Eurocrisis Event

pressure um good guys I’ve dr. Liddel chair the political science department and I was asked to talk today or deceive me a little bit about the European Union and what’s going on I had put together a presentation that I ended about three weeks ago to a group called foreign policy association of Harrisburg on the euro zone of the euro crisis but it’s very much kind of related to what you know understanding what’s going on in Europe and some of the you know crisis and crises that are you know meshing York in Union in the European states do center around the euro so I’m not certainly going to go through this another there may be a couple kind of points that I made click to the kind of maybe highlight a couple things a couple ideas you might kind of keep it open you know as a discussion as it says on there and I have to you know give a shout out to the very nice poster put together here prices in Europe as well as the existence of the European Union a pretty dramatic stuff the existence of the European Union basically all say your meeting is going to be around that’s not going to wear away anytime soon but there certainly is a crisis all right and that’s revealed you know in the kind of daily reports of protests and greece and spain and portugal just in the last you know last week or so and this has been going on for now several years so what i want to do is maybe talking a little bit about you how do we get to that crisis point where we see the kind of fracturing and the protests and certainly the kind of volatility and instability political and economic in Europe and again it can be just a very loose open discussion too so we have questions just go ahead and raise your hand ask kind of go go from there so when I end up again kind of thinking about how it would present a topic to this group you know I came up with the idea so how did we get here and those of you who are talking in with Talking Heads fans you know life and more time so how did we get here yeah it’s kind of a to play I’m just through the weirdness and an abstract of life you know listen to the lyrics or try it on similar hard to make sense of them really in some ways that’s the whole point it’s hard to make sense of this because there are many layers and many levels to trying to get wrap your mind or if you will around this crisis but the subtitle was the rise of decline and the rise of the Cline of the euro because there have been multiple crises over the last you know 20 odd years since the European Union and the euro were launched and you know always a good starting point is 1991 clearly there were lots of discussions prior to nineteen ninety one about you know a European Community their community of course existed prior to that but this 1991 date the Treaty of Maastricht so-called treaty on European Union kind of launches what we today call the European Union and it launches the Europe final of the year you know take another 10 years to kind of physically come into effect with the actual currency and coins 1991 is the start of that and that was about the time that I was in graduate school and searching for a topic for my kind of thesis and you know the rapidly kind of transforming Europe was just literally unfolding before my eyes and it was raising lots of interesting questions theoretical questions which is practical questions you know how does this thing that actually work right this European houses euro actually going to function all right so I was very interested in just kind of thinking about a topic and kind of exploring this kind of came into it at my own I on undergraduate kind of thesis and thinking about where we’ve covered the point is is that over those 20 years from 1991 to where we are today there have been repeated kind of crises and moment of crisis and you know the lesson to be learned is that despite the fact that this is probably the biggest crisis in some ways that they faced in 20 years all of these prices have been overcome right not without a lot of pain and discomfort and all that a lot of summitry and high politics not without you know Germany under the microscope are the Germans going to act like Germans again you know start you know demand you know the friends always kind of scrambling you kind of you know get their head in the camera and say work don’t forget about us and certainly some of that you know north south division within your north penn reps and by germany and maybe some of the

scandinavian countries of the netherlands and what have you in the southern countries the other greece’s of the Portugal’s in spain’s middle east of the european we’ve seen this all before there were these divisions and these divides and the conflict between you know germany and its kind of dominant political and economic power and voice of european union may be the lesser power in their people we’ve seen this before the British were early parts are early members of this emerging crisis but you know once they were kind of ejected from the emerging eurozone in the early 1990s they’ve been pretty much an outside and somewhat remain an outsider this debate we’re really talking about kind of the core of Europe the continent of Europe and kind of the core members of the European Union um gonna jump ahead here the nice as I mentioned the 1991 Day 1991 date it’s always very important remember like so how did this thing get creative all right and it’s important to understand again the historical context okay Europe was divided as we know the Cold War right you’re all full ski polski students at one point i knows Nova Cold War history but it does come to an end in 1989-90 1990-91 it’s right in this kind of two three-year period that the Europeans themselves are kind of face with their kind of a major price crisis of identity like what does it mean to be in Europe right and the answer really for many of them was you know it’s the European community / now going to be called the European that was the answer to their identity crisis I mean up until you know pull more ended them in Europe was essentially occupied and controlled and in some ways limited in its options for developing its own identity right they had their nice little cozy western european club of countries and there was a european community kind of building up but now in 1990 1991 was really in the hands of the Europeans themselves to decide their future and decide to fake right the soviet union and you know essentially imploded into russia russia that of course retreats kind of into you know a small stature kind of status for a lot of a frank good thank you are you joining us when i do when we come to a clock starting a little late anime club me dr. Hoffman come philosophy thank you hey so the Europeans have this kind of moment when they really have their own future their own destiny in their own hands fortunately they have been talking obviously about you know turning the European community into something more bigger or powerful integrating their economies creating a currency at URL you know that would kind of match that but it all comes together in 1991 with the Treaty of austere and there were a number of reasons why it all came together some of those are economic I mean the basic economic arguments you know why the why a single market at a single currency are good for Europe right and of course it’s good for business it’s good for trading it’s good for investment it reduces exchange rate instability between the European economies and as they’ve got tighter and tighter and integrated economically and financially over you know many many years the realization was that you know why would we have a separate currency for the Netherlands for Belgium for Germany for Austria for Italy for Spain I mean imagine this scenario here in the United States of every of our 50 States every single one had their own currency that every time you cross the bridge into jersey you would have to exchange it some you know to bid little financial institution across you know Commodore bearings and you know I have a hundred dollars to exchange and they’re going to charge you you know five five percent for five bucks for that all right well it’s inefficient it’s bad for business it’s bad for tourism it’s bad for consumers it just didn’t make any economic sense and if you’re talking about you know hundreds of billions of dollars of exchange of goods and services you know you’re talking about real money that one by creating single currency so there are many business you know business groups and economic groups has said you know we need to do this the time is right but of course the time wasn’t right until kind of the political moment came and again clinical moment is the end of the Cold War and the idea that Europe now has a chance to kind of craft and create its own you know its own future its own destiny which you know to their credit the leaders of that time especially german chancellor at the time and Helmut Kohl and Francois meet Sarang the president of France I mean these are two guys who understood kind of the historical moment right these are people who had grown up in wartime who understood you know the history of

Europe is one of conflict in war and this was their moment their chance to really truly kind of cement these nation states and europe into something bigger and that would be the european union and kind of the mechanism for kind of linking them together would be the single currency the euro you know Helmut Kohl famously at the time said in 1991 as they were talking about you know this whole European monetary union project and the European Union or broadly said you know political and economic monitoring are two sides of the same coin right we need to unite Europe politically that would be the European Union and we need to unite Europe economically and that would be the euro all right and that would be the way to kind of fuse Europe together kind of glue it together bind it together forever and forever at least maybe they thought all right I’ll get your question in a second the other key part of this was always Germany right the German flushed all right the German question is can be framed in many different ways but the basic way to frame it always is you know what do you do about such a big and powerful country in the center of Europe and the answer was lock it into the European Union and most Germans agreed this is fun and this is a good idea the German leadership at the time said this was a way to kind of show good faith right to Europe and to the future of Europe and kind of overcoming the final divisions of Europe right and now those Eastern European would quickly kind of latch on and connect themselves and now we’re representing Poland in the European Union simulation class which you know when I they first taught this class you know Poland wasn’t part of the European Union simulation but now we have it the last point that I’ll get open enough for quick question was one of the interesting things to think about today in understanding the crisis is that there really seems to be kind of a big disconnect with increasing disconnect between and a mass public opinion and elites appear one way of understanding you’re up in the European Union is to understand that the European Union was always very much a top-down kind of project a political project understood by elites understood by political and economic leaders and kind of foisted upon you know the masses and public opinion was generally you know mostly if you looked at public opinion polls favorably inclined to a lot of what the European Union was about a so-called European project but they weren’t really always kind of asked their opinion about this now of course we have increasing use of referendum in Europe and you know famously in 2005 you know the French and the Irish said no to the European Union developing Constitution that was an early indicator trouble to come because if you can’t rely on the public support for this project in the long term it’s probably it could be doomed to failure right but back in 1991 they’re bringing other word there were no there was no kind of referendum or approval from the people and was this was imposed upon Europe and today this arrangement this understanding where you know at least NASA’s work out of in agreement maybe kind of frame and some argue is actually coming to an end and when the public support is now perhaps gone for this euro and European Union project it does spell certainly I’m not quite saying the existence of the European Union but it does spell again difficulties in trouble right so you have to convince the public you know what why is this really good I mean if you’re an average brief citizen and you’re being asked you know to cut your pensions and cut in your social security and your loss of your job and you know higher tuition rates certainly loss of income and twenty-five percent unemployment you know you’re scratching your head saying you know this may sound good twenty years ago and in fact what’s good for Greece for a while now you know okay take any kind of public opinion poll in Greece and you see it flipped you know you see the red of support kind of flipped over I just had a question out of curiosity I know you mentioned that united kingdom is formed an outsider and they still retain the pound they didn’t go right was it just because the fact they were an outsider some sort of financial reason for not going there’s a lot of reasons you know I mean some of it is just kind of cultural historic kind of belief in British power and influence and being kind of limited or constrained by certainly Germany or you know the eurozone some of it is economic effect

that Britain could you kind of stand outside the eurozone economically and still maintain a kind of a position where it said you know if someone doesn’t lead the Euro right a lot of its trade a lot of its business without still outside the eurozone that’s changed a lot over time but you know there’s kind of the doorway argument always says have to stay outside Europe or the European at least formally because it has enough wealth and resources to do so it’s not reliant on the EU in many ways it has trade agreements with the urban so it’s a good question now one of the things that we should know also about this European Union crisis is that a lot of the problems that have focused on the euro we’re known for them again right this these are not there was nothing new these are things that you know scholars and journalists and many politicians at the time knew they knew that you know if they were going to set up a currency union there would have to be some mechanisms to control spending right and whether you agree with austerity or not the idea was that you know most of these countries would trying to get their economic houses in the order in one form or another especially eventually to join the Europe there were rules in place but you know the rules ultimately are enforced by the member states themselves you know and this is the idea that any international organization that you look at you know those of us are in political science who study international organizations i mean the primary weakness of international organizations is what what do you think just there’s a bunch of different countries they don’t always agree for another division well that’s that’s always a big problem she’s agree with each other but in trying to what if you have rules set up and you’re supposed to follow them with what has to happen enforcement yeah no country can have outside proportionate yeah i mean this idea that you know these states still remains you held on to the basic idea of sovereignty and that you know when it came to enforcement there’s nobody there wasn’t anybody really to enforce the rules they’re kind of enforcing it upon themselves now some countries rcd better than others and the greeks in a few other countries didn’t enforce the rules at least said they were and weren’t quite doing it and cook the books and there were some real neural number problems there alright so that’s one of the problems that was set up so i mean the fact that country like like Greece had these huge debt and deficit figures we do this in the 1990s again when i was studying this topic we were looking at the criteria to join the European monetary union to join the euro we scratching our heads and saying you know what none of these countries really may actually attained the criteria for membership even Germany in the 1990s exceeds the deficit kind of numbers in other words this Germany’s not following the rules well Germany doesn’t have to follow the rule because it’s German right I guess or the fact that it was paying tons of money to deal with reunification oh well you know Germany it’s okay they’re going through a special time in the nineteen ninety-three kind of absorbing East Germany cost lots of money so their deficits went out they’ll get it back you more and generally Germany did all right but others would be kind of fudging the numbers right and there was no way to enforce it so when you talk about you know Greece is in this huge deficit today and this huge debt today a lot of that of course is compounded by you know the financial crisis of 2008 that imposes all of these extra head of burdens on Greek economy but there was a steady kind of growth and debt deficit over a period of time that she’ll been clear to everybody all right so it shouldn’t have been a shocked or surprised to suddenly wake up one day in 2008 and say well these numbers aren’t quite adding up to what we thought they were many people do what was going on the other thing is is a bit of a technical kind of thing but it’s one way of thinking about this is this you know the United States of America is a currency union all right has a single currency right through the doll and within that currency union basically there are a number of shock absorbers that can deal with a major economic crisis and in the currency union like the United States you have you know the possibility of fiscal transfers all right the idea that money moves or we can move around to places where people are hurting right we have a very powerful federal government that raises revenues and then spends the money in

places where people are it could be as simple as you know let’s say you know California has a higher unemployment rate than Pennsylvania so money will be transferred to California be an unemployment benefits for those workers who are left out if there is a crisis in banking in a particular part of the country or the economy again money can flow to where it needs to go in other words we have a federal government that can move money around to places where people or industry or communities are hurting it’s not perfect it’s not a perfect mechanism it doesn’t solve all the problems but it’s their right and it can be very effective mechanism when you’re talking about you hundreds of billions of dollars potentially moving around in Europe you don’t have that all right and the only way you’re going to get that is if you have to go back to the point about countries having to come to an agreement is if they decide that they all want to chip in some money into a big pot which today is called the european stability mechanism it’s a 500 billion euro pot of money that essentially can go around and mostly just given to a country to try to stabilize their budgets right to deal with kind of short-term financial emergencies that these countries are facing now in return of course they have to make some tough decisions right so that’s where the belt tightening or austerity measures of Greece and Portugal and Spain and Ireland come into play you can get money but in turn you’re going to have to you know pay up right Europe doesn’t happen and that’s one of the problems that we see and it’s certainly one of the problems that people talk about overcoming of for Europe today you know we need to create a truly european union budget with similar fiscal policy taxing and spending policy well you know that’s taking power out of the hands of sovereign elected governments of nation-states they don’t want to give up that power again Greece and Portugal they pretty much don’t have any power because they’re just being told what to do in terms of their budgets yeah but concerning Greece we’ve been hearing on NPR that there might be as many as 2,000 people who have assured their money very wealthy people in this list of two thousand and it seems that in an effort to shame them or someone has published their names and land heard and heard that but I’m just wondering if that should be a solution a part of their budgetary blows they have a fair number of very wealthy people who are not paying taxes well yeah I mean that is the end that is one of the answers to the revenue side of the equation increases is effective taxation they again Greece is a bit of an outlier in some of these countries but they didn’t do an effective job collecting taxes and so one way to raise revenue is to actually enforce the rules on the books tax laws but also to raise taxes on you know the wealthy and super wealthy and of course yeah they’re moving move their money very quickly and again they have the URL so the benefit of the euros you can move money around very quickly and easily and you can hide it already jump ahead good who decides how much money to print or um German think that is the the monetary policy is set by one European actor that’s the European Central Bank and if there’s one kind of actor or institution within the European Union that has kind of a European focus in the European line it’s the European Central Bank you can criticize european central bank is being kind you know their bankers all right they’re interested in you know maintaining stability of the currency they’re interested in keeping interest rates you know under control keep inflation under control you know their interests are not always in the interest of you know say a pensioner and greece but to the credit european central bank has been one one of the actors that has some measure of political that’s a vision that is beyond just the nation-state you know they’re trying to help the eurozone at least 17 members of the 27-member european union 17 RND in the eurozone you know the European banks trying to help all right it’s trying to help the situation and they can they can shift money runs european central bank has access to resources that states don’t have so some of the fiscal transfers are essentially a kind of money by the European Central Bank of stabilized banks in Spain for example is headed will run on banks and

their banks have been particularly hard hit that’s pretty that’s a pretty good system that had much like our Federal Reserve again heavily criticized by many on the left and the right as kind of pumping up the economy of the United States pouring money into banks right to help prop them up to get through the mortgage debt kind of crisis all right so as people aren’t paying their mortgages and pain they’re dead or having to you know refinance and figure ways out to pay their debt the Federal Reserve can get can put money into this European Central Bank has done them you know but it may not be enough right some of the other things that are important to kind of think about still within Europe today you know the lack of mobility within the EU nao the EU is open in the sense of people can move around you can you know move your residence as a young person you have a European passport you can you know get your degree here and study there and get a job here and in many ways it has a lot of trappings of mobility all right the problem isn’t still somewhat of a rigid kind of society and the rigidness is still at the national level all right so people still don’t you know like in this country if you lose your job and you’re you know working in Pennsylvania and you know you’re an accountant or or something you know you look at the jobs and it says you know go to Phoenix to go to Texas or go to Florida or North Carolina you know you go you know I mean most Americans have a pretty easy time picking up and moving to me I like it it may be family or schools and all these kinds of things but most Americans is pretty easy to kind of pick up and move and again this is kind of a shock absorber within the united states that in the European Union doesn’t exist and I use that term shock absorbers because he owes you think of a crisis is you know a lot of this shaky right a lot of this volatility a lot of this instability it’s hitting people it’s hitting banks to any countries getting individuals you know you have shock absorbers is kind of a way to kind of soften the blow right and the European Union doesn’t have a lot of shock absorbers I mean the European Central Bank is it was one but the fact that people won’t just pack out you know and I mean if you’re living in Greece are going to pack up and move to Germany where the jobs are probably not right what they’re doing is packing up and leaving Europe they’re coming to the United States or they’re going to Australia they’re going to where you know places where they hide their money I don’t know you know but many young breeks especially they educated you think about a range rang kind of problem in Greece many of the best and brightest young briefs say there’s no future no future I’m going to pack up and leave some of them are going to Great Britain all right trying to get good because they can travel the Great Britain they can live there maybe find a job and you know they’re not subject to the same kind of you know visa constraints of somebody had from outside of the European Union the last point I want to say is is political union all right so this is this whole talk in a way of centered around you know a crisis of the European Union and it’s this idea that has been around and had been around from you know what I said helmut kohl said you know political union and economic Union are two sides of the same coin what they did was they they focus on one side of the coin the economic and financial coin the euro side of the coin but they forgot what was on the other side of the coin which is the Capitals and the state you know interests and locking those in into a firm political union and so when when it all kind of comes spilling to a head is what you know most people will call this sovereign debt crisis all right this is just up here this is the suit you know the crisis was something called the sovereign debt crisis but basically what this means is that for a period up until two thousand eight you could be the Greek government and issue your debt your Greek sovereign debt equal to the value of the German sovereign debt and people accepted your debt equal to Germany’s debt at a certain interest rate all right and think of it this way a personal level not that I have a lot of money or a lot of wealth but I probably have a little bit more than souviens certainly not Frank Frank you know loaded back in school days so his sovereign debt is you know we could assess his debt and say you know what he’s a pretty good risk I’ll loan him money at two percent and dr. Lobel maybe we’ll say three percent all right but they look at jacksons and oh my god you know this is a big risk we’re talking

twenty percent so your grace your Germany and I maybe you know the Netherlands or something okay now what happens over you know from in the 2000s essentially everybody says you’re dead you’re dead my death are all equal but that was not true in the sense that they’re real wasn’t a mechanism standing behind it all the political union to say no what the Greeks can still tax-and-spend how they want the Germans are doing it the Netherlands are good there’s still all individual states they’re still sovereign and as long as you have that equation it’s a recipe ultimately for what emerges is the prices and people investors okay for better for worse the investors and currency speculators are looking at Jackson a little bit more carefully in 2008 and saying you know it’s not adding up it doesn’t look good and the fact they finally say let me see your checkbook and when there’s you know nothing in the check but other than a bunch of negatives things begin to spiral downward now all of this of course is hit by a global recession global financial crisis mortgage real estate crises in Ireland and in Spain there’s a lot of private sector debt so individuals we’re not even talking about States just individuals we’re in debt much like in the United States we were all integrated and connected all right that’s another important point to understand i say to calm you very much linked to what’s going on in Europe as long as Europe stays a little bit sick European economies if the European economy is sick it’s going to you know spill over to the United States it’s going to affect us and then you know mother Ellen me to drag right now the Europeans have been trying to do a bunch of things try to fix this but really it’s a fundamental question right about what is the future of Europe all right now I’m borrowing from some some recent articles and foreign affairs Timothy Garton ash is a really well-known British historian he’s at Oxford he wrote that you know the European Union is going to collapse I mean he sees he kind of coming to an end and in some ways that would favor the idea of the existence of the European in may in fact you know becoming coming to its file in and he explains it in terms of history and generations says you know younger Europeans don’t remember you know the the great crises of the 20th century of your war conflict Great Depression genocide whole cost Cold War’s division divide you see that picture and it’s a very nasty utterly brutish picture younger Europeans have grown up relative prosperity and a relative peace and you know that that idea that Helmut Kohl and Francois Mitterrand in 1991 being people of a generation that had experienced the nastiness of Europe of the 20th century those people are gone especially it’s you know it’s a younger generation are they willing to make the same kind of sacrifices for their other fellow Europeans and for garden ash the answer is done it’s increasingly kind of headed in a direction where let’s say I’m an average German you know 30 year old and 40 year old who you know the grown-up and relative peace and prosperity and you nagger asking me to you know bail out the Greeks before if I’m you know looking at the Greek press all I see is images of you know Chancellor Merkel dressed up in a Nazi uniform you know with her jackboot to the increases throw what does that say about you know peace and harmony and cooperation in the European Union and that may be just a nasty kind of populous and nationalists undercurrent in Greece but it’s pretty strong all right it’s maybe not the majority view point I don’t think it is and the majority of you point voted in you know new government through several elections in May and you know for better for worse as they’re holding their old central but it’s not a pretty picture now I’m not as pessimistic I tend to be the more you know muddling through kind of view and that’s based on because 20 years they’ve been muddling through and make incremental changes some of these are institutional changes within the European Union some of them are some political decisions some of our financial decisions setting up the stability fund that was a big big decision I think some say you know we need the big one we need the big

political union right how do we escape the sovereign debt crisis and that’s ultimately to create a United States where you know Greece and Poland and Germany and France are in the sense of equal members in a common purpose with the common purpose and a common vision and that would be fiscal transfers and a common fiscal policy they already have a common monetary all see that’s the European Central Bank that was your question about who’s kind of running the show but they need to go much further that’s a hard sell right now as you know whenever there’s economic problems in crisis people turn inward they turn towards what they feel comfortable with and what they feel comfortable with is the nation-state you know their own country their own currency their own culture their own borders their own people you know however they define it so you’re asking a lot and I don’t think it’s going to happen I always tell my students in my European politics class that you know five years ago six years ago I was using a book called the United States of Europe as one of the you know additional books besides a textbook that we use any of your optimistic and there’s you know flag and the Constitution and the Euro open borders and European citizenship and more younger people identifying themselves as Europeans I mean it was like that’s done at least done for a while I don’t think it’s over but it’s certainly done for a while it’s all stop there and just you can have some discussion and questions yeah so so would you say just to keep up the analogy of the United States up here would you say that it’s currently more like the Articles of Confederation yeah it’s a great way of thinking about it and I should have brought it up but I think you for bringing it up yeah I mean you know think about what the problems were under Articles of Confederation what were some of those problems different currencies is one call me play a lack of essential government that has really been for Salima States all right what were the Federalists arguing that strong Center would benefit everyone you don’t just certain seats yeah I mean the idea that you needed a strong central government kind of buying these countries into a permanent union would lead to a much safer in secure and prosperous you know the United States of America now of course people disagreed at that time they weren’t all sharing that assessment and either not many Federalists in Europe today who are powerful or convincing enough but you know certainly there are people who know what the issue is an issue is we know we need it maybe move from a confederation which the European Union is in part a confederation it has elements of a federal government it has elements of a confederation it’s a hodgepodge of stuff but really they haven’t made that final leap and yeah I mean if you look at the Articles of Confederation say you know it would affect you know we were splintered into you know 13 independent sovereign states and we’d all be speaking German here in Pennsylvania or something what obligations do European countries have to one another now like in france declares war on canada for some reason or other countries obligated to support that or is that so that’s a hard one to make out there it’s a guy the bonds are intense and heavy in the sense of pressure to conform and to get along and work together they’re all bound by this european project they’ve invested too much and I don’t mean just money and although that’s a big part of it they’ve invested a lot of their kind of political clout and will and reputations on this project and so it says you can’t just throw it away right it is something that has been 60 years going and I think that’s why you know the Nobel Peace Prize was I think very powerfully symbolic in kind of saying hey you’re up wake up you know you have the European Union wake up you have brought 60 you know more years of peace and prosperity to a place that had not known peace and prosperity for quite a long time if ever really all right in their work you know some some periods in your Europe’s

history when there was some stability and you know what have you but you know this is a big project all right and so yes we are bound to each other we’re obligated to help each other and you hear that in the speech is coming from you know Chancellor Merkel and in France saying now we don’t like everything that we see if we may disagree with some of this but there’s something bigger going on here all right a bigger project it is about you know the people like Helmut Kohl and friends home in Tehran in 1990 and people earlier you know after World War Two right to german chancellor at the time of his name is failing me now but French Minister Robert Schumann and Jean Monet the British Minister of Trade and infrastructure forgetting his name the German Jets are 40 42 Harmon I’m a con Thank You Conrad out of that I mean so you know these are these are people who you know kind of built built built built something that can’t just be kind of taken away but they are audien there’s there’s natural laws and you know rules that find themselves together in this common project right but you know they’re making things up a little bit as they go right now this is the bundling through constant you know the one one good thing about crises that it focus is the line right it’s like crisis move needs a solution needs an answer and you know maybe the real answer is political union that would really be the fix but we can’t quite get there so what do we do in the meantime so what they’ve done is created a lot of money so there’s the fiscal transfer kind of idea notices they talk about creating a European banking supervisor all right you can imagine despite having a single currency Europe has you know seven member states with sovereign control over their banking systems it makes no sense because these banks are all tightly integrated within Europe to say nothing of globally so in German banks are heavily invested in Greece and Swedish banks are invested in Spain and everybody should be under one rule instead of regulations it’s kind of crazy that they’re not but they’re moving in that direction what does that sound like it’s confederal ism to a more federal structure where it will be one centralized rule over all of these banking systems it makes a lot of sense on one level how you mention the European Central Bank what role does the IMF play moment um the IMF this is involved in the sense that it is a contributor of money responds to that European Stability talk of money right and because of that it has some say how the money is dispersed and under the rules and conditions under which the money is kind of just first and we know that the leader of the IMF is Christine Lagarde former French finance minister who is very well appointed and those all of the European finance ministers are all friends that pick up the phone they talk to each other so it the money that came in to this European Stability Mexican was 500 billion euro which is the centerpiece of the debates right so when Greece needs 13 billion euros to deal for the next two years with its budget it goes to this european stability mechanism which is kind of a quasi IMF ish entity but the money comes from the European Central Bank its own reserves from the European governments so that’s where you in Germany and others have to contribute and the IMF so all three of them have a say over this process of doling out in line there my so-called troika yeah can they generally have a very similar point of view largely on what needs to be done but it’s their point of view and it’s one that is demands tougher and tougher kind of belt tightening and budget reductions and austerity and you know one could argue that it’s only causing the problem to get work tighten the belt further consumers have less money to spend they don’t spend the money you’re not buying products that further stock was the economy the government goes further into debt that’s good pay out more money on Social Security unemployment not raising enough tax revenue which lays off more workers have to go get more money you know it’s a cycle that many people say is driving Europe you know into a real

existential crisis the crisis will be that point when priestley maybe I’m thinking about Ireland lately because wasn’t too long ago that we heard they were in this blush IT boom and a lot of rich people in Ireland they’re looking very well and most recently we’ve heard about ghost estates where there are these huge tracts of houses that are totally empty because people couldn’t pay mortgages and I lived in London for three years my perception is that the English people think of our Ireland is sort of like although it’s great britain and northern ireland it’s actually they’re sort of like country cousins from the English perspective and it’s just wonder if there’s a strong enough mechanism and the political and social will to help Ireland from the UK standpoint Scotland is a very big player but what about the mechanism would they be helped in the case of a big collapse well I did have a big glass in here you know what you’re talking about with these goes to states is exactly what happened in Ireland they faced a crisis in real estate there was a lot of paper well a lot of people very wealthy I mean I don’t have any Irish family out some clothes Irish friends you know whose parents still owned you know the two bedroom flat in Dublin and it was worth um you know a million euros when you know five years prior was worth 200,000 years so there was a huge real estate speculation about the classic speculative bubble which we had here in the United States which burst so the wealth kind of collapsed all of a sudden you know people went from you know at least on paper super wealthy to having nothing and a lot of that real estate development was predicated you know building homes for all people who were you know somehow making all this money off real estate and certainly some did and probably something got away with but most people did and so what happens is that that real estate bubble collapses the kind of finances of the Irish government in part bailing out thanks partly in dealing with the kind of aftermath of you know out of work and out of luck because they had speculated and guns of debt so much that you know the Irish economy was one of the first to kind of crash and what Ireland did was essentially make a deal with the droid 4 levels fairly significant amount 78 billion-euro kind of this is already two years ago right to to help fund their debt crisis right to give the country the kind of finances to kind of get itself back on track that led to a lot of paying higher paying in the sense of you know people who had a penchant cut people had reductions in income jobs were lost students had to pay more to go to college you know everything with all the fees all the costs everything went to help pay for this and if you ask anybody in Ireland today you know they are pissed off pissed off in part because you know they blame outsider speculators real estate investors the United States investors Americans who had Irish roots who suddenly found themselves back in Dublin buying up property and then you know quickly bailing and leave it you know I’m leaving the best to the Irish and they are angry because they’re now that may be locked into a long-term period of you know very stagnant if any economic growth and you know somebody the influx of money and jobs that were part of that Celtic Tiger in a picture that’s all gone and now I Irish RP evening again they had a refit flow and if you know Ireland’s history is one of outflow the flow is now back alberton didn’t help them interesting I was just following the report within the last month about our Miss states I mean you see em in spain tuesday with you speculative real estate in fact that’s the main problem in spain so we’ve seen quite a bit of structural reform in the so-called peripheral regions of the European Union southern area and that has been somewhat effective dealing with a lot of the

problems I things like exports are up but do you think we need to Europe needs to reform the core area at all so I could Francis Germany etc so if you remember the lecture from the lady from the European our simulation that we’re after we had a a woman economist give a talk to our group of students about rebalancing the European Union and that’s an interesting term you know economists talk about rebalancing in the sense that you know Germans need to spend more in order to you know stimulate the economy because the Germans are savers and they’re kind of tightwads and their government doesn’t want to get about money they should be you know stimulating the economy as much as possible and that would kind of help rebalance Germans buying you know Greek olive oil or whatever briefs make which is a lot these days but maybe it’s something or at least travel there and go spend some money although you know if you’re German tourists and you see people rioting in the streets and things like that Greece is not where you’re going to go so yes I mean economists talk about rebalancing you know and certainly you know there has been some of them going on you know the fact that you know as greed Greece’s tightened up spending controls and you know the Germans haven’t exactly open the spigot but you know they are they are spending money to send to you know fiscally transferring money to to the outer to the periphery all right the problem is more political you know to talk about political rebalancing about power and that’s not as easy as you know spending money and it doesn’t transfer very well if you’re not you’re not having any political rebalancing Germany’s still the drive through the driver’s seat and Frances kind of the bickering partner next next to you but still partner barely and you know in the third row of the bus or the fifth row the bus or the spades and the priestess is released and they’re not in the driver’s seat there’s no political balance ego I don’t know what our time frame is here I do have to finish up shortly there you go couple more questions and discussion yet clinical questions Europe is not necessarily the most business-friendly of economic areas and things like bankruptcy can take seven or eight years to finish going through do you think that perhaps restructuring some of their business regulations and legislation these are you advocating capitalism Jackson is that what captain is kinda way I could be by the stretch trailer this I mean in the united states of america you can go through your bankruptcy settlements and something like a year but in say Francis get much closer to a decade and thus if I seems as if that would make it very difficult to start your own business or try to get into a new market or something so that’s kind of the rigidity of the kind of structural economies of Europe there’s not a lot of way to price flexibility all right and part of that is your government regulation some of its kind of cultural you know you should have a much rapid quicker adjustment of costs for businesses based on what’s going on in Europe and it’s not happening right everything’s not happening is quickly enough is somewhat advocate I think I’m certainly think that some of the you know the rigidity of these rules of you know bankruptcy or opening up or business to work being able to lay off workers nobody wants to lay off the worker but if you’re you’re stuck with somebody for two years because it’s a federal law this is this is a problem you can adjust you know as a business person you know you’re kind of stuck the option is I’m not going to hire anybody all right and so there’s no higher even though their business may be doing reasonably well they’ll hire somebody on a temporary basis all right or they’ll have a work you know under the table for cash that’s fine i guess a little bit but it’s not going to help you long-term so there certainly is a need for you know some changes in the way your–up does business united states we hear a lot of like we have no more manufacturing economy and you know our economy is dying because we’re not making anything I’ve been at Mike you’re

on the only industry I ever really hear up coming out of here up as tourism why are their industries growing are they yeah there’s a lot of large-scale business a lot of small scale medium sized businesses manufacturing I mean Germany still manufacturing kind of sentient right and it’s exporting its products a lot of it is you know shifted towards the United States I’m Clark China another part India and other places and you know part of that is driven by you know certainly you know skilled workforce certain kinds of labor policies training workers or certain types of jobs much more conservative kind of I would say conservative long term investment outlook for businesses they’re not driven by the bottom line and the stock market and you know the ups and downs of what you know Cramer says on you know CNBC tonight I mean these are companies that have been around a long time they think long term and they invest for the long term and they’re going to stay there for the long term so they are manufacturing and producing product they’re not immune to the global Ice lola’s ation pressures right to compete globally and you know they’re dealing with wage costs and they’re dealing with rigidities and their economy that they have to kind of deal with but now they’re I mean your biz is making stuff right but the problem is that you know there’s there’s been no investment it’s dried up private investment meaning coming from investors and bankers and individuals is gone and public investment is you know also withering on the vine all right so you know those are things that can help stimulate an economy but when those those too dried out talking about an economy that can be in gear collapse in the case of Greece it is there’s no private money there’s no public money and so people are just is in lockdown that’s frozen it’s really I mean it’s really quite tragic in Greece which begs the question about you kicking Greece out of the euro and well I did think that was possible even a year ago I think maybe it’s more real now and you know we talked about Poland you know no Coleman really well you pull in the economy has done really pretty well it’s the only economy in Europe that has problem during the whole 2008-2012 economic crisis and run reason is because its currency it’s not part of the euro is outside the era so a manufactured products and sells products within the euro zone in the European Union but its currency is devalued over thirty five percent that’s not so good if you’re a Polish person trying to travel a fraud your polish multi is not going to buy you much but what it does by you as a job all right in the sense that polish industry agriculture resources Cole are being sold and their people sold in a way that’s very competitive and our bus so you know Greece might look at that and say you know the price will be exit from the euro with some very additional sharp short-term pains say the least but long term it might be the way out of what doesn’t seem to be there’s nothing you know there’s really no answers hanging on is that good enough for you barely I mean if you’re a young person in Greece you know plug it right is over 25 you just don’t have a job you may be bright and talented and skill of a university education there’s no opportunity you’re going to leave how are we going to convince young Greeks that the Polish model is right for them I think that part of the reason Poland’s been so successful throughout the financial crisis is simply that they’re much less developed at something like thirty percent of the population is still classified as you have peasantry how are we going to tell some young person agrees well you know why don’t you try being a peasant well you could say maybe go back to the farm grow olives or whatever you now I mean it’s you know you’re can’t turn back time turn back the clock you know there’s there’s many pieces to that German or to the polish model that obviously degrees can’t fall right but there may be some it’s it I mean there’s nothing it looks a bit bleak right now you know you could say it’s

not right for your future and there are going to be continued crises over the next few years they haven’t figured this out I do believe that you will muddle through and continue to build and develop and if you remember the slideshow talked about the last static political union the promises they had it had it wrong they should have done the political union first start there and then build all the economic Union and financial Union and banking Union and fiscal Union zoom level of later on I’m not really a fan of investors so much so may be able to advise but a lot of people are just saying we’re not you know advocate that forgiveness or something like that which we have it does is great depression but um I think that’s kind of like quantitative easing what we call here has been dead in a greased case had been significant debt forgiveness private banks had to write off anywhere from twenty-five fifty percent of their of their loans to to Greece all right so and most of these were German banks and French banks who then went to their governments and asked for you know how ok so the investors themselves who got trapped into the speculative bubble and maybe paid a lot of money and then lost a lot of money they’re still coming to the Uni the taxpayer for a veil all right but there has been some some debt forgiveness maybe not enough should be more you know Greece looks like you know I don’t know third world country I should go a lot of your stupid question squared so yeah thanks it was posted sorry all right take care you know if Greece were to pull out of the out of the Europe you know essentially you would have a complete riding off of all almost a ton of free cab there’s a lot of international pressure to keep them in one more question ok I have last question I’m better be a good one when you mentioned the ties between the United States economy and European economy and not a lot of other history and geography classes that I’ve taken focus on the connection between Europe and its former colonies in Australia Africa Asia are those economies suffering or are those economies now independent enough of Europe that they’re less effective good question some might we look at like Australia its independent enough all right in Australia you know it’s fortunate to have a great deal of resources that are in demand you know natural resources especially by China and food at you no agricultural exports so that Australia is somewhat evening from the Commonwealth let’s put it that way but other other maybe smaller dependencies and smaller you know regions like french west africa hurting a little bit still gets a fair amount of french government assistance to run their economies there’s still a source of products exports to you know to the to the homeland back to france and if the French aren’t buying you know those economies on the periphery are going to be heard as well so yeah I mean there there is there is still these links that have trickled you know down we could use that to the wrong with your item a triple down as a negative way right that’s good I don’t know I get I think you’d have to look at each country and look at the effects but if they’re there well thank you great topic obviously I can’t talk about this whole whole semester as well thank you polly side club thank you doctor or down