This is a rush transcript from "Hannity," October 5, 2011. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST OF "HANNITY": He has been warning us for years about where we could be in just a decade if America follows in Europe's socialistic footsteps.


DANIEL HANNAN, MEMBER OF EUROPEAN PARLIAMENT: Bankrupt. And with your credit gone. I mean, where we are now, in fact.

I’ve been 11 years in the European Parliament, so I have seen it firsthand, the kind of model towards which your current administration is taking you. European healthcare, European daycare, European Social Security, European welfare, European unemployment rate.

HANNITY: Everything.

HANNAN: And believe me you’re not going to like it. The bits of Europe which are most obviously failing, the welfare system, the high spending, that's what you’re copying.


HANNITY: Now, decades of irresponsible fiscal policy has left the European economy in shambles with a number of nearly bankrupt governments, unemployed at almost 10 percent and painfully slow growth. So, is America next or is there still time for us to learn from Europe's mistakes? Joining me now with reaction is member of the European Parliament, author of the book, "The New Road to Serfdom: A Letter of Warning to America." A great book now available in paperback. And the one and only Daniel Hannan is with us. Sir, welcome back.

HANNAN: Hi, it’s lovely to be back.

HANNITY: You know I'm looking to what's happening to Greece, to Spain, to Portugal, to Ireland, to the continent of Europe, to Great Britain, to France, how bad is it from your perspective? You’re there.

HANNAN: This is the tempest long foretold, slow to make head, but sure to hold. I mean, you know when I wrote that book which you very kindly plugged and I was saying the catastrophe is coming to Europe. Well, you look at the news, just the last 24 hours, you know, Italy’s had its rating downgraded again. There's a big bank here in Belgium called Dexia which has been effectively found to be insolvent. The Greek budget deficit figures are even worse than had been predicted. The calamity really is now upon us just in time for the paperback edition. But there is still time for you guys I think to turn back.

HANNITY: When you say, calamity is upon us, now, look, if all these countries, you know, follow in the path of Greece, they can't even adopt the austerity measures that are simple and basic at this point. Are you saying, you know, what is the worst-case scenario you see in Europe? What's going to happen?

HANNAN: Well, there are lots of ways in theory that you could get out of this mess by spending less and bringing your borrowing under control. In practice, the state in Europe has now reached a size that makes that kind of behavior politically impossible. And so we have a debt crisis in Europe and the response has been more debt, pushing more loans on to countries that couldn't meet their existing obligations. The problem was excessive economic integration, jamming all these desperate countries into the same monetary policy. Their solution is even more of it. They want fiscal union, common taxes, and all the rest of it.

In order to fund this, they are now borrowing the almost unimaginable some of two trillion Euros. Well, you know who's got two trillion Euros going around? You know, if somebody had over the last couple of years, given the state of the world, wouldn't you think they would have found a use for it by now? So, of course, what they're really doing is that borrowing that sum from our children. We've reached the point now where the money has run out and this is where you can't carry on forever evading the consequences of the reality.

HANNITY: It’s funny, when Barack Obama, our president, was running for president; he said it was un-patriotic, un-American of George Bush to accumulate $4 trillion of debt in eight years. Well, he met that distinction in two and a half years. And on top of it, he is implementing a nationalized healthcare system. So, how long is it do you predict, based on your model, how long until what is happening in Europe will come to America? How long will it take?

HANNAN: Well, it depends what you do about it in subsequent elections. I mean the thing you could most do to help, when I was last in Washington, D.C. I think I appeared on your program, and the German chancellor was in town, and Barack Obama said, we’re going to help you with giving our own share of the loan through the IMF and so on. You know what? The way you could really help would be to get your own debt under control and to start living within your means. The world relies more than anybody likes to admit on the competitiveness and prosperity of the U.S. economy. If you really wanted to help, you know, sort out that problem at home. Bring down borrowing, bring down spending, bring down debt levels and all of us will reap the benefits.

HANNITY: It's one of those, what we call choice elections. I mean, there are two very distinct, very different visions for the country. I don't know, I assume you are following some of what is happening in the American political scene, but I would imagine that if the economy remains in the current condition, in spite of the promises by the president to overcome these problems, that he will be a one-term president, and I think we’ll have austerity measures, I think we’ll see these things happen. But I wonder to -- even at this point with America 14-plus trillion dollars in debt, I figured that problem is enormous in and of itself. I don't know how we get out of that.

HANNAN: Right. And it's not going to be something that you can fix with tinkering around the edges, cutting one or two programs here and there. There has got to be a fundamental rethink aimed at bringing the budget back into balance within a couple of years, not within the next 40 years or whatever the Republicans in Congress are talking about. We don't have that length of time to play with, I'm afraid. The magnitude of our situation is worse than most of us alive have known before. Yes, it's even worse in some parts of the world like Western Europe. But you know, that's not really going to help you very much.

HANNITY: But you know the interesting thing to me is you are open- minded, and I'm not rubbing -- I'm not doing this to embarrass you, but you supported Barack Obama. You thought this was a good thing. What did you think you missed when you were watching him campaign and giving his speeches? What was missed?

HANNAN: Well, you know, I mean, part of that, to be honest with that I was incredibly underwhelmed by the Republican Party by the end of 2008. They had become a party of big spending, big deficits, bailouts, nationalization, so I thought, you know, how much worse can it get? Well, I had no idea how much worse it could get. Nobody had any idea at the 2008 election that the federal government would now be 30 percent bigger than it was four years ago. I mean, if I remember correctly, as a candidate, Barack Obama has campaigned on the promise of tax cuts. Well to put it as neutrally as possible, that's not how it’s worked out.

HANNITY: He said he cut the debt in half; unemployment wouldn't go above eight percent. Generally speaking, all the people you meet in Europe, is their perception of Barack Obama favorable or not so favorable?

HANNAN: I think they’ve actually got other things to worry about at the moment. He has kind of loomed out of their immediate consciousness. They’re much more concerned in Greece or Portugal or Spain or Italy with keeping their jobs and preventing generational ethical poverty and immigration.

If they're in Germany or the Netherlands or Austria or Finland, they are much more concerned about having these permanent tax rises and wealth transfer to bailout governments that have been profitable than their own.

HANNITY: It's always great to see you. Daniel Hannan, "New Road to Serfdom." A great book, a warning to America. Thank you for being with us.

HANNAN: Thank you, Sean.

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