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The latest on the economy with Stephen Long -

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TICKY FULLERTON, PRESENTER: Our Economics Correspondent Stephen Long joins us in the studio.

Well, Stephen, what are the challenges posed by this deal to support Greece?

STEPHEN LONG, ECONOMICS CORRESPONDENT: Well one of the challenges is, Ticky, that it's clear that
Greece isn't the only sick man of Europe. We've just had the latest figures come out for economic
growth across the 16-nation Euro zone and it's virtually stagnant. It grew by just 0.1 per cent,
dragged down strangely enough by Germany, the strongest economy and largest economy of Europe,
which was flat in the fourth quarter of last year. Now it led Europe out of recession after it fell
into a very deep recession; a lot of hope pinning on Germany, growth was flat. Italy, third largest
economy, went backwards in the fourth quarter, and we heard in Phillip's piece that Greece is
deeper in recession. Spain is remaining in recession. So clearly the problems are not simply ones
of Greece, and that raises the question of why - that perhaps gives an insight into why you saw a
reluctance to put any firm commitments, financial commitments around this rhetorical pledge to
assist Greece.

TICKY FULLERTON: I was gonna say: if a country as big as Germany is in trouble and some of the
other Euro zone economies are in trouble, how willing are they gonna be to stump up the money?

STEPHEN LONG: Well, they're in a bind really because in Germany in was consumption, domestic
consumption and investment that went backwards and offset their export earnings. Now, if the
domestic economy isn't in a good state and the German people were promised that they would never
have to bail out any other European economies if they were part of the Euro zone, then there's
gonna be a lot of political kickback if they actually have to front up real dollars to help this.

But beyond this, you've got the situation about the stability of the entire Euro zone and also
questions about the sustainability of global economic growth, because the assumption was that we
were coming out of recession globally. Now this lends weight to the idea that growth is going to be
stagnant at best or sluggish at best in Europe, a big part of the world economy. And we know also
that the United States is still in a pretty bad way.

TICKY FULLERTON: What about the rest of the world? I mean, if Germany has been a bit of a shock,
how are other major countries going?

STEPHEN LONG: Well, we know that China's going gangbusters; so strongly in fact that for the second
time in a month they've increased the reserve requirements for their banks to cool their economy.
They want to slow growth, but in slowing growth and slowing domestic lending, it's raising fears
about the impact on the rest of the world - Europe of course, the United States, but especially it
has implications for Australia. Clearly we're in a much better way, but the optimism that had been
expressed that we were all out of the woods, I'd say that that's perhaps slightly premature at this

TICKY FULLERTON: Stephen Long, thanks for joining us.

STEPHEN LONG: You're welcome.