European leaders converged in Brussels to figure a way out of a worsening debt crisis and agreed to greater financial oversight and centralization. England refuses to go along with the plan, and Stanford political scientist Francis Fukuyama says he expects some countries will start bailing out of the eurozone.

“The political difficulties of deepening any fiscal union are so great that I wouldn’t bet on that happening,” says Fukuyama, the Olivier Nomellini Senior Fellowat Stanford’s Freeman Spogli Institute for International Studies and a resident at FSI’s Center on Democracy, Development, and the Rule of Law. “The easier path is going to be for countries to begin exiting.”

Fukuyama talks about the summit, the euro’s chances of survival and what’s at stake for America if the currency collapses.

What does the Brussels agreement mean for Europe’s debt crisis?

We will have to see how much of a binding constraint this agreement actually is. It’s just an informal agreement at this point. Political leaders can promise anything at this kind of summit and fail to deliver.

I think the most interesting thing going on is the eurozone – the 17 countries that participate in the euro – is actually splitting off from the greater EU. The reason that’s happening is that in order to save the eurozone, they need to make certain decisions on this type of deepening control. And countries like Britain will never go along with this. The 17 countries have to create their own unit that can make decisions at the expense of the larger EU.

Explain Britain’s refusal to have its budget reviewed by the European Commission

The UK is like the United States – they’ve always been jealous of their sovereignty. If you go to England and talk about crossing the Channel, they’ll say, “Oh, so you’re going to go to Europe.” While an American would say “England is a part of Europe.”

There’s a strong strain – especially within the conservative party – that really does not want to give up authority to what they regard as a bunch of French socialists in Brussels. That’s their vision of what the EU really represents. So they’re resistant about being dragged into any German scheme to deepen the powers in Brussels to include control over national budgets because that is a core element of sovereignty. The majority of people in Britain will say that will happen over their dead bodies.

What is the likelihood that countries will begin exiting the eurozone?

I don’t think it makes sense for a country like Greece to stay in the eurozone. It’s a matter of national pride that they don’t want to be the first country out, but it’s very hard to see how they actually return to growth under a system that links them to Germany in terms of the price of their currency. Long before there’s any kind of centralized fiscal reform that’s imposed on Greece, Portugal and these other peripheral countries, I think it’s more likely that they’ll exit. The euro will probably remain, but it will be at the core of the more stable countries.

What mechanism is there for countries to exit the eurozone?

There is no mechanism. Not only is there no legal way of exiting, there’s no disciplining mechanism. You have a stability pact where countries agreed they wouldn’t run a budget deficit greater than 3 percent, and Germany was really one of the first counties to violate that. But there were no sanctions. That’s the problem right now – there’s neither discipline nor an exit mechanism. That’s why everyone is fearing a disorderly, messy breakup of the EU, which would be extremely damaging.

President Obama has said the U.S. “stands ready to do our part" to help Europe resolve its crisis. What can America really do?

It’s an indication of how far we’ve fallen, but there’s really nothing concretely we can do apart from possibly increasing our International Monetary Fund share. But the IMF doesn’t have the ammunition to really help at all in this particular crisis. So all we can do is sit on the sidelines and try to get the Europeans to take our advice, which a lot of them are not inclined to do given the mess that happened on Wall Street three years ago. It’s a mark of the diminishment of overall American influence that we’re simply relegated to the sidelines of this crisis.

What’s at stake for America in the wake of a total European financial meltdown?

There’s a lot at stake. We are slowly crawling out of the biggest recession since the Great Depression. The one thing that could really send us back into a second leg of a recession is collapse of the European financial system and panic in Europe. If Europe doesn’t do well, the United States isn’t going to do well.

Silvio Berlusconi has been a force in Italian politics during the past two decades. As the country’s prime minister and richest man, the media mogul managed to slip through sex scandals and criminal charges only to be forced out of office by Europe’s debt crisis.

As a new government led by economist Mario Monti takes place, Ronald Spogli talks about Berlusconi’s fall, what’s next for Italy and whether the United States should get involved in the eurozone’s tailspin. Spogli, who served as the U.S. ambassador to Italy from 2005 to 2009, is a Stanford trustee and major benefactor to the university’s Freeman Spogli Institute for International Studies.

What will Italy’s government look like under Mario Monti, and how will it trim the country’s $2.5 trillion debt?

Monti is an economist by training and has been president of Bocconi University, Italy’s most prestigious business school. He was the European Commissioner and that position earned him international influence and experience. So here’s somebody who has economic savvy, institutional gravitas, and the ability to be perceived as above politics.

The new government is expected to carry out the stability program enacted immediately before Berlusconi’s resignation on Saturday.  This law contemplates asset sales to reduce debt, among other measures.  The idea of a wealth tax has been floated in Italy – which by most measures is the richest country on the continent – as a way to immediately and significantly pay down the nation’s debt. 

The Monti government is likely to consider this and other options to reduce the country’s indebtedness.  However, it will have to gain parliamentary approval for any new laws. And depending on the nature of the bill proposed, passage of legislation could prove problematic.

How did Berlusconi manage to survive sex scandals and corruption charges, only to be brought down by Italy’s financial crisis?

I think he survived because for most Italians, his personal life was less relevant than his actions and promises as a politician who could do good things for Italy.

He came into power in 1994, and his ability to dominate Italian politics for nearly two decades has been the main story. He came in with an expectation that as Italy’s richest man and as a successful businessman, he would help jumpstart a country that had begun to stall economically. The notion was that after stagnation had begun to creep in, Silvio Berlusconi was the person to break the logjam and move Italy forward.

But for the last 20 years, Italy has had half the economic growth rate of Europe. That’s the biggest issue against Berlusconi. But nobody is 100 percent convinced that he’s really gone for good. He has an amazing ability to resurrect himself. He’s proven that throughout his political career.

How does Italy’s debt burden fit in to the rest of Europe’s economic woes?

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In terms of the sheer magnitude of the problem, the Italian circumstance dwarfs Greece’s situation and the ability of the initiatives meant to deal with other countries’ crises. The issue is whether the new Italian government will be able to calm the bond markets.

Restoring credibility is absolutely vital. The fundamental concern is that there’s no offered solution to an Italian debt problem. There is no bailout being contemplated that’s big enough to be able to deal with the issue, unlike Greece.

The euro crisis has claimed the political lives of prime ministers in Greece, Spain and Italy. Can we expect more high-profile political casualties?

It’s interesting how the markets – in such a short period of time – have forced a political change that the internal Italian political system has been unable to achieve for quite some time. It’s difficult to speculate as to whether those forces will move to more counties. But it certainly wasn’t contemplated that they’d have this impact on Italy, so its fair to say that nothing is completely off the table.

In the United States, candidates vying for the Republican nomination in next year’s election say America shouldn’t get involved in Europe’s financial mess. Is that the right attitude?

Europe is extremely important to the United States. Not just for economic reasons, but for political reasons. This is a European problem to solve. On the other hand, if it gets to the point where it continues to have a very damaging impact on the world’s capital markets, I think the resolve to keep it as an isolated problem may fade.

Beyond the narrowly defined economic impact of the crisis, we have many issues of global security that we cannot effectively deal with without the help of Europeans. If they’re going to go into a pronounced period of economic contraction, that’s going to heavily impact their ability to be a great partner for us.  Italy is a perfect example of this concern. We counted on its help in the Balkans, Afghanistan, Iraq and Lebanon. Those are expensive missions, and if the country doesn’t grow its economy, it’s harder for them to be a great American ally.  Italy’s economic situation extends to our basic international security interests.

Italy's economic crisis is the subject of a Nov. 18 presentation given by Roland Benedikter, a scholar at FSI's Europe Center. 

Roland Hsu, Associate Director of The Europe Center at the Stanford Freeman Spogli Institute for International Studies was interviewed by the Media Project on the subjects of The Europe Center's research, and its sponsorship of the United Nations Association International Film Festival.  Hsu was asked to discuss the research and policy implications of the subjects of key films in this year's international documentary film festival.  Among the subjects that Hsu underlines:

International Law and Human Rights: The International Criminal Court and the challenges and strategies of the Court's Chief Prosecutor Luis Moreno Ocampo to bring indictments for crimes against humanity -- even indictments of sitting sovereign leaders.

Cultural Minority Rights: Roma communities in Europe (east and west) and the struggle among political and community leaders, as well as residents and school teachers, to balance the preservation and perpetuation of cultural specificity with the need for adaptation and assimiliation.

Reconciliation: how do victims and perpetrators of atrocities and social repression find ways to process their memories, and to live on as neighbors in reconciled community.  Models for such deep truth and reconciliation include the well-known institutions of Truth & Reconciliation Commissions, and also the mediating influence of cultural production in literature and the visual arts.

Among the research and public outreach projects at The Europe Center discussed by Hsu was “Islam in the West: Conflict and Reconciliation” designed to answer the challenge of social and political integration within the high immigration West.  With an effective focus on the European Union and the transatlantic West, The Europe Center is opening a seminar series on “Islam and the West” with partner The Abassi Program in Islamic Studies (Stanford) and European partners including Oxford University, which seeks to investigate the challenges of social integration.  "The design is based on our years of achievement in this area, delivering insight on EU policy towards its newest members, East-West and transatlantic relations, crime and social conflict, and European models of universal citizenship," says Hsu.

The plan for this series began with the book Ethnic Europe: Ethnicity in Today’s Europe: Mobility Identity, and Conflict in a Globalized World” (edited and with an essay by Roland Hsu.)  Hsu explains, "This book was developed from the Center’s international conference on the topic, and reveals path breaking data and proposals for immigration, integration, and a ‘civic Islam’ in a globalizing Europe."

 
The full interview with additional participants is at: http://www.youtube.com/watch?v=5R17XBFnumY

The United Nations Association Film Festival is at: http://www.unaff.org/2011/index.html