17/06/2011 Newsnight

to 70% would render the ECB close to 70% would render the ECB close

to 70% would render the ECB close that Greek default would impose

direct losses on loans made by direct losses on loans made by

French, German and Belgian banks to Greece. The third is that it would

trigger losses contracts from US banks which have

bet heavily that Greece wouldn't default. Of those three,

think the last is likely to the next couple of months. Today

Prime Minister Papandreou reshuffled his Cabinet. Out went the western

oriented oriented technocrat who negotiated

the austerity package and in came Mr Venitsalos. The advantage isn't

obvious. The old guy was western oriented but had little roots in

business Mafias that run Greece so he was pulling levers which just

aren't working. The next man party bruiser so things may change.

TRANSLATION: I told the defence ministry that today I leave from

defence to go to the real war and come here in the name of the Greek

people because they are the managers of the crisis. They are the

ones called to make sacrifices. Only with people, only with society, only

with the productive forces climate of consensus and mutual

understanding can we carry out this great historic challenge. In Berlin

meanwhile a climbdown. Chancellor Merkel suddenly persuaded not to

insist on making investors bear the cost of the second bail-out.

The crunch comes on Sunday with a confidence vote. If he wins,

Papandreou will most likely try to re-negotiate the austerity package

with the EU. If he doesn't, the opposition may yet again come into

frame with calls for a national unity coalition. TRANSLATION: We

have before us a difficult negotiation. These next days are

critical because the handling of our country's crisis in the European

Union had some not so correct calculations. The crisis has now

spread and the right solution for our country will be the

But the problem remains. Any serious But the problem remains. Any serious

austerity package stands the chance of plunging this economy so

into recession that it out. The people here want a default.

Luke, the world famous riot dog, be resting now but he and the

protesters are prepared for more. On the streets and in the Parliament,

everybody knows this is just the lull.

In the last hour Paul has managed to In the last hour Paul has managed to

escape from baggage reclaim at Heathrow and hot footed it to the

studio. The Greeks want to re-negotiate this austerity package.

What do they want? The principle of the renegotiation will be social

justice, so this is delivering to the social base in Greece. They are

working on changes they want to the thing they have already signed up

with the European Union, will be trying to soften some of the

blows that what we call the horizontal cuts, so cuts in welfare,

cuts in wages. The other thing he said is that the fiscal story

have to be delayed. Now, slightly speaking in riddles, but I

read it as that they will ask for some forbearance. They

going for such a big cut in the of the Greek state, which

to be cut from about 55% to about 40-something% in about three years

of GDP. How worried do you think those leaders are, particularly

Sarkozy and Merkel? If they've got their intelligence services as well

as their global and national on the job, their first worry is not

going to be contagion taking down the banking system. That's going to

be their second worry. Their first worry is going to be, and

should be given what I've seen this week, a breakdown of European

solidarity because the Greek people are beginning to think of this in

Nationalist terms. An anarchist to me: I never went on demos with

the Greek flag. Now I'm cool with it. We are all together. And you've

got this re-thinking of the crisis as Greece versus the rest of Europe.

Then, yes, it's the banking crisis. If we do get the Greek banks taken

down, as you saw there 45% of the debt is held by Greek institutions,

they default on half of it, the end of the Greek economy. That

speeds over and spills over to rest of Europe. That's going to be

their worry but the first one political. Thanks. I'm joined now

by the equities investor Julian Pendock, Gideon Rachman

Financial Times and Katinka of the Centre for European Reform.

Is this Lehman Brothers 2? it could well be because no one

foresaw the carnage when Lehman Brothers went down. People

understand the interconnectivity. We do know that France and Germany have

the most direct exposure to periphery nations. Secondly, what we

don't know because the banking stress tests have not forced the

banks to reveal how much is in their banking books is exposed to the

peripheries, the degree of interconnectivity. So the problem

with Lehman's is once they went down banks decided that, if we don't know

how to value our balance sheets, we are going to stop doing business

with other banks and then you have a Europe-wide banking crisis. So for

those who say Greece is such a part of the eurozone, it doesn't

matter, I think they are missing much bigger picture. Do British

people get this? Because we can't quite stand idly by and watch

this happen, can we? No, I don't think they do. There is a

potentially dangerous problem for the British government in that the

Brits tend to pat themselves on the back: we were clever,

the euro, it's not really our mess. You can see that in the

of the British to get involved in the bail-outs to a full extent but

if there is a Europe-wide crisis we get sucked in

these are our major trading partners. We heard Paul talking

about that as people seeing it in Nationalist terms. Some people in

Germany are seeing it that way. heard Germans saying: why should I

pay my taxes for people who don't work hard and pay their taxes? They

might be wrong or right but how some see it? My sense is that

the mood in Germany is now more nuanced than a year ago. A year ago

the mood was: the Greeks had a party, they trashed their house, let

them clean it up. They were going to tide them over but there was

understanding of how deep trouble in Greece was. That has now

shifted. How much austerity can you impose on an economy that is already

shrinking so much and can we actually afford a scenario in which

the euro itself is under threat? So the debate is a bit more nuanced.

It's absolutely right, the political solidarity is not necessarily there

to use taxpayers' money ad infinitum to transfer it to poorer nations in

the south of Europe but there is also a sense that the euro is at

stake and the Germans are still very much prepared to do what it takes

save this. But if people get how important Greece is to the rest

Europe it's also true perhaps that they have less faith in their own

European elites? The Greek government has its problems, the

German government has its problems, Sarkozy has his problems and to talk

about European solidarity moment doesn't play well

everybody, does it? No, not at all. 50% of people in Germany weren't

allowed to vote on joining the euro and so once again you see the

periphery governments, just changing, shifting deck chairs on

the Titanic and the problem that Europe faces as a whole is that the

whole system was designed not to arrive in this position because it's

almost impossible to get out of, so from here you have two choices:

you have a move towards currency area which means a federal

superstate like the US, where California can bail out Michigan,

for example; or do you have a break-up and have some members of

the eurozone, southern bloc, leaving the euro? Do you agree with that,

that Europe is absolutely at a crossroads, where an Eurosceptic or

a real europhile there has to be big change as a result of this?

Yes, I think that's the debate that's beginning to emerge. If you

speak to the real europhiles a lot will say the only way out of this is

through political union, like setting up a European Ministry of

Finance, much bigger financial transfers of the sort that were just

referred to, sort of moving towards an US model where you have a

federal system. The trouble is there's no evidence that's

politically acceptable to the electorates of Europe. There was

sort of gamble among some of the federalists that there would almost

be an automaticity, but that hasn't happened because people

willing to buy it. Do you with that? I do, in a way this is

calling Europe's bluff. It was when good times were rolling to talk

about an ever closer union and the European Union was always

to go forward. Now we are in a crisis situation, we find out

the political fabric we needed for this is just not there, so I think

what's going to happen first is, rather than a federal superstate

emerging, those countries that come up with the cash will set very tough

rules for those countries the moment are in trouble. Now, this

is somewhat ironic because, when Europe was set up part of the

rationale of it was to reduce the dominance of the Bundestag, that it

had over European economies, and give other countries in Europe at

least a share of the decision-making - and we are now going back to a

situation where other core countries together with the Netherlands

the other countries exactly do. I will bring in

well just to hear what you think. Does anybody say in Greece: it would

be a great mercy if we had the drachma back, we could devalue,

tourists would flood back and we would be out of this. They

still be poor. One old guy said to me on the streets I would rather be

poor than take any more money from the European Union. That's the way

they think about it. I think it's likely. Because the problem is, we

are talking here about the known, aren't we? We are talking about what

we expect to happen. But this is a social breakdown going on in Greece

and, if he doesn't get the confidence or if he does and they

form a national government, it's one step closer to the kind of Bolivian

leftist President who was preceded by a unity government of technocrats

and I think the opponents of the whole system who are quite large,

are thinking: bring it on. Bring a national government. What do you

think of that? Let's take a step back. Number one, you don't help

someone who is bankrupt by them with more debt,

interest you take, and number two, I do believe that unity is fragmenting

across Europe. Isn't it set to fail? That great thing we said a few

years ago about certain banks: it can't fail, it has to be bailed out

because the consequences of doing so are so awful? Yes, but

think the phrase that will be entering the lexicon, and we have

seen unrest on the streets of Greece, is austerity fatigue because

inside what's known as internal devaluation because traditional IMF

medicine is you do devalue as have just discussed, if you can't do

that then your wages have to go down, asset prices like your house

prices go down, you get stuck; there's less mobility of labour

people get worse and worse off. Then you get social instability. That's a

description of a vicious circle, isn't it, because that doesn't get

you out of it but deeper into it? No, and there is a re-thinking

on at the moment. I cannot quite foresee a scenario yet in which

Greece or any other country leaves the eurozone. Greece is not actually

a very open economy. It's quite closed, so even a big devaluation

wouldn't do an awful lot for the country to restore growth. What it

needs is fundamental reform and they have started, and Greece is a small

economy. It might actually around relatively quickly. It is

totally right that it is a matter of how much is politically feasible in

Europe, but there will be another package to tide Greece over. At

point in time they will have to write down the debt. At that

in time probably there won't be much of that debt left in the

banking sector; it will all be in public hands so it will be the

taxpayers in the rest of Europe who have to swallow some of these

losses, but these are not enormous sums. As long as we can contain it -

Well, not yet. As long as Spain and Italy don't come into the equation -

yes. Gideon? It seems to me the key point is the one that Paul was

making: how politically sustainable is this? Greece is an extreme

example of a country that saw its salvation as Europe. Europe

associated with rising prosperity, with democracy, and that whole

narrative has turned around and now they feel almost like they are being

colonised by Brussels, by and people react badly to that.

Paul, you would chime with that, sort of things

on the streets? Yes, I think it's impossible until you have been

to get your head around the scale of the social crisis. It's not

Portugal, it's not Ireland, it's not Spain, it's not Egypt. Cairo was

calmer. The streets of Greece are full of single male migrants and

single male poor Greeks and I think, if people think it's the demos or

the 2 or 3,000 anarchists in balaclavas who have caused this,

well, they have put the edge on but the politicians can't survive

forever driving to and from places in closed limos and behind shutters

when they are surrounded by social breakdown. That is what has caused

the rethink and I think that you are right, that is what is causing the

rethink in Brussels, Paris and Berlin. Thank you very

much. Now, the Conservative Philip Davies suggested in the

Commons today that disabled people might benefit from being allowed to

work for less than the minimum wage. He said that the minimum wage

prevents those people from being given the opportunity to get to the

first rung on the employment ladder. Campaigners for disabled people

variously said this was nonsense, preposterous, outrageous and would

take Britain back decades. Here is some of what he had to say. When I

went to visit Mind and I spoke people there that were using

service offered by that charity, they were absolutely upfront with me

and they said that when they went for a job and they came across

situation where there was people who had applied for that job,

they've got mental health problems; other people haven't. They said to

me: who would you take on? They were quite accepting of the fact that

was inevitable that the employer would take on the person who hadn't

got any mental health problems, given that they were both going to

have to be paid the same rate. Given that some of those people with

learning disability clearly by definition can't be as productive in

their work as somebody who hasn't got a disability of that nature,

then it was inevitable that given the employer was going to have

pay them both the same they were going to take on the person who was

going to be more productive, less a risk and that was doing those

people a huge disservice. I'm joined now by the Conservative MP Philip

Davies and by Liz Sayce of RADAR, the leading organisation helping

people with disabilities. Why should disabled people become cheap labour?

Well, I didn't solely feature disabled people in my speech. This

is something that the media have latched onto. I made the point - You

did say it though and Downing Street repudiated it. You said it

undermines fairness in the place. No, no, I said that

who was having difficulty in accessing the jobs market should

able, if they chose to - they shouldn't have to, shouldn't be

expected to - but if they chose to, were trying to build up some work

experience and weren't getting the opportunity, they should be able to

if they chose to, to work below the minimum wage. Are you actually

saying that disabled people were better off when there was no

wage? I was pointing out that was said to me by people at

Mind, the service users at Mind said that they encountered this

problem - Are you saying that people with disabilities were better off

before the minimum wage? No, I before the minimum wage? No, I made

the point in my speech - You they were better off - if you

let me answer, lots of people have benefited from the minimum wage.

Lots of people, with or without disabilities, but we

heads in the sand and pretend there isn't an issue, there's lots of

people out there who haven't got job who are finding it very

difficult to get a job and for those people, some of the

former prisoners, people disabilities, people who leave

school with no qualifications, actually the status quo is doing

them a great disservice. Why did many disability groups and people

with disabilities find this really offensive? Well, I think it was

insulting to kind of assume that just because you are

you are going to be less productive, have less to contribute. We need to

think about assets that people bring and also about the support that

people need in order to be productive. So if, for example,

are blind and you don't have right software on your computer,

then of course you are not going to be productive because you can't work

on a par with everybody else. Aren't you describing a

we would like, which is people having much more equality of

opportunity, no matter what their background or disability may be, but

that's not the world we live in? world we live in is very

competitive, tough to get a job and people with disabilities,

unfortunately, tend to be at the of the queue? I think for the last

couple of decades we have been fighting hard for equality. We have

anti-discrimination law and employment rates

have been going up and we now know - I've just done an independent Review

for government, we know what works and it's not dropping the minimum

wage. What it is is support that is flexible for individuals and

employer knowing that there's somebody to turn to for advice if

they need it and there's all sorts of types of support that mean that

people with learning disabilities who Philip mentioned can have the

instruction they need to do a job. They have status with their families

and communities as never before. is she wrong? No, not at all. So

therefore everything is fine? No, what I am saying is it may be

unpalatable but we have lots of people with or without disabilities

who want a job and can't find one. The preposterous situation where

it's fine for somebody to go and work for nothing, but if they said I

want to work for �5 an hour to prove myself for a short period of time,

that's - Why do you think Downing Street ran away from your comments

like a scolded dog? They are fundamentally wrong but they

think that plays to the chord that people want to call them the nasty

party. I'm actually highlighting real issue for lots of vulnerable

people in the country and we can pretend there isn't a problem, it's

an unpalatable truth but what I'm saying is with employers being

reluctant to take on people, true. That bit is true and

Davies says some people with disabilities have said they would

take a job at less than minimum wage. Absolutely. Some people

obviously work in voluntary work for nothing. I don't dispute

people may have said that but just done a rue speaking to hundreds

of people and that is not disabled people are saying. They are

saying we want fair chances to get jobs. It's not rocket science. We

can do this and I think otherwise we are just entrenching

inequality. We are saying disabled people can work for less than

minimum wage. It sounds like exploitation to me. But aren't

having your head in the sand about this because it's a very competitive

job market and employers will discriminate, whether we think it's

legal or good, they do do that? Well, I think what we need is the

opportunity for disabled people to get into apprenticeships, to get

internships, work experience, and that is a growing area. There are

number of employers number of employers doing very good

work in this area and there's also a law to challenge employers that are

not doing their bit. I think things are gradually moving in the right

direction but I have just been doing a review that made recommendations

to double the number of people would provide the support that

this possible. You don't want a minimum wage for anybody?

would prefer it if there was a private agreement between employers

and employees. But it seems preposterous to me that we want

disabled people to be in internships where they are paid nothing but it's

totally offensive to suggest they might take a job at �5 an hour.

Surely it's more offensive that get jobs for nothing than taking

jobs just below the minimum wage for a short period of time to prove

themselves to an employer who might be reluctant. We will leave it

there, thank you. In Canada there was a riot recently after

hockey match as the police in full Robocop deer piled in to clear

protesters, a photographer took a picture of a young couple appearing

to be kissing in the middle the mayhem. It became an internet

sensation. We try to work out what was really going on and what makes

an iconic photograph. A kiss is a lovely kiss.

They are not just kissing, they are They are not just kissing, they are

making out, aren't they? Second or third base.

# I have been looking for so long at # I have been looking for so long at

# I have been looking for so long at these pictures of you #

these pictures of you # these pictures of you #

Incredibly these are Canadians and Incredibly these are Canadians and

# I have been they are rioting over an ice hockey

game. In the midst of the skirmishes between fans and riot police in

Vancouver a photographer took a picture of a young couple apparently

embracing on the street. They been identified as Scott Jones and

his girlfriend, Alex Thomas. I it's special for lots of reasons

really. The policeman in the foreground out of focus is really

strong and very well placed in the frame. The kiss is a lovely kiss,

you know. There's moments that it looks boring, ugly,

clumsy, but this is just the delicate moment that he is caught

and as I say the colour, I don't know if it's street lighting

smoke in the background, just gives it that vibrancy.

But was it a kiss at all? Another But was it a kiss at all? Another

picture of the scene suggests rather different interpretation. I

think it was Cartier Bresson who said you can reconfigure the world

totally if you are a photographer just by moving a few paces to the

left and of course another picture of the same scene taken from

makes it clear that actually this isn't a kiss, that some sort of

accident has taken place. I one of the things about all of these

pictures is that what you tend to get is a huge narrative, compressed

into it. Then it's up - then you can read the picture, you can expand the

moment depicted and build a around it.

In the past couple of hours In the past couple of hours

Newsnight has caught up with an eyewitness, a reporter who was

covering the ice hockey riot. I think it was a kiss. He was trying

to just make sure she felt comforted. I am sure she was hurt a

little, so in the middle of that chaos, and you got to remember flash

bank bangs were going off so that is pretty disorienting, so I think he

was just being a good lover and helping her up.

There's something about love across There's something about love across

the barricades, says the man who took this picture during the poll

tax riots. I think it's the conjunction of the flames of London

burning, the police, the feeling of tension that you still get and their

complete lostness in each other, the woman and

woman and - her name is Lawrence and the guy is Nidge I found out later

and they were just out of and out of everywhere, they

just in each other. She is pregnant in that picture by the way and now

But ever since this famous French But ever since this famous French

kiss in postwar Paris was have been a little stage-managed by

the photographer, Robert Doisneau, some of us are sceptical about such

striking images of intimacy. I reckon the worldwide disappointment

about the Robert Doisneau kiss was enormous. With this one, I think,

OK, if it turns out that it was kind of set-up, it would be

disappointing but the thing is things are speeded up so much now

that it achieved its - you know, it achieved its instant iconnicity and

then the disillusion. Will be equally quick, I think. Well,

sign of that as we go to press, or do I mean bed? As far as we know,

That was our snogging correspondent, That was our snogging correspondent,

Stephen Smith. Now here is Suzy Klein with a word of what's

Thanks a lot, tonight we have Thanks a lot, tonight we have

highlights of the Edinburgh Film highlights of the Edinburgh Film

Festival and the Sheffield Festival and the Sheffield

Festival and the Sheffield Documentary Festival, everything

Documentary Festival, everything Documentary Festival, everything

Thanks a lot, from domesticated chimps to killer

plagues. For all the hot tips, join me in a moment.

A quick look at tomorrow's front pages. The Independent has: Greek

debt, Europe at a crossroads. The Times has a picture of Rory McIlroy,

66 makes history at the halfway the US Open. Let's hope he

do what he did before. The FT: Berlin concedes on the Greek rescue.

The Guardian also has McIlroy. he hold on this time? Biggest strike

for 100 years says union chief over pensions. It won't be like miners

because we will win, says the Unison leader.

For now we leave you with a reminder For now we leave you with a reminder