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DERMOT MURNAGHAN: We want to look at the background now to the formation of the European Union. In the ashes of the Second World War, Winston Churchill was the first leader to talk of a United States of Europe, it was the beginning of a European dream that was supposed to stop us going to war with each other and prevent another depression so where has it gone wrong, if it is going wrong and what is the future of Europe? Well joining me now from London are the former Conservative Chancellor of the Exchequer, Lord Lawson, former Lib Dem leader Sir Menzies Campbell, from Munich we have the President of the IFO Institute for Economic Research, he’s Hans-Werner Sinn and from Athens, the Professor of Political History, Thanos Veremis. Gentlemen, very good to see you all, thank you very much indeed for joining me. Can I start with Lord Lawson and a very simple proposition really, that with the formation of what was to become the European Union, prevent war, promote austerity, it certainly seems to be failing on the latter.

LORD LAWSON: The European Union was always a political venture, it was to avoid yet another war in Europe tearing Europe apart and causing huge damage to the world as a whole and that was a very worthwhile objective. Whether the fear, if I may be blunt, the fear was that there might be a recrudescence of German militarism, Germany had started both the world wars and therefore German has to be bowed in to some kind of European union, that was the thought. It may have been in fact unnecessary, it may have been that Germany would have remained peaceful, as it certainly has done, even without the European Union but it was understandable why people at the time weren’t sure and they wanted to do this. However this has got nothing whatsoever to do with the eurozone which is also politically motivated but for completely different reasons.

DM: Okay, just on that, on those founding ideals, Thanos Veremis, talking about a hand grenade that didn’t explode, being thrown there in the Greek elections, we’ve seen the rise in the previous elections of the more extreme parties on the left and the right, do you feel the stitching of the European Union politically beginning to come apart?

THANOS VEREMIS: Not in Greek estimation, I wouldn’t say it is coming apart. Nor is this really a contest between left and right. We have pro-European left wingers on the one side along with Conservatives and centrists and then we have ultra-right wingers who are against the euro in a sense, although they don’t appear to say so but that is what their policy is taking us to and extreme left wingers on that anti-memorandum league, so to speak. So it is a league of all kinds of mavericks, right and left, it is not just left versus right but mavericks against the European Union, mainly against the eurozone.

DM: And Sir Menzies, to being you in, do you feel that mavericks in places like Greece are being allowed to prosper on a European front because, as Lord Lawson says, of the huge mistake of the formation of the euro?

SIR MENZIES CAMPBELL: I wouldn’t put it like that, if I may say so there are mavericks in all political parties but of course the foundation of Europe was based upon the determination to prevent France and Germany going to war as they had three times in the previous 100 years but there is a more modern dimension which it is important to recognise and that is the fact that those countries which first suffered under the yoke of Nazism and then of Communism, as soon as they got their democratic freedom they wanted to do two things, they wanted to join NATO because of the fact that that gave them protection, it gave them a defence element in their constitutions and in their new found freedom but they also wanted to join the European Union, partly for economic reasons but also for political reasons as well. There are some countries of which people will say to you quite frankly, one of the reasons we wanted to join these two great institutions was because you can’t become a member unless you are democratic and there is great pressure upon you to avoid anything undemocratic once you have been admitted to membership. It is a way of buttressing the new freedom.

DM: And Hans-Werner Sinn in Munich, no doubt Germany is at the heart of the European project, is there some horror at the way things seem to be turning at the moment?

HANS-WERNER SINN: Yes, of course, people are very much afraid of this development. Basically the Germans are enthusiastic about the EU and they also support the euro but the enthusiasm has calmed down given the huge losses on government securities that have to be borne by someone, that is the problem. Over the years private and public debt has been built up in the southern periphery and it seems that the periphery cannot repay so the question is who bears the losses and that makes people nervous.

DM: We mentioned the horror, is there also some anger in Germany about the way that it has been portrayed in other countries, in particular Greece where we’ve seen Angela Merkel mocked up in cartoons in Nazi uniform and jack boots.

HANS-WERNER SINN: That’s a little bit unfair because Germany is by far the largest donor for Greece and if Greece say went bankrupt, Germany would be losing 80 billion euros but I don’t think that these pictures should be generalised, there are a few extreme people at the edges, that’s not the general attitude of the population I think.

DM: Okay, Lord Lawson, where do you think this goes? I’ve been in Berlin discussing what Angela Merkel can do, what she’s willing to do to salvage the euro project which seems to be at the heart of the problems at the moment. Is that something that’s worth salvaging or should they just let it slip through their fingers in as orderly a fashion as possible?

LORD LAWSON: The euro project, you call it the eurozone project, the European Monetary Union or whatever you like to call it, this is a Doomsday machine, it is economically damaging and it is also a cause of major political discord both between European countries and also leading to extremist parties in many of the European countries, [inaudible] but we are not part of the eurozone but it is a Doomsday machine and therefore it is madness to say how can we keep this Doomsday machine going. What you’ve got to do is recognise it was a ghastly mistake and to dissolve it in as orderly way as possible and look after the banking sector to make sure you have a solvent core banking system. This was not unpredictable, it was predicted. I was amongst those who predicted it when I was Chancellor, far back in 1989 when it was just the beginning of this thing, I made a big speech at Chatham House in London explaining why this couldn’t work and that is was a disaster and it has worked out exactly as I said. The Bundesbank, the German central bank, they knew it too. Karl Blessing, one of the most distinguished presidents of the Bundesbank, he said this cannot possibly work without a full political union and the peoples of Europe do not want a full blooded political union. So this was a disaster, it has to be recognised and I fear that the leaders of Europe at the present time are not prepared to recognise the terrible mistake which they did because they wanted to force a political union which the people of Europe don’t want.

DM: Sorry to hurry you but we are running out of time, I just want to bring in Sir Menzies on that, should the Doomsday machine, as Lord Lawson terms it, be switched off?

SIR MENZIES CAMPBELL: No, I don’t share Nigel Lawson’s apocalyptic view. He says it was always doomed but what has made it difficult is that some countries, some governments, have broken the rules and if these countries, like Germany for example, had stuck to the rules then the present crisis could well have been avoided.

DM: Okay, we’ll leave the last word then in Greece where all the focus is today, Thanos Veremis, wouldn’t it be better then if the euro is to survive, and the consensus still seems to be that it is the only way forward, that Greece gets out in as orderly a fashion as possible? How can it possibly face both ways, reject the austerity and want to stay in the euro?

THANOS VEREMIS: Well it can’t possibly reject the austerity and remain in the euro. What will happen, I predict, is that it will embrace a kind of orderly austerity, an austerity that will have some say for people hardest hit by austerity and then continue, go on, salvage Greece’s position in the euro – and incidentally I think the euro as it is, I would agree with the people who spoke before, is not salvageable, it has to deepen its institutions. In other words, a euro without a federal reserve won’t do so my hope is that this crisis will help Greece find its way into a better relationship with the euro and hopefully the European Union into a better relationship with itself and with the eurozone. In other words, by deepening its institutions, by creating the equivalent of a federal reserve bank which it does not possess and it is a strange set of affairs, a common currency without a common fiscal policy. So there you are, I think what we need is a common fiscal policy, in other words more of Europe rather than less, as the Brits would have it.

DM: Indeed. Okay, Professor Veremis, we must leave it there, thank you very much indeed Professor Veremis in Athens. Our thanks too to Sir Menzies Campbell, Lord Lawson and in Munich, Hans-Werner Sinn.