EU Huddles To Ward Off Financial Contagion
LIANE HANSEN, host:
In Brussels, finance ministers from across Europe are meeting today. Their goal is to find a way to keep Greece's worsening debt crisis from wreaking havoc in all the countries that use the euro as currency. Investors in the United States and Asia are paying close attention. Last week's brief stock market collapse showed that the euro crisis is threatening the global economy.
NPR's Tom Gjelten is following the developments from Madrid. He joins us now. And Tom, I mean, so far the European governments haven't had a lot of success in managing the Greek debt crisis. Have they come up with any new ideas?
TOM GJELTEN: Well, they do have another idea, Liane, it's another emergency fund. They're calling it a Stabilization Fund - a bunch of loans to Greece from the European Union's own accounts, in addition to the $145 billion thats already been promised by the E.U. and the IMF. They are due to announce this fund this afternoon. The idea is to get the news out there before the Asian markets open, which will be this evening, U.S. time. They want to send the markets a message that they are determined to act.
HANSEN: You know, this is all reminiscent of what happened in the fall of 2008 - financial panic and markets in free fall. Have the governments learned any lessons from that experience, so that crisis is not repeated?
GJELTEN: The big lesson is that a crisis like this can get real serious real fast, Liane, so you'd better be careful. But as far as the specifics, it's actually a little hard because there's not total agreement on what the lessons of 2008 really were.
Clearly, the big event of that time was the decision to let Lehman Brothers go bankrupt. Thats what precipitated the panic and the financial crisis. And I think there is a broad view - not a unanimous view - but a broad view that it was a mistake to let Lehman Brothers go. So the lesson there is that Greece can't be handled the way Lehman Brothers was handled. It has to be solved here and now.
But some say the economy wouldve tanked even if Lehman Brothers had been saved. And in the same way, it's not clear that Greece's problems actually can be contained because it's not just Greece. European banks are exposed to Greek debt. If they are hurt, it could freeze lending throughout Europe, could trigger another European recession. This means Greece's problems have to be addressed in a way that limits the damage elsewhere - and it won't be easy.
HANSEN: We just heard about the uncertainty of Britain's next government. There are also state elections this weekend in Germany. What effect will these have?
GJELTEN: It's a really critical issue, Liane, because the single biggest question right now is whether there is political will in these European capitals to do what needs to be done. Investors wonder about that. They wonder whether governments will be able to do what they have to do. And when you have weak governments, it's only going to add to that uncertainty. It's true in Britain, and it's even more true in Germany.
Angela Merkel, the German chancellor, is a key player in this drama. If these state elections this weekend go against her, she'll be politically weakened. Itll raise questions about whether she can push through the things that Germany needs to do. So politics does have a lot to do with it.
HANSEN: As I mentioned, you're in Madrid, and Spain is another country with a big debt problem. So if Greece's problems are going to spread, Spain might be next. So whats the mood there?
GJELTEN: I have to say, Liane, that it's not as urgent as you would think. It's actually somewhat polarized. I think on the one hand, the government has been very upbeat, reassuring the people that everything is going to be OK. And the people seem to be buying it. There's not a lot of nervousness.
On the other hand, there is a vocal opposition thats led by economists and the business community, warning that this is a lot more serious than the government says it is and pressing the government, Liane, to take tougher actions than theyve been willing to take so far.
HANSEN: NPR's Tom Gjelten in Madrid, Spain. Tom, thank you very much.
GJELTEN: Thank you, Liane.
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