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Stephanie Flanders: Simon sort of bringing this down to Earth a little bit from the business
perspective and from a British perspective, looking from the outside.
Are you worried by the direction this is taking, even as a businessman looking at Europe, but
also even these questions of discipline, if people do end up restructuring their debt,
are you worried about the implications of that?
>>Simon Wolfson: Yes, I'm worried about. I'm really worried about it.
I think the term "bailout" is wrong in all the ways that David and Joseph have described,
and they are exactly right. But where it's right is as much as we are bailing these countries
out, there's still a great big hole in the bottom of the canoe. And all that's happened
is all we're doing is we're pushing taxpayers' money into the canoe and paying the banks
back. That is all that's happening at the moment.
And until we recognize the fundamental fact that actually a lot of these countries can't
pay back all the debt that they owe, until we do that, this crisis is not going to end.
All that's going to happen is that governments will continue pouring more and more taxpayers'
money into those countries. And that's very worrying for the whole of Europe and for the
whole world's economy. And my worry is the whole Euro project was
based on two misunderstandings. The first was a business misunderstanding, that somehow
having one currency would encourage trade and stimulate growth. Neither of those is
true. As a businessman who buys in lots of currencies
and sells in lots of different currencies, I can tell you that currency is simply not
a barrier to trade. The world's future markets are such and are cheap enough that actually
there is no real risk in dealing in other currencies unless you have got someone in
the market hugely distorting a currency market. And that is what the Euro essentially is doing,
because the other great myth is that it would bring stability. And of course the Euro has
brought the opposite of stability to Euro's own countries.
If you look at the countries in trouble now, they are the countries that were doing brilliantly
six, seven, eight years ago when interest rates were artificially low in those countries,
inflation was high, and in fact in Ireland you had a one way bet. You could borrow money
from the bank at 3, 4 percent and put it into housing which was rising at 10, 15 percent.
And countries that do that would normally be punished by the value of their currency
would drop and their interest rates would go up. Because they were part of the Euro
that, didn't happen. Now, it didn't feel so bad when that was happening,
but what is happening now is the opposite. They are now locked into a situation where
their debts are repayable in a currency they can't afford to pay it back in, and interest
rates are actually too high for those countries, and there's no way out. Only pain.
And what needs to happen, listening to everyone today, it's very simple what needs to happen.
The countries that can't pay back their debt need to have that debt restructured and then
they need to float the currency. Because that's the only way that places like Greece are going
to be able to become competitive again and that is by devaluing their currency and allowing
export business to tourism business to take off and to get growth back into that economy.