On Europe’s debt crisis

Below is the video clip from 60 Minutes giving the average viewer a better sense of what is going on in Europe right now. The video is timely given the problems Spain and Italy are having with their government debt levels rising. Spain is the country to watch, though.

Yanis Varofauakis,a Greek economist featured prominently in the program, alerted me to his comments about the program on his blog. Yanis had this to say [highlight added]:

I very much fear that the viewer was, in the end, short-changed. Yet again the Euro Crisis was reported in a manner that leads the audience to the conclusion that the problem with the eurozone is that some countries accumulated too much debt and that, now, Germany has the unenviable task of bailing them out; a task that puts it in the difficult position of having to impose strict conditions before it dispenses its citizens’ hard earned money. While the program was sympathetic to the suffering Greeks, the underlying analytical message was simple: Bitter medicine must be dispensed, Germany is dispensing it (courtesy of being the only country that has the funds to bail the rest out) and, alas, Greeks and assorted southerners (plus the Irish) are unhappy about the loss of sovereignty involved (an unhappiness that is heightened by the memory of the Nazi occupation).

This analysis is precisely wrong. During my long interview with Steve Kroft (out of which came the snippets that you see in the piece) I put all my energy into offering what I consider to be the true causes and nature of the Euro Crisis; the way that eurozone was constructed, the prior flow of rivers of private (bank created money into the Periphery, the internal imbalances which have been growing in Europe, its dependence on the US deficit etc. Of these, only the statement “we are part of a currency union which was never designed to sustain such a crisis” made it. But disconnected from any explanation of what I meant, and how it pertains to the failure that is the current bailout-austerity policy mix, I suspect that the viewer had no chance of understanding my point, or using my narrative as a counterweight to those of Mr Schauble and Ms Lagarde.

All in all, CBS did as good a job as I ought to expect. Perhaps it was too much to expect a more nuanced program from a US channel, when Europe’s own media are far cruder and less analytical. Nevertheless, while fearing a worse piece than the one that transpired, I was hoping that my own Channel 4 effort (which brought me to CBS’ attention) would have inspired CBS to aim slightly higher.

Postscript: To all journalists reading this, and who may be interested in some advice on how to report (and how not to report) the Euro Crisis, see this article(which was commissioned by the British Journalism Review, and appeared in its March 2012 issue).

More here.

Also see this week’s newsletter for more on this using the financial sector balances framework of Wynne Godley.