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Europe Faces ‘Terra Nova’ in Efforts to Avoid Financial Crisis

September 29, 2011 at 12:00 AM EDT
The German government won a critical vote to greatly increase financial support for a European bailout fund, which could ease the way to a partial default in Greece. Jeffrey Brown discusses the German vote and the worldwide worries over European debt with The Globalist's Stefan Richter and The New York Times' Nicholas Kulish.
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JEFFREY BROWN: And for more on the German vote and the American worry over the euro, we turn to Stephan Richter, publisher and editor of the online magazine The Globalist, and, from Berlin, Nicholas Kulish of The New York Times.

Nicholas Kulish, I will start with you. How did people there see the stakes in today’s vote? How important was it?

NICHOLAS KULISH, The New York Times: Well, I think people see the stakes as extremely high. I think that they understand that the entire euro currency, even the project of European integration could be at stake. And so they took it very seriously.

JEFFREY BROWN: And, Nicholas, in terms of people’s public attitudes and pressures on the politicians there, are people exhausted, angry, how much support is there for doing something?

NICHOLAS KULISH: Well, I think, you know, I was in the Bundestag today, and I saw some parliamentarians who were at their wit’s end, who were talking about retiring after the pressure that was put on them to vote with Angela Merkel.

You know, the regular people out on the street just have a very hard time understanding why, after years of cutbacks, they suddenly have found hundreds of billions in loan guarantees for the Greeks. It’s a difficult time.

JEFFREY BROWN: Stephan, how do you — how important do you think the vote was and why?

STEPHAN RICHTER, The Globalist: I think it was very important.

It was, in American terms, achieving first base or maybe second base. There’s a long road to go. It was a necessary step, not a sufficient one. There’s a whole lot of other things that needs to happen. But there was a vital and vibe vibrant and vociferous public debate. And I think that’s very necessary, because what we tend to forget is, this is about the power of the purse, the essence of what made democracy, the power of parliaments against kings.

And now the money of the people is being pushed around Europe. I think it’s very necessary, but in a democracy, we need to have a big debate about that. And it’s going to be painful.

JEFFREY BROWN: And even as that debates as going on in preparation for this vote, many people were saying, well, this isn’t enough anyway, right? This is just — it’s not clear yet, but that was going on. So, do you sense any growing understanding that more will be needed?

STEPHAN RICHTER: I think everybody knows it. We’re going through some motions, as I said, first base, second base. Then there’s already talk at the World Bank/IMF annual meeting about replenishing the fund, about doing more to make sure that banks don’t do this stuff again, because there was no cross-border supervision and things like that.

The key is really to lay the foundation, to get Europe right. They got it wrong when they had the (INAUDIBLE) treaty in ’97, when they tried to do some of these things about fiscal probity and so on. They screwed up. They had it on paper. They never put it into reality.

And there’s one thing that I think most Europeans are now united in, which is not to do that same thing again, because it’s very costly if you don’t take the right measures at the right time.

JEFFREY BROWN: And what do you make of the public attitudes now, the kind of thing Nicholas was talking about, the pressures on these politicians?

STEPHAN RICHTER: The pressure — well, that’s what they’re there for, right? It’s not just coasting and just cashing your salary. They have to take painful decisions.

And I think, ultimately, they’re doing a good job, especially if you compare it to what’s going on here with the debt ceiling and so on. Those things being debated in Europe are monumental. They’re terra nova. It hasn’t been seen before.

So, it takes courage. It’s painful. People will resent it, but Europeans have ultimately have always done the right thing after all other opportunities were wasted.

JEFFREY BROWN: Now, Nicholas, I wonder how on the ground there, how much you see all this bringing out divisions within Europe. Are some of the old stereotypes coming out, the old nationalisms about who’s stronger, who helps whom?

NICHOLAS KULISH: Well, I mean, you actually see some interesting — interesting sort of new divisions.

I mean, we’re used to — or I here in Berlin am used to, you know, German and Polish or German and French rivalries or divisions, whereas this sort of — this periphery vs. the center of Europe is kind of new, the Greeks, or the Spaniards, or the Portuguese against the Germans, the Germans, you know, lining up with the Dutch and the Finns.

But, yes, there is a certain, you know, the good Protestant work ethic, saving Northern European countries vs. the — and this is not my stereotype — the lazy, spendthrift people in the south. And so there has been a lot of that, especially in the German tabloid media.

JEFFREY BROWN: And, Nicholas, what about this sense that Stephan just brought up that most people sense that more is going to be needed; this is just we’re second base, maybe? Do you think politicians there have an understanding that they may be asked to come back to this, or are they drawing lines in the sand at this point?

NICHOLAS KULISH: I think it was one of the hardest selling points today for Chancellor Merkel, which was to say, you know, let’s just get this done, while every member of Parliament is hearing that they’re going to be asked for so much more.

And so it’s sort of, you know, this is the last time, and then, you know, you see the hand dipping into your pocket, you know, once more. You know, so that I think made it very, very much a hard sell for the politicians who are — who are swallowing their principles to make this vote to keep their government in power.

JEFFREY BROWN: Now, Stephan, what about on this side of the Atlantic? President Obama recently said Europe has to do much more. Secretary Geithner went over there. And some ministers weren’t that happy with a sense that they were being lectured to.

But the stakes are clearly seen as being high on this side, right?

STEPHAN RICHTER: The stakes are seen as very high, but from an American perspective — Nicholas mentioned Germany and Poland, historically one of the treacherous relationships in Europe.

We have a situation where the German and Polish finance minister for the first time in history can finish each other’s sentences blind. That is a cultural revolution in Europe that we shouldn’t shortchange. That’s fantastic.

And, you know, I think the administration needs to realize that there’s a sense in Europe that — and the German finance minister at a press conference said that repeatedly and told me also last weekend — that everybody should clean up in front of their own door.

That’s the old G7 principle. That should be the G20 principle. People were surprised that Secretary Geithner flew to Poland in order to give a message of, hey, Europeans need to get it.

The Europeans get it. They are dealing with issues that have never been dealt with, cross-border budgeting, finance ministries, fiscal union, euro bonds, you know, bailouts. This is monumental stuff, and the history of Europe is that they use crisis well.

Remember Rahm Emanuel, who said a crisis a terrible thing to waste? Well, he left town because nobody wanted to take his advice. He’s right. And the history of Europe is that they take the crisis and then transform themselves.

And I am confident that that will happen this time again. And in that sense, Americans can be confident and I think take some inspiration, hopefully, from the European experience to do the hard thing when it’s necessary, rather than blaming each other between Democrats and the Republicans.

I mean, relations between Germans and Greeks, I would say, who — which are touchy right now, aren’t as bad as those here domestically between Democrats and Republicans. And that should…

JEFFREY BROWN: It’s all relative.

STEPHAN RICHTER: … us to think. Exactly.

JEFFREY BROWN: It’s all relative.

STEPHAN RICHTER: Exactly.

JEFFREY BROWN: Nicholas, just real briefly here, just going forward, now other countries have to vote on this bailout plan before it goes into effect, right? Just walk us through quickly. What happens next?

NICHOLAS KULISH: Sure.

I mean, I think that, at this point, all eyes are on Slovakia, small, poor, poorer than Greece by far, Slovakia, which is now being asked to — it’s barely been in the euro, and it is now being asked to pony up guarantees for richer countries to help them out.

And they have — there’s been serious resistance on the part of the speaker of Parliament there. But the — but, you know, once Germany – once Germany gets on board, then the pressure becomes really, really extreme. It’s a club of 17, and you feel like if you’re the only one that’s not on board, you know, you’re going to have a lot to answer for.

JEFFREY BROWN: All right, Nicholas Kulish and Stephan Richter, thanks very much.

STEPHAN RICHTER: Thank you.

NICHOLAS KULISH: Thanks a lot.