them up on their sneering remarks about katherine cashtas. two days ago, the five permanent members of the u.n. security council and germany, the great powers, went into very serious negotiations with iran about the development of their nuclear capability. who is leading the great powers? who is leading the security council permanent members? no, it was not hillary clinton, it was katherine ashton. so let's have a little less sneering, please, and a little more seriousness. now, i was under the impression that canadians actually watched hockey on friday nights rather than debated politics. but i guess you couldn't miss the opportunity of seeing all of us at each other on the stage on the subject of europe, me an

englishman, he a scotsman, he a germany and he sort of frenchman which sounds like the beginning of a bad joke, really. which is what i understand many of you think europe and its currency are at the moment. but danny and i are going to ask you to step back. and we're going to ask you to look at a more serious and a bigger picture. we're going to ask you to measure the european union against a longer history and a bigger aim. and before we can define failure in this motion, we have to know what we're talking about. and indeed, the eu's currency zone is certainly in trouble. and it's sending out distress signals. i don't deny that. but the eurozone is not the whole european project.

that project started over six decades ago when it was realized that the whole in europe could and should be and would be bigger than the sum of its parts. that by pooling elements of our sovereignty and of our decision-making, we can achieve things that would not be possible to achieve if we remained a collection of relatively small rather combative nation states. and in doing that, we have put behind centuries of conflict in europe. not a small thing. and we have ended the division of europe, east and west and successfully anchored all of the post-soviet states and the post-dictatorship states of spain, of greece and portugal in a system of values and of irreversible democratic and

human rights. no small achievements. and we've also created actually the largest economic space of its kind in the world, and all the ease of doing business and trading across the eu that goes with that. now, in creating this unique model of super nationalism, we've succeeded in doing what has never been done before and has never been attempted in any other part of the world. and this system has become absolutely central to european life. our commerce, our diplomacy, our security and our policy coordination in so many different areas. and i didn't either neil or yosef can argue with their achievement if they were actually being seriousness. so presumably, they agree that if the eu did not exist, european states would actually

want to invent again something very like it. and even the euro itself, i don't think we can yet write it off as failed. the currency union is certainly flawed, true. it's clear now that two decades ago europe started to run economically before we could walk politically. this is not in my view because we were overambitious. but because we were actually not ambitious enough. we weren't ambitious enough to create the political institutions and machinery needed to make economic and monetary union work. now, the question is, is this failure of the eurozone permanent? in my view, the failure is one of design and execution, not concept and principle.

now, you have heard tonight, and you'll hear it again, the other side tell you that the whole thing is going to hell in a hand cart. but the argument, i think, is that there is actually a workable version of the single currency. the question is whether europe has the political will to implement this version. so yes, a serious stumble. yes, a serious flaw in design. but failure for the whole european project for the whole of the european idea, i would argue not. now, the historical determinists over here -- and i don't quibble with neil's qualifications as an historian. it's very easy, you know, to be an historian, talking about the past and looking through your rearview window -- mirror the entire time. for a politician, i'm afraid, and a minister, you have to be a

little bit more practical and a little bit more serious. so has europe failed? i would say it is just too soon to know. could europe fail? of course it could. but must europe fail? absolutely not. thank you very much. >> well done, gentlemen. a very strong opening to the debate. and i think you've flushed something out which is important which is how this audience chooses to define the european experiment. is it the euro? is it a larger civilizational project? that's going to be up to you to decide when you pick up your second ballot at the end of tonight and for those of you voting online right now. our next phase of this debate is to have these debaters engage each other directly. neil, you were the first to speak, so i'm going to come to you. what have you heard from the opposing sid here that you just

fundamentally disagree with, that you think they've got wrong from a to z, and then i'll have them rebutt. >> exactly as i predicted, he fell into the trap of contributing the peace to the process of european integration. he did it in an emotive way which has played well for him since 1968. it didn't work for me when i was 1968 -- please. >> you're nuts on this. >> this is not 1968. >> no. it's what i want to be. you don't have to tell me in which year i have to talk. >> so you begin to see why the purpose of european integration doesn't work very well. >> oh, oh, oh, oh. >> because we're already talking across purposes. europe's peace since the 1940s

has almost nothing to do with the process of european integration, which as i said, has been primarily economic. it is not the institutions of the eu that made peace. it was nato and the division of europe during the cold war. the only attempt to make european institutions concerned with military affairs failed in 1954 because france voted it down in the national assembly. so we musn't fall for this emotive non sequitur which is the one european language that everybody used to speak. it's not the case. the issue is economic. and what i noticed was that neither danny nor meter addressed my point that in economic terms, europe has failed to deliver. and i've just come back from europe. maybe you live there and don't notice this, but there is a massive economic crisis unfolding on the continent because of the failed project of monetary union. what are you going to say about that?

>> i will tell you. i will tell you. >> danny, you're up. you're next. let's go. >> i will tell you two things. first, one of the biggest achievements of europe -- and you don't make peace only with nato -- it's that the people came together. because if the people of europe wouldn't have come together, that you have no border inside europe, then you don't have peace. and this is one achievement. and you can't deny it. you can't deny it. you can't deny it. no. wait a minute. i want to discuss with the president of your paper because it was schmidt who made the biggest description of the reality of europe. and it is not a '68er. he was one of the most, best prime minister or chancellor of germany. no, i'm not finished. >> this is not the european parliament, okay? >> you always say to me, this is

not -- i didn't tell you. you do what you want. and i do what i want. i don't need a teacher to tell me you're not there. you're not there. you're not there. >> your argument. let's stop talking about the style of debate. focus on the argument. >> i will continue on the economic failure. when there was a german reunification, it was jacque who makes a plan to help the german integration with money, with cash money. it was the european state together who made a big step to help the german nation. when poland came in, it was european money who helped poland to come out and today the polish majority agreed on this. it was the same with the other country. it is true that europe is also a success story for a lot of

countries. and you know what? >> last comment. >> why all the european country wanted to come in europe. and on the economy, then he was right in one point. we have to make a step forward. it's true. in a crisis like this, we must have a political governance of the economy and a fiscal approach together. if not, we are in trouble. >> okay. danny -- danny -- eloquently said -- let me come back to -- let me come back to joseph and just follow up on what danny's saying which is why is a united states of europe not a conceivable outcome of this crisis considering the cost of collapse and what would ensue. >> first of all, i think -- i just want to say to donny, if you are right, you don't have to scream. second, the problem with the two

of you is that you assume the desirable. if we had the political will. if we had political union. then we would overcome our problems. but that's just putting the cart before the horse. the problem is that we don't. and we have to figure out why we don't. and i've tried to explain it. and in a few sentences. none of us and you, least of all, by the way, wants to give up national sovereignty. certainly -- we don't want to be ruled by brussels. neither do you want to be ruled by brussels. or you, certainly none of us. and that's why we never get beyond, we get to the north phase, that's why we can't keep going. and this is not the european parliament. this is not discussed. we try to talk to each other rationally, quietly, politely, respectfully.

you see, this is why we won't have europe. that's the problem. i rest my case. >> lord, you come in on this point of why countries will set aside some of these final key pieces of their sovereignty in turn for a larger europe that comes out of this crisis, in your view, stronger and more united. >> i don't think they do have to set aside their sovereignty, as you put it. i don't think they need to cease being nation states. they don't have to cease being britain or france or germany. the spanish don't have to start being spanish. and the belgians will continue to muddle through as they do. but the point -- the point, frankly, is something slightly different. we're not asking people to give up their nation states. what we are observing is that

european people have chosen to see their states and to see their governments pool their sovereignty and their decision-making in respect of certain key important areas of their lives. and the most important part of their lives is their economic lives. how businesses are created. how jobs are generated. how wealth is created in europe. and by the way, you know, far from europe being broke, we do still represent 25% of global gdp. and we don't have anything like the sort of debt mountain of the united states. so are you saying that the united states, because they have debt, that they're broke? of course they're not broke. now, the point about the single market, which is, as i say, the biggest economic single economic space, a bloc of its kind is two things in my view.

one is an enabling businesses to trade across a single market of 500 million people. you enable businesses to grow in ways which they would not otherwise be able to do if they were limited to their own countries and if they faced a myriad a range of 27 different sets of regulatory laws and policies preventing them from trading freely across that single market. and that's what you will have if you didn't have the single market. and secondly -- and i know this because i was the european trade commissioner. why is it that i am admitted in washington or beijing or moscow or delhi or brasilia? it's not because i'm british. it's not because i'm peter, charming, articulate, lucid. it's because i represent a

europe, a market of 500 million people, and those countries with their businesses and their job creation and their trade and their exports want to get access to our 500 million strong market. and i tell you, if i was simply knocking on the door because i was luxembourg or simply knocking on the door because i was belgian, even if i was knocking on the door, if you don't mind me say, if i were german representing a relatively small market and a small population, i would not get the hearing. i would not have the clout. i would not be able to negotiate with the force that i was able to do as trade commissioner representing the entirety of the european union. now, that's reality. that's a reality. and with the greatest of respect to you two, you asked me to engage with serious arguments. i have yet to hear a serious argument from either of these two. but as a practical man --

>> no, i think you've had your say. >> peter, you've had your say. we're going to give the other side -- >> i'd like to hear the same from the other side. >> let's give the other side a moment here. you're up. >> nor are we in the house of commons. >> oh, so what? big deal. niall, you'll get there. you'll get there. with a performance like that, you'll get there, i promise you. >> number one, it's all very well for you to sing the praises of the european union as an economic area, but it's actually 19% of gdp. check the numbers. and shrinking fast. why is it shrinking? because europe is inflicting on itself a completely manmade avoidable recession. why is it doing that? because of the faulty design of the european monetary union. who designed it? people like you, peter.

people like you who designed it in the 1980s. can i finish? no, really. >> the responsibility. >> i think you've had your say. >> a little young. a little young. >> and the design flaw was there from the outset. if you read the report from 1989, it says at the end that for all of this to work, for the monetary union to work, there will have to be central control over national budgets. and that didn't happen. it never happened. there was a growth and stability pact. remember that? every single member of the eurozone violated it. the greeks cooked the books, but they weren't the only ones. even the germans violated their own rules. and the net result of this has been an economic disaster. do you know what youth unemployment is in spain today? 50%. you put on a face, peter, because it's not your problem, but i can tell you it's the problem of young spaniards, and they're flying europe. >> can i just come in? he's challenged me.

he's challenged me. >> i know. one second. hold on. >> do you think that the banking crisis might have had something to do with the fact that there's 25% unemployment in spain? >> oh, please. can i -- can i respond to that? >> where have you been? >> i'll tell you. in february of 2009, i was actually in the city. and i said the european banking crisis is going to be as bad as the american banking crisis because the leverage is just as bad on the balance sheets and probably the hole in the balance sheets is bigger. i've said that repeatedly since early 2009 and what has been done in europe? nothing. do you know what your policy was? you kicked the can down the road for month after month after month. >> quite the opposite. quite the opposite. >> gentlemen, we want to get everybody's voice in here. we're going to look at the clock and give you two minutes and then give danny two minutes because we're going to move on to questions in a little bit. okay? >> hang on a second. why does he only get two minutes? because he's german?

>> do i get two minutes for screaming or for talking? >> for talking. lead by example. germany usually does. >> you know, you accused of us having no arguments. let me turn this around. and you said something which is typical of all failed experiments from socialism to europe. the theory is okay. the concept is okay. it's just the design of the execution. you remind me of this french nato officer who comes to nato for the first time. oh, this works very nice. the theory of europe is wrong. the wrong. did you hear me? it is wrong. and i can tell that it's wrong by the way you argue. you used about five minutes arguing about this wonderful economic space. nobody challenges this wonderful economic space. we are talking about whether europe can acquire the will and the wherewithal to go the next

step. and if you like an economic space, look at canada and nafta and mexico and the united states. almost as big as europe. they have free trade. but who wants to get together -- the canadians want to get together with the united states or with mexico? so you've made a case for an economic free trade zone. i'll grant you that case, but it's not what we're debating in this room. >> danny, come in on this because you're sitting in the european parliament every day. so you're at the proverbial mountain face there. why do you think you can scale it to a greater level of integrati integration? >> to european law, for exactly the same -- the problem that you talk, it's called europe and chinese and two pacts, there are eight laws. the governance of the european

economy or the banking system, the organization of the banking system, the need -- the need, how the stability should be realized by all the country. it was decided by the european parliament, and it is now since the 1st of january a law in europe. and you will see that what happened, right? when the german and the french break the stability pact can't anymore happen. and now who wants to be ruled? no, no, no, no. i don't need a father. my father died when i was 17. and i don't need another father now. so please stop educating me. i'm not educatable. it's lost. it's lost. it's lost. >> i agree. i agree. >> so i want to tell you -- i want to tell you -- yes. >> i agree with you. you're not educatable.

>> you know, i don't want to be like you, and you don't want to be like me. okay? can we keep it like this. i will tell you something was very deep when you say europe today, you don't want to dismantle it. what you want, it's more efficient. and you say you don't want to be ruled by brussels. okay. the united states, most of the countries, they don't want to be ruled by washington. but this is not the -- stop it now. but i will tell you something. england -- england -- why scotland wants to go out of england? >> do you do this at home? >> who dismantled england? modern life is much more complicated that you understand in your tv show. this is the problem. this is the problem. >> you've got 2 1/2 minutes on the clock before we get to your questions. >> they are like little child,

always educating me. so i want to continue. i want to finish one sentence. >> you've got 25 seconds left and then back to lord mandelson. continue with your argument. don't debate the process. >> i debate the process because it's not fair. if it's not fair, debate the process. >> ladies and gentlemen, who do you want to hear? peter now? okay, here we go. peter. >> i said at the beginning, you know, i talked like a minister, but you talked from the heart. i think he's been brilliant. i love it. >> what do you want me to say? >> talk from the head for a change. we could try that. >> i'm sorry? gentlemen, let's elevate the discussion a bit. peter, i'm going to give you the remaining moments. >> i'd rather hear from the audience because i think that their questions and the issues they raise will be somewhat more interesting for me to address

than some of those i've had from the people. >> anything else you'd like to before i go to questions? >> it's simple. what you heard from the argument is that in order to sort out the crisis, europe has to take the next step. it has to take the next step to some central control of fiscal decisions at the national level. that's federalism, as you know from your own canadian experience. the trouble is that that's not what europeans want. indeed, when the question was posed in referendums in 2005, when a treaty for federalism was presented, it was rejected by the french and the dutch and then abandoned. so what you are calling for, which is the transition to a united states of europe or a federal republic of europe, whatever you want to call it, doesn't have political legitimacy which is why it hasn't happened. so your solution, and this must be to the audience, a

nonsolution. it isn't going to work. the germans aren't going to vote to make those transfers to the other countries. >> i'm confused about something. i've listened carefully to what you've been saying, but i also read an article that you wrote in "the financial times" earlier this month in may. you were talking about the repairs that are needed to the eurozone. nowhere did you write that they are impossible to implement. you talked about a new fiscal compact. you talked about direct help for bans from the ecb. you talked about the creation of euro bonds. you talked about joint and several liability for eurozone sovereign debt. your only complaint is that europe is not going as fast as the united states did in creating a fiscal federalism. and in the end, you finished your article. i don't know who this audience in "the financial times" was as opposed to your audience tonight, but you finished the article with a great flourish quoting the spanish philosopher.

you said europe is the solution, not the problem. now, who is the true niall ferguson, may i ask? >> so peter, can i have a second? since that article -- >> may the 2nd, 2012. >> and since that article -- >> three weeks ago. three weeks ago. >> since that article -- since that article has been published, have you heard anything from the german government to suggest that any of those things have happened? >> i've heard a lot from you tonight. exactly the opposite of what you were arguing three weeks ago. >> we've all agreed that you want to hear from the audience. so i'm going to try to -- >> not a single thing -- not a single thing. >> ladies and gentlemen, help me here. applaud. let's move on to the questions. well done.

this is certainly a lively debate. the first question is going to come from a good friend. she's well known to a lot of us. she's cnbc's senior business correspondent reporter, on-air personality. >> tough act to follow. the question is for niall, and i'll build on joseph's analogy of the mountain climb. do you strive tore the summit. i think many mountain climbers will tell you as many die on the way down as die on the way up. the question is a practical one. is it better, more sensible to press on in this time of crisis to closer monetary and political union rather than retreat with all of the losses that that might entail? >> well, as peter has just pointed out, amanda, i've been arguing for some time now that these steps need to be taken to avoid a major banking crisis, comparable in its magnitude with the crisis of 1931.

>> well done. agreed. >> we agree. well done. >> gentlemen. let him finish, gentlemen. >> the problem is that since i wrote that article from berlin has come nothing but a single word, "nine." she says no. and here's the problem. you can say -- you can say thank you in 23 different languages, but when it comes to saying no. there's only one that really matters, and that's germany. the single biggest problem right now -- the single -- so the single -- >> now you have to talk. now you have to talk. >> if i can answer amanda's question with a little peace, is that the proposition before the german government and people is do you want to take the next step to a federal europe? and when the germans look at how much that's going to cost them, they say no. so although i would very much like to avoid the break-up, right now i see no sign