The Papandreou Offensive

On the day Prime Minister George Papandreou met with Secretary of State Hillary Clinton, House Speaker Nancy Pelosi, and President Obama, he found time to talk with Charlie Rose. Below are edited excerpts of an interview first televised on Mar. 9.

Have speculators made your job more difficult?
[It's like] taking out insurance on your neighbor's house and then if it burns down, you get the money...but betting on failure—in this case the poor economy of Greece—makes it difficult to get normal loans so the economy can survive.

What would happen if Greece were to be another Lehman Brothers?
First of all, Greece won't go down because we're talking about a country that is capable of making change...and Europe will not allow the destabilization of the 27-country euro zone. But if there was no action, then markets would start becoming jittery about other countries, and not only Spain and Portugal. It could be other countries in the European Union.

What impact might it have on the United States?
I don't want to be a doomsayer, and I don't want to create any problems, but this would create imbalances in the exchange rate between the euro and the dollar. I'm not an expert on these issues, but I would think what would happen is the fluctuations...could create a further recession around the world.

Just to make sure I understand this, the message you got from Chancellor Merkel and President Sarkozy and others is that if it's necessary as a last resort for the European Union to step in, they're prepared to do that. That's the guarantee you got?
That's the guarantee we have, not only from them but from the 27 members. If push comes to shove, there will be solidarity from the European Union.

And what about the International Monetary Fund?
We never ruled out the International Monetary Fund. We hope that we won't need any of that kind of help, that the markets will respond positively to our changes. We have said we don't think this will be necessary, but we will keep that option open if we see that things don't go the way we hope they go.

Did American financial institutions help the Greek government cover up the level of its debt?
I wouldn't use the word cover up. These financial instruments, which some people called innovation, were exported from the U.S. to around the world, not only to Greece. These were legitimate tools at the time. Now these legitimate tools have created problems.

You have said that Greece should not be a crisis but a case study.
That's right. I would like to see Greece as a case study, an opportunity for Europe to strengthen its coordination of fiscal policy.

So this has led to discussions about a European Monetary Fund that would be there as an emergency measure in the future.
Yes, I would say [a European Monetary Fund is] on the table.

Larger questions are being raised about the EU by the crisis—namely, that when you stitch together disparate economies with one common currency, it doesn't work. Is the idea of one Europe dead?
The fact that we're going through a crisis is an opportunity for Europe to be more coordinated and more integrated. We're actually talking about a European Monetary Fund or euro bonds, about guarantees for countries, about economic governance in the European Union. That shows the strength of Europe.

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