Zakaria: In defense of German sluggishness
German Chancellor Angela Merkel.
November 4th, 2011
06:59 AM ET

Zakaria: In defense of German sluggishness

By Fareed Zakaria, CNN

It is ironic that Greece - a tiny economy that is a mere 2.2% of the Eurozone and not even among the top 25 economies in the world - has produced so much turmoil. But there has always been a fundamental flaw in the design of the Eurozone. Europe created a single currency without adequate fiscal policy coordination. Very competitive economies like Germany were joined together with uncompetitive economies like Greece.

Nevertheless, I remain cautiously optimistic. This is because, despite what many critics say, Germany is playing its cards right. Many argue that Germany should come up with a dramatic solution to the debt problem.  Chancellor Angela Merkel is not leading, critics charge. I disagree. Germany has a good reason for being sluggish.  It is trying to force countries like Greece to enact meaningful reforms.

The German concern is that if they come up with some dramatic solution to the euro crisis, such as guaranteeing everybody’s debt, financial panic would end but countries like Greece and Portugal would feel no pressure to undertake necessary reforms. These countries would not get their budgets in order; they would let their fiscal houses continue to crumble; they would not become competitive.

All of Germany’s leverage would evaporate the moment it wrote the check to its neighbors. Indeed, a couple of weeks ago, Germany watched as the European Central Bank responded to a financial scare in Italy by intervening.  The situation stabilized. Then the Italians immediately began watering down their commitments to enact economic reforms. This is Germany's nightmare.  It's what they're working so hard to avoid. Understandably, Germany is trying to force as much real reform out of debtor countries as possible before writing checks or making guarantees.

Germany is doing this not just for sound economic reasons.  There are also political motivations. Angela Merkel couldn’t do it any other way. The German taxpayers would revolt if she suddenly guaranteed the debts of countries like Greece. They would feel like they were falling into the same trap that caused the problem in the first place. For these reasons, you’re not going to see dramatic action from Germany.

What you’re going to see instead is some complex solution that places pressure on Greece and other countries to reform while at the same time reassuring markets that Germany will not let the euro fail. This is understandable and sensible, but it will not satisfy the markets, which want a simple, clean solution. For this reason, the Germans are flirting with disaster. What is likely to emerge is a complex, incremental solution. The markets will have to learn to accept it.

The part that I worry about is that even after all of this, Greece is probably not salvageable.  It has too much debt and, fundamentally, it is not a competitive economy. It doesn’t make anything anyone wants. This is not true of Spain or Ireland. Spain and Ireland are quite dynamic economies that got hammered by the financial crisis. So the real question is whether there is some way to ring-fence Greece from the rest of Europe. Perhaps then there’s a scenario in which the Germans guarantee all remaining debt.

The truth is: Greece has defaulted before. There’s a book out that says that since it’s independence in the 1830s, Greece has been in default for 50% of its national existence. The difference is that now the Germans are willing to bail the Greeks out. That’s what’s new.

Europe is trying to create a greater, integrated economy. And this project has gone on for 25 years. For 25 years, everyone has said it’s all going to collapse. But it doesn’t collapse. In fact, far from collapsing, Europe has gotten in some ways larger, stronger and deeper. Now this crisis is clearly the biggest challenge Europe has faced. And Europe has reached this point because the currency was badly designed.

I can’t be sure Europe will get through this mess. My best guess is that, eventually, the solution will come from the European Central Bank (ECB). Like the U.S. Federal Reserve, the ECB has a lot of power and leeway.  If it just started guaranteeing or buying various kinds of debt, it would be able to stabilize the euro. And that’s also politically more palatable.  If the German government has to “recapitalize the ECB” that sounds much better in German than saying “we’re going to bail out the Italians” - even though effectively it is the same thing.

On the leadership of Greek Prime Minister George Papandreou, I actually think he’s trying to handle this in a pretty responsible way. He has accepted huge budget cuts – cuts that, frankly, no American politician could ever accept or enact. The Greeks have gone through two rounds of huge budget cuts. They are proposing a third round of these budget cuts.  But Papandreou is also a politician and he recognizes that his political situation was getting very difficult. And he saw that the opposition party was acting incredibly irresponsibly by opposing the terms of this European bailout and so he called their bluff. The whole point of the referendum was to say to the opposition, “Fine, if you want to oppose this deal, then you take responsibility for the fact that Greece will be thrown out of the Eurozone.”

Papandreou's bid worked. He called the opposition's bluff and as a result the opposition backed down. Overall, I think Papandreou has handled this in a pretty clever way.

Interestingly enough, as a footnote, the leader of the main opposition, Antonis Samaras, and Prime Minister Papandreou are not just people who know each other. They were roommates in college in Amherst in America. Today they are going through this titanic tussle in Greece. You have to wonder what it’s like to be acting out a great drama on the world stage with your college roommate.

Post by:
Topics: Debt Crisis • Europe • From Fareed • Germany • Greece

soundoff (296 Responses)
  1. Pmcdonald

    Nice piece Fareed. The Greek opposition were the ones who would lose if the referendum passed and the government's position would be very much strengthened, which is why the opposition threw their toys out.

    Greece has an economy of similar size to Washington State. If Washington State went bankrupt, the USA would survive. The issue in Europe is really how to manage the politics of the EU rather than the economics (assuming that Berlusconi doesn't act irresponsibly). New governance will come.

    November 4, 2011 at 7:33 am | Reply
    • ComSenseWiz

      Greece should have never been admitted to the EU. They are like a "high maintenance child" in constant need of time and resources. It is breed into their DNA to avoid tax compliance like it was a badge of honor to do so. I see no realistic way they will change short of outsourcing the entire function of tax collection and compliance to the Gestapo.

      The real problem EU countries are Italy and Spain which like all southern European countries also fail at enforcing tax compliance sufficiently. Saving Greece leaves less resources to bail out the big guys and also instills less incentive for Italy and Spain to toe the line as they too can be bailed out with other people's money. This is the way the real world works.

      In my view, this just establishes a house of cards that will eventually collapse. The underlying economic fundamentals of the EU can not support the leverage they are undertaking. This also applies to the USA which means they are out to fund EU bailouts. As such, I remain out of equities and in currency diversified cash. It is just a matter of time when world equity markets take another bath. I'll wait for stocks to get much cheaper.

      November 4, 2011 at 10:08 am | Reply
      • Ellinocanuck

        It's bread into their DNA??? How ignorant and/or elitist can you be!

        November 4, 2011 at 10:34 am |
      • Duque Duke

        "high maintenance child" : Democratic party

        November 4, 2011 at 10:36 am |
      • j. von hettlingen

        Indeed, some architects of the European Common Market, the predecessor of the current European Union dreamed of transforming Europe into an equivalence of the United States of America. The E.U. as an supranational orgainsation is good, a single currency for all was a mistake. The north/south divide has confirmed Samuel Huntington's Clash of Civilisation.

        November 4, 2011 at 11:20 am |
      • Gregson1

        *BTW: The past tense of "breed" is spelled b-r-e-d.

        November 4, 2011 at 11:31 am |
      • Joe D'Angelo

        Ellinocanuck- [at least] the 2nd post you've "taken to task" for commenting on what has been widely cited as a major contributor to Greece's situation. The wide-spread cultural tendency to illegally avoid paying taxes & simultaneously demanding heavy benefits. No, not everyone does it... just a very large number of Greeks do. Reality is reality.

        November 4, 2011 at 11:46 am |
      • aaa

        The Gestapo has already had their turn in Greece.

        November 4, 2011 at 12:57 pm |
      • J

        @ComSenseWiz
        – What is it you don't get? The EU is not the same as the Eurozone. What is the problem with admitting them into the EU? However, to let them be a part of the Eurozone is definitely a huge misstake.

        November 4, 2011 at 1:06 pm |
      • Charles Mecklenburg

        ??? The EU is the European UNION, I think you mean the EC (European COMMUNITY) as the later is the financial union and the former is more political.

        That said to say their DNA is such that they are likely to evade taxes, well it's the sort of way Hit1er talked about his victims. The truth is the same could have been said about ALL nations 80 years ago. Even to this day the rich evade taxes in the US and Europe, and until WWII tax evasion was just as big a problem (if not bigger) in the US.

        November 4, 2011 at 6:29 pm |
      • CommonCents

        @Ellinocanuck. bread? Black Pot Kettle ring any bells?

        November 4, 2011 at 7:36 pm |
      • John Galt

        @Ellinocanuck, cultures and historic realities differ.. Greeks are different than Germans and the Irish. Live with it! More of this PC crap only enables people rather than helping them.. yeah the Greeks are special and important BUT they are not world leaders and as a whole large swaths of their population fails to pay taxes or to step up to the plate the way Ireland did in the same situation.

        November 5, 2011 at 9:52 am |
      • midwestgrl

        stupid child: republican party (or aka the pubic hairs)

        November 5, 2011 at 11:18 am |
      • Lilly

        'BRED in to their DNA???? That's got to be one of the dumbest things I've seen on here. I wanted to comment on your ideas but such feeble remarks like that makes me feel like you're just a crank and not worth the bother.

        November 5, 2011 at 12:09 pm |
      • Rattenschwanz

        Greece should forced to sell all islands and pay back what it has caused in turmoil. The Greeks are layzy people who should not be allowed in the EU.

        November 5, 2011 at 12:23 pm |
      • stam

        i took the time to read all the comments before writing this piece.
        i must admit that all you folks have no idea of the reality of things and are just writing a whole bunch of nonesense.
        the real fault goes to the politicians of the pasted 20+ years who failed to administer the laws and were only looking to out for themselves.
        don't blame the greek people as they have been taken for a ride by all those yahoos left, right or socialist politicians.
        yes, all southern europeans have for the most part a different mentality and way of life than northen europeans, but as they say...the fish smells from the head and not the tail.
        greek people have proven that they can be hard working and dedicated when provided the tools and the platform to do so.
        don't judge the book by the cover, but take the time to learn more and then critic others.

        November 5, 2011 at 10:48 pm |
      • ComSenseLess

        You all forget one major point.l

        Greece broke so many of the Euro entry rule and faked the books. But where did they learn this? Germany were the first exceed debt limits as a % of GDP under the Euro. They paid none of the mandated fines for such a breach and sent a big signal to the rest of the Eurozone = the rules will not be enforced.

        Ironically it Is Germany who fought so hard to have the strict conditions.

        November 6, 2011 at 3:44 am |
      • Tamer Kirac

        Agreed. 1/50th of the US states doesn't determine the judgement on USA (In this case, I am not sure if Washington State is a good example with Boeing, Microsoft, Wayerhauser, Starbucks, that all started and are currently quite present in Washington State). When Greece became a member, it's economy relative to the other EU states wasn't that much different than what it is today. Its' membership was more of a political decision, rather than an economic one. It is the economic conjuncture of the day that has pushed it to the center of stage. When things are good, we all look the other way.

        November 6, 2011 at 5:38 am |
    • Duque Duke

      Fareed, you should apply same logic here in USA. Germany's taxpayer are worried about their money. Same here, we don't want the government to increase all the spending. It is sad that you can not analyze objectively the situation of your own country. Only because you don't have personal interests in Germany or Greece.

      November 4, 2011 at 10:33 am | Reply
      • Howard

        Sorry, Duke, but when you write, "We," you do not know what you're talking about. The "we" to which you refer is a relatively small number of Americans. The vast majority want social security, Medicare, and probably some form of cost-controlled medical services (which will only happen via the government). The problem here, as in Greece (though nowhere near the same degree) is getting people to reconcile their desires with what they are willing to pay in taxes to obtain those desires. Less government? More taxes? Something in between? The jury is still out.

        November 5, 2011 at 6:00 am |
      • midwestgrl

        how about cutting the massive military spending? there is a lot of corruption built in there too..;equal opportunity for all politcal parties i guess

        November 5, 2011 at 11:21 am |
      • Chuck

        midwestgirl... Eliminating the military budget entirely wouldn't solve our current fiscal problems. Sorry. Everything is going to have to take some cuts. Some of them deep, if we are to survive in the long run.

        November 5, 2011 at 12:11 pm |
      • verdy_p

        Military spendings are a MAJOR source of the Greek deficit. And don't you ask what Obama came to propose to Greece? MORE spendings with a new MASSIIVE equipment program (heavy armored tanks... for what? Greece dones not need that, its army is already oversized, and even then, Greece does not paraticipate to any external NATO operations. New F16 jets ? Greece is overequiped too).
        Really, Obama should have vetoed the new military contract with Greece. For now Greece really needs money for something that will really service its population and help local production and exports, or for training and reforming its fiscal administration and equip it with computerized controls of banks, organizations, and people, and to help collect the taxes.

        E.g. taxes on the tens of thousands illegal undeclared swimming pools you can see by satellite view, in Athens, while only 44 of them are declared and pay their tax, or for collecting housing taxes that many people escape using artifices like building houses with multiple floors and not finishing the walls on the last floor...

        There is money in Greece, but it is hold by a minority that refuse to pay taxes and that are never controled. This is a domain where the European Union can help: bullding the computer infrastructure and equiping the fiscal administration, and helping Greece to collect data on money stored in other European banks (well the adoption of the Euro actually helped those having money in Greece to evade elsewhere: there are controls to organize in Luxemburg, London, Dublin, and even in Bern or Geneva on the Greek account holders that have never paid any taxes before exporting their assets in fiscal paradises directly within the European Union, the same holders also having European Visa and Mastercards allowing tthem to live and buy what they want in Greece, simply because there's no currency change control and total freedom of movements of money.

        US can also help: there are tons of investment accounts detained in US by Greek people. Don't assume that Greece is poor: if it was better regulated, there would still be money for paying everyone in public services, there would be national incentives for innovation, exports and promotion of Greece.

        And don't think the situation will be better with Chinese "help" ? China offers very little but gets important assets such as the very important harbour of Athns/Pyrreus and controls on all imports in Greece and will also escape to payments of taxes for the Chinese maritime fleet that invade Europe and America. Just look at what China has made in Africa: lots of jobs promissed, but local workers, if they still ahve work now, are no longer employed or are treated like slaves, often not paid, without any social coverage in case of illness; China just builds a new presidential palace, a new airport, a new road between the palace and the airport, pays for the security forces to protect the lands that China has bought, or to eject people living there.

        Let's not allow this happen also in Greece.

        November 5, 2011 at 12:42 pm |
      • jcm52

        "we don't want the government to increase all the spending."

        Um, don't use such an inclusive pronoun. I would be very happy to see my taxes go up – so long as it goes up for the other rich people who make as much as I do.

        November 5, 2011 at 3:54 pm |
    • mpouxesas

      Fareed...you are judging from the (ill perceived) safety of your own standing here in the US. First of all, the term bailout is misleading...when they borrow at exorbinant rates to pay off a debt that will never be paid off. Secondly, it is not the people or the country that is being bailed out. If you really want to admit it, it is the big #*#&@ bankers who are being bailed out so to take a MINIMAL loss (or to be accurate to survive with great earnings but not...a much as they would wish...)

      November 4, 2011 at 11:50 am | Reply
      • qwerty

        Καλά τα λες πατριώτη αλλά εδώ κάνει ότι δεν καταλαβαίνει ο Ζακάρια, άντε να καταλάβουν τι παίζει οι μπουχέσες που γραφουν εδώ μέσα. Άστα να πάνε την έχουμε βαμμένη...

        November 4, 2011 at 12:15 pm |
      • CommonCents

        In Greece it is more the Government

        November 4, 2011 at 7:38 pm |
      • Whothewhatthe

        The Greek people are getting bailed out, when the government was promising the people the world did anyone ask where the money was coming from? I doubt it. Now its time to pay up and being the lazy people they are they will try everything under the sun to avoid paying. I say kick them out of the EU and they can reapply when they look like they meet the minimum requirements.

        November 5, 2011 at 5:09 am |
    • Samlv

      I noticed that US TARP paid EU banks 100%, but now they'll take a 50% haircut on Greece.

      November 5, 2011 at 9:27 am | Reply
      • LFRS

        Did it? What European banks are you talking about? Citi, Bear Sterns, Lehman?

        November 5, 2011 at 11:39 pm |
    • marco 60

      Stiglitz, DeLong, Baker, Krugman, Romer will easily shoot Fareed's analysis down and expose limited understanding of the issue (as usual).

      November 5, 2011 at 11:24 am | Reply
    • papataal

      Hey, when you cook your books to get into the Euro AND the Thickheads in the Errorzone couldn't figure out you cooked the books, WHO IS TO BLAME! Come on people one currency 17 different governments how was it going to work?

      November 5, 2011 at 11:49 am | Reply
    • Marco60

      The article was ghost written by Nial Ferguson., the man who's opinions on the "Euro Crisis" have been debunked on every level.

      November 5, 2011 at 2:28 pm | Reply
    • Kareny

      The difference is that Washington State produces products that Americans want, Washington apples, Microsoft products to name a few.

      November 6, 2011 at 1:06 am | Reply
    • Ralph J. Monasterio

      Mark my words........and "read my lips".............The END of the EURO is near.........and the end of Greece is even CLOSER. It's NOT just a matter of "IF"........but of "WHEN".......When they formed that FISCAL UNION using the EURO as a common DENOMINATOR.......they failed to GAUGE each countries FISCAL MODUS OPERANDI........like COLLECTING TAXES, SPENDING ON INFRASTRACTURE, EACH COUNTRY'S FISCAL PRIORITIES, ....ETC.....in other words....HOW EACH COUNTRY MANAGED THEIR MONEY.

      It's closely tied to "CULTURE" for lack of a better word. They cannot just sit down among themselves, and DECIDE that, "they" will become UNITED, with a common CULTURE, and a common CURRENCY, and "let" the future take care of itself. And it will "all work out" in the end. Each country MUST have it's own way of doing things. According to what they see FIT...in accordance with their NEEDS.

      There has to be RULES and REGULATIONS.....and each nation must be WILLING to abide by these common rules. LAWS have to be enacted....that MUST be COMMON to all involved, with strict ADHERENCE to COMPLIANCE.

      It becomes a little complicated.....and a lot of STUDY has to go into it. Over time. ....But...this hasn't happened. Much like a company would have it's own ACCOUNTING DEPARTMENT.....to know EXACTLY how much is EARNED and HOW MUCH is SPENT. What does "balancing the budget" really mean? Does each member country really understands what this means? For instance....."you cannot spend money.....BASED on some future INCOME.....that may not OCCUR?"

      This only means that..."I cannot spend money I DON'T HAVE IN MY HAND....RIGHT NOW".....and NOT on some future promise that "I will have that money to spend.....BUT I STILL DON'T HAVE IT."...Above all....WE HAVE TO UNDERSTAND THAT POLITICIANS ARE NOT ECONOMISTS.....they are just that......DUMB POLITICIANS!!

      CAPITZ?

      November 6, 2011 at 9:08 pm | Reply
    • H. Lankutis

      The 'dream' of the EURO and where it came from never made much sense. The Brits were able to keep the 'pound' and still play around with the EURO as well and got the 'formula' right. Namely...... if you have a strong 'pound', you get more UEROs But if you have a 'weak' Greek drachma, you should 'get' less EUROs??? The only 'industry' in Greece is 'tourism' and if I want to go to Greece with my 'dollars' I want them to 'buy' more for me in Greece than say in Germany. But because the Greeks are 'protected' with the EURO I get less for my dollars in Greece as if I was buying something in Germay where the mark currency if 'worth' more. I 'expect' cheaper prices in Greece and Portugal for my dollar because their 'currency' is weaker and that is because their economies are weaker and..... they are 'spending' more of 'social services' as part of the GDP (maybe) only because they can 'hide' behind the EURO. So, us 'dollar people' would only go to those European countries where are dollar buys more and that means....... the EURO needs still be connected like the Brit pound is to the EURO. So what is the Greek drachma worth as the Greeks face 'bankrupcy'? It certainly should not be 'worth' the same as the Brit pound or German Mark? Hope the EURO 'crashes' so I can go to Europe again and have my dollars not 'subsidize' the Greek drachma. I want my dollars to buy more than the EURO in Greece.

      November 7, 2011 at 8:06 am | Reply
  2. chris

    Greece has to want to be saved.

    There is absolutely no way Greece, with it's current policies, should have been allowed into the EU. EU made a huge mistake and now they have to deal with it.

    November 4, 2011 at 9:15 am | Reply
    • Joe D'Angelo

      The propensity of the Greek populace to lie, cheat, and steal- in order to avoid taxes is the primary reason for the problem. It's an art form, there. Early retirement ages and other generous are contributors, but ARE fundable w/the correct tax rate and people who actually pay taxes.

      November 4, 2011 at 9:56 am | Reply
      • Ellinocanuck

        Oh, I bet it takes a liar and a cheat to know one????

        November 4, 2011 at 10:36 am |
      • Beba Blanche

        I guess you should not generalize like that Mr. D'Angelo, although some people in Greece do think like your description!

        November 4, 2011 at 11:12 am |
      • Joe D'Angelo

        Comment based on the reporting coming from Greece & confirmation from Greek friends. & CANUCK- it was an oblique comment on the trend for conservative Americans to think the goal should be to not pay any taxes. Unlike Canada- where sanity and appropriate tax rates provide even for government paid for Health Care.

        November 4, 2011 at 11:40 am |
      • Another-Joe

        Joe: Stereotyping with opinions from a handful of Greeks?!? True Greeks are'nt paying taxes. But at the same time, I could turn in at least 3 people I know who are cheating the IRS right now!!

        November 4, 2011 at 3:13 pm |
  3. Erik

    Sweden is not part of the Eurozone as this article seems to indicate.

    November 4, 2011 at 9:19 am | Reply
    • Erik

      And neither is Denmark, btw.

      November 4, 2011 at 9:21 am | Reply
      • Erik

        Seems CNN now silently edited the article to not mention Sweden and Denmark.

        November 4, 2011 at 11:28 am |
    • ComSenseWiz

      Erik – Apparently, you need to bone up on the EU. The following countries are definitely members:
      Austria
      Belgium
      Bulgaria
      Cyprus
      Czech Rep
      DENMARK
      Estonia
      Finland
      France
      Germany
      Greece
      Hungary
      Ireland
      Italy
      Latvia
      Lithuania
      Luxembourg
      Malta
      Netherlands
      Poland
      Portugal
      Romania
      Slovakia
      Slovenia
      Spain
      SWEDEN
      United Kingdom
      Both Denmark and Sweden are all Caps to make sure you got that and all member countries can be easily found on the official EU website.

      The key European countries NOT in the EU are Norway and Switzerland.

      November 4, 2011 at 9:43 am | Reply
      • Terry

        I find it interesting that Norway has the best healthcare system in the world, based on cost per person, and quality of care. Everyone in covered, and the cost is $4500 per year. The United States presents a cost of $17,600 per person, and 50 million people have no healthcare coverage. Maybe we should hire Norway to run the United States Healthcare System.

        November 4, 2011 at 9:54 am |
      • Erik

        The Eurozone (the economic and monetary union) is not the same as the EU. http://en.wikipedia.org/wiki/Eurozone

        November 4, 2011 at 9:58 am |
      • Virgilson

        Erik said Eurozone and not E.U. They are two different things.

        November 4, 2011 at 10:07 am |
      • Janopetsa

        But the context of this article could easily leave many to interpret that Germany Denmark Sweden and Greece are all Eurozone nations.The EU consists of 27 nations while its Eurozone consists of 17 nations out of those 27.Denmark and Sweden are not members of the Eurozone.

        November 4, 2011 at 10:18 am |
      • Melanie

        @ComSenseWiz – Maybe YOU need to bone up on what the EUROZONE is (that's in CAPS to make sure you got that). Clearly, you're an idiot.

        November 4, 2011 at 11:02 am |
      • Bigred

        Well done ComSenseWiz.

        November 4, 2011 at 11:17 am |
      • Jean

        Ironic that Germany deliberately kept the Turks out because they are not part of the Christian Club, and took Greece in. Today Greek instability is threatening even US markets. By contrast, Wall Street Journal recently remarked that "Turkey's hot economy stands in contrast with those of most neighbors in the European Union, in particular Greece, whose leader last week called on his citizens to emulate the success of his country's old rival in bouncing back from economic adversity."

        November 4, 2011 at 9:29 pm |
      • papataal

        Hey, the EU and the Eurozone are different!.

        November 5, 2011 at 11:53 am |
      • Rattenschwanz

        China and Russia too. Study the eu article section 123eu.

        November 5, 2011 at 12:29 pm |
      • Euro Expat

        You need to understand the difference between the EU and the EMU. The term "Eurozone" refers to the countries which have the "euro" (EMU–European Monetary Unit) and Denmark and Sweden, along with about half of the EU countries do NOT below in the EMU, or Eurozone. That is, they do NOT have the euro as their currency.

        November 5, 2011 at 6:15 pm |
      • Jeremy Tunis

        Just because a country is part of the EU, doesn't mean that its on the Euro currency. Sweden, UK are two examples.

        November 5, 2011 at 9:26 pm |
      • Madtown90

        Norway also has a population of about 4.5 million with oil reserves managed by the National Government from which proceeds go to a national pension plan. Of course they can afford to have cheap health care. We here in the U.S. don't have the resources to have a similar plan.

        November 6, 2011 at 11:46 pm |
    • j. von hettlingen

      @Erik, you're right, Sweden isn't in the Eurozone, thanks god! I would have rejected it in a referendum.

      November 4, 2011 at 10:27 am | Reply
      • Euro Expat

        Sweden already did reject it, thank god! LOL

        November 5, 2011 at 6:16 pm |
    • tatiana

      i love what you said it was so funny i hope you like what i wrote for you to read you can read it to whoevery you want i hope they like it!

      thanks
      from tatiana right back to me thank you

      November 6, 2011 at 12:05 am | Reply
  4. J

    Well, both Denmark and Sweden have their own currencies.

    November 4, 2011 at 9:25 am | Reply
    • ComSenseWiz

      So does the UK but all EU members must recognize and use the Euro and are on the hook to the ECB.

      November 4, 2011 at 9:51 am | Reply
      • Janopetsa

        The UK,Denmark and Sweden are excepted from being legally obliged to adopt the Euro.The UK and Denmark were able to stay outside the EMU.Sweden was recently also granted the right to exclusion.The remaining 7 nations of the 10 non-Eurozone EU member states are still obliged to adopt the single currency "eventually".

        November 4, 2011 at 10:40 am |
  5. Mark

    Greece dug their hole just like America and now whining about the deal they are getting.

    LET THEM FALL FLAT ON THEIR FACE

    November 4, 2011 at 9:26 am | Reply
    • cageybee

      as a Greek-American it pains me to say that most Greeks are just flat lazy. the only thing the do well anymore is flap their jaws.

      November 5, 2011 at 2:12 pm | Reply
  6. big gulps

    This is what happens when the productive nations who are willing to work hard for that status have to bail out the welfare nations who aren't as productive, and depend on the group, rather than themselves, to prosper. I say kick them out of the EU, and let them learn to become productive on their own.

    November 4, 2011 at 9:29 am | Reply
    • bagger

      this is analygous to welfare states in the USA. Which states would you kick out?

      November 4, 2011 at 9:52 am | Reply
      • bagger

        *analogous

        November 4, 2011 at 9:52 am |
      • DeeNYC

        Can we just kick out certain cities like detroit and new orleans?

        November 4, 2011 at 2:14 pm |
      • Michael

        You'd have to start with all the red states except Texas actually. Rural areas get vastly disproportionate funding. California and New York get the worst federal spending return for their tax dollars.

        Here is the data since 1985: taxfoundation(dot)org/research/topic/92.html

        November 4, 2011 at 4:13 pm |
      • Rattenschwanz

        Washington DC is the only state that we do not need.

        November 5, 2011 at 12:31 pm |
  7. nick2

    Actually I agree that it was rather cleverly played by Papandreou. His goal of course, is to ensure that the banks write down at least 50% of the debt that they claim Greece owes. The loans should never have been made – and this is 100% the fault of the global banks. They thought they had Greece over a barrel Put another way, if you walked into an schoolroom of infants with a basket full of candies, you would make it extremely difficult for the teachers to deny the kids. In a nutshell – this is exactly what happened in Greece. Well – the 'teachers' also had a sweet tooth – but for the banks to blame it all on the Greeks is simply laughable. Lets hope that the taxpayers of Europe – and probably the US – refuse this time to make good the banks' speculations.

    November 4, 2011 at 9:43 am | Reply
    • papataal

      Me thinks BANGLADESH has a better economic policy then the Greeks ever did, how did Greeks become the cradle of western civilization?

      November 5, 2011 at 11:57 am | Reply
      • chris

        let the greeks sell their islands to the turks to raise cash, it was theirs for over 500 years anyway. and in return let turkey enter the EU. two problems solved at once.

        November 5, 2011 at 12:51 pm |
  8. Terry

    Why does the EU need to bailout Greece? Let Greece fail. I forecast that nothing will happen. Greece will just go broke and be forced to rebuild, from the ground up.

    November 4, 2011 at 9:48 am | Reply
    • nick2

      Because its government will go bankrupt. That means that a technical state of anarchy could easily take root. In practice it would probably lead to the creation of criminal mafias not unlike what has happened in Mexico. The other Europeans are quite right terrified that it would infect their own systems.

      November 4, 2011 at 10:29 am | Reply
    • Seo

      Why does the Eurozone need to "bailout" Greece, or at least keep things orderly? French, German, Italian and Spanish banks are the ones who own Greek debt. Greece defaults France has to bail out it's banks losing it's AAA rating, Italy would have to run a big budget surplus to avoid default (or people thinking they'll default) which means enduring a recession because of tax rises and budget cuts, Spain wouldn't be able to get access to funds at a reasonable rate and would have to default, this would cause Portugal which is strongly linked to Spain to default. The domino effect would be felt throughout the world, there'd be a massive credit crunch and the world would be back in recession probably a worse one.

      November 5, 2011 at 9:09 pm | Reply
  9. bagger

    they are just going to vote them out of the euro zone. If only we could vote welfare states (states that take more federal dollars than give) like alabama/texas/louisiana/georgia out of the "dollar zone".

    November 4, 2011 at 9:48 am | Reply
    • Tony

      You think Texas takes in more in federal money than its people pay in taxes?? That sounds impossible to me. I'd like to know where you got your data...

      November 4, 2011 at 10:08 am | Reply
      • nick2

        Yes, Texas as a State is a net debtor to the Federal government. There is a mass of federal information about federal tax statsitics on the internet

        November 4, 2011 at 10:35 am |
      • bagger

        yes please look up here that you live in a welfare state. Do you enjoy living on my dime? why don't you tighten your boot straps?
        http://www.taxfoundation.org/research/topic/92.html

        November 4, 2011 at 11:11 am |
      • nick2

        The problem with Texas is that the State taxes are too low to support any kind of welfare for their poorest citizens (and they have many). So rather than tax their own wealthy, they sponge off the Federal system. New York, by contrast, is a net creditor to the Federal system – and – it doesn't seem to have driven the wealthy away while still providing far more welfare for its poorest than Texas can dream of.

        November 4, 2011 at 11:22 am |
  10. Iain

    Hi, ComSenseWiz, sorry but Erik is right – he was talking about the Euro Currency Zone, not the European Union – they aren't the same thing. Denmark, Sweden, United Kingdom, etc... are members of the European Union, but kept their national currencies instead of transitioning to a solely Euro economy – the "Euro Zone".

    November 4, 2011 at 9:55 am | Reply
    • NorCalMojo

      It sounds like you're using internal confusion to justify the global confusion. The EU needs to stop making excuses, get together, and fix the problem. That's what real unions do.

      November 4, 2011 at 2:03 pm | Reply
  11. suzanne

    It had to be expected. Greece does not have the GDP of France or Germany. How can you compete with the only assets you have are: ruins, goats, feta cheese and black olives. The country does not have a diversified economy like the rest of the European Union. It was due to explode. Now, the EU has to fix the damages before it is too late. "Beware of the Greeks and their presents."

    November 4, 2011 at 9:56 am | Reply
  12. David Sewall

    Didn't any of the ancient Greeks warn against defaulting on bills?

    November 4, 2011 at 10:02 am | Reply
  13. Janice in Virginia Beach

    Neither Denmark nor Sweden are part of the Eurozone !!! Whoever wrote this article did not do the research, and now I would not believe anymore of what is written here!!

    November 4, 2011 at 10:09 am | Reply
  14. Rajiv

    Mr. Zakaria, Sweden is no part of eurozone. That doesn't inspire much confidence!

    November 4, 2011 at 10:19 am | Reply
    • bagger

      who keeps track of these things anyway? hopefully europe is.

      November 4, 2011 at 11:13 am | Reply
      • Rajiv

        Then why to write an uninformed piece!

        November 4, 2011 at 11:18 am |
      • bagger

        E.U. is doomed to failure, no common language, no common values, and in a few years no common currency? This was all forseen when England rejected it and stuck with the Pound. Even Germany can't keep these eurotrash slobs from bring the whole system down.

        November 4, 2011 at 11:22 am |
  15. AHC

    Its all about income disparity ? Till we dont have incomes which are plus or minus 10% in every EURO country this system is bound to crack and fail.

    November 4, 2011 at 10:20 am | Reply
    • bagger

      In the usa we have more than one geece. These hillbilly states simply fly under the radar and happily collect their federal tax dollars (welfare check).

      November 4, 2011 at 11:14 am | Reply
  16. Rajiv

    Mr. Zakaria, the piece that you have written tells that you are no economists; so no why not to leave to those who know rather writing a pedeantic things which does not inform much.

    November 4, 2011 at 10:22 am | Reply
  17. Janopetsa

    Mr.Zakaria seems clueless in this and other respects that are connected to global economic issues.Perhaps he should stick to matters concerning the Middle East which seems to be more his area of expertise and leave market matters and the political forces driving them in the hands of the analysts that are better versed.

    November 4, 2011 at 10:30 am | Reply
    • LWZRGHT

      Apologize to Fareed right now!

      If you are such the expert, maybe you should write a piece.

      November 4, 2011 at 10:39 am | Reply
    • bagger

      well that is why President Obama is over there at the G-20 to tell them how it is done.

      November 4, 2011 at 11:17 am | Reply
    • Rajiv

      I completely agree; it is a complete ignorant piece.

      November 4, 2011 at 11:19 am | Reply
      • bagger

        Rajiv, you must be greek. why don't you go get a job?

        November 4, 2011 at 11:24 am |
      • Another-Joe

        Bagger: Get back to the grocery store! lol

        November 4, 2011 at 3:16 pm |
    • Amit-Atlanta-USA

      One of the primary propelling reasons that Mr. Zakaria tries to have a say on even issues he barely understands is his innate desire to capture a high ranking public position. He simply wants to show off his overall breadth (NOT depth!) of knowledge commenting on everything under the sun, literally like the gospel.

      No wonder a website appeared out of nowhere during the 2004 Presidential campaign appealing to the president to appoint Mr. Zakaria as the next US Sec. of State. Mr. Zakaria himself gave credence to that by saying (in an interview to the New Yorker) that his friends (!!) wanted him to take up a public position such as the Sec. of State.

      Also check my response below on Mr. Zakaria's prescriptions to the EU crisis.

      November 4, 2011 at 11:38 am | Reply
    • Roger E.

      Your post is pointless and clueless without any semblance of an explanation. What on earth are you talking about?

      November 4, 2011 at 1:55 pm | Reply
    • Hercules40

      Sorry, but Mr. Zakaria has no clue. Greece produces nothing? Hmm..., Check again Fareed. It is a highly productive country. But rather than sitting here and enumerating all those things, I ask you this:

      Why are the Germans and the ECB not admitting that the banks where responsible for the mess in the banking system in Europe?

      Stick to things you know about and read some of the Economists from Europe, they know a lot more than you.

      November 4, 2011 at 2:01 pm | Reply
      • GeoC

        Amen! This article is fraught with inaccuracy and biases!

        November 5, 2011 at 9:19 am |
      • papataal

        yup, can't live without olive oil and uh?

        November 5, 2011 at 11:59 am |
  18. william gundry

    Greece has a special postion in europe. It is not just a bunch of lazy people and some ancient artifacts. It represents the root of europe's cultural and social heritage. Not being able to deal with greece and countries like italy,is like forgetting the enormous debt western civilisation has to these regions. Cutting them off would be not unlike refusing to sever the head of medusa::::any allusion to the golden age would be irrefutably severed.

    November 4, 2011 at 10:40 am | Reply
    • asdasd

      I have no idea what you just said but Greece sucks and they will fail within a short period of time. You cant just build debt, and then decline to ever pay it off, or decline to reason with the people who you owe money to in paying it off.

      When you screw over your creditors you better be prepared for their sanctions.

      November 4, 2011 at 12:35 pm | Reply
    • Nellore Venkataraman

      Greece being an ancient civilization and contributing the development of human knowledge is no reason for countries to rush to its aid. At what one time or other during the long history of humankind. every country had it glorious days. India, China, Egypt, Babylon, Grece, Italy,........

      November 4, 2011 at 4:43 pm | Reply
    • Jean

      get real.

      November 4, 2011 at 9:34 pm | Reply
  19. LWZRGHT

    {crosses fingers and hopes that he will be eating many cheap Mediterranean salads in the near future}

    Let them fall. I'm skeptical about the "free" market concept, but we will never know until we let it actually happen. Greece seems as good of a place to experiment. Stop the bailouts. And banks, stop loaning money that you don't have and pretending that everything's ok.

    November 4, 2011 at 10:42 am | Reply
  20. Chedar

    German prime minister tells France prime minister: Let's bail out Greece but wait using China money? We may as well invite China in the Eurozone to be a member so they can help Greece. Just a thought.

    November 4, 2011 at 10:45 am | Reply
  21. palintwit

    Not to worry everybody. I have it on good authority that Sarah Palin is on her way to meet with Angela Merkel to help solve this crisis. In fact, she's boarding a plane to Berlin, Wisconsin at this very moment.

    November 4, 2011 at 10:45 am | Reply
  22. ANON-USA

    Mr. Zakaria, you are correct that Germany could never agree to simply bail Greece out. However, I do not believe any solution will come from any central bank. From a historical perspective, banks have a dismal record of effectuating change. Rather, I believe the solution will need to come from a global re-evaluation of the benefits governments are now offering people. Although almost all would support full retirement and medical benefits for those over a certain age, the simple truth is these benefits, which are relatively new from a historical perspective, are bankrupting countries.

    November 4, 2011 at 11:01 am | Reply
    • bagger

      why must you all depend on the germans? I guess they figured out that if they couldn't take over militarily they would do so economically.

      November 4, 2011 at 11:19 am | Reply
  23. closetiguana

    It can save Greece but it can't save Italy.

    November 4, 2011 at 11:03 am | Reply
  24. Amit-Atlanta-USA

    The greatest mistake was admitting Greece into the EU. Now the Europeans have to deal with this bitter pill which they have already swallowed.

    But if the current situation is causing nightmares, one can only imagine the impending disaster that is threatening to strike Europe with the exploding immigrant population.

    As the LONG TERM HEALTH & PROSPERITY OF A COUNTRY is a TRUE REFLECTION OF ITS FUTURE CITIZENS, with the steady decline in Europe’s local white Christian population and the increase in immigrant Muslim population whose VALUE SYSTEMS are DIAMETRICALLY OPPOSITE to that of everything that Europeans hitherto believed in, there is no hope that Europe will ever recover from the current economic and social decline. This is disregarding the fact that at least a part of the current economic crisis is as a result of large scale welfare funds distributed to these new immigrants by the already hard hit Europeans.

    Having said that, Mr. Zakaria can never convince Europeans or Americans on his honesty & fair analysis, given that he has been tirelessly propagating his co-religionists all over the world, and in Europe’s case specifically Turkey's admission into the EU, literally opening the floodgates for greater Muslim migration into Europe and eventually America.

    Given the current bitter experience of the EU with the Greeks, inspite of its fairly diversified economy Turkey can only be a much bigger liability both economically (with the yawning gap between Turkey and EU nations), and ofcourse demographically.

    Unfortunately the naïve & extremely liberal Europeans are missing this much bigger threat while taking a myopic view of the current crisis. Greece as a conduit to large scale illegal immigrants (from the ME, N.Africa, Pakistan & Bangladesh) who eventually make their way into rest of Europe is only making matters much worse…….on all counts!

    November 4, 2011 at 11:05 am | Reply
    • Chris

      Yep, it's all immigrants' fault. Xenophobia is a lot easier than looking in the mirror.

      I will grant you that Europe's immigration policy is deeply flawed, and while I'm no fan of Arabs and Arabian culture, these people move to the west for the same reason that anyone else does: the desire for a better life for themselves and their families, better opportunities for success, relative peace and security, and to get AWAY from the crazies, not some vast muslim conspiracy to destroy Western civilization through immigration if for no other reason than because they're too busy killing each other over interpretations of the Quran to possibly coordinate such a measure.

      Western civilization is in the mess it's in for one simple reason: they let corporations run too rampant. WE did it to OURSELVES. We the people let things get out of hand when things were going well and turned a blind eye to the festering sores under the surface, then acted surprised when the house of cards collapsed.

      Pointing the finger specifically at Arabian immigrants is really nothing more than looking for a scape-goat. We made our own mess and we have to own up to it and clean it up.

      November 5, 2011 at 5:17 pm | Reply
  25. Voltairine

    "Zakaria: Can Europe save Greece?" The Greek people may not want to be, "saved"; there are alternatives (see Iceland), but we'll never know unless there is a vote or the Greeks revolt.

    November 4, 2011 at 11:05 am | Reply
    • Lala

      Iceland's in a mess, you moron. They will be paying for the next 50 years.

      November 6, 2011 at 5:55 am | Reply
  26. MICKYD

    Some days like today, I think it would be better if the world economy just crashed! I know that sounds horrible, but then we would all be equal again! Then maybe (I doubt it!) could create a new economy that would help everyone instead of the few!

    November 4, 2011 at 11:08 am | Reply
  27. TG

    Greece economy was ruins before the collapse. Tourist went there to visit the ruins and the economy was based on tourists, export of salty olives, and salty feta cheese. Now the economy is in ruins and Greeks want to lay down in the sun and expect others to bail out. Good luck with that. I have never heard of a country where people retire early with 100% of the salary in pension

    November 4, 2011 at 11:16 am | Reply
  28. AMERICAN EXPAT

    What a laugh that he sees Spain as a "dynamic economy." It was only dynamic in the sense of construction, which collapsed, and tourism.The former being the main reason for Spain's present demise. Spain produces very little, by comparison to other Western nations, such as heavy machinery, electronics, aircraft, and so on. The only thing keeping Spain alive now is tourism, that has its seasonable ups and downs. I would not be at all surprised to see it eventually on the bail out list!

    November 4, 2011 at 11:20 am | Reply
    • rightospeak

      11 years ago Spain had 20% unemployment ( when I was there) and it has not changed much since.

      November 4, 2011 at 3:42 pm | Reply
    • DP

      Huh? From one american expat to another.... You should take a more epierenced look at what you just wrote. Spain is the worlds 12th largest ecomomy, the 5th largest in Europe, the 8th largest producer of automobiles in the world and actually one of the stablest ecomonmies within the EU. If you happen to live in Europe you purchase Spanish products almost everytime you go shopping as Spain supplys 1/4th of the produce for Europe.

      November 6, 2011 at 6:41 am | Reply
  29. Bigred

    Just got off the phone with friends in the UK. They are ecstatic that they still have the Pound instead of dealing with the Euro and all the current mess. The UK cannot help but be affected by this mess but at least it can weather it better then France and Germany who have Greece (the Mexico of Europe) to drag along.

    Still they wish they could get back to Shillings etc.

    November 4, 2011 at 11:21 am | Reply
    • CommonCents

      The good old days before 1970????

      November 4, 2011 at 8:14 pm | Reply
  30. John Galt

    How can Europe save Greece??? The real issue is why Greeks will NOT save their own nation. Other nations like Ireland recognized the economic issues and embraced change.. the Greeks for whatever reason refuse AND should pay the penalty for it.

    November 4, 2011 at 11:22 am | Reply
    • bagger

      your name says it all, it tells everyone that you are a dbag

      November 4, 2011 at 11:25 am | Reply
    • Seo

      Ireland's main export markets are the UK and the US, that is the only reason we can massively cut costs and spending and export our way out of fiscal trouble. When you try and massively cut costs and spending at the same time as the people you are trading with massively cut costs and spending all you do is make yourself poorer.

      November 5, 2011 at 9:25 pm | Reply
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