French President Nicolas Sarkozy was interviewed for 75 minutes during prime time viewing in France on TF1 and France 2, explaining what he did and Brussels and why it was so important for France. He said "Mon travail, c’est de protéger les Français" – My job is to protect the French people.
The French paper L’Express live-blogged the event and I just wanted to fill you in on the critical passage right at the outset of the interview that everyone has been talking about regarding the Greek default, the CDS and the euro. My translation of the L’Express live blog below.
8:16 p.m.: Yves Calvi asks the first question: Are we out of the crisis or we have just plugged a hole? "If there had been no agreement last night”, Sarkozy said “the world would have headed toward disaster." Pour comprendre le sauvetage de l’euro en 10 leçons, cliquez ici.
8:18 p.m.: Nicolas Sarkozy explains why Greece could not be declared bankrupt. It had 200 billion euros of debt and was unable to repay it. If it went bankrupt, everyone would have gone down, he said. "The entirety of the euro area," he said. We had to solve the problem of "Greek debt sustainability" by forcing the Greeks to make efforts, but efforts to enable them to repay. They could not repay 200 billion and so the banks have been asked to reduce their debt by 50%. Greek debt is now 100 billion. And all this with the agreement of banks.
Analysis. The problem is whether it was a voluntary agreement of the banks. The banks were not really "volunteers" in erasing half of the Greek debt. They wanted to limit the bill to 40%. European governments, Merkel and Sarkozy in the lead, had to threaten to bankrupt Greece to convince them to "accept" this voluntary writedown. They then had their arm twisted more and were asked to smile to boot . Involuntary writedowns would indeed trigger payment of insurance, the so-called CDS, which may, as in the case of Lehman Brothers, open a veritable Pandora’s box. Does the agreement settle all risk of a Greek bankruptcy? No. Risks remain. If only because the Greek economy is still in recession …
8:20 p.m.: Sarkozy says it was a mistake to admit Greece into the euro area. The numbers were wrong, "the economy was not ready." But once it was done, we had to accept it. "Europe is a family," he said, and we do not let family members fall. A team of European negotiators will be present to ensure that Greece is making efforts, including on tax evasion.
Short video of Sarkozy in action at another point in the conversation below. [Update 740AM 28 Oct – The short video is now replaced with a full video. Hat tip to Oldrich]
Source: Revivez le "Sarko show" minute par minute – L’Express