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Kai Ryssdal: Over in Europe this weekend, leaders met for the 13th time to make sure the world and the world’s markets know they’re serious about fixing things in Greece this time. Then they put a final decision off until another meeting Wednesday.
We’ve got Marketplace’s Stephen Beard back for another chat about the once and future end of Greek debt crisis. Hello Stephen.
Stephen Beard: Hello Kai.
Ryssdal: So I am obliged, as I am I think every time I talk to you about this subject, to ask you about the possibilities, the probabilities of Greece actually defaulting and things deteriorating into chaos?
Beard: It’s almost inevitable that Greece is going to default in one way or another. The question is whether it’s going to be an orderly default, where the creditors agree to write off some of the debt, or a disorderly one in which the Greeks just shut up shop and stop paying.
Ryssdal: So explain to me for a moment this meeting over the weekend and what they decided to do, or not do.
Beard: As far as we know, the main thing they’ve decided is they have agreed that eurozone banks need more capital. This may not sound like it, but it is a bit of a breakthrough because they have those stress tests, you remember, in which they said everything was tickety-boo with European banks. Well apparently it isn’t. They’ve agreed that they do need more capital, so if any of the eurozone governments do default or need to restructure their debt, it won’t trigger a European banking collapse. And the figure that we’re hearing is around $150 billion.
Ryssdal: Stephen, you mentioned the possibility of an orderly default. There’s been talk of ringfencing the Greek economy. Can they really do that; can that happen?
Beard: Well, they aim to do that with this bailout fund, and they’re planning to beef it up so that it’s big enough to protect a country like Italy. But the problem, says economist Simon Tilford, is getting other eurozone countries to pay into that fund.
Simon Tilford: How do you persuade a household in Germany or Holland to transfer money to, say, Italy — a country governed by somebody who has consistently put his own private interests above those of the country?
He’s talking there of course about Silvio Berlusconi. Now, the French wanted to get around that problem by having the European central bank print zillions of euros. And the Germans, ever paranoid about inflation, said absolutely no. So they’re casting around now a plan to finance this bailout fund in another way.
Ryssdal: Right, which brings us to Wednesday and this meeting. What’s going to happen there, do you think?
Beard: Well the pressure is really on now to come up with something. And the stress is beginning to tell, and that may hamper progress. There have been some terrific shouting matches, especially between French President Sarkozy and German Chancellor Angela Merkel. In fact, last week they were arguing furiously when an orchestra down the corridor were tuning up to play the European anthem “Ode to Joy” — the anthem virtually drowned out by the bickering of these eurozone leaders. Not a great omen for the resolution of this crisis.
Ryssdal: Roll over, Beethoven, if you will. Marketplace’s Stephen Beard in London. Thank you Stephen.
Beard: OK, Kai.