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How Europe is Coping with Spanish and Greek Financial Crises

Aired February 25, 2010 - 15:00:00   ET



CHRISTIANE AMANPOUR, CNN ANCHOR: Tonight, it was Greece that sparked the worst crisis ever in the Eurozone, but Spain, a major economy, could be next. Could it bring the euro down?

Good evening, everyone. I'm Christiane Amanpour, and welcome to our program.

The financial crisis in Greece is raising extreme tensions in what was once a happy marriage of 27 European countries. In Greece, those tensions are spinning out onto the streets. People are angry over deep spending cuts, austerity measures because of the country's debt crisis. Demonstrators are also out in Spain. Could the euro now be in serious danger?

Top economist Nouriel Roubini says that if Greece goes under, that's a problem for the Eurozone; if Spain goes under, it's a disaster.

But the problem is even bigger than that, and it goes right to the heart of the E.U.'s founding promise of pulling together as an economic and political power. Today, it's sharply divided, for instance, over the war in Afghanistan. In fact, the Dutch government has just collapsed over whether its troops should stay there.

Joining me now from Madrid is Spain's foreign minister, Miguel Angel Moratinos. His country holds the rotating presidency of the European Union right now.

Mr. Foreign Minister, thank you for joining us.

MIGUEL ANGEL MORATINOS, FOREIGN MINISTER OF SPAIN: Well, thank you for inviting me to participate in your always very positive program.

AMANPOUR: Well, thank you so much. Let me ask you about this financial crisis. We've said that it's Greece that sparked it. We understand that Greece has said that Europe will not let the euro fall. Let me just play for you something that the Greek prime minister told us on this program.


GEORGE PAPANDREOU, PRIME MINISTER OF GREECE: The decision that we did take in the European Union was a very important decision, a watershed to say that we are standing by the Eurozone, we are standing by Greece, and we will not let the euro fail.


AMANPOUR: OK, Mr. Foreign Minister, that is Mr. Papandreou confident that the European Union will not let the euro fail. But the thing is, your country is now coming under extreme economic crisis and stress, and people are very concerned about it.

MORATINOS: Well, I have to say that that's not the case. I mean, we are the eighth economy (ph) of the world. I mean, there has been a lot of command (ph), a lot of, I don't know, analysis, but it's been economy that's strong (ph). It's have a total solvency (ph).

We have, you know, 20 percent below the average debt limit (ph) of European Union. And the Eurozone is going to succeed. I mean, it has been a tremendous, you know, success, but people -- some people don't trust or they were not confident about the euro, Eurozone, and European Union success in these new euro (inaudible) monetary currency.


MORATINOS: And I think today, today we have the full support and, of course, of the main rating agency. I mean, I don't know how many countries over the world have a AAA (ph) like Moody's (inaudible) that (inaudible) so don't worry. Spain has, of course, some problems, like everybody in this economic and financial crisis, but we are undermining or undercutting some important measures--


MORATINOS: -- and we are confident and we have no problem.

AMANPOUR: Well, you're confident and you're optimistic and you say you have no problem, but people are out in the street already in Spain. People are complaining about rising and raising the retirement age. Figures are showing that you have an unemployment rate of some 19 percent, 4.3 million are unemployed, the housing bubble is deflating, debts and budget deficit is increasing, and the GDP has contracted.

And, furthermore, your prime minister, Zapatero, has said that he was confident -- and this was last year -- about sparking growth.

I want to play you what Prime Minister Zapatero said about this.


JOSE LUIS RODRIGUEZ ZAPATERO, PRESIDENT OF SPAIN (through translator): The main point is not that we should have a high public deficit this year and next year. We will, indeed, have a high deficit. But the point is to have a plan to get back to 3 percent growth as of, say, 2011.


AMANPOUR: OK, Mr. Moratinos, that was Prime Minister Zapatero last year. And today--


AMANPOUR: But he's talking about getting back to--

MORATINOS: (inaudible)

AMANPOUR: -- 3 percent growth. But right now, growth is at minus 0.1 percent. So there's a difference in -- in the optimism--

MORATINOS: Yes, that's--

AMANPOUR: -- that you're expressing and the reality.

MORATINOS: No, no. Well, no, you know, as you say, the situation is minus 0.1 percent. If we go in the economy, you have to go through the cycles of some crisis (ph). And the -- the -- the decrease of our growth the last year has been even under the average of the European Union.


We decreased minus 3.6 percent, but the last term (ph), as you say, minus 0.1 percent. And we are now starting to grow. And, at the same time, well, I mean, you mentioned about -- I mean, social rallies in the streets. And, you know, we have a tremendous and positive social dialogue with the trade unions and with the patronage (ph), and what happened the other day was because we are taking some measures (ph). And the presence of these sort of trade unions call (ph), it was only no more than 10,000 or 15,000 people on the street.

It's true we have an unemployment problem of 19 percent, 18.6 percent of -- of unemployment. But when Spain was, you know, flourishing at the most important peak of economy in 2007, we have already 8 percent of unemployment.

It's a structural problem we have in Spain because of the housing sector, and the housing sector only represents 4 percent of the economy. That means 96 percent--


MORATINOS: -- of the rest of the economy is responding to -- to the - - to the challenges and responding in a quite positive manner.

AMANPOUR: So -- so when bankers and when other people start to express worries that first Greece and then Spain, this could bring a collapse of the -- of the euro, are you dismissing that? I mean, do you think that Spain could determine the fate of the euro?

MORATINOS: Absolutely. I mean, we are in a very stable situation. And it's not me who say that. It's also OECD secretary general, Mr. Gurria, just two days ago, is, of course, the European Central Bank -- he is the rating agency (ph), as you say.

I mean, I think there's only six countries of over 192 countries in the world that is U.N. member states that have a AAA in the two agency rating agency, and that is Spain. So the -- the debt is below 20 percent of the European Union average, and we have only -- from 52 percent of -- of indebtedness.

MORATINOS: So if we are compared with other important countries, I would not say European, but others, I think we are, of course, suffering the economic crisis, but we are not at all in a situation that we should say we are in a real, real difficulty (ph).

And the Euro Zone is going to respond with the new measures, with the new European strategy for economy and sustainable development. That's what is going to happen during our E.U. presidency.

AMANPOUR: Mr. Moratinos, will the government of Spain be forced to take austerity measures to really make sure that the economy stays viable?

MORATINOS: Well, you know, we -- we took a decision to have an austerity plan of 50 billion euros from now until 2013 to make our deficit to be reduced, because this is true that we have a growing deficit last year, but we are going to keep with the ex-ability pact (ph) of European Union that makes us in 2013 to be only with 3 percent of deficit.

So I think we are ready to achieve that goal. And that showed the seriousness and the determination of the Spanish government to get this macroeconomic stability, guarantee the future of the economic situation of Spain.

AMANPOUR: Mr. Moratinos, I want to ask you whether you agree with what the U.S. economic Nobel Prize-winner, Paul Krugman, has said. He says that, "A breakup of the euro is very nearly unthinkable as a sheer matter of practicality. What we'll probably see over the next few years is a painful process of muddling through, bailouts accompanied by demands for savage austerity, all against a background of very high unemployment. It's an ugly picture," he says.

Do you agree with that, that it's going to be bailouts, unemployment, and an ugly picture for the next few years in Europe?

MORATINOS: No, I -- I disagree, because the European Union -- and we are working together with the new president, Mr. Van Rompuy, President Barroso, and President Zapatero to put on front of the head of state a government of European Union a new economic strategy of the European Union that will change the model, the productive model of European Union. That means so much more economic governance.

What there was lacking in the European Union that we don't have economic unity. And of course it's true. It's our way to move forward in the integration process of the European Union that sometimes we take political decisions and then they are supported by economic ones.


And at this stage, I think that is the challenge. And we are confident that this governments (ph) of European Union with much integrated and coordinated economic policy, we will bring together not only the rights of employers and the -- the rights of the -- the decreased unemployment, but also, you know, a different type of economy -- the green economy that we are looking for.

AMANPOUR: Let me move on and ask a little bit more about foreign policy and also the transatlantic alliance. Now, I heard a top American official say the following, that in Europe, people always ask about the United States, but in the United States, people are always asking about China, about India, in other words, saying that for many in the United States, the E.U. is not really a player. How do you feel about that?

MORATINOS: Well, I think it's not true. We were recently in the White House. I accompanied his majesty, King Juan Carlos. And I received from President Obama a very clear message: We want to really establish a stronger agenda for transatlantic cooperation in this 21st century.

It's a different kind of agenda. Before it was a kind of complementary role of the European Union. But today, we want to preserve values, criteria, principles, the way to handle together the whole economy. If we put together the U.S. economy and European economy, and we see the potential of both big organization, big entities working together, I think that when we talk about G2 -- G2, like China and the United States, it would be uncomfortable not to have a G3.


MORATINOS: The European Union have, of course, a lot of things to be internally (ph). But we have to work at, hand by hand, with the United States. And that is going to happen.

AMANPOUR: Well, let me ask you this, hand by hand with the United States, and yet President Obama is not coming to the E.U.-U.S. summit in -- in the spring. Doesn't that make you mad?

MORATINOS: Not at all, because we have to really understand the agenda of President Obama. As you mentioned, there are many internal agendas important for the United States. And, also, well, we have some foreign agendas that are crucial for not only the United States, but for the whole stability of international world.

In this sense, what we have is to prepare adequately this E.U.-U.S. summit. And I'm sure it's going to take place during 2010. Normally, there's one summit per -- per year. And while we were planning to have it during the Spanish presidency, it happened that the agenda of President Obama cannot allow him to travel to Europe. But we have been working together--


MORATINOS: -- and in a conversation, again, the last week in the United States, we have exchanged some views, some ideas in some areas were together we can make a stronger transatlantic relationship.

AMANPOUR: OK, let's talk specifically about when it comes to the Afghan war. Spain does have some 1,000 troops in Afghanistan. But a recent poll showed that 48 percent of Spanish people thought that your government's decision to send an extra 500 troops was bad or a very bad decision. How are you going to be able to support the NATO mission when you have this sort of war fatigue in your capital, like in many other European capitals?

MORATINOS: Well, we have more than that. We have 150 -- 500 -- 1,500 troops. So we increased with 50 percent our contribution the last two years.

And we have recently, you know, the support of the whole parliament, so we have the support of the political groups. Well, there are one or two that are against, but they're a minority. So the majority of political groups have support this new commitment of Spain towards Afghanistan.

And -- and why? Because, as you say, now we have a clear plan. After the London conference, we have a clear plan of how it should be, our military contribution. But it also have to be coupled with economic and social institution-building response and, also, with a new approach for integration and reconciliation between the Afghan authorities and so-called moderates Taliban.

So we have now a clear picture where we have got to go. And at this - - at this time, that will be understood by the Spanish public opinion. And as I said, we have the full support of the majority of the political groups to go ahead without -- without any difficulties.

AMANPOUR: Foreign Minister Moratinos, thank you so much for joining us from Spain today.

MORATINOS: Well, thank you for inviting me to -- to participate in your program.

AMANPOUR: Thank you so much.

And for a look at the human side of the financial crisis, go to We've got a fascinating insight from a working woman in Greece who says this is not the time for strikes.

And next, a different view of Europe's mess, are antiwar activists in the driver's seat, when we return.




ROBERT GATES, SECRETARY OF DEFENSE: The demilitarization of Europe, where large swaths of the general public and political class are averse to military force and the risks that go with it, has gone from a blessing in the 20th century to an impediment to achieving real security and lasting peace in the 21st.


AMANPOUR: So is Europe demilitarizing, as the U.S. defense secretary says? Joining me from Hamburg, one of Europe's leading newspaper publishers, Josef Joffe, of the German weekly Die Zeit.

Mr. Joffe, thanks so much for joining us. You heard what Secretary Gates said about the danger of Europe demilitarizing, obviously, a major concern with the Afghan war. What does Germany feel about this?

JOSEF JOFFE, PUBLISHER, DIE ZEIT: About demilitarizing or about the Afghan war?

AMANPOUR: (inaudible)

JOFFE: First of all, the Germans which used to be our main -- the main candidates for pacifism and neutralism are actually doing quite well. They just decided to up -- up their contingent by 850, and now the Germans are way over 5,000. So the Germans are surprisingly holding up.

Second most important thing is, it's bipartisan. This decision is being supported by both the conservative right and the social democratic left, though the social democrats are in opposition.

AMANPOUR: What does it say though to you that some 65 percent of German people oppose sending troops to Afghanistan? And how dangerous is that for the transatlantic alliance?

JOFFE: Well, you know, I've learned to put public opinion figures in context. Nobody likes a war. The opinion in the United States is fairly divided. This war or no war is popular in the West, but that doesn't mean that governments can't and don't sometimes do what needs to be done, which is to go against public opinion for strategic purposes and national interest.


JOFFE: And I think with one exception, Holland, what I just said holds true.

AMANPOUR: Well, I just want to ask you about Holland, because it's causing a huge amount of consternation, the Dutch -- the government has collapsed over this issue. They are going to pull out. And it seemed by all accounts that, in fact, the Dutch were doing really well in Uruzgan province where they were stationed.

Let me just quote you something that the Dutch prime minister said. He said, "When President George W. Bush asked us to extend our activities, we said yes. And when President Barack Obama, who has a lot of support in the Netherlands, made such a request, we say no." What does that mean for the U.S. and Europe right now?

JOFFE: Look, Barack Obama was -- when he came to power even before that, he was -- he appeared as somewhat like our rock star and redeemer. And nobody really thought that sheer niceness or affection will change -- will change national interests or national behavior, which it hasn't.

So the Dutch are the odd man out here. The Dutch have a very, very unstable coalition, and so the left took that issue to get out of the -- out of the coalition.

AMANPOUR: But are they--


JOFFE: I'm not completely sure that -- I'm not completely sure that this is the last word, because the Dutch know -- first of all, they're very Atlanticist (ph) people. And the Dutch know the risk is very high that, if they pull out, this might unravel a lot of the rest of the -- of the -- of the defensive tissue.

AMANPOUR: Exactly, including Canada. But you talk about unstable. Let me talk about another area of instability, and that's in the economic zone in Europe. We've just been talking to the Spanish foreign minister. We saw what happened in Greece and what's happening in Spain. I know Germany has a robust economy, but is there a danger now that there could be a collapse of the euro? How do you read it?

JOFFE: I don't -- I don't think so. So far, we are just talking about Greece, and what's happening to Greece is what happens to any state in America that overspends. You have to start paying a big premium on your bonds. They have to pay about 3 or 5 -- 4 percentage points more, so the market is working.

Greece is a small country. If -- if it's Italy, if it's Spain, if it's Portugal, then it will get a bit wobbly. But the critical thing is, we won't let them falter. The big European states and economies have demonstrated by word and deed that we won't let them collapse.

AMANPOUR: Well, you mentioned Spain -- Spain--

JOFFE: So I think that truth will hold.

AMANPOUR: Yeah, and Spain is in -- in some danger right now, as we've been discussing. But let me ask you on a broader issue, this whole situation, does it show the fundamental flaws in what was meant to be a happy and productive marriage of 27 European countries?

JOFFE: The basic flaw is very simple. You can't have a monetary union without a political union. You can't just have somebody who says, "We'll do monetary policy," like the Fed in the United States, and no government to at the same time rein in, control fiscal policy. And--


AMANPOUR: Well, how to get the political -- how to get political union?

JOFFE: What?

AMANPOUR: How to get political union?

JOFFE: We won't get -- we won't get political union. We won't get political union. The point is that the basic flaw is common monetary policy and no common political will, and that has -- is threatening -- threatening that system.

Political union, like -- you mean like Washington--


AMANPOUR: No, no, no.

JOFFE: -- Continental Congress? Not for a long time.

AMANPOUR: Well, then where do you see it go, if there isn't the political will?

JOFFE: The political will is to keep this operation going, and that's why we'll save the Greeks, why we'll save the Portuguese and others. We will not kick anybody out of the euro. And the rich, as always, will pay the way like the rich have to pay more, like the United States has to pay more for the Afghan effort. The more powerful you are, the more you have to pay.

AMANPOUR: What about the strength? You mentioned the United States. We've been talking about President Obama. You know, President Obama has decided not to come to the E.U.-U.S. summit in the spring. It's quite unprecedented, and it's sending a message, or isn't it? What do you think about that?

JOFFE: Well, I mean, some Europeans got hysterical about this. I think Europe, which, by the way, all of Europe has an economy of about 1.5 times the size of the American, ought to be a bit more poised and self- assured than to start whining because Daddy didn't come to the kid's birthday party.

AMANPOUR: On that note, Josef Joffe, thank you so much, indeed, for joining us.

JOFFE: OK. Thank you.

AMANPOUR: And next, NATO troops in Afghanistan face a deadly enemy, as we know, but they are not alone. We'll tell you about one four-legged trooper who's just returned from the war zone, whose nose is the British army's secret weapon. That's when we return.



AMANPOUR: And now our "Post-Script." He doesn't wear a uniform, and he doesn't carry a gun, but he's still a war hero, credited with saving the lives of several comrades. His name is Treo, and he knows how to stand -- well, at least sit to attention on special occasions.

He's a black Labrador with a nose for IEDs. And while on patrol in Afghanistan, he discovered several of the deadly roadside bombs before they exploded. And yesterday in London, he received the Dicken Medal, the animal equivalent of the British Victoria Cross, the highest award for gallantry in combat.

Treo didn't have much to say about his exploits, but his British army handler spoke for him, and he said, "We look after each other." Treo is no longer on active service. He's now enjoying retirement in central England at the home of his handler, who has adopted him.

And turning now to our continuing online conversation about Venezuela. We've received hundreds of questions from you, our viewers. And next, our guests from last week's show will answer them on Twitter, where we're using the hash tag "AmanZuela." So come and join in our hash tag debate.

And that's it for now. Thank you watching. We'll be back tomorrow. Meantime, watch the daily podcast of our program on For all of us here, goodbye from New York.