rising faster than overall prices. the issue philosophically that we must address as a society is -- do we think our elderly are somehow entitled to the best available health care, irregardless of the cost? if the answer is yes, the resulting gain is just one of shifting the cost. who is going to pay is it going to be the government? is it going to the private- sector? is the government going to shift the cost to the private sector? the other option is to tell these folks that they are not necessarily entitled to the best medical care that money can buy under all circumstances. and until we really wrestle with that fundamental philosophical debate, it is hard to see how we will make progress on health care. the circumstances in health care do not change that much from one year to the next. it cannot be why growth is

slower this year than last year. it just does not change that much. demographic projections just do not change fast enough for that to explain this. it does not make sense for that to be the case. that is not what our forecast is 2.3%. it simply is not. >> let me give you a micro example that might counter what you just said. >> ok. >> in ohio last week, health care costs, all of the time. it is a cost of doing business. one manager said, we are getting a little ticked up in the business. i am not going to hire somebody. and the reason is, health care. instead, we are out bringing in

some more part-time people. the notion that our current health care uncertainty -- and obviously, the cost has not gone of greatly, as you pointed out. but when you talk about gdp, it has added some uncertainty. and in terms of what the health care legislation has done to make it worse, i agree with you on the long-term impact, but i think we forget that it is impacting today's economy to. -- economy, too. >> i am a manager of a small business, 20 people. before i left, i got my plane and i asked my cfo how health care is affecting us right now. he said, we pay very generous benefits, so we will be slapped with this cadillac tax. otherwise, it does not make a difference. maybe bigger firms have different circumstances.

>> put yourself in shourd and if you have a -- if you are self insured and if you have a health savings account, which a lot of them do, there's a lot of uncertainty. >> the example used it is not uncommon. there's a lot of what we call labor hoarding out there. firms are very reluctant at the beginning to lay off workers when a recession -- when a recession comes because they will not save that much. but once they do lay them off, they really do not want to bring ahman. -- bring them on. there are fixed costs and that is one of the things that high health care does. >> we have got to deal with these costs. the chairmen of banks -- ranking member have been leaders on this, saying that you will not

get things done until you deal with this. i would hope that is one of the conclusions that we can all agree with, and maybe disagree on some of the other issues. the way you put it, doctor, is probably accurate in terms of some of the difficult choices that we have to deal with for the elderly. and what you did not talk about is that we have to restructure the way we deliver health care. it is not just making a tough choice between price and quality. it is saying, how do you get away from a fee-for-service model and have better quality? and have lower cost? >> you have to restructure the curtain. >> and we have to have output match the volume. >> i have to say that i have to agree with senator portman's last date men. -- statement. if there is one thing that is clear, we have got to change the way we pay for health care.

we have incredible incentives for waste in our current system. and virtually everyone is in agreement on that score. hopefully, that could lead to a taking action. senator? >> thank you very much, mr. chair. i want to ask about availability of credit to small businesses. we had the small business lending fund, which in oregon, many banks supplied, and not a one was granted access to an expanded base and leveraged additional loans to main street. that was the old old. it is still not clear -- that was the whole goal. it is still not clear why so many were denied landing. but this is one strategy. and we had a second strategy, a small business lending fund sustained at 90% guaranteed.

some banks have started to increase their lines of credit to help restore funding, but i would like to know from your perspectives if that has been a significant change. that we have had business is coming to my town halls and talking about their lines being cut in half or eliminated. if they cannot borrow on their credit card and they have no equity on their house to bar on and they cannot get loans from the bank, they are basically still in the water. and they cannot even manage inventory ups and downs that go with the course of a year. credit to small businesses, any insight? >> one thing that i have observed is the segment of the small business committee that is to theserly coprone credit issues are the ones that are exposed somehow to release date. vader own commercial real estate or have assets -- they either

own commercial real-estate or have assets that are exposed. there is a legitimate argument hamas that there is a segment of the small business community that cannot refinance -- there is a legitimate argument, that there is a segment of the small business committee today cannot refinance. an example of an auto shodealerp in st. louis. they could not refinance their credit line three years ago and the reason that was stated was the market value of the properties had fallen so significantly, and they were used as collateral against the loan, and yes, you could have credit, but you either had to put in more equity yourself, or you had to hold a $1 million credit line, essentially raising the cost of the loan.

i think we need to be careful about the kinds of companies that have exposure to the real- estate boom and bust that has impeded their capital and other types of businesses. the banks that i have talked to in the midwest are actively looking for quality opportunities to lend. the definition of quality opportunity is tighter than it was four or five years ago. but again, if you look at the survey responses for large numbers of small businesses, they do not need credit availability even close to the top of an their list of significant problems. >> i am aware of the fact that the sblf not worked in that not nearly as much money has been put out from it. i don't know if what joe just

finished on is part of it. but here is something that we do know, from one program to another, going back to entitlements to harp, to hamp -- almost everything -- there needs to be outraged. the one thing about entitlements is that people -- there needs to be out of reach. the one thing about entitlements is that people do not always know that is available it is not enough to just put it on the table and say, a certain class of businesses are eligible. i always have suspicion when take up rates on what is eligible are low that is the reason. >> let me be clear that this is not banks reaching out and applying to the program. they had a huge incentive to apply only to lend those funds out the door because there was a

1% vs. 7% differential for the bank. the issue was the treasury turning down their application. if we have not had much of an explanation or an analysis from treasury on that. i want to switch gears. >> i am from a small town near peoria, illinois. we have a hometown bank. the president of the hometown bank was calling me almost on a weekly basis last year, asking me when treasury was going to initiate this. it just took treasury so long to get their act together to insure that -- to issue that to get the money out the door. it would have been a lot more help had they done this a year before they ended up doing it. >> was that bank eventually accepted into the program? >> after four or five months of waiting, yes. >> that is a positive, because not a single bank was admitted

that applied. -- that apply in oregon. the president pledged to champion this issue right before he took office. that did not happen. and indeed, there was a huge push back on this issue. you can do it for second homes. judges can do it on boats and planes and every other mortgage contract. a lot of concern has been expressed that this would have a significant impact on mortgages and interest rates in the future. but that has been countered by lookinget's do it by backward and looking at second houses now where the power exists, and we do not see that large discrepancy. why is it so hard for folks to

entertain the concept that you have advocated for? >> i think the biggest problem is that people see that there are certain people who would unjustly benefit from such a thing. people who basically made a real estate that and they lost it and are still going to get bailed out. far more common is a person who took out a loan for $500,000 for a home that was maybe worth $550,000 and then the price fell to $300,000. that person is not going to pay $500,000 for that house. they will walk away if they do not get some kind of loan modification. we should knowledge that fact and create a situation for people who are willing to undergo chapter 13 bankruptcy. which is not available to anybody. if you have assets, you are not allowed to go through chapter 13 bankruptcy. we need to set up a procedure to

basically pay what the mortgage holder is going to get for that anyway, and that is, $300,000. >> when this power exists for other types of loans, second homes and so forth, then it is really utilize. but it is an insult -- an instrument. and in this case, we have all of these modifications were the service he is not very motivated, but this would create a lot of motivation to you both superb -- a lot of motivation. do you both support this as well? >> you need part cared and part ot and partrt carry ou stick. >> at this point, i'm almost willing to support anything. >> [laughter]

thank you. senator sessions. >> thank you all for being here today to provide your insights. we have not passed a budget resolution here through the senate in almost three years. the chairman would argue that we did dean a budget last year in the budget control act the fact is, we put caps in place. the we have not passed a formal budget since 2009, and i hope this committee will find a way to do that this year. the reason that is problematic in my view is that we have all made mention of the fact -- or you have -- that what is driving federal spending is entitlement programs. primarily, health care, medicare and medicaid are growing at multiple rates abroaof inflatio.

doing something on taxes is critical if we're going to take on what i think are the biggest challenges facing the country from a spending and debt standpoint. the other reason i think it is so important that we do a budget is that there is increasing concern among people out there and investors in the economy and about what congress is going to do. there is a study of over 1600 investors released on tuesday that identify the national debt as one of the top concerns on investors' minds as we head into this new year. the study also found that a significant number of investors believe that the uncertainty coming out of washington over debt and regulation is holding the economy back. 85% of small-business executives in a recent survey think that the economy is on a wrong track recor.

do you agree that a formal budget resolution is important, not only because we have got to address the issues of entitlement reform and tax reform to get the debt under control, but also because we need to bring certainty to investors and job creators out there? i think there is a definite correlation between deficit and spending and the economy and jobs. it strikes me that the uncertainty that comes out of washington with regard to how we are going to deal with these long-term problems is complicating the ability of the economy to get back on track and create jobs. >> i think i agree with you.

it would certainly be a good first step and would maybe signal that the gridlock that we have seen in the past year or so might be a thing of the past. >> anything that you can do to make fiscal policy enhance the fiscal environment in which companies are trying to grow their businesses more stable and more predictable has got to be helpful. it is a young literature, but it is interesting that it is growing, attempts to measure growing uncertainty by looking at how many provisions are a tax code, how valuable they are, when they will expire -- this literature does suggest that such measures of fiscal uncertainty can be correlated with slower economic growth. the logic of this is pretty straightforward. if you do not know the environment will be working in next year, two years from now, the next step is to delay major

decisions until more clarity as possible. but it is not easy to have clarity right now. it is not just a budget resolution. it is eliminating the uncertainty for people like what is going to happen at the end of february when this temporary holiday expires. what is going to happen in 2013 when you could have fiscal go to 5% of gdp if everything goes badly? that is a huge element of uncertainty that overhangs anyone's willingness in the long run to make economic decisions. on paper, we know what we have to do. we have to reform the tax code and make it permanent. we have to address the hon funded liability entitlements, and we have to adopt a process for assessing the value of government programs so we do not propagate things in future programs that are unproductive. >> what level of deficit reduction you think is

necessary? the budget control act had $2.1 trillion provided. >> that is not sufficient. >> right. simpson-bowles said $4 trillion. where would you put it? >> i would put it between $4 trillion and $5 trillion in the next five to 10 years. we did a study that showed that if you just continue on the current path, you will see adjusted interest rates starting to move of and the amount of deficit reduction that would prevent that and stabilize the debt to gdp ratio by the end of the decade should be between $4 trillion and $5 trillion. anything beyond that would make a significant improvement in the un-fund of liabilities that would otherwise start to grow rapidly up to that time. i was heartened by the formation of the super committee. i was disappointed that it failed. i hope it will reconvene this year and get back to the task of coming up with the $2.4 trillion.

but actually, that is not enough. it will only be the opening gambit and it will have to be a considerably larger fiscal attraction. >> i am not a forecaster. and i will not try to pull a number out, but i will say this. i think we are underestimating the growth in entitlement spending. as the doctor pointed out, not only do we have the baby boom generation reaching retirement, but the the shot -- the longevity of people, especially age 65 on, is growing by leaps and bounds. people think is not changing that much if you look at the aggregate numbers. at for people like you and me, men between the ages of 40 to 60, longevity has not changed at all in 30 years. the same things that kill men, we have not gotten any better at fixing those. but we have gotten better at

heart disease, treating cancer, the things that usually the fall people age 65 and on. -- the things that usually the befall people aged 65 and on. >> the senator was not here when i said we will go to a market of this committee. but last year, we kind of got "bigfooted" here -- that is my terminology -- by negotiations that started earlier in the year. this year, we are not in that situation. in terms of the hearings that we are looking forward to, we're going to have the chairman of the federal reserve. we are going to have the head of omb, the head of cdo, the secretary of defense -- the head of cdo, the secretary of defense. we are trying to get the

secretary of the treasury. we're going to have the secretary of transportation. we will have a hearing on entitlement reform and a separate hearing on tax reform, because i think there is strong interest on those areas and i think they are central features of our long-term imbalances. and then we will have a hearing on income inequality. we have had another request for a hearing on energy policy. we will have to see if we can work that in, because this year, i think we're going to need to -- if we go to the kind of markup i anticipate, we will probably need more time for markup than we have seen in recent years. if we're going to take a real run at doing what members of this committee have told me individually and collectively they would like to do, it is going to require a longer markup that we have had in previous years. that will have to be factored

into our thinking as well. a final point is, the congressional budget office has not told us when we will get the estimates. initially told us they were shooting for march 9. that has now -- we have been told it has slipped. we do not know what it has slipped to. that is a factor we just have to learn about before we can reach a conclusion. with that, senator whitehouse. >> thank you, chair. i think the chairman can probably predict what i'm going to jump into, because this discussion of health care is always so frustrating in this committee because the focus is always on the cost and the trends, which are real. but as dr. prakken said, based on rising demographics, but one

thing we overlook is the fact that we are running the most inefficient health care system in the world by orders of magnitude. we are at 18% of gdp that we burn on health care. the nearest country -- industrialized country to us, i think, is the netherlands at 12%. other countries deliver health care that is about as good as ours on average. the savings everson with your to our health care system could be between $700 billion -- the savings every year to our health care system could be between $700 billion and $1 trillion, and we could improve the quality of care. i am glad the senator related that issue about restructuring the way we deliver care. i understand that is a process of innovation and learning and of reform, and that for those

reasons, cbo cannot score it. but it is tiresome to have witnesses come before the panel day after day and never mentioned this enormous issue because it is not scoreable. samson vols agreed this was a big issue -- simpson-polls agreed this was a big issue but did not mention it because it was not score a goal. at some point, we have to take off the cbo blinders and get to work on this. we cannot burn $700 billion to $1 trillion a year and do nothing about things like hospital infections that kill people every year, run across, and are completely preventable. -- run up costs, and are completely preventable. it is a constant frustration.

there is so much to be done, and it is such a bipartisan thing we could be doing. and hospitals and health-care systems, from kaiser in california to gundersen lewis in wisconsin to mayo in florida and minnesota all across this country are actually doing it and showing that it works. they are actually saving money by delivering better care, and yet, we have these budget discussions that operate in this artificial cbo universe and we never even take out on. -- take that on. that is concluded. >> [laughter] >> to determine what to say something? >> i always enjoy -- did the chair want to say something? >> i always enjoyed the thunderous presentation. i think you're right. >> i also want to talk about the housing predicament. for a long time i was the sub --

i was the chairman and the subcommittee that looked at the system per if a bank -- at this system. if a bank is under water and needs to renegotiate the value of its headquarters or the property it owns, the bank will not hesitate to talk about reducing that principle with its lender as part of the work out. but then the bank, the same bank, will turn around and tell a homeowner and say, no, we will not discuss the principle of what you owe me on your home. dr. brennan -- brannon has talked a lot about this. i would like to submit a copy of his article open but the housing blues" for the record. >> it will be admitted.

>> thank you. could you talk about the value of allowing a homeowner in bankruptcy to sit down with the lender and negotiate a new principal balance for what they owe in the light of, first of all, if they walk away from it, the bank is going to be written down on what in the foreclosure process anyway. they would get a better number in an organized bankruptcy than they would by going through the foreclosure process, with the description of the -- destruction of the property itself and the collateral and so forth. >> as it stands, my father is a bankruptcy lawyer in peoria, illinois. i am well aware the you were in charge of bankruptcy. my father would love to run many reforms by you. i agree with you in the sense --

this is what i told senator mulally. in a situation where someone those $500,000 on a home worth three under thousand dollars, the mortgage lender is not going to get $500,000. people all over are walking away from their mortgages. it does not seem like that is going to change, at least not in the near future. we shouldn't knowledge that and create a system for people who are severely -- we should acknowledge that and create a system for people who are severely under water to file for bankruptcy. and it's not available to everybody. if you have assets, you are not allowed to file chapter 13 bankruptcy. you are told to go away. and you are told to negotiate something else. >> do you think that would influence behavior elsewhere? i have lived, since the mortgage crisis, with innumerable stories

from rhode islanders who are on the receiving end of the worst bureaucratic treatment i have ever heard of from the big banks about their mortgages. never did in the same person on the line twice, never getting a straight story -- up to 19 months in one case of getting the runaround. when is your home at stake, you can imagine the frustration over never getting a discussion from anybody. the banks are so on motivated. we got money into raila for the hardest hit plan, and ryland -- rhode island housing sat down with the biggest banks to design a program for how the hardest- hit plan funds would be distributed. the agreed upon a plan and when it came time to go forward, the big banks said, we may have agreed on a plan, but we are not

going to participate. there is no alternative. >> if i could stop the senator on that point because we are out of time in this question in by the senator. >> could you submit for the record? >> we could do that. we have been told the vote is hard wired for noon. centre sessions and i have withheld all morning. we still have four senators to question and we only have 12 minutes. that is a problem. senator sessions. >> thank you. i remember about a year ago, a little over, i was at the home of owl blanton in alabama and we had a town-hall type meeting at his house. we lost him recently, but

everybody talked. a man well in his 80s said, i have lived through the depression, world war ii, through correa, through the big inflation and other things that have happened. and i do not believe our problem is the high cost of living. i believe it is the cost of living too high. i was at another town hall meeting and an african-american stood up and said, my daddy told me you could not borrow your way out of debt. we have talked, you have and others have about the uncertainty that is out there. just briefly, would you not agree that when you look at europe and you look at the u.s.,

is our debt to gdp was one-third of what it is today, there would be less concerned and more confident about how are you come out of a recession or where our economy would be? the debt itself, because it is so large in the developed world and we are so high the leveraged that it is creating uncertainties that we have not seen before, could you say yes to that? >> i would rather we have less debt than more debt. yes. >> what we are talking about in europe right now, some are predicting catastrophic events. hopefully, that will not happen. but our debt compared to europe as a whole is not much better than theirs, if any. we are on a path in which we went from $161 billion deficit to $450 billion to $1 trillion i

think this year. some have predicted 4% growth for 2011. dr. prakken, what was your prediction for 2011? >> buttu hi. -- too high. [laughter] >> you do not want to tell us? >> made when? >> january of 2011. >> probably close to 3%. >> you were a little more cautious. >> yes. >> doctor, when you say we ought to borrow another $500 billion

and that this will create more growth than uncertainty and damage, it bothers me. because i am of the view that debt is a problem for us now. i am not saying we need dramatic cuts this year, but i'm saying we need to be very dubious about are we more than we are now borrowing. we were breathing a sigh of relief that we were reducing the were crossed. then the president announced last night that he wants to spend half of the money we were borrowing to fight a war, that money now becomes money he can spend because he is saving it. it should be money that is no longer borrow each year.

because all of it is our road. this initial stimulus plan, as one mentioned, it was certainly less than total of 10% infrastructure. and as bill gross of pinkoson, but it is not a permanent thing. pimco said, it is not a permanent thing. then you look at the -- are you want me to wrap up? you look at the shock at one in people to take a little of their own medicine, and then to have the president say nothing to us about the debt when he gave the state of the union address. his own chairman of this joint chiefs said that as the greatest threat to our national security.

doctor, i don't know what your politics are exactly, but would you start and say -- are we missing something? is this a point when this nation actually has to worry about this course of debt? and does this not have the potential, as this commission -- the debt commission said we are facing the most indefensible financial crisis if we do not do something. protecting your correct. the current fiscal -- >> i think you are correct. the current fiscal policy is not sustainable. it will result in a gradual decline of our living. >> the emphasis needs to be on the trend, not a level.

we have no trouble now financing the level of the deficit that we have now. in fact, we are paying zero interest rates at the short end. the trend is totally unsustainable, completely unthinkable and it is almost entirely, as came out in this hearing, due to rising health- care costs. that is the one thing that needs to be dealt with in terms of long-term deficit control. if we can do that -- and unfortunately, nobody knows how. if we could do that, almost nothing else would matter. >> mr bowls of the commission said we could be facing a debt crisis in two years. that was a year ago when he made that statement. you are talking about medical costs in the next 20 to 30 years, which are horrendous as you rightly point out. i am worried that it is already having an impact on this economy. i think the europeans have

decided they have to retrench now, even though it might have some short-term pain. i am dubious about a big, new spending program. thank you. >> we have three of us left. the vote is hard wired at noon. could we go to 5 minute rounds. would that be acceptable? i apologize to my colleagues. at, let'si tell you wh do six for the two of you and i will either not do it around or have a truncated. >> you are very thoughtful. i think i can get under sickert i am just going to ask one question. dr. brannan, you worked on the hill for a long time. my concern has long been that the lane? section -- the lame-duck session of the 20's of congress will

look very much like the lame- duck session -- of the 2012 congress will look very much like the lame-duck session of the 2010 congress. and quite frankly, the 2012 session has a double whammy because you have this question of the sequestration kicking in. in other words, not really looking at targeting your spending in a careful way. i have looked at a lot of ways to break out of this cycle. for example, i opposed the bush tax cuts and i suggested after 2010, why don't we extend those bush tax cuts for one year so that congress will be forced on a bipartisan basis in 2011 to make some tough choices so that both sides would be under pressure to come together. obviously, we were not successful. i would have liked to have seen it. senator coats and i have a

bipartisan tax reform idea. there have been other ideas on how to approach it. my one question to you is, what do you think can be done over the next few months to try to drive this kind of bipartisan agreement are around tax reform and spending reform so you do not get this kind of lame duck meltdown where the choices are the only ones that do not really serve the country's interests? >> when i started at the hill -- and it seems to happen every six months. how do you tie the hands of the next congress? when i was on the staff of the senate finance committee, the last day we were in session we knew we would be here until 4:00 a.m. or 5:00 a.m. because the last negotiations would not take place until everybody was too tired to do anything.

we have talked about a comprehensive tax reform and people on both sides have acknowledged it and said it takes a year or two to get it done. if you look at what your predecessor, senator packwood, did ultimately, it took about a month to get everything through. and i have talked to him about that. he said, if you take much longer to do comprehensive tax reform, everybody starts to draw out exactly how much their ochs is gored. maybe the thing to do is to try to do it in a lame duck session. >> thank you. >> i happen to agree with you, dr. brannan. i think that might be a way to get it done. otherwise, we would be packed to death on the finance committee. -- pecked to death on the finance committee.

if we have a long, drawn-out fight on this 2% payroll tax cut, what is going to be the effect on job creation and our economic recovery? >> it cannot be too long and drawn out because you only have a month left to make a decision. the decision is whether the holiday ends at the end of february, or is extended through the end of the year, correct? >> correct. >> in which event, a holiday would expire anyway. to be frank, it will not have all that much effect on the economy. moving up 10 months the something that is going to happen at the beginning of next year anyway. but it is roughly $140 billion out of the be taken no

pockets of working men and women. it would certainly reduce their spending some if they did not have that. that would reduce the demand for goods, and in turn, prompted the reduction of production of some goods and, in turn, job losses. it is just simple. if you take spendable money away from people, they will spend less, and reduce less. >> could i just say that i think everybody viewed 82 month extension as economically ridiculous. it was -- a two-month extension has economic the ridiculous. it was the best i could be done under the circumstances. i think there's a strong shareholders that the other 8 to

10 months are coming. the question is whether you drag it out until midnight on the last day, which the congress might. the reputation of the congress starts looking ridiculous to people. >> i agree that there is that expectation. but there is uncertainty about how and over what time frame it will be paid for. if the insistence is that it will be paid for quickly, that mutes the extent that it is paid for over a holiday. it is down the road, you have a more favorable outcome. >> i do not think the stimulus as a whole lot. i think congress is better served thinking about long run changes in taxes and spending and not worrying about short- term variations in the business cycle. i do not think they can do much about it. >> tell me what you think is

going to happen in europe. and according to what you think, if you think is going belly up on the banking system, tell us how bad you think is going to affect us. dr. blinder? >> i alluded to that a little bit in the testimony. i think the best guess -- and that is the right word here -- that they will -- if they continue to kick the can down the road, they have been remarkably successful at that. this has been going on in an acute phase since the spring of 2010. they keep kicking the can down the road, doing just enough to get by. i think that is the best guess for 2012. the downside risks of what you are talking about are enormous. if there is a financial equivalent to lehman brothers

that starts in europe, i think that is a recipe for a worldwide recession starting in europe, but not staying in europe. and as i suggested in that testimony, the potential to knock down u.s. gdp growth, which might otherwise be 2.5% -- let me not even to a forecast. to knock down gdp growth by two percentage points from what it would have been otherwise in a worst-case scenario. >> i agree with everything allen said. i am hopeful that the ecb's decision to lend money to banks in the eurozone so they can either acquire some of this troubled the sovereign debt, or not sell in the fire cell to recapitalize themselves seems to have worked fairly well so far.

and increases the muddle through -- the chances of the muddle-through scenario. europe is the single biggest threat. and you can imagine two or three different scenarios, all of which have roughly probable chances of occurring. either one probably has a 35% or 40% chance of occurring. it is just determining the impact on the u.s. >> we have 7.5 minutes left in this vote. i will forgo my questioning round. this is brilliant management by the chairman. i lose my chance to question the witnesses. but i have an extensive statement -- i had an extensive statement at the beginning. i deeply appreciate the contributions of the witnesses today. you have certainly helped the work of this committee.

with that, we will stand adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> next tuesday, director clapper will be on capitol hill for a hearing by the select senate committee on intelligence. in addition to the director, cia director david petraeus, fbi director robert muller, and a director for the defense intelligence agency are scheduled to testify. live coverage beginning tuesday at 10:00 a.m. eastern here on c- span, and on c-span radio. the director of national intelligence, james clapper, today address information sharing in the intelligence committee -- community. the intelligence sharing and

armand was established in 2004 by the terrorism prevention act, which encouraged sharing of intelligence data across u.s. agencies. the remarks are 50 minutes. >> this is probably the most dangerous audience because everybody here knows something. this is quite a knowledgeable group that is here. this is going to be a very interesting session. i will turn to dan to formally introduce people in a second. i want to say a word of thanks to my friend, general clapper. i had nothing to do with

inviting him, so i feel completely liberated to say what i really think about him. the witches, he is one of my real heroes. -- which is, he is one of my real heroes. this is a man who has dedicated his life to something much bigger than himself, which is serving his country. he has done a spectacular drop in almost every position that the government has -- spectacular job in almost every position that the government has. the only thing he failed that was trying to be a civilian for a brief time frame. he never liked that very much. when called to come back into service after a very distinguished military career, he went to nga, transformed it, give it the most complicated name in history. but then that led to him being pulled into the defense

department as the under secretary for intelligence, and that led to his current role as the director for national intelligence where he is doing a spectacular job at a really tough time. ever since the dni was established, it has been an era of additional resources and now we have this hitpoint. . pivot point to one era of austerity. unfortunately, general klepper has such a broader understanding of this community that he knows how to guide it through this perilous time. i think he is doing a terrific job. this is a very awkward time for general clapper to be coming because the budget is not formally released. i will give him permission of fronter not answer some of your questions if he decides to.

as has always been the case, he is willing to risk his own career, but i'm not willing to do that for him. i am giving him permission to say that he will not answer because the president's budget is not out. a very famous american said you want to judge people by the content of their character, not the color of their skin. i know the content of this man's character. i want to thank our friends at ibm for giving us the opportunity to bring this public forum here today. dan, why don't i turn to you? >> thank you. i am vice president and practice lead for public sector strategy and innovation consulting at ibm. we are pleased to be the strategic indeed -- in this reporter for this conference -- strategic industry partner for

this conference. the conference's focus on information sharing, adapting and improving the information sharing environment. in the years since this was established in 2004, we have come a long way in predicting and preventing incidences' and not simply responding by -- after the fact. we have done this by analyzing and anticipating incidences in real time. this comes as a longtime effort to improve the global security. many members of the team will be participating torre course of the day and we appreciate the arbour synergy to engage in his discussions. -- the opportunity to engage in these discussions. it is my honor to introduce james cropper. he was sworn in at dni in august

of 2010. he is the principal intelligence adviser for the president. he has a long and distinguished career in the armed forces, beginning of the riflemen in the marine corps reserve, and culminating as a general in the u.s. air force and in the intelligence agency. he also held positions as assistant chief of staff during operations desert shield and desert storm, and as the director of intelligence for three war fighting commands in korea and pacific command. he flew 73 combat support missions over laos and cambodia he first retired in 1995. he worked in industry for six years with business is focused on the intelligence community. he served as a consultant and adviser to congress, the department of commerce and energy, and a wide variety of

advisory groups. he investigated the bombing of the towers in 1996. he returned to government in 2001 as the first civilian director of the national imagery and mapping agency. he served as director for five years, transforming that organization. he then served under two of administrations as staff assistant and adviser to the deputy? -- to the deputy secretary of defense. he earned his bachelor's degree in government and politics from the university of maryland and master's degree in political science from st. mary's university in san antonio, texas, and an honorary doctorate in strategic intelligence. he has won numerous awards.

he was named as one of the top 100 i.t. executives in 2001. he has been singled out by the naacp board's service award and has been awarded the security model. in 2007, we served on a foreign relations task force for civil security. i support his thinking around civil liberties and keeping the country safe. i know his commitment to keep the country say. i know his commitment to information sharing. and i know his commitment to civil liberties. with that, i would like to

introduce a director clapper, and we look forward to a good day. [applause] >> it would be nice if i just quit while i was a hectic here after all of that. -- while i was ahead here after all of that. i appreciate the kind introduction. this is an opportunity to kick off a very important dialogue. obviously, i do not need to tell this crowd that information sharing has been a huge mandate for us all since 9/11. the notion of sharing is an interesting concept. it can be phenomenal and it can be dangerous. it depends on what is shared and with home. -- whom. there is an old eastern saying that a thousand candles can be lighted and the camera will not be shortened.

i also found some words written by a noted harvard professor. collecting data is only the first step toward wisdom, but sharing data is the first step toward community. that applies in space within the intelligence community. -- inwithin the intelligence community. -- in spades within the intelligence community. we are here today to talk about the sharing of information. it we might define that as a national responsibility to ensure that any person with an mission need can discover and access actionable information at

the right time to successfully prevent harm to the american people, and at the same time protect national security. we believe -- i certainly do -- that sharing should be done responsibly, seamlessly, and securely. with regard to -- with safeguards in place to protect the privacy, so right, and civil liberties of the american people as well as to prevent unauthorized disclosure. in short, the right data any time, any place, usable by any authorized recipients, preventable only by law or policy and not technology, and protected by a comprehensive regimen of accountability. that is our vision, or in a nutshell, sharing and safeguarding all information exquisitely and perfectly. that is, of course, the nirvana of information sharing.

that is the goal. as we all know, it is not an easy task. information sharing goes far beyond the intelligence community. it can get confusing, so i wanted, by way of explaining the other speakers, explain these relationships at least as i see them. later this morning you will be hearing from other people from my office, the office of director of national intelligence. the panel -- the first panel will be what is called the program manager for the information sharing environment. although the speaker is tethered

to the dni, he is the lead for all national governmental information sharing, and reports to the white house. he cuts across the entire fabric of the u.s. government, straddling the other domains, besides intelligence, which means law enforcement, public safety, homeland security, defense, and foreign affairs. he has a broader mission, including aligning these fields with the white house. intel, my domain, is one area he touches and influences. i would also like to recognize david shedd on the first panel. he was there at the beginning in 2005. on the second panel, which deals with the culture of information

sharing, is the lead on my staff for information sharing within the i.c., a position i established when i came on in this job. she is so devoted to this topic she came off maternity leave to be here. this is her idea of fun. get a baby sitter and a drug conference sponsored by csis. she will be talking about how to change a culture to increase information sharing, which is one of the challenges we have in the intelligence community. the way we are doing this, somewhat accenture ra-- accelerated by the incident with wikileaks, is making short information is secure.

oftentimes there is a zero-some alicia between the need to share and the need to protect. maybe it is better or more accurate to coordinate how we increase both. she makes sure we have policies and technology in place to share information, protect the information, and safeguard civil liberties and privacy. those three pillars of those factors are what we have to reconcile and synchronize. the third panel today is on efficiency, scope, and privacy, and has its eight deputy and wes wilson, from the nctc, which was part of the intelligence reform and terrorism prevention act.

nctc has a special relationship with the president. the fourth and last panel has my civil liberties and privacy officer, and there is a message in the fact that by law , on byodni is a full-time civil liberties and privacy officer. alex is a national asset. he is a trusted adviser on many of our most important issues. he will focus on how we advanced policy and legal operational frameworks. we have a lee are represented and are committed to this conference because of the importance of the subject. let me touch on a few points, and then will take questions.

one of the things that is a new thing for me in this job is of course engaging in the domestic every net, particularly with the law enforcement community. a i have had occasion to engage with them quite a bit, to the auspices of the international association of the chiefs of police. i am and retired military, but i have come to have great respect for what the law enforcement community does to protect our security in this country as well. i found them to be a gold mine of wisdom and insight when it comes to what i call street intelligence. like the military, they put their lives on the line here at

home. many years ago i remember i was president of a community association i lived in, something i will never do again. [laughter] i had set up one of the first neighborhood watch programs in fairfax county, and the practice of doing that i had the opportunity to do some ride- alongs with the police and later on with the state police, and it is quite an education to sit inside a police cruiser looking out and see what our police and law enforcement officials to deal with day in and day out. you have no idea what you're getting into when you pull somebody over. they always go in pairs. it was a great sense of

appreciation and sensitivity training on having that experience and knowing what they do day in and day out. there will be information sharing broadbent that is being worked on -- that is being worked on with law enforcement. six key points. the first is integration, which you may have heard is my emphasis, my mantra, and this job is focusing on intelligence integration. absolutely mission critical for the intelligence community. the vision is simply a nation made more secure because of a fully integrated intelligence community. for all the u.s. government, threats require us to

accelerate responsible information sharing. secondly, doing this requires some standardization, and we are pursuing efficiencies, as all of us are, in our business. yesterday i met with our five ice colleagues, and one of them offered up that term that has become popular in his country, australia, they call it the efficiency dividend, which he said is the orwellian euphemism for cuts. [laughter] we're doing that as well, and one of the things and the big idea, influenced by budget pressure cuts, is for the first time ever an integrated i.t. enterprise across the major intelligence agencies in the

community. this is something we have talked about for years. we were never held to do it, and now we are. i always love the line of the new zealand physicist in 1927, robert rutherford, in dealing with a budget crisis, and a pair freeze, we are running out of money, so we must begin to think. so we are in that mode now. [laughter] one of those is cloud computing, which has potential for savings and promoting integration, and attendant to that is the requisite for security as well. like i.t., this is an in a clear, not a panacea. the third key point is protecting privacy, civil rights, and civil liberties. is paramount. i have become sensitive to this issue, and this is a big deal in

this country, as it must be. i think there is a maturity and sophistication in today's intelligence community about this that i think record of late the public does not appreciate or sea. protecting the rights of americans is core to our information sharing efforts. this requires enterprise-wide approaches. fourth, sharing and safeguarding information must be done in tandem. this would be the opportunity to bring up wikileaks, which has been terrible for us, and has caused us to make changes in our community in terms of auditing,

monitoring, controlling media, and we have to do more to both tag data and ensure that we can properly identify people so we are sharing information, we are are authorized to receive the information. it is counter intuitive, but by having greater identity management and greater and improved labeling, at haggling, cataloguing of data, that both ensures security and enhances sharing. if you can be sure that the information you are sharing is actually going to an authorized recipient, that is an inducement to do more sharing. now, we will of course, as we always do, in still all the appropriate i.t. mousetraps to

prevent a recurrence of wikileaks, but in the end our system is based on personal trust. we had an egregious violation of personal trust in this case. we have had the before and will have them again. the president signed an executive order in october, which is designed to improve the security of classified networks and promote responsible sharing and safeguarding of classified information. it set up some organizational balis to make sure that happens, so we bring together both those poles of sharing and security. so, as a part of this we need to build a more pervasive and

monitoring capabilities, and we have varying degrees of capability right now in the community, so we will invest to bring that into balance. we need to develop and national insider threat policy. the goal is to find that near irvana between the responsibility to share and to protect. that implies a greater integration horizontal across the intelligence community as well as a vertically with, from federal, state, local, tribal,

and the private sector. and our allies as well. the program manager is helping to transfer justice and public safety getting them into the information sharing business model. , working to promote common operating models and shared services. the sixth and final point is that in all this the challenges are not technical as much as they are insuraning right policies. we have developed and coordinated a strategic intent plan for managing i.c. information sharing activities, and working with us there has been established a mechanism for overseeing compliance and safeguarding standards among our mission partners. with that, i think i will stop

and will be happy to take some questions. are you going to moderate? >> thank you very much, general clapper, for that. we appreciate your marks. my name is -- and director of the homeland security program at csis. i want to clarify this is the information sharing conference. this is not the iran conference. this is not the president's budget conference. i would ask you not to put me on the spot and make me hold up a tight ship. i want to use my career of asked

the first question and tapped into some of that the director's extraordinary experience in this field. on the intermission of information sharing, the culture, how have you seen at the community and not just a quick intelligence committee, but the government cannot embrace information sharing over the last 10 years? some of it has to have been forced on them by legislation. what was the biggest factor that has caused the increase of information sharing, and do you think it has an attraction that it is self-sustaining? >> ask away. the biggest event, which was an epiphany for us, was 9/11, and having been around the community a long time, i think that event and what ensued after it was a signal thing for us,

certainly in the intelligence committee, and a larger government. you know, historically, there was this fire wall that having grown up in the intelligence business, between foreign and domestic. i was a young pup at nsa in the 1970's, and watched hearings that were addressing a lot of the abuses that went on under the manager of foreign intelligence, but was done illegally, really, in the united states, may be well intended, but bad for the country. that led to the first version of the sick of order which laid out specifically and reaffirmed that far wall between foreign and domestic. that all came to a halt

dramatically with 9/11. that is what has caused us -- that is what gave rise to the intelligence reform terrorism prevention act which mandated and set up the dni, set up other things, he and the need to recognize legislation for information sharing. now that firewall is gone. is not to say it is completely eradicated culturally, i will say. i think we have made a lot of strikes, and it is more a recognition -- strides, and it is more of a recognition to and protectsibilitly civil liberties. in answer to your question, will it stick? is there enough traction?

absolutely. i do not think there's any question about that. that said, because of the history, where we have been doing foreign intelligence a lot longer than our engagement in the domestic arena, which is not as mature, there are still disparities there which accrue largely from history. from what i have seen in several capacities that i have had in the last 10 years, i think we have made great strides, and that is not to say there is not more to do. >> we have questions. we have microphones going to iran. state your name and your affiliation if you have one. we will start in the front right here. >> what is your best assessment of unintended information sharing, the effect on military

programs in particular, the f-35 program, which was successfully act, and is it your belief that a breach of information resulted of new cost and program stretch-outs to compensate for those breaches? >> the internet age and all that has given us -- it has also led us to an egregious filtering of intellectual property. the f-35 was clearly a target, but i cannot draw any empirical conclusions for it because i simply do not know what the impact that may have had in terms of program stretch-out or

challenges. clearly, the attacks on our intellectual property across the board, whether from individuals or nations states, is a serious challenge to the country, and we need to do something about it. >> next. >> thanks. you mentioned that you are working hard to do things like tag the information and also put in a system where you are monitoring your own people. how far along are you on that? >> not to get too specific, it is a work in progress, and this will be part, as we go to this new architecture, if you will, just speaking within the

intelligence committee, part and parcel this which will promote the thing i am pushing, which is integration, not to mention efficiency. it will be the ability to share more broadly within the intelligence community data, which is still a challenge for us. and in doing so, when we can tag the data so we can label it, account for it, catalog 8, and then when it comes time to establish a committee of interest, you know what day that is in question, and if you have the bona fides of those who have need to have access to it, you can do it that much more quickly and more efficiently than we are able to do now. that is part of this -- what i hope will ensue is a transformation of our i.t. enterprise, just within the intelligence community. that then serves, to emphasize a

point that i made in my remarks, to both enhance security and promote sharing. if you know what the data is in question, you know where it is and with whom it can be shared, and then you can account for it when it is, you're our and a much better posture from a security and a sharing standpoint. is overlan -- -our plan the next five years we will make some serious and noticeable changes. >> the gentleman in the blue shirt. >> good morning. there has been a lot of discussion about the continuing size of the commercial buys by

the intelligence committee. the white house has a study group. what is the role of commercial imagery? will it change substantially? >> going back to it before anybody heard of it, and when i first took over nema in 2001, i became a big believer in commercial imagery. it has the benefit of being in a classified, and that is great for sharing in: missions overseas and domestically. there is always going to be a need, is essential need, -- a substantial need, for commercial imagery within the intelligence industry and for many other purposes. i do not know where we are in the study, but it should be the next couple months. i guess we will have that done,

and that is a relook at the utility and the applicability of commercial imagery. that is not to say that in this era of budget cutting that commercial imagery is considered in that situation as well. >> despite what the reputation that my former organization has upping the troglodytes of information sharing, i am not one of the most knowledgeable people. i spent hours in a safe house in baghdad. you have got it right, the responsibility to share and the need to protect. about, and a clear

lot of people are concerned about the terms that you use, bona fides of recipient information, what does that mean? there is a contrast of the need to know, which became a bad term. we have come back to st. there is an essence to know everything we need. can you help us understand the difference between the notion of need to know, which is a fairly strict construction, relative to information sharing? >> within the context of the intelligence committee, there is of course, as john well knows, the need to protect, sources and methods, and at the same time, there is the old saw about intel is cool and reported intel is really cool. have the dilemma between

protecting sources and methods and the information that is then cleaned and how that information is used. what i was trying to get at is if you are able to tag and label data, so you can break those segments, if you will, the sources and methods as opposed to the substance of the information, which is really what you need to, and then you also can determine it routinely and systematically, so it is not a big, huge deal, and do it with automaticity, that if you have the day that labeled and you know the people who need that access to the day that and can do that and do it on an automated basis, which we cannot do now very well, i think you promote the interests of both sharing and security.

>> next, in the blue shirt, in the middle. the microphone is coming. >> does the current classification system aid or hinder information sharing? if not, what recommendations which you have to help enhance information systems in the digital age? >> ears nothing wrong with the system. it is how it is used -- there is nothing wrong with the system. it is how it is used. you can remove the hendrix's and not classify anything. -- you can remove the hindrances and not classified anything. to the issue of over classifying, which is an allegation that is often made and there is probably some

substance to the accusations. my experience in the intelligence community, a lot of what drives or motivates classification the citizens given the volume of data we deal with them is affected by contemporaneously circumstances. something that we classified today would make a different determination if you look at it a year from now or five years from now. i think we are conservative, and play, about declassifying material. again, this is another one of these holy grails, where we're looking for the ideal sweet spot for classifying, which we should not over classified or under classified. it should be in the middle

somewhere, and that is a difficult thing to do perfectly day in and day out. >> thank you so much. the gentleman in the red tie over here. >> sir, to your mind, which agency has the lead responsibility for sharing information about suspicious activity that indicates an imminent attack, making sure that the regional stakeholders are aware of that? is this a structured data problem or an operational problem, and who make sure there is no scene between this to perspectives? >> -- no seam between those two perspectives. >> your question implies one agency? >> which agency has the legal

responsibility to make sure that protocols are in place -- [unintelligible] >> say, there is one single agency that has a legal obligation to do that. it is a collective responsibility. under the scenario you cite, it is state, local officials, all or starting with the citizenry, for that matter, if somebody witnesses an event like that and gets it to the proper authorities. it can be spoken to the suspicious activity process and the training modules that have been set up for doing that. i really cannot -- it would be

-- it is just not set up that way, that one element is exclusively responsible for and legally accountable for ensuring that warnings are pass quickly. it is a collective responsibility. it is my responsibility, to committee, to ensure -- and that is what i have been placing some much emphasis on integration for. as i said before, but horizontal lake within the intelligence committee and vertically, federal, state, local, travel, and that is not intended to imply it one way hierarchy. it is two ways. the nexus at the state level are the 72 or so fusion centers, which again, there are 72 of them, not just one, that sort of i look upon as the organizational nexus for either

bringing information up from the local level or bringing it down from the federal level. >> we will go right over here. >> you talked about the insider threat policy. can you talk a little bit more about what that involves and where that is in the process? it has been about a year and a half since wikileaks. where is that, that it has taken so long? kenya tock el little bit about the insider threat -- >> i am sorry, i did not hear the first. >> we need to develop an insider threat policy if i understand you correctly.

where does that stand? >> i do not know where the written document is, if that is what you refer to, but frankly, we have always had responsibility for detecting inside the threats. that is why we have an intelligence community. what wikileaks has done is heightened our sensitivity about that. and of course an end i.t. -- in an i.t. contests, and insider threat is quite profound, and that is what everybody is sensitized about being alert to detect insider threats. there is not a silver bullet here. you have to have that, on the steering -- auditing and monitoring. we have done a lot in the last four years to enhance and improve and streamline the , which is another

dimension. >> last question. >> your 0.6, i wondered if you could expand on that, where you say you're not looking for new technology, but you more in the way of right policies and governments. presumably, that means you are not waiting for new technology to move forward, but he on the other hand, you are still open, if new technology is developed, that can help with the more perfect and exquisite sharing of information you are still open to. can you expand on that? >> that is exactly right. this is always been about .overnmance

as we are able to substantiate the technology pervasively, where there is confidence, assurance about the data, its contents, and with whom is want to be shared, that actually serves, as i said earlier, to enhance sharing. to the extent we bring to bear to facilitate that,g absolutely. >> what a brilliant last question, one that insert itself. i encourage you to stay behind for the rest of the agenda. i what might -- i would like to thank ibm and director clapper. [applause]

[captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute] >> next tuesday, director clapper will testify before the senate select committee on intelligence. others are scheduled to testify. we'll have live coverage at 10:00 a.m. eastern tuesday on c- span and c-span radio. each year, world leaders in politics, economics, attend the world economic forum in davos. today david cameron talked about the future of the eurozone,

outlining ways europe could recover following the financial crisis. the u.k. is not part of the 17- member eurozone, but is a member of the 27-member european union. last december prime minister cameron refused to sign a treaty that would change how the market is regulated, stating the treaty was not in the uk's national interest. this event is 30 minutes. >> good morning, ladies and gentlemen. it gives me great pleasure to introduce the prime minister of the united kingdom, mr. cameron. i think we are very privileged after having listened to mr. de to chancellor -- after having listened yesterday to chancellor merkel to hear the prime minister talking about his future of the world and the

future of europe, and i should -- so the prime minister of the united kingdom, please welcome. is all too apparent, while china grows at 8%, india at 7%, and africa at 5.5%. european commission forecast that the eu will grow by just . 6% in 2012, and that is assuming

the problems in the eurozone get better, not worse. mr. day in britain, we had the official figures for the final quarter of the last calendar year, and they were negative. other economies are forecast at a similar outcome or worse. in four years, government debt has risen by 4500 euros. direct investment has fallen by 2/3, and in more than half of eu member states, one-fifth of all young people are not out of work. this is not a moment to try to pretend there is not a problem. nor is it a moment to allow the fear of failure to hold us back. this is a time to show the leadership that our people are quite rightly demanded. tinkering here and there and hoping we will drift to a solution simply is not want to cut it anymore. this is a time for boldness, not

for caution. baldness and what we do nationally, but boldness also in what we do together as a concert. in britain, we have had the ball. we were faced with the biggest budget deficit in our history, more than we had the most leveraged banks, the most indebted [unintelligible] to be cautious would have been catastrophic. instead, we were bold and decisive. we formed the first coalition government in 70 years. we legislated for a fixed term for paul a month -- for parliament. we put forth an aggressive set of plans to get our economy back. welfare bills cut, the cost of

government, cut. the state pension age, increased. let me give you an example. the reform of public sector pensions. this is a difficult issue for any government. we want public servants that the pensions. we have ensured that is the case, but at the same time we have cut the long-term costs in half. by taking bold decisions to get to grips with the debt, britain as shoulder -- has shown it is possible to get ahead of the market. our borrowing costs have fallen to the lowest in a generation, and we are equally bold in meeting our key ambition, which is to support enterprise and make britain the best place in the world in which to start and grow a business. where pursuing a pro-business agenda. we're scrapping needless red tape, reviewing all regulations, creating the most competitive

business tax regime in developed world, the corporation tax coming down to 22%. we're making bulk investments in new infrastructure. while we may begin fiscal conservatives, we are injecting cash into the banking system and introducing credit-easing measures easier for small businesses access finances. my message to you is we are a country that is committed to enterprise and openness. come to britain, the part of this special year for a truly great country. we're taking the bold steps necessary to get our economy back on track. my argument today is that need for bold action at the european level is equally great. europe's lack of competitiveness is its achilles' heel. for all the top, the lisbon

strategy has failed to deliver the structural reform that we need. the statistics are staggering. as measured by the world economic forum, more than half of the eu member states are now less competitive than they were this time last year. while five eu member states are now less competitive than a country that is pretty sclerotic, iran. our single market remains incomplete. there is still a colossal number of professions across the union to which access is regulated by government. that is not all. in spite of the economic challenge, the unemployment challenge, where still doing things to the eu to make life even harder. the eu has promoted and

necessary measures that promote burdens on government that can destroy jobs. agency workers directive, the pregnant workers directive, the list goes on. then there is the proposal for a financial transaction tax. it is right that the financial sector should pay their share and in the united kingdom we're making sure that is the case with a bank levee and the fact that we charged duty on share street these are options other countries can adopt, but if you look at the european commission's original analysis, that showed a financial transactions tax cost the gdp of the european union and could reduce it by 200 billion euros. it could cost almost 500,000 jobs, and forced as much as 90% of some markets away from the european union. even to be considering this at a time when we are struggling to

get our economy growing, is quite simply madness. it should not go on like this. that is what britain has been arguing for a pro-business agenda in europe, and this is not just a british agenda. over the last year we have spearheaded work with 15 other states across the you, inside and outside the eurozone. this weekend chancellor merkel and i package -- called for a package of liberalization of policies. together we push for a completion of the single market in services and in digital. those things could add 800 euros to e.u. gdp. all proposed measures should be

tested for growth. we need a target to reduce the burden of do you regulation. we need a new proportionality test to prevent needless barriers to trade in services and slash the number of a regulated professions in europe. together with our international partners, we need to take decisive action to get trade moving. i am not want to give you the standard speech on doha. last year at this forum, were leaders called for an effort to conclude the doha round in 2011. it did not work. we must not give up on free trade. let us step forward with a new an ambitious set of ideas to take trade ford. first, rather than try to involve everyone at once, let us get some bilateral deals done. let's get the huge trade agreements with india, canada, singapore finalize by the end of this year.

completing all the deals now on the table could add 90 billion yours to europe's gdp. let's look at all the options on the table for agreement between the eu and u.s. where a deal could have a bigger impact than all the other agreements put together. next, let's be more creative in the whitney is the multilateral system. far from turning our backs from multilateralism, we need to continue the work at the wto to make sure we take account of the poorest countries in our world and ensure the wto framework is fit for the 21st century. i believe it means going forward, perhaps with a coalition of the willing, so countries can forge ahead with more ambitious trade deals with their own. there are proposals out already, like the trans pacific partnership, but why not an ambitious deal between europe

and africa? this is a bold agenda on trade which can deliver results for the world economy this year. i propose we start work on it immediately. of course the most urgent question facing all of europe right now is how to deal with the eurozone crisis. this is where i believe in europe needs to the boldest of all. progress has been mate. the european central bank has provided extensive support to europe's banks. many european countries are taking painful steps to address their deficits and to give up a degree of sovereignty over the governmance of their economies in the future. there was the agreement to set up a fire wall. these are necessary steps, and i did not underestimate the leadership and courage that has got us this far. we need to be honest about the

overall situation. the crisis is still weighing down on business confidence and weighing down on investment. a year ago, bond rates were 5% in spain, nearly 5% in italy, and more than 7% in portugal. today they are still 5% in spain, up to 6% in italy, and 14% in portugal. we need the urgent short-term measures to be properly put into effect. the october agreement needs to be fully implemented. the uncertainty increase has been brought to an end. . 's banks must be properly recapitalize, and european firewall needs to be big enough to deal with the full scale of the crisis and a potential contagion. chancellor merkel is absolutely t europeanssinsis countries must get to grips with

their debt. i am not one of those people who think that single currencies can never work. look at america. look at the united kingdom. there are a number of features that are common to all successful currency unions. a central bank that can comfortably stand behind the currency and the financial system, the deepest possible economic integration with the flexibility to deal with economic shocks, and the system of fiscal transfers and collected debt issues that can deal with the tensions and in balances between different countries and regions within the union. currently, it is not that your son does not have all of these. it is that it does not have any of these. clearly, in countries that are close enough in their economic structure that tensions are less likely to rise, but when in balances are sustained and some countries do better than others, year after year, you can face

real problems. that is what the current crisis is demonstrating. of course private capital flow can fight these problems for a while barrick in the eurozone, that is what happened, but once markets lose confidence, your left in an unsustainable position. it's tough discipline is essential, but this is a problem of trade deficits, not just budget deficits. it means countries with those deficits, making painful decisions to raise productivity to drive down costs, year after year, to regain their competitiveness, but that does not happen overnight. it can at painful economic and political consequences. nor is it sufficient. you need the support of single currency partners and a system of the school integration and risk sharing to the creation of

euro area bonds to make a portrait work. there must be action to put the weight of the surface countries behind the euro. i'm not pretending that any of this is easy. these are difficult steps for any country to take. knowing how necessary, but also how hard they are, is why britain did not join the eurozone. they are what is needed if a single currency as currently constituted is to work. some people will say it is well britain is making these points, but you are not any euro, and last month u.s. vetoed adding a new treaty. that me answer that directly. i understand why the eurozone members want a treaty inside the european union. if they do, there have to be safeguards for the countries that are in the european union, but who have no intention of

turning the single currency. i did not get those safeguards, said the treaty is not going ahead inside the european union. let me be clear, to those who think not signing the treaty means somehow britain is walking away from europe, at me tell you nothing could be further from the truth. britain is part of the european union. not by default, but by choice. it is fundamentally reflected in our national interests to be part of the single market on our doorstep and we have no intention of walking away from it. at me be clear, we want europe to be a success and all the measures that we will propose for next week's council will help achieve that success. we want europe to succeed, not just as an economic force, but also as a political force, as an association of countries with a political will and the values and a voice to make a difference in the world. when that political will is

there, and make a decisive difference. together with president sarkozy, britain let the new european sanctions on iran putts will exports so the world does not have to confront a nuclear- arms to iran. in syria with a taken the lead against the repressive violence and we will not lead up until assad steps aside. in libya would put together a coalition faster than any time in our history. british and french pilots that we together in the early hours when the fate of been gauzy was at stake. together, we saw it through, helping the libyan people overcome tyranny and secure their future. i am proud to work with mike european partners, and i'm proud of what we can achieve. i stood on this platform and said europe could recover its dynamism. i believe we can, but only if we are bold, only if we fight for

our prosperity, get to grips with our debt, bold decisions on innovation, trade, and address the fundamental issues at the heart of the eurozone crisis. all these decisions lie in our own hands. there are the tests of the european leaders in the months ahead. the problems we face are man- made, and a bold action and with political will, we can fix them. thank you. [applause] >> i'm very happy to take some questions. you can say who you are and where you are from.

right, person over here. >> in your view, what is the single most important thing the eurozone could do to see a way through this crisis? >> to deal with what i call the short-term issues, the short- term and long-term short-term has cut the greece, banks, and firewall, and if you do those things quickly and fundamentally, you ease sense of crisis accompanied by what the european central bank is already doing, and perhaps could do even more apparent for 2012, that is what would make a clear difference in the sense that the eurozone leaders want to take the steps that will ease the problem. that does not address some of the longer-term tensions at the heart of the single currency, which are about competitiveness and trade deficits, as much as they are about budget deficits.

is that part of the piece that needs for the work and attention, and that is what chancellor merkel was talking about yesterday. >> bankers are telling me they think the eurozone is over the worst of the crisis. do you think that is wishful thinking? >> what is happening at the moment in terms of the high bond yields in countries that are affected that are affecting their growth in participation in the european economy, it is a little bit better than it was at the end of last year, but it is still not fixed. you have got to fix in my view those short-term issues before you can deal with a longer-term problem. why did this problem not manifest itself earlier? there had been many years of successful eurozone operations. in those years, private sector financial flows were covering up for some of that deeper

competitiveness problems. as those flows have dried up, unless they return, you will have to address some of the more fundamental problems at the heart of the eurozone, because every other single currency as a least some of those features, and it seems to me it is logical that a successful single currency will have to adopt some of those it is going to succeed in the long term. gentleman here. >> prime minister, there is a lot of discussion this week about defining and modeling cabalism, and you recently made a speech on this subject. -- modeling capitalism. are we on a path towards state capitalism? >> i do not think we are. those that believe in genuine market capitalism need to meet the defense of our system again state capitalism. at the heart of it is the root

of law. it is exhausting to advertise to internationale investors. in britain we seem to lose them all the time. it is a good test of are you are living in a generally free country we can enforce your property rights and everything else. the genuine open and free market economies have got to stand up and shout about the values of freedom and democracy. those are will reduce those are some of the things that make it up. i do not think we should give up in this battle at all. this challenge commit the two ways. there are facing the people looking out that they and buyers. that is the great values, the great democracy, the fantastic culture. these are great strengths for europe. the second phase is all economic

stagnation, rising unemployment and rising competitiveness. we should not be a pessimist about it. if we do regulate our economies and keep our tax rates down bill, a change the way our economies work, we can be a success story. we have to demonstrate the political will to do it. but facesan show thos to the world. we got a strong economy and the prospects for the future. gentleman over here in the middle. >> what are you looking for for the new treaty to return? power we going to deal with our preferreper every of europe?

>> it is quite clear to me that the eurozone countries need to come together, that do more things together, cooperate more together in able to make a single currency work. they can do that inside the european union if they want to or they can do it outside. what matters is that the country outside the years of is that they have proper safeguards. i the people can overdo what happened in december. if the change in europe came when some countries decided to form a eurozone and to give up the country's enjoyment of the euro. they're going to have to sit together and work together. i do not think for one minute that this process disadvantages of britain. i think we got the best of all worlds. when in the european union. we have a major say about the

work of the union. we're not in the eurozone. that gives us the flexibility to have our own interest rates and run our own monetary policy. we can combine the fiscal stance that we mean confirmed by the imf said there is no fiscal it for miller -- for further stimulus. we are working on credit easing in trying to get credits directly into banks. i do not think this disadvantages britain at all. i think it is the right way to engage in europe. we fight very hard. we have lots of allies. on some occasions we do not want to be in part of what europe is doing. many countries in europe want to tear down their borders and have

completely movement. that is their decision. britain thinks it is right to keep the borders. there is an opportunity to deal with drugs and guns and other issues. that is not to our disadvantage. that is to our advantage. to is the text decks -- who is next? we need a bit of gender balance. >> i am from egypt. my question is about the uk's leadership in foreign policy. what is the u.k. doing to ensure a smooth transition to democracy? >> this is a huge challenge. while i'm still an optimist about the arab spring, i still think that region of our world having the chance to throw off quite corrupt regimes and have the chance of democracy and a say in how their government is still a huge net positive, and frankly for us as well which is

why i am proud of what we did in libya and the help we have given in egypt, i think the issue in egypt is trying to get the transition right. i think the military powers have to do more to show people that they want a functioning democracy. i think they need to take further steps now could that direction. in europe we have a responsibility. i think for too long the neighborhood program in europe was not very conditional. it was not very active. it was not robust. we're changing that to make sure the way europe engages is far more positive and far more about trying to promote democracy temporality and the building blocks. i.t. egypt is keep because of this size ends -- i think egypt is key because of its size and

scale. i think it will do enormous amounts for that region. we should not look away from what is happening in libya. both are small and what the countries. did they can show a guideline to other countries that want to make the showchange from hypocrisy to democracy. we have a room for one more and then a special treat. >> what is your message for it the palestinian and israelites? >> my message is please keep talking. we have the talks in jordan. the truth of this matter is it does not matter what happens with the united nations are what resolutions we pass in the house of commons, this can only happen, a two-stage solution, at

through negotiation of those two parties sitting round the table. president obama has said we can not what it more than they wanted. it is in both their -- we cannot want it more than they want it. it is in their best interest to show the palestinians you're serious about getting a deal. i said do not add to many preconditions before you go into talks. you've got to do the and negotiations around the table. if they show they want to deal, i think we all know roughly what most of those solutions are. there is no tunnel. we need to get the tunnel right in terms of the talks process so

we can get the end point we want. but we thank you again for letting me address you today. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> the israeli presidents, the prime minister of the palestinian authority and the ticket chairman of the world economic forum discuss prospects for peace in the middle east. this is just under one hour. >> good afternoon, ladies and gentlemen. it gives me great pleasure to introduce to you two gentlemen with him you are very familiar in davos. you are aperes,

senior citizen of our meeting. but your first participation dates back over 20 years ago. prime minister fayyad, it was over 10 years we have the pleasure to welcome you here. of course, those two leaders are sitting here together this afternoon. president peres, was the lagers serving member of the israeli message. his efforts in the peace prospect have earned him the nobel prize. and the respective is a nation in the world. -- and the respect of his nation and the world. i never have learned so much in

my laugh about brain research as a discussion with you. prime minister fayyad, you are the prime minister of the palestinians. your courage and convictions have created a new legacy for the people. you are very much recognized for your enduring commitment. i repeat, your enduring commitment to building a strong palestinian institution as well as for your efforts to secure a peaceful future for both palestinians and israelis. the extra special conversation i would like to ask

immediately after all we have heard with impressions that people are just annoyed if i may say so -- they listen to what is happening and the progress. let me ask you, is there a reason for hope? we can have a reconciliation in this question for the world and world peace. >> thank you very much. let me commend as a senior citizen of the board that this conference is different from all the other conferences that i participate. usually the conference's were in search of answers to old questions. this time, the questions are

unknown. it is a conference about what are the questions. you cannot cure an illness if you do not know the nature of it. we are in the question. i am convinced that there will be peace between the palestinians and us based on the two state solution. i do not have the slightest doubt. i am not in desperation. i want to give several reasons why. i believe things are not standing still as people are thinking. i believe the palestinians did a good job. but presidents -- both president abbas and prime

minister fayyad. they started to build with the israel state. at the time was not wasted. we have to distinguish between building a state and running negotiations. you can build even if you do not have negotiations. some negotiations are unnecessary. the situation for the first time has changed on the ground. people can feel a little taste of this. the lights are open like intel of the - like tel aviv and more hopeful. it is a completely modern city. i want to thank you for doing an excellent job on it.

there is no division. we may have some arguments here and there. the second thing is in addition to building a state, they have built a force of their own security. young palestinians were trained in jordan. under the guidance of the united states, they can provide for the first time in palestinian history a security force of their own. these are two developments that i suggest not doing. i do not want to give the impression that incident negotiations we have to build. it is in addition to. now we have to negotiate. even in the negotiations, they get this.

they have no serious alternative but to make peace. did the uprising in the arab spring is not about the conflict. it is not about israel. what happens in syria and other countries and in europe is not part of the conflict. they are using this for their own power. we do not want to settle for an excuse, giving the best thing we can to the air of the people. we take it out by having a limit between the two of us. let me say it is very early for

us to make peace with the palestinians. it is not just starting. it is a historic commitment. the we're trying to make peace not to achieve this but to be true with the jewish tradition. it is not tell us to ruin other people. they are against slaves and all else. we have to remain true to our history and tradition. we are committed to make peace. after a long time, how do you put the piece into reality is? most of the world has agreed there is just one solution. that is a solution of two states.

the arabs will have a palestinian state. the jews will have an israeli state living side-by-side with peace. in the negotiations, there remain some problems. people are extremely nervous bit about the time of negotiations. i think it will take some dates. this will commit mistakes. in the meantime, the middle east has changed already to a different middle east. egypt is the longer the same egypt it used to be. it is an entirely new country. i do not want to criticize. the position of egypt inside the

conflict is not the same as it used to be. i believe with a little bit of patience -- and by the way the remaining problems are more a psychological real. i do not say if it is psychological it is easier to solve a. we can solve it. from my experience, when you come to the end of the world any think this is the end and it may be the last day, there is enough ground on both sides and to have the highest respect. i think it is the best thing that does happen for the palestinians and for peace and for us.

we respect them. we want to talk with them. we have domestic problems. peace is a very serious problem domestically. did you have to convince your people to make concessions. people say we are ready to pay the price. why are you paying so much a? what can you answer? my answer is that unless you close your eyes, you'll never contribute. he must be a little bit for giving and a little bit elegant and even in big u.s.. ambiguous.n in big u.s

i believe it will happen. i hope it'll happen same. i think postponing is damaging. we have to do this on the constructive one. we should finally come out with peace between the two of us and let the arab world deal with its own one. >> do you feel we're close? >> thank you very much. i would like to take advantage of the introduction made by the president's spirit not before i think you

redo president -- i would like to take advantage of the interjection made by the president. this will not be a factor in providing an objective or reasoning leading to the conclusion that there is hope. there must be hope. we have to have hope. hope is something that has to be part of the decision making. can we do what is necessary in order to drive the commitment to continue until we are able to end this conflict? here is what i would like to

take advantage of the outline. it is building a stake in negotiating peace. both are necessary. both are equally necessary. both reinforce each other and work to the outcome that we are all pursuing. they all have to work well. right now what would have to really work hard to be hopeful as where this is concerned. in my own assessment, sent its own inception if we take that to mean the beginning of the cold war, had never been lacking in focus.

we have a process that is driven by a strong desire to get something. it is in a position of a desire. why not try? they will be ok if they do this while pursuing the attempt to get this process again. they are making an adequate effort to do all of the other.

they have acquired it. they do what is necessary to ensure that we have all of the elements necessary. that also requires a lot of attention. it requires cooperation in order to project to make a possible. to begin to be effectively able to that which we're doing of the past few years. this is where you begin to have bet between the building and the other. what must happen in order for

us to find an objective and to be convinced that they will go somewhere politically, i believe these issues require a lot more attention than we have been getting. did the others are key instruments given that a key outcome, the most important one is the emergence of that independence. it cannot be viewed as an instrument of this. they find themselves in a difficult position of having to manage. is there enough attention to this issue?

they have to have the ability to operate in the entire economic spare. i am talking about the west bank. [unintelligible] there are still being there. there is the issue of what do we do and ordered to be able to put this back. that too is a requirements. there's a lot that has to happen for our shared

commitment. this is something we should continue to work on. >> thank you. president peres, would you be ready to make some comments about the reaction to what fayyad said? >> no. right now the major diplomatic effort should be done directly between the two of us. they have their own splits. there are elections but in america and europe. i think we armature to conduct the negotiations. we need the help of europe. we need the help of the united states. we need the support of all other people. i do not underrate it.

there is a danger that if things should be done, if you ask me what is the greatest problem to make in the middle east, my answer is iran. hamas.gency is some hamas took it over and made it a base of shooting of a rocket to israel. now run is financing its commit, sending bombs. they can be more extreme than they are. the second agency is in lisbon lebanon, hezbollah.

there is the situation in the middle east. >> what will we would like is a community would take upon itself to bring an end to the intervention of the i iranians. what do they want? if not want peace. i believe they will lose. the problem is not just the nuclear issue. it took more corruption as the way of governing. cts. encourage the a they do not have any expression

or respect for human rights. it is the only country that threatens openly to destroy another member of israel. this is not enough. i believe we have to put the pressure on the human rights. i believe these are as strong as economics. i believed we have to make them get rid of this government. there's nothing to the i iranians. there's not one that doesn't have a message of positive. i am glad steps were taken. hamas would not exist as they

do without the support. it will relieve 11 non for the pleasure. -- lebanon for their pleasure. it should be expressed in two ways, to support the peace process and the relief, the conflict between the two of us to let us settle the problems. there is nothing concerning the future. it is being used as an ex use. it is large. we would like to get out of that.

we would like to say the complex is the major issue. it is not. it is a major issue between the two of us. is to not go beyond generations to go ahead. the problem in the middle east is not politics. it is the social and economic situation and unemployment. there is a terrible level in poverty. the young people are unemployed. there is a great deal of corruption. no one can say the but the people themselves. i think we can help the palestinians enter the new age. we live in the new age.

the most important instrument to government was taken away from them. usually governments govern by controlling their economy. since economies are global and it affects every country. their economies are unpredictable. all of a sudden a young boy of 27 years old introduces facebook and changes the world. look what is happening. i think the only way to get down to overcome poverty and hunger and starvation is to adopt the autum-- hundred and starvation.

i think it is a great indication for the world. the whole global section will suffer. dick comes together. to that contribution is to bring an end to the complex and let's handle the issues for the betterment of the people.

there is no reason because the economy is no longer injured. forget that globalization breaks some hope as well. i think globalization became the greatest falls against racism. sell the company's work to all over the world, they cannot discriminate anybody because of color or religion or anything else. in an indirect way, it is the first time we have the strongest anti race community in the world. it opened up the world. nobody can control its. we do not end the inning want any more.

it is opening up. it permits a young generation to become modern and save their lives and their future. globalization is not only negative, i think the youngsters will win. some do not have a future because they do not have a message. if the new government needs to be erected and they do not handle the issues in a new age which is global and open, there will not be peace. >> i would like to come back to three points the president mentioned spi. can the palestinians and israelis solve the issues

through direct negotiations? the second point is related to the external factors which have to be taken into consideration. the president mentioned enron. iran. i referred to the young generation. i referred to facebook melinda hills -- millennials. how does it changed the situation in the middle east? >> thank you. in the context in which we have been talking about, the need for the negotiations should be based on a set of principles that are consistent with what is

required. that is in order to bring the conflict resolution. that is the sense in which i said both were necessary. they have negotiations. it seems to me that the idea has been there all along. we need some help for this. the negotiations are a requirement anin order for us to get things up. if you look at the nature of the conflict, they agreed to negotiate the language of their

agreements. how else is it going to be done? it has been recognized all along that we need significant help in order to do this. it is needed. there is time to take a look at the weakness. this is what they should have happened. i think it is time for the president to swing back in the direction from that that is required by international law. it would be guided on the basis of that would to be acceptable.

why? this is actually getting back together. they could do that which is necessary. i am not really suggesting that this is a poor solution. i am suggesting that the processi is in bad shape. this does not mean that something is going to happen. it is time to recognize the feelings of this process. the context is important. i believe both elements are with their regional conflicts.

i believe what the president said about the united states. i believe conditions are not exactly right for a meaningful redemption. the context is most challenging. we have too many small countries. i believe that we cannot be

floored [unintelligible] i think one of the consequences of the arab spring would-be a reawakening of that. they actually begin to find out on the basis of a better understanding. there is a much better understanding of what it is because it to happen. the arab spring happened as a direct consequence of decade of

people in the region. this is good to explain how important it is. how do you take advantage of this tax it seems as though this movement should help us. it is very much consistent of what the nation is looking for. we're looking to be able to see people. i said this movement should be respected and honored. here are in the middle of things.

here's one other side. it is important. it seems to me a consequence of the arab spring. our cause is how the arab spring is defined. our goal has been marginalized by its parent i do not recall that it has been marginalized to the extent it is today. there are preoccupations in the region.

in may it may be quite a number of years before its is down. there is a dimon sample of this. -- there is another example of this spirit th. the key challenges is to put in something that can be invested in. how do we deal with this? >> we are coming to an end.

1994, we were sitting practically every year on the stage. i remember the great hope that people have in the casa blanca confluence. i recall bill miller sitting. rigid i recall remembering sitting -- i recall remembering sitting here. i think the audience can share by impression. they are free of good will. my question is what is the single most important factor to

put this in reality? i do not want to hear what you do. i like to hear what you suggest to the president and prime minister and what you wish are the most important factors. >> i hear this time and again. things did not happen as we hoped for. 20 years is a long time before a person. and historically, it is not very long. usually this takes time pierr. we talk about the remaining disagreements. they mention the most important

one. we have to work on the two legs. it will not make us walk as fast as we should. what happened in those 20 years let's not forget. they agreed to a two-stage solution. it is a major ideological change. do not forget it. the prime minister does not come from the left side. the government agreed to a two- stage solution. it did not exist before never. the government agreed to the construction. some of economic peace. it does not matter.

the construction is done in a good manner. it takes time to build the country. it is not a simple proposition. he is 64 years old. in the 64 years, we have to go through seven rules. imagine the development on the young people. it is hard to understand. when never gave up hope. we have agreed to a two-stage solution. it was a basic agreement. we do this in full agreement. we made some arguments about

this. we also understand that we have to negotiate between the two of us. i believe what we have to do right now, we cannot fault the remaining problems. this is the whole story. this is very complicated. it is beneficial. it is also complicated. now all we have to do is move into steps. step number one is to open negotiations. this will not cover all of the issues to enable the

palestinians to open the negotiations. this should be banned as soon. we should reopen the negotiations. otherwise, it'll be an ongoing press conference. we shall negotiate peace. it may come sooner than we think. the use is not wasted. it is not like it used to be. it takes time. it is costly to you and us and all of us. we are advancing. i wish it would be done quickly than it is. my hope is that the young eric people will bring the people and nation to a modern economy to the escape poverty. only they can do it.

i believe and sincerity. i believe in their future. i do not and seemed in danger is or enemies. -- i do not seen them as dangerous or enemies. the have to do it. it is a strain with wisdom and hope. we're not become victims. i do not know anything in life that you can achieve just by jumping. don't talk to, since. -- don't jump to conclusions. it is more than most of us are thinking. it is more complicated than most of us like that.

we are at the final attempt to complete the very long war that carries with it. in ireland, it took hundreds of years. europe was for thousands of years a broken continent. the civil war was hatred and mistrust. i am hopeful. i do not think we have to wait 100 years. i do not think we have to wait 20 years. i think it will come sooner than we think. we need to negotiate this with elegance and wisdom and restraint. we compare the moral judgment on top of everything. i learned from him several things.

do not be afraid to dare. the second thing i learned from him was that the highest level of wisdom is the preference. there's nothing wiser than to respect the values. it is very respectable. it is the best way to go. >> let's have a sense of proportion. let's look with open eyes to what is a t. -- let's look with open eyes to what is achieved. >> thank you. your reaction?

>> i am looking for the macro level first. i'm looking at what exactly it is. what kind of state did he have in mind when he says palestinian state? it was about 2.5 years ago that they put it away. i believe it is too long before we got to that. looking forward, we are unsure into exactly what it means. let me be clear about what it is we are looking for. we are looking for an independent palestine.

that is our definition of it. i think it is high time for this to be refined with much greater sisyphus bridget specificity -- with much greater specificity. it relates to the objective of raising to a statement. allowing the palestinian authorities to help develop this in that area where it is going to emerge. our ability to develop is there.

the area is about 26% over the area of the west bank. it is habited by only 55%. what is it that could be done to make its the? it is in accordance with the agreement. measures would be suggested. to this majority, it subscribes to a two-stage solution. what is it that must begin happen in order to begin the process? i just gave me a list of a few items. it is just the beginning. thank you. >> thank you president and prime

minister. we all hope for the hope that was expressed year and is soon followed by what you would call a just and peace which will last. when we are here, let's hope that we see the progress. thank you. >> nextue