The Diane Rehm Show , May 11, 2012
MS. DIANE REHM
Thanks for joining us. I'm Diane Rehm. Twin
suicide bombings in Syria kill at least 55 and injure hundreds. Voters in
France and Greece oust incumbent leaders and Russia clamps down on protests of
Vladimir Putin's return to the presidency. Joining me to talk about the week's
top international stories on the Friday News Roundup, David Sanger of The New
York Times, Susan Glass of Foreign Policy magazine and Matt Frei of the UK's
Channel 4 News
REHM
Sarkozy .. had supported the compact to
increase fiscal discipline in the euro zone. Now you've got this conflict in
outward thinking on the part of Angela Merkel in Germany and Francois Hollande.
SANGER
it was only a matter of time before the
question of whether austerity was the right way to go became a ballot
box issue. And last week was the time. It was the time in France and it was
really the time in Greece, as we'll get to in a moment.
But in the end, Hollande's victory, which
was narrow but decisive, indicated that the French people were quite worried
about the direction Sarkozy was going in the austerity movement and that he was
doing it in conjunction with Germany.
And so now the question is, what happens
if France splits away from the approach that Angela Merkel is taking for
Germany. (DO- austerity measure) And of course, Germany is
the one who's bankrolling all of this -- much of this bailout.
REHM
Harvard economist Ken Rogoff does not see
the election of Hollande as a rejection of austerity so much as rejection of
Germany's influence in the euro zone and its leading role in the drive toward
austerity in the region.
FREI
I think it's a little bit of both. .. what's essentially happened in Europe is
that the Germans 60 years after the Second World War were dictating
economic terms to the rest of the continent, whereby Greeks and to some
extent Spaniards and Italians started to feel like there were colonies
within the euro zone. Politically,
this is just not viable. As David
said, we saw the explosion at the ballot box.
If you look at unemployment rates, in
Spain, 50 percent amongst young people, in Italy, 36 percent, in Greece, 52
percent. All the extremist parties have benefited whether on the right or the
left from the elections that we saw in the last week. Now this is just
something that cannot continue.
Although it was said in Germany beforehand
that Francois Hollande would be a disaster for the austerity package that
Germany has come up with, .. Angela Merkel is beginning to flirt with Francois
Hollande in a way that she would never have imagined because although
Germany has the financial clout it doesn't have the political clout
or conviction...
It doesn't because it needs France together.
The Germans don't like doing stuff by themselves for obvious reasons. The ghosts of history are knocking on the
door.
They want to have the cover of France. They
need to do it together with the French. The
German position has weakened.
If the Greeks are caught between austerity
and their own people … the German electorate doesn't like the idea
of anyone in Germany bankrolling Greek debt.
GLASSER
Merkel, as a politician, is perhaps in more
trouble than any of the newly elected leaders in France
But it didn't just start this week with the
elections in Greece and France. What I'm struck by is actually Europe has been in a period of
extraordinary political turmoil following and related to this
economic turmoil .. The government
just fell a few weeks ago in the Netherlands.
FREI
Eight governments in one year.
REHM
But, you know, what does this mean for the
United States and austerity here?
GLASSER
The bottom line is that the EU is the
largest trading partner of the United States. .. and it is the bedrock upon which all of our
international security arrangements are built
SANGER
President Obama .. did not do what
President Clinton did during the Asian crisis in 1998 where the U.S. was the
central player in going in to do the rescues and then brought the IMF in.
In this case, President Obama said this is
first and foremost the euro zone's problem. If you need outside assistance you
do it through the IMF and the United States will cooperate. And did in fact
increase its contributions to the IMF but kept this at some remove.
And he did this as part of a broader
strategy of forcing allies who have a more direct interest in the
outcome of a particular problem to go confront that rather than go deal
with the United States. You saw it in Libya when he wanted NATO and the Arab
League to take a -- I could go on with many other examples.
So now the question comes, if they didn't
pour enough money in soon enough to stem the (Euro zone) problem early on and
let the austerity packages simmer and result in these kind of political
backlashes, .. are we going to say that
the right way to go was the way we handled the Asian crisis.. ?
FREI
But there's a problem here as well, .. to
get congress to approve sending large amounts of money .. zero chance. (DO- deficit)
Secondly, the Asian crisis .. was a much
easier thing to handle because you were dealing with fewer countries and
there were just fewer elections around. there was not a common currency. So, the euro crisis .. is so utterly fiendish
and complicated.
And it comes back to the ultimate problem, ..
when you're asking different economies and different populations with
different electorates and governments to basically pull together on the
same project, unless you have a genuine union like the USA, it's not going to happen.
SANGER
in France people were choosing between two
governments. In Greece this was basically a referendum on are we going
to continue on the austerity? Overwhelmingly the answer was no, some people reaching
for a far right group, some reaching for a far left group. The result is that
right now they have no government.
in the next election, they're suddenly
going to have to choose about what it is they want to do. All this election
last week was about what they didn't want to do.
Well, there is one option that is going to
be heavily debated in Greece right now, and that option is to leave the Euro,
to go back to the drachma, the old Greek currency, and not have to live
underneath the restrictions that the rest of the Eurozone puts on Greece.
it gets Germany and France and everybody
else out of their business. The difficulty is, somebody has to lend them money
to pay back their debts, or they go into a complete, less-managed bankruptcy.
FREI
Greece is huge problem, but it's not the
only problem,
French banks, especially Credit Agricole,
which is one of the largest banks in France, is massively overextended in the
Greek economy. So that's where you see a
fuse going from Greece straight into the French financial sector. Spanish banks
are on the brink as well. Italy is a crisis again waiting to erupt. So it's a
little bit like one of those south California wildfires. You put it out in one
area, and it starts in another area.
