ROBERT SIEGEL, HOST:
Greece holds parliamentary elections next month because the elections earlier this month failed to produce a governing coalition. The two big parties that had signed on to Europe's austerity terms no longer account for a majority of the seats in parliament. The big new player, coming in second was the Coalition of the Radical Left, or Syriza, which opposes Europe's terms for a bailout, but says Greece should continue to use the euro.
Euclid Tsakalotos is a top economic advisor to the coalition leader, Alexis Tsipras. He's an economics professor at the University of Athens. And Mr. Tsakalotos joins us now from Athens. Welcome to the program.
EUCLID TSAKALOTOS: Thank you very much. It's a pleasure to be with you.
SIEGEL: Greeks say they want to remain in the eurozone, your party says Greece should remain in the eurozone, German Chancellor Merkel says Greece should remain in the eurozone, but you remain very far apart on terms for Greek doing so. At this point, should Greece be making contingency plans at least for dropping out or being forced out of the eurozone, and using its own currency again?
TSAKALOTOS: Well, before we get to contingency plans, I think we should try to change what's been going on in Europe for the last two or three years. The continuation of a vicious cycle of austerity measures leading to recession, leading to calls for new austerity measures doesn't seem to be working in Greece. It doesn't seem to be working in Spain or Portugal and Italy. And the Greek people have said that austerity can't be the answer.
SIEGEL: Can you imagine a European solution that would be a mix of some economic stimulus or some debt forgiveness from the E.U., but still include compliance with the cuts in the minimum wage, public payrolls, and other public spending that the last Greek government agreed to?
TSAKALOTOS: I think the euro is in desperate trouble. No fixed exchange rate system can last at long period of recession, stagnation and lack of growth. Eventually peoples will react. Eventually people will say there must be a different way and that is the beginning of the end of the fixed exchange rate system. So either Europe will change direction or the eurozone will collapse - and we don't welcome that.
SIEGEL: But most of the solutions that are proposed, including eurozone-wide Eurobonds, say, would amount to German taxpayers - by accepting to pay much higher interest rates - picking up much more of the tab for all of southern Europe. Angela Merkel's party, speaking of elections, has been losing them these days because German voters think that they're already paying more than their fair share for Europe.
What do you say to their democratic realities?
TSAKALOTOS: If there was a breakup of the eurozone and there was a larger Deutsche Mark zone, then that Deutsche Mark would be severely appreciated. And the impressive export performance of the German economy would dwindle very rapidly. I mean, the United States is a monetary union. If Mississippi is in desperate trouble, then funds from the federal budget go to Mississippi. And not only that but the bonds that paid for that help are paid from people from California, from New York, from Vermont and so on.
Now, most economists think that a monetary union is not viable without a proper central bank, without some kind of fiscal federalism, and it's not viable without economic policies being carried out according to European-wide conditions and not the conditions that are currently held in Germany. Everybody wins something and loses something from a monetary union.
In the period running up to this crisis, where the current account deficits were in Spain and Italy and Greece, where we were buying German goods and also the Germans were gaining by lending us the money to finance our current account deficit.
SIEGEL: But one reality of fiscal federalism in the United States is that while, yes, the U.S. borrows nationwide, so do the states, but Mississippi has to balance its budget. And that's in effect what they've been telling you - you'd better get your fiscal house in order in Greece.
TSAKALOTOS: But there's two issues there. We can look at fiscal rules, if we have fiscal federalism but were not in normal circumstances. We're in moments of recession. This is what Hoover said in America in the early '30s, that in a recession you should balance the budget. And everything we've learned since then and in the experience after 2008, that when you're in a recession is not the time to be thinking about balancing the books.
I would say to the German people that we are not really demanding much more than they gained in 1953 when their debt problem was dealt with by the great powers. And they reached an agreement not only to have a Marshall Plan to get the economy going, but also that German people would pay back their debt according to economic conditions. What does that mean?
That in periods when there was greater growth they would pay back more. And in periods or in years that they had less good performance, they paid back less.
SIEGEL: Germans point to some pretty recent history. When West Germany absorbed the broken economy of East Germany, the whole country paid for it in stagnant incomes for several years. They say, look, we suffered - you've got a broken economy now, you've got to pay for it. It may mean suffering. What do you say to them?
TSAKALOTOS: Well, I'd say I would remind German people of a different episode in their history. In 1918, Keynes said to the great powers - to America, to France and Britain - don't bring Germany to her knees. If you insist on reparations, if you insist on pain, then what you'll have is a Germany that is defeated; a Germany whose economy is in tatters and that will lead to problems. And Keynes was right.
In the 1920s and '30s, we had recession. We had hyperinflation. We had vast unemployment and, as you know, that led to fascism and to war. So we have a lot to learn from history. And the major lesson of history is you don't bring an economy to its knees to help it. It's not good for that economy and it's not good for you.
SIEGEL: Well, Professor Tsakalotos, thank you very much for talking with us.
TSAKALOTOS: Thank you very much.
SIEGEL: Euclid Tsakalotos is an economic adviser to the coalition of Alexis Tsipras, leader of the Coalition of the Radical Left in Greece. Transcript provided by NPR, Copyright National Public Radio.