Russian Prime Minister Vladimir Putin says the world faces a growing “cult of violence,” and Moscow must not let events like those in Libya and Syria be repeated in Russia. Deborah Lutterbeck reports.

Juan Alberto Fuente and Jose Sandino search for their new home - a youth hostel - in Munich, Germany. They've just arrived from Malaga, in southern Spain, in search of work. Both are experienced industrial engineers but Spain's economic crisis had them sitting on their hands. (Photo: Gerry Hadden)

The number of unemployed people in Spain has surpassed 5 million, according to the government. That’s about 23 percent overall – the highest rate since 1994. For the young, the jobless rate is nearly 50 percent. Now, a generation of desperate Spaniards is seeking work abroad. It isn’t the first time poverty has driven Spaniards from home, but such exoduses have been of unskilled laborers in the past. This time, more of Spain’s best and brightest are leaving.

Munich’s airport shuttle stopped on a recent morning to let off arriving passengers downtown. Among those getting off on the freezing sidewalk were Spaniards Jose Sandino and Juan Alberto Fuente.

Sandino and Fuente are thirty-something industrial engineers, from Malaga, in southern Spain. Each has more than a decade of experience under his belt. But Spain’s economic crisis has left them jobless. And turned them into immigrants.

The two clean-cut, shivering men make their way to an information desk at Munich’s main train station, and try out their beginner’s German. After a long subway ride, and getting lost a couple of times on the street, Sandino and Fuente find their new temporary home. It’s a giant youth hostel, filled mostly with young backpackers.

Their room is small and bare, with two wooden beds, a desk, a closet. It’s hard to believe now, Sandino says, but not long ago his construction consulting firm back home was netting him six-figures. Then the housing sector collapsed and so did his business. Sitting on his bed, he says he can’t believe that just this morning he was saying goodbye to his girlfriend and family.

“This move has been complicated, he said, “because my girlfriend is pregnant, and alone now. Our baby is due in July, then they’ll come join me here, where we don’t know anything or anyone.”

Sandino does know one other person here, his traveling pal and bunkmate Juan Alberto Fuente. They met during an intensive German language course this Fall in Malaga, and decided to take the plunge together.

Fuente says he could have just gone on living indefinitely with his parents, knowing he’d be taken care of, but that was not his goal in life.

“If you send out tons of resumes and no one even calls you for an interview,” he said, “you have to go out and find work. You can’t just sit on your hands for years and years.

It’s not about the money, he said, but about feeling useful.

Spain’s near-23 percent unemployment rate is driving highly educated people like Fuente and Sandino abroad by the tens of thousands. This year more people left Spain than moved there for the first time in more than a generation. And Germany’s a principal destination. Here, unemployment is below 4%. But coming north is hardly a waltz through the edelweiss, says Cristina Rico, a long-time Spanish resident of Munich. The unprepared, she says, usually fail.

Having a tea in a Munich café, Rico said a lot of Spaniards heard about how German Chancellor Merkel called for workers to come last year, and misinterpreted it.

“Spaniards have a distorted idea of finding work in Germany,” she said. “That it’s easier than it is. I’ve seen people come here and turn around and go straight back home. They had diplomas but didn’t speak English or German.”

And thus they had no way to communicate.

Cristina said that over the last year she was bombarded with so many emails from unemployed Spaniards curious about Germany that she started a Facebook page, called Spaniards in Munich. Every day people log on with questions about jobs, housing, healthcare, German courses – and diplomas. In Germany, with its strong vocational schooling, even so-called unskilled jobs require a certificate of study. For example, Rico said, even to work in a pet-store you have to show you’ve been trained for it.

That’s what’s been frustrating 20 year old Spaniard Ana Abad for more than a year. Abad came to Munich from Madrid without first finishing her university studies in communications. Now, she said on a recent evening, she needed that diploma.

“I tried to find internships but it was impossible,” she said. “So I took this babysitting and housecleaning job in order to have money for my German language studies. I hope to finish my communications degree via long-distance by June.
‘
And look for work here, she said.

Several Spaniards interviewed here said if you have a diploma and a decent level of German you can usually find a job quickly. Economist Marten Olsen, with the IESE business school in NY, said one reason is because hiring in Germany is less costly and risky than in Spain. He said the cost of hiring in Spain has risen 24 percent in recent years, because of wage and benefits increases. At the same time, he said, productivity has stayed nearly flat. In Germany, he said, it’s been the opposite.

“Spanish workers have only become a little more productive but wage compensation has gone up a lot,” he said in a video presentation from New York. “Germans a lot more productive than the Spanish ones and wage compensation has been only gone up only a little.”

In other words, he said, it’s become relatively cheaper to hire people in Germany than in Spain.

In the old days, Olsen said, Spain could have devalued its currency, the peseta, to stay competitive. That would help stem the exodus of workers in today’s crisis. But with the euro, that option is out.

Juan Alberto Fuente, one of the engineers who’d just arrived from Malaga, said he wasn’t optimistic about Spain’s future. He said he saw something that shocked him on his way in from the Munich airport, and underscored the current difference between his home and here.

“The first thing I noticed was that there are tons of trucks on the German highways,” he said. “In Spain there are virtually none.”

Truck traffic is a major indicator of how productive your economy is, he said.

With young educated men like Fuente and Sandino leaving, there’s a growing concern that Spain may be undergoing an authentic brain drain. The government has played that down. And Spaniards here in Germany said even if it is true, it’s only temporary. Most said they’ll go back to Spain better educated, with real-world experience and real money in their pockets.

But that’s likely to be years from now.

The deep freeze has caused 80 deaths, mostly in Ukraine and Poland.

It also has Russian gas giant Gazprom struggling to meet demand.

Anchor Marco Werman talks to reporter Julia Barton about the energy challenges Gazprom is facing.

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Marco Werman: I’m Marco Werman and this is The World, a coproduction of the BBC World Service, PRI and WGBH Boston. There’s cold and then there’s deadly cold. The deadly cold we want to tell you about right now, it continues to grip central and eastern Europe. The deep freeze has caused at least 80 deaths, mostly in Ukraine and Poland. It also has Russian gas giant, Gazprom, struggling to meet demand. Reporter Julia Barton is in Moscow. Julia, you’re just back from Ukraine where at least 40 cold related deaths have occurred, what was it like there and how are people dealing with this cold?

Julia Barton: Well, as you can imagine the air in Kiev was very frigid, I mean you walk outside and immediately the hairs inside your nose start to freeze over and the water in your eyes starts to turn to ice. So, that tells me at least that it’s well below zero Fahrenheit, but I didn’t see any sign that people were avoiding going outside. You would see women in these huge fur coats, wrapped up in those, and people with their fur chapkas, their hats. The sidewalks are very icy and dangerous. Again, that doesn’t seem to deter anyone. The did close schools in Kiev today, but children are out sledding with their parents and just enjoying a sunny day off.

Werman: And for those 40, at least 40 cold related deaths, how did those people die specifically?

Barton: Well, most of them were homeless and well, this partly might be an issue in terms of Ukraine, of the country starting to do better than some of its former Soviet neighbors in reporting deaths like this, but Ukraine also does not have a good social safety net when it comes to issues like homelessness. And all that becomes absolutely clear when you have a cold snap like this. The country’s prime minister, Mykola Azarov, had to ask people openly and say “We need to help each other. We need to stop being indifferent when we see someone who has nowhere else to go.” And he had to ask hospitals not to turn their indigent patients out onto the street when their treatment is through. The emergency ministry there has setup over 1,700 heated shelters around the country with food and tea, but obviously that’s just a short term answer to a much bigger problem. There’s no kind of well-knit social safety net that can help people with deeper issues, such as alcoholism and drug use, and so they just end up on the streets living in the storm sewer systems and that kind of thing, and there’s nowhere for them to go when the cold like this hits.

Werman: Now, Ukraine and many other of the affected countries rely on Russian gas for heat that comes from Gazprom, the gas monopoly in Russia. Has Gazprom been able to meet the demand?

Barton: Some European countries beyond Ukraine, such as Italy, complained earlier this week that their gas supplies dropped, and they blamed Gazprom for diverting that gas for domestic use. Gazprom says it did not do that. It admits that it has been strained a bit by just a slight amount and so they’ve increased their supplies from underground storage facilities and that gas is in the pipeline. It should be reaching Europe, but they say it just takes time.

Werman: What about Russia’s former satellite nations? I mean how dependent are they on Gazprom?

Barton: They are fairly dependent, although Ukraine has its own supply of gas and the government has said they also released their own domestic storage supplies to heat the country. So they’re saying they shouldn’t suffer any shortages from this cold snap.

Werman: Now, Julia, on Saturday there are antigovernment demonstrations planned in Moscow, and the cold, apparently, is going to continue through the weekend. Could the weather have an impact on the turnout?

Barton: The protest organizers you know, they are still going forward with their plans, but they are starting to talk about the possible impact, and their spin is starting to sound like well, if as many people or a respectable number of people still show up despite this Siberian level of cold, then that sends an even stronger signal to the government that people are fed up. And the cold didn’t stop a small group of protestors from climbing a seven story building today in Moscow, and putting up a huge anti Putin yellow banner across an entire billboard that was facing the Kremlin. The banner said “Putin Go Away” and had a picture of Putin with an X over his face, and it was visible all over central Moscow and got a lot of attention until the police took it down.

Werman: I’m sure those protestors were wearing gloves.

Barton: I would not be surprised.

Werman: Reporter Julia Barton is speaking with us from Moscow, thank you very much.

Barton: Thank you.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

Authorities investigate Italian cruise ship Costa Concordia’s black box to determine what caused Friday’s deadly maritime disaster.

During his victory speech on Tuesday night following the New Hampshire primary, Mitt Romney attacked what he called President Obama’s wish to “fundamentally transform America” — much to the delight of the assembled crowd.

“He wants to turn America into a European style social welfare state. We want to ensure that we remain a free and prosperous land of opportunity. This president takes his cues and inspirations from the capitals of Europe. We look to the cities and towns across America for our inspiration,” Romney said to vigorous applause.

Willem Post, an expert on US politics at the Clingendael Institute for International Relations in the Netherlands, was in New Hampshire to get a read on the candidates. In the days before that speech, Post said he got a chance to speak with Romney for a couple of minutes.

“I asked him, ‘Do you know the Netherlands? Do you know Europe?’ And he said, yes, I’ve been many times in your country as well. And he said about the Netherlands, I love speed skating. I thought — Okay, this is a guy who knows Europe well,” Post said. “Then I was there when he gave his speech, and he was saying, Mr. Obama is too cozy with Europe, with socialist Europe.”

Post thought to himself, “Really?”

The Europe that now has quite a few countries, including the Netherlands, run by centrist and center-right governments?

The Europe that’s wrestling with its budgets, and as often as not is trying to solve its problems with privatization?

Post said he thought, “Mr. Romney, come on. You almost owe us an apology. It’s really nonsense.”

Mitt Romney’s not the only Republican taking shots. Newt Gingrich recently took a turn on Fox News, speaking about President Obama.

“He is in exactly the tradition of the French socialist, or the Italian socialist, or the German socialist. This is somebody who really does believe that if you’re in private enterprise, and you go out and you work hard, you’re somehow doing bad things,” Gingrich said.

Many a European socialist might be shocked to learn that Obama is one of them, according to some European analysts.

But let’s face it — Europe’s financial sector is in big trouble right now, and its leaders can’t seem to fix it. Still, there’s some irony in the current attacks, said Rosemary Hollis of City University in London.

“There’s this attempt to taint Obama by association with the Europeans at a time when the Europeans are getting a very bad press for having failed in terms of their economic models, but it’s liberal, capitalist economic models that have essentially nose-dived,” Hollis said.

Hollis follows transatlantic issues closely, especially as they relate to the Middle East, and she notes that Europe bashing has become a leitmotif in American politics over the past decade.

Remember the call to rename French fries “Freedom” fries in the run-up to the war in Iraq because France refused to support the invasion?

Many Europeans, though, are taking these latest statements in stride. They know it’s an election year, and the rhetoric can get nasty. But the tough rhetoric may be pointing toward a quiet, though fundamental shift in American thinking.

Ian Lesser, who directs the transatlantic center of the German Marshall Fund in Brussels, said Europeans are probably less worried about social comparisons, and more concerned about whether the US will continue to pay attention to Europe.

“The truth is that the real distraction at the moment is that the US is paying more attention, in foreign policy terms, in economic terms maybe even in cultural terms, to Asia,” Lesser said.

As for Mitt Romney, he might want to reconsider using the anti-Europe rhetoric too heavily. He spent two years in France in the late 1960s on his Mormon mission, and he learned French there. There’s promotional video for the 2002 Salt Lake City Winter Games making the rounds now. And it includes Mitt Romney, who headed the Salt Lake Olympic Committee, speaking French to welcome volunteers.

PACs and SuperPACS that support some Republicans and Democrats are already using that in anti-Romney advertisements.

Thousands of Hungarians have taken to the streets to protest, saying their government is turning its back on democracy, and the protests have a soundtrack.

One protest song has simple refrain: “I don’t like, I don’t like, I don’t like the system.” The tune hit Youtube this past fall, and it quickly became an anthem for a grassroots opposition movement. It’s directed against Hungary’s Prime Minister Viktor Orban and his ruling party Fidesz, which dominates parliament.

“After the government got into power, it became clear that all the measures that they did were one by one anti-democratic and unjust,” said the singer, Dorottya Karsay, a 26-year-old activist.

Karsay and other critics say the Fidesz-led parliament has tightened controls on the courts, the media and the central bank. Fidesz maintains these measures are the final step in Hungary’s transition from communism to democracy, which began in 1989. But Karsay doesn’t see it that way.

“I was the first generation that grew up after communism, but I know how my parents grew up and I know how they lived, and how they had to silence their opinions, and I don’t want this country to be like that again,” Karsay said.

Silencing is just what the government is trying to do, according to a Hungarian gangsta rapper who goes by the name Dopeman. (His real name is Laszlo Pityinger.) In one song, Dopeman recites parts of the Hungarian national anthem, while a video shows scenes from an anti-government protest. Most of the song can’t be aired on the radio. Dopeman takes aim at Hungary’s political establishment using blunt, profane terms.

“It’s like blowing up a bomb,” he said, adding, “I’m attacking everybody, the whole political elite and everybody else in position.”

But the political establishment appears to be fighting back. Prosecutors are investigating Dopeman on suspicion of dishonoring a national symbol, Hungary’s national anthem.

So far, the attention doesn’t seem to have hurt the rapper; his video has gotten more than 600,000 views on Youtube.

But Dopeman isn’t the only one getting some government pushback.

A music video, called “Merry Christmas, Hungarian Democracy” features two reporters for the Hungarian online news site, Index, singing and dancing through empty halls of parliament. It’s light-hearted political satire, but it takes aim at some serious issues, including Hungary’s sinking currency and its economic woes. In one line, the reporters sing,

“Don’t make a sound, freedom is all around. While the forint goes up and down, and the IMF gets around.”

Government officials were not amused, said Index political correspondent Gergo Planko.

“We were banned from entering the parliament until we can provide some kind of guarantee that we will never insult the dignity of the house again.”

Planko said that’s an absurd order.

“It’s clear we don’t need to apologize for anything and we need to stress that is part of our job.”

Video: “I don’t like the system” (includes profanity)

Video: DopeMan’s BAZMEG! (includes profanity)

Video: “Merry Christmas Hungarian Democracy” (includes profanity)

Luojie, China Daily, China

NASA held a press conference last month to try to debunk the latest doomsday scenarios for Earth in 2012 but Chinese cartoonist Luojie thinks the space agency may have forgotten one thing.

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That’s in addition to other controversial proposals, like cutting education funding.

But not everything Rajoy is doing to cut spending and increase productivity is raising hackles: He’s also pushing for a sort of “holiday shuffle.”

Spain has 14 holiday days per year. That’s two or three more than what Americans have. In the prime minister’s quest to boost productivity, he isn’t suggesting eliminating any holidays. Just moving them.

Rajoy told parliament last week that he’s going to make Spain’s work calendar more rational. He said, that means dealing with the high costs associated with extra-long weekends.

“We’re going to move mid-week holidays to Mondays,” he said.

Many of Spain’s holidays are like July 4th. They’re pegged to a date. So they can fall mid-week, for instance, on a Tuesday. When that happens, many companies give workers the Monday off. Or people just take Monday off, calling in sick. This month Spain had two such “four-day” weekends. That’s not including the week off at Christmas. When you add it all up, Spaniards took off nearly half of December.

Hardly what a flat economy like Spain’s needs, at least according to Spain’s business leaders.

They’re behind the push to eliminate the extra-long weekends. What’s surprising is that labor unions aren’t up in arms. In fact most working Spaniards are taking it in stride.

Take Victor Garcia, a door to door salesman in Barcelona. He said he’s enjoyed the informal perk of stretching out a long weekend. But he can live without it.

In principle, he said, abolishing the four-day long holiday weekend is a good idea. He thinks Spaniards have such high unemployment, and job insecurity as it is and they’ve got to turn things around somehow. “Working together, we’ve got to try,” he said.

In a nearby pharmacy, owner Dioni Hernandez said Spaniards have enough time off as it is.

“For every holiday we’re closed we lose a minimum of 3 per cent of our monthly business. If when there’s more than one holiday in a month, we really start to get hurt,” said Hernandez.

Spain and other southern European countries have faced criticism during this economic crisis for supposedly not working hard enough. Rajoy’s proposal no doubt seeks to counter that claim.

But is it true that southern Europeans are slackers, while Northern Europeans are more industrious? Earlier this year German Chancellor Angela Merkel assumed it was. She scolded her southern neighbors for taking more vacation than Germans while asking Germany to bail them out.

Merkel got beat up for her comments. Turns out workers in Spain, Italy and Greece on average put in more hours per year than Germans do. That’s according to the Organization for Economic Cooperation and Development.

So why is Northern Europe more wealthy, less in debt? Some suggest that thrift makes the difference. Germans tend to save, while Spaniards have gone on a big borrow-and-spend spree.

With fewer days off under Rajoy’s plan, Spaniards may spend less. But there are obstacles to phasing out the four-day weekends. Spain’s powerful tourism industry is grumbling because Spaniards would spend fewer nights in resorts and hotels. And then there’s the church.

Some important religious holidays, such as the Assumption of Mary fall on the same date as each other. The government proposal to peg it to a Monday would require the blessing not only of Spanish church officials but of the Vatican itself.

What impact will new sanctions have on the country and can Iran’s threats about blocking the strait of Hormuz be taken seriously?

Anchor Lisa Mullins talks to Iran expert Dr. Trita Parsi.

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Lisa Mullins: Today, Iran threatened once again to stop ships from moving through the strait of Hormuz at the mouth of the Persian Gulf. That’s an unsettling prospect. At least one sixth of the world’s oil flows through the strait. But today, Iran’s navy chief called closing it very easy for Iranian naval forces. A spokesperson for the US Fifth Fleet responded, the spokesperson said that the United States will not allow any disruption of traffic in the strait of Hormuz. Dr. Trita Parsi is the author of A Single Roll of the Dice: Obama’s Diplomacy with Iran. Can you tell us, Iran says it may close this vital oil trade route that is the strait of Hormuz if the US imposes more sanctions over Iran’s nuclear program. How credible do you think the threat really is?

Dr. Trita Parsi: I have to say I think it is largely bluster, but at some stage if the west continues with sanctions and particularly if some form of an oil embargo is imposed on Iran, then Iranians don’t have as much to lose from actually taking this step. Right now if they were to close the strait of Hormuz they would also shutdown their own oil exports, but if much of their oil exports already have been taken off the market because of an oil embargo, then Iran has less incentives not to play this card.

Mullins: Well, it has less incentive, but does Iran really want a war?

Parsi: Well, the thing is if there is an oil embargo that is imposed on Iran that is in and of itself viewed by Iran and there’s some support in international law, that is already an act of war, so that would be an Iranian response to a declaration of war.

Mullins: How is that considered an act of war in any sense because there certainly have been sanctions against Iran before. Iran has made threats before. Iran even if it is not to sell oil to the US or Europe could sell oil to China or Russia instead of the West.

Parsi: Any type of naval embargoes have to be approved by the UN Security Council to actually have the force of international law behind it. If it is not then it is considered an act of war. The current form of oil embargo that the US is discussing is not gonna get support in the Security Council as you mentioned because of the opposition from Russia and China. What we’re seeing is that we are in a confrontational dynamic. Both sides are trying to maximize the amount of pressure put on each other, and at some point we’re gonna lose sight of what the actual issue was, and we’re just trying to escalate further in order not to lose face. So I think there is unfortunately, a significant risk that this will get out of control and actually lead to an open warfare between the two countries.

Mullins: How do you think it’s gonna spiral out of control when so many parties here have so much at stake, particularly Iran itself.

Parsi: Right now there’s almost no communication between the different governments and as Mike Mullen, the former chairman of the Joint Chiefs of Staff had warned right before he left office, he said that this lack of communication is very dangerous because it gives way for misperceptions. And when you misperceive you miscalculate. And when you miscalculate you escalate and suddenly there you have it, you have a war that you never intended to have.

Mullins: Well, not yet though. What are the aspects of diplomacy that could be exerted right now?

Parsi: Well, diplomacy is not going to be easy, nor is it gonna be quick. The diplomacy that the Obama administration pursued in 2009 essentially only lasted about two and a half months maximum. And there were only two, two and a half meetings directly with the Iranians. That’s not diplomacy and certainly not an exhaustion of diplomacy. But the political space to pursue that option does not exist in Tehran nor does it exist in Washington, and it’s forcing leaders to abide by the already very constrained political landscapes that they’re in and pursue escalation rather than pursuing conflict resolution.

Mullins: Just to be clear, what could once again, what could be done right now in terms of diplomacy that would prevent confrontation?

Parsi: Under best scenario you would start negotiations right away and negotiations would not be limited just to the nuclear issue. The nuclear issue is probably the toughest issue to resolve because the two sides have dug themselves in so deeply in their positions, but there are other areas, whether it is regional security, Afghanistan or other areas in which conversations and diplomacy can begin. Diplomacy is very much about reducing mistrust. And when you reduce mistrust and you increase transparency information about the other side, that in and of itself is a huge favor towards making sure that there are no accidental escalations.

Mullins: That’s Dr. Trita Parsi, author of A Single Roll of the Dice: Obama’s Diplomacy with Iran.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

Meanwhile, the euro fell further against other major currencies as fears continue over the eurozone’s future. The European currency fell below $1.30 for the first time since January 12.

Anchor Marco Werman speaks with Jacob Kirkegaard of the Peterson Institute for International Economics in Washington.

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Marco Werman: I’m Marco Werman, this is The World. Europe just can’t seem to convince the doubters. Financial observers remain skeptical about the deal European leaders struck last week to boost confidence in the Euro, and that worries investors everywhere. They fear that continued uncertainty in Europe could drag the entire global economy down. Those concerns were apparent today, as stock markets dipped again from Wall Street to Shanghai. Jacob Kirkegaard is a research fellow at the Peterson Institute for International Economics in Washington. Jacob, everyone seemed pretty happy last Friday when the EU announced a deal on the Euro. What’s the big issue now, what’s changed?

Jacob Kirkegaard: Well I think the big issue really is sort of implementation risk. Yes, the EU agreed, or at least 26 of them agreed, to do some in the long term, very far reaching things with respect to this new fiscal compact that they agreed on. But the real issue now is how are we actually going to implement this? Are national parliaments going to all sign up? Do we need referendas in places like Ireland? Do countries need to change their constitutions, and how do we do that? There’s just a lot of uncertainty about that and I think this is what markets understandably are reacting to.

Werman: But some critics have said the deal is essentially a blank sheet of paper. What specifically about implementation makes it kind of toothless right now?

Kirkegaard: Well because it is in a sense a blank sheet of paper. It is some fairly broad rules about structural deficits as well as a new implementation mechanism for fiscal sanctions within the euro area. But again, there’s a lot of uncertainty, for instance, about what are the institutions that are actually going to enforce this? Because this is related to the problem about the UK not joining the agreement, because it means that the legal framework will have to be a new treaty, sort of outside the existing EU treaty. And the existing EU treaty is what the European commission as well as the European Court of Justice operates under, and it’s not really clear what the relationship between those institutions and this new inter-governmental treaty will be. So no, there is essentially uncertainty all around.

Werman: I mean given how impossible it all seems to close a circuit on this EU agreement from last Friday it doesn’t bode very well for the economy in 2012, not in Europe, nor around the world.

Kirkegaard: I dont think that there’s any doubt that because of all of this uncertainty, that the Euro area is going to experience at least a relatively shallow downturn in the beginning of 2012. It may already have entered a recession in the fourth quarter of this year. I don’t personally though believe that we are facing another complete collapse of the European economy like what you saw in 2009 when GDP contracted 4-5%, I don’t think that’s in the cards. But you’re right, I mean this over-bearing uncertainty about the outlook is going to spill over beyond the borders of the Euro area to the UK, to the more global economy more broadly. So yes, this is certainly going to be a drag on the global economy as a whole throughout 2012.

Werman: Jacob Kirkegaard with the Peterson Institute in Washington. Thank you very much.

Kirkegaard: My pleasure.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

Hotel owners say bookings are down. Construction companies are idle. But there’s at least one sector that is actually growing: health and beauty. On a Barcelona street a tandem of beauty-related businesses thrive.

One of these shops is the Marco Aldany hair salon.

Inside, a bank of chairs is occupied, mostly by middle-aged women getting their hair washed, cut and dyed. More women wait on seats by a window. The manager here, Patricia Marquez, darts from station to station, keeping her stylists, and her clients happy.

“The truth is we can’t complain,” said Marques. “We’re lucky. It’s a good salon, and our clients are faithful. And more keep coming.”

This is a place that thrives in Spain precisely because times are otherwise tough. Marquez said that’s because people feel out of control, insecure. Here, she said, with unemployment nearly 23 percent, inexpensive ego-boosts go a long way.

“A person needs to feel handsome, to feel comfortable with themselves. If they don’t look good it doesn’t matter what they do. You have to feel comfortable in your own skin,” Marquez said.

And Marquez said clients are seeking such comfort in her chairs more often, as the economy grinds on. According to a leading Spanish consultancy, the country’s beauty industry is on track to grow 3 percent this year. The overall economy, by contrast, is flat.

One client here today is Francesca, an auburn-haired retiree. She’s on a fixed income, but said she’d never give up her weekly coif.

“Because of our culture and upbringing,” she said, “we older woman feel better with our hair done up rather than letting it get all messy. It’s a question of feeling good about yourself. If it means spending 50 bucks of your pension per month, well, we can allow ourselves that.”

Fifty bucks is a relatively cheap deal for the full treatment, by the way. Economists and sociologists say that makes treating yourself to a new hairstyle or make-over, or manicure, nearly crisis-proof.

“Haven’t you heard about the recent survey in Spain?” a client named Mariona asked at a different salon. “It found that if a Spanish woman were forced to choose between a meal or a make-over, she’d go hungry.”

It’s even more true, given Spain’s grim economic backdrop. The government is slashing spending from healthcare to education. The jobless rate keeps rising. One clue to explain why such gloom would cause people to spend more on their hair or nails can be found on the lips. That is, the Lipstick index. It’s a term coined by Leonard Lauder, of the make-up giant, Estee Lauder, in 2001. Lauder observed that in times of crisis his company sold more lipstick.

The index was hardly scientific but Analda Santano, who runs the cash register at the Cinema Nails salon, said it’s accurate. But its not just about the gloom, she said.

She said people here realize one day the crisis has to end, and that the well-groomed will be well-positioned when opportunity knocks.

“If your hands are a mess,” she said, “people will look at you badly. A woman should have her nails painted. If you’re a man your nails need to be smooth and without any flaking skin on the fingers.”

Haircuts for self-esteem, manicures for jobs that might materialize – businesses selling good looks and grooming come out on top.

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This summit was billed as the Eurozone’s last chance to stave off impending economic doom. French President Nicolas Sarkozy and German Chancellor Angela Merkel said they wanted tough new budget guidelines for the eurozone countries, and they wanted the power to punish any country that couldn’t keep its economic house in order.

Given the scale of the problem, and the scope of the solution, Sarkozy and Merkel pushed for a European Union wide agreement, one approved by all 27 members of the EU — even the ten that don’t currently use the euro.

But Friday morning, Britain’s Prime Minister David Cameron said no, in fairly blunt terms.

“We’re not in the euro, and I’m glad we’re not in the Euro,” Cameron said. “We want the eurozone countries to come together and to solve their problems. But we should only allow that to happen if there are proper protections for the single market and other key British interests. Without those safeguards, it is better to have those countries make their arrangements separately.”

That’s exactly what France, Germany and the rest of the eurozone say they will do.

They don’t have much choice; in the European Union, treaty changes have to be approved by all member states. So they’ll forge ahead without Britain, said France’s Nicolas Sarkozy on Friday.

“Our British friends — this is not a criticism – say not only are we not in the euro, but we’re glad we’re not in it,” Sarkozy said. “And we who defend the euro, who are changing the way the euro functions and are learning from the crisis, we’re not going to apologize for doing everything we’re doing to save our currency.”

Germany’s Angela Merkel also praised the agreement.

“I’m very happy with the result because we managed not to make a useless compromise for the euro,” Merkel said. “Everybody in the world will see that we’ve learned from the mistakes in the past.”

The plan now is to adopt an “inter-governmental treaty” that would ensure tougher budget guidelines and the power to enforce them.

That kind of treaty wouldn’t require every member of the EU to sign on, according to Herman van Rompuy, president of the European Council.

“An intergovernmental treaty can be approved and ratified much more rapidly than a full fledged treaty change,” van Rompuy said, “And I think speed is also very important to enhance credibility.”

Speed is not a word many would use to describe the eurozone’s actions to stem the financial crisis up to this point. And while tighter, more centralized budget controls were on many longer-term wish lists, some say that today’s agreement doesn’t tackle the urgent issues; that Greece is all but bankrupt, and that Italy and Spain may soon follow and drag the rest of the eurozone down with them.

David Rennie, political editor at The Economist, said there’s been a disturbing lack of realization that the markets are already losing faith in the euro and a single currency.

“That kind of market panic can only be stopped with massive intervention,” Rennie said, adding that European leaders “are still, unfortunately, dragging their feet.”

In Friday’s agreement, the eurozone countries have agreed to speed up the creation of a stability or bailout fund for troubled countries. They also said they would look at boosting the amount of money in that fund.

Some experts say it will take something on the order of $5 trillion to calm the markets.

The eurozone pact also calls for providing more money to the International Monetary Fund to be used to help ailing economies.

What many were hoping for, though, was some indication that the European Central Bank would be allowed to step in and buy up government debt from countries in trouble.

Germany, however, remains firmly against that.

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Marco Werman: For a perspective on what this EU deal means for the global economy, we turn to Mark Weisbrot. He’s Co-Director of the Center for Economic Policy Research in Washington. He also writes a weekly newspaper column on economic and policy issues. Mark, you’ve compared the European financial mess to a house on fire. Explain that for us.

Mark Weisbrot: Well, it is kind of like a house on fire in the sense that the financial crisis there is already slowing the European economy. In fact, according to the OECD, the Eurozone is already in recession. The United States, they lowered their projection for the U.S. economy from 3% to 2% for next year. They lowered the forecast for Russia, China, Brazil and most of the world. So, the house is on fire and the owners are basically arguing about fire safety regulations for the future and they’re not even really getting that right. Meanwhile you also have… to take the analogy further, you have the fire chief – that’s the European Central Bank – saying that he’s not going to touch or let anybody touch the fire hose until he gets what he wants.

Werman: But doesn’t this agreement essentially show that the European leaders are not letting the house burn down, they are taking this seriously?

Weisbrot: No, because they are not doing what needs to be done in the short term. The whole cause of the acute crisis that is slowing the world economy right now and threatening to cause the second world recession in 3 years is the bond market for Italy and Spain. The markets are afraid that the European authorities are going to do to Italy what they did to Greece where they set in motion this process where the government cut spending, the economy shrinks, revenues to the government fall because the economy shrinks and then they have to cut more. And meanwhile, the interest rates on their bonds go up to unsustainable levels because bond holders begin to believe that they are not going to be able to pay their debt. That is the real problem and the European Central Bank has the ability to end that crisis right now simply by buying Italian and Spanish bonds. It wouldn’t even have to buy that many if they just set a guarantee on the interest rate.

Werman: Won’t the stricter fiscal and financial discipline implicit in this new agreement help to prevent further ‘Italys’ and ‘Spains’ and the EU from going bust?

Weisbrot: No, because the fiscal tightening is what’s made this crisis worse. Look at Greece. What happened there, they had a deficit of 115% of GDP when they signed their first IMF agreement early last year, and now it’s 162% because they shrunk the economy by cutting spending. I mean, that problem could have been resolved very easily a year and a half ago. Now they could cancel 60% – 70% of their debt and they would still default. This is the fear in the financial market, is that the same thing is going to happen to Italy. That’s why they really have to change course, and the most important part of that is just buying up the Italian and Spanish bonds to make sure that those interest rates don’t rise to unsustainable levels as they did in the case of Greece and Ireland and Portugal.

Werman: Do you think European leaders still don’t fully grasp the gravity of the situation there? Or, are they just politically unwilling to accept tough medicine?

Weisbrot: I don’t know if they don’t understand the gravity of it, but they have these goals. They want Italy to cut its budget, to raise the retirement age, to do all these…and the other countries as well – Spain, Greece…to make these very unpopular changes that people would never vote for. And so, what they are doing is they are saying, “If you don’t do these things, we are going to let your interest rates rise, the interest rates on your bonds go up to the point where you will be at the brink of default.” So they are playing a game of brinkmanship and chicken, and they’ve been doing this for the last year and a half. You can see for yourself, this is the fifth time that the leaders have met and come to agreement, and each time they have an agreement they don’t do enough to resolve the problem. That’s why this is going to go on, most likely, for years to come.

Werman: Mark Weisbrot, Co-Director of the Center for Economic Policy Research in Washington, thanks for explaining this to us.

Weisbrot: Thank you.

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But on Thursday, French President Nicolas Sarkozy, said that if a decision on fixing Europe’s debt woes can’t be reached by Friday, “there are no second chances.”

After months of economic doom and gloom, punctuated by a series of these summits, it’s hard to see how the eurozone is suddenly out of “second chances.”

But on Thursday, ahead of his trip to Brussels, Nicolas Sarkozy made his case.

“Never has Europe been so necessary. Never has it been in so much danger,” Sarkozy said. “Never has the risk of an explosion of Europe been so great.”

Many have argued that it’s been that way for 18-months now.

Previous summits have produced a lot of talk about how Greece’s debt will be dealt with, and how the “economic contagion” that everyone fears won’t spread to Italy and Spain.

Action, on the other hand, has been slow in coming, a fact German Chancellor Angela Merkel acknowledged on Thursday.

“Words alone will not be credible anymore because time and time again we didn’t stick to our word, the Chancellor said. “And therefore we need more cohesion, therefore, in my view, we need treaty changes; treaty changes in which the European institutions, especially the Commission, will have more responsibility and we will have to submit more to the ruling of the Commission than in the past, in times when member states, including Germany, watered down our rules.”

Merkel and Sarkozy are spearheading an effort to get European nations to agree to a series of measures aimed at preventing this kind of crisis from happening again.

They’re calling for tighter, more centralized, and more disciplined oversight of the budgets, and debt levels, of eurozone countries.

And for the ability to punish those countries that don’t comply. Some say it’s about time.

“Europe has to change, and the institutions have to change, not the currency,” said Mathijs Bouman, a Dutch economist and author. “We avoided that for 10 years, and now we have only a few days to fix it.”

He says the European Union’s very structure is not designed to deal with this kind of economic crisis.

“I think one discussion in the White House would solve the crisis in the US,” Bouman said. “We don’t have a White House in Europe, so we have discussions every three months, slowly…slowly…slowly…and the financial markets, they don’t understand that.”

And that’s why Merkel and Sarkozy’s talk of “treaty change” seems off the mark to some.

EU treaty changes might take months, even years, to be approved by the member states. But the crisis, critics say, is happening right now, and it’s having a big impact on the lives of millions of Europe’s citizens.

Economist Arjo Klamer sees a big disconnect between Europe’s dickering politicians and its citizens.

“They feel that with the Euro they have lost their voice. Brussels is too far away. Europe is too big. And there are lots of people that feel sort of alienated from the whole process,” Klamer said.

The United States has a big stake in how the eurozone crisis plays out.

The EU is America’s largest trading partner. American companies, and banks, are heavily invested here.

US Treasury Secretary Timothy Geithner was in Europe on Thursday for economic crisis talks with Italy’s new Prime Minister.

But it’s not just US companies and officials who are looking on nervously.

The heavy metal group Metallica recently rearranged its world tour schedule.

The band’s management pushed up European tour dates in case people have no money to rock out six months from now.

Come to think of it, you can probably expect quite a bit of head banging in Brussels tomorrow should Europe’s leaders once again fail to offer concrete steps to stop the economic crisis.