GERMAN FINANCE MINISTER SAYS GREEKS ARE BLAMING GERMANY FOR AN AUSTERITY PROGRAM THEY BROUGHT ON THEMSELVES - "60 MINUTES" SUNDAY
Steve Kroft Explains the European Debt Crisis that Could Ultimately Curtail U.S. Recovery
The ill will many Greeks feel toward Germany for imposing painful financial conditions on the massive loans the country made to them are just a normal response to a difficult situation, says German Finance Minister Wolfgang Schauble. It's natural for people suffering from their own mistakes to blame others, Schauble tells Steve Kroft in a story explaining Europe's debt crisis - a scenario that could worsen and affect the U.S. economic recovery. Kroft's report will be broadcast on 60 MINUTES Sunday, April 8 (7:00-8:00 PM, ET/PT) on the CBS Television Network.
Of all the members of the European Union, Greece was hit the hardest by the recession because it was half a trillion dollars in debt and has only 11 million people. The EU agreed to bail out Greece, with the largest checks coming from its strongest member, Germany. In return for the loans, Greeks would have to abide by a financial austerity program that included laying off 150,000 public workers, salary reductions of 20 percent, higher taxes and lower government spending. It's understandable that Greeks were upset with Germany, says Schauble. "When you have countries or people who have been living beyond their means, and now they have to apply some austerity, they have to make cuts, they have to reform their labor market� people tend to push the blame to others," Schauble says. "They are looking for scapegoats. It's perfectly normal," he tells Kroft.
To make matters worse, Greeks still remember the German occupation of their country in World War II and have made protest posters featuring swastikas that allude to German domination. The posters sometimes have German leaders on them, even Schauble. "That's part of politics," says the finance minister, who tells Kroft he is just trying to do his job, and Germany doesn't want to dominate anyone. He too, remembers World War II. "It doesn't mean we want to dominate anybody. Germany tried to do so in the past and it never worked, but it no longer wants to do so today." Watch an excerpt.
But to Greeks, it's more than tough medicine when an outside entity suggests interfering with their government. At one point, Schauble thought it might be a good idea to postpone elections so a new government wouldn't vote down the austerity conditions. It was a big mistake, says Yanis Varoufakis, an economist at the University of Athens. He says Greeks are to blame for their financial problems, but "you cannot tell a people when they're going to hold elections. You cannot tell a sovereign parliament when it should be dissolving itself or not," he tells Kroft. "You can express a wish, but you cannot issue, especially if you're speaking with a German accent� what to do."
Greece isn't alone. All the countries in the Eurozone have tightened their belts to weather the recession, leading to economic slow-downs that could put other European countries at risk of defaulting on loans. Kroft also speaks to Christine Lagarde, head of the International Monetary Fund. "There's still medicine to be taken. And that's what's happening in most of these southern Eurozone states at the moment, plus Ireland," she says, adding that it is not certain that Greece will avert bankruptcy and a forced exit from the EU and its common currency, the euro.
A Greek bankruptcy would affect the rest of Europe's weaker countries and ultimately, the U.S., because its largest trading partner is the EU, says London financial analyst Louise Cooper. "The fear of Greece is it sets a precedent for other indebted countries. Then everybody who owns Portuguese debt or Irish debt, possibly even Spanish debt or Italian debt, you start to worry, �Will I ever get my money back?'" she tells Kroft. This then could lead to a shutoff of loans, economic stagnation and default. "Clearly if the Eurozone has a really bad time of it this year, which it could well do, then America will not escape unscathed," Cooper tells Kroft.