:00:09. > :00:15.The IMF declares the global economy is entering a new dangerous phase,
:00:15. > :00:18.just as Greece tries to grab at another �8 billion hand-out to
:00:18. > :00:23.stumble on with. The global economic outlook today: grim.
:00:23. > :00:31.In groz they are getting ready to implement yet another economic
:00:31. > :00:33.shock, but with it draining away, can anything save this country from
:00:33. > :00:40.default. They are burning their tax bills in
:00:40. > :00:42.at then, if the fate of Greece is sealed, cannot the same be said for
:00:42. > :00:45.the euro and our own economic experts.
:00:45. > :00:49.Martin Wolf is here, along with a former Chancellor of the Exchequer,
:00:49. > :00:52.former Chancellor of the Exchequer, and a City analyst.
:00:52. > :00:57.Is Liberal Democrat enthusiasm the only thing standing between the
:00:57. > :01:03.British Government and a fit of full on Europhobeia. If you keep
:01:03. > :01:07.beating the anti-European drum, if you Labour over tax cuts for the
:01:07. > :01:12.rich, you will put into peril the most crucial treatment of the
:01:12. > :01:15.Government. The Energy Secretary will be here to bury the
:01:15. > :01:19.misbegotten euro, or pos below praise it. The time was when
:01:19. > :01:24.governing took place on paper and in triplicate. What happens when
:01:24. > :01:29.politicians make decisions on smart phones. We poke the ant hill to see
:01:29. > :01:33.what crawls out. What is the story about the
:01:34. > :01:43.Government minister and the unofficial hidden e-mail system,
:01:43. > :01:47.tell us how the secret world of Whitehall works today.
:01:47. > :01:54.The grok Government tonight said they are getting close to a- the
:01:54. > :02:00.Greek Government tonight said they are getting close to the package
:02:00. > :02:03.for the bailout money. That won't put an end to the problems. If you
:02:03. > :02:07.doubt how desperately serious maybe the consequences of this problem
:02:07. > :02:11.for all of us, listen to the International Monetary Fund today.
:02:11. > :02:18.It has slashed its growth forecast, and said if political leaders fail
:02:18. > :02:28.to find way of sorting the mess in the eurozone, things could get much,
:02:28. > :02:33.
:02:33. > :02:36.much worse. Is there a deal or what? There is
:02:36. > :02:40.no deal. Greece has been 25 days worth of cash before it has to
:02:40. > :02:45.switch the lights off here in the Acropolis, and sack the people who
:02:45. > :02:51.look after that, and every other state employee in the country. So
:02:51. > :03:00.no rush. We do, however, know some of the details of the deal. We are
:03:00. > :03:06.seeing Greek national newspapers being briefed tonight. One of the
:03:06. > :03:09.papers has 100,000 state workers to be sacked or moved to involuntary
:03:09. > :03:13.holidays, and public sector wage cuts and generally more austerity.
:03:13. > :03:18.I have been meeting people today, school students who have turned up
:03:18. > :03:23.in their schools in September, no textbooks. I have been hearing the
:03:23. > :03:27.police trade union claiming that police officers having to buy their
:03:27. > :03:32.own armour, fill up their own patrol cars. All this before the
:03:32. > :03:38.new round of austerity. Because the old austerity didn't work, and what
:03:38. > :03:43.it means is things are going to get a lot tougher.
:03:43. > :03:50.While the politicians dithered, the people were, once again, out on the
:03:50. > :03:53.streets. Greek civil servants know they are hours away from a mass
:03:53. > :03:57.redundancy programme, tens of thousands will be laid off, tens of
:03:58. > :04:02.thousands more put on compulsory holidays on 60% pay. Once again,
:04:02. > :04:06.Greece is at the centre of the storm, because past solutions have
:04:06. > :04:11.not worked. Upped the terms of its first bailout, in May last year,
:04:11. > :04:19.Greece was supposed to reduce its budget deficit to 7.6%, the latest
:04:19. > :04:25.estimate is 8.5% and rising. Its debt is predicted to hit 189% of
:04:25. > :04:30.GDP next year. As a result, IMF negotiators are holding back eight
:04:30. > :04:33.billion euros of bailout money, and imposing strict, new austerity
:04:33. > :04:38.measures. At the centre of the new deal is a two billion euro property
:04:38. > :04:42.tax, this is what many people in Greece think of that tax.
:04:42. > :04:46.The problem is, those who are bailing Greece out just don't
:04:46. > :04:50.believe reforms will be enacted. The IMF yesterday called for a one-
:04:50. > :04:56.off shock to the system. European partner, in effect, have
:04:56. > :05:01.told you as a country, that they will standby you for as long as it
:05:01. > :05:05.takes. Provided that Greece continues to pursue sound policies.
:05:05. > :05:09.So this, in our view, really places the ball in your court. The ball is
:05:09. > :05:13.in the Greek court, and implementation is of the essence.
:05:13. > :05:18.But Greeks have had 18 months of this, there is a weariness on these
:05:18. > :05:23.streets, and many economists and politicians believe the medicine of
:05:23. > :05:28.tax rises and austerity is simply killing the patient.
:05:28. > :05:33.When you have built within the people, the concrete people, the
:05:33. > :05:41.very conviction that they are trying to impose measures that they
:05:41. > :05:46.have just imagined out of thin air, the real situation will not conform.
:05:46. > :05:51.Civil servants won't im pliment the measures, real people won't pay
:05:51. > :06:01.their taxes, and the whole country, the whole economic system of the
:06:01. > :06:04.
:06:04. > :06:09.country is going to gently flounder. This is pulling others towards the
:06:09. > :06:13.danger zone, Italy saw their credit rating downgraded, and any Greek
:06:13. > :06:17.default could signal a crisis in France, Belgium and Germany. The
:06:17. > :06:24.global economy has entered a dangerous new phase. The recovery
:06:24. > :06:29.has weakened considerably. Down sideways and increased sharply.
:06:29. > :06:34.Strong policies are needed both to improve the outlock and to reduce
:06:34. > :06:38.the risks. Globally the problems are mounting.
:06:38. > :06:45.Fiscal crisis and recession feed off each other, the IMF today
:06:45. > :06:51.revise its forecast down for the eurozone and the US and the UK.
:06:51. > :06:55.Markets have become more sceptical about the ability of policy makers,
:06:55. > :06:59.of Governments, to stablise their public debt. And tonight, on the
:06:59. > :07:05.brink of yet another round of austerity, and protest, Athens is
:07:06. > :07:11.the capital of the unknown. From what's known of the austerity
:07:11. > :07:15.package, is it likely to work? depends what we mean by working.
:07:15. > :07:19.There is a risk that Greece will default this week. That is why we
:07:19. > :07:22.are having this meeting. If Greece defaults, that is bad news for the
:07:22. > :07:27.world's banking system. But, I think it is likely there will be a
:07:27. > :07:29.deal. It is effectively a game of chicken between the IMF and EU
:07:29. > :07:35.negotiators and the Greek Government. We are down to the
:07:35. > :07:38.detail. The detail is important, what the IMF needs, the EU, is to
:07:38. > :07:43.go back to countries that provide the money for the bailout and say
:07:43. > :07:50.this is not just going to work for now, but it will put Greece back on
:07:50. > :07:54.a path that if not spectacularly brilliant, it is not disastrous,
:07:54. > :07:59.and we won't be here again. It is in the balance whether they can do
:07:59. > :08:05.that. They are scraping the bottom of the barrel by cutting the tax
:08:05. > :08:15.ceiling from 8,000 euros to 4,000 though YuriGagarino50 roars, you
:08:15. > :08:15.
:08:15. > :08:21.start paying tax at 4,000 though euros, it is stuff they can do now.
:08:21. > :08:25.We have had 18 months of austerity now, and the economy is shrinking
:08:25. > :08:28.faster, the tax take is collapsing. In part, because people are just
:08:28. > :08:38.not making profits, not making money, but also, there is evasion,
:08:38. > :08:39.
:08:39. > :08:42.there is revolt, there is refusal. What the IMF is asking the Greek
:08:42. > :08:46.Government is to finally turn around to its own electoral base
:08:46. > :08:51.and say, do you know what, the era is over, free education, free
:08:51. > :08:57.health care, what's left of it, all the things we have stood for, are
:08:57. > :09:03.gone. And they want it to be a kind of a political shock so that, as
:09:03. > :09:07.the IMF guy put it, yesterday, the shock is felt and then we build
:09:07. > :09:11.from there. They just don't feel there has been enough psychological
:09:12. > :09:13.adjustment in Athens or the rest of Greece, as to what austerity really
:09:13. > :09:19.means. The significance of this
:09:19. > :09:23.downgrading of the IMF growth forecast? Well, I think the IMF
:09:24. > :09:28.growth forecast for the USA, for the eurozone, for the UK, it means
:09:28. > :09:32.that we're running out of steam on recovery. And we are now in the
:09:32. > :09:39.territory of looking for policy action, not just here in Athens but
:09:39. > :09:45.in Washington, London and Brussels. We can begin to expect some, we can
:09:45. > :09:49.expect tomorrow the US Central Bank to signal the more - European bank
:09:49. > :09:54.to have more money printed, quantitative easing as it is called.
:09:54. > :09:58.We can see that more money will be borrowed on their behalf, with a
:09:58. > :10:02.big policy debate, that all politicians, not just our's in
:10:02. > :10:06.Britain and those in Greece have to grapple with, can there be more
:10:06. > :10:11.stimulus, if the old stimulus didn't work, what price the next
:10:11. > :10:16.stimulus. With us is the economic journalist, Martin Wolf, the former
:10:16. > :10:26.Chancellor, Lord Lamont, and the markets analyst, Louis Cooper. Can
:10:26. > :10:31.
:10:31. > :10:35.Greece be saved from defaulting on its debts? No, there is no chance
:10:35. > :10:39.Greece won't default on the debt. Almost no-one believes anything
:10:39. > :10:43.else. Do you also believe that Greece will default? It will
:10:43. > :10:47.probably be put off until after 2013. They will find a package to
:10:47. > :10:50.get them through. It is a default at the end? It has been a partial
:10:50. > :10:53.default already. I think there will be a further default. I think it
:10:53. > :10:58.would have been better if this had been recognised earlier. What do
:10:58. > :11:04.you think? I think it's absolutely given. They can't pay back the
:11:04. > :11:08.amount of debt they have. I would be quite so optimistic as 2013.
:11:08. > :11:14.Credit Default Swap market is telling you that it's getting close.
:11:14. > :11:22.So, you all agrow, Greece is going to default at some point if it
:11:22. > :11:26.hasn't already done so. What is the consequence of that? It depends on
:11:26. > :11:29.how it is done, is it with co- operation, with agreement,
:11:29. > :11:33.essentially they have reached the end of the road. In that case it is
:11:33. > :11:38.possible to default without leaving the euro. What would happen is
:11:38. > :11:42.there would be a huge writedown of debt, halved at least, and an
:11:42. > :11:51.agreement to recapitalise the banks, only the eurozone could do that,
:11:51. > :11:55.and lickify the banks. If that weren't - liquify the banks, if
:11:55. > :11:59.that weren't done they would have to have a new currency. Wouldn't
:11:59. > :12:03.that destroy any credibility the euro would have? The opposite, if
:12:04. > :12:07.the euro is going to work at all, some of us have always been very
:12:07. > :12:11.sceptical, it includes the possibility, inherent in the model,
:12:11. > :12:15.that Governments will default. Just like states can default in the
:12:15. > :12:21.United States. The default is quite different from exit, though it can
:12:21. > :12:27.lead to exit. Default seemed to me always a plausible outcome, Greece
:12:27. > :12:30.is the case. I agree with that, I think if Greece left the euro,
:12:31. > :12:35.which I think ought to happen in the long run, if that happened now
:12:35. > :12:40.that would be, one thing is possibly a problem or disaster, the
:12:40. > :12:45.other would be a cat it is a trophy. If that happened you would see a
:12:45. > :12:51.huge increase in the debts particularly of French banks, all
:12:51. > :12:54.detects to Greece. And ifth would be a very difficult problem to
:12:54. > :12:58.manage. And it would be a very difficult problem to manage.
:12:58. > :13:02.want them to stay? I think leaving with the market pressure would be
:13:02. > :13:06.catastrophic, I think it is in the interests that they should stay in
:13:06. > :13:09.for maybe a couple of years, and then you should have a
:13:09. > :13:14.reconsideration of the whole structure of the euro. How does it
:13:14. > :13:21.look in the markets? Ugly. The credit markets are getting to
:13:21. > :13:24.Lehman level, they are creaking wildly. Most commentators and
:13:24. > :13:29.journalists focus on equity markets, they don't know about the wholesale
:13:29. > :13:34.funding markets. This is how banks fund themselves. At BGC it is what
:13:34. > :13:38.we do a lot of. I had a long chat with the brokers at their desk, and
:13:38. > :13:41.he said if you are a French bank with any exposure to Greece,
:13:41. > :13:45.Ireland and Portugal, getting short-term funding is difficult. He
:13:45. > :13:48.says you have to beg, borrow or steal. And banks have to, have to
:13:48. > :13:53.balance their books at the end of the day. It is all very well
:13:53. > :13:55.talking about big writedowns on Greece, but liquidity is far more
:13:55. > :14:01.important. It is very tough out there.
:14:01. > :14:05.What about the question, not of falling out of the euro, but being
:14:05. > :14:12.chucked out of the euro? Legally it is impossible, there is nothing in
:14:12. > :14:15.the treaty that allows it. The thing is you can't just leave the
:14:15. > :14:19.euro, legally, you have to leave the European Union, and then you
:14:19. > :14:24.have to ask to come back. I think in this case they wouldn't be
:14:24. > :14:30.allowed back. But this was designed to be irrevocable. That is how it
:14:30. > :14:32.is designed. So you would be creating a new treaty, you know how
:14:32. > :14:36.that goes. The Dutch Finance Minister and Prime Minister have
:14:36. > :14:41.proposed that there should be, in addition to fiscal measures that
:14:41. > :14:44.there should actually be a mechanism created for the future
:14:44. > :14:47.whereby countries that are not meeting their fiscal targets should
:14:47. > :14:51.be able to be expelled. But this is something that they have just put
:14:51. > :14:55.on the table. It is for the longer term. We need a new treaty. You are
:14:55. > :15:02.going to need new treaties whatever happens. One of the great problems,
:15:02. > :15:07.one of the reasons this thing is so dangerous, is that the stablisation
:15:07. > :15:12.mechanism, the European fnction financial stability - Financial
:15:12. > :15:18.Stability Facility, has to be radfied by all the 17 members of
:15:18. > :15:21.the eurozone. Some countries - rad ratified by all the 17 members of
:15:21. > :15:25.the eurozone. And the smallest party in the coalition in one
:15:25. > :15:29.country is saying it won't vote for it. There are so many moving parts
:15:29. > :15:35.in all of this, that even a small objection by a small country can
:15:35. > :15:39.tip the thing over the cliff. There are so many possibilities for
:15:39. > :15:44.miscalculation and error. At which point is it bad news for us? It is
:15:44. > :15:48.already. The real danger, in my opinion, is they go on with half
:15:48. > :15:52.measure after half measure, sticking plaster after sticking
:15:52. > :15:56.plaster, you get a respite for a few weeks, then another crisis,
:15:56. > :16:01.then another respite, and another crisis. This goes on and on, it is
:16:01. > :16:04.sapping confidence in the most appalling way. Presumably it is
:16:04. > :16:07.already having an effect, presumably from where you are in
:16:07. > :16:13.the markets, the effect upon banks and the rest of it is something
:16:13. > :16:16.that begins to feed through to other parts of the economy, is it?
:16:16. > :16:21.Absolutely. There are many banks having trouble funding themselves
:16:21. > :16:24.on a day-to-day basis. They can get money, but it is expensive, and
:16:24. > :16:30.they are funding very short-term, three month, or six months money
:16:30. > :16:35.that they used to get all the time. That has gone. And banks' long-term
:16:35. > :16:39.funding where they issue bonds, we haven't seen big European banks
:16:39. > :16:44.issue bonds since in June. Banks have big loan books, they have to
:16:44. > :16:47.fund them. The banking system is getting close to crisis levels. It
:16:47. > :16:52.is all very well talking about political will to sort the mess out,
:16:52. > :16:55.but this takes months, years. quite agree. The markets don't wait
:16:56. > :17:03.that long. We talk about politicians being behind the curve,
:17:04. > :17:06.you are so far behind the curve you need to run very quick to catch up.
:17:06. > :17:10.The European Central Bank is now going to be forced to do everything
:17:10. > :17:13.it hates, among other things, it is going to have to finance the
:17:13. > :17:17.Governments in trouble, including countries like Italy and Spain, it
:17:17. > :17:21.is going to have to finance the banks, its balance sheet will have
:17:21. > :17:26.to explode, and the Germans will absolutely loathe it. In addition,
:17:26. > :17:30.as Christine Lagarde pointed out, they will have to find way of
:17:30. > :17:34.putting capital in the banks to make them look stronger. The
:17:34. > :17:40.European banking system, the big zest in the world is under enormous
:17:40. > :17:44.stress. What happens to us? If they do manage this thing it creeks on
:17:44. > :17:48.to a subsequent - creaks on to a subsequent crisis, the Germans will
:17:48. > :17:53.hate all of this, they can leave, they have more of an option than
:17:53. > :17:57.anybody else. But if they fix it goes on, if they don't fix it we
:17:57. > :18:00.have a monstrous banking come sovereign crisis next door.
:18:00. > :18:05.people start leaving the euro, they have to leave the European Union.
:18:05. > :18:09.That is the end of the European Union then? I think it is true, if
:18:09. > :18:13.the Germans decide that they cannot stand this, any more, and they do
:18:13. > :18:19.decide to pull out, we are nowhere near that, but if they do, yes the
:18:19. > :18:24.European Union, in my view is dead. This remakes political map of
:18:24. > :18:28.Europe completely? This crisis is very serious. There is tremendous
:18:28. > :18:33.tension in France, you have the older generation that this is the
:18:33. > :18:39.crowning jewel, the creation of the euro and bringing in Germany and
:18:39. > :18:43.anchoring it in Europe. Germany is fed up with the cost of it, opinion
:18:43. > :18:47.is changing. Mrs Merkel is sitting there, waiting and hoping that some
:18:47. > :18:52.consensus will emerge and it won't. Thank you very much. The crisis in
:18:52. > :18:55.the euro casts a very long shadow indeed, which also falls across
:18:55. > :19:00.those of us who choose not to be part of the project, bailing out
:19:00. > :19:03.other European states who opted in has already cost us an arm and a
:19:03. > :19:07.leg. There are other potential costs too, for example, the two
:19:07. > :19:09.wings of our very unusual Government have quite different
:19:09. > :19:14.instincts with some prominent Liberal Democrats having once seen
:19:14. > :19:18.the euro as a passport to paradise, and prominent Conservatives getting
:19:18. > :19:24.knows bleeds at the very mention of the - nosebleeds at the very
:19:24. > :19:28.mention of the idea. When the coalition Government was formed
:19:28. > :19:32.last year, the divisions between the Lib Dems and the Conservatives
:19:32. > :19:36.on Europe weren't exactly a secret. The parties didn't settle their
:19:36. > :19:41.differences, but decided to bury them in a Downing Street garden
:19:41. > :19:44.instead. But now the crisis in the eurozone could become a crisis for
:19:44. > :19:51.the coalition. If anyone inside Government thinks for one moment
:19:51. > :19:55.that we can renegotiate our relationship with Europe that is
:19:55. > :19:58.the end of the coalition, I am afraid. There will be a point where
:19:58. > :20:02.the liberals and the Tories can't agree, then it collapses, it could
:20:02. > :20:07.be the issue of Europe and the euro. Britain's relationship with the
:20:07. > :20:11.rest of Europe has caused fissures in the political landscape, the SDP
:20:11. > :20:14.was set up partly in response to Labour's policy to leave the then
:20:14. > :20:18.European community. In the 190s John Major's Conservative
:20:18. > :20:23.Government was riven with division over economic and monetary union.
:20:23. > :20:28.These days the vast majority of Tory MPs are now sceptical towards
:20:28. > :20:32.the EU. So today a Lib Dem cabinet minister warned some of his
:20:32. > :20:36.Conservative colleagues not to turn the euro crisis into a political
:20:36. > :20:40.drama. We will not, as Liberal Democrats in Government, weaken the
:20:40. > :20:49.ties that deliver our national interest through Europe.
:20:49. > :20:55.APPLAUSE And let that be a warning to the
:20:55. > :21:04.Conservative right here, we need no Tea Party tendency in Britain.
:21:04. > :21:09.APPLAUSE If you fail to compromise, if you
:21:09. > :21:16.fail to seek the common ground that unites us, if you insist that only
:21:16. > :21:21.you have the answers, if you keep beating the Antoinetteity European
:21:21. > :21:27.drum. If you slave over tax cuts for the - anti-European drum, if
:21:27. > :21:34.you slave over tax cuts for the rich, you will wreck the economy
:21:34. > :21:40.because we are all in this together and we can't get out of it alone.
:21:40. > :21:43.In truth there are far fewer divisions between coalition cabinet
:21:43. > :21:46.ministers than between the two parties' backbenchers. In practice
:21:46. > :21:51.David Cameron and Nick Clegg now accept the concept of a two-speed
:21:51. > :21:57.Europe, where those nations inside the eurozone more closely align
:21:57. > :22:00.their policies on tax and spending, putting it more bluntly, the
:22:00. > :22:04.better-off countries on the continent would bail out the others,
:22:04. > :22:11.in return for greater say over their economies.
:22:11. > :22:15.The Treasury says contingency plans are being drawn up if the crisis
:22:15. > :22:20.deepens. Unpessimistic scenarios a further recapitalisation of the
:22:20. > :22:24.banks shunting ruled off. If Britain faces any of the cost of
:22:24. > :22:28.the crisis, many people a political price should be exacted. The key
:22:29. > :22:32.demand is we want powers back from the EU so we once against govern
:22:32. > :22:36.ourselves in this country. In particular, the need to have a
:22:36. > :22:39.referendum so that the people decide. And I think probably, I
:22:39. > :22:42.mentioned 100 people, I think clearly there is a large number of
:22:42. > :22:46.colleagues, I think really growing day by day, who are backing that
:22:46. > :22:51.call for a referendum. Here at Lib Dem conference, a
:22:51. > :22:55.former Treasury spokesman has decided to issue a stark warning to
:22:55. > :22:58.any Conservative minister who is tempted to follow the lead of Euro-
:22:58. > :23:02.sceptic backbenchers. Europe is obviously one of the real
:23:02. > :23:05.fault line in the coalition, which is why in the coalition agreement
:23:05. > :23:10.the only possible answer was a total stand still. We don't move
:23:10. > :23:15.forward, we don't move back, that's the deal, that is what we are stick
:23:15. > :23:19.to, and if anyone inside Government, and there have been some worrying
:23:19. > :23:23.noises from William Hague, if anyone inside Government thinks
:23:23. > :23:27.more one moment that we can renegotiate our relationship with
:23:27. > :23:31.Europe, that, I'm afraid, is the end of the coalition, if that were
:23:31. > :23:36.to happen. These blank cheques are on sale in
:23:36. > :23:40.the Lib Dem shop, are you doing a roaring trade on those? We do a
:23:40. > :23:44.very good trade trade on the cheques. The Liberal Democrats are
:23:44. > :23:48.of course serious about deficit reduction, but as you have maerd
:23:48. > :23:52.blank cheques are selling well. What the Conservative backbenchers
:23:52. > :23:56.are suggesting is that the junior coalition parties have such a soft
:23:56. > :24:00.spot for the EU they are willing to write as many of these as possible
:24:00. > :24:05.to prop up the single currency. We have our Liberal Democrat cheque
:24:05. > :24:08.here, you have been critical in the past about bolstering the eurozone,
:24:08. > :24:12.how much do you think the British Government's liability should be,
:24:12. > :24:16.how much should they pay? I will give you that back, I think we
:24:16. > :24:19.should tear up this cheque, because we shouldn't pay any more money to
:24:19. > :24:23.Europe. What we should be doing is making
:24:23. > :24:27.sure that the euro collapses in a style and at a time that can
:24:27. > :24:31.actually be managed, not in a crisis mode. At the moment we are
:24:32. > :24:35.heading for the collapse of the euro in a crisis. But a former City
:24:35. > :24:39.fund manager says that the eurozone shouldn't be allowed to collapse.
:24:39. > :24:44.None the less, it may have to contract a little.
:24:44. > :24:49.Greek bonds, Greek ten-year Government bonds are yielding 25%.
:24:49. > :24:57.That says that everyone in the market knows that they have got to
:24:57. > :25:04.default. Rather than having these ever-more frequent bailout packages,
:25:04. > :25:08.just like letting a spend thrift increase their credit card limit,
:25:08. > :25:11.we must get together and take a decision on Greece. More unites
:25:12. > :25:15.than divides coalition ministers on how to handle the current crisis,
:25:15. > :25:19.the pressure set to be applied from each party's rank and file for them
:25:19. > :25:24.to move further apart. Joining us now from the Liberal
:25:24. > :25:27.Democrat Conference in birmling ham is the energy - Birmingham, is the
:25:27. > :25:31.Energy Secretary, Chris Huhne. On the question of the euro, do you
:25:31. > :25:35.still subscribe to the view that you once held that the euro is
:25:35. > :25:39.living up to the highest expectations of the economists who
:25:39. > :25:43.advocated it, and Britain is missing out? Clearly not, Jeremy.
:25:43. > :25:47.One thing I think is very clear, is that if you are like Greece, a
:25:47. > :25:52.country that has falsified your national accounts, and in this case,
:25:52. > :25:56.in order to get into the euro area, even if you were outside the euro
:25:56. > :26:02.area, there would be a real day of reckoning. All that would happen if
:26:02. > :26:07.the Greeks had their own currency, is that they would be facing a
:26:07. > :26:11.Latin American-style hyperinflation, with a massive devaluation, that is
:26:11. > :26:16.not an easy way out either. The reality is the problems that are
:26:16. > :26:20.besetting Greece are ones which predated the euro area. It would
:26:20. > :26:25.have been a huge mistake for us to join the euro was it? It was a huge
:26:25. > :26:28.mistake for the Greeks to join knowing as they did their national
:26:28. > :26:31.accounts were...I'm Asking whether it would have been a mistake for us
:26:31. > :26:35.to join, and clearly it would, wouldn't it? Clearly, if you look
:26:35. > :26:40.at the number of countries that have joined, there is a commitment
:26:40. > :26:48.to making the euro work, which I think we would underestimate at our
:26:48. > :26:52.peril. Up until now, right the way European Union history, from the
:26:52. > :26:57.1950s onwards the British people have consistently underestimated
:26:57. > :27:01.the political will on the European mainland to actually get these
:27:01. > :27:05.problems together. Yes or no, should we have joined the euro as
:27:05. > :27:11.you advocated, yes or no? question of joining the euro is
:27:11. > :27:15.clearly not one for the UK. We are out of the euro and that issue is
:27:15. > :27:18.settled. All I'm saying to you if we start wringing our hands.
:27:18. > :27:25.trying to get a straight answer about whether you think it is a
:27:25. > :27:30.good idea to join or not? You have had a very straight answer. We have
:27:30. > :27:34.consistently underestimated the political will to the euro. That is
:27:34. > :27:38.the answer to a different question, do you think it is a good idea to
:27:38. > :27:42.join the euro, yes or no? The issue hasn't been a live one in British
:27:42. > :27:45.politics for a long time. If we had joined the euro it might have been
:27:45. > :27:51.a different beast. The key issue today is whether or not Greece
:27:51. > :27:54.should have joined the euro, the answer to that is clearly no. If
:27:54. > :27:58.they hadn't provided false figures to the European Commission in order
:27:58. > :28:02.to get in, whatever the monetary system in Greece there would have
:28:02. > :28:06.been a problem. You have made that point. Can I try something else out
:28:06. > :28:09.on you. When you said today, that you do not want a Tea Party
:28:09. > :28:16.tendency in Britain, were you referring to any members of the
:28:16. > :28:20.cabinet, when you made that accusation? No, I'm talking about
:28:20. > :28:27.what we are seeing on the Conservative right, a number of
:28:27. > :28:31.cases. Who are they please? Well, you have just been quoting on your
:28:31. > :28:35.own programme some backbenchers talking about trying to renegotiate
:28:35. > :28:39.our existing treaty obligations within the European Union, this is,
:28:39. > :28:44.afterall, the eurozone taking half of our exports. How many of them,
:28:44. > :28:49.Bill Cash and a few friend? This is a significant number, and there are
:28:49. > :28:53.people who are putting pressure on the Government to try to come to a
:28:53. > :28:56.set of conclusions, which to my mind would be deeply against our
:28:56. > :29:00.national interest. When we have a fundamental interest in the success
:29:00. > :29:05.of the European Union, half of our exports go to the eurozone, these
:29:05. > :29:10.are political choices, this is a geographical reality. We sell more
:29:10. > :29:15.to Ireland alone, which is a member of the eurozone, than we do to
:29:15. > :29:20.Brazil, India. We are familiar with the arguments, I'm trying it find
:29:20. > :29:26.out? I'm not sure you are familiar with the arguments. You were
:29:26. > :29:29.directing that at Bill Cash and a few like-minded souls on
:29:29. > :29:33.backbenches, that is what it was directed at? We have had two
:29:33. > :29:37.examples recently, where it seems to me there is an attempt to move
:29:37. > :29:41.the centre of graeity in the Government away from the agreement
:29:41. > :29:48.we made in the coalition deal, that was very clear about Europe, we
:29:48. > :29:51.don't go forward but back either. If we are having people in the
:29:51. > :29:54.Conservative Party saying we need to unpick our European
:29:54. > :29:58.relationships, when they are so fundamental to our prosperity and
:29:58. > :30:02.growth and export, that will be a problem for us in the Liberal
:30:02. > :30:10.Democrats. You would agree with Lord Oakeshott, that it would be a
:30:10. > :30:17.deal breaker, wouldn't it? Lord Oakeshott chooses his own words on
:30:17. > :30:20.this. What I am saying is we have the basis of a compromise, which is
:30:20. > :30:25.in the coalition agreement. We will not unpick that, we will respect
:30:25. > :30:32.the coalition agreement. The point I will make in my speech is we have
:30:32. > :30:36.achieved through the deficit reduction in Government. We have
:30:36. > :30:39.got out of the economic danger zone affecting so many other countries
:30:39. > :30:44.with bigger deficit than us. Let's talk about the deficit plan. There
:30:44. > :30:48.is talk tonight of there being an additional �5 billion, some how
:30:48. > :30:55.found, to be spent on capital investment in infrastructure
:30:55. > :30:59.projects. Is that true? I have no, I don't recognise that figure at
:30:59. > :31:02.all. I have absolutely no knowledge of that. It would be news to me.
:31:02. > :31:08.you recognise any figure, is there a plan to free up billions of
:31:08. > :31:11.pounds? No. There is no such plan? What there clearly is a desire
:31:11. > :31:16.right the way across the Government to make sure we are putting forward
:31:16. > :31:19.as creatively and imaginatively as we can, ideas to get growth going.
:31:19. > :31:23.But the fundamental achievement, which we have made so far, which is
:31:23. > :31:27.to get that deficit coming down, and to persuade the financial
:31:27. > :31:32.markets, that we are a safe haven and not the sort of risk which they
:31:32. > :31:35.have seen in Ireland, Portugal and Spain and Italy, and Greece. That's
:31:35. > :31:38.fundamental. Because if our interest rates start rising like
:31:38. > :31:43.their's, we will be in a double-dip recession, and we have saved the
:31:43. > :31:48.country from that. We now need to build on that. Unlike them, they
:31:48. > :31:52.are in the eurozone and we are not. Specifically on this question.
:31:52. > :31:55.is not just the eurozone, as you have seen from the IMF forecast
:31:55. > :31:59.there is a downgrade in the United States, and the failure of
:31:59. > :32:03.compromise that I gave as an example in my speech was actually
:32:03. > :32:07.in the United States. Where the failure to compromise between the
:32:07. > :32:11.President and Congress actually has led to the downgrading of the
:32:11. > :32:17.United States credit standing. I don't want to see us go through
:32:17. > :32:20.that. Was there anything like this plan, �5 billion you say you don't
:32:20. > :32:25.recognise, has anything like this been discussed in cabinet and
:32:25. > :32:30.agreed upon? No. Nothing at all? Has anything like this been
:32:30. > :32:35.discussed and agreed upon in the last couple of days, say?
:32:35. > :32:39.Certainly not that I am aware of. This story is a fiction? We do that
:32:39. > :32:43.r have a growth review process where we are attempting to come up
:32:43. > :32:49.with pragmatic ways in which we can get the economy growing, and make
:32:49. > :32:53.sure we are getting the jobs coming back, and getting back ob that path
:32:53. > :32:58.to recovery. We have done the serious heavy lifting of reducing
:32:58. > :33:02.the deficit and getting out of the danger zone, we have to move
:33:02. > :33:05.forward to the positive agenda of stimulating growth and getting jobs
:33:05. > :33:07.coming back. I don't recognise anything of the story you have
:33:07. > :33:11.given to me. Thank you very much.
:33:12. > :33:15.How much are we entitled to know about what goes on in Government?
:33:15. > :33:19.Every party makes promises about not keeping things from the citizen,
:33:19. > :33:22.and claims to believe in some form of open Government. Yet the
:33:22. > :33:25.Financial Times has seen e-mails from a so-called special advisers,
:33:25. > :33:29.they are the political cronies, politicians take into Government,
:33:29. > :33:34.to keep them true to the faith, amid all those Godless civil
:33:34. > :33:38.servants, which can be construed as showing something else all together.
:33:38. > :33:44.We have spent most of the add - Michael Cockerell has spent most of
:33:44. > :33:50.his adult life looking at how power works in this country. We asked him
:33:50. > :33:54.what he made of it. Whitehall has its own secret world, for some
:33:54. > :34:00.civil servants discretion is like the calcium in their bones. But
:34:00. > :34:04.sometimes leaks reveals what has been going on inside Whitehall's
:34:04. > :34:07.inner sanctum. A sensational story in today's Financial Times, alleged
:34:07. > :34:12.that Michael Gove, the Education Secretary, and his senior political
:34:12. > :34:17.advisers, were using a private e- mail system, which concealed
:34:17. > :34:21.sensitive information from his own officials and from the public. When
:34:21. > :34:24.the department was asked to produce these e-mails under a freedom of
:34:24. > :34:28.information request, the department said it had no record of them.
:34:28. > :34:31.think the question here is not whether it has once or it is a one-
:34:31. > :34:35.off, it is whether or not there is a systematic avoidance of the
:34:35. > :34:40.scrutiny that comes with freedom of information. The suggestion is that
:34:40. > :34:49.Mr Gove and his advisers have established a parallel private
:34:49. > :34:51.network, to the formal Government e-mail. If ministers decide to
:34:51. > :34:57.short circuit official system that is allow decisions to be understood
:34:57. > :35:00.and become accountable, then it will lead to bad Government. It
:35:00. > :35:04.will trip ministers up and the Government up. It is very tempting
:35:04. > :35:11.in the short-term, sometimes, to bypass systems and do things off
:35:11. > :35:14.the record, private e-mail systems, blackberries, whatever, it is not
:35:14. > :35:18.good Government. Decisions will be taken that aren't accountable or
:35:18. > :35:22.properly understood. In its response to the allegations the
:35:22. > :35:28.education department said its top Mandarin had seen the e-mail the FT
:35:28. > :35:32.relied on. It said the e-mail concerned a political matter. As
:35:32. > :35:39.Conservative spring conference and sent to party officials not civil
:35:39. > :35:44.servants. The Financial Times story, which may or may not be known as
:35:44. > :35:50.gofgate, shows dramatically how the way Whitehall works has changed
:35:50. > :35:54.over the years. It contains many ingredients that are different from
:35:54. > :36:00.the traditional Whitehall Mandarins. The rise of the span, the special
:36:00. > :36:09.adviser. 30 years ago, a TV satire showed
:36:09. > :36:19.how the efigures civil servants reacting to the intrusion of the
:36:19. > :36:21.
:36:21. > :36:27.first Spad. This is my political adviser. Oh, yes of course.
:36:27. > :36:32.Mr Weaser? Wiser. Of course. These are Labour's two top advisers,
:36:33. > :36:37.with the power to give orders to civil servants, the super-SPADs
:36:37. > :36:41.brought a new power. Do you know there has been a massive
:36:41. > :36:45.irretrievable data loss, the last seven months worth of new immigrant
:36:45. > :36:53.details have gone. During your time as a special
:36:53. > :36:57.adviser, the thick of it was a satire which was satirising the way
:36:57. > :37:02.special advisers work, do you recognise that? Not myself, but
:37:02. > :37:07.there were certain people who liked life imitating art, or the other
:37:07. > :37:11.way round, and modelled themselves on Malcolm Tucker. There weren't
:37:11. > :37:15.that many of them. Mo of the special advisers I dealt with were
:37:15. > :37:18.good people and highly motivated and wanted to contribute to
:37:18. > :37:23.Government. There weren't that many of them, but a few? A few, not many.
:37:23. > :37:27.Those were the ones that you usually hear about.
:37:27. > :37:31.When David Cameron, a former SPAD himself came to power, he said he
:37:31. > :37:37.was determined to run Whitehall in a pre-Blair way, he cut back
:37:37. > :37:42.sharply on the number of unelected special advisers. But Cameron's own
:37:42. > :37:45.chief SPAD, himself, became a hugely controversial figure. Andy
:37:45. > :37:48.Coulson, the Number Ten press secretary, had the job of
:37:48. > :37:51.secretarying Cameron to the tabloids. Coulson had resigned as
:37:51. > :37:56.editor of the News of the World, while denying any involvement in
:37:56. > :38:01.phone tapping by his journalists. But the affair continued to haunt
:38:01. > :38:05.Coulson in Number Ten, though Cameron tried to stick by him.
:38:05. > :38:08.Coulson resigned saying that when the spokesman needs a spokesman it
:38:08. > :38:12.is time to go. Following a certificaties of gaffes, Cameron
:38:12. > :38:17.decided to beef up the Downing Street machine by bringing in a
:38:17. > :38:23.whole new raft of Blair-style special advisers.
:38:23. > :38:28.Michael Gove had his own special adviser, who had been vetoed by
:38:28. > :38:33.Coulson for being too leaky. Today's story about Gove and his
:38:33. > :38:36.advisers, allegedly using an e-mail system to bypass civil servants,
:38:36. > :38:42.comes itself from leaked e-mails. Tomorrow's Financial Times returns
:38:42. > :38:47.to the attack, it claims that Gove ran his own private e-mail, called
:38:47. > :38:50.the Mrs Blurt account, where he discussed policy matters, bypassing
:38:50. > :38:54.civil servants. The department tonight told us that they and the
:38:54. > :38:57.Cabinet Office are clear that private e-mail accounts do not fall
:38:57. > :39:03.within the Freedom of Information Act and are not searchable by civil
:39:04. > :39:06.servants, this is a Whitehall farce that will run and rup.
:39:06. > :39:08.- run. The Liberal Democrats leave
:39:08. > :39:12.Birmingham tomorrow, after their annual conference, to return to
:39:12. > :39:16.their constituencies, and gloat about governing, or worey if they
:39:16. > :39:20.will ever recover from it. Before they clambour aboard the train or
:39:20. > :39:23.into their hybrid cars, their leader will tell them what a fine
:39:23. > :39:27.job they are doing in making it possible for him to be deputy Prime
:39:27. > :39:30.Minister, and what a great job he and his ministers are doing in
:39:30. > :39:33.stopping the Conservatives eating babies for breakfast. We will have
:39:33. > :39:42.the thrill of listening to Nick Clegg tomorrow.
:39:42. > :39:45.What's got you going tomorrow? it show. I thought I was hiding it
:39:45. > :39:49.well. The theme running through Nick Clegg's speech tomorrow will
:39:49. > :39:53.be that his party in Government in coalition with the Conservatives
:39:53. > :39:59.are doing the right things, not the easy things. To pick up on the
:39:59. > :40:01.conversation with Chris Huhne about the �5 billion, there has been a
:40:01. > :40:05.rumour all afternoon that will be announced tomorrow in Nick Clegg's
:40:05. > :40:09.speech. I put it to one of Nick Clegg's advisers he emphatically
:40:09. > :40:16.told me there will be no new capital spending announced tomorrow.
:40:16. > :40:21.There will be a reiteration for the people in the hall to try to
:40:21. > :40:24.reinvagueate - reinvague rate their achievements, things they have -
:40:24. > :40:28.reinvigourate in their achievements, things they have done in Government.
:40:28. > :40:33.In terms of going forward, it is going to be interesting to see
:40:33. > :40:37.whether we pitches his message to the - he pitches the message
:40:37. > :40:40.exclusively to the hall or beyond. It is a difficult job for any party
:40:40. > :40:43.leader, particularly one in coalition with a party where a lot
:40:43. > :40:47.of his members fundamentally disagree with them. Whoever said
:40:47. > :40:51.you can't please all of the people all of the time might have been
:40:51. > :40:58.thinking about the Liberal Democrat party.
:40:58. > :41:04.There is no such thing as a typical Liberal Democrat. I'm a Lib Dem.
:41:04. > :41:10.I'm a Liberal Democrat. I'm a Liberal Democrat. I'm a Lib Dem.
:41:10. > :41:15.diversity can make this bunch a difficult party to lead. Leading
:41:15. > :41:18.the Liberal Democrats can be like herding cats sometimes. But I think
:41:18. > :41:24.if leaders are wise, they will realise they can get 80% of what
:41:24. > :41:30.they want. It is when they try for 100% the trouble starts. Is Nick
:41:30. > :41:34.Clegg trying for 100%?'S Going for 90%, he needs towards 80 and then
:41:34. > :41:38.he will be fine. With the Liberal Democrats it is not that they have
:41:38. > :41:42.a reason for Liberal Democrats, they have all reasons for not being
:41:42. > :41:46.in other parties. The second thing to say about them, is the people
:41:46. > :41:50.who turn up to conference aren't necessarily representative of
:41:50. > :41:56.either the party as a whole, or still less, the people who vote
:41:56. > :42:01.Liberal Democrat. Mark Littlewood knows all about the
:42:01. > :42:05.different Lib Dem groups, when he was director of comouncations for
:42:05. > :42:10.the party he had to live and - communications for the party, he
:42:10. > :42:15.had to live and breathe these groups. The people addressed
:42:15. > :42:19.tomorrow in the speech are left orientated. These are the guys
:42:19. > :42:27.knocking on doors, delivering leaflet, collecting petitions,
:42:27. > :42:30.usually to save the local hospital or whatever. A leftist bent. The
:42:30. > :42:34.wider membership of the party, the many thousands of Liberal Democrat
:42:34. > :42:39.members who aren't here, they tend to be a bit more market orientate.
:42:39. > :42:42.They are not delivering leaflets or taking a week off work to come to
:42:42. > :42:47.the conference. But when they are asked to vote in a members' ballot,
:42:47. > :42:50.they make decisions that favour the orange book wing of the party. I'm
:42:50. > :42:54.right in saying every Liberal Democrat leadership election has
:42:54. > :43:03.always tended to elect the centre right rather than the centre
:43:03. > :43:07.candidate. This is the health debate, where we
:43:07. > :43:14.will find a huge concentration of the Social Democratic wing of the
:43:14. > :43:19.party. Here, well they are kind of obsessed with, as they see it,
:43:19. > :43:23.fragmentation and competition within public services.
:43:23. > :43:30.Shirley Williams is very popular with this part of the party, she
:43:30. > :43:34.was once a Labour minister, leaving there only when Labour, in her view,
:43:34. > :43:38.became too left-wing. Like many Lib Dems though, she retains a left of
:43:38. > :43:43.centre world view. If you were to do a straw poll in there, you would
:43:43. > :43:46.get a large number of people saying this hasn't been fully considered
:43:46. > :43:54.yet, there needs to be a lot more work on this, and we need to put it
:43:54. > :43:58.off for a year and work out what to do? You would, and you would get
:43:58. > :44:02.people saying start from scratch. The problem is because Mr Lansley,
:44:02. > :44:05.who is a very energetic minister, has been campaigning for a long
:44:05. > :44:11.time for the changes he wants to see. What we now have is a
:44:12. > :44:15.situation where it is very difficult to go back. There is
:44:15. > :44:19.There is a sense that there are people in the Liberal Democrats who
:44:19. > :44:22.see things differently, who see localism and setting up local
:44:22. > :44:26.autonomy as the way to save public services. Other people will say
:44:26. > :44:30.that is leading to a postcode lottery of which we are not
:44:30. > :44:34.comfortable? I don't find that to be the deepest division, there is
:44:34. > :44:39.very little division on the concept of the NHS as a public service.
:44:39. > :44:43.There is nom some division on where the power should lie. That has been
:44:43. > :44:47.largely met by changes in the health bill. Pity poor Nick Clegg,
:44:47. > :44:51.a line he puts in a speech that might get half the audience
:44:51. > :44:57.cheering, and the other half throwing things. No wonder he has
:44:57. > :45:02.to spend so much of his time trying to emulsify his dispr rate party.
:45:02. > :45:06.- disparate party. Whether you consider yourself more of a Social
:45:06. > :45:09.Democratic or classic liberal, whether you are here for Paddy
:45:09. > :45:14.Ashdown or Shirley Williams. We will all, to one degree or another,
:45:14. > :45:24.all of the above. We share the same interHans, we are cut from the same
:45:24. > :45:25.
:45:25. > :45:28.cloth, we are Liberal Democrats. The diversity of the Liberal
:45:28. > :45:31.Democrats has always been a strength for the party. It has been