Michael Portillo's Great Euro Crisis

Download Subtitles

Transcript

0:00:09 > 0:00:13'Arriving at Athens' new international airport

0:00:13 > 0:00:17'there's no obvious sign that Greece is in dire straits.

0:00:17 > 0:00:21'It all looks pretty normal, but, ten years after joining the euro,

0:00:21 > 0:00:24'this country is effectively bankrupt

0:00:24 > 0:00:26'and the government has put the airport up for sale.'

0:00:26 > 0:00:28I haven't been to Greece for 20 years,

0:00:28 > 0:00:30since I came as a government minister,

0:00:30 > 0:00:33and Athens just had an old-fashioned airport in those days,

0:00:33 > 0:00:36in a different location from this beautiful new one,

0:00:36 > 0:00:39and Greece had its own currency, the drachma.

0:00:39 > 0:00:42Since then the country has been through an economic boom,

0:00:42 > 0:00:44when borrowing was cheap

0:00:44 > 0:00:48and the government and the people went on a spending binge.

0:00:48 > 0:00:50Now have come the years of bust,

0:00:50 > 0:00:55and I believe that Greece's crisis is due to having joined the euro.

0:00:58 > 0:01:01'But will the Greeks agree with me?

0:01:02 > 0:01:04'I want to find out

0:01:04 > 0:01:07'whether this crisis has shaken their faith in the single currency.'

0:01:07 > 0:01:10- Prime Minister.- Hello. - What a pleasure!

0:01:10 > 0:01:13'Will they take my advice and get out,

0:01:13 > 0:01:17'and so recover competitiveness with a free-floating drachma?'

0:01:17 > 0:01:19Don't worry if I take out my wallet.

0:01:19 > 0:01:22I am not in any way trying to corrupt you.

0:01:22 > 0:01:24Do you want the euro or the drachma?

0:01:24 > 0:01:25Uh-huh.

0:01:25 > 0:01:26'Locked into the euro,

0:01:26 > 0:01:29'the Greeks are facing drastic austerity measures,

0:01:29 > 0:01:31'measures that, some of them believe,

0:01:31 > 0:01:34'are being imposed by Germany.'

0:01:38 > 0:01:41'Later, I'll go to meet the German taxpayers

0:01:41 > 0:01:45'who are contributing to Greece's mammoth bailout.'

0:01:49 > 0:01:53You've probably seen the way Greek papers have been depicting you.

0:01:53 > 0:01:56How do you feel about it?

0:01:57 > 0:02:00'Is this the moment the eurozone becomes more united,

0:02:00 > 0:02:03'or will it be pulled apart?'

0:02:15 > 0:02:19'It's only when you take a walk through the streets of Athens

0:02:19 > 0:02:23'that you get a sense of the situation that this country is in.

0:02:23 > 0:02:26'I can't believe that I'm in Europe in 2012.

0:02:26 > 0:02:31'It is hard to imagine how such a small nation of 11 million people

0:02:31 > 0:02:34'could have accumulated a national debt equivalent to

0:02:34 > 0:02:37'31,000 euros per man, woman and child.'

0:02:37 > 0:02:40Athens wears the face of recession.

0:02:40 > 0:02:44Here's a shopping complex with every business closed bar one,

0:02:44 > 0:02:46which is selling its goods at a 50% discount.

0:02:46 > 0:02:50Graffiti is universal. Here a bank has been burnt out.

0:02:50 > 0:02:52Everywhere are signs of dereliction.

0:02:56 > 0:02:58'A quarter of the shops have closed

0:02:58 > 0:03:02'since Greece's crisis first took hold four years ago.

0:03:02 > 0:03:05'And sights like this have become commonplace.

0:03:05 > 0:03:07'Here at this one location,

0:03:07 > 0:03:11'800 people queue each afternoon for their daily rations.

0:03:11 > 0:03:15'This queue is for migrants, who were the first to suffer from the crisis.

0:03:17 > 0:03:21'30 yards away, I see preparations for further handouts.

0:03:21 > 0:03:23'This time for Greek people.

0:03:23 > 0:03:26'This is a new phenomenon in a country where family support

0:03:26 > 0:03:28'is normally so strong.

0:03:30 > 0:03:32'Their numbers, which are growing every day,

0:03:32 > 0:03:35'have risen to 20,000 in Athens alone.'

0:03:35 > 0:03:38There are people who come here, and they have problems...

0:03:38 > 0:03:41'Civil servant Dimitra Nousi now runs the food distribution

0:03:41 > 0:03:44'for this part of Athens.'

0:03:44 > 0:03:46- Hello, everyone.- ALL: Hello!

0:03:47 > 0:03:50How many people will you be feeding here today?

0:03:50 > 0:03:541,250 people daily.

0:03:54 > 0:03:55That's amazing.

0:03:55 > 0:03:58Yes, the number has been going up, the last months especially,

0:03:58 > 0:03:59because of the crisis.

0:03:59 > 0:04:03I understand that a few years ago you were, I think,

0:04:03 > 0:04:05a civil servant working on the Olympic games.

0:04:05 > 0:04:07I am still a civil servant.

0:04:07 > 0:04:10So you personally have gone in a short period of time

0:04:10 > 0:04:13from managing wealth to managing poverty?

0:04:13 > 0:04:16Yes, only in ten months.

0:04:18 > 0:04:20- It's a shock.- A shock.

0:04:20 > 0:04:26From European projects, from ambitious breakthrough projects,

0:04:26 > 0:04:29to slices of bread for poor people.

0:04:29 > 0:04:33Do you find that the people who are coming here to receive the food

0:04:33 > 0:04:36suffer a real problem with their dignity?

0:04:36 > 0:04:39With their loss of status?

0:04:39 > 0:04:44Yes, these people feel it. It's very normal, they feel very embarrassed.

0:04:44 > 0:04:48We have to find a way to survive with dignity.

0:04:48 > 0:04:52We are not experienced to this kind of poverty,

0:04:52 > 0:04:55to start counting the slices of the bread.

0:04:59 > 0:05:01The scenes that I have witnessed here

0:05:01 > 0:05:04remind me of those black and white photographs

0:05:04 > 0:05:06of the American Great Depression of the 1930s.

0:05:06 > 0:05:09The fact that it is happening in 21st-century Europe

0:05:09 > 0:05:11seems to me incredible.

0:05:11 > 0:05:14How did all this come about?

0:05:18 > 0:05:20The launch of the euro is the dawn of a new age,

0:05:20 > 0:05:22according to the European Central Bank,

0:05:22 > 0:05:25as 12 countries take the plunge.

0:05:25 > 0:05:29'The euro was introduced on New Year's Day 2002.

0:05:29 > 0:05:33'Joining it was supposed to help weak economies like Greece

0:05:33 > 0:05:36'catch up with their richer eurozone partners.'

0:05:36 > 0:05:41I've come to pay my respects at this shrine to the drachma,

0:05:41 > 0:05:43Greece's last national currency.

0:05:43 > 0:05:46It gave up the right to print its own money

0:05:46 > 0:05:49in favour of joining a broader European dream.

0:05:49 > 0:05:52In my view, a weak economy like Greece

0:05:52 > 0:05:55should never have shared the same currency with Germany,

0:05:55 > 0:05:57the economic powerhouse of Europe.

0:05:57 > 0:06:03The weak drachma made it easy to export Greek tomatoes and olives,

0:06:03 > 0:06:07but being part of the stronger euro has made Greece uncompetitive

0:06:07 > 0:06:10and sucked in manufactured imports.

0:06:15 > 0:06:18'And this is just the sort of manufactured import

0:06:18 > 0:06:21'that flooded into Greece once it had joined the euro.

0:06:21 > 0:06:25'The Greeks went on a buying spree of German luxury cars,

0:06:25 > 0:06:27'cars like the Porsche Cayenne.'

0:06:27 > 0:06:30This car and the euro were launched in the same year

0:06:30 > 0:06:32and their stories are intertwined.

0:06:32 > 0:06:35Produced by the technological wizardry of Germany,

0:06:35 > 0:06:39the middle classes of non-industrial Greece aspired to own it.

0:06:39 > 0:06:44And this car turned into the symbol of German manufacturing might

0:06:44 > 0:06:46and the Greek economic bubble.

0:06:53 > 0:06:55'To help me to understand just what happened in Greece

0:06:55 > 0:06:58'after it joined the euro, I have arranged an appointment

0:06:58 > 0:07:01'with a man who has taken a special interest in the origin

0:07:01 > 0:07:03'of Greece's debt crisis...'

0:07:03 > 0:07:04Hi! Jason, how are you?

0:07:04 > 0:07:06Hi, Michael. How are you?

0:07:06 > 0:07:10'..economist and hedge-fund manager Jason Manolopoulos.'

0:07:10 > 0:07:13Tell me, a lot of people think that the figures to enable Greece

0:07:13 > 0:07:15to join the euro were rigged.

0:07:15 > 0:07:17You know, the figures on the deficit and so on.

0:07:17 > 0:07:19Is that true? Were the figures rigged?

0:07:19 > 0:07:22It is a common acknowledgement that they were rigged.

0:07:22 > 0:07:25Everybody in the European Commission also knew it.

0:07:25 > 0:07:28But again, Greece joining was a political project back then,

0:07:28 > 0:07:30rather than a purely economic project.

0:07:30 > 0:07:33Describe for me those boom years, after Greece joined the euro,

0:07:33 > 0:07:36around the time of the Olympics. What was it like?

0:07:36 > 0:07:38You had all these fancy villas springing up,

0:07:38 > 0:07:41you had a huge amount of spending in luxury goods,

0:07:41 > 0:07:43people taking weekend trips to Paris

0:07:43 > 0:07:45rather than going to their local village.

0:07:45 > 0:07:50A huge sense of, you know, a general sense of euphoria.

0:07:50 > 0:07:53Everybody was happy, going out, Greece had won the football,

0:07:53 > 0:07:57the euro, we had the Olympics. It was like a dream come true.

0:07:57 > 0:07:59People were allowed to have a lifestyle that they hadn't

0:07:59 > 0:08:01enjoyed previously.

0:08:01 > 0:08:03At one point in time, in 2010,

0:08:03 > 0:08:05there were eight billion of car loans in Greece.

0:08:05 > 0:08:07- Eight billion?- Eight billion.

0:08:07 > 0:08:13That was 3.5% of GDP, compared to zero ten years ago.

0:08:13 > 0:08:15Would Greeks have been able to buy as many cars like this

0:08:15 > 0:08:17as they did under the euro?

0:08:17 > 0:08:18Oh, absolutely not.

0:08:18 > 0:08:22Through the '80s, the cars on the streets here

0:08:22 > 0:08:24were predominantly French, Italian, and Japanese.

0:08:24 > 0:08:30And, you know, these luxury cars', or German cars' reputation was not worth the money, ie, too expensive.

0:08:30 > 0:08:34The strong exchange rate that Greeks had by being in the euro

0:08:34 > 0:08:36helped them, but also more importantly

0:08:36 > 0:08:40the availability of cheap credit to finance these purchases

0:08:40 > 0:08:43made all these imports of cars come to Greece.

0:08:45 > 0:08:48'Greece now had access to the eurozone's low interest rates.

0:08:50 > 0:08:54'In just six years, Greece's deficit with Germany

0:08:54 > 0:08:58'went from under three billion euros to over eight billion.

0:09:06 > 0:09:11'The great Greek euro boom ended abruptly in 2008

0:09:11 > 0:09:13'when the global economy crashed.

0:09:13 > 0:09:17'Since then, Greece has plunged into one of the most drastic recessions

0:09:17 > 0:09:20'in recent international history.'

0:09:20 > 0:09:23I've been trawling the internet to see how many luxury cars

0:09:23 > 0:09:26are for sale, and the answer is, thousands,

0:09:26 > 0:09:29including hundreds of Porsche Cayennes.

0:09:29 > 0:09:34And there's one here being sold by Doros of Piraeus.

0:09:42 > 0:09:46'Doros Liappis, whose electrician's business isn't faring too well

0:09:46 > 0:09:48'in the current economic climate,

0:09:48 > 0:09:50'has had the car on the market for seven months.'

0:09:50 > 0:09:54Doros, this is a lovely car, but why did you want to buy one?

0:10:25 > 0:10:28Can you remember how many euros this cost you?

0:10:34 > 0:10:39So, if you do manage to sell it, will you make a big loss on the car?

0:10:48 > 0:10:51Now, you're not going to go without a car.

0:10:51 > 0:10:53Have you acquired a new one?

0:10:55 > 0:10:56HE LAUGHS

0:10:56 > 0:10:58- What, this one here?- Yes.

0:10:58 > 0:11:01This is a little bit smaller, but...

0:11:01 > 0:11:03HE LAUGHS

0:11:03 > 0:11:05..it's a very nice car.

0:11:10 > 0:11:12- It's a Mercedes?- Yes.

0:11:12 > 0:11:18So even though you've had to get rid of your lovely big German Porsche,

0:11:18 > 0:11:20you end up with a tiny little Mercedes.

0:11:24 > 0:11:27Doros, you still have, at the moment, a Porsche,

0:11:27 > 0:11:29although you are selling it,

0:11:29 > 0:11:31you still have a little Mercedes, a Smart car.

0:11:31 > 0:11:33Lots of people would love to be in this position.

0:11:33 > 0:11:36Are you in this position because Greece is in the euro?

0:11:58 > 0:12:02'It's a feast day, and Doros has invited me to a family dinner

0:12:02 > 0:12:04'prepared by his wife Katarina...'

0:12:07 > 0:12:09'..and unemployed daughter Eleni.

0:12:09 > 0:12:13'Although it's a holiday, his son and business partner Sakis

0:12:13 > 0:12:15'is away finishing a job.'

0:12:15 > 0:12:17- So, Doros...- Yes?

0:12:17 > 0:12:22..at one time, your electrician's business, how big was it?

0:12:23 > 0:12:25And now how big is the business?

0:12:58 > 0:13:00Eleni, did you lose your job?

0:13:00 > 0:13:03Yes.

0:13:03 > 0:13:06I lost my job one and a half years ago.

0:13:06 > 0:13:10I was a secretary in a shipping insurance company.

0:13:10 > 0:13:12Are you looking for a job?

0:13:12 > 0:13:15Yes, I'm looking for a long time,

0:13:15 > 0:13:18but I didn't find it yet.

0:13:18 > 0:13:20Now there's something I'd like to ask you all.

0:13:20 > 0:13:24OK, Doros, here's a choice for you,

0:13:24 > 0:13:27- euros or drachmas?- Yes.

0:13:27 > 0:13:29Euros.

0:13:29 > 0:13:31Which would you choose?

0:13:31 > 0:13:33I prefer euros, of course.

0:13:33 > 0:13:36- And Katarina, which would you choose?- OK, money!

0:14:10 > 0:14:14I am touched by Doros and his family's attachment to the euro.

0:14:14 > 0:14:16But maybe it's not surprising,

0:14:16 > 0:14:19because interest rates were sky high while Greece had the drachma.

0:14:19 > 0:14:23Like many here, this family blame the politicians

0:14:23 > 0:14:24for the mess Greece is in.

0:14:24 > 0:14:28But then, Doros did very well out of public-sector contracts.

0:14:28 > 0:14:32Because, if Greek families borrowed and spent to excess,

0:14:32 > 0:14:36the Greek government put their profligacy in the shade.

0:14:42 > 0:14:46'The results of Greek government expenditure after joining the euro

0:14:46 > 0:14:48'can be seen all over Athens.

0:14:49 > 0:14:52'Many metro stations received lavish upgrades

0:14:52 > 0:14:54'and new stations have been opened,

0:14:54 > 0:14:57'expanding the network into the suburbs.

0:14:58 > 0:15:01'There is also a new electric railway system

0:15:01 > 0:15:03'that rivals anywhere in Europe.'

0:15:04 > 0:15:07There's no doubt that new railways and trains like these

0:15:07 > 0:15:10helped the Greek economy and enabled it to modernise.

0:15:10 > 0:15:12The problem was that most of the equipment

0:15:12 > 0:15:13couldn't be manufactured in Greece,

0:15:13 > 0:15:17so it had to be imported with borrowed money.

0:15:17 > 0:15:18'Next stop, Koropi.'

0:15:20 > 0:15:24'It's no surprise that the carriages, engines and signalling equipment

0:15:24 > 0:15:26'were supplied by German companies.

0:15:26 > 0:15:29'And the money that countries like Germany and France lent to Greece

0:15:29 > 0:15:33'also went into keeping these state operations going.

0:15:33 > 0:15:37'Each year, the railways alone were losing almost one billion euros.

0:15:38 > 0:15:42'But Greece's most notorious public expenditure bonanza

0:15:42 > 0:15:45'was on the 2004 Olympic Games.

0:15:48 > 0:15:50'Today, eight years after the Olympics,

0:15:50 > 0:15:54'all over Athens, buildings and facilities lie unused.

0:15:54 > 0:15:59'Meanwhile, Greece is still paying the interest on the 12 billion euros

0:15:59 > 0:16:02'that the Games eventually cost.

0:16:02 > 0:16:05'Tasos Telloglou is an investigative journalist

0:16:05 > 0:16:09'who has written extensively on the financial fiasco

0:16:09 > 0:16:12'of the Athens Olympics.'

0:16:12 > 0:16:15So what I see now is a place that's deserted

0:16:15 > 0:16:18but obviously that cost billions of euros to build.

0:16:18 > 0:16:19A lot of money was borrowed.

0:16:19 > 0:16:21As you look back on it now,

0:16:21 > 0:16:24would one regard the Olympics in Greece as a success?

0:16:24 > 0:16:29It was a lot of money spent, with, as you can see,

0:16:29 > 0:16:33post-Olympic use that is equal to nothing.

0:16:33 > 0:16:35Nothing, in fact.

0:16:35 > 0:16:37Yes, it's equal to nothing.

0:16:37 > 0:16:42This park is a mirror of a society and a country

0:16:42 > 0:16:47that there is always a lack of investigating

0:16:47 > 0:16:50the cheaper possibilities.

0:16:50 > 0:16:54There is a lot of corruption and clientelism,

0:16:54 > 0:16:57where to put our friends to make some money.

0:16:57 > 0:16:59Jobs for the boys.

0:16:59 > 0:17:01Jobs for the boys of the right party.

0:17:01 > 0:17:02Uh-huh.

0:17:02 > 0:17:10And this, of course, when the money was cheaper and accessible,

0:17:10 > 0:17:13was easy to do, it was easy to manage.

0:17:13 > 0:17:14But it isn't anymore.

0:17:14 > 0:17:18Tasos, let me put a very straightforward choice to you.

0:17:19 > 0:17:22Euro or drachma for Greece?

0:17:22 > 0:17:28Euro, because my generation was brought up with the dream that

0:17:28 > 0:17:32we were going to have a currency like that, a stable currency.

0:17:32 > 0:17:33And the drachma?

0:17:33 > 0:17:37The drachma was the currency in which I was paid

0:17:37 > 0:17:39when I started working

0:17:39 > 0:17:44and I had to pay 25% interest for my credit card, which I don't like.

0:17:44 > 0:17:47But your dream, I think, has become a nightmare.

0:17:47 > 0:17:50Well, it's a very straightjacket,

0:17:50 > 0:17:54but I think Greece anyway needs a straightjacket.

0:17:59 > 0:18:02'The yachting marinas on the sea front at Piraeus,

0:18:02 > 0:18:05'Athens's port city, give another clue to the story

0:18:05 > 0:18:08'of Greece's record-breaking debt.

0:18:08 > 0:18:10'Taxes.

0:18:10 > 0:18:13'The Greeks notoriously failed to pay them.

0:18:13 > 0:18:17'Since the crisis, over a thousand luxury-yacht owners

0:18:17 > 0:18:22'have been discovered falsely claiming tax exemptions.'

0:18:22 > 0:18:24It's a lovely marina.

0:18:24 > 0:18:28There's been a lot in the British press about the number

0:18:28 > 0:18:30of yachts that there are belonging to Greek people,

0:18:30 > 0:18:34apparently rather more than Greek people declaring high incomes

0:18:34 > 0:18:36to the tax authorities. Is this true?

0:18:36 > 0:18:39There was a lot of tax evasion in Greece over the period,

0:18:39 > 0:18:42and all this cash that was generated had to find outlets

0:18:42 > 0:18:45and these yachts were one of the luxury products where they went.

0:18:45 > 0:18:48'Across the economies of the eurozone,

0:18:48 > 0:18:52'there are huge differences in cultural attitudes and institutions

0:18:52 > 0:18:56'that to me make them incompatible as partners in a single currency.'

0:18:56 > 0:18:59Now, is this really a cultural thing?

0:18:59 > 0:19:02I mean, is it just that Greeks don't trust their institutions,

0:19:02 > 0:19:05or is it just that they're not used to paying taxes?

0:19:05 > 0:19:09Well, I think it starts from the reverse, ie, Greece has weak institutions

0:19:09 > 0:19:14and if...these weak institutions cannot impose a fair tax system.

0:19:14 > 0:19:18So let's say you were in the restaurant business,

0:19:18 > 0:19:22or the souvlaki business, and your competitor doesn't pay his VAT of 23%

0:19:22 > 0:19:26and you do, how can you compete on a commodity product like that?

0:19:26 > 0:19:29So you are forced, in some sense. So the Greek system isn't corrupt,

0:19:29 > 0:19:30but it is corrupting.

0:19:30 > 0:19:33How good is the Greek state at assessing and collecting taxes?

0:19:33 > 0:19:36There's no cross-checking, everything is done manually,

0:19:36 > 0:19:39there's no IT systems. This was an uncontrollable monster,

0:19:39 > 0:19:41nobody really knew what was going on.

0:19:41 > 0:19:44I'm getting the impression from you that many of the problems

0:19:44 > 0:19:46that Greece has encountered it wouldn't have faced

0:19:46 > 0:19:47if it had kept the drachma.

0:19:47 > 0:19:51So I have to ask you now, for Greece's future,

0:19:51 > 0:19:52the drachma or the euro?

0:19:52 > 0:19:55Well, I'm gonna have to choose the euro

0:19:55 > 0:19:58because Greece has weak institutions and a corrupt political system,

0:19:58 > 0:20:00neither of which will change if you go back to the drachma,

0:20:00 > 0:20:03and it will give them access to a printing press

0:20:03 > 0:20:05to continue their ways of before.

0:20:05 > 0:20:08'So no takers for my drachmas yet.

0:20:08 > 0:20:12'Even Jason's not persuaded by my Eurosceptic views.

0:20:12 > 0:20:15'I think that to become more competitive,

0:20:15 > 0:20:19'a country needs to keep the option of devaluing its own currency.

0:20:19 > 0:20:24'Whilst not ideal, the alternative can be much worse.'

0:20:36 > 0:20:38'Almost every day there's a demonstration

0:20:38 > 0:20:41'against the austerity measures.

0:20:41 > 0:20:45'Today it's scientists from the National Institute of Mineralogy.

0:20:45 > 0:20:50'They're venting their anger against the trio of foreign institutions

0:20:50 > 0:20:52'known as the Troika.

0:20:52 > 0:20:54'That's the European Union, the European Central Bank

0:20:54 > 0:20:57'and the International Monetary Fund.'

0:21:07 > 0:21:10'Their particular ire is reserved for the Environment Minister,

0:21:10 > 0:21:12'George Papaconstantinou.'

0:21:26 > 0:21:30'I've decided to pay a visit to Mr Papaconstantinou.'

0:21:30 > 0:21:32KNOCKS ON DOOR

0:21:32 > 0:21:36- Hello.- Hello, Minister. Michael Portillo.- Nice to meet you.

0:21:36 > 0:21:39What a pleasure to see you. Thank you very much for your time.

0:21:39 > 0:21:43'Until recently he was the Greek Minister of Finance,

0:21:43 > 0:21:45'which was surely the job from hell.'

0:21:46 > 0:21:49I was once pretty unpopular when I was a politician,

0:21:49 > 0:21:52people cheered when I lost my seat in Parliament,

0:21:52 > 0:21:54but I must say, since I've been in Greece,

0:21:54 > 0:21:57I've been shocked by how unpopular politicians are.

0:21:57 > 0:22:01There seems to be a real feeling against the political class.

0:22:01 > 0:22:03It is impossible for a Greek...

0:22:03 > 0:22:05an active Greek politician to walk on the streets today.

0:22:05 > 0:22:08- Really?- Not because they would be attacked

0:22:08 > 0:22:11but because it would be very easy

0:22:11 > 0:22:14for someone to turn around and call them a traitor.

0:22:14 > 0:22:18People are waking up to the fact that there was a bubble

0:22:18 > 0:22:19and the bubble has burst

0:22:19 > 0:22:22and part of their living standards were not based on solid foundations.

0:22:22 > 0:22:29Unfortunately, those that are paying for the crisis are also those

0:22:29 > 0:22:33that did not have a...were not responsible for the crisis.

0:22:33 > 0:22:35I was chief secretary to the Treasury,

0:22:35 > 0:22:37trying to control public spending, and I thought I had things tough,

0:22:37 > 0:22:41but you had to negotiate the austerity package here in Greece.

0:22:41 > 0:22:45I mean, tell me, how was that for you? Were you sleeping at night?

0:22:45 > 0:22:48Well, you were never faced with a situation whereby

0:22:48 > 0:22:54you had to take very harsh measures that changed people's livelihoods

0:22:54 > 0:22:58and increased taxes and ended up increasing unemployment

0:22:58 > 0:23:03and a very tough negotiation for the biggest bail-out package ever,

0:23:03 > 0:23:06with an austerity programme attached to it.

0:23:06 > 0:23:09It was not the easiest time, as I'm sure you can imagine.

0:23:09 > 0:23:11Don't worry if I take out my wallet,

0:23:11 > 0:23:14I am not in any way trying to corrupt you.

0:23:14 > 0:23:17The drachma and the euro. Which is the future of Greece?

0:23:17 > 0:23:20Let me say this, I have forgotten what this looks like.

0:23:20 > 0:23:22It was very nice for the past, it's not for the future.

0:23:22 > 0:23:24This is the future

0:23:24 > 0:23:26and I am surprised you're not waving a British pound.

0:23:26 > 0:23:29This would not be our choice either.

0:23:30 > 0:23:32In exchange for rescue packages

0:23:32 > 0:23:35that eventually mounted to 240 billion euros,

0:23:35 > 0:23:37about £200 billion,

0:23:37 > 0:23:41Mr Papaconstantinou and his successors

0:23:41 > 0:23:42have had to increase taxes,

0:23:42 > 0:23:44make savage cuts in government spending

0:23:44 > 0:23:48and put many of Greece's national assets up for sale.

0:23:48 > 0:23:50We will follow this road,

0:23:50 > 0:23:52because this is the only road to be able to save the country.

0:24:00 > 0:24:03'To get a sense of just how hard these measures

0:24:03 > 0:24:06'are beginning to bite, I travel down to the Port of Piraeus,

0:24:06 > 0:24:09'which, like many of Greece's national assets,

0:24:09 > 0:24:11'is now up for sale.'

0:24:11 > 0:24:13Good morning, good morning.

0:24:13 > 0:24:18'Outside the Perama shipyard, I find unemployed ship repairers

0:24:18 > 0:24:21'keeping a 24-hour vigil, demonstrating their opposition

0:24:21 > 0:24:25'to the government's plans to sell their workplace.'

0:24:25 > 0:24:28Why are you standing here now? What's the purpose of standing here?

0:24:31 > 0:24:32The public sector?

0:24:35 > 0:24:38Who do they want to sell it to?

0:24:46 > 0:24:48How many jobs are there here at the shipyard?

0:24:53 > 0:24:55And now?

0:24:57 > 0:24:59From 6,000 to 200!

0:24:59 > 0:25:00About.

0:25:00 > 0:25:01Have you still got a job?

0:25:04 > 0:25:06You haven't got a job.

0:25:06 > 0:25:10So how much money... What did you use to get?

0:25:10 > 0:25:12What did they pay in the old days?

0:25:17 > 0:25:18Yes.

0:25:38 > 0:25:39'The euro is meant to have brought

0:25:39 > 0:25:42'the disparate nations of Europe together.

0:25:42 > 0:25:44'Their economies were supposed to converge.

0:25:47 > 0:25:49'But I suggest that the opposite has happened.

0:25:49 > 0:25:53'By many economic indicators, Greece has slid back

0:25:53 > 0:25:58'to where it was in 1998, four years before it joined the euro.

0:26:00 > 0:26:03'Above the shipyards is one of the hardest-hit areas in Greece,

0:26:03 > 0:26:05'the suburb of Perama.

0:26:05 > 0:26:09'Unemployment here has now reached 80%.

0:26:11 > 0:26:13'Yet welfare cuts and increased health charges

0:26:13 > 0:26:15'are compounding the misery.

0:26:15 > 0:26:19'The international organisation Doctors of the World

0:26:19 > 0:26:21'recently set up a clinic here.'

0:26:21 > 0:26:24Good morning, Dr Kanakis.

0:26:24 > 0:26:25Hello, hi, welcome.

0:26:25 > 0:26:29I'm Michael Portillo. What a very crowded place this is.

0:26:29 > 0:26:32'Normally this organisation would be providing services

0:26:32 > 0:26:34'in sub-Saharan Africa.'

0:26:34 > 0:26:37We are in the middle of a humanitarian crisis.

0:26:37 > 0:26:41People with no food, no access to health, even no house.

0:26:41 > 0:26:43So, we have no reason to work on Africa, we have to focus here.

0:26:48 > 0:26:50- Good morning.- Good morning!

0:26:50 > 0:26:53- Hello, who's this?- Angelina.

0:26:53 > 0:26:56Hello, Angelina, how very nice to see you. George, hello.

0:26:56 > 0:26:58How are you? Good to see you.

0:26:58 > 0:27:01If you went to the hospital now...?

0:27:01 > 0:27:02Much money.

0:27:02 > 0:27:06- Any idea of how much? - More than 100 euro.

0:27:06 > 0:27:08100 euros, maybe just for an examination?

0:27:08 > 0:27:09Yes.

0:27:09 > 0:27:11Was it always like this?

0:27:11 > 0:27:13Did you always have to pay money at the hospital?

0:27:13 > 0:27:16No, before we were going free and now it's different. It changed.

0:27:16 > 0:27:18I understand your husband is unemployed,

0:27:18 > 0:27:20what did his job use to be?

0:27:20 > 0:27:22- What is his job?- A carpenter.

0:27:32 > 0:27:35- How long has he been unemployed? - Three years.

0:27:35 > 0:27:38Do you and your husband and Angelina have a future in Greece?

0:27:38 > 0:27:39No.

0:27:39 > 0:27:41'It is only with the help of their parents

0:27:41 > 0:27:45'that Lia and George manage to survive.

0:27:48 > 0:27:53'Each time the government negotiates another record-breaking bailout,

0:27:53 > 0:27:57'the IMF and the European institutions impose yet more

0:27:57 > 0:28:00'austerity measures on the Greeks.'

0:28:05 > 0:28:10It was here in Constitution Square that the anger and frustration

0:28:10 > 0:28:13of Athenian citizens burst forth.

0:28:13 > 0:28:14CROWD CHANT

0:28:17 > 0:28:21Demonstrators appeared en masse to be baton-charged by the police.

0:28:21 > 0:28:22EXPLOSION

0:28:29 > 0:28:31SHOTS FIRED

0:28:33 > 0:28:36Rioters threw paving stones and Molotov cocktails.

0:28:36 > 0:28:38The air was thick with teargas

0:28:38 > 0:28:42as the Greek public fought back against austerity.

0:28:45 > 0:28:49'These young Greeks resent not only the onerous conditions required

0:28:49 > 0:28:51'to remain in the euro,

0:28:51 > 0:28:55'but also that they're being imposed by outsiders.

0:28:55 > 0:28:57'Some, like these rioters,

0:28:57 > 0:29:00'blame Germany as Europe's real power-broker.

0:29:00 > 0:29:04'And Greek bitterness is intensified by traumatic memories

0:29:04 > 0:29:07'of German occupation during World War Two.'

0:29:09 > 0:29:11CROWD: Nazis! Nazis! Nazis!

0:29:11 > 0:29:16'But Greeks I've spoken to say they want to stay in the euro.

0:29:16 > 0:29:19'I can't help wondering whether they're truly ready for

0:29:19 > 0:29:23'the political sacrifices that will surely follow the financial ones.'

0:29:26 > 0:29:29It's clear to me that being in the euro

0:29:29 > 0:29:32has led Greece deep into poverty and to seek bailouts,

0:29:32 > 0:29:37and such dependency on others can cause feelings of injury and insult.

0:29:37 > 0:29:40But resentment can cut both ways.

0:29:40 > 0:29:44It's time to talk to the taxpayers who are funding the rescues,

0:29:44 > 0:29:47including the people who built this car, in Germany.

0:29:57 > 0:29:59'I've come to East Germany,

0:29:59 > 0:30:01'transformed since the fall of Communism.

0:30:04 > 0:30:07'Just outside the city of Leipzig

0:30:07 > 0:30:10'is the most advanced car plant in the world.

0:30:12 > 0:30:15'This is where Porsche built the Cayenne

0:30:15 > 0:30:18'that Doros Liappis is trying to sell.

0:30:18 > 0:30:21'90% of the cars here are for export.

0:30:21 > 0:30:25'That's good for Germany's balance of payments surplus,

0:30:25 > 0:30:28'but bad for the deficits of countries like Greece

0:30:28 > 0:30:30'that imported large numbers of luxury cars.

0:30:30 > 0:30:34'Advanced technology's got something to do with it, of course.

0:30:34 > 0:30:37'But Germany also benefits from sharing a currency

0:30:37 > 0:30:39'with countries like Greece.

0:30:39 > 0:30:42'These weaker economies pull down the value of the euro,

0:30:42 > 0:30:46'which makes German cars relatively cheaper for foreigners to buy,

0:30:46 > 0:30:49'whether they're in Greece or anywhere else.'

0:30:49 > 0:30:52So you're here to see the Cayenne.

0:30:52 > 0:30:56We will bring that car to the customer as soon as possible.

0:30:56 > 0:30:59'Because, according to PR manager Heine Von der Laden,

0:30:59 > 0:31:03'Porsche's biggest markets are now outside Europe.'

0:31:03 > 0:31:06Is the European Union the most important market for Porsche?

0:31:06 > 0:31:10No, traditionally the number one is the US market

0:31:10 > 0:31:14and nowadays the second important market is China.

0:31:14 > 0:31:19So people from China and from Asia, they like especially the Cayenne.

0:31:19 > 0:31:21And these cars, for example, where are they going to?

0:31:21 > 0:31:25I have to check. Oh, yes, that car goes to China.

0:31:25 > 0:31:29'I've seen that Greeks like the Cayenne too.

0:31:29 > 0:31:32'In fact, cars are Germany's biggest category of export to Greece.'

0:31:33 > 0:31:35Vielen Dank.

0:31:35 > 0:31:37'I join some of the Porsche workers

0:31:37 > 0:31:39'and ask them about their Greek eurozone partner

0:31:39 > 0:31:44'who's been giving Germany so much grief in the last few months.'

0:31:44 > 0:31:46If I were a Greek person and I say,

0:31:46 > 0:31:49"Look, we need some help, we are in some difficulty here

0:31:49 > 0:31:52"and you Germans are pretty well off, you are pretty rich,

0:31:52 > 0:31:54"please help us," what do you say to that?

0:32:11 > 0:32:15So now I want to offer you a choice for the future of Germany.

0:32:15 > 0:32:21Is the future of Germany the euro or the Deutschmark?

0:32:24 > 0:32:26Why? Warum?

0:32:37 > 0:32:39I don't think that's going to happen soon.

0:32:39 > 0:32:41Which do you choose, then?

0:32:55 > 0:32:59'Lars Heinrich and his friends typify the optimism

0:32:59 > 0:33:01'I'm finding here in East Germany.

0:33:08 > 0:33:10'Of course, these young workers

0:33:10 > 0:33:13'are themselves beneficiaries of a bail-out,

0:33:13 > 0:33:15'German-style.

0:33:16 > 0:33:21'That was the re-unification of Germany more than 20 years ago,

0:33:21 > 0:33:24'and it cost far more than the rescue of Greece today.

0:33:24 > 0:33:27'It followed the collapse of the former Communist regime here in the East.'

0:33:27 > 0:33:31'Since 1990, the German government has invested

0:33:31 > 0:33:36'almost 1.5 trillion euros in the economies of cities like Leipzig.'

0:33:40 > 0:33:42'The Church of St Nicholas has a unique place

0:33:42 > 0:33:45'in the story of German reunification.

0:33:45 > 0:33:47'I've come with economist Gunther Schnabl,

0:33:47 > 0:33:50'who's researched the costs of rebuilding the German economy

0:33:50 > 0:33:52'after the collapse of the East.

0:33:52 > 0:33:55'After months of peace prayers here,

0:33:55 > 0:33:58'huge demonstrations spread into the town centre.'

0:33:58 > 0:34:00CROWD CHANT

0:34:01 > 0:34:04In 1989 after the service people left the church

0:34:04 > 0:34:06and started to gather on this square.

0:34:06 > 0:34:10It's mainly how the demonstration started.

0:34:10 > 0:34:14From day to day they grew and people started to walk through

0:34:14 > 0:34:17the city and around the city on the ring street.

0:34:17 > 0:34:19CROWD CHANT

0:34:20 > 0:34:24And this monument commemorates those events, doesn't it?

0:34:24 > 0:34:26Yes.

0:34:26 > 0:34:29'Today, Germany is a united democratic country.

0:34:29 > 0:34:31'But, even now, West German taxpayers

0:34:31 > 0:34:34'are still transferring money to raise up the East.

0:34:36 > 0:34:41'One example of that expenditure is the Leipzig Trade Fair centre,

0:34:41 > 0:34:43'opened in 1996.

0:34:43 > 0:34:45'It's known as the Messe.'

0:34:45 > 0:34:48This is the main Messe building and it's part of the investment

0:34:48 > 0:34:50which has been done during the 1990s,

0:34:50 > 0:34:53financed of course by Western German money,

0:34:53 > 0:34:56and it's part of the economic success of Leipzig.

0:34:56 > 0:34:59It's a very, very impressive set of buildings, I must say.

0:34:59 > 0:35:03'We've come to Leipzig's annual skills and crafts fair.

0:35:03 > 0:35:06'It's a perfect illustration of the emphasis on training

0:35:06 > 0:35:08'that gives Germany its competitive edge.

0:35:08 > 0:35:12'From what I can see, the local economy is flourishing.

0:35:12 > 0:35:15'But making the backward East competitive

0:35:15 > 0:35:18'was achieved at a cost that nearly crippled Germany.'

0:35:19 > 0:35:23So after incurring the immense costs of re-unification,

0:35:23 > 0:35:26how did Germany become competitive again?

0:35:26 > 0:35:29So the main channel was via real wage cuts.

0:35:29 > 0:35:32So in the mid-1990s, pensions were cut,

0:35:32 > 0:35:38in general, social security benefits were curtailed,

0:35:38 > 0:35:41and the austerity in the public sector

0:35:41 > 0:35:43also was extended to the private sector.

0:35:43 > 0:35:46And therefore as a result real wages in Germany

0:35:46 > 0:35:50mainly remained constant or even declined.

0:35:50 > 0:35:54So for how long has the average German not seen any increase

0:35:54 > 0:35:56in his living standards?

0:35:56 > 0:35:58For more than 15 years.

0:35:58 > 0:36:0015 years without any increase in living standards?

0:36:00 > 0:36:03Yes, and they have increased in Greece

0:36:03 > 0:36:06and other Southern European countries substantially.

0:36:06 > 0:36:09And Germans don't feel too good about that.

0:36:09 > 0:36:13Yes. They have brought very large sacrifices.

0:36:14 > 0:36:17And of course they are worried that they have to go on

0:36:17 > 0:36:18with these sacrifices.

0:36:18 > 0:36:22'The Germans' decade of austerity has some similarity

0:36:22 > 0:36:25'to what Greece is going through today.

0:36:25 > 0:36:29'When the euro was introduced, it did little for most Germans' living standards.'

0:36:29 > 0:36:32'I wonder if Gunther regrets saying Auf Wiedersehen to the Deutschmark.'

0:36:32 > 0:36:36So, Gunther, I've got here, you'll remember these, some German marks...

0:36:36 > 0:36:39These are German marks and euros.

0:36:39 > 0:36:42Now, which do you choose for Germany for the future?

0:36:42 > 0:36:46I choose the euro for the German future.

0:36:46 > 0:36:50Welfare in Europe will strongly hinge on a common currency,

0:36:50 > 0:36:53but this needs to be underpinned by the necessary reforms.

0:36:57 > 0:37:01'At the fair, I run into Lars Heinrich, from the Porsche factory.

0:37:01 > 0:37:02'As a younger worker,

0:37:02 > 0:37:05'he's benefited from the recent investment in East Germany.

0:37:05 > 0:37:07'His father Gerald, on the other hand,

0:37:07 > 0:37:12'lost the steady job he once had, and hasn't worked since.'

0:37:12 > 0:37:15What is now being asked of Greece

0:37:15 > 0:37:19is really not as big an adjustment

0:37:19 > 0:37:22as was asked of the East German people over the last 20 years?

0:37:46 > 0:37:48'Despite their obvious frustration with the Greeks,

0:37:48 > 0:37:52'the Germans here have all been giving me the same response.

0:37:52 > 0:37:56'Without exception, they've bought into the idea that the euro

0:37:56 > 0:37:58'is part of a future for which they've already

0:37:58 > 0:38:00'made large sacrifices.

0:38:01 > 0:38:03'Well, maybe.

0:38:03 > 0:38:07'But it's also a measure of Germany's more sophisticated economy

0:38:07 > 0:38:09'that it could make such changes

0:38:09 > 0:38:12'without the sort of upheavals that Greece is experiencing.'

0:38:12 > 0:38:16In the medieval era, two German cities prospered because they

0:38:16 > 0:38:20found themselves at the crossroads of great European trade routes.

0:38:20 > 0:38:24Then, after World War Two, Leipzig found itself in the Communist East

0:38:24 > 0:38:27and Frankfurt in the capitalist West.

0:38:27 > 0:38:31Now as I travel between one and the other, there's no border to cross,

0:38:31 > 0:38:35but I am exchanging the low-slung car factories of Leipzig

0:38:35 > 0:38:39for the skyscrapers of Germany's financial capital on the River Main.

0:38:44 > 0:38:47'Here in this cluster of sleek buildings

0:38:47 > 0:38:50'is the European Central Bank.

0:38:50 > 0:38:53'And, almost next door, the headquarters of Commerzbank.

0:38:55 > 0:38:59'German financial institutions have been amongst the largest lenders

0:38:59 > 0:39:00'to the Greek government.

0:39:00 > 0:39:05'Last year, Commerzbank lost 800 million euros on its Greek loans.'

0:39:05 > 0:39:08Guten Morgen. Morgen.

0:39:08 > 0:39:10'The bank's chief economist, Jorg Kramer,

0:39:10 > 0:39:14'believes the roots of the Greek crisis go back 20 years.

0:39:15 > 0:39:18'Back then the Maastricht Treaty set out the ground rules

0:39:18 > 0:39:20'for a single currency.'

0:39:20 > 0:39:23European Community ministers have signed the new treaty committing

0:39:23 > 0:39:26the 12 member countries to closer economic and political union.

0:39:26 > 0:39:30'On paper at least, countries signing up for the euro

0:39:30 > 0:39:34'had to meet tough criteria on budget deficits and government debt,

0:39:34 > 0:39:36'with no bail-outs for spendthrift governments.

0:39:36 > 0:39:39'But no-one took any of the rules too seriously.'

0:39:40 > 0:39:43How did Germans, for example, get lured into

0:39:43 > 0:39:45lending to Greece, do you think?

0:39:46 > 0:39:48Well, I think you have to understand the history

0:39:48 > 0:39:50of the European Monetary Union.

0:39:50 > 0:39:54We had a non-bail-out clause in the Maastricht treaty...

0:39:54 > 0:39:57May it rest in peace.

0:39:57 > 0:39:59Yeah, but nobody believed it from the very beginning.

0:39:59 > 0:40:03Therefore everybody thought, well, we can invest in Greece

0:40:03 > 0:40:07and if any problem may pop up in the end,

0:40:07 > 0:40:09other countries will bail out Greece.

0:40:09 > 0:40:14This was the underlying belief of all investors, not only in Germany.

0:40:14 > 0:40:16But it was put into the euro with Germany.

0:40:16 > 0:40:20I mean, was this not the most extraordinary mistake?

0:40:20 > 0:40:23Absolutely, and the Bundesbank in public said

0:40:23 > 0:40:28that Greece is not ripe to enter the European Monetary Union.

0:40:28 > 0:40:31So does it follow, if Greece should never have been in the euro,

0:40:31 > 0:40:34that it would be best if Greece were now out of the euro?

0:40:34 > 0:40:35Absolutely.

0:40:35 > 0:40:38Is that the way forward?

0:40:38 > 0:40:42With Greece on board, I think it is not possible

0:40:42 > 0:40:44to make a fresh start for the eurozone.

0:40:44 > 0:40:46I think everybody knows it.

0:40:46 > 0:40:49'At last, I've found someone who shares some of my sentiments.

0:40:49 > 0:40:53'But aren't the Germans being a bit hard on the Greeks?

0:40:53 > 0:40:58'Hasn't their thirst for German products contributed to Germany's prosperity?'

0:40:58 > 0:41:00Germany has done terribly well out of this.

0:41:00 > 0:41:02The fact is that the euro is a cheaper currency

0:41:02 > 0:41:06than the Deutschmark would be, and Germans have benefited enormously.

0:41:06 > 0:41:08I've been in Greece and I've seen, you know,

0:41:08 > 0:41:11all the trains that Siemens sold to the Greeks,

0:41:11 > 0:41:14I've seen all the Porsches that Greek consumers bought,

0:41:14 > 0:41:19and this is one of the reasons why people in Greece say, "Look, Germany ought to help rather more

0:41:19 > 0:41:22"because Germany's benefited so much from the euro."

0:41:22 > 0:41:24I don't buy into this argument.

0:41:24 > 0:41:27Of course, when they live beyond their means,

0:41:27 > 0:41:31they import German goods, and therefore you see a lot of Porsches, et cetera.

0:41:31 > 0:41:34Greece is too small to be able to explain

0:41:34 > 0:41:38any significant part of the German success story.

0:41:38 > 0:41:41'But the repercussions of Greece's debts

0:41:41 > 0:41:44'are certainly having an impact.

0:41:44 > 0:41:50'Some Germans, seeing the riots on TV, are beginning to lose patience.'

0:41:50 > 0:41:53Guten Morgen! Wie gehtst?

0:41:53 > 0:41:54Thank you, thank you. And yourself?

0:41:54 > 0:41:58How do you feel about giving more money to the Greeks?

0:42:24 > 0:42:26Ja, ja, not good at all.

0:42:32 > 0:42:34'Andrea Ypsilanti is a leading member

0:42:34 > 0:42:36'of the Social Democratic Party.

0:42:36 > 0:42:38'She was once married to a Greek,

0:42:38 > 0:42:41'and knows her former husband's country well.

0:42:41 > 0:42:45'I want to ask her about the worsening feeling between Greeks and Germans,

0:42:45 > 0:42:50'but first, I have a question about the protesters from Occupy.'

0:42:50 > 0:42:52I'm very struck that they apply for permission here.

0:42:52 > 0:42:55- Yes, it's very sweet, isn't it? - It is, yeah. Extraordinary.

0:42:55 > 0:42:57You see, we'll never make a revolution,

0:42:57 > 0:43:01because we'd ask before if we're allowed to do it!

0:43:01 > 0:43:04Well, right now, the social peace isn't going very well, is it?

0:43:04 > 0:43:07- No.- I mean, Greeks are burning German flags,

0:43:07 > 0:43:10- Greeks are being very rude about Germany.- Exactly.

0:43:10 > 0:43:15Doesn't it worry you that this euro is bringing a lot of dissent?

0:43:15 > 0:43:20Well, I think a lot of countries have dissent in their own countries.

0:43:20 > 0:43:23When I do my speeches, when I do my talks, I hear people saying,

0:43:23 > 0:43:27"Well, it can't go on like that," but they cannot see,

0:43:27 > 0:43:29and that is the problem facing them,

0:43:29 > 0:43:32they cannot see who is going to give the answer.

0:43:32 > 0:43:35Because the Greeks do not trust their own parties,

0:43:35 > 0:43:37their own political governments, any more.

0:43:37 > 0:43:41How do you react to what's happening in Greece now?

0:43:41 > 0:43:44Well, we have a parted discussion in Germany.

0:43:44 > 0:43:48One part of people influenced by a big newspaper,

0:43:48 > 0:43:52saying we can't put any more money into this country,

0:43:52 > 0:43:56they have to save, they have to get their economy moving,

0:43:56 > 0:44:00they have to lower their wages, they have to cut their pensions,

0:44:00 > 0:44:05and of course there is another part of people who see that

0:44:05 > 0:44:09they cannot cut their spendings any more,

0:44:09 > 0:44:11I mean, they're on the limit,

0:44:11 > 0:44:14and if you don't want to produce a riot in Greece,

0:44:14 > 0:44:17you know, you have to one day say, "OK, finish, stop."

0:44:17 > 0:44:18So what's your view?

0:44:18 > 0:44:22My view is that they really cannot go on

0:44:22 > 0:44:25with their austerity politics, you know.

0:44:25 > 0:44:29We have to give them a chance to pick up their economy any more.

0:44:29 > 0:44:31And they are really on the limit.

0:44:34 > 0:44:37Here in the economic powerhouse of Europe,

0:44:37 > 0:44:40I've learnt something of the dilemmas facing the Germans.

0:44:40 > 0:44:42They're thought to be very wealthy,

0:44:42 > 0:44:46but after years of pay restraint many don't feel rich at all.

0:44:46 > 0:44:49They believe in discipline within the eurozone,

0:44:49 > 0:44:52but they don't want to be thought authoritarian.

0:44:52 > 0:44:56They feel solidarity with poorer Southern Europeans,

0:44:56 > 0:44:59but they don't want to throw good money after bad.

0:44:59 > 0:45:01They're willing to help out,

0:45:01 > 0:45:05but not to be drawn into permanent subsidies.

0:45:06 > 0:45:11'Frankfurt may be the financial heart of Germany,

0:45:11 > 0:45:15'but the political power still lies in Berlin.

0:45:15 > 0:45:18'Officially the European institutions

0:45:18 > 0:45:21'make the rules for the euro's future.

0:45:21 > 0:45:23'But many suspect that the real decisions are made here.'

0:45:23 > 0:45:25I'm in Berlin to meet

0:45:25 > 0:45:30one of the most powerful men in Europe, Mr Wolfgang Schuble.

0:45:30 > 0:45:33He doesn't actually normally dress like that

0:45:33 > 0:45:35but that's the way he's been depicted in the Greek press.

0:45:35 > 0:45:41And his boss, Angela Merkel, gets the same treatment.

0:45:41 > 0:45:44I wonder how Mr Schuble feels about that?

0:45:46 > 0:45:47Morgen!

0:45:47 > 0:45:50I'm really looking forward to this meeting.

0:45:50 > 0:45:53Wolfgang Schuble really is one of the key figures.

0:45:53 > 0:45:55He's the guardian of German monetary orthodoxy

0:45:55 > 0:45:58and he's the scourge of the Greeks for their profligacy

0:45:58 > 0:46:01and failure to pay their taxes.

0:46:03 > 0:46:10Guten morgen. Ich besche Herr Minister Schuble bitte schon.

0:46:10 > 0:46:12OK. Come in, please.

0:46:12 > 0:46:13Danke.

0:46:18 > 0:46:22You've probably seen the way that some of the Greek papers

0:46:22 > 0:46:25have been depicting you.

0:46:25 > 0:46:28And indeed, the way they've been depicting Angela Merkel.

0:46:28 > 0:46:32I mean, how do you feel about this?

0:46:46 > 0:46:49Do you really think that with the austerity measures in Greece,

0:46:49 > 0:46:50Greece can ever recover?

0:47:10 > 0:47:14A number of European leaders have commented that Greece

0:47:14 > 0:47:15should never have been in the euro.

0:47:15 > 0:47:18Does it not follow, logically,

0:47:18 > 0:47:20that Greece should not be in the euro today that actually

0:47:20 > 0:47:24things would be much easier for the euro if Greece were not a member?

0:47:45 > 0:47:49Do you feel that democracy is a casualty of this crisis

0:47:49 > 0:47:50or indeed of this system?

0:48:40 > 0:48:42From Berlin I'm going to go back to Greece,

0:48:42 > 0:48:45the place where the impact of policies made here is really felt.

0:48:45 > 0:48:48Since I was last in Athens, a lot has happened.

0:48:48 > 0:48:50The Greeks have done a deal with their creditors

0:48:50 > 0:48:53to write off vast amounts of debt.

0:48:53 > 0:48:58That's enabled them to borrow more from the European Union and the IMF

0:48:58 > 0:49:02and that way they've been able to pay interest on old debt.

0:49:02 > 0:49:06They've cleared a number of hurdles but my feeling is,

0:49:06 > 0:49:08they've got many more yet to scale.

0:49:11 > 0:49:14'I'm back in Athens for an interview with Lucas Papademos,

0:49:14 > 0:49:17'the Prime Minister appointed caretaker last November.

0:49:17 > 0:49:19'For now, the riots have ceased.

0:49:19 > 0:49:21'But real incomes are still falling,

0:49:21 > 0:49:24'and almost one in ten people here

0:49:24 > 0:49:28'are now taking some form of hand-out, food or medicine.

0:49:28 > 0:49:31'The huge sacrifices being made here are not just financial.'

0:49:38 > 0:49:41'Dimitra Nousi is still administering the provision

0:49:41 > 0:49:44'of food supplies in the city centre.'

0:49:44 > 0:49:47Has anything changed since I was last here?

0:49:47 > 0:49:50There are more people asking for help.

0:49:50 > 0:49:54There are more families who come here asking for

0:49:54 > 0:49:57a plastic bag of supermarket products for home.

0:49:57 > 0:50:03These people do not feel as ashamed as they used to feel before.

0:50:03 > 0:50:07You're seeing the hard end of what's happening in Greece today,

0:50:07 > 0:50:09and it is happening under the euro.

0:50:09 > 0:50:11So I have to ask you, for the future,

0:50:11 > 0:50:13would you choose the euro or the drachma?

0:50:13 > 0:50:20I prefer euro, but controlled by another European policy,

0:50:20 > 0:50:22by other politicians maybe,

0:50:22 > 0:50:28by another political mentality that is closer to the European culture.

0:50:28 > 0:50:30Many things that have been happening in Greece recently

0:50:30 > 0:50:32have been dictated from outside Greece,

0:50:32 > 0:50:34have been dictated by the European Union.

0:50:34 > 0:50:37- How do you feel about that? - We belong to a union...

0:50:37 > 0:50:38How do you feel about that?

0:50:38 > 0:50:41Inevitably some things are dictated by outside.

0:50:41 > 0:50:43You don't mind that?

0:50:43 > 0:50:49It's one of the rules of the union. I think everybody has to admit it.

0:50:49 > 0:50:51The Prime Minister in Greece at the moment was not elected,

0:50:51 > 0:50:54he was appointed.

0:50:54 > 0:50:56How do you feel about that?

0:50:56 > 0:51:00Uh, I don't feel very badly about that.

0:51:00 > 0:51:04I cannot say simply that he is appointed.

0:51:04 > 0:51:07It is not a violation of our institutions.

0:51:07 > 0:51:12There is a kind of approval. We know that. We feel that.

0:51:12 > 0:51:16I think it's a kind of, uh,

0:51:18 > 0:51:23consensus that exists in Europe and in Greece as well.

0:51:27 > 0:51:29'It's a sign of the times that,

0:51:29 > 0:51:32'like its financially challenged neighbour Italy,

0:51:32 > 0:51:35'Greece has been governed by an unelected Eurocrat.

0:51:35 > 0:51:40'Lucas Papademos was also once governor of the Greek Central Bank.

0:51:40 > 0:51:43'He was appointed Prime Minister to direct Greece's compliance

0:51:43 > 0:51:46'with the tough conditions set by its foreign lenders.'

0:51:48 > 0:51:50- Prime Minister. - Hello. Very nice to meet you.

0:51:50 > 0:51:52What a pleasure! Thank you so much for seeing us.

0:51:52 > 0:51:55- Thank you for coming. - Thank you.

0:51:55 > 0:51:59Now, take your seat, over there. I'll take my usual chair.

0:51:59 > 0:52:02'His five months as Premier haven't been comfortable.'

0:52:02 > 0:52:05Well, Prime Minister, I'm not sure that I envy you your job.

0:52:05 > 0:52:07You've had a very difficult time indeed, haven't you?

0:52:07 > 0:52:11I have to agree with that. It's been a very challenging period.

0:52:11 > 0:52:13Where will the growth actually come from?

0:52:13 > 0:52:16What will enable Greece to become more competitive?

0:52:16 > 0:52:19We're already implementing significant and far-reaching reforms

0:52:19 > 0:52:23in the labour market that will improve its efficiency

0:52:23 > 0:52:25and restore cost-competitiveness.

0:52:25 > 0:52:29As Europe moves forward to ever-closer political union,

0:52:29 > 0:52:34how is the democratic deficit going to be plugged?

0:52:34 > 0:52:37Uh, how can you set up a democracy at the European level

0:52:37 > 0:52:40when there isn't really a European people?

0:52:40 > 0:52:43How do we deal with that issue?

0:52:43 > 0:52:46For a country that participates in a monetary union,

0:52:46 > 0:52:51inevitably there is a certain loss of autonomy of economic policy.

0:52:52 > 0:52:57I would not call this a loss of democratic control.

0:52:57 > 0:53:01So governments are accepting, I would say, in a democratic way

0:53:01 > 0:53:03this loss of autonomy,

0:53:03 > 0:53:08because it is necessary for the efficient function of monetary union,

0:53:08 > 0:53:12which is presumably accepted because of the benefits it entails.

0:53:12 > 0:53:15But if you are losing your autonomy at the national level,

0:53:15 > 0:53:18don't you have to establish a new democracy at the European level?

0:53:18 > 0:53:22And that...that's what seems to me incredibly difficult to do.

0:53:22 > 0:53:25If you are accepted by the people I would not call it, uh,

0:53:25 > 0:53:31loss of democratic autonomy, the same way that in a given country,

0:53:31 > 0:53:36authorities have a certain power because the people have decided

0:53:36 > 0:53:38to assign these powers to this authority.

0:53:38 > 0:53:43You have a debt that is vastly more than 100% of your economy.

0:53:44 > 0:53:47Can I not tempt you to go back?

0:53:47 > 0:53:51I think this is my signature. Yes, it is.

0:53:51 > 0:53:55But I wouldn't go back to this, although it is a beautiful bank note.

0:53:55 > 0:53:57Uh, the Greek people are suffering, and it's true,

0:53:57 > 0:54:00they have made many sacrifices over the past few years.

0:54:00 > 0:54:05But more than 70% do support

0:54:05 > 0:54:08the continuing participation in the euro.

0:54:11 > 0:54:15'I have been surprised by how consistently everyone I have met

0:54:15 > 0:54:19'on my travels has disagreed with me about the future of the euro.

0:54:20 > 0:54:22'To me, the crisis exposes

0:54:22 > 0:54:25'the fundamental economic and cultural incompatibilities

0:54:25 > 0:54:28'of the richer North and the weaker South.

0:54:28 > 0:54:31'To them, that's a challenge for which

0:54:31 > 0:54:33'they're seeking political solutions,

0:54:33 > 0:54:37'that I fear may lead to an undemocratic Federal Europe.

0:54:40 > 0:54:43'I want to put my concerns to two people I met last time,

0:54:43 > 0:54:46'Jason Manolopoulos and Tasos Teleglou,

0:54:46 > 0:54:51'and also to the outgoing Socialist MP Eva Kaili.'

0:54:51 > 0:54:54To have a democratic control, that would require a European people,

0:54:54 > 0:54:59but there isn't a European people, we're still very much nation states

0:54:59 > 0:55:03and we focus upon our own national political situations.

0:55:03 > 0:55:07So how can this so-called democratic deficit be filled?

0:55:07 > 0:55:12They have to really find a way to combine North with South,

0:55:12 > 0:55:16they have to let people realise that this is a union

0:55:16 > 0:55:18that puts people first.

0:55:18 > 0:55:21The way to face it is to realise that we have to create

0:55:21 > 0:55:23a different plan inside the eurozone.

0:55:23 > 0:55:27It has to work, we have to make it work, we're trying to.

0:55:27 > 0:55:33Germany wants it, France wants it, I do think the UK will come back.

0:55:33 > 0:55:36Do you know the expression, "over my dead body"?

0:55:36 > 0:55:37THEY LAUGH

0:55:37 > 0:55:38Your one, I know.

0:55:38 > 0:55:41Jason, where are you on this?

0:55:41 > 0:55:43The democracy we had over the last 30 years

0:55:43 > 0:55:46didn't produce much for the country, and left us in a dismal state,

0:55:46 > 0:55:49so I'm not sure the democracy we had, um...

0:55:49 > 0:55:53served the Greek citizens in a good form.

0:55:53 > 0:55:57So you don't really feel nostalgic for Greece's modern democracy?

0:55:57 > 0:55:59Greece, not at all, no.

0:55:59 > 0:56:03If people associate democracy with failure,

0:56:03 > 0:56:06that means they maybe they won't love democracy very much,

0:56:06 > 0:56:08they won't defend democracy.

0:56:08 > 0:56:11But for Greece at this point in time it's the lesser of two evils.

0:56:11 > 0:56:13So let's get our shop into shape.

0:56:13 > 0:56:16Since we haven't been able to control the state

0:56:16 > 0:56:20and make Greece now a fully functioning capitalist economy with,

0:56:20 > 0:56:22you know, creating jobs and so on and so forth,

0:56:22 > 0:56:24we might as well take this.

0:56:24 > 0:56:28I think there is only one answer, which is the federalisation,

0:56:28 > 0:56:31even deeper federalisation, like the ancestors of the European Union

0:56:31 > 0:56:33have dreamed of.

0:56:33 > 0:56:38I don't see any other technical or political solution.

0:56:38 > 0:56:42The European Commission should be a kind of European government,

0:56:42 > 0:56:46which I don't think...it's something awful for British ears.

0:56:46 > 0:56:48Oh, it's awful for British ears, yes.

0:56:48 > 0:56:50Europe will face a dilemma,

0:56:50 > 0:56:54that's like the pill you have to take from the doctor.

0:56:54 > 0:56:57You either swallow it or you die.

0:56:57 > 0:57:02And if you want to compete with the Chinese, the Asian

0:57:02 > 0:57:06and the North American markets, you have to go for this federalisation.

0:57:06 > 0:57:10'The views expressed by my Greek friends

0:57:10 > 0:57:13'are reflected in opinion polls across the eurozone,

0:57:13 > 0:57:16'where the majority support the idea of a more centralised Europe.

0:57:16 > 0:57:21'And yet to me they do so without any notion of how this new Europe

0:57:21 > 0:57:24'would work as a democracy.'

0:57:24 > 0:57:27'Throughout the continent, governments are faltering

0:57:27 > 0:57:30'as they face public opposition to the austerity measures

0:57:30 > 0:57:32'and now the voters of Greece and France

0:57:32 > 0:57:35'have punished the politicians that tried to impose them.

0:57:35 > 0:57:37'The people want the euro

0:57:37 > 0:57:40'but don't seem prepared to accept the tough conditions attached.

0:57:40 > 0:57:44'And in my view, this means that the great euro crisis

0:57:44 > 0:57:47'is a long way from being solved.'

0:57:49 > 0:57:53When the Athenians invented democracy 2,500 years ago,

0:57:53 > 0:57:56the philosopher Plato predicted disaster.

0:57:56 > 0:57:59I fear that democracy has led politicians

0:57:59 > 0:58:03to out-promise each other, offering goodies that are enjoyed today

0:58:03 > 0:58:06but must be paid for in the future.

0:58:06 > 0:58:10That's been easy during decades of rising living standards,

0:58:10 > 0:58:14but can democracies cope with an entirely new situation where,

0:58:14 > 0:58:20instead of meeting expectations, they can offer only cuts,

0:58:20 > 0:58:22and struggle to manage decline.

0:58:24 > 0:58:29'As a convinced democrat, I hope Plato may yet be proved wrong,

0:58:29 > 0:58:33'but, as a confirmed Eurosceptic, see further troubles ahead.'

0:58:44 > 0:58:48Subtitles by Red Bee Media Ltd