:00:09. > :00:12.You think the crisis in Europe doesn't matter to you? Think again,
:00:12. > :00:16.if the eurozone collapsed, your savings, your job and your pension
:00:16. > :00:20.could all be at risk. Whatever is going on in the European economy
:00:20. > :00:26.now in terms of contraction, could easily turn into a depression and
:00:26. > :00:29.widespread social unrest. On the day that the head honcho of
:00:29. > :00:33.the European Commission described the crisis as a baptism of fire for
:00:33. > :00:38.a whole generation, and the Bank of England warned banks here to
:00:38. > :00:41.prepare for the worst, can or should the euro survive? The
:00:42. > :00:47.schemes and scheming of the politicians are one thing, but as
:00:47. > :00:51.Greece has discovered, when a currency fails, there are human
:00:51. > :00:55.casualties. My outrage is on a daily basis, when I go out and I'm
:00:55. > :01:00.very sad, and very gloomy. Does Germany have the will to pull
:01:00. > :01:04.Europe back from the abyss. We're in Berlin, ahead of a crucial vote
:01:04. > :01:09.tomorrow. What does Ed Miliband, the wonk who
:01:09. > :01:19.got the leadership, really think about market forces. I'm in favour
:01:19. > :01:20.
:01:20. > :01:24.of capitalism for the record, it is what kind of capitalism you have.
:01:24. > :01:27.Good evening, as statements of the blindingly obvious go, it is a
:01:27. > :01:32.record contender. The European Union is facing its greatest
:01:32. > :01:36.challenge, according to no less an authority than Jose Manuel Barroso,
:01:36. > :01:40.the capo di tutti capi, in the European Commission. It has turned
:01:40. > :01:44.out that the so-called plans to save the euro are a lot less
:01:44. > :01:49.substantial than they seemed to be a couple of days ago. The image
:01:49. > :01:53.problem of this 17-headed Jedward, can be solved by much further
:01:53. > :01:58.integration. Oh, and by the way, we need to levy a financial tax that
:01:58. > :02:03.could clobber the City of London. Let's go through this mess, bit by
:02:03. > :02:10.bit, about our economics editor, Paul Mason. Where are we up to so
:02:10. > :02:16.far? It all reinvolves around the fate of the ESFF which is the
:02:16. > :02:20.failout plan, if it is passed we get 440 billion euros, Europe gets
:02:20. > :02:24.to spend it on bailing out countries and banks. The Fins
:02:24. > :02:31.passed their bit today, we think the Germans will pass their bit of
:02:31. > :02:35.it through the parliament tomorrow. Greece has done it by passing an
:02:35. > :02:39.austerity plan, yet to implement it. That takes us back to 21st July,
:02:39. > :02:43.three months ago. Since then, things have moved on, the economy
:02:43. > :02:46.has flattened out, banks in a much worse situation than they were, the
:02:46. > :02:50.Bank of England warning our banks to get ready for more stress in the
:02:50. > :02:53.system. Really, the politicians, that generation going through this
:02:54. > :02:59.baptism of fire is really struggling to catch up with where
:02:59. > :03:04.we are. Where are we going? We have been
:03:05. > :03:08.looking now at the senario force what could happen. If you expand
:03:08. > :03:12.the 450 billion to 2 trillion, mooted at the weekend, or if you
:03:12. > :03:16.don't. If you don't, what will happen if you get a chaotic slide
:03:16. > :03:26.out of the euro by the Greeks. I have been discussing this with a
:03:26. > :03:36.
:03:36. > :03:40.couple of experts, and got the Currency unions are always designed
:03:40. > :03:45.as permanent, and forever, but in history, they don't usually last
:03:45. > :03:54.much longer than a decent car. Greece joined the EC the same year
:03:54. > :03:58.as the ill-fated Dell lorian was - DeLorean, which prompted the
:03:59. > :04:08.question, what is the difference between the DeLorean and the euro,
:04:09. > :04:09.
:04:09. > :04:13.one is a dodgy vehicle that fell victim to finance, and the DeLorean
:04:13. > :04:23.is a Great Barr to go back to the futurement
:04:23. > :04:23.
:04:23. > :04:29.Even the most realistic scenario has explicit dangers.
:04:29. > :04:33.Last night Greece voted through the crucial tax rise that should see it
:04:33. > :04:36.get the eight billion euros is needs to survive. Even now there
:04:36. > :04:42.are stories of teachers and policemen not being paid, they are
:04:42. > :04:48.cutting it fine. Meanwhile, the Fins today, voted
:04:48. > :04:54.through the 440 billion euro plan for an expanded bailout plan. And
:04:54. > :04:59.Germany probably will tomorrow. What's next? I hope they will try
:04:59. > :05:03.and do a minimum of three things, get a default template for Greece
:05:03. > :05:08.that could be used for other countries if necessary recapitalise
:05:08. > :05:12.the banks so they can move on. And ensure the European Central Bank
:05:13. > :05:18.stands ready to buy any amount of Spanish and Italian bonds providing
:05:18. > :05:25.the liquidity that might be necessary.
:05:25. > :05:28.At the weekend, the G20 mooted a plan to expand the eurobailout to
:05:28. > :05:34.two trillion euros, by letting the European Central Bank print more
:05:34. > :05:38.money and borrow a lot more money. They gave themselves until the G20
:05:38. > :05:42.summit in November to make their minds up. But German politicians
:05:42. > :05:46.have been quick to squash the idea, what happens if we get to November
:05:46. > :05:49.and there is no stability. Italy's debt at 120% of GDP looks
:05:49. > :05:55.unsustainable. There are fears that Italy and Spain could get dragged
:05:55. > :06:00.into the danger zone. If there is no megaplan by the Cannes summit of
:06:00. > :06:04.the G20, I think, not only will the markets be bitterly disappointed,
:06:04. > :06:11.because we're not even back to plan A, there isn't a plan A, but I
:06:11. > :06:16.think that we could seriously be in a mode in which we could encounter
:06:16. > :06:21.bank runs, deposit runs, bank failures, and whatever is going on
:06:21. > :06:26.in the European economy now in terms of contraction, could easily
:06:26. > :06:29.turn into a depression and widespread social unrest.
:06:29. > :06:33.The last uncontrolled default was ten years ago in Argentina, this is
:06:33. > :06:37.what it looked like. The banks closed, the President left by
:06:37. > :06:41.helicopter, but the country eventually recovered. So what's
:06:41. > :06:46.wrong with doing an Argentina. think we should be sceptical about
:06:46. > :06:53.the claims that Argentina had such a good time with default and
:06:53. > :06:57.devaluation. It was a dramatic time, the middle-class was wiped out.
:06:58. > :07:03.They were rescued not by default and devaluation, but a commodity
:07:03. > :07:08.boom which was great for their trade and exports, up until today.
:07:08. > :07:16.Things might have looked different if you hadn't the commodity boom,
:07:16. > :07:19.there is no similar boom in sight for any eurozone country.
:07:19. > :07:23.Right now the politicians are discussing everything behind closed
:07:23. > :07:30.doors. But one thing they are open about is that nobody should leave
:07:30. > :07:39.the euro. If you fast rewind back to the 130s you can see why.
:07:39. > :07:43.A - 1930s. A euro exit for Greece could be contagious. In the 1930s,
:07:43. > :07:48.once one company left the gold standard, others followed, Germany,
:07:48. > :07:52.Britain, Japan. This is what happened to growth in the 1930, the
:07:52. > :07:55.countries that left growth and pursued protectionist and
:07:55. > :07:59.expansionist policies recovered first. America and France who clung
:07:59. > :08:03.to the currency peg, recovered last. The problem with any repeat of that,
:08:03. > :08:10.a chaotic break up of a currency peg is this, it could collapse
:08:11. > :08:15.Europe's banks. At UBS we have tried to quantify
:08:15. > :08:20.the impact on countries like Greece and Germany of a euro failure, it
:08:20. > :08:25.is a huge quantity of GDP, in Greece's case it could be as much
:08:25. > :08:32.as 60-80% of GDP. In Germany's case it could be between 30-40%. This is
:08:32. > :08:38.just guess work. Right now, the future for Europe looks random, and
:08:38. > :08:43.depends on forces moving beyond the control of Governments. The whole
:08:43. > :08:47.arrangement looks simultaneously, futuristic and archaic.
:08:47. > :08:50.With us to discuss the eurozone we have Amadeu Altafaj Tardio, a
:08:50. > :08:55.spokesman for the European Commission, he joins us from the
:08:55. > :09:00.continent. Johanna Kyrklund, a fund manager with Schroder Investment
:09:00. > :09:06.Management, Peter Oborne, a journalist with the Telegraph, and
:09:06. > :09:09.Richard Lambert, as well as an ex- head of the CBI, once edited the
:09:09. > :09:13.Financial Times. Looking from Brussels, would you like to
:09:13. > :09:17.apologise, Amadeu Altafaj Tardio, for the lack of European leadership
:09:17. > :09:22.on this crisis? I don't think we have to apologise, but we have to
:09:22. > :09:27.call for a strong political will, and a strong political response
:09:27. > :09:32.from European leaders, to prevail over all these market fears, and
:09:32. > :09:41.over the narrow minded nationalisms. This is the risk we have to avoid.
:09:41. > :09:45.We have to have a strong European response to a problem that has an
:09:45. > :09:49.impact on all European citizens, from Athens to London, from Madrid
:09:49. > :09:57.to Helsinki. You believe Europe's leaders are in control of events,
:09:57. > :10:02.do you? Yes, I think so. European political leaders are taking very
:10:02. > :10:06.difficult decisions. It is very hard, for instance, to confront the
:10:06. > :10:10.public opinion with measures of austerity. Politicians usually
:10:10. > :10:14.don't like to do that. They know that this has a political course
:10:14. > :10:23.for them, but still, they are responsible enough to tell their
:10:23. > :10:26.citizens that come accumulating debt and risks is the most anti-
:10:26. > :10:30.social behaviour. They are ready to take the criticism and ready to
:10:30. > :10:37.discuss with their European partners. Why don't the markets
:10:37. > :10:43.believe you? Because there is something more than market logic
:10:43. > :10:46.here at stake. This is a political construction. We have kept the
:10:46. > :10:49.solidarity since the end of the Second World War. This is a
:10:49. > :10:56.political project. We believe this is the best way to ensure
:10:56. > :11:00.prosperity for our citizens, to maintain welfare systems that have
:11:00. > :11:04.no comparisons all over the world. There is a strong political will to
:11:04. > :11:09.keep these objectives, and therefore, markets should believe
:11:09. > :11:14.that we will not let Greece down. We will not, and we cannot avoid a
:11:15. > :11:18.default by Greece, for instance. Because the implications of such a
:11:18. > :11:22.development would be brutal for our citizens. The British Foreign
:11:22. > :11:30.Secretary, William Hague, has described the euro as a burning
:11:30. > :11:33.building with no exits. I fully disagree. I think that
:11:33. > :11:37.there is a strong commitment by European leaders, in the eurozone
:11:37. > :11:43.and outside the eurozone, and even elsewhere, for instance, we were in
:11:43. > :11:48.Washington in the IMF annual meetings a few days ago, even
:11:48. > :11:54.politicians from the US, from China, from the emerging economies, were
:11:54. > :11:58.encouraging the euro to take decisions and to provide a strong
:11:58. > :12:04.European response. I don't understand why Mr Hague will be
:12:04. > :12:09.less convinced than, for instance, Mr Timothy Geithner in the United
:12:09. > :12:11.States. Why don't the markets take the same view of things? I think
:12:11. > :12:15.the concern markets are expressing is there the institutional
:12:15. > :12:20.framework in Europe, whether it is designed to make quick decisions.
:12:20. > :12:24.The reality is what we have seen over the last few years there isn't
:12:24. > :12:28.a framework for fast decision making. That is what you need in
:12:28. > :12:31.these markets. What they don't like, is this is a political project more
:12:31. > :12:35.than anything else? The fact it is a political project. That is fine,
:12:35. > :12:38.and I don't think the markets are necessarily questioning that. But a
:12:38. > :12:42.political project does need to be supported by institution that is
:12:42. > :12:47.can cope with whatever the world economy throws at them. The reality
:12:47. > :12:51.is those institutions haven't been apparent. Particularly, so far all
:12:51. > :12:56.we have had is a case of European leaders saying don't worry, it will
:12:56. > :13:00.be all right, we won't let Greece go, without detail on how they are
:13:00. > :13:05.going to do that. What did you make of what we heard from Brussels
:13:05. > :13:11.there? Mad, it is really weird, he doesn't know what he's talking
:13:11. > :13:15.about. The idea this is a political problem. Excuse me mate, it is an
:13:15. > :13:19.economic problem. The euro is collapsing under the weight of its
:13:19. > :13:23.own contradictions, and the idea that political will can solve an
:13:23. > :13:28.economic problem runs against the basic insight of none other than
:13:28. > :13:33.Karl Marx, that economics in the end trumps politics. These guys are
:13:33. > :13:37.in total and utter denial. It is terribly frightening listening to
:13:37. > :13:42.that idiot in Brussels. Mr Idiot in Brussels, would you like to
:13:42. > :13:48.respond? No, I think that these words speak for themselves. Just
:13:48. > :13:52.one thing, this is not about being outside or inside the euroarea. The
:13:52. > :13:57.UK in 2010 had the deficit that was the same as Greece, it is not the
:13:57. > :14:02.euro that is the problem. The euro is, in fact, a shield that has
:14:02. > :14:07.protected many of our economies, and it is a factor of stability and
:14:07. > :14:10.prosperity. We went through the most difficult crisis since the end
:14:10. > :14:14.of the Second World War, all countries have experienced that.
:14:14. > :14:19.Richard Lambert, you wanted us to join the euro at one point? Yeah,
:14:19. > :14:24.we felt back in the 1990s that the euro would happen whether Britain
:14:24. > :14:30.was part of it or not, and these were our major trading partners,
:14:30. > :14:36.and it was better to be in than out. You were wrong? Things changed, the
:14:36. > :14:41.rules weren't obeyed, France and Germany broke the rules. The banks
:14:41. > :14:46.were undercapitalised, massive instability across the area, and
:14:46. > :14:49.when the biggest financial crisis came along that was it. You were
:14:49. > :14:52.editor of the Financial Times during this period, it was
:14:52. > :14:57.predicted very, very clearly by a large number of people. Margaret
:14:57. > :15:03.Thatcher, William Hague, the Tory leader, who the FT sneered at day
:15:03. > :15:08.in day out. The FT didn't give this story proper economic analysis. It
:15:08. > :15:11.took the line of that idiot in Brussels that it is a political
:15:11. > :15:14.project. Even though you were a financial newspaper, you didn't
:15:14. > :15:18.apply economic analysis. You took the political view. By the way, I
:15:18. > :15:26.have a book, I bought a present for you when I heard you were coming on
:15:26. > :15:34.the programme, guilty men, you are one of them, I suggest you read it.
:15:34. > :15:40.It analyses the performance of the Financial Times. "guilty men" was a
:15:40. > :15:43.phrase used by Michael Foot about the Nazis, are Angela Merkel and
:15:43. > :15:47.President Barroso the equivalent of the Nazi party? What utter nonsense.
:15:47. > :15:52.You were one of a group of people, had you had your way, we would be
:15:52. > :15:54.in the position of Greece, taking orders from the EU and the IMF,
:15:54. > :16:00.Britain's economic security would have been destroyed, our political
:16:00. > :16:04.independence would no longer exist, if the Financial Times had its way.
:16:04. > :16:08.Shall we talk about this for more or talk about what is happening.
:16:08. > :16:14.you think it is likely Greece will fall out of the euro? Personally I
:16:14. > :16:18.feel the numbers now are impossible to manage. It seems to me there are
:16:18. > :16:23.a number of scenarios, on the one hand, the extreme position, namely
:16:23. > :16:25.a collapse of the euro, is very unlikely, because the economic and
:16:25. > :16:30.political consequences would be a disaster, a fiscal union is
:16:30. > :16:35.unlikely. The question is, is it possible to get an orderly way of
:16:35. > :16:41.getting Germany and Greece to withdraw from the eurozone. Is it
:16:41. > :16:43.possible? I think it might be. It is something that might happen.
:16:44. > :16:47.Germany to withdraw from the eurozone? Getting Germany to
:16:47. > :16:51.support Greece in withdrawal. They would need massive liquidity,
:16:51. > :16:55.massive support for their banks. What is the perceived wisdom, I
:16:55. > :16:59.know it is changing day-to-day in the markets. What is it now about
:16:59. > :17:03.Greece's future? If Greece was actually to withdraw from the euro
:17:03. > :17:08.that would be potentially extremely destablising because of the impact
:17:08. > :17:11.on the Greek banking system. There is a need to restructure the debt,
:17:12. > :17:16.our hope would be without having to leave the euro. That would really
:17:16. > :17:24.massively increase the chances of contagion to Europe. Unless it was
:17:24. > :17:28.possible for the ECB and Germany to provide liquidity and support.
:17:28. > :17:32.would help if they were restructuring their debt. I don't
:17:32. > :17:39.think they can help offset the consequences of Greece leaving the
:17:39. > :17:42.euro that, that fire might be too big. You think they will fall out?
:17:42. > :17:46.It is inevitable and it is enor newsly in their interest to get out
:17:46. > :17:52.of the euro. The moment it does it will be competitive. One of the
:17:52. > :17:55.points nobody has quite made, is the total inhumanity of the euro,
:17:55. > :18:01.it is destroying the livelihoods of millions of Greek businesses and
:18:01. > :18:07.people. We will hear a bit from Greece and the human consequences.
:18:07. > :18:13.The euroelite. Will you stop referring to them as "this idiot",
:18:13. > :18:16.you may think that he's out of contact with reality, he's now
:18:16. > :18:21.walking out of the studio in Brussels, well done, we can't even
:18:21. > :18:25.hold him to account now. Because you have just been grattuously
:18:25. > :18:28.offensive to him. Unfortunately, listening to this man, talking such
:18:28. > :18:33.nonsense over a matter of such importance that affects the lives
:18:33. > :18:36.of millions and millions of people, listening to that nonsense, it is
:18:36. > :18:40.offensive to decent people that want jobs. What about the
:18:40. > :18:45.proposition we heard earlier today from Mr Barroso, who presumably is
:18:45. > :18:50.the boss of our friend in Brussels, who has just walked out of the
:18:50. > :18:54.studio. He clearly believes there is a solution, and the solution is,
:18:54. > :18:58.stronger political union, and fiscal union? Is that even a
:18:58. > :19:03.starter given what's happened to the euro? I think it is unlikely.
:19:04. > :19:08.Because for two reasons, one is the time it would take a treaty
:19:08. > :19:10.revision, political drama, two, is it wouldn't address the fundamental
:19:10. > :19:14.problem, which has emerged, which is the southern European countries
:19:14. > :19:18.are a lot less competitive than the northern European countries. Were
:19:18. > :19:24.they to be locked into a fiscal union, they would face years of
:19:24. > :19:29.austerity, and of the only way to get a competitive place is if their
:19:29. > :19:33.prices go year after year after year. Is he in fantasy land there?
:19:33. > :19:37.I think that actually the issue is, you can't keep imposing austerity
:19:37. > :19:41.on the southern European economies, that won't sort out their debt
:19:41. > :19:45.problems. They have to grow. will have a bigger impact on the
:19:45. > :19:49.GDP than the debt. Germany has to step in and bail out its neighbours
:19:49. > :19:54.and ultimately money will go from northern Europe to southern Europe.
:19:54. > :20:00.It is Greece that has brought the eurozone to meltdown. There are
:20:00. > :20:03.plenty of people saying after the event, saying they should never be
:20:04. > :20:08.allowed in by the wise-afer-the- event. Now they have to pay the
:20:08. > :20:18.price of earlier lies and fecklessness, politicians lives and
:20:18. > :20:30.
:20:30. > :20:36.hubris have consequenced for people. There are human casualties.
:20:36. > :20:42.This summer, Syntagma Square became a theatre of economic war.
:20:42. > :20:51.Now, with the stones of Syntagma permanently scarred, the worry is,
:20:51. > :20:55.so is Greek society. The danger for Greece, just right now, is that
:20:55. > :21:03.Greeks will feel alone and totally hopeless. They are going to abandon
:21:03. > :21:08.any pretence, and not go out rioting, but stop conforming to any
:21:08. > :21:13.sort of rules. Among politicians, sociolologists, protestors, one
:21:13. > :21:18.word keeps coming up when they try to describe what might be happening
:21:19. > :21:23.to Greek society, anomie, absence of law. It is not the overthrow of
:21:23. > :21:33.Government people are worried about, it is the gradual dissolution of
:21:33. > :21:34.
:21:34. > :21:40.all the bonds that tie society together.
:21:40. > :21:45.From - From the ages of 15-30, young people in Greece expect
:21:45. > :21:50.nothing from society, from the political system, even from their
:21:50. > :21:56.elders. Their hope resides in their family, and their friends. Once
:21:56. > :22:03.more, is that going to be enough? It might be yes, might be no. If it
:22:03. > :22:13.is a no, if it is a resolute no, then this sort of explosion is
:22:13. > :22:16.
:22:16. > :22:19.going to make the rioting of last month to seem almost a joke.
:22:19. > :22:23.When Greek teenagers went back to school this month, they found a
:22:23. > :22:33.shortage of everything. In a society that values education
:22:33. > :22:40.highly, it isth has become a symbol of malaise. They didn't give us
:22:40. > :22:47.books, they gave us a CD. But someone who hasn't a CD can't read.
:22:47. > :22:51.We want to bring us books, no CDs, no nothing, only books.
:22:51. > :22:56.People say there is no money to pay for the books, there is no money to
:22:56. > :23:02.pay for the things you want? There is money. But they give them to the
:23:02. > :23:11.companies. They give the money to the companies to survive from the
:23:11. > :23:16.crisis and we have to pay them. Why we? We don't make the crisis.
:23:16. > :23:20.Their parents are facing lay-offs, reduced hours, unpaid bills, and
:23:20. > :23:27.there is a sense that the basic social contract, pay tax, and get
:23:27. > :23:34.an education, is breaking down. They returned their CDs to
:23:34. > :23:44.parliament with a defiance that has become routine.
:23:44. > :23:45.
:23:46. > :23:51.But the majority of Greeks have not been on the demonstrations. In this
:23:51. > :23:56.quiet suburb of Athens, there is frugstraigs of a different kind. -
:23:56. > :24:01.frustration of a different kind. Mary a freelance teacher and
:24:01. > :24:04.Demetrios an estate agent. They are part of a private sector feeling
:24:04. > :24:08.the real austerity, tax rises and business downturn has halved their
:24:08. > :24:12.income in two years. The money started to decrease, we realised
:24:12. > :24:19.that we weren't able to buy the things that we used to buy before.
:24:19. > :24:24.So now we only buy the basics. And now a few days lately we aren't
:24:24. > :24:29.able to buy even those. Most people would look at your home and think
:24:29. > :24:35.of you as middle-class? We are middle-class, actually. We were
:24:35. > :24:39.used to a Come To Me High standard of life, let - to a very high
:24:39. > :24:43.standard of life. We used to go out with friends often, we invited
:24:43. > :24:49.friends over to have dinner and barbecues. Now I have to invite a
:24:49. > :24:55.friend for a year, what do you think? Yes. For a year, because I
:24:55. > :25:01.can't afford it. Have either of you been on a demonstration? No. I
:25:01. > :25:06.haven't. And I won't. Because I think it is vain. My outrage is on
:25:06. > :25:10.a daily basis when I go out and I'm very sad and gloomy, because I see
:25:10. > :25:20.the future is quiet pessimistic, let's say. I don't know what's
:25:20. > :25:22.
:25:22. > :25:26.going to happen to my kids. I can't find an outlet.
:25:26. > :25:31.In the next phase of the crisis, what matters is the way people
:25:31. > :25:35.react in places like this, the quiet suburbs. Because we don't
:25:35. > :25:44.really understand what happens if the middle-class of a developed
:25:44. > :25:50.country just switch off from politics, and lose hope.
:25:50. > :25:55.The figures tell their own story, suicide is up 40% in a year, thefts
:25:55. > :26:02.and break-ins have double in two years. There is open hostility to
:26:02. > :26:05.migrants, and vagrancy has become a major problem. And, the open
:26:05. > :26:11.lawlessness goes beyond Syntagma Square.
:26:11. > :26:16.The village of Keratea became a no- go area for police, after locals
:26:16. > :26:21.rejected the siting of a rubbish dump.
:26:21. > :26:28.When, in your neighbourhood, you have the feeling that it has been
:26:28. > :26:32.taken over by unrulyness, you don't have the re - reaction of even
:26:32. > :26:38.controlling your own behaviour. Life in the city, not only in at
:26:38. > :26:44.then, but all around Greece, comes crumbling down. Normal life gets
:26:44. > :26:51.more and more difficult. These little things happening every day,
:26:51. > :26:56.are far more important than the overall deficit situation, or the
:26:56. > :26:59.banking crisis. It's like a low- intensity conflict, and it is
:26:59. > :27:04.happening in the strangest of places.
:27:04. > :27:11.I was told to turn up at a courthouse, there was sob an
:27:11. > :27:19.auction of repossessed homes. But the Can't Pay, Won't Pay
:27:19. > :27:26.campaign got there first. The campaign started with the non-
:27:26. > :27:34.payment of road tolls, their aim now is to prevent the payment of
:27:34. > :27:38.the two billion emergency tax passed last week.
:27:38. > :27:48.I am a advertising company. It is unusual to see company advertising
:27:48. > :27:58.people protesting in a court. Why? The Greek people have lost, we have
:27:58. > :27:58.
:27:58. > :28:03.lost our lives. We have lost our lives. Everything. These protestors
:28:03. > :28:09.are drawn from the very classes that frequent the cafes around
:28:09. > :28:11.Syntagma, professionals, small business owners, the unlikeliest of
:28:11. > :28:15.rebels. You are not worried that creating
:28:15. > :28:21.this you create some social breakdown, where the whole bonds of
:28:21. > :28:31.Greek society start falling apart? I don't believe that this situation
:28:31. > :28:38.is anarchy. We pay those taxes we owe. Not the illegal taxes, not the
:28:38. > :28:43.taxes that came from an order somewhere else outside Greece.
:28:43. > :28:49.Greeks know, whoever they vote for, that the euro, and their own debt
:28:49. > :28:55.dictates what happens next. There is a sense of listlessness, and
:28:55. > :28:59.among political scientists, fear of the unknown. If we face a system of
:28:59. > :29:07.potential collapse, how far away from that are we? It might come
:29:07. > :29:17.very sudden. It might come in a flash.
:29:17. > :29:18.
:29:18. > :29:21.Because the sense of helplessness is very intense, just right now.
:29:21. > :29:28.When the issue was economics and the protests were led by the
:29:28. > :29:33.traditional left, the dynamics were, at least, predictable.
:29:33. > :29:38.This new problem of anomie, low- level conflict, and quiet
:29:38. > :29:44.dispassion injects uncertainty. And you can see it on the faces of
:29:44. > :29:48.nearly every social group. We have been joined now in the studio by
:29:48. > :29:52.Katinka Barysch, from the centre for European reform. Do you get the
:29:52. > :29:58.feeling that European leaders are quite aware of what some of the
:29:58. > :30:04.social consequences of this may be? I believe so. Because it has been
:30:04. > :30:09.reported enough. The discussions at the moment are more about Greece
:30:09. > :30:14.being put on a long-term reform plan. This isn't only about Greece
:30:14. > :30:18.trying to squeeze another euro or five out of its budget, but is this
:30:18. > :30:24.country on course to have a viable economic model. Or does it need to
:30:24. > :30:27.be propped up in perpetuity. saw there in a country, that some
:30:27. > :30:32.people who sounded absolutely at the end of their tether. This is
:30:32. > :30:39.clearly, potentially, a place of social breakdown? Yes. That is a
:30:39. > :30:44.price worth risking is it? No, I definitely wouldn't say so. At the
:30:44. > :30:48.moment the idea that the euro can be rescued by imposing austerity on
:30:48. > :30:53.all European countries at the same time is clearly crazy. What Greece
:30:53. > :30:58.needs to do first and for most is restructure its debt, and cup up
:30:58. > :31:01.with a long-term plan of restruck - come up with a long-term plan of
:31:01. > :31:05.restructuring. And moving to an economic model that means there are
:31:05. > :31:13.things people want to buy. In the meantime, there are really serious
:31:13. > :31:17.risks of social breakdown? I saw that in the shocking report. Yes.
:31:17. > :31:19.It is the IMF and the ECB and the European Commission negotiating
:31:20. > :31:23.with the Greek Government at the moment about what needs to be done.
:31:23. > :31:29.There is a second bailout just going through the system for Greece,
:31:29. > :31:34.and I don't know where the balance will be struck in the end. In the
:31:34. > :31:39.end whether the euro and indeed the dreams of Europe's political elite,
:31:39. > :31:42.lives or dies, is a matter in the hands, or the bank account of the
:31:42. > :31:45.German people. The parliament in Berlin meets to decide whether it
:31:45. > :31:51.likes the idea of increasing the bailout fund.
:31:51. > :31:55.What do you think is going to happen? It is confidently expected
:31:55. > :31:58.that parliament will approve the bailout fund tomorrow. The question
:31:58. > :32:02.is, will Angela Merkel get sufficient support from her own
:32:02. > :32:07.centre right coalition to pass it, or will she face such a rebellion
:32:07. > :32:10.from her own supporters, so disgusted are many of them at the
:32:10. > :32:14.Greek bailout and the apparently profligate Greek, that she will
:32:14. > :32:17.have to rely on the opposition. That would be hugely embarrassing
:32:17. > :32:21.for Chancellor Merkel, and undermine the stability of the
:32:21. > :32:25.ruling coalition. At the moment it is very much in the balance. It
:32:25. > :32:29.needs 1 rebels to force her into a corner. At the moment it looks like
:32:29. > :32:33.there could well be 19 rebels. What is your feeling about whether
:32:33. > :32:38.the Germans are likely to batch the much bigger bailout being talked
:32:38. > :32:42.about as being - to back the much bigger bailout being talked about
:32:42. > :32:46.is being the main thing? That is not being talked about tomorrow,
:32:46. > :32:51.because on the table they are looking backwards at a measure that
:32:51. > :32:54.they supposedly approved two months ago. That's on the face of it.
:32:54. > :32:59.Everybody suspects that this is a Trojan horse measure. Behind that,
:32:59. > :33:06.there will be a lot of undeclared baggage and further billions going
:33:06. > :33:10.to help the Greeks. People don't necessarily like that. We have been
:33:10. > :33:15.in Wolfsburg today, where VW have their headquarters. It is a place
:33:15. > :33:19.that has done very well out of the euro, based on exports and profited
:33:19. > :33:22.from the euro. Even there people are suspicious of pouring good
:33:22. > :33:27.money after bad, as they see it, they are worried about the
:33:27. > :33:29.accountability of it all. They are not too happy at all, desspite the
:33:29. > :33:35.assurances from the German Finance Minister that there is no more
:33:35. > :33:41.money to go after tomorrow's round. Do you think that Angela Merkel is
:33:41. > :33:44.strong enough, politically, to save the euro? Not singlehandedly,
:33:44. > :33:47.surely not. No European leader would be able to do that. It is, of
:33:47. > :33:53.course, true that everybody at the moment is looking towards Berlin,
:33:53. > :33:57.and what the Germans are going to decide. Although she can't do it
:33:57. > :34:00.singlehandedly, a German veto frustrates any plan. The Finance
:34:00. > :34:04.Minister, has already said this much bigger fund is out of the
:34:04. > :34:08.question? He has to say that at the moment, because otherwise the vote
:34:08. > :34:13.tomorrow won't go through. shouldn't take his words at face
:34:13. > :34:19.value? Of course it is not the last word. They have said before the
:34:19. > :34:21.German politicians, the first Greek bailout will be a one-off, the
:34:21. > :34:26.European Financial Stability Facility would be a temporary thing,
:34:26. > :34:29.now it is permanent. The ECB would never buy bonds, it is buying bonds
:34:29. > :34:33.now. This is not the last word from the German Government, but they
:34:33. > :34:36.have to take it step by step, and once they have the new rules on the
:34:36. > :34:40.bailout fund in place, they will take the next step. It must be very
:34:40. > :34:44.interesting. All this stuff is being said to placate the markets.
:34:44. > :34:47.But the markets are canny enough, presumably, to see through it,
:34:47. > :34:52.aren't they? You were asking the question, can Angela Merkel save
:34:52. > :34:56.Europe? Ultimately it does come down to Germany saving Europe,
:34:56. > :35:01.unfortunately yes other countries like France can contribution to the
:35:01. > :35:07.FSF, if you want to expand that it will be Germany footing the bill,
:35:07. > :35:13.not France, or Finland or the other Triple A companies, it will be
:35:13. > :35:15.Germany. They must be discounting any
:35:15. > :35:18.reassurances from European politicians? Certainly we have
:35:18. > :35:22.learned to disregard statements, because we have seen a lot of
:35:22. > :35:24.promises and not many facts, yet. There has been a bit of hope, just
:35:24. > :35:30.over the last couple of days, there is a feeling maybe there is
:35:30. > :35:36.something come uting out of the G20. This dishonesty on the part of
:35:36. > :35:40.politicians is a great part of the problem, isn't it? The language
:35:40. > :35:47.used there is why, essentially, they have been consistently behind
:35:47. > :35:50.the curve over the last month. Action they took in July, had they
:35:50. > :35:56.taken that at the beginning of the year, that might be a firebreak.
:35:56. > :36:01.They are always behind because they have to assure the domestic
:36:01. > :36:06.constituencies. Like the G20 back in 2008, there was a central
:36:06. > :36:10.initiative and drive to get stuff done, that seems to have dissipated.
:36:10. > :36:14.That is what is worrying, the interplay between markets and
:36:14. > :36:18.politics, in theory, a stitch in time saves nine f they had put the
:36:18. > :36:23.measures in place we wouldn't get into the mess. Political
:36:23. > :36:27.instability is something you can't price, you can do economics but
:36:27. > :36:30.politics? Politically, I'm not trying to defend the European
:36:30. > :36:35.leadership here, politically surely it is much more difficult to make
:36:35. > :36:40.these huge steps up front, and try to convince your voters, OK, the
:36:40. > :36:42.situation doesn't look very serious, we will just make two-and-a-half
:36:42. > :36:46.trillion euros available. Or the situation we are in now, where
:36:46. > :36:52.Europe is burning, and then you go to the voters and say we have no
:36:52. > :36:55.choice but to make this money available. Politically it is much
:36:55. > :37:00.easier to be behind the curve, which is probably why we are there.
:37:00. > :37:05.Can I raise another point. What happens if the euro turns out knob
:37:05. > :37:09.to be as robust as these rather disconnected politicians seem to
:37:09. > :37:17.think. What happens if the euro does fall apart? I think the
:37:17. > :37:20.possibility of that is so serious I think you can discount it it is not
:37:20. > :37:25.completely impossible, - discount it. It is not completely impossible.
:37:25. > :37:29.If we saw it, it would spread depression across the world in way
:37:29. > :37:32.we haven't seen since the war. And we would see a political glue that
:37:32. > :37:36.has held Europe together since the war desapatient. That is why I
:37:36. > :37:41.don't think it will happen, they will go for big sticking plasters,
:37:41. > :37:45.the bigger the better. It is a risk. What do you think? I think
:37:46. > :37:49.unfortunately the consequences of such a break up would be so serious,
:37:49. > :37:54.ultimately they will step back from the brink. Reality is what you will
:37:54. > :38:00.see as a collapse in the currencies, the peripheral economies, the
:38:00. > :38:03.banking systems collapsing. This is a project conceived in political
:38:03. > :38:09.hubris, perpetuated by political dishonesty, they are now completely
:38:09. > :38:12.unsure about what they should do, apart from accruing more powers to
:38:12. > :38:15.themselves? I think ultimately they know what to do, but they have to
:38:15. > :38:17.get the electorate on board, that is part of the problem they are
:38:17. > :38:22.facing. Behind closed doors they understand the commitments they
:38:22. > :38:25.need to make. And the markets believe that's what's going to
:38:25. > :38:29.happen? I'm asking you to generalise in a ridiculous way, but
:38:29. > :38:34.that is what you think to be the case? We think that ultimately we
:38:34. > :38:39.will get a package in place but the risks are significant at this point.
:38:39. > :38:44.As you were saying, Richard, the problem is with political risk it
:38:44. > :38:46.is very hard to make sensible forecasts. We're much more used to
:38:46. > :38:51.analysing the economic environment. This is why it is difficult for
:38:51. > :38:54.investors to place any kind of money into the market in a serious
:38:54. > :38:58.sense. Ultimately we are reliant on what the politicians come up with,
:38:58. > :39:01.that is very hard to forecast. While the rest of Britain and much
:39:01. > :39:05.of the rest of the world has been worrying about whether the euro is
:39:05. > :39:08.going to implode, and if so, how much of the international trading
:39:08. > :39:13.system could fall apart, whether it is the end of life as we know it.
:39:13. > :39:14.The Labour Party has been digesting their leader's speech. The Labour
:39:15. > :39:20.Party Conference in Liverpool continues to resound to Ed
:39:20. > :39:24.Miliband's words of yesterday. That wasn't enough for Kirsty, she
:39:24. > :39:29.wanted to hear from the Labour leader, personally.
:39:29. > :39:35.Miliband, this is all about creating yourself as your own mand.
:39:35. > :39:40.Your close friend and adviser, Mr Wood said we are in the death
:39:40. > :39:43.throws of neo-liberalism? It is a good job I didn't use the phrase,
:39:43. > :39:47.because it is incomprehensible. It is the idea. The idea that there
:39:47. > :39:52.are certain ways of running our economy, based on a certain set of
:39:52. > :39:55.values, short-term, fast buck, in it for grurself, take what you can,
:39:55. > :39:58.which I don't think are the values of the British people. We have to
:39:58. > :40:04.find a different set of values. Those values infected, not just our
:40:04. > :40:08.economy, but the society as well. That means the era of light-touch
:40:08. > :40:11.regulation is not only over for the banks, it is also over for business
:40:11. > :40:15.big and small, that actually the Government will pay a more active
:40:15. > :40:21.role if you are in charge? Government needs to play a more
:40:21. > :40:24.active role. For example, I think, a proper industrial policy, where
:40:24. > :40:29.you build British strength, work with the private sector, across the
:40:29. > :40:33.economy. Particularly in sectors where we can succeed. That is what
:40:33. > :40:37.business wants. You have to be careful in relation to regulation,
:40:37. > :40:41.you don't want to overregulate. I made the distinction between
:40:41. > :40:44.predators and producers, we may come on to that, it is about
:40:44. > :40:47.business practice and the rules the system encourages. Are they rules
:40:47. > :40:53.that encourage long-term wealth for the economy, or does it encourage
:40:53. > :40:57.practices, which, if you like, gauge short-term practices. We will
:40:57. > :41:02.come on to the rules in a moment. Adam Smith, Gordon Brown's
:41:02. > :41:07.favourite philosopher, said it is not from the man nef lens from the
:41:07. > :41:11.butcher or baker, but with regard to their own self-interest we can
:41:11. > :41:15.expect our dinner. He's not wrong about the self-interest. The
:41:15. > :41:20.Government always sets rules. The free market has a certain variety
:41:20. > :41:23.of rules. Do they encourage people to do the right or wrong thing.
:41:23. > :41:28.Capitalism is not always pretty, but it often delivers? I'm in
:41:28. > :41:32.careful of capitalism, it is what kind of capitalism you have. On the
:41:32. > :41:36.point of changing the system and having as a different set of values.
:41:36. > :41:41.Neo-liberalism isn't exactly out of vogue in Europe were are the Social
:41:41. > :41:44.Democrats, apart from in Denmark, they are dead in the water. Part of
:41:44. > :41:50.the problem for Social Democrats is that there was an old way of doing
:41:50. > :41:55.things, which was, as you say, we run the economy in a pretty much
:41:55. > :42:00.unchanged way, let's use the prordz of growth to invest in public
:42:01. > :42:04.services, - proceeds of growth to invest in public services. It had
:42:04. > :42:09.advantages and disadvantages. The disadvantages were it didn't change
:42:09. > :42:13.the way our economy worked enough, we had higher inequality rather
:42:13. > :42:20.than lower. For the next ten years there won't be money around. That
:42:20. > :42:25.route to social justice is not open to us in the way it was before.
:42:25. > :42:28.your world, who desides who are the predator companies and which are
:42:28. > :42:32.the producer companies? It is less about right and wrong companies, it
:42:32. > :42:35.is about the right and wrongs practices. If you think about the
:42:35. > :42:38.Vickers changes, that John Vickers is putting in place, or recommended
:42:38. > :42:41.for the banks. That is about encouraging the banks to think in a
:42:41. > :42:45.different way, and work in a different way, to avoid a financial
:42:45. > :42:48.crisis. Why do I want more competition in the banks, so we get
:42:48. > :42:52.a better deal for the small businesses. It is about creating an
:42:52. > :42:59.economy, that encourages and rewards those who do the right
:42:59. > :43:04.thing, not the wrong thing. praised Sir John Rose for his work
:43:04. > :43:08.as Rolls-Royce. He has gone to work in bank. I knew you would say it.
:43:08. > :43:14.Did you not do your research. Why didn't you say he could be Co Still
:43:14. > :43:17.be a good guy, although Rothschild is a good bank and all about
:43:17. > :43:21.acquisitions? I did say in the speech it is not about targeting
:43:21. > :43:26.one industry, and financial services have to be part of the
:43:26. > :43:29.solution not the problem. It is the practices we see in certain
:43:29. > :43:36.businesses. Let's say financial services delivers ideal in growth,
:43:36. > :43:39.and Britain is desperate growth, is that bad? You said that growth
:43:39. > :43:44.built on stand from predatory activity is growth we don't want.
:43:44. > :43:47.Are we in a position to be picky? We are if it turns out it is not
:43:47. > :43:51.sustainable. What happened in the banking system was we thought lots
:43:51. > :43:58.of wealth had been created, we thought this would be good for
:43:58. > :44:02.Britain, it turned out to be an incredibly shaky and unstable set
:44:02. > :44:09.of foundations. Let's talk about the other end, you talk about the
:44:09. > :44:12.upper echelons. Allocating social housing you said do we treat the
:44:12. > :44:17.person who contributes to their community, the same as the person
:44:17. > :44:21.who doesn't. Is this the deserving and undeserving poor? No I don't
:44:21. > :44:25.think it is. Is that the way it sounds? I hope it doesn't. Let me
:44:25. > :44:32.explain what I think, I see need as important. William Beveridge's
:44:32. > :44:35.vision for the welfare state, in 1940, was about a welfare state
:44:35. > :44:40.that reflected contribution as well. I say, as Manchester City Council
:44:41. > :44:45.is doing, it is right to say if you work, if you volunteer, that should
:44:45. > :44:50.be rewarded. Some people can't work? Of course. There are no jobs
:44:50. > :44:54.in Of course you have to take account of that. The system, in
:44:54. > :44:58.relation to bankers or those on benefits, it sends signal about
:44:58. > :45:02.what kind of behaviour we want to encourage. Why does this matter so
:45:02. > :45:06.much? Let me make this point, it matters so much because the British
:45:06. > :45:10.people, people going out working hard, sloging their guts out, think,
:45:10. > :45:15.well hang on a minute. If people get social housing and at the top
:45:15. > :45:23.of society, I want it based on a deal and a bargain, as I said
:45:23. > :45:28.yesterday. You want people to have extra points on the housing list.
:45:28. > :45:33.For doing good deeds. Is there a tick list, or is it arbitary?
:45:33. > :45:37.way the housing decisions are made is by local authority, it is not Ed
:45:37. > :45:41.Miliband sitting in Whitehall deciding about Mr Jones or Mr Smith
:45:41. > :45:47.about getting help. Sadiq Khan says it is either about being a school
:45:47. > :45:52.governor, or volunteering in your charge, this is very arbitary?
:45:52. > :45:56.proposal is this, which is councils reflect, not just need, in their
:45:56. > :45:58.decisions on housing allocations, but contribution as well. Of course
:45:58. > :46:02.it is for local authorities to make their own decision about how they
:46:02. > :46:05.reflect that. If you go to Manchester and the City Council and
:46:05. > :46:07.see what they are doing, that is precisely what they are doing.
:46:07. > :46:12.say the man from the local Government is looking at what
:46:12. > :46:16.people do when unemployed? That is what they do at the moment. They
:46:16. > :46:21.don't look at whether they cut old people's grass every week. You set
:46:21. > :46:26.up a system that actually ends up leading to some corruption because
:46:26. > :46:28.it is about personal decisions? That is a recipe for pessimism.
:46:28. > :46:32.Come on, Manchester City Council are doing t other councils are
:46:32. > :46:37.trying to do it, it is the basis of the original Beveridge principle.
:46:37. > :46:41.Maurice Glasman, to whom you gave a peerage and look to for ideas, has
:46:41. > :46:45.said at the conference this week that you are a socialist and
:46:45. > :46:50.intellectual with an angry insurgent side. Is your problem
:46:50. > :46:54.he's right? I don't know what it means. You don't know what a
:46:54. > :46:57.socialist and an intellectual is? I'm someone who wants to change
:46:58. > :47:00.Britain, I'm a democratic socialist, I am somebody who made an argument
:47:00. > :47:04.yesterday, one of the reasons people have found it difficult to
:47:04. > :47:12.adjust to my speech is it was an argument. It was an argument about
:47:12. > :47:16.Britain. It was an argument that said, we have to change the ways we
:47:16. > :47:21.do things, business as usual isn't working. It is about saying the way
:47:21. > :47:26.we have run our country for a decade, has to change.
:47:26. > :47:31.Tomorrow morning's front pages now, the Times has news of an on going
:47:31. > :47:41.crisis in the adoption service and the picture of a gorgeous pouting,
:47:41. > :47:57.
:47:57. > :48:04.part-time teacher in a punt in That's all from Newsnight tonight,
:48:04. > :48:10.we are used enough to shows of pet lance from childish and fabulously
:48:10. > :48:18.wealthy footballers. The latest displayers when Carlos Tevez
:48:18. > :48:24.refused to take the pitch despite being paid �200,000 a week. What a
:48:24. > :48:31.compromise in the 1966 Carling Cup, the goalkeeper played on even when
:48:31. > :48:40.he had broken his neck. Watch this Carlos, you so-called striker.
:48:41. > :48:45.Trout plan pounces like a cat. He tells the trainer he's already, but
:48:45. > :48:51.the crowd can see his neck is hurting badly. Troutman is game as
:48:51. > :48:56.of. Injured or not, he's determined to pull his weight. United hold the
:48:56. > :49:00.championship, and now City have the cup. Once again, the experts have
:49:00. > :49:09.been proved wrong, and splendid team work and the extra ounce of
:49:09. > :49:13.stamina have beaten the favourites Pinch yourself it is the end of
:49:13. > :49:15.September, a remarkably hot and sunny day on the cards across large
:49:16. > :49:18.swathes of the UK. Particularly England and Wales. This is where
:49:18. > :49:22.the best of the sunshine will be, this is where the highest of
:49:22. > :49:26.temperatures will be as well. Every bit as hot as it was on
:49:26. > :49:31.Wednesdayful one or two places getting up into the - Wednesday.
:49:31. > :49:34.One or two places getting up to the high 20s. One or two exceptions,
:49:35. > :49:39.along the coasts of south Devon and Cornwall, a bit of mist coming in
:49:39. > :49:43.on the breeze. Making it a bit cooler. Most of South-West England
:49:43. > :49:48.will have a glorious day, across the bulk of Wales. Western coastal
:49:48. > :49:53.areas might be cloudy as times but it will stay dry. For Northern
:49:53. > :49:57.Ireland starting off damp in some places, the rain drying away, but
:49:57. > :50:02.cloudy. Limited brightness, the same applying to much of Scotland.
:50:02. > :50:07.The rain will fade away. Cloudy, in any brightness. Temperatures doing
:50:07. > :50:10.pretty well. Looking to Friday, signs of outbreaks of rain pushing
:50:10. > :50:14.to Northern Ireland, western Scotland in particular. The best of
:50:14. > :50:18.the temperatures, once more, as we end the month, will be across the
:50:18. > :50:23.more southern and eastern areas. We could be breaking records as we go