Browse content similar to 25/12/2012. Check below for episodes and series from the same categories and more!
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This is World Business Report. 1 euros a go predictions were | :00:25. | :00:31. | |
widespread that Greece would leave the eurozone. -- year ago. Are we | :00:31. | :00:35. | |
at the beginning of the end of the eurozone crisis or is there a lot | :00:35. | :00:45. | |
:00:45. | :01:01. | ||
more to come? Thank you for joining us. From an American perspective, | :01:01. | :01:06. | |
you were once an adviser to the White House on these affairs, do | :01:06. | :01:11. | |
you feel that the steps that have been put in place in the eurozone | :01:11. | :01:16. | |
are probably a long way towards say e to | :01:16. | :01:22. | |
say as an outsider to this it looks to me like the political theatre is | :01:22. | :01:26. | |
very good. Political theatre accounts for a lot, but | :01:26. | :01:31. | |
fundamentally the market believes that the ECB can buy it all of the | :01:31. | :01:38. | |
Italian bonds, Spanish bonds, everyone else... The Germans in | :01:38. | :01:42. | |
particular at do not believe the ECB have that mandate. They have | :01:42. | :01:47. | |
given permission to buy a few of these bonds in the margin. | :01:47. | :01:50. | |
think there are underlying misunderstanding staff have not | :01:50. | :02:00. | |
been tested? -- that have. They are going to be tested. Would you agree | :02:00. | :02:03. | |
with that? with that? misunderstandings between member | :02:03. | :02:13. | |
:02:13. | :02:14. | ||
countries? countries? know. The European Central Bank until now has | :02:14. | :02:19. | |
not used this instrument. That said, I think this crisis is not solved | :02:19. | :02:25. | |
at all. It is a political crisis mainly. What we need to do, we need | :02:25. | :02:33. | |
to go as fast as possible into a genuine economic, fiscal and | :02:33. | :02:37. | |
political union. Including a common bond market in Europe. These | :02:37. | :02:41. | |
problems have not been battered by the European leaders. For the | :02:41. | :02:50. | |
moment markets are quiet, but this crisis is not soft at all. Would | :02:50. | :03:00. | |
you agree that what is needed is much more greater integration? -- | :03:00. | :03:09. | |
not solved. I would not agree with that. I would agree the crisis has | :03:09. | :03:17. | |
not been resolved. It has been pacified. The ECB has made | :03:17. | :03:26. | |
speculation against bonds. This crisis, the underlying cause has | :03:26. | :03:36. | |
:03:36. | :03:36. | ||
never been economic, it has been competitiveness. There are vast | :03:36. | :03:41. | |
imbalances between countries on the periphery. The way it has been | :03:41. | :03:45. | |
resolved in practice is by destroying wages in peripheral | :03:45. | :03:54. | |
countries. The spreading the risk of debt, one country issues debt, | :03:54. | :04:00. | |
all of them become responsible for paying it back, is that a solution? | :04:00. | :04:07. | |
Not really. It is a problem and Europe does need a fiscal mechanism | :04:07. | :04:17. | |
:04:17. | :04:17. | ||
but the real issue is to produce balances. The imbalances do not | :04:18. | :04:22. | |
come from the peripheral countries, they come from the core. Germany is | :04:22. | :04:27. | |
as much a problem as it reform countries are. Explain the current | :04:27. | :04:35. | |
account differences, why is it important? Competitiveness is the | :04:35. | :04:43. | |
key. Even if Greece was to default 100% on its debts, it cannot be | :04:43. | :04:50. | |
competitive in the context of the road today. They need to devalue. - | :04:50. | :04:59. | |
- the euro. They need to become more price competitive. I think the | :04:59. | :05:06. | |
humanitarian issues will compel The key is to understand the human | :05:06. | :05:11. | |
cost. More and more children admitted to Athens hospitals with | :05:11. | :05:17. | |
malnutrition. We see companies saying we are not going to give | :05:17. | :05:21. | |
chemotherapy to grace any more the . As | :05:21. | :05:25. | |
the humanitarian problem gets worse, politicians will begin to say, | :05:25. | :05:32. | |
which is more stable? Staying in the euro or dealing with the | :05:32. | :05:42. | |
:05:42. | :05:44. | ||
humanitarian issues? Germany Burma handover cash endlessly. -- Germany | :05:44. | :05:50. | |
will not hand over. Could integrated politics solve that | :05:50. | :05:56. | |
problem? If you have a larger European budget you can develop | :05:57. | :06:05. | |
more of these policies in a country like Greece. I think that the more | :06:05. | :06:09. | |
Europe, the larger the Budget, the European budget is only 1% of the | :06:09. | :06:19. | |
is 24% of the American GDP. That is the real source of the crisis. | :06:19. | :06:24. | |
Behind the euro there is no state of ferrety, there is no bond market, | :06:24. | :06:30. | |
there are no common policies. -- state autho state authoe can | :06:30. | :06:35. | |
exist without a currency, there are many examples of that, but a | :06:35. | :06:40. | |
currency cannot exist without a state. We have to develop that as | :06:40. | :06:46. | |
fast as possible. Otherwise it is the end of the euro. Do you agree | :06:46. | :06:51. | |
that economic reform could change this imbalance in competitiveness? | :06:51. | :06:57. | |
I would agree with that. Let's talk about the kind of reform necessary. | :06:57. | :07:06. | |
Germany has consistently undershot its targets for inflation. The | :07:06. | :07:16. | |
:07:16. | :07:17. | ||
cumulative gap over the last ten years is outstanding. They are | :07:17. | :07:22. | |
trying to crush of wages and living conditions in the south. That is | :07:22. | :07:30. | |
not right. The adjustment must fall on surplus countries, that is where | :07:30. | :07:36. | |
it is most easily dealt with. The European Monetary Union is imposing | :07:36. | :07:46. | |
:07:46. | :07:47. | ||
all of the costs on the deficit countries. It is an unbelievable | :07:47. | :07:54. | |
situation. You talk about more political integration, can it be | :07:54. | :08:01. | |
achieved when you have a profound differences between France and | :08:01. | :08:07. | |
Germany? How can Germany helped to lower costs of the reforms in a | :08:07. | :08:13. | |
country like Spain? The only way to do it is by the neutralisation of | :08:13. | :08:22. | |
debt. That is the solidarity we need. Mariano Rajoy and do whatever | :08:22. | :08:28. | |
he wants, but if he is confronted by interest rates of 5% -6 %, he | :08:28. | :08:35. | |
cannot do anything. The average interest rate in the US at the | :08:35. | :08:45. | |
:08:45. | :08:53. | ||
moment is 5%. We have to solve that. You are shaking your head. It is | :08:53. | :08:58. | |
never going to happen. It would cost the Germans 50% of their GDP | :08:58. | :09:04. | |
to do a bail-out of the entire eurozone. That is ten times the | :09:04. | :09:11. | |
Marshall Plan that Americans did for Western Europe. I understand. | :09:11. | :09:17. | |
From a German point of view, it means them taking the financial | :09:17. | :09:21. | |
responsibility for the risk taking others are incurring. I do not see | :09:21. | :09:25. | |
the German public ever agreeing to clearystal | :09:25. | :09:30. | |
clear on that point. The other thing, inflation would be a | :09:30. | :09:36. | |
solution from the point of view of almost every eurozone state apart | :09:36. | :09:45. | |
is worth watching. Fin land is saying, maybe we should check out | :09:45. | :09:55. | |
:09:55. | :09:55. | ||
of this thing. -- Finland. This is the point, both sides cannot agree. | :09:55. | :10:01. | |
How optimistic are you about the eurozone? I am still optimistic. | :10:01. | :10:11. | |
:10:11. | :10:13. | ||
what is necessary. They do not want to lose the euro. In my opinion, at | :10:13. | :10:21. | |
the end it is the pressure of the markets next year and 2014, who | :10:21. | :10:25. | |
will oblige the German political leadership to go into that | :10:25. | :10:35. | |
:10:35. | :10:39. |