Copyright ©2012 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

MELISSA BLOCK, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

ROBERT SIEGEL, HOST:

I'm Robert Siegel. And we begin this hour with turmoil in the eurozone. In Athens today, Greek politicians tried and failed again to form a coalition government. Talks will continue, but time is running out. The failure comes amid growing fear that Greece will default on its debts and leave the currency union. To make matters worse, the health of Spain's banking sector is also in doubt. And NPR's Eric Westervelt reports, that the current prescription to heal the eurozone, austerity, has instead toppled governments and stirred relentless protest.

ERIC WESTERVELT, BYLINE: Europeans vented anger at austerity in the streets and at the ballot box over the weekend.

(SOUNDBITE OF DEMONSTRATION)

WESTERVELT: In Spain, tens of thousands took to the streets in Madrid and several other Spanish cities in peaceful protest against deep budget cuts and other austerity measures.

(SOUNDBITE OF DEMONSTRATION)

WESTERVELT: There was frustration and anger, some of it tinged with sadness. In downtown Madrid, Jose Antonio de le Gala, a 28-year-old physician, watched from the sidelines and lamented the painful fallout from a burst real estate bubble.

JOSE ANTONIO DE LE GALA: Most of people thought that we can grow forever, and that's not possible. If you grow, there's a moment that the economic situation is going to stop or is going to go wrong. For years, most of the people has lived in a way that they couldn't maintain.

WESTERVELT: In Germany, Chancellor Angela Merkel's conservative CDU party took another hit in regional elections over the weekend. This time, the loss was in the country's most populous state, North Rhine-Westphalia, where the CDU got more than 8 percent fewer votes than it got in 2010. The big winners were the Social Democrats and the Greens. The emboldened opposition is now likely to press for new growth measures to compliment Merkel's strict austerity prescription.

In Brussels, senior European politicians have kept up a steady stream of warnings for Greece to make good on its deep cost-cutting pledges or risk an exit from the eurozone.

HERMAN VAN ROMPUY: I am very concerned about the situation in Greece. This is a defining moment for the country.

WESTERVELT: European Council President Herman Van Rompuy's predictable comments only seemed to highlight a growing disconnect between what's actually happening in Athens and Madrid and the official thinking in Berlin and Brussels. Greeks voted overwhelmingly for parties that have vowed to fight the budget-cutting program. Polls show that anti-ballot parties would do even better if a new voting round is needed, which seems likely. Former IMF chief economist Simon Johnson, now with the Peterson Institute, says the loud, political and popular backlash against austerity shouldn't mask the reality that the Greeks and the currency bloc are in serious trouble.

SIMON JOHNSON: The European Union in part and the eurozone in whole is on the brink of a total disaster - which Greece, by the way, is just the beginnings. It's just the tip of the iceberg, if you like. The eurozone is a Titanic. It's just struck the iceberg, and they haven't yet realized how profoundly damaged they are below decks.

WESTERVELT: Gloom was the order of the day. The German magazine Der Spiegel reported that the EU is exploring how to provide funding for Greece even after a departure from the eurozone in an attempt to limit the contagion. Mark Hallerberg directs the fiscal governance center at Berlin's Hertie School of Governance.

DR. MARK HALLERBERG: I'm not sure what you can do to save Greece. That sounds terrible, but sometimes countries need to default.

WESTERVELT: Once again, the big fear, Hallerberg says, is will a Greek exit from the eurozone spark panic and drag the larger troubled eurozone economies and perhaps the entire currency union down? Or will the firewalls, which the EU insists are now robust, prove adequate?

HALLERBERG: The issue is does it spread to Italy, does it spread to Spain? The worry, of course, I think, now is especially in Spain. You know, the third largest bank in Spain is now being partially nationalized. There are rumors of all sorts of additional problems. And the question is, you know, maybe there's enough fuel in Spain that the fire will get over and catch there.

WESTERVELT: Tomorrow night, just hours after being inaugurated, French President Francois Hollande makes his first visit to Berlin. He made opposition to German-led austerity central to his campaign. He's expected to push for new measures to boost economic growth. Merkel insists such measures must not increase total debt. Eric Westervelt, NPR News, Berlin.

Copyright © 2012 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.