Tom Keene Talks with Niall Ferguson

These stress tests in Europe, what's the historical precedent of trying to get transparency? Can they work?
Well, of course, they worked—or at least seemed to work—in the U.S. There's a completely different culture in European banking, and it's the opposite of mark to market. The culture in German banks for decades, even centuries, has been to lend long to some industrial concern, and you don't really look too closely at how that thing does over the years.

During my recent trip to London, many people there were talking about Germany. Whither Germany, given the financial crisis?
There are two big issues about Germany. One is obviously whether the Germans are really getting it about the role that they have to play in moving Europe out of this near-depression. The Germans just want to run surpluses—and if everybody tries to run a surplus, we end up in a depression. The other part of the story is frankly the hypocrisy of the Germans on the subject of the Greek crisis. The reality is that it was the German and French banks that got bailed out because they were the principal holders of all that dodgy Greek debt.

How will the economics of austerity play in Britain?
The public sector unions are going to go completely ape when the cuts are announced. There's going to be job cuts, pension cuts, pay cuts across the board.

    Before it's here, it's on the Bloomberg Terminal.