ANY QUOTES USED MUST BE ATTRIBUTED TO CRISIS IN EUROPE DEBATE, SKY NEWS

ADAM BOULTON:
Good evening from the European Parliament in Brussels, the heart of a continent in crisis. Indeed the news of the hour is that one of the leading ratings agencies has just put the European Union on negative watch but tomorrow European leaders gather here and they’ve been told that they must find an agreement or face potential economic catastrophe. Meanwhile, the bookies William Hill have already cut their odds to 3 to 1 that the euro will be gone by the end of 2012 and there are also those who are warning that the crisis threatens the survival, the very peace of Europe and the union itself. Well joining me to debate that are four leading European politicians: Guy Verhofstadt is a Liberal MEP and a former Prime Minister of Belgium, Sharon Bowles is a Liberal Democrat MP who chairs the European Parliament’s economic and monetary affairs committee, Pervenche Berès is a French Socialist MEP who is chair of the employment and social affairs committee and Martin Callanan is the head of the Conservative party here in Europe. Well you can take part as well, following the debate on Twitter will be Philip Souter from Business for New Europe and Kevin Schofield from the Sun newspaper and when he can get away they will be joined by Sky’s European correspondent, Robert Nisbit. So what exactly do the European leaders have to do in the next two days and what happens if they can’t reach agreement? Sky’s European correspondent, Robert Nisbit, is in our Brussels studio, Robert.

ROBERT NISBIT:
Well what they have to do is in effect save the euro or at least restore confidence in their ability to save the euro. The summit has to produce something that convinces the markets, other countries around the world outside the eurozone that are getting increasingly worried about the crisis here and what that may trigger around the rest of the world but also voters at home because there are domestic pressures of course on all of these European politicians as well. But the issue they have is this, there are two crises here. The immediate sovereign debt crisis, the existential crisis that’s happening in Italy and Spain and other countries at the moment that have extremely high debt and very low growth but there are also inherent problems in the architecture of the euro that allow, or don’t allow I suppose, the countries within the eurozone to tackle those issues. So this summit have to address both and both are connected so what we can expect from the summit is some kind of agreement on a fiscal pact between the 17 members of the eurozone and what Angela Merkel and specifically Nicholas Sarkozy of France are hoping is that will unlock the massive reserves of the European Central Bank, which is seen by many as the big institution that really can solve the sovereign debt crisis at the moment so it is a very tall order. If they don’t do it, what’s likely to happen? Well we could, as you were talking about earlier, we could see more credit downgrades, we could see a very messy default by Greece, potentially followed by Portugal. The stake are immense but remember, this is their fifth go at trying to solve this issue. We have had four crunch summits before, can this one deliver the goods?

ADAM BOULTON:
Robert, thank you very much indeed. Well let’s get some views now, Guy Verhofstadt, just how important is this summit? We have had a lot of crisis summits before here in Brussels haven’t we?

GUY VERHOFSTADT:
Yes, most people are saying this is an historical summit but they say always that it is an historical summit so, no, it is an important summit because they have to decide now on the establishment in my opinion of an economic and fiscal union and that’s the only way to stop the crisis. You can have a monetary union, if you have a monetary union you need also a single economic and fiscal union.

ADAM BOULTON:
So when you guys set it up you got it wrong really for the eurozone?

GUY VERHOFSTADT:
I think so. We thought more than ten years ago that we should have a currency and that spontaneously that would lead to more convergence of economic and fiscal policies and that didn’t happen and it is now quite proven that if you have a single currency it is impossible to go forward with 17 different governments, 17 different markets and 17 different economic strategies. You can have a state without a currency but it is impossible to have a currency without a state.

ADAM BOULTON:
Pervenche Berès, there is still the question of who pays isn’t there? It was in a sense a currency union on the cheap because individual countries weren’t standing behind each other.

PERVENCHE BERES:
Well who pays? You also have to define who are the winners and who are the losers of the euro and once you have defined who are the losers and who are the winners, then you could have a good trade off and I think one of the things that we have not really 100% realised when we settled the euro, I don’t 100% share the view by Guy Verhofstadt because I think it was known when we had ratified the Maastricht Treaty that it was an on-going process and that was agreed in 1992 what was acceptable at this stage, but it could never be realised as the final point for the economic and monetary union. But now we are at a rendezvous point where we need to put the stage forward and now we have to realise that to share a currency is just sharing a joint and several liability, this is what is at stake.

ADAM BOULTON:
But from a French perspective it means Germany pays doesn’t it?

PERVENCHE BERES:
Well I think it cannot be so simple. You know the thing is, between France and Germany it has always been someone has something to bring to the couple and the difficult situation today is I think the French side of the couple is too weak and is giving up too much of its own view on how to have an equilibrium inside this crisis or outside this crisis.

ADAM BOULTON:
Sharon Bowles, when you look however at what is being discussed, you look at the letter tonight from Merkel and Sarkozy, there is not actually any of the nitty-gritty of the money or how the markets are going to be calmed in it. Is that kind of understood in these plans for the eurozone?

SHARON BOWLES:
Well I think we are going to have to have several things. We have got to have what has been called the fiscal compact which satisfies the ECB and is the kind of land mass on which we can land whilst we are wallowing around in the ocean at the moment but we still need the lifeboat that takes us to the land mass and that is something that helps to calm the markets. The idea has been floated that we can bring forward the European Stability Mechanism, that’s the permanent bail-out fund, and run that in parallel with the existing temporary one, the financial facilities and so that …

ADAM BOULTON:
So that’s a bigger pot?

SHARON BOWLES:
Yes, so then the pots overlap and that helps with …

ADAM BOULTON:
Has anyone said they are prepared to do that yet?

SHARON BOWLES:
Well it’s on the table, it is proposed and Van Rompuy I think is looking at those kinds of things. You’ve also got to make sure that you don’t have the requirement for unanimity or vetoes stopping deployment of these funds and all kinds of other things so I think there is quite a lot of the nitty-gritty they do have to grips with.

ADAM BOULTON:
Martin Callanan, the British Conservative position is we don’t think this is a very good idea but we think you ought to do it in our own interests and thank goodness we’re not part of it, is that basically it?

MARTIN CALLANAN:
I think the reality now is that we’re on the third bail-out of Greece for goodness sake, I think the euro, it’s time we recognised that it is unsustainable on its current course and borrowing more and more money, whether it is different pots, different bail-out pots, pouring more money into it and at the same time imposing unprecedented austerity on southern Europe is ultimately unsustainable and we should finally give up trying and accept that the euro should be a lot smaller than it is at the moment in my view.

ADAM BOULTON:
Is he right?

PERVENCHE BERES:
I had the opportunity to meet the CEO of Goldman Sachs not so long time ago and he obviously told us that there would be no big investor in the financial market that cannot be investing in the eurozone and so I think sometimes you have to listen to these guys who obviously know how the markets function. I think if you look at what is happening with the triple A for the eurozone that has been jeopardised by Standard and Poor, it is not so much that they don’t believe in the future of the euro, is that they are wary about the way it is proposed to be because it is only going to be proposed on the basis of history.

GUY VERHOFSTADT:
You have read the decision of Standard and Poor of two days ago?

ADAM BOULTON:
Well just tonight they have …

GUY VERHOFSTADT:
It is interesting to read it because in this decision that they have made public first in Frankfurt, they are saying that the main reason that they see is that there is a lack of economic, fiscal and political union. What Standard and Poor is asking for is that … I am not asking for that, it is Standard and Poor who are asking for it.

MARTIN CALLANAN:
If it was to work, that would happen but …

GUY VERHOFSTADT:
They are asking for that, that is now at stake. I don't think you can say with the euro who is losing and who is paying for that, I think everybody should lose if the euro should disappear and one of the countries that should lose the most if the euro should disappear is Great Britain, is the UK. It is the marketplace for euros.

ADAM BOULTON:
But against that, if you don’t have a central bank which is a lender of last resort and you don’t have the issuing of euro bonds, common bonds, there is …

PERVENCHE BERES:
This is something we are asking for, the parliament has voted this for several times, there is no doubt that we believe that …

MARTIN CALLANAN:
That is the reason why the European parliament is fighting for …

ADAM BOULTON:
My understanding is that that is not what they are saying in Berlin.

SHARON BOWLES:
Angela Merkel and Sarkozy seem to have put out a statement saying no euro bonds, Van Rompuy is saying we can have euro bonds when we have had the fiscal discipline and I think that is correct. You have to have some certainty that you have addressed the moral hazard but I think it would be a really big mistake to rule out euro bonds on Friday.

ADAM BOULTON:
We’ll come back to you in a moment but earlier this evening I spoke to the Belgian European Union Trade Commissioner, Karel de Gucht.

KAREL DE GUCHT:
We have to find a solution, we have to stop the bleeding and for that it is very important that the ECB plays its proper role. And by the way, if you will allow me to add, when President Sarkozy and Chancellor Merkel met a couple of days ago in France, they have said very clearly that the European Central Bank is independent in its decisions.

ADAM BOULTON:
Other than the political goal, if you like, of an ever closer union, why is it even important to save the euro?

KAREL DE GUCHT:
Oh I think it is of tremendous importance, even apart from the integrating factor because of the European Union has reached the level of integration we have, it is also largely due to the euro. Apart from that, the alternative is that the euro falls apart. Now this would be a meltdown, not only of the European economy but I think of quite a big part of the rest of the world as well. This would have a dramatic, and a dramatically negative impact on the economic development, it would make us considerably poorer, nobody would know how to get out of the crisis that we have arrived in in that way. I don’t understand that people are ready to consider this even.

ADAM BOULTON:
Well according to the agreement thrashed out by Angela Merkel and Nicholas Sarkozy this week which will be put to the European leaders at the summit, eurozone countries will face automatic sanctions if they break economic rules imposed by Brussels but will some countries be forced to call a referendum which would take time and risk the defeat of the whole idea. Do you see that there will have to be referendums in some of these countries, I mean Ireland is an obvious one?

SHARON BOWLES:
We are not for automatic sanctions because what they are proposing is what we actually had proposed in the so-called six pack legislation before, it is a change to the voting pattern in the council so that it has to be what we call a reverse qualified majority vote, that’s not a treaty change. We were able to change that to some extent already.

ADAM BOULTON:
But you would have to put it in the treaty wouldn’t you?

PERVENCHE BERES:
This is what they are suggesting and if you look at all the proposals they have on the table for this summit, they all can be applied without treaty change so I think it is only a political trick to have this treaty change, to show that you are strong and you are able to impose sanctions in the treaty but this is not reasonable and I hope this parliament will stand on its feet to say there can be no treaty change without a convention because if you are really going to move ahead to a fiscal union this is not only automatic sanctions …

MARTIN CALLANAN:
But this could take years, change could take years. We’ll be solving the next crisis! This is not going to do anything to resolve this one.

PERVENCHE BERES:
On this one we are agreed!

MARTIN CALLANAN:
It could take months or several years to even ratify it. This is not going to solve a problem that could actually result in the collapse of the euro by three weeks’ time, this is ridiculous. They are concentrating on entirely the wrong problem in the summit. They are not addressing competitiveness, nobody is talking about how we are going to pay off all the debt, nobody is talking about …

ADAM BOULTON:
But your fellow Conservatives are calling for a referendum.

MARTIN CALLANAN:
Yes, I think there should be a referendum because if we have …

ADAM BOULTON:
But that would delay things, that wouldn’t solve the …

MARTIN CALLANAN:
A referendum can be organised in a couple of months, it is going to take years for the thing to be ratified. It’s about time I think there was more democratic consent to some of these changes. Part of the problem with the euro and a number of the big countries like Germany, is there is no democratic consent to bailing out the rest of southern Europe. Nobody was ever asked whether the euro should be created in the first place.

ADAM BOULTON:
Well joining us now from Washington is Jose-Maria Aznar, the former Prime Minister of Spain. Now he led his country into the euro and with hindsight, Mr Aznar, was that a mistake?

JOSE-MARIA AZNAR:
Well no, I believe personally that the euro has been during the last decade a very serious success. The problem beginning with the rules of the euro, the poorer countries not respect the rules and we have losing this moment the confidence, the international confidence in the original rules of the euro and we must change the rules and recover confidence and trust.

ADAM BOULTON:
And how is Spain to avoid a decade of austerity now?

JOSE-MARIA AZNAR:
I believe that the new government of Spain fortunately is decided to take very strong decisions, to establish disciplines, to balance budget, economy, more open economy, more liberalisation, more privatisation, more flexibility, reforms of markets. I think one of the rules of the euro is the euro isn’t a guarantee of stability but as well it is a necessity to do flexible economies to gain competitiveness and this is a very serious moment for government but I have trust in the new government of Spain, the new Prime Minister, Mariano Rajoy, he has taken the right decisions in Spain.

ADAM BOULTON:
But the problem is as I understand it is you can’t have flexibility and stability. If you had the stability, the disciplines with punishments of the new fiscal union in the eurozone, then a country like Spain is basically going to have no flexibility at all in its own economic policies.

JOSE-MARIA AZNAR:
In my view, the general ideas that this proposal of Nicholas Sarkozy and Angela Merkel are in the right part in the right direction but we must pay attention in one very important thing. When we created the euro we created a monetary and financial area of instability but the responsibility of fiscal consolidation and fiscal disciplines is in the hands of the national governments. With common goals around discipline, we can bring forth this discipline and you can as well establish even sanctions but not out of the nature of the euro, not converge the euro in an area of harmonisation because this will be in my view detrimental for the growth, the future growth of several countries, of a lot of countries in the eurozone.

ADAM BOULTON:
Mr Aznar, thank you very much indeed for joining us and don’t forget, if you’ve got any comments you can join in the debate online. If you go to Skynews.com you’ll find a streamed version of this programme and if you’re on Twitter you can use the hashtag #eurodebate, all one word. Do stay with us, we’ll be live to Greece, Italy, Ireland and of course here in Brussels as well, asking will Europe have to sacrifice democracy to return to economic stability?

END OF PART ONE

PART TWO

ADAM BOULTON:
Hello again, we’re debating the crisis in Europe live from the European Parliament building here in Brussels. So one of the key questions is, should all eurozone countries be forced to agree to fiscal rules set from Brussels and what implications does that have for democracy? Sky’s Europe correspondent, Robert Nisbit, is in our Brussels studio. Robert.

ROBERT NISBIT:
Well Adam, let’s look at what’s sitting on the table before all of the leaders that is going to be discussed at this summit. In essence there are two proposals, one pushed by France and Germany, the other pushed by the European Council which is the chamber for this summit, and both are broadly similar in their push. They’re talking about bringing the eurozone countries into a much tighter fiscal hug and this creates problems and issues of course and discussions about sovereignty and whether this centralising push to Brussels will reduce the power of national governments to control their own destinies. In essence we’re going back to the stability pact that was pushed by Germany in the 90s, that no budget deficit should pass 3% of GDP and that no national debt should pass 60% of GDP but I think the most controversial element of this is that if a national government within the eurozone were to put together its budget, it may have to submit it first to say a stability commissioner in Brussels who would then pore over it. Also they are proposing that national governments within the eurozone would introduce a golden rule through their parliaments which would suggest that everything they did had to pursue the policy of reducing their budget deficit and balancing their budgets completely. So obviously you can see the problems here for the countries within the eurozone, how do they go back to their people and say look, we are going to lose some of the powers that we have over this, we are going to be handing them to Brussels. There are key elements in here that I think are going to be fought over the table, one of them particularly Adam that I think is crucial to talk about is the harmonisation of taxes. That obviously is a big lever for most national governments but what if they all have to agree the same, say Corporation Taxes and Financial Transaction taxes? That’s where things could get really sticky around the table.

ADAM BOULTON:
Robert, thank you very much indeed. Guy Verhofstadt, are we really going to see the end of the autonomy of the nation state for those countries within the eurozone?

GUY VERHOFSTADT:
That is not the end to the autonomy of the nation states because every member state of the eurozone shall be responsible to implement these rules and can choose different possibilities. One country can raise taxes and the other country can cut …

ADAM BOULTON:
But fiscal union implies a certain amount of commonality.

GUY VERHOFSTADT:
That is normal too. If you have one currency it is normal that you have the same fiscal rules apply to the different countries but you don’t have to say that it is a lack of democracy because it is the European parliament in fact who shall control those rules and …

MARTIN CALLANAN:
If your taxes are harmonised, if your spending is harmonised, if your Corporation Tax is harmonised, if all your borrowing is harmonised, how can you … what choice do you have in an election?

GUY VERHOFSTADT:
I am talking about convergence. What means convergence is that you in fact give a narrow rote on which the different economies of the union have to develop themselves with minimum values and maximum values to avoid social lumping on the one side and to in fact guarantee the competitiveness of our economies on the other side. What we shall do, what the Commission shall do, I hope that it is the Commission, is simply to see that the different countries are following these policies. If not, they can be sanctioned and penalised.

ADAM BOULTON:
Would that degree of control be acceptable to the French?

PERVENCHE BERES:
As you we are now entering an electoral campaign in France and I can see that when President Sarkozy is going to propose that we go back to this debate on the golden rule, to be introduced in the constitution just before we are having these elections, it really looks like bad news and a trick when he has been responsible for much of the difficult situation we are now in in France. So I think he is really the last one to be able to impose to France the introduction of this golden rule in our constitution but the reality I think we are facing is that beside the consequences of this crisis and its multi-dimension that we are facing is that since the euro was established we have been only under the growth and stability pact, growth was only nominal there and the idea behind this pact is that you need to have your house in order. What this crisis shows and what the history of the euro shows is that it is not enough and what is lacking is what you are doing together.

ADAM BOULTON:
But that does involve giving away sovereignty doesn’t it?

PERVENCHE BERES:
It depends how you do it. If you involve the European parliament, if you involve national parliament at the right time with the right power, you will do it okay but the problem is today the proposal that is on the table by Merkozy is not this one.

ADAM BOULTON:
The European parliament by definition is not a national parliament is it?

SHARON BOWLES:
We are elected and we …

ADAM BOULTON:
But you are a small component of …

SHARON BOWLES:
There are other organisations in it but the crux of this matter is that if you are in a currency union then it makes absolute common sense that generally you have to operate a balanced budget in the interests not only of your own country and the lessons of the past show us, it is a bit like financial markets you know, self-regulation hasn’t worked and so what are we going to do? So therefore you have to have a certain amount of regulation there and countries are applying these to banks, isn’t it about time that they applied them to themselves?

ADAM BOULTON:
Well of course that has already had consequences for changes of government in some countries, by election or not, one of those is Ireland where a new austerity budget has been introduced this week and joining us now from Dublin is Micheál Martin who is the former Foreign Minister for Ireland and now leader of the opposition Fianna Fail party and the party that described Germany as the greatest threat to Europe. Micheál Martin, you in Ireland changed the government through an election, does that mean that Ireland is still in control of its future as Enda Kenny the Taoiseach said at the weekend?

MICHEAL MARTIN:
Irrespective of whether you are borrowing from a bail-out facility or the bond market, there are limitations to one’s sovereignty, that’s a natural fact of life. Wasn’t it Carville who said he wanted to be reincarnated as a bond market because then he could really intimidate people? So sovereignty is something that we agree to share in accordance with our wishes so that when we joined the European Union, when we joined the currency, there was a certain sharing of sovereignty. Our problem really, and my analysis of this is that we are looking at it through the lens of a narrow fiscal control agenda which is not actually the origins of the problem, the origins are more of a financial crisis that had precipitated a crisis in sovereign debt and that in this instance we have a single currency without really a normal functioning central bank. If you compare the eurozone collectively with for example Great Britain or indeed with the United States, you’ll see differences fundamentally in the United States and Great Britain, they are not experiencing the sovereign debt crisis that the eurozone is yet the collective debt of the eurozone is actually not in any way as bad as the United States debt or indeed Britain’s itself. In our view what is happening at the moment worries me because I think there is a fundamental flaw in the analysis. It’s not just about a narrow fiscal control agenda, because if it was we for example in 2007, the European Commission actually commended Ireland for compliance with the fiscal, with the master criteria and so on, and we know what happened afterwards.

ADAM BOULTON:
Does that mean you would therefore support Ireland signing up to stricter rules including fiscal union within the eurozone?

MICHEAL MARTIN:
What I am saying is I think, no what I’m saying is that the analysis is wrong. I don’t actually think the issue is just about narrow fiscal control, I have no difficulty with surveillance, it’s in our interests, it’s in every country’s interests to have sensible budgetary policy and strategy but I think what is more imminent and more important is that the European Central Bank becomes the lender of last resort which it isn’t at the moment. That lack of certainty for the markets is what is really precipitating the crisis and I don’t see anything in the proposals so far, at least explicitly, that would suggest that the European Central Bank is about to become that lender of last resort and to buy bonds at issuance. I think that fundamentally is at the core of this problem and treaty change and all of that has problems attached to it as earlier speakers said, because of the length of time it will take to implement and so on. I think we really should leave the politics outside the door and get to the core of the immediate problem of the immediate crisis and take steps that will give the markets the confidence to start buying European sovereign debt.

ADAM BOULTON:
Micheál Martin, thank you very much indeed. Well of course in Greece they changed government in a rather different way, let’s go to Athens now and be joined by the economist, Louka Katselli, who served as Minister for Labour and Social Security in the Papandreou government before being expelled from the party when she voted against elements of the austerity reforms in October. She is also director of the OECD in Paris. Thanks very much indeed for joining us, do you think it is sustainable for Greece to carry on in the eurozone as it is at present?

LOUKA KATSELLI:
Yes, I think it is sustainable provided that Europe sorts itself out, that we have financial stability in Europe and that we proceed with implementing the medium term fiscal strategy we have with all the structural reforms that we have put forward.

ADAM BOULTON:
That begs the question really as to whether Greece can deliver, whether it can start raising taxes and whether the people can put up with a decade of austerity.

LOUKA KATSELLI:
Greece has already delivered in terms of the fiscal adjustment. Don’t forget that we started this with a budget deficit which was over 15%, now the fiscal consolidation outcome is about 9% of GDP so we have managed to put forward a major fiscal reform together with all kinds of structural reforms. The problem is the recession, it is a deep recession and I agree with previous speakers that fiscal consolidation is a necessary condition, especially for countries of the south but it is not sufficient. We need growth to resume and for growth to resume we need a Europe which is growing rather than a Europe which is falling into a deeper recession. We need central banks to intervene to provide stability in the market, we need reforms in terms of financial protection, so that we can have rules of conduct for financial markets, for credit agencies and we need some control over tax havens which are unregulated, so the package is much more than a fiscal compact, the fiscal compact is one element of this package but for Europe to put its house in order it needs actually a pro-growth agenda and a pro-employment agenda.

ADAM BOULTON:
And what about democracy? Greece invented the stuff, you haven’t got much of it now have you with a technocratic government?

LOUKA KATSELLI:
Well I am worried as well about the deligitimisation if you want of democratic processes. That’s why we think that this government is an interim government which we have agreed to and we have voted for it so that it can really provide a framework for all parties to collaborate, at least the three major parties to collaborate. Yesterday we voted for a budget, 258 parliamentaries voted this budget, so we expect elections to come soon and we hope that through this election we can be stronger to implement more effectively the structural reforms so that we can enhance competitiveness and have a fiscal consolidation which is credible and sustainable.

ADAM BOULTON:
Thank you and finally to Rome and Rafaelle Fanetti who is a senator in Berlusconi’s party in the Italian parliament which has agreed to an austerity package representing £17 billion of savings this week, thank you for being with us too. What are you looking for Mr Fanetti?

RAFAELLE FANETTI:
We are looking for confirmation of the seriousness of the European leaders to put forward a proposal which would guarantee a better, more solid European institution. Italy has always been behind, it is a founding partner of the European Union and we expect something stronger to come out in terms of institutional capability and signals to the market.

ADAM BOULTON:
It means effectively, does it, if you have fiscal union that other countries with stronger economies, Germany, would be putting themselves to a certain extent behind Italy’s financial position?

RAFAELLE FANETTI:
Well I guess we are all in the same major problem, we are facing financial markets which are in turmoil and we have to provide a definitive and common answer to it so Italy owns 26% of the euro denominated debt so we have an important responsibility and it is the reason why we have put together the strongest majority in the parliament to support the Monti government and now we expect a strong answer from Europe all together.

ADAM BOULTON:
As a supporter of Silvio Berlusconi, how do you feel about the fact that the German Chancellor phoned the Italian President to discuss how he could be moved out of office?

RAFAELLE FANETTI:
This has never been confirmed. It was a co-ordination from the institutional point of view by President Napolitano which had the Italian institutions sort out a problem and now the Berlusconi majority in the parliament is still there and is supporting the Monti government so we are very much in the picture and we are doing responsibly our biggest effort to provide a solution to the fiscal problems that Italy has deriving from the huge debt that was accumulated in the last 50 years so it is not our own responsibility of course but our responsibility behind the Monti government’s success at least so far.

ADAM BOULTON:
Thank you very much indeed. By some British analyses, Germany appears increasingly isolated as the European crisis unfolds but is Micheál Martin right to say that Germany could potentially be Europe’s biggest problem? Do you think what we heard there from those countries that are under pressure was credible, the sorts of things they want? Are they on the table in your view?

MARTIN CALLANAN:
I have a lot of sympathy with Germany’s position, I have to say if I was the German Chancellor responsible to my tax payers, and the Germans see themselves as being very frugal and having had a sound currency, they were never told that joining the euro entailed them guaranteeing all of the debts of what they would regard as feckless southern Europeans and now there is a tremendous resistance in Germany so I think if it was Britain on the line I’m sure David Cameron would be under similar pressure from British taxpayers. This is the problem and your previous speakers illustrated that. What they want is euro bonds, mutualisation of debt, they want somebody else to stand behind them and account for the mistakes that they have made in their own fiscal policies, this is the problem with the euro and you talk about democracy, it won’t be long of course of before an extremist party in these countries start to say there is an alternative to this, we don’t have to have our tax policies dictated by unelected bureaucrats in Brussels, we don’t have to have our fiscal policies dictated by what they would regard as foreigners. It is unsustainable from a democratic point of view, what’s the point of an election if you can’t control your tax policies, you can’t control your spending policies, you can’t control your borrowing policies because you are forced down this narrow road. As Guy said, this is fundamentally undemocratic.
 

GUY VERHOFSTADT:
I think first of all I have to say the Germans have all interest to keep the euro and they have enormous advantages of the single currency so you are only talking to what some German tax payers are saying.

MARTIN CALLANAN:
I don’t see them making the sort of commitments that have been talked about there.

GUY VERHOFSTADT:
I think it is important to say that Germany has all interest to keep the euro and that is the reason why they want to talk about solutions for the euro but Mr Martin is totally right, it is not only about the fiscal union, it is also necessary to create for example a bigger role for the central bank. Let’s make comparison, let’s look to the US. The US have 100% of debt, no problem. Look to Japan, 229% of debt, no problem, the lowest interest rate in the world. The reason why we have problems and they don’t have problems is there is a federal state behind, there is a big central bank behind, there is a bond market behind and that is the reason why …

ADAM BOULTON:
Is that on the table for the discussions here in Brussels?

PERVENCHE BERES:
It will come, it will come. All these historical summits, they have been followed the one after the other. The only difficult situation, it is true that you are all saying that the next summit is going to be an historical one, I am not so sure because …

ADAM BOULTON:
It was Olli Rehn I think who is in charge of the Financial Commission, he said this was the summit to save the euro.

PERVENCHE BERES:
But the main proposal coming from France and Germany is about to completely change and you cannot solve this crisis with a treaty change. I don’t like to follow always the market but I still need to restore their confidence and what they are asking for and what everybody needs is just to know that the ECB will intervene to stop …

ADAM BOULTON:
But that is the question isn’t it? What is being discussed here, are people moving quickly enough? We have been told it will happen eventually but it is not on the table now, is that going to be good enough in your view?

SHARON BOWLES:
I think this is the problem, there has to be enough on Friday, Thursday and Friday, that is good enough. If it is not good enough then we really are in trouble and therefore I think all the options have to remain on the table and an awful lot of them have to be picked up. It doesn’t mean euro bonds tomorrow because that would be wrong because there would be moral hazard but there are different kinds of joint issuance, the same as we have got in the bail-out mechanism that could be utilised. The ECB we have to remember is independent and the parliament will defend that, I am committed to defending the independence of the ECB but they have mechanisms to intervene, again when they think the moral hazard issues have been addressed.

ADAM BOULTON:
Okay, we’ll be back with this in a moment. Don’t forget, if you have got any comments you can join in the debate online if you go to Skynews.com, you’ll find a streamed version of the programme and on Twitter just use the hashtag #eurodebate, all one word. Do stay with us, next we’ll be asking if it matters if the European Union or indeed the euro breaks up, what it would mean for Britain.

END OF PART TWO

PART THREE

ADAM BOULTON:
Hello again, we’re debating the crisis in Europe, live from the European Parliament buildings in Brussels. Now there have been some dire warnings that this crisis could culminate in the breakup not just of the eurozone but of the European Community itself, with many predicting the first country out could be Britain. So does that matter? Sky’s European correspondent, Robert Nisbit, is in our Brussels studio. Robert.

ROBERT NISBIT:
Adam, really the existential threat at the moment of course is the euro but what you’ve heard, certainly from the language of people like President Sarkozy and Angela Merkel, when they have been talking to their own national governments, is that a threat to the euro is a threat to the European community and the European union and they have been using it really as a cudgel I think by which to sell their programme which is more austerity for the countries that they believe have been the financial transgressors. Of course you also heard it from prime ministers who are no longer prime ministers in the eurozone like Mr Papandreou from Greece, he was obviously talking that up to sell his plan to his national government but I think what is most likely is that probably the tectonic plates will start shifting around the European Union. Now what does that mean for Britain? Does it mean that there is not just a two tier Europe, i.e. a much tighter core of eurozone countries and then other countries that don’t use the euro pushed to the periphery or could it actually mean a three tier Europe, with France and Germany and the powerhouses clumped in the middle, then other eurozone countries a little bit further outside and then Britain really out in the cold? All of this of course is a problem and a political problem for David Cameron and successive government and think of those other governments that are a part of the European Union and when they actually reach the special commitment that puts them on the path to the euro, they’re having virtually no say in this whatsoever. Think of Croatia, they’re going to be signing and joining the European Union maybe in 2013 so obviously there is a lot for the British government to watch here but also a lot for the British government to lose. Remember, Europe is the biggest trading partner, they buy our stuff and that is why this is crucial.

ADAM BOULTON:
Robert, thank you. In the House of Commons today the Prime Minister said he will be bringing the Bulldog spirit to Brussels tomorrow but earlier the Germany MEP, Mr Pottering, speaking to Robert, warned that David Cameron should stop being negative about Europe.

HANS-GERT POTTERING:
I would like to see not on the Prime Minister, I would like to see a British position which is positive and not negative. I don’t want to hear about vetoes, I want to hear about people who have responsibility to say we make our contribution that Europe works because even for the British, this European Union and the existence of the euro is so important that everybody, including the British government, should make a positive approach and work together with all the others.

ADAM BOULTON:
Well joining us now from the centre of Brussels, speaking of being positive about Europe, is the leader of the UK Independence Party, Nigel Farage. Mr Farage, presumably you are looking forward to the break-up of the euro and preferably the European Union as well?

NIGEL FARAGE:
Well I’d like to see David Cameron make some positive arguments tomorrow. I’d like him to say to the 17 eurozone members who are on the verge of abolishing national democracy, please don’t do this guys, it is a huge error, it will lead not just to the rise of extremist parties but it will probably lead to huge violence and possibly even a revolution in countries like Greece. I’d love him to say that but yes, honestly, even if I had some residual sympathy for the European Union, it went when the democratically elected governments of Greece and Italy were removed by the bully boys of Brussels and replaced by their own lackeys. The sooner this thing breaks up and the sooner we get back to a Europe of sovereign nation states, co-operating together, trading together, being good neighbours with each other but running their own affairs in a democratic manner, I will be delighted.

ADAM BOULTON:
I’ve got to put it to you that I’ve just been speaking to people in Athens and in Rome and their argument is that these governments were ratified by elected parliaments, that they are there for a temporary period and that they are therefore democratic, at least I suppose as democratic as members of the House of Lords sitting in the British cabinet.

NIGEL FARAGE:
Listen, Mario Monti, the Prime Minister of Italy, now has a cabinet, not one of whom is elected and is directly accountable so I don’t buy that argument at all. Really what you have had on this programme tonight from Athens, from Rome and mostly from Brussels, are members of the political class who invented the euro, who have been the architects of this failure and nobody in these countries is actually having the courage to stand up for national democracy. The political class has never been more out of touch with public opinion, with business opinion and I think we’re going to see some very, very radical political changes over the next few years. These people have simply failed.

ADAM BOULTON:
So as far as the British national interest is concerned, which your party says it represents, do you or do you not want the eurozone to hold together?

NIGEL FARAGE:
I think the worst thing that could possibly happen is if countries like Greece and Portugal are kept inside this economic prison of the euro. The austerity measures being forced upon them without the compensation of devaluing currency will drive them into depression, mass unemployment, huge civil disorder and possibly even worse than that. If we were good Europeans what we would do is we would help them get their currencies back and attempt to start massive capital flight from those countries.

GUY VERHOFSTADT:
What is the answer, Mr Farage? You want the break-up of the euro? Is that what you want? What about Britain, the most important trading partner of Britain is the eurozone, is that in the British interest, Mr Farage, to break up the euro?

NIGEL FARAGE:
My dear Mr Verhofstadt, listen, whether Britain is a member of the EU or not, Mercedes will go on selling their cars in Britain and we’ll buy French wine and we’ll go on doing business. I had a meeting with some Swiss people yesterday, they were astonished that we were talking about trade …

[All talking at the same time]

NIGEL FARAGE:
… in the European economic area and the EU is negotiating separately sixty free trade deals around the rest of the world. We don’t need to be part of a political union …

GUY VERHOFSTADT:
If you will allow me, I hope Mr Cameron is more intelligent than Mr Farage has been and that he is not continuing to block solutions because the solution is very clear. If Mr Cameron really wants to block solutions now on Friday in Brussels, what will happen is that the 17 members of the eurozone will go forward with more … That is a decision taken by the British government because the British government can come into the euro, they are allowed to come in the euro, to strengthen the euro even if they have a public …

NIGEL FARAGE:
There is no chance of the UK joining the euro, we have seen the mistakes that have been made and we surely don’t want to repeat the problems, I can assure you.

ADAM BOULTON:
But your position is different from the UK Independence Party, you do want to support the eurozone integrating further?

MARTIN CALLANAN:
I think it is the business of the eurozone whether they want to integrate further or not, what I want to see David Cameron doing is protecting the British national interest. The British national interest is being involved in the EU, it is taking part in a single market and it is …

PERVENCHE BERES:
But you cannot then take advantage of the eurozone and asking to give up any of the rules or give up any of the regulations on single market …

MARTIN CALLANAN:
… the eurozone is unsustainable in its current form and it will be the best solution for some members to leave.

SHARON BOWLES:
That’s not the government’s position, this is not sustainable.

ADAM BOULTON:
Is it not the time now for Britain to say in order to let you go forward, because we effectively have a veto like the other national members, we want something in return, we want to take powers back?

PERVENCHE BERES:
But this is what they are doing, this is what they are doing.

MARTIN CALLANAN:
I think we want to take powers back in terms of protection of financial services in the City of London, I think they want to take powers back …

[All talking at the same time]

PERVENCHE BERES:
You can’t do that, that is not acceptable.

MARTIN CALLANAN:
The EU has stopped us from growing ….

ADAM BOULTON:
Why is it not acceptable?

PERVENCHE BERES:
Because everybody knows that the best interest of UK is that the euro survive, even Mr Farage somehow with his stupid solutions said that he doesn’t want the euro to collapse because it is in the best interest of the UK …

MARTIN CALLANAN:
I don’t want it to collapse either …

PERVENCHE BERES:
… and without the euro you can say goodbye to the internal market of the EU.

MARTIN CALLANAN:
Come on, we had the single market before we had the euro.

ADAM BOULTON:
What is going to happen if David Cameron comes here and says look, I will let this go through but I want something in exchange? What’s going to happen?

PERVENCHE BERES:
This is not democracy.

GUY VERHOFSTADT:
That is not the way to deal with this crisis. If he tries to use this crisis of the euro to have some other changes which are not in the European Union, I think this is a stupid game to play. You can’t play with the euro …

[All talking at the same time]

ADAM BOULTON:
But this will cause problems in the coalition as well won’t it?

SHARON BOWLES:
Ah well, you’ve got to realise that all leaders, and it is a very bad thing, are left pandering to their own national populations so …

MARTIN CALLANAN:
Why is that a bad thing, Sharon, to be accountable to your own population? Come on!

SHARON BOWLES:
Accountable is one thing, but actually pandering to an opinion where you have not actually put forward the argument. What I am going to say is Merkel has to say that the ECB can’t intervene in a quantitative easing and she has to say that there isn’t going to be a transfer union. Sarkozy has to say that France can’t give up control and sovereignty and inter-governmentalism and in the UK … you’ve had your go, in the UK Cameron says that he has to go for repatriation. Well I’ll tell you, all three of them are wrong and all three of them have got to give because otherwise you will have a mess and the mess is unaffordable.

ADAM BOULTON:
We’ve got a minute left, I just want to ask you a yes or no question – in a year’s time will there still be a eurozone with 17 member nations?

PERVENCHE BERES:
Yes.

GUY VERHOFSTADT:
Yes.

MARTIN CALLANAN:
Of course not, it’s impossible.

SHARON BOWLES:
If they do the right thing on Friday.

ADAM BOULTON:
You think they could possibly?

SHARON BOWLES:
I think they could possibly but I have to say that this is not what …

ADAM BOULTON:
And in ten years’ time will Britain still be in the European Union?

SHARON BOWLES:
.. it is not the end of the story.

GUY VERHOFSTADT:
I hope so but of course I think the place of Britain will be … but maybe they shall be members of the euro.

PERVENCHE BERES:
Yes.

MARTIN CALLANAN:
Yes but I think the European Union will look very different to what it does now.

ADAM BOULTON:
We end on a point of agreement, thank you all very much indeed. That was our debate on the European crisis, full coverage of that summit of course coming up on Sky News over the next two days. Thank you for being with us.