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.

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)

The BBC’s Chloe Hadjimatheou reports from Athens.

So, far the steps the European government have taken to resolve the situation have come up a little short.

Anchor Lisa Mullins talks to Rana Foroohar of Time magazine about the prospects for the upcoming year.

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Lisa Mullins: I’m Lisa Mullins and this is The World, a coproduction of the BBC World Service, PRI and WGBH in Boston. America’s fragile economic recovery may depend less on the things being said in Washington and on those being made in Berlin, Athens and Rome. The European debt crisis has engulfed the 17 countries that use the euro and it’s already having an impact on this side of the Atlantic. So far the steps the steps the European governments have taken to resolve the situation have come up a little short. Rana Foroohar oversees business and economic coverage for Time magazine. She says the problem is that Europe is kinda like a dysfunctional family.

Rana Foroohar: Germany is the boring dad. He’s been working a desk job for 12 years. You know, he saved up a lot of money, and Greece and Italy, who are his teenage kids, have gone out and crashed the car. He nows has a choice to make. They’re his children, is he gonna pay for the damage or is he gonna say you’re on your own? And the Germans just have not made that fundamental choice yet, and it does come down to them because Germany and particularly Angela Merkel, is really the only, Germany is the only country and Angela Merkel is the only leader that can really bring this crisis to a close by unifying Europe by saying we’re gonna back the debt of the weaker countries if need be, and we’re gonna come together with a true political union.

Mullins: So then is Germany at least right now kind of you know, if it is that tough father, is it exerting tough love by resisting giving aid to the countries like Greece?

Foroohar: Well, that’s certainly one way to look at it and that’s the way the Germans would look at it. And you can see their point, you know, they’ve been very prudent. They’ve done a lot of hard work in the last 12 years. They’ve reformed their economy, their labor markets, they’ve become more flexible, they’ve saved, they’ve become incredibly competitive on the global stage. Their export machine can compete with China at much higher wage levels. So they’ve done all this hard work and you can understand why they look to the south and think well, why should we bailout these spendthrift countries? But here’s the rub: one of the reasons that the Germans have done so well is because they’ve been part of the union. They’ve been able to export a huge amount to the other Eurozone countries, the neighboring countries. Their weaknesses in some way have been Germany’s strengths. And they’ve benefitted during the boom days of the ’90s from this union and now they’re gonna have to pay the price, or not, decisions still have to be made.

Mullins: Well, we see Greece for instance, comparing the Germans today to occupiers in WWII. Is that fair?

Foroohar: Well, it’s absolutely not fair, but I think that the sort of political nature of that language really shows you how deep these divides go. The cultural divides. And you know, there is, I think what that touches on is this nervousness about Germany at the heart of Europe, Germany as a leader of Europe because you know, Europeans look at WWII. They think you know, what would a powerful Germany be like? But the truth is that Germany and France together were the countries that gave birth to the European Union. It was their steel and coal union in the 1950s that started the union. Germany is the only country strong enough economically to really lead right now and Europe desperately needs leadership.

Mullins: Is there reason to believe that in 2012 there will be solutions to this crisis? I don’t know if Germany or who you might say would provide them, but do you think they’ll be there?

Foroohar: Yeah, it’s an excellent question. I think it is going to come down to some really good brinksmanship on the part of Angela Merkel. If she can walk this incredibly difficult line and try to bring together France and possibly the UK, although you know, the UK looks like it’s slowly but surely sort of seceding from the union, which is another story altogether. But if she can do that, if she can sort of sit everyone down at the table and get some real cohesiveness and say okay, we’re gonna bail you out. We’re gonna back your debt, we’re gonna create some euro bonds, but in exchange for that you have to give up some political control and some fiscal control to the larger union, then I think that we will see solutions. But the problem is these issues go very deep for Europeans you know, they’ve been sort of a selfish union, a union that was born in boom times and was mainly economic. And now that things have gone bust they’re having problems with coming together as a real political union.

Mullins: Rana Foroohar, an assistant managing editor at Time magazine overseeing business and economic coverage, nice to have you on.

Foroohar: 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.

This has been a painful year for Greeks. It’s also been a painful time for Greece’s former prime minister.
George Papandreou stepped down in November – a casualty of the economic crisis that has battered Greece and much of the rest of Europe.

Mr. Papandreou talks with host Lisa Mullins about what lies ahead for Greece.

“This is a question of how we govern our world, not only Greece .. and how our citizens can be protected from … the moods of the market,” Papandreou says.

“No matter what good formulas we have as leaders, in the end if they don’t have the support of the citizens, they won’t work.”

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Lisa Mullins: I’m Lisa Mullins and this is The World, a coproduction of the BBC World Service, PRI and WGBH in Boston. The financial crisis in Greece is not over. This week officials held talks with creditors trying to convince them to forgive up to 50 percent of the country’s debt. That would help Greece avoid a default. Despite all the bailouts that is still a possibility. This has been a painful year for Greeks. They’re coping with drastic austerity measures. It’s also been a painful time for the former prime minister, George Papandreou. He stepped down in November after his call for a referendum on the austerity measures threw financial markets into turmoil. Well, today, Papandreou says a lot still hangs in the balance.

George Papandreou: Well, it’s been a crisis management year. In the end this is a question of how we govern our world, not only Greece, but the Eurozone. This is a question of democratic governments, how in fact, our citizens can be protected by the changes and the mood of the markets very often go beyond what we in nation states and democracies or control overseeing.

Mullins: In homes across Greece the austerity measures are taking hold, the ones that you pushed through at great political expense. Let’s talk about this new property tax that’s just begun to be levied with electricity bills in Greece. If people don’t pay their power, their electricity is going to be cut in the middle of the wintertime. How do you justify pushing this measure through parliament?

Papandreou: This property tax is a progressive tax, it puts the burden much more on the rich and much less on the poor, and if there’s somebody that doesn’t have the money then this will be taken into account of course, so that we don’t have problems concerning for example, cutting off the electricity. But those who do have the money, they will have to pay. Now, it should’ve taken place over the last 10-20 years.

Mullins: And very likely that Greece wouldn’t be in the position that it’s in today that you faced if it had taken place over the last 10-20 years. According to your own government there are 15,000 people who have defrauded the country of what would be the equivalent of $51 billion. These are tax cheats. How is that ever gonna change?

Papandreou: That’s not an easy thing because this is not simply a question of passing a law, it’s changing a whole machinery.

Mullins: Exactly, a whole mindset.

Papandreou: And even a mindset because of course, what somebody would say, why should I pay taxes when these big shots here that have a lot of money just are able to beat the system, so why should I be the one to take the fall? So I think there’s a sense of justice we have to restore inside our society. And I think this is a wider issue around the world now, is with the financial crisis, you can see this with the banks, you can see this with the financial system, why people are saying you know, why am I taking the fall when these other guys are able to get away with murder in a sense.

Mullins: Hindsight is 20/20 of course, but do you regret offering to put out the austerity measures to a referendum to a democratic vote?

Papandreou: Not at all, I think that putting out this to referendum would basically say the Greek people have their fate in their own hands. We would make a decision, it would be a serious decision. I believe we would have won the referendum in the fact that Greek people would have said yes, we do want to remain…

Mullins: Well, that was the big question because if it didn’t win then the domino effect would take hold and everything else might collapse, that was the fear.

Papandreou: Well, that would’ve been a democratic decision. That would’ve been a decision of the Greek people if they didn’t want to remain within the euro…

Mullins: But it would affect…

Papandreou: That is not take on the responsibilities, that would be the question, not the euro itself, but that would’ve been a democratic decision which everybody would’ve had to respect.

Mullins: Right, I’m sorry, but Italy would’ve had to respect it, Spain would’ve had to respect it, Germany and so on.

Papandreou: Absolutely, but this is important because we have to realize that living in a globalizing economy there are forces that go beyond politics and beyond our democracies. And that’s undermining our sense of empowerment that the Greek or other people should be feeling. No matter what good formulas we may have as leaders, in the end if they don’t have the support of our citizens they will not work.

Mullins: You’ve got two children and I wonder, since you are the third Papandreou to lead Greece, when you look to your children whether or not they become leaders themselves, how will you describe this period for you as prime minister, now former prime minister, in a country in crisis?

Papandreou: My family tradition is a struggle for democracy. My grandfather was jailed. He was almost executed six times in his life, and exiled fighting for democracy. My father was jailed twice again, by dictatorships fighting for democracy. I lived as a young kid in exile — Sweden, Canada, the United States, England, in different parts of the world until the dictatorship fell. I think we have very important decisions to make and but this is not just a Greek problem, these are problems now that the world around talk about and I think that’s why we have movements like the Occupy Wall Street or Occupy Democracy in the states and other parts of the world where the younger generation is saying you know, we want a voice. And we should give them a voice.

Mullins: Are you gonna run again?

Papandreou: That’s another question, I’ve been running all my life, but not always in politics; running for different causes or running for what I believe in. I’ll stay active, but how I will, that’s a question that I’ll have to answer at some point.

Mullins: George Papandreou, former prime minister of Greece and the leader of the Greek Socialist Party, very nice to talk with you.

Papandreou: Nice talking to you and I wish you the best for the holidays that are coming up.

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Energy costs are hard enough to pay in winter and some people are refusing to pay.

Anchor Marco Werman discusses the impact this is having with the BBC’s Chloe Hadjimatheou in Athens.

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Marco Werman: Many people in Greece are strapped for cash and they’re now parting with even more of their hard earned money. As part of the deal with its creditors the Greek government is raising taxes on a whole range of things. For example, it’s hoping to raise two billion euros by the end of the year through an emergency property tax. That tax is being added to homeowners electricity bills in an attempt to reduce tax evasion. But some people are refusing to pay saying it’s just not fair, especially with winter coming on. I spoke with the BBC’s Chloe Hadjimatheou just back from Athens. She says the government is determined to force the issue.

Chloe Hadjimatheou: No one as far as we know has been cut off yet. The government has extended the deadline specifically so that people won’t go without electricity over Christmas. But they have said they will cut people off if they refuse to pay and we’re gonna start seeing people cut off in January, although now groups of activists have started forming. Specifically, electricians have started gathering together and calling themselves electrician activists, and they vowed to reconnect anyone who’s being cut off.

Werman: Right, and at least one neighborhood that you went to, those electricians are actually getting some surreptitious help from the mayor. What’s happening there?

Hadjimatheou: Well, the mayor of [inaudible 1:13], which is quite a poor district in northern Athens has created an office in the town hall for people who can’t afford to pay, and also people who are refusing to pay, to go and seek legal advice. And parallel to that he has gathered together a group of these activist electricians and he has vowed that anyone in his district that’s cut off will receive help from an activist electrician. I met one of these electricians who told me that he’s had advice from the national electricity company, from employees there on how to go about making these reconnections. So they’re prepared and they’re ready to go ahead and illegally reconnect anyone, and they’re prepared to take the consequences too.

Werman: And what are they doing, taking you know, automobile jumper cables from power lines and just hooking them up to the house?

Hadjimatheou: In fact, this electrician showed me how it’s done. It seems that their is a little spark plug inside the electricity box that the electricity company would come and remove. So they’re prepared with these little spark plugs to go and reinstate them in the electricity boxes. It’s that simple really.

Werman: Won’t the utility companies figure that out? Can’t they see you know, if juice is going to a disconnected home?

Hadjimatheou: They probably can and it may end up as a little war of spark plugs.

Werman: Well, for individuals it doesn’t sound like it’s going to be necessarily a dark Christmas, but certainly a bleak Christmas this year in Greece.

Hadjimatheou: Yes, may people feel very upset about this and although the government is saying that they have collected about 80 percent of the taxes they have sent out (so many people aren’t prepared to take the risk), there has been a very large backlash. And people are sitting and waiting to see if they will be disconnected next year. Many people say they feel they’re being blackmailed by the government and they just won’t play that game.

Werman: The BBC’s Chloe Hadjimatheou, thank you so much.

Hadjimatheou: 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.

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.

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The industry used to be full of high-fliers and to an extent, it still is, but this year, thanks to continuing economic turmoil and the “Occupy” protests bank bashing appears to have reached new levels.

With all the uncertainty over the Euro and the continuing economic gloom in Britain, it’s been a stressful year on the trading floors of the big banks in London’s financial district; apparently a little too stressful for one senior bank executive.

The surprising news broke at the beginning of last month.

“Shares in Lloyd’s Banking Group have fallen by almost five percent after its chief executive announced he was taking long term sick leave. Doctors say that Antonio Hortas Osorio is suffering from fatigue due to overwork”, said the BBC.

Hortas Osorio was recruited to run Lloyd’s earlier this year, after British taxpayers bailed out the banking group in 2008. His may have been the most high-profile case of banking sector stress but addictions counselor Richard Kingdon, said he’s certainly not alone.

“Especially with the climate at the moment is not helping as well, you know. A lot of people are under a lot of stress and a lot of pressure. It’s not a good time to be up here at the moment, you know. The bankers are being kicked by the media so I don’t think it’s doing much for people’s esteem,” said Kingdon.

Kingdon set up a practice, called City Beacon, in the financial district two and a half years ago to treat bankers with addiction problems. He said he has seen a steady flow of clients, those who embraced a fast paced, big spending lifestyle fueled by alcohol and cocaine.

George, a banker who asked me not to use his real name, is a client of Kingdon’s. He said when he was using, he’d be out doing drugs and drinking every night of the week. He would then spend the weekend sleeping.

George said he has been clean for two years; so he has a pretty clear-eyed take on the tumult in the City these days. He is also quick to add that there’s been much less substance abuse in recent year, but he says not everyone has the ability to handle the financial storms that are hitting them.

“Everybody’s losing money, it’s not a very happy place. There’s a lot of fear, uncertainty. I’m pretty fine with it. I don’t know how they (other bankers ) cope with it. You wouldn’t get the truth out of them anyways. They’d just tell you they were fine. The whole city’s based on fear anyway,” he said.

Those inside the bank buildings may well feel fear, but it seems many who work outside its boundaries believe it is a place where the greedy squander money: taxpayers’ money. They saw the government bail out some of the banks, then watched as bank executives were rewarded with bonuses.

Just a few weeks ago, the BBC aired a documentary called “When Bankers Were Good.” The host, satirist Ian Hislop, made special mention of the suicide of one banker back in 1856 after his bank went bust.

“You see it’s that Victorian shame again. Noone is suggesting that those responsible for the current financial crisis should do the equivalent and all go and throw themselves off tall buildings in Canary Wharf. Well not all of them obviously. But as a sign of repentance it is fairly impressive. Certainly a lot more convincing that giving yourself a bonus and saying it’s time to move on,” Hislop said.

Vilified, stressed and scared, it does not sound like a good time to be a banker, but many young people are still itching to get onto those trading floors.
A twenty-one year old intern, who refused to be identified, said he loved the work.

“The worst thing I could imagine is sitting at a desk just processing or number crunching. At the moment I’m sitting there and I’m hearing news first hand and I’m seeing how markets react first hand to some huge events in the current crisis. It’s very exciting,” he said.

He said he worked hard to get the one-year work experience. Though he hears the public anger aimed at bankers, it that does not deter him from planning a career in banking.

“I think there’s a lot of other people in this country and around the world that exploit the public and public opinion a lot more than bankers do, but people have chosen to publicize bankers as the public hate figure and almost scapegoat them for everything,” he said.

A more world weary George who has spent two decades in the business, admits to feeling the sting of the public’s condemnation.

“Yeah I do feel that. It’s not very nice is it, to be in a job where nobody likes you,” George said.

He does not thing the criticism is justified.

“I don’t’ think I’m educated enough to really comment on it, but I don’t think it is. We’re good for the economy, but it’s easy to point the finger at us, I suppose and maybe it should be the politicians.”

In the runup to Christmas, thousands of city workers flocked to bars and restaurants, celebrating the season, perhaps toasting their survival and relative good fortune, but Geroge said the uncertainty lingers.

“2008 was hard, but then 2009 was good because of it so – and now? Same sort of thing is happening, we’re weathering the storm as we did in 2008 but the next couple of years will be good because of it. It’s tough these day.”

The New Year is not likely to change much for those who work and worry on the trading floors and the executive offices of what is still is one of Britain’s most important sectors.

They also know it’s unlikely many in Britian here will spare them a vote of sympathy.

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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.

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Marco Werman: Okay, so economists warn that the collapse of the euro could have a big negative impact on the American economy. That’s an especially worrisome scenario for many in the US who own small businesses. Kim D’Amato is the owner of Priti NYC, a company that specializes in eco friendly luxury nail polish. She says that while her main worry a few years ago was the US economy, she’s now concerned about Europe.

Kim D’Amato: I started off with the first organic spa in New York City and from there I built my product line. And just as I was growing and things were getting great the economy fell here. So I had to choose whether I was going to turn it into just a product line or keep it as the spa business. And I chose to do the product because I knew I could sell all over the world and then attack the European market, which wasn’t having the same sort of problems we were.

Werman: Right, and that was what, 2008, things started tanking.

D’Amato: Yeah, 2008 things started tanking and it was a choice I had to make. And I looked towards the international market for sales because the economy here, the small businesses that I deal with were already falling down. So I looked towards the European market and tried to get in there with a lot of small businesses and it started working.

Werman: So does that mean that most of your clients are in Europe right now?

D’Amato: A lot of yes, I’d say 50% of my business is overseas right now.

Werman: So what does that mean if things go really bad with the euro, how does that make its way back to you?

D’Amato: Well, you know, it’s kind of like a domino effect because I use small businesses to make my creams and my scrubs, and the things that I need to surround my polish line to keep it so it can go into a spa as well as a retail situation. And those people you know, create everything for me. And when my sales are huge they have business as well, so it’s like I’m supporting other small businesses. So when the sales go down all of us are going to go down and it’s really worrisome.

Werman: If the euro tanks does that mean that Europeans just stop buying from you?

D’Amato: Yeah, I think it’ll be a whole major slowdown exactly like we saw here in the states a few years back. I’m finding more sales from the eastern block right now. I haven’t really seen the slowdown over there right this moment, but I’m very worried because small businesses again are going to be the first to go down. So, it’s something that we’re all kind of sitting on the edge waiting to see what’s going to happen.

Werman: Do you know other small business owners in New York like yourself, are they all anticipating a similar impact on sales?

D’Amato: I think so. I know a few of them. Not a lot of people I know sell internationally like I do. I have you know, a very unique product that sells all over the world, no problem, and I live between France and America. But yeah, friends of mine who are selling overseas you know, they started in Japan and they fell through that whole disaster that happened over there. They lost all their clients. I myself lost some of my Japanese clients through that. I mean it feels like the world’s disasters and the world economy is affecting every small business as I know it.

Werman: So what is your strategy to cope with the potential loss of customers in Europe? Are you cultivating other markets?

D’Amato: Yeah, I’m thinking you know, it seems the eastern block is working okay. I don’t know why that is picking up so fast, but it seems to be doing very well. But of course I’m looking towards Australia and maybe Korea and China, and all those types of countries that seem to be opening their markets to all the new ideas of business.

Werman: I mean eco friendly luxury nail polish isn’t exactly niche anymore, but you know, is it the kind of thing that can culturally make the jump to other markets?

D’Amato: Yes, definitely, I mean nail polish and lipstick, you know what they say — in a recession these two things, the sales of them never go down. And if you look the sales of both of these products are through the roof right now. So it’s a very interesting market. And you know, the reputation of the product and the quality of the product is what really keeps it going.

Werman: And sales are up here in the US but not in Europe?

D’Amato: Sales are up in the US and sales in Europe are very smooth right now. They’re not jumping extremely high and they’re not dipping extremely low.

Werman: Kim D’Amato, the owner of Priti NYC, thanks a lot for your time.

D’Amato: You’re very welcome.

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Euro banknotes (Illustration: Andrew Netzler)

German Finance Minister Wolfgang Schaeuble has said Standard & Poor’s (S&P) threat to downgrade eurozone countries is the “best possible incentive” ahead of Friday’s summit.

S&P put almost all eurozone countries on “credit watch” on Monday.

European leaders are meeting this week to save the common currency but in the Netherlands, some say enough is enough – it’s time, they say, to ditch the euro and go back to the guilder.

It’s a cold, wet day at the Albert Cuyp Street market in Amsterdam, one of the best places in town to grab anything from waffles, to sexy underwear, to an antique armoire.

When I ask a vendor who sells gloves, scarves and hats how’s business, he responds that it’s as gloomy as the weather.

“People spend a lot less,” said the vendor who didn’t want to give his name. “But food is more expensive, everything is more expensive.” He said people don’t have money left to buy anything.

To add to the misery, he said, the Dutch are now being asked to bail out the Greeks, the Portuguese and the Irish.

Like many here in The Netherlands, the vendor blames the euro. He said the Dutch guilder was one of Europe’s strongest currencies when the switch was made in the late 1990s.

“We sold our guilder too cheap,” the man said. “That’s what I think, and a lot of people think that. Give me back my guilder.”

Mathijs Bouman, an economist and author, said that looking back, the year before the euro was introduced, “Seventy to eighty percent of the Dutch people were in favor of the euro introduction.”

He said the Dutch loved the guilder, but let it go in the name of being good European partners.

Bouman said he understands why , in this time of crisis, some are nostalgic for the old currency. But for Holland, there’s no turning back.

“Abandoning the euro would destroy our economy,” Bouman said. “Especially in the Netherlands, if you look at multinational firms for instance, our banks — they’re really embedded in the Euro system. All their debts and assets are in euros, and we don’t know what will happen if we break it up. How does the old saying go?  You can’t unscramble a scrambled egg.”

To prove his point, Bouman recently appeared on Dutch television. He grabbed a bowl, some eggs and a whisk and made, you guessed it, scrambled eggs.

But that isn’t stopping some from proposing ways to unscramble the Euro.

One idea floated by Dutch politicians is for a “northern Euro,” or “Neuro.” It would only include northern European countries on sound economic footing. The Dutch would get in because, in the words of one politician, “We Dutch are able to control ourselves.”

But this week, the ratings agency Standard and Poor’s put the Netherlands and other members of the Eurozone on alert, by warning of a possible downgrade of the credit ratings of the bloc’s strongest economies.

“It was a very clear sign telling us — you, northern part of Europe — don’t overestimate yourself,” said economist Jaap Koelewijn. “Your budgets are also going out of control, if you don’t take care. Your banking system is at risk.”

Koelewijn added that European leaders probably need to pony up more than $5 trillion for the European bailout fund in order to calm the markets and keep economic contagion in check.

But Dutch economist Arjo Klamer said that the price tag for keeping the Euro together is too high. To be clear, Klamer’s been against the euro from the beginning. Without a true political and fiscal union, he argued at the time, there was no hope for a single currency.

Now, Klamer said, just throwing money at the problem doesn’t address the real underlying issues – namely, that the economies of the various Eurozone countries vary so widely.

“Economies are dynamic,” Klamer said. “Things change and you need to have an institutional framework in place that can account for those dynamics, and has the space and flexibility to adjust to what’s happening.”

Klamer contends that future growth will center around cities and regions in Europe, and not around any kind of supra-national political or economic entity.

“With one Euro you become like a fortress in the world, and you stand firm with a huge market and you can position yourself vis-a-vis China and the United States. I think that’s an old-fashioned idea that comes from the 19th century. In the future, we shouldn’t think in terms of these huge powers.”

Like everyone else in Europe, the Dutch will be paying close attention to meetings of European leaders scheduled for Thursday and Friday in Brussels.

I asked economist Mathijs Bouman what he thinks will happen.

He urged me to watch the “chicken” scene in “Rebel Without a Cause,” the one where James Dean’s counterpart gets his sleeve caught and can’t bail out in time.

The Euro is just like that, he told me; one small mistake at this point and the car will go right over the cliff, and the Dutch along with it.

“And,” he added with a grin, “I’m an optimist.”