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STEVE CHIOTAKIS: European leaders are holding an emergency meeting in Brussels today. At issue for the moment is a second bailout of Greece. But the bigger question is the financial stability of Europe.
Marketplace’s Stephen Beard is with us live from London with the latest. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: What’s at issue? Why has it been so difficult putting together this additional bailout money for Greece?
BEARD: Because there’s a split between the Germans and the French. The Germans, whose taxpayers pick up a large part of the tab for these bailouts, want the private investors, including the banks that bought Greek government bonds to take a hit. But the French and the European Central Bank have been saying that would be disastrous. It would be a default, it would perhaps trigger a series of defaults, and perhaps a second European banking crisis.
CHIOTAKIS: All right, so the debate is going on. Is there going to be a deal?
BEARD: Well, the French and German leaders met yesterday. They say they’ve reached a common position but Gabriel Stein of Lombard Street Research says they’ve probably reached a messy compromise that won’t convince investors that Europe is on top of the problem.
GABRIEL STEIN: If today’s summit results in another inconclusive or obvious stop-gap plaster-like measure, I think we will find that the next fiscal crisis will take place in the next several weeks in the Euro area.
And by fiscal crisis, he means another government — perhaps even that of Spain or Italy — needing a bailout. He says the only realistic solution is that Europe becomes more like a United States of Europe — issuing a federal Euro zone bond backed by the whole Euro zone. But that’s going to be hugely unpopular, especially in Germany.
CHIOTAKIS: Marketplace’s Stephen Beard in London. Stephen, thank you.
BEARD: OK Steve.
JEREMY HOBSON: European leaders are holding an emergency meeting in Brussels today. And observers are calling it a critical moment for Europe. Officials are struggling to figure out how to pay for a second bailout of Greece.
For more on all this, let’s bring in our European Correspondent Stephen Beard. He’s with us live. And Stephen, this debt crisis has been going on for more than a yea now. Is today really ‘make-or-break’ as some have said?
STEPHEN BEARD: Yes because contagion’s been the big fear in this crisis. And in recent days, the crisis has begun to spread to Spain and Italy. Investors recon that if Europe can’t even deal with Greece, they certainly won’t be able to support these two much bigger economies and the Euro could fall apart.
HOBSON: Stephen, why has it been so difficult for them to put together this additional bailout money for Greece?
BEARD: There’s a split between the Germans on the one hand and the French and the European Central Bank on the other. The Germans, whose taxpayers bear the brunt of these bailouts, want the private investors — including the banks — that bought Greek government bonds to take a hit. But the French and the European Central Bank have been saying that would be catastrophic. It would be a default. It could trigger a series of defaults, and perhaps a European banking crisis, perhaps another recession.
HOBSON: So is there likely to be a deal?
BEARD: Well the French and German leaders had a long meeting yesterday. They say they reached a common position — we don’t know what it is or whether it’s going to work. But certainly the leaders at today’s summit are under a lot of pressure.
Here’s what the normally upbeat president of the European Commission — Jose Manuel Barroso — had to say.
JOSE MANUEL BARROSO: The situation is very serious. It requires a response, otherwise the negative consequences will be felt in all corners of Europe — and beyond.
Indeed, both the U.S. president and the IMF have weighed in, urging the Europeans to fix the problem of Greece before it spirals out of control.
HOBSON: Marketplace’s Stephen Beard in London, thanks Stephen.
BEARD: OK Jeremy.
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