09/12/2011 Newsnight


09/12/2011

Stephanie Flanders with analysis of the European summit in Brussels. Mark Urban and Paul Mason report on the Prime Minister's decision to stay out of a new EU economic agreement.


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Transcript


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Did he jump, or was he pushed? Afraid I cannot do that. It's not

:00:13.:00:18.

in our national interests. I don't want to put that in front of my

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Parliament because I don't think I could recommend it with a clear

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conscience, so I am going to say now and exercise the veto. That is

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effectively what I did. David Cameron says he's made the right

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choice for Britain, but was it a choice made for him by European

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leaders? Did he walk away with anything? Well, he certainly

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enhanced his reputation as a defender of the national interests.

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Alas, for Britain, this summit was meant to be about coming together

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decisively to act in the common good. We'll be asking the Europe

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Minister whether his leader has put Britain on a path out of the EU.

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And there is that small matter of the crisis that started all of this.

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Paul Mason is here. The new EU budget rules make spending your way

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out of recession illegal. So where is Europe's growth going to come

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from? We assess whether this summit has done anything to take the euro

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out of the danger zone. And what the past 24 hours has done to

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British politics - thrilled Tory backbenchers, nervous Liberal

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:01:35.:01:35.

Democrats - how easily now can they Good evening. Or is it "auf

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wiedersehn, England". So read the banner headline in one German

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magazine today. 26 members of the European Union are going to

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negotiate a new treaty to help make the single currency work. Britain

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is not. David Cameron said he had to veto a treaty of the 27 because

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the others wouldn't give special protections to our financial

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services industry. Eurosceptics are thrilled, and Liberal Democrat

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Ministers are trying not to look too glum. But you might say it's a

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strange kind of veto that doesn't prevent the thing that the

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Government wanted to stop and doesn't win the city any more

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protection from Brussels than it already has. Our diplomatic editor

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Mark Urban was there. Mark, what did happen? Well, it was

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always going to be complicated. If David Cameron had gone along with

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what the others wanted, then there would have been this process of

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treaty change, triggering all sorts of legislative and political steps

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in the member countries, but because he didn't want to go along

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with it, and that process, by the way, would have taken months -

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people say until March - to produce the sort of effects that we're

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looking at, so it was never going to be a quick-fix, but because

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David Cameron said no and did use his veto - a pretty major moment in

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European history - they can now blame him for things that go wrong

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subsequently. They call this "the family photo", but this clan now

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has a black sheep. After a night in which Britain had found itself

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alone on the new package of measures to protect the euro, there

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was an attempt to make up between Britain's has been itial

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antagonists, but there was no disguising that the decision to

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veto EU treaty changes left David Cameron a lonely figure this

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morning and allowed Nicolas Sarkozy to apportion blame.

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TRANSLATION: As to your question about our British friends, in order

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to accept reform of the 27-nation treaty, David Cameron proposed

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something we all thought was unacceptable. Namely, there would

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be a treaty written into the protocols that would allow the UK

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to opt out of rules regarding financial services. Having gone on

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until 5.00am this morning, some other countries were ready to be

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even blunter in describing Europe's new alignment. Brit, not Europe -

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Brits divided, and they are outside of decision making. Europe is

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united. In the press room, those with various political axes ground

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them energetically this morning, giving their interpretation of what

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happened and where it left Britain. David Cameron has been wandering

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around this building virtually alone. We have had Sarkozy spiting

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with venom. I fear the City of London will have a very heavy price

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to pay for this in terms of legislation coming down the road.

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If Cameron goes back to the United Kingdom if he thinks by vetoing

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this treaty and appeasing them he has another thing coming. Britain

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sees this as a definitive placing on the margins of the EU. Is that

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right? Let's remember that monetary union is only one aspect of what

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the European Union does. The bulk of decision-making in the EU

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remains a matter for all 27 member states. Of course, the narrative of

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Britain's isolation in Europe is such a well-worn one that the press

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can always be relied upon to lap it up. Thuest tried to combat it in

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recent weeks by suggesting the UK might be at the head of a group of

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countries outside the EU that shared similar views, but last

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night really gave light to that, and the question now for the coming

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months is how Britain is going to exert any influence in the

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discussions that lie ahead? For months, 17 of the eurozone have

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been central to this crisis, and the ten other members of the EU,

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peripheral. Last night, six of those others agreed to back the

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Franco-German plan. Additionally, Hungary, the Czech Republic and

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Sweden referred it for parliamentary approval. That left

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only the UK unambiguously opposed. Mr Cameron now cast doubt over

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whether Europe's institutions, particularly the Commission,

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effectively its Civil Service, should be allowed to support the

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other nations moving ahead when one nation objects. The institutions of

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the European Union belong to the European Union. They belong to the

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27. They're there to do the things that are set out in the treaties

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that we've all signed up to over the years, and that is an important

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protection for Britain. However, those running the EU beg to differ,

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arguing they can throw their organisational weight behind those

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countries that have signed up to the fiscal compact. This formula

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has some handicaps, but we will try to overcome them, and I think we

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have - we will need a large interpretation of the role of

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institutions and others, as we did it in the past. Pushing on without

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changes to Europe's key treaties does, though, threaten a power

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struggle. The new fiscal compact strengthens the role of the

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commission, the unelected officials, but what about the other two

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pillars of the EU, the council, its 27 member governments collectively

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and the European Parliament? There were already rumblings in Brussels

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today. This is possible if it is a copy paste of the existing treaty

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with the same role for the European Commission as today and with the

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same democratic control by the European Parliament because I

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cannot accept that we shall have a whole economic governance inside

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the eurozone and inside the European Union without the

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democratic control by the European Parliament. So for those processing

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what everyone apart from Britain agreed, there are many open

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questions still. This could take months of negotiation and create

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its own diplomatic gridlock. That's not fast enough for countries that

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want the underlying sovereign debt problem solved quickly. We have new

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governments in Italy and Spain. We have signals from both of them that

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they're doing more to address their - their economies in deep distress.

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That's the most important step to take. I think that this governance

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issues are of importance, but it's much more related to the crisis

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management. Britain's exit from this negotiating process is a

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gamble. Quite apart from the UK domestic aspect, it's complicated

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life for the others. They're unlikely to forget that in the

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eurozone's hour of need, Mr Cameron put national interests first, and

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they may not forgive him either. That was Mark Urban in Brussels.

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Before we came on air, I spoke to David Lidington, the Minister for

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Europe. Minister, what was David Cameron so frightened of last night

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that he had to take this step? The position he was faced with was that

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if he accepted a treaty at the level of 27, that would be an

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amendment to the treaty governing the whole of the European Union,

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its institutions, the way it does business, and there was a real risk

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that without the safeguards that he wanted included in that treaty at

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27, that you would over time have a read-across from the closer fiscal

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integration that the eurozone countries want to do towards

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measures that would influence financial services, in particular,

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but also the single market as they affect Europe at 27. It's such an

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odd kind of veto because the thing you wanted to stop is going to

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happen without those safeguards. Aren't you worried about that?

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Clearly we have to be vigilant, not just on financial services, but on

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British interests more widely within the European Union. If you

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look at exactly what happened over the last 12 months, what you've

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seen is a number of initiatives coming forward where George Osborne

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and his Treasury team have negotiated very hard, where they've

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worked with other European countries who have agreed with our

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views, and they've got a lot of that legislation in a form we have

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been able to live with. With this decision David Cameron has taken,

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do you think it's really more likely that that's going to happen

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in the future or less likely? think that people are going to

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continue to work on the basis of common interests. They're going

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ahead with this. They're irritated with what we've done. Realistically,

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surely there is more chance they're going to go ahead with things the

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City doesn't like than a few weeks ago when we still might have had a

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small amount of good will. I think there is an inherent risk in the

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euro that you could get the growth of rival blocks, and we have to

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work to avoid that. I have never pretended that risk was absent, but

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what I think is a mistake is to see that the eurozone or the eurozone

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plus or the - are all monolithic, cohesive blocks. What you've got

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are countries, particularly in the eurozone, that have come together

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for a particular purpose - yes? And we actually want them to succeed

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in... Yes, that's... If I can finish the point that who on many

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issues have a huge overlap of interests with the UK, and you talk

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to a lot of eurozone countries, and they'll say, "We want to continue

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working with you precisely to see elsewhere". Do you want this to

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succeed, this treaty with 26 members? To be honest, I never

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believed that a treaty was going to be the key to solving the problems

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of the eurozone. I think that the problems of the eurozone - it's

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certainly in British interests that the eurozone sorts its problems out,

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but the key to that is first of all dealing with the immediate crisis

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through working out the details of the Greek debt, the bank

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recapitalisation and the strengthening of the, f,... If this

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is an irrelevance, we don't want to help them by allowing them to use

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European Union resources... It's not an irrelevance when you have a

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change to the Treaty of Lisbon, which because that treaty governs

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all the European institutions and the way in which the European Union

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our vital economic interests. are Europe Minister. You must have

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some sympathy with your counterparts in Europe who would

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say, "They're saying they have made a principled decision. This just

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seems petty." It's not winning any friends at all this move, is it?

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think what we have to make clear is yes, we'll stand up for British

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national interests when it comes to a decision, but that we also

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continue to want the eurozone to work successfully to restore

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economic stability, and if you listen to - I am sure you did - to

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what Chancellor Angela Merkel said in her press conference after the

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summit was concluded, she said that she would be continuing to work

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with David Cameron and the United Kingdom. And what do you think of

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Paddy Ashdown saying that this is 40 years of UK diplomacy down the

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drain? No. I think that is an exaggeration and if I look at what

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Nick Clegg said and Menzies Campbell said today, you'll see I

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think that the Liberal Democratic leadership accepts the Prime

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Minister, given the choice faced him last night had no option but to

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take the decision he did. Isn't this the start of a road that leads

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quickly to us leaving the EU? because there are important British

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interests which I think mean that we are right to remain as members

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of the European Union. But it's 26 and one - 26 countries who have

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carried on and got their treaty and everything else and one country

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outside. You really think that's sustainable? No, because you're

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looking at a structure under which decisions about did regulation of

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economic affairs will be taken at the level of 27, in which

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discussions about foreign and security policy will be continue to

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be taken at the level of 27, where the United Kingdom is one of the

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leading European countries. David Lidington, thank you very much.

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Thank you. We'll have more on the politics of

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all this in a minute. But now, big bazookas - that's what Paul Mason

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and I thought we'd be talking about today. David Cameron said the

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Eurozone needed to come up with one, an overwhelming show of force to

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set fear into the heart of any hedge fund manager planning to make

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money from the Euro's demise. But it doesn't seem to have turned out

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that way. Germany seems to have persuaded the others to make the

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Eurozone a lot more - well, German. But there's little sign that

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Chancellor Merkel or the European Central Bank offering to use their

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:14:40.:14:42.

big bazookas in return. Paul is Most people in the markets think

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not, and it will be the market to decide this. Yesterday, with the

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European Central Bank pumped money into the banking system, making

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borrowing very easy to do for banks, will work and will stop the banks

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collapsing in this ever-increasing credit crunch we are seeing in

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Europe. When it comes to the actual sovereigns, the countries that

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could go bust, the problem remains. This is a graphic produced by

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Capital Economics, a London consultancy. Spain and Italy need

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to borrow about one or trillion over the next few years. They

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cannot borrow at the moment because people don't want to lend it to

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them because they fear they might lose it. So it has to come from

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what we thought would be a bazooka Mark 2. This is what it could look

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like. The EFSF, the taxpayers' money against which they will

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borrow some more. That take Shittu around half a trillion. Another

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half an from B E S M, but they could run in parallel. -- From D.

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And this is the IMF. That will get some money from Europe and blended

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back. There is there bazooka. His is big enough. -- that is big

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enough. A bit at the bottom his country's

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borrowing. If that should collapse, and Standard & Poor's comes

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overnight and says she cannot borrow any more at the rates you

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did, that things collapse. -- then things collapse. People will be

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downgraded and it will be by to the bazooka.

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-- goodbye. All of that could be one big

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question mark, we don't know if any of that could happen.

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At least we know what that could look like.

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It is odd, because you say the market has said this is not enough,

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but they are not happy with it, nor have they tend to today.

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No. -- nor have they tanked. The small print, it is not that

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small, they keep it up detailed up- to-date is that in future, eurozone

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government are not allowed to have a structural deficit over 0.5% of

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their GDP. A Briton's is currently 4.5 and after bore years of George

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Osborne's austerity, we will get it down to 2.5 -- after four years. If

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you are going to impose austerity, where does growth come from? One

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bond participant was very straight with me on this. I think we need a

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fiscal union to accommodate a monetary union. But what we have

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got it looks much more like an austerity Union. We have got limits

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on deficits, we have got a big push to reduce spending and this reduced

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government spending looks set to come at the same time as banks

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tighten up and they reduce private sector spending and that

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constitutes a double whammy to growth. Thank you very much, Paul.

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We are going to cast an eye a bit more over the summit and work out

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whether the euro and the world economy has been saved denied. --

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saved the tonight. We have that Gertrude Tumpel-Gugerell, a member

:18:13.:18:18.

of the ECB Central Board over the last eight years and they are

:18:18.:18:25.

joined by Mohamed El-Erian. We should start with you, you are the

:18:25.:18:31.

ones with your one trillion dollars and your fund, you could make a or

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break this, are you piling in or getting out even faster? I don't

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think we can make it or break it, but our assessment is they took

:18:42.:18:46.

some important steps, but they are not sufficient, so this is neither

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a quick fix nor is it a comprehensive fix. So we remain on

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the sideline in terms of engaging in the bond markets of the most

:18:56.:19:00.

vulnerable European economies. is quite a bad result, because we

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were being told all of these things about 10 days to save the euro,

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five days to save the euro. This was supposed to bring a step change

:19:08.:19:14.

in the thinking of people like you. Think of it in the following way:

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everybody recognises that the eurozone building is very fragile.

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So the eurozone is now building another building and all they have

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done is laid the foundations. They haven't yet put the different

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floors on, so people are not going to move from the old building to

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the new building, they are going to move from the old building out.

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That is why Europe has to accelerate what it is putting in

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place. It is not enough to put in a foundation and say we are there to

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come back in March and build another few flaws. Gertrude Tumpel-

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Gugerell, you are sitting in the institution, or you used to, that

:19:51.:19:56.

was supposed to be one of the flaws of that institution. We talk about

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the ECB being the crucial part of the end solution to the euro. Do

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you think that is going to change? Is the EC began to come in now? --

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ECB. The European Central Bank has been in different kind of measures

:20:15.:20:20.

to bring Europe out of the crisis, we shouldn't underestimate this. If

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you look at the results of the summit, there are three major

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achievements. The first one is a long term it could lead --

:20:27.:20:34.

commitment to sound fiscal Prom -- a long-term commitment to sound the

:20:35.:20:44.

fiscal policies. Blows to help countries Bridge difficult periods.

:20:44.:20:49.

-- loans. And also to support the credibility of these different

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measures taking... The people, partly because of something that

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the European Central Bank president said last week, have thought that

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if there was this kind of commitment to these tough fiscal

:21:04.:21:08.

rules, there would be some sort of reward from the European Central

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Bank. Are you suggesting that is wrong? The solution can come only

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from building new confidence in the country's policies, so the solution

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can come only from the Government themselves. What the European

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Central Bank has done and has done in the past and can do in the

:21:31.:21:36.

future is first of all provide liquidity. This is the major task

:21:36.:21:41.

of a central bank in such an end -- a situation. The ECB took a step

:21:41.:21:46.

yesterday by deciding to provide three years liquidity and the

:21:46.:21:50.

European Central Bank still has its of government bond purchase

:21:50.:21:57.

programme available. The solution cannot come from the central bank

:21:57.:22:07.
:22:07.:22:13.

alone. That is something we have had a few times. Cherie Givet Dana,

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-- Shriti Vadera, does the ECB need to do more? I don't think there is

:22:19.:22:23.

enough there at the moment. What we wanted, and we should stop

:22:23.:22:27.

expecting something in one day, but what we wanted was clarity on an

:22:27.:22:31.

end to destination and a breach of liquidity for sovereign bonds to

:22:31.:22:35.

that the destination. -- Bridge. We half got boat and we haven't got

:22:35.:22:40.

all of it and it is over the next few months that will tell -- we

:22:40.:22:45.

half got both. We will probably have a downgrade as Paul Mason has

:22:45.:22:50.

said over the next few weeks, and that liquidity will be tested. Is

:22:50.:22:54.

the ECB going to step in? And there does need to be a reward, there

:22:54.:23:00.

needs to be a compact on both sides. They could bind the secondary

:23:00.:23:04.

market, but at the moment, they are the only institution in the

:23:04.:23:09.

structure that is able to act. The rest of the money isn't ready.

:23:09.:23:18.

you say to ball boys -- Paul Mason's. That -- point, when all

:23:18.:23:21.

other countries announced a stimulus package in 2009, that

:23:21.:23:28.

wouldn't be possible now? You think that is right? I think it is true

:23:28.:23:32.

that they have produced a toolkit with only one tool, austerity. It

:23:32.:23:38.

is about cuts and deficit caps. Actually, the real problems with

:23:38.:23:42.

the countries in real trouble right now it is the current account, they

:23:42.:23:46.

are not competitive enough. There is nothing that shows these

:23:46.:23:49.

countries will be able to trade their way. They cannot inflate,

:23:49.:23:53.

they cannot depreciate, they cannot borrow cheaply, they don't get

:23:53.:23:59.

money from the ECB. Something has got to give and it could end up

:23:59.:24:02.

with solvency problems and really consigning Europe to 10 years of

:24:02.:24:06.

absolutely no growth. If there is a solvency problem and nobody gives

:24:06.:24:11.

them any funding it, we will be looking at restructure. Mohamed El-

:24:11.:24:15.

Erian, as an Economist, you must worry about where growth is there

:24:15.:24:21.

to come from. It is all fiscal, it is all about tightening budgets.

:24:21.:24:25.

The ECB is saying it doesn't necessarily want to do any more. Do

:24:25.:24:31.

you worry about that? Absolutely. It is one of the five things that I

:24:31.:24:36.

worry about. There is a list to assess summit at the summit. One is

:24:36.:24:44.

Debt, solvency has a numerator and denominator. The denominator is how

:24:44.:24:48.

quickly you grow and generate income. There isn't enough to focus

:24:48.:24:51.

on that. Second, there is no vision for what the eurozone is going to

:24:51.:24:55.

look like in three years' time. Third, the banking system is still

:24:55.:25:01.

Abass. We still have capital inadequacy, asset problems. 4th, we

:25:01.:25:05.

haven't had a clear signal between liquidity problems and solvency

:25:05.:25:11.

problems, and as long as we don't delineate clearly, there will be

:25:11.:25:15.

question marks. And at the big bazooka, which is the ECB, it has

:25:15.:25:20.

and cumin. I sympathise with the ECB, because they have done a lot

:25:20.:25:24.

and have been a bridge to know where. They need to be a bridge

:25:24.:25:29.

there somewhere, but that place is not known. It is a long list and

:25:29.:25:39.
:25:39.:25:39.

growth is the first item...., briefly, surely De -- surely the

:25:39.:25:42.

ECB doesn't want to be a lender of last resort, but as the crisis

:25:42.:25:46.

continues, it is having to do a lot of emergency support for banks. Are

:25:46.:25:51.

you suffering from the fact that this crisis is not being resolved

:25:51.:25:55.

and there would be enough growth? Growth comes from assessing

:25:55.:26:00.

structural problems and of course, it is a concern. We see the growth

:26:00.:26:06.

prospects for next year are weaker and the aim of the fiscal measures

:26:06.:26:10.

is to limit the structural deficit, which of course takes into

:26:10.:26:18.

account... That hurts growth. Structural reforms had growth. It

:26:18.:26:21.

is reforming labour markets and things in the short term that

:26:21.:26:25.

actually might slow down economies. As we have seen from various

:26:26.:26:30.

countries, I think a number of measures have been taken in the

:26:30.:26:35.

last few years, and if you look at Spain for instance, Spain has tried

:26:35.:26:40.

to address its problems in the labour market. It is in a difficult

:26:40.:26:45.

situation but it is trying to reform the labour market in the

:26:45.:26:47.

direction where it will have more possibilities for employment. The

:26:47.:26:52.

truck -- the same is true for other countries as well. You should take

:26:52.:26:58.

into account the fiscal rule is addressing the structural deficit.

:26:58.:27:02.

The structural deficit takes into account the business... We have to

:27:02.:27:06.

leave it there. Thank you very much to all of you, of I'm Sorry, we

:27:07.:27:11.

have to cut it off. Fog in the Channel, Continent cut

:27:11.:27:15.

off. The old joke isn't as funny today, because it is clear where

:27:15.:27:19.

the rest of Europe wants to go. It is Britain's future that since

:27:19.:27:25.

clouded in doubt and that must include the future of the coalition

:27:25.:27:29.

between Euro-sceptic Conservatives and Europhile Liberal Democrats.

:27:29.:27:33.

Right now, Europe's top duo are apparently so fused in their common

:27:33.:27:39.

purpose they are known as the single name Merkozy. The joke doing

:27:39.:27:43.

the rounds at Westminster is that had David Cameron joined, it

:27:43.:27:47.

wouldn't quite have spelt kamikaze, but politically it could have

:27:47.:27:51.

amounted to quite the same thing. It would have been like the

:27:51.:27:54.

Maastricht Treaty row of seven years ago, except far worse,

:27:54.:27:59.

because he would have had to have brought a bill before parliament to

:27:59.:28:03.

bring the treaty into effect. There would have been MN bends, with Bill

:28:03.:28:08.

Cash and the critics who were around 20 years ago coming back for

:28:08.:28:12.

a second bite -- amendments. There would have been a call for a

:28:12.:28:16.

referendum, even a leadership challenge. The morning after in

:28:16.:28:21.

Brussels was very different. Soft music, warm handshakes, and David

:28:21.:28:25.

Cameron sticking his signature on the dotted line. It is just that

:28:25.:28:30.

this was the paperwork for Croatia to join the EU, not the treaty that

:28:30.:28:34.

most of Europe wanted. This does represent a change in our

:28:34.:28:38.

relationship with Europe, but the court relationship, the single

:28:38.:28:44.

market, trade, investment, that remains as it was and that is very

:28:44.:28:48.

important -- core relationship. In terms of the future and referendums,

:28:48.:28:52.

we will not be presenting a treaty to Parliament. Other countries are

:28:52.:28:56.

going to be signing up to a treaty that has some quite invasive

:28:57.:29:00.

aspects in terms of their sovereignty, their ability to set

:29:00.:29:03.

their own budgets. It will be a matter for them how they deal with

:29:03.:29:07.

their parliament. We will not take a treaty like that two hours.

:29:07.:29:12.

ins and outs of the politics are tricky for David Cameron and are

:29:12.:29:15.

pulling him in two different directions. Liberal Democrats think

:29:15.:29:19.

that Britain should do whatever it takes the stage in the European

:29:19.:29:23.

club, even if that means getting out of the coalition -- to stay.

:29:23.:29:27.

Meanwhile, plenty of Conservative backbenchers think we should use

:29:27.:29:30.

this as a once-in-a-lifetime opportunity to renegotiate better

:29:30.:29:37.

terms, if not entirely out of the EU, definitely closer out than

:29:37.:29:47.
:29:47.:29:48.

It is nearly 20 years since John Major's Government was brought to

:29:48.:29:52.

the very brink by splits over Europe. One of the leaders of that

:29:52.:29:56.

rebellion was clear - yesterday's veto should only be the start.

:29:56.:29:59.

There are many people who think perhaps we have been proved pretty

:29:59.:30:05.

well on the nail. What I'm saying is this - that there is a necessity

:30:05.:30:08.

to tackle the nature of the European Union as it now is, and I

:30:08.:30:13.

have said repeatedly in a debate yesterday for weeks, if not months

:30:13.:30:16.

and years, that we have to have a fundamental renegotiation of the

:30:17.:30:20.

treaties in our relationship to the European Union. Paul Goodman used

:30:20.:30:25.

to be Conservative MP and now writes for the Tory grassroots

:30:25.:30:28.

website Conservative Home, so he's pretty well tuned in to how

:30:28.:30:34.

Conservative MPs are thinking. There has been a tide of Euro-

:30:34.:30:36.

scepticism flowing through the Conservative Party for the past 25

:30:36.:30:40.

years since Thatcher's Brew speech. What this extraordinary veto has

:30:40.:30:45.

done this amazing event, is it's given that tide another big push,

:30:45.:30:48.

and after this, the question that a lot of Conservative backbenchers

:30:48.:30:53.

will be asking is, well, we've always been told we've got to be in

:30:53.:30:56.

the EU because of our national interests and because we have to be

:30:56.:31:00.

at the heart of Europe. If we're not, we're going to be at the edge,

:31:00.:31:03.

we have to renegotiate a completely new relationship because what's the

:31:03.:31:09.

point of being at the edge but governed by all the rules? While

:31:09.:31:12.

many Conservatives are clearly delighted, this is a very difficult

:31:12.:31:16.

time for Nick Clegg, leader of the Liberal Democrats, a former MEP and

:31:16.:31:20.

pro-European to his core, like much of his party. At the same time, of

:31:20.:31:25.

course, though, he's in coalition with David Cameron. Any Eurosceptic

:31:25.:31:28.

who might be rubbing their hands in glee about the outcome of the

:31:28.:31:32.

summit last night should be careful for what they wish for because,

:31:32.:31:36.

clearly, there is potentially an increased risk of a two-speed

:31:36.:31:40.

Europe in which Britain's position becomes more marginalised, and in

:31:40.:31:45.

the long run, that would be bad for growth and jobs in this country.

:31:45.:31:47.

But other Liberal Democrats are keener to pin the blame on the

:31:47.:31:51.

Prime Minister. I think David Cameron has let us down very, very

:31:51.:31:57.

badly. It's not simply a matter of the written Declarations which end

:31:57.:32:01.

up as treaties of one form or another. It's all about

:32:01.:32:05.

relationships, and what happened at the dinner last night in Brussels

:32:05.:32:10.

was that the 17 countries in the eurozone gathered amongst the 27 of

:32:10.:32:15.

the European Union and said we need help. We need to give the financial

:32:15.:32:18.

markets confidence about the euro that we're united in going forward.

:32:18.:32:21.

We need to make arrangements as quickly as possible, and we needed

:32:21.:32:25.

the help of everyone to do that, and David Cameron effectively said,

:32:25.:32:29.

I'm not prepared to help or to lift a finger. In fact, he went worse

:32:29.:32:33.

than that - he kicked them in the teeth that will not be forgotten.

:32:33.:32:37.

Could Europe then split the coalition? After so many supposedly

:32:37.:32:39.

impossible things have already happened, well, nothing appears

:32:39.:32:44.

completely out of the question. David Grossman. Where does this

:32:44.:32:51.

leave the coalition? With me is the Liberal Democrat Lord Oakshot and

:32:51.:32:56.

the Conservative MP Bernard Jenkin. For you and other Eurosceptics,

:32:56.:33:00.

this is brilliant news, what happened? Can I just make a

:33:00.:33:04.

criticism, which is there is an awful tendency in the BBC to turn

:33:04.:33:07.

this into a narrative about the coalition and about the

:33:07.:33:09.

Conservative Party. This is actually about the substance of an

:33:09.:33:14.

issue, and it's about the substance of an issue of which the

:33:14.:33:17.

Eurosceptic... And how much of this programme have we spent talking

:33:17.:33:20.

about the substance of the issue, and how much have we spent...

:33:20.:33:24.

we had your opening report saying alas for Britain we're isolated.

:33:24.:33:27.

This is interesting. You don't think this is significant for the

:33:27.:33:30.

relationship within the coalition? I do think this is very significant,

:33:30.:33:33.

and I think Matthew is going to think this is very significant. I

:33:33.:33:38.

think everybody should regard this as significant that we are now in a

:33:38.:33:41.

new situation, in a new relationship with our European

:33:41.:33:45.

partners because they are going off and doing something on their own,

:33:45.:33:49.

and we are not involved, but the foundations for that were laid at

:33:49.:33:53.

the Maastricht Treaty, and this moment was always going to become

:33:53.:33:57.

inevitable, and some of us have been saying that for a very long

:33:57.:34:00.

time, and we now must face the consequences of it, and I think

:34:00.:34:06.

David Cameron has now faced the consequences. He's confronted it at

:34:06.:34:10.

Brussels. He said that Eurosceptics shouldn't be celebrating. Can you

:34:10.:34:14.

think of one reason why they shouldn't? They shouldn't be

:34:14.:34:19.

celebrating. Just doing "I told you so?" Bernard Jenkin has been a

:34:19.:34:23.

serial rebel. He, with Iain Duncan Smith, has been leading the

:34:23.:34:27.

opposition effectively of our membership of the European Union.

:34:27.:34:31.

That's not true. He's now saying we told you so. The fact is this is a

:34:31.:34:35.

very damaging day for Europe and for Britain. He says the Europeans

:34:36.:34:40.

have gone off on their own. They haven't. Britain has cut itself off

:34:40.:34:48.

from our main trading partners, our main allies, our main friends. It's

:34:48.:34:52.

deeply dangerous. And millions of jobs, not just in the city, have

:34:52.:35:01.

been put in danger. You say we have given up... What are we giving up?

:35:01.:35:06.

A place at the table with 26 other countries. We have not given up. As

:35:06.:35:10.

David Cameron was explaining, we're still in the 27. The treaty

:35:10.:35:13.

structure is still answerable to the 27 structure as it was before.

:35:13.:35:16.

What has a changed? The only thing that's changed is that the other

:35:16.:35:20.

member states have decided to go off on their own and do something

:35:20.:35:24.

on their own because they cannot conceive of respecting a national

:35:24.:35:28.

interest - a relatively modest demand, I have to say. Many of us

:35:28.:35:33.

would have liked... Excuse me. Excuse me. Are you seriously

:35:33.:35:36.

suggesting that Angela Merkel for Germany and Nicolas Sarkozy for

:35:36.:35:40.

France are not defending their national interests? Of course they

:35:40.:35:43.

are. Don't be ridiculous. So they're saying - the fact is that

:35:43.:35:49.

we - this is the end game of a desperately silly decision by David

:35:49.:35:55.

Cameron when he was trying to buy right-wing votes in a leadership

:35:55.:35:59.

election to lead the mainstream European grouping - he would have

:35:59.:36:02.

been there in Marseilles with the Angela Merkel and Nicolas Sarkozy

:36:02.:36:11.

in Spain, and he's off with the head bangers and wackos in Eastern

:36:11.:36:19.

Europe... If - Prime Minister, would he have been at that dinner?

:36:19.:36:24.

He wouldn't. You're talking rubbish. No, I'm not. You may not have liked

:36:24.:36:27.

it, but Conservative Prime Ministers with a lot more

:36:27.:36:31.

experience, frankly, than David Cameron were there in awhriens the

:36:31.:36:36.

main players on the European right. Now they're completely isolated.

:36:36.:36:39.

Now what really matters is that the British Prime Minister has been

:36:39.:36:44.

doing special pleading for special interests in the City and

:36:44.:36:47.

conciliating people like you who have never accepted the coalition

:36:47.:36:54.

agreement. You're always asking for a referendum which isn't in the

:36:54.:36:56.

agreement instead of putting British interests first. You think

:36:56.:37:00.

this doesn't lead to a renegotiation between British...

:37:00.:37:04.

Put it this way... You seem to be torn about what's happened. Why not

:37:04.:37:10.

openly and honestly say so. I think there needs to be a renegotiation.

:37:11.:37:15.

If we don't get that, that'll be driving us towards the exit. That's

:37:15.:37:19.

why I want a renegotiation, because I want us to remain in the European

:37:19.:37:22.

Union. It's not in the coalition agreement. You're trying to wreck

:37:22.:37:29.

that agreement, which we all signed. The coalition agreement has been

:37:29.:37:36.

overtaken by recent events. It did not. The coalition agreement didn't

:37:36.:37:40.

envision the imminent collapse of the euro. It hasn't collapsed.

:37:40.:37:44.

Despite any lack of help from David Cameron, it hasn't collapsed.

:37:44.:37:48.

They're getting their act together, but without us. From now on are the

:37:48.:37:53.

parties going to get on as badly as you two are? No. We have a deal. We

:37:53.:37:58.

signed up to a deal on Europe which Mr Jenkin and his friends have

:37:58.:38:00.

never accepted. They basically don't trust David Cameron. They

:38:00.:38:04.

think he should have won. He didn't. The fact is a deal is a deal, and

:38:04.:38:07.

all the time you're trying to undermine it, and it's deeply

:38:07.:38:11.

damaging for Britain's position in Europe... I'm sorry. We have to

:38:12.:38:16.

Stephanie Flanders presents analysis of the European summit in Brussels. Mark Urban and Paul Mason report on the Prime Minister's decision to stay out of a new EU economic agreement.


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