A division in Europe over economic fund
TEXT OF INTERVIEW
KAI RYSSDAL: Let me pick up on Steve’s point about Europe and note that at least one proposed bailout plan did not get off the drawing board this weekend. The Hungarian government has been floating the idea that some struggling Eastern European economies could really used a hand — to the tune of hundreds of billions of dollars. Western Europe would have to pick up the tab. And at a summit this weekend they gave a resounding thumbs down.
Marketplace’s Stephen Beard’s been following along from London. Hello, Stephen.
STEPHEN BEARD: Hello, Kai.
RYSSDAL: The western members of the European Union said not just “No,” but “Heck, no” to this plan. Why?
BEARD: In fact, it was the Germans who vetoed it. And, of course, Germany has the largest, most powerful economy in the E.U. So what they say goes. And the Germans have been pretty tight-fisted with their own bailouts. And also, the Germans argue that billions are already going into Eastern Europe. I mean, they point out that just this past Friday, a $31 billion package to the East was unveiled. Most of the former Communist countries in the east are members of the E.U. They’ve been getting billions of euros in aid, anyway. The Germans just don’t think a major new fund is necessary.
RYSSDAL: These are not, though, I mean, Hungary, Romania, the Baltic States . . . they’re not huge economies. Why do they need a quarter of a trillion dollars?
BEARD: Well, they are small economies. You’re right. But they have racked up some pretty big debts. I mean, they’ve become utterly dependent on Western credit. Since the collapse of communism, these countries have been struggling to catch up with their wealthy Western neighbors. Something like a trillion dollars flowed into these Eastern economies during the boom. As soon as the credit crunch hit, however, that tap was turned off. Many of these economies are now facing major recessions. We could be talking about declines of 10 percent or more.
RYSSDAL: There’s been talk about the political fallout from this economic crisis for some time. Are we seeing it now here. I mean, the division, possibly of Europe?
BEARD: The Hugarians are warning of something along those lines. I mean, they’re talking in pretty apocalyptic terms, of mass unemployment in the East. And just to get the West Europeans really worried, mass migration of people from east to west. And, eventually, they say, yes, a new Iron Curtain — imposed this time by the West and designed to keep the Easterners in the East, which would be pretty ironic.
RYSSDAL: OK, but wait a second. The one thing that sort of has held Europe together for however long it’s been together is this concept of the internal market. You see it in the euro, you see it in trade policies and immigration policies. You can’t really seriously be telling me that this economic crisis would tear all that apart?
BEARD: Politically and economically it seems most unlikely that these former Communist countries would pull out of the E.U. because their noses were out of joint over the failure of the West to bail them out. But this is just a further sign of strain, strains within the European Union. A further sign that as this economic crisis deepens, countries are focusing more and more on their sort of narrow national concerns. The E.U. was hoping that this summit in Brussels at the weekend was going to produce a kind of common approach, a unified approach, to the . . . global economic crisis that they would then be able to take along to the big summit, the G-20 Summit, in London next month. Well, all this talk about a new Iron Curtain . . . Not a good omen for any coordinated attempt to manage the crisis on a global scale.
RYSSDAL: Stephen Beard at the Marketplace European Desk in London. Thank you, Stephen.
BEARD: OK, Kai.
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