:00:13. > :00:16.As caretakers jobs go, it is quite a big one, run the country for a
:00:16. > :00:20.month until we can find someone else. The political mess in Greece
:00:20. > :00:24.may be resolved in new elections next month. Fears of cash pouring
:00:24. > :00:30.out of the country in the meantime leave it in an even more uncertain
:00:30. > :00:33.position. So, this was just a warm-up for the
:00:33. > :00:37.swearing in of another Greek Prime Minister next month.
:00:37. > :00:43.Greek prime ministers are none of our business, but if the Greeks
:00:43. > :00:47.decide they have to leave the euro, it certainly will be. Germany's
:00:47. > :00:49.Deputy Finance Minister remains bluffly confident it won't come to
:00:49. > :00:53.that. When the governor of the Bank of
:00:53. > :00:59.England, says as he said today, that the eurozone is tearing itself
:00:59. > :01:02.apart, he's just wrong? We are a free country, a free Europe,
:01:02. > :01:06.everybody is free to misjudge the political will of the European
:01:06. > :01:10.Union. But if the citizens don't like it,
:01:10. > :01:16.how can Governments get them to take the medicine. Is the wisdom of
:01:16. > :01:19.crowds that you can't cut and grow at the same time actually right?
:01:19. > :01:23.The Chinese age quake, they supposedly restrict families to one
:01:23. > :01:30.child. So why are they running fertility campaigns, encouraging
:01:30. > :01:40.women to conceive. How do ideas people have in the
:01:40. > :01:42.
:01:42. > :01:46.bath get to become political policy. The President of the EU bureaucracy
:01:46. > :01:50.did what the union usually does on these occasions and said today they
:01:50. > :01:52.would respect the democratic will of the Greek, but wanted them to
:01:52. > :01:56.remember there were 16 other democracies in the euro. No
:01:56. > :02:00.suggestion of pressure, then. The fact that such a vast chunk of the
:02:00. > :02:07.Greek population wants to stay in the euro, but doesn't want to pay
:02:08. > :02:10.the price demanded for doing so, led today to the equivalent of Mr
:02:10. > :02:13.Justice Cocklecarrot being sworn in as the interim Prime Minister,
:02:13. > :02:18.until somebody else can be found who might form a Government after
:02:18. > :02:26.elections next month. Nobody is paying in this country,
:02:26. > :02:30.they steal money, they eat money, the politicians and them, they live
:02:30. > :02:35.and nobody goes to jail. Never tell a taxi driver you are going to meet
:02:35. > :02:39.a politician, it always sets them off. But in Greece, five years into
:02:39. > :02:44.an economic crisis almost universally blamed on a supposedly
:02:44. > :02:49.self-serving elite, the Athens cabbie seems to speak for the
:02:49. > :02:53.nation. The people are very angry, they want to punish them. You can't
:02:53. > :02:59.take the money from the pension of an old man and all these people
:02:59. > :03:05.with billions of dollars not to pay anything. This is unfair, of course.
:03:05. > :03:07.Today, ten days after inconclusive elections, the President of Greece
:03:07. > :03:14.appointed a caretaker Prime Minister, who can't be punished,
:03:14. > :03:18.because he's not a politician, but a senior judge. He and his new
:03:18. > :03:22.technocratic cabinet will govern for one month, until voters are
:03:22. > :03:31.asked their opinion again on June 17th. It has no clear mandate to
:03:31. > :03:36.make binding deals with Greece's cred ditors -- creditors, or stop
:03:36. > :03:41.the cuts they are demanding. It is at the banks people are spreading a
:03:41. > :03:46.fear, which the head of state says could turn into panic. Greeks
:03:46. > :03:51.withdrew 700 million euros in the weeks during the election, as they
:03:51. > :03:55.contemplated a return to their old currency, the drachma. With the
:03:55. > :03:58.current uncertainty, who wouldn't rather have their euros in their
:03:58. > :04:03.hand, available for use across the continent, rather than leave them
:04:03. > :04:08.in a Greek bank and risk them being stamped as a transitional currency,
:04:08. > :04:13.or even worse, as some fear, forcibly converted into drachmas,
:04:13. > :04:16.which will probably then lose most of their value. The liquidity
:04:16. > :04:20.crisis is growing, meanwhile further installments of bail out
:04:20. > :04:24.funds from the European Union and the IMF, are dependant on further
:04:24. > :04:32.austerity, that voters have rejected. Soon there may be no cash
:04:32. > :04:36.to pay Government wages. TRANSLATION: According to the
:04:36. > :04:38.Ministry of Finance, the money available will last up to the end
:04:38. > :04:44.of June. Families are afraid at the moment, they are taking their money
:04:44. > :04:48.out of the banking system. This is the big danger. That is why we need
:04:48. > :04:52.political stability so badly. the party leaders who failed to
:04:52. > :04:57.come up with any workable coalition can't provide that stability. Among
:04:57. > :05:01.them in talks with the President today, Alexis Tsipras, leader of
:05:01. > :05:07.the radical left grouping, Syriza, which came an unexpected second in
:05:07. > :05:10.the last election, and some think may win next time. Today, in a BBC
:05:10. > :05:15.interview, he was again defiant in rejecting the terms of Greece's
:05:15. > :05:19.bail out. TRANSLATION: Throughout Europe now the citizens understand
:05:20. > :05:25.that the disease of austerity, if it destroys Greece, will spread to
:05:25. > :05:30.the rest of Europe. Therefore, European leadership, and especially
:05:30. > :05:35.Mrs Merkel, need to stop playing poker with the lives of people.
:05:35. > :05:41.Some within his own party now want him to go further, and reject the
:05:41. > :05:49.euro. A currency Syriza is still officially committed to keeping.
:05:49. > :05:55.When we have our currency, we have Mrs Merkel's currency now, it is
:05:55. > :06:02.totally craze year, a country in such a recession, to have a very
:06:02. > :06:08.expensive currency. So, I think that a national currency will solve
:06:08. > :06:11.the great problem in Greece, the problem of liquidity. The centre
:06:12. > :06:16.right New Democracy, which narrowly won the last election, aims to
:06:16. > :06:22.convince voters that a return to the drachma would be a catastrophy.
:06:22. > :06:27.It means that there will be chaos, the banking system will collapse,
:06:27. > :06:33.what else, savings, everything, it will just go, we will be back to
:06:33. > :06:37.drachma, I'm not sure what the rate will be between a euro and the new
:06:37. > :06:41.drachma. For now, most Greeks continue to believe they can have
:06:41. > :06:51.it all, the euro without the strings. It may turn out to be a
:06:51. > :06:55.
:06:55. > :07:03.dangerous fantasy. Every country has a plan for the Greek exit,
:07:03. > :07:09.Greece has not a plan for a Greece exit. The Greek exit still looks
:07:09. > :07:11.like scare mongering, it would hurt the Germans more thant Greeks,
:07:11. > :07:16.wouldn't it? I don't think the Germans want us out of Europe,
:07:16. > :07:19.because it will cost a lot of money for them to take us out of Europe,
:07:19. > :07:23.more money than our loan is, I don't think they like that. They
:07:23. > :07:28.want to be a strong country with investments, to pay them back, and
:07:28. > :07:31.to have a good life, everybody, nobody wants to come to the drachma
:07:31. > :07:36.again and lose so much money, I don't think the European people
:07:36. > :07:40.want that. I believe they find a solution, I believe they will do
:07:40. > :07:43.that. Europe hasn't had to make that
:07:43. > :07:49.calculation yet. But it is ever more likely that it will have to
:07:49. > :07:54.sooner or later, if the Greeks fail to decide themselves.
:07:54. > :07:58.Tim is still in Athens. Now we know vast sums of cash are being
:07:58. > :08:01.withdrawn from Greek banks, so is the banking system now becoming a
:08:01. > :08:05.bigger problem than the political system?
:08:05. > :08:08.That's right. We thought that the Greek crisis was on hold, roughly,
:08:08. > :08:12.for a month, until the next elections, but, of course, that is
:08:12. > :08:17.not turning out to be the case at all. And the financial pressures
:08:17. > :08:20.are mounting all the time. First, as you say, is the question of the
:08:20. > :08:23.run on the banks. We can only assume the amount of money taken
:08:23. > :08:28.out of banks will get greater and greater, as the prospect, that is
:08:28. > :08:32.what the polls suggest, the likely prospect of a left-wing victory in
:08:32. > :08:36.the next election increases. Then there is the situation that the
:08:36. > :08:41.European Central Bank today has said that it will stop providing
:08:41. > :08:46.cheap loans to some Greek banks, for routine operations. Now, there
:08:46. > :08:50.is still a way the Greek banks will get money through another channel,
:08:50. > :08:53.that will be also stopped if the ECB considers those banks to be
:08:53. > :08:57.insolvent. You can see there possibly a developing liquidity
:08:57. > :09:00.crisis that could lead to a collapse of the Greek banking
:09:00. > :09:04.system. Then we would be back to the question of another bail out,
:09:04. > :09:08.or a forced exit from the euro, while the caretaker Government,
:09:08. > :09:16.which has no real mandate, is still in place. This is a nightmare high
:09:16. > :09:20.pop sis, there is a lot of ifs -- hypothesis, there is a lot of "ifs"
:09:20. > :09:25.there, but the groks are saying, no reason to pan -- Greeks are saying,
:09:25. > :09:32.no reason to panic yet. The governor of the Bank of England,
:09:32. > :09:36.said he thought the eurozone was tearing itself apart. Such is the
:09:36. > :09:43.view from Threadneedle Street, but it is not the talk they like in the
:09:43. > :09:47.biggest member of the eurozone. The deputy Germany Finance Minister was
:09:47. > :09:50.in London today, I took the opportunity to corner him on the
:09:50. > :09:55.issues? Do you think in a year there will be 17 members of the
:09:55. > :10:00.euro? Yes. You can't be 100% certain? No, but the result of what
:10:00. > :10:04.will be a reality in one year is not only by chance but political
:10:04. > :10:07.will. The activities and engagment of the European Union and the
:10:07. > :10:12.European Central Bank, over the last two years, was to keep Greece
:10:12. > :10:16.back on track, we will go on. But that means we require a stable
:10:17. > :10:19.Government in Greece, but the path is regaining competitiveness, and
:10:19. > :10:23.stability. When the governor of the Bank of
:10:23. > :10:28.England, says as he said today, that the eurozone is tearing itself
:10:28. > :10:32.apart, he's just wrong? We are a free country, we are a free Europe,
:10:32. > :10:38.everybody is free to misjudge the political will of the European
:10:38. > :10:41.Union. He has done that, he has misjudged that? I think he's
:10:41. > :10:46.misjudging the activities of the heads of state. We have achieved, I
:10:46. > :10:50.think, quite a case of stability. We achieved the private sector
:10:50. > :10:55.involvement, and now we have some challenges, because of unstable
:10:56. > :10:58.Governments, but I'm expecting, as a result of the election mid-June,
:10:58. > :11:01.a stable, pro-European Government, that is committed today the
:11:01. > :11:06.memorandum of understanding. when the British Prime Minister,
:11:06. > :11:09.David Cameron, says the eurozone has to decide whether to make up or
:11:09. > :11:13.break up, he also has misunderstood the situation, there is a decision?
:11:13. > :11:18.This is clear, but we have already taken the decision two years ago.
:11:18. > :11:23.Make up. So he's misread it? the decision was quite clear, when
:11:23. > :11:27.we started the engagment, for solidarity towards Greece, in
:11:27. > :11:31.exchange to that, we asked the Greek people to get back on track
:11:31. > :11:36.to reform the country, to stablise the budget, to make structural
:11:36. > :11:42.reform, to come back on a growth path. This is actually what we are
:11:42. > :11:47.doing for the last two years. boss says the Greek people have to
:11:47. > :11:51.decide whether they want to be inside the euro or outside the euro,
:11:52. > :11:57.haven't they decided they want to be both? Actually, yes. But if you
:11:57. > :12:03.have a participating with the several advantages you have by the
:12:03. > :12:06.currency, you have to fulfil the complication - obligations. But you
:12:06. > :12:10.must have thought about Greece being unable to maintain its
:12:10. > :12:13.position in the euro? The question that Greece would be competitive
:12:13. > :12:18.within weeks, which some of the political debaters seem to have, is
:12:18. > :12:28.wrong. It would take a decade. Our programme is not based on weeks,
:12:28. > :12:31.but on years, to support Greece, and to re gain political movement -
:12:31. > :12:35.- regain political movement towards competitiveness. They can't stay
:12:35. > :12:39.within the euro and reject the austerity package? You are right in
:12:39. > :12:44.that judgment. They seem to think they can? I don't think that they
:12:44. > :12:49.think that. They are disappointed with their Government, that is
:12:49. > :12:52.quite clear. What they are not now facing is not the result of the
:12:52. > :12:56.European integration, it is the result of the lack of reforms over
:12:56. > :12:59.the last decade. For Germany the euro is working, but it is not
:12:59. > :13:04.working for much of the rest of Europe, and you know it is not
:13:04. > :13:08.working? Actually I disagree with your judgment on that one, it is a
:13:08. > :13:13.win-win situation for both of the participants. Those who gain more
:13:13. > :13:17.solidarity, and those who invest in sol darty. Stability is what we
:13:17. > :13:21.gain for -- solidarity. Stability is what we gain for both sides.
:13:21. > :13:26.they say the price of staying in the euro is too great, they are
:13:26. > :13:30.free to leave, aren't they? Technically they are not, but we
:13:30. > :13:35.can't keep them if they don't want. If you look on the polls, there is
:13:35. > :13:39.a majority of the Greek people who want to stay within the euro. And
:13:39. > :13:43.my clear answer, if you want to participate in the advantages, and
:13:43. > :13:47.I think they are big, you should change the course of politics.
:13:47. > :13:51.Plenty of voters, and not just in Greece, but in France as well, now
:13:51. > :13:57.think there may be an alternative towards austerity, is there?
:13:57. > :14:02.course there is an alternative. What is it? The alternative is not
:14:02. > :14:06.only calling for catastrophy in Greece, but enhancing their chances,
:14:06. > :14:11.taking the time they need. But on the other hand, in exchange to them,
:14:11. > :14:17.that we have to keep them on track. Greece is in a very complicated
:14:17. > :14:21.situation, politically, socially and economically. Do you actually
:14:21. > :14:26.think that arguing that this will lead into a catastrophy is any help
:14:26. > :14:30.to improve the situation. I'm not trying to help anybody, I'm asking
:14:30. > :14:33.why you haven't thought about it? haven't said I haven't thought
:14:33. > :14:38.about it. You have, what do you think it would be like? I think it
:14:38. > :14:41.would be worse than the situation we have now. And what about the
:14:41. > :14:44.philosophical alternative, that Francois Hollande poses in France.
:14:44. > :14:52.Do you think there is an alternative to austerity, as he
:14:52. > :14:56.says? I wouldn't use the word "austerity". It is his word? This
:14:56. > :15:00.is the first measure mainly misunderstood. The growth
:15:00. > :15:06.strategies have to be based on fiscal conditions that gain trust
:15:06. > :15:13.from the market. Growth and consolidation, I would call it.
:15:13. > :15:16.Both sides of one medal, called "economic stability". Whatever Mr
:15:16. > :15:20.Hollande says or other European statesmen say, Germany will not
:15:20. > :15:24.change its position? Germany will develop its position, we have a
:15:24. > :15:29.very good meeting between Chancellor Merkel and Francois
:15:29. > :15:33.Hollande. It came clear to me as a result, we are not renegotiating
:15:33. > :15:37.the Fiscal Compact. Because fiscal conditions have to be stable. But
:15:37. > :15:42.we take up the ideas the European heads of state, including David
:15:42. > :15:45.Cameron, are organising since autumn last year, to re-focus the
:15:45. > :15:50.debate back from crisis, on to growth strategies. Thank you very
:15:50. > :15:55.much. David Cameron warned that it was
:15:55. > :15:58.make-or-break time on the euro today. As you heard just there. Our
:15:58. > :16:01.political editor, Allegra Stratton is here. What is it about? We were
:16:01. > :16:05.supposed to be getting a speech tomorrow on parenting and family
:16:05. > :16:07.issues. Instead, it is a sign of the choppyness in Government right
:16:07. > :16:12.now, and the issues we have just been hearing about, that they are
:16:12. > :16:15.actually doing a speech on the euro and the economy. Today in Prime
:16:15. > :16:18.Minister's Questions, David Cameron gave us a flash of what he will be
:16:18. > :16:23.mentioning. The eurozone has to make a choice, if the eurozone
:16:23. > :16:31.wants to continue as it is, then it has got to build a proper firewall,
:16:31. > :16:35.it has to take steps to secure the weakest members of the eurozone, or
:16:35. > :16:39.it has to work it out and go in a different direction. It has to make
:16:39. > :16:45.up or look at a potential break up, that is the choice they have to
:16:45. > :16:51.make, and it can't be long put off. That is an ultimatum, it sounds
:16:51. > :16:56.like a civil servant rewriting John Wayne. It is an ultimatum by a man
:16:56. > :17:00.who hasn't a dog in the fight? is aimed at the tkhesic audience,
:17:00. > :17:02.not at the central banks around -- domestic audience, not the central
:17:02. > :17:06.banks around Europe. That frustration is about a certificate
:17:06. > :17:09.yues of things, relating to the -- series of things, relating to the
:17:09. > :17:13.interview just done. For a while the Government has talked about has
:17:13. > :17:18.Germany done enough to think about the idea of eurobonds, reaching out
:17:18. > :17:22.to Greece. Has there been enough done to put a firewall around Spain
:17:22. > :17:26.and Italy. It is frustration. It is the moment they are saying to the
:17:26. > :17:28.British public, if it gets choppy and bad, we saw it coming, it is
:17:29. > :17:34.not an extension of the incompetence issue, we were on top
:17:34. > :17:38.of it and issuing advice. Briefly what will the speech be about
:17:38. > :17:42.tomorrow? It is the old friend, austerity versus growth, they will
:17:42. > :17:46.say they are sticking to Plan A. They are looking at a way to get
:17:46. > :17:52.growth in the future through austerity. There is serious concern
:17:52. > :17:56.what might happen should there be a euro break up. The paradox in
:17:56. > :17:58.politics at the moment, which I keep saying in the packages, is the
:17:58. > :18:01.deficit is the most controversial decision this Government has made,
:18:01. > :18:04.but also the one the British public, for the time being, believe they
:18:04. > :18:09.are right about. The events in Europe allow them a vivid display
:18:09. > :18:15.of why they are at it. Thank you.
:18:15. > :18:20.Tomorrow the Prime Minister is going to tell us austerity, or --
:18:20. > :18:27.why austerity, isn't the enemy of growth. As you will have seen if
:18:27. > :18:32.you were watching the German Finance Minister earlier, the "A"
:18:32. > :18:36.word makes many politicians agitated. What does austerity do to
:18:36. > :18:41.growth? That we have a rampent deficit that
:18:41. > :18:45.needs urgent attention, is not disputed, how and how fast it
:18:45. > :18:48.should go cut is. Most people will describe the current mix of
:18:49. > :18:53.spending cuts and some tax rises as austerity, but is it really. Can
:18:53. > :18:58.you grow your economy, while cutting back at the same time.
:18:58. > :19:02.Certainly the coalition thinks so, it aims to take �81 billion out of
:19:02. > :19:07.the UK economy between now and 2015. It feels that by cutting borrowing,
:19:07. > :19:10.what you save on bank interest can be used to invest in long-term
:19:10. > :19:14.projects. And things started well, unemployment has stayed relatively
:19:14. > :19:18.low, and the cost of borrowing for Britain, for example, its bond
:19:18. > :19:21.yields, are also at record lows. But the planned rebalancing of
:19:21. > :19:24.Britain's economy away from borrowing and consumption, and
:19:24. > :19:27.towards manufacturing and exports, is faltering.
:19:27. > :19:30.The Government's austerity plan was to take money out of the public
:19:31. > :19:35.sector, and hope that private sector companies would rush in to
:19:35. > :19:39.fill the void, as well as a cheap pound leading to an export-led
:19:39. > :19:44.recovery. But the Government hasn't exactly had the wind at its back,
:19:44. > :19:47.there is a spike in commodities, et cetera specially oil prices, banks
:19:47. > :19:50.-- especially oil price, banks are so weak they won't lend to
:19:50. > :19:53.companies or consumers. And the markets into which exporters hope
:19:53. > :19:59.to sell their goods, particularly western Europe, are still very
:19:59. > :20:03.feeble. On top of that, the planned cuts have barely started. If you
:20:03. > :20:09.think things are austere now, you might want to ask your grandparents
:20:09. > :20:13.what they were like in post-war Britain. Rampent joblessness was
:20:13. > :20:18.widespread, and benefits didn't exist and healthcare was primitive.
:20:18. > :20:22.Across the Irish Sea they know a thing about austerity. Since 2008,
:20:22. > :20:29.most salaries, including the well unionised public sector have been
:20:29. > :20:32.cut by a fifth. Unploilt is twice that of Britain's, and house prices
:20:32. > :20:36.have collapsed. Britain won't need that kind of correction, because
:20:36. > :20:41.the boom wasn't as big as Ireland's. Will British voters have the
:20:41. > :20:45.stomach for that kind of drop in living standards. When people talk
:20:45. > :20:49.about reefrpbt austerity, as if there were -- recent austerity, as
:20:49. > :20:53.if there were spending cuts and the economic slowing down. That is a
:20:53. > :20:58.misconception, the spending cuts have yet to come. So the British
:20:58. > :21:02.public think they are in the middle of a major windback by the British
:21:02. > :21:06.Government ain't seen nothing yet? It has barely started. So if
:21:06. > :21:10.austerity, as an economic model, is in danger, can aiming for growth by
:21:10. > :21:14.borrowing even more money be the answer? President Hollande got
:21:14. > :21:20.elected on that very premise, and across the pond, the US is showing
:21:20. > :21:23.robust signs of growth on the back of President Obama's two short-term
:21:23. > :21:27.stimuli, first through I infrastructure, and recently
:21:27. > :21:32.through tax rebates. The problems with President Obama's growth plan,
:21:32. > :21:37.a good old fashioned Keynsian stimulus, is it dicks the debt
:21:37. > :21:40.mountain can down the road. By injected thrillions of dollars into
:21:40. > :21:45.the US economy you will create growth and you may get re-elected,
:21:45. > :21:49.but you are postponeing the problem to a future President or future
:21:49. > :21:53.generation. But can American-style growth be achieved here, by
:21:53. > :21:57.borrowing even more money. On the latest projections they will borrow
:21:57. > :22:01.something like �150 billion more over the course of this parliament
:22:01. > :22:06.than they originally intended. They are borrowing �150 billion more
:22:06. > :22:11.because their plan has failed. Tax revenues aren't as strong as they
:22:11. > :22:14.hoped, because the social security bill is stronger than they hoped.
:22:14. > :22:17.They are borrowing money, it would be better to borrow money to get
:22:17. > :22:21.the economy moving, paying people to be in work, rather than paying
:22:21. > :22:27.people to be out of work. Could there be a third way? Can an
:22:27. > :22:35.economic stimulus and cutbacks work in tandem. Francois Hollande thinks
:22:35. > :22:39.so, he's already banging that drum in Brussels? Austerity and growth
:22:39. > :22:43.are not mutually exclusive. Some countries need to take tough action
:22:43. > :22:46.to reduce their amount of borrowing, it is the rate which you do it,
:22:46. > :22:49.what is sensible. If you don't have policies for growth, the risk is
:22:49. > :22:53.you crash the economy, we are back in a double-dip recession now, if
:22:53. > :22:57.you look at what is happening in Europe, it is a scene of
:22:57. > :23:01.unremitting gloom. Tomorrow David Cameron will attempt to steel our
:23:01. > :23:04.nerves for the long but rewarding battle against debt. The economy
:23:04. > :23:09.and ultimately voters will decide whether it is worth fighting for
:23:09. > :23:12.now. Here now are the Conservative MP,
:23:12. > :23:19.and former adviser to the Chancellor, Matthew Hancock, the
:23:19. > :23:23.economist, Ann Pettifor, and the chief executive of the city broker,
:23:23. > :23:29.Priebke, Terry Smith. It is -- Priebke preb. It is clear that
:23:29. > :23:34.austerity isn't doing anything for growth? As Alastair Darling said in
:23:34. > :23:37.the clip there, the two aren't mutually exclusive. You need to
:23:37. > :23:41.deal with the deficit to have sustainable growth. We have the
:23:41. > :23:45.lowest interest rates since 1703, we found out this week. We can cite
:23:45. > :23:49.any number of statistics, the fact is we are back in recession. Only
:23:49. > :23:52.today the growth forecasts were downgraded? Of course they were.
:23:52. > :23:55.That is nothing to do with austerity? There is a sharp
:23:55. > :23:58.increase in commodity price, and we have seen from the first package
:23:58. > :24:03.what has happened in the eurozone. But the crucial question is, and
:24:03. > :24:07.the question that people will be asking, and we should all ask, is
:24:07. > :24:11.what can you do to try to get out of this, given that we are in a
:24:11. > :24:15.debt crisis. And if you...Everybody Wants to get out of it. But the
:24:15. > :24:22.other way of putting your excuse, is that Government policy has had
:24:22. > :24:27.no effect? That's not true. It is all external factors, the euro
:24:27. > :24:31.crisis, commodity prices and the rest? Let me tell you where it has
:24:31. > :24:35.had an effect, the deficit has come back down by a quarter over the
:24:35. > :24:38.past two years. That means we are a quarter of the way, broadly,
:24:38. > :24:43.through the difficulties. You know, does that mean there is three
:24:43. > :24:47.quarters to go, and does it mean it will be difficult? Yes. But we are
:24:47. > :24:51.a quarter of the way through, the deficit is coming down, yes it is
:24:51. > :24:54.difficult. There are head winds that aren't helping, but if you
:24:54. > :25:00.don't try to deal with your debts, then you won't get growth. We have
:25:00. > :25:04.seen in the euroarea, what happens if you leave it. Where is the
:25:04. > :25:08.evidence that the austerity is hurting growth? Well, it's in
:25:08. > :25:13.Europe, across Europe, of course. What about in this country? In this
:25:13. > :25:16.country it is in the evidence that Mr Justin King of Sainsbury's has
:25:16. > :25:21.given us. That customers are not walking through his door. It is in
:25:21. > :25:26.the evidence of the banks, who are frightened to lend because they can
:25:26. > :25:30.see the contraction getting worse. It is in the evidence of the
:25:30. > :25:33.companies who have are hording -- who have been hording cash, because
:25:33. > :25:36.they are so in fear of the Government policies and contraction,
:25:36. > :25:39.that they will not take risks in investment. That is where the
:25:39. > :25:42.evidence is. It is in rising unemployment. I know the
:25:42. > :25:48.unemployment numbers today looked a little bit better, but the vacancy
:25:48. > :25:53.numbers were down. And the long- term unemployed were up. I think it
:25:53. > :25:57.is better when there is good figures, like today's unemployment
:25:57. > :26:00.figures, to welcome those figures, and welcome areas that are growing,
:26:00. > :26:06.like exports to the rest of the world that isn't Europe, which are
:26:06. > :26:09.up by 16%. There are good signs. But the point is this, you can't
:26:09. > :26:14.borrow your way out of debt. I have said it endlessly. Can I say about
:26:14. > :26:19.that, if that is the case, why did the Chancellor say in his 2012
:26:19. > :26:22.budget, just recently, that net borrowing was going to increase by
:26:22. > :26:26.�100 billion, over the next year or two. Because the size of the
:26:26. > :26:30.deficit that he's dealing with is vast. And of course, it has to come
:26:30. > :26:35.down, you have to deal with the deficit before you can then deal
:26:35. > :26:38.with the debt. This is the appropriate point to bring you in,
:26:39. > :26:43.you claim there isn't any real austerity here? There is no
:26:43. > :26:48.austerity so far. Even with the Government's figures. The reduction
:26:48. > :26:52.in Government spending is 1.5%, that is 0.7% of GDP. That can't
:26:52. > :26:56.have caused the problem with the economy, it is just not big enough.
:26:56. > :26:59.The economy never got out of recession. He's right that the
:26:59. > :27:03.policy hasn't caused the difficulties, but he has the wrong
:27:03. > :27:08.policy, because he hasn't got one at all? To debate the policy in a
:27:08. > :27:11.moment. We never got out of the recession. �500 billion of deficit
:27:12. > :27:16.spending, �300 billion on quanative easing, and the interest rates are
:27:16. > :27:20.the lowest for 300 years. Einstein said, repeating the same action and
:27:20. > :27:23.expecting the same result is a definition of insanity, it hasn't
:27:23. > :27:28.produced a result in the economy. List a few things you think should
:27:28. > :27:30.be cut in Government spending? only things you can cut in those
:27:30. > :27:33.circumstances, the benefits bill, and the National Health Service.
:27:33. > :27:36.You can't make very big cuts elsewhere. Cut the health service
:27:37. > :27:41.and the number of people on benefits, presumptionably and the
:27:41. > :27:46.level of benefits? You can't make cuts by tinkering at the edges,
:27:46. > :27:50.that is the definition of austerity, in your view? It is not really the
:27:50. > :27:54.only part of austerity. I think you need to cut the tax take, and the
:27:55. > :27:58.whole size of the state, unless you believe the Government is more
:27:58. > :28:03.efficient at spending money than the individuals. The Government is
:28:03. > :28:08.doing just that. It can't cut the Welfare Bill, it can't cut pensions.
:28:08. > :28:11.It is having real difficulties with that bit of the budget. But it is
:28:12. > :28:15.slashing capital investment. Let's look at the facts here. It is
:28:15. > :28:20.slashing productive investment. amount of people on out of work
:28:20. > :28:25.benefits is lower than at the election two years ago. And the
:28:25. > :28:31.benefits have been capped, there is a big row about that. And making
:28:31. > :28:34.sure that people have to try to get work, if they are getting benefit.
:28:34. > :28:40.Terry Smith is no clown, he understands how economies work, he
:28:40. > :28:45.has come to a completely different conclusion? Not the case. Terry
:28:45. > :28:52.said there are cuts. There has been no significant austerity.
:28:52. > :28:58.deficit is down. Is my 1.5% number correct. I will explain. Is it
:28:58. > :29:05.correct? I take it that's yes, is it. No, my number is not correct?
:29:05. > :29:09.The deficit is down from �160 billion at the time of the election,
:29:09. > :29:13.and down now. Have you cut spending by more than 1.5% of Government
:29:14. > :29:18.spending in the last year? Yes. must have missed that, I thought it
:29:18. > :29:24.was about �680 million now, it was about �690 million before? You have
:29:24. > :29:29.to look at the impact. Terry, 270,000 Government civil servants
:29:29. > :29:34.have lost their jobs. That's cuts in spending. What they haven't done
:29:34. > :29:40.and what hasn't happened, is that spending on the revenue side, on
:29:40. > :29:43.benefits and pensions has risen. But what is being cut is spending
:29:43. > :29:49.on managed expenditure and capital investment. Very drastically cut.
:29:49. > :29:53.That's the bit of investment, Jeremy, that will generate jobs and
:29:53. > :29:58.generate income for companies like Sainsbury's. And construction
:29:58. > :30:03.companies. You are comparing apples and oranges here, do you have any
:30:03. > :30:08.inclination towards either an apple or orange. Which two on these two
:30:08. > :30:11.in analysis do you come down in favour of? As we see somebody
:30:11. > :30:14.saying that the Government is cutting too fast, and somebody
:30:14. > :30:19.saying that the Government isn't cutting enough, that is normally a
:30:19. > :30:25.sign that the Government is getting it about right. I would like to
:30:25. > :30:31.explore an idea that Ann Pettifor has got here, explain to us the
:30:31. > :30:34.thing that is usually said, you can't increase spending, to
:30:34. > :30:37.increase spending increases more borrowing? The deficit doesn't tell
:30:37. > :30:41.you anything about what is going on in the economy. Because the fact is,
:30:41. > :30:47.the deficit is rising, or falling, because of what's happening in the
:30:47. > :30:50.rest of the economy. And the fact is, we have had hollowed out from
:30:50. > :30:54.the economy something like �120 billion, since the start of the
:30:55. > :30:58.financial crisis. As Terry says, the Government intends to take out
:30:58. > :31:04.another �85 billion. What is your solution? We have this create hole
:31:04. > :31:08.in the economy, somebody has to invest in it, the private sector
:31:08. > :31:13.won't because it is too nervous and indebted. The only sector that can
:31:13. > :31:18.is Government, it can do that with fingerprintsing from the Bank of
:31:18. > :31:22.England. The idea that the deficit doesn't matter. Is delusional.
:31:22. > :31:25.is dangerous. I didn't say it didn't matter, I said it didn't
:31:25. > :31:30.reflect what is really going on. Anne has discovered the secret
:31:31. > :31:35.source of finance we can use is frankly delusional. The Bank of
:31:35. > :31:39.England has been financing the budget deficit. It has been doing
:31:39. > :31:42.it indirectly, but it has been financing the deficit. It hadn't
:31:42. > :31:46.escaped our notice, if it is that easy, why not get the Bank of
:31:46. > :31:49.England to lend the Government all the money it needs to pay off the
:31:49. > :31:54.debt. Why didn't we think of that? It is not enough for the money it
:31:54. > :31:58.pay off the debt. It has to be invested in sound infrastructure
:31:59. > :32:02.projects, which, for example, would boost private sector activity in
:32:02. > :32:06.the construction sector. Which would boost economic activity,
:32:06. > :32:10.enable companies to make profits, people who have jobs, and income to
:32:10. > :32:15.be generated to pay the taxes which will reduce the deficit. This idea
:32:15. > :32:19.that you spend more, and therefore borrow less is frankly, for the
:32:19. > :32:23.birds. I think it is delusional. The British economy is predicted to
:32:23. > :32:27.grow at just under 1% next year. China is hoping for 7.5%. In the
:32:27. > :32:32.space of a single generation the size of China's economy has
:32:32. > :32:36.overtaken most of those in western Europe. But China's also set to
:32:36. > :32:41.overtake Europe in another key area. Thanks to longer life expectancy,
:32:41. > :32:47.and plummeting birth rates, China's population is getting older.
:32:47. > :32:56.Mukul Devichand roorns, 30 years after China implemented its one-
:32:56. > :33:01.child policy, the Government faces a crisis of too many elderly.
:33:01. > :33:06.This is one of the fastest-ageing places on earth. In Shanghai there
:33:06. > :33:11.are twice as many old people as there are young. As the city has
:33:11. > :33:16.developed, people are having fewer and fewer children. The one-child
:33:16. > :33:22.policy has accelerated the decline in the birth rate. And where
:33:22. > :33:25.Shanghai leads, China follows. Break-neck economic growth in
:33:25. > :33:31.China's cities, has been accompanied by an astonishingly
:33:31. > :33:34.rapid ageing of their populations. China is growing old, at a rate
:33:34. > :33:42.unprecedented in human history. This ageing could bring the
:33:42. > :33:46.country's seemingly irrepressible March out of poverty to an end.
:33:46. > :33:50.This woman spend her working life in a factory, her husband is a
:33:50. > :33:56.tailor, they have been married for 53 years.
:33:56. > :34:01.Now, she has Alzheimer's. Every day he bathes her, dresses her, and
:34:01. > :34:08.brings her to this drop-in centre for lunch.
:34:08. > :34:12.He says it is hardest when she doesn't know who he is.
:34:12. > :34:15.TRANSLATION: Before she got sick she was full of life. She loved the
:34:15. > :34:20.opera, now she doesn't really understand what is going on. Her
:34:20. > :34:28.mind is gone. Life has become difficult. But I must take care of
:34:28. > :34:32.her, anyone in my position would do the same. This is all the help the
:34:32. > :34:37.state can provide. A basic welfare system does exist in China, but it
:34:37. > :34:41.is many years behind anything in the west. Nationally, the
:34:41. > :34:45.Government says ten million care workers are needed. So far, only
:34:45. > :34:51.100,000 have been trained. Providing for the elderly will
:34:51. > :34:57.create a massive drain on China's future wealth.
:34:58. > :35:02.Chinese society has not been fully prepared for its pension and social
:35:02. > :35:05.security systems, so people are worried, what will be the case if
:35:06. > :35:11.they do not have kids, and they do not have the social security, what
:35:11. > :35:15.can they do when they become old? Traditionally in Chinese families,
:35:15. > :35:19.this didn't used to be a problem. The elderly were cared for at home.
:35:19. > :35:24.But as the birth rate is declining, there are now not enough of the
:35:24. > :35:27.younger generation, to look after the old.
:35:27. > :35:37.Those what who can afford it end up somewhere like this, recently
:35:37. > :35:38.
:35:38. > :35:43.opened, one of the new private care homes in the city. This man has
:35:43. > :35:49.been here since he had a stroke, four months ago.
:35:50. > :35:58.His daughter wishes she could care for him at home. But, she says, she
:35:58. > :36:08.needs to go out to work. She, herself, has only one child. She
:36:08. > :36:08.
:36:08. > :36:14.worries about who will look after her, when her time comes. By the
:36:14. > :36:19.year 2050, one third of China's population will be over 60. That's
:36:19. > :36:22.450 million people. This huge imbalance has been caused by
:36:22. > :36:27.China's showcase development policy, the one-child programme. It has
:36:27. > :36:37.forced down the numbers of young people, just when they are needed
:36:37. > :36:42.
:36:42. > :36:50.most. China's economic model is in danger.
:36:50. > :36:54.The lack of young workers is already slowing down the economy.
:36:54. > :36:58.Having too few young people is a serious threat in itself. China's
:36:58. > :37:03.economic engine has been fuelled by a seemingly endless supply of cheap
:37:03. > :37:08.and young labour. If that supply now runs out, then China's ability
:37:08. > :37:12.to keep on growing could be seriously undermined.
:37:12. > :37:17.In this factory south of Shanghai, workers make jewellery and
:37:17. > :37:20.accessories that end up in high streets across Britain. Research
:37:20. > :37:25.suggests that one quarter of China's economic growth has come
:37:25. > :37:30.from the supply of cheap labour. It is here that the impact of
:37:30. > :37:35.demographic change is being felt most keenly. The shortage of the
:37:35. > :37:44.labour force is inevitable to increase the labour costs. This
:37:44. > :37:53.will force China to restructure its economy. To move from the labour-
:37:53. > :37:55.intensive export-orientated economy, towards a more capital-intensive or
:37:55. > :37:59.technology-intensive economy. aren't enough young people for the
:37:59. > :38:07.model on which China's economy depends. In addition main migrant
:38:07. > :38:11.workers have moved back to their home towns, to care for their
:38:11. > :38:14.elderly parents. Around Shanghai there is an acute labour shortage.
:38:14. > :38:18.TRANSLATION: It is really tough to find new workers because the cost
:38:19. > :38:23.of labour keeps increasing. Workers are asking for more pay and better
:38:23. > :38:33.conditions when we hire them. At the same time as labour costs
:38:33. > :38:38.are rising, the pressure from retailers is for ever cheaper stock.
:38:38. > :38:44.TRANSLATION: We are becoming uncompetitive, it is affordable for
:38:44. > :38:50.companies to move from China to Thailand. All of this means that
:38:50. > :38:54.China's one-child policy is beginning to lose loosen, and
:38:54. > :39:00.Shanghai is in the vanguard. In this family planning clinic, young
:39:00. > :39:03.women are no longer instructed in contraception and abortion, but in
:39:03. > :39:09.fertility, and how to conceive more successfully. In Chinese terms,
:39:09. > :39:13.this is something of a revolution. TRANSLATION: We hope people will
:39:13. > :39:17.follow the regulations and have a second child. We are offering
:39:17. > :39:21.parenting classes as well as fertility clinics. If you are an
:39:21. > :39:24.only child and you marry someone else who is also an only child, you
:39:24. > :39:32.have always been allowed to have two children. But now we are trying
:39:32. > :39:38.to encourage everyone to do so. many Chinese people aren't
:39:38. > :39:41.listening. The majority in Shanghai still choose to have one child.
:39:41. > :39:46.They believe their children's life chances are better, that they
:39:46. > :39:50.themselves are richer in small families.
:39:50. > :39:54.In fact, some academics think China's future lies in a smaller
:39:54. > :40:01.population. That increasing the birth rate is a matter of buying
:40:01. > :40:06.time. Amidst vast social change. To modify the policy cannot reverse
:40:06. > :40:10.the ageing process, but at least it can slow down the process,
:40:10. > :40:19.providing more time for Chinese society to get ready, to prepare
:40:19. > :40:24.for the restructure of the society. In that case we can cope with
:40:24. > :40:29.ageing issues more easily and properly. One thing this couple
:40:29. > :40:34.don't have, is time. He says as long as he has the
:40:34. > :40:39.strength, he will always care for his wife. He says if she was put in
:40:39. > :40:45.care home, he would be apart from her, at least this way they can be
:40:45. > :40:51.together. TRANSLATION: There's nothing more
:40:51. > :40:55.we can do now. At least we have the past. All we can hope for is that
:40:55. > :41:03.her illness progresses slowly, and we can both enjoy what little time
:41:03. > :41:07.we have left. China is facing up to the fact that it is ageing. And at
:41:07. > :41:12.a rate that few societies have ever experienced. It will have to find a
:41:12. > :41:19.way to pay for the costs of ageing, without the economic wealth
:41:19. > :41:25.supplied by so many young people. There is a special phrase for why
:41:25. > :41:29.they worry, "China might become too old to get rich".
:41:29. > :41:34.As we all know, thanks to the experiences of Jim Hacker, real
:41:34. > :41:40.power in Britain is wielded by masses of anonymous sir Humphreys,
:41:40. > :41:45.that used to be the case until Tony Blair and Malcolm Tucker came along.
:41:45. > :41:50.Now the man known as David Cameron's brain, Steve Hilton, has
:41:50. > :41:54.disappeared on a Saab battle. He was known for wandering -
:41:54. > :41:59.sabbatical, he was known for running around without any shoes
:41:59. > :42:05.and coming up with original ideas. Who does the blue-sky thinking now.
:42:05. > :42:09.And in these storm tossed times, do we need more blue sky. The nearest
:42:10. > :42:16.we can get to it are here, Danny Kruger, who now runs a charity,
:42:16. > :42:20.helping prisoners and young people at risk of crime, and an adviser to
:42:20. > :42:24.Ed Miliband until last week, and prefers the company of the Social
:42:24. > :42:29.Research Unit now. Where do ideas in Government come from? Probably
:42:29. > :42:32.the ideas we had in opposition, mostly. Interestingly the most
:42:32. > :42:36.inventive stuff seems to have been thought up beforehand. The job of
:42:36. > :42:40.Government, often seems to be the job of handling the daily crises.
:42:40. > :42:44.Can I pay tribute to Steve Hilton, I worked with him in opposition. I
:42:44. > :42:49.don't know what it was like working in Government, it must be have been
:42:49. > :42:52.frustrating, he found it frustrating working with us in
:42:52. > :42:57.opposition. He was one of the most imaginative I have worked with. And
:42:57. > :43:02.contributed a huge amount to the creativeness and inventiveness the
:43:02. > :43:07.party came to Government with. have been living in this mail trom
:43:07. > :43:13.and firmive of ideas in opposition? Is that what it is like? There are
:43:13. > :43:19.lots of places political parties get ideas, in Government or
:43:19. > :43:23.opposition. They look at research, universities, they look abroad.
:43:23. > :43:27.This idea that we don't have enough big ideas out there, that is not
:43:27. > :43:30.the issue with what's begin doing going on with Government in the
:43:30. > :43:33.last -- been going on with the Government in the last few years.
:43:33. > :43:37.Nobody will say this Government hasn't had big ideas, they clearly
:43:37. > :43:45.have. The real issue is how you apply those ideas. What your
:43:45. > :43:48.analysis of an issue is. They do need to reform the NHS and what
:43:48. > :43:51.does success look like? Until you have those things straight, it is
:43:51. > :43:55.hard to understand how the big ideas will come along and change
:43:55. > :43:59.the world. The circumstances under which you take office, and try to
:43:59. > :44:02.act out these schemes that you cooked up in opposition, are
:44:02. > :44:05.clearly critical, there are times for great ideas, and there are
:44:05. > :44:08.times for just trying to get your head down and get on with things,
:44:08. > :44:12.aren't there? This Government is occasional low stuck on the horns
:44:12. > :44:16.that have dilemma. They have some very large ideas, and they have
:44:16. > :44:20.come into office with a clear determination to change the country.
:44:20. > :44:24.And yet they are managing a terrible economic situation, as
:44:24. > :44:29.well as all sorts of external things going on, and the daily
:44:29. > :44:32.crisis of Government. It looks like and feels like, from the outside
:44:32. > :44:35.looking in, they are constantly battling the determination to
:44:35. > :44:38.change the country and do radical and substantial things, with a need
:44:38. > :44:42.to manage the crisis of the day. It must be incredibly difficult to
:44:42. > :44:45.balance the two. If I could just jump in, I would say never
:44:45. > :44:48.underestimate the power of the small idea. It is not just about
:44:49. > :44:53.big ideas. For example, if you want to improve how children are doing
:44:53. > :44:57.at school, we know that the most important thing is the quality of
:44:57. > :45:01.teach anything their classroom. Trying to change that experience
:45:01. > :45:05.through one big idea, one silver bullet, one structural reform of
:45:06. > :45:11.our school systems very, very difficult. We know it is the small
:45:11. > :45:13.things that add up to change. How we train our teachers, how we teach
:45:13. > :45:17.our professional development in schools. I think it is very
:45:17. > :45:20.important. Big ideas are great, we all need them. If we are really
:45:20. > :45:26.interested in serious change, you shouldn't underestimate the power
:45:26. > :45:32.of doing lots of small things well. What about this idea, and one has
:45:32. > :45:35.heard it promogated, Tony Blair talked about it a bit, the
:45:35. > :45:39.institutional boundaries, notably exsemplified in the Civil Service,
:45:39. > :45:43.always said to be a great break upon change s that fair on the
:45:43. > :45:46.Civil Service, do you think? haven't worked in Government, you
:45:46. > :45:49.sense the frustration when you watch politicians trying to get
:45:49. > :45:54.their way, and having spoken about the grand changes they are going to
:45:54. > :45:59.make, finding them some what diluted in office. But I also think
:45:59. > :46:02.there is a sense in which they are obliged by their own ideology, the
:46:02. > :46:05.loyalties they have to their party, and what they said in opposition,
:46:05. > :46:08.and to the grand ideas they came into Government with, then they run
:46:08. > :46:12.into the sands of reality. That is probably a healthy process, tough
:46:12. > :46:16.run fast through the sand, it is good they start running quickly.
:46:16. > :46:19.that your impression too? I don't think that is quite fair. NHS
:46:19. > :46:23.reform, for example, nobody would argue the Government has found
:46:23. > :46:30.itself in some of the difficulties they have around NHS reform,
:46:30. > :46:35.because the Civil Service has acted as a break on reform. -- brake on
:46:35. > :46:39.reform, but it is the politics that are an issue and the way it
:46:39. > :46:42.developed in the political system. I don't think it is fair to say the
:46:42. > :46:45.Civil Service are always a brake on what ministers want to. Do I would
:46:45. > :46:49.argue you see politicians who want too much change, and too much
:46:49. > :46:59.change can be just as bad, as not enough.
:46:59. > :47:25.
:47:26. > :47:35.Thank you very much. Tomorrow That's all tonight. Emily will be
:47:36. > :47:39.
:47:39. > :47:42.here with more tomorrow, until then, goodnight.
:47:42. > :47:46.Good evening, not as cold tonight as last night. Thanks to a lot more
:47:46. > :47:49.cloud. It makes for grey start in the morning. Some brightness across
:47:49. > :47:55.north-east England, that will disappear. Brive, bright or sunny
:47:55. > :47:58.spells across the south. Northern Britain dull. Outbreaks of rain and
:47:58. > :48:01.drizzle coming throughout the day across northern England. Generally
:48:01. > :48:05.from Birmingham southwards it will be dry. Any showers in the south
:48:05. > :48:08.will be few and far between. Cloudier than today, still some
:48:08. > :48:12.brightness coming through. A hint or two of sunshine, just about
:48:12. > :48:16.lifting the temperatures into the teens. Feeling cool because of the
:48:16. > :48:19.strength of the breeze. The breeze picking up slowly across Wales. A
:48:20. > :48:24.bright day in the south. The outbreaks of rain and drizzle on
:48:24. > :48:30.the north coast, rain and drizzle will come and go throughout the day.
:48:30. > :48:40.Dull, dump and chilly, temperatures stuck in single figures, as across
:48:40. > :48:53.