sort it out so first of all thank you for being on the show it's always a pleasure to have you won thank you laura let's start by dividing and conquering the good the bad in the ugly which is something that you actually came up with before we get to why we're dividing accordingly who is the good who is the bad and who is the ugly look at the eurozone crisis. the good the bad the ugly is really the trifurcation of europe it's a split in three parts of european core traditionally both in terms of the

mythology political mythology that the spermy in the european union today but also economically traditionally the good used to be the tonic water that's germany finland austere possibly netherlands there are some questions about them. however during the current crisis what's becoming more and more apparent is that the good really is kind of the bell both in terms of their response to the crisis but also because they're now experiencing exactly the same contagion as the rest of the eurozone has experienced and increasingly when you look at the g.d.p. figures to look at the retail sales figures you look at the investment flows you look at credit supply pretty much by any parameter possible by unemployment for example as well now increasingly the good are not really that great in terms of economic growth either however we can still call them the good and then we have the bell and that is the countries which are currently in the limbo they are neither in growth territory territory knowing the c b a recession like the rest of the eurozone this is ireland it's portugal and belgium

with exception for ireland the other two countries i asked them to low growth rates they're structurally unsound but reformable things can be made you know right in their current interest rates policies of the e.c.b. are probably too high for them your evaluation is a bit too high for them as well there is some questions about their own margins and particularly the case of violent ireland during the good club the big question there is of course that ireland has a very young population and it can sustain growth rates that germany can sustain so it needs about two and a half to three times the growth rate of germany in order to sustain itself and then we get to the traditional largely traditional largely is really either the spain greece or this stage possibly now also cyprus courtesy of greek bank restructuring and government debt restructuring for those countries neither the rates. not. really mounts are so bold as to block that doesn't really matter

much for them with. structural reforms and those on the top of. those homes well that's interesting and i want to get to that but first i want to just point out that it's kind of funny that in looking at the eurozone crisis the good there is no good right the good is bad by by any kind of. objective measure right so now the ugly you say monetary policy won't help they need structural reforms one thing that you pointed out in a recent piece in the globe and mail after druggy made his remarks about what the e.c.b. is going to do now of course love it or hate it everybody was expecting him to do something big just taken out vowed to support the euro he didn't but it seemed to me in that article that you wrote you were saying that maybe he did lay out a policy outline that could help encourage those structural reforms and maybe some of those ugly countries did i have that right and if so how so and if not please correct me. indeed you got it configure right the only difference there is that yes

easy be magical dragon particular has laid out some you know if you want the schedule really it's not even the foundation it's a sketch of a foundation for some of the policies which is he can technically conduct and at the same time those policies will not induce if you want moral hazard amongst the countries which will be beneficiaries of them in the shorter term they will create an added incentive for those countries to carry out that informs unfortunately and time has shown now as well neither u.c.b. has the political capacity to deliver on those outlines that drug has put forward nor at the same time those relief for those changes that they see people a sea level would be much more than buying time so while it is a net positive in my ear this is exactly what i was writing there about you know at the same time it probably is not sufficient so if you look at the options that e.c.b.

and draggy have their hands on their hands right now the first one is the securities market person problem and it's s. and p. and he announced that he's going to come back to us oblique that program and again this may be there are a lot of conditionals there and that they will begin to doubt that the shorter and of the maturity curve which is exactly as i write in my piece there for all of the mail it is exactly the situation where it would improve the incentives for those countries which whose bonds are being bought by the e.c.b. to take longer term reforms and also it is a little bit of pressure on the short end but in reality it's nothing more than buying time and again the big question is buying time for what you have to have a real serious commitment from italy spain and greece in and also ireland and also portugal and also belgium and other countries as well in terms of their ability to carry out those reforms so far there is a lot of talk not really much of that informs now however there is interest and part of course is it is box and sell. into another corner by the locks and its

policy tools that it claims it can actually deploy it at the same times. puts a strait jacket on its political ability because let's look at this this way the mandate of the e.c.b. is very restricted there is treat them very limited yet in the recent months it has been expanded to supervise the banks it also now with drug use commons is potentially going to be expanded to enforce the conditionality on the member states which are going into the bones for accent program when you are the e.c.b. support program you see these very rapidly become you know for them to the east of becoming some sort of the dictatorship if you want because i don't know a single central bank anywhere in the world which actually dictates to the sovereigns the conditions under which they can't raise the money i think i point ok dictator mario draghi well one clarification i had for you with the s.n.p.

if the e.c.b. does go forward with that this is a program where they buy sovereign debt our a right they buy bonds i understand how that buys time how does that encourage structural reforms though or does it just buy them their time in theory to put forward reforms but it. the you will do the way you drive you very cautiously phrase that is that he will be focusing on the shorter and the maturity of the bonds that he will be by and if that is the case for example he buys the short of my tour to say two or three year bonds and leaves the five. bonds as they are what that will do it will stiffen the curve of the yield curve in other words the difference between the shorter term finance and the longer term financing will become larger that will mean that the governments which are going into this program will be incentivized to borrow more short term in the returns and also means a faster turnover of those bonds and more of those governments commitments to the reforms that the markets would like to see over time so in theory once again it

works to create the marginal incentive for the government stronger take a longer term reforms and at the same time it lowers the cost of going through the process of those are the terms of those reforms in the short run but this is again only a theory it has worked with operation twist for example in the united states that we haven't seen any reforms available in terms of the curve the fact ok. the making and i think you really be but we knew we know as you point out theory is often very different from reality let's have a little bit more about reality let's move from dictator druggy to a technocrat mario monti because italy is on your ugly list and italy is in deep recession and that makes people more worried that they won't be able to pay down their debt mario monti evidently has really been stepping up the offensive against angela merkel first is this counterproductive or is this an effective

method for him to pursue. i think monti's for a certain very clever if you want strategy monte realizes that italy is unlikely to carry out significant reforms it is unlikely to have a very tight control over its debt situation and let's remember that italy is generating the fact really primary surplus right now so if the problem is not the deficit something that the government can't cut but rather the weight of overall debt so monti is looking at it from the point of view of traditional economists that he is as well and he is looking at it from the point of view of if i can get in eason from the central bank from the european central bank. assuming the conditions allows him politically to do so then he will need some room in terms of the fiscal transfers in order to stimulate domestic economy now again this is pure european thinking there is nothing in the growth nothing generates growth other

than government spending so he is trying to pressure europe and angela merkel to increase the fiscal policy coming now let's remember that we're already had the fiscal policy come it will have the part which was signed by the european leaders back in june which is effectively a shambolic exercise in the reason they relabel the fifty five billion of already allocated funds into new funds and they haven't ordered an idea that the european investment bank is the going to get them billion new capital from the european sovereigns from the european commission as the result of that it will be able to leverage that to borrow sixty billion more so even on the surface right now it's very clear that the fiscal policy within the e.u. is completely if you want psychotic i mean it's shambolic in fact both the fiscal course in the more intrigued policy in the european union today is nothing more than continues the invention of complex. and your mistakes hadzic invention and i know when we're talking all about it i want to continue this conversation i want to

stick to monti a little more after a quick break we're going to go to break professor good to have and then we'll come right back with more with him economist and coeditor of what if ireland default and also still ahead should other central bankers take cues from the workers at brazil's central bank today they're on the right i'll give you our case sense on what that could accomplish perhaps the first your closing market numbers.

british. markets why not. find out what's really happening to the global economy in cars a report on. welcome back we're taking stock of the eurozone crisis before the break we were talking about mario monti versus angela merkel and another question that comes up is this a legitimate tete a tete or is it more of a p.r. effort on the part of monti in response to public opinion which appears at least increasingly hostile to germany at least that's the sense you get looking at a newspaper editorial like this take a look this is one of berlusconi's family papers i should mention and it has merkel

with the headline fourth reich so there's that question and then there is this which i thought was so interesting you know a reuters analyst did an analysis of this kind of taking off the gloves of mario monti in the in. the tete a tete with angela merkel and said that this offensive reflects partly domestic pressure as monti's popularity has slumped above seventy percent to around thirty five percent due to public anger that there has been no reward for a debt cutting sacrifices that have worsened a deep recession well hey whoa whoa whoa listen the point of appointing a technocrat because they were above having to answer to public opinion because they weren't an elected politician that was worried about reelection whatever happened to that well let's bring constantine back in to answer that he's economist and co-author of the book what if ireland defaults and i guess i just want your take on this you know what i just said about people saying that montes recent efforts are because of public opinion i thought that was the whole point of having

a technocrat does that to show that nobody can be above public pressure or does this particular analyst have it wrong. well no i think there is a combination of two things first of all there is very complex italian politics which are at play and italy is is on time and politics over all there is remember that last week for example monti needed support of the barrel's courtney camp in order to actually gain the world's past some of the reforms through the senate and that support came one of food of monty hadn't been for stop ologist for one of the statements he made about the bill of scorn and things like that so there is some political dimension lein there to the credit of monti he has clearly stated that he is not going to run in the elections he is not looking forward to any sort of the extension of the term and that you know he is the pure caretaker government if you want. that sad there is of course as i said before both political and also other social partnership type of pressures on monti in order to bring in popular support

and bring in the support of the likes of the trade unions the likes of the industrialists and the configuration of the industries in italy very powerful lobbies which will be ultimately the or if you work on participants or partners or opposition to the forms of his trying to structure let's remember that italy is quite volatile internally politically not in so much in a sense of the state politics but the local on the ground politics you would remember that back a few years ago there was a certain nation attempt one of the ministers in the italian government when he was drafting the much more benign set of the reforms and things like that so you have this type of dynamic in the society the society is almost on the brink we also have to remember that it balanced errantly i in their words known asparagus though and it's a period when they invariably shuts down and goes on the vacation in other words there's a lot of angry people out there with

a lot of time on their hands you do not want to ignite the tinderbox and therefore montes of course box and cleverly as well. yeah that's really interesting to point out i do want to continue on this discussion of the good the bad the ugly with someone that a country rather that isn't actually part of the eurozone but it is part of the e.u. and that's the u.k. and the bridge that has been kept has been capturing more headlines seemingly this seems mostly based on the calculus having to do with the political relationship between the u.k. and its european neighbors that that is kind of souring even more during this euro zone crisis with more euro skeptics in the u.k. do you think that there is any merit to the idea that there would be a bridge that. there is certainly building up pressure within the u.k. in terms of the electorate and no longer just the traditional euro skeptic electorate but more towards the center center right electorate which is becoming

increasingly frustrated with what they're observing now we have to remember that the u.k. is a large economy it is extremely open economy it trades and took nationally and globally it is also heavily reliant on financial international financial services it also has a reliance on international legal services and things like that all of those platforms are currently being eroded by the european mad dash towards some sort of the centralization of authorities and regulation and as a result of that the u.k. is by will or by just be in the u.k. if you want to become an increasingly isolated within the eurozone within europe itself it's not a member of the eurozone but it is a member of the u. it's very difficult for me to see how the u.k. would actually in the un to vote against the membership in the europe itself and the you itself but it certainly is pushing further the farther side any possibility faint that was before it completely zero is now of the u.k. ever joined in the eurozone so you know and really quickly before we go we don't

have a minute but you mentioned that italy is shutting down during august this is not just limited to italy i keep thinking stories about other european leaders heading up of a case in august does it have any material pairing on the eurozone crisis that everyone's going on vacation of course it has a huge material out there and i mean you can look at the volatility in the markets you know the markets themselves all of that is very clearly indicative of the fact that the you are currently a straight number that is the news flow and the people who are a man on the trading desks you know pretty much would be or junior variety they would be much more trigger happy and much less strategic in their decision making it also is showing that right now you have a lot of marginal news coming up i mean for example yes of course mario draghi would be a major news maker be under your doubts but. drugget has made a sets of cormorants and statements which were never backed up by any factual when you told us the proposals any factual evidence whatsoever it hasn't been challenged it isn't hasn't been challenges because the european media and european markets are

right now on before any sort of news flow let's get into september and see what comes out the comes out of spain what comes out of portugal possibly also are then certainly italy and what most likely will see is the amplification of the crisis deepening of the recession and this is out of the eurozone is going to be back fire them down into the crisis itself in the financial markets as well so perhaps september is when the good the bad and the ugly chips really fall where they lie thank you so much for laying this all out for us content to give me a preview of what's ahead he's economist and coeditor of what if ireland defaults.

are let's wrap up with loose change dimitri you know used to be all about breaking the glass ceiling for women in the news media just take a look at this famous movie oh excuse me general hello just want you to know that if iran does not show up i am ready to go on sweet argue and i've had this discussion a million times there's never been a woman anchor hard. well now there are plenty and purportedly it's all about fighting off the younger face of court and the slide show business insider put together they put together age discrimination on t.v. ten anchors who were replaced by younger women they are mostly women but one man and you know dimitri add to tell you i think that this whole slow slide show should be replaced with middle aged male anchors who are pissed off that younger women are taking their job because that's where i think you really see they just premonition come into place in this industry the men are discriminated against i'm saying you see middle aged so there's a fine younger women so there's discrimination going on i don't know you. know i don't think so i've got

a. huge advocate of the free market is that are going to as it was younger women to leverage their news then so be it do you. know. what you're overblown oh look there's a script but this is look i'm susan are you speechless to me you're going to have a hard time spit it out. i can hear the control room. ok look this is financial media it's like five percent male all right i don't blame them they want to see women. that's not to take anything i disagree with the female ability. or any of that also one thing i want to point out that does show up in these pay grade when an older experienced person gets booted for maybe a younger inexperienced person what does that have to do with the pay that somebody is taking in a younger hungrier person is willing to do that job for less money as they're climbing up the ladder whereas some middle aged person on the way down perhaps is

being overpaid. look. who is stuck and let's move on to the next one because we have heard it all from central bankers before haven't we just remember this. what is the worst case scenario if in fact we were to see prices come down substantially across the country well i guess i don't buy your premise it's a pretty unlikely possibility we've never had a decline in house prices on a nationwide nationwide basis so what i think is more likely is that house prices will slow maybe steady lauri's might slow construction spending a bit i don't think it's going to drive the economy too far from its full employment so yeah examples like that are why we're often asking if central bankers could just stop meddling and then we saw this story in bloomberg today that a brazilian or that the brazilian central bank employees staged a strike the first in five years they're in pursuit of higher wages but i was wondering unintended consequences if more central bank employees go on strike does

that mean less action by central banks yeah but it's so ridiculous it's hypocrites they're upset that they're there responsible printing money they're causing a fuss so they want to strike so it's kind of didn't think that this is the head of the central bank i think these are their own they're going to drive because of inflation or working at the bank that are not necessarily central to the hands devising policy but hey maybe buy them protesting we can actually do something about central planners efforts i'm i'm i can see something to this. these guys the other seven years old i don't care i don't care if you were secretary of the i associate. only you are right it's only employee at some point we're ok you're all right you need to do more pop culture research dimitri but all right now it's loose change which is good because i wasn't talking to thanks so much for watching and be sure to come back tomorrow and in the meantime you can follow me on twitter at lauren lyster give us feedback on the show and you missed you tube dot com slash

capital accounts c s n h d on hulu and have a great night thanks so much see at m.r.o. .