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[Music]
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we're speaking today about the economic
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and financial problems in Spain with
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Maro Gan management professor at Wharton
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and also director of the Lauder
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Institute of international studies uh
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welcome good morning Steve happy to have
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you with us
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today sovereign debt is big in the news
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these days particularly with Greece but
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Spain is actually perhaps a bigger
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challenge for Europe because its economy
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is four times the size of Greece uh
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could you tell us about the problems in
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Spain and how they've developed well as
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far as sovereign debt is concerned uh it
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is true that Spain is a much bigger
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economy one of the largest nine or 10
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economies in the world however the debt
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burden right now is not as big as uh
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that of uh uh Greece or Italy uh or even
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the UK it's actually about the same
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level compared to the size of the
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economy as in Germany uh the problem of
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course looking uh towards the future is
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that it is growing fast because of high
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Unemployment uh but it is still is at
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manageable levels and uh that is I think
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reflected in the fact that the country
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continues to get a AAA rating uh from
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the
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agencies well it's interesting that uh
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Spain is actually in pretty good shape
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based on what you've just said
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um but there's a lot of concern that its
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debts going to go up now in the case of
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Greece uh it was a little bit more of a
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typical case
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where where most observers U see that as
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a case of government overspending uh but
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Spain's actually been very good in
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managing its debt and actually I think
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ran surpluses for four or five years
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leading up to the financial crisis yeah
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uh and so they were in part a victim
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weren't they of circumstances AB
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absolutely um this is not to minimize
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the problems that beset the country I
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mean the problems are serious I don't
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think the Deb problem is as urgent as
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some of the other problems and of course
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everything is interrelated so I I did
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not mean to uh minimize the uh uh you
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know difficulties uh lying ahead uh but
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I don't think the debt itself is a big
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problem now of course you know
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comparisons with Greece are easy to make
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but at the same time uh are uh you know
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difficult to justify uh because Greece
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is a relatively small economy uh it's
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not very competitive uh it has been
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basically you know propped up by by the
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by the rest of Europe uh Greece is is
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not a country that uh contains a lot of
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companies that are internationally uh
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you know competitive or that have a
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global presence um so it is a very very
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peculiar case now having said that it is
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one of the member countries of the Euro
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system uh and as such then uh you know
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anything that goes wrong with any of the
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members of the Euro undermines The
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credibility of the entire uh scheme and
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some people might say that Greece was
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kind of the can opener that opened up
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the problem but when you look inside um
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it's the bigger economies like Spain
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that present the challenge regardless of
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how they got into the problem sure sure
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and not only Spain also I think Italy is
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a is a very big uh issue so the Euro
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just turned uh 10 10 years old and uh of
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course the problem with the with the
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euro is like with any uh currency area
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that is created uh with multiple
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governments pursuing different kinds of
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policies is that that you need some
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measure of coordination you need some uh
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you know system in place for dealing
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with situations such as the one that we
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find ourselves in right now and uh that
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was probably the uh you know a mistake
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that was made 10 years ago not to put in
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place this mechanism so that now when we
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have this crisis now having said that I
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think the Euro has been pretty much a
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success and I think the the fact that a
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lot of countries around the world hold
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uh an important percentage of their
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reserves ranging from 20 to 30% in euros
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is I think a very very uh strong message
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uh indicating that uh you know there are
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people out there who actually you know
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like the Euro and they've been
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diversifying a little bit of the dollar
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reserves you know in and putting them
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into into Euros over the last uh five or
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seven years uh so I think that is a uh
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you know a signal that from the markets
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and from the uh Reserve holders around
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the world that the Euro actually is a
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viable currency it's just that there are
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some problems with it but there are also
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problems with the dollars there are
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problems with stering there are problems
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with all of the other currencies that
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are used for holding reserves let's come
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back to that idea of the mechanism a
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little bit later but I wanted to ask you
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about how Spain's unique problems
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developed it it seems as though um a
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real estate bubble developed and and as
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real estate prices increased a lot of
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money came pouring in from outside of
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Spain particularly from Germany and that
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that increased prices even further which
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created the bubble and then of course
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the world financial crisis led to a
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collapse of housing bubbles in many
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countries Spain was just one uh that
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that had a housing bubble problem um so
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where where does do you agree with that
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analysis and where does that part I
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think that is part of the picture I
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think in in Spain uh regarding the real
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estate sector broadly defined uh we
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there are several issues there one as
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you mentioned is the um the bubble in
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prices which affected certain parts of
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the country just as it did the United
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States right the coasts more than than
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the uh than the center and so on and so
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forth uh but there's also a construction
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bubble uh meaning a construction boom uh
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during the last uh six or seven years uh
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in Spain uh you know the construction
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business just building not just uh
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residences or houses or commercial uh
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real estate but also uh roads and
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bridges and uh railway tracks and all of
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that uh became a very important part of
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the economy to the point that uh about
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45% of all new construction in Europe
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not just residential construction any
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kind of construction in all of Europe
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was taking place in Spain 45% when the
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Spanish economy is only maybe 15% of
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Europe right um so there was a
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construction boom uh which of course is
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very it's an industry that is very labor
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intensive and so when uh construction
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you know slows down then you have a lot
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of people actually going out of jobs out
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of their jobs and it's not only the the
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direct jobs in construction it's also
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the companies that make cement it's the
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companies that you know uh move around
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the cement and the bricks and the all of
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the construction materials it's all of
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the activities that surround
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construction which is a uh you know
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which are very very important and so you
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know this is having a very very
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important effect on unemployment but
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having said that there's another thing
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that I would like to add which is that
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the Spanish economy suffers and we can
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talk more about that from a chronic
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problem in terms of uh productivity
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sluggish productivity growth relative to
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its competitors and this is what is
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really you know causing trouble uh right
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now those are both interesting points uh
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when a country gets in the kind of
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trouble that Spain is in if they're not
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in a currency Union and don't have in
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effect a fixed currency one of the ways
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to get out of that problem is to devalue
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your currency your exports will increase
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that will help to stimulate the economy
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and that more or less pulls a country
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out over some period um Spain can't do
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that they're hamstrung because uh being
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in the European Union and and with the
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Euro they don't have control of their
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currency anymore you're absolutely so
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how can they get out of proof of the the
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the importance of uh of a an orderly
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currency devaluation for getting out of
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recessions is that uh in Spain in the
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1970s there was a recession there was
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another one of course in the 1980s
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beginning of the 1980s and another one
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in the beginning of the 1990s and at
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each of those uh uh points in time Spain
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devalued the currency and uh uh you know
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subsequent to that it enjoyed relatively
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strong growth uh so that's the way in
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which traditionally uh you know the
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Spanish economy has gotten out of
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trouble it's a beggar die neighbor kind
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of uh way out it's the easy way out uh
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having a uh strong currency or being
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part of a strong currency such as such
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as the Euro also uh brings with it
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benefits lower interest rates uh a more
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stable uh economic microeconomic
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environment um so one should not you
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know deny the benefits there is this
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problem now and that's what I was
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mentioning earlier that the really the
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only way for the Spanish economy uh and
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for Spanish based businesses not just
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Spanish owned businesses but also
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foreign multinationals operating in
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Spain the only way to remain competitive
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is to increase productivity because we
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cannot uh lower prices artificially
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through the exchange rate so increasing
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productivity what does that mean in
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practice it sounds like uh deflationary
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policy is that right well it means uh
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workers and managers and uh pretty much
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everybody working harder uh it means
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doing so uh without or smarter or
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smarter and it means doing so working
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harder without necessarily getting paid
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more and and uh it means investing more
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in education uh which I think has been
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or continues to be the problem or part
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of the problem in the country and uh it
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essentially means also letting the
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market uh operate and see which kinds of
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activities should really be located in
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Spain and which ones shouldn't uh
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remember very few people actually know
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that uh in Spain the most important uh
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export category besides tourism right
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which is Big just the same way as it is
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big in Italy or in France uh the second
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most important category is automobiles
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export category and uh and it is the the
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number one uh manufacturing uh good that
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is exported and of course we have a uh
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we we're anticipating that there will be
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a competitiveness problem if we don't
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improve our productivity uh let's say in
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the next three to five years so these
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are all long-term Solutions it sounds
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like Spain's unemployment is
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19.5% GDP fell by 3.6% in 2009 they're
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they offering now is there anything that
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can be done more immediately uh there
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are no Magic Bullets uh the only thing
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that uh you know uh uh if you cannot
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devalue the currency the only thing that
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you can do in the very short run is to
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uh try to reduce costs uh the easiest
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way of course is by not granting wage
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increases or by you know even if
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companies you know in the presence of
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high employment if they could reduce
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wages right they could negotiate with
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their workers the problem of course is
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that the labor market situation uh or
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institutions are not not very flexible
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so it's difficult to actually lower
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wages uh on short notice uh uh so um
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it's going to be a slow recovery that is
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that is exactly the situation uh
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compared to the uh recessions in the
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early 90s in the early 80s or the one in
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the 1970s this is going to be a slower
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recovery and by the way will depend
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largely on the extent to which uh
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particularly the rest of Europe
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recoveries because Spain's most
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important trading partners are France
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Germany Italy the UK
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switching lenses a little bit just
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moving out a little bit to consider more
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of Europe and you mentioned beggar Thy
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Neighbor policies so in Europe we've got
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this jut exporter Germany which is has
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for years been uh carrying a trade
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surplus a big Trade Surplus they're very
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good at creating goods and exporting
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them uh but if Europe's going to have uh
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a balance of some sort if if one country
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is going to be a huge exporter the by
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far biggest economy in the European
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Union then other economies are going to
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have a trade deficit by definition isn't
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that right and if you can't balance
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currencies among the com countries
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because it's essentially a fixed
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currency how then can these countries
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balance um their their fiscal spending
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their currencies their interest rates
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how how does that work in a fixed
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interest rate envir or fixed currency
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environment absolutely I mean we're
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going back to the issue with the Euro
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which is that some parts uh uh of Europe
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uh or the Euro zone are more competitive
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than others uh in the global marketplace
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now keep in mind that the European Union
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as a as a block the 27 countries uh they
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have more or less balanced trade with
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the rest of the world okay so it's equal
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exports and imports but of course as you
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just pointed out within the European
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Union some countries enjoy huge uh trade
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uh uh surpluses that's Germany and the
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worst the worst trade deficit by the way
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is Spain okay so so at one extreme you
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have Germany and at the other you have
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Spain and then the other 26 member
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countries uh 25 member countries uh lie
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somewhere in between so the issue is as
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usual is um you know there will be some
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parts of Europe as a result of that that
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will do better than others uh and
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hopefully there will be adjustments in
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other words uh well the Germans over the
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medium run and the long run uh should be
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paid more money for what they do because
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they're very good at what they're doing
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and the Spaniards at the other end of
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the spectrum will see their standards of
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living uh come down uh as they
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hopefully restructure their economy uh
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they will find a way in which they can
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compete uh globally and then they will
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take it from there but there's going to
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be right now in the next few years a big
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uh Readjustment a big restructuring in
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Europe also in the United States by the
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way but but for sure in Europe as a
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result of the big changes that are
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taking place in the global economy do
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you think this threatens the
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cohesiveness of the European Union well
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sure any restruct absolutely any
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restructuring any Readjustment uh uh you
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know causes problems uh there are
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elections and uh people will be unhappy
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uh when when election come time comes
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now in Europe as you know the elections
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that matter are the national elections
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and they take place at different points
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in time depending on the country each
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country is in a different electoral
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cycle uh so there will be tension and
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there will be frictions and uh I don't
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think the European Union as such is
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going to uh you know unravel I think
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that's
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Unthinkable uh but uh there will be
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frictions and there will be a lot of
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problems that will be will need to be uh
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uh you know ironed out and certainly uh
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we're getting into a situation in which
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uh you know I think the Moment of Truth
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has has come right because we do have
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other countries around the world that
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have become uh as productive and as
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competitive as Europe South Korea Taiwan
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China is you know coming close even some
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Latin American countries are doing
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exceedingly well in certain industries
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so the Moment of Truth has come uh it
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has come for Europe it has come from the
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United States I think the you know the
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first countries in the world to
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industrialize are facing yet again a
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competitive crisis right and uh they'll
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need to figure out uh you know what to
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do do you think that uh with
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unemployment close to 20% in Spain uh
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and it sounds like years of austerity of
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of some kind that that that political
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pressure that you talked about are
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political changes uh and social
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pressures could build to a point where
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there would be say a demand within Spain
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to withdraw from the the currency Union
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go back to the petta for example uh no I
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don't think so um in fact the uh support
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uh for monetary Union uh was highest in
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Spain it actually much higher than in
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Germany because in Germany a lot of
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people uh you know were reluctant
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because of you know they already had a
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strong currency uh so Spain is actually
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a country that from the point of view of
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public opinion is very pro- European and
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I think it's just Unthinkable but it's
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Unthinkable from another point of view
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which is that uh you have a lot of
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homeowners in Spain who have a mortgage
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and their mortgage is for the you know
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in most cases like 95% of the cases it's
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a variable adjustable interest rate and
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is linked to the euro uh you know
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interest rate uh so uh there is a very
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very strong reason why people would not
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want uh Spain to uh to get out of the
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EUR because suddenly you know their
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mortgage payments would go through the
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roof because once you get out of the
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Euro you know anything that is in Spain
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would actually you know revert to a
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higher interest rate right
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uh so there's absolutely no chance that
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Spain by itself would want to get out of
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the Euro so zero chance of that uh no
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but keep in mind one very important
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thing which is that the Euro could
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depreciate itself and that would help
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Spain as long as Spanish companies uh
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export or to the extent that Spanish
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companies export outside of the Euro
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zone right so the Euro does decline in
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value and has been declining in value
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over the last uh month uh month and a
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half relative to the US dollar for
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example uh that would help the uh the
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export competitiveness of of country
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such as Spain also Germany of course
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right uh so there are a lot of moving
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pieces here uh but there's one
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clarification also that I wanted to make
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about the 20% unemployment rate in Spain
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um it is 20% right and it is incredibly
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High uh but it affects uh for the most
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part the young people right uh what does
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this mean well this means that
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essentially among the younger age group
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we're talking about 40 45% unemployment
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rate that is where the problem is uh the
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problem is that you could lose one
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generation here right uh one generation
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that essentially would be you know
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outside of the labor market making some
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money here or there in the informal
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economy right because they have to leave
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on something and but that's not the way
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to start your your career that's not the
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way to start your sounds like a recipe
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for a real political problem absolutely
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absolutely so what's what's the answer
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you mentioned um earlier about a
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mechanism some people were talking about
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uh a European equivalent of say the the
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international monetary fund a European
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monetary fund that would help
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to sort of stabilize or bail out
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countries like Greece that get into
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trouble um is is that something that is
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likely to fly well uh the European Union
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could obviously decide to set up such a
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uh such an institution uh the IMF uh
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essentially intervenes in emergency
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situations that is to say when countries
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run out of money they don't have
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reserves they don't have uh you know the
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means to actually keep going right uh
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keep going in the sense of um you know
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uh living up to their commitments
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Financial commitments and being able to
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pay for whatever things they need to
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import and every country needs to import
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something right uh so is Greece in that
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situation right now well it seems that
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it's very close to that uh and uh of
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course the IMF could bail them out right
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uh the interesting political or image
00:18:19
issue right now is that well no European
00:18:22
country would want you know or or no
00:18:24
European country would want one of their
00:18:26
member countries of European Union to be
00:18:28
bail out by International institutions
00:18:30
such as the or Global institution such
00:18:32
as the IMF so there is this idea that
00:18:34
well maybe the solution should be a
00:18:35
European solution right but once again
00:18:37
we didn't think about this or they
00:18:39
didn't think about this 10 years ago and
00:18:41
now in the midst of a crisis uh they
00:18:44
need to come up with a solution and they
00:18:46
find that there's no institution right
00:18:48
to to deal with that now of course the
00:18:49
other way to to get it done is to just
00:18:51
get two or three countries in Europe
00:18:52
perhaps led by Germany and say we're
00:18:54
going to bail them out but there are a
00:18:56
lot of political pressures within
00:18:57
Germany domestic political pressures not
00:18:58
to do so because as you know the uh the
00:19:01
ruling Coalition includes now the
00:19:02
liberal uh party and the liberal party
00:19:05
is very much against something like this
00:19:07
what is Europe likely to do they don't
00:19:09
want others coming in they they want to
00:19:11
take care of their own situation uh but
00:19:14
there's a lot of differences within the
00:19:18
countries and Europe I think uh I think
00:19:20
let's uh let's think in terms of two
00:19:22
scenarios well the first scenario is
00:19:24
that the crisis is just uh Greece okay
00:19:27
there's no other country so I think
00:19:29
probably then uh in the next uh you know
00:19:31
few months some kind of an ad hoc
00:19:33
solution would be quietly put in place
00:19:36
right you know the the Greek problem
00:19:38
will be dealt with Greece is a small
00:19:40
economy anyway it can be easily bailed
00:19:42
out by the rest of Europe and that will
00:19:44
be the end of it that gives some
00:19:45
breathing space exactly so it will be
00:19:47
quietly put in place you know without uh
00:19:50
you know uh with the public attentions
00:19:52
uh you know set elsewhere and so on so
00:19:54
forth scenario number two is that of
00:19:56
course the crisis spreads and it's not
00:19:57
only Greece but it's also so you know
00:19:59
conceivably Ireland or Portugal maybe
00:20:02
some countries in Eastern Europe let's
00:20:03
not forget that countries in Eastern
00:20:05
Europe are also in Dire Straits and uh
00:20:07
perhaps Italy uh quite frankly I don't
00:20:09
see Spain but you know if if the crisis
00:20:12
spreads to you know like uh uh five six
00:20:15
eight countries then maybe Spain could
00:20:17
be part of that uh so if you put
00:20:18
yourself in the very very pessimistic
00:20:20
scenario then obviously an ad hoc
00:20:22
solution wouldn't do it will need to be
00:20:24
something more organized something more
00:20:26
institutional it may require uh you know
00:20:28
the IMF uh F's intervention after all MH
00:20:32
so especially if there were some sort of
00:20:33
outside shock like a sudden jump in oil
00:20:35
prices for example exactly right now we
00:20:39
something else you know comes our way if
00:20:41
there's another typhoon right that comes
00:20:43
our way then or Europe's way uh then
00:20:46
that you know the situation will get
00:20:49
much much worse and uh you know
00:20:51
something more drastic will need to be
00:20:53
so it it was interesting that earlier
00:20:54
you you put your finger on increasing
00:20:57
productivity as ultim imely the the cure
00:21:00
for this situation but in in the short
00:21:03
run is it going to
00:21:05
be austerity of the kind that we we were
00:21:08
used to the IMF imposing in the 80s and
00:21:10
90s on on countries uh just that just to
00:21:12
keep things simple if you do not devalue
00:21:14
the currency which is the initial you
00:21:16
know question that you posed and that
00:21:18
your productivity is growing at a slower
00:21:20
Pace than that of Germany or that of the
00:21:23
other people who are in your same
00:21:25
currency area right then the is
00:21:29
essentially you know no solution your
00:21:32
living standards are going to come down
00:21:35
uh it's not only that you're going to
00:21:36
have an employment you may have more or
00:21:37
less unemployment but just in general
00:21:39
even those who are employed are going to
00:21:42
be earning you know less for what they
00:21:44
do because they're not as productive
00:21:46
right I mean sooner or later the day of
00:21:48
reconing kicks in and the market you
00:21:50
know especially you know the global
00:21:51
trading system will you know impose on
00:21:54
you uh its conditions which is
00:21:56
essentially well if you're not as good
00:21:57
as the others you know you're not going
00:21:59
to do as well in this economy uh so
00:22:01
that's the ultimate uh you know
00:22:03
consequence of this it's not that the
00:22:05
country Spain in particular or any other
00:22:07
country is just going to you know
00:22:08
disappear it's just that its people its
00:22:11
population are going to enjoy lower
00:22:15
standards of living or to put in a
00:22:16
different way they're going to be
00:22:17
declining at least in relative terms
00:22:20
compared to those of other countries
00:22:22
that are more productive and again the
00:22:24
issue is Spain's productivity is growing
00:22:26
let's say at 1 or two% per year uh well
00:22:29
in some East Asian countries is growing
00:22:31
at four or five% in Germany it's growing
00:22:33
you know somewhere in between those two
00:22:35
numbers so uh it's not sustainable uh
00:22:37
your standards of living will have to
00:22:39
come down unless of course you devalue
00:22:42
but I don't think that's going to happen
00:22:44
I don't think uh Spain or Greece or
00:22:46
Italy are going to leave the the Euros
00:22:48
system and even different lands now
00:22:51
there's other countries that were in the
00:22:53
wings wanting to get into the EU um this
00:22:55
is the first really major crisis that
00:22:57
the EU has had these this is the kind of
00:22:59
Crisis that that critics and Skeptics
00:23:02
worried about uh and it's it it's
00:23:04
finally here and we'll see how things
00:23:06
get manage but will that affect I mean
00:23:08
it seems like it's likely to affect uh
00:23:11
other countries um Beyond Greece and so
00:23:14
forth that are that are hoping to get
00:23:15
into the EU like it like turkey for
00:23:17
example right so there's turkey and
00:23:18
there's some uh a few other Eastern
00:23:21
European or former you know Soviet
00:23:23
republics who might at some point want
00:23:25
to be in now turkey I think is a uh you
00:23:28
know it's an interesting uh uh you know
00:23:31
situation uh they've been you know
00:23:33
applying for membership for a very long
00:23:35
time they have everything to gain from
00:23:37
being members of the European Union even
00:23:39
though they already enjoy some of the
00:23:40
benefits because they have some free
00:23:42
trade agreements with some of the
00:23:44
countries uh but of course they will get
00:23:46
a windfall from uh you know the
00:23:48
structural funds from all of the
00:23:49
subsidies the European Union subsidies
00:23:51
and of course it will give foreign it
00:23:53
would give foreign investors a great
00:23:54
deal of confidence of confidence in
00:23:56
Greece in in turkey and as a result of
00:23:58
that then more foreign investment were
00:24:01
would um pour into uh into turkey uh but
00:24:05
I think the current crisis should in
00:24:07
quite frankly in my view uh if I were
00:24:10
turkey uh should not diminish uh the
00:24:13
desire to become member of the European
00:24:15
Union because the benefits are you know
00:24:17
enormous and turkey is already quite
00:24:19
integrated with uh the rest of the with
00:24:22
some of the countries European Union
00:24:23
especially with Germany right in terms
00:24:24
of trade uh the other important thing
00:24:26
here to keep in mind is that the
00:24:27
European Union has actually
00:24:29
enlarged uh or let me uh rephrase has
00:24:33
entered into negotiations about
00:24:35
enlargement during crisis uh so when
00:24:37
Spain and Portugal and uh entered uh the
00:24:40
negotiations were taking place in the
00:24:42
early 1980s when you know the economy
00:24:44
European economy wasn't doing that great
00:24:46
uh remember also Britain and uh Ireland
00:24:49
uh and Denmark became members in the
00:24:50
early 1970s 1973 okay so uh so the the
00:24:55
union has um welcomed new members during
00:24:58
times of crisis in the past uh so I
00:25:01
don't think turkey should give up give
00:25:02
it up and I certainly believe strongly
00:25:04
believe that European Union should uh
00:25:08
get serious about admitting turkey as a
00:25:10
as a member would it change how they how
00:25:12
turkey might want to enter in other
00:25:15
words uh the UK has managed to escape um
00:25:18
turning to the euro could turkey do do
00:25:20
something similar at least at least yes
00:25:23
the two things are not necessarily
00:25:24
linked to each other that is to say you
00:25:25
could become a member as you just
00:25:27
pointed out uh and not become uh part of
00:25:30
the of the euro currency in fact I would
00:25:33
strongly you know suspect that uh if
00:25:36
Turkey were to become a member let's say
00:25:38
in 5 years from now it would probably be
00:25:41
you know asked to you know wait a few
00:25:44
more years for Euro membership because
00:25:46
that's a tighter you know degree or
00:25:49
extent of integration and it requires
00:25:51
you know a number of other structural
00:25:53
reforms uh uh so you know what turkey
00:25:56
needs to think about is uh negotiations
00:25:59
and uh you know because there's all
00:26:01
sorts of details that need to be uh
00:26:03
fleshed
00:26:04
out so maybe you could uh give us one
00:26:08
final word on where things are heading
00:26:11
with Spain and with the European Union
00:26:13
what's most likely in the next critical
00:26:14
weeks ahead well in the next weeks ahead
00:26:17
obviously uh we're going to see uh quite
00:26:19
a bit of uh you know turmoil and
00:26:22
discussion and debate some of it really
00:26:25
heated in terms of what needs to be done
00:26:27
and one again if uh there's no uh
00:26:31
surprise event out there like a in
00:26:32
oil prices or whatever I think uh you
00:26:35
know we're going to uh you know enter
00:26:37
into a period of three or four years
00:26:38
during which in Europe in general but I
00:26:40
think in Spain in particular there will
00:26:42
be very sluggish economic growth maybe
00:26:44
you know half a percentage point maybe
00:26:46
1% one and a half modle through modle
00:26:48
through uh it's very hard to reduce
00:26:50
Unemployment uh with such a slow growth
00:26:53
and uh it's just going to be hard uh and
00:26:56
uh once again I think we are going to to
00:26:58
be enter entering a period during which
00:27:00
living standards in some parts of Europe
00:27:02
I think that also applies to the United
00:27:03
States by the way but certainly in
00:27:05
certain parts of Europe including Spain
00:27:07
uh will uh not grow as much uh and in
00:27:11
fact they might even shrink uh so I
00:27:13
think we are you know entering a period
00:27:16
of uh you know just um you know not
00:27:19
catastrophe not uh you know uh outright
00:27:23
uh you know um decline in the economy
00:27:26
but certainly uh you know a kind of a
00:27:30
flat you know profile in terms of
00:27:32
economic growth and in terms of incomes
00:27:35
uh and people are going to wonder
00:27:36
exactly you know after three or four
00:27:38
years of such a
00:27:40
situation what went wrong and perhaps
00:27:43
engage in some serious uh reforms we
00:27:45
talked about external shocks I saw that
00:27:48
the latest trade figures for Germany for
00:27:49
the latest period were down shockingly a
00:27:52
large amount I think it was over 6% um
00:27:56
and that's already causing some worries
00:27:58
uh did that does that number surprise
00:28:01
you and how could that affect the it was
00:28:03
surprising and this is why there's now
00:28:06
more concerned in Europe because Germany
00:28:09
being the largest economy if it's not
00:28:10
doing as well and for Germany obviously
00:28:13
the export um situation is absolutely
00:28:15
crucial so it was
00:28:17
surprising and again I think it reminds
00:28:20
us that Germany has not resolved all of
00:28:22
its problems right uh but once again
00:28:24
it's not that the country is going to
00:28:26
you know disappear from the face of the
00:28:27
world I mean uh you know it is a uh very
00:28:31
competitive economy right though it has
00:28:33
its problems they have a highly educated
00:28:35
population and uh you know they've
00:28:38
surmounted uh you know very very
00:28:40
important challenges before so you know
00:28:42
what there's also room for optimism but
00:28:44
uh once again I don't think we're going
00:28:46
to see a fast turnaround in Europe in
00:28:48
the next three or four years it's going
00:28:50
to be painful it's going to be slow it's
00:28:53
going to be uh just uh you know very
00:28:56
very prolonged uh you know way or Road
00:29:00
out of this recession well not to put
00:29:02
too much on one number but that that
00:29:04
trade number is causing worries that
00:29:06
there could be a double dip recession in
00:29:08
Germany do you think that's it could be
00:29:11
possible but at the very least I think
00:29:12
the most likely scenario is that uh
00:29:14
we're going to be entering a period of
00:29:16
just you know so sluggish growth that uh
00:29:21
uh you know unemployment is not going to
00:29:22
come down and of course if unemployment
00:29:25
doesn't come down then the budget
00:29:26
deficit deficits will remain at very
00:29:28
high levels right because of subsidies
00:29:30
unemployment subsidies uh so it's it's
00:29:32
going to be it's going to be tough
00:29:33
challing be tough thanks for joining us
00:29:35
we're out of time I appreciate it very
00:29:37
much thank you very much okay thanks
00:29:39
Steve
