This is a rush transcript from "Special Report," September 28, 2011. This copy may not be in its final form and may be updated.


JAY CARNEY, WHITE HOUSE PRESS SECRETARY: The president has made clear we believe Europeans have the capacity, the financial wherewithal the deal with the problem.

It's an interconnected global economy, and the situation has clearly caused a head wind to develop for several months now for the overall global economy and in particular the American economy.


BRET BAIER, HOST: There is concern about the overall global economy as the Eurozone situation continues to intensify. We're back with the panel. We'll start there. Charles, what about this on the precipice and how everything is interconnected?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: The good news is Greece passed a property tax. The bad news is that in Greece people don't pay taxes. So it's sort of a more, a more voluntary activity in Greece than anywhere else in the west.

The real issue is will Germany do the bailout? That is what everything hinges on. Remember, West Germany bailed out East Germany at the cost of trillions, so it's already done it once. Now it will have to bail out southern Europe. They aren't even Germans. In the end, they have to do it because they will all sink or swim together.

BAIER: Juan?

JUAN WILLIAMS, THEHILL.COM: What you're going to see, though, is a tremendous negative reaction as exhibited so far from the citizens of Europe. They do not like these austerity measures. They are not buying in to them. They see them as excess and in essence the way we Americans saw the bailout of banks and Wall Street. That's the way they view it. Why are the big guys taken care of? Articles all around are saying there will be more trouble in the streets.

BAIER: Fred?

FRED BARNES, WEEKLY STANDARD: Dealing with the Greeks is like dealing with Pakistan. It's an irresponsible country that you don't trust anything they say and you shouldn't in Greece because they haven't reduced the size of government or sold any of the property they own. But you are better off than not if you still give them the money. You keep your influence there. You have some control of what happens. And so, I think you are right. Germany will pony up again.

BAIER: You're not up for ambassador to Greece anytime soon.

BARNES: I'm just telling it like it is.

BAIER: That's right. Next up, the Congress looking to essentially pass a piece of legislation that deals with China's undervaluing its currency. Take a listen.


SEN. CHUCK SCHUMER, D-N.Y.: We are sending a message to China -- the jig is up. You either revalue your currency and play by the rules or you're going to face severe consequences. And to the administration, we're saying that the time for asking China nicely is over.

SEN. JEFF SESSIONS, R-ALA.: In these tough economic time we ought not to allow any of our trading partners to rig the game in their favor.


BAIER: Manipulating currency, Fred, a big deal and one with a lot of bipartisan support.

BARNES: You don't see Jeff Sessions and Chuck Schumer, you know, on the same side very often. They can lean some on China. China will change this much on how they value the currency. They have done it before. It makes the argument go away. The U.S., look, the U.S. has a horrible trade deficit with China but it's not mainly because of the currency problem.

BAIER: Juan, Donald Trump has been trumpeting this pretty hard.

WILLIAMS: The question is do you start essentially a trade war in the midst of a moment when the global economy is so fragile? The United States is on absolutely solid ground in saying the Chinese don't play fair. No question that the Democrats, Republicans, anybody can see that. But the question is what are the consequences for challenging the Chinese at this moment? I'm not sure they thought that through.

BAIER: What is the potential downside?

WILLIAMS: Say the Chinese then began putting pressure on the Americans in terms of all they hold in terms of the bonds and all of our assets. That's trouble. So much of our economy is reliant on the fact that we have heavy trade with China.

KRAUTHAMMER: Like just about everything happening in Washington, this is not about governing. It's about campaigning. The reason the senators want this is so everybody can be on board as registering a vote against China and against its currency. It will probably pass, probably in the House, and the president will probably either sign it -- veto it or soften it.

It's not going to have a real effect on our relations with China. We are pushing on China, but there is no way we will enter into a currency war, trade war right now. It would destroy our economies mutually as happened in the '30s. This is a way for Democratic senators, especially the ones in the industrial states, to go on record as being anti-Chinese, which is extremely popular.

BAIER: But it sounds like you downplay the issue. Experts say three million American jobs have been taken or lost in the past decade from the U.S. trade deficit with China. You say it's not a problem.

KRAUTHAMMER: No. It's a real issue, a real problem. The problem is it doesn't have the easy solution. Everybody assumes like Trump imposing, you know, prohibitive tariff on it. That cannot happen. The reason it hasn't happened is because it would be destructive to both sides. And ultimately it's a question of do you have a remedy or only have a protest? What the vote here is about is a protest.

BAIER: That is it for the panel.

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