29/06/2012 Newsnight

Tonight, after almost four years and 19 summits, is this the deal

that might just save the euro. The decision for no-strings bail out

money for Italy and Spain, represents what some see as a

retreat by German Chancellor, Angela Merkel. Even a change in the

EU centre of gravity, to the south. Catastrophy averted, markets surge,

but how does Europe return to growth? We will explore whether it

really is that big a deal, with the boss of a giant investment fund.

We also know the public's view of bankers, greed year, corrupt and

living the champagne lifestyle, but how do they see themselves and us,

their investors. The former rogue trader, Nick Leeson, is here.

The woman who prosecuted Norway's mass killer, Anders Breivik, tells

us why she shook the hand of the man who murdered 77 Norwegians.

Good evening, this could be the European Union's big moment, at

last. Angela Merkel appears to have backed down under enormous pressure

from Italy, Spain and France, producing a deal that offers euro

zone countries in trouble, access to money, but with fewer strings

attached. The markets like the deal, but they always do for a while. Can

Angela Merkel sell it at home, persuading sceptical German tax-

payers, that saving the euro is worth even more of their money. We

will begin with our diplomatic editor, Mark Urban, in Brussels.

In this diplomatic daps, those who have the money and those -- dance,

those who have the money and those who want it have circled one

another for months. During the early hours of the morning, the

Spanish and the Italians threatened to stop the whole show, if Germany

didn't loosen up a bit, and do things it had long said it wouldn't.

For months we have seen a chicken and egg argument at these summits.

Should Europe's poorer-performing economies receive the bail outs

they urgently need, or should the systemic problems be dealt with and

tough discipline imposed on those nations.

Overnight there has been a very important development, which is

that Germany has softened its opposition to using joint European

money to help the banks in those countries, and, indeed, those

countries' Governments themselves. Has Germany crossed a rub conin

terms of using these funds to alleviate the sovereign debt?

has made a step. They have not crossed their red line of debt

mutualisation, of eurobonds and so on, but they have made the existing

instruments more flexible. German Chancellor insisted using EU

bail out funds, the EFSF and ESM, to help striken members, didn't

involve a change of policy, because it could all be done within

existing rules and structures. TRANSLATION: What we have agreed

today is that Germany will submit the request under the EFSF, thus

that status will be transferred to the ESM. Those who would perhaps

now take a decision to assist Spanish banks, will be in a some

what preferred position, and others would have felt perhaps worse off.

We want -- didn't want to create that kind of disadvantage for them.

I exerted pressure and so far we want people to maintain and stick

to the procedures agreed. But the questioning German press detected

humbug from a Chancellor that has repeatedly tried to avoi giving

southern European countries a blank check, but has now underwritten

their banking systems, effectively. If you want the euro you have to

share a bit. Angela Merkel has no other possibility, she either makes

some compromises or says goodbye to the euro, Germany is not in the

situation at the moment to say goodbye to the euro. The key

ingredients was Spain's banks would get help, recapitalisation from

Europe's funds, Ireland could follow too, and the same EU funds

could be used to buy Government bonds, for instance in Italy, and

other countries to help them deal with their sovereign debt. Exactly

how this will be done has not yet been worked out. There will also be

increased supervision within eurozone banks, and protection of

deposits. But does the strengthening of the

eurozone inevitably mean a growing gulf with EU countries outside it.

Last year we have seen a lot of discussions on how to secure the

need for 27 decision makers, especially to protect the internal

market. We have preserved this time that we start with the meeting of

the European Council, all 27, but that they sometimes continue as 17.

Now this time late in the night. So, yes, there is a discussion, which I

think is very important, but as of now I think we can handle it.

is your own instinct, will we be back in another urgent discussion

in a month or two, or has there been sufficient impetuous given now

by this summit, to safeguard those countries? I think actually we have

made sufficient decisions that actually are heading in the right

direction and that could ease some of the market reactions, but at the

end of the day, I'm very sure that the reforms done by the nation

states, that will need to follow. This is what we have seen in

countries like Sweden and Finland, when we were hit by financial

crises in the early 1990s, this has been seen in Latvia and Ireland,

and I'm pretty sure it is also true for the most troubled countries out

there. Of course David Cameron is watching the moves towards fiscal

union with a bady eye, trying to find a -- beady eye, trying to find

the balance of staying in a single market with all it involves, with

protections that might trigger a referendum. There is an issue with

being engaged with being frustrated by the way it works. I'm not only a

practical euro-sceptic, I'm an optimist about getting this

relationship right. So the performers have left the

stage again, with Chancellor Merkel going back to convince her

parliament that she's not caved in to southern Europe. As always, the

acid test will come in the markets. And that wider economic reality

that exists beyond the looking glass of EU summits.

Our Economics Editor, Paul Mason, has been gauging the reaction to

today's agreements. The markets clearly liked it, but does that

mean this is a really decisive moment? The euro sup, the European

stock markets rup, the cost of borrowing for Spain and Italy are

down a bit. They do like it. It has stopped disaster. If they haven't

done what they did last night, all the things listed there, we would

have been looking at a banking crisis across Europe, a bond market

crisis on top of what is still there, which is a shrinking economy.

We would have been looking at capital flight increasing, where as

what we are looking at now is it may slow down. It certainly hasn't

stablised. I think the crucial thing it sounds technical and geeky,

but it is very important, is that the whole issue of seniority has

been solved. That is, the Germans and the Finns were saying if we

lend you the money, southern Europe, we will allow those loans to become

more senior than the private sector loans to your bank, and we will get

our money back first. That is what one trader said building a firewall

out of Semtex, they have pulled out of it, it is a constant German

demand, but they have pulled back from it. Stablisation rather than

solution is where we are. Given what you have said, politically

what has changed? Merkel did blink, her own newspapers realised it,

they called it day of defeat. The Italian newspapers following on

from the defeat of the Germans in football the night before, were so

scatterlogical in their description of what happened to Mrs Merkel it

can't be translated into English on TV. Yes, she was defeated. Above

all, because the insistence on austerity, as the precondition for

aid, and the existence, the insistence of strategic change, the

fiscal union, et cetera, as the precondition, is gone. It is gone

out of the German demand. The reason is very simple, Francois

Hollande. Where some of those journalists where Mark was, telling

me two months ago, when I was there, Merkel will tame Hollande, just

wait a month or two instead, Hollande has effectively turned the

table on Mrs Merkel and there is a new order in Europe, ending the

period, I think, that began when Merkel and Sarkozy decided to use

the crisis to do something bigger stragically with Europe, it is too

fragile to do that with. They are in crisis management mode, and they

have managed it for now. A few minutes ago I spoke to Mohamed El

Erian, the world's largest bond investor, with �2 trillion of funds

under his direction. Do you have any more confidence that the

eurozone is a good place for you to invest some of the billions that

you look after? It is getting better, but it is not yet as a

stage where we would invest in the peripheral economies. Let me

explain why. There is no doubt that the European leaders are taking

more substantive steps. They have got the sequencing right, they seem

to understand the enormity of the problem. That is all encouraging,

however, they still haven't gotten to what we Saul the Sputnik moment,

recognising that you -- we call the Sputnik moment, recognising you

need a breakthrough, recognising you need to catch up with the

crisis and get ahead of it. Until that happens, I'm afraid we will

have yet another crisis management summit a few weeks down the road,

it is not yet safe to invest in the peripheral economies. But, in terms

of the core of this, which is Germany and Angela Merkel, she's

obviously got political problems and presumably, that's the

difficulty in getting to the Sputnik moment, can she persuade

her people to put their hands in their pockets? National democracies

are not mapping well to the regional requirements. You see this

in Germany, you also see it in Greece, you see it in Spain. The

second issue, is a lack of self- assurance, mutual assurances,

people don't trust that the other side will do the right thing, and

therefore, they are playing the game of chicken, rather than

collaborating. But if the track is broadly right,

as you accept, and they are talking about banking union, fiscal union,

and more supervision, I wonder where you think that leaves Britain

in and the City of London, as attractive to investors as before?

It will for a while. I don't think Europe, the eurozone can get to

fiscal union, banking union, political integration quickly. This

is not a problem that will be solved. Secondly, the natural

forces complicate things. Capital is leaving the periphery, capital

is leaving Europe as a whole. So Britain is going to look good for a

while, relative to its European counterparts. The big question is

down the road, Gavin, if the Europeans get their act together,

and if they can truly produce a stronger eurozone, then the

implications for Britain will flip immediately. Just a final thought

if I can ask you briefly, do you think the worst may be over, the

track is right, there is more political will than when we last

had a conversation a month or so ago? I hope so, but I don't think

so. I don't think so, first because there is still some difficult steps

to take. Second, the neighbourhood for Europe is getting worse, the US

is slowing down, China is slowing down, Brazil is slowing down. And

finally, what you said earlier, leaders have not as yet sold these

solutions to their people. So, I hope it's better, but I would not

plan on T Thank you very much for talking to

Chancellor Merkel has a big sales job to do at home, Marcus

Brigstocke is a German MP in the same party -- Ralph Brinkhaus is a

German MP in the same party as Angela Merkel. The papers call this

a painful defeat for Merkel, it was, wasn't it? I do not like the

expression "defeat", we had a defeat yesterday in Poland on the

football filed, but not in Brussels. I guess it -- field, but not in

Brussels. It was the result of negotiations and in very hard

circumstances. I guess we had a good outcome of the negotiations,

but we almost have to keep in find...I'm Sorry to interrupt, good

outcome, you didn't get what you wanted, and Francois Hollande seems

to have changed the entire game in Europe, because you were obviously

so determined to be very close to France and you have done what the

French, Italians and Spanish wanted? We do not see a game which

has changed totally, we have put more flexibility into some tools,

and we have put away some mistakes of the old system, and that's all.

To come back to the previous remarks, it is very stupid to call

it a defeat, we almost have to keep in mind that we have to convince

the people on the streets in Germany. I'm an MP, I have to talk

to my people in my constituency, they do like Europe, but they do

not like to pay for Europe, especially they do not like to pay

for Europe when, for example, France is telling us, OK, we are

putting the retirement age at 60, where as we talk to our people

telling them we have a retirement age of 67. This is a problem. We

have always to keep in mind the communication. Many people in

Britain will understand exactly what you are saying, which is why

when you talk to people on the German streets, do they not say

this is a bit of blackmail, they know we want to be good Europeans,

they know about the German past, they know how important this is to

us, and yet, the Spanish, the Italians and others, the weaker

members, are effectively telling you what to do, that is blackmail?

It could be, if we are not successful in communicating to the

people that this is one part of the game. The other part of the game

has structural reforms, we still want to have the structural reforms

because of the liquidity, this money, it is a short-term solution

we have. For a long-term solution we really need structural reforms,

and so nobody questions a structural reform in Brussels. We

are talking about speed, we are talking about tools and flexibility,

and about a lot of other things, but at the end of the day, we want

to have the structural reforms and this is the most important point.

Thank you very much for joining us. This could be watershed moment for

Britain's banks, the revelations about fiddling at Barclays and new

allegations of mis-selling, come on top of computer gliches at RBS and

subsidiaries, not to mention the disastrous business mistake that is

brought us into the financial crisis in the first place. Today

the Prime Minister said he's considering new legislation, that

traders who fiddle The Libertines rate have insensed the public and

politicians. -- the LIBOR rate have insensed the public and politicians.

And it is an industry with profound problems. I hope everyone now

understands that something went very wrong with the UK banking

industry and we need to put it right. That goes to both the

question of culture in the banking industry, and to the structure of

the banking industry. From excessive levels of compensation,

to shoddy treatment of customers, to a deceitful manipulation of one

of the most important interest rates. And now, this morning, to

news of yet another mis-selling scandal, we can see that we need a

real change in the culture of the industry.

Nick Leeson is well known as someone who served time as a rogue

trader when we worked with Barings in 1995 and Gervais Williams runs

the investment fund, MEN. Just an assessment of this moment in

banking, does it feel like a watershed moment? It is a very

important moment, LIBOR is at the centre of the banking system, to

have distortions openly, in an international context, where LIBOR

is depended upon internationally not just UK banks is very central.

What do you think of it as from the view of the traders, how they are

seeing things? A lot is made of moral outrage. Do they act in a

moral way or are they trying to get the next trade? Is it always about

greed? It is all about competitive edge, regulation is important in

that regard. It needs to be efficient and robust, when there

are breaches of regulation it needs to be stamped down upon and

punishment needs to be meaningful. What happens in my case, if you

push those boundaries all the time, and the regulations prove to be

inefficient, or the regulators prove to be incompetent, then you

know, you end up with utter contempt and disdain for the

regulators. One thing that also comes through in a number of these

occasions is contempt for the customers, do you think some people

think the customers are mugs? think, it is impossible to tar

everybody with the same brush. You are going to get an element of that

in any industry, and that's going to exist in banking as well. But

the e-mails that have passed around, for me, exhibit the amount of

contempt there is for the regulator. The regulator is inefficient,

bordering on incompetent. Do you see a problem with the entire

culture of the trading floors, people just push the boundaries,

try to get away with it and do, quite often? There is a big

cultural issue, asset prices have been rising on off and on from the

1980, it is a cultural expectation, where the tail is wagging the dog.

Do you think the rest of us, who don't know what is going on, don't

care very much while everything is prospering, and the statement about

when the tide goes out you see who is wearing no clothes, and that is

what has happened? It is what has happened, but it is more meaningful.

It is a point where customers, not just in the UK, but international,

they will sit up and their attitudes will change, this will be

with us for many years for reputational damage. To the UK?

the City for financial issues. is very bad for business? It is

very bad for business. We are talking about trust, people are

trusting their capital to investors in the City. Not everyone is bad,

but if there is a culture whereby markets are distorted, then you

just don't know, as a customer, whether you are getting a fair

price or not. Do you agree with that? Whenever there is a scandal

there is so much rhetoric, you can see it this week, this happened a

few years ago, the traders are no longer here, everybody is OK.

bad apple, nobody believes that, do they? The public, for a number of

years have, they have accepted the rhetoric they have received. It is

this rogue trader, it is not systemic, it is not everything

going on, we have dealt with it. This can be a defining moment. As

long as punishment is handed down. There is a proper investigation

into everything that happened too. What do you mean that punishment is

handed down, do you want new laws, as the Prime Minister seems to

suggest, are there existing laws that might work, can you clawback

some of the money from the people who have made money? If something

criminal has been done they have to be punished. There has to be a

proper investigation into everything that happened around

Barclays arbgts way the markets were manipulated f people look deep

enough they will find things that are wrong. The regulators need to

improve. The quantity of regulation is not important. It is the quality.

This came from America, didn't it? Where it was spotted first? That is

half the problem were were the English people, where were the

English regulators. It will have a much more long lasting effect, it

is not just about regulation, regulation will close the door

after all of this, and there will be an effect in the long-term. It

is the customers changing and the scale of the customers changing

their attitude that really changes things, as it comes through that

will change things with a view to culture going through. Can you

understand it with customers, we are all customers with bank

accounts what can we do? We feel outraged, affronted, taken for a

ride, and yet what can we do about it? The fact that there will be

such a big change in terms of attitude also give the politicians

opportunities to make a much more significant changes, they have been

worried about damaging the City up until now, but they will be

empowered now to make more significant changes, which will

have a much greater effect. Do you, for instance, new legislation, new

powers of scrutiny, what kind of things. Again, in the period that

you have been talking about, light- touch regulation was a buzzword for

a long time, discredited now, perhaps? What we will go for is

simply more simplification, it is complexity, with interrelationships

that is clouding the ability of people to make good decisions in

terms of regulation and leadership. Tying it in with the other story,

you have heard Ralph Brinkhaus saying short-term things will be OK

for the City of London, but in the long-term if Europe gets its act

together things will change. And looking at the banks and saying

they are smelly? Something needs to be done, the regulators need to be

improved. That will come through the Government and making sure

everything is better. If you are on trading floor, earning a healthy

living or knowing how it works, you won't want to work for the

regulator for half the money? have to pay the regulators more,

and attract better individuals. Any school that is finishing up, in any

school across the country, the best people go towards medicine, towards

the trading floors, and there is something left in the mid-thal goes

towards the regulators that he can -- middle bit that go towards the

regulators. You need people who better perform and are better

skilled, who see how the markets are manipulated, and challenge what

is going on. It doesn't matter what degree of understanding you have,

if you don't challenge what is going on it will continue.

It was the deadliest attack in Norway since World War II, almost

one year ago, on the 22nd July, 2011, Anders Breivik detonated a

bomb in Oslo's Government quarter killing eight people. The murders

continued on an island a few hours later, where he shot dead 69,

mostly teenage members of the governing Labour Party, on a summer

camp. The trial will offer awe stage to the world, Anders Breivik

wrote in his manifesto posted on the Internet before the attacks.

When that trial began in April, the responsibility for prosecuting the

crimes fell to Inga Berjer Engh. Her' action to Breivik's Nazi

salute, was to shake hands with him. Breivik used the trial, which ended

last week, as a platform for his far right political views, arguing

that his victims were legitimate targets in his war against Marxist

multiculturalism. She also heard the harrowing testimony of

survivors who escaped the gun of a man whose only regret is that he

didn't kill more. Inga Berjer Engh spent the trial

demolishing Breivik's far-fetched claims to be part of a network of

right-wing extremists, styling themselves, the Knights Templar.

The prosecution concluded that far from being a terrorist he was, in

fact, insane, and not responsible for his crimes at all, a suggestion

Breivik himself claimed was offensive. In August a panel of

judges will decide whether Norway's most notorious killer will serve

his sentence in a prison cell, or a psychiatric ward.

Earlier I caught up with the chief prosecutor in the Breivik trial,

Inga Berjer Engh. He was obviously guilty of killing people, but

equally obviously he wanted a platform for his views, he wanted a

stage to the world, as he put it. How concerned were you about that

aspect of the trial? Well, that's been a discussion in the media,

especially in Norway. That discussion, I would say is

meaningless n a way, but it is, I can't take that discussion too

seriously's accused of a crime, when he's use accused, he has

certain rights. One of the principal rights he has in court is

to speak and make a statement in court, and it is very important

that we hold on to our rules and principles, even though we are

facing a horrible crime like this. In court Breivik gave a Nazi salute,

and then you walked up and shook his hand, why did you do that?

did that once, the first day of court. We always do that in court.

Every trial I have, no matter what the accused has done, I go up to

them and I shake hands with them, and I think the rest of the people

that had a role in court also did that. All the other lawyers. I

think has important. You don't feel any qualms about that, this is a

man obviously with blood on his hands, who had given a Nazi salute

in a country occupied by the Nazis, where there are people alive today

who remember that occupation. Wasn't it quite offensive? It was

offensive when he did it. I think his lawyer told him not to do it,

and he stopped. But in order to shake his hand, I think it is, my

goal has been to treat him as any other criminal. I think that is

important. I think which managed to do -- we management to do it, and I

think most of the -- we managed to do it, and most people have respect

for that view. Some people disagreed with it. For me it was

important to treat him like all the other criminals that I bring to

court. Even though you argued in court that this man is insane?

hi to argue, I was not sure when we started the trial, we were not able

to conclude on that. But in order to have, in order to face a prison

sentence in Norway you have to be sane. If there is any reasonable

doubt about that condition, we are oblige today propose to the court

to make -- obliged to the court to make an order for mental healthcare

and not an ordinary prison sentence. If it was reasonable doubt, and it

was after we finished after ten weeks. We had two court-appointed

forensic scientists who had stated he was psychotic, and he was on the

2nd of July, and he still is. They stated he had massive deillusions.

How important is it for the families that he is regarded as

insane, and not, in some way, totally responsible for his

actions? My experience during the trial, for some families, it was

very important he was looked upon as sane, and sentenced to an

ordinary prison sentence. For other people they were not so concerned

about it. What is common for all of them, that they need to feel secure,

secure that he's going to be away, he's going to be locked up, if it's

in a hospital, or it is in prison, it doesn't really matter that much

for some people. They need to feel sure they are not going to meet him

in the street. Isn't that a sopt soft option if he ends up in a

mental hospital rather than a prison. You have bent over

backwards to be humane and decent and tolerant to a defendant, but

you also a duty to those who have suffered most grievously, who would

like to see this man punished, some would like to see him executed?

but when we face crimes that we cannot believe, like this crime, I

think my role as a prosecutor is to follow the law, and the principle

that is we have a long tradition of. That is why I do it and not the

ones that have been hurt, because there is a lot of feelings there.

Thank you for talking to us. The review show is up next, Kirsty,

what have you got? Get ready for strange doings with

fried chicken in William Friedkin's black commondy, Killer Joe, there

is darkness at the heart of the Edvard Munch exhibition at Tate

Modern. Ben Whishaw and Tom Hiddleston ride it out in the Dark

Crown, join us in just a minute. There is darkness at the heart of

quite a few of the newspapers, That's all from Newsnight, we lead

you with a tribute to the headline writers at the Sun newspaper and

their return to form this morning, this is how they advised Diamond it