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At World Economic Forum, Talk of Future of European Union and the Euro

January 25, 2013 at 12:00 AM EDT
As the World Economic Forum convened for its annual conference in Switzerland, Hari Sreenivasan talks to Ray Suarez from Davos about one of the biggest topics of discussion: the European Union and the economic future of its member states, especially the United Kingdom and Germany.

HARI SREENIVASAN: And to another NewsHour correspondent overseas, Ray Suarez in Davos, Switzerland. He’s moderating panels at the World Economic Forum, where there’s been talk about the future of the European Union.

We spoke earlier this evening.

Ray, let’s start with the news this week. The U.K. is making some noises about backing away in some parts from the European Union. What is the reaction there, where all these European leaders are?

RAY SUAREZ: Well, here in Davos, the week was heavily dominated by news of the health of the joint European currency, the euro, and whether, in fact, the European Union as it has come to be known would remain with one of its largest members.

Prime Minister David Cameron earlier this week dropped a bomb, that he was going to later in this parliamentary term in a couple of years put Britain’s continued membership in the European Union to a vote. And right now, the Union is not very popular among British politicians. So perhaps, feeling the heat at home, Cameron is responding this way.

HARI SREENIVASAN: And what about the relationship with Angela Merkel of Germany, who put a tremendous amount of her own personal credibility on the line to help prop up the currency?

RAY SUAREZ: Well, you know, Britain has long bridled under the rules that accompany its membership in the European Union. And David Cameron has been hinting that the price of staying might be negotiating a better deal for his country in some of the areas that the European Union governs.

Well, Angela Merkel and other European politicians in response have said, wait a minute, Britain can’t work out its own special deal. There’s long been grumbling on the continent about Britain’s trying to tug against the reins that hold it to the continent. Angela Merkel is being credited this week in Davos with saving the joint European currency.

Some of the economists who predicted last year during last year’s conference that the euro wasn’t long for the world and that Greece would certainly be out of the currency are now conceding that Greece is probably in to stay and that the euro is probably in to stay as well. But it is at no small cost to Angela Merkel and her party.

HARI SREENIVASAN: Help put this in perspective. In your blog post yesterday, you were writing about the sentiment response from George Soros, big-time investor, as well as Mohamed El-Erian, who runs a large investment fund.

RAY SUAREZ: George Soros was one of the people who earlier early on said that the European Union had designed the currency badly and that its weaknesses would probably become evident.

So, he felt that he had been vindicated when the economic crisis hit both North America and Europe, and suddenly the governments of European countries in the Eurozone had to step in and guarantee all kinds of loans, weakening the currency.

Soros says that Angela Merkel’s efforts in the intervening 14 months have probably saved the euro. He gives her a lot of credit, but he still isn’t high on the future of the currency. He says that while Germany has done very well by the currency — it’s brought down the prices of its goods and made its exports affordable in many more places in the world — there is still serious problems with the euro that have to be taken into account.

Tonight, I went to a high school here in this Swiss alpine town where they invited all comers, both people attending the conference and locals, to come hear European finance ministers talk about the future of the euro. And it’s like discussing a patient that you thought was going to die and is now merely in intensive care.

Nobody likes to use the word austerity. The Italian finance minister, Vittorio Grilli, calls it responsibility.

The German finance minister, Guido Westerwelle, said, oh, I don’t like the sound of the word austerity. It sounds so harsh in English. I prefer the word discipline, which probably he jokes is a good German word.

And earlier this week, the head of the IMF, Christine Lagarde, called it consolidation.

Either way, it’s painful. Europe has 18 million unemployed, and these measures are going to have to stay in place for a long time to come.

HARI SREENIVASAN: Finally, Ray, if you can give us a slice of the atmosphere — in one of your posts, you said it has been described by its critics, the entire conference and meeting, as Woodstock for gasbags.

Have they changed? Are they trying to be more inclusive? Is the agenda of the meeting any different?

RAY SUAREZ: Absolutely.

In the years since 9/11, and then even reinforced in the years since the global financial meltdown, there’s been a real attempt to bring in the critics of capitalism, bring in the critics of the World Economic Forum itself into the conference to be able to confront the leaders of industry and the leaders of government who come here year in and year out to deliver their critique.

So not only is the crowd more diverse than it was a dozen years ago when I came for the first time, but also the matters under consideration are more diverse.

There is far more talk about global climate change, far more talk about inequality in wages inside countries and then across different economic zones, a lot of worry about the poor, not necessarily out of altruism, but out of the understanding that if you can make the poor less poor, they will be better customers and transnational business will prosper.

HARI SREENIVASAN: All right, thanks, Ray.

And you can read Ray’s daily dispatches from Davos on the Rundown.