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UK warned to brace for savage spending cuts -

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LEIGH SALES, PRESENTER: Our Europe correspondent joins me now from London.

Phil, Germany, Spain, Ireland, Italy, Greece - are these just the first cabs off the rank? What's

PHILIP WILLIAMS, EUROPE CORRESPONDENT: Well, it's hard to predict exactly which country will move
next, but certainly I think by the end of this year you'll probably see virtually every country in
Europe having established some sort of austerity program.

They vary enormously, of course, from the extremes of Britain, from the extremes of political and
street trouble in Greece, but they do have one aim and that's to get their debt levels down.

That whole debt era is over, at least that's what people want to happen, and there's some pretty
severe cuts along the way for almost all countries. And we haven't seen the end of it yet and we
can just look to Britain for example.

They're slashing and burning has yet to begin really. We've had ?6 billion cut out of the budget -
six billion pounds already. That's a drop. There could be 10 times that amount just coming in the
next year alone. So some really serious cuts to come.

LEIGH SALES: David Cameron's been trying to, I guess, prepare the ground for those absolutely
enormous cuts you mentioned there.

What's been the public reaction and what's the public mood so far, particularly given that he's
very new in office?

PHILIP WILLIAMS: Well there's a lot of goodwill, there's the political sorta honeymoon still there,
so people are willing to listen to him and they do understand that there is a serious problem here
in Britain.

But, you know, the reality of the cuts actually biting them and hurting them having their services
cut back or losing their job will be another thing. So politically, it's quite a risky move, but of
course they are in the very early phase of the political cycle here.

If it goes to five years they got plenty of time for the economy to have picked up again so they
may not yet feel that politically themselves. But they say this is the pain they have to go through
because, as David Cameron says, if we continue - if Britain continues the way it is at the moment,
then in five years time it will owe $2.5 trillion and the interest alone on that would be over a
billion pounds every week. So it's just not sustainable.

The country's ministries, important ministries like education don't even spend that much in a year
and they say something just has to give and all in the country will have to share that pain.

LEIGH SALES: The austerity measures are partly about reassuring the markets. What's been their
response to this?

PHILIP WILLIAMS: Well, the markets have been gradually shifting downwards as confidence in the
whole euro area evaporates worldwide, and of course the sense that, "Is this Europe going to lead
the rest of the world into a double debt recession?"

That's the fear, really, and that is the big question, too. Can you have these austerity measures,
can you slash and burn to the extent that's being done without dropping these countries and the
euro zone and Europe as a whole back into recession? And some economists think they can get away
with it, some think they can't.

LEIGH SALES: Philip Williams in London, thanks for that.