28/09/2011 Newsnight


28/09/2011

In-depth investigation and analysis of the stories behind the day's headlines. Kirsty Wark reports from the Labour Conference while Jeremy Paxman is in London.


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Transcript


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You think the crisis in Europe doesn't matter to you? Think again,

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if the eurozone collapsed, your savings, your job and your pension

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could all be at risk. Whatever is going on in the European economy

:00:16.:00:20.

now in terms of contraction, could easily turn into a depression and

:00:20.:00:26.

widespread social unrest. On the day that the head honcho of

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the European Commission described the crisis as a baptism of fire for

:00:29.:00:33.

a whole generation, and the Bank of England warned banks here to

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prepare for the worst, can or should the euro survive? The

:00:38.:00:41.

schemes and scheming of the politicians are one thing, but as

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Greece has discovered, when a currency fails, there are human

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casualties. My outrage is on a daily basis, when I go out and I'm

:00:51.:00:55.

very sad, and very gloomy. Does Germany have the will to pull

:00:55.:01:00.

Europe back from the abyss. We're in Berlin, ahead of a crucial vote

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tomorrow. What does Ed Miliband, the wonk who

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got the leadership, really think about market forces. I'm in favour

:01:09.:01:19.
:01:19.:01:20.

of capitalism for the record, it is what kind of capitalism you have.

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Good evening, as statements of the blindingly obvious go, it is a

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record contender. The European Union is facing its greatest

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challenge, according to no less an authority than Jose Manuel Barroso,

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the capo di tutti capi, in the European Commission. It has turned

:01:36.:01:40.

out that the so-called plans to save the euro are a lot less

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substantial than they seemed to be a couple of days ago. The image

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problem of this 17-headed Jedward, can be solved by much further

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integration. Oh, and by the way, we need to levy a financial tax that

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could clobber the City of London. Let's go through this mess, bit by

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bit, about our economics editor, Paul Mason. Where are we up to so

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far? It all reinvolves around the fate of the ESFF which is the

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failout plan, if it is passed we get 440 billion euros, Europe gets

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to spend it on bailing out countries and banks. The Fins

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passed their bit today, we think the Germans will pass their bit of

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it through the parliament tomorrow. Greece has done it by passing an

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austerity plan, yet to implement it. That takes us back to 21st July,

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three months ago. Since then, things have moved on, the economy

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has flattened out, banks in a much worse situation than they were, the

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Bank of England warning our banks to get ready for more stress in the

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system. Really, the politicians, that generation going through this

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baptism of fire is really struggling to catch up with where

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we are. Where are we going? We have been

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looking now at the senario force what could happen. If you expand

:03:05.:03:08.

the 450 billion to 2 trillion, mooted at the weekend, or if you

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don't. If you don't, what will happen if you get a chaotic slide

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out of the euro by the Greeks. I have been discussing this with a

:03:16.:03:26.
:03:26.:03:36.

couple of experts, and got the Currency unions are always designed

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as permanent, and forever, but in history, they don't usually last

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much longer than a decent car. Greece joined the EC the same year

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as the ill-fated Dell lorian was - DeLorean, which prompted the

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question, what is the difference between the DeLorean and the euro,

:03:59.:04:08.
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one is a dodgy vehicle that fell victim to finance, and the DeLorean

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is a Great Barr to go back to the futurement

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:04:23.:04:23.

Even the most realistic scenario has explicit dangers.

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Last night Greece voted through the crucial tax rise that should see it

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get the eight billion euros is needs to survive. Even now there

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are stories of teachers and policemen not being paid, they are

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cutting it fine. Meanwhile, the Fins today, voted

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through the 440 billion euro plan for an expanded bailout plan. And

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Germany probably will tomorrow. What's next? I hope they will try

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and do a minimum of three things, get a default template for Greece

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that could be used for other countries if necessary recapitalise

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the banks so they can move on. And ensure the European Central Bank

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stands ready to buy any amount of Spanish and Italian bonds providing

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the liquidity that might be necessary.

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At the weekend, the G20 mooted a plan to expand the eurobailout to

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two trillion euros, by letting the European Central Bank print more

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money and borrow a lot more money. They gave themselves until the G20

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summit in November to make their minds up. But German politicians

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have been quick to squash the idea, what happens if we get to November

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and there is no stability. Italy's debt at 120% of GDP looks

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unsustainable. There are fears that Italy and Spain could get dragged

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into the danger zone. If there is no megaplan by the Cannes summit of

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the G20, I think, not only will the markets be bitterly disappointed,

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because we're not even back to plan A, there isn't a plan A, but I

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think that we could seriously be in a mode in which we could encounter

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bank runs, deposit runs, bank failures, and whatever is going on

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in the European economy now in terms of contraction, could easily

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turn into a depression and widespread social unrest.

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The last uncontrolled default was ten years ago in Argentina, this is

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what it looked like. The banks closed, the President left by

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helicopter, but the country eventually recovered. So what's

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wrong with doing an Argentina. think we should be sceptical about

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the claims that Argentina had such a good time with default and

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devaluation. It was a dramatic time, the middle-class was wiped out.

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They were rescued not by default and devaluation, but a commodity

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boom which was great for their trade and exports, up until today.

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Things might have looked different if you hadn't the commodity boom,

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there is no similar boom in sight for any eurozone country.

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Right now the politicians are discussing everything behind closed

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doors. But one thing they are open about is that nobody should leave

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the euro. If you fast rewind back to the 130s you can see why.

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A - 1930s. A euro exit for Greece could be contagious. In the 1930s,

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once one company left the gold standard, others followed, Germany,

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Britain, Japan. This is what happened to growth in the 1930, the

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countries that left growth and pursued protectionist and

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expansionist policies recovered first. America and France who clung

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to the currency peg, recovered last. The problem with any repeat of that,

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a chaotic break up of a currency peg is this, it could collapse

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Europe's banks. At UBS we have tried to quantify

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the impact on countries like Greece and Germany of a euro failure, it

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is a huge quantity of GDP, in Greece's case it could be as much

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as 60-80% of GDP. In Germany's case it could be between 30-40%. This is

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just guess work. Right now, the future for Europe looks random, and

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depends on forces moving beyond the control of Governments. The whole

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arrangement looks simultaneously, futuristic and archaic.

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With us to discuss the eurozone we have Amadeu Altafaj Tardio, a

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spokesman for the European Commission, he joins us from the

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continent. Johanna Kyrklund, a fund manager with Schroder Investment

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Management, Peter Oborne, a journalist with the Telegraph, and

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Richard Lambert, as well as an ex- head of the CBI, once edited the

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Financial Times. Looking from Brussels, would you like to

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apologise, Amadeu Altafaj Tardio, for the lack of European leadership

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on this crisis? I don't think we have to apologise, but we have to

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call for a strong political will, and a strong political response

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from European leaders, to prevail over all these market fears, and

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over the narrow minded nationalisms. This is the risk we have to avoid.

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We have to have a strong European response to a problem that has an

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impact on all European citizens, from Athens to London, from Madrid

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to Helsinki. You believe Europe's leaders are in control of events,

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do you? Yes, I think so. European political leaders are taking very

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difficult decisions. It is very hard, for instance, to confront the

:10:02.:10:06.

public opinion with measures of austerity. Politicians usually

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don't like to do that. They know that this has a political course

:10:10.:10:14.

for them, but still, they are responsible enough to tell their

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citizens that come accumulating debt and risks is the most anti-

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social behaviour. They are ready to take the criticism and ready to

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discuss with their European partners. Why don't the markets

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believe you? Because there is something more than market logic

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here at stake. This is a political construction. We have kept the

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solidarity since the end of the Second World War. This is a

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political project. We believe this is the best way to ensure

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prosperity for our citizens, to maintain welfare systems that have

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no comparisons all over the world. There is a strong political will to

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keep these objectives, and therefore, markets should believe

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that we will not let Greece down. We will not, and we cannot avoid a

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default by Greece, for instance. Because the implications of such a

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development would be brutal for our citizens. The British Foreign

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Secretary, William Hague, has described the euro as a burning

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building with no exits. I fully disagree. I think that

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there is a strong commitment by European leaders, in the eurozone

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and outside the eurozone, and even elsewhere, for instance, we were in

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Washington in the IMF annual meetings a few days ago, even

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politicians from the US, from China, from the emerging economies, were

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encouraging the euro to take decisions and to provide a strong

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European response. I don't understand why Mr Hague will be

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less convinced than, for instance, Mr Timothy Geithner in the United

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States. Why don't the markets take the same view of things? I think

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the concern markets are expressing is there the institutional

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framework in Europe, whether it is designed to make quick decisions.

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The reality is what we have seen over the last few years there isn't

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a framework for fast decision making. That is what you need in

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these markets. What they don't like, is this is a political project more

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than anything else? The fact it is a political project. That is fine,

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and I don't think the markets are necessarily questioning that. But a

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political project does need to be supported by institution that is

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can cope with whatever the world economy throws at them. The reality

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is those institutions haven't been apparent. Particularly, so far all

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we have had is a case of European leaders saying don't worry, it will

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be all right, we won't let Greece go, without detail on how they are

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going to do that. What did you make of what we heard from Brussels

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there? Mad, it is really weird, he doesn't know what he's talking

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about. The idea this is a political problem. Excuse me mate, it is an

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economic problem. The euro is collapsing under the weight of its

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own contradictions, and the idea that political will can solve an

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economic problem runs against the basic insight of none other than

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Karl Marx, that economics in the end trumps politics. These guys are

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in total and utter denial. It is terribly frightening listening to

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that idiot in Brussels. Mr Idiot in Brussels, would you like to

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respond? No, I think that these words speak for themselves. Just

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one thing, this is not about being outside or inside the euroarea. The

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UK in 2010 had the deficit that was the same as Greece, it is not the

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euro that is the problem. The euro is, in fact, a shield that has

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protected many of our economies, and it is a factor of stability and

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prosperity. We went through the most difficult crisis since the end

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of the Second World War, all countries have experienced that.

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Richard Lambert, you wanted us to join the euro at one point? Yeah,

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we felt back in the 1990s that the euro would happen whether Britain

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was part of it or not, and these were our major trading partners,

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and it was better to be in than out. You were wrong? Things changed, the

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rules weren't obeyed, France and Germany broke the rules. The banks

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were undercapitalised, massive instability across the area, and

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when the biggest financial crisis came along that was it. You were

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editor of the Financial Times during this period, it was

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predicted very, very clearly by a large number of people. Margaret

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Thatcher, William Hague, the Tory leader, who the FT sneered at day

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in day out. The FT didn't give this story proper economic analysis. It

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took the line of that idiot in Brussels that it is a political

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project. Even though you were a financial newspaper, you didn't

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apply economic analysis. You took the political view. By the way, I

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have a book, I bought a present for you when I heard you were coming on

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the programme, guilty men, you are one of them, I suggest you read it.

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It analyses the performance of the Financial Times. "guilty men" was a

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phrase used by Michael Foot about the Nazis, are Angela Merkel and

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President Barroso the equivalent of the Nazi party? What utter nonsense.

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You were one of a group of people, had you had your way, we would be

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in the position of Greece, taking orders from the EU and the IMF,

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Britain's economic security would have been destroyed, our political

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independence would no longer exist, if the Financial Times had its way.

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Shall we talk about this for more or talk about what is happening.

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you think it is likely Greece will fall out of the euro? Personally I

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feel the numbers now are impossible to manage. It seems to me there are

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a number of scenarios, on the one hand, the extreme position, namely

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a collapse of the euro, is very unlikely, because the economic and

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political consequences would be a disaster, a fiscal union is

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unlikely. The question is, is it possible to get an orderly way of

:16:30.:16:35.

getting Germany and Greece to withdraw from the eurozone. Is it

:16:35.:16:41.

possible? I think it might be. It is something that might happen.

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Germany to withdraw from the eurozone? Getting Germany to

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support Greece in withdrawal. They would need massive liquidity,

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massive support for their banks. What is the perceived wisdom, I

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know it is changing day-to-day in the markets. What is it now about

:16:55.:16:59.

Greece's future? If Greece was actually to withdraw from the euro

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that would be potentially extremely destablising because of the impact

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on the Greek banking system. There is a need to restructure the debt,

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our hope would be without having to leave the euro. That would really

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massively increase the chances of contagion to Europe. Unless it was

:17:16.:17:24.

possible for the ECB and Germany to provide liquidity and support.

:17:24.:17:28.

would help if they were restructuring their debt. I don't

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think they can help offset the consequences of Greece leaving the

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euro that, that fire might be too big. You think they will fall out?

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It is inevitable and it is enor newsly in their interest to get out

:17:42.:17:46.

of the euro. The moment it does it will be competitive. One of the

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points nobody has quite made, is the total inhumanity of the euro,

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it is destroying the livelihoods of millions of Greek businesses and

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people. We will hear a bit from Greece and the human consequences.

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The euroelite. Will you stop referring to them as "this idiot",

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you may think that he's out of contact with reality, he's now

:18:13.:18:16.

walking out of the studio in Brussels, well done, we can't even

:18:16.:18:21.

hold him to account now. Because you have just been grattuously

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offensive to him. Unfortunately, listening to this man, talking such

:18:25.:18:28.

nonsense over a matter of such importance that affects the lives

:18:28.:18:33.

of millions and millions of people, listening to that nonsense, it is

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offensive to decent people that want jobs. What about the

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proposition we heard earlier today from Mr Barroso, who presumably is

:18:40.:18:45.

the boss of our friend in Brussels, who has just walked out of the

:18:45.:18:50.

studio. He clearly believes there is a solution, and the solution is,

:18:50.:18:54.

stronger political union, and fiscal union? Is that even a

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starter given what's happened to the euro? I think it is unlikely.

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Because for two reasons, one is the time it would take a treaty

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revision, political drama, two, is it wouldn't address the fundamental

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problem, which has emerged, which is the southern European countries

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are a lot less competitive than the northern European countries. Were

:19:14.:19:18.

they to be locked into a fiscal union, they would face years of

:19:18.:19:24.

austerity, and of the only way to get a competitive place is if their

:19:24.:19:29.

prices go year after year after year. Is he in fantasy land there?

:19:29.:19:33.

I think that actually the issue is, you can't keep imposing austerity

:19:33.:19:37.

on the southern European economies, that won't sort out their debt

:19:37.:19:41.

problems. They have to grow. will have a bigger impact on the

:19:41.:19:45.

GDP than the debt. Germany has to step in and bail out its neighbours

:19:45.:19:49.

and ultimately money will go from northern Europe to southern Europe.

:19:49.:19:54.

It is Greece that has brought the eurozone to meltdown. There are

:19:54.:20:00.

plenty of people saying after the event, saying they should never be

:20:00.:20:03.

allowed in by the wise-afer-the- event. Now they have to pay the

:20:04.:20:08.

price of earlier lies and fecklessness, politicians lives and

:20:08.:20:18.
:20:18.:20:30.

hubris have consequenced for people. There are human casualties.

:20:30.:20:36.

This summer, Syntagma Square became a theatre of economic war.

:20:36.:20:42.

Now, with the stones of Syntagma permanently scarred, the worry is,

:20:42.:20:51.

so is Greek society. The danger for Greece, just right now, is that

:20:51.:20:55.

Greeks will feel alone and totally hopeless. They are going to abandon

:20:55.:21:03.

any pretence, and not go out rioting, but stop conforming to any

:21:03.:21:08.

sort of rules. Among politicians, sociolologists, protestors, one

:21:08.:21:13.

word keeps coming up when they try to describe what might be happening

:21:13.:21:18.

to Greek society, anomie, absence of law. It is not the overthrow of

:21:19.:21:23.

Government people are worried about, it is the gradual dissolution of

:21:23.:21:33.
:21:33.:21:34.

all the bonds that tie society together.

:21:34.:21:40.

From - From the ages of 15-30, young people in Greece expect

:21:40.:21:45.

nothing from society, from the political system, even from their

:21:45.:21:50.

elders. Their hope resides in their family, and their friends. Once

:21:50.:21:56.

more, is that going to be enough? It might be yes, might be no. If it

:21:56.:22:03.

is a no, if it is a resolute no, then this sort of explosion is

:22:03.:22:13.
:22:13.:22:16.

going to make the rioting of last month to seem almost a joke.

:22:16.:22:19.

When Greek teenagers went back to school this month, they found a

:22:19.:22:23.

shortage of everything. In a society that values education

:22:23.:22:33.

highly, it isth has become a symbol of malaise. They didn't give us

:22:33.:22:40.

books, they gave us a CD. But someone who hasn't a CD can't read.

:22:40.:22:47.

We want to bring us books, no CDs, no nothing, only books.

:22:47.:22:51.

People say there is no money to pay for the books, there is no money to

:22:51.:22:56.

pay for the things you want? There is money. But they give them to the

:22:56.:23:02.

companies. They give the money to the companies to survive from the

:23:02.:23:11.

crisis and we have to pay them. Why we? We don't make the crisis.

:23:11.:23:16.

Their parents are facing lay-offs, reduced hours, unpaid bills, and

:23:16.:23:20.

there is a sense that the basic social contract, pay tax, and get

:23:20.:23:27.

an education, is breaking down. They returned their CDs to

:23:27.:23:34.

parliament with a defiance that has become routine.

:23:34.:23:44.
:23:44.:23:45.

But the majority of Greeks have not been on the demonstrations. In this

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quiet suburb of Athens, there is frugstraigs of a different kind. -

:23:51.:23:56.

frustration of a different kind. Mary a freelance teacher and

:23:56.:24:01.

Demetrios an estate agent. They are part of a private sector feeling

:24:01.:24:04.

the real austerity, tax rises and business downturn has halved their

:24:04.:24:08.

income in two years. The money started to decrease, we realised

:24:08.:24:12.

that we weren't able to buy the things that we used to buy before.

:24:12.:24:19.

So now we only buy the basics. And now a few days lately we aren't

:24:19.:24:24.

able to buy even those. Most people would look at your home and think

:24:24.:24:29.

of you as middle-class? We are middle-class, actually. We were

:24:29.:24:35.

used to a Come To Me High standard of life, let - to a very high

:24:35.:24:39.

standard of life. We used to go out with friends often, we invited

:24:39.:24:43.

friends over to have dinner and barbecues. Now I have to invite a

:24:43.:24:49.

friend for a year, what do you think? Yes. For a year, because I

:24:49.:24:55.

can't afford it. Have either of you been on a demonstration? No. I

:24:55.:25:01.

haven't. And I won't. Because I think it is vain. My outrage is on

:25:01.:25:06.

a daily basis when I go out and I'm very sad and gloomy, because I see

:25:06.:25:10.

the future is quiet pessimistic, let's say. I don't know what's

:25:10.:25:20.
:25:20.:25:22.

going to happen to my kids. I can't find an outlet.

:25:22.:25:26.

In the next phase of the crisis, what matters is the way people

:25:26.:25:31.

react in places like this, the quiet suburbs. Because we don't

:25:31.:25:35.

really understand what happens if the middle-class of a developed

:25:35.:25:44.

country just switch off from politics, and lose hope.

:25:44.:25:50.

The figures tell their own story, suicide is up 40% in a year, thefts

:25:50.:25:55.

and break-ins have double in two years. There is open hostility to

:25:55.:26:02.

migrants, and vagrancy has become a major problem. And, the open

:26:02.:26:05.

lawlessness goes beyond Syntagma Square.

:26:05.:26:11.

The village of Keratea became a no- go area for police, after locals

:26:11.:26:16.

rejected the siting of a rubbish dump.

:26:16.:26:21.

When, in your neighbourhood, you have the feeling that it has been

:26:21.:26:28.

taken over by unrulyness, you don't have the re - reaction of even

:26:28.:26:32.

controlling your own behaviour. Life in the city, not only in at

:26:32.:26:38.

then, but all around Greece, comes crumbling down. Normal life gets

:26:38.:26:44.

more and more difficult. These little things happening every day,

:26:44.:26:51.

are far more important than the overall deficit situation, or the

:26:51.:26:56.

banking crisis. It's like a low- intensity conflict, and it is

:26:56.:26:59.

happening in the strangest of places.

:26:59.:27:04.

I was told to turn up at a courthouse, there was sob an

:27:04.:27:11.

auction of repossessed homes. But the Can't Pay, Won't Pay

:27:11.:27:19.

campaign got there first. The campaign started with the non-

:27:19.:27:26.

payment of road tolls, their aim now is to prevent the payment of

:27:26.:27:34.

the two billion emergency tax passed last week.

:27:34.:27:38.

I am a advertising company. It is unusual to see company advertising

:27:38.:27:48.

people protesting in a court. Why? The Greek people have lost, we have

:27:48.:27:58.
:27:58.:27:58.

lost our lives. We have lost our lives. Everything. These protestors

:27:58.:28:03.

are drawn from the very classes that frequent the cafes around

:28:03.:28:09.

Syntagma, professionals, small business owners, the unlikeliest of

:28:09.:28:11.

rebels. You are not worried that creating

:28:11.:28:15.

this you create some social breakdown, where the whole bonds of

:28:15.:28:21.

Greek society start falling apart? I don't believe that this situation

:28:21.:28:31.

is anarchy. We pay those taxes we owe. Not the illegal taxes, not the

:28:31.:28:38.

taxes that came from an order somewhere else outside Greece.

:28:38.:28:43.

Greeks know, whoever they vote for, that the euro, and their own debt

:28:43.:28:49.

dictates what happens next. There is a sense of listlessness, and

:28:49.:28:55.

among political scientists, fear of the unknown. If we face a system of

:28:55.:28:59.

potential collapse, how far away from that are we? It might come

:28:59.:29:07.

very sudden. It might come in a flash.

:29:07.:29:17.
:29:17.:29:18.

Because the sense of helplessness is very intense, just right now.

:29:18.:29:21.

When the issue was economics and the protests were led by the

:29:21.:29:28.

traditional left, the dynamics were, at least, predictable.

:29:28.:29:33.

This new problem of anomie, low- level conflict, and quiet

:29:33.:29:38.

dispassion injects uncertainty. And you can see it on the faces of

:29:38.:29:44.

nearly every social group. We have been joined now in the studio by

:29:44.:29:48.

Katinka Barysch, from the centre for European reform. Do you get the

:29:48.:29:52.

feeling that European leaders are quite aware of what some of the

:29:52.:29:58.

social consequences of this may be? I believe so. Because it has been

:29:58.:30:04.

reported enough. The discussions at the moment are more about Greece

:30:04.:30:09.

being put on a long-term reform plan. This isn't only about Greece

:30:09.:30:14.

trying to squeeze another euro or five out of its budget, but is this

:30:14.:30:18.

country on course to have a viable economic model. Or does it need to

:30:18.:30:24.

be propped up in perpetuity. saw there in a country, that some

:30:24.:30:27.

people who sounded absolutely at the end of their tether. This is

:30:27.:30:32.

clearly, potentially, a place of social breakdown? Yes. That is a

:30:32.:30:39.

price worth risking is it? No, I definitely wouldn't say so. At the

:30:39.:30:44.

moment the idea that the euro can be rescued by imposing austerity on

:30:44.:30:48.

all European countries at the same time is clearly crazy. What Greece

:30:48.:30:53.

needs to do first and for most is restructure its debt, and cup up

:30:53.:30:58.

with a long-term plan of restruck - come up with a long-term plan of

:30:58.:31:01.

restructuring. And moving to an economic model that means there are

:31:01.:31:05.

things people want to buy. In the meantime, there are really serious

:31:05.:31:13.

risks of social breakdown? I saw that in the shocking report. Yes.

:31:13.:31:17.

It is the IMF and the ECB and the European Commission negotiating

:31:17.:31:19.

with the Greek Government at the moment about what needs to be done.

:31:20.:31:23.

There is a second bailout just going through the system for Greece,

:31:23.:31:29.

and I don't know where the balance will be struck in the end. In the

:31:29.:31:34.

end whether the euro and indeed the dreams of Europe's political elite,

:31:34.:31:39.

lives or dies, is a matter in the hands, or the bank account of the

:31:39.:31:42.

German people. The parliament in Berlin meets to decide whether it

:31:42.:31:45.

likes the idea of increasing the bailout fund.

:31:45.:31:51.

What do you think is going to happen? It is confidently expected

:31:51.:31:55.

that parliament will approve the bailout fund tomorrow. The question

:31:55.:31:58.

is, will Angela Merkel get sufficient support from her own

:31:58.:32:02.

centre right coalition to pass it, or will she face such a rebellion

:32:02.:32:07.

from her own supporters, so disgusted are many of them at the

:32:07.:32:10.

Greek bailout and the apparently profligate Greek, that she will

:32:10.:32:14.

have to rely on the opposition. That would be hugely embarrassing

:32:14.:32:17.

for Chancellor Merkel, and undermine the stability of the

:32:17.:32:21.

ruling coalition. At the moment it is very much in the balance. It

:32:21.:32:25.

needs 1 rebels to force her into a corner. At the moment it looks like

:32:25.:32:29.

there could well be 19 rebels. What is your feeling about whether

:32:29.:32:33.

the Germans are likely to batch the much bigger bailout being talked

:32:33.:32:38.

about as being - to back the much bigger bailout being talked about

:32:38.:32:42.

is being the main thing? That is not being talked about tomorrow,

:32:42.:32:46.

because on the table they are looking backwards at a measure that

:32:46.:32:51.

they supposedly approved two months ago. That's on the face of it.

:32:51.:32:54.

Everybody suspects that this is a Trojan horse measure. Behind that,

:32:54.:32:59.

there will be a lot of undeclared baggage and further billions going

:32:59.:33:06.

to help the Greeks. People don't necessarily like that. We have been

:33:06.:33:10.

in Wolfsburg today, where VW have their headquarters. It is a place

:33:10.:33:15.

that has done very well out of the euro, based on exports and profited

:33:15.:33:19.

from the euro. Even there people are suspicious of pouring good

:33:19.:33:22.

money after bad, as they see it, they are worried about the

:33:22.:33:27.

accountability of it all. They are not too happy at all, desspite the

:33:27.:33:29.

assurances from the German Finance Minister that there is no more

:33:29.:33:35.

money to go after tomorrow's round. Do you think that Angela Merkel is

:33:35.:33:41.

strong enough, politically, to save the euro? Not singlehandedly,

:33:41.:33:44.

surely not. No European leader would be able to do that. It is, of

:33:44.:33:47.

course, true that everybody at the moment is looking towards Berlin,

:33:47.:33:53.

and what the Germans are going to decide. Although she can't do it

:33:53.:33:57.

singlehandedly, a German veto frustrates any plan. The Finance

:33:57.:34:00.

Minister, has already said this much bigger fund is out of the

:34:00.:34:04.

question? He has to say that at the moment, because otherwise the vote

:34:04.:34:08.

tomorrow won't go through. shouldn't take his words at face

:34:08.:34:13.

value? Of course it is not the last word. They have said before the

:34:13.:34:19.

German politicians, the first Greek bailout will be a one-off, the

:34:19.:34:21.

European Financial Stability Facility would be a temporary thing,

:34:21.:34:26.

now it is permanent. The ECB would never buy bonds, it is buying bonds

:34:26.:34:29.

now. This is not the last word from the German Government, but they

:34:29.:34:33.

have to take it step by step, and once they have the new rules on the

:34:33.:34:36.

bailout fund in place, they will take the next step. It must be very

:34:36.:34:40.

interesting. All this stuff is being said to placate the markets.

:34:40.:34:44.

But the markets are canny enough, presumably, to see through it,

:34:44.:34:47.

aren't they? You were asking the question, can Angela Merkel save

:34:47.:34:52.

Europe? Ultimately it does come down to Germany saving Europe,

:34:52.:34:56.

unfortunately yes other countries like France can contribution to the

:34:56.:35:01.

FSF, if you want to expand that it will be Germany footing the bill,

:35:01.:35:07.

not France, or Finland or the other Triple A companies, it will be

:35:07.:35:13.

Germany. They must be discounting any

:35:13.:35:15.

reassurances from European politicians? Certainly we have

:35:15.:35:18.

learned to disregard statements, because we have seen a lot of

:35:18.:35:22.

promises and not many facts, yet. There has been a bit of hope, just

:35:22.:35:24.

over the last couple of days, there is a feeling maybe there is

:35:24.:35:30.

something come uting out of the G20. This dishonesty on the part of

:35:30.:35:36.

politicians is a great part of the problem, isn't it? The language

:35:36.:35:40.

used there is why, essentially, they have been consistently behind

:35:40.:35:47.

the curve over the last month. Action they took in July, had they

:35:47.:35:50.

taken that at the beginning of the year, that might be a firebreak.

:35:50.:35:56.

They are always behind because they have to assure the domestic

:35:56.:36:01.

constituencies. Like the G20 back in 2008, there was a central

:36:01.:36:06.

initiative and drive to get stuff done, that seems to have dissipated.

:36:06.:36:10.

That is what is worrying, the interplay between markets and

:36:10.:36:14.

politics, in theory, a stitch in time saves nine f they had put the

:36:14.:36:18.

measures in place we wouldn't get into the mess. Political

:36:18.:36:23.

instability is something you can't price, you can do economics but

:36:23.:36:27.

politics? Politically, I'm not trying to defend the European

:36:27.:36:30.

leadership here, politically surely it is much more difficult to make

:36:30.:36:35.

these huge steps up front, and try to convince your voters, OK, the

:36:35.:36:40.

situation doesn't look very serious, we will just make two-and-a-half

:36:40.:36:42.

trillion euros available. Or the situation we are in now, where

:36:42.:36:46.

Europe is burning, and then you go to the voters and say we have no

:36:46.:36:52.

choice but to make this money available. Politically it is much

:36:52.:36:55.

easier to be behind the curve, which is probably why we are there.

:36:55.:37:00.

Can I raise another point. What happens if the euro turns out knob

:37:00.:37:05.

to be as robust as these rather disconnected politicians seem to

:37:05.:37:09.

think. What happens if the euro does fall apart? I think the

:37:09.:37:17.

possibility of that is so serious I think you can discount it it is not

:37:17.:37:20.

completely impossible, - discount it. It is not completely impossible.

:37:20.:37:25.

If we saw it, it would spread depression across the world in way

:37:25.:37:29.

we haven't seen since the war. And we would see a political glue that

:37:29.:37:32.

has held Europe together since the war desapatient. That is why I

:37:32.:37:36.

don't think it will happen, they will go for big sticking plasters,

:37:36.:37:41.

the bigger the better. It is a risk. What do you think? I think

:37:41.:37:45.

unfortunately the consequences of such a break up would be so serious,

:37:46.:37:49.

ultimately they will step back from the brink. Reality is what you will

:37:49.:37:54.

see as a collapse in the currencies, the peripheral economies, the

:37:54.:38:00.

banking systems collapsing. This is a project conceived in political

:38:00.:38:03.

hubris, perpetuated by political dishonesty, they are now completely

:38:03.:38:09.

unsure about what they should do, apart from accruing more powers to

:38:09.:38:12.

themselves? I think ultimately they know what to do, but they have to

:38:12.:38:15.

get the electorate on board, that is part of the problem they are

:38:15.:38:17.

facing. Behind closed doors they understand the commitments they

:38:17.:38:22.

need to make. And the markets believe that's what's going to

:38:22.:38:25.

happen? I'm asking you to generalise in a ridiculous way, but

:38:25.:38:29.

that is what you think to be the case? We think that ultimately we

:38:29.:38:34.

will get a package in place but the risks are significant at this point.

:38:34.:38:39.

As you were saying, Richard, the problem is with political risk it

:38:39.:38:44.

is very hard to make sensible forecasts. We're much more used to

:38:44.:38:46.

analysing the economic environment. This is why it is difficult for

:38:46.:38:51.

investors to place any kind of money into the market in a serious

:38:51.:38:54.

sense. Ultimately we are reliant on what the politicians come up with,

:38:54.:38:58.

that is very hard to forecast. While the rest of Britain and much

:38:58.:39:01.

of the rest of the world has been worrying about whether the euro is

:39:01.:39:05.

going to implode, and if so, how much of the international trading

:39:05.:39:08.

system could fall apart, whether it is the end of life as we know it.

:39:08.:39:13.

The Labour Party has been digesting their leader's speech. The Labour

:39:13.:39:14.

Party Conference in Liverpool continues to resound to Ed

:39:15.:39:20.

Miliband's words of yesterday. That wasn't enough for Kirsty, she

:39:20.:39:24.

wanted to hear from the Labour leader, personally.

:39:24.:39:29.

Miliband, this is all about creating yourself as your own mand.

:39:29.:39:35.

Your close friend and adviser, Mr Wood said we are in the death

:39:35.:39:40.

throws of neo-liberalism? It is a good job I didn't use the phrase,

:39:40.:39:43.

because it is incomprehensible. It is the idea. The idea that there

:39:43.:39:47.

are certain ways of running our economy, based on a certain set of

:39:47.:39:52.

values, short-term, fast buck, in it for grurself, take what you can,

:39:52.:39:55.

which I don't think are the values of the British people. We have to

:39:55.:39:58.

find a different set of values. Those values infected, not just our

:39:58.:40:04.

economy, but the society as well. That means the era of light-touch

:40:04.:40:08.

regulation is not only over for the banks, it is also over for business

:40:08.:40:11.

big and small, that actually the Government will pay a more active

:40:11.:40:15.

role if you are in charge? Government needs to play a more

:40:15.:40:21.

active role. For example, I think, a proper industrial policy, where

:40:21.:40:24.

you build British strength, work with the private sector, across the

:40:24.:40:29.

economy. Particularly in sectors where we can succeed. That is what

:40:29.:40:33.

business wants. You have to be careful in relation to regulation,

:40:33.:40:37.

you don't want to overregulate. I made the distinction between

:40:37.:40:41.

predators and producers, we may come on to that, it is about

:40:41.:40:44.

business practice and the rules the system encourages. Are they rules

:40:44.:40:47.

that encourage long-term wealth for the economy, or does it encourage

:40:47.:40:53.

practices, which, if you like, gauge short-term practices. We will

:40:53.:40:57.

come on to the rules in a moment. Adam Smith, Gordon Brown's

:40:57.:41:02.

favourite philosopher, said it is not from the man nef lens from the

:41:02.:41:07.

butcher or baker, but with regard to their own self-interest we can

:41:07.:41:11.

expect our dinner. He's not wrong about the self-interest. The

:41:11.:41:15.

Government always sets rules. The free market has a certain variety

:41:15.:41:20.

of rules. Do they encourage people to do the right or wrong thing.

:41:20.:41:23.

Capitalism is not always pretty, but it often delivers? I'm in

:41:23.:41:28.

careful of capitalism, it is what kind of capitalism you have. On the

:41:28.:41:32.

point of changing the system and having as a different set of values.

:41:32.:41:36.

Neo-liberalism isn't exactly out of vogue in Europe were are the Social

:41:36.:41:41.

Democrats, apart from in Denmark, they are dead in the water. Part of

:41:41.:41:44.

the problem for Social Democrats is that there was an old way of doing

:41:44.:41:50.

things, which was, as you say, we run the economy in a pretty much

:41:50.:41:55.

unchanged way, let's use the prordz of growth to invest in public

:41:55.:42:00.

services, - proceeds of growth to invest in public services. It had

:42:01.:42:04.

advantages and disadvantages. The disadvantages were it didn't change

:42:04.:42:09.

the way our economy worked enough, we had higher inequality rather

:42:09.:42:13.

than lower. For the next ten years there won't be money around. That

:42:13.:42:20.

route to social justice is not open to us in the way it was before.

:42:20.:42:25.

your world, who desides who are the predator companies and which are

:42:25.:42:28.

the producer companies? It is less about right and wrong companies, it

:42:28.:42:32.

is about the right and wrongs practices. If you think about the

:42:32.:42:35.

Vickers changes, that John Vickers is putting in place, or recommended

:42:35.:42:38.

for the banks. That is about encouraging the banks to think in a

:42:38.:42:41.

different way, and work in a different way, to avoid a financial

:42:41.:42:45.

crisis. Why do I want more competition in the banks, so we get

:42:45.:42:48.

a better deal for the small businesses. It is about creating an

:42:48.:42:52.

economy, that encourages and rewards those who do the right

:42:52.:42:59.

thing, not the wrong thing. praised Sir John Rose for his work

:42:59.:43:04.

as Rolls-Royce. He has gone to work in bank. I knew you would say it.

:43:04.:43:08.

Did you not do your research. Why didn't you say he could be Co Still

:43:08.:43:14.

be a good guy, although Rothschild is a good bank and all about

:43:14.:43:17.

acquisitions? I did say in the speech it is not about targeting

:43:17.:43:21.

one industry, and financial services have to be part of the

:43:21.:43:26.

solution not the problem. It is the practices we see in certain

:43:26.:43:29.

businesses. Let's say financial services delivers ideal in growth,

:43:29.:43:36.

and Britain is desperate growth, is that bad? You said that growth

:43:36.:43:39.

built on stand from predatory activity is growth we don't want.

:43:39.:43:44.

Are we in a position to be picky? We are if it turns out it is not

:43:44.:43:47.

sustainable. What happened in the banking system was we thought lots

:43:47.:43:51.

of wealth had been created, we thought this would be good for

:43:51.:43:58.

Britain, it turned out to be an incredibly shaky and unstable set

:43:58.:44:02.

of foundations. Let's talk about the other end, you talk about the

:44:02.:44:09.

upper echelons. Allocating social housing you said do we treat the

:44:09.:44:12.

person who contributes to their community, the same as the person

:44:12.:44:17.

who doesn't. Is this the deserving and undeserving poor? No I don't

:44:17.:44:21.

think it is. Is that the way it sounds? I hope it doesn't. Let me

:44:21.:44:25.

explain what I think, I see need as important. William Beveridge's

:44:25.:44:32.

vision for the welfare state, in 1940, was about a welfare state

:44:32.:44:35.

that reflected contribution as well. I say, as Manchester City Council

:44:35.:44:40.

is doing, it is right to say if you work, if you volunteer, that should

:44:41.:44:45.

be rewarded. Some people can't work? Of course. There are no jobs

:44:45.:44:50.

in Of course you have to take account of that. The system, in

:44:50.:44:54.

relation to bankers or those on benefits, it sends signal about

:44:54.:44:58.

what kind of behaviour we want to encourage. Why does this matter so

:44:58.:45:02.

much? Let me make this point, it matters so much because the British

:45:02.:45:06.

people, people going out working hard, sloging their guts out, think,

:45:06.:45:10.

well hang on a minute. If people get social housing and at the top

:45:10.:45:15.

of society, I want it based on a deal and a bargain, as I said

:45:15.:45:23.

yesterday. You want people to have extra points on the housing list.

:45:23.:45:28.

For doing good deeds. Is there a tick list, or is it arbitary?

:45:28.:45:33.

way the housing decisions are made is by local authority, it is not Ed

:45:33.:45:37.

Miliband sitting in Whitehall deciding about Mr Jones or Mr Smith

:45:37.:45:41.

about getting help. Sadiq Khan says it is either about being a school

:45:41.:45:47.

governor, or volunteering in your charge, this is very arbitary?

:45:47.:45:52.

proposal is this, which is councils reflect, not just need, in their

:45:52.:45:56.

decisions on housing allocations, but contribution as well. Of course

:45:56.:45:58.

it is for local authorities to make their own decision about how they

:45:58.:46:02.

reflect that. If you go to Manchester and the City Council and

:46:02.:46:05.

see what they are doing, that is precisely what they are doing.

:46:05.:46:07.

say the man from the local Government is looking at what

:46:07.:46:12.

people do when unemployed? That is what they do at the moment. They

:46:12.:46:16.

don't look at whether they cut old people's grass every week. You set

:46:16.:46:21.

up a system that actually ends up leading to some corruption because

:46:21.:46:26.

it is about personal decisions? That is a recipe for pessimism.

:46:26.:46:28.

Come on, Manchester City Council are doing t other councils are

:46:28.:46:32.

trying to do it, it is the basis of the original Beveridge principle.

:46:32.:46:37.

Maurice Glasman, to whom you gave a peerage and look to for ideas, has

:46:37.:46:41.

said at the conference this week that you are a socialist and

:46:41.:46:45.

intellectual with an angry insurgent side. Is your problem

:46:45.:46:50.

he's right? I don't know what it means. You don't know what a

:46:50.:46:54.

socialist and an intellectual is? I'm someone who wants to change

:46:54.:46:57.

Britain, I'm a democratic socialist, I am somebody who made an argument

:46:58.:47:00.

yesterday, one of the reasons people have found it difficult to

:47:00.:47:04.

adjust to my speech is it was an argument. It was an argument about

:47:04.:47:12.

Britain. It was an argument that said, we have to change the ways we

:47:12.:47:16.

do things, business as usual isn't working. It is about saying the way

:47:16.:47:21.

we have run our country for a decade, has to change.

:47:21.:47:26.

Tomorrow morning's front pages now, the Times has news of an on going

:47:26.:47:31.

crisis in the adoption service and the picture of a gorgeous pouting,

:47:31.:47:41.
:47:41.:47:57.

part-time teacher in a punt in That's all from Newsnight tonight,

:47:57.:48:04.

we are used enough to shows of pet lance from childish and fabulously

:48:04.:48:10.

wealthy footballers. The latest displayers when Carlos Tevez

:48:10.:48:18.

refused to take the pitch despite being paid �200,000 a week. What a

:48:18.:48:24.

compromise in the 1966 Carling Cup, the goalkeeper played on even when

:48:24.:48:31.

he had broken his neck. Watch this Carlos, you so-called striker.

:48:31.:48:40.

Trout plan pounces like a cat. He tells the trainer he's already, but

:48:41.:48:45.

the crowd can see his neck is hurting badly. Troutman is game as

:48:45.:48:51.

of. Injured or not, he's determined to pull his weight. United hold the

:48:51.:48:56.

championship, and now City have the cup. Once again, the experts have

:48:56.:49:00.

been proved wrong, and splendid team work and the extra ounce of

:49:00.:49:09.

stamina have beaten the favourites Pinch yourself it is the end of

:49:09.:49:13.

September, a remarkably hot and sunny day on the cards across large

:49:13.:49:15.

swathes of the UK. Particularly England and Wales. This is where

:49:16.:49:18.

the best of the sunshine will be, this is where the highest of

:49:18.:49:22.

temperatures will be as well. Every bit as hot as it was on

:49:22.:49:26.

Wednesdayful one or two places getting up into the - Wednesday.

:49:26.:49:31.

One or two places getting up to the high 20s. One or two exceptions,

:49:31.:49:34.

along the coasts of south Devon and Cornwall, a bit of mist coming in

:49:35.:49:39.

on the breeze. Making it a bit cooler. Most of South-West England

:49:39.:49:43.

will have a glorious day, across the bulk of Wales. Western coastal

:49:43.:49:48.

areas might be cloudy as times but it will stay dry. For Northern

:49:48.:49:53.

Ireland starting off damp in some places, the rain drying away, but

:49:53.:49:57.

cloudy. Limited brightness, the same applying to much of Scotland.

:49:57.:50:02.

The rain will fade away. Cloudy, in any brightness. Temperatures doing

:50:02.:50:07.

pretty well. Looking to Friday, signs of outbreaks of rain pushing

:50:07.:50:10.

to Northern Ireland, western Scotland in particular. The best of

:50:10.:50:14.

the temperatures, once more, as we end the month, will be across the

:50:14.:50:18.

more southern and eastern areas. We could be breaking records as we go

:50:18.:50:23.