Made in Germany: The Business Magazine

Holger Schmieding, chief economist at Berenberg Bank, talks to us about the euro and the debt crisis.DW-TV: Chief economist from the Berenberg Bank, Holger Schmieding, what do you think the future looks like in Italy? Holger Schmieding: I actually think the future for Italy does not look bad. Italy does now have some austerity in the pipeline, but relative to the austerity in Greece, in Britain, in Spain, and what is ahead in the US, Italian austerity does not have to be all that harsh because the fiscal deficit of Italy actually isn't all that high. DW-TV: Why were markets reacting so nervously to Italy then? Holger Schmieding: First of all markets are very nervous, in the wake of the Greek crisis, this is just a fact of life. And then we had a public spat between the finance minister, which is seen as being extremely responsible in terms of fiscal matters, and the prime minister which is not necessarily seen as always being responsible fiscally. And this spat spooked markets. But now we have seen Italy passing an austerity package and that will hopefully will contribute to Italien tangence dying down. ? DW-TV: If we have a look at the current mountains of debt here in Europe Greece is right up on top of course, with Italy NOT all that far behind. Ireland and Portugal are already being bailed out. But what about Germany? It's got to foot the bill of course, the bulk of the bill for the E-U's share, as far as these rescue packages go. Where does that leave Germany do you think? Holger Schmieding: Germany has over the decades acquired a great reputation in markets. That is why Germany can borrow at very low interest rates, despite its debt being also not very low. On top of that, Germany is on course to cut its budget deficit to virtually zero next year. That inspires confidence. Italy by the way will probably manage to eliminate its deficit in 2014, which by global standards would be also be pretty good. DW-TV: All that sounds, to use your words, on course, where are we at as far as the euro crisis goes as a whole? Holger Schmieding: The euro crisis at the moment is extremely dangerous, markets are highly nervous. The euro markets need a political signal, that politicians will really do a lot to keep that crisis at bay, so the summit this Thursday has to come up with a result. DW-TV: There are a lot of ideas being thrown around at the moment in reaction to this summit, what do you think needs to be done? Holger Schmieding: First of all we need a solution, and secondally the best possible solution would be a program to use European funds to buy Greece, Greek debt back at a discount. That would reduce the burden of Greek debt outstanding because we would be buying back at a discount. And it would be a signal of political confidence in Greece. Interview: Brent Goff