BBC interview on the G20 summit

Presenter: Mr Balls a very good afternoon to you. What was your reaction to what you heard from David Cameron?

Ed Balls: Well the Prime Minster is obviously very frustrated indeed because, for the second time in two weeks, we’ve had a summit which has really failed to come out with any answers at all. There’s no plan for jobs and growth which the world desperately needs. There’s no change of course on these austerity plans which are not working and choking off growth and jobs but also the eurozone crisis is getting deeper and deeper by the day. It’s clear that there’s no leadership now to get this sorted out. The Prime Minister said two weeks ago we needed a ‘big bazook’a but nothing’s happened, there’s no progress. This is so dangerous and it will impact upon jobs and growth in Britain and round the world and to be honest how many more times can we have summits which end up in total disarray?

P: What can he do though? What would you do if you were in George Osborne’s position? They can only apply so much pressure can’t they?

EB: Well, three years ago, to be fair, Gordon Brown and Alistair Darling from outside the euro led then world in sorting out issues then. It’s harder now because we’re not a member of the euro but we’re still members of the European Union and you know a few months ago I think the attitude of David Cameron and George Osborne was, ‘Britain can be a safe haven, not affected, we don’t really need to go to the meetings or try to lead’. I’m afraid that’s turned out to be very mistaken and now they’re not really being taken seriously in the big meetings. The problem is, as we heard in the discussions there, the risk is, the fear is that we’ll end up with American and British taxpayers stepping in to do what the eurozone seems unable to do for itself and that will be absurd.

P: But it could be so much worse. Some of your colleagues wanted to go into the euro didn’t they, so we could be in a much worse position today if that had happened?

EB: Well Britain didn’t join the euro because a Labour government decided not to join the euro. I was strongly of the view for many years that was the right decision. Labour kept us out of the euro, thank goodness we did because many people feared it wouldn’t work and it hasn’t worked very well and we now see that real problem of leadership and these issues around the IMF and its role now are very concerning.

P: What sort of things would you be pressing for then, what do you think we need to see and how quickly?

EB: Well I think all the focus on Greece is missing the point. The real danger now is what is happening across the eurozone area and the spread of contagion to Spain and to Italy. It’s not working in Greece because look, they’ve not grown. Their unemployment is rising, their debts are getting worse because simply having austerity on austerity actually isn’t solving the problem. You’ve got to have a more balanced approach to getting deficits down and you’ve got to get growth and jobs moving. That’s our problem in Britain where our economy is flatlined, it’s a problem in the eurozone too. But secondly there’s a massive crisis of confidence now because the European Central Bank is not willing to stand behind Italy and Spain which are not in the same situation as Greece but are being dragged into this crisis. The German taxpayer, as David Cameron acknowledges, isn’t willing to do what is needed in a single currency to back the [European] Central Bank. The leaders in France and in Germany are not on the case and we’re now in this position where it looks like the IMF may be called in to effectively take over and play the role the European Central Bank should be playing. That is ridiculous. The IMF’s job is not de facto to become the central bank of Europe and I think David Cameron and George Osborne need to be very careful they don’t end up inadvertently or advertently taking us down this road. David Cameron was saying in the press conference there will be no IMF contribution to a bailout fund. But if we end up in parallel with IMF resources going in to support Spain and Italy, then that would be effectively the same thing. The European Central Bank should be doing that, the US Treasury Secretary said today to the BBC’s economics editor that the European Central Bank has got all the resources it needs to stand by European countries. It shouldn’t be for British and American taxpayers to bail out the European Central Bank, the Germans, the French and the stability fund and I very much hope David Cameron is going to be very clear on this point. The IMF resources should not bail out Spain and Italy, that’s the European Central Bank’s job.

P: But you know very well that the reason the ECB isn’t that heavily involved at the moment is because the Germans don’t want them to be?

EB:                  But the Germans are in a single currency. Britain’s not. We didn’t join – quite the right decision. The Germans are in the single currency. The European Central Bank is the central bank for the eurozone. You can’t have a single currency with a central bank which says I’m not willing to play the vital role of lender of last resort. In Britain the Bank of England does it, in America the Federal Reserve does it. You can’t say in Europe, in the eurozone, the ECB won’t do that job because the German people won’t support it and therefore expect…it’s ridiculous. The French President saying to China ‘will you bail out us?’, saying to the IMF : ‘will you bail us out?’. Why should the IMF or Chinese money go in where the European Central Bank is not willing to put its money even though it absolutely can? That is not a central bank which is working in a functional way. It is a single currency area which is descending into chaos and confusion and the result will be a huge impact on the world economy. We can’t have more summits like this which end up in total disarray, no leadership in the eurozone, no leadership I’m afraid from Britain either saying to the European colleagues get this  sorted out, you are taking us down a road to catastrophe.

P: Ed Balls joining us from Leeds, thank you very much.

-ends-

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Posted November 4th, 2011 by Ed's team