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FAREED ZAKARIA GPS

Why Does Iran Think Nuclear Talks Have Reached Turning Point; World Leader Refuses to Watch Oscar-Nominated Film Made in his Own Country

Aired March 3, 2013 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FAREED ZAKARIA, CNN HOST: This is GPS, the Global Public Square. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

We have an important show for you today. First, was there a breakthrough in the nuclear talks this week? Is a deal possible? A rare response from the Iranians government, I have an exclusive conversation with Iran's ambassador to the United Nations.

Then, the automatic spending cuts have kicked in, but are they so bad? Maybe not. I've got a great panel to hash it out.

And with Italy's bizarre election results this week, is the euro crisis back. And why is Silvio Berlusconi so popular. We'll talk to perhaps Italy's premiere journalist, Beppe Severgnini.

But, first, here's my take. Secretary of State John Kerry is making news on his first foreign trip swinging through nine countries in Europe and the Middle East.

He's talking about European trade deals, about providing greater assistance to the Syrian opposition and he's talking about Iran, of course. These are all important issues.

But I wonder if Kerry should instead have just visited two countries on his first trip, China and Japan. That's where the most significant and dangerous new developments in international relations are unfolding and where American diplomacy could make a bit difference.

The world's second- and third-largest economies have been jostling for months over territory, reviving ugly historical memories and making clear that, in the event of a crisis, neither side would back down.

Trade between the two countries, which usually hovers around $350 billion a year, is down substantially. An accident, miscalculation or unforeseen event in the East China Seas could easily spiral out of control.

And that would mean conflict between great powers in the fastest growing region of the world. The kind of problems that always has global consequences. The Obama administration came into office determined to make Asia a priority, topped by its ties to China. Hillary Clinton's first trip as Secretary of State was to Asia. The administration wanted to engage China as a partner.

China's reaction to these overtures was confused and muddled. Beijing worried that it was being asked to involve itself in superpower diplomacy, which would distract it from its single-minded focus on economic development.

Some in the Beijing foreign-policy elite wondered if this was a trap, forcing their government to rubber-stamp decisions that would be shaped out of Washington. As a result, Beijing's response to the administration's initial diplomacy was cool, sometimes even combative.

Meanwhile in Asia, many of the continent's other powers had begun worrying about a newly assertive China. From Japan to Vietnam to Singapore, governments in Asia signaled that they would welcome a greater American presence in the region, one that would assure them that Asia was not going to become China's back yard.

The Obama administration shrewdly responded with its pivot in 2011, combining economic, political and military measures, all designed to signal that the U.S. would strengthen its role in Asia, balancing any potential Chinese hegemony.

The result of the pivot, however, was to further strain relations with Beijing. Today China and the United States maintain mechanisms, like the strategic and economic dialogue between senior officials, but they are formal and ritualistic.

No American and Chinese officials have developed genuinely deep mutual trust. Beijing views the pivot as a containment strategy and believes that rising Japanese nationalism, tolerated by Washington, is responsible for the crisis in the East China Sea.

The lack of progress in U.S.-China relations stands as the single greatest vacuum in President Obama's otherwise reasonably successful foreign policy.

Whoever is to blame, the fact remains that the only durable path to peace and stability in Asia is a strong relationship between the United States and China. The two countries are not always going to agree, but they need to have much better and deeper ties.

So when he gets back from his trip, Secretary Kerry should start planning his next one, to Asia.

For more on this, go to cnn.com/fareed for a link to my Washington Post column, but up next, Iran. Let's started.

Expectations were not high for this week's nuclear talks with Iran, but, then, the chief Iranians negotiator said the meeting had been a "turning point" and Secretary of State Kerry called the talks useful. By the standards of these meetings, this is giddy optimism. So what happened and what can we expect in the next round of talks?

Joining me now in a rare and exclusive interview is Iran's Ambassador to the United Nations, Mohammad Khazaee. Welcome, sir.

MOHAMMAD KHAZAEE, IRANIANS AMBASSADOR TO THE UNITED NATIONS: Thank you, Dr. Zakaria. It's a great pleasure to be with you.

ZAKARIA: So tell me what specifically Iran sees as a turning point in these negotiations. Is it the issue of the Fordo nuclear facility that it does not have to be shut down, but merely suspended? Is it the issue of the 20 percent enrichment of uranium? What is the turning point?

KHAZAEE: Thank you. That's a good point. Eventually, in my view, none of them makes a negotiation a turning point in the process of negotiation.

In my view, as far as I'm informed, both sides are getting closer to each other and the proposals that were put on table by -- on the table by the 5-plus-1 were smart -- were much closer to the realities on the ground to kind of a sense of having a better cooperation with Iranians -- an Iranians with the 5-plus-1.

So the whole idea was much realistic than done before. So, therefore, I think that both sides found some grounds for cooperation in the future.

ZAKARIA: And let me just spell it out, so the things that encouraged you were that there was some talk about relaxation of sanctions, there was some understanding that you did want some 20 percent enriched uranium to be used in the Tehran medical research reactor for medical purposes. So these you regard as steps forward?

KHAZAEE: Definitely. You know we have to have a realistic approach in the negotiation. Of course, the details should be discussed from the technical point of view in the course of next couple of weeks and next few months which they will discuss both sides.

But the feeling that Iranians have from the negotiation is that both sides are getting closer to each other. That's the main point. It doesn't really matter about the details to discuss right now. The details could be discussed later on.

But when they decide to negotiate with each other with more comprehensive, simultaneous steps should be taken, these are the important points.

So, for example, how much stockpile Iran can have or how much -- or the enrichment at what level should be in Iran. Those are, in my view, a small and technical point that should be discussed.

Besides that, my understanding is that Iranians will be able to enrich uranium at least at the 5 percent level if what they did for need TRR and for our more than 1 million patients it provided (inaudible). So these are the good and positive signs that we can take. But, of course, we still have a far way to go ahead to fulfill Iranians' expectation from the other side for a confidence-building measures.

But I think, over the last few years, it was a turning point in the negotiations between Iran and 5-plus-1.

ZAKARIA: One of the things that disappointed many people here was a turn of events that took place about two weeks and you were in Tehran in the time and you have access to all the top leaders so let me ask you this.

Vice President Biden raised the prospect of direct talks between the United States and Iran. Ayatollah Khamenei, the supreme leader of Iran, seemingly responding that said, you know, we're not going to do things like that.

The U.S. is pointing a gun at Iran and wants us to talk to them. The Iranians nation will not be intimidated by intimidated by these actions.

So my question to you is does Iran want to have direct negotiations with the United States on a broad range of issues?

KHAZAEE: Iran is for negotiation and definitely we welcome any kind of dialogue and talks with the United States, as well as many other countries, all of the countries around the world.

This is the principle of Iranian foreign policy. So if you heard also the statement made by Ayatollah Khamenei, the supreme leader of the Iran, which I have his statement, he says, "We are reasonable. Our officials are reasonable, our people are reasonable. We understand reasonable needs and accept reasonable views."

"The Americans should show that they do not try to threaten. They should show that they do not speak and act unreasonably." And, then, at the end, he says, "This is the way to engage the Islamic Republican in Iran. The American's should prove their goodwill. If they do, then they will see that the Iranian people will answer in an appropriate way."

It's a clear message. I can tell you.

ZAKARIA: And what is the message?

KHAZAEE: I can tell you. The clear message of Iran is that if we see that United States is serious and is honest about this proposal for negotiation, cooperation, direct talks with the Iranians, Iranians will accept it and we will welcome it definitely.

There is doubt that that. I can confirm it here with you and also for your distinguished audience that Iran will come negotiation and direct talks with the United States provided that we make sure that U.S. is serious and do not act differently.

But let me go to the sentence by Vice President, Mr. Biden. We do respect. What he says here exactly, just one sentence.

ZAKARIA: Yes.

KHAZAEE: He says, "There is still time. There is still space for diplomacy," that's fine, we welcome this part, "backed by pressure." Look, it doesn't work that way. The most important point is that some officials in United States should understand how to speak with the Iranians.

You hear Secretary John Kerry; he was talking about mutual respect. We welcome that. Mutual respect doesn't go along with pressure.

ZAKARIA: We'll be back in a moment with Iran's Ambassador to the United Nations. When we come back, I'll ask him exactly what the United States needs to do to get direct talks with Iran going.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Iran's Ambassador to the United Nations, Mohammad Khazaee; a rare, exclusive interview talking about the prospects for a deal with Iran.

So, you were saying, as the representative of the government of Iran, Iran would welcome direct talks with the United States as long as it shows it's serious.

What is the sign that the United States needs to show to show that it's serious about these talks?

KHAZAEE: You know the system here is very complicated.

ZAKARIA: Also, in your country.

KHAZAEE: Also, in my country, but there are some differences. Iranians have been victimized by U.S. policy. American have not been victimized by the Iranian's policy.

ZAKARIA: What ...

KHAZAEE: (inaudible) different.

ZAKARIA: You took our hostages a while ago. But let's not get into this. Tell us what ...

KHAZAEE: Even that one if some American companies -- compared to what Iranians received from the U.S. policies different. Anyway, I don't want to get to that ...

ZAKARIA: For the future, what should the U.S. do?

ZAKARIA: Look, asking for direct talks with Iran, at the same time, I'm not saying it's necessarily the policy of President Obama or Secretary of State or anyone else or is the policy of the Congress here because there are some differences, you know, among their views and their approaches vis-a-vis Iran. I don't want to talk about or blame anybody. But my point is, as soon as you say, OK, we are ready to talk to you and work with you, but, at the same time, we punish you and put pressure on you and your people, Iranians cannot accept that.

Let me make it clear here. As long as pressure continues on Iranians, nobody in Iran are there to talk about negotiations. But if Iranians see a single, small even, indication that OK, today they United States is going to talk and act wisely vis-a-vis Iranians, I can assure that talking to the United States or any other nation around the world is a welcoming approach in policy by the Iranians.

And not talking to you, this is not holy book verses or something like that. No, it's because of the hostility.

ZAKARIA: You want to just see some sign that the United States sends a signal maybe some relaxation of sanctions or some indication that this is not just pressure.

KHAZAEE: Of course, we are not right now negotiating here, obviously. But the point is that Iranians should make sure that American is not using pressure on Iran for negotiation.

Negotiation should be for negotiation, talks to find common ground and solve if there's any misunderstanding or there is a problem that obviously exists.

May I ...

ZAKARIA: Yes.

KHAZAEE: Add just my own experience?

ZAKARIA: Sure.

KHAZAEE: I am not a politician. Put it this way, I am talking from the bottom of my heart. Let me put it this way, eight years or nine years we were under attacks by Saddam Hussein. A war -- imposed war which was supported by U.S. and (inaudible) countries and even some of our countries.

I remember those years that every day you could hear the strange noise of bombs and things in Tehran and other cities. I had three kids. It was difficult even to find a Similac or milk for your baby in Iranian market, from milk to many other things.

But Iranians stood against the pressure and hegemony of outside countries against them. So we are a nation that we have stood about eight years fighting and defending ourselves.

So, therefore, with such a nation and the history that you know very well, talking about pressure, putting about -- threatening Iran is not going to work.

ZAKARIA: We have to go, but I have to ask you.

KHAZAEE: That's fine.

ZAKARIA: You are one of the officials who was part of starting the Iranian film industry, all these (inaudible) that win awards. Many, many years ago, you were one of the guys who were funding it.

KHAZAEE: That's right.

ZAKARIA: So I have to ask you what did you think of the movie "Argo?"

KHAZAEE: Thank you very much. As you rightly mentioned it, I was member of the Festival Film Jury for five years when I was in Iran. From the technical point of view, to be honest with you, if I was a judge, the movie is a very weak movie.

ZAKARIA: A weak movie?

KHAZAEE: Weak movie. I'm not saying it is just a very weak or is not compatible with other kind of movies which Hollywood movies, but, compared to "Lincoln", compared to "Life of Pi", compared to the "Les Miserables", you know it did not deserve to receive Oscar prize first of all.

There are many mistakes in the movie. For instance, you are familiar with our culture. Even the producer or the director, they are not familiar with the Iranian culture.

You know, in Iran, when we want to say hello to somebody, we say "Salam," but when we want to say goodbye, we say, "Kodafez." Even the movie when they were going to say, "Kodafez" they were saying "Salam."

So even that much, the producer or director or (inaudible) of the movie were not familiar with the Iranian culture. And, to be honest with you, whoever in Iran saw the film, they felt insulted by American.

It was politically wrong and technically wrong and I think the producer of the film that is known as the Ambassador of Peace as I heard should be ashamed of producing such a film that, from the technical point of view, political point of view, was wrong, as well as insulting a big nation like Iran.

I would like to invite the producer and the director of the film to travel to Iran and then they travel to Iran, the day after they will apologize from the big nation of Iran for producing such a weak film.

ZAKARIA: Ambassador Khazaee, always a pleasure to have you on.

KHAZAEE: Thank you very much. It was a pleasure to be with you today, Fareed.

ZAKARIA: Up next, a different movie. We're going to talk to about world leader who doesn't even want to watch an Oscar-nominated film from his own country. What in the World is next.

(COMMERCIAL BREAK)

ZAKARIA: Now, for our What in the World segment. This year, Oscar-nominated movies have had a strong tie to real geopolitical events and they've got everyone watching and talking.

Zero Dark Thirty was all about the race to catch Osama bin Laden and Senators and CIA directors have all weighed in on the movie.

Argo told the story of six American diplomats who managed to escape Iran at the height of the 1979 hostage crisis and Michelle Obama presented it with the Best Picture prize.

But there is a major leader who says he has no interest in watching an Oscar-nominated movie about his own country. I'll get to the world leader in a moment, but, first, the movie.

It is "The Gatekeepers." The documentary is about Shin Bet, Israel's internal security service. No one has ever interviewed any one of its leaders on camera. "The Gatekeepers" talks to six of them, the last six directors to retire.

It is unprecedented to hear top Israeli spies discuss issues like collateral damage or the morality of killing terrorists, but, in this film, they do.

They are honest about the methods they had to use, deadly, brutal, effective. All of them believed that these methods were justified given Israel's circumstances, ruling over millions of Palestinians with terrorist groups operating among them.

But what was stunning to hear is that all of them believed the only real solution for Israel was to end the occupation now. Take a look at these clips from the film.

This is Former Shin Bet Director Avraham Shalom who says Israelis have become cruel.

(BEGIN VIDEO CLIP)

AVRAHAM SHALOML, FORMER DIRECTOR, SHIN BET: The future is bleak. It's dark, the future. Where does it lead? To change in the people's character. On the other hand, it's a brutal occupation force.

(END VIDEO CLIP)

ZAKARIA: He goes on to say the army has become a brutal occupation force similar to the Germans in World War II.

Another says this, "We win every battle, but we lose the war."

And one this:

(BEGIN VIDEO CLIP)

(UNKNOWN): One man's terrorist is another man's freedom fighter.

(END VIDEO CLIP)

ZAKARIA: These are the kinds of words you'd hear from radicals and left-wing doves in Israel usually. The film is getting some attention there. More than 50,000 Israelis have seen the film, a pretty substantial number for a documentary.

But, as I mentioned earlier, one very important person hasn't watched it and says he has no plans, the Prime Minister of Israel. Benjamin Netanyahu is likely to form a coalition and begin a new term as prime minister this month.

One of his first big projects will be to welcome President Obama to his country. Obama will be making his first visit to Israel as president. What will they discuss? For sure Iran and, of course, they'll discuss Syria and the unrest across the Arab world.

But "The Gatekeepers" is a reminder that the questions of what to do about the Palestinian territories that Israel has now occupied for almost 50 years should also get on the agenda.

At least that's the message I got from the last six directors of Shin Bet; men who have devoted their lives to defending the State of Israel. Maybe they know something.

When we come back, that nine-letter word that everybody knows, but doesn't quite understand, sequester. I've got a great panel to talk about it and Europe.

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN ANCHOR: I'm Candy Crowley in Washington with a check of the headlines. Crews have begun demolishing the Florida home where a man was devoured by giant sinkhole. Jeff Bush was in his bed when the ground beneath him collapsed Thursday. Authorities called off the search for his body yesterday. The demolition could take a few days.

The man who was behind a deadly January attack on an Algerian gas facility is dead. Moktar Belmoktar was killed Saturday in Mali. He led a Jihadist group associated with al Qaeda.

The Roman Catholic Church's cardinals are gathering in Rome to prepare for picking a new pope. This is the first Sunday in eight years without a pontiff. No date has been set to begin the process of selecting a successor to Benedict XVI, but the cardinals will have their first meeting tomorrow. Benedict officially retired last Thursday.

And Vice President Joe Biden is in Selma, Alabama, today to commemorate the 1965 voting rights march. The vice president will deliver the keynote address at a brunch and then join others retracing the walk across the Edmund Pettis bridge. It was 48 years ago this month that Alabama state troopers attacked a group who attempted to march from Selma to Montgomery in support of what would become the Voting Rights Act.

And those are your headlines. "Reliable Sources" is at the top of the hour. Now back to Fareed Zakaria "GPS."

ZAKARIA: So, first we went over the cliff and now we have been sequestered all in the span of two months. How bad are these automatic spending cuts economically in the short term and the long run? How bad does the United States look to the rest of the world? We will ask all this to our panel, Zanny Minton Beddoes is the economics editor of the "Economist". David Leonhardt is the Washington Bureau Chief of "The New York Times" and Roger Altman has done two stints at the highest levels of the U.S. Treasury and then went on to found Evercore Partners, great investment banking firm. Welcome all. David, you wrote a piece, in which you said, this isn't so bad after all. That's sort of what the Republicans are saying. But so, let me give you the opposite view, which is, you only have seven months to squeeze all these cuts in. While it looks like it's two percent, since so much is exempt, it is actually a lot more than two percent and because it's done in this kind of cleaver-like fashion, you can't actually scalpel. So that in fact, this is going to look pretty bad.

DAVID LEONHARDT, WASHINGTON BUREAU CHIEF, THE NEW YORK TIMES: Yeah, I mean it all depends on what your priorities are, right? If your priorities are, it won't matter, clearly it's going to be much worse than that. If your priorities are this is probably going to send us into a recession or resembles the fiscal cliff, it's not as bad as that. I think a big part of the problem here is you point out, is the makeup of the cuts, it's not just the size. As a percentage of GDP, it's not horrible. But the problem is it's so arbitrary. I mean you listen to economists. So many of them words like "dumb" and "stupid," not technical words to describe this. And so, it's going to be hard for agencies to react to it.

ZAKARIA: Roger, you described this as - this is like being attacked and by, you know, by the ...

ROGER ALTMAN, FORMER U.S. DEPUTY SECRETARY OF THE TREASURY : Invading Iraq when the attack came from Afghanistan.

ZAKARIA: Right. Explain why. Because the way I put it is, the way to think about it is all the stuff we should be cutting in the federal budget is sacrosanct under the sequester, and all the stuff we shouldn't be cutting is the stuff we are cutting.

ALTMAN: Well, the two big problems relative to the fiscal condition of the United States are, on the one hand, the growth in entitlement spending, which, of course, isn't addressed by the sequester.

ZAKARIA: Right.

ALTMAN: And the degree, to which revenues - in relation to GDP remain quite a bit too low, which, of course, isn't addressed either by the sequester. So it's ...

ZAKARIA: What it cuts, instead, is infrastructure, science, research ...

ALTMAN: Which, first of all, has already been cut by $1.1 trillion, to the Budget Control Act of 2011, that's a lot. And in terms of GDP, the non-defense portion of discretionary, which is very substantially affected by the sequester is approaching a 50-year low. So, it's in effect shooting the wrong victim. And that's why it's so stupid.

ZAKARIA: Zanny, the latest GDP numbers, the revised numbers suggest that the economy is barely growing. So, isn't it possible even though this is not a large part of GDP, this could actually have the effect of tipping the United States into something like a second recession?

ZANNY MINTON BEDDOES, ECONOMIST EDITOR, THE ECONOMIST: I don't think it will tip the United States into a second recession. Because I think there are quite strong parts of the economy now should be (inaudible), but I think it does mean that what could be - could have been a rather more vigorous recovery is going to remain a very lackluster, one at best. And overall, it's not as bad as we have gone off the fiscal cliff. But it's still cumulatively quite a lot of fiscal tightening coming this year. I think the biggest of any major economy. And so, it's really not what the U.S. economy needs, because as Roger says, this doesn't solve any of the U.S.'s real problems which, on medium to long time problems, particularly in entitlement spending, it cut stuff that actually good for the economy and it weakens a lackluster recovery. So, on all accounts, it's dumb.

ALTMAN: One thing, that is fascinating is that the financial markets, you can see it in the stock market, which is off to its biggest - the best start in something like 17 years, is looking right through this. It's essentially saying we got through the fiscal cliff, no serious economic effect. All the threats of the debt limit, that's off the table. We're going to get through the sequester, we're going to get through the risk of a government shutdown and the financial markets are looking ahead to roughly the end of 2013 and seeing a transition towards a stronger economy.

ZAKARIA: But what about people like your colleague Paul Krugman who say - the economy has been terribly depressed. You have something - on the range of 20 million people unemployed or underemployed. What you really need far from moderate austerity programs, you need a big fiscal push, you need big spending plans.

LEONHARDT: We've now got tons of evidence that austerity does not work after a financial crisis. The United States in the '30s, Japan, Europe, this time relative to us and yet the United States has turned after really being aggressive in 2009 and to some extent early 2010 turned towards austerity. It's really remarkable to see that the United States has now been cutting government employment over the last few years. Something it did not do in the '80s, during the Reagan years or the '90s or the oughts. And so, the idea that the best combination here would be some sort of short-term investment, take advantage of the low interest rates, and try to put some people back to work, and long-term austerity is pretty widely accepted and we're not going to get it for political reasons.

BEDDOES: I completely agree with that. But what strikes me in this debate is that often people on the left don't really want to do the long-term entitlement reform.

LEONHARDT: That's correct.

BEDDOES: And so, I think we would have a very different debate. And I fault both sides. You're absolutely right on the stupidity of short-term austerity, but if we had, even from the administration, but certainly from commentators more focus on the need for long-term entitlement reform, then the U.S. would be able to say, look, we've solved our problem, we put the house in order and we are not doing down the short-term cuts.

LEONHARDT: This idea that we have no deficit problem, I think is clearly wrong. The question is your time frame. Right? Over the next few years the deficit isn't our problem. Over the next 20 years, the deficit really is a problem, and it's important to acknowledge that, as you say.

ZAKARIA: You, on the other hand, are pretty bullish about the U.S. economy. So, you think that even by next year growth is going to be strong enough that the Fed might have to raise rates or that some of these cuts would be fine.

ALTMAN: Oh, I'm not sure about when the Fed will change monetary policy. Actually, I think the president maximum ease policy will probably remain through the end of next year and probably into 2015. But I do think one of the things people miss on the debate about austerity, and I want to be very clear that I don't think the 2008 financial collapse was a good thing. Nor the great recession a good thing, not at all. It was too much anguish and pain and so forth. But it tends to have a dramatic restructuring effect. It's had that in the United States and it's about to begin to have that or is beginning to have that in Europe. And I'm really - a lot of focus on the private sector because it's had a tremendous restructuring impact on the private sector. So, you see, U.S. manufacturing competitiveness is improving. You see this, as Zanny said, this incipient housing boom. And I think it will be a boom. You see this breathtaking turnaround in oil and gas production. U.S. oil production just passed 7 million barrels a day. A lot of people think it's going to get to 10 million barrels a day. We have 100 years supply of natural gas. Very cheap, tremendous competitive advantage. And you see the American household finally coming to the end or about the end of deleveraging, we've just seen the statistics on the households beginning to borrowing on a net bases for the first time since the crisis. And the point is that the events of 2008 and the great recession have had a big, call it cleansing effect, on the private sector. And it is now beginning to kick in. And so, I think we're going to have quite a strong economy, give or take beginning in 2014. Some people think the beginning, some people think the middle and I think that's one of the reasons you see financial markets so strong.

ZAKARIA: We need to take a break, but when we come back, we go to Italy. What the elections there mean. Do we have another Euro crisis on our hand? Stay tuned.

(COMMERCIAL BREAK) ZAKARIA: After this week's Italian elections, Italy is essentially leaderless, according to my next guest. He says between the pope's retirement, the soon to be retirement of the president of Italy and a hung parliament that will be unable to pick a new prime minister, no one will be in charge. Beppe Severgnini is a columnist for Italy's "Corriere Della Sera" and an author. He is one of Italy's most respected journalists, I'm, of course, also joined in New York by my panel, Zanny Minton Beddoes of "The Economist", Roger Altman of Evercore and David Leonhardt of the "New York Times." Beppe, let me ask you this questions, does it matter that nobody is running Italy? There's all - you know, the line in Italy has always been the government sleeps and the economy grows.

BEPPE SEVERGNINI, JOURNALIST, CORRIERE DELLA SERA: Well, no, it does matter to be honest. It does matter a lot. But we're not worried. You shouldn't be worried. I think things will be sorted out and then we'll go into how in a little while, I guess. But don't panic. I remember, I was in Aspen, for the Aspen ideas festival late June 2012, paneled by Europe. Everybody was talking about the doom day, you know, everything is over and I told them, keep quiet. Let's see what happens. And, in fact, it turned out that things got better. So, before we decide that it's over. I think the expression is not over until the fat lady sings. It comes from opera. Opera is Italian, don't forget that.

ZAKARIA: But let me ask you, Beppe, why did the Italians do this? It is one thing to reject austerity and things like that. But, you know, you have elected either one or two clans, depending on one's - one's estimation of Silvio Berlusconi. What are the Italians saying?

SEVERGNINI: Out of four Italians. One didn't vote, one voted for Berlusconi. One voted for the center left, one voted for Grillo. So, that's why we are in a stalemate. Beppe Grillo is a kind of wrecking ball for Italian politics. And to be honest, some of the Italian political building need to go down. Political parties asked for it. The question is, will we be able to build up something to replace what we pull down?

ZAKARIA: Roger, your point about Europe, as I understand it, is particular countries like Italy. It doesn't matter what they say and how much they protest, they're going to have to put in place some of the austerity measures that have been demanded because it's the market that's demanding this, right?

ALTMAN: Of course, there have been austerity measures, Fareed, already begun, in so many countries. Look at Ireland, for instance. But, yes, I find some aspects of the debate about austerity is good, austerity is bad to be a little misguided because at least, initially, looking back a year ago at the worst of the crisis, the Euro zone crisis, it is the global capital markets that demanded changes in the financial conditions or a fiscal path that passed some of the peripheral countries, Italy, Spain, and so forth. And there was therefore no choice as there never is, when a borrower loses market access, virtually does. There is no choice but to restructure. And restructure means consolidating your finances and other steps that are seen as austerity. So, I don't think that if you look back on it, there was a choice as to whether or not to have austerity. The issue is how much and over what period of time.

ZAKARIA: What do you ...

(CROSSTALK)

BEDDOES: I have a slightly different view. I mean I think that Italy has big problems and I think the problems are not primarily fiscal. And primarily, that the Italian economy hasn't grown. Italian productivity is terrible, it's just not a competitive economy. Per capita income has been (inaudible) appallingly, over the last since the introduction of the euro. And so, when you think about what does Italy need? It needs a huge take up. It needs huge reforms of its labor markets, of its product markets. It needs to open things up. It needs to have all kind of deep fundamental reforms to kind of energize the sclerotic Italian economy. It needs huge political reforms, too, because I think that there is a sort of outrage at the Italian political elite. But I don't think that austerity, by which I mean, you know, tax increases, which there has been a lot and hitting short-term deficits is really the source of Italy's problem. So, I think the emphasis was wrong. And the emphasis, actually, to kind of make that point more broadly within Europe has been much too much on hitting short-term deficit targets and much too little on the kind of overhaul that Europe needs to boost growth. And so, I do slightly disagree with you, Roger, in terms of emphasis. Because I think much more emphasis on growth would have both made the economics of the reform program more sustainable, but also would have helped the politics.

ZAKARIA: So, in a way, it seems what Zanny thinks, you needed less austerity and more structural reform.

LEONHARDT: Right.

ZAKARIA: But the structural reform is actually the hardest thing to do because that's when you're breaking up gills, you're taking on unions, you're opening up protected sectors of the economy. Frankly, we haven't done that much of it here.

LEONHARDT: No, that's exactly right. And Italy is sort of a nice prism to think about the United States, because on the one hand, Italy's problems are clearly worse than ours. We haven't had any demands from the global financial markets to restructuring the way that Italy has. We haven't had any problems to borrow. But we also haven't done this sort of structural reforms. And if anything, the sequester has the opportunity to make it worse. One of the things I worry about and you hinted at this before, is that the sequester effectively hits things that apply to future economic growth. Right? It leaves alone all kinds of benefits that maybe valuable. Like Medicare and Social Security, but don't contribute to economic growth. And growth is the best way to solve deficits. It's Italy's problem and in a lesser way, it's our problem, as well.

ZAKARIA: Beppe, what about this issue that Italy has done a fair amount of austerity, but very little reform. If you look at unit label costs which is one proxy for reform, they're barely changed in Italy whereas that down substantially in places like Spain, even Greece. That if you look at the structural reforms that people think Italy needs, they haven't done that much with all Mario Monti's efforts.

SEVERGNINI: Don't forget, it's very important for people who are looking at this program to understand how we get there. Give me like ten seconds. When all the crisis hit, every country reacted in different ways. You in America, what happened, you know, on the left, people occupied whatever it was happy- free to occupy a (inaudible) Tea Party on the right. Even Greece they clashed in the square, in France they took to the streets. In Britain, they enjoyed swearing at that bankers. In Italy it was all very quiet and people accepted Mario Monti bitter medicine. And these is the reaction. A bit sort of delayed, but I think now if they managed to put together, I agree with Zanny, we really need to go into structure reform. Berlusconi was a disaster as the prime minister because Italy between 2001 and 2011 grew only a few countries in the world, grew less than Italy - Eritrea, IET (ph) and Zimbabwe. How is that possible? We sell Prada, we sell Maserati and Ferrari. We are a good, big manufacturing country. Bigger than Britain, as a matter of fact, in terms of manufacturing. So, we need to go back to what we can do and restructure. Maybe it's the time to do they are so scared, political party, they'll do everything.

ZAKARIA: Beppe Sevengnini, Zanny Minton-Beddoes, Roger Altman, David Leonhardt, thank you all very much.

Up next, why are the people of Egypt and Tunisia shaking and why might those nation's leaders be shaking, as well? We'll explain, when we come back.

(COMMERCIAL BREAK)

ZAKARIA: Pope Benedict XVI left office on Thursday. We all await the election of his successor. But did you know that person will take up two jobs? The papacy, but also sovereign of the Vatican City state. That brings me to my question of the week. The Vatican is a small country, but how small? How many official citizens does the Vatican city state have? "A" around 450. "B" around 4,500. "C" around 450,000 and "D" around 4.5 million. Stay tuned and we'll tell you the correct answer. Go to cnn.com/Fareed for more of the "GPS Challenge and follow us on Twitter and Facebook. Remember, if you miss a show or a special, go to iTunes.com/fareed.

This week's book of the week is Lee Kuan Yew, "The Grand Master's Insights on China, the United States and the World." Two senior scholars at Harvard Graham Allison and Robert Blackwill spent hours with the legendary founder of Singapore and have presented his world views in this short book that is packed with intelligence and insight. If you are interested in the future of Asia, which means the future of the world, you've got to read this book.

Now for the last look, in America, "Harlem Shake" may be the top off single. In Egypt and Tunisia, there's some serious Harlem shaking going on. And it's causing leaders to tremble as it becomes a potent symbol of protest, revolt and defiance. Take these kids at a school in Tunisia. They danced en masse to the song and posted their exploits on Youtube. That prompted a quarter of a million hits and reports of an investigation by the country's minister of education and that prompted a backlash. Video after video after video of Tunisians proudly doing the Harlem shake in defiance. And then there's Egypt, where the authorities went further and the backlash was worse. Four pharmaceutical students were arrested for doing this Harlem shake in front of the pyramids and that set off a big reaction. Late in the week in Cairo, there was a mass shake in front of the Muslim Brotherhood headquarters to protest. Now, who says America's popular culture exports have no value? The answer to our question of the week was, A according to the official Web site of the Vatican City state, it has about 450 official citizens, many of whom actually live else where. According to the CIA fact book the total population, including citizens of other nations who live there is around 800. Thanks to all of you for being part of my program this week. I will see you next week. Stay tuned for "Reliable Sources."