SUSIE GHARIB: Tomorrow, German Chancellor Angela Merkel and French President Nicolas Sarkozy hold an emergency meeting on Europe’s deepening debt crisis. One topic unlikely to be on the agenda is the creation of so- called “euro-bonds.” Even though some experts believe they could be a solution to Europe’s troubles, Germany is against the bonds as a solution.
Tonight, Suzanne Pratt kicks off our special series “How to Fix the Economy” with a look at Europe’s debt crisis.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For some Americans, a tour of the United Nations in New York City might be the only European exposure they’ll ever get. But just because many U.S. citizens don’t travel abroad doesn’t mean they shouldn’t care about our neighbors across the pond, particularly their economy. After all, Europe is America’s fourth-largest trading partner.
Economist Bob Brusca says if Europe tips into recession because of its debt crisis, the fragile American economy could be next.
ROBERT BRUSCA, CHIEF ECONOMIST, FACT & OPINION ECONOMICS: We really don’t have a lot of cylinders this economy is firing on, and if we were to lose exports in a big way to some kind of a European recession and its knock-on effects, that could be very serious for the U.S. economy.
PRATT: So, beyond paying close attention to European headlines, what can be done to help mitigate Europe’s troubles? Economist Constance Hunter says she would start by dumping Greece from the Eurozone.
HUNTER: They have to let Greece go. They have to let it leave the euro. They have to let it restructure, which is basically a nice way of saying default.
PRATT: Hunter explains that, ideologically, Greece is not on the same page as the rest of Europe, especially core countries like France and Germany.
HUNTER: The center of Europe has a perception of what it means to be European. And that has fiscal policy implications, it has monetary policy implications, and it has working age and retirement implications, none of which Greece really fits.
PRATT: Other experts have been calling for the issuance of joint Eurozone bonds. While some view the common bonds as just another Band-Aid, others say it could solve the crisis by allowing all member states to borrow at more affordable rates.
And such a move could provide a blueprint for European government consolidation.
BRUSCA: They think they can raise money this way, and in some way unify the fiscal situation, because a lot of people think, looking at them, look, you can’t just have a monetary union without a fiscal union. We can see the big hole this is. You’re going to have to fix this up.
PRATT: Don’t expect that fix to come tomorrow when France’s Sarkozy and Germany’s Merkel are scheduled to meet. Experts say, just as it took time to create the European mess, it will take time to repair it.
Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
GHARIB: Tomorrow, as we continue our series “How to Fix the Economy,” we turn our focus to the housing market and the frustrations of trying to sell when there’s a glut of foreclosures on the market.