Jeremy Hobson: Well we Americans know what a credit rating downgrade feels like, and that's sort of the feeling
this morning in the U.K. -- after Moody's downgraded the ratings on a dozen British banks at a time when the banks can least afford it.
Just yesterday,the head of the the British version of the Federal Reserve -- Mervyn King at the Bank of England -- announced he would pump an additional $100 billion into the economy. He said the world could be facing its most serious financial crisis ever.
Mervyn King: I think it's pretty clear that the world economy as a whole is slowing down much faster than people thought even a few months ago.
Well, the eye of the financial hurricane is currently centered over Athens, Greece. And we're pleased to be joined now from Athens by the Greek Foreign Minister, Stavros Lambrinidis.
Foreign Minister, is the debt crisis in Greece getting worse or better right now?
Stavros Lambrinidis: I think it has the potential to get much better, once the decisions that the European Union took on the 21st of July get applied by all parliaments that have voted.
The problem up to now has been that although Greece has been a great cost to its people and to its economy -- we're in a serious recession -- the markets thought that we could never achieve our goals because we simply didn't have enough time to do it. And this is a discussion that is being had right now in Europe -- how it is that we can move ahead with the best possible way to safegaurd not only Greece, but also Europe and the euro from those who believe or doubt our ability to do so.
Hobson: How do you think that Greece ended up in the worst position in Europe financially?
Lambrinidis: Well there's no question that we had an explosive combination of debt and deficit back in 2009 -- which was the biggest of any European country. At the same time, however, there's also no question that many European countries had exceeded the goals for debt, or deficit, or both that have been set jointly by us and the European treaties. And that created imbalances as opposed to balances.
Hobson: It seems that as the news comes out everyday about whether Greece is going to get its next round of bailout funding, that the Greeks sort of feel like they're getting a raw deal -- that they are being treated badly by the people who are trying to help bail them out. Is that your sense?
Lambrinidis: No. But there's no question that the Greek people are not happy because the measures, of course, that have to be applied are extremely tough. Just to give you a sense of this, 5 percent of the deficit was reduced in only one year.
Now if one puts that in the context of U.S. numbers, that would be the whole defense budget of the U.S. being cut in only one year. At the same time, the whole pension system was recalled in that same year; 10 percent of public sector employees left in that same year -- were not replaced; a number of structural and fiscal conservation changes took place in a very short period of time. That brought the country into a recession -- of course that hurts.
Hobson: Finally, I want to ask you: Greece is going through a period of austerity measures -- this is something that is probably going to happen sometime soon in the United States. Could you give us a lesson? What have you learned that you would tell other countries who are going through the same thing?
Lambrinidis: What I would say, on the one hand, that there is no way to get out of a major debt unless one reaches primary surpluses. I would also say that at the same time, it's extremely important to focus on growing the economy while it is contracting because of fiscal consolidation.
It is, if you like, these are two joint -- and they should be inevitable -- parts of the same coin.
Hobson: Greek foreign minister Stavros Lambrinidis. Thank you so much for joining us.
Lambrinidis: Thank you very much.
“I think the best compliment I can give is not to say how much your programs have taught me (a ton), but how much Marketplace has motivated me to go out and teach myself.” – Michael in Arlington, VABEFORE YOU GO