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DERMOT MURNAGHAN: Joining me to go through today’s business sections in the Sunday papers is the former Chancellor and Conservative peer, Lord Lamont, a very good morning to you Lord Lamont, thanks for doing this for us and I suppose the big story of the week and for several months and years, the issue of the Greek bail out and a story you’ve picked out for us in the Telegraph saying that the rescue threatens the eurozone itself. Now a rescue, why would that be?

LORD LAMONT: Well the argument is by an Ernst and Young item report that the bail-out will be accompanied by a proper fiscal union and there will be intense interference in the affairs of other countries because of the surveillance that will from now on be necessary to ensure that people keep to the rules of the eurozone. Actually I don't think that will happen, I think what you’re going to get is simply very much what we’ve had in the past, a souped up version of the growth and stability pact where people just look at the borrowing, look at the total spending. I don't think we’re going to see a fiscal union in the sense of having one system of corporation tax and a European Ministry of Finance, I don't think it will happen but it was just interesting that they …

DERMOT MURNAGHAN: But budgetary rules as well, which the Greeks for so long so flagrantly disregarded and were swept under the carpet for so long by the big eurozone countries because they thought, oh it didn’t really matter but without some tighter form of fiscal union and oversight of those rules, even the existing rules, surely this deal will come unstitched?

LORD LAMONT: Yes, I think the deal is going to come unstitched anyway, all I’m saying is I don't think you will get a full fiscal union in the sense that that phrase is normally meant with a common Treasury, a common tax system. I think Germany uses phrases like that because it wants to disguise what is really going on which is Germany laying down the law of how things should be conducted in Greece which is provoking immense reaction.

DERMOT MURNAGHAN: That’s the thing isn’t it, it’s the political dimension in all the discussions. I mean you were involved in them in government weren’t you, about people talking about closer and closer fiscal union – you can’t have one without political progress in that direction as well.

LORD LAMONT: Yes, but I think people often lose sight of the fact that the great founding fathers of the European Union, as they are called, the great founding fathers, Jean Bonnet, people like that, they used this phase ‘ever closer union’. What they meant was an ever closer union of the people of Europe, they didn’t mean building this huge bureaucratic superstructure, they meant the coming together of people naturally in Europe through trade, through travel, through holidaying, those are all the things that have brought Europe closer together rather than the bureaucratic institutions that we have managed to create.

DERMOT MURNAGHAN: Let’s look at our own economic problems now, you have picked out an interesting take here from Geoffrey Dicks in the Sunday Times – forget the gloom, the numbers say be happy. Well we haven’t heard that for a long time!

LORD LAMONT: No, well I did just notice this by Geoffrey Dicks who is a well-known economist who probably appears on your programmes but he just was pointing out that when you look at the global economy there are some encouraging signs. Firstly what is happening in the United States, the United States does seem to have an accelerating recovery. Secondly, despite the very disappointing last quarter figures in Europe, all the surveys of manufacturing in France, Germany and even here, do actually indicate quite a bit of optimism. We have also seen the stock market in European markets climbing high on the expectation that there will be a resolution to the Greek problem and it is as if you are getting what you might call a relief rally, as though people are saying hurrah, the world hasn’t ended.

DERMOT MURNAGHAN: But it could just be remission couldn’t it? In particular you mentioned the United States and we all know about its electoral cycle and the need for the President to get unemployment down, the amount of money it is printing in its quantitative easing programme. Do you not think the chickens could come home to roost next year and the year beyond? The worries about the size of America’s debt have not gone away.

LORD LAMONT: Well I think there are long term issues with the American deficit, that’s right. When you say printing money, we’ve printed more money proportionately than the United States has. I think that the recovery will actually be two steps forward, one step back or one step forward one step back, I think it will be hesitant for quite a while but I think the Geoffrey Dicks article nonetheless is actually quite a welcome respite or counter balance to excessive gloom.

DERMOT MURNAGHAN: And can I just ask you about one story, much discussed in other areas, it’s not on the business pages today but I know you’ve got an interest in it, we’ve been discussing Iran and its nuclear ambitions and the work being done to try and discourage them in a non-military sense. Talking obviously about the role of sanctions, the EU, Britain amongst them, you’ve got a feeling though that sanctions aren’t really that effective and actually have an economic effect with the country that’s imposing them.

LORD LAMONT: I don’t believe that sanctions are going to solve this problem and I of course accept that there is a problem, the proliferation issues, if Iran gets a nuclear weapon that is something I don’t want to see but I don’t believe that sanctions are going to work. We have had 30 years of sanctions and I think you have got to remember that Iran is a country that had the longest war of the 20^th century in which a quarter of a million people died, where they were invaded. They have their own defence and strategic security concerns and I don’t think that by just piling the pressure on this way it is going to work. What I am particularly worried about is that the sanctions are affecting ordinary people, they affect the opposition. There are reports of deliveries of grain falling by 40% in Iran and food prices rocketing up, I don’t think this will help to solve the problem. What I think they need is yes, discussion on the nuclear issues but I think they also need wider discussions about Iran’s place in the region and its own security.

DERMOT MURNAGHAN: Okay, Lord Lamont, thank you very much indeed. Lord Lamont there taking us through the business pages and other areas as well.