Transcript of interview with Sky News’ Murnaghan programme

DERMOT MURNAGHAN: The Prime Minister said this week he would do whatever he could to keep Britain safe from the storm but Labour say the austerity measures have already failed in Greece and they are putting Britain at risk as well. Let’s say a very good morning to the Shadow Chancellor, good morning Mr Balls. Can we get your analysis before we get your prescription, do you see Greece’s days in the euro now as inevitably numbered?

ED BALLS: Well at the summit last night in America, the leaders said that Greece should stay in and I have to say that in these circumstances for Greece to try to leave the euro in a disorderly way would cause huge damage to the world economy, to the British economy, the eurozone economy because the eurozone has not sorted out how to stop this crisis spreading to Spain and to Italy and those are much larger countries to which our economy and our banks are very exposed, so Greece needs to stay in at least as long as the eurozone needs to sort its act out and I’m afraid that’s taking a long, long time.

DM: Then what is the prescription, how does Greece, given its political change that is taking place at the moment, this rejection of the austerity programme, whatever form of government gets in it seems is going to do that, how does Greece then stay in the eurozone?

EB: Well Greece, unlike Spain and Italy, is not really connected to the global financial markets at all, it is essentially propped up by money from the eurozone.

DM: And money from the Germans.

EB: And money from the Germans, and that can carry on and the issue is, do you get the right balance between tough decisions to get Greece’s house in order but not so tough that you choke off growth, push up unemployment and turn the politics sour. And it’s that balance the eurozone has got wrong in the last couple of years which has turned recession and depression in Greece and in other countries in the south of Europe, into a crisis. In the end it’s not true to say that deficit reduction delivers growth, unless you actually have growth then your deficits go wrong and the politics goes wrong.

DM: I’ve heard you make those parallels before, let’s move on to the United Kingdom and our economic situation. In terms of what’s gone on in Greece we’re nowhere near close so you can’t really be prescribing any austerity whatsoever, I mean there have been figures out this week which show there haven’t actually been any real cuts in public spending at all, it’s £22 billion higher than it was in 2008 in the UK. In Greece they have had massive public spending cuts, we have nothing like that.

EB: Well we aren’t in the same position as Greece or Spain but we are back in recession which is not what was predicted two years ago.

DM: But do you think caused by some of those cuts?

EB: I do, I do, and I don’t have any doubt about that. All the evidence is that Britain went into recession – before the eurozone crisis – here in the domestic economy. But actually the eurozone today is not in recession while Britain is and our recovery was choked off by bringing forward bigger spending cuts but also the early tax rises, the rise in VAT which hit confidence, hit growth, has pushed us back into recession, pushed unemployment up and also means George Osborne is even borrowing £150 billion more than he planned. I think there is a big choice here and if I can just go back to that G8 summit at the weekend and the Greece point, you had overnight this announcement and cosy photos of David Cameron and President Obama. The reality is that Obama and the new French President Hollande are saying you’ve got to have a growth and jobs plan because without growth you won’t get the deficit down. David Cameron has been stuck with the German Chancellor Merkel saying for the last two years faster cuts will work, stick with the austerity, that’s the only way to growth. It’s been proved wrong across Europe and in Britain too, they look increasingly isolated in my view.

DM: You’re using your examples rather selectively because let’s pick on Germany then which has always kept its house in order and has had some of the strongest growth within the eurozone and hasn’t borrowed excessively.

EB: Well the German economy had a huge crunching impact of unification, bringing East and West Germany together 15 years ago and at that time they had huge fiscal challenges, then got that under control but the reality is that the euro in the last ten years has worked to Germany’s advantage, has made it more competitive, has had faster growth, has not had those problems that you talked about with deficits. The downside is that Germany’s success in those years was building up those problems for Spain, Italy and Greece and don’t forget, going into this crisis, Italy, Spain, these countries didn’t have deficits at all, they had surpluses but they’ve got an uncompetitive currency. Germany has now got to pull its weight.

DM: You know what comes back at you from the German experience that you’ve described, is that Labour was in power during those years and you were building up deficits when Germany was making sure it was getting rid of its.

EB: Well we’ve discussed this before. The reality is that between ’97 and 2007, the Labour government got our national debt down as a percentage of income and we had lower national debt than Germany, lower national debt than France, lower national debt than America. We then had a global financial crisis which hit every country and is hitting the eurozone now, it hit Britain and America first but you had to act at that point when tax revenues fell to stop depression. But our economy was recovering, unemployment was falling, we had a balanced plan. George Osborne is now borrowing more in this parliament than Labour planned. The national debt will be higher at the end of the parliament than at the beginning. He said, I’ll get the deficit down – he’s failed because he and David Cameron have taken our economy back into recession, that’s a fact.

DM: And you think that Mr Cameron, you said this week or last week that Mr Cameron has not been influential enough in these international debates that are taking place. What more can he do? He’s been to the G8, he’s been jogging one on one with President Obama, he’s getting that face time, he’s getting his word isn’t he?

EB: Well look, David Cameron has been saying, we’re told, for the last nine months to Germany, the European Central Bank must do its job, put the firewall in place, stop the contagion. On that he’s failed because they’ve not listened to him. The other thing that David Cameron has been saying for the last year and a half to Germany, stick to your guns, the austerity will work, we’re doing it in Britain, you keep telling the rest of the eurozone to do it. On that one I’m afraid David Cameron has probably been too influential because he’s been making an argument which is intellectually and critically flawed and failing.

DM: But it’s one the Germans agree with. How would you get the Germans to listen to your alternative course? Francois Hollande it seems can’t and he’s in the euro, he’s in that pact.

EB: Give him a chance, he’s only been there for a week. I think the bigger point is his predecessor, President Sarkozy, the previous French President, a right of centre politician, tried to persuade Germany too but in the end it ended up with Merkel, Sarkozy and Cameron – this ‘Camerkozy economics’ – all agreeing austerity would work. They ended up, they tried to persuade Germany, they failed and thought well for a quiet life we’ll go along with it. That was certainly the French president’s view. I think David Cameron was always a believer. In the end, if you’re not though at the table being influential, somebody has got to persuade Germany that this is a catastrophe for Britain, Europe and the world and that Germany has got to change course. The problem is, the German people went into the eurozone ten years ago on the clear promise that they weren’t going to bail out Italy and the central bank wasn’t going to play this role. Both things have got to change.

DM: Given what you’ve described as a potential catastrophe for Britain, I mean seeing as so many commentators are saying the whole euro project is unravelling before our very eyes, do you think it’s time we had a proper referendum in this country, an in/out referendum in this country on EU membership?

EB: Well I have absolutely no doubt that Britain’s future needs to be as part of Europe. For us to be out of the EU would be a disaster for investment, for jobs, for our long term future, politically and also economically. Right now, I don’t think that’s a priority. What I want is the British government to say we got it wrong on austerity and change course and make the case for a balanced jobs and growth plan and to start trying to persuade Germany that in the collective interest they have got to back the [European] Central Bank doing their job, and a jobs and growth plan I think is more in tune with what the public wants than going into an internal and navel gazing debate now about Europe.

DM: But it has changed, it has changed in all recognition from the organisation we joined back in the early 70s and since that last referendum in 1975. Isn’t time for another one, isn’t it time to give the British people a say?

EB: Well I don’t think you should ever say that the public shouldn’t be consulted as part of the discussion and in some ways part of Europe’s problems is that it has been seen to be run too much by elites and not enough in touch with the people. But if you went to my constituency today and said what do you worry about most, they would say why isn’t the eurozone sorting things out, I’m worried about jobs and investment in our area from a eurozone crisis. Right now I do think that’s the biggest priority.

DM: But just on a referendum, you’re not ruling one out?

EB: Look, I said what I said last week and I don’t think anybody sensible would do that but it’s not the issue now.

DM: Can I ask you about Mr Blair? It’s been said that Ed Miliband would like to see him back in some kind of role within Labour, do you think he has got a political contribution still to give to this country?

EB: Tony Blair will always have a role in Labour, he was one of our most successful Prime Ministers, he won elections, Gordon Brown was the Chancellor and showed some big decisions on the euro and Bank independence, these are people who will be consulted and part of the discussion. I’ve spoken to Tony Blair and talked to him in particular about the importance of winning this argument about the self-defeating nature of the Cameron austerity argument so I consult him and Ed does too.

DM: Do you think he could have a job though, a formal job?

EB: Well I’m not sure quite sure what job you move on to from having been Prime Minister but I think what Ed said today was if Tony Blair wants to be part in any way, that would be good from our point of view and I would welcome that just as last week me joining forces with Lord Mandelson to say whatever differences we’ve had about British membership of the single currency, Britain has got to win the arguments short-term against austerity, medium term on tough budgets, long term on economic reform in Europe, these are good things for us to do.

DM: And if Tony Blair, why not Gordon Brown? You mentioned there his wealth of experience. Do you think Mr Brown would have a role to play?

EB: Well look, Gordon Brown is travelling around the world talking about the things which really make him passionate – international development and the case for global action on the economy. I’ve got no idea what Tony Blair and Gordon Brown want to do. As I said it is quite hard to see what you do after you’ve been Prime Minister but look, in America they have Jimmy Carter, Bill Clinton, even Ronald Reagan went on to do statesman-like things afterwards and the same thing should be true in Britain. Sometimes we have a tendency to write people off after they’ve finished their time in office but I’m not sure if that’s wise.

DM: And given that we’re talking about former Prime Ministers, what about the current one? Do you think he’s working hard enough at the moment from what you’re reading about his ability to chillax, watch DVDs and play video games? Do you think he should be working harder given the state of the economy?

EB: I don’t want to be too pompous about this, it’s a good thing at the weekend to have a bit of time. Whether it’s a good idea for his aides to be saying he’s obsessed with Fruit Ninja is slightly worrying but what I’m worried about is what he’s doing during the week. I often feel in the House of Commons he is not really on top of the issues, he’s not on top of the detail, he doesn’t know the answers to the questions and he doesn’t seem to always understand the economics of the huge problems that we’re dealing with and when we’re in recession that’s a bit worrying. So, look, I don’t care what he does on Sundays but Monday to Friday he makes me worried and the same is true with our part-time Chancellor too.

DM: OK, Mr Balls, thank you very much indeed. The Shadow Chancellor there, Ed Balls.

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Posted May 20th, 2012 by Ed's team