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QUEST MEANS BUSINESS
Uproar in Greece as Parliament Votes for Austerity, Pitched Battles in the City Square, Economists Debate the Measures
Aired June 29, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Rustic austerity, a popular uprising and a city square in chaos, with pitched battles. And at the same time, a parliament here in Greece that passes the measures.
I'm Richard Quest tonight live from Athens, where I mean business.
Good evening to you tonight from Athens, a city that in part is in chaos, but now has a roadmap for its future financial health. The Greek government has said yes to more austerity. The people are crying out in anger and tonight, after several hours of pitched battles, the tear gas still hangs low over the city square.
Earlier, Greek lawmakers voted in favor of the new round of cuts. The EU leader said they took a step back from the very grave scenario of default. The government won by 17 votes, small, but bigger than expected. The fall out, you can see here, in the streets below us.
(CROWD NOISES, CHEERING, SCREAMING)
The hardcore of protestors threw stones, set fires, the police responded with stun grenades, truncheons, and an extraordinary amount of tear gas. World attention is focused on this square, in the heart of the city. What happens here could break, and now perhaps, make, project Europe.
The Greek Prime Minister George Papandreou says it is the best thing for Greece, in the long run.
(BEGIN VIDEO CLIP)
GEORGE PAPANDREOU, PRIME MINISTER OF GREECE (through translator): We have two choices, the difficult road of change, and the road of destruction. We choose the difficult, the painful, the necessary road of change. We don't go back. We don't retract. We will fight for the best for the Greek people.
(END VIDEO CLIP)
QUEST: Now, European Union leaders obviously welcomed the decision. They had called this a vote of national responsibility. The Commission President Jose Manuel Barroso, no stranger to being on this program, and the European Council President Herman Van Rompuy issue a joint statement, saying the country -- Greece, that is -- had taken an important step along the necessary path of fiscal consolidation. A second vote will follow on Thursday. That vote has now the business of now enacting, and then implementing, the roadmap and the plan that was voted on today.
As the Greek drama played out in the streets and in the parliament, the European President, Herman Van Rompuy has given the first-ever state of the union address for the European Union.
(BEGIN VIDEO CLIP)
HERMAN VAN ROMPUY, PRESIDENT, EUROPEAN COUNCIL: It may be politically incorrect to say so, but in my view the state of the union is not so bad, even if the mood is not so good. But the mood is, this afternoon, much better than this morning after the positive vote in the Greek parliament. Ladies and gentlemen, political courage still exists.
(END VIDEO CLIP)
QUEST: It seems surreal, the world of difference between what the politicians have been debating and voting upon, and the anger, the raw emotion and the hooligan violence being taking in place in the square. But this is what it has been all about. Lawmakers voted for $40 billion in cuts, and tax rises; $70 billion in privatization over the next four to five years. A 20 percent wage cut for public sector workers. They agreed only one worker should be hired for every 10 who retire.
At the core of the financing for Greece has been the European Union, the ECB, and the IMF; an organization that has, itself, been in turmoil after losing its managing director, Dominique Strauss-Kahn. Earlier I was joined by the acting managing director, John Lipsky, who had put so much into ensuring a successful Greek bailout package. I asked Mr. Lipsky, the result that it now was forward, did it mean that Greece was OK?
JOHN LIPSKY, ACTING MANAGING DIRECTOR, IMF: The Greek action is the bedrock of the adjustment program. And it is just worth mentioning, it is often reported that this is an austerity program. It is in fact a program of structural reform intended to restore the competitiveness of the Greek economy within the Eurozone and to allow the prospect of restored and sustainable growth, in Greece.
The second part is the financing support that will be necessary to make that program possible. And that is what we are still discussing with our European partners and we are making progress. As you know, in the last week there was an agreement on the terms of which -- broad terms -- of private sector involvement in providing financing. We are still working out the details.
QUEST: Are you satisfied with the French proposal that would have this longer mature rollover? Is this the cornerstone, do you think, for private involvement in the second bailout deal?
LIPSKY: Well, Richard, as you know, there was an agreement that the -- any private sector involvement would be on a completely voluntary basis, there are a number of proposals being discussed right now. We have made real progress over the past week. And I'm looking forward to additional progress quickly. But this is a very complicated issue. There are many alternative proposals and many complex aspects to be nailed down before this becomes final.
QUEST: The people here in Athens, they often accuse, perhaps the likes of me and you of, you know, we live in a sort of economic ivory tower, and we go to summits and we go to meetings. The people here say that all the plans of the Greeks, the IMF, the Europeans, none of them offer them any hope. They just offer recession and hard times ahead. They do -- whatever the long prognosis is, in the short term, they have a point, don't they?
LIPSKY: Well, of course, the starting point is an extremely difficult one. But who would have counseled running a budget deficit of 15 percent of GDP? Who would have counseled running up debts? But most important has been the loss of competitiveness of the Greek economy because of the inefficiency, uh, the inefficient state enterprises, of restrictions on markets and other price controls, that have robbed the Greek economy of its prospect of growth. That is what has to be fixed.
QUEST: Are you confident tonight that the Eurozone, the euro, and indeed the whole global financial architecture is standing a bit -- on a bit more firm ground than it was before we started the vote?
LIPSKY: Well, I, in fact, I was not so worried that there would -- that we couldn't withstand a failure here. But the important point is now we are on a very positive path. The Greek's action is the absolute benchmark of a successful program here. So that is a very positive step.
(CROWD NOISES, RIOT POLICE WHISTLES
QUEST: And that is John Lipsky, of the IMF, the acting managing director, who will retire in August. Mr. Lipsky will be (UNINTELLIGIBLE) who will be taking over is Christine Lagarde.
Tomorrow you can hear John Lipsky's view on his successor at the IMF, Christine Lagarde. And he will also be talking on the question of U.S. debt.
When we come back to Greece, to Athens after this short break, my next guest will tell me why not only austerity will work, but where the hope is for the people in the square. We'll be back. QUEST MEANS BUSINESS, we are live in Athens tonight.
QUEST: All day I have been in the square, being tear gassed, and having stun guns, basically, throughout the area. Elena Panaritis is a member of Greek parliament -- I do apologize, I think I may have mangled your name, yet again.
ELENA PANARITIS, MEMBER OF PARLIAMENT, GREECE: That's OK.
QUEST: But she is a member of the Greek parliament and an economic informal advisor to the prime minister and to a former World Bank economist.
John Lipsky said this is not just austerity for austerity's sake.
QUEST: As a member of parliament, you have just voted for more hardship for your people.
PANARITIS: Yes, we have. We have voted for more hardship. But there is no other way out. There is no gain with no pain, as we say in the States. And unfortunately, we have to go through fiscal changes and reforms, but we have to go through structural reforms. And these structural reforms that we have already started, but do not show any tangible results yet, are the reasons why these people are out there.
QUEST: The problem, of course, was that 12 months ago we were told that you would be back in the markets next year, and that it would all be -- now, look, I read George Papaconstantinou 's, the former finance minister's article this morning, in which he basically a lot has been done, but there have been failings. Why should we give Greece the benefit of the doubt with this latest round?
PANARITIS: Because Greece is a country that has structural problems. It is not a liquidity crisis, what we are dealing with, it is a solvency.
PANARITIS: Well, no. That is not the case. It is a capital adequacy issue. And capital adequacy issues are usually managed with structural reforms. They don't take a year, they take longer.
QUEST: So why did any -- are you prepared to admit, now, that it was erroneous, albeit, with good motives, it was erroneous to give such a misleading, optimistic impression last year?
PANARITIS: But let's look at it in the real -- the real aspect of it. Last year they perceived that -- and today as well, sometimes, we still do make this mistake -- Greece is the 48th country -- rich country in the world. And we don't assume that it has a situational problem. That systems are broken. So we assume automatic changes. If taxes will increase by 1 percent, revenues will increase by 100 percent --
PANARITIS: But it doesn't happen.
QUEST: Exactly. And that is the problem you now have for the future. Because all of the assumptions on your debt, for the future, under this plan and the bailout that will come, are for best growth, privatization receipts, and basically a rosy scenario.
PANARITIS: But actually, all of these are based on the fact that we will do structural reforms. What do I mean by that? We will eliminate debt by actually structuring and simplifying our way of doing business.
QUEST: Tell me -- tell me, why it wouldn't just be better to have an orderly -- I'm not suggesting a disorderly -- I'm not saying tell the two fingers to your creditors, but an orderly restructuring and default? Just admit it can't be done.
PANARITIS: No, it could be done. We could do it. It is an option, but we are opt to not to, because we are part of the part of the euro. You see we are not an independent country. We can't just decide for ourselves without taking into consideration what the other 16 members of family are going to do. So since we are part of that same dinner table, and we have all decided that we are going to eat that same currency, we have to accept what the others 16 suggesting. And we have get along with that.
QUEST: All right. You're gonna -- I'm going to be downright mischievous now. You're eating that same currency, someone would say you are drinking the same Hemlock.
PANARITIS: Well, everybody is allowed to have their own opinion, aren't they?
QUEST: Many, many thanks, indeed for joining us this evening.
PANARITIS: Thank you.
QUEST: I appreciate it enormously. And we'll talk again.
PANARITIS: I hope so. Thank you.
QUEST: Many times.
PANARITIS: A pleasure.
QUEST: All right. Now, news of the Greek parliament had approved the austerity measures, hit the main Athens stock market earlier. It lost all its early gains before bouncing back toward the end of the session. Banking and mining metal shares were top performers across the region. The euro also lost its gains against the U.S. dollar, after the austerity vote it is now rebounded and is up to around a 1/6 of a cent, at 1.44.
The world has been watching the events in Athens and not only because they wanted to see what was happening on the street. They needed to know the vote, and its affect. John Defterios is in London with a look at what lies ahead for Europe. And Felicia Taylor is at the New York Stock Exchange to join us now.
Felicia, when we know now what is happening in Athens, are the U.S. markets reassured by that?
FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: The U.S. markets are reassured because some uncertainty was taken out of the market, but investors worry that this is just simply temporary. You know we have been using this phrase all day, that it is just simply kicking the can down the road. This was not a relief rally that we saw earlier today, in that Greece's problems are not totally solved. It is a relief that Greece isn't falling into the abyss today.
So we saw a little bit of a sell on the news, on this. Bought the rumor, earlier in the week, we had triple digit gains on Monday and Tuesday. Initially, this morning, on the New York Stock Exchange had a pop, and then the shares fell back into the red. But we still have double digit gains right now. Traders earlier on the floor were joking that it is kind of ridiculous to see a 100 point rally earlier today, on no real news and very low volume. It is good news today for Greece but it isn't a certainty down the road that its problems are indeed solved, Richard.
QUEST: Felicia Taylor, in New York. And Felicia was at the IMF just 24 hours ago. We'll talk about that next week, or later in the week with Felicia on the IMF.
John Defterios is in London to put the perspective into this.
John, I know that you have constantly reminded us that after all this is done Greek debt doesn't actually doesn't fall that far or that fast, but at least hand to the heart, they have at least done the deal tonight.
JOHN DEFTERIOS, CNN FINANCIAL CORRESPONDENT: Yes, in fact, it was not a default, Richard. Today's vote is part of an orchestrated plan to deliver funding for Greece. Basically, Greece, you do your bit, and we the troika, the European Union, the European Central Bank, and the International Monetary Fund, will do ours. This is what it looks like in the month of July and the quarter ahead.
First let's start with July 3. This Sunday, European economic finance ministers meet in Brussels, on the table, the fifth and final traunch of the bailout plan. Number one, it will mean $17 billion, if it can get that implementation through parliament tomorrow. Then we go to July 11, Euro group finance ministers, 17 countries who share the euro, need to advance their private sector banks, roll and restructure Greece's debt. The initial plan, by France, to restructure half into 30-year bonds, is considered a credit advance. So it is a big question mark over that.
July 15, Greek bond payments start; $9 billion, coming due, and will continue through the month of August. At the end of July Greece is hoping to have a second bailout plan approved by the troika. It is about the same size as the first one. We are talking $140 billion. It is the big secret that nobody is talking about just yet. But look for it at the end of July.
And finally, in September, Richard, the troika will visit Greece to see if what has been promised, in terms, of a deeper round of austerity cuts, have actually been implemented. So, if you are trying to kick the can down the road, September is a time to look back in and say, could they go through that second round of austerity, Richard? That is the huge question.
QUEST: John, Elena Panaritis believes, obviously, in this austerity measure, it is all doable. It is realistic. But do you think, from where you are standing and looking at the numbers, Greece can do this?
DEFTERIOS: Well, you are asking for quite a bit here; $40 billion between now and 2015. But the big challenge is, this is again, a lot of things that people don't like to talk about. There is a culture of tax evasion in Greece. In 2008 public filings showed that only 60 percent actually paid incomes taxes, in the entire country. That coasts Greece $20 billion alone, in 2008. Now the problem exists, even with the government workers. Hundreds of finance ministry staff is being investigated, right now, for tax evasion. That is in the finance ministry, alone.
And we all know about the generous welfare package. It is exacerbating the debt problem. There was an IMF report warning that the debt to GDP, which is now about 157 percent, would skyrocket to 800 percent of GDP by 2050, if the Greeks didn't move ahead. So this was why, Richard, you see all those people protesting in the square, and we are likely to see some strains going forward, they needed to lean on the public sector. During that first 10 years of the euro, we saw the public sector swell, during the time of the Olympics and 4 percent growth. And all the EU funding coming in, they didn't restructure. They let the public sector grow, and pay back is very, very difficult right now.
QUEST: John Defterios, in London with that part of the story.
After the break, a former finance minister of Greece joins us. What does he make -- not only of the vote, but the ability of the Greek people to withstand it. This is QUEST MEANS BUSINESS, live to you tonight from Athens, where as you can see, over my shoulder, the tear gas just keeps getting pumped out as the battles between protestors and police continue. QUEST MEANS BUSINESS, good evening.
QUEST: Good evening from Athens. I'm Richard Quest, QUEST MEANS BUSINESS. I'll be coming to you live tonight from the Greek capital, on the day in which the government voted, or parliament voted, in favor of the austerity measures. The public are still on the street protesting and the hooligans are still running battles with the police, who are firing tear gas. The Greek Prime Minister George Papandreou said this was a moment in Greek time, when the future of the country could be looked upon.
(BEGIN VIDEO CLIP)
GEORGE PAPANDREOU, PRIME MINISTER OF GREECE (through translator): In any case we should avoid the collapse of the country. We should maintain this opportunity to discuss about it today and tomorrow. We should correct our mistakes, in our course, whenever it is necessary. We should proceed to joint initiatives. People -- many people outside demonstrate, many, some of them, because really they are suffering.
(END VIDEO CLIP)
QUEST: Joining me now is Stefanos Manos, the leader of Greece's Drasi Party, and a former finance minister of the country. He joins me now via broadband from his home in Athens.
Sir, the vote went in favor, not everybody voted for it, obviously. And there were a few abstentions. Why were you not in favor?
STEFANOS MANOS, FMR. GREEK FINANCE MINISTER, DRASI PARTY LEADER: Well, the particular package is more of the same medicine. This government, as you mentioned before, has allowed the swelling of the public sector.
Now, in my view, the public sector employs about 400,000 redundant people, out of 1 million. And instead of cutting down public spending, this government increases non-stop taxes, in order to keep paying for people that do not actually work. Then that this the main problem.
QUEST: All right.
MANOS: Savvy? (ph)
QUEST: Well, let's just take that. The law has passed, the enactment will now go through. Should Greece receive a further second financial bailout from the IMF, the EC and the ECB?
MANOS: I would recommend to Europe and the IMF to help Greece repay its obligations with fresh money, but not give any one euro for new deficits. This government, last year, produced a deficit, a new deficit, of 11 billion euro. In the first five months of this year, although allegedly it cut spending, the total expenditure of the state, without taking into account, interest, has swelled. So they are spending more than they spent last year. That is the wrong recipe. And what Europe should do is just tell flatly to us Greeks, we won't give you money for new deficits.
QUEST: All right. Do you think that Greece is now secure, within the euro, or do you fear, to use that phrase that has been used 1,000 times, the can has just been kicked down the road?
MANOS: I suspect this is true. I do not expect that Greece will be able to produce what this new package foresees. Particularly in the area of privatization, because this government has never believed in privatization, it has not prepared for it. And now it has accepted under duress in order to get this new traunch of the loan. It has accepted a timetable, which in my view is absolutely undoable.
QUEST: Right. Stefanos Manos, joining us via Skype. We thank you for joining us this evening.
Now, I need to explain to you, why, perhaps the light is not as bright as it might normally be when we broadcasting in the hours of darkness. The reason is the protestors down below. When they see the lights of the television cameras get switched on, not only does it attract attention -- and bottles and stones and marble and things get thrown at the building, the hotel where we are at -- but also those green lasers get shined right not only at me, but of course, to my cameraman's eyes and into the camera lens. So that is one reason why, perhaps, we may shed some economic light on the proceedings, but I'm afraid the physical light, well, we are still somewhat in the dark.
It is not only the politicians that can't agree, or the people, even economists have some disagreement about what it all meant. Earlier today, over a coffee, I was joined by the economist Nick Skrekas to discuss -- and I was surprised how strongly he opposed the measures.
NICK SKREKAS, ECONOMIC ANALYST: This doesn't mean anything very positive at all for the Greek people. In fact, this $28 billion worth of measures and cuts will effectively mean one month's less salary for your average household. It is more likely to mean at least a 10 to 12 percent GDP drop until 2015. And it really just describes the perfect debt trap, where the more you tax and the less you spend from public coffers, the worst things get because the economy can't generate tax revenues to pay off lenders.
QUEST: The IMF and the Eurozone, they know all the pitfalls of what you are talking about. They are trained economists and bright men and women at that. So they are aware of the recessionary measures that are being imposed.
SKREKAS: Well, I am not sure that there isn't any alternative. There are alternatives, but ones that they aren't willing to consider. Such an alternative would be, and it is unavoidable in my view, a debt restructuring. Now, you don't help anyone who is in this much debt by giving them more debt.
QUEST: What would you say to the European officials who say, tonight, that Greece voted to be responsible and put the country back on its feet?
SKREKAS: No, the kind of medicine that is being dished out is actually quite poisonous in the level of its dose. And there is very little nobility in this austerity. Of the last 14 months we have had one -- we have had 100,000 businesses closing due to this policy recipe. We now have a quarter of the great population under the poverty line. And with these measures it is only going to get worse.
QUEST: To those people watching, saying that Greece had to restructure, there has to be better tax collection, there has to be a less generous welfare system. There has to be higher productivity. Surely, these measures do all those things?
SKREKAS: Some of those measures are in the right direction, but the great majority are actually very destructive for the economy, very destructive for the middle class. Unemployment will skyrocket. The economy will tank even further. You will see social disruption. What we really need is all the Eurozone governments to sit down with the lenders and work out a moratorium for the euro periphery, for about two, three years, to allow economies to bounce back somewhat, into more normalized states, and then we can work out how to repay the debts.
QUEST: Do you think that in five to seven years' time, this privatization, you know, in many ways similar to what happened in Russia, where they talk about how the assets were stolen, in many cases, by the oligarchs. People will say, they privatized the corrupt came in, the corrupt got the goods.
SKREKAS: That is a huge risk at the moment, a huge risk. I don't know that it will actually go down that direction. I certainly hope it doesn't. But it is a very significant risk.
QUEST: In 10 years' time will Greece still be in the euro?
SKREKAS: I think in a few years' time, we may still be in the euro. I think in 10 years' time, if we are wise enough, we shouldn't be in the euro. And we have already seen how the benefits have been wiped out, since Eurozone entry, just in the case of 12, 13 months of austerity. Moreover, we don't have the tools to be able to help our economy, without having control of our own money supply, of our own currency, of our own interest rates.
QUEST: That, of course, is one perspective, on the Greek economy, but it is not only Greece that has some money worries. The U.S. economy also has deficits. And there are concerns about its economic future. After the break, the former U.S. Treasury Secretary Larry Summers joins me to discuss the president's economic plans and what needs to be done next.
QUEST MEANS BUSINESS is live in Athens.
QUEST: Well, what would the ancient Greeks who built the Acropolis make of the chaos and confusion, economically, politically, the destruction of the civil society, that they put so dear, on the streets of the Greek capitol, her in Athens, tonight. Where tear gas and running battles with police still loom large.
Hello, I'm Richard Quest. QUEST MEANS BUSINESS, live from Athens tonight. And on this network, the news always comes first, and so that is why we turn to John Defterios, at CNN, London.
DEFTERIOS: Let's get back to our top story, and that is government debt. Let's go back to Central Athens, Syntagma Square, to Richard -- Richard.
QUEST: John Defterios, we thank you. We are going to move from one country in debt, Greece, to another one, the United States. Critics of President Obama, some say he should now be far more involved in the deficit reduction talks. That are so vital, certainly in relation to the raising of the U.S. debt ceiling.
Mr. Obama, at a press conference suggested that member of Congress should cancel their summer holiday, their vacations, and stay and deal with this issue, until it is sorted out. He said that the rival parties must work together and do anything they can to avoid debt default.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: So the good news is because of the work that has been done, I think we can actually bridge our differences. I think there is a conceptual framework that would allow us to make huge progress on our debt and deficit, and do so in a way that is not hurt our economy right, here, and right now. And it is not often that Washington, see both parties agree on the scale and the urgency of the challenge at hand. Nobody wants to put the credit worthiness of the United States in jeopardy. Nobody wants to see the United States default.
QUEST: That is President Obama.
Larry Summers was one of the very top economic advisors, to President Obama, he was Treasury secretary to President Clinton, and we are delighted that the former Treasury Secretary joins us now from Harvard University.
Mr. Treasury Secretary, thank you for joining us. It is good of you to give us time tonight. We have a lot to cover, as I am sure you understand.
Let us begin with these debt and deficit ceiling talks, in Washington, how realistic and how worried are you that there could be an accident, and a technical default?
LARRY SUMMERS, PROFESSOR, HARVARD UNIVERSITY: I trust it won't happen. It would be financial Armageddon, if it did. Quite likely it would make the events after Lehman Brother's failed, look like a picnic. It is not something that any rational individual would contemplate permitting. And I believe that while there may be some drama along the way, that we will not see a default. That is something that is so horrible, that it would be beyond my imagination.
QUEST: The nature of deficit reduction talks, and you have been through more than your fair share, is it always goes to the wire. But this time, with an election next year, Republicans --
Do forgive me. We have obviously more stun grenades going off here in Athens.
With the Republicans refusing tax rises, Democrats on spending cuts, where do you think this is going to fallout, Mr. Summers?
SUMMERS: Look, it is not just deficit talks. All negotiations tend not to get resolved until the last hour and everybody has tried to get as much of their position as they could. And in that context my expectation would be that some kind of compromise will be reached. There will be some strategically designed cuts in domestic spending.
There is likely to be some cuts taken in defense spending, as well, which has been a priority for the Democrats. There will be some resolution on tax policy questions. No one wants to signal in advance the concessions they are prepared to make, because that means making them. But I think you will see a compromise in the end. And like all compromises, no one is going to like it very much, they are just going like it relative to the alternatives.
QUEST: All right. Turn our attention to, and pull the strands together for me, Greece, everybody was terrified of a debt default and the contagion affect that would affect the United States, perhaps.
Do you believe tonight that that contagion affect has been lessened and are you more optimistic the U.S. won't feel any effects?
SUMMERS: I think the Greece situation has been contained for the moment, not resolved. Ultimately, a resolution is going to depend upon Greece's ability to carry through on what is a very, very difficult program, economically. And as the scene behind you demonstrates, an enormously difficult program in a democracy, with citizens with strong entrenched interests. It is going to depend, in Greece, on how the financial play out is, how those with funds in Greece's banks respond to the uncertainties that surround the Greek government, and also surround the prospects for the program and the prospects for continued support from Europe. So I would say we have bought time. But this situation as an issue is with us and is likely to pose a recurrent challenge in coming months.
QUEST: Right. Finally, to pull the strands together, if we may, we have Europe's sclerotic growth and a periphery that is in deep financial trouble. The United States has deficit issues and it also has growth questions and inflation worries. Where do you think the biggest risk now lies?
SUMMERS: You know, I think, obviously, from the point of view of the global system as a whole, what is happening in Asia is profoundly important. China is now the second-largest economy in the world. China's growth is the largest single contributor to global GDP growth, by a significant margin --
-- given its scale and the rapidity of the growth rate. So what happens in China, in particular, and in Asia in general, is going to be central for the global economy.
And obviously we have a stake not just in their success, but in their success being based on a model that emphasizes domestic demand, rather than exporting to our markets.
QUEST: Larry Summers, thank you so much for joining us and putting all of this into some perspective for us. And, please, do come back again, to QUEST MEANS BUSINESS, when hopefully it won't be quite so noisy with the stun guns and grenades of Athens.
The former U.S. Treasury Secretary Larry Summers joining us, there.
While we have been on the air the tear gas has been flying once again. They are clearing the square, in Constitution Square in Athens. We'll be back in just a moment. QUEST MEANS BUSINESS, live from Greece.
QUEST: Good evening from Athens. I'm Richard Quest.
There is an enormous amount of tear gas once again having been thrown into the sky by police battling protestors here in Athens, the parliament having past the vote. Austerity anger, though, is not just being felt here. Other countries, too, are feeling the effects. The U.K. is preparing for what could be the largest set of strikes since the great strike in the 1920s. Some of those strikes start tomorrow in Britain. They will be protesting plans to reform public sector pensions. Spain has been dealing with strikes on and off for months. One of the most vulnerable case in the Eurozone; worker there protesting against spending cuts and tax increases. And in Germany the critics are getting louder for Angela Merkel. They are protesting about the way she is handling the European question.
Joining me is Fred Pleitgen in Berlin.
And, Fred, when I say that, of course, it is a fundamental objection to too much money coming from Germany to the southern European cities and countries.
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, it certainly is, on the one hand, Richard, and on the other hand, it is also the way that the Angela Merkel government has handled all of this in its day to day dealings. And it is interesting that you say that it is about the European question, because I do think that that really is fundamentally about what everything here -- what the problems are, with the way that the Angela Merkel government has handled all of this.
The big criticism toward Angela Merkel is that in the midst of all of this she has been looking more towards poll ratings, to winning regional elections, rather than to solving this crisis. And there are a lot of Germans who, as you say, are very critical of the fact that now, again, they will probably be having to pay a large chunk of this bailout money, probably the largest chunk of any European country. And at the same time they don't feel that Angela Merkel has gained anything through this politically.
Now on the other hand when you look at this on a European level, usually, when you look back at other former governments here in Germany -- Gerhard Schroeder, Helmut Kohl -- in the times when it has come down to the wire, they have always put the European interests ahead of the German interests; simply because the European Union is so very important to this country historically. And that is something that many people here in Germany, and of course, many people here in Europe don't feel that the Angela Merkel government has done. And that is why she really hasn't done herself any favors on a domestic level and certainly not on a European level, Richard.
QUEST: Blunt question, Fred. Is Angela Merkel on the ropes? Is she in trouble?
PLEITGEN: Well, she is sort of semi on the ropes. But it is not really only because of the question of the European bailout. That certainly is a very large chunk of the problem; the fact of the matter that the Germans are going to have to pay a lot of their tax money again. Also, pairing that with the fact that the Germans, of course, in the past couple of years have gone through very, very heavy austerity measures, in and of themselves.
The one thing that is really keeping Angela Merkel afloat, by the way, is the fact that the German economy is still humming. So while the Germans are very unhappy by the very fact that they are going to have to give up all this money to help bailout Greece. Right now they are not feeling it as badly as they would if the German economy is doing worse than it is right now. So they don't really see that as big a problem. But she certainly is on the rope also because of a lot of other issues. And one of the things she is trying to push through right now is tax breaks. And that, of course, is something that is completely contrary to putting up additional tax money to help Greece, Richard.
QUEST: Fred Pleitgen, who is in the German capital of Berlin for us tonight. Many thanks, Fred.
The whole issue of Greece has shaken the Eurozone to its very core and raised the fundamental questions about the future of the zone. When we come back after the break, putting it together again won't be any easy task, to build confidence in the euro.
QUEST: One, two, three, four, there are five fires, that I can see, small, little blazes, going on. But an enormous amount of tear gas that is blowing across the square.
Good evening. Live from Athens, QUEST MEANS BUSINESS. I'm Richard Quest.
What this was really all about was not so much saving one small European country, Greece. No this was about saving the wider European project, the euro, and the single currency. Germany and France have both said they will do whatever it takes to protect the euro. And the fear has been that Greece could be the first country to have been bailed out or "turfed out".
Jim Boulden now looks at the issues surrounding saving the euro.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT (voice over): So, project euro has survived to live another day. Now what? Does the Greek crisis hurt the euro concept and therefore the dream of a united Europe under a single currency, or actually strengthen it?
Doomsayers have been warning that Greece could bring down the entire dream of monetary union. Or at least, default on its loans with huge losses to European banks. To avoid that there are calls for Greece to be expelled from the euro, or voluntarily leave.
It is a far cry from the day nearly 10 years ago when the euro launched as a hard currency, backed by a treaty that has no provisions for a country to leave the euro.
SIMON TILFORD, CENTRE FOR EUROPEAN REFORM: I'd be careful of ruling it out completely. I think it is still unlikely.
BOULDEN: Unlikely to leave. Instead, some say, the richer countries in the Eurozone face years of simply transferring funds, not loans, to Greece. Is that politically more palatable than the messy breakup of the euro?
TILFORD: If they face the choice between what could prove politically impossible, providing ongoing transfers from the core of the Eurozone, or from the rest of the rest of the Eurozone, to Greece, or negotiating the country's withdrawal from the Eurozone. It is not clear which way they will jump.
BOULDEN: Leaving the euro would only come years after pain and anguish for monetary union. Efforts by the European Central Bank, in Germany, to support the euro show that there is no appetite within Europe's power brokers to break up the currency. It is now likely Greece will soon get some sort of debt relief before every being allowed to default. The questions is, will it be orderly or disorderly?
KEVIN FEATHERSTONE, PROFESSOR, LONDON SCHOOL OF ECONOMICS: We are talking the language here of some kind of ordered, voluntary rollover by foreign banks lending to Greece.
BOULDEN: In other words, help Greece push its problems down the road a few years, while building up the defenses to keep Greece from infecting other countries.
MARK WALL, DEUTSCHE BANK: So the strategy that is emerging, this muddle through strategy, it feels just not quite right. But it is in an incredibly complex problem that the EU is trying to address. They are trying to do the maximum to help Greece, but at the same time, minimizing the ramifications for other countries.
BOULDEN: That delicate dance could set in motion the eventual demise of the euro, or could actually bullet proof the currency from nearly any further shocks. Jim Boulden, CNN, London.
QUEST: As we conclude tonight, QUEST MEANS BUSINESS from Athens, whilst stun guns and grenades and more tear gas, "Profitable Moment" after the break.
QUEST: Tonight, "Profitable Moment". There have been many changes over the years to the traditions in Greece. But this country is now about to experience many more that will go to the root and branch of how this country, and its people, live their lives.
There will be $40 billion worth of cuts over the next few years.
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UNIDENTIFIED FEMALE: Oopah!
QUEST: It will affect every part of life. Benefits for the elderly, benefits for those out of work will also be cut.
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QUEST: In a country where taxes are rarely paid, the taxes are going up.
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QUEST: In short, every aspect of Greek life will feel the effects of what is about to happen.
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QUEST: Of course, outside this country, the biggest concern will be what happens to the Eurozone? Can the euro zone and the Euro Group survive the Greek tragedy?
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QUEST: And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest, live in Athens. Whatever you are up to in the hours ahead, I hope it is profitable
I'll be back in London tomorrow night.