a long time. it's one of the reasons why i've been skeptical about the single currency, i think there is a growing realization, that alongside plans to deal with deficits so you have fiscal credibility, you need an active monetary policy. that is what we have in the uk. and just as it's the uk has a single currency between our nations, if you're going to have a working single currency, you need that monetary policy, too. >> mr.als ter darling. >> i welcome the change of rhetoric over the weekend. the prime minister recognizing that austerity alone won't work. at least from his point of view in europe. could you tell us whether or not the german position has changed at all? because it doesn't seem like it. and until the german position does change, i find it very hard to believe the eurozone is possibly going to come up with anything that is convincing and credible before the greek elections on the 17th of june. >> i have great respect for the gentleman.

i think you have the right point. i would say that the german approach is changing to an extent because the germans know that alongside deficit reduction plans in a single currency, you do need to have greater coordination of the single currency. the concern is they don't want to take the foot off deficit reduction until they have more of a political system around a single currency. i understand their concerns. it's one of the reasons i never wanted to join a single currency because i've always thought it involves a single economic government. i think that is the struggle to try to convince countries in europe that alongside deficit reduction, you need a more active monetary policy. european central bank stands behind the currency and the structural reforms, the single market we've always argued for. >> thank you, mr. speaker. does the prime minister agree,

the bank of england and the banking regulators in the u.k. need to amend their operation, in order to ensure sufficient money and credit available to fuel the private sector led recovery, not just more cheap money for the state. could they not learn from america which is doing this very well, and avoid the problems which europe is plunged into by doing it far worse than we're doing it. >> my friend makes a very important point. when i say active monetary policy, i don't simply mean a central bank that engages in quantities, you need to assure that all the monetary institutions are properly capitalized and properly working. i think around europe, there's a lot of work that needs to be done on that. >> with regard to the prime minister's discussion with the president of pakistan. will he deploy barack obama's

offensive courtesy to the president of pakistan, the united states has violated the sovereignty of with deadly effects. and will he say that britain stands shoulder to shoulder with with our commonwealth partner in defying american colonialism. >> i have to say i wouldn't put it like that. the point is, i think we need to, with our american allies and the special relationship work very closely with them to try to deal with the terrorism that has come out of afghanistan, and is still coming out of parts of pakistan, it's in our national interest we do that. i urge all international friends and partners to show patience and understanding with pakistan because they are the biggest victims of terror of all. they have complex politics, and they need to be given the space to resolve some of these issues and they need to know that their

friends like britain will not leave them after the afghan conflict is over. but are there for long term partnership, friendship and support. >> mr. speaker, of course i associate myself and colleagues, but the tributes to our serving forces particularly in afghanistan and those who have given their lives. on the global economy, would the prime minister continue to make clear, although we are not in the eurozone, and shouldn't wish to join the eurozone, it's in our interest to support the other countries in the eurozone by supporting their structural reform. including as the father of the house indicated by supporting their structural reform. and increase across the whole of europe is in their interest and ours, and construction at home is the best way of getting us into the growth that we need in this country. as an immediate priority. >> i think my friend is entirely right, it's in britain's interests that the problems of the eurozone are dealt with.

we have made consistently a whole with series of suggestions about firewalls, strengthening banks, about consistent and strong contingency plans. the point i was making is it's become ever more urgent to make those contingency plans because, quite frankly, it's not in our power about whether greece will decide to stay in the eurozone or out of the eurozone. we have to prepare for every eventuality. >> this morning the european parliament by a very large majority passed the call for action stance. >> i'm against the financial transactions tamm. for a simple reason, the european commission did a piece of research into a transactions test. and found it would cost hundreds of thousands of jobs. what it sounds like, it's taxing the bankers and the rest of it, actually you end up putting up the costs of people's insurance policies, putting up the costs of pension policies and driving all that offshore.

i'm not surprised some of the european countries support it, because they see it as a good way of taking a lot tax out of the u.k. and spending in europe. i'm not falling for it. >> mr. william cash. >> there is increasing pressure for political union between certain member states. whether this is by enhanced corporation or by governmental treaty or other stealth measures. does my friend accept that irrespective of the european union act passed last year that such a fundamental change in the relationship between the member states of the european union and the united kingdom would necessitate a referendum? >> i think the right position for the u.k., if we were to pass power from westminster to brussels, if we should hold a referendum.

where i do agree is clearly the single currency has within it the seeds of greater political union, and we have to work out in this country, the coalition and the conservative party how to respond to that, and how to get the best deal for britain as that situation develops. >> you talked about the continued importance of nato, and some of the things that had been agreed. but the changes that have been agreed are largely peripheral, and the need for reform is pretty profound. is there not a danger that the understandable focus of the economic crisis is sucking the life out of the need for reform in nato. we need to focus on that, and notwithstanding the understand able needs of the economy, make sure the change program that's

so badly needed to get decent interoperatability within with nato doesn't lose its momentum. >> the gentleman speaks with with great knowledge of this subject. i would be more optimistic. there has been one nato reform, which i know he would welcome, which is to try to cut down on the bureaucratic headquarters. to be fair to secretary-general rasmus, we've also delivered the ballistic missile defense in capability. i think that's an important step forward for nato. where i'm an optimist, perhaps more optimistic than him, i think the reality of the situation is going to drive us toward reform. everyone faces tough budgets. the fact that america is providing almost three quarters of natos funding and assets is unsustainable. other countries are going to have to step up to the plate, look at their arrangements, cooperate more as we're doing with the french. in order to deliver more of the teeth and less of the tail.

>> while i endorse the view that nato is vital to our security and may i congratulate you on the role you played as the leader of one of the most important countries. the secretary-general's program for smart defense is key to the future of nato. and that the right old gentleman. >> i thank my friend for his remarks. the truth is, that there is duplicated capacity over europe in terms of defense, and much of it is not deployable. what we need is for all countries to undergo the quite difficult and painful things we've done in terms of strategic defense reviews to work out what are the systems that you need for the conflicts of the future. recognizing that we're less likely to fight fights, land invasion in nato much more likely to be dealing with failed states, the capacities you need are different.

even that won't be enough. we need a lot more cooperation, i think between the leading members of nato. and that's why we're working so closely with the french. we can deliver complimentary capabilities and get more done. >> the aim of achieving growth, the imf yesterday specifically made a recommendation that the u.k. banks slow up their acquisition of buffers, thereby producing more money to small businesses. does the government agree with that recommendation and will they work with the bank of england to implement it as soon as possible? >> i think the gentleman raises an important point. this is a difficult issue to get right. here we are rightly discussing two problems. one the need for growth. the other, the need for financial stability and making sure you're safe with the head winds of a potential eurozone storm approaching. i think the best approach is to

work hand in glove with the bank of england to get that balance right. that's what the government will do. >> i'd like to congratulate the prime minister on his stamina. i calculate by this evening he would have done three summits in two days on five continents. can i reiterate the points made, by the members of sussex. we have to -- what we need, and it's essential that we have a review of nato's strategy with a full commitment by all its members. >> i'd like to thank my honorable friend about his remarks on my summitry. that will be enough summits for some time. the g-20 will soon catch up with us. what he says about nato is right. we need the reviews by all nato

countries to go through their budgets to work out what is actually necessary for national defense, but what more we can all do to make sure nato has the capacities for the future. >> the importance of anywnato tr national security and the need to spend more in the technology of tomorrow. on the issue of cyber terrorism, which is posing an ever-greater threat, can the prime minister a assure us there will be the intense focus on resources given to that very big and growing problem across the world? >> well, i can certainly say for the u.k.'s part, one of the things we did in the strategic defense review, was from some of the savings we made. from memory, i think 900 million pounds into a cyber defense program. that's been coordinated with gchq and the private sector. it's the capability we hope to work with other nato members to make sure we're sharing the best experience and endeavors, that

should lead to savings. >> mr. speaker. the euro is dead. it's no more. it ceased to be. it has expired. why did the euro continue to claim it is alive and well? isn't it essential that europe implements an oddly gray cup of the eurozone, before the markets force an economic tsunami? >> what i would say to my honorable friend, i've always been a genuine euro skeptic. skeptical about the euro. that's why i didn't want to join it. we have to recognize what is in this country's interests. i believe that will involve a greater fiscal transfer, i think it must involve over time europe bonds. it involves more active monetary policy in europe. and we should be encouraging european partners to go down

this road to ensure the system works properly. we have to be clear that although there are real dangers in terms of disorganized exits from the euro, it's not just the country that is would devalue. that would have an impact on us. you have to think about the impact on financial institutions and banks around europe, including british banks. it's very important that the eurozone takes those steps to put in place the contingency plans to keep them safe. >> now that he's lecturing greece about the need for growth, and we need a little bit in spain, and also in the eurozone, for the sake of clarity, can we get to the bottom of this growth here, repeat these words after me. i'm going to drop the austerity plan and go for growth in britain. now's your chance. >> i'm afraid i don't agree. i don't agree with the honorable gentleman -- i deeply regret my

last intervention with him was a bit more sharp than it should have been. i hope you accept my apology for that. he's a tremendous ornament to this house, and always remains the case. i don't agree with him, because i think a deficit reduction plan is necessary and essential for growth. and i do make this point again. when this government came to power, our interest rates were the same as spain's. ours are less than 2%. theirs 6%. one of the reasons for that, we have a credible fiscal policy. >> thank you, mr. speaker. could my friend give the house an absolute cast iron assurance that while he is prime minister, this country will never ever join the euro, unlike the position of the leader of the opposition who is open to the idea. >> i'm very happy to give that pledge. i note the leader of the opposition said it depends how long he will be prime minister.

whether or not we'll join the euro. i'm not sure which prospect is more terrifying. >> people see their friends suffering from a lack of opportunities, so they feel distressed when they see huge unemployment rates for young people in greece and spain. will the prime minister say specifically what discussions he had with g8 colleagues about infrastructure development as a possible plan for growth. >> we did discuss the issue of infrastructure development, i think it can be part of what needs to be done. the rise unemployment is tragic in any country. when you look at the figures in greece and spain and elsewhere. they are eye watering figures, 50% of young people unable to find work. as i've said, i think the elements of the plan we need the fiscal credibility that gives you the low interest rate. the active monetary policy that supports demand in the economy, as it has done in the u.k., that needs to be combined with structural reforms and there is

a need for proper structural reforms so they can have competitive economies. i think the extra element is using the credibility that we've earned. the strength of the government's balance sheet to try to deliver innovative finance. into things like infrastructure and into credit. that is obviously an option that is open in europe as well, and i think that's what president hollande is referring to. those are the elements of a growth plan, we got them in the u.k., we need them in europe as well. >> would my friend agree that when we look at the scale and time scale, we get a sense of the awesome challenge that would face any german chancellor in trying to achieve fiscal union in europe. >> i think my honorable friend is entirely right. this is why, when some people, imply that german stubbornness is unreasonable. it's understandable.

obviously, i think for the success of the eurozone, we need everyone to adopt the sorts of approaches i've been talking about. in terms of monetary policy and the rest of it. it is important to understand people's motivations and difficulties, because that is what lies behind the current impasse. >> chris bryant. >> it is good the russians shared in the motion on syria. even leaving aside the rigged elections in the russian federation, there are major human rights abuses in russia. for instance, kolikovski's second trial who has been condemned by many organization in the world and in russia. he tried to get an appeal for that, it was turned down only last week, by judge alexander verano. he's a military judge. he's in the military chamber of the supreme court. when the decision was handed down there could be no appeal, it was done on the russian armed forces website. doesn't this show that russia

has a great distance to go yet before it can really embrace being a part of the humanitarian nations? >> we discuss regularly with russian colleagues the importance of freedom and human rights and democracy. when i visited russia, i met and discussed precisely those issues i think it is worth with while . having russia in the g8. when with we are discussing issues like iran and syria, where russia has an interest and we want them to join in in the efforts that we're pursuing, i think it's helpful to have them there. >> thank you, mr. speaker. >> in the absence of progress toward a global trade, the eu u.s. deal could be a decent second best if it reduces its tariff barriers to trade and how much the european community will benefit from it.

>> i think there is something salvageable, which is helping reduce customs times, charges and the rest of it, rather than the bigger package. i think we should pursue that. in terms of the eu/u.s. potential deal, we had a conversation at the end of the g8 where we agreed to look at the issues paper for the g20 whether there was a small enough distance between the eu and u.s. to close that would make a deal worthwhile. i'm hopeful, britain is one of the most open trading nations. there are real concerns on both sides. you have a french position on oog cult. an american position on services and other issues. i think we have a good look at it in the g20 and see whether we can fast track it. >> is the prime minister aware that greece spends 50% more on defense than ourselves, france or turkey.

it is the biggest arms importer in europe. the greek shipping industry 70% of gdp doesn't pay a penny in tax. the greeks orthodox church doesn't pay a penny in tamm. can we ask him to descale defense spending? the orthodoxed church to pay a little bit to solve the greek crisis. >> i think the auto general makes a good point, which is it, however much one can look at the greek situation and feel for the suffering people have in terms of unemployment and living standards, there is a crying need for genuine reform in greece and for a more straight forward and honest politics of dealing with the problems. making sure people do pay their taxes and industries are competitive. the issue about defense spending is obviously more complex because of the relationship between greece and turkey.

there should be an opportunity to decrease greek spending on national defense in that way. but encouraging it to be a good nato member at the same time. >> thank you very much, mr. speaker. at the g8 summit did any of the leaders make the argument that dealing with the deficit and supporting growth are alternatives? or did they argue that you need to support growth through monetary policy, supporting the banks, getting trade going? and was there anybody who made the argument that you need to borrow your way out of debt? >> he makes an important point. there was no one suggesting somehow dealing with deficits and getting growth are alternatives. they are complimentary. you need growth. that is the view of everybody around the g8 summit. there's only one group of people that have their head in the sand or a complete deficit denial, that's the people that gave us the deficit in the first

place. >> i would like to turn your attention to youth unemployment over 5067s. 50%. and the economy set to contract by a further 6% in the current financial year. he has preached austerity, in this kcountry and all around the world. that's what's been done in greece and that's the result of it. is he prepared to put pressure on the european central bank as far as he can, to stop the austerity oppression on greece and start supporting the needs of very ordinary people who work very hard and don't deserve this misery? >> where i part company, we very consistently said you need to have deficit reduction that delivers you the low interest rates, and enables your central bank to pursue an active monetary policy, which is what we've had in this country. and at the same time, you need the structural reforms to make sure your businesses are competitive and they can take on more people and grow. that is what we're seeing in britain with 600,000 more

private sector jobs. that is a world away from what is happening in greece or many other parts of the eurozone, they haven't undertaken the structural reforms we have in this country. >> thank you very much, mr. speaker. mr. speaker, i'm sure my right old friend will agree with me the biggest threat to our country at the moment is the crisis in the eurozone. almost parallel to that is the possible pending crisis in the middle east with a start that today's very . important conference in baghdad did we find time over the weekend to speak to the russian and chinese leaders to emphasize the importance their lowell is to make sure we have a peaceful outcome of the situation? >> a good portion of the g8 was spent discussing the situation in iran, and specifically talking about the talks that are underway in baghdad today. it was heartening that the

russians signed up to a pretty tough text in terms of iran. i think the path is very clear that europe has rightly adopted these oil sanctions. the pressure is beginning to tell on the iranian economy. this is the moment to pressure other countries aaron the world to join in on these sanctions and to say with the iranians there is another pathway. you can have a more decent relationship but you have to give up the ambition of enriching uranium to the extent it could deliver you a nuclear weapon. >> mr. speaker, whatever the structural deficiencies, the problems in greece, the problem is not caused by that. it was caused by the banking and economic crisis in the world the way the eurozone has dealt with this. the suffering in austerity that's taking place in greece is on a completely different scale than what we've even envisioned in this country. it's untenable for that to continue. the problem is not to look at

the germans and say, what can we do? remind the prime minister greece is a very proud nation. they're a very important ally of ours, they stood by us. alone in 1941 against the nazis. we should do what we can to help them. >> of course i agree. greece is an important ally. the historical analogy is right. i don't agree with him, that the problems in greece are only caused by the euro or by the banking crisis. there are deep and profound problems in the economy that need to be dealt with. i think -- as i've said the right combination is, you need to have the deficit reduction plans. you need to have an active monetary policy, and you need structural reforms. in the end, it's going to be for the greek people to decide whether they want to do these things inside or outside the euro. clearly a disorderly exit would be bad for britain, and we should do everything we can to avoid that. we need to plan for every eventuality and have proper contingencies in place.

>> thank you, mr. speaker. in the absence of much needed supply reforms in the eurozone, i suggest the day of reckoning is fast approaching. in the vast majority of those cases, the countries have benefited. does the prime minister think we are fast approaching the time where we should stop talking about the need to save the euro, because this can create uncertainty and hit confidence and investment in this country? >> you make an important point. i'm not entirely sure i agree. you have examples of countries that have left currency pegs and suffered in the short term, but then recovered. also, you've had countries like czechoslovakia. which split its currency in two and actually managed that process well. i think there is a substantial difference when you have a currency zone with a single currency, and you have a

potential breakaway from that. i think it's a different situation because the banks are so intertwined. that's why we have to think very carefully about it in terms of the contingency plans. >> jim mcgovern. >> thank you, mr. speaker. >> very recently my wife with and i welcomed an italian home to dundee. could the prime minister assure me and personnel, my family and constituents that on his watch there will always be a black watch. >> i want us to keep the regimental structure we have. i think it is important. obviously, though, at the same time, we need to deliver this big change in our armed forces, which is going to deliver a larger army, but a better

balance between a professional army and territorial army. we're looking at how that can be done while saving the important regiments that people write. captions copyright national cable satellite corp. 2008 captioning performed by vitac