if he succeeds, he charts a path out of the crisis for other countries. then iran. it's in dire economic straits for a very different reason. we have another exclusive. this one with iran's finance minister about just how crippling u.s.-led sanctions have been for his nation. next up, a conversation with paul krugman. the biggest question in the world today is whether to spend or whether to cut. krugman is the leading voice saying stimulate. i'll ask him to defend his views. all that plus superstitions in the race for space. but, first, here's my take. everyone is worried that greece might default on its national debt. that's really not news. by one estimate and the 180 years since greece gained its independence from the ottomans in 1832, the country has been in default or restructuring for half that period. the news is that this time, germany is willing to bail greece out. throughout the euro zone crisis, it has been conventional wisdom to regard the germans as narrow-minded, ungenerous, and dogmatically wedded to descriptions of austerity to treat europe's problems. these criticisms are vastly overstated. consider that germany is being asked to take its taxpayers' money in a democracy and tuesday to bail out a country like greece, which is guilty of mismanagement, poor competitiveness and financial fraud. and it has said yes. in return for this, germans are being called nazis in greek newspapers. germany is by far the largest contributor to the european financial stability facility which totals a staggering $924 billion. that number will rise, and when combined with earlier funds and loans, germany's share will easily exceed the country's total annual federal tax revenues. imagine the united states being willing to guarantee more than $2 trillion in a fund to bail out, say, mexico. the german government has also relaxed its once-rigid opposition to a more aggressive monetary policy and now it has signalled that it is even open to some stimulus plans for greece. german leaders have said again and again that they are willing to bail out weak euro zone countries, but they have asked for reform as a condition of that aid. the real path to growth for countries like greece and italy is less austerity, to be sure, but more reform. reform that opens up their labor markets, breaks protections, and liberalizes sectors of their economies. these are politically hard to do, and certainly greece has done very little of it. and greece needs reform badly, as do other countries. the world bank rates greece and italy as the worst two high-income countries in which to do business. other rankings place them even lower in terms of economic competitiveness. german chancellor angela merkel is opposed to some sweeping solution to the euro crisis, like euro bonds, not because of their cost. germany will end up paying more. but because they would take off the pressure to reform. the only leverage germany has with countries like greece is that it gets the money incrementally as it enacts reforms. now, greece might yet to have to default and quit the euro zone and perhaps the european union, but if it does go down this path, greece will find that the markets will refuse to lend it money at reasonable rates unless it does pretty much the same things germany is asking it to do anyway. life without germany will mean a lot more austerity than life with germany. for more on this, you can read my column in this week's "time" magazine and on time.com. magazine and on time.com. let's get started. -- captions by vitac -- www.vitac.com all eyes are on europe right now, and "time" magazine calls my next guest the most important man on that continent. italian prime minister mario monti traveled to the united states for the g-8 meeting at camp david and the nato meeting in chicago, and he joins me now in washington. >> welcome. >> pleasure to be here. >> let me ask you, prime minister, first we'll talk about italy, but first i got to talk to you about greece. there is, in a sense, a bank run taking place. greece is going to be unable to finance itself unless there is some kind of massive help from europe. can greece stay in the euro? >> i think greeks want to stay in the euro. not all greeks are ready to do whatever is necessary to stay in the euro. but i think as we approach the 17th of june election date, the feeling in greece that it's crucial for their country, i believe also for europe, but certainly for their country. it's crucial to stay in the euro with focused minds and political programs on putting together a collective willingness to do so. certainly, europe cannot, of course, abandon or even substantially undermine and reduce the commitments it asked of greece in order to help it. i think an equalibrium will be found. but whatever is achieved on greece in this very difficult situation will not really allow europe and the euro zone to breathe unless a more substantive agenda for growth is decided upon in europe to accompany fiscal consolidation. >> but in the short run, without the help from the european central bank, it is difficult to see how greece will be able to meet just its basic day-to-day financing requirements as money leaves the country. somebody described it as a bank job, not a bank run. that slowly money is leaving greece. is there a solution to this? >> of course, it is the most fundamental mission of the ecb, although it's not mentioned specifically, to see to it that the euro is safeguarded in its integrity. so i think against this background, the ecb, the new institutions, and the greek authorities, or what is left of them in the process of reaching the new elections, we'll find a solution. it will not be the first time in the history of the eu that when europe is really bumping into the wall, all of a sudden, minds are focused, political will is urged and a solution is found. >> when you talk about the need for a growth amendment in europe, are you saying that the austerity programs really haven't worked? if you look at a country like ireland, which has done everything it was asked to do, or many of the things in terms of fiscal consolidation, cutting spending, raising taxes, it has not produced growth. it has not even produced much investor confidence. italy's budget deficit is up, its debt-to-gdp ratio is up and largely because growth has collapsed. should these austerity measures end? >> first of all, i don't like to speak about austerity. i prefer to speak of fiscal discipline. fiscal discipline, in the end, amounts to austerity if it is not accompanied by other policies. fiscal discipline, in my view, is there to stay. italy has done huge efforts towards fiscal discipline, and it is now the country which will -- in the european union which will achieve a structural balanced budget before all the others next year, actually a slight structure surplus. and yet, growth is not coming. >> how does that happen? in italy, you have -- you have, as you say, done more fiscal consolidation than any country. you have done structural reforms as well. how do you get that demand going? >> exactly. >> you need somebody to buy your products. are you saying you want germany to buy things from you? >> well, we -- we are gaining a better position in terms of competitiveness because of the structural reforms. we are actually destroying domestic demand through fiscal consolidation. hence, there has to be a demand operation throughout europe, a demand expansion. as you pointed out, most clearly, we, for example, in italy are having problems because we have achieved very good fiscal results, but will they really be sustainable in the longer term unless the denominator, gdp, increases through growth. >> what do you think it says about western democracies that when one of the most important democracies, like italy, one of the richest countries in the world, got into trouble, you had to almost suspend democracy to fix it. they have gone through an unelected tsar, you, who has been asked to please fix it, and then the politicians can come back and do their mischief in a few years, but, i mean, it's -- because there is an issue. the problems italy faces all western democracies face. over the last 30 years, there's been a build-up of entitlements, of goods and services being provided to the public from the state with no sense of account -- of the kind of fiscal balance and the result is all these countries are in debt and the picture looks worse as people retire. can democracy handle this? >> democracies have to handle this. how? well, i believe the reason why democracies are very poor these days to handle this is that democracies like markets have become much too short-termist. the combination of very important media of frequent elections, of even social networks that tend to polarize people towards more extreme positions. with a combination of these factors has the consequence that in democracies, politicians, professional politicians, tend to reject only to embark in solutions that imply short-term costs and longer term benefits with great reluctancy only when they are faced with an actual huge crisis. so the problem to me is how it's possible to reconcile classical electoral democracy, which, after all, we love with a longer term perspective, so i think democracy in the long-term in our countries will survive if it comes to be associated with leadership. we'll not survive if democracy plus media brings to us more and more followership rather than leadership. >> can you say confidently that what will come out of this crisis will be a deeper and more integrated europe and not a europe that breaks up in some way? >> i am confident. i didn't say that the greek crisis if we take it since the first manifestations in early 2010 has confirmed very vividly that europe becomes adult and stronger through crisis because we may be able or unable to ultimately solve the specific crisis in greece, but in the process we have achieved a much higher degree of coordination of national fiscal policies. we have put in place firewalls to use contagion effects. i mean, the ecb in its autonomy has been able to find new techniques of intervention. so clearly, the governments of the e.u. has been improved by the greek crisis. now, hopefully one would like to see improvements in the governance of the e.u. without all times having a crisis a trigger. >> mario monti, pleasure to have you on, sir. >> thank you very much. >> up next, many observers say the sanctions against iran are working, that the nation's economy is taking a beating. i will ask tehran's economics minister for his view on the situation. 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[ female announcer ] glidden brilliance collection paint and primer in one. available only at walmart. got a day? get some color. ♪ glidden paint makes it easy to add color to your life. glidden gets you going. i tell you what i can spend. i do my best to make it work. i'm back on the road safely. and i saved you money on brakes. that's personal pricing. evidence is mounting that the sanctions against iran are having a crippling effect on that nation's economy. greatly decreasing its oil exports, making most international transactions all but impossible and bringing on high inflation. next week, iranian officials will meet with the great powers in baghdad to discuss the reason behind those sanctions, iran's nuclear program. i am now joined by iran's economic minister. thank you so much for joining us, mr. minister. >> translator: thank you very much. i am very grateful and appreciative to be here and have a conversation with you. >> so ever since president obama signed those sanctions at the end of december, the iranian real has dropped more than 50%. you now face the prospect of an oil embargo from the european union. your central bank is no longer able to conduct international transactions. this must be very, very difficult for iran. >> translator: well, i do believe that we must have a broader view of iran's economy, and only concentrating on a few sectors cannot be a true representation of iran's economy. i'll give you a few examples. last year the total non-oil exports increased by 30%, and according to the latest reports that the international monetary fund has published, iran's gdp, iran's per capita income has also increased. >> but let me ask you there, 80% of your foreign revenues come from oil. you are telling me that these restrictions on oil, the particular european union goes through with them, the indians say they're buying less from you. the japanese say they're buying less from you. these are not going to affect you? 80% of your external revenues come from oil. >> translator: we must pay close attention when we speak of oil revenues and sanctions against oil sales. who were the winners and the losers of such sanctions? indeed, it is difficult, but not just for iran. we can all rest assured that there will be a considerable increase in international oil market prices. now, is this the best approach? >> just to be clear, because this is very important. you think that if the european union goes through with the oil embargo, which is slated to go into effect in july, oil prices will go up very substantially? >> translator: certainly. certainly. even the imf says that as a result of he's sanctions, oil prices will perhaps reach and hover around $160 per barrel. and the decrease in financial and economic output in europe will truly be felt. >> how long can you endure these kind of sanctions? because they are affecting your banks. they are affecting now the -- the senate is pass ones related to the tanker business. how long can you continue to with stand these sanctions? >> we have been the target of sanctions for the last 33 years. we never went looking for these sanctions, but during the last two years, of course, the volume of these sanctions have increased tremendously, and we believe that those who imposed the sanctions have exerted the maximum level of pressure they have been capable of, but the reality that is showing itself today is that the capacities and the economic specialties and strengths of iran are such that can cause a backlash and an economic backlash for the imposers of these sanctions and their countries. this really shows that the economy, economic strength of iran, is in such a way that can with stand these sanctions and will not be the only economy to suffer. >> so -- but if these sanctions do cost you a lot, cost the average iranian a lot, why not allow the iaea inspectors in, say to them can you go to every facility, including the ones that we have previously not allowed you to, we have nothing to hide, you can see all our nuclear programs and certify that it's peaceful? and once you get that certification, these sanctions will get lifted. >> translator: we have said time and time again that we will not give up this unalienable right. we are a member, full signatory and abiding member of the iaea. there are conversations and dialogues taking place today currently, but there cannot be a germany and double standard in the treatment of member countries such as iran. if these principles can be understood and applied with mutual respect, i think we will be in a much better place. >> final question. what will the price of oil be in august of this year? >> translator: i believe that we must at least, in order to have sustainable growth for the producers, maintain prices at $100 per barrel. but keep in mind the following. can the industrial powers get out of the current situation they're in with these prices? therefore, the answer being obvious, the prices will go considerably higher than $100 per barrel. if we see reforms, tangible reforms in this behavior, we will be in a much better place. if we don't, we will witness an increase in international oil -- >> mr. minister, pleasure to have you on. up next, a strange story in the middle east, while much of the region clambers for democracy. one group is planning the opposite. opposite. a confederation of monarchies.d@ not in this economy. we also have zero free time, and my dad moving in. so we went to fidelity. we looked at our family's goals and some ways to help us get there. they helped me fix my economy, the one in my house. now they're managing my investments for me. and with fidelity, getting back on track was easier than i thought. call or come in today to take control of your personal economy. get one-on-one help from america's retirement leader. or creates another laptop bag or hires another employee, it's not just good for business, it's good for the entire community. at bank of america, we know the impact that local businesses have on communities. that's why we extended $6.4 billion in new credit to small businesses across the country last year. because the more we help them, the more we help make opportunity possible. are you still sleeping? 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[whoosh, clang] you need lifelock, the only identity theft protection company that now monitors bank accounts for takeover fraud. lifelock: relentlessly protecting your identity. call 1-800-lifelock or go to lifelock.com today. now for our what in the world segment. i couldn't help but notice a speech by a man who has all but disappeared from our tv screens. >> america does not get to choose if a freedom revolution should begin or end. it only gets to choose which side it is on. america's message should ring clear and strong. we stand for freedom. >> over the years and long before the start of the arab spring, former president george w. bush has been consistent in pressing his freedom agenda in africa and the middle east. in fact, the world over. it's an optimistic conservatism that contrasts strongly with the pessimism of many other conservatives. take, for example, israel's prime minister, who last november called the arab spring an islamic anti-western, anti-liberal, anti-israeli, undemocratic waif. the irony is that in his deep suspicion about the arab spring, bebe has a strange bedfellow, the saudi monarchy. it's not often you see israel and saudi arabia agree on policy, but the two share a general fear of the upheavals in the arab world. so much so in the saudis' case that they hosted a conference last week to bolster the very opposite of modern democracy, monarchies. five saudis were invited to riyadh. each is a monarchy, and each a member of the group called the gcc, or the gulf cooperation council. the saudis' hope is to turn that group into a more closely knit federation, something like the european union, they say. they feel a union of monarchies would serve as a bulwark against the region's turmo