Is the eurozone crisis changing the landscape of British politics? Should Conservatives who want out of Europe altogether join the UK Independence Party?
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Afternoon folks, welcome to the Daily Politics. Confusion and chaos
are the only ways to describe the extraordinary events surrounding
the G20 summit in the south of France. It's all down to the Greeks.
As we come on air the Greek cabinet is in another emergency session.
Prime Minister Papandreou has already lost his parliamentary
majority. Coe be about to lose his job. It looks like he's lost his
plan for a referendum and there is a confidence vote to lose tomorrow.
No wonder the G20 is left scratching its head back in Cannes.
World leaders thought the G20 summit would rubber stamp the euro
don't deal agreed last week. Now there's nothing to endorse, bar the
growing realisation that if Greece defaults Europe and America are
heading back into recession. We will be hearing from our
correspondents in Cannes and Athens and talking to two former British
Chancellors, Alistair Darling, and Nigel Lawson.
And how is the crisis changing the landscape of British politics?
Should Conservatives who want out of Europe altogether join the UK
Independence Party? All that coming up. With us for the
duration former Conservative politician who recently defected to
UKIP, Alexander Hesketh, twobg the programme. Events are moving
quickly this morning as world lieders set out for the -- leaders
set out for the G20 in Cannes expecting to endorse the Greek
bail-out and the rest of the plan that was supposed to save the
eurozone. But that plan has unravelled before the ink was dry,
thanks to various shenanigans emanating from Athens. As things
stand, no one in the G20 knows if Greece is staying in or out of the
euro. Backs or rejects the bail-out, or even has an operating Government.
The Greek Prime Minister, George Papandreou, has has just announced
that he as offered his resignation to the Greek cabinet. We don't know
what the response is yet, but he is clearly hanging on to his job by
his fingernails. He has lost his majority, the support of Ministers,
including his ambitious deputy, the referendum plan is in tatters. He
faces a confidence vote in 24 hours. We will keep I posted -- on all the
news as it happens. Th President Obama and the G20 host President
Sarkozy made the usual pleasantries this morning and had a joke about
the recent birth of the French President's daughter but it was
clear neither had a clue about what to do next. We are going to flesh
out more details about how the plan will be fully and decisively
implemented. We also discussed the situation in Greece and how we can
work to help resolve that situation, as well. The United States will
continue to be a partner with the Europeans to resolve these
challenges. TRANSLATION: We need leadership of Barack Obama,
we need the solidarity and support of the United States of America and
we need a joint, common analysis as to the way we can put the world
back on the path of growth and stability.
Now, let me go through this breaking news that we are getting.
Reuters reporting he hasn't resigned and doesn't intend to, but
also reports that he may at least have offered his resignation to the
Greek cabinet. When we get clarification of that we will bring
you up to speed. Alexander Hesketh, this is a remarkable G20, because
normally these summits are planned in advance, the draft is usually
written before they get there. It's all falling apart, what do they do
next? I mean, this has happened before and was totally predictable,
because the history books are full of examples of where you try and
have a currency union without having a political union. It's
doomed from the kick-off. That's why the Germans and French are now
realising they have to have a fiscal union. They're going to have
a fiscal union and it's going to cost a great deal of money if
they're not careful. Will they have a fiscal union that will include
all 17 of the eurozone members. You would have to bet any fiscal union
is not going to include Greece now? My bet is that they will
desperately try and hold the whole thing together with - I mean, July
21st was a complete fraud. The last meeting was a complete fraud in
terms of if you actually looked at in the cold light of day and
outside the Brussels bubble and they'll try and keep it together
because in a sense France ogt to be the leader of club med and the
Germans should lead a group if they want to stay in the euro in
northern Europe. I don't see the French allowing... I agree, which
is why the whole thing is doomed. Let me bring you up to date, we are
getting more clarification of what's happening in Athens. It
seems the Greek Prime Minister, Mr Papandreou, hasn't just offered his
resignation to the cabinet, he is actually going to see the Greek
President to offer his resignation to the President. It's largely an
honorary title. He is going to do this, he hopes as a prelude to
forming what's been called a Government of national unity. That
may sound sensible, the problem is that the opposition, the main
centre-right opposition in Greece is totally opposed to the bail-out
that Mr Papandreou is proposing and wanted to have a referendum on. So
whether there would be much unity in that Government is something
that we will fine out in the days - - fine out in the days ahead. The
stakes for today's G20 summit couldn't be higher, at the moment
they're spectators at the feast watching Greeks not bearing gifts.
What can we expect? It's changing all the time.
President Sarkozy who is hosting today's summit had hoped it would
be a relaxed and glamorous affair on the French Riviera, where they
presented the deal thrashed out last week to the rest of the world.
Instead it's turned into a big fat Greek nightmare. The Greek Prime
Minister's decision to hold a referendum on the rescue package is
set to dominate the discussions and now we learn Mr Papandreou will go
to the Greek President to offer his resignation. This morning he lost
his majority in parliament, which doesn't bode well for his
confidence vote tomorrow. Then there's the referendum itself,
thought to be held on December 4th. Last night the Greek leader had a
difficult meeting with President Sarkozy of France and Chancellor
Merkel of Germany, where they warned him Greece's future in the
eurozone was at stake. Mr Sarkozy said later:
The two leaders have said the next bail-out cheque will be withheld.
President Sarkozy was hoping the meeting would allow him to lobby
the Chinese President to contribute to the European financial stability
fund, designed to protect countries in the eurozone from collapsing.
But they too have indicated they need more clarity on the situation
in Greece. So, where does this leave David Cameron? Last night the
British Government said they're prepared to give more money to the
IMF, which could, in turn, could could towards helping struggling
eurozone countries, something that won't go down too well with his own
back backbenchers. I am joined by our correspondent Christian Fraser
at the G20 meeting in Cannes. We have had the spectacle of the Greek
Prime Minister being summoned by the leaders of France and Germany,
to explain himself. Now we hear he is off to see the President to
perhaps offer his resignation. It's chaos, isn't it? There must be
total bewilderment among the G20 leaders gathering here. They come
to talk about the global economy and how to resurge to - to create
resurgence in the economy and they're focusing on one of the
smaller members of the eurozone, Greece. What we are hearing from
Athens in the last few minutes is that the Prime Minister has in fact
offered - is going to offer his resignation to the Greek President.
There will be a Government of national unity that will be given
powers to negotiate with creditors and they will move, instead of a
vote of confidence and a referendum, towards elections in the short-term,
probably within around four weeks. Now, as Andrew was saying, that
does create all sorts of other problems because the opposition,
presumably would be included in this Government, has already
indicated that it wants to renegotiate the bail-out package
that is it - that's been offered to Greece and the German Chancellor
has already made it abunantly clear it's not up for renegotiation.
What's come out of the confirmss over the past 24 hours is something
new and that's that the spectre of Greece leaving the eurozone is very
much on the table. And that begs questions in turn, how do you do
that? What mechanism is there for one of these members to leave the
eurozone? Can they be forced to leave? Can Greece go back to the
drachma? You can forgive the be-- bewilderment of other leaders here
who have been invited to try to invest in this new expanded bail-
out fund, they must be scratching their heads asking what do you want
to us invest in? Greece perhaps leaving the eurozone, the
Commission has put out a notice saying there is no mechanism for
that, if you leave, you have to leave the the European Union, too.
If you are saying Angela Merkel has anticipated what is going to happen
and says there is is going to be no further negotiation, do you think
that threat will stand, bearing in mind that will harm countries like
Germany if there is a disorderly default or do you think the Germans
and French could be pushed into perhaps either renegotiating or
giving the money without the bail- out fund or referendum on it to say
yes in Greece? Well, I think it comes down to domestic politics at
the end of the day. The French have been terrified, not particularly
about Greece in isolation, but the knock-on effect to the likes of
Spain and Italy. There are two concerns this raises, first of all,
the idea of giving the people a referendum, while it might be
applauded in some quarters as a step towards democracy, on issues
after all that will affect a generation for perhaps up to ten
years, it does then open the door to other countries like Italy who
also have a Government of disunity. We have seen one of the partners of
Mr Berlusconi's coalition are already digging their heels in,
what is is to stop them saying how come the Greeks get a decision on
this and we don't? The second problem is the Germans have
obviously, and we did see Angela Merkel taking the lead again last
night, they are obviously saying now that we can't go on like this
indefinitely. Greece has to make a decision, whether it's in or it's
out. Whatever the wording of the referendum is, whatever the wording
they would have decided for this referendum, it boils down to this:
Is Greece in or out? That's further than the French would have wanted
to go but Angela Merkel is pushing it in that direction. Thank you.
It's unclear what the leaders can do now, there is a nice little
restaurant to the left of our correspondent's shoulder there.
They might as well have a walk along there and enjoy themselves.
The breaking news, the Greek Prime Minister, Mr Papandreou, is
planning to stand down. He is handing in his resignation to the
Greek President within the next 30 minutes. It looks like a new
coalition, a so-called Government of national unity is going to be
formed under a former governor of the bank of Greece. At this time a
week ago we were told that there was a deal to bail out Greece and
save the euro. Some of us doubted it, we spoke to two former
Chancellors about where we went from here. They were pretty sniffy
about the whole affair. One week on the deal looks near to collapse,
their scepticism looks vindicated. We thought we better reassemble the
team, I speak of messers Darling and Lawson, to discuss again where
do we go from here? Alistair Darling, are we on the brink of a
Greek departure from the eurozone? It's very difficult for them to
stay, I am not an expert on Greek politics pwau Government of
national aou -- unity does sound odd, it may take some skill to hold
something together. The real problem which I set out last week
is that the Greek fix was never going to work. Even if it had
worked, it was still going to be left with a debt of 120% of its GDP,
which that doesn't work. So the deal they were being offered and
asked to implement was never going to work and should never have been
on the table last week. Never mind the other two legs of what they did
last week, the Greek capitalisation of European banks which is now
urgent, because if you talk about disorderly default there will be
default in the Greek banks which will come back to other European
banks and the rescue fund is not there. As you said at Prime
Ministers questions yesterday, it's a fund that doesn't exist.
doesn't exist and the rescue may be needed very, very shortly. I think
- I hope the G20 is not sitting at the side of the Mediterranean
waiting for the Greeks to come back. They have to look at what was
agreed last week, because it won't work and I said it would unravel
and it has. What they also need to do, which is urgent, is to look at
policies that will get growth back into the system, because as long as
we have this lack of growth, these problems are going to get worse and
worse. It's the lack of policy for growth, the G20 could do that and
it should meet with the same urgency and purpose it did two
years ago. The economy is smaller now. And by the way, without
wishing to hog the programme, if Greece does get tipped out of the
euro, don't let's kid ourselves that's going to sort the problem
out. It's not in our interests to have a country cast adrift with all
the things that could go wrong, not The fact is, even before Mr
Papandreou announced he wanted a referendum, the deal that Alastair
was talking about was already falling apart. The Italians were
having to pay much higher yields on their debt because the bond markets
didn't believe the deal. Let's isolate the three different strands.
There is first of all the eurozone itself, which is a completely
flawed construct, European monetary union, it cannot work. I predicted
this. I made a big speech at Chatham House when I was Chancellor
in 1989 predicting precisely this. Plenty of others saw this too.
Greece is clearly going to fall out of the eurozone... You think it is
as clear as that? Yes, I do, quite soon. The others will struggle on
for quite some time, but it is fundamentally flawed. So that's
that. Alastair is right that growth is important, but there is no quick
growth injection you can produce. You have to say, what is the
immediate problem. The immediate problem is the threat of a European
and to some extent global banking crises as a result of this severely
impaired sovereign debt that's around the place. Therefore the
banking crisis has to be addressed in two ways. I think Europe as such
is not going to be able to play a significant part. There are two
levels. First of all, each nation, each member state, just like
Britain had to address its own banking problems with when it had
banking problems. Which Alistair Darling was involved in. Absolutely.
The authorities there are going to have to address the problem of
their ropey, dodgy banks, and see what needs to be done and on what
terms. Then there's a case for a global approach. I think the
British Government is absolutely right to do it through the IMF. A
further advantage of doing it through the IMF, I think if China
is going to be able to allowed greater voting rights within the
IMF which I deserves to have because of the strength of its
economy, I think you will get Chinese money only in that way will
you get Chinese money and resources devoted to solving the global
problem. So I think those are the three strands. That's way ahead.
Alistair Darling, you've done a bit of G20ing in your time. You were
involved in the big summit in London. If you were there today in
Cannes, given the events that are playing out in Athens, what would
you do? Well, I think there are two things I would do. Firstly, the G20
does need to do everything it can to bring every influence to bear to
try to get the eurozone countries to sort out their immediate
problems. I agree with Nigel about the recapitalisation. It can only
do that nationally. No-one else can do that. That's the first thing. I
also agree with him that there isn't a quick fix for growth 2009,
when countries agreed to do whatever it took to stop recession
becoming depression by putting stimulus into their economies, even
a week before it wasn't clear they would agree to that. But because
they were scared stiff about the confesss -- about the consequences,
they acted. You now have the risk of countries defaulting. You have a
risk of that spilling outweigh beyond Europe. So there is every
interest in the world here in getting, in making sure that we
address some of the big imbalances, the China problem, the American
problem, but also that countries act together. On their own, yes
they can do some things, but they need to act together, otherwise
they'll be dragged along in the wake of events. Nigel Lawson, you
said there's a danger to European banks if the national Government
have to act. It seems to me the biggest danger is the Italian
system, as they buy most of the Italian bonds. And the Italian
Government is in no shape to recapitalise Italian banks.
Italian Central Bank is still quite a strong institution, even though
the Italian Government is very, very rocky. I think that the
Italians ought to be able to manage this. We are talking, the Italian
political situation will clearly have to be resolved soon. Silvio
Berlusconi can't go on like he is. That has got to be resolved. Buying
time is an important element in all of these sorts of problems. One of
the first problems I was dealing with in 1983 was the Latin America
sovereign debt crisis. Hit many similarities to this. -- it had. We
solved it satisfactorily through the IMF, buying time. That's what
you have to do. And through an Argentinian default as well. Yes.
Countries do default and they come back from the grave, as it were.
Only Honduras and Ecuador has defaulted more than Greece. Greece
has got previous on this. It is not unusual for it to happen. Is UKIP a
bit like Madame Lafarge as you do your knitting as the tumbrils roll?
Every working family in this country is going to be affected by.
This we have an interest in trying to avoid this ever happening again?
That's why we do not wish to be involved within Europe. Of a way
and manner that's conducted way. That's why we have a great interest.
Finally, ex-Charles, if the eurozone is going to move towards
more fiscal integration, which is the policy of this Government as
well as Her Majesty's opposition, and is the policy of Mrs Merkel and
Nicolas Sarkozy, will it be an integration of the 17 or even the
16, or will it be a smaller eurozone that does that? My guess
is that a lot of uncertainty that it will be a smaller unit. There is
such a disparity between Germany on the one side and if you assume
Greece is out of it. One point that Nigel made, an important one, what
is desperately needed is time. You can't reorder the eurozone within
days but they won't get that time unless they deal with the problems
that were there last week. On a smaller eurozone? They may try that,
but I don't think the people s even of the smaller part, the inner core,
I don't think they really want a full political union. So the thing
is not going to make sense even at that level. Gentlemen, we'll leave
it there, but don't go too far away. We may need to make a block booking
for you. Remember Harold Wilson said a week is a long time in
politics? It is certainly a long time in eurozone politics! An hour
is a long time in Greek politics! Gentlemen, former Charles, thank
you. -- Chancellors, thank you.
Now, the Greek Prime Minister isn't the only European leader with his
own domestic political problems. There's no prospect of him losing
his job, of course, but you'll remember last week that 81 of David
Cameron's MPs defied him and voted in favour of a referendum on
Britain's relationship with Europe. We decided to take a look back
through the archives and began to wonder - can you guess what these
Apology for the loss of subtitles for 41 seconds
Yes, they were all former Conservative Party members who have
now joined UKIP. One of them was a young Lord Hesketh, our guest of
the day here, who joined UKIP last month. Well, we're joined now by
Andrea Leadsom, a Conservative MP and one of the 81 rebels who defied
the party leadership last week. Thank you for joining us. Lord
Heskey, you have made this radical switch after a long history with
the Conservative Party. What's wrong with the Tory Party? I think
that all political parties over the European issue have become
completely controlled by the Civil Service. That's a combination of
the Civil Service in this country and the Civil Service in Brussels.
And the establishment that goes with that. It is not just the civil
servants. But Europe is hard-wired into the system. But if you've got
a Prime Minister like David Cameron, who reputedly was very Euro-sceptic,
surely it is down to the leadership of the party? I think the actions
of Andrea and 81 people in the House of Commons last week shows
that there's a distinct sense of unease about whether or not whoever
is running the House of Commons is actually able to deliver. This is
the real problem. This is the actuallity of it, which is for
instance I saw one Tory MP once weekend, wisely, in my opinion,
suggesting that we should immediately get rid of the UK
ambassador in Brussels, who goes under the winning name of Akreb.
Unusual to say the least! actually I would put a politician
in there. This is about politics, not about the grand project which
Giscard d'Estaing would have called it. But your main aim is to have a
referendum isn't it? And surely the best and only likely way of making
it that happen is to work through the Conservative Party isn't it?
disagreement I don't think you spend 50 years with the Tory Party
and make the jump that I made unless you've come to the collusion
that -- conclusion that all political parties, for want of a
better word, set-up, are incapable of dealing wit. You might as well
jump ship and join UKIP? Not at all. I think the Government are doing an
excellent job. At what? For example ensuring Britain doesn't remain a
part of the bail-out mechanism after 2013. Looking after British
interests. David Cameron, William Hague and George Osborne have
spoken strongly about the need to renegotiate powers in Britain's
best interests. I'm certainly working with a wide range of
colleagues across the party to look at ways that we can renegotiate
powers. But then, as Lord Hesketh said, he spent all this time in the
Conservative Party, but none of these things have come to fruition.
There is no reliable evidence to say any of those power would be
repatriated, and you won't get that referendum. But things have changed
in the last week, they've certainly changed in the last couple of years.
And I remain incredibly hopefully and positive that this Government
is going to make that difference. In terms of having a referendum?
They've already ruled that out and your colleagues have argued this is
the best opportune time to have a referendum to renegotiate Britain's
relationship with Europe. Very a slightly different take on it. The
point about the vote last week, for me at least. The key thing is that
the British people should have their say at some point. This
wasn't about a lack of confidence in the Government. This was a point
about democracy, that people have waited since 1975 to have a further
say on the EU. It is that alone that made me decide to vote for a
referendum. That is not to say that I think the Government is doing the
right thing in moving towards a situation that looks after
Britain's interests in the EU. you worried that any of your
colleagues will leave the party and join UKIP? Not at all. There are a
group of people in the Conservative Party who believe Britain would be
better outside of the EU. My straw poll of the 20 is 10 intake, we are
a Euro-sceptic bunch but we don't favour getting out altogether.
Doesn't that represent the majority view, regoegs yes, but not pulling
out of the EU altogether? I think what Andrea said was interesting.
She is talking about the parliamentary party. I don't expect
to see many people coming out of the parliamentary party, if any.
Peter Oborne in today's Telegraph, he says we are going as a political
party. We are not just a single- issue party. We had a manifesto at
the last election and the reality is that more and more people are
coming to us. Can I give you two examples. Briefly. One is the Tobin
tax. The response we've had from the City in the last two weeks is
simply breathtaking. Now, just time to put you out of
your misery and give you the answer to yesterday's Guess The Year
competition. 1960 was the year. Alexander, pick a winner. J reg
began from Peterborough. -- J Regan.
I'm back here tonight on This Week with Alastair Campbell and Michael
World leaders are arriving at the G20 summit in Cannes with the eurozone teetering on the brink - if Greece defaults there are real fears that Italy could be next and that that could push the rest of the world back into recession. We hear from our correspondents in Cannes and Athens and talking to two former chancellors Lord Lawson and Alistair Darling.
And how is the crisis changing the landscape of British politics? Should Conservatives who want out of Europe altogether join the UK Independence Party? With Andrew and Jo for the whole programme is the former Conservative politician who recently defected to UKIP - Lord Hesketh.