Greece Leans Back at Cliff's Edge
PLEITGEN: Welcome back to the program. And here's a question for you: why are these two men smiling? It seems like they have little reason to rejoice at this point. Greek Prime Minister Alexis Tsipras has taken his country as close as it's ever been to default and possibly having to leave the Eurozone. But he and the European Commission president were all laughs and back slaps this morning as Greece offered last-minute proposals to stave off economic disaster. Even the leader of Europe's finance ministers who days ago said the chances for a deal were, quote, "very small," sounded more positive.</s>JEROEN DIJSSELBLOEM, EUROGROUP PRESIDENT: It's a welcome step and we consider it a step in the positive direction so I think it is also an opportunity to get that deal this week. And that's what we will work for.</s>PLEITGEN: Seems like the Greeks might not be so positive. They are withdrawing billions of euros in cash, fearing government constraints. Athens has until the end of the month to repay 1.6 billion euros in loans or default. And many Greeks are making their voices heard.</s>PLEITGEN (voice-over): These are live pictures from outside the parliament in Athens and as you can see, there's a large crowd of protesters there. And as you can hear, it's a very vocal crowd as well. And even if they get to a deal, it's unlikely that it would be more than kicking the can down the road. Greeks want to keep the euro but still despise the crippling austerity the E.U. and IMF have imposed on them.</s>UNIDENTIFIED FEMALE (through translator): Yes to a deal, but not with further measures. No more measures. People are very tired. It's the sixth year of the crisis and it's alive there have been no reforms. There have been a bunch of reforms over the last five years. Every second day, they pass bills through parliament. Enough. We are very, very tired and our future can't continue to be so ominous.</s>PLEITGEN: Ominous is possibly the right word here and my next guest is former U.S. Treasury Secretary Larry Summers. He wrote this weekend that Greece is possibly Europe's failed state in waiting. Mr. Summers joins me now from Harvard.</s>PLEITGEN: Sir, welcome to the program.</s>LARRY SUMMERS, FORMER U.S. TREASURY SECRETARY: Glad to be with you.</s>PLEITGEN: So what do you think? Is this deal going to come through or are we going to see a long-term solution or could this be the beginning of the end of Greece in the Eurozone and possibly a bigger economic disaster?</s>SUMMERS: Too early to know. Obviously the mood looks a little better this morning. But what's really crucial here is that the Greeks come forward with further steps that the sense that there's an ideological war be deescalated, that people become pragmatic, that Europe recognizes that Greece has been through more painful adjustment than any other country, that it's lost nearly a third of their public employees, that their GDP is down nearly 30 percent, that they made adjustments far, far larger in the name of fiscal restraint than any other country has and that in light of that, there has to be a balancing of Greece, Greek measures, with strong support of -- from the outside. That means recognizing the ultimate unsustainability of Greece's debts. That means being prepared to continue to stand behind and support a resumption of confidence in the Greek banking system. That means being prepared to make investments and support the kind of investments that create jobs, create opportunities for growth. All of that is important if Greece and Europe and the world are going to make their way through this situation.</s>PLEITGEN: It's interesting that you mention growth, because one of the things that you've been saying is that growth is the only way to get out of these gigantic deficits and to obviously get this economy back on track. But it seems as though -- first of all, there has been almost no economic growth recently in Greece. And it seems also as though there are different takes on how that can be achieved. The Germans clearly think that growth can only be achieved through austerity and the Greeks seem to have a very different take on that.</s>SUMMERS: I don't think it's realistic at all to think that austerity in and of itself produces growth. It means --</s>PLEITGEN: But the Germans have done it. I mean, the Germans themselves have imposed austerity on themselves and have done it.</s>SUMMERS: Well, the Germans haven't really imposed remotely as much austerity on themselves as the Greeks did. The Germans provided huge, huge support to East Germany ultimately in a way that was successful. But it wasn't an austerity strategy that was imposed on East Germany. And the argument is -- and I understand it -- it's that whatever, whatever, one country can only provide so much support to another country and at some point the Greek economy has to stand on its own two feet. And maybe it won't be able to pay back debt. But it can't expect to be able to borrow more and more and more. And that's the part of the German concern that's legitimate. But I think one has to think about the transition and what the transition path is and one has to think about it in the context of the common community that the Europeans have entered into. But I do want to say one other thing about the German position here, because I think it is important to understand. Many in Germany and many who look at Germany say we did it. Why can't others? But it's important to understand what Germany did. Germany held down its wages, gained competitiveness and was prepared to lend people money. And in that way, Germany has found itself running the world's largest trade surplus. And with Germany's large trade surplus, of course the Germany economy is prospering. But one thing: everybody can't run a trade surplus. And Germany's gains have come heavily from running a trade surplus and to that extent in important respects they've come at the expense of other countries. So Germany's is a more successful strategy than it is a generalizable strategy.</s>PLEITGEN: What do you think the Greeks need to do, then? I mean there are certain things that the other Eurozone countries have said, for instance, privatization, the pensions, touching the pensions, which is a huge issue, what are things that they need to put in place to finally get this off the table -- because it's been going on for so long. And every time something like this comes up, a payment comes up, it seems like they're on the brink of financial disaster.</s>SUMMERS: And look, I don't think this is going to be the last Greek crisis. There are deep structural issues within Greece politics and within the Greek economy that are going to need to be addressed. I think the government has an awareness of some of the most important of those issues. Greece does need to adjust pensions. It has the pension benefits that go with being a rich country and within Europe it is not a rich country. And there does need to be some pension adjustment. And I believe the Greeks have put that forward. The Greeks need to reform their tax system, their value-added tax system is too riddled with too many loopholes. And the Greeks recognize that and they are going to reform their tax system. The Greeks need to create a much more permissive environment, an environment in which businesses can start more easily and can hire workers more flexibly. And there's a great deal of work that needs to be done to achieve that. Greece ultimately will need to privatize important part of its asset base because we've learned that companies work better in the private sector with shareholders who own them rather than in the public sector with a government that's in charge, just look at the U.S. post office if you're in doubt about that proposition. But the Greeks are right to be worried about giving away assets as part of a fire sale. That is a valid concern. And so the pace of privatization needs to be appropriately measured. The Greeks need to insist on having a debt profile out through time that is set carefully so that it doesn't act as too much of a deterrent to prosperity, because there is not a sense that if Greece prospers, every dollar they earn or most of the dollars they earn are going to go to pay people off rather than to help the people of Greece. Those are some of the things that I think are most important for Greece.</s>PLEITGEN: Larry Summers, thank you very much for your perspective.</s>PLEITGEN: And Greece is looking towards the unclear future in or possibly out of the Eurozone. After a break, America faces its own painful past. Imagine a world where flags and not guns dominate national debates after the Charleston shootings -- that's next.