. The Growing Mess in Greece
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Fighting for the future of the eurozone -- France and Germany strike a deal to help save Greece from default. But can the common currency survive and was it ever a good idea in the first place? Plus, U.N. Goodwill Ambassador Angelina Jolie heads to Syria's border, where almost 10,000 have now fled the violence. And getting in the driver's seat -- why Saudi women are calling on their country to switch gears. Those stories and more tonight, as we connect the world. A growing mess in Greece and increasingly drastic measures to contain it. The Greek prime minister today reshuffled his cabinet, appointed a new finance minister and signaled he will push hard for new austerity measures to be approved by parliament. But even though the government declared that Greece would stay afloat, its real future may be decided beyond its borders. And after days of disagreement, Germany today backed away from a plan to force private investors to shoulder some of the burden in a new bailout package. Instead, the German government agreed to make participation by private investors strictly voluntary. After a two hour meeting in Berlin, French President Nicolas Sarkozy called the agreement a breakthrough. And German Chancellor Angela Merkel said they would work as quickly as possible to make the new aid deal a reality.</s>ANGELA MERKEL, GERMAN CHANCELLOR (through translator): The faster the better. I don't think it makes sense to settle on a date. But the most important thing is that we have principles.</s>SWEENEY: Well, a short time ago, I spoke with my colleague, Richard Quest. And I asked him if Germany had blinked first here.</s>RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": Angela Merkel had been very fierce about demanding some form of private bondholder pain that would go along with any restructuring. I mean, she didn't quite go as far as to say it had to be compulsory. But the fact was that in a dispute between those who said everybody had to be on board voluntarily and those who said, well, maybe some people will have to be dragged to the party, she was much more in the latter group. Now, after discussions with Sarkozy, she's basically come on board. The ECB, if you like, has won the day. There will be no compulsory or non-voluntary action forcing people to take -- to take a hair cut.</s>SWEENEY: I mean this is a public disagreement between the French and the German governments. France is much more exposed than Germany in Greece. So what Angela Merkel had to say, how much of an indication is it that Europe is spooked about Greece?</s>QUEST: Oh, I think there's no question that Europe is -- is worried about what happened. I wouldn't push too far this idea of Germany versus France. I think it was Germany -- because, remember, in 2013, in the future, there will be this arrangement where private bondholders will be expected to share the -- the pain. So Merkel has won the argument in the long run. It's just on this particular case, on this case, it was a battle of ideology, of philosophy, between those on the ECB and those at the Bundesbank, between the two different views. But it was simply too risky to push this any further, because while they're arguing, this is -- I mean I -- to change the analogy, you know, Athens is burning while they're fiddling. They know they've got to provide the money. That is not the question. They know that. It will be billions and it will take years. What they want to know is who else is in this leaky boat and how much pain is going to be spread around?</s>SWEENEY: Any sense at all, down the line, that the euro is under threat for the eurozone and the whole European project?</s>QUEST: Fionnuala, I cannot, tonight, see a scenario in which Greece leaves the euro. The logistics of it are incredible. The philosophy of it is out of this world. The mechanisms of making it happen would simply be unrealistic. As for a collapse of the eurozone, that is just unthinkable.</s>SWEENEY: Well, it may be unthinkable, but that doesn't mean a whole lot of people aren't worried about it. The survival of the eurozone and its currency is vital to the entire global economy. First introduced in 1999 to stable and strengthen the European economy, the euro is now used by more than 300 million people in 17 EU countries. It's also the second most highly traded currency in the world, behind the U.S. dollar. Well, can the euro survive this crisis or was it doomed from the start? Mats Persson thinks it was. He's the director of Open Europe. But Katinka Barysch has hopes for its future. She's the deputy director for the Centre for European Reform. They're both in our London studio tonight. First of all, Katinka, presumably, you would agree that, yes, the eurozone can survive this crisis.</s>KATINKA BARYSCH, DEPUTY DIRECTOR, CENTRE FOR EUROPEAN REFORM: The eurozone can survive this crisis. You mustn't underestimate the political investment that has gone into this project. This isn't just a currency on top of a single market that we have built in Europe. It is the -- sort of the crowning achievement of more than half a century of political integration in Europe.</s>SWEENEY: OK, if I may...</s>BARYSCH: So...</s>SWEENEY: -- jump in there. Political integration in Europe. It's been about political will. And the eurozone couldn't have taken off without political will. But if it isn't working on a practical level, despite how -- it doesn't matter how much political will is put into it, it might not work. We're hearing tonight that Moody's is now looking at a possible downgrade for Italy's credit rating. Where is this going?</s>BARYSCH: It is hard to see where this is going. But what I do detect for the time being is that we have broken every rule. We have -- have turned over every agreement to save this currency. We are doing things now inside the European Union in the eurozone that even 12 or 18 months ago were absolutely inconceivable. So the political will is there. Of course, the governments aren't as proactive and as -- as bold here as, you know, you would -- you would like them to be if you're an economist. But they are really trying their best. And I think the -- the crisis will probably run for some years. We will put more sticking plasters on, but we will really try to save the euro, because a break-up, at the moment, is just inconceivable.</s>SWEENEY: Mats Persson, a break-up at the moment is just inconceivable. But that, presumably, is what you'd like to see.</s>MATS PERSSON, DIRECTOR, OPEN EUROPE: A break-up of the eurozone. I'm not sure I would want to see a break-up of the eurozone per se. I think what -- what all of -- all of us want to see is a European economy that functions well and that prospers and a monetary union that works in the long-term. And the question is what will now work? What does Europe -- Europe's leaders need to put on the table in order to -- to get out of this -- this crisis? And, yes, I agree, maybe Greece and the Eurozone -- the Eurozone can muddle through yet again. Again, but the politics of the eurozone is now -- are now very, very complicated, because what you ask of taxpayers in some of these rich member states is, effectively, that they underwrite the debts of foreign governments...</s>SWEENEY: So you're still advocating...</s>PERSSON: --</s>SWEENEY: You're still advocating a Eurozone that functions despite all this?</s>PERSSON: Well, I mean it's -- we have to look at the long-term solutions. Now, the question is, can Greece stay in the eurozone? And I would say, at one point, eurozone leaders we'll have to make a choice. Either they put Greece and some of these other weaker economies on permanent life support -- in other words, they send subsidies their way, similar to what you have in individual countries -- for example, in Germany, where West Germany sends East Germany money -- or the eurozone simply has to revise its membership. I think that is the choice, whether to go for a full scale fiscal union or whether...</s>BARYSCH: Right.</s>PERSSON: -- to go the other way. And it's a fork in the road. And at one point or another, the eurozone we'll have to make that choice, because it cannot muddle through forever.</s>SWEENEY: Katinka Barysch, the European coal and steel agreement, as you well know, the steel and coal agreement was set up after the Second World War in order to stop France and Germany ever going to war again. So the question is now, in 2011, as we look at this scenario outlined by Mats Persson, has the European project gone too far?</s>BARYSCH: It's certainly taking a breather at the moment. We are definitely in a crisis situation. And the danger here is that although we are doing whatever it takes to save the euro, it is exactly these measures that are undermining the political solidarity on which this project is based. So what we need to see at the moment is -- is a sense of solidarity that we are not saving Greece, we are saving the euro. And what is going to happen is that we will, obviously, provide more money for Greece to tide them over until they can get their economy to grow again. But eventually, I assume that Greece's debt will have to be written down. And by the time they write it down, a lot of that debt will have migrated from private hands into public hands. So Mats is absolutely right that, in the end, transfers from rich taxpayers in the core of euro to the poorer countries will be necessary. But Greece is a...</s>SWEENEY: OK...</s>BARYSCH: -- very small country. It's only 2 or 3 percent of Eurozone GDP. So we can afford to save that and to put that country back on the path to growth.</s>SWEENEY: Well, OK. But there's also a question there of just how much other countries are exposed. Let me bring some really interesting and thoughtful comments that we've had about the euro on our Facebook page. I'll just read out a few of them to you both. Angelica Ciansar (ph) -- I hope that's the pronunciation of her last name -- writes from Malta: "The euro is easier when going abroad and shopping online. But as a matter of pride, I would have preferred it we had kept our own currency." But Karsten from Germany writes: "It's a mess. Most economies that also adopted it are weaker than ours. It has no use for us." Raphael Wenric is from Belgium. And he disagrees, writing: "As an entrepreneur, it's easier for me to invoice or receive invoices from abroad, making my business stronger." And, finally, Colin Mehgan is, perhaps, only half joking when he writes: "I'm from Ireland. Can we join the dollar?" The question that Mats raised, I want to go back to. Do you honestly believe that countries like Britain and other somewhat euro skeptic countries, would ever witness and allow full integration to happen, something that you see as being an absolute or a remedy for this current situation ultimately?</s>PERSSON: Is that question addressed to me?</s>SWEENEY: Yes, it is.</s>PERSSON: OK. Well, it's not only Britain, though. And that's -- that's what a lot of people tend to forget. You see growing resistance to closer fiscal cooperation and this idea of bailouts. You see growing resistance in countries -- countries that traditionally have been quite sort of euro enthusiastic...</s>SWEENEY: Because it's not working for them.</s>PERSSON: -- for example, Finland...</s>SWEENEY: Ireland...</s>PERSSON: -- well, for example, Finland. Finland is...</s>SWEENEY: Ireland is one of those countries.</s>PERSSON: Well, Finland is one of -- one of the countries on the other end of the -- of the bailout spectrum, so to speak, where the -- the Finnish people have traditionally been very, very good Europeans. But now, they are starting to object to this whole idea that they're underwriting these bailouts. And it has led to the rise of a populist party there coming virtually from nowhere...</s>SWEENEY: Indeed.</s>PERSSON: -- to -- to prominence. So I mean you see that not only in Britain and some of these traditionally euro skeptic countries, but increasingly in other member states, as well. And that is very problematic for this prospect of closer fiscal union. So while I'm saying that is necessary, the politics of it is very unpredictable.</s>SWEENEY: All right, despite the political will that seems to be there. Mats Persson, Mats, thank you very much, indeed. Katinka Barysch. Both of you joining us from London. Well, Eurozone finance minister are set to meet on Sunday night in Luxembourg. And that's when they could agree to release the next slice of the original Greek bailout package. But the second rescue package may not be finalized until July. CNN, of course, will stay on top of this story all weekend and in the months ahead. You're watching CONNECT THE WORLD. And still to come, a gesture of goodwill -- actress and U.N. Ambassador Angelina Jolie witnesses the despair at the Turkish-Syrian border. We'll have more on that in about 10 minutes from now. And then, warming up for Wimbledon. It's just a shame the weather isn't. That's up in half an hour. But first, a look at the rest of the day's main news, including the torrential rain and flooding that's inundating parts of China.