Guest Host: Katty Kay

The Greek government teetered on the brink of collapse, as it announced it would not proceed with a referendum on the EU bailout plan; leaders meeting at the G20 summit in Cannes breathed a sigh of relief; Libya appointed a new interim prime minister, as it moved forward with its transition to peace; Syria agreed to a plan to end violence in the country, but the crackdown continued; the Palestinians got a boost in their bid for statehood after UNESCO, the UN’s cultural body, admitted them as a member; and a French paper was firebombed after putting an image of Mohammad on its cover. Guest host Katty Kay of the BBC will analyze the week’s top international news stories with James Kitfield of National Journal, Courtney Kube of NBC, and Robin Harding of Financial Times.

Guests

  • Robin Harding U.S. economics editor, The Financial Times.
  • Courtney Kube national security producer for NBC News.
  • James Kitfield senior correspondent, National Journal.

Transcript

  • 11:06:32

    MS. KATTY KAYThanks for joining us. I'm Katty Kay of the BBC, sitting in for Diane Rehm. Diane is in Maine on a station visit. She'll be back on Monday. The prime minister of Greece struggles to hold onto his job. European economic troubles overshadow the G20 meeting in France and violence continues in Syria, despite a deal with the Arab League.

  • 11:06:53

    MS. KATTY KAYJoining me in the studio to discuss this week's top international news stories, James Kitfield, senior correspondent with National Journal, Courtney Kube, national security producer for NBC News, Robin Harding, U.S. economic editor for The Financial Times. All of you thank you so much for joining me.

  • 11:07:10

    MS. COURTNEY KUBEThank you.

  • 11:07:10

    MR. JAMES KITFIELDGood morning.

  • 11:07:11

    MR. ROBIN HARDINGThank you.

  • 11:07:11

    KAYWe will be opening the phones in about a half an hour. The 1-800-433-8850 is the phone number here. Do give us a call with your questions and comments and send us an email, drshow@wamu.org. You can find us on Facebook and Twitter as well. James, let me start with you, Greek tragedy, Greek drama, Greek farce, what's going on in Athens this week?

  • 11:07:33

    KITFIELDIt's like watching a slow motion train wreck, it really is and unfortunately, and that train does wreck, it's going to take down the -- possibly the world financial system with it and so here we have little Greece, who's, you know, through this. Last week we had this big deal that the Europeans got together, basically going to bail them out but on, you know, agreement they'll have these austerity measures, going to shore up the central bank.

  • 11:08:01

    KITFIELDMonday, Papandreou from Greece throws in this total turmoil. He says he's going to put this deal to a referendum. You know, we've seen how unpopular these austerity measures are already with the riots all throughout Athens and the rest of Greece. So that just threw financial markets into a tizzy, right on the eve of this G20 vote. I mean, the good news is he's backed off of this, said there will be referendum now.

  • 11:08:26

    KITFIELDHe apparently was actually doing a little maneuvering job where he could solidify his position within in his own government, maybe hang onto power and for a unity government. But it gets to the chore of what's the problem with the euro zone, which is that you have a consensus to get into this thing altogether but never a -- and a consensus to break all the rules about debt ratios, etc. but never a consensus on the kind of financial and institutional framework that would make a financial union coherent.

  • 11:08:55

    KITFIELDSo now we're having -- facing very tough decisions and in any small country, we're starting to figure out, in Europe, can bring the whole process to a grinding halt if their parliament balks.

  • 11:09:05

    KAYOkay. Courtney, I'm fascinated by what's happening in Greece because I do think it gets, as James is suggesting, to the kind of heart of what the euro is about. But it also gets to national characteristics because the polls show in Greece in this week that a majority of Greeks want to stay and be part of the euro zone. A similar majority of Greeks don't want the austerity measures that it's going to take in order to keep them in the euro zone. I mean, this is the fundamental problem, right?

  • 11:09:32

    KUBEExactly. And that's one of the reasons presumably that Prime Minister Papandreou put this or threatened to put this to a referendum was it was so domestically unpopular. The bailout essentially said that the European -- other European zone leaders, primarily Germany and France, were going to provide another $11 billion in November and then they were also going to forgive about half the debt that Greece owed to banks.

  • 11:09:58

    KUBEBut in response for that there were these tremendous austerity measures that the Greek people were going to have to endure and that included more unemployment. There would be fewer pensions, they were going to have to have higher taxes. The Greek people have been putting up with these austerity measures for about a year now and they are furious. There's been unprecedented protests, there have been strikes. But what it really goes to is when you look at the difference between the two of the nations that are involved here, Greece and Germany.

  • 11:10:26

    KUBEThe German people are also kind of upset. They're saying, you know, we don't have these luxurious really lifestyles that some of these Greek people who work for the government and are able to afford. For instance, they have -- they retire at 50. They have, you know, weeks and weeks of vacation very single year, mandatory vacation. So the German people, who one could argue, really should've had the referendum, whether they wanted to provide this money to Greece. The German people are upset that they're bailing out, what they look at as a lavish lifestyle and an un-responsible one.

  • 11:10:57

    KAYRobin, James started by saying that this is a crisis that has knock-on effects all around the world. If I am a businesswoman in Oklahoma, why should I be bothered about what's happening in Greece this week?

  • 11:11:08

    HARDINGWell, there's a very profound reason why you should be bothered. Because if this falls apart in Greece then the sort of chain of dominos is going to go like this, Greece defaults on its payments to European banks, European banks go under. European banks can't repay U.S. banks or U.S. money market mutual funds. There will be a big financial panic, which will very quickly become global and that's going to have knock-on effects on your ability in Oklahoma to get credit from your bank.

  • 11:11:34

    KAYSo it is something that the rest of the world is watching, what's happening in Athens right today?

  • 11:11:38

    HARDINGAbsolutely, absolutely because you have to think, Athens and Greece are the role model for what could happen in much bigger European countries, which also have problems, notably Italy and notably Spain. If Greece does decide to default, decides not to go with an organized restructuring of its debt and accept this bailout, then people are going to think, well, Italy's going to do the same thing and Italy owes hundreds of billions of euros to international banks. That's why the problem in a small country is actually a global problem.

  • 11:12:09

    KAYRight and that's why it's dominating the G20 meeting in Cannes, which was of course, meant to be about the global financial crisis and yesterday, at least, got completely high jacked by what was happening.

  • 11:12:18

    KITFIELDyou know, and again to make my earlier point, and I totally agree with that. I mean, you've already started to see the cost of borrowing for Italy jump up as the markets, you know, look down the road and look at who's the next weakest person and they look at Italy and Italy is, you know, is almost too big to bailout. So, you know, this -- and the problem is the markets move very quick and the European union and the euro zone move very slow because you have to build this consensus, again, from 17 members in the European -- euro zone or 27 members in the European union at large. It's a very cumbersome process. The markets have been ahead with them every step of this crisis and they're still playing catch-up.

  • 11:12:54

    KAYRight. Okay, when -- it's going to be incredibly difficult for Greece to make the kind of cuts as you were suggesting, Courtney, that it needs to, to stay within the requirements of the bailout fund. Italy, also struggling with these austerity measures. I mean, what are you looking at in terms of how the euro zone is shaped in five years time?

  • 11:13:14

    KUBEWell, there's actually one silver lining to this entire issue in Greece and that may be that it may actually force Italy to accept that it has an even bigger problem than Greece has right now and to take it and to take measures now. You know, for instance, Greece is right now at about $450 billion in debt. Italy is $2.5 trillion. As James was saying, they are not bailout-able at this point. It's just too big.

  • 11:13:39

    KAYSo are we thinking that this G20 meeting is a turning point in history, Robin? That we -- this is the moment we'll look back and think, you know, this is the beginning of a smaller euro zone?

  • 11:13:50

    HARDINGI think not and I can't think of any G20 meeting ever, in fact, or any G7 meeting for the last 20 or 30 years that would be regarded as the turning in history.

  • 11:13:59

    KAYBut is it the moment -- okay, too big a phrase there. but my sense is out of this G20 meeting there is now explicit recognition that Greece might leave the euro zone? And that has not been said explicitly before European leaders.

  • 11:14:14

    HARDINGWell, that's certainly true and I think we are moving to a little crisis point in this series of crises. But I think the thing you have to recognize about what's been happening in Europe for more than a year now, is we have a crisis and then a little bailout is agreed to paper over it. And we have another crisis and another little bailout is agreed to paper things over until the next time.

  • 11:14:34

    HARDINGThe trouble is there's a really fundamental, deep problem, which has to be addressed. You have to completely change the nature of the Greek and Italian economy from accepting financing from Germany and using it to buy a Mercedes, to actually producing something themselves and persuading the Germans that they want to buy it. So there's no short solution to this and that's why the Greek measures involve such a lot of pain, involves a decade of pain. There really is no quick and easy answer to this and that's why I think we've not reached a sort or turning point yet.

  • 11:15:05

    KAYOkay. James, news coming out from Cannes where the G20 meeting is happening. President Obama has just said that the U.S. economy is growing way too slow and he said, put simply, "The world faces challenges that put our economic recovery at risk." Of course, the Americans again, very focused on what's happening there in Europe this week.

  • 11:15:24

    KITFIELDAnd he made an interesting point. I mean, if you look at, you know, that he was sympathetic to how difficult it is for all these European leaders. I mean, look at how difficult for him and for the Republicans to agree on a way forward with either stimulus or cuts in the deficit. I mean, there's a fundamental disagreement that has split this country basically in half and it's tied his hand. So you have this sort of situation where the president's running around promoting a jobs bill that doesn’t have a chance in Hades of actually passing.

  • 11:15:52

    KITFIELDReally starting the campaign season right now but doing anything for the job situation. so, I mean, I think it gets to the point that when we -- in 2008 when the crisis first erupted a lot of people threw a lot of money, a lot of countries threw a lot of money at this crisis and there is debt weariness in a lot of our societies and it certainly is in our own society. So we're, you know, we're in a really rough patch for the global economy. I mean, I think he claim that, you know, the stimulus did keep it from getting worse as you talked about in your earlier segment but it's going to be a tough motto to run on next year for him.

  • 11:16:28

    KAYCourtney, what are the Chinese saying at the end of this week? Because of course, there had been some hope that the Chinese might offer to contribute to the bailout fund for Greece. Are they willing?

  • 11:16:39

    KUBEIt doesn't look domestically popular for China to give money to this bailout and I think that's going to be one of the things that when historians look at back at this G20 if they do, that comes out of it is that France really wanted to woo China and India and say, look, Europe is a good investment, come put your money here. And in the end, it was sort of embarrassing because everything was taken over by this news of Greece, which just looked so disorganized and it was moving so quickly that I think the Chinese leadership is going to leave there and say, well, why would we want to put money into this losing investment?

  • 11:17:14

    KUBEI also think, frankly, that from President Obama's perspective, this marked a real shift. This was his fifth G20 and for the first time, he was not one of the major players there. And you can look at it from two perspectives, either Europe didn't go to the U.S. and say, we need money, help us, because the U.S. really can't afford to put $150 billion into Europe right now. But did the U.S. not come to, I'm sorry, did Europe not come to the U.S. but they went to China. I think this one marked a real shift in how the U.S. is seen on an international stage, whether they're seen as an international player.

  • 11:17:48

    KAYMeanwhile, of course, China saying that Europe has to get its own house in order before it's going to assist with the bailout fund. We're going to take a short break. Courtney Kube, national security producer for NBC News, James Kitfield, senior correspondent with National Journal, Robin Harding is U.S. Economics editor for The Financial Times. They're all with me in the studio. We'll be taking your calls, 1-800-433-8850 is the phone number. The email address is drshow@wamu.org. It's been a very busy week. We've got to get onto Libya, Syria, a whole host of other issues that have been happening around the world. We will get to those and your calls and questions. I'm Katty Kay. We're going to take a quick break, stay listening.

  • 11:20:02

    KAYWelcome back. I'm Katty Kay of the BBC sitting in for Diane Rehm and you have joined the international hour of our Friday News Roundup. During the break, we got news from Greece. A senior Greek governing party lawmaker says he will not support the government in a critical confidence vote unless Prime Minister George Papandreou pledges to resign over the weekend and start talks on a caretaker government. And of course, Robin Harding, that vote due to take place in a few hours time. How's it looking for the prime minister?

  • 11:20:32

    HARDINGWell, I think Papandreou's a goner regardless of how the vote goes. I mean, he has rolled the dice with this referendum proposal being shot down pretty horribly. He may have actually gained something by solidifying the opposition support for this bailout and thereby generating at least a little bit of political unity behind this. But I think it's going to come at the price of his leadership.

  • 11:20:53

    HARDINGWhether the vote passes or not, I think it's still up in the air. I think even if a number of his own lawmakers defect, it's still possible that that vote will go through if he can pick up a bit of opposition support. But either way, I don't think it really makes that much difference. He's gone. The question is whether Greek as a -- Greece as a country and as a policy can get behind this bailout and accept the decade of pain that's going to come with it.

  • 11:21:18

    KAYI interviewed the Greek foreign minister who was in Washington last week and he -- it was just after the deal was announced and he was very gung-ho. He said, this is all about the future. We're not looking back to the past anymore. No one can scapegoat anymore, but Greece is prepared to change. The Greek people know that they have to have this austerity in it. And I said, you know, look, you live in a country where paying taxes is a kind of lifestyle choice. Is that going to change? He said, we -- you know, that's not fair and actually, yes, we know what -- the pain we have to go through. Do we love it? No, but we are going to change as a nation.

  • 11:21:50

    KAYCan you change people, a culture like that, James Kitfield?

  • 11:21:54

    KITFIELDI think it's difficult and I think, you know, Robin was saying, well, Italy and Greece are going to have to sort of build economies or sell things to their northern neighbors. And, you know, maybe that happens, but it seems to me that, you know, you have to expect some unevenness in this euro zone. And...

  • 11:22:12

    KAYWhich is why now some people are talking about a kind of divided euro zone system.

  • 11:22:16

    KITFIELDRight. And -- you know, and it has to be mentioned that, you know, Germany has been an export engine in large part 'cause it's selling to its neighbors in Europe. So, I mean, Germany has stake in this game, if you will. But I think it'll be very hard to turn around sort of the Greek culture in a way that makes them sort of mini northern neighbors or like Scandinavians. They're not. They're Mediterraneans. They have a different kind of culture and a different approach towards work and life.

  • 11:22:40

    KAYWhich, Robin, explains China's reluctance.

  • 11:22:42

    HARDINGYes. I think it bears saying that joining Europe and joining the euro is part of a sort of effort by the Greek elite and political class to transform themselves and make themselves more European. So when you hear elite Greeks saying that we want to change and we can change, I think you have to take it with a pinch of salt.

  • 11:23:00

    HARDINGThe Chinese point -- and what I think is absolutely crazy is that the Europeans are even contemplating taking money from China. China has a huge surplus and it has to put it somewhere and they have to put it somewhere where a deficit is so they can put it U.S. bonds or in European bonds. Fine, but Europe has the European Central Bank. So, you know, it can bail out itself. It doesn't need to accept money from China with political strings attached to it.

  • 11:23:23

    KAYSo why did the Europeans go to China?

  • 11:23:26

    HARDINGWell, so they have to raise this very large amount of official financing. And the only entity in Europe which can do that is the European Central Bank. The European Central Bank is very reluctant to do that basically 'cause it's worried about its credibility. And the reason it's worried about its credibility is 'cause it doesn't want to give money without strings attached to Silvio Berlusconi in Italy.

  • 11:23:46

    KAYAnd, Courtney Kube, that's why we had Mario Draghi the new president of the European Central Bank pushing back against this idea just yesterday that the ECB was going to be the lender of last resort.

  • 11:23:57

    KUBEExactly. And he surprised a lot of analysts this week when he took over -- he just took over this week. Kind of a tough time to take the office. And he quickly...

  • 11:24:04

    KAY(unintelligible) .

  • 11:24:04

    KUBEAbsolutely. And he quickly cut interest rates by a quarter point, surprising analysts by doing it a little earlier than they had anticipated before the end of the year. And he basically did it -- you know, he's trying to shore up confidence in the European markets and build confidence internationally. And it's still -- it stands to see if it actually works.

  • 11:24:24

    KAYWe have an email here from Jonathan who writes us from Washington D.C., "Please discuss Italy, the elephant in the room, and its leadership issues. Also those rhinoceroses -- rhinocerosi, I guess, Spain and Portugal and what happens if China catches cold." Well, let's -- James, I'm going to ask you about Italy particularly because there were kind of rumors swirling this week that maybe Silvio Berlusconi was going to have to go.

  • 11:24:46

    KITFIELDYou know, and everyone's looking for some sort of a silver lining in this crisis and that, to me, would be the silver lining, to get Italy off its sort of stagnation and finally get rid of this guy. He's an embarrassment. He is under charges of sexual -- you know, soliciting sex with minors. He's been -- he's a playboy. He's been a huge distraction and he's lorded over a period when Italy has borrowed way too heavily. And if Italy's going to be -- you know, convince its neighbors in the financial market so it's going to get its house in order, it's very hard to say how it does it with Berlusconi at the helm.

  • 11:25:24

    KAYRight. But is there somebody else who can take over who is -- who you think is the kind of financial shining white knight waiting to make the cuts that Italy needs to make?

  • 11:25:32

    KITFIELDWell, I mean, the reason he's been in office so long as there is not that shining white knight waiting on the side. But it's getting to the point now, in my view, that it's hard to see how anyone could be worst at this point. A technocrat right now would be -- who's not charismatic and is not as well known as Berlusconi might even be a good thing. But, no, I don't see -- I don't have the name handy of a white knight that is obviously sitting on the sidelines that everyone's going to rally behind.

  • 11:25:57

    KAYYeah, but it's interesting. I mean, talking to people at the IMF this week they're kind of iterating what you say, that at this point anyone is preferable to Berlusconi. And that it might give the market some sense of confidence that Italy is prepared to make the leadership changes. Let's shift to Libya, Courtney Kube. We have a new prime minister who taught at the University of Alabama. He is an electronics engineer. What can you tell us about him?

  • 11:26:20

    KUBEYeah, the National Transitional Council elected their new interim prime minister this week. It's Abdurrahim El-Keib. And, as you said, he taught at the University of Alabama at Tuscaloosa. And he was actually born in Tripoli so he's considered by the Libyan people to be a Westerner -- a western side of the nation. But then he spent about four decades outside of the country. He was in opposition to Gadhafi and he left the country.

  • 11:26:42

    KUBEAnd people who taught with him and his students -- there's a bunch of stories this week about his character and everyone speaks very highly of him. They said that one thing he never spoke much about was Libya when he lived in the United States. And that was because he was concerned about his family back home in Libya and because of his strong opposition to Gadhafi. But he came back over the summer and he was one of the financiers of the revolution towards the end in August.

  • 11:27:08

    KUBEWhat he brings to the table is -- the interim president right now is from the east...

  • 11:27:14

    KAYRight.

  • 11:27:15

    KUBE...and he's from the west. So he's seen as the potential to unify a nation which right now is pretty fractured, not just in its politics. It's a very loose, weak political structure that's just in its infancy right now, but also more so in these tremendous militias that are all over the country that are refusing to disarm. And that they either need to unify or figure out a way to disarm them or else they're going to end up with sectarian conflict throughout the country.

  • 11:27:43

    KAYRobin Harding, what's been the reaction from the United States and Europe and other members of NATO to the appointment of the new prime minister?

  • 11:27:51

    HARDINGWell, I think it's generally been positive, which is not really a surprise. You know, you've got a U.S. educated technocrat in charge of Libya. Hooray. I think that's really the point about this man. I mean, no one can feel obviously threatened by him. I mean, he's not obviously an Islamist, he's not a general, he's not a strongman. He's going to be a technocrat. That's, you know, good from one point of view. But equally you have to wonder, is this the man who can, you know, put Libya together. Is this the great leader, the sort of post-revolutionary leader of Washington who's going to build a new nation? I mean, that's the point where you have to worry a little bit.

  • 11:28:25

    KAYJames.

  • 11:28:27

    KITFIELDYeah, I mean, everyone should look at this situation as we've seen sort of post-revolutionary situations or post-regime change situations. If we have some experience with...

  • 11:28:36

    KAYIt could be tricky.

  • 11:28:36

    KITFIELDExcuse me?

  • 11:28:37

    KAYIt can be tricky.

  • 11:28:38

    KITFIELDCan be very tricky and, you know, they can be hijacked, as we saw with Iran's revolution. It can take many months as we saw -- oh, many months -- many years as we saw with Iraq. But I think this is a good first step and they are saying the right things. They're talking about forming a national assembly within eight months. They're talking about within two years transitioning to elected government. So they're saying the right things. They seem -- this National Transitional Council seems to have segued into sort of an interim government in waiting.

  • 11:29:04

    KITFIELDSo I'm a glass-half-full kinda guy here but given that nothing could be worse than Gadhafi, however we should not take our eye off Libya 'cause it's in for a very sort of rocky period.

  • 11:29:14

    KAYOkay. It's going to be interesting to see whether the new prime minister coming from Tripoli can kind of make that bridge to Benghazi, which of course is where the National Transitional Council was based. And a lot of people in Libya very conscious that it was Benghazi that was calling the shots for quite a long time there during the rebellion. Let's go to the phones now to Don in Louisville, Ky. Don, you've joined "The Diane Rehm Show."

  • 11:29:39

    DONThank you. I was wanting to speak to a few points and try to link them altogether. One of the things that I was hearing in talking about the Greek problem was have they not done anything to try to eliminate say like middle management in government to try to actually decrease their debt that they have? Along with that, I mean, at the unsustainable, you know, interest rate of like, what, 25 percent, how are they supposed to try to get that to become manageable if they don't do something to, you know, get rid of people in government.

  • 11:30:20

    DONAnd also one of the things that I was looking at is that if you look at this country here in the United States, isn't that part of the major problem that we're having now with our deficits running at 42 percent? And isn't that what part of the problem is hindering this country from actually being able to help other countries? And then along with that our decreasing role that we're taking in the world now because of what's happening with China. What's that going to do with our capabilities to protect ourselves?

  • 11:30:48

    KAYOkay.

  • 11:30:49

    DONI mean, this is a major issue that's going on and it's -- I mean, if we don't do something that just -- I mean, in all of these different countries, where we going to go?

  • 11:30:59

    KAYOkay.

  • 11:31:00

    DONWhat's going to happen...

  • 11:31:01

    KAYDon, I'm going to get back to your original question there about Greece and how much of the cuts that have taken place have taken place within the public sector, Robin. 'Cause that seems to be what Don is getting at, that Greece has got to make cuts to its public sector if it's going to try and address its deficit issues.

  • 11:31:19

    HARDINGWell, the answer there is that Greece has been trying to cut public sector jobs. It's just the trouble is that a large number of Greeks are middle managers in the public sector and there isn't really very much else for them to go and do once they're laid off from the public sector. And so they have vigorously resisted these cuts. And a big part of the problem with these successive bailouts of Greece is that Greece has struggled to implement agreements it has made to actually cut back the size of its public sector.

  • 11:31:42

    HARDINGTo your interest rate point, Don, the market rates are very high and that's why this bailout is needed because the bailout comes after much lower rates of interest which Greece can actually afford to pay.

  • 11:31:52

    KAYBut how can you, James, square the circle -- or rather how can Greece square the circle -- and to some extent America is facing the same situation of cutting public sector jobs and salaries and growing the economy in order to pay down the deficit?

  • 11:32:06

    KITFIELDYeah, I mean, that's the thing. If I knew that I wouldn't be sitting here. I'd be in -- I'd be the head of a hedge fund.

  • 11:32:10

    KAYOh, yes, you would. You'd still be with us.

  • 11:32:12

    KITFIELDYou know, it is an argument about, you know, when you turn on the gas and when you put on the brakes and when you address your deficit and when you try to stimulate a very stagnant economy. And that's the debate we're seeing between the Republicans and the Obama White House. On the bigger issue -- I mean, your listener raises an interesting point which is that America is definitely going to be in a period of some retrenchment in the next decade. We can -- it's not hard to see we're going to -- we're cutting defense as it is. It is open to whether the sequestration thing happens and we cut it much more.

  • 11:32:43

    KITFIELDBut it's going to be a challenge for us to play the role -- the leadership role -- we saw it this week at the G20 -- the kind of leadership role the world's kind of used to us playing because we don't have the money to throw around. We're going to be in a situation where we're drawing down on our military forces. And China has got lots of money but it's also making its neighbors very nervous with a lot of its activities.

  • 11:33:07

    KITFIELDSo this is strategically going to be a very difficult period to watch. You know, I think that Courtney's actually right. This shift of wealth and power that is historically unprecedented, generally from the developed West to the developing Asia with China at its center has been accelerated dramatically by this economic crisis the world's gone through. The developing countries have done very well in a period when the developed countries are really, really reeling.

  • 11:33:34

    KAYAnd many Americans of course saying that that is actually the shift that needs to take place, that America should not be spending resources and valuable lives nation building abroad, but should be focusing of course on building up infrastructure here in the United States.

  • 11:33:49

    KITFIELDWe have no choice.

  • 11:33:50

    KAYElizabeth in Battleground, Ind. Elizabeth, welcome to "The Diane Rehm Show."

  • 11:33:55

    ELIZABETHHi. I'm pretty scared talking on the radio.

  • 11:33:58

    KAYOh, don't be scared. We're very friendly.

  • 11:34:01

    ELIZABETHYou know, I -- there's many things I would like to say about Greece. I've become very tired of hearing such a sort of partial truth told. I think what really finally frustrated me to the point to phone was this throwing out the statement they all retire at 50, they live a lavish lifestyle. And I think that making these -- I mean, there may be some people in Greece that retire at 50. Certainly, all public servants do not. It's like saying, you know, some military people here retire at 50. Does that mean all people that work for the government here retire at 50?

  • 11:34:40

    ELIZABETHI think it's really -- it's not a good thing to just throw out these statements that are such -- may be a very small piece of the truth. Certainly there is many problems there. There's corruption that goes through there. Only 40 percent of the population is paying income tax. But those people are paying a very high tax and now they're paying more tax. Are they collecting the tax from the rest? No. Is there any program that plans to collect it? I mean, tax collection is one of the biggest problems, particularly from the wealthy, but also from an underground section of the economy. But that has -- and that has been allowed to go because actually wages are very low compared to here. What a school teacher makes in Greece, what a university professor makes in Greece.

  • 11:35:30

    ELIZABETHThere is some things that are, you know, odd. Maybe a truck driver makes twice as much as a university professor in some cases. There are corrupt unions and there are not. But it's been so oversimplified and so thrown out that, well they're just all living high. They live beyond their means. It's just not true.

  • 11:35:48

    KAYOkay, Elizabeth. We're going to try and unpack some of that for you, because you raise a good point that we shouldn't be throwing out generalizations. Let's talk a little bit about the specifics. Robin, what can you fill us in on the specifics of how Greeks do live?

  • 11:36:03

    HARDINGWell, I think it is true to say that Greece is a society where there are a number of insiders, people who are, you know, inside certain professions or inside the government who are able to live very comfortably. And equally there are outsiders who haven't been able to get into those sort of closed circles. And they, as you say, are really -- you know, they were not prosperous before this crisis and they're even less prosperous now. So I think you do raise a very fair and profound point.

  • 11:36:32

    HARDINGIf I were a Greek and I were given the choice to vote in this referendum, do I want this bailout or not, I would think extremely carefully. Because taking the bailout means yes, after ten years of paying we can aspire to be a sort of Northern European nation and change ourselves. But it requires that ten years of paying so do I not want to exit the euro, go back to the drachma? We can devalue and we can get the economy back on its level keel a lot faster. And we may not have the long run prosperity that staying in the euro generates. But do we want to take -- you know, it's not a short run pain. It's medium term pain to get there.

  • 11:37:08

    HARDINGSo it’s a more profound question than I think people are sort of casually saying when they say, yes, the Greeks are being ungrateful in talking about a referendum on this bailout.

  • 11:37:17

    KAYRobin Harding, U.S. economics editor for The Financial Times. We're going to go back to this question 'cause I think, Courtney, you can fill us in too on some of these details. Courtney Kube is here, James Kitfield is here. We'll have more of our international News Roundup. We're also going to get to Syria and to France. Do stay with us. We're going to take a quick break.

  • 11:40:02

    KAYWelcome back, I'm Katty Kay of the BBC sitting in for Diane Rehm. You have joined the international hour of our Friday News Roundup and just before the break Elizabeth called with a very interesting question, asking us to clarify effectively what the situation is in Greece and what standards of living there are, what tax rates are, how people are actually managing there. And she was saying that we were casting aspersions on the Greeks having a lavish lifestyle, Courtney, give us a bit more of the numbers.

  • 11:40:28

    KUBEWell Elizabeth was right about one thing and that's that when Prime Minister Papandreou took office a couple of years ago he realized that the previous administration had been cooking the books. So the Greek people, the idea that this was all something that came of them just acting irresponsibly it probably is not fair because you could argue that some of the Greek people just didn't know how much debt the government was in at that time.

  • 11:40:54

    KUBESo what I meant by a lavish lifestyle -- and I think that what's in a lot of the commentary in the media right now about that is that Greek people, Greek citizens who work for the government, they enjoy tremendous benefits. And when you're looking at it from an outside perspective especially if you're someone like Germany or China who would potentially be spending billions of dollars to help Greece not default on their debts, these people have a lot more benefits.

  • 11:41:22

    KUBEThey have pensions. They have, you know higher salaries than what you would see in other nations so that's where some of that commentary would come from, some of that analysis. It might not be fair to say that they all live lavish lifestyles. That's not true but they do, people who work for the government, do enjoy or have up until now, enjoyed tremendous benefits.

  • 11:41:40

    KAYI was reading Michael Lewis' book "Boomerang." I don't know if any of you have read it. It's a great kind of tour of European countries and how they all responded to the debt crisis. But he has some very interesting, and perhaps Elizabeth it would be interesting for you to look at this and very interesting numbers on Greece and particularly on the retirement age, that there is a retirement age of 50 in Greece for people who have jobs that are deemed to be arduous.

  • 11:42:05

    KAYBut he points out that people like hairdressers for example have managed to say that their jobs, to classify their jobs as arduous in order to get that retirement age of 50. So, you know clearly there was a certain amount of people shafting perhaps their financial responsibilities and that is coming back to hurt the country right now.

  • 11:42:24

    KAYLet's get to Syria because I want to make sure that we have time to cover this. James Kitfield, this week on Wednesday Syria signed an agreement with the Arab League that seemed to auger a better period in the country's history. They agreed to open the country up to foreign journalists. They agreed to negotiate with the opposition, to take the tanks off the street, that kind of thing.

  • 11:42:42

    KAYThe very next day we had reports from Homs that people are being killed, I think a couple of dozen people have been killed by the Syrian government. Which is the Assad that we should believe, the one that signs the agreement with the Arab League or the one that the next day sends the troops into the streets of Homs?

  • 11:42:56

    KITFIELDBelieve the Assad as he does and not as he says because he has constantly said I'm ready to, you know, he convinced Secretary of State Hillary Clinton and many Europeans including the Turkish Prime Minister Erdogan that he was a reformer and he kept promising these reforms that never appeared. And when the Arab Spring you know, washed up to his doorstep, has been very brutal consistently killing as many the U.N. thinks as 3,000 protesters and he seems not to have changed.

  • 11:43:25

    KITFIELDSo you know there was a brief moment of hope when the Arab League went to Damascus and got this agreement and you know, if he was really wanting to chance to get out of this situation he's in and really reform that was an opportunity to do that. It doesn't seem like he's doing that. I think this will solidify the view amongst the opposition that this guy has passed the point of no return. We can't trust him, his hands are too bloody at this point and he cannot be part of any solution so I'm not hopeful that this is a turning point. I wish it was.

  • 11:43:57

    KAYRobin, it is Friday, which means that, of course, it's the day that people go out to prayer and the protesters have traditionally protested after the prayers. What happened today in Syria?

  • 11:44:06

    HARDINGWell, so it appears that there were further protests and that the government sent the military into the cities again and I don't know much more beyond what's been reported.

  • 11:44:17

    KAYBut it hasn't been the situation that we've seen, quiet in Syria today, Courtney?

  • 11:44:20

    KUBEAbsolutely, there were more protests, more attacks in and around Damascus and Latakia so it's more of the same. What's interesting is as long as this violence continues and in Assad's agreement to accept the Arab League, it's just another stall tactic, that you can't argue that there's anything here that's legitimate and him saying that he's going to agree...

  • 11:44:41

    KAYBut the opposition is taking it as that?

  • 11:44:42

    KUBEAbsolutely. And the problem, there's one continuing problem that's sort of the undercurrent throughout this entire violence, this entire Arab Spring in Syria and that's this opposition, which while continuing to grow. It still is not organized. There's not -- there's not an opposition that Assad could really talk to right now. If this Arab League agreement really were to come to fruition there's no real organized opposition for him to meet with.

  • 11:45:07

    KUBESo I mean, at this point, him agreeing to this Arab League is just another one of his stall tactics.

  • 11:45:14

    KAYRobin, it's been nearly eight months now that these protests have been taking place and there doesn't seem to be any sign that they are going to pull back. I mean, at great risk to themselves, they're still turning out on the streets. They must now all be known by the security forces because presumably they've been filmed and photographed by the Assad regime. What's the situation with the international community? Where are we standing there?

  • 11:45:35

    HARDINGWell, the international community escalates its rhetoric, but the trouble is it doesn't really have any good options. If this was Libyan, there is no interventionist option. The Arab League, that would not welcome intervention and militarily I understand it would be difficult to do. Sanctions have been applied and they escalate the sanctions and maybe the next step is to do a bit more of that and to try and persuade some of Syria's other neighbors such as Turkey to implement more effective sanctions as well. But unlike in Libya, there really isn't any obvious option for the international community to effectively intervene.

  • 11:46:13

    KITFIELDI agree. I don't see a military intervention at all in the cards and NATO's not interested. The United States is not interested. The Arab League is not interested and surely Russia and China are not interested in giving NATO another green light for a sort of intervention like that because they thought that they went well beyond their writ that they gave them in the spring in Libya.

  • 11:46:29

    KITFIELDHowever, I mean, I do think, you know, Turkey is ready to -- Turkey's been very -- feels very betrayed really by Assad. I think Turkey is ready to get on with tougher sanctions. I think the Europeans have talked about really an oil embargo. I think that's going to be the next step because there aren't any other good steps. But you know, increasingly, Assad has no friends in the world, although the Chinese and the Russians are an impediment to really, really tough sanctions because they have a traditional interest in that country, especially the Russians.

  • 11:46:59

    KITFIELDSo this thing lurches on and I don't see him going any time in the immediate future, but it gets harder and harder for me to imagine how this guy gets back to any kind of normal as the leader of that country.

  • 11:47:11

    KAYCourtney, where do you think Assad goes and what do you think the time frame is?

  • 11:47:15

    KUBEI don't think it's going to happen anytime soon. The one -- there are two good silver linings to this story so far and that's that the sanctions that are already in place are having an effect on the economy and that is putting stress on Assad and his government. The other is that the Arab League is the one who came forward, this agreement this week and so he's facing further Arab isolation as James was saying.

  • 11:47:35

    KUBETurkey, who was once a staunch ally of Assad, is now on the side of this opposition and is actively against the Assad regime. So I don't see anything happening soon with Assad certainly stepping down or being overthrown, but his days are numbered to some extent.

  • 11:47:54

    KAYOkay. Let's go back to the phones, to Aaron in Washington, D.C. Aaron, you've joined "The Diane Rehm Show." You have a question for the panel?

  • 11:48:01

    AARONHi, thanks for taking my call.

  • 11:48:02

    KAYYou're very welcome.

  • 11:48:04

    AARONI'm calling because you guys have kind of said -- danced around it a little bit, but one of my biggest problems with the whole -- the debt crisis is that whenever I hear leverage or over-leverage or -- in regards to debt, I get this image of this money that over the last couple of decades has been conjured really out of thin air and only exists in -- on the books. And debt, in general, you know, when we look at it in our checkbooks, it's in red. And I feel like what they have done is they have simply said, well, of course, we'll pay our debt and they just change it to a black in their, you know, financier's checkbook. And what we're doing now is we're paying on an over-leveraging of debt.

  • 11:48:54

    AARONWe're paying money that doesn't actually exist except in the checkbooks of these people with billions and billions of dollars. And I was just wondering, is it even possible now to go back to, I guess what you would call like the original collateral, on all these debts that the world has accrued and really have a real-world idea of what we owe. And I feel like really when it gets right down to it, the Greek protesters and the Wall Street protesters what we're really upset about, even if we don't know it, is the fact that we're paying as taxpayers debt that these millionaires and billionaires have accrued that doesn't exist to us.

  • 11:49:33

    AARONIt only exists because they've over-leveraged it to pay for things that. It's like inflation, saying that, of course, it will be worth this in ten years, but the problem is we've reached a point where we didn't grow as fast as we could have, which originally wouldn't have been a problem if we were still looking at real-world debt, but we aren't anymore. We're looking at this over-leveraged bubble of debt...

  • 11:49:55

    KAYOkay.

  • 11:49:55

    AARON...and instead of the government saying, we're going to pay down, you know, the original costs, we're now trying to keep all these people afloat and that's where risk comes from.

  • 11:50:08

    KAYOkay, Aaron. I'm going to jump in there because we've got a few nodding heads here in the studio. Robin?

  • 11:50:15

    HARDINGI don't know about a nodding head, but I'll try and tackle that. So you know, essentially what happened in the bubble is house prices kept going up so people took on more debt which let house prices go up more so people took on more debt. And then the house prices fell and there was a lot more debt left over than house prices were worth.

  • 11:50:32

    HARDINGAnd so we've seen the Federal Reserve doing stimulus with very large numbers attached to it and we've seen government stimulus with very large numbers attached to it trying to resolve this situation. But I don't think it's fair to say that it's not real. What we've seen happen is that basically governments have stepped in and said, right, well, the private sector can't borrow any more so we're going to have to take over that role of providing demand in the economy.

  • 11:50:56

    HARDINGBut the reason why the U.S. is not recovering strongly is because households are trying to pay down their debts. They haven't magic-ed them away. They're trying to pay them down. And because they're trying to pay them down, they can't consume and so I don't think it's fair to say this is all somehow magic or funny money. We're feeling the real pain from...

  • 11:51:15

    KAYFrom having over-borrowed?

  • 11:51:15

    HARDINGYeah, precisely, and that's why you know there's no quick way out of this. The only quick way out of it would be to allow inflation to get out of control and the Federal Reserve has made it very clear that's not happening and there's absolutely no evidence that it's happening.

  • 11:51:25

    KAYI'm Katty Kay, you're listening to "The Diane Rehm Show". And if you'd like to join us, do call 1-800-433-8850 or send us an email to drshow@wamu.org A couple of other stories that I want to get to. James, let's start with UNESCO giving the Palestinians full membership this week. Why did they decide to do it and what was the reaction?

  • 11:51:46

    KITFIELDWell, we saw this coming last month at the General Assembly where the Palestinians applied for full membership both in the Security Council and in these subsidiary U.N. arms like UNESCO. UNESCO did it because basically the Palestinian cause has a very sympathetic ear in the United Nations. A lot of, especially developing countries, side with the Palestinians, feel like they're an occupied people and they have a right to self determination. So we're going to see more of this.

  • 11:52:11

    KITFIELDIt's also why the U.S. along with Israel fought this in September because it opens up a real can of worms now, because now the U.S. and Israel have suspended their payments to UNESCO, which is going to cause UNESCO problems. It's going to cause Israel's supporters in Congress to talk about suspending payments to the U.N. in general, as long as this, you know, they're admitting the Palestinians into these various subsidiary groups as members.

  • 11:52:36

    KITFIELDIt's going to -- you know, the Israelis, as they are want to do, slammed the Palestinians for this move by announcing 2,000 more constructions of housing in the occupied territories in East Jerusalem. They cut the -- handing over the tax levies that they give the Palestinians, custom levies, which is going to -- may very quickly bring the Palestinian Authority to a crisis point in terms of its finances which are not good anyway.

  • 11:53:00

    KITFIELDSo you know, the Palestinians are at the end of their tether and they're doing things to try to sort of win world opinion, which I am sympathetic to. But they're doing it in a way that makes it very hard for the United States to actually help them. You know, eventually we're going to have to find some way to get both these sides back to the negotiating table. Each of these steps is really a step away from the negotiating table and I find that.

  • 11:53:23

    KITFIELDSo we're in not even a stalemate, the whole peace process is backsliding and, you know, every time it has backslid like this in the past, eventually violence occurs. And we saw -- we now saw two boats approaching Gaza trying to break that blockade. That led to violence the last time that happened. We'll keep an eye on that, but the situation there is either moving forward or it's moving backwards and we've been through an extended period in the last year and a half of moving backwards.

  • 11:53:48

    KAYOkay, Courtney. I'll give you another story that I'd like to get to just before we end the program. France, the office of the weekly publication Charlie Hebdo was fire-bombed in France this week, why?

  • 11:54:00

    KUBEWell, they had just completed this spoof issue that was guest edited by the Prophet Mohammad and it included images of him, cartoons of him. You know, of course, this was also the same publication that in 2006 republished the cartoons that were in a Danish newspaper that caused tremendous unrest throughout the Middle East. It's a publication that continues to push the limits between satire and what they can get away with under freedom of expression, freedom of the press.

  • 11:54:34

    KUBEAnd the problem is in France, it's the largest Muslim population in Europe and there was an outcry. There was...

  • 11:54:43

    KAYNo one's claimed responsibility for the fire-bombing, is that right?

  • 11:54:44

    KUBENot yet. And there was one of the editors even said something, well, this could have just been some drunk people. We don't know. But the police think it was a Molotov cocktail and there have been threats against the people who work in the office so it appears to be targeted. It appears to be because of this publication that was about to come out and has since now come out on another organization, another newspaper printed some of the cartoons along with an explanation for why they were doing it.

  • 11:55:07

    KUBEYou know as I said it's a publication that's known for pushing the limits and the only difference this time was the target and that was Mohammad, which, of course, in Islam, there's not allowed to be representations of the Prophet Mohammad. It's a tremendous insult to Islam. But the fact is this is a satirical publication and they have the right to express, to freedom of expression.

  • 11:55:30

    KAYJames, are we still in the situation, though, where something like this with Charlie Hebdo could cause knock-on effects as we saw with the Danish cartoons? I mean, are the tensions still at that level?

  • 11:55:41

    KITFIELDYou know, I think the tensions are less now, but the tensions are -- I mean, people died because of that earlier...

  • 11:55:47

    KAYRight.

  • 11:55:47

    KITFIELD...all over the world. I mean, that was very, very objectionable to, you know, a majority of Muslims to see their religious leader depicted in any way, but certainly not in sort of a satirical, laughable fashion. You know, I heard a comment from a French Muslim who I think got it exactly right, which is that just because you can do this thing because you have a First Amendment right or you have a right to free expression in Western societies doesn't mean you should do them. So I think I would hope we get to a place where we condemn this constant provocation. Why these provocations to a vast minority group inside of France? I think it's irresponsible.

  • 11:56:26

    KAYParticularly when you already have tensions with those...

  • 11:56:29

    KITFIELDRight, and people can die. I think it's irresponsible, but, you know, I would defend to the last straw to do it. I just hope we get to a place where the people who do do this get condemned by society for constantly provoking crises that we don't need right now.

  • 11:56:45

    KAYOkay. Yeah, we certainly don't need another crisis after all that we've been talking about this week, one crisis we don't need with the fire-bombing of the magazine, Charlie Hebdo. James Kitfield, senior correspondent with the National Journal, Courtney Kube, national security producer for NBC News and Robin Harding, U.S. economics editor, The Financial Times, thank you all so much for joining me. It's been an incredibly busy week yet another busy week on the international scene I suspect with everything that's happening in Greece and Europe. We're going to fill another hour easily next week as well. Thank you all so much for joining me.

  • 11:57:14

    KUBEThank you.

  • 11:57:14

    KITFIELDThank you.

  • 11:57:14

    HARDINGThank you.

  • 11:57:14

    KAYI'm Katty Kay of the BBC. I've been sitting in for Diane Rehm. Diane is up in Maine, she's on a station visit. She will be back on Monday. Thank you so much for listening all of you, do have a great weekend.

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