great question. we know a couple of things. one is, it takes about $21,000 to create and retain jobs. you can do the math on that. the five million-dollar contribution that starbucks made to keep this off, the starbucks foundation made to get this off, ajdabiya about just under 1700 jobs -- ought to be about just under 7 to better jobs as we go through this. we do not know how to -- 1700 jobs as we go through this. we do not know how much otherwise. we do a thing called jobs counter and we will track that are a periodic basis and we will look at how many jobs are donated from people like you and then we multiplied that using our formula to get a -- an

estimate of how many jobs we expect it to create. we will ask the cdfi's to track the data so we have something to compare it to. and we will also do a jobs audit. we have an independent third- party agency that will be able to go out and look at how the money was used about what jobs were created, and they will talk with some of the businesses and get an honest count. we want to be transparent. we want to be accountable. we want people to know what happened with this. it depends on a number of dollars is the short answer. the second question, we have not received much push back from anybody. we have received a lot of support. and there's a lot of -- a lot of excitement and denthusiasm about

this. it is a sort of fundamental tenet of what america is about. we expect there to be bipartisan support. historically, we have been -- had bipartisan support. they are simply pragmatic solutions to real problems that affect real people every day. >> there is another tweet to ask you how you came up with the $5 as opposed to something smaller, like a dollar. where did you vote -- come up with the $5 figure? >> there was not a lot of magic to it. that is a good question. there was not a lot of magic to the $5 figure. we thought it was a reasonable, minimal amount for people to donate. and we understand that some people do not have $5 to spare and a those are the folks, frankly, that we want to be able to help with this program. there was not great science about it. we thought it was a modest

amount for most people. if we know that is not for some people and we hope that we can help them. >host: 1 other tweet. they want to know if starbucks is putting up matching funds as part of this program. guest: they're putting up seed funds. and the $5 million that came from a starbucks foundation was intended to get things rolling so that we can start as soon as possible. the program launches on november 1 and we can't -- people can start making donations. we want to start creating jobs before we even have the chance to take in that money and put it back out. having said that, the starbucks foundation is also providing support in the form of -- i said earlier that 100% of every donation will go through to the communities, through to the cdfi and every $5 will support $35 of

financing. one of the ways we can do that is the starbucks foundation is covering the incremental costs to make sure the program gets done right. their support as $30 to every $5. the goal here is to respond to what we hear in communities, what howard schultze has told me he hears from works -- from folks working in stores and what i hear all the time going out in communities, whether it is in rural dot dakota or anywhere else. -- south dakota or in your house. those people are looking for a means to do something. that is what we are trying to do here. the host: last couple of calls for mark kaniewski. -- mark pinske. caller: one of the things to

strike me as the with the government has treated the factory worker in this country. we have lost half of our manufacturing jobs in the last 10 or 12 years. the republicans passed nafta. and of course, bill clinton signed the bill so that there are both democrat and republican responsibility for this. i want to see the government start protecting our manufacturing base, rather than allowing it to be sent overseas. the chinese protect their own economies through their manipulation of their currency and by duties that they charge on people trying to shift into china. into china. one of these days the middle class will realize that they are not met a class anymore because the manufacturing jobs --

middle-class anymore because the manufacturing jobs that made the middle class are not there anymore. ultimately, i think you will be faced with that. i would hope the federal government will -- would get off their square one and start protecting the american factory worker. host: not a question there, but any response? guest: there is no question that there is a lot of distress and a lot of upset and turmoil in the workplace and in the jobs market. i certainly acknowledge that and i think that we need to do something as a nation. i cannot be the answer for what government can and should do. we are out there trying to support those folks, whether it is manufacturing, retail, affordable housing and construction. we are trying to figure of how

to support those folks and create and retain jobs that way. >> the last call this james -- host: last call is from james in greenville, michigan. caller: i have a question and a comment. my question is, how many people does it take to consider -- to be considered a small business? one to 500 is considered a small business, correct? guest: there are lots of different numbers and people define it in different ways, but that is fine. caller: my next comment is, the problem obama is having is all of the racist republican senators from the south are making it -- their mission not to help him with the economy or anything else. they want him to fail. have a good day. host: last call there. a final comment from our guest about thiselphia, whic

program, which you hope will help wrap it up if you can. guest: our hope is that it will motivate and spur businesses direction, motivate businesses and corporations, even motivate the government to look forward and figure out what we can do about this. starbucks is committed to doing this for an extended time frame as long as we need to. it would be very happy to put ourselves out of business when the economy comes back. we hope that happens sooner rather than later but we are just trying to speak to the fundamental spirit of americans helping americans. we think it will give people a reason to look up and look forward and, together, hopefully we can create and maintain jobs for the usa. host: thanks for a look ahead

at this new program. we appreciate your time. guest: my pleasure. thank you. >> president obama announced changes today to the home refinance mortgage program. his remarks are next. mitt romney formally became a candidate in the new hampshire primary, filing paperwork in concord. and we will hear from the massachusetts -- the former massachusetts governor later. as europe struggles with its debt problem, british prime minister david cameron faces dissent in his own party over britain's membership in the european union. and then later, analysts discuss the challenges in the global economy. >> although this headline proved wey's defeated had a political impact and he continued to impact politics.

the contenders, live from the roosevelt hotel in new york city, friday at 8:00 p.m. eastern on c-span. >> now, president obama announces changes to the home lending program with a lower monthly payments for homeowners that are in so-called underwater mortgages. this is part of an economic initiative the president will make this week that does not require congressional approval. the president made the announcement in las vegas. >> good afternoon, everybody. [cheers] thank you for letting the block your driveway. >> your welcome. >> [laughter] it is wonderful to be with all of you and i want to thank jose and rosette for letting us set

up in front of their house. and we just had a wonderful visit. without a doubt, the most urgent challenge we face right now in getting our economy to grow faster and to create more jobs. i know it. the people of nevada know it. and i think most americans understand that the problems we face did not happen overnight and we will not solve them overnight either. what people do not understand, though, is why some elected officials in washington do not seem to share the same sense of urgency that people all around the country are. last week for the second time this month, republicans in the senate blocked a jobs bill from moving forward. a bill that would have meant nearly 400,000 teachers, firefighters, and first responders been back on the job.

it was the kind of proposal that in the past, at least, republicans and democrats have supported. it was paid for. and it was supported by an overwhelming majority of the american people. but they still said no. your senator, majority leader harry reid, he has been fighting nonstop to help getting -- get the economy going. but he is not getting help from some of the members of the nevada delegation. and we need them to get their act together. the truth is, the only way we can truly attack our economic challenges, the only way we can put hundreds of thousands of people back to work right now is with bold action from congress. that is why i'm going to keep forcing the senators to vote on common sense, a paid-for jobs proposals. last month when i spoke to

congress about our jobs crisis, i also said that i intend to do everything in my power to act on behalf of the american people with or without progress. -- congress. i am here to say to all of you and to the people of nevada and people of las vegas, we cannot wait for an increasingly dysfunctional congress to do its job. where they will not act, i will. in recent weeks, we decided to stop waiting for congress to stop no child left behind and to give the states the flexibility they need to help children achieve higher standards. we took the steps on our own to reduce the time it takes for small businesses to get paid when they have a contract with the federal government. and without any help from congress, we eliminated outdated regulations that will save hospitals and patience billions of dollars. these steps are not substitutes

for the bold action that we need to create jobs and grow the economy, but they will make a difference. we will not wait for congress. i told my administration to keep looking every single day for actions that we can take without progress, steps that can save consumers money, make government more efficient and responsive, and help heal the economy. we will be announcing these executive actions on a regular basis. today, what i want to focus on is housing, which is obviously on the minds of a lot of folks in here in nevada. probably the greatest single cause of this brutal recession has been the housing bubble that burst of four years ago. since then, average home prices have fallen by nearly 17%. nationwide, more than 10 million homeowners are under water. that means they owe more on their homes than they are worth.

and here in las vegas, the city that has been hit hardest of all, almost the entire housing market is under severe stress. when a home lose its value, a family loses a big chunk of their wealth. paying off mortgage debt means that consumers are spending less and businesses are making less and jobs are harder to come by. as long as this goes on, our recovery cannot take off as quickly as it would after a normal recession. the question is not whether or not we do something about it. we have to do something about it. the question is, what do we do and how fast do we move? one idea that i have proposed is contained in the jobs act that congress has before them right now. it is called project

rebuild. a lot of neighborhood like this one have watched housing the values declined not just because of the housing bubble bursting, but because of the vacant homes across the street. right now, there are hundreds of thousands of vacant homes like these and more than 1 million unemployed construction workers. that does not make any sense when there is work to be done and workers ready to do it. project rebuild connects the two by helping the private sector put construction workers to work rehabilitating vacant or the abandoned homes and businesses across the country. that will help stabilize home prices in communities like this one, and it will help families like the bonillas to buy a new home and have an aunt -- have a nest egg. this is something that congress can do right now. we will put construction workers back to work and we will rebuild

homes all across nevada and across the country. if congress passes this jobs bill, we can get project rebuild moving right away. if congress acts, then people in nevada and across the country can get significant relief. but remember what i said, we cannot just wait for congress. until they act, until they do what they need to do, we will act on our own. we cannot wait for congress to help our families and our economy. in the past two years we have taken some steps to help families refinance their mortgages. nearly 1 million americans with little equity in their homes have gotten assistance so far, and we have made it easier for unemployed homeowners to keep their jobs while they are looking for a job. and we are making progress in the rental housing, which will help stabilise housing prices here in las vegas and across the country. but we can do more. there are still millions of americans who have worked hard and acted responsibly, paying

their mortgage payments on time. now that their homes are worth less than they owe on their mortgage, they are having trouble getting refinancing even though mortgage rates are at record lows. that will soon change. last month, i directed my economic team to work with the federal housing finance agency, or fhfa, and their partners in the housing industry to identify barriers to refinancing, knocked the barriers down, and explore every option available to help american homeowners to refinance. today, i'm pleased to announce that the agency in charge will be making a series of steps to help responsible homeowners refinance and take advantage of low mortgage rates. let me name those steps. number one, the barrier will be lifted that prohibits responsible homeowners from refinancing if their home

dahlias have dropped so low done -- that what they owe its 20% or higher of what they owe on their home. this is critical in places like las vegas were the home by u.s. have dropped 50% in the past few years. if you have a home that is worth $200,000 with an interest rate at 6% to my right now you cannot refinance. if you meet certain requirements, you will have the chance to refinance at lower rates, which could save you hundreds of dollars a month and thousands of dollars a year on mortgage payments. second, there will be lower closing costs and certain refinancing fees will be eliminated, fees that can sometimes cancel out the benefits of refinancing all together, so people do not bother because they have all these fees they have to pay. we will try to knock away all those fees. third, there will be more

competition so that consumers can shop around for the best rates. right now, some under water homeowners have no choice but to refinance with their original lender, and some lenders, frankly, just refuse to refinance. this will force others to compete for that business by offering better rates and eligible homeowners are going to be able to shop around for the best terms. take these things together and this will help a lot more homeowners to refinance at lower rates, which means consumers save money, families to save money, and it gets those families spending again and that makes it easier for them to make their mortgage payments so that they do not lose their homes and bring down home by use in the neighborhood. i will keep doing everything in my power to help stabilize the housing market, grow the economy, accelerate job growth, and restore some of this security that middle-class

families have felt it slipping away for decades. in closing, the stuff that i've highlighted today will not solve all the problems in housing market here in nevada or across the country. given the magnitude of the housing bubble and the huge inventory of unsold homes in places like nevada, it will take time to solve these challenges. we still need congress to pass a jobs bill. we still need them to move forward on projects rebuild, so we can have more homes like this and a wonderful family having the opportunity to live out the american dream. but even if we do all those things, the housing market is not going to be fully healed until the unemployment rate comes down and the inventory of homes on the market also comes down. but that is no excuse for inaction. that is no excuse for just say no to americans who need help right now. it is no excuse for the games and the gridlock we have been seeing in washington.

people out here do not have the time or the patience for some of that nonsense that has been going on in washington. and if any member of congress thinks there are no unemployed workers or no down on their luck neighbor with in their district that would benefit from the proposals of the jobs bill, then they better think again. they should talk to the families out here in nevada. these members of congress who are not doing the right thing right now, they still have the chance to take meaningful action to produce -- put people back to work and help middle-class families like the bonillas. but i cannot wait for it. we will still keep taking the message across the country. we will just act on our own and keep putting pressure on congress to do the right thing for families all across the country. i am confident that the american people want to see action. we know what to do. the question is whether we will

have the political will to do it. thank you. and god bless you. god bless the united states of america. thanks for welcoming me to your neighborhood. thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

cheering] sharin

but every weekend, let -- >> everwood can let the c-span of burke's peerage for public affairs. on c-span, public affairs events. c-span2 as the latest on nonfiction authors. and american history showcases the people that shaped our country. all of these are available at the c-span library. the c-span networks, washington your way. >> republican presidential candidate mitt romney formally became a candidate in the new hampshire primary, filing people work at the state housing copper. after submitting paper work, the former massachusetts governor held a rally with supporters on the state house steps. he is joined by john sununu.

the new hampshire primary is expected to be held on january 10. this is about 20 minutes.

>> long time, no see. [applause] >> wow. do you think we could fit a few more people in here? good morning. how are you? >> [inaudible] >> nice to see you. >> oh, there he is.

>> a few of my friends came into your office. thank you. thank you so much. appreciate your help. i am honored to be here with a few friends. i will not mention all the names, but it is great to have governor john sununu here. this used to be his home. i am happy to see him. [applause] has it worked in the past when he was here? you have a great secretary of state. you've done a great job. for the next 40-50 years, bill. you'll make sure the new hampshire remains a first in the nation. it is our responsibility and an otter that the rich the desert.

i am happy to be part of this. i am hoping this time it will take. i'm hoping to become the nominee. [applause] now, let's see. where do you want me to sign? right down there. it's a signature. all right there. i'm mitt romney. a signature right there. great. i have to sign herree, too, somewhere. >> you just signed the house away. [laughter] >> not the first time. let's see. i just sign. oh, i see. in the top there, ok. new hampshire is number one.

there we go. >> yay! >> great. thank you. john, do you want to sign this, too? >> [inaudible] >> is that right? that worked, didn't it? whoops. there it goes. >> it's all right. don't worry. we'll get it. >> there we go. what is this a year? -- what does this say here? thank you. this is a family affair. >> i'm stuck back there. >> i don't know why we cannot sit a few more people back here. -- fit a few more people back here. thanks, guy.

s. >> we'll go to the white house and meet you. >> great inauguration. appreciate your help. thank you so mcuh. uch. have i said hi to everybody? >> [inaudible] [laughter] [applause] >> mitt, mitt, mitt, mitt, mitt, mitt, mitt. [applause]

[cheering] [whistling] >> i want to thank you all for taking the time to come out this morning. and since i like to be as efficient as possible, let me introduce the gentlemen that i believe will be the next president of the united states and the man i am in dorset in that endeavor. -- i am endorsing in that endeavor. mitt romney. >> thank you. it is good to be on the steps. and this time to be accompanied by john sununu, a great governor, a great chief of

staff, and the best person i can imagine to endorse me today. thank you for your help and support. it is an honor to have you here. peopleere's a team of around me. this is a volunteer team that will turn out voters on primary day, which by the way, will be the first primary in the nation as it ought to be. [applause] and i think you will find the american people recognize that it is time for real change in washington. they recognize that president obama has not done the job that they thought they elected him to do. the president came into office and had one job to get done immediately and that was a turnaround the economy. now over 1000 days later, he is talking about the stimulus plan. we looked at his first stimulus. did it work? >> no. >> did obama-care work? >> did cap and trade to raise the cost of energy work?

it promises to raise taxes work for the american people? was president obama able to turn around the economy? you see, president obama has not worked. individuals across this country recognize that. 25 million americans of work or stop looking for work. this is evidence of the fact the president obama has not worked for america. if we want to get america working again, we have to bring in a different approach to washington. president obama and his friends believe that america should be a nation led by government. they are wrong. america should be an nation led by three people -- three people choosing their course in life. [applause] this is not a nation by government, this is a nation by people. and government has become too intrusive, too big, too fat.

and that is why it is spencer difficult for this economy to turn around. when government tries to tell us what kind of health care we can have, when government tells us we have to join a union whether we want to or not, then the government has become too intrusive and we are going to stop this and return government to be directed by the people, not by bureaucrats in washington. [applause] when the federal government consumes 25% of our total economy, we are going to say no more, we will cut it back to 20%. it is time to cut back the size of the government to a size that is manageable and is within the course of america's greatness which is to keep government small and let people have greater rights. i am afraid the president obama for far too many years has taken his guidance from the social democrats of europe that saw

government placing a heavier hand on people and have your hand on free enterprise and the economy. that has not worked. the right course is to believe in america and believe in freedom of the american people. i believe in america. i believe in free enterprise. i believe in opportunity and freedom, when the founders crafted this country, they gave us not only political freedom, the right to choose who would represent us, they give us the freedom to choose our course and life. by virtue of those choices, this became the place where people from all over the world came seeking freedom, opportunity, this was a land of pioneer is what has made american and asian we are. as government continues to grow and expand and becomes heavier and heavier, it changes the nature of this country. we will not let it happen. we will believe in the american people, not believing in big

government. [applause] i love this country. i love this country. >>we love you, mitt. >> i love the principles upon which this country was founded. i love the passion of the american people for freedom and opportunity. we face real challenges in the world. we are patriotic people. these patriotic people are going to come together to do what is necessary to keep america great. as i go across this country, i see time and time again people love america like i do recognize that we are not another place on the planet with a flight. we are an exceptional nation. founded upon an exceptional promise that god endowed our people and all people with certain inalienable rights. and among them life, liberty, and the pursuit of happiness. [applause] this exceptional nation will not be stopped by anything other

than government becoming too big and too intrusive in our lives. we are going to scale back government and increase the freedom of the american people so that we can once again be the most powerful economy and the world, could for the middle class, creating jobs americans need, with rising standards of living, and we can remain as we have been, the hope of the earth. thank you, guys. great to be here with you. [applause] good to see you again. thank you. thank you. stella, thank you. thank you. >> good to see you, too. >> thank you.

>> thank you, sir. >> thanks, diane. how are you? >> [inaudible] >> i'm very excited. we've got great volunteers. there will come together and vote on primary day. the primary data subtle as the first in the nation. here in new hampshire. >> starting to feel that more tension on the the final -- is here? >> i think it's becoming more intense as time goes on we will focus on the failure of

president obama. he is under a lot of pressure right no. w. i think the american people recognize he is a nice guy, but he does not been able to do what it takes to get america working again. >> [inaudible] >> mitt, mitt, mitt, mitt, mitt, mitt. [cheering] >> very much so. he was the last one eliminated. >> [inaudible] ♪

>> reduce taxes on middle income americans. a very simple and flat approach. i want to make sure that with any tax system is one that reduces the burden on middle income americans. my 59 point plan. there are some steps are taken immediately. then there are steps i will take down the road to flat in the tax code and do our best to reduce the burden on middle income americans. >> middle income americans are the ones that have been most hurt by the obama economy. that is why it is so important for us to do, fashion our tax system to help middle income americans. >> [inaudible] >> can i get your autograph. i came all the way from new jersey. 2:00 in the morning. >> anyone else got a pen?

there's a sharpee. thank you. thanks, everybody. >> [inaudible] >> thanks so much. >> we're not taking any questions. >> thank you. >> governor romney -- >> thanks for the help. thank you. american legion. >> [inaudible] >> take care. see you. >> did you get everything you

need? >> yes. >> good to see you. >> thanks, sure. good to see you. where did john go? are you coming with us? >> no, we are taking off. >> you are taking off? good to see you. thank you so much. hey, buddy. get a picture here. all righty. thank you. thank you my friend. >> governor, you are on your own. do not blow it. >> [laughter] >> [inaudible] >> watch more video of the candidates, see what political reporters are saying and track the latest campaign contributions with c-span's

website for campaign 2012. it helps you navigate the political landscape. twitter feeds and facebook updates from the campaigns, canada biographies and the latest polling data, plus links to c-span media partners at c- span.org/campaign2012. >> as europe struggles with its debt problem, david cameron faces dissent in his own party over the u.k.'s membership in the european union. that is next on c-span. then financial analyst discuss challenges in the global economy. later, president obama announces an initiative to make it easier for homeowners to refinance their mortgages. on tomorrow as "washington journal", congressman adam smith his serves on the armed services committee will give his perspective on a joint congressional deficit reduction committee. then an update on the

investigation into the solandra solar company. after that, author and financial historian john steele gordon will talk about the creation of federal income tax. "washington journal" each morning at 7:00 a.m. span 3, a hearing will examine the in affect the debt crisis could have on u.s. trade and economy. this comes after they met in brussels to work on the details of the european bailout fund. coverage gets underway at 10:00 a.m. eastern. that is also on c-span radio. in the british house of commons, prime minister david cameron updated members on his meeting over the weekend with eu leaders about the debt crisis.

the prime minister was asked about future financial support for greece and whether he will consider referendum on pulling t of the ur o european union. >> order, statement, the prime minister. >. >> with permission, mr. speaker, i would like to make a statement on recent developments in libya and yesterday's european council. yesterday in libya, after 42 years of tyranny and 7 months of fighting, the national transitional council declared the formal liberation of their country. everyone will have been moved by the pictures of joy and relief that we saw on our television screens last night. from tripoli to benghazi, from misurata to zawiyah, libyans now dare to look forward, safe in the knowledge that the gaddafi era is truly behind them. this was libya's revolution. but britain can be proud of the role we played. our aim throughout has been to fulfil the terms of the un security council resolution, to

protect civilians, and to give the libyan people the chance to determine their own political future. with the death of gaddafi, they now have that chance. the whole house will join me in paying tribute to our armed forces for the role they have played. over 3000 missions, some 2000 strike sorties. one fifth of the total strike sorties missions flown by nato. as the chief of the defence staff has written this morning it has been "one of the most successful operations nato has conducted in its 62-year history." and i believe it's something the whole country can take pride in. the decision to intervene militarily, to place our brave servicemen and women in the line of fire, is never an easy one. we were determined from the outset to conduct this campaign in the right way, and to learn the lessons of recent interventions. so we made sure this house was provided immediately with a summary of the legal advice authorising the action. we held a debate and a vote in parliament at the earliest opportunity. we made sure that decisions were taken properly throughout the campaign, with the right

people present, and in an orderly way. the national security council on libya met 68 times, formulated our policy, and drove forward the military and diplomatic campaign. we took great care to ensure that targeting decisions minimised the number of civilian casualties. and i want to pay tribute to my rt hon friend the member for north somerset for his work on this. it is a mark of the skill of raf, british army and other coalition pilots that the number of civilian casualties of the air attacks has been so low. the military mission is now coming to an end -- and in the next few days, nato's operation unified protector will formally be concluded. it will now be for libyans to chart their own destiny -- and this country will stand ready to support them as they do so. many learned commentators have written about the lessons that can be learnt from the last seven months. for our part, the government is conducting a rapid exercise, while memories are still fresh, and we will publish its key findings. for my part, i am wary of drawing some grand, over- arching lesson -- still less to claim that libya offers some

new template that we can apply the world over. i believe it has shown the importance of weighing each situation on its merits, of thinking through carefully any decision to intervene in advance. but i hope it has also showed that this country has learned not only the lessons of iraq, but the lessons too of bosnia. when it's necessary, legal and right to act we should be ready to do so. mr. speaker, let me turn to yesterday's european council. this european council was about three things. sorting out the problems of the eurozone. promoting growth in the eu. and ensuring that as the eurozone develops new arrangements for governance, the interests of those outside the eurozone are protected. this latter point touches directly on the debate in this house later today, and i will say a word on this later in my statement. resolving the problems in the eurozone is the urgent and over-riding priority facing not only the eurozone members, but the eu as a whole -- and indeed the rest of the world economy.

britain is playing a positive role proposing the three vital steps needed to deal with this crisis -- the establishment of a financial firewall big enough to contain any contagion, the credible recapitalisation of european banks, and a decisive solution to the problems in greece. we pushed this in the letter we coordinated to the g20 and in the video conference between me and angela merkel, nicolas sarkozy and president obama last week. we did so again at the european council this weekend and will continue to do so on wednesday at an extra european council meeting. but ultimately the way to make the whole of the eu, including the eurozone, work better is to promote open markets, flexible economies and enterprise. this is an agenda which britain has promoted, under successive governments and successive prime ministers. but it is now an agenda which the european commission is promoting too. we have many differences with the european commission, but the presentation made by the commission at yesterday's council about economic growth

was exactly what we have pushing for. it drives home the importance of creating a single market in services, opening up our energy markets, and scrapping the rules and bureaucracy that make it take so long to start a new business. both coalition parties are pushing hard for these objectives. this may sound dry. but if we want to get europe's economies moving, to succeed in a competitive world, then these are the steps that are absolutely necessary. these are arguments which margaret thatcher made to drive through the single market in the first place, and which every prime minister since has tried to push. i am no exception. if the countries of the eu were as productive as the u.s. and we had the same proportion of women participating in the economy and were as fast and flexible at setting up new businesses then we would have the same per -- the same gdp per capita gdp as the u.s.. the remainder of the council was spent on the safeguards needed to protect the interests of all 27 members of the eu. the council agreed that all

matters relating to the single market must remain decisions for all 27 member states and that the european commission must "safeguard a level playing field among all member states including those not participating in the euro." this leads me directly to the debate we are having in this house later today. members of my party fought the last election committed to three things -- stopping the passage of further powers to the eu, instituting a referendum lock to require a referendum, by law, for any such transfer of powers from this house, and bringing back powers from brussels to westminster. all three remain conservative party policy. all three are in the national interest. in 17 months in government, we have already achieved two of the three. no more powers to brussels -- indeed the bail out power has actually been returned and, of course, the referendum lock is in place. and i remain firmly committed to achieving the third -- bringing back more powers from

brussels. the question tonight is whether to add to that by passing legislation in the next session of this parliament to provide for a referendum which would include a question on whether britain should leave the eu altogether. this was not our policy at the election and it is not our policy now. let me say why i continue to believe this approach would not be right why the timing is wrong and how britain can now best advance our national interests in europe. first, it's not right because our national interest is to be in the eu, helping to determine the rules governing the single market -- our biggest export market, which consumes more that 50 per cent of our exports and which drives much of the investment into the uk. that is not an abstract, theoretical argument: it matters for millions of jobs and millions of families in our country. that's why successive prime ministers have advocated our membership of the eu. second, it's not the right time, at this moment of economic crisis, to launch legislation that includes an in- out referendum.

when your neighbour's house is on fire, your first impulse should be to help him put out the flames not least to stop the flames reaching your own house. this is not the time to argue about walking away. >> [clamoring] >> not just for their sakes, but for ours. legislating now for a referendum, including on whether britain should leave the eu, could cause great uncertainty and could actually damage our prospects of growth. third, and crucially, there's a danger that by raising the prospect of a referendum -- including an in/out option -- we miss the real opportunity to further our national interest. fundamental questions are being asked about the future of the eurozone and therefore the shape of the eu itself. opportunities to advance our national interest are clearly becoming apparent. we should focus on how to make the most of this, not pursue a parliamentary process for a multiple choice referendum. those are the reasons why i will not be supporting the motion tonight. as yesterday's council conclusions made clear, changes to the eu treaties need the agreement of all 27 member

states. every country can wield a veto until its needs are met. so i share the yearning for fundamental reform, and i am determined to deliver it. to those who are supporting today's motion but don't actually want to leave the eu, i say to you this: i respect your views. we disagree not about ends, but about means. i support your aims. like you, i want to see fundamental reform. like you, i want to re-fashion our membership of the eu so that it better serves this nation's interests. the time for reform is coming. that is the prize. let's not be distracted from seizing it. and i commend this statement to the house. >> ed milliband. >> mr. speaker, can i start by thanking the prime minister on his statement? on libya, can i join him in

expressing deep and abiding gratitude to members of the british armed forces. over the last seven months, our servicemen and women have been a credit to our nation, exercising our responsibility to the libyan people and to uphold the will of the united nations. that is why i supported the government in its actions. i commend the prime minister on the role he has played in taking the right and principled decision on this issue. there are difficult days ahead, and it is for the libyan people to determine their future, but let me say, i agree with him, that alongside the responsibility to protect, which we exercise, is a responsibility to help rebuild. in particular, to help provide the expertise that the new libya will require. let me now turn to europe. and here is the opening of my remarks that reflect some of the things the prime minister said. we are clear and have been consistently that getting out of the european union is not in our

national interest. cutting ourselves off from our biggest export market makes no sense for britain. and it an overwhelming majority of british business, however on happy they are, know that, too. what more, at this moment of all moments, the uncertainty that would ensue from britain turning in words over the next two years off to debate this in- out referendum is something our country cannot afford. the best answer to the concerns about the people about the european union is to reform the way it works, not to leave. we should make the completion of a single market, budget reform, and reform of state aid the issue. that is why we will be voting against the motion tonight. mr. speaker, this is the context that the european council for the prime minister went to this weekend. growth stalled in britain since the autumn. unemploymentunemployment is risd

there is a threat of a new banking crisis. that is why the summit was important. it sounds like you now believe britain should play an active role in solving this crisis, but the truth is the prime minister has a chance to grandstand on the sidelines, not to help. the chancellor even refused to go to the initial meeting he was invited to on the issue. they show no will to try to find a solution. on banking, does he believe that the amount of recapitalization being discussed is sufficient to ensure financial stability across the european banking system, particularly in light of the larger capital requirement? on greece, does he believe that the previously announced greek bailout lessons are being learned and will provide a sustainable solution? on growth, does he not

understand that europe could get -- will not get a grip on its debt problems unless it gets a grip on crisis of growth? i suppose we should be pleased that the government has moved from empty chairs at a meeting to the prime minister getting into the meeting. but he will have to do better. he was surprisingly quiet about his real achievement of the summit. in a few short hours, he managed to write the european version of how to lose friends and alienate people. he went into the summit lecturing the germans. he came out of it being shouted down by the french. apparently, apparently, apparently, apparently president sarkozy, until recently his new

best friend, had had enough of the posturing and the hectoring. mr. president, yesterday you spoke not just for france, but for britain as well. you know the prime minister was in brussels. you know the prime minister was in brussels, but his mind was elsewhere. the tory parker on europe suffering another nervous breakdown. the prime minister making frantic phone calls home. people threatening to resign. it is not just the foam roses on a comeback tour. the right honorable member is back amongst us, a touring the television studios. all of the present difficulties are of his own making. what did he say in 2006? instead of talking about the things most people care about, we were banging on about europe.

deep down, he is one of them. the dublin with iraq skepticism is a slippery slope. that is what -- dabbling with your wrote skepticism is a slippery slope. i do not know if he is aware that the german chancellor was there. the french president was there. the president of the commission was there. mainstream center-right europe, the prime minister was not invited. he is the person who kept telling us he was a euro skeptics, who at the election promise renegotiations of the terms of britain's membership in the eu. his party is paying the price because they believed what he told them. the country is paying the price

because we are losing influence. yesterday, the prime minister was at it again, and we heard it again today. what do we see? the resurrection of the old classic, to get out of the social chapter and withdraw. but the coalition agreement is clear that option is off the table. that option, the preferred option of the prime minister, is off the table. the foreign secretary confirmed it again this morning. at the december summit, what position is he going to take for renegotiation or against? the coalition agreement says the option is off the table. he said he is on the table. the position is totally unclear. this goes to the heart of this prime minister's ability to fight in europe on behalf of this country. like his predecessor, he is

caught between the party interest and the national interest, like the rerun of an old movie. and out of touch tory party is tearing itself apart over europe. all the time, the british people are left to worry about their jobs and livelihood. the prime minister needs to start fighting for the national interest. >> first of all, let me thank him for his kind words on libya. i agree with him that we have a responsibility to help rebuild, and we will certainly do that. in terms of what he said on europe, it started well, with praise for the importance of the single market, something i am in favor of. he did not tell us all of his views in europe. yesterday, he was asked repeatedly if labour would join the euro zone. he said, "it depends on who the

prime minister was." i am not sure which prospect is more terrifying. he accused the government of not going to meetings in europe. we have been going to meetings in europe to get us out of the bailout mechanism they put us into. he asked me to make sure the bank recapitalization is credible. there was a 10 hour meeting insuring that would happen. on greece, we certainly want to see decisive action. he said an extraordinary thing about the french president, saying he thought the french president speaks for britain. that is what he said. i have to say it is difficult from the opposition to sell out your country, but he has just done it.

i struggle to look for a question to answer. there were not many questions. he talked about the importance of global leadership. let me remind him one of the keys is coin to be the role of the imf. he let his backbenchers and front benchers through the division lobby to vote against the imf deal that his former prime minister had negotiated in london. that was an absence of leadership, like so much received from the honorable gentleman. i see people keen to catch my eye, but i remind the house we have a very heavily subscribed debate to take place afterward. >> i agree with the view on the debate this afternoon, but had he gone to the terms of the motion, the third option, which was to renegotiate membership

based on trade and cooperation -- is that not incompatible with membership of the european union? should not anybody interested in renegotiation within the union oppose this motion? >> i think the vital interest for the u.k. is belonging to the single market, not just being able to trade, but having a seat at the table where you can negotiate the rules, which countries like norway are not able to do. another problem with the motion -- i completely understand the notion my colleagues have about europe. if you have a three-week choice, you could find 34% of the country's voting to get out of the european union would deliver that, or 34% could vote on the status quo, which many of us think is unacceptable. i think we have had the alternative and a clear decision was made.

>> how would the prime minister characterize his relationship with president sarkozy? >> if you have good relations with somebody, you can have frank discussions with them. i can tell you exactly what happened at the european council yesterday. on the issue of libya, britain and france have worked together probably more closely than at any time in the last 40 years. on defense cooperation, we will continue to do that. but there is a need sometimes to speak clearly and frankly on behalf of britain. it is in our national interest that the eurozone deals with its problems. it is right that we make that clear. >> my friend deserves great credit for his to the mission -- for his determination and leadership in libya. the seat understand that his views and mine on europe are hardly an identical.

but can not agree that opposing president sarkozy abroad and opposing the notions we discussed here at home is clearly acting in the national interest? >> i am very grateful for that compliment. the fact is he is right to make the point. this is a coalition. there is not complete agreement on european policy between the parties of the coalition. but the coalition came together in the national interest and is acting in the national interest. >> isla store. >> i think it is a shame we spent only 10 minutes on libya and the european council. undersecretary said that even if all of the greek debts -- u.s. secretary geithner said even if all the greek debts were repaid, which would have a problem. >> i wish there had been more

statements on european councils. i have always committed to come back and report to the house. the point the honorable lady makes is right. greece is just the most glaring problem the eurozone has to deal with. that must be dealt with decisively. it needs to be backed by a fire wall and the recapitalization of banks. but the fundamental problem is this issue of competitiveness and the large current imbalances building up in some of the memberships -- member states, particularly those in the south. what needs to happen is an advance in competitiveness, in trade, in completing the single market, which will help all those economies in the longer term. >> the prime minister has made it clear he advocates fiscal union within the eurozone. can he explain to the house how it is that fiscal union of that kind is not a fundamental change

in our relationship with the european union, when it is established that the constitutional position is clear that where there is fundamental change, there must be a referendum? how can he square that circle? >> i do think fundamental changes are coming in europe. they are clearly coming in the eurozone. to start with, that may lead to pressures for a treaty change. that will present opportunities for britain. we should respond to those opportunities. is it right to go off down the path of having a referendum, including this option, just as there are big opportunities for britain as the eurozone and eu is changing? >> i congratulate, with others, the prime minister for his stance in libya. can i remind him there are countries like yemen that need to be focused on? the lisbon agenda set up

benchmarks for economic growth. is the prime minister confident that despite the eurozone crisis, those targets will be achieved? >> first of all, he is right on yemen. we are spending increasing time in the national security council exploring how we can help that country to achieve not only a transition toward greater democracy and freedom, but to help tackle the real security concerns in yemen. he is right. there has been in lisbon process, the 2020 process. although the agenda gets pushed forward, in many cases, the targets and measures are not met. what i would say, after 17 months of going to these council meetings -- i see in the european commission a change of heart, not least because everybody recognizes the priority is growth. the commission has to stop adding expensive regulations to business and has to start deregulating, exactly the agenda

we are putting forward. >> would the prime minister agree, not just in libya, but indonesia and egypt, there is a real opportunity for transition to democracy? to what extent will this be done on a bilateral basis, with our partners through the european external action? >> the first thing we have done is to help to change the european neighborhood policy to make sure it is much more engaged with libya, with tunisia, with egypt, with more conditionality, so there is progress toward rights and democracy for countries we are helping. in addition, we have a significant bilateral program. one essential is to help develop building blocks of democracy, political parties and a civic society. that is something we can help with. >> i join in paying tribute to the bridge every of our servicemen and women for libya,

the work of nato, and commend the prime minister for his leadership on the issue. i am afraid on europe the same cannot be said. the people in britain will be asking why has he decided to firmly set his face against not only his own backbenchers, but against the will of the british people, for a referendum on the issue of europe? a >> i thank him for what he says about libya. our country can be proud of what our armed service personnel have done. on the issue of europe, i am very clear about what parliament should do about a referendum. when we come to this place, we do not give away powers that belong to the people. i think it is wrong we did not have a referendum on lisbon and those other treaties. the clear view i have is that when it comes to this parliament proposing to give up powers, that is when there should be a

referendum. that is the guarantee we have written into the law of the land. >> our future prosperity lies with improved trade with india, china, south america, and emerging economies in africa, not an inward-facing protection racket like the european union, founded on the inefficient businesses of french farmers. can the minister give us a timetable for getting power's back from the european union? >> where i have some disagreement with my honorable friend is of course we want to export more to china, india, brazil, russia, and turkey. of course we want to do that. we have to recognize that today 50% of our trade is with european union countries. it is our interest not just to keep the markets open and have a say in their regulation, but to further open them up. that is what we should and are

pushing, we do we should push and are pushing in the european union. that is important. otherwise, i think it is very clear what the country wants us to do. that is to stay in the european union, but to retrieve some powers and make sure we have a better relationship with europe. that is the commitment we have. >> the prime minister must recognize, talking about italy, greece, spain, portugal, and ireland, it is only growth that will make a difference to the crisis. why not advocate those policies within these debates, and give a lead to the british people on why it is important? >> heck i think one of the reasons why some of these countries have gotten into these difficulties is not just the shortage of growth and competitiveness, although that has been key, but also building up large budget deficits.

there is a lesson across europe that you have to make sure you cut your costs according to what you can afford, a lesson we are tragically having to learn in this country as well. >> we were pleased am heartened to see the prime minister stand up to the french. when it comes to the national interest, is it not the key point that we need action on the budget, action on getting out of the bailout fund, not selling us up the river, with the rebate we used to have? >> the important point is what the british people want to do specifically with respect to europe. the biggest danger they sense is getting dragged into another bailout. that is why in the treaty change that has come forward that was the price we exacted to get out of the you bailout fund by 2013. we returned that power to the uk. we should also being -- be

taking action on the european budget. we have agreed for a freeze this year. those plus the referendum are what we have been able to deliver in this government already. >> the prime minister margaret thatcher put our money where her mouth is. contributions to the european union went up from 6.6 billion pounds to 4.4 billion pounds. is the prime minister trying to emulate the new europe? >> the honorable gentleman reminds us that margaret thatcher did put her money where her mouth was. the problem is the next government gave it away when they gave up the rebound -- the rebate with nothing in return. >> can my friend speculate on what the costs would have been to the taxpayer, going forward, if he and his friend had not

negotiated to get britain out of the bailout mechanism? >> the point about the bailout mechanism is we were left exposed by the last government because of the existence of the efsm. while we are still at risk between now and 2013, we have ended it from 2013. we also stayed out of the second greek bailout. these things have saved real money. i think that is important for people to understand. the government has been focused on delivering something concrete and important for the british people at this time. >> as a member of this house who voted for the implementation of the security council resolution 1973, and who as foreign secretary refused to meet gaddafi when he invited me to go to libya to collect financial compensation, blood money for the family of pc fletcher, may i

state my discussed and revulsion with the murder and nature of the killing of gaddafi? i ask him to emphasize to the transitional council that the future of democracy in libya lies in reconciliation, not revenge. >> i think the gentleman makes an important point. i can announce that the leader of the national transitional council announced today there will be an inquiry into the circumstances of colonel gaddafi's death. clearly, we wanted him to face justice. that should have happened. but i do not stand back from what i said in my statement that because the gaddafi era is over, because he is gone, that does give the libyan people, who genuinely fear the prospect of him coming back -- they can now get on with that future. >> i greatly welcome the prime minister's leadership on libya.

it's liberation is a success not only for the libyan people, but for proving the international community can act together to protect. but will the prime minister agree we must also exercise caution? intervention must be used sparingly, when there is a serious threat to human life, when there is a proportional response, and there is a clear desire for action nationally, internationally, and within the country? >> i would add that you should only intervene if you believe you are capable of doing so and can bring about the effect you need. i think there is an important issue there, not just seeing what is legal and necessary, but also what you can do. >> the prime minister must know of the growing division between the public and politicians.

the is he not have any concern for what is happening at the sites where three party leaders are putting their backs into it on a decision that was not binding, talking about a referendum in future legislation in 2013? doesn't that just mean once again the public will say that 75% of us would like to see a referendum and this parliament is not listening? >> i think the lady asks an important question. i absolutely believe it is right to have public petitions in the way we now do. i also think it is right to have this time given over to backbench motions. it is this government that brought that reform about. the issue of europe is not a side issue. it is important. it is important that political parties and governments make their views known. but i do not except that you can hold a vote on something as important as this on a thursday and hope it does not go

unnoticed. this is an important issue. i believe in the importance of parliament. i don't not -- i do not believe in a sovereign parliament on the one hand them think that some of its policies don't matter. >> the prime minister told that -- told the telegraph that we should get powers back over social policy, yet on march 25 he agreed to a treaty change which did not ask for anything in return. >> i have to take issue with my honorable friend. the limited treaty change that is about to be debated in the house of commons and passed, i hope, gets us out of the bailout mechanism the last government got us into. i thought and still think that is the single most important price we could exact with that treaty change. that was the biggest concern the british public had. the point i made yesterday and

will make again today -- i do believe a huge changes coin to take place in the european union and the eurozone. i believe this will give us opportunities to maximize the national interest. that is something which should be debating about both as a party and within the coalition, and in the house of commons as a whole. i do not think we further that by having a referendum that includes an in-out option, walking away from the burning house when we should deal with that issue and then talk about the future. >> what about the assessment of the consequences of the eurozone crisis on u.k. regional export- led economic growth? >> the eurozone crisis has had a chilling effect not only on eurozone economies, but on our own, the american economy, and elsewhere in the world. the eurozone is a huge market for world goods and there has been a slowdown because of the lack of confidence.

we have to be clear that if we were to see the breakup of the eurozone that would have very severe consequences for neighboring countries and neighboring banks. that is why i think it is very important we work with eurozone partners to try to sort this issue out. >> bernard jenkins. >> can i join others in commending my friend for his leadership on libya. he does deserve considerable credit. can i think him also for the constructive tone which he is adopting toward those of us who have anxiety that so many parties have been promised a referendum again and again? it clearly is something the british people want, to have a say over our future relationship with the european union. it is likely the house of commons is likely to vote heavily against what the europeans -- what the british people want. >> i will try to keep my tongue

constructive throughout. i completely understand people's frustrations. they were promised a referendum on the lisbon treaty and did not get that referendum because it was put in place by the last government, and it was not possible to hold that referendum. but i think the answer to frustration about not having a referendum about the last thing is not to just offer a referendum on the next idea. the most important thing is to deliver what people want, which is to get the best out of the european union. where there are opportunities, we take them. that is the focus we should have. >> the prime minister rightfully said that the 27 nation states will decide anything on the single market. it has not told the house that the president of the council has been elected president of the 17 nation states within the eurozone, with france on one shoulder and germany on the other.

the president has said he will inform the british government prior to summit meetings. does the prime minister think that to be informed is the same as to be consulted? >> , the gentleman makes an important point. as the eurozone comes together and government's arrangements change, it is important that those countries who are not in the eurozone have their interests protected. that is why i secured specific language about making sure there is a level playing field and countries outside the eurozone are protected. this is a journey. the eurozone is going on one journey, where they see closer collaboration and cooperation. countries outside the eurozone i believe will be looking for further protections to make sure our vital national interests, like financial services, are properly protected from what is happening in the eurozone. >> with victory in iraq and

afghanistan, we have 100 days to deliver a stabilization before the joy of victory turns to despair among the local population. the clock is ticking. can the prime minister say a few words as to how we will deliver this stabilization? >> worked closely with others on this plan for libya. i am optimistic on this basis that we have seen with the national transitional council that it is genuinely national, bringing the country together, not wanting to see a division between benghazi and tripoli. the clock is on to set up a general transitional council. everything i have seen shows they want to get on with rebuilding their country. because of their oil wealth and the wealth in their sovereign fund, the have the means by which to do it. >> in the prime minister's statement, he suggested eu economies could be as productive

as the u.s. if we had the same proportion of women in the work force. both unemployment against women in the united kingdom being higher than at any point since 1998, can the prime minister tell us three things he has done to increase the proportion of women in the work force? >> we have increased the hours of free nursery care. that is what we have done. >> can the prime minister tell the house whether the president of switzerland and the prime minister of norway were at the table arguing with the french? i suspect the answer is no, because the relationship is very different two hours. they are not in eu. what you see in this motion is a wrong option for our country to pursue. >> i think there is an important point. we have to ask very clearly what is the national interest for the uk. at the heart of our national

interest when it comes to the european union is not only access to the single market, but to make sure we are sitting around the table, determining the rules of our exporters have to follow. we must not lose that. >> which situation does the prime minister hope we will arrive at first -- that the eurozone can pass without drinking on it, or that euro skeptics will pass it without going over it? >> that took a long time to construct. what i believe will happen is the eurozone countries are coming together. they are seeing the need for a big and bold solution. that needs to happen. that will not solve the problem. there are still major strains the need to be dealt with in the long term. but i believe that will happen over the course of this week. it is up to the house of commons how it votes tonight, but i am

clear our interests are to seek our national interest at all times. >> can i congratulate the prime minister on his leadership on libya? returning to fiscal union, i ask the prime minister what part of fiscal union he believes could trigger the european union act 2011? >> the key point about the european act that we put in place, the referendum, is that in the passage of powers from britain to brussels results in a referendum. that is the key thing we have delivered. never again can you have a situation where you have a treaty passed that moves powers from this house to somewhere else without asking the british people first. sometimes i think we have lost the ability to and recognize what a significant change this is. i think everybody on this side

of the house can be proud of it. >> from my last question, a few months ago this house spent 42.5 hours debating the eu bill and the business of the eu to allow for the referendums. is there any chance in the near future of a referendum on the eu? >> if a government proposes passing powers from this house to brussels, it should ask the british people first. that is the simple principle we have put into law. i think it is important we try to establish clear rules for the use of referenda in a parliamentary democracy. i believe if you are giving up powers that belong to the british people, you should ask them first. >> i commend the prime minister on his statement, not least because it will reassure the thousands of my constituents who work for european countries.

i would ask him to reassure me that the things my constituents do not like about europe -- bureaucracy, profligacy, growth, overspending, and too much regulation -- will be dealt with to the best of his ability during the course of this government? >> i can give him that assurance. if he looks at what we have achieved in a relatively short time, getting out of the bailout, getting an agreement for a freeze in the european budget, and getting the european commission to focus on deregulation are all important points. but i would agree with his first point. one reason companies come and invest in britain is not just because of our economic strength and flexible labor market. it is also because of access to the world's biggest single market. i think that is very important for investment by firms into britain, creating the jobs and the wealth we need. >> with some financial analysts

saying the banks that hold sovereign debt may have to take a 25% to 50% write-down, can the prime minister elucidate what it means by a financial firewall big enough to contain any contagion? do you think the house i am afraid to be involved in this? can it be solved in europe? >> for a decisive resolution to the greek situation, we need at a significant infusion of capital to the banks. the must be credible stress tests. there have been the stress tests in europe, but they have not been robust and credible. that has been secured. the second thing you need, the firewall, the big bazooka at the shadow chancellor referred to the other day, is to make sure you have a mechanism big enough to help stop contagion to other

countries. there will be discussions with in the eurozone and outside the eurozone about how big it needs to be. the answer is bigger than is currently proposed and they need to keep working on it. >> is there a possibility there will need to be treaty changes in the next few months? will the prime minister assure me and citizens in this country that he will use this opportunity to make sure we get rid of ridiculous regulations which are impeding growth and job creation in our country? >> i agree with the honorable lady. we should use these opportunities as the european union changes and the eurozone changes to maximize britain's national interest. we do not yet know how much of a treaty change will be proposed by the germans and others, how expensive it will be. we will have to look carefully to see what is right for britain in response. so far in this government, there has been one tree the change

proposed. we expected an important price, which was to get us out of the bailout, which was a clear and present danger to the united kingdom. >> as leader of the opposition, you underestimated the crisis. as a result of that, we had to go terribly fast into european politics. what is the next alibi going to be for the postponement of the referendum? >> i have not underestimated the scale of the crisis we face in europe and across the world economy. sadly, the crisis has been made worse by the vast overspending that took place under the government of which he was a member. >> the last general election, the conservative manifesto committed ourselves to seeking to return powers from europe on economic and social policy. but nowhere within the manifesto

was there a commitment to seek an in-out referendum, and nowhere within the manifesto was there a commitment to seek to renegotiate our terms of membership in the european union. >> my honorable friend makes an important point. we did have a commitment to seek the return of important powers, like the social and employment legislation. obviously, we are in a coalition. i remain committed to achieving that. i think it is in the british national interest. but it was not part of our manifesto and policy to seek a referendum that included an in- out option. i respect there are members not just on this side of the house, but on the labor side as well, who have long wanted a referendum. some of them would like to get out of the european union altogether. that is not our policy. that is the reason we are having this debate on a monday in the

proper way. this is not a side issue. it is an important issue. i believe in the sovereignty of parliament. to me, all decisions by parliament matter. the idea that we could sweep this off to a debate on thursday is wrong. what parliament decides matters. that is why this government is taking this motion seriously. >> a few weeks ago, i visited a group in my constituency. the complaint the difficulty they have had evacuating british staff from libya. that explained their key desire to go back to working on infrastructure projects as soon as possible. can the prime minister tell us how we are going to go about making sure that happens? >> this issue is important to his constituents and this business, and important for british investment into libya. steven green, lord green, has already held a libyan investment conference. he plans to travel to libya.

i recommend a contact that minister so we can help the group with the important work they do. >> many of my constituents who have contacted me over the last few days say they lost their trust in politics because of the last government refusing to give them a referendum on the lisbon treaty. what substantive message cannot honorable friend give me that i can take back to those constituents? >> i understand their concerns. i think just because the last government failed to give a referendum does not mean we should vote today on a referendum for an in-out option that was not in any of our manifestoes. the things people care about most in europe, constraining the european budget, getting out of the bailout funds, cutting unnecessary regulation -- the government is doing all of those things, and there will be more

to come. >> did i hear correctly when the prime minister said there should be a referendum on the maastricht treaty? in light of the foreign secretary's opposition to that, can he say when he changed his mind? >> i have always felt that, and our build it -- our bill is clear. any of those treaties would have triggered a referendum. i do not think the honorable gentleman has been keeping up. i hope labour will commit to this legislation. if ever in the government tries to give away powers from this house, the have to ask the british public first. >> carry it baldwin. "-- has the prime minister noted that while this government has ruled out joining the era, -- the euro -- >> an interesting series of interviews over the weekend by the leader of the opposition. as well as saying that if he was

prime minister he would like us to get back into the euro again, the other thing he said -- he was asked whether brussels have got too much power. he said he did not think brussels has too much power. that is the position of the labor party. wrong about the euro. wrong about brussels, wrong about britain, wrong about everything. >> i it share the prime minister's optimism with the liberation of libya, and pay tribute to the role of our armed forces have played. however, is the prime minister as concerned as i am about the allegations of the summary execution of anyone, even a violent presence like gaddafi, and does he share the urgent need to reassert democracy in this country? >> we saw the pictures on our televisions and newspapers. they were not pleasant. i think everyone understands

that is not what should have happened. there should have been a trial and gaddafi facing justice. as i said earlier, the chairman has announced an inquiry. i think it is important the libyans carry this out properly. >> could i respectfully disagree with the prime minister that there are no lessons from libya? the lessons which could be applied to europe is what matters is not what you ought to do, but how you do it, with whom, and when. >> i did not say there were no lessons to learn. i think there are lessons to learn. the government is carrying out a lessons-learned process. we will announce the key points about that. the comment about building alliances is vital. what i was trying to say and perhaps did not put across properly is i think you have to be careful not to say that because libya was successful you can read that across to every

other proposed intervention. you cannot. i am a liberal conservative. there is a bit of skepticism you should bring to these schemes before you embark on them. >> is it this prime minister position that he could see substantial german-led changes in the german -- in the lisbon treaty without a referendum? >> if there is a proposal for moving powers from the house of commons to brussels, there is a referendum guaranteed. it is vital people understand that. that is the promise we made. we do not know whether a treaty change will be proposed, what it will consist of, or how big it will be. we will use that opportunity to further the national interest, something that did not happen under 13 years of the labor government.

>> closer fiscal policy coordination in the eurozone marks 2 we would different degrees of economic integration among member states. does the prime minister consider that unlike other recent referendum, this development, along said passage of the eu act, is a more meaningful veto on changes as a result to treaty changes and their impact on our own country? >> i think my friend is right. i think that is the assurance people seek. you should not change the rules of the game. you should not give away powers that are not yours to give away. the british people should have a block. that is what we have put into place. no government should rule out forever putting questions in a referendum. this government had a referendum on the alternative vote. that is not what i am saying. i am selling the bedrock of our view is is that you should not give power away from parliament without asking people first.

>> ahead of tonight's vote, with rebellion looming, can the prime minister tell us what advice he has taken from former prime minister john major? >> he had plenty of events -- plenty of advice from the former prime minister because he used to work for him, whether it appears on the cd or not. -- cv or not. >> with large supply chains across europe and a market of 500 million, does the prime minister agree that we need to see if further strengthened capacity of a single market to deliver more trade? >> this is an important point. all these years after the single market was started, we still have not completed a single market in services, and in this country service is one of our strongest industries. it is countries like germany that have not yet completed that

single market. i know people are fearing the liberalization of energy markets and the regulation in europe, but if we want to raise our growth rate and a game it is squarely in the british national interest. >> amount to congratulate my friend on his leadership in the libyan situation. the many doctors have been proved wrong. will he assure me he will continue to work with the present up -- the president of france and others on the security council to address the situation in syria? >> whatever our disagreements on economic policy, by and large we are united on this. the french president and i will work closely on foreign affairs issues. there is a coming together of french and british national interests. where we do have this agreement, we should not be frightened of airing that and discussing these things. >> earlier this month, president

obama sent new hundred u.s. military advisers to you gone debt to help fight a militia group that fights in central africa. the foreign affairs committee will look at the white house decision to send american assistance. later, also on c-span to, pentagon officials will testify about proposed changes to the military retirement system at a armed services committee meeting. that takes place at 1:00 p.m. eastern. financial analysts discussed the current calendar is the global economy faces. the group is comprised of what is called the joint show regulatory committee. they follow financial trends around the world. from the american enterprise institute, this is one hour and 50 minutes.

>> welcome. this is a public symposium following the eighth joint summit meeting of the six shuttle financial regulatory committees. the theme of our meeting was lessons from the past, moving into the future. that is what we are going to focus on today in this symposium. there are six shots of financial regulatory committees. the oldest is the u.s., since 1986, followed by europe and japan.

the european common 1998 and japanese in 1998. let america in 2000. asia in 2004. the latest to join us are oceanus, australia and new zealand, in 2006. we met at santiago, chile. we met at copenhagen, denmark. at this meeting, we had 36 members from 20 different countries attending. we started on saturday morning and just finished a few minutes ago. it is sort of like a mini imf with all those people from different countries. the purpose is to exchange ideas and to see if we can develop strategies and programs that can be acceptable to all of the committees. the agenda for today's meeting -- i am first going to introduce the chairman of the six committees. there will introduce the members sitting here. many members of a have business

commitments and have had to leave. but we do have enough members here who could interact with you after the symposium. then the individual chairmen are going to review briefly, 5 minutes or less, the gist of the papers they wrote, the impact of the financial crisis on their area, policies taken are not taken, and lessons they have learned. we developed a policy statement after we listened to all the papers and committees, and had a great deal of discussion. the head of the u.s. committee will present the policy statement we have adopted. there are copies available. then we have two commentators from the world bank and imf. if everybody stays with in their

time schedule, that should leave enough time for a q&a from the audience. let me get started and introduce the chairman -- chairman of the various shaddock committees. juliana suarez, would you like to introduce the members of the latin american committee? >> raise your hand. this is the former secretary [inaudible] guillermo chapman, right there, is in panama, and is a very

important negotiator in issues related to the canal. finally, pedro, a professor at the university of sao paulo and former head of their securities commission. >> [inaudible] >> is your microphone on? >> my name is jeremy. i am from singapore university. i chair the asian committee. there are three members here, three over here. one is from the faculty of a university in indonesia. next to her is maria, a senior economic advisor at the asian development bank. jonathan is on the faculty at

the hong kong university of science and technology. >> thank you, and jeremy. we only have one person left from the japanese group. the rest had to run back. >> i am from the university in tokyo. the japanese members were here until yesterday. unfortunately, all of them except me left this morning. i am going to talk about the japanese situation today. >> next harold, the chairman of the european shown a committee. >> thank you. from the european side, we had seven members come to the meeting. five are still here. one is the professor of finance at the university of frankfurt in germany. then we have a professor of

economics at the university in paris. we have a professor of finance at the school of economics in helsinki. we have a professor of law at the swiss federal university of technology, if i say it correctly, in zurich, switzerland. >> kevin davis is chairman of the phocion a group. >> i am a professor of -- of the oceanea group. >> i am a professor in new zealand. professor mervyn lewis is professor of banking and finance at the cow university of south australia in adelaide. this is a professor from melbourne. >> now we will have the presenter for each commit to go

briefly, 5 minutes or less, telling the gist of their papers. we will do this in order of the establishment of the committees. the oldest committee is the u.s. it is not necessarily the most important, but we were the first established. charlie will be presenting. would you come up to the podium? >> thank you, george. i will briefly summarize the the end of our paper, which presents 11 key lessons learned from the crisis and from the policy response to the crisis. first, one of the main drivers of the crisis was government housing subsidies, subsidies for risk, particularly in the mortgage market, which included hud mandates on fannie and freddie's behavior and many other government policies that encouraged lax underwriting, especially over time, and

increased leveraging in the mortgage market. unfortunately, almost nothing has been done to address this key problem and prevent it from happening again. the second problem was easing monetary policy keeping interest rates far below equilibrium levels for years in a row, 2002 through 2005, which resulted in the underpricing of risk, asset price inflation for risky assets, including housing, and fuelled unreasonable expectations that helped inflate the housing but -- house and bubble. the fed has not accepted responsibility for these mistakes, nor has it said how it will implement a practice that would prevent it from happening again. we have learned that regulatory and supervisory frameworks are deeply flawed. two of the most obvious and important witnesses are the failure to measure risk in the

financial system on an accurate basis in advance. the second important problem is the failure to recognize losses when they start to accumulate, despite the fact that they are apparent to the market into anyone who does not have the political or other motivation for hiding them. the regulatory reforms have not addressed these key problems of the risk and loss, despite the thousands of pages of dodd- frank. bank risk-management is another area that failed. corporate governance in some banks was deeply flawed. risk-management failed to recognize and constrain bell u- destroying risk-taking that harmed bank stockholders and contributed very much to the financial crisis. some of the interventions the

government undertook were well- designed, especially those that had structure that made them liquidating and temporary. others were not so well designed. for example, we are still seeing the federal reserve with a trillion dollars of mortgage- backed securities stuck on its balance sheet, based on reactive and not well designed programs which have ongoing implementations -- implications for problems of fed independence. we found out theirwe found out s aren't domestic weakness having to do with the ability and internationally having to do with what to do when troubled institutions present problems across borders to require some kind of international coordination of policy.

these problems remain unaddressed. we have reinforced perceptions that were pre-existing about the too big to fail doctrine. lead to some institutions are too big to fail despite some reforms in the legislation, many people believe that the legislation institutionalizes that. there are also some technical problems relating to the dealer system and the way the federal reserve implements policy which explosives the fed system to unnecessary concentration of problems having to do with the small number of dealers. we point to the ecb as a better approach for a broader based system for engaging in monetary policy. >> one of the difficulties when

you are wearing two hats as the chairman is that i forgot to introduce the members of the u.s. committee. if i could recognize them, the university of pennsylvania and carnegie-mellon. boston college. university of chicago law school. anybody else i should recognize? bob will be here in a moment. he is on my left. peter, of course. where is he? american enterprise institute. anybody else? the second person to speak is herald. -- harold. 5 minutes. >> good morning ladies and gentlemen. it is a pleasure to see so many

of you here. talking about european situation, you can imagine that the regulatory committee was having a difficult time because the whole world is looking at europe and saying, i get your act in order. as you will notice later on during the session, we're going to issue as a shadow committees dealing with some of the problems in europe. europe is unique in the sense that it has a large, important diversity and also institutional complexity. we are a collection of 27 countries which is basically a type of flow of goods and persons and capital services.

the other 27 countries, we have 17 which have been the single currency. the euro. that means that we also have 10 and on the eurozone countries and a country like switzerland which is closely linked to the european union but is not a member. although voices are becoming stronger to join the u.s. [laughter] you know, of course a charlie has greek ancestors is going to join the europeans. we are nicely mixing up. in terms of the crisis, during the first year there were some banks that were hit in the

united kingdom. quite a few german banks. it happens to be investing substantially in the u.s. subprime loan portfolios. the reaction in europe and the crisis after september 2008 when the lehman brothers sale, the reaction we have seen in many european countries was basically titled a big bailout in terms of the government injecting money into the banking system. some got nationalized. loan guarantees were provided. there were all types of bank guaranteed liabilities. they have started issuing new bonds.

in late 2008, an important committee started working led by walmart -- one of the former directors of the imf. they produced a report of strengthening the european the supervision which has led to the situation that as from january, some new institutions were created. the type of observatory of risk and -- also and three new supervisory agencies who are new in the sense that they were created, they are the successors of formal types of corporations. i'm talking about the banking authority and the markets authority and the european

authority for issuance and occupational pension. these new agencies need the type of strengthening supervision. the corporate -- cooperation between european supervisors. as a shadow committee arguing, this is not likely to remain stable for the banking and financial services. in terms of other legislation in europe, europe has been implementing bazel 3. there is a new proposed directive to capital requirements following the work of 2003. as you have seen in the newspaper, there is an independent banking commission

who are arguing that large banks, which are active in commercial banking, the ring fencing of the commercial banking part. what is urgent in europe is that we need to develop much more stringent regulations -- regulations. whenever large banks and also with dexia, it is hard to sort out things. a few words about the european crisis. we have been preparing for this meeting. i start this presentation with the complexity of the europe.

we notice a difficult process. you are aware of the plan which is being discussed that the greek debt is unsustainable and needs to be restructured. there is a point of a recapitalization of the european banks where they will be able to absorb losses. this weekend there was a meeting of the government leaders. the imf was asking for double. that is interesting to see. the main thing under discussion is how to increase the firepower of the financial stability facility. the point is that the typo of causal that european leaders are solving is how you -- how can you prevent contagion spreading from greece, how can you

prevented to going to countries like spain and italy? if they are under attack, we have a problem in the eurozone. we're talking about the central bank, the rescue fund, they do not want to commit additional money. that is a difficult causal to resolve. if we need to have a much larger rescue fund, a taxpayer money will be at risk. that is something that european leaders will be a sorting out to be before next wednesday. by understand that all plans are being discussed. it has some interesting ideas. thank you.

>> good morning, ladies and gentlemen. i would like to talk about the japanese institution on behalf of the japanese committee. i am not to the chair. when the crisis happened, japan was just coming out of a decision that when the owned bubble collapsed in 1990. that is the japanese system and the institutions were fortunate. things had improved and that time. for example, the financial

services agency, the fourth major bank to get out of the nonperforming loans in 2000. as shown in the graph, they disclosed nonperforming numbers. it declined in 2000. the decision was delayed because the bubble burst in 1990. in terms of the global financial crisis, the late decision worked. that means that japanese banks did not have any risky investment.

the direct impact on the japanese institutions was limited. the obvious reason is that the japanese banks did not have much exposure. the financial system maintain stability. it was stable so far. however, the economy suffered a lot. here is the gdp growth. it suffered more than that of united states. so why did the japanese economy suffer so much? why did the financial system go largely harm to. ed?

the most important was the decline of the exports to countries that were hit by the financial crisis. it looks like the company -- country will remain stable but that is not correct. there are two major problems so far to this decision. one is that to the imf financial stimulus needed to sustainable. the japanese banks made a large amount of bonds.

the interest rates could be 4.7 trillion yen which is 12% of its capital. the fiscal expansion may have contributed to prevent the economy from going into a deeper recession. but the fiscal situation was already serious before the financial crisis. the second problem, going back to -- it helped banks to conceal losses for classifying loans as nonperforming.

first, we can learn from the japanese experience. one is japanese banks do not want to repeat the non- performing loan programs. one lesson is enforcing policy. from may and stability point of view, the expansion might create another crisis. summarizing all of this, the economy is relying on exports and is suffering a lot from the

financial problems abroad. thank you for your attention. >> most of you know, latin america is perceived as the region that was -- during the financial crisis. there was not a banking crisis or loss of confidence from depositors. that did not mean that the region was not affected. it was heavily affected by the shock. after there was a triumph in liquidity, local banking credit , many countries became negative.

however, the difference is that it was short-lived. in the region recovered briefly by 2010. it was facing the same problems that it was facing before the crisis. the problem was that they depreciated the currency. we're kind of in the same situation when the possibility of the new crisis may hit the region. we are you there were three reasons for this outcome. -- argue there were three reasons for this outcome. the initial conditions mattered for the crisis in the past and it will price -- matter forever crisis there is going to come.

there was an improved performance and a better financial framework. the second is policy makers had a better response. for the first time in many years, they were able to implement monetary policies. that is something that in the past banks are not able to implement. the third factor is luck. it happens that after the crisis, the fed reduced the rate on financing conditions for countries like latin america as well as commodity prices recovering immediately for the commodities that latin america exports. there was a combination of those factors. the most important lesson to us

is that the central bank's learn what in economics is called a trinity. the fact that you cannot have an open capital account and have an independent monetary policy. latin america has tried to go against the trinity and it has always failed. latin america has many characteristics that are important for dealing with the crisis. the first one is it is the most financially open region among the developing countries. its capital flows come and go and there are some controls in brazil. most of the rest of the country does not have many restrictions. the second one, you cannot issue hard currency. i would like to stress this one.

this makes the difference between advanced economies. nothing else makes a difference. at the end of the day, you need internationally traded liquidity. that is the u.s. dollar. when your in this situation and your a bank facing those things and you recognize this is where you are, then you know what you have to do with your system. you want to have flexibility. you do not want to be trapped. the house to an account because you cannot issue hard currency. that is what these countries did. it served them well. at the time of the crisis, there were able to expand liquidity. corporations needed hard currency to make good on some of

the positions they had taken with international banks. that is what they did. in addition to that, they also learned that good fiscal management matters. latin america is well known for the debt crisis. if you look at the history, latin america is check, check. they learned, no more debt. very little debt. most countries have a small ratio of debt to gdp but they must have a maturity structure that is worked out. using the low-interest rate, they concentrated expensive debt for lower interest. being in that position implies that when the crisis hit, there was not a large amount of money that had to be rolled over.

that is not the case in latin america. i do not have time for more but let me finalize with the question, where is latin america for the next crisis? a little bit less than in 2007. some countries that had expanded this kind of policy have not yet backed up completely. on the monetary standard, they are doing a wonderful job. that is a lesson for the united states. [laughter] we are full of lessons. some countries have work to do and they had better hurry up or the crisis will and put them in

the same position as 2008. >> our next speaker is jeremy. >> thank you, george. we are compiling a report of what happened in the 2008 crisis and how it impacted the asian economy. one lesson we learned which is very important, it is important to understand what happened. the pre crisis conditions. then what were the steps taken by policy makers to handle this and trying economic and financial crisis back then. asian economies are reversed. -- diverse.

by and large there were a lot of similarities going before the crisis hit in 2008. asian countries are relatively sound economically speaking. they have good fundamentals. there was a crisis that hit in the late 1990's and people learned. what really helped to that point was the low inflation rate and a robust growth rate. the key issue is the low debt to gdp ratio of 60%. going into the crisis, the chart shows that the stock market was at a historic high. all in all the asian economy was in good shape. just before the crisis hit. another factor that was unique in the region is that the

financial institutions are consolidated. we know what happened in 2007. i do not need to go through all of this. the lehman bankruptcy, the liquidity dried up. it was important to look at this chart and see that a lot of the stock market is at a historical high for many countries. the same in the real sector. i also noticed the recovery came in no time, less than a year's time we're back to a pre-crisis level for a lot of the economies in asia. if you looked at the economic growth after the crisis, it was phenomenal. what spoiled that? the fiscal policy adopted in by the region made a sharp cut in

interest rate. the cost of the insurance after the demon case. some were worried there would be a bank runs or measures in place to restore confidence in the system. one important issue is the and build up a lot of this results. it allowed the economy to intervene in the a foreign market. and also fiscal stimulus, 5% to 8% of the gdp. it allows the managers to increase confidence in the market including imposing restrictions by the central bank and suspending the accounting rules. some would argue those four

measures taken by some of the countries in the region. what happened after the crisis? we saw a sharp recovery. singapore registered a 14% growth rate. china was more than 10%. with this rate, you get "hot money." you cannot separate combat and the -- but it created a new set of problems. housing, price appreciation in places like china and hong kong in my country of singapore. there is inflationary pressure. one of the issues the government has to deal with are the things that makes their exports expensive. so they impose capital controls

and things like that. one of the big lessons from the crisis, in some sense, the asian market lucked out because of conservative banking practices and the fact that exotic products are not popular among investors over there. and also a financial institutions are well regulated. they are a hawkish about looking over the financial institution. they have a reserve that provides a cushion. one thing we learned is a prudent use of stimulus. it is hard to calibrate but an overuse of stimulus leads to new problems like a real estate bubble. we had a real estate bubble in

singapore and hong kong. and currency appreciation. one of the things that was adopted in a lot of the asian markets was the use of policies to handle some of this spiralling housing prices. in singapore, every time you had a housing market that went out of control, the government would impose rules as to who can buy. if you own a government subsidized property, you cannot buy and other private property. there were speculator is in the market. you can load up to 80%. we cut it to 60%.

overall, i think it helps to stem some of the bobble. that is a lesson to be learned. >> the last speaker is kevin davis. >> thank you very much, george. there is no correlation in that the speaking order from older to realgar is correlated with the most affected regions to the ffected regions. it was quite uncomfortable for a while, and we had a 50% drop in the market. the banking maintained profitability, relatively high profitability, but there were substantial failures outside of the regulatory areas.

in terms of the economy, a moderate impact. 1/4 of economic growth. why was that? some element of luck. we were at the right place at the right time. both countries are tied into asia. also, resources of commodities helped on the economic front. the australian and new zealand banks are one and the sand, because there are four. they were not exposed to toxic access. they were busy bar when themselves -- borrowing themselves using those funds in profitable lending, largely for housing. there was no incentive to get out there and -- trying to build

up structured investment vehicles. also in australia and new zealand, very strong supervision, reflecting the fact there is ay 2000's bad experience with the failure of a major insurance company. there was a conservative banking, with not much emphasis on trading. also reflecting the fact that bankers members are longer than we thought they were. we had bad experiences in the early 1990's, and the memories of those on the over somewhat. it is important that at the time of the crisis there were substantial government actions, in positions of guarantees of bank debt and bank deposits the provisions of the liquidity facilities, and strong fiscal

expansion facilitated that both governments had been running surpluses for some time. what were the consequences? one of the important consequences was that prior to the crisis in both countries were marked by the fact that they were the only g-30 countries without cost of insurance. having introduced guarantees, it was difficult to continue that situation. new zealand is attempting to go back to the depositor-at-risk model. whether that is feasible is unlikely because one of the consequences of the experience is that we all thought to be to fail was the case. we now know that too big to fail is the case in new zealand and australia. what is happening affecting the

national agenda, even though they sailed to the crisis recently, we are having the imposition of tougher regulations, also important reflecting the failures outside the banking sector in terms of retailing and or worse -- borrowers, there is more focused on consumer protection, and there's a shift on responsibility away from consumers to take the responsibility to see if a financial product, toward the financial products and that banks having war responsibility assisting the nature of that product. one of the untested hypotheses, the regulatory structures. both countries had similar regulatory structures, and in australia we had a specialist dedicated credential supervisor.

i lot of the gaps that might have existed disappeared over the years as we took responsibility away from state governments and allocated it featherlight. a lot of the risk in the economy was cast on to end users. in particular, most of the bank lending was the variable interest rate lending, and to the extent there were increases, they were passed on to borrowers. the equity market collapsed, primarily impacting individuals through the pension fund investments. that sent more of the risk want to end users and we see a reflection in the fact that there is a significant increase in savings by individuals. a third possible lesson, maybe

there are bits of having it concentrated made up of branch banking. this might come this by -- despite there is competition coming from that model, that some of the systemic risk in internalizing the banks, maybe there is -- they are easy to supervise about perhaps a small number of larger banks. finally, the last lesson i would point to is one of the benefits of the two systems was a division between the prudential regulated sector and the unregulated sector. the message had been that it was outside the credential regulated sector. >> will you then listen to these reports an? we did not want to issue a statement saying all it takes is

luck. we need to spend a little bit more time, so we debated it a day, and our statement will be introduced by bob litan. >> thank you. when this was planned a year ago, the main idea was that the shadows from the different parts of the world would get together and we would share lessons with each other, with the feud that at some distant time we could draw on these lessons and apply them so maybe next time we would do better. well, the distant time i arrived a lot more quickly than we anticipated a year ago, so we met at a quite convenient time, where the world is facing a potential crisis in europe, and so our statement concentrates on europe and it is to provide a framework for judging the plants that may be merged out of the

discussions that are now going on and presses and other discussions that will go on after that, and a lot of the media commentary that will surely follow all this. i should say personally, and i think a lot of people will share this view, i think we all have great sympathy with the finance ministers and the elected leaders in brussels, who are now wrestling with these problems. they are huge. and they will -- all the options will entail very significant and painful costs. and we had the benefit that we are not elected leaders, and we are economists, lawyers, and then provide expertise and a framework, but we do not have to face voters, and the people been there now are under huge pressure, and as i said we have sympathy. just last may before i get to the introduction, i do not know

how i ended up doing this, but i am the designated summerize are, but we have a lot of other experts in their room, so when we get to the questions and answers, a lot of people will want to voice their views, i want to express appreciation to everyone who contributed to this statement. the first point is at the end of our statement, and that is that the world has a huge stake in the outcome of this crisis. this is not well recognized, i think, and a lot of the media's in the different parts of the world. if europe goes down in some fashion, there could be capital flight from the margin markets around more, and at that point it leads us to suggest that the imf needs to think about bolstering its resources to provide liquidity to emerging markets. second, there could be credit -- significant credit contraction in latin america. as pointed out that a sizable fraction of the banking system

in latin america is from european banks, and if they are in trouble, there's a great risk that money will be transferred from latin america to europe to bolster those banks. with that money beyond, you get credit contraction. number three, there was a contraction in trade credits that could happen all over again. add to that the fact that if europe goes south, the contraction in the real economic activity in europe will lead to a decline in exports from all the countries that now send goods and services to europe, and that includes the united states, asia, japan, china, and all commodity exporters. all nations get it. equity investors have a big stake in europe, said it hit directly if european markets go down, and if that happens, that could trigger an avalanche in declines in other equity markets around the world.

fifth, the united states money market funds, 40% of their assets are invested in short- term liabilities in european banks. needless to say, if european banks are in trouble, we will talk about that in a minute, then our money markets and investors get hit. finally, there is the unknown unknowns, and that is we do not know the extent of counter-party exposure to europe. we do not know who gets hit, so in 2008, aig to be rescued, largely because the regulators feared counter-party risk. we do not know anenough who they are and whether there could be another aig or aigs. if that does not scare you enough as to why this matters, it should, and here is what we suggest. at the beginning it is important to understand that our three separate entered-related problems in europe -- number

one, there are sovereign debts that are unsustainable. number 2, there are banks that are facing insolvency or severe under capitalization. number three, and this is not widely recognized, there is what is called differential competitiveness within the euro- zone, you have some countries like greece whose currencies are overvalued, so their export machine, is significantly compromised. conversely you have other countries whose currencies beebe under the new. like in the north. you had this differential that need to somehow get ironed out. that leads to the next major point that we make, that whatever is done, there must be a long-run credible plan for resolving these three problems, because without addressing these three fundamental problems, the market will not have any confidence in what comes out

wednesday or maybe the following week, and we will just large from crisis to crisis. the us to greece. i will talk about greece, the bulk of the statement is we have to do more than six greece. it comes to that country, the elements are clear. at that needs to be restructured in an orderly fashion, the losses the to be allocated to creditors and governments, and the rest of europe must be protected from the follette in case bad things happen increase, so there is a ringed fence and the rest of your. as to the broader -the we- european banks have to be honestly assess and their capital adequacy must be a short period that could be accomplished by closing some inefficient banks, by recapitalizing the banks either from public or public sources or

public sources or by government guarantees, but somehow the adequacy and safety and soundness of the banking system in europe has to be assured. second, there needs to be ample substantial funds available to support liquidity and to support the bank recapitalization efforts to the extent they are needed. the money now provided by the esf and the ecb are not enough. there needs to be a lot more indeed kitty. the funds be available either without preconditions or only to qualifying countries. now let's get to the really tough nut, to the differential competitiveness that we talked about. what we did in the statement is outlined three alternatives, and these cannot be wished away. it is going to have to be a

political decision about what the leaders decide to do, but none of these are painless. option number one is what we call the past of option, and it is just to allow essentially the countries that are in deep trouble to experience a continued deflation, a decline in their wages, so they become competitive. they have to take a very long time, could be accompanied by high unemployment and political unrest that ec in greece and other countries. the second option is some countries could lead the euro- zone, and that should solve their competitiveness problem because they could become competitive. that could entail, probably would entail, very significant short-term disruption that could damage the e.u. experiment entirely.

the third option is to allow higher inflation for the euro- zone in particular for the number so we get wrong way to appreciate in the north, a wage decline in the south, which is accompanied by a deep structural reforms so we do not have to do this over and over again and exchange rates become misaligned in the future. the key in the third option is the euro-zone have to allow for several years that the possibility or the acarology of more inflation to fix this competitiveness problem. the final point we make has to do with banking regulation. it is an unrecognized fact that the basel work contributed to this crisis. basel system essentially risk- rated different assets.

what that has meant is that the banks have gorged themselves on european that, and now they are stuck. it has given them no incentives to discriminate between the countries that are sound and not sound, no incentive to diversify their government holdings, and so the basel system is a direct answer to this mess. what we end up recommending is that the whole basel system needs to be redone. the zero-risk wage is to be geiven up. a simple leverage ratio should be a place where you should begin, which is the ratio of owners capital to total assets. we talked about the quality standards, but the framework we have now has got to be fixed,

and all has to be done urgently because time is of the essence. >> thank you. it is important that we should probably make recommendations and get some feedback from people outside the field. we are fortunate that with us today we ustwo senior people from the world bank and the imf, and we will first speak with asli demirguic-kunt. >> thank you very much. it as an honor to be here. i am a fan of all your statements. it is a pleasure. i need to say all of these views are my own and are mined only, and if anything, the bank was probably -- would probably

vehemently disagree with them. i read through all the papers. my task was to read the papers and comment on them, much less the, the statements which i just heard, but i think what i am on to say today is going to have implications for that one as well. just a comment on it actually the one that i read most carefully, because the first one i received, is the u.s. paper, while basically i very much agree with what is in there, and agree with the analysis that the macro policy and a global imbalances made it more likely that the crisis, he essentially the underlying reason, where all the incentive distortions that were introduced into the system. i am also want to say that i agree with the lessons that are drawn in that paper, and

perhaps most important lesson is summarized on page 61, where the authors underlined again that credible reforms must address the incentives of that bank, the regulators, the politicians, so that all these -- all the problems that we see that may look like technical problems are actually incentive problems, so the solutions he to address these. here i will say that the question is how, how to do this credibly, how to do this effectively, which has been difficult so far. in that respect, i wanted to give you three parts, based on my own research and the experiences with developing countries in the world bank.

if i were to just mention them briefly, one has to do with transparency and simplicity. the other one will underline the importance of clawing back the subsidies for the large and interconnected, too big to fail, and the third is actually trying to reorient the whole regulatory process to sort of focused on incentives rather than other core principles along auditing sentence. let me go through each one of them. so this is very consistent with what you made at the end of your statement. when the the crisis challenged the basel work in important ways, and it continues to challenge it. there were flaws with external

ratings, accuracies of internal risk models, lack of disclosure and transparency. inlet my recent papers, but colleagues from the fund thought that maybe we could learn something about the usefulness and the redisign of the capital to regulation by looking at what is happening during the crisis. we try to look at quarterly stock returns from 2006 until 2009, and we used this 2007 schock as an unexpected-shocked just to see how a market prices were perceived different capital definitions and house sort of banks' ability to withstand stress deford. we knew that all banks did poorly in terms of their stock market value, but some did

better than others, so the question was whether better performing banks were also better capitalized, and which measure apple was most informative. this is relevant for the discussion here, because what we find is indeed during the crisis stock market investors placed higher by year -- in better capitalized banks, but the capital asset ratio, the leverage ratio, was more other ratio.tn any the crew is a measure of risk exposure was much more informative than the measure used by the regulators barrett there's also evidence that higher quality tier -one capital was more relevant for starke market investors. what does this mean for the statement here? it reminds me of your earlier

statements where you mentioned how it is very difficult for economic capital to be calculated, and indeed the fact andbasel regulations still emphasized capital as a problem because this leads to manipulation and unintended consequences. it is much better to use simple ratios such as the leverage ratio, complemented with signals from the market itself. i thought in this statement you need to emphasize again that transparency and the simplicity, because complexity itself distorts the incentive.

i figured it out that you were going to say that in advance. that is good. the second point that i'd want to emphasize is this whole issue about the to be to fail, and how important it is to fix the exit mechanism if we're ever going to hope that effective regulations of provisions. i think everybody agrees about it, ought but the solutions very. i just wanted to review my thoughts here based on some of the research i have done, also on deposit insurance. i believe introducing -- which are crude is not the way to go. the whole idea it needs to be

clawing back the incentives to because of large and interconnected. i wanted to emphasize three areas. one higher additional capital requirements to make it more costly for these institutions to become large. the second issue is to have greater crisis prepared this in general. outside of the crisis, be able to think through about what to do in these institutions to increase -- in case there is a crisis. living wills, shelf bankruptcies, so in a time when there is to do something, there is a blueprint there, even if you do not necessarily follow it very closely. you have taken the opportunity to think through this outside of the crisis situation make a set

much easier to provide the impression that something can be done the side that knee-jerk reaction bailing out these institutions. finally, i think this is the most controversial point and the most counter intuitive, given that we have heard that during the crisis those countries that did not have insurance introduced insurance and those that did have it increase the coverage. why am i saying this? we know explicit deposit insurance is not there for systemic crises. the government steps in whenever that happens. it is only there for bailing out individual financial institutions. what do we have? we have large financial institutions which we are trying to claw the subsidies and we are

having cities does not make sense in my mind. the coverage is actually four small financial institutions in order to make them competitive, viable. to the extent we believe these institutions are important for mom-and-pop operations, and if we agree with that, then there are reasons with having explicit deposit insurance for small banks. on the large side, i see no reason that explicit deposit interest on top of the too big to fail cities. the whole idea for a depositor, when one tries to decide where to put their money, is going to be -- the choice is going to be between an insured small banks versus at least a bank that does not have an explicit deposit

insurance, presumably implicit insurance. this would go a little way in clawing back the subsidies. finally, now, i think we all agree that incentives are important, but i think we are falling and little bit short discussing how to reorient the whole approach of regulation toward one that focuses on incentives. for example, the current approach currentbasel really emphasizes assessment of compliance with various regulations, different versions of basel, and i know being part of the bankin, huge resources ae

spent in order to develop these principles in spends huge amount of resources ensuring compliance with these types of regulations and having participated in these sort of programs and having led some of them, i know the whole process is basically captured by the negotiation of back ticking exercise of figuring out whether one regulation is adhered to and the other one isn't. unfortunately, though, ironically, again, studies and these studies that i've conducted myself with colleagues the fund, looking at the impact of compliance with these b.c.p.'s and bank financial strength find really no robust correlation. there is really nothing that sort of seems to suggest that all these exercises are helping

in making the financial systems around the world more robust. if anything, there is only some evidence that the principal that captures the quality of transparency and information which makes sense to all of us in this room is the one that is most highly correlated with good outcomes. so what should be done and this is my last slide. basically, again, i, with a couple of my coauthors from the bank, are trying to propose incentives to identify incentives giving rise to systemic risks become a core part of the financial architecture. the need for a macroprudential authority is already acknowledged by the international community but most of the approaches and tools that are given to this macro prudential authority is really prudential add-ons.

what we are proposing is that the focus of this macro prudential regulation should be incentive audits as a means of identifying and correcting systemic risks. so similarly, i think this whole program, which all of us are spending so much time and energy on, should move away from compliance with principles to an assessment of incentive problems throughout individual countries. thank you very much. [applause] >> thank you, asli. next commentator is luc laeven of the i.m.f. luc? >> thank you for the opportunity to comment. i'm afraid i won't adjust this to all the individual papers. there is a lot of insufficient

detail there that is obviously very important if you think about making unless some of these parts of the world so we're touch on the overarching themes that are important that were present in some of the papers but not in all of them and i will ask more open ended questions at the end hopefully for a subsequent meeting or something like that. i should also stress that these are my own views and not those of the i.m.f. and i have not coordinated them although i will echo some of her views. first of all, getting better incentives where asli ended brings me immediately to think about how to reinforce the market together with disciplined banks. we have large literature on that and we would all like it to work better. what i mean by market discipline is the stock market's and the

bond market's ability to not only monitor but control default of financial insuffickience at large. we have mixed evidence in the academic lit literature on the effectiveness of this because the government has policies in place that makes it difficult for the market. and we have deposit insurance because shareholder discipline is not something you expect too much of because shareholders like managers of banks want to take excessive risks, meaning more than what would be socially optimal. that's the role of the shareholder. have the downside risk and that's not something to complain about but it's the way system operates. you want to look at a debt holder, what is it doing? debt holder, maybe a small depositor. we have especially in the more

developed financial systems very large debt holders that could play an active role but if we always come in with guarantees and bailouts during crisis, you make this discipline moot and that's sort of where i think there are a number of challenges too big to fail, just one of them, trying to get debt holders to discipline banks. an important element, asli mentioned, it's troubling that accounting information of intanks banks is so imprecise, especially in times of crisis. so if you would look, let's say, just at the u.s., what happened to the accounting information contained in u.s. bank holding companies going into the crisis, you actually already sort of the market started to notice some trouble vis-a-vis the more regulatory measures of book capital so market value of bank's equity had plummeted and there were large differences

between market value and book value of bank's capital and regulatory capital had not moved all that much. that was the case not just in the u.s. but also in europe. and of course distressed the market, fire sales and maybe the market is not getting it right but the discrepancies were so large and there was clear stress on the financial system that if you see regulatory capital moving at all, you sort of raise questions there. and then in the s.n.l. crisis in the u.s. and the japanese experience summarized today, that regulators often resort to forbearance at times, you have serious questions about whether regulatory capital is overstated and that's depicted in the graph where the red value shows the market's book value ratio that plummeted in 2008 for the median u.s. bank holding company and

has obviously not recovered. typically, it's between 1 and 2, there's variations to operating a banking enterprise. this plummeted for the medium bank. two of their bank holding companies were severely underwater if you go by this measure. and the regulatory capital, if anything, slightly increased. and the picture is starker if you would do this for the euro zone countries. so how do you go about improving market discipline and ultimately something i would like to call regulatory discipline, in the worst possible world, if you don't have market discipline and regulatory forbearance, for us already i'm echoing that we need to limit the extension of government safety nets, typically they have been during financial crisis so looking forward we need to backtrack. we need accurate financial information. we need to reduce accounting

discretion which again was intensified because we let go of markets book. we have particular severe problem, on the one hand, we want to rely on the market but at the same time banks have become so large and interconnected and you see the financial cycles as credit moves over the cycle. so at good times, banks are building up risk and how do we deal with that so we've developed this new term, macroprudential. i'm not calling for more regulation, just better regulation. the key here is why are we coming up with this macro prudential regulation? because the market cannot deal with certain risks. there are market failures. market discipline is no defense against macroprudential risk. the market cannot effectively do with aggregate risk.

it doesn't externalize it. macroprudential is needed to predict the banking system as a whole and it's known for quite some time -- for example, russia justifies why you need to have because you have the market on the part of the market they cannot deal with aggregate risk and really what we feed to think about is financial stability for the public good. if you go back what, have regulators done? they've on the risk of individual banks. this is what they are asked to do and they go by that paradigm. they really need to focus much on systemic build-ups of risk and that requires a different way of thinking about it, a new framework. i think the europeans some steps ahead maybe simply because of the more urgent and obvious need

to have macroprudential regulation since they have the individual countries trying to have a common market but they have frameworks in place but nowhere near to having an effective system in place to deal with this. the other element that came back and it was echoed in the u.s. presentation but also in the asia presentation, oftentimes the banking crisis goes hand in hand with credit booms and in this particular case with the real estate. i want to say a few things about this because they're particularly dangerous bubbles. not just for the end consumer but really strong association between having real estate booms and busts and financial crisis, or recessions generally. and i think it's important to recognize that not all asset-priced booms are those we should worry about, that should

not necessarily be a wor but the one with real estate, yes, in the sense, go back to the crash, one of the views of why that was not a painful crisis, it was finance. but when you think about real estate, it's leverage. leverage is the culprit when you have the financial mede areas leverage household savings to lever up and build on more credit. what kind of action should be taken and that was the part of the missing how to develop good yardstick here. it's tricky how you focus on fris income ratios, in the real estate market, when do you consider a crisis that is built on excessive credit growth. this is something that maybe cannot see very well in the back but it's just a picture coming out of work by some of our colleagues that shows that on

the axis, there's a strong relationship between those u.s. states that showed a very large expansion in mortgage credit and those states that secretly had large mortgage delinquencies. so there was a large link between housing booms and busts in the u.s. but that it also coincided exactly with financial leverage so those states where the busts and booms remember largest also had the highest leverage meaning the financial institutions and the households in those states have above average leverage ratios. how to think about preventing real estate booms because now we'd like to prevent those and the three policy areas to think about. obviously, monetary policy. the other one was dealt with in the u.s. presentation.

and an argument to be made, one of the underlying culprits together with other government policies, but really, fixing monetary policy to deal with an isolated boom may be too costly at all because it's something where you have the entire economy, not rather just a specific sector so that's something to keep in mind before using it. fiscal policy, though, is something that was emphasized in specially the latin american crisis, but the best side of it is thinking of real estate. many countries including the u.s., debt is favored over equity and well are things in place, deductibility of mortgage and europe, similar policies in place, something to think about of how to erode some of these measures. i don't want to say that was a the crisis because i don't think any link between the crisis in and of itself and the

favorable treatment of debt. i just meant that the crisis ahead, you have a larger stock of debt to deal with. macroprudential tools, there are several common tools that have been used around the world, loan loss provisioning spain has used quite effectively although the question, did it do enough, and asian economies, loan to value limits have been used to reduce the billion buildup of credit. typically if it's spread by capital flows but by and large, these measures have met with mixed success. it's easy to circumvent especially if driven by capital inflows and the questions, the policies overl the longer term are in and of themselves are resilient to the politics of booms which they're

trying to reduce. so this is the experience in hong kong, echoed in the asian presentation, where this just showing the development of house prices, the red dotted line. they were just continuing upwards although the government tried to limit housing development by imposing stricter loan to value limits so they had temporary relief but did not really do much in terms of the overpriced developments. important open-ended questions, first one is very much, as asli said, we need to improve incentives for banks. need to allocate capital to most productive use and you're not doing that at the moment. part of that puzzle had to come from improving debt over discipline and we have put in place an awful lot of new

government guarantees and we need to think about how to go back to the system we had before. but then we also need to recognize that markets do fail, especially when you're talking systemic risk, and we're living in a world where financial institutions are global and very interconnected and systemic risk, if anything, is expected to only increase in size so that's something where regulator comes in and tries to get the regulator to actually do its job is going to be very important. macroprudential policies, i think, is something that's important to shift the attention away just from microprudential to more macroprudential. whether you need institutions, that's another question. where should the authority reside is a related question, as it links up to monetary policy, if you have a central bank, that opens up another set of questions. i think this is sort of my to do

list on this topic. thank you. [applause] >> thank you very much, luc. we do have time for q&a with the audience. please state your name and affiliation and who you're directing the question at. could we have a microphone? here it is. >> warren coates retired from the international monetary fund. as george has taught us, capitalism is at the core and center of this. the u.s. paper says the central lesson is the failure to recognize and credibly allocate losses, with reference to europe. and that that doesn't make them go away. the asian paper referred to the

suspension of mark to market, seemingly quite contradictory. i assume this is a typically asian way, actually, of capital forbearance during a recession. my question is, in point, this is the cyclicality issue of capital. isn't capital forbearance and i don't mean critically undercapitalized or negative capital, but isn't capital forbearance what capital is for? i mean, shouldn't capital have a counter-cyclical quality such that when we honestly mark to market the value of sovereign debt and write down a lot of capital, i think that's something that should be done, but then shouldn't we permit a period of time for banks, who are honestly disclosing that

they've used their capital in a way it was meant to be used, to gradually rebuild it over time in the future, rather than socking credit markets by attempting to recapitalize them instantly at the bottom of a recession. that's my question. >> it's a great question. there's so many things to say about it. i guess what i would say about it is, the key lesson, in fact, luc laeven's slide pointed it out, is that there was a lot of time there when the market was still open, when capital was declining prior to september 2008 and in fact global large banks raised $450 billion of capital. markets were open from september 2007 to september 2008, but they

didn't raise as much as they should have and they watched market values decline because they didn't want to dilute, and especially because they knew they had the downside protection. we need some mechanism that effectively identifies those losses and creates incentives for banks to replace capital on a timely basis when the capital ratio is still high. the systemic risk is the result of the erosion of capital. a cumulative loss of capital that creates liquidity crises through counter party risks because nobody has credible financial strength. problem was identifiable -- in fact it was identified by the markets as luc's slide showed and the slide in our paper showed. the point is -- and i have reform proposals that focuses on ways to try to create mechanisms especially through properly designed contingent capital certificates alongside equity that would try to push banks to

have strong incentives to timely capital.ost to add to the wonderful comments that we had from both the discussions, we need have smart capital standards that function that way, that when we see that graph that luc had, that we do something about it rather than watch go down until the crisis happens and then try to react. >> i'll intervene for 60 seconds. for those of you who aren't familiar with the technicalities, contingent capital means that a bank issues a debt instrument that automatically converts to equity upon some identifiable event. and in the paper that charlie is talking about that he's doing with dick hearing, what they're proposing is that the triggering event be some kind of 90-day moving average of the equity price of banks so that if the price goes down over a 90-day period, let's say, that would trigger the conversion of the debt automatically to equity and that would automatically

re-fill-up the capital count and having that stuff issued in place would be a way of handling the problem in a counter cyclical fashion without having to go to the markets at a critical point in time when you can't sell the stuff. >> i'm bob fineburg and i'd like to ask charlie a follow-up question. when you're talking about augmenting capital, the assumption behind that is that the banking -- the business model for the banking industry can use that capital effectively. if, on the other hand, the model has been so badly broken that any capital that is raised is going to be destroyed in the process of just what banks do, then that's not going to work.

so i'm asking whether you've thought about that and the benchmark might be that in his maiden speech, when gene ludwig became comptroller of the currency, he said that the banking industry has been in secular decline since the end of world war ii. he said we can't allow the natural erosion of this industry to proceed. so that would set the stage for the interventions we've seen over the last 30 years. >> just a quick response, getting back to the comments both of asli and luc, if you have a real consequence that the bank can anticipate which is that they're going to face real recognition of loss that, also affects their risk management

incentives in the first place so if you're worried that bank management -- if i understand your comment right -- that bank management isn't working well and the bank isn't worth recapitalizing, the point is, if you have a disciplined financial system, banks will be managed a lot better so we have to link the quality of the banks' strategy ex-ante with the consequences of bad strategies ex-post. >> his question was more far reaching. was asking whether the banking model is viable at all. seriously, that was his question, and he's saying pouring more capital into an unviable system is a waste of money. was the import of your question and my gut reaction to that is, there are plenty of banks out there right now that are making money and so there is money to be made taking deposits and lending and doing fee-based

business. it may not be at the level at which we temporarily have right now where essentially the banks are gorged with money because people are afraid to put it anywhere else. that shrinkage will have to take place once confidence returns in the system. but you ask a very good question. because some parts of the banking model may actually have to recede. >> i think we ought to look at bank profits. if you average it out over the last 20 years, the growth rate of bank profit ibility in relation to g.d.p. and the growth rate of employment in the financial sector as percent of total g.d.p. were increasing tremendously so many things you need to average out, the aspect of banking, the big banks, small banks, as bob said, there are profitable banks but it is a

question of profitability over time. i have a question for charlie. i find this smart capital discussion very interesting, the contingent capital, convertible debt. it makes a lot of sense given that capital is a costly way of financing and given that the more cost you impose on the institutions, the more investment they make in trying to circumvent these things. it's a good idea. but i can't but help but wonder to what extent this is somewhat similar to hybrid sorts of capital that we've absorbed which at the understand of the day when push came to shove did not absorb the losses that we hoped it would. >> i think the key for the reason you just said and for other reasons is that the threshold of that ratio at which conversion would take place has to be pretty high. and that means that when you get even close to a failure

experience, you've already had to convert it. asli, we would expect that there would never be a conversion because we make conversion so dilutive for the existing shareholders that you would into thely issue market to prevent getting close to the trigger so our view is you would have a more thermostat effect where the equity ratio would stay very high because banks would have strong incentives to timely replace lost equity and if you ever got a significant shock to capital, long before failure, which is what you're asking about, that would already be equity so it wouldn't have this problem of absorbing loss. it would already have been equity long before failure. >> yes, sir? >> hi, steven lee. one of the questions which i have is the regulatory capital

and market's expectation of capital and then the banks own internal assessment of capital requirement from adjusted basis. they all seem to be all together in the crisis. in the macro crisis, market's expectation of capital is way higher than what the bank ever provide and the bank in the crisis confidence, there's almost -- not enough capital of to satisfy market's demand. whereas in those situations we may have regulators stepping in to provide a backstop and the banks may just be able to survive the crisis but other than that, in the major crisis, market's expectations seems to be generally far exceeding whatever the bank could be able to provide for themselves. is that something that is generally observed? or does that make sense?

do you have other perspectives on that? >> this is sort of related to the paper that i was mentioning with my colleague. we tried to understand how markets perceived different concepts of capital during the crisis, last crisis, because we thought that would be an interesting exercise to do and indeed when you look at the regulatory capital that was required by basel, there was not much difference among institutions, among large institutions, small institutions that did well versus worse, but when you look at simpler ratios that were much more difficult to manipulate, like the leverage ratio, there was significant

differences leading up to the crisis and the way markets sort of rewarded those institutions during the crisis. so i wouldn't say that anything goes because, i mean, it's important that for capital to distinguish -- i mean, the market did distinguish between institutions based on its capitallization at the time of the crisis. i think for two reasons. one, for the loss absorbed of capacity and also it took as a signal that better capitalized institutions would have better portfolios during the crisis, as well. >> i think it's important to recognize that all very large banks at least have a substantial amount of taxpayer contributed capital and that this grow when is they get in

trouble, that the market capitallization includes that so that if you think it might be resolved and forced into insovvencey, its market cap will get very small because it will become like fannie and freddie today, gambles on what the government will finally do with them. those stocks are selling for around 25 cents a share after being well into the $90's as their peak. the idea of the reforms talked about especially by luc and asli is to make sure that there's the intervention well before things get putting a lot of taxpayer money behind and that's the point of coco's. the real issue, though, is that you don't get cocoa for free and the presumption is that the i.r.s. will agree that interest

payments on these particular instruments will be tax deductible and i can see that that would be something one could lobby against very hard in the industry so as to keep the subsidies flowing. >> part of our purpose or our statement is to emphasize what's happening in europe is important what's happening here and i'm surprised to see that we're going back to some issues that don't limit themselves to europe. i hope you're shaking people up, that the european crisis is a crisis that will affect us. yes, sir? >> i want to relate the point that asli was making about observing that banks with similar regulatory capital had very different equity or

leverage ratios. this implies -- this simply implies that what was implicit in the risk weight is that the less risky assets in the weighting were actually not less risky. right? and this relates directly to the point of government debt. so, really, this shows that the market was already looking at government debt as much more -- [inaudible] >> mike prowl, i'm unaffiliated. on the european statement, there were a couple of things that caught my eye and i'm wondering whether you'd like to elucidate or maybe you couldn't reach a

common conclusion. one, on the passive strategy paragraph. i'm wondering whether that's a repudiation of the concept of expansionary austerity. second, the sentence that says "funds from such a facility," this bailout facility, "could be made available either without preconditions or only to qualifying countries that have passed sufficient reforms" seems to me to present two polar possibilities without any indication of whether you were able to wrestle with this and come to a preference on approaches or what you intended to communicate. >> you're quite insightful about committee operations, aren't you. on the latter one, the question of whether or not there ought to be any preconditions or

whatever, i guess, in an ideal world, the european central bank would just make liquidity available like the fed does but that is obviously not acceptable and not politically going to play in europe so that's why the alternative was mentioned that the most likely outcome is that you're going to have to meet some kind of conditions and have some kind of reforms in order to be eligible and your first point was -- i've forgotten. oh, yeah, expansionary -- are we implying that the first option for adjusting this competitiveness, namely is really not a very good outcome? and the answer is, yes, if that's what you read into it, i don't think that would be our first preference. so, therefore, we talked about the other two options. >> just to be clear, zeroing in

on this, but do you see as some have argued, fiscal austerity as bringing benefits in the form of increased confidence and so on so that you don't necessarily get the deflationary effect you're concerned about? >> let's take components that because there's probably differences in views in our committee. one thing we'd all agree on is that in the short run, austerity that leads to deflation is only going to probably aggravate unemployment and unrest and the only question is how long does it take to bounce back, right? so there will be difference in views on that. >> from the latin american committee. i think this is a very important question and should it have been raised during the committee, we should have been more precise about it. what i think we are saying is that countries in southern

europe, currencies are overvalued, and given the fact that they do not have their own currency, high unemployment, negative growth, deflationary adjustment. therefore, these are economies that are already imploding. adding into that implosion fiscal austerity is going to do nothing for you. there's no such thing in that context as expansionary austerity. now, that's different from a case such as for example the u.s. where you might be in an unsustainable debt dynamics and that case, it is debatable whether fiscal contraction might end up being in the net the basis ofon

regaining credibility in the fiscal finances vis-a-vis the more keynesian sort of effects that we're thinking but under a deflationary implosion, austerity only makes things worse. >> there's a question over here, warren coates. he had the first question, he gets the last question. while he's thinking about the question, let me tell you that all the six chapters written by the six shadow committees will be on the a.i. website and hopefully within two weeks, a semi electronic book and hopefully by the beginning of november, you'll have access to these six chapters. warren? >> i have a kind of nitty-gritty last question but in the spirit

of the importance of incentives and lessons learned, the australian presentation wasn't clear to me with regard to why, if australian banks were heavily lending into real estate, and australia was funding a lot abroad, how they avoided, why they avoided structuring some of those real estate loans into some of the kinds of packages that created problems for the u.s. market. >> they were bright enough to do that. >> i wanted to see if he would say that. >> of course i would say that. general, there was a large security market in thaws froze

during the global financial crisis but the lending standards utilized in that market were still such that basically everything was still prime lending so there was very little in the way of subprime. in terms of the banks' borrowing to lend into that, the major borrowers were the four major banks and they lent on balance sheet rather than using the securitization market. but in general, one of the dilemmas for australia and new zealand has been that housing prices have been very high and there's always the risk that we are yet to suffer a downturn in housing prices although i must say governments and central bankers are sanguine about that. they don't see major concerns there and that even if there is a down turn, the stress tests they've adopted suggest the banks will sail through that but given the stress tests they've done in europe, how much confidence you place in that, i'm not sure. >> let me thank you all for

coming. the theme of our meeting are, things are not hunky dory. you should not go home and sleep soundly. there are things you should be bothered about and you should take action. >> pray. >> no, no, it's not pray. it's luck. thank you for coming, and goodbye. [applause] [captions performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> president obama announced changes today to the home mortgage refinance program. his remarks are next on c-span. republican presidential candidate mitt romney formally became a candidate in the new

hampshire primary. we'll hear from the former governor later. and as europe struggled with its debt program, british prime minister david cameron faces dissent in his own party over britain's membership in the european union. on tomorrow's "washington journal," congressman adam smith who serves on the armed services committee, will give his perspective on the joint congressional debt reduction committee, and an update into the investigation into the solyndra solar company. after that, author and financial historian, john steele gordon, will talk about the creation of the u.s. federal income tax. later on c-span3, a hearing will examine the effect that europe's economic problems could have on

u.s. trade, employment and the economy. this comes after european leaders met over the weekend in brussels to work out the details of a euro bailout fund. live coverage from the house financial services subcommittee gets underway at 10:00 eastern. it's also on c-span radio. now, president obama announces changes to the home lending program designed to lower monthly payments for homeowners that have underwater mortgages. this is part of a number of economic initiatives the president will make this week that do not require congressional approval. the president made the announcement in las vegas. >> good afternoon, everybody. [cheers] thank you for letting me block your driveways. >> you're welcome. >> [laughter]

it is wonderful to be with all of you and i want to thank jose and lysette for letting us set up in front of their house. and we just had a wonderful visit. without a doubt, the most urgent challenge we face right now is faster and to create more jobs. i know it. the people of nevada know it. and i think most americans understand that the problems we face did not happen overnight and we will not solve them overnight either. what people do not understand, though, is why some elected officials in washington do not seem to share the same sense of urgency that people all around the country are. last week for the second time this month, republicans in the senate blocked a jobs bill from moving forward. a bill that would have meant

nearly 400,000 teachers, firefighters, and first responders been back on the job. it was the kind of proposal that in the past, at least, republicans and democrats have supported. it was paid for. and it was supported by an overwhelming majority of the american people. but they still said no. your senator, majority leader harry reid, he has been fighting nonstop to help get the economy going. but he is not getting help from some of the members of the nevada delegation. we need them to get their act together. the truth is, the only way we can truly attack our economic challenges, the only way we can put hundreds of thousands of people back to work right now is with bold action from congress. that is why i'm going to keep forcing the senators to vote on

common sense, a paid-for jobs proposals. last month when i spoke to congress about our jobs crisis, i also said that i intend to do everything in my power to act on behalf of the american people with or without congress. i am here to say to all of you and to the people of nevada and people of las vegas, we cannot wait for an increasingly dysfunctional congress to do its job. where they will not act, i will. in recent weeks, we decided to stop waiting for congress to fix "no child left behind" and decided to give states the flexibility they need to help children meet higher standards. we took the steps on our own to reduce the time it takes for small businesses to get paid when they have a contract with the federal government. and without any help from

congress, we eliminated outdated regulations that will save hospitals and patients billions of dollars. these steps are not substitutes for the bold action that we need to create jobs and grow the economy, but they will make a difference. so we're not going to wait for congress. i told my administration to keep looking every single day for actions that we can take without progress, steps that can save consumers money, make government more efficient and responsive, and help heal the economy. we will be announcing these executive actions on a regular basis. today, what i want to focus on is housing, which is obviously on the minds of a lot of folks in here in nevada. probably the greatest single cause of the financial crisis and this brutal recession has been the housing bubble that burst four years ago. since then, average home prices have fallen by nearly 17%. nationwide, more than 10 million

homeowners are under water. that means they owe more on their homes than they are worth. and here in las vegas, the city that has been hit hardest of all, almost the entire housing market is under severe stress. this is a painful burden for middle class families and it's also a drag on our economy. when a home lose its value, a family loses a big chunk of their wealth. paying off mortgage debt means that consumers are spending less and businesses are making less and jobs are harder to come by. as long as this goes on, our recovery cannot take off as quickly as it would after a normal recession. the question is not whether or not we do something about it. we have to do something about it. the question is, what do we do and how fast do we move? one idea that i have proposed is

contained in the jobs act that is before congress right now. and it's called "project rebuild." a lot of neighborhood like this one have watched housing the values declined not just because of the housing bubble bursting, but also because of the foreclosure sign next door or the vacant home across the street. right now, there are hundreds of thousands of vacant homes like these and more than 1 million unemployed construction workers. that does not make any sense when there is work to be done and workers ready to do it. so "project rebuild" connects the two by helping the private sector put construction workers to work rehabilitating vacant or abandoned homes and businesses all across the country. that will help stabilize home prices in communities like this one, and it will help families like the bonillas to buy a new home and build a nest egg. this is something that congress can do right now.

it's in the jobs bill. we will put construction workers back to work and we will rebuild homes all across nevada and across the country. if congress passes this jobs bill, we can get project rebuild moving right away. if congress acts, then people in nevada and across the country can get significant relief. but remember what i said, we cannot just wait for congress. until they act, until they do what they need to do, we will act on our own. we cannot wait for congress to help our families and our economy. in the past two years we have taken some steps to help families refinance their mortgages. nearly 1 million americans with little equity in their homes have gotten assistance so far, and we have made it easier for unemployed homeowners to keep their homes while they're looking for a job. and we're looking to turn vacant properties into rental housing,

which will help stabilize housing prices here in las vegas and across the country. but we can do more. there are still millions of americans who have worked hard and acted responsibly, paying their mortgage payments on time. now that their homes are worth less than they owe on their mortgage, they are having trouble getting refinancing even though mortgage rates are at record lows. that will soon change. last month, i directed my economic team to work with the federal housing finance agency, or fhfa, and their partners in the housing industry to identify barriers to refinancing, knocked the barriers down, and explore every option available to help american homeowners to refinance. today, i'm pleased to announce that the agency in charge will be making a series of steps to help responsible homeowners refinance and take advantage of low mortgage rates. let me name those steps. number one, the barrier will be

lifted that prohibits responsible homeowners from refinancing if their home values have dropped so low that what they owe is 25% or higher of what they owe on their home. this is critical in places like las vegas were the home by u.s. have dropped 50% in the past few years. let me give you an example. if you have a $250,000 mortgage at 6% interest rates, but the value of your home has fallen below $200,000, right now you can't refinance, you're ineligible. but that will change. if you meet certain requirements, you will have the chance to refinance at lower rates, which could save you hundreds of dollars a month and thousands of dollars a year on mortgage payments. second, there will be lower closing costs and certain refinancing fees will be eliminated, fees that can sometimes cancel out the benefits of refinancing all together, so people do not

bother to refinance because they have all these fees they have to pay. we will try to knock away some of those fees. third, there will be more competition so that consumers can shop around for the best rates. right now, some under water homeowners have no choice but to refinance with their original lender, and some lenders, frankly, just refuse to refinance. these changes will encourage other lenders to compete for that business by offering better terms and rates. eligible homeowners are going to be able to shop around for the best terms. take these things together and this will help a lot more homeowners to refinance at lower rates, which means consumers save money, families save money, and it gets those families spending again and that makes it easier for them to make their mortgage payments so that they do not lose their homes and bring down home values in the neighborhood. i will keep doing everything in my power to help stabilize the

housing market, grow the economy, accelerate job growth, and restore some of this security that middle-class families have felt slipping away for more than a decade. let me say this in closing. these steps i've highlighted today will not solve all the problems in nevada or across the country. given the magnitude of the housing bubble and the huge inventory of unsold homes in places like nevada, it will take time to solve these challenges. we still need congress to pass a jobs bill. we still need them to move forward on project rebuild, so we can have more homes like this and a wonderful family having the opportunity to live out the american dream. but even if we do all those things, the housing market is not going to be fully healed until the unemployment rate comes down and the inventory of homes on the market also comes down. but that is no excuse for inaction. that is no excuse for just say

no to americans who need help right now. it is no excuse for the games and the gridlock we have been seeing in washington. people out here do not have the time or the patience for some of that nonsense that has been going on in washington. and if any member of congress thinks there are no unemployed workers or no down on their luck neighborhood with in their district that would benefit from the proposals of the jobs bill, then they better think again. they should talk to the families out here in nevada. these members of congress who are not doing the right thing right now, they still have the chance to take meaningful action to put people back to work and help middle-class families like the bonillas. but we can't wait for that action. i'm not going to wait for it. i'm going to keep taking this message across the country where we don't have to wait for congress but we'll act on our own and we'll keep putting pressure on congress to do the

right thing for families all across the country and i am confident that the american people want to see action. we know what to do. the question is whether we will have the political will to do it. thank you so much, everybody. god bless you. god bless the united states of america. thanks for welcoming me to your neighborhood. thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> how are you? are you getting ready to go to work or dujust get up? how are you? nice to meet you. how are you, sir? >> fine, thank you. >> and how are you?

>> there was something for everyone at last weekend's texas book festival. >> going after the head of the snake, you chop off the head of the snake, and the rest of the snake eyes. that has been the idea, but unfortunately, the reality has been very different. >> while most of the founding fathers for thinking of those colonies on the western seaboard, chairperson was dreaming of his empire for liberty that would go all the way to the mississippi and ease into those great harbors on the pacific, san diego, monterey,

and san francisco. >> i had covered the military and the cia after that, in the years before and after 9/11. as a reporter on mosby's, i had seen things grow up around me that i was not sure what that work. people i had known for a long time disappeared into world that did not exist before, or they had no titles. after 10 years of working in that realm, you save what is going on? >> i finally decided to call it the ripple effect, which was a chapter title. i realize that every time we use water, it sets of a ripple effect, a series of consequences that most of us are aware of. >> watch every event covered last week online at the c-span video library. watch what you want, when you want. >> republican presidential candidate mitt romney formally

became a candidate in the new hampshire primary. filing paperwork at the state house in concord. after submitting the paperwork, the former massachusetts governor held a rally with supporters and the steps of the state house. he is joined by former new hampshire governor john sununu. in new hampshire's presidential primary is expected to be held on january 10. this is about 20 minutes.

>> long time, no see. [applause] >> wow. do you think we could fit a few more people in here? good morning. how are you? >> [inaudible]

>> nice to see you. >> oh, there he is. >> a few of my friends came into your office. thank you. thank you so much. appreciate your help. i am honored to be here with a few friends. i will not mention all the names, but it is great to have governor john sununu here. this used to be his home. i am happy to see him. [applause] has it worked in the past when he was here? you have a great secretary of state. you've done a great job. for the next 40-50 years, bill. newll make sure the

hampshire remains a first in the nation. it is our responsibility and and honor that they richly deserve. i am happy to be part of this. i am hoping this time it will take. i'm hoping to become the nominee. [applause] now, let's see. where do you want me to sign? right down there. it's a signature. all right there. i'm mitt romney. a signature right there. great. i have to sign here, too, somewhere. >> you just signed the house away. [laughter] >> not the first time.

let's see. i just sign. oh, i see. in the top there, ok. new hampshire is number one. there we go. >> yay! >> great. thank you. john, do you want to sign this, too? >> [inaudible] >> is that right? that worked, didn't it? whoops. there it goes. >> it's all right. don't worry. we'll get it. >> there we go. what does this say here? thank you. this is a family affair.

>> i'm stuck back there. cannotn't know why we sit a few more people back here. -- fit a few more people back here. thanks, guys. housell go to the white and meet you. >> great inauguration. appreciate your help. thank you so much. have i said hi to everybody? >> [inaudible] [laughter] [applause] >> mitt, mitt, mitt, mitt, mitt, mitt, mitt.

[applause] [cheering] [whistling] >> i want to thank you all for taking the time to come out this morning. and since i like to be as efficient as possible, let me introduce the gentleman that i believe will be the next president of the united states and the man i am endorsing in that endeavor. mitt romney. >> thank you.

it is good to be on these steps. and this time to be accompanied by john sununu, a great governor, a great chief of staff, and the best person i can imagine to endorse me today. thank you for your help and support. it is an honor to have you here. and there's a team of people around me. this is a volunteer team that will turn out voters on primary day, which by the way, will be the first primary in the nation as it ought to be. [applause] and i think you will find the american people recognize that it is time for real change in washington. they recognize that president obama has not done the job that they thought they elected him to do. the president came into office and had one job to get done immediately and that was a turnaround the economy. now over 1000 days later, he is talking about the stimulus plan. we looked at his first stimulus.

did it work? >> no. >> did obama-care work? did cap and trade to raise the cost of energy work? did promises to raise taxes work for the american people? was president obama able to turn around the economy? you see, president obama has not worked. individuals across this country recognize that. 25 million americans out of work or stop looking for work. this is evidence of the fact the president obama has not worked for america. if we want to get america working again, we have to bring in a different approach to washington. president obama and his friends believe that america should be a nation led by government. they are wrong. america should be an nation led by three people -- free people choosing their course in life. [applause]

this is not a nation by government, this is a nation by people. and government has become too intrusive, too big, too fat. and that is why it has been so difficult for this economy to turn around. when government tries to tell us what kind of health care we can have, when government tells us we have to join a union whether we want to or not, then the government has become too intrusive and we are going to stop this and return government to be directed by the people, not by bureaucrats in washington. [applause] when the federal government consumes 25% of our total economy, we are going to say no more, we will cut it back to 20%. it is time to cut back the size of the government to a size that is manageable and is within the course of america's greatness which is to keep government small and let people have greater rights.

i am afraid the president obama for far too many years has taken his guidance from the social democrats of europe that saw government placing a heavier hand on people and have your hand on free enterprise and the economy. that has not worked. the right course is to believe in america and believe in freedom of the american people. i believe in america. i believe in free enterprise. i believe in opportunity and freedom, when the founders crafted this country, they gave us not only political freedom, the right to choose who would represent us, they give us the freedom to choose our course and life. by virtue of those choices, this became the place where people from all over the world came seeking freedom, opportunity, this was a land of pioneer is what has made american and nation we are. as government continues to grow

and expand and becomes heavier and heavier, it changes the nature of this country. we will not let it happen. we will believe in the american people, not believing in big government. [applause] i love this country. i love this country. >> we love you, mitt. >> i love the principles upon which this country was founded. i love the passion of the american people for freedom and opportunity. we face real challenges in the world. we are patriotic people. these patriotic people are going to come together to do what is necessary to keep america great. as i go across this country, i see time and time again people love america like i do recognize that we are not another place on the planet with a flag. we are an exceptional nation. founded upon an exceptional promise that god endowed our people and all people with

certain inalienable rights. and among them life, liberty, and the pursuit of happiness. [applause] this exceptional nation will not be stopped by anything other than government becoming too big and too intrusive in our lives. we are going to scale back government and increase the freedom of the american people so that we can once again be the most powerful economy and the world, could for the middle class, creating jobs americans need, with rising standards of living, and we can remain as we have been, the hope of the earth. thank you, guys. great to be here with you. [applause] good to see you again. thank you.

thank you. stella, thank you. thank you. >> good to see you, too. >> thank you. >> thank you, sir. >> thanks, diane. how are you? >> [inaudible] >> i'm very excited. we've got great volunteers. there will come together and vote on primary day. the primary data subtle as the first in the nation. here in new hampshire. >> starting to feel that more

tension on the the final -- is here? >> i think it's becoming more intense as time goes on. we will focus on the failure of president obama. he is under a lot of pressure right now. i think the american people recognize he is a nice guy, but he does not been able to do what it takes to get america working again. >> [inaudible] >> mitt, mitt, mitt, mitt, mitt, mitt. [cheering] >> very much so. he was the last one eliminated. >> [inaudible]

♪ >> reduce taxes on middle income americans. a very simple and flat approach. i want to make sure that with any tax system is one that reduces the burden on middle income americans. my 59 point plan. there are some steps are taken immediately. then there are steps i will take down the road to flat in the tax code and do our best to reduce the burden on middle income americans. >> middle income americans are the ones that have been most hurt by the obama economy. that is why it is so important for us to do, fashion our tax system to help middle income americans. >> [inaudible]

>> can i get your autograph. i came all the way from new jersey. 2:00 in the morning. >> anyone else got a pen? there's a sharpee. thank you. thanks, everybody. >> [inaudible] >> thanks so much. >> we're not taking any questions. >> thank you. >> governor romney -- >> thanks for the help. thank you. american legion. >> [inaudible] >> take care.

see you. >> did you get everything you need? >> yes. >> good to see you. >> thanks, sure. good to see you. where did john go? are you coming with us? >> no, we are taking off. >> you are taking off? good to see you. thank you so much. hey, buddy. get a picture here. all righty. thank you. thank you my friend. >> governor, you are on your own. do not blow it. >> [laughter] >> [inaudible]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> what more video of the cost of the candidates, see what political reporters are saying, and track the latest campaign contributions with c-span is website for campaign 2012. it helps you navigate the political landscape with candidate biographies and the latest polling data. all at c-span.org. >> british prime minister david cameron basis dissent in his own party over the u.k. membership in the european union. that is next on c-span. in financial analysts discuss challenges in the global economy. earlier this month, president obama sent 100 u.s. military advisers to you ghana to help

the country by the militia group lra that fights in central africa. tomorrow the house foreign affairs committee will look at the white house decision to send military assistance. live coverage at 10:00 a.m. eastern on c-span2. later, pentagon officials will testify about proposed changes to the military retirement system at a house armed services subcommittee hearing. live coverage gets underway at 1:00 p.m. eastern. in the british house of commons, prime minister david cameron updated members on his meeting over the weekend with eu leaders about the debt crisis. the prime minister was asked about future financial support for greece and whether he will consider referendum on pulling britain out of the european union. >> order, statement, the prime minister. >> with permission, mr. speaker,

i would like to make a statement on recent developments in libya and yesterday's european council. yesterday in libya, after 42 years of tyranny and 7 months of fighting, the national transitional council declared the formal liberation of their country. everyone will have been moved by the pictures of joy and relief that we saw on our television screens last night. from tripoli to benghazi, from misurata to zawiyah, libyans now dare to look forward, safe in the knowledge that the gaddafi era is truly behind them. this was libya's revolution. but britain can be proud of the role we played. our aim throughout has been to fulfil the terms of the un security council resolution, to protect civilians, and to give the libyan people the chance to determine their own political future. with the death of gaddafi, they now have that chance. the whole house will join me in paying tribute to our armed forces for the role they have played. over 3000 missions, some 2000 strike sorties.

one fifth of the total strike sorties missions flown by nato. as the chief of the defence staff has written this morning it has been "one of the most successful operations nato has conducted in its 62-year history." and i believe it's something the whole country can take pride in. the decision to intervene militarily, to place our brave servicemen and women in the line of fire, is never an easy one. we were determined from the outset to conduct this campaign in the right way, and to learn the lessons of recent interventions. so we made sure this house was provided immediately with a summary of the legal advice authorising the action. we held a debate and a vote in parliament at the earliest opportunity. we made sure that decisions were taken properly throughout the campaign, with the right people present, and in an orderly way. the national security council on libya met 68 times, formulated our policy, and drove forward the military and diplomatic campaign. we took great care to ensure that targeting decisions minimised the number of civilian casualties. and i want to pay tribute to my

rt hon friend the member for north somerset for his work on this. it is a mark of the skill of raf, british army and other coalition pilots that the number of civilian casualties of the air attacks has been so low. the military mission is now coming to an end -- and in the next few days, nato's operation unified protector will formally be concluded. it will now be for libyans to chart their own destiny -- and this country will stand ready to support them as they do so. many learned commentators have written about the lessons that can be learnt from the last seven months. for our part, the government is conducting a rapid exercise, while memories are still fresh, and we will publish its key findings. for my part, i am wary of drawing some grand, over-arching lesson -- still less to claim that libya offers some new template that we can apply the world over. i believe it has shown the importance of weighing each situation on its merits, of thinking through carefully any decision to intervene in advance. but i hope it has also showed that this country has learned not only the lessons of iraq,

but the lessons too of bosnia. when it's necessary, legal and right to act we should be ready to do so. mr. speaker, let me turn to yesterday's european council. this european council was about three things. sorting out the problems of the eurozone. promoting growth in the eu. and ensuring that as the eurozone develops new arrangements for governance, the interests of those outside the eurozone are protected. this latter point touches directly on the debate in this house later today, and i will say a word on this later in my statement. resolving the problems in the eurozone is the urgent and over-riding priority facing not only the eurozone members, but the eu as a whole -- and indeed the rest of the world economy. britain is playing a positive role proposing the three vital steps needed to deal with this crisis -- the establishment of a financial firewall big enough to contain any contagion, the credible recapitalisation of european banks, and a decisive solution to the problems in

greece. we pushed this in the letter we coordinated to the g20 and in the video conference between me and angela merkel, nicolas sarkozy and president obama last week. we did so again at the european council this weekend and will continue to do so on wednesday at an extra european council meeting. but ultimately the way to make the whole of the eu, including the eurozone, work better is to promote open markets, flexible economies and enterprise. this is an agenda which britain has promoted, under successive governments and successive prime ministers. but it is now an agenda which the european commission is promoting too. we have many differences with the european commission, but the presentation made by the commission at yesterday's council about economic growth was exactly what we have pushing for. it drives home the importance of creating a single market in services, opening up our energy markets, and scrapping the rules and bureaucracy that make it take so long to start a new business. both coalition parties are pushing hard for these

objectives. this may sound dry. but if we want to get europe's economies moving, to succeed in a competitive world, then these are the steps that are absolutely necessary. these are arguments which margaret thatcher made to drive through the single market in the first place, and which every prime minister since has tried to push. if the countries of the eu were as productive as the u.s. and we had the same proportion of women participating in the economy and were as fast and flexible at setting up new businesses then we would have the same per -- the same gdp per capita gdp as the u.s.. the remainder of the council was spent on the safeguards needed to protect the interests of all 27 members of the eu. the council agreed that all matters relating to the single market must remain decisions for all 27 member states and that the european commission must "safeguard a level playing field among all member states including those not participating in the euro." this leads me directly to the

debate we are having in this house later today. members of my party fought the last election committed to three things -- stopping the passage of further powers to the eu, instituting a referendum lock to require a referendum, by law, for any such transfer of powers from this house, and bringing back powers from brussels to westminster. all three remain conservative party policy. all three are in the national interest. in 17 months in government, we have already achieved two of the three. no more powers to brussels -- indeed the bail out power has actually been returned and, of course, the referendum lock is in place. and i remain firmly committed to achieving the third -- bringing back more powers from brussels. the question tonight is whether to add to that by passing legislation in the next session of this parliament to provide for a referendum which would include a question on whether

britain should leave the eu altogether. this was not our policy at the election and it is not our policy now. let me say why i continue to believe this approach would not be right why the timing is wrong and how britain can now best advance our national interests in europe. first, it's not right because our national interest is to be in the eu, helping to determine the rules governing the single market -- our biggest export market, which consumes more that 50 per cent of our exports and which drives much of the investment into the uk. that is not an abstract, theoretical argument: it matters for millions of jobs and millions of families in our country. that's why successive prime ministers have advocated our membership of the eu. second, it's not the right time, at this moment of economic crisis, to launch legislation that includes an in- out referendum. when your neighbour's house is on fire, your first impulse should be to help him put out the flames not least to stop the flames reaching your own house. this is not the time to argue about walking away.

>> not just for their sakes, but for ours. legislating now for a referendum, including on whether britain should leave the eu, could cause great uncertainty and could actually damage our prospects of growth. third, and crucially, there's a danger that by raising the prospect of a referendum -- including an in/out option -- we miss the real opportunity to further our national interest. fundamental questions are being asked about the future of the eurozone and therefore the shape of the eu itself. opportunities to advance our national interest are clearly becoming apparent. we should focus on how to make the most of this, not pursue a parliamentary process for a multiple choice referendum. those are the reasons why i will not be supporting the motion tonight. as yesterday's council conclusions made clear, changes to the eu treaties need the agreement of all 27 member states. every country can wield a veto until its needs are met. so i share the yearning for fundamental reform, and i am determined to deliver it. to those who are supporting today's motion but don't actually want to leave the eu, i say to you this: i respect

your views. we disagree not about ends, but about means. i support your aims. like you, i want to see fundamental reform. like you, i want to re-fashion our membership of the eu so that it better serves this nation's interests. the time for reform is coming. that is the prize. let's not be distracted from seizing it. and i commend this statement to the house. >> ed milliband. >> mr. speaker, can i start by thanking the prime minister on his statement? on libya, can i join him in expressing deep and abiding gratitude to members of the british armed forces. over the last seven months, our servicemen and women have been a credit to our nation, exercising our responsibility to the libyan people and to uphold the will of the united nations. that is why i supported the government in its actions. i commend the prime minister on

the role he has played in taking the right and principled decision on this issue. there are difficult days ahead, and it is for the libyan people to determine their future, but let me say, i agree with him, that alongside the responsibility to protect, which we exercise, is a responsibility to help rebuild. in particular, to help provide the expertise that the new libya will require. let me now turn to europe. and here is the opening of my remarks that reflect some of the things the prime minister said. we are clear and have been consistently that getting out of the european union is not in our national interest. cutting ourselves off from our biggest export market makes no sense for britain. and it an overwhelming majority of british business, however on happy they are, know that, too. what more, at this moment of all moments, the uncertainty

that would ensue from britain turning in words over the next two years off to debate this in- out referendum is something our country cannot afford. the best answer to the concerns about the people about the european union is to reform the way it works, not to leave. we should make the completion of a single market, budget reform, and reform of state aid the issue. that is why we will be voting against the motion tonight. mr. speaker, this is the context that the european council for the prime minister went to this weekend. growth stalled in britain since the autumn. unemployment rising, and the threat of a new banking crisis. that is why yesterday's summit was so important. it sounds like you now believe britain should play an active role in solving this crisis, but the truth is the prime minister has a chance to grandstand on the sidelines, not

to help. the chancellor even refused to go to the initial meeting he was invited to on the issue. they show no will to try to find a solution. on banking, does he believe that the amount of recapitalization being discussed is sufficient to ensure financial stability across the european banking system, particularly in light of the larger capital requirement? on greece, does he believe that the previously announced greek bailout lessons are being learned and will provide a sustainable solution? on growth, does he not understand that europe could get -- will not get a grip on its debt problems unless it gets a grip on crisis of growth? i suppose we should be pleased that the government has moved from empty chairs at a meeting to the prime minister getting

into the meeting. but he will have to do better. he was surprisingly quiet about his real achievement of the summit. in a few short hours, he managed to write the european version of how to lose friends and alienate people. he went into the summit lecturing the germans. he came out of it being shouted down by the french. apparently, apparently, apparently, apparently president sarkozy, until recently his new best friend, had had enough of the posturing and the hectoring. mr. president, yesterday you spoke not just for france, but for britain as well. you know the prime minister was in brussels. you know the prime minister was

in brussels, but his mind was elsewhere. the tory parker on europe suffering another nervous breakdown. the prime minister making frantic phone calls home. people threatening to resign. it is not just the foam roses on a comeback tour. the right honorable member is back amongst us, a touring the television studios. all of the present difficulties are of his own making. what did he say in 2006? instead of talking about the things most people care about, we were banging on about europe. deep down, he is one of them. the dublin with iraq skepticism is a slippery slope. that is what -- dabbling with your wrote skepticism is a slippery slope.

i do not know if he is aware that the german chancellor was there. the french president was there. the president of the commission was there. mainstream center-right europe, the prime minister was not invited. he is the person who kept telling us he was a euro skeptics, who at the election promise renegotiations of the terms of britain's membership in the eu. his party is paying the price because they believed what he told them. the country is paying the price because we are losing influence. yesterday, the prime minister was at it again, and we heard it again today. what do we see? the resurrection of the old classic, to get out of the social chapter and withdraw. but the coalition agreement is clear that option is off the

table. that option, the preferred option of the prime minister, is off the table. the foreign secretary confirmed it again this morning. at the december summit, what position is he going to take for renegotiation or against? the coalition agreement says the option is off the table. he said he is on the table. the position is totally unclear. this goes to the heart of this prime minister's ability to fight in europe on behalf of this country. like his predecessor, he is caught between the party interest and the national interest, like the rerun of an old movie. and out of touch tory party is tearing itself apart over europe. all the time, the british people are left to worry about their jobs and livelihood. the prime minister needs to start fighting for the national interest.

>> first of all, let me thank him for his kind words on libya. i agree with him that we have a responsibility to help rebuild, and we will certainly do that. in terms of what he said on europe, it started well, with praise for the importance of the single market, something i am in favor of. he did not tell us all of his views in europe. yesterday, he was asked repeatedly if labour would join the euro zone. he said, "it depends on who the prime minister was." i am not sure which prospect is more terrifying. he accused the government of not going to meetings in europe. we have been going to meetings in europe to get us out of the bailout mechanism they put us into.

he asked me to make sure the bank recapitalization is credible. there was a 10 hour meeting insuring that would happen. on greece, we certainly want to see decisive action. he said an extraordinary thing about the french president, saying he thought the french president speaks for britain. that is what he said. i have to say it is difficult from the opposition to sell out your country, but he has just done it. i struggle to look for a question to answer. there were not many questions. he talked about the importance of global leadership. let me remind him one of the keys is coin to be the role of the imf. he let his backbenchers and front benchers through the

division lobby to vote against the imf deal that his former prime minister had negotiated in london. that was an absence of leadership, like so much received from the honorable gentleman. i see people keen to catch my eye, but i remind the house we have a very heavily subscribed debate to take place afterward. >> i agree with the view on the debate this afternoon, but had he gone to the terms of the motion, the third option, which was to renegotiate membership based on trade and cooperation -- is that not incompatible with membership of the european union? should not anybody interested in renegotiation within the union oppose this motion? >> i think the vital interest for the u.k. is belonging to

the single market, not just being able to trade, but having a seat at the table where you can negotiate the rules, which countries like norway are not able to do. another problem with the motion -- i completely understand the notion my colleagues have about europe. if you have a three-week choice, you could find 34% of the country's voting to get out of the european union would deliver that, or 34% could vote on the status quo, which many of us think is unacceptable. i think we have had the alternative and a clear decision was made. >> how would the prime minister characterize his relationship with president sarkozy? >> if you have good relations with somebody, you can have frank discussions with them. i can tell you exactly what happened at the european council yesterday. on the issue of libya, britain and france have worked together probably more closely than at

any time in the last 40 years. on defense cooperation, we will continue to do that. but there is a need sometimes to speak clearly and frankly on behalf of britain. it is in our national interest that the eurozone deals with its problems. it is right that we make that clear. >> my friend deserves great credit for his to the mission -- for his determination and leadership in libya. the seat understand that his views and mine on europe are hardly an identical. but can not agree that opposing president sarkozy abroad and opposing the notions we discussed here at home is clearly acting in the national interest? >> i am very grateful for that compliment. the fact is he is right to make the point. this is a coalition. there is not complete agreement

on european policy between the parties of the coalition. but the coalition came together in the national interest and is acting in the national interest. >> isla store. >> i think it is a shame we spent only 10 minutes on libya and the european council. undersecretary said that even if all of the greek debts -- u.s. secretary geithner said even if all the greek debts were repaid, which would have a problem. >> i wish there had been more statements on european councils. i have always committed to come back and report to the house. the point the honorable lady makes is right. greece is just the most glaring problem the eurozone has to deal with. that must be dealt with decisively.

it needs to be backed by a fire wall and the recapitalization of banks. but the fundamental problem is this issue of competitiveness and the large current imbalances building up in some of the memberships -- member states, particularly those in the south. what needs to happen is an advance in competitiveness, in trade, in completing the single market, which will help all those economies in the longer term. >> the prime minister has made it clear he advocates fiscal union within the eurozone. can he explain to the house how it is that fiscal union of that kind is not a fundamental change in our relationship with the european union, when it is established that the constitutional position is clear that where there is fundamental change, there must be a referendum? how can he square that circle? >> i do think fundamental changes are coming in europe. they are clearly coming in the

eurozone. to start with, that may lead to pressures for a treaty change. that will present opportunities for britain. we should respond to those opportunities. is it right to go off down the path of having a referendum, including this option, just as there are big opportunities for britain as the eurozone and eu is changing? >> i congratulate, with others, the prime minister for his stance in libya. can i remind him there are countries like yemen that need to be focused on? the lisbon agenda set up benchmarks for economic growth. is the prime minister confident that despite the eurozone crisis, those targets will be achieved? >> first of all, he is right on yemen. we are spending increasing time in the national security council exploring how we can help that country to achieve not only a transition toward greater democracy and freedom,

but to help tackle the real security concerns in yemen. he is right. there has been in lisbon process, the 2020 process. although the agenda gets pushed forward, in many cases, the targets and measures are not met. what i would say, after 17 months of going to these council meetings -- i see in the european commission a change of heart, not least because everybody recognizes the priority is growth. the commission has to stop adding expensive regulations to business and has to start deregulating, exactly the agenda we are putting forward. >> would the prime minister agree, not just in libya, but indonesia and egypt, there is a real opportunity for transition to democracy? to what extent will this be done on a bilateral basis, with our partners through the european external action?

>> the first thing we have done is to help to change the european neighborhood policy to make sure it is much more engaged with libya, with tunisia, with egypt, with more conditionality, so there is progress toward rights and democracy for countries we are helping. in addition, we have a significant bilateral program. one essential is to help develop building blocks of democracy, political parties and a civic society. that is something we can help with. >> i join in paying tribute to the bridge every of our servicemen and women for libya, the work of nato, and commend the prime minister for his leadership on the issue. i am afraid on europe the same cannot be said. the people in britain will be asking why has he decided to firmly set his face against not only his own backbenchers, but

against the will of the british people, for a referendum on the issue of europe? a >> i thank him for what he says about libya. our country can be proud of what our armed service personnel have done. on the issue of europe, i am very clear about what parliament should do about a referendum. when we come to this place, we do not give away powers that belong to the people. i think it is wrong we did not have a referendum on lisbon and those other treaties. the clear view i have is that when it comes to this parliament proposing to give up powers, that is when there should be a referendum. that is the guarantee we have written into the law of the land. >> our future prosperity lies with improved trade with india, china, south america, and emerging economies in africa, not an inward-facing protection racket like the european union,

founded on the inefficient businesses of french farmers. can the minister give us a timetable for getting power's back from the european union? >> where i have some disagreement with my honorable friend is of course we want to export more to china, india, brazil, russia, and turkey. of course we want to do that. we have to recognize that today 50% of our trade is with european union countries. it is our interest not just to keep the markets open and have a say in their regulation, but to further open them up. that is what we should and are pushing, we do we should push and are pushing in the european union. that is important. otherwise, i think it is very clear what the country wants us to do. that is to stay in the european union, but to retrieve some powers and make sure we have a better relationship with europe. that is the commitment we have.

>> the prime minister must recognize, talking about italy, greece, spain, portugal, and ireland, it is only growth that will make a difference to the crisis. why not advocate those policies within these debates, and give a lead to the british people on why it is important? >> heck i think one of the reasons why some of these countries have gotten into these difficulties is not just the shortage of growth and competitiveness, although that has been key, but also building up large budget deficits. there is a lesson across europe that you have to make sure you cut your costs according to what you can afford, a lesson we are tragically having to learn in this country as well. >> we were pleased am heartened to see the prime minister stand up to the french.

when it comes to the national interest, is it not the key point that we need action on the budget, action on getting out of the bailout fund, not selling us up the river, with the rebate we used to have? >> the important point is what the british people want to do specifically with respect to europe. the biggest danger they sense is getting dragged into another bailout. that is why in the treaty change that has come forward that was the price we exacted to get out of the you bailout fund by 2013. we returned that power to the uk. we should also being -- be taking action on the european budget. we have agreed for a freeze this year. those plus the referendum are what we have been able to deliver in this government already. >> the prime minister margaret thatcher put our money where her mouth is.

contributions to the european union went up from 6.6 billion pounds to 4.4 billion pounds. is the prime minister trying to emulate the new europe? >> the honorable gentleman reminds us that margaret thatcher did put her money where her mouth was. the problem is the next government gave it away when they gave up the rebound -- the rebate with nothing in return. >> can my friend speculate on what the costs would have been to the taxpayer, going forward, if he and his friend had not negotiated to get britain out of the bailout mechanism? >> the point about the bailout mechanism is we were left exposed by the last government because of the existence of the efsm. while we are still at risk between now and 2013, we have ended it from 2013.

we also stayed out of the second greek bailout. these things have saved real money. i think that is important for people to understand. the government has been focused on delivering something concrete and important for the british people at this time. >> as a member of this house who voted for the implementation of the security council resolution 1973, and who as foreign secretary refused to meet gaddafi when he invited me to go to libya to collect financial compensation, blood money for the family of pc fletcher, may i state my discussed and revulsion with the murder and nature of the killing of gaddafi? i ask him to emphasize to the transitional council that the future of democracy in libya lies in reconciliation, not revenge. >> i think the gentleman makes

an important point. i can announce that the leader of the national transitional council announced today there will be an inquiry into the circumstances of colonel gaddafi's death. clearly, we wanted him to face justice. that should have happened. but i do not stand back from what i said in my statement that because the gaddafi era is over, because he is gone, that does give the libyan people, who genuinely fear the prospect of him coming back -- they can now get on with that future. >> i greatly welcome the prime minister's leadership on libya. it's liberation is a success not only for the libyan people, but for proving the international community can act together to protect. but will the prime minister agree we must also exercise caution? intervention must be used sparingly, when there is a

serious threat to human life, when there is a proportional response, and there is a clear desire for action nationally, internationally, and within the country? >> i would add that you should only intervene if you believe you are capable of doing so and can bring about the effect you need. i think there is an important issue there, not just seeing what is legal and necessary, but also what you can do. >> the prime minister must know of the growing division between the public and politicians. the is he not have any concern for what is happening at the sites where three party leaders are putting their backs into it on a decision that was not binding, talking about a referendum in future legislation in 2013? once't that just mean again the public will say that 75% of us would like to see a

referendum and this parliament is not listening? >> i think the lady asks an important question. i absolutely believe it is right to have public petitions in the way we now do. i also think it is right to have this time given over to backbench motions. it is this government that brought that reform about. the issue of europe is not a side issue. it is important. it is important that political parties and governments make their views known. but i do not except that you can hold a vote on something as important as this on a thursday and hope it does not go unnoticed. this is an important issue. i believe in the importance of parliament. i don't not -- i do not believe in a sovereign parliament on the one hand them think that some of its policies don't matter. >> the prime minister told that -- told the telegraph that we

should get powers back over social policy, yet on march 25 he agreed to a treaty change which did not ask for anything in return. >> i have to take issue with my honorable friend. the limited treaty change that is about to be debated in the house of commons and passed, i hope, gets us out of the bailout mechanism the last government got us into. i thought and still think that is the single most important price we could exact with that treaty change. that was the biggest concern the british public had. the point i made yesterday and will make again today -- i do believe a huge changes coin to take place in the european union and the eurozone. i believe this will give us opportunities to maximize the national interest. that is something which should be debating about both as a party and within the coalition, and in the house of commons as a whole. i do not think we further that

by having a referendum that includes an in-out option, walking away from the burning house when we should deal with that issue and then talk about the future. >> what about the assessment of the consequences of the eurozone crisis on u.k. regional export-led economic growth? >> the eurozone crisis has had a chilling effect not only on eurozone economies, but on our own, the american economy, and elsewhere in the world. the eurozone is a huge market for world goods and there has been a slowdown because of the lack of confidence. we have to be clear that if we were to see the breakup of the eurozone that would have very severe consequences for neighboring countries and neighboring banks. that is why i think it is very important we work with eurozone partners to try to sort this issue out. >> bernard jenkins. >> bernard jenkins.