 Hello and welcome to NewsClick. Today we have with us Prof. Jyothi Ghosh and will discuss the latest election results in France and Greece and the possible impact of the European Monetary Union. Jyothi, we have discussed Greece a number of times. It is very clear now that what we had discussed earlier has come true. The Greek people have essentially rejected the kind of compact which was put on their governments. The two parties who are the key parties in this compact which was reached, austerity, cuts and so on, have been punished by the electorate irrespective of what happens and we don't know which way the elections next will go. It's very clear that this compact has failed. Greece will not tolerate the kind of policies which have been dictated by the European Union. What do you think is the future for Greece at the moment and for the European Union in general? Well, Greece is actually nearing the end game I think. But it's very strange because this is one of those phases in Europe where it could still go either way. If you remember I had said a year ago that I do not see the Eurozone surviving beyond this year, that is 2012, if the current policies continue. And that's certainly still the case. But the recent politics suggest that there might be a wider attempt to change those policies. So it could still go either way. The trouble is the time is very short. Now what's happening right now is that there is a concerted attempt to try and bully the Greek population. You better vote responsible parties in on the 17th of June. And to some extent that's working because you know this whole fear psychosis which is being created, the Conservative Party is rising in the polls slightly. It still won't be good enough because there is a fundamental and very deep fury at the kind of austerity that they're being made to undergo. 20% unemployment, 50% amongst the youth. And I don't see how this can really continue for long. And it's not just the open unemployment. You know, we forget that a very large proportion of Greek people are self-employed and their incomes have collapsed. So they're still employed. But so there are people running small restaurants, hotels, etc. who have nobody. No income. So we are talking about a very savage reduction in real incomes, worse than the Great Depression for sure, for Greece, because there's been something like a 30% decline in real incomes in the last five years, which is worse than the European average during the Great Depression. So it's really very, very major. We're not likely to see that this is going to generate any kind of positive response in terms of the euro. However, it really now depends on the rest of Europe. It's no longer what happens in Greece. Now, I think it really depends on the rest of Europe. Because if you look at it, what have the Greek people said? I mean, they all say, yes, we want to stay in the euro zone. But we don't think the euro zone has to have this kind of adjustment mechanism. We believe that it has to be a fiscal union which allows for a much more steady and equitable response, which basically means you must increase fiscal transfers and you must have a growth pact rather than enforce this austerity. Now, so far, Germany has essentially been saying no. Everybody has to take the austerity medicine and push people down into a self-fulfilling destructive kind of a morass. Increasingly, the politics across the rest of Europe is saying that this doesn't work. And that's, I think, very interesting. It's not just the French election, which has all, with the small margin indicated that the people are against this policy. It is also the recent election in Germany, North, Ryan Westphalia, which completely demolished the ruling party and was a vote, it was made into a referendum on austerity in Germany. So, the people of Germany have also spoken in a sense. But even the German people will not accept the bailout of the rest of the Europe as they see it. So, therefore, even if they voted for austerity, large transfers across Europe, which means transfers to Greece or Spain, is going to also have a reaction. Well, of course, but I think people have to be asked this question. Do you want the Euro? Who benefited from the Euro? We've talked about this before. The major beneficiary of the Eurozone was Germany. So, if you want to keep the Eurozone, you have to pay some thing. You have to do still some measures. Actually, if the Eurozone breaks up, it's the German banks who hold really the Spanish and the Greek debts in large areas. It's German, French, Dutch, Austrian banks, which are all being banned. But it's not just the banks. I mean, Germany has benefited from a Euro which is much lower than a Deutsche Mark would have been. So, it has kept the benefits of its competitiveness. It didn't have an exchange rate appreciation, which it would have had if it had been on its own. So, Germany is a huge beneficiary. The reason it has export surpluses is because of the Eurozone. And a lot of its surpluses are within the Eurozone. If you actually have a break up and if the peripheral countries come out, of course, they have major devaluations and immediately, Germany loses its competitive advantage. If you look at the German politics, the kind of transfers that is required to keep the Eurozone together in terms of Greece, Spain, and possibly Italy, it doesn't look like the German polity is willing to accept those kind of transfers. That's the long-term problem from Eurozone as well. A lot of these numbers are exaggerated. You know how it's a bit like in India when people say that, oh, you know, we're going to have an employment guarantee and then you get ridiculous numbers coming out by the naysayers who say, oh, it's going to cost 10% of GDP. Same with the food security bill. In fact, the Greek problem could have been solved three years ago with one-tenth of the resources that would be required today. It's all a question of how the markets respond. So, if in fact Europe had decided to provide some kind of a bailout of a transfer to Greece, three years down the line, it would have been a much smaller amount and the problem could have been resolved in a more significant way. Now, it's just got too far. It's gone too far and of course each attempt at austerity makes the problem worse. It makes all the ratios worse. It makes it more and more difficult for the Greek government to be able to repay. So, it's now gone beyond the tipping point. Greece, I do not think can anymore stay in the Eurozone and be competitive without very, very enormous transfers which are politically unfeasible. So, it looks like Greece is leaving. But Greece leaving is not the end of the story and they know that. But no, Greece leaving could actually have a cascading effect. Absolutely. So, it's not just Greece leaving. It would mean that the Spain then goes over next to the tipping point and then Eurozone really becomes not possible to hold together. Well, certainly, once you give a signal that you will allow one country to exit, the Grexit, as it's being called, then Portugal, Ireland, very clearly next in line, Spain waiting in the wings. Which is the biggie? Italy. No, we're talking about very, very large countries actually. Spain and Italy both come into the same situation and Portugal and Greece today is. Then, obviously, the Eurozone future is really very limited. So, effectively, it's really a question of Greece becoming the signal for Spain and Italy also to move. Exactly. And so, that's why I'm saying that now it's a question of who blinks first. Because it's now that it has come to this and it is, this is being realized in every capital in Europe. That this is just the beginning. It's the finger in the dike. You know, if you remove it, that all hell is going to break loose. I think this people are aware of. So, now the question is who's going to blink first. I still think it's open. I don't think we can completely predict it. Because, you know, you're already seeing shifts. Now, there's an election due in the Netherlands. Very likely, you're going to get a similar result to Greece. Which is to say that the pro austerity, pro fiscal rectitude parties are going to get bashed. You're going to get what are known as extremes. It's very likely that the socialist party, which is so far proposed, are the sensible policies, will emerge on top. If it does, then you may well have the beginnings of a broader sort of pact across Europe, where you get along in France and different countries, you know, the Netherlands and others pushing Germany into a situation where they are forced to agree. A more Keynesian kind of policies where the state plays much more of an interventionist role. And therefore, the central bank in the European Union, if there is one, also plays a far more interventionist role. In fact, there are relatively simple things to do. You know, they do quantitative easing. The European central bank has put huge amounts of money into the banks. Instead, they should be putting the money into governments. That's all. Simple. It's a very small accounting move, which they haven't done all this time because they claim it will be moral hazard and it's disastrous and so on. Do you think that we have a larger crisis of the neoliberal orthodoxy now emerging in Europe and possibly later on in the United States, which still seems to see a lot of the right wing rhetoric being actually accepted by the people? Yes, definitely. I think there's no question about it that if you like, you know, the glory days of neoliberalism are over. But it's still the case that in the North, when you look at the debate, it's a very reactive debate. The people who are opposed to austerity are opposed. Everybody is saying don't do so many cards, don't close this down, don't reduce spending. They're not saying do the following in the same way. So the positive agenda has not emerged clearly. That's going to take a little bit more of ferment. I think you get much more evidence of positive agenda, let's say certainly in Latin America, but also in some Asian countries, you know, clear moves about how to take something forward. It's very much still a reactive response. That's a very important point that you make. Now the way forward is never done by economists. We do apologies to you, but it's really always movements and what we did not see earlier, which we're seeing now, is emergence of movements which are asking for a certain set of policies. Otherwise the mainstream parties don't seem to move. But in the United States, of course, there is the Occupy movement. But if you really look at it, even now, austerity is a good word and cutting deficit is a good word. While anything which says more deficits, more spending, more welfare is a bad word. That's really the crux of the rather the real prop of the neoliberal economics in the world. Yes. And that, I think, gives us, leads to a bigger difficulty which has to do with the nature of mature democracies. And the United States is a classic example of that, of the takeover of democracy by corporate interests. So that, you know, the mass of ordinary people in the United States are fed by Fox News and, you know, some ghastly periodicals which are telling them this all the time. So they really haven't got even the information that will allow them to think intelligently on this. But it's also a part of the right-wing movement which have now for 30 years sought to capture the political, political heart of the United States in which, of course, there has been a huge amount of funding that has come in. But if you really look at it, the linchpin of all this, ultimately, is the U.S. politically and not so much Europe. So I think the issue really would be for neoliberal economics to suffer a defeat at this level. Europe would be the first step. It's really the United States which has to break. The momentum can come from many different directions. And it's a waning superpower. Yes, there will be lots of last gasps in different parts of the world as it seeks to stretch empire. It may well create another world war by mistake through Iran. I mean, we don't know. All of these are open questions. But I'm not so sure that if the rest of the world is going to wait around for some great thing to happen in the U.S., you know. Do you think the World Bank, the IMF are going to play any role in this or they're going to follow behind? The World Bank and the IMF will continue to try and play the role represented by U.S. interests. But they are less and less relevant. So effectively it's a political situation on the ground which is going to determine what happens in these countries in the future and what you're saying in the rest of the world as well. And also it's a very rapidly changing political situation. It's really changing month to month. So I think that as there is a lot of cause for despair, there's also a lot of source of optimism. Thank you very much. I think we'll also continue to observe the situation month by month and have more of these interactions. Thank you, Jairati. Thank you. It was a pleasure.