SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Progress came in fits and starts at
a European summit in Brussels today and that led to early losses and a late
comeback here on Wall Street. European leaders met to work on three key
items: an agreement not to overspend and a permanent bailout fund to deal
with the spreading financial crisis. But you know Tom, while they reached
a deal on that bail out fund, not everyone would sign off on the measure,
but would instill stronger fiscal discipline.
TOM HUDSON, NIGHTLY BUSINESS REPORT ANCHOR: Still not a unanimous agreement here Susie and while there
was some movement at that European summit, we still don`t have a deal
between Greece and its lenders over the efforts to cut the amount that
Greece owes them. And that really hurt efforts today to send a more
optimistic message to investors that Europe is getting on top of its debt
crisis. So that lead to the blue chips losing 6 and 3/4 points at the bell
after dropping more than 100 points in the first hour of trading. The
NASDAQ at the close was down 4, the S&P 500 down 3 and change.
GHARIB: Now at the core of the European negotiations is the impact
that serious budget cutting could have on the individual nations in the
Eurozone. Sylvia Hall takes a closer look at the issues facing European
SYLVIA HALL, NIGHTLY BUSINESS REPORT CORRESPONDENT: In a meeting
room in Brussels, almost all of Europe`s leaders agreed not to spend
outside their means. The UK and the Czech Republic were the holdouts. More
than 1,000 miles away, debt-ridden Greece hangs in the balance. The
country`s unemployment rate stands at almost 20 percent and it`s facing a
14.5 billion euro bond payment due in March. Germany has the finances to
help, but it`s demanding painful budget cuts in return. Political economist
Matthias Matthijs says Germany may be holding a hard, dangerous line.
MATTHIAS MATTHIJS, ASST. PROF., AMERICAN & JOHNS HOPKINS UNIVS.: It
makes the imbalances in the European economy even worse, rather than
solving them. And I think it`s the imbalances of creditors and debtors in
Europe that was at the heart of this crisis, not the fiscal sins of all
HALL: He says the focus on budget cutting — a policy called
austerity — in Europe has the potential to make matters worse, putting
people out of work and distracting from pro-growth measures.
MATTHIJS: If you can grow an economy, then we can bring down the
debt- to-GDP ratio also and I think that`s a big misunderstanding. America
never paid back the big World War II debt. They grew out of it. That seems
to be a much more attractive solution to the problem.
HALL: But Fred Bergsten of the Peterson Institute says the
sustainability of the Eurozone is riding on its members` abilities to get
their fiscal houses in order.
FRED BERGSTEN, DIR., PETERSON INST. FOR INTL. ECONOMICS: The long-
term issues are critically important. Europe created an economic and
monetary union that was complete on the monetary side, but inadequate on
the economic side and the whole experiment with the euro will collapse
unless they get that reconciled.
HALL: Bergsten says austerity is important, but agrees Europe`s
leaders should also look hard for ways to get their economies moving again.
Bergsten says right now Europe is not out of the woods, but he thinks the
EU and the euro will emerge stronger than ever.
BERGSTEN: In the current crisis, they have never gotten ahead of it in
the sense of fully assuaging market anxieties, but at each stage when there
could have been a collapse, they`ve come up with the necessary money, the
necessary programs and new institutional changes which are now underway
which will also in the process lead them to come out stronger.
HALL: Austerity measures are already having a real impact. Just
today, Belgian transportation workers began a 24-hour strike in protest of
budget cuts in Europe. Sylvia Hall, NIGHTLY BUSINESS REPORT, Washington.