Jeremy Hobson: The markets are focused on the European debt crisis this morning. The main political parties in Greece have agreed to form a new government that will not be led by the current prime minister George Papandreou, but will push through the controversial bailout package.
Meanwhile in Italy, leader Silvio Berlusconi is denying rumors that he’s about to resign so a new government can come in and pass economic reforms.
For more on all of this, we’re going to bring in Julia Coronado, chief economist with BNP Paribas. She is with us every Monday and this morning, she is live here in the studio. Good morning.
Julia Coronado: Well Julia, I want to start with the words of a Greek opposition politician who spoke to Marketplace this morning. Simos Kedikoglou is a member of Parliament with the New Democracy party, and here’s what he said:
Simos Kedikoglou: This agreement that we arrived at yesterday, it could have been done in June. But Mr. Papandreou wanted to hold onto his chair. So at least now he has decided to leave his precious chair.
He’s decided to leave his precious chair. Julia, do you think that leaders in Europe have held up the debt crisis by looking our for their own political interests?
Coronado: Well look — these politicians are facing really hard choices in having to ask their population to accept really painful cutbacks. So yes, they’re definitely dragging their feet as much as they can.
Hobson: What do economists like you do when you look at these changes in Europe and you don’t know what the next government is going to do for the economic parts of the debt crisis?
Coronado: There’s so much uncertainty and things have been changing so quickly. I mean, one possibility being talked about in Italy now is taking politics out of it a bit, moving to a technocrat government — where basically, professional bureaucrats will work out a solution.
Hobson: But then don’t you subvert the will of the people?
Coronado: Well, yes, of course the people should have a say in these choices, but often — as we also see in the U.S. — when hard choices have to be made, sometimes what we get is political turnover and political stalemates, and a lack of progress.
Hobson: Do you think that as we approach elections here in the U.S. next year, that there’s the possibility of a big change — either of the presidency or perhaps of the House of Representatives flipping back to the Democrats?
Coronado: Or perhaps both. All incumbents are vulnerable when the economy’s not doing well. And it’s hard to see the silver bullet that’s going to solve our problems between now and then.
Hobson: Julia, I want to ask you one more thing. We talk to you every week — is there any issue outside of Europe and the banks and stuff like that that we haven’t talked about that you think is really important for people to think about?
Coronado: You know, one thing I worry about a lot as an economist is the high rate of unemployment and underemployment amongst young people. It’s something I wish got more policy focus. Right now, the deal really has changed for young people, and we risk losing the potential of a generation if we don’t address that.
Hobson: Julia Coronado, chief economist with BNP Paribas, thanks so much for coming in.
Coronado: My pleasure.
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