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DERMOT MURNAGHAN: We’re going to take a look through the business papers and chat more on the economy with the outgoing Chairman of Goldman Sachs Asset Management, Jim O’Neill. A very good morning to you.

JIM O’NEILL: Good morning.

DM: I seem to talking to everyone here about new jobs, well we know you’re going for one. How long have got to go ?

JO’N: Two days actually. After Tuesday I’m gone.

DM: What are the plans then?

JO’N: I’m praying the weather is going to stay like this, get a bit of sunshine, chill out for a while.

DM: A bit of gardening leave? I mean you must want to stay involved in the world of business at least?

JO’N: Economics and finance is in my bones, I’ve been at it for 32 years and I can’t imagine a life without following it but quite what I’m going to do next I don't know. I made a conscious decision that when I was going to step down to not commit myself to anything. I’m having a rather large number of things thrown my way but I want to sit back and relax and think about it.

DM: Okay well sit back and look back, how do you view the last five, six years in the British economy? It has been quite an extraordinary period because people say double dip, triple dip, whatever it is, we went down and we’ve bumped along the bottom ever since.

JO’N: Do you know, I am in the process of writing another small book actually and I was jotting down some notes on the way back from the States about the UK and one part of me, I’m a bit baffled actually. If you look at evidence in various parts of the world, some places have done quite a bit better, the US just reported two and a half percent annualised growth in the latest quarter, Germany which I’m sure we’ll come on to in a second is doing okay and of course many emerging economies are doing well and the UK is a very open economy, it had a big drop in the pound which should have helped us trade wise so sometimes I really find myself subscribing to the school that thinks that the strength of the economy is under reported and it is nice in that sense to see the latest numbers come through stronger. I would not at all be surprised that after a couple of years in the future that we find out that the past two years have not been quite as weak as it seems, however …

DM: However?

JO’N: That would only be modest and I think the combination of fiscal restraint and of course this consistent push of trying to force banks to raise more capital, both of which in the big picture make sense in their own sense but doing them both at the same time is quite a burden for the economy to take.

DM: Well let’s pick up on one of those stories which of course throws more light on that within the Times, on page four, austerity critics ignore the true horror of our debt. Talk to us about this story, Jim.

JO’N: Well I don’t really go with David’s line on it, this is the Sunday Times, this is trying to defend something that’s brewing in the background the past fortnight, there are a couple of famous academics, Rogoff and Reinhart who wrote this big paper two years ago saying above the magical level of 90% debt, economies suddenly fall off the cliff and some figures around the world and some suggest also here that they’ve latched on to this to explain why they’re doing what they’re doing. We just had a few weeks ago a new paper published which has found holes in the Rogoff and Reinhart piece and the timing of it is very coincidental with all these growing protests, particularly in Italy, about the austerity drive in Europe so there is a growing mood in the markets, partly why European equities rallied so much last week, that enough of this and I have some sympathy with that.

DM: So within that, how much do you feel then that the austerity drive within the UK has affected that growth picture?

JO’N: As I said a minute ago, I think in a time where the banking sector is being forced to re-lever, it can’t have the freedom to lend even if it wanted to in the way that it did. Usually you’d expect compensation for that either from either government spending or something going on through the exchange rate for trade and so having austerity at the same time as that is an additional burden. I think I’m on record when the coalition first came in, I wouldn’t have gone down quite the same path.

DM: But is there more room for manoeuvre?

JO’N: Well I’ve noticed, coming back from travelling yesterday, I noticed the use of the word flexible appears to be being applied a bit by some of the Chancellor’s friends which I think is the right thing to do and I think to have a somewhat more flexible approach makes sense.

DM: And flexible through the Bank of England. I mean much seems to be made about the arrival of Mark Carney, doesn’t it?

JO’N: I ran into Mark a few weeks back and I said you should go and have lunch with Fergie because trying to manage expectations as high as the ones that Mark’s got, I only know one human being in this country that’s capable of doing that and it’s Alex.

DM: Sir Alex Ferguson, very good point! Okay Jim, another story for us, this is in the Telegraph and related to, you mentioned football there, Germany’s wunderkinds shaped Europe and quite extraordinary the performance by the German teams against the Spanish giants.

JO’N: In some ways Germany is at the heart of the two big stories for me of the week because they equate debt with reform and austerity and I think there’s a push against them but on this one, the success of the two German teams is really quite incredible and I think I’m right, there has never been an all-German European Cup Final and it looks like we’re looking at one and within it, the Dortmund model in particular is something that intrigues me because they are managing to compete with the European giants with a sort of all-inclusive structure of a club and is it more indicative of Germany economically? If you look at how well Germany has been doing relative to the rest of Europe in this changing world and now we see it in their football teams. We’re all used to the Spanish and the Italians being the example to look at but suddenly it’s the Germans and in my latter days I’m thinking the way of the future is what I’ve called more and more about adaptive capitalism and it’s true for all walks of life, whether it’s Formula 1 or certainly football, as it is for economic affairs and it looks to me that the Germans are coping with it really well.

DM: That’s fascinating, we could go on for ages but I’m afraid we must end it there. Jim O’Neill thank you very much indeed and best of luck with whatever you do in the future.

JO’N: Thank you.