Transcript of Newsnight interview on the Eurozone crisis

Gavin Esler: We’ve seen this series of sticking plasters and Mark is suggesting that will continue, do you think in the long-term the euro is doomed in its present form?

Ed Balls: I think the euro will last because there is a huge political commitment but the problem is that, as you said, sticking plaster after sticking plaster has been found out. For a year now we’ve had a lack of decisive leadership from the European governments in the Eurozone to really say, we’ll sort this out, and the crisis had now moved from Greece to Portugal and Ireland, now to Spain and Italy. This is hugely hugely dangerous and serious and will have a direct impact in the UK as well so we cannot be bystanders. We are close to a real crisis.

GE: But we can’t be bystanders but we have really got no way of particularly influencing this. I mean we are not a player in the euro and you say lack of leadership, well that may be true but Britain can’t offer it so what do you think they should do?

EB: Well to be honest I think we can and we must. There is no doubt that our Prime Minister and our Chancellor have been distracted in recent weeks but the fact is that this is key to our national interest. Half of our trade is with our European partners…

GE: But what should they do, what should they do?

EB: Well they should be saying, look, we’re not in the Eurozone – and I have to say thank goodness we are not – for Britain to be in this Eurozone would have been a complete catastrophe. We are not in the Eurozone…

GE: But that is another reason for saying we can’t actually show much leadership because we’re not in it.

EB: But we can be an honest broker and the fact is in past crises other countries have worked closely with each other, the same should be happening now. Our Prime Minister should be going to the meeting tomorrow. Our Chancellor should be engaged in these debates actively in Brussels tomorrow and we should be saying…

GE: Saying what, what should they say?

EB: Well they should be saying, you’ve got to deal with the situation as it is now. You’ve got to stop the contagion. You have to accept that – unless there are clear guarantees which are… Eurozone wide, to say we will put a guarantee under the debt of these countries – the crisis is going to get worse and worse and worse and it’s got to be done and it does mean more coordination.

GE: But you’re saying German taxpayers have got to guarantee Greek debt?

EB: And that is the reality, that is the reality.

GE: You wouldn’t want the British taxpayers to do that would you?

EB: Which is why we are not in the Eurozone.

GE: But why would the Germans want to do it?

EB: Because in the end that is the price you pay for going into a single currency. The fact is that countries like Greece have borrowed more cheaply because there was an implicit guarantee; they were part of the Eurozone area. At the point where it becomes clear that that is in doubt there is a crisis, interest rates go up, their debt is now not sustainable. The problem is as that spreads in to Spain and Italy, this I billions of pounds of exposure, this is hugely significant and the world cannot allow the Eurozone to fail to resolve its political issues and therefore allow that contagion to destabilise the British and the global economy.

GE: Right but what you are saying is very significant because you are effectively, although you are putting it in slightly different words, saying that the Eurozone has got to get tighter and tighter, bound together more tightly. Are the Germans really happy… you are saying that is implicit in the project and that leaves Britain further on the outside, in other words this really is a two-speed Europe with Britain definitely on the outside.

EB: I don’t think it was inevitable that the Eurozone had to have that degree of fiscal coordination. The more it went wider to countries in Southern Europe the more that was the risk. But in economics and politics you’ve got to deal with the reality. The reality is now that without greater burden-sharing and coordination the euro will be in deep deep crisis and I’m afraid the German taxpayer is going to have to be told this is where we are at.

GE: You know, Britain would have more leverage would they not for example if… the Labour Party voted against doubling the increase in our contribution to the IMF, the government was in favour if it, it went through. But you seem to be saying we should be telling people how to do things but you’re not prepared to put up any money to do it.

EB: Look I am in favour in a rise in the IMF subscription but not if that is happening without sorting out these European issues and the fact is that our government, our Chancellor and our Prime Minister have basically been absent from this debate in the last year. We should be trying to lead these debates. They feel as though, it’s complex, there’s the eurosceptics, keep out of it. That is why we are now close to catastrophe. We should be in there making the argument, I don’t think there should be a taxpayer contribution to a Eurozone facility but we should be in there in the meetings making the…

GE: But with the greatest respect, Ed Miliband two weeks ago was being accused of not being able to lead his party he’s not going to be able to lead Europe.

EB: Well look, leadership is about two things; it’s about dealing with crises as they come along and having a clear strategic view. In the last two weeks Ed Miliband has had a clear strategic view on hacking and he has been leading that debate. Our Prime Minister and our Chancellor can neither clear up the doubts over hacking or engage in this leadership on Europe and that is a very dangerous place for Britain to find ourselves, essentially, in these European debates, headless when jobs and growth in Britain are at risk.

GE: Do you, just for the 30 seconds we’ve got left, do you see an appetite for the German taxpayers to do what you have been suggesting? It has been suggested within Europe, and they are hugely contentious as you know, within Germany.

EB: In the end it will happen. The longer it takes the more dangerous this crisis is. Our Prime minister and our Chancellor should be urging action and that coordination. What they shouldn’t…

GE: Spending other people’s money that’s the point I’m making.

EB: And what they shouldn’t be doing is just saying, the bigger your cuts, the faster you cut the better. It’s not worked in Greece, it’s not worked in Ireland. I have to say here in Britain we’ll have our GDP figures next week. What’s happened in the last six months? Our economy has flat lined because even though we are not in the euro, we have been trying to take that medicine and it is not working. No wonder our Chancellor of the Exchequer is very very worried tonight. But my view is it’s time for a bit of leadership.

-ends-

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Posted July 20th, 2011 by Ed's team

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