02/11/2011 Newsnight


02/11/2011

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


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Tonight, as we come on air, the leaders of the eurozone are putting

:00:10.:00:14.

extreme pressure on Greece to save the Euro-bailout and the euro

:00:14.:00:20.

itself. The Greek Prime Minister is summoned to meet the French

:00:20.:00:27.

President and the German Chancellor. Here at the G20 the Greeks have

:00:27.:00:31.

been told, fine, have your referendum, but you won't get any

:00:31.:00:39.

bailout money until that's over. The three-day debate on a no

:00:39.:00:42.

confidence motion in Mr Papandreou's Government has started

:00:42.:00:48.

here without him. So just as soon as he can extricate himself from

:00:48.:00:55.

that French embroillio, he will have to dash back to at thens to

:00:55.:01:01.

fight for his political life. will speak to the European

:01:01.:01:09.

council's President's righthand man. How similar are the economic

:01:09.:01:13.

problems of now to the Great Depression. The new head of the

:01:14.:01:16.

Press Complaints Commission will tell us why his job is still worth

:01:16.:01:26.

doing. And : # It's the end of the world as we

:01:26.:01:31.

know tl Michael Stipe and Mike Mills on why the band REM split,

:01:31.:01:40.

and why music and politics mix. Good evening, it is probably one of

:01:40.:01:43.

the most difficult evenings of George Papandreou's political life.

:01:43.:01:46.

This is the way it was supposed to go. Last week the eurozone leaders

:01:46.:01:49.

finally saved the currency. This week the biggest economies on earth,

:01:49.:01:53.

and the G20 would need in Cannes and use that as a springboard to

:01:53.:01:57.

push the worldwide recovery forward. It was a great script until it was

:01:57.:02:00.

thrown into the dustbin by Mr Papandreou's decision to hold a

:02:00.:02:06.

referendum on the terms of their bailout. We begin tonight in Cannes,

:02:06.:02:09.

where Greece's Prime Minister has been called in to see the head

:02:09.:02:16.

teachers for a real caning. The press conference with Mr

:02:16.:02:19.

Sarkozy and Mrs Merkel is still going on. It is not often you get

:02:19.:02:24.

at one of these conferences a real and serious action. But they are

:02:24.:02:27.

coming thick and fast in the last five minutes.

:02:27.:02:32.

The EU has formally suspended the eight billion debt repayment due to

:02:32.:02:37.

Greece that was agreed last week. Mrs Merkel said that there had been

:02:37.:02:41.

a big change in the psychology. A dramatic change in the psychology

:02:41.:02:45.

of the situation, because Greece called this referendum. She has

:02:45.:02:50.

accused the Greek Prime Minister of playing poker, and said that the

:02:50.:02:53.

Greek referendum question should be about in or out of the euro.

:02:53.:02:58.

Something that the Greeks themselves are not, of course, keen

:02:58.:03:03.

on. China has said that it's not interested in lending to the big

:03:03.:03:07.

bailout fund, the one trillion euro EFSF, that is going to be aimed at

:03:07.:03:10.

Italy. It is not interested, because with all this uncertainty

:03:10.:03:19.

around who can value the risk, who can base a calculation of risk on

:03:19.:03:23.

lending that kind of money. That is nice work for a country that wasn't

:03:23.:03:27.

even invited to the Cannes G20 country. Greece, too small to be in

:03:27.:03:32.

the top 20. The mood here, of course is very tense. It is still

:03:32.:03:36.

on going tonight. I think the reactions are even now filtering

:03:36.:03:39.

out and will do throughout the programme. Overall, there is a

:03:39.:03:43.

feeling that the Greek situation can be contained. Because the

:03:43.:03:47.

bigger situation with Italy, Spain and the rest of the world, does

:03:47.:03:50.

beckon the attention of these leaders, afterall the world could

:03:50.:03:53.

be on the brink of a double-dip recession. That is what they worry

:03:54.:04:00.

about. All today, ins and outs here at Cannes, with world leaders being

:04:00.:04:03.

told, get your act together they are under pressure to raise their

:04:03.:04:09.

game. In diplomatic speak, they are

:04:09.:04:13.

called Mer kozy, the two heads of state at the heart of Europe. When

:04:13.:04:18.

they met the Greek Prime Minister tonight, an unexpected invitey, it

:04:18.:04:22.

was not very cosy, because the Greek PM has basically spoiled

:04:22.:04:32.

their party. Although Cannes is in full lock down mode, on the luxury

:04:32.:04:35.

coastline it is some how hard to remember the world is in crisis.

:04:35.:04:40.

They chose this place to focus on the big issues, growth, currencies,

:04:40.:04:49.

the reregulation of the world. The summit's bim toll, 20 flags wrapped

:04:49.:04:54.

- symbol, 20 flags wrapped around something sweet, but Greece has

:04:54.:04:57.

soured things. Last Thursday Greece was offered a deal to write off 100

:04:58.:05:03.

billion euros worth of debt, with banks agreeing to take 50% losses.

:05:03.:05:07.

The price, years of austerity and control of economic policy handed

:05:07.:05:11.

to outside experts. But Greece needs to roll over 20 billion euros

:05:11.:05:15.

worth of existing debt by the end of January. With the referendum,

:05:15.:05:20.

nobody's sure who will lend. In the French parliament the response was

:05:20.:05:26.

blunt. TRANSLATION: You can't be in Europe to benefit from its

:05:26.:05:30.

solidarity, and aside from Europe to escape the discipline that every

:05:30.:05:36.

nation must consent to. Meanwhile, in Italy, there was an emergency

:05:36.:05:41.

cabinet meeting tonight, because the bond markets are signals danger.

:05:41.:05:44.

We knew the interest rates on Italy's long-term debts were

:05:45.:05:49.

getting frightening, but look at the interest rates on 12-month

:05:49.:05:53.

loans, usually below 1%. This is what's happened, it has spiked now

:05:53.:06:00.

above 5% this week. And some fear that's a signal the Italian crisis

:06:00.:06:04.

will imminently spill over into the banks, because this is the kind of

:06:04.:06:07.

debts banks use for short-term business. Americans are already

:06:07.:06:11.

telling Mr Berlusconi that you will not be able to sell your bonds for

:06:11.:06:15.

the next few weeks or months at the punitive interest rates, they are

:06:15.:06:18.

demanding, they don't trust you. Mr Berlusconi is enough of a business

:06:19.:06:22.

person to know what that signal means. Then when his closest

:06:22.:06:31.

friends, here at the G20, and in the G, say look, you have got to

:06:31.:06:35.

promise and do grb G7, you can't just promise it, you have to do it

:06:35.:06:39.

back home, and the young people have to have jobs, that is the only

:06:39.:06:43.

way to grow your economy. I think Berlusconi will finally bite the

:06:43.:06:49.

bullet and do it. It is hard to see it here amid the luxury of the

:06:49.:06:58.

Riviera, but the world recovery is slowing, growth is down, and debt

:06:58.:07:04.

up. Jose Angel Gurria, who runs the influential think-tank, OED, and

:07:04.:07:09.

who will be in the talks, thinks it is crucial to sort out Greece and

:07:09.:07:14.

then move on. Greece is unique in terms of the problems. We should

:07:14.:07:20.

ring-fence it, referendum or not. We should really stop the contagion

:07:20.:07:24.

and build the big firework. That might mean an even bigger bailout

:07:24.:07:28.

to Greece, just to ring-fence it completely, otherwise why are we

:07:28.:07:32.

sitting here worrying about it after a third of the debt is

:07:32.:07:37.

written off already? Because the original sin was that we said, in

:07:37.:07:44.

the beginning, two years ago, the future of Europe and the future of

:07:44.:07:47.

the euro, is linked to Greece. Whatever happens to Greece happens

:07:47.:07:56.

to all of us. That was obviously a mistake. Why is it that at summit

:07:56.:08:00.

after summit, we pass resolutions, we pass action plans, but we never

:08:00.:08:04.

see this structural question addressed? After spending a lot in

:08:04.:08:08.

order to get out of the recession, into a feeble recovery, where did

:08:08.:08:14.

that leave us? With huge deficits. And huge accumulated debt. More

:08:14.:08:20.

than 100% debt to GDP in the OECD on average. And you still have 10%

:08:20.:08:24.

unemployment, and you still have 20% unemployment of the youth, or

:08:24.:08:29.

30% or 40%, you still have people all over the world occupying the

:08:29.:08:33.

streets, occupying Wall Street or the City. They have pint haven't

:08:33.:08:37.

they? Of course they have a point. - They have a point, haven't they?

:08:37.:08:40.

Of course they have a point. That means no matter how tight the

:08:40.:08:43.

budgets are we have to leave space for them and the things that are

:08:43.:08:53.

the seedz of the future growth. the Greek crisis has centralised

:08:53.:08:57.

the problem, the rest of the world has enough of things that don't

:08:57.:09:01.

deliver growth. They have started to punish politics that don't

:09:01.:09:05.

deliver it. Mr Papandreou's arrival here signals how fast things are

:09:05.:09:08.

develop anything this crisis. Six months ago the arriving leaders

:09:08.:09:11.

could have looked at Greece and said that is what you don't want to

:09:11.:09:14.

happen. That is what happens when you lose control of your sovereign

:09:14.:09:19.

debt. Now they look at Papandreou and think, that is what happens if

:09:19.:09:25.

you lose control of your streets. And now, as a result of his

:09:25.:09:28.

referendum call, Mr Papandreou seems to have lost control of the

:09:28.:09:36.

very bailout he thought had saved him. I'm just noticing as you were

:09:36.:09:40.

watching that report, that the Merkel press conference in Cannes,

:09:40.:09:45.

Mrs Merkel is saying that the Greek referendum must ask does Greece

:09:45.:09:50.

wish to be in the eurozone area. We will pursue that in just a moment.

:09:50.:09:54.

The other part of the story is in Greece itself, where Mr

:09:54.:09:59.

Papandreou's referendum could lead to harder times ahead. There is

:09:59.:10:03.

really intense pressure on the Greeks, Mrs Merkel saying they are

:10:03.:10:07.

playing poker, and effectively saying any referendum is an in-out

:10:07.:10:10.

referendum? Yes, they couldn't be under any greater pressure than

:10:10.:10:14.

they are already. Mr Papandreou's party fraying under the strain,

:10:14.:10:19.

ministers going sick, all the rest of it. Of course we don't have a

:10:19.:10:22.

response at the moment to what's just been said in Cannes. But it is

:10:22.:10:27.

interesting that earlier today, Mr Papandreou's spokesman said quite

:10:27.:10:30.

specifically, that this would not be a referendum on the euro in or

:10:30.:10:34.

out. It was a referendum on the bailout package, and whether the

:10:34.:10:38.

people were prepared to accept it and implicitly the sacrifices it

:10:38.:10:42.

involves. It is interesting that they seem to have tried to head off

:10:42.:10:45.

that line, before even he arrived at that time dinner in Cannes. The

:10:45.:10:49.

other thing one can't help but think, is in the language of the

:10:49.:10:53.

accusation from Chancellor Merkel tonight, of playing poker, that

:10:53.:10:58.

there may be some indication of her own tactics in this supremely

:10:58.:11:01.

difficult moment. Perhaps they are all playing poker, but perhaps it

:11:01.:11:05.

is with other people's money. I notice that President Sarkozy is

:11:05.:11:09.

saying we cannot spend European tax-payers' money if Greece doesn't

:11:09.:11:12.

follow Brussels' agreement to the letter. How worried do you think

:11:12.:11:16.

the people are in Greece that they are going to be seriously punished

:11:16.:11:24.

for this referendum? There is this question of the eight billion euros,

:11:24.:11:28.

that was supposed to be made available to them in mid-November,

:11:28.:11:33.

to get them through the cry sifs trying to keep the economy afloat

:11:33.:11:38.

here. - crisis of trying to keep the economy afloat here. This could

:11:38.:11:41.

be the element of poker from Chancellor Merkel, is it a credible

:11:41.:11:44.

threat to withdraw this money. This evening they seem to be saying in

:11:44.:11:48.

Cannes, yes it is, this is not a deal you can pull apart and take

:11:48.:11:51.

the candy and then throw the rest of it open to the referendum. But

:11:51.:11:55.

many people in Greece will reflect that if that money is taken away,

:11:55.:12:00.

just a week or two, potentially, before Greeks go to the polls, that

:12:00.:12:04.

could have a disastrous effect on the course of the euro, and it

:12:04.:12:07.

could actually trigger the implosion that France and Germany

:12:07.:12:11.

are so desperate to avoid. So it will be fascinating to see whether

:12:11.:12:15.

they really are in ernest about that threat, or whether some kind

:12:15.:12:20.

of formula is put together, simply to get Greece through the crisis

:12:20.:12:24.

that leads up to the referendum, assuming it still happens. Thank

:12:24.:12:30.

you very much. The Greek decision to hold a

:12:30.:12:35.

referendum on the bailout package, and the implications, are being

:12:35.:12:41.

absorbed in every European capital. Joining me live is Alvaro Santos

:12:41.:12:49.

Pereira, the Portuguese Finance Minister, and Richard Corbett. How

:12:49.:12:52.

irritated are you in the EU leadership that Mr Papandreou has

:12:52.:12:59.

made you look like fools? Well, on the one hand the EU, as you know is

:12:59.:13:03.

not a centralised powerful authority, it is a union of

:13:03.:13:06.

democracies, and democratic procedures in each member-state

:13:06.:13:10.

have to be respected. But on the other hand, last week, when this

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package was put together, that everybody thought was a key turning

:13:15.:13:18.

point, there was no indication at that point from the Greek side that

:13:18.:13:23.

this may well be put to a referendum. Which, whatever its

:13:23.:13:29.

merits, prolongs the uncertainty for a long period of time. Indeed.

:13:29.:13:32.

Triggering a return to market volatility, which is undermining

:13:32.:13:36.

the whole process. Indeed, but it also shows the profound weakness at

:13:36.:13:40.

the very heart of the EU, when you have a deal which is unravelled

:13:40.:13:46.

within five days? Well, as I said, the EU is not a dictatorship, it is

:13:46.:13:50.

a uefpb democracies, you have to work with - a union of demok

:13:50.:13:54.

circumstance you have to work with the - democracies, and you have to

:13:54.:14:00.

work with the countries in that. If Greece so chooses to put this deal

:14:00.:14:04.

to a referendum it can. But you can also understand how others have

:14:04.:14:08.

reacted to that. They thought there was a deal that could be enacted

:14:08.:14:13.

quickly, that would already calm the markets, the initial effect was

:14:13.:14:17.

very beneficial, it was well received, this puts that in

:14:17.:14:19.

jeopardy. You can understand the reaction from other member states

:14:19.:14:27.

to that decision. Do you now see, in the words of Mrs Merkel, that

:14:27.:14:32.

has to be an in-out of the eurozone decision for Greece, however they

:14:32.:14:38.

word it, that is what is at stake here for Greece? It is indeed

:14:39.:14:43.

difficult to understand what a "no" would actually mean. Would they be

:14:43.:14:48.

saying, no, this loan is not big enough, we want a bigger loan to

:14:48.:14:52.

help us turn the corner, or are they saying we don't want any loan

:14:52.:15:00.

at all, we can manage wout without assistance from the rest of the

:15:00.:15:04.

Euro-- - eurozone. It is an odd situation to have a referendum the

:15:04.:15:07.

leadership, at least, thinks there is only one possible answer. But

:15:07.:15:14.

the people may well say we don't actually like that answer. But from

:15:14.:15:18.

different perspectives, you won't have an answer to what they want

:15:18.:15:25.

instead. Would you contrue this as an in-out - cons true this as an

:15:25.:15:29.

in-out vote s that how you see it? The Greek Government will formulate

:15:29.:15:39.
:15:39.:15:48.

the question. You See the knock-on effect of a potential no-vote might

:15:48.:15:54.

bring the question of Greece leaving the euro might be possible.

:15:54.:15:59.

How do you view this Greek referendum? Good evening, for us

:15:59.:16:04.

the Greek referendum obviously increases the uncertainty, and

:16:04.:16:12.

increases volatility. On our part what we see is we are extremely

:16:12.:16:16.

strongly committed to reform, we are strongly committed to fiscal

:16:16.:16:21.

consolidation, we believe in a reform agenda that would bring,

:16:21.:16:27.

would make Portugal a country that is more business-friendly, more

:16:27.:16:31.

business orientated, with better labour laws, with new competition

:16:31.:16:37.

laws just approved and under public consultation. It could all be blown

:16:37.:16:40.

sideways? You may be doing all the right things, and with the angels

:16:40.:16:45.

on this but the Greek decision means months of uncertainty for you

:16:45.:16:51.

and the people of Portugal. The Greek decision increases the

:16:51.:16:56.

uncertainty, on our part, what we can do is show the world we are

:16:56.:17:02.

doing our best and doing whatever we can to maintain dialogue with

:17:02.:17:06.

the trade unions, we have maintained also a peaceful

:17:06.:17:10.

environment in Portugal, together we have had a very strong reform

:17:10.:17:16.

agenda. That makes sure fiscal consolidation is made possible,

:17:16.:17:20.

together with a growth agenda that is bringing large reforms to

:17:20.:17:25.

Portugal, unequivocal reforms. suggesting, whatever you do, your

:17:25.:17:30.

fate is in the hands of ten million people in Greece. It has nothing to

:17:30.:17:34.

do with these greet reforms you may be doing. It has to - great reforms

:17:34.:17:38.

you may be doing. It is to do with the Greek referendum going ahead

:17:38.:17:44.

and whether it blows up the euro? We strongly believe by doing the

:17:44.:17:49.

reform agenda we are doing, we will be able to stop any contagion that

:17:49.:17:55.

might come about with the Greek situation. Even if they vote no.

:17:55.:17:59.

strongly believe. For us it doesn't make sense to get out of the euro,

:17:59.:18:02.

for several reasons, including the fact that our exports are growing

:18:02.:18:06.

at 9% a year, they have been growing for quite a while, in the

:18:06.:18:11.

last three or four years they are growing very well. So, for us the

:18:12.:18:18.

euro, the impact of the euro has past passed, our exports are

:18:18.:18:23.

getting stronger and the economy getting more stronger, it doesn't

:18:23.:18:27.

make sense at all for us. Bringing in Mr Corbett again. You can

:18:27.:18:31.

imagine if you were in the Chinese delegation, they will look at this

:18:31.:18:35.

and think it is a complete shambles and not putting the Chinese people

:18:35.:18:40.

as money in anything to do with Europe? I think that - the Chinese

:18:40.:18:44.

people's money in anything to do with Europe? I think you have to

:18:44.:18:47.

look much further than Greece. The package agreed last week was in

:18:47.:18:52.

part about Greece, but also in part about building firewalls so make

:18:52.:18:57.

sure there is no contagion from Greece to other states in the euro,

:18:57.:19:03.

or the rest of the European Union. The increased capitalisation of

:19:03.:19:06.

banks, increasing the fire power of the so-called bailout fund. That is

:19:06.:19:11.

all designed to make sure there is no contagion from Greece. If you

:19:11.:19:16.

were China you wouldn't put money into it? Those aspects are not

:19:16.:19:19.

subject to the referendum in Greece, they still stand as part of the

:19:19.:19:22.

deal. They are still there and should reassure potential investors

:19:22.:19:25.

from other parts of the world. Thank you very much.

:19:25.:19:30.

Let's go back to Paul Mason in Cannes, who has not just been

:19:30.:19:33.

following tonight's events ahead of the G20 Summit tomorrow, but also

:19:33.:19:37.

looking at some of the lessons of history. We thought two years ago

:19:37.:19:43.

we had avoided a repeat of the Great Depression. We spent

:19:43.:19:48.

thrillions of digging ourselves out of the Lehman Brothers - trillions

:19:48.:19:52.

digging ourselves out of the Liam man brothers crisis. Required

:19:52.:19:56.

reading, the economic history of the early 1930s, that period is the

:19:57.:20:02.

period that shows us what happens if the - if during the crisis you

:20:02.:20:06.

enter, as we have done tonight, the finger-pointing stage, the blaming

:20:06.:20:11.

stage, and the competitive exit out of the crisis stage. I have been

:20:11.:20:15.

looking at what the parallels are, what we can learn, and how we can

:20:15.:20:25.
:20:25.:20:27.

avoid repeating it. The depression of the 1930s began in Wall Street,

:20:27.:20:30.

with the share price crash. How did it get from Wall Street to the rest

:20:30.:20:35.

of the world. That is the story of a cross-border

:20:35.:20:39.

banking crisis, social unrest, countries reneging on their debts,

:20:39.:20:44.

and the breakdown of an international currency system. If

:20:44.:20:48.

that sounds familiar, it should. What is haunting the world's

:20:48.:20:53.

leaders, as they prepare for the G20 Summit is a repeat of the early

:20:53.:20:59.

1930s. In the 1930s there was a great

:20:59.:21:01.

fracturing of globalisation. So countries which had been used to

:21:01.:21:05.

co-operating with each other in a number of ways, all took to doing

:21:05.:21:08.

their own thing. They took to doing their own thing politically and

:21:08.:21:16.

economically. The world that collapsed in 1931

:21:16.:21:21.

was a glilt glittering, ultra modern world, the economic recovery

:21:21.:21:27.

of the 1920s had produced Art Deco, luxury for the masses, and for the

:21:27.:21:31.

elite, as with this family and its purpose-built deco mansion, what

:21:31.:21:39.

could possibly go wrong. The 1920s had seen rapid

:21:39.:21:42.

technological advance, when the crisis started it looked like just

:21:42.:21:46.

a blip, what had produced all this was a global system of trade and

:21:46.:21:51.

currencies based on gold. But in the fight to safe that system, they

:21:51.:21:54.

would destroy almost everything else. One of the things that

:21:54.:21:58.

happened in the 1930s was the very mechanism which people focused on,

:21:59.:22:03.

which they thought would promote globalisation, actually was a

:22:03.:22:08.

contributor to its end. The gold standard was a system of

:22:08.:22:13.

fixed exchange rates that obliged Governments to balance their books

:22:13.:22:17.

long-term. But in the worst-hit countries, once the downturn

:22:17.:22:27.
:22:27.:22:28.

started, sticking to gold forced Governments to make austerity worse.

:22:28.:22:31.

Today some worry what happened with the gold standard could happen with

:22:31.:22:35.

the euro, here again, adherence to the rules is forcing some countries

:22:35.:22:40.

to impose harsh austerity. And even as the streets erupt, the European

:22:41.:22:43.

political class has convinced itself that nobody can leave the

:22:43.:22:48.

euro. The thing about Europe is the

:22:48.:22:52.

single currency, and the way that all these 17 countries are tied

:22:52.:22:56.

together by one exchange rate. The parallel with the early 1930s is

:22:56.:22:59.

clearly the gold standard, where some countries believe that the

:22:59.:23:08.

gold standard was the basis for prosperity. The reality was that it

:23:08.:23:12.

was imposing enormous deflation on some countries and the UK was one

:23:12.:23:19.

of the first to break-away. Britain's exit from gold in 1931

:23:19.:23:25.

forms a case study in how events can confound a currency peg. First,

:23:25.:23:28.

the Labour Government collapsed over the levels of austerity

:23:28.:23:35.

required to stay on gold. And then, amid defence cuts, the Royal Navy

:23:35.:23:39.

mutinyed. Those particular spending cuts led to parts of the Royal Navy,

:23:39.:23:42.

fearing that they would have very large salary cuts, and there was a

:23:42.:23:50.

mutiny, which included the flagship of the Navy, The Hood, this, in

:23:50.:23:54.

mid-September 1931 triggered a very widespread panic, people thought

:23:54.:23:57.

there might be a coup and all kinds of things, and international

:23:57.:24:00.

investors really panicked in respect of the UK. And the

:24:00.:24:04.

Government quite soon after gave up on the attempt to hold the gold

:24:04.:24:07.

standard. When Britain came off gold, the establishment were so

:24:07.:24:12.

shocked that one former Labour minister said, we didn't know you

:24:12.:24:17.

could do that. Germany and Japan came off gold in the same year, and

:24:17.:24:21.

the industrial output showed those who ran for the exits first,

:24:21.:24:27.

recovered first. The depression of the 1930s was felt worst by those

:24:27.:24:31.

countries that were last to abandon their commitment to the global

:24:31.:24:37.

system. America, and France. Of course, we know what happened,

:24:37.:24:41.

within a decade the big powers were engaged in trade wars, currency

:24:41.:24:45.

wars, land grabs, and ultimately military conflict.

:24:45.:24:49.

And the problem today is you can just see the beginnings of some of

:24:49.:24:56.

that. When the USA decided on a second

:24:56.:25:01.

round of qeesing, QE-2, the result was to boost inflation in the

:25:01.:25:05.

rapidly developing countries like bra still. Bra still's Finance

:25:05.:25:11.

Minister called it economic war and re- Brazil's Finance Minister

:25:11.:25:17.

called it economic war. Japan, fearing its exports would be hit by

:25:17.:25:21.

a weaker dollar, intervened to weaken its own currency,

:25:21.:25:26.

Switzerland did the same, Japan did the same this week and so did

:25:26.:25:30.

Argentina, that has led to some fearing the break up of

:25:30.:25:33.

globalisation, others to welcome it. I don't think there is a danger

:25:33.:25:43.

with retreating from globalisation. Globalisation has led to a lot of

:25:43.:25:49.

problems causing the credit crunch, we have to ask is this what we want,

:25:49.:25:52.

a world dominated by large companies with weak labour power.

:25:52.:25:57.

It is not a level playing field at the moment. You have Asian

:25:57.:26:02.

Governments gaming the system which manipulating the exchange rate.

:26:02.:26:07.

last week's euro deal injected, potentially, more friction into

:26:07.:26:10.

that argument. Europe needs to borrow a trillion, but when the man

:26:10.:26:14.

doing the borrowing turned up in China, with his begging bowl, he

:26:14.:26:21.

was told stop criticising us over currency, and then we will see.

:26:21.:26:25.

In the early 1930s, even as the global economy slid towards break

:26:25.:26:30.

up, the band played on. This was a world in which radio was growing

:26:30.:26:34.

rapidly, the movies were beginning to talk, public morals were getting

:26:34.:26:39.

loser. - looser. Today it seems impossible that our

:26:39.:26:45.

global system could disappear, so much of our culture is bound up

:26:45.:26:50.

with it. Their's did. Within a decade, the whole world of jazz,

:26:50.:26:57.

loose morals and modern art was gone.

:26:57.:27:03.

There is no legal justification whatever for France not paying the

:27:03.:27:07.

current installment of $20 million on her debt to us.

:27:07.:27:11.

Two things drove the break up, debts that had become politic sized,

:27:11.:27:16.

and social unrest. - politicised, and social unrest.

:27:16.:27:21.

On the streets, once unrest brokeout, it proved impossible for

:27:21.:27:27.

politicians to resist, and national route out of the crisis. This time

:27:27.:27:31.

around, free market economists have been at the forefront of defending

:27:31.:27:35.

globalisation, but now some are beginning to see the possibility of

:27:35.:27:40.

retreat. Do you think it is realistic for us to still be

:27:40.:27:45.

talking about a global, multilateral solution to this

:27:45.:27:50.

crisis? I think it is both unrealistic and if it were it would

:27:50.:27:54.

be a mistake. I think it would be better at this stage for us each to

:27:54.:27:59.

look to our own ramparts, each try our own thing, and if we see

:27:59.:28:03.

something is working better somewhere else than what we have

:28:03.:28:06.

tried we can copy them. If you wait too long and end up doing your own

:28:06.:28:10.

thing, you do your own thing in an environment in which the

:28:10.:28:14.

populations and the politicians who turn up as their spokesman, blame

:28:14.:28:18.

international co-ordination for the events. They will say, we have been

:28:18.:28:22.

forced, by the Germans or the Americans, or the IMF or the UN, to

:28:22.:28:28.

do things this way, and part of our identity now is that we are against

:28:28.:28:35.

them, the enemy. In Greece, that's already happening.

:28:35.:28:39.

But the occupy protests too, though international, are each putting

:28:39.:28:45.

pressure on national Governments to act. Here again, say the economists,

:28:45.:28:50.

there are lessons from history. should not underestimate the social

:28:50.:28:55.

and economic peril of neglecting the moral aspect of policy. If

:28:55.:28:59.

people are subject to injustice for long enough, they will ultimately

:28:59.:29:08.

reject that and the political consequences can be terrifying.

:29:08.:29:12.

1934 the San Francisco industrial strike, this is worse than the

:29:12.:29:21.

world war. Today we are a lot richer than in the 1930s, that

:29:21.:29:26.

should cushion the blow. But the social cohesion is lower. To a

:29:26.:29:29.

generation whose future has been cancelled, it will be of little

:29:29.:29:35.

comfort that things were worse back then.

:29:35.:29:39.

In the last few minutes, Mr Papandreou has been speaking, and

:29:39.:29:46.

he has been quite defiant. I believe it is crucial that we

:29:46.:29:54.

show the world that we can live up to our obligations. We can live up

:29:54.:30:00.

to these obligations, and this is crucial for our future

:30:00.:30:09.

participation in the eurozone. telegraphic though that statement

:30:09.:30:12.

scenes, it does contain a message, it tells the world that what Mr

:30:12.:30:15.

Papandreou is trying to do in Greece is to convince the Greek

:30:15.:30:21.

people to take the bailout, to take the conditions which involve having

:30:21.:30:25.

foreign civil servants inside their own ministries, and to stay inside

:30:25.:30:29.

the eurozone. It is telling Mrs Merkel and Mr Sarkozy this is a

:30:29.:30:33.

gamble, I'm taking on your behalf, to try to convince the Greek people.

:30:34.:30:38.

It is saying, in other words, it is not to the cynical, a gamble in

:30:38.:30:41.

which I end up being chucked out of power, and therefore I don't take

:30:41.:30:45.

the blame for the disaster. I think that was a very clear message there

:30:45.:30:50.

from Mr Papandreou. Thank you very much.

:30:50.:30:54.

After their handling, or non- handling of the newspaper hacking

:30:54.:30:57.

scandal, the Press Complaints Commission has appeared more or

:30:57.:31:01.

less friendless, a toothless poodle, according to Ed Milliband, a

:31:01.:31:04.

failure and we need a new system entirely, according to David

:31:05.:31:09.

Cameron. Now the PCC has a new chairman, Lord Hunt, does it have a

:31:09.:31:13.

future. We will ask Lord Hunt in a moment. First, how the PCC hit the

:31:13.:31:20.

headlines for all the wrong reasons. The phone hacking scandal destroyed

:31:20.:31:23.

Britain's biggest-selling newspaper, News of the World. It still

:31:23.:31:30.

threatens the Murdoch empire. Hello it is Glenn. How are you.

:31:30.:31:35.

Just a quick one, voice mail reset on Gordon Taylor, it has Tottenham-

:31:36.:31:40.

related issues there. Many believe it will soon claim the scalp of the

:31:40.:31:43.

regulatory body, the Press Complaints Commission too. The PCC

:31:43.:31:46.

has been absolutely shocking in terms of any pretence of regulating

:31:46.:31:50.

the press. They just haven't done it. If you examine the time line

:31:51.:31:54.

behind the phone hacking story, then the weight of evidence against

:31:54.:32:04.
:32:04.:32:05.

the PCC becomes embarrassingly clear. It reveals an organisation

:32:05.:32:09.

totally dependian on the good will and operation of those it is

:32:09.:32:12.

regulating. It also shows that those trying to blow the whistle

:32:12.:32:16.

were wrong, and it gave the impression of a body trying to shut

:32:16.:32:21.

down the story. For the PCC the challenge began in 2006 with the

:32:21.:32:28.

arrest of News of the World's private investigator Glenn Mulcaire,

:32:28.:32:35.

he had been working with the royal correspondent, Clive Goodman,

:32:35.:32:41.

hacking phones. The Police swung into action and interviewed the

:32:41.:32:44.

suspects, the regulatory body said it was one rogue reporter, this

:32:44.:32:50.

satisfied the PCC. Later the PCC would write it was not its reblit

:32:50.:32:55.

to replicate the police investigation to establish other

:32:55.:32:58.

transgressions, so no powers of investigation, no powers of audit,

:32:58.:33:04.

all was well in the best of all possible worlds. In 2009 the

:33:04.:33:08.

Guardian revealed other journalists had known about the phone hacking.

:33:08.:33:12.

Once again the PCC swung action to investigate, and published a report.

:33:12.:33:15.

That report concluded there was no substantial evidence to support

:33:15.:33:19.

that and that it had not been materially misled. Indeed, a week

:33:19.:33:24.

later, when giving evidence to the society of newspaper editors, the

:33:24.:33:28.

chair said new evidence had emerged from a Metropolitan Police

:33:28.:33:31.

detective. Who said that the number of victims of phone hacking was

:33:31.:33:35.

just a handful, not the thoughs referred to in evidence by leading

:33:35.:33:40.

phone hacking lawyer Mark Lewis. Not only did you go along with the

:33:40.:33:43.

News of the World lying that it was only one rogue reporter, not only

:33:43.:33:47.

did you implicitly attack the Guardian. You are not hearing your

:33:47.:33:51.

answers, you ignored my answers. You then attacked the lawyer to

:33:51.:33:56.

testified to the Commons that 6,000 people had been hacked. I didn't

:33:56.:34:01.

attack the lawyer, I'm not going into that. You had to apologise and

:34:01.:34:08.

pay costs, correct. They ended up paying damages and my legal costs.

:34:08.:34:12.

They certainly didn't understand the full nature of the hacking

:34:12.:34:14.

scandal? Not only did they not understand it, they didn't bother

:34:14.:34:20.

to look at it and get evidence. They were more concerned it seems

:34:20.:34:23.

in pleasing the crowd and the pay masters rather than investigating

:34:23.:34:28.

the problem. Shortly after that interview, Baroness Buscombe

:34:28.:34:32.

announced she was stepping down. Her successor will have to decide

:34:32.:34:36.

if the PCC has lost so much credibility it can no longer

:34:36.:34:39.

command respect, or whether it is possible to strengthen the

:34:39.:34:49.
:34:49.:34:49.

commission as part of reform. Lord Hunt here, the new head of the PCC.

:34:49.:34:53.

It sound from that worp that you are worse than useless, because you

:34:53.:35:01.

give a fig leaf of respectability to those newspapers? My job is not

:35:01.:35:05.

to look at the past, but to start with a blank sheet of paper and

:35:06.:35:11.

work out the best possible system for the self-regulation, the

:35:11.:35:13.

independent self-regulation of the press, that will command the

:35:13.:35:16.

confidence of the public. You don't start with a blank sheet of paper,

:35:16.:35:22.

you start with a Levison inquiry, not about the past but the future.

:35:22.:35:27.

You have to deal with that. Every single thing we have heard there

:35:27.:35:36.

suggests the PCC, if you like, are a union for newspapers who serve on

:35:36.:35:41.

the PCC The way I see it, I have just arrived, I have been given a

:35:41.:35:44.

blank piece of paper, I sense a mood for fundamental reform. It is

:35:44.:35:48.

my job now to work out what is the best possible structure.

:35:48.:35:53.

puzzled by the blank sheet of paper thing? There isn't one? There is

:35:53.:35:58.

for me. The past of the PCC doesn't matter? I'm suggesting you the

:35:58.:36:03.

future, if you you have got one, does matter, and the Levison

:36:03.:36:06.

Inquiry could say you are useless, as the Prime Minister and the

:36:06.:36:10.

leader of the opposition have said? What I would like to do is this,

:36:10.:36:16.

Lord Justice Levison has this inquiry, he's looking into a whole

:36:16.:36:23.

range of areas of policy, the ethics of the whole of the press

:36:23.:36:26.

regulatory system. What I would like to do is fill in my blank

:36:26.:36:30.

piece of paper, listening to everyone, taking account of all the

:36:30.:36:34.

concerns, some of which you have just expressed. And then present

:36:34.:36:38.

Lord Justice Levison with what I believe to be the solution. It is

:36:38.:36:43.

then up to him to decide whether that is adequate or not. But I'm

:36:43.:36:46.

going to do everything I can to produce the right result. That is

:36:46.:36:50.

very interesting, you also said a regulator, or self-regulator, is

:36:50.:36:53.

that how you see yourself, you would want to be a regulator,

:36:54.:36:58.

because the charges, - the charge is, you are not? I think one of the

:36:58.:37:02.

reasons I have been asked to do this job s I'm a lawyer. I have

:37:02.:37:07.

been with my law firm for 46 years, OK 35 years in parliament, but I

:37:07.:37:11.

have very understanding partners. I specialise in regulatory law. What

:37:11.:37:15.

I have to say straight away, in answer to the question you have

:37:15.:37:22.

raised, is that the PCC is not a regulator. Should it be? There

:37:22.:37:28.

needs to be a regulator, now another two bodies, the editors

:37:28.:37:33.

code committee, which actually, if you read the code, it is an

:37:33.:37:40.

excellent code, the sort of code that the late David Calcott wanted

:37:40.:37:46.

the press to endorse. Two years after he stepd set up the PCC, he

:37:46.:37:50.

said it wasn't strong enough or working. The point is systemic

:37:50.:37:54.

failure, I know you don't want to look back at the past, but as a

:37:54.:37:58.

regulator, you wouldn't go and regulate anybody by saying what do

:37:58.:38:03.

you think, OK, fine, would you expect it your self. That has to

:38:03.:38:11.

change or the PCC will go, won't it? I was in the cabinet that

:38:11.:38:15.

received the first of the reports and then the second. I approach

:38:15.:38:20.

this with two fundamental beliefs, first of all in self-regulation,

:38:20.:38:23.

and secondly in freedom of the press. I think that is one of the

:38:23.:38:27.

greatest assets we have. It carries with it, not only the right for

:38:27.:38:33.

free expression, but also the heavy responsibility. I have got to try

:38:33.:38:37.

to find the structure that will restore public confidence in the

:38:37.:38:41.

whole system. You are not there to be the last PCC chairman, are you.

:38:41.:38:45.

That is the implication? That is still to be decided, if there is an

:38:45.:38:49.

appetite for fundamental reform. I would hope we would see the

:38:49.:38:53.

existing work of the PCC, a lot unrecognised, which has been very

:38:53.:38:58.

effective in dealing with complaints. But I want to see a

:38:58.:39:02.

regulatory system, which does require renewal and regeneration. I

:39:02.:39:06.

will do my best. Thank you very much.

:39:06.:39:09.

To their fans they have always proved very popular right here in

:39:09.:39:15.

Britain. News that REM are spliting up after 1 years was a real moment

:39:15.:39:21.

of sadness. Their music - 31 years a real moment of sadness. Their

:39:21.:39:25.

music is called alternative right, but it is also a political voice

:39:25.:39:30.

throughout the world. Our report talks about why it really is the

:39:30.:39:38.

end of the world as we know it. # Shiny happy people

:39:38.:39:44.

The men from Athens Georgia, weren't your typical rock stars. As

:39:44.:39:48.

Rolling Stone Magazine said, they lived in some weird town nobody

:39:48.:39:52.

ever heard of, they didn't play power chords, they probably

:39:52.:40:02.
:40:02.:40:03.

couldn't even spell spanned decks. Massive - Spandex. Massive stardom

:40:03.:40:08.

sat uncomfortably on REM shoulders. Unlike Bono, when you see him out

:40:08.:40:13.

in his leathers waving a flag, someone who looks to the manor born,

:40:13.:40:18.

it never looked quite that, rather like Morrisey in the Smith, they

:40:18.:40:21.

looked like they could do it, but never looked as comfortable doing

:40:21.:40:26.

it. In Michael Stipe he had a rock man, who subverted what the rock

:40:26.:40:34.

frontman was, more Quentin Crisp than Rock Viking.

:40:34.:40:40.

# Kaufman in the wrestling match # Yeah, yeah, yeah.

:40:40.:40:47.

REM took traditional American rock feel, and gave it a reading list.

:40:47.:40:51.

Their songs could be about subjects as ease sow teric about the

:40:52.:40:57.

troubled sitcom star, Andy Kaufman as in Man On The Moon.

:40:57.:41:03.

This was alternative rock. M it's the end of the world

:41:03.:41:08.

- # It's the end of the world # As we know it

:41:08.:41:13.

You could say the same of the causes REM championed.

:41:13.:41:17.

Members of the band have campaigned for environmental, feminist and

:41:17.:41:22.

human rights causes, and to encourage voting. But are they for

:41:22.:41:29.

real, or just celebrity liberals, as some have claimed. For a while

:41:29.:41:34.

they were lumped in with the charity aristocracy, I think they

:41:35.:41:40.

always remained true to a slightly esoteric and leftfield agenda.

:41:40.:41:44.

Stipe aligned himself with any number of causes, he genuinely

:41:44.:41:48.

believed in them, that is not to say anybody else didn't. You

:41:48.:41:51.

certainly felt his heart was in them rather more than Sting, shall

:41:51.:41:59.

we say. To take a liberal agenda, quite an

:41:59.:42:02.

explicitly liberal agenda and fill American rock stadiums with it and

:42:02.:42:10.

the radio, is no mean feat, it they have remained a constant in

:42:10.:42:15.

American conscience in the way that politicians haven't.

:42:15.:42:20.

idiosyncratic REM marked their break-up, not with fights and writs,

:42:21.:42:26.

but with a new video featuring Kirsten Dunst, was it that

:42:26.:42:31.

difficult 16th album, or did they chuck the towel in after David

:42:31.:42:37.

Cameron picked their Perfect Circle for his desert island disc. Was

:42:37.:42:42.

there a moment when you thought that's it, it's over? It was a long

:42:42.:42:47.

moment. Two years worth. We took a long time to figure out we wanted

:42:47.:42:52.

to call it a day and disband. you could go on, separate for a bit,

:42:52.:42:57.

come back for a bit, other bands do it, why? Because it was an

:42:57.:43:01.

opportunity for us to walk away on our own terms, which is something

:43:01.:43:04.

that, as far as I know, very few bands, certainly that have been

:43:05.:43:08.

around for any length of time, have had the opportunity to do. There

:43:08.:43:12.

are no external forces making us do this, we have no problems.

:43:12.:43:19.

don't hate each other? No. We can walk away as friends and feel like

:43:19.:43:23.

we have accomplished everything we wanted to accomplish. We touched on

:43:23.:43:28.

the politics there, going back to the Reagan administration, you

:43:28.:43:32.

spoke at the Clinton inaugural in 1993, how important was that for

:43:32.:43:37.

you, and does it mix with the music? That was a moment for

:43:37.:43:41.

America, we had been through 12 years of what I thought were the

:43:41.:43:46.

darkest political years of my country. In my lifetime. We had no

:43:46.:43:51.

idea that Bush and Cheney were on the horizon, they trumped his

:43:51.:43:58.

father. But to be able to welcome in someone who was relatively

:43:58.:44:02.

liberal-minded or at least moderate, as the Clinton administration

:44:02.:44:06.

started out to be, it was a great moment for America. This is a great

:44:06.:44:10.

moment for politics, isn't it, therefore, presumably for political

:44:10.:44:15.

song writing, I know some of you in your songs have touched in and out

:44:16.:44:19.

of it. This is great moment for it right now? It is easy to write

:44:19.:44:22.

about politics in the opposition, when you are the underdog and you

:44:22.:44:26.

are angry at what's going on. Eventhough we are huge fans of

:44:26.:44:30.

President Obama, the fact is, he has been stymied in so much of what

:44:30.:44:35.

he wanted to do by the minority, which seems inherently unfair to us,

:44:35.:44:43.

and just as irritating as having the majority being the problem.

:44:43.:44:47.

are not abandoning President Obama, and would support him next year?

:44:47.:44:50.

absolutely. He's in trouble isn't he? He's in trouble, this is my

:44:51.:44:57.

opinion, nothing more. He won't say up front that the administration

:44:57.:45:01.

that he followed screwed things up so badly, and that he and his

:45:01.:45:06.

administration had to clean up the mess. And I wish he would just say

:45:06.:45:11.

that. But it seems unpresidential to do so. When you have toured

:45:11.:45:16.

around the world for many years, very popular here, as we have said,

:45:16.:45:19.

do you notice how views of America and Americans have changed since

:45:19.:45:25.

you have started touring. In other words, how popular are Americans

:45:25.:45:30.

and how popular is America now? think it is better than it was

:45:30.:45:33.

certainly when we first started coming over here. There were the

:45:33.:45:38.

civils being placed around, we were the lighten - cuefls being placed

:45:38.:45:43.

around, and we were - cruise missiles being placed around and

:45:43.:45:47.

Westminster the face to complain to when we were here. General America

:45:47.:45:51.

is perceived a little better than when we started out, it is a

:45:51.:45:55.

neverending struggle and it doesn't get better in the big picture.

:45:55.:46:01.

important is it when anybody who is a celebrity in any field gets

:46:01.:46:06.

involved in causes, your causes have been Darfur and domestic

:46:06.:46:09.

politics. Does that actually help or not? I think it does, people

:46:10.:46:14.

have come up to me over the course of 32 years we have been together

:46:14.:46:19.

as band and said I was an aimless 17-year-old and I heard this song

:46:19.:46:24.

or saw this show and I'm an environmental lawyer, thank you for

:46:24.:46:27.

helping influence my life choice. Stuff like that happens, more often

:46:27.:46:32.

than you would think. That makes me feel, as a public figure, like our

:46:32.:46:36.

actism, although it might turn off some fans because they might have a

:46:36.:46:40.

different opinion, I think it is important to feel like you can

:46:40.:46:44.

express yourself. But is there a problem when you are one of the

:46:44.:46:48.

biggest rock bands in the world doing that kind of thing. Sometimes,

:46:48.:46:52.

for instance, Sting and Bono, not entirely popular with some people

:46:52.:46:56.

because of that? You certainly risk alienating people. As a human being,

:46:56.:47:01.

I have to get up and look at myself in the mirror in the morning. And

:47:01.:47:04.

what I live for is not to be popular with everyone, but to be

:47:04.:47:08.

true to what I believe in and what I feel. If that involves using our

:47:08.:47:11.

platform to make political statements and potentially

:47:11.:47:14.

alienating a certain portion of the audience, that is something we have

:47:14.:47:19.

to do any way. When are you getting back together again? We are not.

:47:19.:47:29.
:47:29.:47:30.

Thank you for asking. When is the hell freezes over tour going to go

:47:30.:47:37.

on? It is over. Sad? It is bitter sweet, it is strangely liberating.

:47:37.:47:40.

Oddly liberating, we feel very comfortable with what we have done.

:47:40.:47:45.

Today's protest, the Occupy Wall Street, fans of that? Absolutely,

:47:45.:47:52.

yes. Let's get a quick last word from Paul in Cannes at the G20.

:47:52.:47:56.

In the last 60 minutes effectively what has happened is the deal done

:47:56.:48:01.

in Brussels last week has been put on hold. Greece won't get the eight

:48:01.:48:04.

billion bailout money it was due, until the referendum, it is fairly

:48:04.:48:09.

clear that the G20 leaders are accepting that Mr Papandreou wants

:48:09.:48:12.

the referendum, and we are being told he will try to go for it in

:48:12.:48:15.

December, possibly as early as the 5th of December. This could all

:48:15.:48:19.

change by Friday, he has to get it through the Greek parliament. But

:48:19.:48:23.

ultimately, there is a bit of poetic justice, the Greek crisis,

:48:24.:48:27.

at the root of all the other crises going on in this town, will be

:48:27.:48:31.

resolved by the Greek parliament and the Greek people.

:48:31.:48:34.

That is all from Newsnight tonight, more from Kirstie tomorrow, good

:48:34.:48:44.
:48:44.:48:50.

Good evening, few of us will be completely dry overnight. Outbreaks

:48:50.:48:54.

of rain in the north and the east. Northern England and Scotland,

:48:54.:48:57.

conditions will improve during the day. A scattering of showers across

:48:57.:49:00.

the west and south initially. Developing a bit further inland.

:49:00.:49:04.

Some showers puorning into the back of northern England for the end of

:49:04.:49:09.

the afternoon. Much of the wet start will be dry and bright. There

:49:09.:49:13.

is that threat of showers anywhere across central and southern areas,

:49:13.:49:16.

some heavy, some of of the wetter conditions across East Anglia and

:49:16.:49:21.

the south-east. It looks as if across South-West England and Wales,

:49:21.:49:26.

the big threat of showers should be in the afternoon. Brighter weather

:49:26.:49:29.

throughout the day despite the continuing threat of showers. For

:49:29.:49:31.

Northern Ireland the heaviest of the showers again for the afternoon,

:49:31.:49:37.

a few rumbles of thunder too, the brighter spells, 15-16, same sort

:49:37.:49:40.

of values across Scotland, showers in the west of Scotland, but to the

:49:40.:49:43.

north and east it will be a brighter second half of the day.

:49:43.:49:46.

From Thursday into Friday, again some outbreaks of rain, Friday, you

:49:46.:49:50.

can see the city forecast, Scotland and Northern Ireland, not many

:49:50.:49:54.

showers to speak of, compared to further south, outbreaks of rain on

:49:54.:49:58.

Thursday, Friday looking that little bit brighter, but there will

:49:58.:50:01.

be slow-moving, heavy and thundery showers. Those showers will be at

:50:01.:50:04.

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