28/10/2011 Newsnight


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The richest continent on earth, Europe decides how to solve the


Europe decides how to solve the debt crisis.


And then hits China for a bailout. What will be the price of making


Beijing Europe's lender of last resort. The Europeans are so weak


that they have to beg China to ask for its contribution to the bailout


fund, which I think is a bit humiliating. Is this a turning


point in the rise of China, and perhaps the eclipse of Europe. Also


tonight, top directors' pay source by almost 50%, the Prime Minister


talk - soars by more than 50%, the Prime Minister talks about more


transparency. Is that because the Government doesn't know what to do.


Their first born would be first in line to the throne, boy or girl. If


it is good enough for a Queen, why not good enough for Dukes, Duchess


and Lords and Laidies. We will hear from our gates.


Anyone travelling in China in the past few years struck by something


exorderry, the country managers to call itself a developing country


and merge - manages to call itself a developing country and a


superpower. The fate of Europe lies in the kapbdz of a communist


capital. What will it demand in return, and how much are we


witnessing a power shift in Europe towards Germany, while Europe risks


being eclipsed by Asia. As China's economy powers ahead,


old assumptions are being recast, and new relationships forged. Today


the head of Europe's stability fund was in Beijing, looking for 70


billion euros. That may be a lot, but it is less than a 30th of the


foreign currency war chest that China has amassed through its trade


surplus. The foreign exchange reserves of China go up every month,


therefore there is a need for investment. And that is also my


experience talking to the Chinese authorities, that they are


interested in finding attractive, solid, safe investment


opportunities. Across the EU there is a hunger for


inward investment. This development on the whirr ral is being financed


in part by Chinese money. If this is welcome in these times of


recession, why should EU borrowing be any different. The Chinese are


very careful about their public image. What they get in return for


any assistance that they might give. Of course we don't know exactly


what is being discussed in Beijing, but we do know, on past record,


when the Chinese have made an investment, they will also raise


other issues, like, we don't like that our currency gets criticised.


We need market economy status recognition, they raise other


issues that has been bothering them for some time, and this quid pro


quo is very much in line with how they normally negotiate, I think,


as they think about helping Europe, these other issues are likely to


surface, so this is much broader than just the Chinese thinking,


could I get the best return for my money. The Chinese leadership


strings could mean ending an arms embargo, stopping criticisim of


their trade practices and gaining greater access to European


technology. For some Europeans that is too high a price. The most


important trading partner of China is Europe, but I regret, in way,


that the Europeans are so weak that they have to beg China to ask for


its contribution to the bailout fund. Which I think is a bit


humiliating. The perception of European weakness has already


caused flack for Nicolas Sarkozy, as he returned home from this


week's summit, he went on TV, insisting he had held his own with


Germany and was not going begging to China. TRANSLATION: If the


Chinese, who have 60% of the worldwide reserves decide to invest


in the euro rather than the dollar, why refuse. Afterall, there is


nothing to negotiate. Our independent will not be affected in


any way. Why shouldn't we accept that the Chinese have confidence in


the eurozone and deposit part of their excess funds in our funds or


banks. Inevitably, China's leaders see in Europe's current crisis, an


opportunity. They want to move from the shadow of history, when the EU


took a sort of very aspirational, idealistic attitude, used to some


time lecture and hector China about internal issues, it now says we are


equal, we are partners, we don't want that kind of relationship any


more. We have had enough of it. The conversation between China's


leadership and the western powers will continue at next week's G20


Summit in France. This week's developments will put China in a


strong position. Europe's begging bowl approach to China provides the


leadership there with a great opportunity, to further their own


long-term goal of a more equal relationship, with the developed


economies of the west. Now that's part of a long historical trend, of


course, of power moving eastwards. But that won't stop opposition


forces in many European countries from blaming today's leaders for


going to Beijing in such a craven manner.


Have you seen really, that when the President of China went to the UK,


or to France, or to Italy, he was told something bad about the


Chinese attitudes, in relation to freedom of speech, have you seen


recently any leader in the EU saying that China has some change


to accept in its social policy, with regard to its own workers? No.


No it has already begun. For the moment, China's leaders haven't


agreed to help out. Like many others, they want to know more


about Europe's latest bailout man. But few believe they will re-


bailout plan. But few believe they will refuse, since Europe has made


a point for eloquently than China ever could.


I'm joined by Georg Boomgaarden, Ha-Joon Chang an economist who


specialises in China, Pippa Mlmgren, economics adviser to George Bush,


and Timothy Garton Ash, Professor of European Studies at Oxford. How


embarrassing is it for the richest continent on earth to go to chine


that to help solve these economic prob - China, to solve these


economic problems, why can't Europe or Germany solve it for themselves?


We have a global world economy, in a global world economy, it is very


positive and good if everyone in this global economy who can and


wants to acts as positively where crises happens. It is a good thing,


going to China saying, please, give us some money? It is not, please,


give us some money, it is an offer to invest money. It is an offer to


invest money, certainly into a region, which for China is also


very important. We are the biggest client. This is certainly something


very important. I think trade relations is not a game, it is


normally putting both sides on a better level. Timothy Garton Ash,


it is good for the world, it is good for China to be part of this?


I think the ambassador has put magnificent spin on it. Look, the


eurozone did, theoretically have another option, which is to say


they will do it ourselves, save it ourselves, make the European


Central Bank the lender of last resort, issue Euro-bonds,


guaranteed by Germany, and have Germany fiscal discipline, but the


fact is, across the eurozone, but the fact is, the German people


didn't want that, they wouldn't let Chancellor Mercury do that, nor did


the Greek or Italian people. That is - glp ska Chancellor Merkel do


that, nor did the Greek or Italian people, that is why we are going


with the begging bowl to China. It is a small milestone on the longer


term with the shift from west to east. If he's right, it is easier


for Angela Merkel to go to Beijing than the Bundestag, is that true?


It is not about going to the Bundestag or Beijing, it is about


how far Europeans are able to be united, and strong Europe in a


globalised world. We are on the way, this is not something which is


already finished. I know we discussed it earlier, when you want


to have a common policy on that, then you should never, never touch


the incompetence of the ECB, this is an - independence of the ECB, it


is an ECB decision, and if you don't do not do that you have an


inflationary machine, this is tax on the poor. How is this going to


be seen in China, what do you think they will l they want out of this


relationship? At one level, this is not a big deal, because China has


already bought quite a lot of European bonds. But it is a


watershed in a sense that it is being turned into some kind of


formal arrangement. I do not know exact whree what will change hands.


- exactly what will change hands, but China does take on the attitude


that they want a more equal relationship. Exactly what that


would involve, would it involve discussions about exchange rate


policy, or human rights, I don't know. There is one way of looking


at it, they have already propped up the American economy, thank you


very much, it has not changed what the Obama administration does or


doesn't do, why should we worry about it? Absolutely, that isn't


what is on the table here. What is on the table is an investment that


is effectively guaranteed. It is not buying the bonds, if it were


that simple they would just go out and buy them, they are available on


the open market. This is a totally different deal. I think it is


precisely Asim thee Ash says, it is - Asim thee Ash says, it is because


the Bundestag doesn't approve and they can't inflate the Governments


can't accept that, they have to reach to outside parties. Of course


the Chinese were not wanting this deal, now it is on the table they


are going to say we have some other requests, we would like to buy a


lot of hard assets in western Europe, infrastructure, agriculture,


all sorts of things, with a privileged price. It brings an


income with implications. Also I think foreign policy does get sold


in a Chinese direction. Meaning what, western medias will shut up


about Tibet? Correct, and a number of issues. That shifts the dialogue.


Does it permanently change it? No, but it shifts the dialogue. Do you


think it will have that effect, perhaps not a revolutionary effect,


but slowly the mood will change? have no doubt about that. That it


will be slowly, slowly chipping away, market economy status, the


issue of the arms embargo. Please don't invite the Dalai Lama, go a


bit softer on human rights. And let me add one very important thing,


which is there is one United States, but 27 states in the European Union.


40% of Chinese direct investment is in southern and Eastern Europe.


These are relatively weak, small economies. If it goes on like that,


and it is likely to in the crisis, you get almost like something of a


China lobby inside the European Union. One should not underestimate


the potential for the power shift. That is a big problem for the


European Union? I don't think at all, if you look at the decisions


of Brussels, this is a very small part. You are absolutely right, the


first element in it is the very big package giving leverage to the EFSF,


this is the real big shot. Some spoke of Baz zook ka, I don't like


- bazooka, I don't like the military comparisons. These are the


so-called special vehicles, they are a very small part of it. There


it is not between the Bundestag and China, it is between something else.


It is between responsible investor, who is asked, and we have excellent


experience with sovereign wealth funds, from the gulf states, China


and others, it is not looking for money in circles which get into


panic when just a pundit comes up and tells something panicky again.


They go to IRA liable lender. go to a reliable lender, trying to


get the Chinese perspective on this, am I right in thinking the average


employed worker in Beijing earns less than the average unemployed


person in the European Union. Et competitive question on the long-


term - the competitive question on the long-term is going in China's


direction? For one thing I'm not Chinese, I don't speak for the


country. But I'm not as optimistic as other people about China's


future. You know it has its own internal problems. There is a huge


realistic bubble, many of the projects they launched with the


2008 fiscal stimulus package are going sour, and there is a huge


inequality growing. At the moment the economy is moving at a very


high-speed, 9-10%, everyone is happy, when that stops, we don't


know if China can continue on that. Doesn't that bear out the


ambassador's big point, which is we are all in this together, like the


world, China has a part to play and we shouldn't be frightened of it?


Forget for a moment that it is China, every investor has to be


scared about putting more capital into Europe. Why should the Spanish,


Italians and Irish pay 100% of their debt, if the Greeks only pay


half. We just did a haircut on the Greek debt. The pressure on the


rest of the Europeans to implement a level of austerity that I don't


think human beings can bear. We are going to see a lot of pushback. The


politicians may say we agree to the austerity, the public won't agrow.


They will say why should we pay if those guys didn't. The risk to the


bondholders is immense. Forget their Chinese. Consider if it is so


risky that you have to beg an investor, this is telling you


something about the situation. is fair point, is it not? No it is


not. I really beg to disagree. It is not a fair point, because it is


very unfair to the different countries in Europe. Maybe over the


Atlantic Europe looks like one, it is not. And Greece is a real


special case and what is part of these decisions is isolating Greece


from the others, because this was a very long-term, you had an increase


in salaries, for example, 135% in the last 12 years, nobody had this,


in Spain you had real estate crisis and in Ireland, Portugal is still


developing, but all of them, Spain, Portugal, Greece and now also Italy,


they are all on the good pass. One final area, how will Germans


feel about this, we know the burden of history on everybody in Europe.


What we are seeing this week is Germany is not just the economic


motor but has to be the political motor of the EU, because nobody


else can do it. Does that change the mine set within Europe and


Germany in particular which you know - mind set within Europe and


Germany in particular which you know well? Germany is Europe's


central power, that is a reality for many years. At least since


unification again, and particularly when it comes to economics. We in


Britain or France can hardly object to the Germans pursuing their own


national interest. But I think that we do ourselves no service by


suggesting that it is all perfectly normal and actually it is just


normal globalisation and indeed that the problem is solved. The


eurozone has not been saved, we are not out of the woods yet, and


Germany itself will be the first and, in many ways the biggest,


victim of a failure of the eurozone. I think the crisis is still very


much in action. The Chinese aspect is just a small part of it. Very


briefly, ambassador, he is right, we're not out of the woods yet?


Chancellor has said it will take some time until the house is in


order, that is correct about Germany. I don't share your view


that this is still a very risky way, the point is to complete the


incomplete monetary union. This is a democratic process, this takes


longer than the market thinks. If democratic leaders have to decide


it takes more time. That requires a fiscal and political union which


the architects of monetary union thought should follow, but now the


Germans and others don't want. will save that for another night.


Thank you very much. Now, we are all in this together,


apparently, but some people are more in it than others. While the


talk in Britain is of austerity and inflation bringing real wage cuts


that seem to apply everywhere, that is, except the top boardrooms,


where directors are trousers much more than ever before. When salary,


benefits incentive and bonuses are added together, FTSE 100 directors


have seen their incomes jump by 49% in the last financial year. Chief


executives aren't far behind. Their awards increasing by 4%.


A study has found. The average salary for a top CEO stands at �3.8


million. Compare all that, and you might just be tempted to do so with


the average pay rise across the whole economy, and there is quite a


contrast. It currently stands at a modest 2.5%. Eaten away by


inflation, which is more than 5%. I'm joined by Luke Johnson a serial


entree pen your, and my other guest. You can see that people sitting at


home think it is unjust, everybody knows their wages are going back


wards in real terms, and directors getting paid more it seems wrong?


find it very difficult that as Brits he always have to look at the


negative side of things. Over the last two or three years every


pillar of our society has been challenged, whether it be


journalists, whether it be politicians, whether it be bankers,


and the one pillar that has remained very much intact it is


corporate UK, it has held us in good stead. It is quite inic when


listening to the previous conversation - ironic is listening


to the previous conversations is that taxes aren't high enough.


bankers have behaved badly and others have behaved badly,


directors have haid badly and are not showing why they deserve it?


you look at corporate tax receipts, excluding the banking sector, I


would say they are higher in October 2011 than envisaged at the


beginning of the year. We live in a global economy. I reckon Luke would


probably right now, 21% of FTSE chief executives don't have British


passports. The last thing I want, as an investor in these companies,


is to hear on Monday morning that the chief executive of one of our


investors who is foreign, like Burberry, or Marks & Spencers, has


decided to move to a culture that is less blame orientated. Is that


fair, people at the top end will go where the money is? I'm not sure I


agree. I think there is a bit of a myth that management talent is


incredibly rare, and therefore has to be extraordinarily well rewarded.


I think people are entitled to object, when they see bosses of


public companies, these are companies that individuals are not


founded, they are simply employees, executives, who have worked their


way up the hierarchy, and they are being paid 100-200-times what the


bottom ranking employees are paid. There is an argument to say that is


disproportionate. You know boards could do something about it and the


shareholders, if they felt strongly about it? I agree, it is


disappointing that pension funds and insurance investors, ultimately


owned by small, individual shareholders, with pensions, aren't


objecting more strongly. I accept that we have to compete on a world


stage, but for principally UK businesses, to be paying huge


increases such as these Stade tisics suggest have been, in a time


when ordinary hard-working people are getting zero increases, it will


clearly offend. Do you accept there is a problem? Do we get our money's


worth? I think it is popular policing, I think this house is in


order. And Luke knows the environment very well. The


institutions of London, who did get a bad rap over encouraging balance


sheets in banking, if somebody is not doing their job they will be


hard as nails. GlaxoSmithKline make �8 billion a year, their board is


paid a seventh of what Manchester City's squad will be paid. I don't


think comparing footballers is not a good comparison? Man City is 12


people, Glaxo has been built up over decade, quite a lot of people


can do the job the board are doing. The trouble is you have inside,


institutional capture by corporate executives, you have the agency


problem whether it is too big a difference between investors and


managers. They are not entrepeneurs who are risking their homes, and


who are going to use their personal credit card to meet the monthly


payroll if the business isn't succeeding. Their downside is they


lose their job. Their upside is they get paid �10 million, up to


that, a year. Is that right? There is a toughening up on institutions


particularly with the criticism they got with the encouragement of


banking culture going from advice to sales, and Scottish institutions,


such as Standard Life, seen to be very supportive to what happened at


Royal Bank of Scotland and HBOS, came under a lot of criticism. That


had merit. This is slightly more varied, people will go where the


money is. Corporate UK, excluding the banking sector, is one of the


things we can waive our flag on. There are changes to the way the


monarchy works. Bringing changes to centuries of traditions. The


principle change concerns the first born. Future Monarchs will be able


to marry Roman Catholics, and the first born child can inherit the


throne, whether a boy or girl. When list Beth II was crowned in -


Elizabeth II was crowned, it was absence of a brother that secured


her the role. As early as the 1960s, we are told, civil servants thould


the rules inaxe crownistic. Whether or not it is the imminence


of a new royal heir, following this year's wedding, that has prompted


it, change t appears, really is happening.


Presided over by the Queen herself, the 16 Commonwealth nations at


their conference in Australia have agreed to ind the rule of male prim


Mo beginure, meaning William and Kate's first born will take the


throne. One further anomoly, the ending of this rule won't


automatically apply to the aristocracy, some traditions remain


very much in the era of Downton Abbey. So, if this is some kind of


progressive move, why shouldn't it apply more widely to aristocratic


titles. I'm joined by my guests, Tony Benn renouncing his title in


1963, the first person to do so. On the male ascension, you think it is


a good idea, removing it and making it open to girls? I think it is


Monday sense, I don't think it was a bad idea in fuedal times, if the


head of the family had to be a male, he also had to have a lance or a


sword or a horse and ride. That was a sensible then. That is where it


all came from. The need for protection. Now a female can


protect the family with a computer et cetera, quite as well as anyone


else. And female Monarchs have not done too badly, as you have written


yourself in the past? Exactly. If people list the great Monarchs of


our country, let's face it, no-one would leave out Queen Elizabeth I,


it might well include Queen Vicoria. It is common sense. One should not


get into a state of thinking it should always have been so. Now it


should be so. Do you think it is a good move,


this is progressive, is it? Well, it removes discrimination against


women, which still exists, for example, Church of England won't


appoint women bishops, there was a struggle to get women the vote and


so on. If we are talking about the function of the head of state, and


if you take the function of a Monarch, whether a man or a woman,


they have enormous power, they appoint the bishops, the judges,


they can dissolve parliament and so on. And I give you one example


which occurred to me, in order to be a member of parliament you have


to swear an oath of allegiance to the Queen. And I thought about it,


and realised that I didn't owe my allegiance to the Queen, but to the


people who elected me, to the people who selected me as a


candidate and to my conscience. Therefore, in order to be an MP I


had to tell 17 lies under oath and that is the question, why, if you


are going to extend the right to women, why shouldn't you extend the


right to everybody, by having an elected head of state. That's


another point. But I wondered a slightly more limited change but


still a big one, would be to extend it to the aristocracy in general.


Am I right in thinking you would be the Earl of Longford, because your


younger brother inherited the title? Yes, my one of four brothers


inherited the title. He doesn't use it, as a matter of fact. Something


that Tony Benn will understand. I have to say that I spoke to him


this morning and said I was coming on the programme, and he said, oh


God, are you going to say you want to be countess of Longford. I said,


no, I'm not, because you don't use it, what I'm going to say, if I'm


anything, and don't let's be sexist, don't you agree, I should be Earl


of Longford. But as a matter of fact I don't want to be Earl of


Longford either. Politicians haven't bitten this particular


bullet, they are not going to extend it to the aristocracy.


don't believe to the hereditary titles, if I went to the dentist -


and he said he's not a real dentist but his father was I would move


dentists. I think democracy is the most important thing. When you


elect a member of parliament, you actually employ him. When I was an


MP, in my constituency, every one of my constituents was my employer.


And they could put me there, and get rid of me. So I was kept very


much disciplined by the knowledge that I represented them. That is


the basis on which I believe that society should be run. Isn't this a


good move, isn't this move to say that the first born child of Prince


William and Princess Catherine, should be the Monarch, this is a


good move, isn't it? I personally amin favour of an elected head of


state. I'm just discussing, isn't it a good move, a common sense move,


a modern move, are you not in favour of it? I'm not in favour of


discriminating against women at any purpose. But if you ask me whether


I think the head of state should be by-election or by inheritance, I'm


in favour of election. On that note of near agreement, thank you very


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