CNBC's Caruso-Cabrera Blames Govt Spending for Europe's Economic Problems

Appearing on Monday's NBC Nightly News, CNBC's Michelle Caruso-Cabrera blamed decades of overspending by European governments and borrowing to help provide promised benefits for the continent's current economic problems.

She said "a lot of governments in Europe for many decades now have borrowed a lot of money in order to give very generous benefits to their workers and their retirees. They thought that they would grow enough to generate enough revenue to pay back those debts. That hasn't happened."

The CNBC correspondent - known for her libertarian economic views - went on blame the day's stock market drop in Europe on Italy's refusal to cut its own government spending in spite of promising to do so in exchange for receiving outside assistance in dealing with its national debt:

Europe's central bank stepped in and said we will help you, Italy, we will help you keep your interest rates low, but you've got to promise to make changes like balancing your budget, reducing the size of your government, which is very bloated, passing a balanced budget amendment.

So far Italy has failed to do all those things despite getting the help, and over the weekend leaders of the European central bank made very clear they're unhappy with Italy.

Below is a complete transcript of the segment from the Monday, September 5, NBC Nightly News:

KATE SNOW: Wall Street was closed on this Labor Day holiday, but other financial markets around the world took a beating today. Worries about the economy here at home with that job number on Friday saying job growth flat-lined and fresh anxiety about a possible debt disaster in Europe smashed stocks there. Germany's main stock index fell 5.3 percent,  France was down 4.8 percent, and, in London, stocks fell 3.6 percent today. CNBC's Michelle Caruso-Cabrera joins me now. Michelle, why such steep drops in Europe today?

MICHELLE CARUSO-CARBRERA: Well, the general concern, Kate, is that a lot of governments in Europe for many decades now have borrowed a lot of money in order to give very generous benefits to their workers and their retirees. They thought that they would grow enough to generate enough revenue to pay back those debts. That hasn't happened.

The immediate concern right now, the reason the market sold off today is Italy. It is the most indebted nation in Europe, and the situation grew so grave earlier in the summer that investors started to treat Italy like a sub-prime borrower, pushing its interest rates up very, very high. Europe's central bank stepped in and said we will help you, Italy, we will help you keep your interest rates low, but you've got to promise to make changes like balancing your budget, reducing the size of your government, which is very bloated, passing a balanced budget amendment.

So far Italy has failed to do all those things despite getting the help, and over the weekend leaders of the European central bank made very clear they're unhappy with Italy. The sell-off you see comes from the concern that if Italy doesn't keep receiving help, if they were to default on their debts, you would see bank failures across Europe. And that would be problematic. European banks are the ones that have lent Italy all that money.

SNOW: And bank failures does not sound good for anyone. What does that mean for American consumers, for all the rest of us?

CARUSO-CABRERA: Well, if there were to be bank failures in Europe and a banking crisis, you can be sure that the European economy would go into a recession. Think about this: When you put all the countries in Europe together collectively, their economy is bigger than the United States. An economy that big going into recession is problematic overall. and then, remember, they buy our products, they are one of our biggest trading products. They buy Ipods, they buy cars from General Motors. It would hurt us in our economy as well, plus we can expect our stock market to fall pretty sharply in the morning.

SNOW: Something we'll continue to watch, especially tomorrow morning. Michelle Caruso-Cabrera, thanks so much.