Browse content similar to Alistair Darling - British Chancellor of the Exchequer, 2007-2010. Check below for episodes and series from the same categories and more!
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school building programme. That is the summary of the news, that's it | :00:02. | :00:12. | |
:00:12. | :00:13. | ||
from me tonight. It is now time for Just how close to meltdown is the | :00:13. | :00:18. | |
eurozone? With Greece preparing for election which many see as a de | :00:18. | :00:25. | |
facto referendum on a euro exit, the Continent's markets are awash | :00:25. | :00:33. | |
with fear. Ankaras, contagion, systemic collapse. -- Bank runs. | :00:33. | :00:39. | |
These are threats to the global economy. My guest today is Alastair | :00:39. | :00:45. | |
Darling, who was the Chancellor during the financial crisis of 2008. | :00:45. | :00:54. | |
Is there a way out for the economic hole that Europe has dug for | :00:54. | :01:04. | |
:01:04. | :01:17. | ||
Alastair Darling, welcome to HARDtalk. I want you, if you would, | :01:17. | :01:21. | |
to compare the feelings that are brought now with those that you | :01:21. | :01:26. | |
were so very aware of in 2008 at the height of the financial crisis. | :01:26. | :01:29. | |
Is there more reason to be concerned about European and global | :01:29. | :01:34. | |
economic stability now than there was then? In some ways there is | :01:34. | :01:37. | |
more reason because here we are three-and-a-half years since the | :01:37. | :01:43. | |
collapse of the banking system and there is still no end in sight. In | :01:43. | :01:47. | |
fact we have now moved from a banking crisis into a situation | :01:47. | :01:51. | |
where the world economy is did come together to get growth going, then | :01:51. | :01:57. | |
we took the fat off the pedal. We still have this downturn in various | :01:57. | :02:01. | |
stages across the world -- the foot off the pedal. In Europe, not only | :02:01. | :02:05. | |
have you got Greece, but in the last couple of weeks there has been | :02:05. | :02:09. | |
concern about the banks which is so similar to what was happening in | :02:10. | :02:16. | |
2008. It is. You talk about Greece being at the heart of it, but is it | :02:16. | :02:20. | |
fair to say that it is about so much more than Greece? There's a | :02:20. | :02:25. | |
systemic challenge now to the viability of the euro as a common | :02:25. | :02:29. | |
currency. Do you accept that? are three inter-related problems | :02:29. | :02:33. | |
and you can't look at them separately. The overarching problem | :02:33. | :02:38. | |
is that if you have a single currency then the economic and | :02:38. | :02:41. | |
political necessities are that you come closer together, the richer | :02:41. | :02:46. | |
parts have to help the poorer parts. That is part of the problem. One of | :02:46. | :02:51. | |
the problems is Greece, whatever happens has to be some sort of | :02:51. | :02:54. | |
settlement that enabled Greece to get through things and have some | :02:54. | :02:58. | |
hope. Second the European and eurozone area did not clean up the | :02:58. | :03:02. | |
banks in the way they should. Thirdly, this business of austerity | :03:02. | :03:08. | |
alone been sufficient, this is complete nonsense. Until they put | :03:08. | :03:13. | |
that behind them they are going to be stuck in this downward spiral. | :03:13. | :03:18. | |
We have got Greece, the viability of Europe's banks, and a broad | :03:18. | :03:22. | |
economic strategy across Europe. Let's take one by one and let's | :03:22. | :03:30. | |
start with Greece if we make. I referred in the introduction, June | :03:30. | :03:38. | |
17th election, many saw it as a vote as to whether to stay in the | :03:38. | :03:44. | |
eurozone. If the answer is No Then Greece will be forced out. Do you | :03:44. | :03:49. | |
believe the Germans and others are right to insist they can be no | :03:49. | :03:54. | |
renegotiation of the bail-out deal? -- they can. I have always been | :03:54. | :03:58. | |
critical of the deal because I don't think it will work. In eight | :03:58. | :04:02. | |
years' time that will mean Priest will have a debt level higher than | :04:02. | :04:08. | |
when they went into the crisis -- Greece will have. Can it ever get | :04:08. | :04:13. | |
on its feet? That is one fundamental problem. The other | :04:13. | :04:17. | |
side... Let me stop you there. If you take the position that this | :04:17. | :04:22. | |
deal is incredible, and therefore not worth the paper it's written on, | :04:22. | :04:26. | |
are you suggesting every creditor that is owed money by the Greek | :04:26. | :04:30. | |
government has to write all of it off? That is a separate issue if we | :04:30. | :04:35. | |
carry on much longer. Supposing there were no Greek elections at | :04:35. | :04:40. | |
all, not for years, and the Greek government carried on as a | :04:40. | :04:43. | |
technocratic government. When they signed off the last attempt to | :04:43. | :04:47. | |
impose a settlement on Greece, everybody knows they will have to | :04:47. | :04:51. | |
come back for more. The European Union knows that, the eurozone | :04:51. | :04:55. | |
countries know that. This is a settlement that leaves Greece with | :04:55. | :05:02. | |
debt levels of 120 % of its national income in a year's time. | :05:02. | :05:05. | |
That is not the message coming from the pro bail-out deal Greek | :05:05. | :05:10. | |
politicians and also the eurozone, either somebody is lying to the | :05:10. | :05:13. | |
European public or you are overstating the case? If anything I | :05:13. | :05:19. | |
am trying to understate it, because there are huge things at stake here. | :05:19. | :05:24. | |
After this was signed it emerged that within the eurozone there was | :05:24. | :05:28. | |
an acceptance it would have to come back for more. That is one side of | :05:28. | :05:33. | |
it. On the other side you can't say to Greece, you are off the hook if | :05:33. | :05:37. | |
you like. Equally I have no time for politicians in Greece who say | :05:37. | :05:41. | |
they don't have to do anything, they can just forget everything and | :05:41. | :05:49. | |
they will write off al our debts. If they stay in the eurozone there | :05:50. | :05:56. | |
are issues, but if they leave, they will be pain in Greece. If they do | :05:56. | :05:59. | |
leave the eurozone it will be inconceivable that Europe will not | :05:59. | :06:04. | |
have to do something to help Greece transition into something it will | :06:04. | :06:08. | |
then have to be. I take your point and there is going to be paying | :06:08. | :06:13. | |
either way. Whether there's a way of keeping Greece inside the | :06:13. | :06:20. | |
head of the IMF, said something very interesting hours ago. | :06:20. | :06:23. | |
"Everyone in Europe must analyse the costs and the benefits of both | :06:23. | :06:31. | |
of these scenarios very carefully before deciding what to do". As a | :06:31. | :06:34. | |
former finance minister, what do you think that analysis of costs | :06:34. | :06:40. | |
and benefits leads you to conclude about Greece and the euro? I think | :06:40. | :06:44. | |
it would be better if we could reach a settlement with Greece | :06:44. | :06:48. | |
within Europe than out of Europe. So somebody else will have to pay a | :06:48. | :06:53. | |
substantial amount of their current outstanding bills? Whatever happens | :06:53. | :06:58. | |
there will be a cost. If it all goes wrong, suppose Greece is | :06:58. | :07:02. | |
forced out, the risk is the contagion spreads to other | :07:02. | :07:06. | |
countries, the countries, like Spain for example, where the cost | :07:06. | :07:10. | |
to the remaining eurozone members is therefore much bigger. Greece is | :07:10. | :07:15. | |
tiny in the scheme of things, it is 2% of the whole economy. When you | :07:15. | :07:19. | |
talk about the bigger countries it is a different ball game altogether. | :07:19. | :07:23. | |
I would like to say Greece signed up to a deal that could be made to | :07:23. | :07:28. | |
work, so there's no way of getting out of it. But what I see in the | :07:28. | :07:33. | |
deal they signed is one that is not credible. Part of the problem is if | :07:33. | :07:36. | |
you impose a treaty on a country, where people don't believe there's | :07:36. | :07:40. | |
a lot of pain yes, but at least there is a game at the other end, | :07:40. | :07:43. | |
but they don't see that, and they see all the suffering not getting | :07:43. | :07:47. | |
them anywhere, it is not surprising that they are seduced by people | :07:47. | :07:52. | |
with simplistic arguments and pain- free solutions. Isn't there a | :07:53. | :07:56. | |
credibility gap the other way, and let's move on from Greece, because | :07:56. | :08:00. | |
you have already alluded to the fact there is deep trouble in Spain | :08:00. | :08:05. | |
and the Spanish financial system, and real problems in Italy and | :08:05. | :08:11. | |
Portugal as well. A lot of European politicians, and I am thinking of | :08:11. | :08:15. | |
France while Holland in France and the Prime Minister of Spain, and | :08:15. | :08:19. | |
others as well -- Francois Hollande. They are all talking about Euro | :08:20. | :08:23. | |
bonds, as if this could be the solution to this spreading problem | :08:23. | :08:29. | |
and spreading fear of contagion. Do you believe the idea that you | :08:29. | :08:34. | |
collectivised the debt and use the full power of the European Union to | :08:34. | :08:38. | |
guarantee the debt of sovereign nations in Europe on its, can that | :08:38. | :08:48. | |
:08:48. | :08:50. | ||
be a viable solution? It is certainly a solution -- European | :08:50. | :08:54. | |
bonds. You might have some problems with the German constitutional | :08:54. | :09:00. | |
court. They almost certainly would. As I said at the start of this | :09:00. | :09:04. | |
programme the logic of a currency union is you get increasing | :09:04. | :09:09. | |
economic and therefore political co-operation and ultimately Union. | :09:09. | :09:13. | |
I don't think we want that yet. But the logic of that means something | :09:13. | :09:21. | |
that allows you to swimming pool the cost of boring, so the rich | :09:21. | :09:26. | |
carry the poor.... Germany will have to act as a guarantor? | :09:26. | :09:30. | |
European Central Bank is pouring money into the banking system. | :09:30. | :09:33. | |
Clearly it is a European central bank so all of the countries are | :09:33. | :09:37. | |
standing behind it. The power of that Bank was used at the start of | :09:37. | :09:40. | |
this year to stop what I think would be the collapse of some major | :09:40. | :09:45. | |
banks. There's an example where the collector advising happens already. | :09:45. | :09:52. | |
The German view is that if you give Greece an inch it will take a mile | :09:52. | :09:57. | |
-- collect revising. I understand that and if you don't put your foot | :09:57. | :10:01. | |
down there is a risk that they will say they don't need to bother. But | :10:01. | :10:07. | |
if you impose something, it has got to be something that sticks. But on | :10:07. | :10:10. | |
your central point, is there a value in Europe coming together? | :10:10. | :10:14. | |
The United States is a fully federal country, the richer bits | :10:15. | :10:19. | |
help the poorer bits. But it is a nation state, it is a federal | :10:20. | :10:25. | |
nation. Is it your contention, I want to tease out the logic of this, | :10:25. | :10:31. | |
that Euro bonds, which are already been talked about, can only happen | :10:31. | :10:35. | |
when there's a clear commitment to full fiscal and in the political | :10:35. | :10:41. | |
union? They cannot be separated. What you have got in the eurozone, | :10:41. | :10:45. | |
everybody knows it is a fudge. If you go back to when it was set up | :10:45. | :10:49. | |
at the end of the 1990s they had a thing called a stability and Growth | :10:49. | :10:54. | |
Pact, which is there to keep the economy is in line. The first two | :10:54. | :10:57. | |
countries that broke it were France and Germany and nobody did anything | :10:57. | :11:01. | |
about it for these reasons, they were too big. Even in the situation | :11:01. | :11:07. | |
you have got now, I kind of halfway house, you can still do euro bonds. | :11:07. | :11:13. | |
What about a moral hazard? In 2008 you had to deal with that when he | :11:13. | :11:18. | |
rescued the banks and in a sense that continued bad practice. Would | :11:18. | :11:24. | |
it not be the same thing for sovereigns? If you are allowed euro | :11:24. | :11:27. | |
bonds to rescue terrible decision making at the top in Spain, Greece | :11:27. | :11:32. | |
and other countries, you would be exacerbating the problem of moral | :11:32. | :11:36. | |
hazard. I understand the concept of moral hazard but let's look at | :11:36. | :11:40. | |
Leeman Brothers. The Americans tried out something that had not | :11:40. | :11:46. | |
been tried before, and you let a very large bank crash. You could | :11:46. | :11:49. | |
say that is an a sample of moral hazard, it does not matter how you | :11:49. | :11:55. | |
arrived at it, because it was an unfortunate accident more than | :11:55. | :12:00. | |
anything else. But it brought the banking system within hours of | :12:00. | :12:03. | |
collapse. You could say to the Greeks, you lot have completely | :12:03. | :12:09. | |
screwed up, suffer the consequences. If Greece went out of the euro that | :12:09. | :12:13. | |
weigh the consequences would be terrible for Greece, and we would | :12:13. | :12:18. | |
not be able to sit back and say it does not matter. But it would be | :12:18. | :12:21. | |
terrible for countries doing the right thing, countries that are | :12:21. | :12:25. | |
trying to put their house in order. They would be hit by the backwash | :12:25. | :12:30. | |
if you got this contagion spreading through Europe. Marach moral hazard | :12:30. | :12:35. | |
is fine in peace time, but in a cute crisis which is what we are in | :12:35. | :12:39. | |
at the moment, it is a brave set of governments that say let's see what | :12:39. | :12:44. | |
happens. I hear your voice of experience from 2008 when you say | :12:44. | :12:49. | |
that. But some quick-fire questions, how close are we right now to a run | :12:49. | :12:53. | |
on at least one significant European Bank? You can never tell | :12:53. | :12:58. | |
with these things. I have no reason to think it will happen in the next | :12:58. | :13:02. | |
few hours. But as you saw last week, when stories start to spread, the | :13:02. | :13:06. | |
Greek money has been taken out of the banks, the Spanish government | :13:06. | :13:11. | |
had to deny there was a run on one of their banks. Look what happened | :13:11. | :13:15. | |
with Northern Rock in 2007, everything is fine Monday and it | :13:15. | :13:21. | |
isn't the next. In other words, this is what worries me, something | :13:21. | :13:26. | |
could happen one morning that leads to panic. What I learned from 2008 | :13:26. | :13:30. | |
was that in order to stop this you have to do far more than people are | :13:30. | :13:34. | |
expecting an you have to do it more quickly and that hasn't happened. | :13:34. | :13:38. | |
You have to do it more and quicker, how can that happen in the European | :13:38. | :13:43. | |
context when we see every day the differences between Francois | :13:43. | :13:47. | |
Hollande, and Angela Merkel in Germany? We see all of the | :13:47. | :13:51. | |
differences and confusions coming out of Greece as well. How is it | :13:51. | :13:54. | |
possible to imagine the quick decision-making you're talking | :13:54. | :14:03. | |
about coming out of the European I can only imagine it happening in | :14:03. | :14:07. | |
one circumstance, and that is if everything absolutely goes wrong, | :14:07. | :14:11. | |
and that finance ministers are scared stiff less. The chairman of | :14:12. | :14:15. | |
RBS, one of the largest banks in the world, they say they are | :14:15. | :14:20. | |
running out of money. They say they could last only to hide than three | :14:20. | :14:26. | |
hours. If that bank shut its doors, that would spread through the | :14:26. | :14:34. | |
entire system. Are you saying that we need that kind of deep crisis to | :14:34. | :14:39. | |
force European leaders to find a viable and common policy? If I look | :14:39. | :14:43. | |
at what has happened with the eurozone in Greece, they started to | :14:43. | :14:48. | |
try to sort it out at the last meeting I went to in 2010, they had | :14:48. | :14:53. | |
been consistently behind events, and when they needed to do | :14:53. | :14:57. | |
something, they had done not enough, too late, and sometimes completely | :14:57. | :15:02. | |
the wrong thing. They have got a month before we see the colour of | :15:02. | :15:07. | |
the next great government. I hope they use that time to good effect. | :15:07. | :15:14. | |
A final thought on the eurozone. The current Euro autumn Italy will | :15:14. | :15:20. | |
have to go. It will be better it the eurozone broke up. -- the | :15:20. | :15:30. | |
:15:30. | :15:30. | ||
county record and Italy. I just wonder in the current climate, | :15:30. | :15:34. | |
where there you could have an orderly break-up. Remember how long | :15:34. | :15:40. | |
it took to put the euro to get there? It took decades. If you are | :15:40. | :15:45. | |
breaking up, you are talking about acquiring a new currency that is | :15:45. | :15:54. | |
good to use on Monday morning. If you are in tranquil times, it could | :15:54. | :15:58. | |
well be that you reach the conclusion that the euro was never | :15:58. | :16:03. | |
going to work, so let's recognise that ate it may be better off for | :16:03. | :16:08. | |
everybody. But remember where we are now. The Continent, a large | :16:08. | :16:14. | |
part of it is in recession, and coming back to the UK, it is very | :16:14. | :16:17. | |
important to us. If you are going to start that kind of thing, you | :16:17. | :16:27. | |
have to be sure where you are going to end up. You mention the UK. I | :16:27. | :16:32. | |
want to talk more about the UK. There is a continuing and important | :16:32. | :16:38. | |
debate about economic strategy. The Government is committed to the | :16:38. | :16:41. | |
strategy of austerity, putting it front and centre, getting the | :16:41. | :16:47. | |
deficit down and cutting national debt. The Labour Party, your party, | :16:47. | :16:53. | |
has consistently said that they are doing it too fast and too quickly. | :16:53. | :16:58. | |
That they would moderate the cuts. Christine Lagarde said, when I look | :16:58. | :17:02. | |
back to 2010 and what could have happened without the sort of fiscal | :17:02. | :17:06. | |
consolidation the current government has taken, I shiver. | :17:06. | :17:16. | |
:17:16. | :17:16. | ||
What she actually said, if then that -- if there was not a credible | :17:16. | :17:21. | |
plan, she would shiver. She is referring to the David Cameron and | :17:21. | :17:26. | |
George Osborne plan. Nobody is arguing that they needed to be a | :17:26. | :17:32. | |
plan. She backed their plan. The kind government's emphasis on | :17:32. | :17:37. | |
austerity, on slashing the deficit quickly as possible, is the right | :17:37. | :17:47. | |
:17:47. | :17:50. | ||
strategy. She endorsed the Government's plan. But she also | :17:50. | :17:56. | |
said, as the iMac said 12 months ago, the risk is that we are | :17:56. | :18:02. | |
institutionalise an economy of low growth. If it does not work, we | :18:02. | :18:08. | |
need a Plan B. It is not our government's plan. George Osborne | :18:08. | :18:13. | |
says he has created the space, in the end it is about confidence, | :18:13. | :18:18. | |
because of the programme that he has taken, he has got the | :18:18. | :18:22. | |
confidence of the ratings agencies, the bond markets, to allow him some | :18:22. | :18:29. | |
space to take measures such as boosting the construction industry. | :18:29. | :18:35. | |
You need a credible plan to get your borrowing down. I wanted to do | :18:35. | :18:39. | |
that, the Government is doing that as well. But he is borrowing more | :18:40. | :18:49. | |
:18:50. | :18:58. | ||
than he said he was in 20th June 10. -- June 2010. He cannot say that he | :18:58. | :19:03. | |
is on course. We do happen to be back in recession in this country, | :19:03. | :19:06. | |
something that I did not think would happen, that he did not think | :19:06. | :19:12. | |
would happen, but we are back in recession. I am in favour of all | :19:12. | :19:17. | |
the infrastructure projects. The problem is that there is a long way | :19:17. | :19:20. | |
between announcing and that contractors being engaged, jobs | :19:20. | :19:26. | |
being created, and the projects being completed. A lot of the | :19:26. | :19:31. | |
projects have not been started. The IMF was making the point, that out | :19:31. | :19:35. | |
government, may well have to do far more than they bargained for, if we | :19:36. | :19:41. | |
do not get growth going again. they say that for right now, the | :19:41. | :19:46. | |
Government is on the right track. I want to tease out the Labour Party | :19:46. | :19:50. | |
economic strategy. We have a crisis in the eurozone, a recession at | :19:50. | :19:56. | |
home, but the Labour Party has not decided what it wants its economic | :19:56. | :20:04. | |
policy to be. Would you agree with that? There are a few voices more | :20:04. | :20:14. | |
:20:14. | :20:15. | ||
influential than yours when it comes to the debate. The present | :20:15. | :20:18. | |
government did not tell us what they were planning before the | :20:18. | :20:22. | |
election. But there are signals that can be sent. You can look | :20:22. | :20:27. | |
around Europe and have views on what is happening elsewhere. | :20:27. | :20:33. | |
Francois Hollande has made it clear that he is going to attacks 75% on | :20:33. | :20:38. | |
people earning over one million euros. He is going to regulate the | :20:38. | :20:43. | |
banks on a very pro active way. He is going to talk about a financial- | :20:43. | :20:48. | |
services tax. Those are signals being sent about where he puts his | :20:48. | :20:53. | |
economic priorities, which Ed Miliband is not prepared to take. | :20:53. | :21:00. | |
He set it out in deep as it -- the election campaign. Which he | :21:00. | :21:09. | |
happened to win. Is there not a message for Labour? The time is to | :21:09. | :21:15. | |
set it out when we approach the election. I'm not asking for every | :21:15. | :21:22. | |
dot to be signed off one, but I am asking for the Labour could -- the | :21:22. | :21:26. | |
Labour Party to restore the 50% tax rate, which the Tories had decided | :21:26. | :21:32. | |
to reduce? In my view, and I cannot speak for my party, in my view is | :21:32. | :21:38. | |
that you will have to take that decision closer to the time. I | :21:38. | :21:43. | |
would not have taken it off this time. Because at a time when people | :21:43. | :21:47. | |
are still finding their income squeezed, it seemed wrong that the | :21:47. | :21:50. | |
first place that you go to take taxes off our people at the top end | :21:50. | :21:55. | |
of the scale. He has made that clear. We have made it clear that | :21:55. | :21:58. | |
the Government ought to be doing more to bring forward the | :21:58. | :22:05. | |
infrastructure programme. You will not be painted into a corner in | :22:05. | :22:12. | |
give too much Pacific, but let's talk about the Greek radical left, | :22:12. | :22:20. | |
the leader, going around the European capitals, saying that they | :22:20. | :22:24. | |
have to stand up to corporate capitalism. They have to fight for | :22:24. | :22:28. | |
a better economic system that represents workers better, and are | :22:28. | :22:37. | |
not simply in the interests of the capitalists. I think it is a Greek | :22:37. | :22:47. | |
:22:47. | :22:48. | ||
situation. I think if you look at the broader lessons that need to be | :22:48. | :22:53. | |
drawn, the system for banks failed, it needs to be tightened up, these | :22:53. | :22:55. | |
institutions are so important to the economy that you cannot leave | :22:55. | :23:01. | |
it to chance. On the economy, the fundamental difference between us | :23:01. | :23:09. | |
and the Conservatives, we believe that governments cannot define the | :23:09. | :23:13. | |
forces of gravity, but they can make a difference in terms of | :23:13. | :23:18. | |
fairness and the way that you'd cut the deficit, and to get economic | :23:18. | :23:22. | |
growth going again. When Ed Miliband made a speech about | :23:22. | :23:26. | |
predatory capitalism, very soon afterwards Tony Blair appeared in | :23:26. | :23:30. | |
the press and according to sources close to him said, we have to be | :23:30. | :23:34. | |
credible with business, we cannot go into the election without a | :23:34. | :23:39. | |
single CEO from a big company backing us as we did in the last | :23:39. | :23:45. | |
election. If you want to win, you have to win from the centre ground. | :23:45. | :23:54. | |
I agree with that. It is a trip in the UK that you cannot win | :23:54. | :23:59. | |
elections did he come from the centre. -- a truth. You have to | :23:59. | :24:04. | |
have a policy that makes sense for businesses. But if you are running | :24:05. | :24:09. | |
an economy in such a way that business cannot flourish, they are | :24:09. | :24:14. | |
not going to do the things that you want to do in order to help people. | :24:14. | :24:21. |