Greece faces questions from eurozone
Just as European finance ministers were meeting on a bailout for Greece, questions surfaced on whether the Greek government used derivative contracts concocted by Wall Street banks to hide the country's budget problems. Europe correspondent Stephen Beard talks the details with Bob Moon.
Greek Prime Minister George Papandreou arrives for an European Union summit focused on supporting debt-laden Greece and preventing contagion throughout the rest of the eurozone in Brussels. (Georges Gobet/AFP/Getty Images)
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TEXT OF INTERVIEW
Bob Moon: Just as European finance ministers were meeting on a financial bailout for Greece, an embarrassing new question surfaced in The New York Times and other media outlets: Did the Greek government use derivative contracts concocted by Wall Street banks to hide the depth of that country's budget problems?
A Greek official said today those investments were legal at the time and are no longer being used. But it didn't exactly set a good tone for those eurozone partners being asked to pony up.
Marketplace's Stephen Beard joins us now from London. And Stephen, I suspect that wasn't the most cordial of meetings. Did they manage to decide anything?
STEPHEN BEARD: Not a lot it seems. The stalemate continues. The Greeks have been urging their fellow members of the eurozone to spell out the rescue plan, how they're going to save Greece, but the biggest member and the richest member of the eurozone -- Germany -- wants to know what Greece is doing to save itself. The Germans want hard evidence that the Greeks are cutting their deficit before they talk about bailing them out. So this meeting today hasn't satisfied either the Greeks or financial markets. We don't know if there is a set of measures that the eurozone will take to save Greece from default.
Moon: What about this news about this supposed cooking the books, so to speak, by Greece. Did it cause the finance ministers to dig in their heels at that meeting today do you think?
BEARD: I think so without any doubt. I mean, it has hardened, particularly the German resolve, not to pour large amounts of their cash into Greece. There's a pretty widespread view in Germany that Greek governments in the past have been both feckless and deceitful, and feelings are running quite high about this in Germany. The Germans say we've made sacrifices, we've cut our public spending, and for example, raised our state retirement age to 67. While the Greek unions are now threatening to strike over the plan to raise the Greek retirement age to only 63. So the Germans say why should we pay up so that the Greeks can retire much earlier than we can. It's a nonsense they say.
Moon: Well, you say they didn't decide much today. Is this bound to mean more jitters for the financial markets going forward?
BEARD: I think it's inevitable, especially, as seems likely, if the recession in Greece deepens making it more difficult for them to service their public debt. The Greeks are in a sort of viscous circle here. They're being pressured into cutting their deficit, but cutting public spending, and putting up taxes in a recession is going to make the recession worse, which will reduce tax revenue and push up public spending and increase the deficit. They probably can't win.
Moon: Beyond Greece, we keep hearing about other countries -- Spain, Portugal, Ireland, Italy -- that are still heavily indebted. Is the future of the euro in jeopardy?
BEARD: It would be extraordinary if the euro collapsed because it's not in any of the members' interest that it should. The consequence of the euro falling apart would be devastating, damaging for all member states. But it is possible. If we got a very severe double-dip recession here in Europe with even more series budget problems, it is possible. Currency unions like this -- and this is the biggest in history -- do usually eventually fall apart.
Moon: Marketplace's Stephen Beard in London. Thanks for keeping us updated.
BEARD: OK, Bob.
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From Milan, MI, 02/15/2010
The Eurozone is not the largest currency union in history. The United States dollar is. (The idea of the United States as a single country is relatively recent, dating from the Civil War at the earliest.)
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