14/09/2011 Newsnight


14/09/2011

In-depth investigation and analysis of the stories behind the day's headlines with Emily Maitlis.


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Transcript


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Tonight, rising unemployment and no growth to speak of, what happens to

:00:08.:00:13.

plan A when there's apparently no plan B. He must be only person in

:00:13.:00:17.

the world who thinks you spend more to get out of a debt crisis.

:00:17.:00:21.

So the message to all those people who have lost their jobs, is the

:00:22.:00:26.

Prime Minister is not going to change course.

:00:26.:00:30.

And as unions announce the date for millions to strike, we ask where

:00:31.:00:34.

Labour stand, we will be joined by the Shadow Chancellor, Ed Balls.

:00:34.:00:38.

Is Europe in denial over Greece and the debt crisis, America is urging

:00:38.:00:44.

action, but all France and Germany can say is Greece stays in the euro.

:00:44.:00:49.

If Greece can't be thrown out, what price the rules of the eurozone.

:00:49.:00:53.

The assassination of Libya's rebel commander has raised some troubling

:00:53.:00:56.

questions about the nature of the anti-Gaddafi forces.

:00:56.:01:00.

I will be asking who killed the Chief-of-Staff, and why is matters

:01:00.:01:10.
:01:10.:01:11.

so much to Libya's future The journalists, Johann Hari hands back

:01:11.:01:21.
:01:21.:01:23.

a prestigious writing prize, we ask his editor why he hasn't sacked him.

:01:23.:01:29.

There is famously no plan B for the Government. What happens when the

:01:29.:01:33.

unemployment rises to the highest in two years, and the worst hit are

:01:33.:01:37.

young people and women, and when growth is nowhere to be seen, and

:01:37.:01:43.

even our coalition parters, in the form of Nick Clegg himself, says

:01:43.:01:48.

Britain's economic outlooks a gotten worse. With the threats

:01:48.:01:53.

strikes, millions of public sector workers preparing forea day of co-

:01:53.:01:57.

ordinated action. How to difficulty up the goodies, how to keep

:01:57.:02:01.

everyone happy and make sure everyone gets a slice. Well, the

:02:01.:02:04.

easiest answer, of course, is get a bigger pie, and it is the same with

:02:04.:02:09.

the economy. All the main parties agree growth

:02:09.:02:13.

is the answer. Why? Growth puts more people in jobs, they pay more

:02:13.:02:17.

tax, they claim less in benefits, they earn more, they spend more,

:02:17.:02:23.

confidence goes up. The country has to borrow less, and as a proportion

:02:23.:02:28.

of GDP, magically, our debts shrink. But the news on the economy today

:02:28.:02:34.

was bad. Unemployment up 80,000 to 2.51 million. People will laugh

:02:34.:02:36.

when I write this down, I would say the most important thing is

:02:37.:02:41.

actually being able to listen. Except it seems, when being advised

:02:41.:02:44.

to change your economic strategy. The Prime Minister was

:02:44.:02:48.

brainstorming at a Jobcentre in London today. The Government had

:02:48.:02:53.

been counting on private sector job growth, more than compensating for

:02:53.:03:01.

public sector job losses. There was bad news on this today. What is

:03:01.:03:06.

particularly worrying about today's particularly worrying about today's

:03:06.:03:08.

unemployment figures s that some of the biggest increases in employment,

:03:08.:03:12.

and falls in employment have taken place in London and the south-east,

:03:12.:03:16.

the east, so the greater south-east around London. And of course, much

:03:16.:03:21.

of the country's most successful private sector is in that area. So,

:03:21.:03:25.

if there is a problem there, it will radiate out, potentially, in

:03:25.:03:30.

the medium to long-term. Not surprisingly Prime Minister's

:03:30.:03:34.

Questions in the Commons today was dominated by jobs and the economy.

:03:34.:03:39.

His claim, and the Chancellor's central claim, that you could cut

:03:39.:03:42.

the public sector and the private sector would make up the difference,

:03:42.:03:49.

isn't happening. For every two jobs, for every two jobs being cut in the

:03:49.:03:53.

public sector, less than one is being created in the private sector.

:03:53.:03:59.

Isn't that the clearest sign yet that his policy just isn't working.

:03:59.:04:02.

Let me say to the honourable gentleman, there is not one ounce

:04:02.:04:05.

of complacency in this Government about the need to do more, to help

:04:05.:04:10.

people back to work. We have a growth plan, that includes cuts in

:04:11.:04:15.

corporation tax, freezing the council tax, cuts in petrol duty.

:04:15.:04:18.

Introducing the regional growth fund, making sure we have

:04:18.:04:22.

Enterprise Zones in every part of the country. But in every week and

:04:22.:04:25.

every month we will be adding to that growth programme to help

:04:25.:04:29.

people get back to work. Growth isn't looking good at the moment.

:04:29.:04:34.

So far the official forecast has been downgraded for this year, from

:04:34.:04:40.

2.3% to 1.7%. And maybe, revised down even further. In the half year

:04:40.:04:45.

so far, the economy has only clocked up 0.7% of growth. Some

:04:45.:04:48.

suggest that means it is time for a plan B.

:04:49.:04:51.

Essentially there are only two approach that is the Government can

:04:51.:04:56.

take to try to stimulate growth. The cheaper, but far more long-term

:04:56.:05:00.

option, is supply-side reform. That means sorting things out like

:05:00.:05:06.

planning, bureaucracy and red tape and benefits, dependency.

:05:06.:05:10.

The other approach is called demand-side reform, far more

:05:10.:05:14.

expensive, but quicker to take effect. Splashing out lots of money

:05:14.:05:18.

on infrom structure projects, or cutting taxs to get people spending

:05:18.:05:22.

again. When people talk about plan B, that

:05:22.:05:30.

is what they are talking about. Stkphrl but, say the Government,

:05:30.:05:34.

plan B risks scuppering the whole economy. That argument is

:05:34.:05:38.

strengthened by the worrying scenes we are seeing coming from the Euro-

:05:38.:05:41.

area. It is clear what happens to countries that doesn't have a

:05:41.:05:47.

credible plan to deal with their he have sits. Securing economic growth

:05:47.:05:51.

looks set to be harder for the Government, after what happened at

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the TUC conference today A wave of public sector strikes, potentially

:05:55.:06:00.

three million workers balloting on day of action for November 30th.

:06:00.:06:06.

The issue, a change in public sector pensions. I and all of our

:06:06.:06:16.
:06:16.:06:18.

unions most certainly do not take this step likely. We remain

:06:18.:06:20.

committed to solving this through negotiations. For that to succeed

:06:20.:06:25.

we need the Government to take a new approach, to bring new

:06:25.:06:30.

proposals to the table. I think the union bosss are behaving in a

:06:30.:06:33.

deeply irresponsible way. Deeply irresponsible, because talks are

:06:33.:06:36.

still going on. Deeply irresponsible because at a time

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when the whole world, including wrin, face as real economic -

:06:42.:06:46.

Britain, faces a real economic challenge, this will only affect

:06:46.:06:49.

prosperity and jobs in this country. Are we heading for more of this,

:06:49.:06:53.

the potential strikes add another political dimension to an already

:06:53.:06:58.

difficult situation for the Government. For the opposition too,

:06:58.:07:03.

a dilemma, to support or condemn the big public sector union, who,

:07:03.:07:10.

after all, pay most of the Labour Party's bills. We ask for the

:07:10.:07:13.

Government - we asked for the Government to provide a minister to

:07:13.:07:20.

talk about this, they said no-one was available. We have the Shadow

:07:20.:07:25.

Chancellor, Ed Balls with us. Do you think you should call for the

:07:25.:07:28.

unions to call off the strikes? Nobody wants to return to the

:07:28.:07:35.

strikes and divisions of the 1980s, it takes two sides in sorting out

:07:36.:07:41.

this. When you see the relish in George Osborne's eyes, he wants to

:07:41.:07:48.

get out of the problems in the economy by concentrating on the

:07:48.:07:51.

strikes. Have you said to the unions call off this ballot, call

:07:51.:07:55.

off the strikes? The unions have been saying all along they want

:07:55.:08:00.

proper talks to get to a fair deal. The Government pre-empted all of

:08:00.:08:03.

that by a huge rise in pension contribution. You won't ask them to

:08:03.:08:08.

call off the strikes? It takes two sides to sort it out. As one side

:08:08.:08:13.

will you ask them to call off the strike?Ly Say to the unions to get

:08:13.:08:18.

round the table. They can only say that if the Government wants a deal.

:08:18.:08:21.

The Government won't want a deal, they want the confrontation.

:08:21.:08:25.

are happy for them to ballot members on this? Of course, it is

:08:25.:08:28.

their right to ballot members. Nobody wants a strike, if, in the

:08:28.:08:32.

end, there are men and women in their 50s, who feel, even though

:08:32.:08:36.

their pensions are low, that they will be told to pay more and work

:08:36.:08:39.

longer for less money, of course they are going to be upset, but the

:08:39.:08:42.

Government can sort this out. George Osborne and the unions can

:08:42.:08:47.

sort this out, if they want n fair way. The Government has got a big

:08:47.:08:50.

responsibility here. If we get to pint after a ballot where we have

:08:50.:08:53.

strikes, for millions of public sector workers at the end of

:08:53.:08:57.

November, will you be telling them how economically damaging this is.

:08:57.:09:02.

That this is a pivotal point for our economy now? We don't want

:09:02.:09:06.

strikes, they are a last resort, we want talks and a fair deal on

:09:06.:09:09.

pensions. What George Osborne wants to do is blame a flatlining economy,

:09:09.:09:12.

and rising unemployment on the trade unions. It is his decisions

:09:12.:09:17.

which are getting us into this mess, not the trade unions. Let's look at

:09:17.:09:21.

your plans for growth. You have been urging the Government to roll

:09:21.:09:27.

back the VAT back to 17.5. Why wouldn't you do the same with other

:09:27.:09:33.

taxes? I said a year ago that if you tried to get the deficit down

:09:33.:09:37.

this fast it would lead to flatlining economy, to potentially

:09:37.:09:41.

rising unemployment, back then the Government said what nonsense, they

:09:41.:09:46.

said if you cut faster in the public sector, it will lead to more

:09:46.:09:53.

private sector jobs. You are sticking to your guns, you want the

:09:53.:09:56.

lowered VAT rate. The evidence is I was right and they were wrong.

:09:56.:10:00.

won't you do the same with the 50%? It is up to the Government to come

:10:01.:10:04.

forward with proposals on how to get the economy moving. That is

:10:04.:10:08.

growth crisis. But you have been banging on about the 50p tax, why

:10:08.:10:12.

wouldn't you say if cutting VAT could work at one end, then cutting

:10:12.:10:18.

the 50p tax could also work at the other end? The reason why

:10:18.:10:22.

unemployment is rising and consumers aren't spending is lack

:10:22.:10:28.

of confidence and squeezed living standards. VAT is hit, �450 a

:10:28.:10:32.

family. The idea that the best and fairest way to get the economy

:10:32.:10:38.

moving, to get unemployment down s to only cut taxes for people

:10:38.:10:41.

earning over �150 though though it is families and our country

:10:41.:10:48.

suffering worrying about the jobs. Let's have some stim Louis to get

:10:48.:10:52.

the economy - stimulus to get this economy working.

:10:52.:11:02.
:11:02.:11:02.

Why not do it at both ends? January we had a rise in VAT had a

:11:03.:11:07.

has hit families, we have unemployment rising, and you are

:11:07.:11:10.

saying the priority should not be a temporary cut in VAT for families.

:11:11.:11:16.

I'm not talking about priority, I'm talking about the IFS, which you

:11:16.:11:20.

often quote, saying the 50p tax may raise nothing and it could cost

:11:20.:11:24.

millions. Why keep it, it could be economic lunacy? Let's twit see

:11:24.:11:30.

what George Osborne's study says. If he were to deliver on his

:11:30.:11:33.

convictions, he would ask the independent OBR to do this study. I

:11:33.:11:37.

think it is a nonsense to say the top rate of tax doesn't raise any

:11:37.:11:43.

money. If you want to act any money. The VAT cut will cost �1 million,

:11:43.:11:48.

you can't a- �13 billion, you can't afford that? If you want the

:11:48.:11:52.

economy moving, you cut the VAT a more balanced approach to the

:11:52.:11:55.

deficit, reinstate building schools for the future. Today we had a

:11:55.:11:58.

speech from Nick Clegg, which was an insult to the intelligence,

:11:58.:12:02.

after all the hype, what did he say? Absolutely nothing at all.

:12:02.:12:06.

There is no plan B from this Government, and the longer they put

:12:06.:12:11.

politics before substance, and just come along with these parrotive

:12:11.:12:15.

lines, the more people will lose jobs and the economy will suffer,

:12:15.:12:19.

and will not get the deficit down if unemployment is rising. Your

:12:19.:12:23.

leader, Ed Miliband, admitted yesterday, that some cuts the

:12:23.:12:25.

Government is introducing will be impossible to undone. What are

:12:25.:12:28.

those then? We came forward in Government with cuts to public

:12:28.:12:33.

spending and tax rise, the rise of National Insurance, the top rate of

:12:33.:12:39.

tax, in education I set a billion pounds worth of cuts and in

:12:39.:12:42.

policing. Of course there has to be tough decisions and get the deficit

:12:42.:12:45.

down, fundamentally the economy is not growing, and unemployment rises.

:12:45.:12:50.

If there is fewer people paying tax, more people on benefits, that means

:12:50.:12:53.

billions more in spending, the deficit is higher not lower. This

:12:53.:12:58.

is not working. What we have is a Government which wants to use

:12:58.:13:01.

political language but it flies in the face of economic reality. We

:13:01.:13:05.

see that in the evidence. Yet when you were in Government, and the

:13:05.:13:09.

economy was tanking, you blamed global forces, you blamed the

:13:09.:13:12.

global situation, and this Government is now fighting a

:13:12.:13:16.

globally bad legacy as well as what they would say is the mess they

:13:17.:13:20.

have inherited from you? It was a global financial recession. And is?

:13:20.:13:23.

And is, there is no doubt about that. The question you have to ask

:13:23.:13:28.

is why is it the case over the last year, Britain has grown more slowly

:13:28.:13:32.

than all these countries. Why did we go into the downturn before

:13:32.:13:37.

people in the last year. The reason is because we are cutting faster

:13:37.:13:40.

than any other major economy, and it is not working. I said this a

:13:40.:13:44.

year ago, and the Government said don't talk nonsense, they said,

:13:44.:13:47.

look the economy is strong, we are out of the danger zone,

:13:47.:13:50.

unemployment is falling, what has actually happened in the last 12

:13:50.:13:54.

months is they have got it so badly wrong. What is what has happened in

:13:54.:13:58.

the last month is Government ministers have started carrying

:13:58.:14:03.

around the autobiography of your former Chancellor, article tear

:14:03.:14:06.

Darling who admits there is no credible policy when you were in

:14:06.:14:09.

Government. He said there was a plan to half the deficit, George

:14:09.:14:13.

Osborne ripped it up and went faster. He said if you went faster

:14:13.:14:18.

on public cuts t would lead to private confidence. There was never

:14:18.:14:22.

any evidence or history or economic theory to stand up to that

:14:22.:14:25.

political rhetoric. He has been proved badly wrong. When the public

:14:25.:14:30.

is asked in Times poll if they can see Ed Miliband as the next leader,

:14:30.:14:34.

they say no, it doesn't matter what you come up with, they don't see

:14:34.:14:39.

it? We lost the election last year, we have a new lead, and we all have

:14:39.:14:45.

a lot of work to do. Did they get the wrong Ed? No. The more they see

:14:45.:14:49.

a Conservative Government making the wrong calls, unemployment

:14:50.:14:53.

rising, the economy flatlining, the deficit not coming down. The more

:14:53.:14:57.

they see their pensions being cut and school buildings not being

:14:57.:15:01.

built. They will ask is it fair what do we hear for the Government,

:15:01.:15:06.

cut the top rate of tax over �150,000, what planet are they

:15:06.:15:11.

living on. In the eurozone, curiously, little

:15:11.:15:15.

appetite for plan B either, dire predictions from the Polish finance

:15:15.:15:21.

minister, that the end of Europe could mean a war within a decade.

:15:21.:15:28.

The US secretary, Timothy Geithner, calls for action. But it seems

:15:28.:15:32.

there is a steadfast refusal to deal with the problem that is

:15:32.:15:37.

Greece? In the last 24 hours, we have had a big, flagged up

:15:37.:15:40.

teleconference between Merkel, Sarkozy and Papandreou, the Greek

:15:40.:15:49.

Prime Minister. It happened at 6.00. After an hour, a man came out in

:15:49.:15:55.

the parliament, likes one of those announcements you get in the sold

:15:55.:16:00.

Soviet Union. All it says is Greece stays in the euro, and should meet

:16:00.:16:06.

the conditions of the bailout. If you read the grammar, one is for

:16:06.:16:09.

definite and one is maybe. We are left asking what happened. The

:16:09.:16:15.

reason we have been waiting for this meeting is because 8 billion

:16:15.:16:19.

euros worth of bailout money hangs in the balance. There are IMF and

:16:19.:16:23.

EU inspectors in Athens looking at whether Greece is meeting in the

:16:23.:16:27.

commitments. The whole idea of the week is they had to meet the

:16:27.:16:32.

commitments or they wouldn't get the eight billion. When I read the

:16:32.:16:35.

short and pithy statement to mean is that Greece will stay in,

:16:35.:16:45.

whether or not it actually meets any of these conditions.

:16:45.:16:48.

Default is the word on everybody's lips. Some thought Greece could

:16:48.:16:53.

throw in the towel today. So the big guns came out with big warnings.

:16:53.:16:57.

If you think about the basic lessons of financial crisis, it

:16:57.:17:01.

take as certain number of things to solve them definitively. You have

:17:01.:17:06.

to have a clear, unequivocal, unified commitment to do whatever

:17:06.:17:11.

it takes to solve T tough use overwhelming force. And the Polish

:17:11.:17:21.
:17:21.:17:27.

Finance Minister got into the The problems centre on Greece,

:17:28.:17:32.

facing mass protests, unable to make austerity stick, its economy

:17:32.:17:42.

shrinking. Negotiators had just walked away from handing over eight

:17:42.:17:47.

billion euro's worth of lifeline - euros worth of lifeline money. At

:17:47.:17:51.

6.00 began the phone call that many believed to bring decisive action

:17:51.:17:56.

on Greek debt. An hour later, no decisions, no joint statement, but

:17:56.:18:00.

only words. France and Germany are convinced the future of Greece is

:18:00.:18:06.

within the eurozone, decode that. It is simply a commitment by Angela

:18:06.:18:11.

Merkel and Nicolas Sarkozy, that even though Greece will not meet

:18:12.:18:15.

its austerity targets that were agreed on in the national deals, we

:18:15.:18:20.

will still give them the money. If you look at the report that the IMF

:18:20.:18:24.

produced last week, it was clear that Greece falls way short of its

:18:24.:18:29.

targets. For example when it comes to raising taxes.

:18:29.:18:33.

Yet Merkel and Sarkozy, and other eurozone countries have to pay up

:18:33.:18:37.

this money to Greece in order for this country not to go bankrupt and

:18:37.:18:46.

possibly even leave the euro zone. The stress now is in the banks.

:18:46.:18:52.

Overnight two French banks were downgraided for their exposure to

:18:52.:18:58.

Greek sovereign derb downgraded for their exposure to Greek sovereign

:18:58.:19:03.

debt. There are others in trouble. The current expected losses on

:19:03.:19:06.

Greek bonds are somewhere in the region of 80% of the value of the

:19:07.:19:12.

bonds. Given that the French banking system holds at least 89

:19:12.:19:17.

billion worth of euros of exposure to Greece, we are looking for

:19:17.:19:20.

billions of losses on the French balance sheet. Parts of that will

:19:20.:19:25.

be sured, as a result of that there will be also - insured, as a result

:19:25.:19:29.

of that there will be calls for the insurance companies to underline

:19:29.:19:35.

those as well. The wave of problems, will, if you like, continue across

:19:35.:19:37.

the entire financial system of France itself.

:19:37.:19:42.

But it is the Greek and Cypriot banking system that stands in

:19:42.:19:46.

danger of collapse. These banks are on the frontline of exposure to

:19:46.:19:51.

Greek Government debt. Right now the markets are giving clearer

:19:51.:19:55.

signals than the politicians. Greece is counting the days before

:19:55.:19:59.

it defaults at this stage. It doesn't matter at this stage what

:19:59.:20:04.

the European Union leaders are saying, the markets have made the

:20:04.:20:07.

determination. Looking at the yields on bonds of Greek Government

:20:07.:20:13.

debt, you know it is in the triple digits currently, as a result you

:20:13.:20:19.

know it is an insolvent country. But, for tonight at least, the end

:20:19.:20:25.

game is on hold. Paul is still with us. There is

:20:25.:20:30.

talk of eurobonds from the European Commission today s that feasible?

:20:30.:20:35.

Let's explain what eurobonds are, it is like lumping all of Europe's

:20:35.:20:40.

debt into one IOU. When it is issued, it is like when a parent

:20:40.:20:46.

backs the mortgage of one of their inkol vant children. Germany stands

:20:47.:20:52.

behind - insolvent children. Germany stands behind them. Within

:20:52.:20:55.

an hour the German economics minister stood up and said it is

:20:55.:20:58.

unconstitutional in Germany, and illegal in Europe. That is the

:20:58.:21:03.

level of agreement we have on eurobonds. They don't serve Greece,

:21:03.:21:09.

these are long-term proposelias. terms of the actual - Proposals.

:21:09.:21:14.

In terms of the actual time scale, how will it pan out? What is in

:21:14.:21:18.

everybody's minds is research and scenarios of what will happen. I

:21:18.:21:22.

have been privvy to it from the consultancy and banking research

:21:22.:21:27.

flying around. Let me give you an example, the Europeans banks right

:21:27.:21:32.

now, their shares are priced as if there is a 50/50 chance of Portugal,

:21:32.:21:37.

Greece, Ireland, Spain and Italy leaving the euro zone. That means

:21:37.:21:41.

they are trading way below the book value of the bank itself. What does

:21:41.:21:46.

this mean? If you go along, I have it in front of me, I shan't reveal

:21:46.:21:50.

the detail, it is frightening, you could go along a list of banks and

:21:50.:21:56.

say, busted, busted, busted. That is folk cushion minds. What does it

:21:56.:21:59.

mean, every time Merkel, Sarkozy, anybody else, comes to negotiate

:21:59.:22:02.

with the Greeks as they did by phone tonight, as they will do on

:22:02.:22:07.

Friday. They look at them and say we will force you to do this or we

:22:07.:22:10.

will kick you out of the eurozone. Then they look at the remember

:22:10.:22:15.

search and say, not such a great idea. That is where we have been

:22:16.:22:20.

for beaks and will be here for weeks until - for weeks and will be

:22:20.:22:25.

here for weeks until something happens. Balls, their hands are

:22:25.:22:31.

tied, they can't have see know option? I'm not sure we have week,

:22:31.:22:36.

I think Europe is staring down the barrel of the gun here. It is

:22:36.:22:39.

potentially catastrophic, for Italy to have its debt in doubt in this

:22:39.:22:43.

way. For the European Central Bank to be unable to act and the German

:22:43.:22:46.

Government still refusing to support action, this is potentially

:22:46.:22:50.

totally catastrophic. In the end it is a political failure. In the

:22:50.:22:54.

eurozone, if the countries don't stand together, if the markets

:22:54.:22:57.

doubt this, as they now are, you could have complete disaster, not

:22:57.:23:07.
:23:07.:23:08.

just in it low. What should happen - what should happen now? They need

:23:08.:23:12.

to guarantee Italian debt, but they can't do that without all the

:23:12.:23:17.

countries backing it. If they don't, either the eurozone collapses or

:23:17.:23:20.

Germany has to leave. That is their fundamental choice F they can't

:23:21.:23:24.

face up to that, we have the American Treasury secretary flying

:23:24.:23:29.

in on Friday, to plead with the Europeans to sort it out. George

:23:29.:23:35.

Osborne should be backing him in 100%. Although it sounds technical,

:23:35.:23:38.

economically this could be bigger than anything we have seen in the

:23:38.:23:43.

last three years. We are staring down the barrel of a 1930s-style

:23:43.:23:49.

crisis and political leadership in Europe is not. There

:23:49.:23:57.

We will take this further with our guests.

:23:57.:24:02.

Lapavitsas Professor of economics in London. One of the men who is

:24:02.:24:08.

thought to have predicted the Liam man crash, Magnus.

:24:08.:24:17.

Do you think that political leaders are in absolute denial here? Yes. I

:24:17.:24:21.

can't believe they aren't having privately the type of discussions

:24:21.:24:25.

that many of us have about what should be done. They are doing a

:24:25.:24:29.

very good job of pretending their not addressing the key issues. That

:24:29.:24:34.

is the vicious circle that exists between the deteriorating credit of

:24:34.:24:38.

Governments and the deteriorating credit of banks. If you don't,

:24:38.:24:41.

sense you can't solve the Government problem overnight, you

:24:41.:24:45.

can solve the banking problem. They could bring it to a very quick stop,

:24:45.:24:54.

actually. By doing what? announce ago credible programme to

:24:54.:24:58.

retap kalise, not all banks, but the systemically important ones

:24:58.:25:03.

that hold huge amounts of debt in the peripheral Europe. A lot of

:25:03.:25:06.

people looking to Angela Merkel saying where is the leadership you

:25:06.:25:13.

need to be showing on this one? has never been a strong and quick

:25:13.:25:18.

leader. The expectations were a bit high. The political problem in

:25:18.:25:23.

Germany is that, the Germans are willing to stump up a large amount

:25:23.:25:25.

of money, but they want total control of it. They want to put a

:25:25.:25:30.

cap on it. With what they don't want is any unpreliminary ited

:25:30.:25:36.

commitment to bailing out their neighbours. - unlimited commitment

:25:36.:25:43.

to bailing out their neighbours. That is what we have gotten in to?.

:25:43.:25:48.

The second problem is recapitalising the banks. It is

:25:48.:25:51.

unpopular in Germany to bailout southern Europeans who got

:25:51.:25:59.

themselves in a mess because they spent too much. It is even less

:25:59.:26:03.

attractive to bail out the bankers again. That is the problem for

:26:03.:26:06.

Angela Merkel, her party criticising her, the coalition in

:26:06.:26:12.

tatters, and the media against any further money being made available.

:26:12.:26:17.

There is to chance that Greece is going to leave the euro, it is just

:26:17.:26:22.

the slow lingering propping up? think that it is important to

:26:22.:26:26.

understand that the programme applied to Greece a year half ago

:26:26.:26:30.

has failed totally. We have to start with that. It hasn't failed

:26:30.:26:33.

because of the weakness of Greece, but because of the nature of the

:26:33.:26:39.

programme itself. It was badly thought out and badly applied. What

:26:39.:26:44.

is caused in Greece is economic and social devastation, people need to

:26:44.:26:49.

be clear. Unemployment is at 20%. There are networks of Barter

:26:49.:26:53.

emerging in the poorer areas, the hospitals are collapsing. People

:26:53.:26:58.

are returning to the countryside to make ends moot, the country is

:26:58.:27:02.

regressing rapidly. The programme is untenable and won't survive.

:27:02.:27:07.

What is the solution? The solution is very clear, Greece will have to

:27:07.:27:10.

default. Greece cannot carry the incredible of bebt imposed on it at

:27:10.:27:14.

this stage. It will have to default, and in a democratic and sovereign

:27:14.:27:22.

way. Lift the burden of debt. Once it defaults and does that. It can

:27:22.:27:26.

exit the euro and set its economy on a proper path. Do you mean

:27:26.:27:31.

something that is controlled and agreed by the other Governments?

:27:31.:27:37.

Default is two types, led by the creditors, or the debtor. We have

:27:37.:27:41.

seen ways in which the fault has been led by the creditor, it hasn't

:27:41.:27:47.

worked. The must be led by the debtor, in this case, to have a

:27:47.:27:51.

significant amount of debt. Greece needs 70% writing off of debts.

:27:51.:27:56.

Could it be controlled if led by Greece? I would put it slightly

:27:56.:28:02.

differently. A default can be orderly or disorderly. If it is

:28:02.:28:05.

disorderly we will face a collapse of the financial system, great

:28:05.:28:08.

depression, terrible political outcomes. You don't want to think

:28:08.:28:16.

about them. It is an order default which, is I hope what the leaders

:28:16.:28:22.

are building towards t will be done in a very messy way, but the system

:28:22.:28:26.

can survive and we can move on after that. If Greece defaults,

:28:26.:28:30.

when it defaults. Do you think it is defaulting

:28:30.:28:34.

already? I don't think there is any question. Tough prop up the Greek

:28:34.:28:39.

banking system or it will collapse, as Paul's package haid clear

:28:39.:28:45.

earlier. You have to do the - made clearer earlier. You have to do the

:28:45.:28:50.

same for the rest of Europe. The thing that Angela Merkel hasn't led,

:28:50.:28:54.

in my point of view, is the choices are starker. It is not a question

:28:54.:28:59.

of bailing out foreigners and German banks, you have to do a bit

:28:59.:29:04.

of both, that is the pain of being a creditor country. Even still, you

:29:05.:29:10.

have a situation where this is wallpapering, nobody is pretending

:29:10.:29:15.

that Greece is getting better or becoming more able to deal with its

:29:15.:29:19.

problems or solving them? Again the Germans are not that worried about

:29:19.:29:23.

Greece, Greece is a small country. That is a euphamism. They can have

:29:23.:29:28.

their own problems? There is a consensus, even in Germany, that

:29:28.:29:32.

Greece can't repay its debt and it needs restructuring. They are

:29:32.:29:37.

trying to buy time to stablise the situation. And then have that

:29:37.:29:40.

orderly default. If you could contain it they would have let

:29:40.:29:43.

Greece default a long time ago. They are worried it will spread

:29:43.:29:47.

liblg a wild fire through the rest of the - like a wild fire through

:29:47.:29:51.

the rest of the eurozone. Now it comes to the point where they have

:29:51.:29:56.

to bail out a large economy like Italy. They haven't proven that

:29:56.:30:00.

they can tell even tiny Greece to do their hope work, to clean up

:30:00.:30:03.

their economy, to implement their reforms. They will make very large

:30:03.:30:09.

sums of money available indeed to Italy. They still can't tell the

:30:09.:30:15.

Italian Government to reform. Then you have the open ended fiscal unit,

:30:15.:30:21.

that scares people. The point Ed Balls raises is instead of worrying

:30:21.:30:26.

about everyone else, it is like Germany going and saying it is

:30:26.:30:29.

better off without the pigs? German Government is committed to

:30:29.:30:33.

Europe, not only as it is, but to further European integration, that

:30:33.:30:38.

is what the surveys have shown. They want to make sure they don't

:30:38.:30:42.

land themselves in a situation where suddenly trillions of euros

:30:42.:30:45.

have to be made available to countries, where you have no

:30:45.:30:48.

control over what happens to that money? That is not an option,

:30:48.:30:53.

really. If Germany leaves the euro, the project is dead and we have,

:30:53.:31:00.

you know, that terrible dark consequence unfolding. Why is that,

:31:00.:31:06.

the Polish Finance Minister was saying today, it sounds slightly

:31:06.:31:14.

apocalyptic, war within a decade in the euro is over? Gulp, possibly,

:31:14.:31:17.

because historically, when monetary unions have collapsed. This is

:31:17.:31:22.

koind of what happens. Obvious - kind of what happens. This is an

:31:22.:31:28.

outcome nobody wants. Nobody? euro has failed, the euro is a

:31:28.:31:32.

mechanism for recession. It has created an impossible situation in

:31:32.:31:36.

Europe, it is split between core and periphery, the periphery has

:31:36.:31:42.

suffered and the core benefits. The periphery is now forced to go

:31:42.:31:46.

through an enormous recession for no obvious outcome. In this context,

:31:46.:31:51.

and I can only speak for Greece, which I know more about. The only

:31:51.:31:57.

option is to really get out of this advice, to break the advice of the

:31:57.:32:01.

hard currency, - vice of the currency and the euro, there is no

:32:01.:32:08.

future for Greece in the euro, or the peripheryy in the euro.

:32:08.:32:12.

It was an assassination that shook international confidence in Libya's

:32:13.:32:15.

rebels, at the height of the campaign against Colonel Gaddafi in

:32:15.:32:19.

late July, their commander and chief, General Younis, was murdered

:32:19.:32:23.

and mutilated, apparently by men on his own side, after being arrested

:32:23.:32:29.

on the orders of the rebel leadership. With the murder

:32:29.:32:34.

unsolved, there is mounting anger of the a powerful tribe, they say

:32:34.:32:38.

senior officials of the National Transitional Council, conspired

:32:38.:32:42.

with Islamic extremists to kill general. A claim that is strongly

:32:42.:32:45.

denied. This is a case that is threatening to stablise the

:32:45.:32:50.

beginnings of new Libya. They helped overthrow Gaddafi's regime.

:32:50.:32:57.

Now elders of one of Libya's most powerful tribes, are threatening

:32:57.:33:02.

vengeance against his successors. The extraordinary and prominent

:33:02.:33:08.

debt of their most prominent member, has shaken their confidence in the

:33:08.:33:12.

country's new leadership. General Younis was the biggest defector

:33:12.:33:16.

from Gaddafi's regime, NATO's main contact in Libya. But on the eve of

:33:16.:33:22.

a major offensive in July, he was arrested by his own side. And later,

:33:22.:33:32.
:33:32.:33:32.

brutally murdered. Leaked documents, seen by Newsnight, revealed a day

:33:32.:33:36.

earlier, official of the general national transitional council, had

:33:36.:33:40.

arrested Younis without the proper authority

:33:40.:33:48.

The conspiracy was concocted at the executive council, and they now who

:33:48.:33:57.

is behind it. They issued a summons to General Younis, they lured him,

:33:57.:34:01.

lay in wait for him, and did what they did to him.

:34:01.:34:08.

There is no proof of that, alt council denies t but there is a

:34:08.:34:11.

mysterious chain of events, revealing deep divisions within a

:34:12.:34:16.

revolution that so many died for. And with outside showers, including

:34:16.:34:22.

Britain, to support it. The murder of Abdel Fattah Younes, dumb

:34:22.:34:26.

founded international backers, raising questions they tried to

:34:26.:34:31.

avoid about the nature of Libya's opposition and the potential to run

:34:31.:34:34.

the country. Even today those questions haven't been completely

:34:34.:34:38.

laid to rest. The killing of the commander cast as long shadow over

:34:38.:34:46.

Libya's future. General Younis was a controversial man, for 40 years a

:34:46.:34:53.

key aid of Colonel Gaddafi, laterally his Interior Minister, he

:34:53.:34:59.

changed sides during the revolution. Street talk in Benghazi claimed

:34:59.:35:03.

that his loyalties were still divided. In July, five months into

:35:03.:35:10.

the war, he was planning an attack on Gaddafi's lines at Brega, west

:35:10.:35:17.

of Benghazi when rebel militia men arrived with this warrant. Trand by

:35:17.:35:23.

a head of the transitional council, it ordered people to be taken into

:35:23.:35:27.

custody. In the middle of the night he was escorted back to Benghazi, a

:35:27.:35:33.

council source said he and his aids left calmly in just two cars.

:35:33.:35:39.

Family members present remember it differently.

:35:39.:35:45.

TRANSLATION: We went with a reinforced guard, two and three

:35:45.:35:49.

brigade, they were in front and behind us. This was very tough and

:35:49.:35:52.

very suspicious. Eyewitnesses say they were arrested

:35:52.:35:57.

and escorted, not by regular council forces, but by independent

:35:57.:36:03.

militia men of a unusually religious appearance.

:36:03.:36:08.

TRANSLATION: The number of cars was 80 or 90, but increased at everyone

:36:08.:36:14.

checkpoint. Every car was full of civilian rebels, fully armed. They

:36:14.:36:21.

were chanting, "traitor", and "Gaddafi", there was no-one from

:36:21.:36:27.

the police or the other people there, just people shouting into

:36:27.:36:35.

the dawn. The Defence Minster, scribled this extraordinary note at

:36:35.:36:39.

4.30 in the morning, counter manding the arrest warrant. He said,

:36:39.:36:45.

it had been issued by a non- combatant authority and might

:36:45.:36:49.

damage morale at the front. Soon after sending the note. According

:36:49.:36:55.

to the council, the Defence Minster left for Egypt, on urgent business.

:36:55.:36:59.

His order had no effect, the general was brought to this

:36:59.:37:04.

military camp, his son and the son of his aide, were allowed to leave.

:37:04.:37:08.

They never saw their fathers alive again.

:37:08.:37:12.

It is still a mystery what happened to General Younis, after he was

:37:12.:37:19.

taken behind these gates. The family came the following day to

:37:19.:37:22.

find out what happened, but the place was already deserted, as it

:37:22.:37:31.

still is today. The following morning, thousands

:37:31.:37:36.

attended the funeral of Younis and his two aides in Benghazi's

:37:36.:37:41.

Liberation Square. All three had been found burned and mutilated, in

:37:41.:37:44.

a valley outside the city. At the end of the day, when the family

:37:44.:37:48.

said it had been assured by council officers, that the general was safe,

:37:48.:37:51.

even about to appear at a press conference.

:37:51.:37:55.

The council said two men killed them, of whom one has already been

:37:55.:38:00.

arrested. Part of a wider group of 16 suspects, linked to the case. It

:38:01.:38:07.

has released few other details from the on going inquiry.

:38:07.:38:13.

But members of this tribe say they have seen testimony that Islamic

:38:13.:38:17.

extremists, including at least one Egyptian were involved? They were

:38:17.:38:22.

an Islamic radical group, who committed this execution. According

:38:22.:38:32.

to the eyewitnesses, who have been with him. His guards, sow that - so

:38:32.:38:37.

that people looked at the strange shape, with the long beard, with

:38:37.:38:42.

their vocalisation, the way they spoke, it obviously looks like

:38:42.:38:48.

people from extreme background. The council has said the killers

:38:48.:38:55.

were members of one fundamentalist brigade, Obaida Ibn Jarrah, named

:38:55.:39:03.

after the friend of the Prophet Mohammed. It has now been disbanded.

:39:03.:39:10.

The council's chairman, Libya's new lead, said they weren't following a

:39:10.:39:13.

religious agenda. TRANSLATION: nature of the killings suggests an

:39:13.:39:19.

act of personal revenge, it looks back to something well before Libya,

:39:19.:39:24.

something Younis was involved in, as a commander of the special

:39:24.:39:33.

forces. He's talking about a time here. The Gaddafi regime tried to

:39:33.:39:39.

flush out suspected Islamic fighters. But his former family,

:39:39.:39:43.

and activists say the general wasn't involved.

:39:43.:39:46.

Younis could have been killed because of suspicions that he was

:39:47.:39:51.

double dealing, although there is no evidence. Or as the family blofs,

:39:51.:39:56.

because he planned to disband - believes, because he planned to

:39:56.:40:03.

disband military militias. TRANSLATION: Younis was their most

:40:03.:40:07.

dangerous enemy, a tough old soldier. He wanted to disarm these

:40:07.:40:11.

people and force them back to civilian life. He believes the

:40:11.:40:17.

circumstances of the general's arrest, shows the militias have

:40:17.:40:24.

supporters on the platform. TRANSLATION: Why army militias,

:40:24.:40:29.

only because there is a relationship between the board and

:40:29.:40:34.

the council itself. These are the events leading up to

:40:34.:40:39.

the general as arrest. It questions the legitimacy and independent of

:40:39.:40:43.

the special judicial committee that issued the warrant. Saying that the

:40:43.:40:47.

decision to appoint it was tarnished by shortcomings. One of

:40:47.:40:52.

those behind the decision, was religious affairs minister, until

:40:52.:40:55.

recently, Imam of a Manchester mosque. But he can't tell me

:40:55.:41:05.

anything about the case. TRANSLATION: Anything related to

:41:05.:41:07.

the martyrdom of General Younis, must be left to the he of the

:41:07.:41:13.

council, there I will stop. To Younis's supporters, the

:41:13.:41:17.

irregular process, that led to his arrest, looks highly suspicious.

:41:17.:41:24.

But it could just show incompetence. It was a conspiracy that killed him,

:41:24.:41:29.

or simply a series of unfortunate managal mistakes that

:41:29.:41:33.

unintentionally delivered him into the wrong hands. A case of maltad

:41:33.:41:42.

minutes traigs. That is certainly the - maladministration. That is

:41:42.:41:46.

certainly preferred by the cab. The cabinet have been investigated, and

:41:46.:41:51.

in the light of it they have decided to reshuffle the cabinet.

:41:51.:41:57.

He says the mistakes had nothing to do with the event. Younis's death

:41:57.:42:02.

certainly raised guess about Europe's independent military

:42:02.:42:08.

brigades. Enthusiastic volunteers of all kinds joined them, but most

:42:08.:42:14.

are now returning to civilian life, leaving a committed core, including

:42:14.:42:19.

many from Islamist backgrounds. TRANSLATION: These militias are

:42:19.:42:22.

outside the law, their aim is to control the Government of Libya.

:42:23.:42:27.

The council has been weak in taking action against them.

:42:27.:42:31.

international face of Libya's largely unknown and tested rebels,

:42:31.:42:36.

as they began their fight against Colonel Gadaffi, was an audacious

:42:36.:42:42.

shot in the dark. Britain, France and others argue it has been

:42:42.:42:46.

triumphantly vindicated. Yet, even though we know surprisingly little

:42:46.:42:52.

about the exact political reflection of Libya's new

:42:52.:42:56.

leadership. We can't yet accurately engage the strength of an Islamist

:42:56.:43:00.

element, that is certainly becoming more evidence, and some argue, more

:43:00.:43:10.
:43:10.:43:11.

Before taking their leave of Younis's family, the visiting

:43:11.:43:16.

elders of his tribe, are entertained with verse.

:43:16.:43:22.

It is a political rant. Warning against division the. But they all

:43:22.:43:28.

know, since the general's murder. That post revolution Libya and

:43:28.:43:32.

peace will be much harder to achieve than most.

:43:32.:43:35.

The Independent columnist, Johann Hari, is returning his prestigious,

:43:35.:43:40.

or well prize, following an investigation and admission of

:43:40.:43:47.

plagiarism. Writer, who admitted attacking critics under a pseudo

:43:47.:43:52.

name on twittweter, is taking a leave of access. He will keep his

:43:52.:43:59.

job and be asked to pay for the course himself.

:44:00.:44:04.

This all happened under your tenure, are what was your conversation you

:44:04.:44:10.

had? The first conversation was me expressing my shock that this had

:44:10.:44:16.

had happened. I was really quite devastated for the readers of the

:44:16.:44:23.

Independent, for his colleagues. How did he explain this? All sorts

:44:23.:44:28.

of reasons, really. Going back, he did have some health issues. He had

:44:28.:44:33.

some health issues, that was a factor. I think one key factor, and

:44:33.:44:38.

it weighed heavily on my mind when I decided what to do about him was

:44:38.:44:43.

he really had so little training. That, in a way, impacted and

:44:44.:44:53.

reflected badly on the Independent. He only left university in 2001 and

:44:53.:45:01.

wrote a few articles for the New Statesman, and suddenly is now

:45:01.:45:06.

propelled into the stark economist. I thought no-one has taken apart

:45:06.:45:11.

his columns. Which respect I'm not sure what you mean about health

:45:11.:45:16.

issues, you don't want to adopt a pseudonym from Wikipedia and attack

:45:16.:45:22.

people through it? That actually was, he gave that as the reason, we

:45:22.:45:26.

did check. The bulk of those centuries were made in that

:45:26.:45:30.

period.? He freely admits he was on prescription tranquillisers and

:45:30.:45:37.

came off them. I said you can't use it as an excuse, it is the same as

:45:37.:45:40.

one of the rioters claiming drunkenness, they still go to jail.

:45:41.:45:44.

The thing that weighed heavily on my mind was the lack of training,

:45:44.:45:51.

that is why he's going for training. Presumably in the Independent among

:45:51.:45:57.

other newspapers, sanctimonious, rightly, maybe, about phone hacking,

:45:57.:46:01.

you don't start asking the same questions of young tabloid hacks

:46:01.:46:07.

could go that? Well, I'm not sure. I would say on the plagiarism issue,

:46:07.:46:14.

at the time, nobody complained. You're not going to say go and do

:46:14.:46:19.

more training? It reflected padly on the Independent, you are right

:46:19.:46:27.

to say that. If he had been older, wiser or more trained, I didn't, I

:46:27.:46:35.

took a view the he's 32 years of age, and only been a columnist and

:46:35.:46:40.

interviewer. No grizzly old news editor has taken apart his copy and

:46:40.:46:44.

said does which bit come from, he was were President Yeltsin into the

:46:44.:46:48.

stardom and has to start again at the - propelled into the stardom

:46:48.:46:53.

and had to start again. We will take you to through to the

:46:53.:47:03.
:47:03.:47:03.

JK Rowling is named as a core participant. The jobless totals too.

:47:03.:47:08.

Sarah Palin, political future in doubt, after a report she had a one

:47:08.:47:14.

night stand with basketball player and cocaine. The Telegraph 300,000

:47:14.:47:24.
:47:24.:47:24.

Apology for the loss of subtitles for 43 seconds

:47:24.:48:07.

That is all from Newsnight tonight. Goodnight from all of us here.

:48:07.:48:11.

Turning chilly overnight. A cold start to tomorrow morning, fog

:48:11.:48:15.

around as well. Taking time to clear. Essentially it is a fine,

:48:15.:48:21.

early autumn day, with plenty of sunshine on offer, certainly on

:48:21.:48:26.

northern England more sunshine. Manchester, Leeds and Hull all up

:48:26.:48:31.

to 1. Cloudy in the Midland, is sunny spells will reach 20. There

:48:31.:48:36.

will be some mist and fog across the southern counties early on. By

:48:36.:48:39.

mid-morning they should have cleared. They may well linger

:48:39.:48:43.

through the morning rush hour, could be misty in parts of South

:48:43.:48:48.

Wales, some sunshine here. Cloudy across parts of North Wales.

:48:48.:48:51.

Cloudier times through Northern Ireland. When the sun is out

:48:51.:48:56.

feeling pleasant in the afternoon, 16-17w we are losing the strong

:48:56.:49:01.

wind across Scotland, feeling warmer here again, blue skies for

:49:01.:49:04.

many during the afternoon. By Friday, cloud and outbreaks of rain

:49:04.:49:08.

will drift from the west. Turning to heavy showers in the afternoon,

:49:08.:49:11.

across parts of Northern Ireland and North Wales. Parts of the south

:49:11.:49:15.

may well stay dry on Friday. There could be sunshine, certainly for a

:49:15.:49:19.

while, overall the weather patterns do change. After a fine and settled

:49:19.:49:24.

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