at the olympics to take up sport in a way that they might not now. if you just crack that, that would already have such a dramatic effect on the health and well-being of the young people in this country. so i think it's an immensely exciting. i hear some people say, there's going to be disruption. yeah, there is going to be a bit of disruption. thousands upon thousands of people. but at the same time i think it's going to be a showcase for us to show ourselves off to the rest of the world. >> actually, this week, we've got the school games taking place at the olympic site. and i agree that there hasn't been enough competitive sport in our schools for many, many years. we need to get competitive sport back, team sport back in schools. and the school olympics has been a great success. over half the secondary schools in the entire country have taken part and this week the finals are taking place at the olympic park. the other thing is, all of the venues we're securing a legacy for. so it's not like some olympics

where you build great facilities and then a few years later they are all covered in tumbleweed or you've actually had to take them down. almost all of them are going to have a real, tangible legacy and huge amounts of use for the future. whether the velodrome for cycling or the aquatic center for swimming. we've secured legacy. it's one of the reasons we won the contract, the contest for the olympic games was it's a legacy games with real use for the facilities afterwards. next question. gentleman at the back. >> will there be more quantitative easing this year? >> oh, no, we don't want to talk about that because it's the bank of england which is entirely independent as it should be. but i think one thing that has been obvious in everything we've done over the last two years is if you want in the jargon of a monetary authorities central banks to do their bit to kind of get some money into the system, they are only really going to feel free to do that if they feel the government is doing its

side of the bargain by kind of filling the black hole in the public finances. so there's been a lot of activity from the bank of england over the last period, quantitative easing. it's immensely important to the british economy. i think it's unlikely that would have been possible if the government at the same time hadn't been kind of dealing with this deficit and debt issue at the same time. >> that's absolutely right. sometimes what people say to us why not just go easy on the public spending decisions. why not go easy on the deficit and the debt. if we did so, you could see any rates go up. and for every 1% on interest rates, basically hits the typical family mortgage by about 1,000 pounds a year. so it would be totally self-defeating which is why i think we need to stick to the plans we set out. tough and difficult though those are. we're going to take a couple of questions from the press, if that's okay. mr. robinson from the bbc. >> thank you very much, deputy

prime minister. nick robinson from bbc news. europe is turning its back on austerity. do you fear that britain is beginning to turn its back on austerity? mr. clegg, if growth is a priority, why are you forcing him to back house of lords reform? and mr. cameron, why on earth are you letting him? >> let's deal with this issue of what you call austerity, what i call efficiency, dealing with our budget and getting growth at the same time. that's what we need to do. we need to do both those things. if you look at what president hollande is suggesting in france, his program forgetting rid of his budget deficit is pretty much on a pathway with ours. i think it's a bit of a myth to believe that somehow there's some people in europe that are going to spend a lot more money and those of us who realize we have to deal with our debt and our deficit. we all have to deal with our deficits. if we don't, our interest rates will go up. that's the fact and that's why we've got to deliver these difficult public spending

reductions that also everything we can do to get growth at the same time. now house of lords reform, okay. i wouldn't for a minute say this is the most important thing the government is doing. of course it isn't. but parliament is quite capable of doing more than one thing at a time. do i think it would be a good idea if actually parliament delivered a house of lords that had people who were elected by you, the members of public in the house of lords to pass the laws that we all have to live by? sure i do. and every single party, major party, went into the last election saying that they wanted to reform the house of lords. so i think it's a perfectly sensible reform for parliament to consider. as i say, what matters, the things we're really focused on, getting that deficit down. getting our economy moving and creating a country and a society that's more worthwhile where people feel if i put in, i get out. if i work hard, i do the right thing, i will be able to do better for myself and my family. that's the program that the government is really pursuing.

but sorting out some of our constitution at the same time, i don't see why parliament can't deal with that, as i said. we'll cut away from this recorded program and take you back as we return to the nato discussing security challenges and close the gap on the military capabilities. >> -- now defunct western european union. clearly there's a new impetus brought about by rising defense costs and falling defense budgets. what really fascinates me on this particular issue really is the dominant underlying narrative in which this debate takes place. in some it's about europe does not pull its weight in the alliance and that europe and nato is heavily subsidized by the united states. if my view, this is a rather simplified and distorted view, not only of the nato budgetary

process and how the public good of security shared, funded and measured in an alliance. nonetheless, having said that over the years, there have been many colorful warnings that describe these capabilities gap and the unequal burden sharing, and the number of speeches last year, robert gates probably did more than most to revive this debate, though for me i rather like one of the latest comments which robert kaplan referred to in an article last week. he cited a u.s. air force planner who was clearly exasperated by the shortfalls in key european capabilities during the libya intervention, and he described nato as like snow white and the 27 dwarfs. so the billion dollar question is this, can the smart defense approach a pooling of resources

and integration of transatlantic, especially european military procurement to ensure the alliance retains needed capabilities even at a time when the allies are making deep defense cuts or, to put it into the language of that u.s. air force officer, will those european dwarfs be whistling while they work, will they be doing so in tune and on the same song sheets? will they be taking on a larger share of the burden of keeping snow white safe from the clutches of a mean al qaeda affiliated stepmother and will we all be ensured a fairytale ending which essentially means more security for smaller defense budgets. to answer these tricky questions, we have a very talented panel. because we're on c-span, i'm going to give a brief resume of

the four speakers we have. we have julia smith who has just become deputy national security adviser to vice president biden. previously served for three years as principal director for europe and nato policy at the pentagon. i'm prior to joining the administration she was director of the european program at the center for international studies. before that she was with basic as a former basic person, there's still time for me to invite you to the ball i hope. next to me on my left is an drash simone ye, managing director of the center for transatlantic relations at johns hopkins. previously hungarian ambassador to united states and before that the first hungarian permanent representative on the nato council. he was a negotiator on the

preparing hungary's membership in nato. to my immediate right is john fefr, co-director at the institute of policy studies, 2012 open society fellow looking at the transformations across eastern europe. he's also been a writing fellow at the provisions library in washington, d.c. and a pan tech fellow in korean studies at stanford university. mayor yoes me opinion loss is president of strategy international based in greece. nato specialist, former visiting scholar at the center for transatlantic relations, visiting fellow at the george washington business school and eu center of excellence in washington, d.c. he has a book coming out on nato security future in greece. i think just from the resumes, you can see they've each got a lot to offer on this particular topic. i'll be asking them to speak for 10 to 12 minutes and i'll be

playing the role of the wicked witch if they look like they're going over time. julie, let's start with you. >> thank you very much. thank you for the invitation. it's god to see more friends and faces, particularly those from basic. so we all know that the defense budgets of allies inside the nato alliance have been an ongoing challenge for the alliance, and not just in terms of what allies spend, i think it's also been a question of how allies spend the budgets that they have in hand. and this has become increasingly worse over the last couple of engineers for a couple of reasons, most notably the financial crisis which all of the 28 members of the alliance are grappling with and turning to their defense budgets for some possible relief, including cuts that are coming here in the united states. but what's changed about the cuts that we've seen over the

last months and recent years is two things. one, the actual size of the cuts that we've been witnessing has changed quite dramatically in years past and decades past, we've seen allies cut somewhere from five, six, seven, eight -- let's say between 5% and 10% of their defense budgets. this has had an impact on their alliance. it wasn't really what i would describe as a crushing blow in any way, shape or form. what's changed is now we're seeing countries cutting upwards of 20%, 25%. that's where i think some really tough choices have to be made by nato member states. they really are forced to prioritize. sometimes that's very helpful and useful because there's no question that there are instances where one can easily find inefficiencies and waste. i think when you're talking about a 25% cut in most defense

budgets, particularly those that have already seen cuts in recent years, you really start to feel that collectively inside the alliance in terms of new capability gaps that have been appearing. the second thing that's been happening that's changed a little bit in recent years, vis-a-vis defense budgets has been the actual type of the cuts we've seen unfolded on the european continent. traditionally what would happen, when a country was faced can cutting their defense budget, they'd kind of skim across the top and take little bits from all the different areas, whether it's r&d or acquisition, personnel. everybody would be affected one way or another. but what's happened now is that countries have been forced to move forward with what we call not horizontal but vertical cuts. that's where whole capability elements are eliminated entirely. one example that's cited quite frequently is the dutch decision

to eliminate all of their tanks, all of their armor. and one could argue that from a dutch national security perspective maybe that was a decision that was wise and long overdue, but one has to also ask the question had there been a conversation in nato among all of the allies to determine whether or not that actual capability might be needed in years ahead. say, looking out over the next decade. that type of a conversation is not happening. so that's another problem that i would point out is that inside capitals nah nato member states, individual members are taking these rather radical decisions in some cases and again might seem perfectly reasonable and rationale for each of the member states to take those specific decisions like the dutch eliminating armor or the danes many years ago eliminating all their submarines. but what's not occurring is there's not a wider conversation inside the alliance right now

about what should we be ring fencing, what do we think the future missions could look like. where do we think we should be spending our very limited resources and what guidance could we offer to capitals to say, look, if you have a choice between x and y we'd prefer you lean towards x instead of y or vice versa. this is again something that's not occurring, and i think will have a long-term impact on the alliance collectively. the other bit of bad news i would say in terms of just sketching out the nature of the problem before i get to what's happening at the summit is that it doesn't seem like the cuts that we're seeing right now, whether they're vertical or horizontal or 5% or 20% show any signs of stopping while the uk does technically have, when it looks at its defense planning out into the next decade, it has a bit of a reversed bell-shaped curve where

they're planning for a brighter day when there will be an uptick. one is not entirely sure whether or not that will actually occur. one could give credit to london for at least thinking that that might be a possibility. unfortunately, mine are on the dramatic downward spiral with no anticipation that that may level out at some point or begin to tick upward. i think the last things i would say in terms of the nature of the problem is it's not all bad news when it comes to defense budgets and defense spending inside the nato alliance. one thing i would point out is despite the fact that we've seen these quite dramatic cuts and the financial crisis is putting quite a squeeze on many member states. we're not seeing nations pull out of current operations due to the financial crisis. we have not had any countries step forward and say we are leaving afghanistan tomorrow

simply because we can't afford it. there are countries that are going to be accelerating their departure, possibly from afghanistan. some have already opted to leave afghanistan from a combat perspective. but the reasons for that have not been laid out explicitly tied to the financial crisis. so generally speaking, i think with few exceptions we could say that despite the gloomy news on defense spending and defense budgets, we have seen an environment where operations have not been impacted in a dramatic way. in fact, nato undertook libya and no one came to the table and said we simply can't afford this right now. what is happening though is while countries are trying to maintain their commitments in current nato operations, they have not been able to maintain their commitments to modernization or transformation, whatever you want to call it. so that's the part of the defense budget that has probably take ten greatest hit, not the

actual operations, per se. the question on the table is as countries come out of afghanistan and we work our way through the transition, what will happen to the resources that were dedicated to those operations. one would hope they might be funneled back in to develop capabilities that are lacking or to draw lessons learned to ensure that those resources are reinvested in a way that helps the alliance long term address some of these capability gaps. but, in fact, i think that we will continue to see modernization efforts stalled and i don't expect we'll see a major uptick in those efforts in the years ahead. so that gets us to -- that's kind of a quick burst on the nature of the problem, how we're looking at it. the question is what can this summit possibly do to alleviate that situation or help this capabilities challenge that the alliance is facing. the alliance has come up with, as ian mentioned, these nato

forces 2020 construct which mirrors a little bit the u.s. joint forces 2020 construct as the u.s. was undergoing its recent defense review and coming up with a defense strategy. and the concept is that, you know, the united states as an individual nation and nato collectively as an alliance has to do some long-term thinking about where it wants to be in ten years' time or let's say eight years' time and outline the types of missions it envisions undertaking in the future and what capabilities will be required to undertake those missions and try and set kind of some -- identify some kind of priority areas for the alliance knowing that most allies simply aren't going to be able to do everything all the time. not every ally in the alliance will be able to be a full-spectrum ally, an ally that can do everything from peacekeeping up to high intensity combat. we already have a number of ally

that is have reached that point and been able to develop niche capabilities. if it's not coordinated, it's like a pot luck dinner, everybody brings salad or you don't have brownies or a main course. how can we better coordinate these ef fords? the suchl mitt is going to try to start tall lines to help identify those priority areas. it's going to start first and foremost with delivering on some of the commitments that were made in lisbon. you might remember at the last summit in lisbon, the alliance launched this lisbon critical capabilities commitment where the alliance identified ten priority areas where the alliance would commit itself to enhancing its capabilities in these core areas. it ranged from everything from counterer ied to ags, a long list of longstanding capability gaps, new capability gaps

highlighted in afghanistan and capability gaps tied to future challenges like cyber. so what we wanted to do in this upcoming summit in chicago is to move forward with that list and lisbon we're following through on those. and two of the key milestones there will obviously be missile defense, and we can talk about this in the q & a if you like, that the alliance will be declaring capability, and secondly, it will be moving forward finally after it points out this is nothing new, but it's it's a miracle we closed the deal on hes. and for those of you tracking hes, it's been a very difficult effort to get all 13 nations to procure this capability, five global hawks, but also get the alliance at large to support it and maintain it at 28, not just the 13 procuring that particular capability. so that's part of the

capability's package in chicago. oh, i know i'm running out of time. let me just go through a couple other things quickly, and we can cover other things in the q & a. smart defense ian mentioned where the alliance will be coming forward with a group of 20 pooling and sharing initiatives. here, smart defense is essentially trying to do more with less. and this is a concept that's been tried by groups of allies, either who have opted because of they're in the same geographic area or in the same kind of weight class from a capabilities perspective, to join hands and develop a capability that could be utilized by the alliance. there are some very positive success stories where this has been tried in the past. some have not been as successful. but i think the point of this summit is to try and get more of those to take root, and push countries to step forward and offer to lead specific capability initiatives in areas that have identified as critical, such as helicopter maintenance, maritime patrol

aircraft. there's a very long list. munitions, storage of munitions, a gap that was highlighted, in fact, in the libya operation, as well. here the u.s. is going to step forward and lead three of these initiatives. it's going to participate in six of them, we believe. and on top of it, one of the other smart defense initiatives that will be rolled out in chicago is baltic air policing, which has been ongoing, but there is a new commitment to extend that beyond 2018. and on top of it, we expect the baltic nations to come forward with additional offers for host nation support. the last thing i'll mention is training. i think in this era of defense cuts and where we're segal lies eliminate entire capability elements, it's absolutely critical that the alliance put a very heavy emphasis on training to keep skill sets alive, assuming there may be brighter days ahead. an example of this would be the u.s. and the u.k. coming

together to sign carrier cooperation agreement most recently because the u.s. -- the u.k. will not have access and will not have carriers at its disposal. but it will continue to ensure that its military is trained and will be working with the united states in that particular area. many other examples of this exist, and i think the hope is that as we identify this brigade in the united states that it will be rotating battalions to europe, possibly twice annually, although we're still working on the frequency of that. that that will also be a way to enhance training in the alliance. and that will be a new u.s. contribution to the nato response force. and, again, we can get into some of those details in the q & a. so i fear i've spoken too long already. i'm going to leave it at that. and turn it over to the next person on the panel. thank you. >>. >> judy, thank you very much for very rapidly going through what is quite a packed agenda, when you start to look at these issues, and it's very difficult

to -- in the time allotted. you were very genius as well to describe britain's future defense struggles as a bell curve. i think in the uk it's been described as kind of a black hole around $35 billion worth of defense expenditures which has been pushed into the future. because the country can't afford to pay for it now, so we're looking for carrier programs and try dent replacement. but these are challenges for the future. i'm going to pass on to the second speaker. >> thank you. thank you, julie. this was really very good. first i would like to say that in real life snow white would be dead without the dwarfs. so -- and i would also like to just say that in the real story,

i don't remember grimm threatening with snow white, in that the dwarfs are supposed to be scared of what snow white said. and i say this in a not so cynical way. i think it's -- we europeans, we get the message. we got it. we understand. i think we should move on from the gates message politically. i don't think it's helpful in the long run. i think we're past that. i think it's important that we understand that both sides got it. there is a basic issue here. and i think that really is the roots of the problem. it's not just about the financial situation of europe. it's not just about the economy. it's not just about the willingness. there's a deep division between europeans and the united states

and the perception of threat. what the real threat is. what is the threat of the 21st century? what is it that we are really building our capabilities for. and i seriously hope that sooner or later -- look, this summit will be important. it will be an important milestone. but it will not be historic in the sense that this will be the big summit that solves everything. and that's okay. not all summits have to be like that. i think there are summits that just have to push the bar or kick the ball further. and i think this is great. i also would like to say that smart defenses, i think it's a great idea. but one should be very careful. it's not the magic stick. it really is -- it's a mind-set. it's a great mind-set. it's a mind-set which says, look, we've got a problem.

europeans have a serious problem in financing their militaries. we have a problem keeping to the agreed percentage of spending. but honestly, that's only -- that's not the whole point. i think it's also important that we are very clear about the other circumstances, like, for example, the losing of appetite by our societies to go to war. or take up military actions. now, the good news is, so far, when it was really necessary, the solidarity with the united states was there. so let's face it. more countries are part of the coalition. we're part of the coalition of the willing and are part of isaf.

and countries that seriously believe that afghanistan is a major threat. we're supposed to be there. we do it. many do it, because it's so important for the transatlantic some solidarity. that should not be forgotten. because the message is, yes, the transatlantic relationship still matters. now, i wish snow white had not pivoted to the kingdom, the other kingdom. i just want to say this, because it has caused a lot of confusion among the dwarfs. and i think we're over that. we're past that. we get it now. it's not as bad and it's not as serious as we first thought. and we europeans should stop whining about, you know, what is -- you know, the u.s. pivot to asia. it's fine. it's probably more asia, less

europe. if i can recommend to my friends in the united states the way to present it in the future is more asia, not less europe. what i would just like to say is that i guess libya was good news. libya was good news, because first, the europeans really took action. second, of course there is a lot of discussion about, you know, how good were the europeans? well, look at it this way. the europeans could have done it without the united states, just not as easily. not as fast. not as -- not with the losses that we suffered. but it would have been much more difficult. so it was good. it was great the united states stepped in. it, of course, points to a lot of the shortages and shortcomings that we have in our capabilities. but there was something -- there was another element that you should not, you know -- you should