Michael Portillo's Great Euro Crisis This World

'Arriving at Athens' new international airport

'there's no obvious sign that Greece is in dire straits.

'It all looks pretty normal, but, ten years after joining the euro,

'this country is effectively bankrupt

'and the government has put the airport up for sale.'

I haven't been to Greece for 20 years,

since I came as a government minister,

and Athens just had an old-fashioned airport in those days,

in a different location from this beautiful new one,

and Greece had its own currency, the drachma.

Since then the country has been through an economic boom,

when borrowing was cheap

and the government and the people went on a spending binge.

Now have come the years of bust,

and I believe that Greece's crisis is due to having joined the euro.

'But will the Greeks agree with me?

'I want to find out

'whether this crisis has shaken their faith in the single currency.'

-Prime Minister.

-Hello.

-What a pleasure!

'Will they take my advice and get out,

'and so recover competitiveness with a free-floating drachma?'

Don't worry if I take out my wallet.

I am not in any way trying to corrupt you.

Do you want the euro or the drachma?

Uh-huh.

'Locked into the euro,

'the Greeks are facing drastic austerity measures,

'measures that, some of them believe,

'are being imposed by Germany.'

'Later, I'll go to meet the German taxpayers

'who are contributing to Greece's mammoth bailout.'

You've probably seen the way Greek papers have been depicting you.

How do you feel about it?

'Is this the moment the eurozone becomes more united,

'or will it be pulled apart?'

'It's only when you take a walk through the streets of Athens

'that you get a sense of the situation that this country is in.

'I can't believe that I'm in Europe in 2012.

'It is hard to imagine how such a small nation of 11 million people

'could have accumulated a national debt equivalent to

'31,000 euros per man, woman and child.'

Athens wears the face of recession.

Here's a shopping complex with every business closed bar one,

which is selling its goods at a 50% discount.

Graffiti is universal. Here a bank has been burnt out.

Everywhere are signs of dereliction.

'A quarter of the shops have closed

'since Greece's crisis first took hold four years ago.

'And sights like this have become commonplace.

'Here at this one location,

'800 people queue each afternoon for their daily rations.

'This queue is for migrants, who were the first to suffer from the crisis.

'30 yards away, I see preparations for further handouts.

'This time for Greek people.

'This is a new phenomenon in a country where family support

'is normally so strong.

'Their numbers, which are growing every day,

'have risen to 20,000 in Athens alone.'

There are people who come here, and they have problems...

'Civil servant Dimitra Nousi now runs the food distribution

'for this part of Athens.'

-Hello, everyone.

-ALL: Hello!

How many people will you be feeding here today?

1,250 people daily.

That's amazing.

Yes, the number has been going up, the last months especially,

because of the crisis.

I understand that a few years ago you were, I think,

a civil servant working on the Olympic games.

I am still a civil servant.

So you personally have gone in a short period of time

from managing wealth to managing poverty?

Yes, only in ten months.

-It's a shock.

-A shock.

From European projects, from ambitious breakthrough projects,

to slices of bread for poor people.

Do you find that the people who are coming here to receive the food

suffer a real problem with their dignity?

With their loss of status?

Yes, these people feel it. It's very normal, they feel very embarrassed.

We have to find a way to survive with dignity.

We are not experienced to this kind of poverty,

to start counting the slices of the bread.

The scenes that I have witnessed here

remind me of those black and white photographs

of the American Great Depression of the 1930s.

The fact that it is happening in 21st-century Europe

seems to me incredible.

How did all this come about?

The launch of the euro is the dawn of a new age,

according to the European Central Bank,

as 12 countries take the plunge.

'The euro was introduced on New Year's Day 2002.

'Joining it was supposed to help weak economies like Greece

'catch up with their richer eurozone partners.'

I've come to pay my respects at this shrine to the drachma,

Greece's last national currency.

It gave up the right to print its own money

in favour of joining a broader European dream.

In my view, a weak economy like Greece

should never have shared the same currency with Germany,

the economic powerhouse of Europe.

The weak drachma made it easy to export Greek tomatoes and olives,

but being part of the stronger euro has made Greece uncompetitive

and sucked in manufactured imports.

'And this is just the sort of manufactured import

'that flooded into Greece once it had joined the euro.

'The Greeks went on a buying spree of German luxury cars,

'cars like the Porsche Cayenne.'

This car and the euro were launched in the same year

and their stories are intertwined.

Produced by the technological wizardry of Germany,

the middle classes of non-industrial Greece aspired to own it.

And this car turned into the symbol of German manufacturing might

and the Greek economic bubble.

'To help me to understand just what happened in Greece

'after it joined the euro, I have arranged an appointment

'with a man who has taken a special interest in the origin

'of Greece's debt crisis...'

Hi! Jason, how are you?

Hi, Michael. How are you?

'..economist and hedge-fund manager Jason Manolopoulos.'

Tell me, a lot of people think that the figures to enable Greece

to join the euro were rigged.

You know, the figures on the deficit and so on.

Is that true? Were the figures rigged?

It is a common acknowledgement that they were rigged.

Everybody in the European Commission also knew it.

But again, Greece joining was a political project back then,

rather than a purely economic project.

Describe for me those boom years, after Greece joined the euro,

around the time of the Olympics. What was it like?

You had all these fancy villas springing up,

you had a huge amount of spending in luxury goods,

people taking weekend trips to Paris

rather than going to their local village.

A huge sense of, you know, a general sense of euphoria.

Everybody was happy, going out, Greece had won the football,

the euro, we had the Olympics. It was like a dream come true.

People were allowed to have a lifestyle that they hadn't

enjoyed previously.

At one point in time, in 2010,

there were eight billion of car loans in Greece.

-Eight billion?

-Eight billion.

That was 3.5% of GDP, compared to zero ten years ago.

Would Greeks have been able to buy as many cars like this

as they did under the euro?

Oh, absolutely not.

Through the '80s, the cars on the streets here

were predominantly French, Italian, and Japanese.

And, you know, these luxury cars', or German cars' reputation was not worth the money, ie, too expensive.

The strong exchange rate that Greeks had by being in the euro

helped them, but also more importantly

the availability of cheap credit to finance these purchases

made all these imports of cars come to Greece.

'Greece now had access to the eurozone's low interest rates.

'In just six years, Greece's deficit with Germany

'went from under three billion euros to over eight billion.

'The great Greek euro boom ended abruptly in 2008

'when the global economy crashed.

'Since then, Greece has plunged into one of the most drastic recessions

'in recent international history.'

I've been trawling the internet to see how many luxury cars

are for sale, and the answer is, thousands,

including hundreds of Porsche Cayennes.

And there's one here being sold by Doros of Piraeus.

'Doros Liappis, whose electrician's business isn't faring too well

'in the current economic climate,

'has had the car on the market for seven months.'

Doros, this is a lovely car, but why did you want to buy one?

Can you remember how many euros this cost you?

So, if you do manage to sell it, will you make a big loss on the car?

Now, you're not going to go without a car.

Have you acquired a new one?

HE LAUGHS

-What, this one here?

-Yes.

This is a little bit smaller, but...

HE LAUGHS

..it's a very nice car.

-It's a Mercedes?

-Yes.

So even though you've had to get rid of your lovely big German Porsche,

you end up with a tiny little Mercedes.

Doros, you still have, at the moment, a Porsche,

although you are selling it,

you still have a little Mercedes, a Smart car.

Lots of people would love to be in this position.

Are you in this position because Greece is in the euro?

'It's a feast day, and Doros has invited me to a family dinner

'prepared by his wife Katarina...'

'..and unemployed daughter Eleni.

'Although it's a holiday, his son and business partner Sakis

'is away finishing a job.'

-So, Doros...

-Yes?

..at one time, your electrician's business, how big was it?

And now how big is the business?

Eleni, did you lose your job?

Yes.

I lost my job one and a half years ago.

I was a secretary in a shipping insurance company.

Are you looking for a job?

Yes, I'm looking for a long time,

but I didn't find it yet.

Now there's something I'd like to ask you all.

OK, Doros, here's a choice for you,

-euros or drachmas?

-Yes.

Euros.

Which would you choose?

I prefer euros, of course.

-And Katarina, which would you choose?

-OK, money!

I am touched by Doros and his family's attachment to the euro.

But maybe it's not surprising,

because interest rates were sky high while Greece had the drachma.

Like many here, this family blame the politicians

for the mess Greece is in.

But then, Doros did very well out of public-sector contracts.

Because, if Greek families borrowed and spent to excess,

the Greek government put their profligacy in the shade.

'The results of Greek government expenditure after joining the euro

'can be seen all over Athens.

'Many metro stations received lavish upgrades

'and new stations have been opened,

'expanding the network into the suburbs.

'There is also a new electric railway system

'that rivals anywhere in Europe.'

There's no doubt that new railways and trains like these

helped the Greek economy and enabled it to modernise.

The problem was that most of the equipment

couldn't be manufactured in Greece,

so it had to be imported with borrowed money.

'Next stop, Koropi.'

'It's no surprise that the carriages, engines and signalling equipment

'were supplied by German companies.

'And the money that countries like Germany and France lent to Greece

'also went into keeping these state operations going.

'Each year, the railways alone were losing almost one billion euros.

'But Greece's most notorious public expenditure bonanza

'was on the 2004 Olympic Games.

'Today, eight years after the Olympics,

'all over Athens, buildings and facilities lie unused.

'Meanwhile, Greece is still paying the interest on the 12 billion euros

'that the Games eventually cost.

'Tasos Telloglou is an investigative journalist

'who has written extensively on the financial fiasco

'of the Athens Olympics.'

So what I see now is a place that's deserted

but obviously that cost billions of euros to build.

A lot of money was borrowed.

As you look back on it now,

would one regard the Olympics in Greece as a success?

It was a lot of money spent, with, as you can see,

post-Olympic use that is equal to nothing.

Nothing, in fact.

Yes, it's equal to nothing.

This park is a mirror of a society and a country

that there is always a lack of investigating

the cheaper possibilities.

There is a lot of corruption and clientelism,

where to put our friends to make some money.

Jobs for the boys.

Jobs for the boys of the right party.

Uh-huh.

And this, of course, when the money was cheaper and accessible,

was easy to do, it was easy to manage.

But it isn't anymore.

Tasos, let me put a very straightforward choice to you.

Euro or drachma for Greece?

Euro, because my generation was brought up with the dream that

we were going to have a currency like that, a stable currency.

And the drachma?

The drachma was the currency in which I was paid

when I started working

and I had to pay 25% interest for my credit card, which I don't like.

But your dream, I think, has become a nightmare.

Well, it's a very straightjacket,

but I think Greece anyway needs a straightjacket.

'The yachting marinas on the sea front at Piraeus,

'Athens's port city, give another clue to the story

'of Greece's record-breaking debt.

'Taxes.

'The Greeks notoriously failed to pay them.

'Since the crisis, over a thousand luxury-yacht owners

'have been discovered falsely claiming tax exemptions.'

It's a lovely marina.

There's been a lot in the British press about the number

of yachts that there are belonging to Greek people,

apparently rather more than Greek people declaring high incomes

to the tax authorities. Is this true?

There was a lot of tax evasion in Greece over the period,

and all this cash that was generated had to find outlets

and these yachts were one of the luxury products where they went.

'Across the economies of the eurozone,

'there are huge differences in cultural attitudes and institutions

'that to me make them incompatible as partners in a single currency.'

Now, is this really a cultural thing?

I mean, is it just that Greeks don't trust their institutions,

or is it just that they're not used to paying taxes?

Well, I think it starts from the reverse, ie, Greece has weak institutions

and if...these weak institutions cannot impose a fair tax system.

So let's say you were in the restaurant business,

or the souvlaki business, and your competitor doesn't pay his VAT of 23%

and you do, how can you compete on a commodity product like that?

So you are forced, in some sense. So the Greek system isn't corrupt,

but it is corrupting.

How good is the Greek state at assessing and collecting taxes?

There's no cross-checking, everything is done manually,

there's no IT systems. This was an uncontrollable monster,

nobody really knew what was going on.

I'm getting the impression from you that many of the problems

that Greece has encountered it wouldn't have faced

if it had kept the drachma.

So I have to ask you now, for Greece's future,

the drachma or the euro?

Well, I'm gonna have to choose the euro

because Greece has weak institutions and a corrupt political system,

neither of which will change if you go back to the drachma,

and it will give them access to a printing press

to continue their ways of before.

'So no takers for my drachmas yet.

'Even Jason's not persuaded by my Eurosceptic views.

'I think that to become more competitive,

'a country needs to keep the option of devaluing its own currency.

'Whilst not ideal, the alternative can be much worse.'

'Almost every day there's a demonstration

'against the austerity measures.

'Today it's scientists from the National Institute of Mineralogy.

'They're venting their anger against the trio of foreign institutions

'known as the Troika.

'That's the European Union, the European Central Bank

'and the International Monetary Fund.'

'Their particular ire is reserved for the Environment Minister,

'George Papaconstantinou.'

'I've decided to pay a visit to Mr Papaconstantinou.'

KNOCKS ON DOOR

-Hello.

-Hello, Minister. Michael Portillo.

-Nice to meet you.

What a pleasure to see you. Thank you very much for your time.

'Until recently he was the Greek Minister of Finance,

'which was surely the job from hell.'

I was once pretty unpopular when I was a politician,

people cheered when I lost my seat in Parliament,

but I must say, since I've been in Greece,

I've been shocked by how unpopular politicians are.

There seems to be a real feeling against the political class.

It is impossible for a Greek...

an active Greek politician to walk on the streets today.

-Really?

-Not because they would be attacked

but because it would be very easy

for someone to turn around and call them a traitor.

People are waking up to the fact that there was a bubble

and the bubble has burst

and part of their living standards were not based on solid foundations.

Unfortunately, those that are paying for the crisis are also those

that did not have a...were not responsible for the crisis.

I was chief secretary to the Treasury,

trying to control public spending, and I thought I had things tough,

but you had to negotiate the austerity package here in Greece.

I mean, tell me, how was that for you? Were you sleeping at night?

Well, you were never faced with a situation whereby

you had to take very harsh measures that changed people's livelihoods

and increased taxes and ended up increasing unemployment

and a very tough negotiation for the biggest bail-out package ever,

with an austerity programme attached to it.

It was not the easiest time, as I'm sure you can imagine.

Don't worry if I take out my wallet,

I am not in any way trying to corrupt you.

The drachma and the euro. Which is the future of Greece?

Let me say this, I have forgotten what this looks like.

It was very nice for the past, it's not for the future.

This is the future

and I am surprised you're not waving a British pound.

This would not be our choice either.

In exchange for rescue packages

that eventually mounted to 240 billion euros,

about £200 billion,

Mr Papaconstantinou and his successors

have had to increase taxes,

make savage cuts in government spending

and put many of Greece's national assets up for sale.

We will follow this road,

because this is the only road to be able to save the country.

'To get a sense of just how hard these measures

'are beginning to bite, I travel down to the Port of Piraeus,

'which, like many of Greece's national assets,

'is now up for sale.'

Good morning, good morning.

'Outside the Perama shipyard, I find unemployed ship repairers

'keeping a 24-hour vigil, demonstrating their opposition

'to the government's plans to sell their workplace.'

Why are you standing here now? What's the purpose of standing here?

The public sector?

Who do they want to sell it to?

How many jobs are there here at the shipyard?

And now?

From 6,000 to 200!

About.

Have you still got a job?

You haven't got a job.

So how much money... What did you use to get?

What did they pay in the old days?

Yes.

'The euro is meant to have brought

'the disparate nations of Europe together.

'Their economies were supposed to converge.

'But I suggest that the opposite has happened.

'By many economic indicators, Greece has slid back

'to where it was in 1998, four years before it joined the euro.

'Above the shipyards is one of the hardest-hit areas in Greece,

'the suburb of Perama.

'Unemployment here has now reached 80%.

'Yet welfare cuts and increased health charges

'are compounding the misery.

'The international organisation Doctors of the World

'recently set up a clinic here.'

Good morning, Dr Kanakis.

Hello, hi, welcome.

I'm Michael Portillo. What a very crowded place this is.

'Normally this organisation would be providing services

'in sub-Saharan Africa.'

We are in the middle of a humanitarian crisis.

People with no food, no access to health, even no house.

So, we have no reason to work on Africa, we have to focus here.

-Good morning.

-Good morning!

-Hello, who's this?

-Angelina.

Hello, Angelina, how very nice to see you. George, hello.

How are you? Good to see you.

If you went to the hospital now...?

Much money.

-Any idea of how much?

-More than 100 euro.

100 euros, maybe just for an examination?

Yes.

Was it always like this?

Did you always have to pay money at the hospital?

No, before we were going free and now it's different. It changed.

I understand your husband is unemployed,

what did his job use to be?

-What is his job?

-A carpenter.

-How long has he been unemployed?

-Three years.

Do you and your husband and Angelina have a future in Greece?

No.

'It is only with the help of their parents

'that Lia and George manage to survive.

'Each time the government negotiates another record-breaking bailout,

'the IMF and the European institutions impose yet more

'austerity measures on the Greeks.'

It was here in Constitution Square that the anger and frustration

of Athenian citizens burst forth.

CROWD CHANT

Demonstrators appeared en masse to be baton-charged by the police.

EXPLOSION

SHOTS FIRED

Rioters threw paving stones and Molotov cocktails.

The air was thick with teargas

as the Greek public fought back against austerity.

'These young Greeks resent not only the onerous conditions required

'to remain in the euro,

'but also that they're being imposed by outsiders.

'Some, like these rioters,

'blame Germany as Europe's real power-broker.

'And Greek bitterness is intensified by traumatic memories

'of German occupation during World War Two.'

CROWD: Nazis! Nazis! Nazis!

'But Greeks I've spoken to say they want to stay in the euro.

'I can't help wondering whether they're truly ready for

'the political sacrifices that will surely follow the financial ones.'

It's clear to me that being in the euro

has led Greece deep into poverty and to seek bailouts,

and such dependency on others can cause feelings of injury and insult.

But resentment can cut both ways.

It's time to talk to the taxpayers who are funding the rescues,

including the people who built this car, in Germany.

'I've come to East Germany,

'transformed since the fall of Communism.

'Just outside the city of Leipzig

'is the most advanced car plant in the world.

'This is where Porsche built the Cayenne

'that Doros Liappis is trying to sell.

'90% of the cars here are for export.

'That's good for Germany's balance of payments surplus,

'but bad for the deficits of countries like Greece

'that imported large numbers of luxury cars.

'Advanced technology's got something to do with it, of course.

'But Germany also benefits from sharing a currency

'with countries like Greece.

'These weaker economies pull down the value of the euro,

'which makes German cars relatively cheaper for foreigners to buy,

'whether they're in Greece or anywhere else.'

So you're here to see the Cayenne.

We will bring that car to the customer as soon as possible.

'Because, according to PR manager Heine Von der Laden,

'Porsche's biggest markets are now outside Europe.'

Is the European Union the most important market for Porsche?

No, traditionally the number one is the US market

and nowadays the second important market is China.

So people from China and from Asia, they like especially the Cayenne.

And these cars, for example, where are they going to?

I have to check. Oh, yes, that car goes to China.

'I've seen that Greeks like the Cayenne too.

'In fact, cars are Germany's biggest category of export to Greece.'

Vielen Dank.

'I join some of the Porsche workers

'and ask them about their Greek eurozone partner

'who's been giving Germany so much grief in the last few months.'

If I were a Greek person and I say,

"Look, we need some help, we are in some difficulty here

"and you Germans are pretty well off, you are pretty rich,

"please help us," what do you say to that?

So now I want to offer you a choice for the future of Germany.

Is the future of Germany the euro or the Deutschmark?

Why? Warum?

I don't think that's going to happen soon.

Which do you choose, then?

'Lars Heinrich and his friends typify the optimism

'I'm finding here in East Germany.

'Of course, these young workers

'are themselves beneficiaries of a bail-out,

'German-style.

'That was the re-unification of Germany more than 20 years ago,

'and it cost far more than the rescue of Greece today.

'It followed the collapse of the former Communist regime here in the East.'

'Since 1990, the German government has invested

'almost 1.5 trillion euros in the economies of cities like Leipzig.'

'The Church of St Nicholas has a unique place

'in the story of German reunification.

'I've come with economist Gunther Schnabl,

'who's researched the costs of rebuilding the German economy

'after the collapse of the East.

'After months of peace prayers here,

'huge demonstrations spread into the town centre.'

CROWD CHANT

In 1989 after the service people left the church

and started to gather on this square.

It's mainly how the demonstration started.

From day to day they grew and people started to walk through

the city and around the city on the ring street.

CROWD CHANT

And this monument commemorates those events, doesn't it?

Yes.

'Today, Germany is a united democratic country.

'But, even now, West German taxpayers

'are still transferring money to raise up the East.

'One example of that expenditure is the Leipzig Trade Fair centre,

'opened in 1996.

'It's known as the Messe.'

This is the main Messe building and it's part of the investment

which has been done during the 1990s,

financed of course by Western German money,

and it's part of the economic success of Leipzig.

It's a very, very impressive set of buildings, I must say.

'We've come to Leipzig's annual skills and crafts fair.

'It's a perfect illustration of the emphasis on training

'that gives Germany its competitive edge.

'From what I can see, the local economy is flourishing.

'But making the backward East competitive

'was achieved at a cost that nearly crippled Germany.'

So after incurring the immense costs of re-unification,

how did Germany become competitive again?

So the main channel was via real wage cuts.

So in the mid-1990s, pensions were cut,

in general, social security benefits were curtailed,

and the austerity in the public sector

also was extended to the private sector.

And therefore as a result real wages in Germany

mainly remained constant or even declined.

So for how long has the average German not seen any increase

in his living standards?

For more than 15 years.

15 years without any increase in living standards?

Yes, and they have increased in Greece

and other Southern European countries substantially.

And Germans don't feel too good about that.

Yes. They have brought very large sacrifices.

And of course they are worried that they have to go on

with these sacrifices.

'The Germans' decade of austerity has some similarity

'to what Greece is going through today.

'When the euro was introduced, it did little for most Germans' living standards.'

'I wonder if Gunther regrets saying Auf Wiedersehen to the Deutschmark.'

So, Gunther, I've got here, you'll remember these, some German marks...

These are German marks and euros.

Now, which do you choose for Germany for the future?

I choose the euro for the German future.

Welfare in Europe will strongly hinge on a common currency,

but this needs to be underpinned by the necessary reforms.

'At the fair, I run into Lars Heinrich, from the Porsche factory.

'As a younger worker,

'he's benefited from the recent investment in East Germany.

'His father Gerald, on the other hand,

'lost the steady job he once had, and hasn't worked since.'

What is now being asked of Greece

is really not as big an adjustment

as was asked of the East German people over the last 20 years?

'Despite their obvious frustration with the Greeks,

'the Germans here have all been giving me the same response.

'Without exception, they've bought into the idea that the euro

'is part of a future for which they've already

'made large sacrifices.

'Well, maybe.

'But it's also a measure of Germany's more sophisticated economy

'that it could make such changes

'without the sort of upheavals that Greece is experiencing.'

In the medieval era, two German cities prospered because they

found themselves at the crossroads of great European trade routes.

Then, after World War Two, Leipzig found itself in the Communist East

and Frankfurt in the capitalist West.

Now as I travel between one and the other, there's no border to cross,

but I am exchanging the low-slung car factories of Leipzig

for the skyscrapers of Germany's financial capital on the River Main.

'Here in this cluster of sleek buildings

'is the European Central Bank.

'And, almost next door, the headquarters of Commerzbank.

'German financial institutions have been amongst the largest lenders

'to the Greek government.

'Last year, Commerzbank lost 800 million euros on its Greek loans.'

Guten Morgen. Morgen.

'The bank's chief economist, Jorg Kramer,

'believes the roots of the Greek crisis go back 20 years.

'Back then the Maastricht Treaty set out the ground rules

'for a single currency.'

European Community ministers have signed the new treaty committing

the 12 member countries to closer economic and political union.

'On paper at least, countries signing up for the euro

'had to meet tough criteria on budget deficits and government debt,

'with no bail-outs for spendthrift governments.

'But no-one took any of the rules too seriously.'

How did Germans, for example, get lured into

lending to Greece, do you think?

Well, I think you have to understand the history

of the European Monetary Union.

We had a non-bail-out clause in the Maastricht treaty...

May it rest in peace.

Yeah, but nobody believed it from the very beginning.

Therefore everybody thought, well, we can invest in Greece

and if any problem may pop up in the end,

other countries will bail out Greece.

This was the underlying belief of all investors, not only in Germany.

But it was put into the euro with Germany.

I mean, was this not the most extraordinary mistake?

Absolutely, and the Bundesbank in public said

that Greece is not ripe to enter the European Monetary Union.

So does it follow, if Greece should never have been in the euro,

that it would be best if Greece were now out of the euro?

Absolutely.

Is that the way forward?

With Greece on board, I think it is not possible

to make a fresh start for the eurozone.

I think everybody knows it.

'At last, I've found someone who shares some of my sentiments.

'But aren't the Germans being a bit hard on the Greeks?

'Hasn't their thirst for German products contributed to Germany's prosperity?'

Germany has done terribly well out of this.

The fact is that the euro is a cheaper currency

than the Deutschmark would be, and Germans have benefited enormously.

I've been in Greece and I've seen, you know,

all the trains that Siemens sold to the Greeks,

I've seen all the Porsches that Greek consumers bought,

and this is one of the reasons why people in Greece say, "Look, Germany ought to help rather more

"because Germany's benefited so much from the euro."

I don't buy into this argument.

Of course, when they live beyond their means,

they import German goods, and therefore you see a lot of Porsches, et cetera.

Greece is too small to be able to explain

any significant part of the German success story.

'But the repercussions of Greece's debts

'are certainly having an impact.

'Some Germans, seeing the riots on TV, are beginning to lose patience.'

Guten Morgen! Wie gehtst?

Thank you, thank you. And yourself?

How do you feel about giving more money to the Greeks?

Ja, ja, not good at all.

'Andrea Ypsilanti is a leading member

'of the Social Democratic Party.

'She was once married to a Greek,

'and knows her former husband's country well.

'I want to ask her about the worsening feeling between Greeks and Germans,

'but first, I have a question about the protesters from Occupy.'

I'm very struck that they apply for permission here.

-Yes, it's very sweet, isn't it?

-It is, yeah. Extraordinary.

You see, we'll never make a revolution,

because we'd ask before if we're allowed to do it!

Well, right now, the social peace isn't going very well, is it?

-No.

-I mean, Greeks are burning German flags,

-Greeks are being very rude about Germany.

-Exactly.

Doesn't it worry you that this euro is bringing a lot of dissent?

Well, I think a lot of countries have dissent in their own countries.

When I do my speeches, when I do my talks, I hear people saying,

"Well, it can't go on like that," but they cannot see,

and that is the problem facing them,

they cannot see who is going to give the answer.

Because the Greeks do not trust their own parties,

their own political governments, any more.

How do you react to what's happening in Greece now?

Well, we have a parted discussion in Germany.

One part of people influenced by a big newspaper,

saying we can't put any more money into this country,

they have to save, they have to get their economy moving,

they have to lower their wages, they have to cut their pensions,

and of course there is another part of people who see that

they cannot cut their spendings any more,

I mean, they're on the limit,

and if you don't want to produce a riot in Greece,

you know, you have to one day say, "OK, finish, stop."

So what's your view?

My view is that they really cannot go on

with their austerity politics, you know.

We have to give them a chance to pick up their economy any more.

And they are really on the limit.

Here in the economic powerhouse of Europe,

I've learnt something of the dilemmas facing the Germans.

They're thought to be very wealthy,

but after years of pay restraint many don't feel rich at all.

They believe in discipline within the eurozone,

but they don't want to be thought authoritarian.

They feel solidarity with poorer Southern Europeans,

but they don't want to throw good money after bad.

They're willing to help out,

but not to be drawn into permanent subsidies.

'Frankfurt may be the financial heart of Germany,

'but the political power still lies in Berlin.

'Officially the European institutions

'make the rules for the euro's future.

'But many suspect that the real decisions are made here.'

I'm in Berlin to meet

one of the most powerful men in Europe, Mr Wolfgang Schuble.

He doesn't actually normally dress like that

but that's the way he's been depicted in the Greek press.

And his boss, Angela Merkel, gets the same treatment.

I wonder how Mr Schuble feels about that?

Morgen!

I'm really looking forward to this meeting.

Wolfgang Schuble really is one of the key figures.

He's the guardian of German monetary orthodoxy

and he's the scourge of the Greeks for their profligacy

and failure to pay their taxes.

Guten morgen. Ich besche Herr Minister Schuble bitte schon.

OK. Come in, please.

Danke.

You've probably seen the way that some of the Greek papers

have been depicting you.

And indeed, the way they've been depicting Angela Merkel.

I mean, how do you feel about this?

Do you really think that with the austerity measures in Greece,

Greece can ever recover?

A number of European leaders have commented that Greece

should never have been in the euro.

Does it not follow, logically,

that Greece should not be in the euro today that actually

things would be much easier for the euro if Greece were not a member?

Do you feel that democracy is a casualty of this crisis

or indeed of this system?

From Berlin I'm going to go back to Greece,

the place where the impact of policies made here is really felt.

Since I was last in Athens, a lot has happened.

The Greeks have done a deal with their creditors

to write off vast amounts of debt.

That's enabled them to borrow more from the European Union and the IMF

and that way they've been able to pay interest on old debt.

They've cleared a number of hurdles but my feeling is,

they've got many more yet to scale.

'I'm back in Athens for an interview with Lucas Papademos,

'the Prime Minister appointed caretaker last November.

'For now, the riots have ceased.

'But real incomes are still falling,

'and almost one in ten people here

'are now taking some form of hand-out, food or medicine.

'The huge sacrifices being made here are not just financial.'

'Dimitra Nousi is still administering the provision

'of food supplies in the city centre.'

Has anything changed since I was last here?

There are more people asking for help.

There are more families who come here asking for

a plastic bag of supermarket products for home.

These people do not feel as ashamed as they used to feel before.

You're seeing the hard end of what's happening in Greece today,

and it is happening under the euro.

So I have to ask you, for the future,

would you choose the euro or the drachma?

I prefer euro, but controlled by another European policy,

by other politicians maybe,

by another political mentality that is closer to the European culture.

Many things that have been happening in Greece recently

have been dictated from outside Greece,

have been dictated by the European Union.

-How do you feel about that?

-We belong to a union...

How do you feel about that?

Inevitably some things are dictated by outside.

You don't mind that?

It's one of the rules of the union. I think everybody has to admit it.

The Prime Minister in Greece at the moment was not elected,

he was appointed.

How do you feel about that?

Uh, I don't feel very badly about that.

I cannot say simply that he is appointed.

It is not a violation of our institutions.

There is a kind of approval. We know that. We feel that.

I think it's a kind of, uh,

consensus that exists in Europe and in Greece as well.

'It's a sign of the times that,

'like its financially challenged neighbour Italy,

'Greece has been governed by an unelected Eurocrat.

'Lucas Papademos was also once governor of the Greek Central Bank.

'He was appointed Prime Minister to direct Greece's compliance

'with the tough conditions set by its foreign lenders.'

-Prime Minister.

-Hello. Very nice to meet you.

What a pleasure! Thank you so much for seeing us.

-Thank you for coming.

-Thank you.

Now, take your seat, over there. I'll take my usual chair.

'His five months as Premier haven't been comfortable.'

Well, Prime Minister, I'm not sure that I envy you your job.

You've had a very difficult time indeed, haven't you?

I have to agree with that. It's been a very challenging period.

Where will the growth actually come from?

What will enable Greece to become more competitive?

We're already implementing significant and far-reaching reforms

in the labour market that will improve its efficiency

and restore cost-competitiveness.

As Europe moves forward to ever-closer political union,

how is the democratic deficit going to be plugged?

Uh, how can you set up a democracy at the European level

when there isn't really a European people?

How do we deal with that issue?

For a country that participates in a monetary union,

inevitably there is a certain loss of autonomy of economic policy.

I would not call this a loss of democratic control.

So governments are accepting, I would say, in a democratic way

this loss of autonomy,

because it is necessary for the efficient function of monetary union,

which is presumably accepted because of the benefits it entails.

But if you are losing your autonomy at the national level,

don't you have to establish a new democracy at the European level?

And that...that's what seems to me incredibly difficult to do.

If you are accepted by the people I would not call it, uh,

loss of democratic autonomy, the same way that in a given country,

authorities have a certain power because the people have decided

to assign these powers to this authority.

You have a debt that is vastly more than 100% of your economy.

Can I not tempt you to go back?

I think this is my signature. Yes, it is.

But I wouldn't go back to this, although it is a beautiful bank note.

Uh, the Greek people are suffering, and it's true,

they have made many sacrifices over the past few years.

But more than 70% do support

the continuing participation in the euro.

'I have been surprised by how consistently everyone I have met

'on my travels has disagreed with me about the future of the euro.

'To me, the crisis exposes

'the fundamental economic and cultural incompatibilities

'of the richer North and the weaker South.

'To them, that's a challenge for which

'they're seeking political solutions,

'that I fear may lead to an undemocratic Federal Europe.

'I want to put my concerns to two people I met last time,

'Jason Manolopoulos and Tasos Teleglou,

'and also to the outgoing Socialist MP Eva Kaili.'

To have a democratic control, that would require a European people,

but there isn't a European people, we're still very much nation states

and we focus upon our own national political situations.

So how can this so-called democratic deficit be filled?

They have to really find a way to combine North with South,

they have to let people realise that this is a union

that puts people first.

The way to face it is to realise that we have to create

a different plan inside the eurozone.

It has to work, we have to make it work, we're trying to.

Germany wants it, France wants it, I do think the UK will come back.

Do you know the expression, "over my dead body"?

THEY LAUGH

Your one, I know.

Jason, where are you on this?

The democracy we had over the last 30 years

didn't produce much for the country, and left us in a dismal state,

so I'm not sure the democracy we had, um...

served the Greek citizens in a good form.

So you don't really feel nostalgic for Greece's modern democracy?

Greece, not at all, no.

If people associate democracy with failure,

that means they maybe they won't love democracy very much,

they won't defend democracy.

But for Greece at this point in time it's the lesser of two evils.

So let's get our shop into shape.

Since we haven't been able to control the state

and make Greece now a fully functioning capitalist economy with,

you know, creating jobs and so on and so forth,

we might as well take this.

I think there is only one answer, which is the federalisation,

even deeper federalisation, like the ancestors of the European Union

have dreamed of.

I don't see any other technical or political solution.

The European Commission should be a kind of European government,

which I don't think...it's something awful for British ears.

Oh, it's awful for British ears, yes.

Europe will face a dilemma,

that's like the pill you have to take from the doctor.

You either swallow it or you die.

And if you want to compete with the Chinese, the Asian

and the North American markets, you have to go for this federalisation.

'The views expressed by my Greek friends

'are reflected in opinion polls across the eurozone,

'where the majority support the idea of a more centralised Europe.

'And yet to me they do so without any notion of how this new Europe

'would work as a democracy.'

'Throughout the continent, governments are faltering

'as they face public opposition to the austerity measures

'and now the voters of Greece and France

'have punished the politicians that tried to impose them.

'The people want the euro

'but don't seem prepared to accept the tough conditions attached.

'And in my view, this means that the great euro crisis

'is a long way from being solved.'

When the Athenians invented democracy 2,500 years ago,

the philosopher Plato predicted disaster.

I fear that democracy has led politicians

to out-promise each other, offering goodies that are enjoyed today

but must be paid for in the future.

That's been easy during decades of rising living standards,

but can democracies cope with an entirely new situation where,

instead of meeting expectations, they can offer only cuts,

and struggle to manage decline.

'As a convinced democrat, I hope Plato may yet be proved wrong,

'but, as a confirmed Eurosceptic, see further troubles ahead.'

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