CNN transcript of an interview between Becky Anderson and Stephen Pope
Thursday October 18th 2012
CONNECT THE WORLD
Connect the World Special: EuroZone Crisis
Aired October 18, 2012 - 16:00 ET 20:00 BST 21:00 CET
BECKY ANDERSON, HOST: This hour on Connect the World...
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE (DIANA MAGNAY): The smell of tear gas is thick in the air. The police fire stun grenades, the huge, loud bangs, the protesters throwing rocks, anything, really, they can get their hands on at the (inaudible)...
(END VIDEO CLIP)
ANDERSON: Violence in Athens as thousands of protesters take a stand once again against more painful cuts.
ANNOUNCER: Love from CNN London, this is Connect the World with Becky Anderson.
ANDERSON: As Greeks say enough is enough, tonight a Connect the World special on the true cost of austerity in the EuroZone, just how much is too much? Tighten your seat belts, this is CNN.
Well, as EU leaders try to bring Europe's finances closer together, workers in Greece are back on the streets of Athens once again, furious over tough new cuts that they claim would tear their lives apart. Diana Magnay is in Athens for us tonight. And taxi drivers, doctors, teachers, air traffic controllers out on the streets across the country today. How would you describe the mood?
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Well, there were around 30,000 people in Fantagma Square (ph) earlier today, Becky, all out to demonstrate their hatred of these further cuts just as the government is negotiating more cuts with the troika to try and stave this country off from the imminent bankruptcy.
And you've seen these demonstrations before. I've been here before. There was not as much violence as we've seen in the past, but almost predictably, and this is one of 20 general strikes that have happened here in Greece since this debt crisis began, almost predictably it did descend into violence. Let's take a look.
MAGNAY: Rocks, bottles hurled at police. The usual suspects amongst the crowds.
These are the guys who don't really like us filming all come prepared with their gas masks and their helmets like we have.
Because up close, you need them. It's the photographers who are right on the front lines.
UNIDENTIFIED MALE: OK, when you're ready.
MAGNAY: Always follows a similar sort of pattern. And it always seems to happen outside of the hotel where all the journalists are up in the street in front of the parliament. The smell of tear gas is thick in the air. The police fire stun grenades, these huge loud bangs, the protesters throwing rocks, anything really they can get their hands on at the (inaudible)...
UNIDENTIFIED MALE: (SPEAKING IN FOREIGN LANGUAGE)
MAGNAY: "When at night your brother commits suicide, then you'll remember me," this man yells at police.
He means the unemployment that has lead to so many suicides in this country, angry that the police protect politicians who have let this happen.
I haven't seen this before, and I've covered a lot of these demonstrations. Well, you just get a very dramatic push from one of the side streets and the protesters just marched at police without a care in the world. That's certainly how it looks. (inaudible) up toward the parliament.
But they're pushed back, wiping tear gas from their eyes. As the (inaudible) rest, the crowds disperse. But like the tear gas hanging in the air, the anger stays.
MAGNAY: Anger against our own politicians, Becky, anger against leaders in Brussels, anger against this policy of austerity which they believe cannot be the answer. And you have people asking you on the streets, saying, you know, what is the solution, because this isn't. We have unemployment at 25 percent, youth unemployment at 55 percent. The economy keeps shrinking. This is the fifth year of recession. These endless cuts cannot be sustainable. They cannot put us on a pattern towards growth. They cannot give us a future.
And interestingly, the IMF's world economic outlook recently admitted as much. They said we miscalculated. We didn't realize that this amount of budget saving, this belt tightening would lead to the kind of recessions that it has in Greece and Spain. So some admission from officials that the feeling on the street is that austerity as such is unsustainable, Becky.
ANDERSON: Yep. All right, Di. Thank you for that. Diana Magnay is in Athens for you this evening.
Economists do tend to agree that spending cuts hurt growth. The question is by how much? When is austerity too much austerity? Well, it's a dilemma that even the IMF, as Di said, struggles to answer. She said just last week it admitted it got its sums wrong and now believes that the damage of rising taxes and a cut in spending causes to growth could be up to three times higher in some parts of Europe than previously thought.
Stephen Pope is with me this evening in the studio, a man whose experience in the world of finance stretches across three decades. You're with me throughout this next half hour. So let's just kick off with a question we're posing this half hour.
When is, or how much austerity becomes too much austerity? You're a man who has always said austerity is a way forward. Don't mess around with demand lead growth and stimulus. You must agree when you see those pictures out of Greece that there is a line in the sand we much draw?
STEPHEN POPE, MANAGING PARTNER, SPOTLIGHT IDEAS: There clearly is a level when any government that has been applying austerity sees a certain number of quarters where there is no improvement, in fact it's sinking into further rounds of depression now, that one has to start questioning is the policy correct?
But it's not just a question of are we not cutting enough, are we cutting too much or be spending more. It has to be framed into the entire context of how is our economy functioning? And some of these periphery economies that function within the rigidity of the euro are in a position where the current policy script is not working, because they have no way of making a sufficient devaluation on their economy.
ANDERSON: They were told to do this by the IMF and two other bodies. The IMF just last week saying it got its sums wrong, that's unacceptable isn't it?
POPE: Well, it's very disappointing to know that an august body such as the IMF would turn around and say, no, we've miscalculated. But economics is a social science, it's not a pure science. And it is open to correction and revision, although maybe not to that magnitude. But certainly I think that you can sense the anger of the people. One recognizes that. But it's not enough just to turn around and say, we need growth. Growth is an end game, it's not a policy. What we actually have to find out is what will be the correct policies to prescribe and then determine how are we going to pay for it, because somebody has to be accountable. Because at the end of the day it's all about the money.
ANDERSON: We are going to discuss that as we move through this next 20 or so minutes. To get a sense of just how bad things are in Greece I want you to hear from our senior international correspondent tonight Matthew Chance. Earlier this year he witnessed how the country's middle class is suffering when he visited a soup kitchen. Here are his reflections now on what he saw.
MATTHEW CHANCE, CNN INTERNATIONAL CORRESPONDENT: We visited the soup kitchen in central Athens we were confronted with I suppose the true human cost of the economic crisis in Europe. In this one corner of the Greek capital, there were hundreds and hundreds of people young and old, men and women, who had turned up to get a simple hot meal And I remember thinking what's strange about this is that they're mostly well dressed, middle class people - not homeless, not illegal immigrants, just ordinary Greeks who had no other option. And that was the moment for me that it really sunk in that this crisis was about much more than just debt.
You know, around the world many people see this Greek financial story as a debt problem. People focus on how many billions of euros the country owes to get itself out of debt, but from the point of view of the people on the street it looks very different. You're seeing here in this soup kitchen, people who just a year ago were ordinary European citizens -- they shopped at super markets, they had apartments, they had jobs. They've seen their standards of living drop off a precipice and that's the real Greek tragedy that's being played out in reality across this country.
It was pretty tense capturing the scene. People were ashamed to be photographed there. Some of them were very angry we're there at all. We were threatened at one point. But there was one many, I remember, who agreed to speak to us. His name was Andreas. He was a pensioner, but I remember he hadn't received a pension for months.
ANDREAS, PENSIONER: We're going to make sacrifices, but we're going to survive. We are going to survive, this is guaranteed, because we survive 5,000 years almost. And we're going to survive again. That's all.
CHANCE: The point he was making is that this is certainly a terrible trauma that it's going through, but it will come to an end, that's the hope of many Greek people. And my worry is that that won't be for a very, very long time.
ANDERSON: Matthew Chance with his reflections.
Well, EU leaders as we speak are wrapping up supper in Brussels. Greece front and center, one assumes, is a big question out there, EuroZone does it stay in, does it get out. Do they drop the euro. What's the solution here? Policymakers and politicians haven't got it right and the people of Europe are suffering. So, wherever you are watching in the world tonight tweet me in 140 characters or less I want your solutions to avoid the great global stagnation @BeckyCNN. If you're not on Twitter, send me your thoughts Facebook.com/CNNConnect.
Stephen has tweeted his solution tonight. He says, "EZ," Eurozone, "want to say the euro. If yes, there are four solutions. One, inflate. Two, stimulate. Three, bailout more. Four, agree on euro bounds or else five break up."
Did you cheat? Was that 140 character?
POPE: It is 140 characters. In fact, it's probably less.
ANDERSON: Stephen is with me. This is Connect the World.
POPE: Austerity in Twitter.
ANDERSON (LAUGHES): Austerity in Twitter!
This is Connect the World. A special on the EuroZone crisis. It's 10:10 in Brussels. As I say, no word yet from EU leaders who are gathered there trying to come up with a solution to this crisis.
As they talk, coming up this show. We take a look at Spanish woes as families there battle to stay afloat amid growing unemployment.
Thousands of Greeks protest cuts in Athens and austerity by even harder. We bring you a Connect the World special on the EuroZone.
Greece, of course, not alone in its misery. Rumors abound that Spain may ask for a full bailout just months after a banking rescue that the company - sorry, the country had hoped would save the economy. Unemployment has rocketed over the last two years.
There, have a look at this.
AL GOODMAN, MADRID BUREAU CHIEF: I've been covering Spain's economic crisis for a few years. And since I live in Madrid, I can see the pain it's causing every day. Spanish friends tell me how they're affected by the government's austerity cuts and tax hikes to reduce the deficit. It means they're salaries have been cut, their vacation days reduced, their purchasing power in decline. But it's much worse for many who have lost their jobs in this country with more than 24 percent unemployment.
One man down on his luck is this construction worker who lost his job and now panhandles. Every morning when I drive my son to school, we pass by his corner where he sells packets of tissues. We did a story about him. And another driver told us he gives money to this man, Jose Antonio, because any Spaniard could end up like him.
Last June I met this man, Valentine Garcia, who lost his job as a waiter two years ago. Like a growing number of Spaniards, he gets a monthly food handout from the Red Cross. He agreed to talk to CNN only because he thought the exposure would help him reach a potential employer.
VALENTINE GARCIA, OUT OF WORK WAITER (through translator): I am willing to work at any hour. I have experience in working any shift. I am not asking much.
GOODMAN: But when we checked in with him again this month, he was still looking.
GARCIA (through translator): I don't know. I think it's gotten worse. To go around and see more stores, restaurants and businesses closed due to the situation in the country.
GOODMAN: The situation in Spain is what has sapped the optimism of many Spaniards. On the whole, they're seeing a lifestyle of abundance some began to take for granted slipping away.
Al Goodman, CNN, Madrid.
ANDERSON: All right.
So you've been tweeting me what is the solution, then, to this European crisis. I've got Stephen Pope with me. He's given us his idea in 140 characters or less.
Dyke E Boo (ph), "@BeckyCNN, Bailout and break- up is your solution like here in New York ask those with the means to sacrifice a little. Pay more taxes, cut salaries, etc. from the polls. Can't ask the middle/poor - middle classes or the poor to do it all."
Another person saying, "allow Greece to break away from the EU and let Russian billionaires invest. Investment, not bailouts, will save Greece."
Coming in thick and fast here, one to you Stephen on your five points for a solution. One person tweeting here says, "it's going to take years to do that, Steve Pope."
POPE: It is going to take years. But this is the trouble, many of these people who you see protesting and in states of despair are paying the prices for the sins of former politicians who misled about the statistics, European bureaucrats who took the stats at face value without checking it properly. That's why Greece is now in such a state.
In Spain, there was too much allowance for the banking system to become politicized, so lending was made with a political agenda, not a commercial agenda. And suddenly, once all the cheap money has disappeared, those are the countries who are on the periphery find that they are up in a rock and a hard place situation.
ANDERSON: And that's what we're learning. There is no one size fits all.
POPE: No. And there is no one of those solutions that I put up there that can be taken in isolation. I think it has to be a blend of all of them if the leaders of the EuroZone are deadly serious about preserving this currency bloc.
ANDERSON: Talking about your tweet, of course. We're going to bring that back up when we come out of this short break.
You're watching a Connect the World special on the EuroZone. Coming up, the lessons that Japan might offer. That, after this.
ANDERSON: Welcome back.
You're watching a Connect the World special on the EuroZone crisis. Live from London, I'm Becky Anderson for you.
A boom gone bust: high unemployment, higher debt, Japan knows all too well what Europe is currently facing. Consider these scenes from a report that CNN aired 10 years ago.
UNIDENTIFIED MALE: Osaka Castle is a near 500 year old reminder of Japan's might and prosperity. At its base, an equally powerful reminder of the country's current troubles. This is a tent city of Osaka's homeless living in the park that surrounds the Castle.
UNIDENTIFIED MALE (through translator): I don't have an address so people are reluctant to hire me. If I could work as a day laborer, that would be OK, but there are no jobs now.
ANDERSON: 10 years ago. Well, some economists say that the hard lessons learned then can help Europe now while others warn the continent may be looking at even tougher road ahead.
Alex Zolbert reports.
ALEX ZOLBERT, CNN INTERNATIONAL CORRESPONDENT: It was the boom time of the 1980s, a roaring Japanese economy, a soaring stock market and real estate prices run completely wild. According to some valuations, the grounds of the imperial palace, all 3.4 square kilometers, or 1.3 square miles of it, were worth more than the entire state of California. And when the bubble burst in the early 1990s, it left the country with what many refer to as the lost decades, years of slow growth, rising debt, and consumers who are afraid to spend.
The stock market, once nearing the 40,000 mark, still sits at less than one-fourth of that level. Economists here say European leaders need to take a close look.
RICHARD KOO, CHIEF ECONOMIST, NOMURA RESEARCH INSTITUTE: I hope they understand as quickly as possible that this is no ordinary recession, or it is always...
ZOLBERT: Economist Richard Koo knows Japan's story firsthand. And now he's making frequent trips to Europe to advise officials and business leaders. To keep money moving, to keep the gears of the economy churning in a rare situation like this he says governments must take the lead and keep spending.
KOO: What we learned from the Japanese experience is that if the private sector is no longer maximizing profits, but actually minimizing debt, in that situation if the government also tries to repair its balance sheets by reducing spending and raising taxes, then the whole thing will collapse.
ZOLBERT: Other economists point out that during most of the 1990s Japan was getting tailwinds from a surging global economy, something Europe is not getting today.
KOO: In Japan, the unemployment rate at the start of the malaise was only about 2.5 percent. It went up to 5 percent, right, but real threat of social unrest because people being out of work, being disenfranchised, we never had to worry about that here in Japan while in Europe those worries are very high.
ZOLBERT: Some here in Japan dispute the notion of a lost decade or lost decades, saying yes while growth slowed, unemployment remained low. The infrastructure is some of the best in the world. And with inflation kept in check, the Japanese people never lost their purchasing power.
KOO: Wages and employment continued to grow while prices actually fell very moderately, so in real terms Mr. and Mrs. Watanabe continue to be better off.
ZOLBERT: Do you think we're going to talking about the lost decade that Europe has had?
KOO: I'm afraid so. I mean, they have already gone so deeply into the hole they have to recognize that this is a different disease put in a different diagnosis, start taking different medicines.
ZOLBERT: Different medicines, but no simple cure.
KOO: There is no magic bullet, that's a definite lesson we got from Japan.
ZOLBERT: Alex Zolbert, CNN, Tokyo.
ANDERSON: Stephen Pope is still with me, our markets guru. We've been talking about how much austerity is too much austerity. Stephen, just to underline how bad things are I want you and our viewers to take a look at the latest debt to GDP numbers for Greece, Spain and Italy. These are numbers between 2008 and 2012, that is the Greek number. And when we're looking at, what, a 50 percent rise in debt? We're trying to tell the Greeks that you've got to be austere, you've got to stop spending and that's what happened? You look at the numbers out of Spain and Italy, they're on the same trajectory.
Things are getting worse because the IMF and others imposed these austere measures, aren't they?
POPE: That's right. And I think what you're seeing there is that austerity was imposed upon Greece when the economy was already, shall we say tanking. And that meant GDP was falling. So trying to cut back on the levels means you're actually impairing any chance the GDP has to recover. So in a way GDP to debt, trying to chase a target is always chasing its tail and it's not going to be successful.
ANDERSON: If you were sitting around that supper table where the EU leaders are tonight, given what we've just seen out of Japan and reminded ourselves what happened with that loss or more, what would your message be tonight, because, you know, this one size fits all solution is giving the Greeks real hardship is just not working. What's your message?
POPE: Well, I think the situation with Japan is different, because they had their own currency. They could change the exchange rate to maintain an edge, a competitiveness. Greece, Spain, Portugal and so on have all been trying to dance to an exchange rate that suits the Germans. Now clearly this is not a possible way of continuing.
So if the great and the good around that table, and why they're only meeting for supper, they should have been there all day for breakfast to get this going. Really, they should be addressing - if we really are serious about this, everybody: wealthy and poor, north and south, have to make certain sacrifices. And that means surrendering some sovereignty, going for fiscal union, going for political union. And it doesn't matter whether people's national pride is affronted, they have to give in if there's going to be a mutualization of debt and if there's going to be a massive infrastructure stimulus coming from the wealthy north nations.
So, there has to be quid pro quo on all sides rather than the north dictating to the south and the south backsliding all the time.
ANDERSON: There's a solution for you. We've been asking for solutions on Twitter, tonight, to this European crisis, and one who's just written to me 48 seconds ago, "Becky -- Germany, Holland, France, et cetera drop out of the euro, the pigs -- Portugal, Ireland, Italy, Greece, and Spain are left alone with the euro, they devalue it and grow from there on." I guess that is one solution.
And we've run out of time for you and I to talk for the time being. We'll be going on Twitter. Stephen, always a pleasure. Thank you very much, indeed. @BeckyCNN, keep your tweets coming in.
...Off air POPE advised ANDERSON that he had released papers in 2011 looking easing Greece out of the Euro and for the nothern triple A nations to leave, forming the North European Unit... see "Getting Greece To Go" August 1st 2011 and "Euro's End" September 14th 2011.
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