31/12/2011 Dateline London

Our top team of crystal ball gazers and clairvoyance will be predicting

some of the likely outcomes of the Europe and the world economy - will

we have the euro in a year's time? Will there be a euro by next

Christmas? We will have a euro. I think we will have to let go of a

country like Greece to begin with. To begin with we have this attempt

to get fiscal union in place by March, which is very hard to do for

some countries. We cannot predict whether that will happen. It is

unpredictable whether it will succeed. This is a German idea of

austerity imposed on countries who have no growth to begin with. Will

this be a lie for Europe -- a life. Winnowed the central bank needs to

come forward and offer money for buying bonds. -- we know. It is

like inflating your way out of a crisis. The German member of the

ECB will resign immediately and will have a huge uproar. The

Germans will say yes we will continue with the euro but we have

two separate some countries from the pack. We will have you row,

maybe in a different form? Do you agree? I do agree. This is one of

the things about the EU, whenever there is a crisis - four months

before the final agreements are Initial, the way forward is clear.

It is just the incredibly difficult domestic politics that go along

with getting them back that happens. There is no doubt that to this day

the bid to make in the middle - France and Germany - what to keep

the euro together. -- want to. It is possible that Greece may not be

part of it and it is possible Portugal may not be part of it. And

even in Ireland, which swallowed the austerity medicine as bravely

as any other, they may be given a vote as to whether they remain in

the euro. You would have thought that, Sarkozy would vote for him

sufficiently to keep him in Office. -- thought that, yes, Sarkozy,

I think it is far from clear whether the euro will survive. I

disagree with the other panellists. I think what we have in many

European economies is patients lying in the road pleading and

rather than getting on with the surgery, what Europe is doing is

building a hospital for the future, rather than giving surgery now. I

pick it is possible that Britain, during 2012, even if it does not

bring economic benefits... Everyone is clear that if the euro goes,

Britain will suffer. It is a question of whether the problems

will be long-lasting or short. My view is that, until countries are

free from the euro bankruptcy machine, recovery will not begin. I

see the break-up of Euro -- the euro is like surgery - painful at

David Cameron has bought himself time by not agreeing to the plant

signed off on in Brussels. -- to the plan. He can sit pretty and

watch what happens and how they take care of their own problems. I

was going to change the metaphor from hospital and so want to be

psychological problems of the euro. It is basically facing up to

reality. It is one of the things looking back on the year, people

would say that they did not face up to the problems with the honesty

many voters understand when they tried to pay for food at the

supermarket. The term of "Too big to fail" Is one thing that a lot of

people look to. People cannot imagine the euro failing because

they do not know what that means for Europe. Economic problems as

well as political problems - what does that mean for the EU? What

will happen in Britain next year, that distancing will continue to

impact the European Union in the long haul. You have just returned

from the United States. How was Britain's role in Europe seen from

there? When I talk to American politicians of different

ideological positions, they see Britain's role as being Max someone

they can talk to within the EU. If they become semi-detached, does

that pose a problem? President Obama would call Angela Merkel once

a week and then he calls Sarkozy and that what happened next year.

Less so with the next year. The UK is already seen as distant. Britain

is not playing a primary role any more. That raises a question about

Britain's overall role in the world in 2012 and beyond. It is somewhat

inevitable the American President will speak to the euro leaders when

it is the time when the eurozone is having a crisis. We have had a

succession of American Presidents, when they come to power, as --

deciding Britain is less important our relationship. -- a year

relationship. It may not have the status of recent times, during the

Cold War, for example, but Britain and America will have that

essential relationship for a long time. Confidence in politicians is

at the lowest ebb ever and if this creation of the euro fails, people

will ask what happened to the politicians. They will have -- that

will have huge repercussions in the way people look at the political

elite in general. I would like to say that it is quite a good thing

that David Cameron has finally put in the open what we have all known

for decades about any Conservative Prime Minister, but just generally

the establishment in this country, that is Britain has always been a

slightly separate issue and has its own special relationship with the

EU. It seems to be that, in a crisis, which this is, particularly

one that will have to be addressed in the first 90 days of this year,

it is better to be in the back of the room as observer status. If

this was a problem in Britain, the The onus is on Europe to prove that

they can solve and save the currency. Britain was wise in this

decision not to enter. Praise has to go to Gordon Brown. Some people

were writing off President Obama's presidency. Now, equally foolishly,

some people are writing off the Republican presidential candidates.

It will be an interesting year but it is true that in 2011 people were

writing off Obama. Looking at the Republican field... You would have

to say that Obama will probably be re-elected with the highest level

of unemployment since the war. Probably re-elected? Probably. The

Republican race is still likely to come down to two candidates. Both

carry so much baggage forward. The situation to me is much like 2005

in Britain where Tony Blair had taken this country against popular

opinion into war in Iraq. By 2005, the war had gone badly wrong yet

Tony Blair won his third election. Why? The Conservative Party was led

by Michael Howard. No-one would lead the -- he would not lead the

Conservatives to victory. The Republicans are Stark. They will

come out of their primary process with a candidate who will not stand

up to scrutiny unless, going back to 1952, the Republican Party was

in the same situation and they went scouting through the generals... We

may have a President David Petraeus by the end of this decade. I do not

think it will happen this year. Looking at how Obama goes into the

2012 elections, he can say that he killed Osama bin Laden, pulled

troops out of Iraq and was drawing down troops in Afghanistan, nearly

over by the time he goes to the elections. Those are strong points.

We will see consistent messaging about a bummer's successors,

especially fighting terrorism and in ending the war in Iraq. That is

a promise kept - that his language we will see until the elections

next year. What no-one can predict is whether there will be any sort

of attack on the US which could change that. The record stays clean

and good and sparkling for President Obama as long as there is

no attack, especially in the US, or anywhere of US interest. There is

uncertainty in the coming year looking at foreign policy for

President Obama. Pratt -- Pakistan will be important and the slow

transition in Afghanistan, whether that goes well, we will have to see.

I think Iran is less important for their foreign policy. We are seeing

in Washington, domestic politics will be there strong focus.

Fighting terrorism is a domestic issue. The Iraq war, even

Afghanistan, people do not feel that they are at war. The Arab

spring will be vital in the coming year for Obama's standing

internationally but he will not be looking towards that until 2013. Do

you share the opinion that some Republicans have that this is a

great party with the -- incredible people in it but they have better

candidates than the ones likely to emerge in 2012. Jack Bush, the

former President's brother, has so much compassionate credentials, so

many good features yet he is not running. -- Jeb Bush. I think a

Republican candidate still can win this because looking at the opinion

polls in America and the attitude to government in America at the

moment, there is such despondency and a concern about Washington is

more broken than they feared. That is where the Republican candidate's

opportunity comes if he can betray himself as a fixer. He may also

warned about a divided Washington They call it Obama care. Do you

take my point? I think I'm actually hoping there will be a Republican

President because they are the party who it is still helping all

gem to be broken up in Washington. They have refused all the

suggestions that Obama put forward. History will allow them to prove

themselves - once they are in office they will have to govern

more responsibly and they would have to remove all of those

obstacles they have put in the way. One thing I would like to say about

2012 is that America's problems, as bad as the economy is, it seems to

be settling. The social volatility in my native country cannot be

underestimated. How this plays out in traditional politics I think is

anyone's guess. If we say, well, Obama is likely to win for the

Republican is a credible candidate, it does not begin to scratch what

is happening deep in American society. American society is in

crisis. How that is acted upon in 2012 will be critical I think.

Let's move on to British politics. The coming year is set to be

another one of austerity. Why is the Labour Party up making more

headway? What about David Cameron, faced with a difficult year with

the more Euro-sceptic wing of his party. How difficult is it to have

to prove Euro-sceptic credentials when people would say he has done

that? It is funny that we are having his programme now. If I was

on four weeks ago we would have been talking about David Cameron

being in a lot of trouble with his own party. There were huge grumbles

about how the Conservative Party and the Conservative press was

viewing him. That has all changed because of this EU treaty. It sets

him up very nicely for the new year. He is has a weak Labour leader, he

has the junior partner almost as a prisoner. His opinion rating is so

low he cannot escape. David Cameron is perhaps not the best leader

Britain has ever had, someone was quite compromising in a lot of

respect, not a great Churchill-like a figure. He is surrounded by such

weak opponents that he has dominated British politics and he

will for some time. Do you agree with that? That can run may face

another vote that he might win as he won back the last one, due thing

he has established his credentials? I think within his party, somewhat.

Again, because the weakness of the coalition is that the Lib Dems no

longer have a say. Previously, what Cameron had to do was try to

balance the two met sides. Those who were not happy about the

collision and those who said they needed it. Now the Lib Dems are

stark and they will not get out of it. That strengthens him somewhat.

He said that, maybe in 2012 the Lib Dems about -- will lose out so much

that they will need to stand for something. Why is the Labour leader

not stronger than he is? Dock like this is not the time for an

alternative political philosophy to emerge. In the olden days we could

going to imaginary policies put before the electorate. It is just

one issue - the economy, and they don't have an alternative answer.

Yes, they keep saying - I should have gone a little easier on the

speed of the cuts to public spending, but that does not make an

alternative philosophy. It is trimming around the edges. I agree

with you, in substance there is not a lot of difference between the

economic plans, but the body language, the posture, the Labour

Party was against the cuts. Most people in Britain by huge numbers

of percentage points, think that we have to cut. They don't like it,

but the... It hurts them. I will stick my neck out for a wild

prediction - I can see the Lib Dems out of the coalition and rolling

over - going to the people again and getting even a small, a wafer-

themed majority by 2012. Then you get five years.... Why not just

extend the life of the Parliament up until 2017. AB gamble. -- at a

big gamble. What do you see as the big predictions for 2012? What

would you like to see happen? the United Kingdom? I think we will

have continuing austerity. That is clear. We are not masters of our

own destiny - the issues that we started with the beginning of the

programme - will the eurozone continued to be a chronic problem

or will there be an acute crisis where the eurozone needs to face up

to its problems and deal with them? I think Britain is an observer in

this. The will there be some irritation about that? That we are

not masters of our are in destiny? Maybe we will not be ever again.

Even the most powerful countries are completely... Will there be

some irritation that we have not got a bigger voice in the big

decisions that affect us? I think where the pressure will come is in

Britain was like new semi-detached situation in Europe. We will try to

reach integrate, which is what the junior part of the collision want.

The majority of the party will try to formalise the semi-detached

status and it look at the fact that the rest of the world is growing,

China, India, and we are chained to the European model which is in

serious economic decline. That will be the pressure on David Cameron,

to build on that a veto and chart a more independent, internationalist

outlook, less European. Let's look more widely at predictions. What

about the Middle East? In Iraq, which is where you're from, and you

see more progress, more stability? Notes. A huge political problems

coming up in the next year. -- know. The American troops leaving have

just opened all the problems, there was a bandage on, it is off now.

When there is a problem, Americans will not fly into Baghdad to sorted

out. They do not agree, it is a dysfunctional political system.

Iraq also has Syria on its border, which have a hugely unpredictable

in the next year. The only thing we can guarantee is that it will be

unstable. No-one knows how Syria is going to turn out. Middle East

peace will not happen in the next year. We have an American president

who is busy with his own elections. It is not looking good for the next

year. However, it is brilliant because people have found their

voice in 2011. I think there will be the continued push for reforms,

even if we don't see revolutions we will see the push for reforms and

changes. Do you see Iraq falling more and more into the Iranian

sphere of influence? No. I think Iran is very influential in Iraq

today and has pushed all the boundaries it can. I think Iraq is

trying to play more of a role in the Arab world. I think the

coalition is too important to fail. It has got to prove that it is able

to steer the ship through Safe Waters. Cameron will get a boost by

two very positive development, the Olympic Games in London will give a

bit of a new surge of optimism to the country, I don't know how long

it will last. It may cause a blip in GDP performance because people

don't turn up to work. (LAUGHTER). Then he will have to steer it

through the storm, that his austerity. This is something we

didn't touch on, there could be a significant Lib Dem defection. That

would be suicide. It is extraordinary that that hasn't

happened yet. Four of the problems of the coalition we haven't had a

major defection. We haven't had a member attack Nick Clegg on

television. The solidarity has been remarkable given that they are so

low it... What do you predict? I predict it is that unemployment

will rise and rise. In America, long-term unemployment benefits are

coming to an end. Across Europe, where unemployment has been rising

since the collapse of the Leman brothers, unemployment benefits are

thinning out. We have been lucky enough to see social unrest. I

think some of that will turn up in 2012. To quickly get in a word

about Iran - it stands out. I'm not quite certain what happens now. I

agree with you that you run's direct influence on Iraq is

overstated. -- Iran's.... I think Syria will fall. I think of when

that happens that Iran's in Florence and the gaining power of