20/09/2011 Newsnight


20/09/2011

The latest on the debt crisis in Athens where students have taken to the streets to demonstrate after schools opened for the new term without text books. With by Jeremy Paxman.


Similar Content

Browse content similar to 20/09/2011. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

The IMF declares the global economy is entering a new dangerous phase,

:00:09.:00:15.

just as Greece tries to grab at another �8 billion hand-out to

:00:15.:00:18.

stumble on with. The global economic outlook today: grim.

:00:18.:00:23.

In groz they are getting ready to implement yet another economic

:00:23.:00:31.

shock, but with it draining away, can anything save this country from

:00:31.:00:33.

default. They are burning their tax bills in

:00:33.:00:40.

at then, if the fate of Greece is sealed, cannot the same be said for

:00:40.:00:42.

the euro and our own economic experts.

:00:42.:00:45.

Martin Wolf is here, along with a former Chancellor of the Exchequer,

:00:45.:00:49.

former Chancellor of the Exchequer, and a City analyst.

:00:49.:00:52.

Is Liberal Democrat enthusiasm the only thing standing between the

:00:52.:00:57.

British Government and a fit of full on Europhobeia. If you keep

:00:57.:01:03.

beating the anti-European drum, if you Labour over tax cuts for the

:01:03.:01:07.

rich, you will put into peril the most crucial treatment of the

:01:07.:01:12.

Government. The Energy Secretary will be here to bury the

:01:12.:01:15.

misbegotten euro, or pos below praise it. The time was when

:01:15.:01:19.

governing took place on paper and in triplicate. What happens when

:01:19.:01:24.

politicians make decisions on smart phones. We poke the ant hill to see

:01:24.:01:29.

what crawls out. What is the story about the

:01:29.:01:33.

Government minister and the unofficial hidden e-mail system,

:01:34.:01:43.

tell us how the secret world of Whitehall works today.

:01:43.:01:47.

The grok Government tonight said they are getting close to a- the

:01:47.:01:54.

Greek Government tonight said they are getting close to the package

:01:54.:02:00.

for the bailout money. That won't put an end to the problems. If you

:02:00.:02:03.

doubt how desperately serious maybe the consequences of this problem

:02:03.:02:07.

for all of us, listen to the International Monetary Fund today.

:02:07.:02:11.

It has slashed its growth forecast, and said if political leaders fail

:02:11.:02:18.

to find way of sorting the mess in the eurozone, things could get much,

:02:18.:02:28.
:02:28.:02:33.

much worse. Is there a deal or what? There is

:02:33.:02:36.

no deal. Greece has been 25 days worth of cash before it has to

:02:36.:02:40.

switch the lights off here in the Acropolis, and sack the people who

:02:40.:02:45.

look after that, and every other state employee in the country. So

:02:45.:02:51.

no rush. We do, however, know some of the details of the deal. We are

:02:51.:03:00.

seeing Greek national newspapers being briefed tonight. One of the

:03:00.:03:06.

papers has 100,000 state workers to be sacked or moved to involuntary

:03:06.:03:09.

holidays, and public sector wage cuts and generally more austerity.

:03:09.:03:13.

I have been meeting people today, school students who have turned up

:03:13.:03:18.

in their schools in September, no textbooks. I have been hearing the

:03:18.:03:23.

police trade union claiming that police officers having to buy their

:03:23.:03:27.

own armour, fill up their own patrol cars. All this before the

:03:27.:03:32.

new round of austerity. Because the old austerity didn't work, and what

:03:32.:03:38.

it means is things are going to get a lot tougher.

:03:38.:03:43.

While the politicians dithered, the people were, once again, out on the

:03:43.:03:50.

streets. Greek civil servants know they are hours away from a mass

:03:50.:03:53.

redundancy programme, tens of thousands will be laid off, tens of

:03:53.:03:57.

thousands more put on compulsory holidays on 60% pay. Once again,

:03:58.:04:02.

Greece is at the centre of the storm, because past solutions have

:04:02.:04:06.

not worked. Upped the terms of its first bailout, in May last year,

:04:06.:04:11.

Greece was supposed to reduce its budget deficit to 7.6%, the latest

:04:11.:04:19.

estimate is 8.5% and rising. Its debt is predicted to hit 189% of

:04:19.:04:25.

GDP next year. As a result, IMF negotiators are holding back eight

:04:25.:04:30.

billion euros of bailout money, and imposing strict, new austerity

:04:30.:04:33.

measures. At the centre of the new deal is a two billion euro property

:04:33.:04:38.

tax, this is what many people in Greece think of that tax.

:04:38.:04:42.

The problem is, those who are bailing Greece out just don't

:04:42.:04:46.

believe reforms will be enacted. The IMF yesterday called for a one-

:04:46.:04:50.

off shock to the system. European partner, in effect, have

:04:50.:04:56.

told you as a country, that they will standby you for as long as it

:04:56.:05:01.

takes. Provided that Greece continues to pursue sound policies.

:05:01.:05:05.

So this, in our view, really places the ball in your court. The ball is

:05:05.:05:09.

in the Greek court, and implementation is of the essence.

:05:09.:05:13.

But Greeks have had 18 months of this, there is a weariness on these

:05:13.:05:18.

streets, and many economists and politicians believe the medicine of

:05:18.:05:23.

tax rises and austerity is simply killing the patient.

:05:23.:05:28.

When you have built within the people, the concrete people, the

:05:28.:05:33.

very conviction that they are trying to impose measures that they

:05:33.:05:41.

have just imagined out of thin air, the real situation will not conform.

:05:41.:05:46.

Civil servants won't im pliment the measures, real people won't pay

:05:46.:05:51.

their taxes, and the whole country, the whole economic system of the

:05:51.:06:01.
:06:01.:06:04.

country is going to gently flounder. This is pulling others towards the

:06:04.:06:09.

danger zone, Italy saw their credit rating downgraded, and any Greek

:06:09.:06:13.

default could signal a crisis in France, Belgium and Germany. The

:06:13.:06:17.

global economy has entered a dangerous new phase. The recovery

:06:17.:06:24.

has weakened considerably. Down sideways and increased sharply.

:06:24.:06:29.

Strong policies are needed both to improve the outlock and to reduce

:06:29.:06:34.

the risks. Globally the problems are mounting.

:06:34.:06:38.

Fiscal crisis and recession feed off each other, the IMF today

:06:38.:06:45.

revise its forecast down for the eurozone and the US and the UK.

:06:45.:06:51.

Markets have become more sceptical about the ability of policy makers,

:06:51.:06:55.

of Governments, to stablise their public debt. And tonight, on the

:06:55.:06:59.

brink of yet another round of austerity, and protest, Athens is

:06:59.:07:05.

the capital of the unknown. From what's known of the austerity

:07:06.:07:11.

package, is it likely to work? depends what we mean by working.

:07:11.:07:15.

There is a risk that Greece will default this week. That is why we

:07:15.:07:19.

are having this meeting. If Greece defaults, that is bad news for the

:07:19.:07:22.

world's banking system. But, I think it is likely there will be a

:07:22.:07:27.

deal. It is effectively a game of chicken between the IMF and EU

:07:27.:07:29.

negotiators and the Greek Government. We are down to the

:07:29.:07:35.

detail. The detail is important, what the IMF needs, the EU, is to

:07:35.:07:38.

go back to countries that provide the money for the bailout and say

:07:38.:07:43.

this is not just going to work for now, but it will put Greece back on

:07:43.:07:50.

a path that if not spectacularly brilliant, it is not disastrous,

:07:50.:07:54.

and we won't be here again. It is in the balance whether they can do

:07:54.:07:59.

that. They are scraping the bottom of the barrel by cutting the tax

:07:59.:08:05.

ceiling from 8,000 euros to 4,000 though YuriGagarino50 roars, you

:08:05.:08:15.
:08:15.:08:15.

start paying tax at 4,000 though euros, it is stuff they can do now.

:08:15.:08:21.

We have had 18 months of austerity now, and the economy is shrinking

:08:21.:08:25.

faster, the tax take is collapsing. In part, because people are just

:08:25.:08:28.

not making profits, not making money, but also, there is evasion,

:08:28.:08:38.
:08:38.:08:39.

there is revolt, there is refusal. What the IMF is asking the Greek

:08:39.:08:42.

Government is to finally turn around to its own electoral base

:08:42.:08:46.

and say, do you know what, the era is over, free education, free

:08:46.:08:51.

health care, what's left of it, all the things we have stood for, are

:08:51.:08:57.

gone. And they want it to be a kind of a political shock so that, as

:08:57.:09:03.

the IMF guy put it, yesterday, the shock is felt and then we build

:09:03.:09:07.

from there. They just don't feel there has been enough psychological

:09:07.:09:11.

adjustment in Athens or the rest of Greece, as to what austerity really

:09:12.:09:13.

means. The significance of this

:09:13.:09:19.

downgrading of the IMF growth forecast? Well, I think the IMF

:09:19.:09:23.

growth forecast for the USA, for the eurozone, for the UK, it means

:09:24.:09:28.

that we're running out of steam on recovery. And we are now in the

:09:28.:09:32.

territory of looking for policy action, not just here in Athens but

:09:32.:09:39.

in Washington, London and Brussels. We can begin to expect some, we can

:09:39.:09:45.

expect tomorrow the US Central Bank to signal the more - European bank

:09:45.:09:49.

to have more money printed, quantitative easing as it is called.

:09:49.:09:54.

We can see that more money will be borrowed on their behalf, with a

:09:54.:09:58.

big policy debate, that all politicians, not just our's in

:09:58.:10:02.

Britain and those in Greece have to grapple with, can there be more

:10:02.:10:06.

stimulus, if the old stimulus didn't work, what price the next

:10:06.:10:11.

stimulus. With us is the economic journalist, Martin Wolf, the former

:10:11.:10:16.

Chancellor, Lord Lamont, and the markets analyst, Louis Cooper. Can

:10:16.:10:26.
:10:26.:10:31.

Greece be saved from defaulting on its debts? No, there is no chance

:10:31.:10:35.

Greece won't default on the debt. Almost no-one believes anything

:10:35.:10:39.

else. Do you also believe that Greece will default? It will

:10:39.:10:43.

probably be put off until after 2013. They will find a package to

:10:43.:10:47.

get them through. It is a default at the end? It has been a partial

:10:47.:10:50.

default already. I think there will be a further default. I think it

:10:50.:10:53.

would have been better if this had been recognised earlier. What do

:10:53.:10:58.

you think? I think it's absolutely given. They can't pay back the

:10:58.:11:04.

amount of debt they have. I would be quite so optimistic as 2013.

:11:04.:11:08.

Credit Default Swap market is telling you that it's getting close.

:11:08.:11:14.

So, you all agrow, Greece is going to default at some point if it

:11:14.:11:22.

hasn't already done so. What is the consequence of that? It depends on

:11:22.:11:26.

how it is done, is it with co- operation, with agreement,

:11:26.:11:29.

essentially they have reached the end of the road. In that case it is

:11:29.:11:33.

possible to default without leaving the euro. What would happen is

:11:33.:11:38.

there would be a huge writedown of debt, halved at least, and an

:11:38.:11:42.

agreement to recapitalise the banks, only the eurozone could do that,

:11:42.:11:51.

and lickify the banks. If that weren't - liquify the banks, if

:11:51.:11:55.

that weren't done they would have to have a new currency. Wouldn't

:11:55.:11:59.

that destroy any credibility the euro would have? The opposite, if

:11:59.:12:03.

the euro is going to work at all, some of us have always been very

:12:04.:12:07.

sceptical, it includes the possibility, inherent in the model,

:12:07.:12:11.

that Governments will default. Just like states can default in the

:12:11.:12:15.

United States. The default is quite different from exit, though it can

:12:15.:12:21.

lead to exit. Default seemed to me always a plausible outcome, Greece

:12:21.:12:27.

is the case. I agree with that, I think if Greece left the euro,

:12:27.:12:30.

which I think ought to happen in the long run, if that happened now

:12:31.:12:35.

that would be, one thing is possibly a problem or disaster, the

:12:35.:12:40.

other would be a cat it is a trophy. If that happened you would see a

:12:40.:12:45.

huge increase in the debts particularly of French banks, all

:12:45.:12:51.

detects to Greece. And ifth would be a very difficult problem to

:12:51.:12:54.

manage. And it would be a very difficult problem to manage.

:12:54.:12:58.

want them to stay? I think leaving with the market pressure would be

:12:58.:13:02.

catastrophic, I think it is in the interests that they should stay in

:13:02.:13:06.

for maybe a couple of years, and then you should have a

:13:06.:13:09.

reconsideration of the whole structure of the euro. How does it

:13:09.:13:14.

look in the markets? Ugly. The credit markets are getting to

:13:14.:13:21.

Lehman level, they are creaking wildly. Most commentators and

:13:21.:13:24.

journalists focus on equity markets, they don't know about the wholesale

:13:24.:13:29.

funding markets. This is how banks fund themselves. At BGC it is what

:13:29.:13:34.

we do a lot of. I had a long chat with the brokers at their desk, and

:13:34.:13:38.

he said if you are a French bank with any exposure to Greece,

:13:38.:13:41.

Ireland and Portugal, getting short-term funding is difficult. He

:13:41.:13:45.

says you have to beg, borrow or steal. And banks have to, have to

:13:45.:13:48.

balance their books at the end of the day. It is all very well

:13:48.:13:53.

talking about big writedowns on Greece, but liquidity is far more

:13:53.:13:55.

important. It is very tough out there.

:13:55.:14:01.

What about the question, not of falling out of the euro, but being

:14:01.:14:05.

chucked out of the euro? Legally it is impossible, there is nothing in

:14:05.:14:12.

the treaty that allows it. The thing is you can't just leave the

:14:12.:14:15.

euro, legally, you have to leave the European Union, and then you

:14:15.:14:19.

have to ask to come back. I think in this case they wouldn't be

:14:19.:14:24.

allowed back. But this was designed to be irrevocable. That is how it

:14:24.:14:30.

is designed. So you would be creating a new treaty, you know how

:14:30.:14:32.

that goes. The Dutch Finance Minister and Prime Minister have

:14:32.:14:36.

proposed that there should be, in addition to fiscal measures that

:14:36.:14:41.

there should actually be a mechanism created for the future

:14:41.:14:44.

whereby countries that are not meeting their fiscal targets should

:14:44.:14:47.

be able to be expelled. But this is something that they have just put

:14:47.:14:51.

on the table. It is for the longer term. We need a new treaty. You are

:14:51.:14:55.

going to need new treaties whatever happens. One of the great problems,

:14:55.:15:02.

one of the reasons this thing is so dangerous, is that the stablisation

:15:02.:15:07.

mechanism, the European fnction financial stability - Financial

:15:07.:15:12.

Stability Facility, has to be radfied by all the 17 members of

:15:12.:15:18.

the eurozone. Some countries - rad ratified by all the 17 members of

:15:18.:15:21.

the eurozone. And the smallest party in the coalition in one

:15:21.:15:25.

country is saying it won't vote for it. There are so many moving parts

:15:25.:15:29.

in all of this, that even a small objection by a small country can

:15:29.:15:35.

tip the thing over the cliff. There are so many possibilities for

:15:35.:15:39.

miscalculation and error. At which point is it bad news for us? It is

:15:39.:15:44.

already. The real danger, in my opinion, is they go on with half

:15:44.:15:48.

measure after half measure, sticking plaster after sticking

:15:48.:15:52.

plaster, you get a respite for a few weeks, then another crisis,

:15:52.:15:56.

then another respite, and another crisis. This goes on and on, it is

:15:56.:16:01.

sapping confidence in the most appalling way. Presumably it is

:16:01.:16:04.

already having an effect, presumably from where you are in

:16:04.:16:07.

the markets, the effect upon banks and the rest of it is something

:16:07.:16:13.

that begins to feed through to other parts of the economy, is it?

:16:13.:16:16.

Absolutely. There are many banks having trouble funding themselves

:16:16.:16:21.

on a day-to-day basis. They can get money, but it is expensive, and

:16:21.:16:24.

they are funding very short-term, three month, or six months money

:16:24.:16:30.

that they used to get all the time. That has gone. And banks' long-term

:16:30.:16:35.

funding where they issue bonds, we haven't seen big European banks

:16:35.:16:39.

issue bonds since in June. Banks have big loan books, they have to

:16:39.:16:44.

fund them. The banking system is getting close to crisis levels. It

:16:44.:16:47.

is all very well talking about political will to sort the mess out,

:16:47.:16:52.

but this takes months, years. quite agree. The markets don't wait

:16:52.:16:55.

that long. We talk about politicians being behind the curve,

:16:56.:17:03.

you are so far behind the curve you need to run very quick to catch up.

:17:04.:17:06.

The European Central Bank is now going to be forced to do everything

:17:06.:17:10.

it hates, among other things, it is going to have to finance the

:17:10.:17:13.

Governments in trouble, including countries like Italy and Spain, it

:17:13.:17:17.

is going to have to finance the banks, its balance sheet will have

:17:17.:17:21.

to explode, and the Germans will absolutely loathe it. In addition,

:17:21.:17:26.

as Christine Lagarde pointed out, they will have to find way of

:17:26.:17:30.

putting capital in the banks to make them look stronger. The

:17:30.:17:34.

European banking system, the big zest in the world is under enormous

:17:34.:17:40.

stress. What happens to us? If they do manage this thing it creeks on

:17:40.:17:44.

to a subsequent - creaks on to a subsequent crisis, the Germans will

:17:44.:17:48.

hate all of this, they can leave, they have more of an option than

:17:48.:17:53.

anybody else. But if they fix it goes on, if they don't fix it we

:17:53.:17:57.

have a monstrous banking come sovereign crisis next door.

:17:57.:18:00.

people start leaving the euro, they have to leave the European Union.

:18:00.:18:05.

That is the end of the European Union then? I think it is true, if

:18:05.:18:09.

the Germans decide that they cannot stand this, any more, and they do

:18:09.:18:13.

decide to pull out, we are nowhere near that, but if they do, yes the

:18:13.:18:19.

European Union, in my view is dead. This remakes political map of

:18:19.:18:24.

Europe completely? This crisis is very serious. There is tremendous

:18:24.:18:28.

tension in France, you have the older generation that this is the

:18:28.:18:33.

crowning jewel, the creation of the euro and bringing in Germany and

:18:33.:18:39.

anchoring it in Europe. Germany is fed up with the cost of it, opinion

:18:39.:18:43.

is changing. Mrs Merkel is sitting there, waiting and hoping that some

:18:43.:18:47.

consensus will emerge and it won't. Thank you very much. The crisis in

:18:47.:18:52.

the euro casts a very long shadow indeed, which also falls across

:18:52.:18:55.

those of us who choose not to be part of the project, bailing out

:18:55.:19:00.

other European states who opted in has already cost us an arm and a

:19:00.:19:03.

leg. There are other potential costs too, for example, the two

:19:03.:19:07.

wings of our very unusual Government have quite different

:19:07.:19:09.

instincts with some prominent Liberal Democrats having once seen

:19:09.:19:14.

the euro as a passport to paradise, and prominent Conservatives getting

:19:14.:19:18.

knows bleeds at the very mention of the - nosebleeds at the very

:19:18.:19:24.

mention of the idea. When the coalition Government was formed

:19:24.:19:28.

last year, the divisions between the Lib Dems and the Conservatives

:19:28.:19:32.

on Europe weren't exactly a secret. The parties didn't settle their

:19:32.:19:36.

differences, but decided to bury them in a Downing Street garden

:19:36.:19:41.

instead. But now the crisis in the eurozone could become a crisis for

:19:41.:19:44.

the coalition. If anyone inside Government thinks for one moment

:19:44.:19:51.

that we can renegotiate our relationship with Europe that is

:19:51.:19:55.

the end of the coalition, I am afraid. There will be a point where

:19:55.:19:58.

the liberals and the Tories can't agree, then it collapses, it could

:19:58.:20:02.

be the issue of Europe and the euro. Britain's relationship with the

:20:02.:20:07.

rest of Europe has caused fissures in the political landscape, the SDP

:20:07.:20:11.

was set up partly in response to Labour's policy to leave the then

:20:11.:20:14.

European community. In the 190s John Major's Conservative

:20:14.:20:18.

Government was riven with division over economic and monetary union.

:20:18.:20:23.

These days the vast majority of Tory MPs are now sceptical towards

:20:23.:20:28.

the EU. So today a Lib Dem cabinet minister warned some of his

:20:28.:20:32.

Conservative colleagues not to turn the euro crisis into a political

:20:32.:20:36.

drama. We will not, as Liberal Democrats in Government, weaken the

:20:36.:20:40.

ties that deliver our national interest through Europe.

:20:40.:20:49.

APPLAUSE And let that be a warning to the

:20:49.:20:55.

Conservative right here, we need no Tea Party tendency in Britain.

:20:55.:21:04.

APPLAUSE If you fail to compromise, if you

:21:04.:21:09.

fail to seek the common ground that unites us, if you insist that only

:21:09.:21:16.

you have the answers, if you keep beating the Antoinetteity European

:21:16.:21:21.

drum. If you slave over tax cuts for the - anti-European drum, if

:21:21.:21:27.

you slave over tax cuts for the rich, you will wreck the economy

:21:27.:21:34.

because we are all in this together and we can't get out of it alone.

:21:34.:21:40.

In truth there are far fewer divisions between coalition cabinet

:21:40.:21:43.

ministers than between the two parties' backbenchers. In practice

:21:43.:21:46.

David Cameron and Nick Clegg now accept the concept of a two-speed

:21:46.:21:51.

Europe, where those nations inside the eurozone more closely align

:21:51.:21:57.

their policies on tax and spending, putting it more bluntly, the

:21:57.:22:00.

better-off countries on the continent would bail out the others,

:22:00.:22:04.

in return for greater say over their economies.

:22:04.:22:11.

The Treasury says contingency plans are being drawn up if the crisis

:22:11.:22:15.

deepens. Unpessimistic scenarios a further recapitalisation of the

:22:15.:22:20.

banks shunting ruled off. If Britain faces any of the cost of

:22:20.:22:24.

the crisis, many people a political price should be exacted. The key

:22:24.:22:28.

demand is we want powers back from the EU so we once against govern

:22:29.:22:32.

ourselves in this country. In particular, the need to have a

:22:32.:22:36.

referendum so that the people decide. And I think probably, I

:22:36.:22:39.

mentioned 100 people, I think clearly there is a large number of

:22:39.:22:42.

colleagues, I think really growing day by day, who are backing that

:22:42.:22:46.

call for a referendum. Here at Lib Dem conference, a

:22:46.:22:51.

former Treasury spokesman has decided to issue a stark warning to

:22:51.:22:55.

any Conservative minister who is tempted to follow the lead of Euro-

:22:55.:22:58.

sceptic backbenchers. Europe is obviously one of the real

:22:58.:23:02.

fault line in the coalition, which is why in the coalition agreement

:23:02.:23:05.

the only possible answer was a total stand still. We don't move

:23:05.:23:10.

forward, we don't move back, that's the deal, that is what we are stick

:23:10.:23:15.

to, and if anyone inside Government, and there have been some worrying

:23:15.:23:19.

noises from William Hague, if anyone inside Government thinks

:23:19.:23:23.

more one moment that we can renegotiate our relationship with

:23:23.:23:27.

Europe, that, I'm afraid, is the end of the coalition, if that were

:23:27.:23:31.

to happen. These blank cheques are on sale in

:23:31.:23:36.

the Lib Dem shop, are you doing a roaring trade on those? We do a

:23:36.:23:40.

very good trade trade on the cheques. The Liberal Democrats are

:23:40.:23:44.

of course serious about deficit reduction, but as you have maerd

:23:44.:23:48.

blank cheques are selling well. What the Conservative backbenchers

:23:48.:23:52.

are suggesting is that the junior coalition parties have such a soft

:23:52.:23:56.

spot for the EU they are willing to write as many of these as possible

:23:56.:24:00.

to prop up the single currency. We have our Liberal Democrat cheque

:24:00.:24:05.

here, you have been critical in the past about bolstering the eurozone,

:24:05.:24:08.

how much do you think the British Government's liability should be,

:24:08.:24:12.

how much should they pay? I will give you that back, I think we

:24:12.:24:16.

should tear up this cheque, because we shouldn't pay any more money to

:24:16.:24:19.

Europe. What we should be doing is making

:24:19.:24:23.

sure that the euro collapses in a style and at a time that can

:24:23.:24:27.

actually be managed, not in a crisis mode. At the moment we are

:24:27.:24:31.

heading for the collapse of the euro in a crisis. But a former City

:24:32.:24:35.

fund manager says that the eurozone shouldn't be allowed to collapse.

:24:35.:24:39.

None the less, it may have to contract a little.

:24:39.:24:44.

Greek bonds, Greek ten-year Government bonds are yielding 25%.

:24:44.:24:49.

That says that everyone in the market knows that they have got to

:24:49.:24:57.

default. Rather than having these ever-more frequent bailout packages,

:24:57.:25:04.

just like letting a spend thrift increase their credit card limit,

:25:04.:25:08.

we must get together and take a decision on Greece. More unites

:25:08.:25:11.

than divides coalition ministers on how to handle the current crisis,

:25:12.:25:15.

the pressure set to be applied from each party's rank and file for them

:25:15.:25:19.

to move further apart. Joining us now from the Liberal

:25:19.:25:24.

Democrat Conference in birmling ham is the energy - Birmingham, is the

:25:24.:25:27.

Energy Secretary, Chris Huhne. On the question of the euro, do you

:25:27.:25:31.

still subscribe to the view that you once held that the euro is

:25:31.:25:35.

living up to the highest expectations of the economists who

:25:35.:25:39.

advocated it, and Britain is missing out? Clearly not, Jeremy.

:25:39.:25:43.

One thing I think is very clear, is that if you are like Greece, a

:25:43.:25:47.

country that has falsified your national accounts, and in this case,

:25:47.:25:52.

in order to get into the euro area, even if you were outside the euro

:25:52.:25:56.

area, there would be a real day of reckoning. All that would happen if

:25:56.:26:02.

the Greeks had their own currency, is that they would be facing a

:26:02.:26:07.

Latin American-style hyperinflation, with a massive devaluation, that is

:26:07.:26:11.

not an easy way out either. The reality is the problems that are

:26:11.:26:16.

besetting Greece are ones which predated the euro area. It would

:26:16.:26:20.

have been a huge mistake for us to join the euro was it? It was a huge

:26:20.:26:25.

mistake for the Greeks to join knowing as they did their national

:26:25.:26:28.

accounts were...I'm Asking whether it would have been a mistake for us

:26:28.:26:31.

to join, and clearly it would, wouldn't it? Clearly, if you look

:26:31.:26:35.

at the number of countries that have joined, there is a commitment

:26:35.:26:40.

to making the euro work, which I think we would underestimate at our

:26:40.:26:48.

peril. Up until now, right the way European Union history, from the

:26:48.:26:52.

1950s onwards the British people have consistently underestimated

:26:52.:26:57.

the political will on the European mainland to actually get these

:26:57.:27:01.

problems together. Yes or no, should we have joined the euro as

:27:01.:27:05.

you advocated, yes or no? question of joining the euro is

:27:05.:27:11.

clearly not one for the UK. We are out of the euro and that issue is

:27:11.:27:15.

settled. All I'm saying to you if we start wringing our hands.

:27:15.:27:18.

trying to get a straight answer about whether you think it is a

:27:18.:27:25.

good idea to join or not? You have had a very straight answer. We have

:27:25.:27:30.

consistently underestimated the political will to the euro. That is

:27:30.:27:34.

the answer to a different question, do you think it is a good idea to

:27:34.:27:38.

join the euro, yes or no? The issue hasn't been a live one in British

:27:38.:27:42.

politics for a long time. If we had joined the euro it might have been

:27:42.:27:45.

a different beast. The key issue today is whether or not Greece

:27:45.:27:51.

should have joined the euro, the answer to that is clearly no. If

:27:51.:27:54.

they hadn't provided false figures to the European Commission in order

:27:54.:27:58.

to get in, whatever the monetary system in Greece there would have

:27:58.:28:02.

been a problem. You have made that point. Can I try something else out

:28:02.:28:06.

on you. When you said today, that you do not want a Tea Party

:28:06.:28:09.

tendency in Britain, were you referring to any members of the

:28:09.:28:16.

cabinet, when you made that accusation? No, I'm talking about

:28:16.:28:20.

what we are seeing on the Conservative right, a number of

:28:20.:28:27.

cases. Who are they please? Well, you have just been quoting on your

:28:27.:28:31.

own programme some backbenchers talking about trying to renegotiate

:28:31.:28:35.

our existing treaty obligations within the European Union, this is,

:28:35.:28:39.

afterall, the eurozone taking half of our exports. How many of them,

:28:39.:28:44.

Bill Cash and a few friend? This is a significant number, and there are

:28:44.:28:49.

people who are putting pressure on the Government to try to come to a

:28:49.:28:53.

set of conclusions, which to my mind would be deeply against our

:28:53.:28:56.

national interest. When we have a fundamental interest in the success

:28:56.:29:00.

of the European Union, half of our exports go to the eurozone, these

:29:00.:29:05.

are political choices, this is a geographical reality. We sell more

:29:05.:29:10.

to Ireland alone, which is a member of the eurozone, than we do to

:29:10.:29:15.

Brazil, India. We are familiar with the arguments, I'm trying it find

:29:15.:29:20.

out? I'm not sure you are familiar with the arguments. You were

:29:20.:29:26.

directing that at Bill Cash and a few like-minded souls on

:29:26.:29:29.

backbenches, that is what it was directed at? We have had two

:29:29.:29:33.

examples recently, where it seems to me there is an attempt to move

:29:33.:29:37.

the centre of graeity in the Government away from the agreement

:29:37.:29:41.

we made in the coalition deal, that was very clear about Europe, we

:29:41.:29:48.

don't go forward but back either. If we are having people in the

:29:48.:29:51.

Conservative Party saying we need to unpick our European

:29:51.:29:54.

relationships, when they are so fundamental to our prosperity and

:29:54.:29:58.

growth and export, that will be a problem for us in the Liberal

:29:58.:30:02.

Democrats. You would agree with Lord Oakeshott, that it would be a

:30:02.:30:10.

deal breaker, wouldn't it? Lord Oakeshott chooses his own words on

:30:10.:30:17.

this. What I am saying is we have the basis of a compromise, which is

:30:17.:30:20.

in the coalition agreement. We will not unpick that, we will respect

:30:20.:30:25.

the coalition agreement. The point I will make in my speech is we have

:30:25.:30:32.

achieved through the deficit reduction in Government. We have

:30:32.:30:36.

got out of the economic danger zone affecting so many other countries

:30:36.:30:39.

with bigger deficit than us. Let's talk about the deficit plan. There

:30:39.:30:44.

is talk tonight of there being an additional �5 billion, some how

:30:44.:30:48.

found, to be spent on capital investment in infrastructure

:30:48.:30:55.

projects. Is that true? I have no, I don't recognise that figure at

:30:55.:30:59.

all. I have absolutely no knowledge of that. It would be news to me.

:30:59.:31:02.

you recognise any figure, is there a plan to free up billions of

:31:02.:31:08.

pounds? No. There is no such plan? What there clearly is a desire

:31:08.:31:11.

right the way across the Government to make sure we are putting forward

:31:11.:31:16.

as creatively and imaginatively as we can, ideas to get growth going.

:31:16.:31:19.

But the fundamental achievement, which we have made so far, which is

:31:19.:31:23.

to get that deficit coming down, and to persuade the financial

:31:23.:31:27.

markets, that we are a safe haven and not the sort of risk which they

:31:27.:31:32.

have seen in Ireland, Portugal and Spain and Italy, and Greece. That's

:31:32.:31:35.

fundamental. Because if our interest rates start rising like

:31:35.:31:38.

their's, we will be in a double-dip recession, and we have saved the

:31:38.:31:43.

country from that. We now need to build on that. Unlike them, they

:31:43.:31:48.

are in the eurozone and we are not. Specifically on this question.

:31:48.:31:52.

is not just the eurozone, as you have seen from the IMF forecast

:31:52.:31:55.

there is a downgrade in the United States, and the failure of

:31:55.:31:59.

compromise that I gave as an example in my speech was actually

:31:59.:32:03.

in the United States. Where the failure to compromise between the

:32:03.:32:07.

President and Congress actually has led to the downgrading of the

:32:07.:32:11.

United States credit standing. I don't want to see us go through

:32:11.:32:17.

that. Was there anything like this plan, �5 billion you say you don't

:32:17.:32:20.

recognise, has anything like this been discussed in cabinet and

:32:20.:32:25.

agreed upon? No. Nothing at all? Has anything like this been

:32:25.:32:30.

discussed and agreed upon in the last couple of days, say?

:32:30.:32:35.

Certainly not that I am aware of. This story is a fiction? We do that

:32:35.:32:39.

r have a growth review process where we are attempting to come up

:32:39.:32:43.

with pragmatic ways in which we can get the economy growing, and make

:32:43.:32:49.

sure we are getting the jobs coming back, and getting back ob that path

:32:49.:32:53.

to recovery. We have done the serious heavy lifting of reducing

:32:53.:32:58.

the deficit and getting out of the danger zone, we have to move

:32:58.:33:02.

forward to the positive agenda of stimulating growth and getting jobs

:33:02.:33:05.

coming back. I don't recognise anything of the story you have

:33:05.:33:07.

given to me. Thank you very much.

:33:07.:33:11.

How much are we entitled to know about what goes on in Government?

:33:12.:33:15.

Every party makes promises about not keeping things from the citizen,

:33:15.:33:19.

and claims to believe in some form of open Government. Yet the

:33:19.:33:22.

Financial Times has seen e-mails from a so-called special advisers,

:33:22.:33:25.

they are the political cronies, politicians take into Government,

:33:25.:33:29.

to keep them true to the faith, amid all those Godless civil

:33:29.:33:34.

servants, which can be construed as showing something else all together.

:33:34.:33:38.

We have spent most of the add - Michael Cockerell has spent most of

:33:38.:33:44.

his adult life looking at how power works in this country. We asked him

:33:44.:33:50.

what he made of it. Whitehall has its own secret world, for some

:33:50.:33:54.

civil servants discretion is like the calcium in their bones. But

:33:54.:34:00.

sometimes leaks reveals what has been going on inside Whitehall's

:34:00.:34:04.

inner sanctum. A sensational story in today's Financial Times, alleged

:34:04.:34:07.

that Michael Gove, the Education Secretary, and his senior political

:34:07.:34:12.

advisers, were using a private e- mail system, which concealed

:34:12.:34:17.

sensitive information from his own officials and from the public. When

:34:17.:34:21.

the department was asked to produce these e-mails under a freedom of

:34:21.:34:24.

information request, the department said it had no record of them.

:34:24.:34:28.

think the question here is not whether it has once or it is a one-

:34:28.:34:31.

off, it is whether or not there is a systematic avoidance of the

:34:31.:34:35.

scrutiny that comes with freedom of information. The suggestion is that

:34:35.:34:40.

Mr Gove and his advisers have established a parallel private

:34:40.:34:49.

network, to the formal Government e-mail. If ministers decide to

:34:49.:34:51.

short circuit official system that is allow decisions to be understood

:34:51.:34:57.

and become accountable, then it will lead to bad Government. It

:34:57.:35:00.

will trip ministers up and the Government up. It is very tempting

:35:00.:35:04.

in the short-term, sometimes, to bypass systems and do things off

:35:04.:35:11.

the record, private e-mail systems, blackberries, whatever, it is not

:35:11.:35:14.

good Government. Decisions will be taken that aren't accountable or

:35:14.:35:18.

properly understood. In its response to the allegations the

:35:18.:35:22.

education department said its top Mandarin had seen the e-mail the FT

:35:22.:35:28.

relied on. It said the e-mail concerned a political matter. As

:35:28.:35:32.

Conservative spring conference and sent to party officials not civil

:35:32.:35:39.

servants. The Financial Times story, which may or may not be known as

:35:39.:35:44.

gofgate, shows dramatically how the way Whitehall works has changed

:35:44.:35:50.

over the years. It contains many ingredients that are different from

:35:50.:35:54.

the traditional Whitehall Mandarins. The rise of the span, the special

:35:54.:36:00.

adviser. 30 years ago, a TV satire showed

:36:00.:36:09.

how the efigures civil servants reacting to the intrusion of the

:36:09.:36:19.
:36:19.:36:21.

first Spad. This is my political adviser. Oh, yes of course.

:36:21.:36:27.

Mr Weaser? Wiser. Of course. These are Labour's two top advisers,

:36:27.:36:32.

with the power to give orders to civil servants, the super-SPADs

:36:33.:36:37.

brought a new power. Do you know there has been a massive

:36:37.:36:41.

irretrievable data loss, the last seven months worth of new immigrant

:36:41.:36:45.

details have gone. During your time as a special

:36:45.:36:53.

adviser, the thick of it was a satire which was satirising the way

:36:53.:36:57.

special advisers work, do you recognise that? Not myself, but

:36:57.:37:02.

there were certain people who liked life imitating art, or the other

:37:02.:37:07.

way round, and modelled themselves on Malcolm Tucker. There weren't

:37:07.:37:11.

that many of them. Mo of the special advisers I dealt with were

:37:11.:37:15.

good people and highly motivated and wanted to contribute to

:37:15.:37:18.

Government. There weren't that many of them, but a few? A few, not many.

:37:18.:37:23.

Those were the ones that you usually hear about.

:37:23.:37:27.

When David Cameron, a former SPAD himself came to power, he said he

:37:27.:37:31.

was determined to run Whitehall in a pre-Blair way, he cut back

:37:31.:37:37.

sharply on the number of unelected special advisers. But Cameron's own

:37:37.:37:42.

chief SPAD, himself, became a hugely controversial figure. Andy

:37:42.:37:45.

Coulson, the Number Ten press secretary, had the job of

:37:45.:37:48.

secretarying Cameron to the tabloids. Coulson had resigned as

:37:48.:37:51.

editor of the News of the World, while denying any involvement in

:37:51.:37:56.

phone tapping by his journalists. But the affair continued to haunt

:37:56.:38:01.

Coulson in Number Ten, though Cameron tried to stick by him.

:38:01.:38:05.

Coulson resigned saying that when the spokesman needs a spokesman it

:38:05.:38:08.

is time to go. Following a certificaties of gaffes, Cameron

:38:08.:38:12.

decided to beef up the Downing Street machine by bringing in a

:38:12.:38:17.

whole new raft of Blair-style special advisers.

:38:17.:38:23.

Michael Gove had his own special adviser, who had been vetoed by

:38:23.:38:28.

Coulson for being too leaky. Today's story about Gove and his

:38:28.:38:33.

advisers, allegedly using an e-mail system to bypass civil servants,

:38:33.:38:36.

comes itself from leaked e-mails. Tomorrow's Financial Times returns

:38:36.:38:42.

to the attack, it claims that Gove ran his own private e-mail, called

:38:42.:38:47.

the Mrs Blurt account, where he discussed policy matters, bypassing

:38:47.:38:50.

civil servants. The department tonight told us that they and the

:38:50.:38:54.

Cabinet Office are clear that private e-mail accounts do not fall

:38:54.:38:57.

within the Freedom of Information Act and are not searchable by civil

:38:57.:39:03.

servants, this is a Whitehall farce that will run and rup.

:39:04.:39:06.

- run. The Liberal Democrats leave

:39:06.:39:08.

Birmingham tomorrow, after their annual conference, to return to

:39:08.:39:12.

their constituencies, and gloat about governing, or worey if they

:39:12.:39:16.

will ever recover from it. Before they clambour aboard the train or

:39:16.:39:20.

into their hybrid cars, their leader will tell them what a fine

:39:20.:39:23.

job they are doing in making it possible for him to be deputy Prime

:39:23.:39:27.

Minister, and what a great job he and his ministers are doing in

:39:27.:39:30.

stopping the Conservatives eating babies for breakfast. We will have

:39:30.:39:33.

the thrill of listening to Nick Clegg tomorrow.

:39:33.:39:42.

What's got you going tomorrow? it show. I thought I was hiding it

:39:42.:39:45.

well. The theme running through Nick Clegg's speech tomorrow will

:39:45.:39:49.

be that his party in Government in coalition with the Conservatives

:39:49.:39:53.

are doing the right things, not the easy things. To pick up on the

:39:53.:39:59.

conversation with Chris Huhne about the �5 billion, there has been a

:39:59.:40:01.

rumour all afternoon that will be announced tomorrow in Nick Clegg's

:40:01.:40:05.

speech. I put it to one of Nick Clegg's advisers he emphatically

:40:05.:40:09.

told me there will be no new capital spending announced tomorrow.

:40:09.:40:16.

There will be a reiteration for the people in the hall to try to

:40:16.:40:21.

reinvagueate - reinvague rate their achievements, things they have -

:40:21.:40:24.

reinvigourate in their achievements, things they have done in Government.

:40:24.:40:28.

In terms of going forward, it is going to be interesting to see

:40:28.:40:33.

whether we pitches his message to the - he pitches the message

:40:33.:40:37.

exclusively to the hall or beyond. It is a difficult job for any party

:40:37.:40:40.

leader, particularly one in coalition with a party where a lot

:40:40.:40:43.

of his members fundamentally disagree with them. Whoever said

:40:43.:40:47.

you can't please all of the people all of the time might have been

:40:47.:40:51.

thinking about the Liberal Democrat party.

:40:51.:40:58.

There is no such thing as a typical Liberal Democrat. I'm a Lib Dem.

:40:58.:41:04.

I'm a Liberal Democrat. I'm a Liberal Democrat. I'm a Lib Dem.

:41:04.:41:10.

diversity can make this bunch a difficult party to lead. Leading

:41:10.:41:15.

the Liberal Democrats can be like herding cats sometimes. But I think

:41:15.:41:18.

if leaders are wise, they will realise they can get 80% of what

:41:18.:41:24.

they want. It is when they try for 100% the trouble starts. Is Nick

:41:24.:41:30.

Clegg trying for 100%?'S Going for 90%, he needs towards 80 and then

:41:30.:41:34.

he will be fine. With the Liberal Democrats it is not that they have

:41:34.:41:38.

a reason for Liberal Democrats, they have all reasons for not being

:41:38.:41:42.

in other parties. The second thing to say about them, is the people

:41:42.:41:46.

who turn up to conference aren't necessarily representative of

:41:46.:41:50.

either the party as a whole, or still less, the people who vote

:41:50.:41:56.

Liberal Democrat. Mark Littlewood knows all about the

:41:56.:42:01.

different Lib Dem groups, when he was director of comouncations for

:42:01.:42:05.

the party he had to live and - communications for the party, he

:42:05.:42:10.

had to live and breathe these groups. The people addressed

:42:10.:42:15.

tomorrow in the speech are left orientated. These are the guys

:42:15.:42:19.

knocking on doors, delivering leaflet, collecting petitions,

:42:19.:42:27.

usually to save the local hospital or whatever. A leftist bent. The

:42:27.:42:30.

wider membership of the party, the many thousands of Liberal Democrat

:42:30.:42:34.

members who aren't here, they tend to be a bit more market orientate.

:42:34.:42:39.

They are not delivering leaflets or taking a week off work to come to

:42:39.:42:42.

the conference. But when they are asked to vote in a members' ballot,

:42:42.:42:47.

they make decisions that favour the orange book wing of the party. I'm

:42:47.:42:50.

right in saying every Liberal Democrat leadership election has

:42:50.:42:54.

always tended to elect the centre right rather than the centre

:42:54.:43:03.

candidate. This is the health debate, where we

:43:03.:43:07.

will find a huge concentration of the Social Democratic wing of the

:43:07.:43:14.

party. Here, well they are kind of obsessed with, as they see it,

:43:14.:43:19.

fragmentation and competition within public services.

:43:19.:43:23.

Shirley Williams is very popular with this part of the party, she

:43:23.:43:30.

was once a Labour minister, leaving there only when Labour, in her view,

:43:30.:43:34.

became too left-wing. Like many Lib Dems though, she retains a left of

:43:34.:43:38.

centre world view. If you were to do a straw poll in there, you would

:43:38.:43:43.

get a large number of people saying this hasn't been fully considered

:43:43.:43:46.

yet, there needs to be a lot more work on this, and we need to put it

:43:46.:43:54.

off for a year and work out what to do? You would, and you would get

:43:54.:43:58.

people saying start from scratch. The problem is because Mr Lansley,

:43:58.:44:02.

who is a very energetic minister, has been campaigning for a long

:44:02.:44:05.

time for the changes he wants to see. What we now have is a

:44:05.:44:11.

situation where it is very difficult to go back. There is

:44:12.:44:15.

There is a sense that there are people in the Liberal Democrats who

:44:15.:44:19.

see things differently, who see localism and setting up local

:44:19.:44:22.

autonomy as the way to save public services. Other people will say

:44:22.:44:26.

that is leading to a postcode lottery of which we are not

:44:26.:44:30.

comfortable? I don't find that to be the deepest division, there is

:44:30.:44:34.

very little division on the concept of the NHS as a public service.

:44:34.:44:39.

There is nom some division on where the power should lie. That has been

:44:39.:44:43.

largely met by changes in the health bill. Pity poor Nick Clegg,

:44:43.:44:47.

a line he puts in a speech that might get half the audience

:44:47.:44:51.

cheering, and the other half throwing things. No wonder he has

:44:51.:44:57.

to spend so much of his time trying to emulsify his dispr rate party.

:44:57.:45:02.

- disparate party. Whether you consider yourself more of a Social

:45:02.:45:06.

Democratic or classic liberal, whether you are here for Paddy

:45:06.:45:09.

Ashdown or Shirley Williams. We will all, to one degree or another,

:45:09.:45:14.

all of the above. We share the same interHans, we are cut from the same

:45:14.:45:24.
:45:24.:45:25.

cloth, we are Liberal Democrats. The diversity of the Liberal

:45:25.:45:28.

Democrats has always been a strength for the party. It has been

:45:28.:45:31.

Including the latest on the Greek debt crisis from Economics editor Paul Mason in Athens, where students have taken to the streets to demonstrate after schools opened for the new term without text books.

Presented by Jeremy Paxman.