. >> brown: and ken rogoff i note that the imf issued a report last week that said onwards to emergingurope remains a tangible down side risk. translate that for us. how serious is the situation? >> the trouble is that the smaller countries, the periphery countries, greece, portugal and ireland are in deep deep trouble. but if they default on their debt, that hits the banks in the richer countries and the governments there have to bail them out. people are afraid that there will be a chain reaction and that spain and italy and maybe it will even hurt germany and france. >> brown: talk about italy in particular. was it a surprise, this downgrading of italy's credit rating over the weekend? >> no, i wouldn't overstate it. i mean, remember, they downgraded the united states too. i think it's a recognition of reality. italy's definitely not on the front line. it's really spain that's the immediate problem if the other three countries have problems. spain has a 20% unemployment rate and a very, very tough road to travel to get back to a sustainable fiscal policy. >> brown: speaking of spain

we'll see if it happens. >> brown: ken rogoff, the of "why we care" question for americans.hat are the implications now for the financial and economic troubles in europe? >> i can only tell you that i was at a meeting of european financial leaders as the u.s. financial crisis was unfolding, and they were almost giddy thinking they had done things right and wouldn't have a problem, not realizing the tidal wave that was coming across the atlantic. if they have a financial meltdown in europe, our companies are connected. our banks are connected. our investors are connected. it won't be good for the united states. i think washington must be pushing very hard for them to try to find at least a patch that takes them out a couple years hoping that there's a miracle. but i'm not sure that it's coming. >> brown: gillian tett, what are you hearing from americans as they look across the ocean? >> there are two points to make. firstly if you want to look at the potential connectist, just look at the number of american market money funds and pension funds that hold assets. they could be

toosm from the federal reserve in terms of helping the economy recover and has that hurt -- >> ken rogoff was a graduate schoolmate of mine. i played chess against him which was a big mistake. i enjoyed that book very much. i thought it was very informative. as you say, it makes the point that as an historical matter recoveries following financial crises tend to be relatively slow. now, what the book didn't really do, though, is give a full explanation of why that's the case. certainly part of it has to do with the problems in credit markets and my own research when i was in academia focused a great deal on the effects of problems in credit markets on recoveries. other aspects would include the effects of credit problems on areas like housing and so on, and we're seeing all that, of course, in our economy. with that said, another possible explanation for the slow recovery from financial crises might be that policy responses were not adequate. that they -- that the recapitalization of the banking system, the restoration of credit flows and monetary and fiscal policies were not sufficient t