Transcripts For CNNW Your Money 20120506

in the last two years, 13 governments in the european union have either collapsed or been voted out of power. today, french president nicolas sarkozy is caught in a runoff with francois hollande that cast him his job. under sarkozy, france's unemployment climbing to 10%, while economic growth ground to a halt. also today, greece, a national election taking place in a society crushed by debt. greek unemployment now at 21%. up from just 9% before bailouts and austerity brought protesters to the streets. and as no other network can, we brought together cnn's best from around the world. veteran business correspondent john defterios from abu dhabi, he'll break down what you need to know. jim bittermann is live from paris at the headquarters of now defeated french president nicolas sarkozy. he just conceded to socialist francois hollande. matthew chance is in athens at the center of an election that also took place today, greek voters deciding whether they are willing to accept tough cuts to deal with the country's enormous debt. a greek default could crush america's own slow recovery. al goodman is in madrid, a country closely watching these election results with all of you. the unemployment situation is tough here in the u.s., in spain it's much worse. youth unemployment now above 50%. diana magnay is in berlin, up until now, germany has been the backbone of europe's economy and the main architect of austerity. is it going to be the next one to fall into recession? with me in new york, breaking down what europe's crisis means for the united states, christine romans, host of "your bottom line" and christie freeland, editor for thomsons reuters digital. today they fired french president nicolas sarkozy. he will be replaced by socialist francois hollande. sarkozy becomes the highest profile european leader ousted during the region's economic crisis. cnn's senior european correspondent jim bittermann joins us live from paris. jim? >> reporter: you know how they say you should have been here a day ago. you should have been here an hour and 15 minutes ago. this place was packed with sar k cozy supporters thinking he had a chance to win and he didn't win. he conceded defeat almost immediately when the numbers came from the television networks across the country, the exit polls. here is a little bit of the concession speech he gave to the followers here. >> translator: trance hfrance h republic, a new president, this is a choice. francois hollande is the president of france and must be respected. >> reporter: and while the crowd here is thinning out, one of the things that sarkozy said was that he was going to remain engaged in politics and that was a reference to something that is going to come down the line here in about five weeks' time. 10th of june, first round of the legislative elections here and these people, the folks that were here supporting sarkozy, very narrow defeat for sarkozy, and, in fact, they'll be out working to win seats in the parliament here in france. and that could lead to something that is even worse than what they think the hollande government will bring and that's gridlock. because as you know in the united states, when you have a congress of one party and a president from another, not a lot gets done and it could look like -- it looks like that is what we're headed towards here in france if these legislative elections come out the way these people would like tonight. >> that is why we're doing a live show about this for our u.s. audience because in are looking at europe today to wonder what this means for us. stand by, jim. we'll be back to you in a moment. look at this map of europe. the countries highlighted in yellow are all back in recession, including spain, greece and the united kingdom, notably france isn't there. 12 european countries all together are in recession and that is raising concerns that our sluggish recovery could fizzle out. europe taken as a whole is -- as large an economy as the united states. so all eyes are on jobs. people losing jobs don't spend money. they don't buy american made goods or services. christine roman has come armed with numbers about the comparison in unemployment. christine in. >> unemployment here in the u.s. currently 8.1% as you know. situation in most of europe is far worse. look at the 17 countries where they constitute the eurozone and use the euro as the currency. unemployment is at the highest level overall since 1999. and spain's jobless rate is above 24%. italy is at a 12-year high, almost 10%. greece, portugal, ireland, all above the 14% mark. greece, almost 22%. the three largest economies in the eu are faring a little better, ali. france has a 10% unemployment rate. germany, 5.6% unemployment. britain, which still uses the pound, is not a member of the eurozone but a very important demographic in all of this, it is at 8%. clearly tough times for europe and the concern is if you have fewer euros or pounds in your pocket, you're not spending them on american made goods and that slows the u.s. recovery as well. >> we talk about a spillover effect, it is not like a cup of coffee that spills over and you have coffee on you, it has to do with whether or not you as a country are doing the right things to brace for this coming storm. to john defterios. when it comes to the economy, greece is a country that has quite possibly done about everything wrong. the government agreed to tough cuts in exchange for being bailed out but voters are not happy. today they are expected to try and slow if not halt those cuts altogeth altogether. explain, john, to our u.s. audience the scope of the problem, just how much trouble is greece actually in. >> it is in a league of its own. you think of a recession in europe or the united states, you say 12 to 18 months of recession. greece right now is in the fifth year of recession. it is hard to compete with anybody else in that sort of figure. fifth year of recession, expected to contract another 5% in 2012 after contracting 5.5% last year. look at this number this is quite shocking. this is the way you saw greece going to parliament square, protesting against the austerity cuts. the gdp lost 20% alone since 2009. christine signaled greece in terms of the overall european map of the unemployment situation. if you single out the youth unemployment in greece, it is dire. one out of two greeks between the age of 15 and 24 without a job. 51.2% the unemployment rate at 21.7%. the big question now, this is why people in the united states have been focusing on this what happens next? will greece come out and see the light at the end of the tunnel? if you look at the debt to gdp, the answer is no. 2011, the debt to gdp, highest in europe, at 165%. if you roll back the clock on the greek debt to gdp, it was at 120% in 2008. look at this, ali, roll the clock forward to 2020, the greeks will be where they started back in 2008 at 120% of gdp. t greeks on the ground today when they were voting and they had two huge columns of the parties getting 80% or more, the early exit polls show they're getting a third and that's the reason why. they say we have all this austerity and really nothing at the end of the tunnel to show for that austerity in a ten-year period. >> once again, a topic interesting to our u.s. viewers. if you're going to take some pain, many people would like to see there would be some gains, some recovery and that's been something so difficult for politicians to show the greek people and it is a difficulty to continue right now. john, stand by. joining us overlooking parliament square in athens is cnn's matthew chance. how is it going over in athens now? >> reporter: it has been a political earthquake here, nothing short of it. the traditional party as john was saying there that dominated greek politics for the last three or four decades, they have been essentially swept aside by the greek electorate. polling just about making it in double digits. it is incredible the a support that flowed away from them. the parties that have benefited are on the fringe of the greek political debate. the communists, people like that. it really is a huge protest vote against the austerity measures that greek people had to endure. this is the first time in two years that greeks had a chance to make their opinions heard at the ballet box and they delivered an absolutely devastating message to those traditional parties, those supporters of the austerity measures, the ones that pushed them through and imposed them on the people of this country, they're looking elsewhere it seems for solutions. >> here is the problem, matthew, our viewers will be more familiar with the unrest in greece than anywhere else. it was more clear that voters in greece didn't like any of this. you remember last year, we would see those rites in the streets of france. what now happens? the greeks said we don't like this austerity, but their government won't be able to get any further in terms of loan guarantees. they owe so many people so much money. what happens now? >> reporter: much of it depends on what the outcome of this election is tonight. we haven't had the results in yet. we just had exit polls. the votes are still being counted. it is a very complex political system as well. it is proportional representation. the seats will be distributed according to the percentage that each party has. it is when we get the final seats, we can add up the numbers, no single party will get an outright majority, but will there be enough seats among the parties that support austerity? need 151 seats between them. will there be enough seats between them to continue greece standard's path of austerity or is this country going to do a u-turn f it reneges on its commitments that is going to send shock waves not just through greece, but throughout the rest of the world and certainly the united states. >> very important question, not just what people want to happen, it is what is possible to happen. matthew, stand by there as you rightly point out. we're waiting for the results in greece. we have them from france. nicolas sarkozy who you see her in his car driving away, has conceded victory to francois hollande, a socialist. very fast to concede before all the votes were counted. he knew it was over for france, one of the largest economies in the world. big questions if francois hollande will do what he said he's going to do and how the world and the markets and 401(k) will respond to that. up next, insight and later live to madrid and look at spain. one country in europe did most things right and still got dragged under by the financial crisis. this man is about to be the millionth customer. would you mind if i go ahead of you? instead we had someone go ahead of him and win fifty thousand dollars. congratulations you are our one millionth customer. people don't like to miss out on money that should have been theirs. that's why at ally we 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[ male announcer ] we are insurance. ♪ we are farmers ♪ bum, ba-da-bum, bum, bum, bum ♪ you're watching a special live edition of "your money," covering the election results in france and greece. if you just joined us, the french president nicolas sarkozy has conceded defeat to his socialist rival francois hollande in paris. we're waiting for final results in greece. it seems that both nations are rejecting austerity. the idea of government cutbacks because of the pain that it is causing on the ground. john defterios is in awe abu dhabi. christine is with me here in new york. christa freeland, at thompsons reuters. what is going through your mind as you watch this. >> to me, the most important question is does this trigger a new round of the euro crisis. you've been making parallels between the plight of a greece, the plight of a spain, and the potential debt crisis in the united states. but there is a big difference. these guys do not control their own currencies. if you control your own currency in a situation like this, you can print money to pay off your debt or you can devalue your currency and that's a way to restore economic competitiveness. they don't have that option now. does this mean that you start a gain to have countries starting with greece say actually this europe thing it not working for us. >> it works out for my viewer. what happened if the eurozone starts to come apart, if countries stacountry s stop using the currency. does that weaken the currency overall? >> what it could mean, there isn't the -- the euro was sort of constructed like a roach motel. you could go in, but you couldn't go out. that was on purpose because the politicians who created it were real believers in europe. they thought this was the way to avoid another world war. so they wanted to create first an economic union and hoped a political union would follow. if it starts to fall apart my fear and what i think president obama's fear should be is does it send shock waves through the world economy and we would feel those here in the united states pretty quickly. >> we learned this in 2008, john that when a bank sneezes across the world, it could shut down your loan here in the united states. how much damage can a failed greece do to the global economy? >> it is ironic we're talking about it because it is only a $300 billion economy as i noted here. it shrunk by 20% since the start of this crisis. but the fact is, and christa makes a good point, if one of the members of the eurozone, one of the 17 decides to duck out, it puts the whole project into question. we should look back here on what happened, the fall of the berlin wall 1989 led the european union leaders to try to come together with union as a trade union, but also in ten short years after that, introduce a single currency. the reality is we have a two speed europe, something the architects of the europe didn't want to have, germany, france, the netherlands, the uk, not a member of the eurozone, and then the southern half of the continent, spain, portugal, italy and greece unable to grow right now. you have an unemployment rate of 21% in greece. youth unemployment of better than 50%. but the greeks fell asleep during the first ten years of having that currency. they had the benefit of low interest rates from germany. so instead of reforming their labor market, they borrowed a lot of money, had a lot of money come in to fund the building of the olympics in 2004. they're growing at 4%. that was the time to reform. with all candor here, for the first ten years of the currency they didn't reform. the payback now is a very severe one. it would be ironic that the smallest economy in europe could bring down the euro project going forward. >> that's why we're paying so much attention to greece today when in fact france is a huge economy. concerns about the french economy are very real. what you're looking at here are photographs of -- video, live video of francois hollande. he is the president-elect in paris. nicolas sarkozy has been defeated and conceded. you now see under police escort francois hollande, the next president of paris, headed in a motorcade toward his headquarters where he will be greeted by remarkably jubilant supporters. not just because he's won, but to many people who have felt crushed, crushed by the kind of austerity we're seeing in europe, christine, in france, it hasn't been anywhere near how bad it was for citizens in greece and yet they're coming and saying what you keep hearing in the united states, there are many people who say we need austerity, we need to balance the budgets and what you're seeing in france and greece in this motorcade for a new president is a rejection of that. >> living within your means, ali, is something that everyone says they want to do, but these voters and these countries show that living within your means and how you do that can be very painful and voters reacting very strongly to that notion. what are the messages for u.s. politicians? in the united states, i argue we haven't had austerity yet. we're running huge budget deficits. we have a debt -- a national debt the size of the u.s. economy still. and where we had cutbacks has been budget cuts on the state and local level and that has hurt. americans have a taste of this belt tightening but nothing like you've seen in europe. the message for u.s. politicians is to do it properly, at the right time, or your electorate will revolt. >> the message may be don't take one extreme or another. the solution may be a little bit of all or a gradual move into austerity. these guys are paying a price for rapid austerity that they didn't care about. we'll take a quick break and look at what you're seeing there is the motorcade taking francois hollande, the newly elected president of france to his headquarters where he'll deliver a speech. two recessions in three years. al goodman from madrid for a look at how spain has been hit by the financial crisis, a country that didn't do it all wrong now half its young people are unemployed. you're watching a special live edition of "your money." stay with us. jen's car wasn't handling well. so i brought it to mike at meineke. we gave her car a free road handling check. i like free. free is good. my money. my choice. my meineke. to our viewers, you're looking at francois hollande, the president-elect of france, having just arrived at his headquarters in tulle, france. business he's about to give a -- he's defeated president nicolas sarkozy who conceded. let's listen in to the new -- the next president of france, francois hollande. [ cheers and applause ] >> translator: my dear citizens, fellow citizens, french people, this 6th of may has just chosen change by bringing me the presidency of the french republic. i feel the honor which has been given to me and the task, the important task faced beyond -- in front of you to serve my country. i commit myself to serve my country. with devotion of this function, the requirements and on this subject, i'd like to congratulate nicolas sarkozy who led this country for five years and who on this subject deserves all our respect. i express my deep gratitude to all those who, through their votes, have made this victory possib possible. >> we're going to keep an eye on that speech. we'll bring you all the relevant parts, francois hollande who just won the election, the presidential election in france. we're bouncing around. we have france, we have greece, we're waiting for results to come in, but it may look similar. wasn't to bri i want to bring in spain. there isn't an election here but we keep talking about contagion what happens to other countries. spain is struggling with an aftermath of a housing market that went bust. spain didn't do everything wrong like greece did. christine romens on this. >> look at this we're at 8.1% unemployment in the u.s. spain is above 24% for the national average. for those under 25 years old, its youth, the people who are the future of the country, 51% unemployment. let's look at gdp for spain. you can see here there was growth, 2009, a long recession and then it kind of tried to pull out of it in 2010. look at this, the last two quarters in the red, that is a shrinking economy. they're back in recession in large part because of austerity measures across europe. but despite all of these cutbacks, the country's debt is still projected to jump to its highest level in more than two decades in 2012. spain's debt to gdp ratio will soar almost 80%, that's below the european average, but a big rise from last year. here is why it matters. it can affect interest rates on loans, income tax rates, things every citizen in spain cares about. youth unemployment in particular a real, real problem for spain. that's the future. >> we talk about debt, we talk about how much it costs the country to borrow. if it costs your country too much, it will cost you too much to borrow. let's go to al goodman. we laid out the numbers on the economic crisis in spain. if viewers in the u.s. are interested in the two elections, the debate all over europe, austerity versus growth. what are you hearing? >> reporter: this is very much the top story in spain, right across all the websites of the main newspapers here because with a new government in power here, this situation that you see in france, conservative replaced by a socialist, which happened in france, six months ago it was a socialist replaced by a conservative. the conservative government came in and said they would clean up the economic mess left by the socialists, but they have bet on austerity more and more and more, basically following the german model of chancellor angela merkel, saying if we can just cut, cut, cut, we will eventually get the growth here. the problem is left over from that real estate boom and this is familiar to u.s. viewers, the banks here left with a lot of bad debt and there is no credit, no money to be borrowing here. and so this is why the spanish people, especially a segment of them have been so interested in what has been going on in france, because they feel that the president-elect of france hollande has given signals that he'll bet not just on austerity, but on growth. this is a key issue here. you've got the unions which have been on the streets in force across the country in recent weeks, just two demonstrations last week, so far peaceful, so everyone here has got a stake in trying to see a change and get something going in this terrible economy. >> you bring up a good point. austerity doesn't have to be the opposite of growth. austerity can be one method you use to achieve growth stimulus. these struggles depend on other people sometimes. that's the puzzlement in spain. getting crushed under some of its own problems and some of other pep's problems. that's why this san interesting conversation for the people here and in the united states. might we too get caught up in this. stand by. we'll be back to you. the u.s. presidential election is six months away. just like in europe, the candidates, some of them, hostage to the economy. we'll look at why president obama needs to be more worried about what is happening in europe than in ohio. by continuing to help you do more and focus on the things that matter to you. but when i was diagnosed with prostate cancer... i needed a coach. our doctor was great, but with so many tough decisions i felt lost. unitedhealthcare offered us a specially trained rn who helped us weigh and understand all our options. for me cancer was as scary as a fastball is to some of these kids. but my coach had hit that pitch before. turning data into useful answers. we're 78,000 people looking out for 70 million americans. that's health in numbers. unitedhealthcare. here in the united states, this weekend, president obama formally opened his re-election bid on saturday, in ohio, which is a key state in this fall's elections. the president touted his administration's rescue of big auto companies and blasted rival mitt romney's stance on the issue telling voters in ohio, many of whom depend on big auto for their livelihood, when someone wanted to let detroit go bankrupt, we didn't -- we didn't turn our backs. just like europens, americans are debating whether stimulus or austerity can boost economic recovery, it is clear where romney stands. >> no question in my mind if this president were to be re-elected we will ultimately face a greece-like setting where people will wander whether they want to loan money to america and loan money to america at low interest rates. >> for more on the republican view of what is going on in europe, wisconsin congressman paul ryan who chairs the budget committee said this. what we're seeing here is what happens when politicians make so many empty promises to their citizens, and then turn into broken promises when they can't keep spending other people's money. a lot of stuff go on here. let's bring christa freeland in, very good at simplifying this for our viewers. i asked nobel prize winning economist paul krugman the other day when he was here, if the crisis in europe is the proof that people like him need that austerity doesn't work. here's what he said. >> yes. if you were -- if there was a big debate two years ago, a lot of people in europe and here said cut government spending, the economy will expand, look at spain, look at greece, look at ireland, it doesn't work that way. >> all the keynesians, the people in favor of stimulus, who believe when you're in a recession you have to spend money, you know, so the paul krugman view is the reason that the country's economy is not like your domestic budget. so you have to take a different approach. so when you're in a recession -- >> but i want to stop you there for a second. the country's economy is not like your domestic budget. it frustrates me when politicians refer to your credit card and running a balance on the credit card. it is not the same thing. >> right. there is -- it is easy to think of a country's economy and think in my own house, i can't spend more than i earn, otherwise i get in huge trouble, so my country shouldn't do that either. and that was sort of what happened in the 1930s. they said this is wrong. what has to happen in these moments when there is a recession is the government has to create demand. it has to go out there and pump money into the economy so that you have that spending, so that, you know, the economy starts working. in a way, an analogy could be like kick starting the engine on your car. and that's what paul krugman and his ilk are arguing, and actually the united states has been doing a lot more of that than europe. i think right now all of the believers in stimulus in the united states are going to be cheering because what they're saying is austerity has failed in europe, the voters have rendered their verdict and i think they'll hope that the global political weather now shifts and the conversation moves from deficit reduction, which i think is what a lot of us have been focused on, towards jobs, employment, get the economy going, worry about the deficits after the economy is running at full speed. >> and how in greece, a lot of those wins have already changed irrespective of the election results. when we come back, deciding votes in both france and greece today as angry voters take charge of their future. we'll go back to jim bittermann in paris and matthew chance in athens. [ female announcer ] did you know the average person smiles more than 50 times a day? so brighten your smile a healthy way with listerine® whitening plus restoring rinse. it's the only rinse that makes your teeth two shades whiter and two times stronger. ♪ listerine® whitening... power to your mouth. are connecting here. linkedin connects with the big board. president obama is attempting to make the case that tough times remain tough, things would have been worse without him. that's the strategy french president nicolas sarkozy attempted in defending his own economic record. didn't work for him. sarkozy was defeated in today's election in france. he's the latest most high profile, most significant of the european leaders who have been swept from office during this economic crisis. or what to most of us has seemed like the recovery just in the last two years. sarkozy has often been called sarko the american because of his pro washington stance. jim bittermann joins us from paris. you are in a hall that was busy not 40 minutes ago. it appears empty. what's the story? >> reporter: i'm all alone here, ali. the fact is everybody has gone. before they left, they had a few nasty remarks for the socialist who are going to take over and wished them good luck because they know what the economic problems are. one of the things that is interesting is when you mention obama and president sarkozy in the same breath, the fact is they have another similarity and it certainly was part of mr. sarkozy's defeat. that is that there are some people in the country who absolutely do not like mr. sarkozy, just viscerally. they didn't like him. they didn't like the way he behaved, didn't like who he was and as a consequence, there was a large anti-sarkozy vote out there. i think you might get some of that, there are some people in the united states who feel very strongly about mr. obama, not so much on his policies or his policies but as well on the personality issue. so that's one thing i think that you may be looking for when you draw these kind of comparisons. another thing is that a lot of people left here tonight saying can hollande deliver? he made a lot of promises here, ate love promises will cost a lot of money. he'll be facing exactly the same problems as sarkozy, economically. >> that's a good point, jim. that may be why we're probably half an hour, an hour away from seeing how markets -- futures will react. it may be why we see a more muted response than you think, because the business community was furious that a socialist might take over in france. they might sit around and say he can only do so much. they're all to some degree hostages of the larger economy. stay there for us. in greece, angry voters are putting their foot down after two painful austerity measures that have left no family in greece untouched. exit polls in that country show that the ruling coalition is headed for a steep loss. while parties on the far left and the far right are making significant gains. greece is a complicated picture. matthew chance here to break it down a little bit for us. matthew? >> reporter: dramatic shifts taking place in greek politics. the traditional parties that have dominated this country's parliament for the course of the past three or four decades really being dealt a powerful blow by the electorate, losing the vast majority of their support. the parties that are benefitting from that are the parties that have previously been on the fringes of the greek political system, one of them is the coalition of the radical left. and joining me now is eucli euclid sakalotis. you must be very satisfied with the election today. >> we're very pleased. we think that the greek election is very important not only for greek politics, but european politics. we believe that the greek people are the first who said resounding no to austerity measures. they're the first people who said that isn't leading anywhere, not only for greeks but for europeans that the vicious cycle of austerity measures leading to greater recession, leading to calls for more austerity measures is not leading anywhere. >> briefly, do you think your party will be able to form an anti-austerity coalition in this country? >> the first party will be asked by the president of the republic to see if it can form a government. it has very small legitimacy. it is marginally the first party. it is lost a third of its support. and i think it is going to be very difficult when the people have spoken and the people said we want to return to social policies and want to return to democracy. we want greek people to be able to decide on the things that matter for them. >> all right, professor, thank you very much for being with us here. not altogether clear whether this left wing coalition could be formed. the most slightly scenario at the moment is still depending on the results coalition between the pro austerity parties, greek may well continue down the same path. >> matthew, stand by, stay close. we heard from -- we were monitoring francois hollande's speech in france. he said austerity can no longer be the only option for europe. this is him concluding his speech in tulle, france. so, christine, what we have been talking about here is that american, keynesians, liberals are looking at europe and saying, see, this is what happens. watch out, romney. watch out, republicans. this is what is going to happen if we listen to you and balance budgets and impose greater austerity. you say that the republicans could be taking a message out of this. >> yeah. they could be looking at the same events in europe and saying, look, this is what happens when you don't get your fiscal house in order and you do it properly. and they're saying, we have got to get our fiscal house in order or we'll have so much debt, we're going to have the world looking at us and bond markets looking at us and saying, we're not going to loan you money, lend you money at such low, low interest rates anymore. and this whole era of the u.s. being able to borrow so much to live with that, outside of its means at cheap interest rates that those days would be over. you have the republicans -- the people on the right that live within the means crowd saying exactly the opposite of what the kenzians are saying, saying europe is proof that the u.s. has to fix its mess now or we'll be like them. >> john, coming off that interview with matthew, greece say little bit of that proof. it is evidence that you can get yourself into more of a pickle by not doing some of the right things early on. >> no, in fact for the first ten years of the membership of the euro, they didn't do anything. they had no interest rates and borrowed like crazy to get their debt up to 120% of gdp, even while growing. they should have reformed. there has been a marked change this is something worth underlining for our u.s. audience, for the last 48 hours, some very major names falling on the back of francois hollande and his call for the fact that it can't be all about austerity. gerhard schroeder is suggesting if europe does not grow at all, it will get lost between the number one economy in the world, the united states, and the number two economy and china and not contribute to global growth. mario dragu, the european central bank, now suggesting we need a growth pact as well. they're talking about a marshal plan which you had after world war ii in europe to start spending on infrastructure. there has been a negative reaction to this from the markets and francois hollande and you mentioned the market maze open lower as a result. this may be an overreaction. he's suggesting maybe 1% of gdp be spent when he comes into the first year of office. they're also suggesting it comes from europe to raise money through euro bonds on spending on infrastructure and using the so-called european investment bank. he's going to be very prudent. there is even discussion with him as president, ali, he may pick somebody like jean-claude tricchet to be the prime minister, that the markets in the united states and global investors could support. it will be a tilt towards growth and not austerity, but i don't see them scrapping anything that will put the euro into trouble. >> john, thank you very much for that. john defterios in abu dhabi. he mentioned gerhard schroeder. germany is the largest economy and the main proponent of the cost cutting measures we have short-handed into austerity. what happens there if anti-austerity candidates are elected in key european countries. can the eurozone and the currency survive and what does that mean to everybody else including you? 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[ male announcer ] if you can't afford your medication, astrazeneca may be able to help. chairman chancellor angela merkel states her policy on cutting spending across the fiscally troubled eurozone. the fate of that policy and its bailouts may now be in jeopardy with the political changes taking place in france with which it partners, and greece which owes it a lot of money. let's go to berlin. diana, angela merkel and nicolas sarkozy were in sync trying to foster fiscal discipline across germany. now what? >> reporter: yes. well, their little partnership is no more. yes, hollande and his campaigning has always said, growth is what we must follow. growth, austerity doesn't have to be inevitable is what he just said in his speech. and there were questions about whether that would set him on a collision course with the german chancellor, belt tightening, fiscal discipline. this fiscal pact she carefully constructed with nicolas sarkozy. in the last couple of weeks, because berlin sees the writing on the wall, ali, merkel has been talking about growth. in fact the foreign minister came out and said, we will talk about a growth pact. but the question is, how do you achieve that kind of growth? she says growth doesn't come through expensive stimulus programs. it doesn't come through spending more. she says it comes through structural reforms. and that doesn't really seem to be the way that francois hollande seens growth. you just have to look at the measures he wants to do in france. he wants to build up the public sector. he wants to create more jobs there. he wants to do things like lower the retirement age. these are not really the way the two countries operate. but that franco-german alliance is so key, of course. and they are going to have to find common ground. ali, i think what's important here is if you look at the two characters of mrs. merkel, mr. hollande, they're both pragmatists. they will make it work because they know they have no other choice. >> diana, thank you for that. christian, you've got views on germany and how it plays on this? >> i think diana is right. i think germany is the key player right now. and the thing is that, you know, as we saw from christine's charts, the germans are the only europeans doing real well right now, and that's because the construct favored the european economy. a good way to think about germany is, it was the china of europe. it had export-led growth. it was able to export to the rest of europe. and thanks to the euro, the currency that germany had was lower, less highly valued than the deutsche marc would have been, putting some muscle behind -- >> gave them an advantage. >> right. americans complain about china keeping its currency low to export to the rest of the world. but the southern europeans have really, really suffered because of this arrangement. >> and it went the other way for them. >> and the question is, are the germans prepared to rebalance europe, which would cost germany a lot of money. german exporters would be less competitive. that will be the price for keeping the 50-year european story together. >> john is europe. what should american viewers take away from this? >> i had the chairman of the big commodities group and the big indian group, and they all favored the european model of spending more, they liked the decisiveness we saw in america. and to take a page from the chief economist of morgan stanley, he said only the flexible survive right now in these economic times. the germans restructured about six, seven years ago. the rest have not been flexible in the labor markets and dealing with their debt. they need to do so now. probably a tilt towards growth and less austerity. >> john, we will be watching it very closely. this is probably the most-watched french or german election in the entire world. because as christine said earlier, very astutely, everybody watching this is taking a message away that might be very different from their political opponents. stay with us. we'll be right back. you're watching a special live edition of "your money." so you see everything the way it's meant to be seen. experience life well lit, ask for transitions adaptive lenses. every communications provider is different but centurylink is committed to being a different kind of communications company. ♪ we link people and fortune 500 companies nationwide and around the world. and we will continue to free you to do more and focus on what matters. the concert in france, celebrating the victory of francois hollande over french president nicolas sarkozy, who lost the election, and has conceded defeat. christine romans with me. christina, i was just checking my twitter feed on the break. what on earth did you say? christine romans, and ali velshi, send your nice tweets to me. what did you see? >> i just illustrated, or articulated the view from the right in this country, which they're looking what's happening in europe and saying, this shows you have to get your fiscal house in order. you can't spend beyond your means forever or you'll fall apart like they are. where people in this country are saying, look what's happening in europe. you cannot have austerity like this, or you're going to lose in the polls. this shows both sides can point to what's happening and embolden their position. what i would say is the very near term, you've got spain, you've got italy, you've got a couple of countries there that re

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