Cameron's economic hopes

Mexico is what the future looks like and Britain needs to be linked to it.

So said David Cameron on a trip to the capital city.

This country is already in the world's top 20 economies and and it's moving up fast.

How the prime minister must envy that when Britain has an economy that's seems stuck going nowhere. When I spoke to him today I asked him whether he shared Vince Cable's view that this was a 1930s style slump but volunteered that the government had got to do more to get the economy moving.

The government's been talking ever since the Chancellor's Autumn Statement about using Britain's low long-term interest rates not to borrow more and spend more but to underwrite private investment in building more homes and infrastructure. He is promising to unveil another scheme soon.

David Cameron is also sounding just a little more optimistic about the eurozone sorting itself out. British sources have been talking up the scheme - which I wrote about yesterday - to bail out Spain and Italy but the Germans and others have refused to confirm.

The prime minister is beginning to face up to the possibility that the economic crisis may not have got worse this week but may not get better soon either. His hopes seem to rest on a eurozone deal - as yet not agreed and unannounced - and a building programme at home - heralded weeks ago but as yet not delivered.

PS: I asked him why he was happy to be filmed in the rain and grey skies of Mexico City but not at the beachside G20 summit. He listed all the work he'd done and the meetings he'd had and pointed out that he'd not had time for a swim before looking at me and saying, with a smile, unlike some of those interviewing me. So let me confess I did get the chance for a dip in Mexican waters. In truth, the PM had a bit of time when all his meetings ended but was advised it was a picture he should avoid at all costs.

Here is the full transcript of the interview:

Q: Prime Minister, you look at this extraordinary sky-line, is there a bit of you that thinks this is the future and Europe is looking increasingly like the past?

PM: This is the future in that this is one of the countries, one of the fast-growing countries of the world, we've got to link Britain to and that's why I'm here with a big trade delegation, growing Britain's exports, increasing the amount we sell and invest around the world because we've got to get our economy moving and linking up with countries like this is absolutely key.

Q: The Business Secretary talked about us being in a slump like the 1930s. Do you fear that he's right?

PM: I wouldn't put it like that, but we're obviously facing in Europe a difficult set of circumstances that is harming our growth and our prospects and it's going to take time to fix. There was some good news at the G20, but frankly Britain needs to roll up its sleeves and do everything we can to get our economy moving. That's why we're doing everything we can to pass on the low interest rates that the government can borrow at. I want those interest rates to be available to the home owners. I want them to be available to the small businesses, but we are making progress. We cut our deficit by a quarter since we came to office, but we've got a lot more to do.

Q: Are you in effect saying that the British government is contemplating building their way out of this crisis, because up until now investment spending has been cut, house building is at a low, businesses can't get loans, infrastructure is not being built?

PM: Let's be clear about what we can't do and what we can do. What we can't do is go on some spending and borrowing spree. You can't borrow your way out of debt, but what we can do is because of our credibility we've got record low interest rates. What we can do is make sure we pass those low interest rates on to businesses, on to home owners, make sure that we go ahead with the infrastructure that will help our economy and get houses built in Britain again - all of the things we can do - would make a big difference.

Q: The Chancellor talked about that last autumn and yet people look around, businesses say we still haven't got the loan, our children still can't afford to buy a house, houses are still not being built. Are you saying that inside government you're the one saying what on earth's going on, why don't you get on with it?

PM: First of all, let's look at the news today. We've got unemployment falling for a third month in a row. In the private sector, there are businesses that are growing, expanding and employing people and there's good news. Do we need to do more to help our economy move? Yes, we do., And let's be clear about what we can't do - borrow our way out of debt, that was Labour's way, it won't work. What we can do is use the financial strength we have to help businesses to help home owners to help infrastructure get built and that's what we're doing.

Q: It's not a slump you say, but is your message to people watching at home - I just can't promise to people that nothing will get better for some time?

PM: I think everyone at home knows we're living in very tough times. They switch on their television screens, they see the situation in Greece, problems in Spain, problems across our continent. They know things are tough. What I would say to people is - this government will do everything it can to keep Britain safe from these storms, to make our banks safe, deal with our deficit - down by a quarter since the last election and a really active sleeves rolled up government to get out to the fastest growing parts of the world and trade with them. Let's do everything we can at home to get our economy moving.

Q: Are you confident after your talks that the EU will now bail out not just Greece but the big economies like Spain and Italy, who need to be bailed out if this eurozone crisis is to end?

PM: I'm confident that they know how serious the situation is and they know that if they don't use all the instruments, all the institutions of the eurozone to stand behind their currency, they will face real problems. It's sometimes frustrating that they have to get so close to the brink before they take the steps that are necessary, What I say to them is if you've got a single currency we've got one in the UK, if you've got a single currency you've got to stand behind it. You've got to have a bank that absolutely supports it and you've got to recognise that it means supporting different bits of the eurozone, if you're a eurozone member when they're having a difficult time.

Q: In crude terms, it means the German taxpayer has to pick up the bill for the mess in Greece and Spain and Italy doesn't it?

PM: This is where I understand Angela Merkel's difficulty and her political difficulties because the Germans have run their economy very effectively over many years. But it's their currency - they need their currency to work, so they need to have guarantees from other parts of the eurozone that they're putting their house in order, but there has to be solidarity as well.

Q: If this new Europe is built that you're urging, you're in a curious position aren't you? All your life you've said you're against the euro and federalism. Now you say I want the euro stronger and I want more federalism. Isn't that odd and if it happens, are you going to consider giving the British people a vote, a referendum on it?

PM: On the referendum, we have in law a lock, so we cannot pass powers from Westminster to Brussels without asking the British people first in a referendum and that is right. But I'm relaxed about what is happening in Europe for this reason - that I've always believed you're going to have different parts of Europe doing different things in different ways. We're a leading member of NATO and probably the most important European member of NATO but we're not in the single currency. We like the single market. We're traders, we're investors. We want to trade with Europe. We don't want to share their currency. I've always believed you can have different parts of Europe acting in different ways. That's what's happening and that can be good for Britain.

Q: And people may get a vote on that future?

PM: The referendum guarantee is there. If there are powers passed from Britain to Europe, from Westminster to Brussels, there will be a referendum. I don't want to see powers passed from Britain to Brussels. I want to see Britain's place in the European Union, our membership of the single market, properly safeguarded. Our membership of this organisation is just as valid as anyone else's. I often say to my European colleagues - don't forget Britain is a big net contributor to the European Union. It is ours as well as yours. It's got to work for us as well as work for you.

Q: You're happy to be filmed in front of this Mexican sky-line? You seemed to be a tad reluctant to be filmed on the beach?

PM: Well, I wasn't on the beach. I was in a convention centre, working hard not only having G20 meetings, but also having separate meetings with the Russians about Syria, with the Indians about defence, with the Cambodians about the future of Burma. That's what I've been doing. I suspect that some of the people who've been interviewing me have perhaps had a different time.