10/11/2011

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:00:09. > :00:13.Tonight, warnings of a new recession for Europe. As investors

:00:13. > :00:18.and the commission cut growth forecasts across the EU, is the

:00:18. > :00:23.euro itself about to crack? We will hear tonight from Rome, Berlin and

:00:23. > :00:26.New York. The man who knew too much,

:00:26. > :00:30.apparently not, James Murdoch says the truth of widespread phone

:00:30. > :00:34.hacking was hidden from him. But the News International boss

:00:34. > :00:38.apologises for the revelations broken by Newsnight, that lawyers

:00:38. > :00:41.of phone hacking victims were put under surveillance by News of the

:00:41. > :00:43.World. I want to say for the record it is appalling, something I would

:00:43. > :00:48.never condone, and the company should never condone, it was

:00:48. > :00:52.shocking when I found it out. parliament, frustration. But did it

:00:52. > :00:56.really merit this. Mr Murdoch, you must be the first Mafia boss in

:00:56. > :01:01.history who didn't know he was running a criminal enterprise.

:01:01. > :01:05.Watson, please, I think that is inappropriate, Mr Chairman. We will

:01:05. > :01:10.hear from a News International executive and a victim of hacking.

:01:10. > :01:18.Also tonight, the battle of the oligarchs, from the creme Len to

:01:19. > :01:23.the alps to the courts. Abramovich versus Berezovsky.

:01:23. > :01:27.Hello and good evening, what if it is already too late? Despite calls

:01:28. > :01:31.from politicians to act now to save the eurozone there are some voices

:01:31. > :01:34.now admitting that the chance may have already been missed. Today the

:01:34. > :01:37.European Commission downgraded its growth forecasts and admitted

:01:38. > :01:47.Europe was at risk of a new recession. A banker is now in

:01:48. > :01:48.

:01:48. > :01:52.charge of Greece. The country recognised Lucas Papademos as their

:01:52. > :01:56.head. The market seemed reassured by the changes, even with

:01:56. > :01:59.Berlusconi agreeing to go. Is it too late to prevent a recession?

:01:59. > :02:04.There are people in the markets who believe this problem of Italian

:02:04. > :02:08.sovereign debt may be yesterday's problem. That the movements in the

:02:08. > :02:11.price of Italian debt, certainly its short-term debt, may be

:02:11. > :02:16.signalling something else, which is trouble in the banking system,

:02:16. > :02:18.primarily in the Italian banking system, more widely in the European

:02:18. > :02:23.banking system. This short-term debt is a key instrument that banks

:02:23. > :02:28.use to trade with each other. We have had, tonight, it is not often

:02:28. > :02:33.I read out notes from analysts, we had a note from analyst at

:02:33. > :02:36.Schroders, this is a company that manages �300 billion worth of

:02:36. > :02:39.people's money, saying this, politicians have missed their

:02:39. > :02:43.opportunity to prevent a European credit crunch, and following

:02:43. > :02:46.yesterday's events, the banking system in Europe is now likely to

:02:46. > :02:52.experience a serious shock from the fal fall-out of the country's bond

:02:52. > :03:02.market collapse. That is a fairly clear bet, or

:03:02. > :03:03.

:03:03. > :03:06.wager, on another Liamman in Europe. To stop it -- Lehman in Europe, the

:03:07. > :03:14.action to stop it, the solutions are as political as they are

:03:14. > :03:22.economic. The German nightmare about money,

:03:22. > :03:26.is coloured in black and white. By what happened in the 1920s. In the

:03:26. > :03:30.Weimar Republic, the Central Bank printed money, and hyperinflation

:03:31. > :03:35.followed, children used bank notes as toifplts they weren't much use

:03:35. > :03:39.for anything else. Those cultural scars explain why Germans are so

:03:39. > :03:42.nervous about letting the ECB take the extraordinary measures other

:03:42. > :03:46.central banks have taken. Instead the technocrats at the European

:03:46. > :03:51.Central Bank are attempting, not very successfully, to keep a lid on

:03:51. > :03:55.things, with a short-term fix. ECB has been coming in, day-to-day,

:03:55. > :03:59.since the beginning of August, and buying Italian and Spanish

:03:59. > :04:02.Government paper, trying to keep the prices up and yields down. This

:04:02. > :04:07.way the price of Italian debt is affordable. In reality the

:04:07. > :04:10.programme is not transparent. The banks don't know when the ECB is

:04:11. > :04:15.coming, what the point of the programme, and when it will stop.

:04:15. > :04:19.This graph those what the ECB is doing, buying up loans from Greece,

:04:19. > :04:23.Ireland and Portugal, and since August, big time from Italy. But

:04:23. > :04:28.Italy as another 300 billion euros of debt to roleover this year,

:04:28. > :04:37.nobody else is buying. What they note -- roll over this year, nobody

:04:37. > :04:42.else is buying. What they need is to have a reserve of thrillions,

:04:42. > :04:48.and then the markets would know where the ECB is going and know it

:04:48. > :04:51.is at affordable levels. There is a problem, board members and other

:04:51. > :04:54.European traditionalists, thinks it breaks the treaty law and the

:04:54. > :04:58.spirit on which the euro was founded. The other option, already

:04:58. > :05:04.offered to Italy, but refused, is a short-term credit line from the IMF.

:05:04. > :05:11.That comes at a price too. The IMF mission in Rome, already demanding

:05:11. > :05:16.specific privatisations, and more refoerms. -- reforms. It would be

:05:16. > :05:22.very difficult for the IMF to fund the entirety of a bailout of an

:05:22. > :05:26.economy. That is as rich in Germans of GDP per capita, as Italy, other

:05:26. > :05:31.economies are much poorer economies contributing to the IMF, would feel

:05:31. > :05:35.uncomfortable with that. If the short-term threat is contagion from

:05:35. > :05:38.geez Greece, -- Greece, then getting Greece under control will

:05:38. > :05:41.help. The new Prime Minister was swoorn in there today. Can the

:05:41. > :05:47.banks losing money under the private sector involvement lose

:05:47. > :05:54.more? No says the man who rep presents them. I think for Greece

:05:54. > :05:57.the 50% nominal reduction is the beard line of what could be

:05:57. > :06:06.reasonable as voluntary, any reduction in value and losses

:06:06. > :06:12.clearly would be there with markets that are non-voluntary. In the

:06:12. > :06:16.short-term there is a mismatch, everybody thinks the ECB will move,

:06:16. > :06:19.those in politics think it won't. Markets have given up on

:06:19. > :06:22.Governments, given the mess in Italy and Greece in the past week,

:06:22. > :06:25.markets have moved on that a single Government can change situations.

:06:25. > :06:28.It doesn't really matter who is running Greece and Italy in the

:06:28. > :06:32.near term, what is what matters is the ECB coming in and trying to

:06:32. > :06:37.deal with the situation. Italy too has its nightmare images of the

:06:37. > :06:43.past. Burning money to control inflation. Tonight, something more

:06:43. > :06:50.valuable than money is smoldering, the credibility of the eurosystem.

:06:50. > :06:55.We will be hearing about that a little later from Paul. Joining

:06:55. > :06:57.from Rome, Federica Mogherini, an Italian member of parliament,

:06:57. > :07:02.Michael Barrymore, and Gillian Tett of the Financial Times, and here in

:07:02. > :07:08.the studio, Alan Brown from Schroders, mentioned in the report.

:07:08. > :07:12.I will start with you, Alan, one of these lines in the report is that

:07:12. > :07:16.Europe is essentially missed -- has essentially missed the opportunity

:07:16. > :07:20.to prevent a credit crunch. Do you believe it is too late to avoid

:07:20. > :07:24.recession? I believe we are at the early stages of a credit crunch

:07:24. > :07:27.right now. I believe the real politics is that it is virtually

:07:27. > :07:31.impossible for politicians to get ahead of the game at this stage. I

:07:31. > :07:34.almost feel that we have to almost reach the train wreck before

:07:34. > :07:39.politicians will actually be empowered to take the actions that

:07:39. > :07:43.most of us in the markets believe are necessary. Where is the train

:07:43. > :07:45.wreck, how far away are we from that? We are already

:07:46. > :07:50.extraordinarily close. The focus is on Italy because that is where the

:07:50. > :07:55.large money is. We are talking about debts of 1.9 trillion. We are

:07:55. > :07:59.talking about the Italian economy going back into recession, and the

:07:59. > :08:03.yield on Italian bonds today would be completely unsustainable for

:08:03. > :08:09.Italy's finances, if they were maintained at that level for any

:08:09. > :08:11.length of time. Mogherini, David Cameron, our Prime Minister, --

:08:11. > :08:17.Federica Mogherini, David Cameron, our Prime Minister, pointed the

:08:17. > :08:19.finger and said Italy was a clear and present danger, a major part of

:08:19. > :08:24.the problem? We are aware of the fact that we have a responsibility.

:08:24. > :08:27.We as politicians, even being in opposition, it is hard for me to

:08:27. > :08:31.share the responsibility with Berlusconi's Government now, but we

:08:31. > :08:35.are aware of the fact that politics and the Government has a

:08:36. > :08:39.responsibility, and that we have to fix the problem. Not only for Italy

:08:39. > :08:43.but for the eurozone, for the European Union, and for the world,

:08:43. > :08:47.probably, because we see how the markets are interlinked. We are

:08:47. > :08:53.trying to do our best to speed up the process. To have a different

:08:53. > :08:56.Government in a couple of days, not more. To do whatever is needed to

:08:56. > :08:59.recover and make sure that it is not too late. Hopefully we are

:08:59. > :09:02.still in time. It is interesting, the point that Paul made in his

:09:02. > :09:07.report is that markets have essentially given up on Governments

:09:07. > :09:13.now. As a member of parliament, how do you respond to that? That is

:09:13. > :09:15.very sad, I have to say. But Italy has had, and still has, partly, a

:09:15. > :09:20.credibility problem, that is peculiar to our political scene in

:09:20. > :09:24.the last months and years. I believe that with the choice of

:09:24. > :09:27.having Mario Monti as the next Prime Minister, given that it is

:09:27. > :09:33.the choice, because it is not given for granted yet, but still it looks

:09:33. > :09:38.like it will happen in the next 48 hours. I think that will be the

:09:38. > :09:43.right choice. Also considering what was said before, he is, for sure,

:09:43. > :09:47.the right person to reassure the markets, and to try to solve our

:09:47. > :09:50.problems, even if his point of view is not a political one, but more of

:09:50. > :09:55.a technical one. I think this is the right choice at the right

:09:55. > :09:59.moment, finally. Gillian Tett, in New York, I know you have been with

:09:59. > :10:02.Alan Greenspan today and talking to Obama's people, viewed with that

:10:02. > :10:08.distance and perspective, is the solution more obvious? Well, I

:10:08. > :10:12.think the sense of fear is palpable. In fact, Alan Greenspan told a

:10:12. > :10:15.meeting earlier today as far as he's concerned Europe is America's

:10:15. > :10:18.biggest economic problem right now. In a sense there is real concern

:10:18. > :10:22.about contagion, that the global economy could be pulled into a

:10:22. > :10:26.slowdown f not recession, as a result. And we're heading for

:10:26. > :10:31.financial market turmoil. The Americans, perhaps, more than

:10:31. > :10:36.anybody, know that when markets are losing confidence, what you need is

:10:36. > :10:40.clear action, decisive action, and preferably action that surprises

:10:40. > :10:45.the market on the upside, doing more than they ask for. They know

:10:45. > :10:51.what to do, that is what they did with the bailout programme in 208,

:10:51. > :10:54.to top the panic after Lehman Brothers. What is causing concern

:10:54. > :11:00.here, is they don't see any sign that the European leaders have

:11:00. > :11:04.their version of a bailout. What would that be? It would be clear

:11:04. > :11:07.measures to draw a line in the sand, to joined pin the eurozone bond

:11:07. > :11:11.markets, to force the banks to come completely clean about their

:11:11. > :11:14.exposures to sovereign debt, and if necessary to inject more capital

:11:14. > :11:19.into the system. Then, to start talking about whether the eurozone

:11:19. > :11:22.is going to create more co- ordinated fiscal policies going

:11:22. > :11:25.forward, or address the fundamental structural problems that are

:11:25. > :11:29.plaguing the eurozone now. Essentially yolking an economy like

:11:29. > :11:33.Italy, which is very unproductive, where productivity is not grown

:11:33. > :11:40.over the last decade, with Germany, where productivity has grown 9.4%

:11:40. > :11:43.in the last decade. There are big structural problems exposed.

:11:43. > :11:47.Michael Barrymore, isn't the solution staring us in the --

:11:47. > :11:51.Katinka Barysch, is the solution staring us in the face, I can see

:11:51. > :11:55.Gillian nodding her head. The IMF have been ruled out, none of the

:11:55. > :12:02.poorer countries want a fund that bails out Europe, essentially, the

:12:02. > :12:07.buck is right in your corner, isn't it? Yeah, and I'm in Berlin, the

:12:07. > :12:10.world is staring at Berlin for a solution, and I'm in Berlin and

:12:10. > :12:19.everybody seems to be staring at Frankfurt. Now, one thing that I

:12:19. > :12:22.have picked up here over the last couple of days is there is an

:12:22. > :12:28.acceptance in the German political circles that the ECB has to do

:12:29. > :12:31.whatever it takes to tide us over this particular part of the crisis.

:12:31. > :12:40.Although you will always hear German politicians say that they

:12:40. > :12:45.are against the the central banks buying dodgy Government bands,

:12:45. > :12:48.there is an acceptance. There is an awful lot of communication going on

:12:48. > :12:52.between Frankfurt and the German Government at the moment, not the

:12:52. > :12:56.ECB and the German Government, but also the Bundesbank, the German

:12:56. > :13:00.Central Bank and the German Government, there was a falling out

:13:00. > :13:03.recently, because the German Bundesbank wrecked a plan to use

:13:03. > :13:07.special drawing rights of artificial currency that all IMF

:13:07. > :13:10.members hold, to boost the European Financial Stability Fund. There is

:13:10. > :13:13.bad blood even between those authorities. It is all in Frankfurt

:13:13. > :13:19.at the moment. Having said that, I think that a lot of German

:13:19. > :13:23.politicians, sorry? Just to say, are you saying the ECB is not in

:13:23. > :13:28.the picture at all. Nobody is talking about the ECB now? They are

:13:28. > :13:32.talking about the ECB, but the Germans are the people who

:13:32. > :13:37.basically invented independent central banks and they are not

:13:37. > :13:44.necessary happy with all the ECB does. I have met some people who

:13:44. > :13:48.are very close to the Government and are very unhappy with the ECB

:13:48. > :13:51.druging its feet. Exactly what Gillian has just said, and what the

:13:51. > :13:55.market analyst also said, they should make a very clear statement

:13:55. > :14:00.that they are now going into the market, they don't disclose the

:14:00. > :14:03.sums, they just say we will back the Italian bonds. That they stop

:14:03. > :14:08.dithering, they are buying bonds at the moment, they say they don't

:14:08. > :14:10.like it, they don't know how long it will take. The German

:14:10. > :14:13.politicians aren't necessarily happy with this, but this is a

:14:13. > :14:17.country where you don't criticise central banks openly, it is not

:14:17. > :14:20.done. I take it back to Gillian Tett, although it seems like the

:14:20. > :14:24.obvious solution, there is no direct chain of command between the

:14:24. > :14:28.German Government and the ECB, it simply can't be done? There is no

:14:28. > :14:34.direction and command. But frankly, all eyes now on Mario Draghi. This

:14:34. > :14:39.really is his historic moment. It is worth bearing in mind for the

:14:39. > :14:43.ECB to step in and underwrite the Italian and Greek bond markets is a

:14:43. > :14:47.huge psychological step. For the US Congress, in late 2008, it was a

:14:47. > :14:51.huge psychological step for America to essentially nationalise, or use

:14:51. > :14:55.public money to bail out the banking system. Psychological steps

:14:55. > :15:00.can occur, in a crisis. It wouldn't be impossible to imagine this. But

:15:00. > :15:04.the really big question now is will Mario Draghi, because he's Italian,

:15:04. > :15:08.feel he has to be more German than the Germans to get credibility? Or

:15:08. > :15:11.is he willing to really role the dice and do something bold and

:15:11. > :15:14.dramatic. He does come from the private sector background, it is

:15:14. > :15:17.worth rembering that. He has worked at Goldman Sachs before. He knows

:15:17. > :15:21.what happens when traders get involved, and maybe just maybe a

:15:21. > :15:26.point will come where he says he's going to behave like a trader, he's

:15:26. > :15:29.going to do something bold and dramatic and make my mark. Time to

:15:29. > :15:35.break the rules? Absolutely, it is breaking the rules. Under the

:15:35. > :15:40.Lisbon Treaty, the ECB is not allowed to go out and monetise debt

:15:40. > :15:44.in the system. It means tearing up rules. That is why we will get to

:15:44. > :15:47.the 11th our and 59th minute before we get it. We have further to go

:15:47. > :15:50.with this, stay with us. We will be talking about the future of Europe.

:15:50. > :15:54.Meanwhile it has been reported that France and German officials have

:15:54. > :15:58.held discussions on the prospect of a smaller eurozone w some countries

:15:58. > :16:01.leaving the currency all together. The discussions are still highly

:16:01. > :16:06.theoretical and have been denied by the German Chancellor herself, but

:16:06. > :16:16.much of the focus in the midst of Europe's worst crisis since the ske

:16:16. > :16:20.

:16:20. > :16:24.Second World War, will be clearly The sovereign debt crisis has

:16:24. > :16:30.pulled Europe's long-term problems well into the short-term. A

:16:30. > :16:36.currency union without a tax union, a half cocked Central Bank, a huge

:16:36. > :16:39.competitiveness gap, a social model, but no-one left to pay for it. From

:16:39. > :16:43.the politicians, always the same plea, give us breathing space to

:16:43. > :16:49.make the long-term structural reforms. But 18 months of

:16:49. > :16:53.indecision has removed the breathing space. Europe now has to

:16:53. > :16:56.do structural reform in the worst of circumstances. The European

:16:56. > :17:02.Commission slashed its growth forecast for 2012 today by more

:17:03. > :17:06.than two-thirds, from 1.8% to 0.5%. It predicts recession in Italy,

:17:06. > :17:11.stagnation in Spain, sharp slowdowns in German and northern

:17:11. > :17:15.Europe, and stagnation in the UK for the first half of next year.

:17:15. > :17:19.It makes it worse for all of Europe, not just a southern European

:17:19. > :17:25.problem. GDP is not growing and their dynamics look worse, on paper

:17:25. > :17:28.all the countries have a lot more fiscal tightening to do. It pushes

:17:29. > :17:32.them into a fiscal spiral, they are cutting and the economy is pushed

:17:32. > :17:36.into recession, and it is hard to get out of the mess. On paper it

:17:36. > :17:42.makes growth worse. What are the long-term options, the eurozone

:17:42. > :17:46.could go for fiscal union, but discussions focus lately on who is

:17:46. > :17:50.in and who is out? The best scenario for the eurozone is the

:17:50. > :17:54.most highly indebted economies leave. And you are left with a much

:17:54. > :17:57.stronger core eurozone involving Germany and some of the other

:17:57. > :18:02.northern countries. That could then perhaps make convincing steps

:18:02. > :18:06.towards a fiscal union, which means this situation doesn't arise again.

:18:06. > :18:10.If the eurozone did break up, the collapse in asset prices on the

:18:10. > :18:15.periphery, might be enough to take down a large part of the banking

:18:15. > :18:22.system, here and across the world. The dreaded credit event, or Lehman

:18:22. > :18:28.moment. That would beanter mount to default, the nomination -- be anter

:18:28. > :18:32.mount to default, the new thing would be more than the nominations

:18:32. > :18:37.of the current area countries. They are in the euro, one is a key

:18:37. > :18:41.country in the world, any redenomination would produce

:18:41. > :18:46.significant loss. There is one other option, Germany leaves the

:18:46. > :18:50.euro, and forms a new currency block around the new reborn damp

:18:50. > :18:53.mark with other countries, like Austria, Finland and the

:18:53. > :18:58.Netherlands. That option is looking more and more feasible the longer

:18:58. > :19:03.this goes on. If Germany is forced into much larger bailouts, much

:19:03. > :19:11.larger contributions to other countries, than it is comfortable

:19:11. > :19:15.with, it might be in the end it chooses to leave the eurozone.

:19:15. > :19:21.would be Europe, but not as we know it. Paul Mason there, the guests

:19:21. > :19:24.are still with me. Federica Mogherini, an Italian MP,

:19:25. > :19:34.Katinka Barysch from Berlin, Gillian Tett from the FT in New

:19:34. > :19:44.York, and Alan Brown of Schroders. I will throw this to you, Bill Cash,

:19:44. > :19:49.In Berlin r they privately considering this smaller Europe?

:19:49. > :19:55.Some people are very publicly considering it, there are some

:19:55. > :20:03.prominent commentators, the former head of the employers' federation,

:20:03. > :20:06.who say we need the euro nord that is only with the stability

:20:06. > :20:09.orientated immediate neighbours, and we kick the southern Europeans

:20:09. > :20:13.out. That is a minority view. Within Government circles there is

:20:13. > :20:19.no talk about breaking up the eurozone. They are, of course,

:20:19. > :20:21.discussing the idea that eventually maybe we need a clause in the

:20:21. > :20:25.European treaty that allows countries that don't want to stay

:20:25. > :20:28.in to leave. This is a very long- term sort of thing. As a solution

:20:28. > :20:33.to the crisis, in Government circles people are not talking

:20:33. > :20:36.about a break up of the eurozone, partly because there is a feeling

:20:37. > :20:41.of solidarity, partly because they know for countries such as Greece

:20:41. > :20:48.to be out there on its own would be very, very tough, and they know

:20:48. > :20:53.there would be mayhem. How do you disentangle what is a drachma-

:20:53. > :20:57.eurobond and a damp mark euroband, how do you have capital controls in

:20:57. > :21:01.the monetary union. They know if parts of the periphery breaks away,

:21:01. > :21:05.the rest of the eurozone will have a currency that is exceedingly

:21:05. > :21:12.strong, for an export-orientated economy, such as gaeerm Germany,

:21:13. > :21:17.that is a scary thought. Is it inconceivable? No, since 1945, on

:21:17. > :21:21.the narrowest of definitions, 69 currencies an the world, many odd

:21:21. > :21:25.and small, have come to an end, and the sun still rises in the morning.

:21:25. > :21:29.It doesn't have to be a calamity, but it has the potential. It

:21:29. > :21:34.becomes one if, in the removing say Greece from the eurozone, we then

:21:34. > :21:41.end up with a contagion, leading to a domino collapse of all the other

:21:41. > :21:50.perrif kal economies. Is Italy on the in-- Periphery economies.

:21:50. > :21:55.Italy on the in or outside? I think it is on the inside, it is running

:21:55. > :21:58.a much lower deficit than the UK. It is the governance structures of

:21:58. > :22:03.Europe which unfortunately are making it so difficult for the

:22:03. > :22:08.European economy, at large, to cope with this problem. Federica

:22:08. > :22:12.Mogherini, do you think that once the political structures change, by

:22:12. > :22:17.that, the euphamism is Berlusconi is gone, could Italy find itself

:22:18. > :22:23.back on the inside? Absolutely, I think the Italian economy, and the

:22:23. > :22:28.banking system are stronger than they have been described so far. I

:22:28. > :22:33.think with the right reforms and measures, both long-term, mid-term

:22:33. > :22:41.and very short-term, we can do much better than we have done so far.

:22:41. > :22:47.And I think that Italy is ready to be back on its feet again. And be

:22:47. > :22:50.part of the eurozone as it should be and it is now. I started by

:22:50. > :22:54.saying this is all highly theoretical, of course, is it

:22:55. > :23:00.possible to have a controlled break-up, does it make any economic

:23:00. > :23:03.sense? It is not highly theoretical, I can tell you that here in New

:23:03. > :23:08.York there are banks and asset managers doing all sorts of

:23:08. > :23:12.internal fire drills for a potential break-up and exit of one

:23:12. > :23:15.or two members. I was chatting with asset managers, people who control

:23:15. > :23:18.some of the biggest pots in the world, going down the list saying

:23:18. > :23:22.do you draw the line of groz and Portugal, what about Ireland, if

:23:22. > :23:28.there is some kind of exit of members. People are certainly

:23:28. > :23:33.talking about it. Any kind of exit or break up will be messy. People

:23:33. > :23:35.know that, and the great lesson of Lehman Brothers back in 2008, when

:23:36. > :23:39.it collapsed, of the interconnectiveness of the

:23:39. > :23:42.financial system today means there are often very unexpected shocks

:23:42. > :23:45.that no-one has thought of when something happens, that is what

:23:45. > :23:49.people are worried about. This couldn't happen without a

:23:49. > :23:52.substantial number of banks going under, could it? Banks may need

:23:52. > :23:58.more capital, but they don't necessarily have to go under.

:23:58. > :24:02.your view the same, Gillian? It is unclear, that is exactly why people

:24:02. > :24:07.are so concerned. There are already people looking at the linkages

:24:07. > :24:11.between the banking system and trying to work out exposures. One

:24:11. > :24:14.tiny example, at the moment public entities, state entities don't post

:24:14. > :24:19.any capital when they post derivatives deals, nobody thought

:24:19. > :24:22.we would be in situation where people could default. What are the

:24:22. > :24:32.reprecussions if people did default and didn't pay back the money they

:24:32. > :24:36.owed, we don't know. Economically you can see how it is ethically,

:24:36. > :24:41.but it could be catastrophic. You have the illusion of parity, France

:24:41. > :24:45.and Germany, standing strong side by side together. If it emerged

:24:45. > :24:55.that France was not as strong as Germany, that is pretty much the

:24:55. > :25:01.

:25:01. > :25:05.end of post-war Europe, isn't it? My generation grew up with the

:25:05. > :25:10.conviction that in European integration the direction is always

:25:10. > :25:15.in one way, towards more integration, more harmony, more

:25:15. > :25:19.solidarity amongst the European people. For the first time in my

:25:19. > :25:23.lifetime, we are staring at the real possibility that we might go

:25:23. > :25:26.back wards, that countries might opt-out, that there might be chaos.

:25:26. > :25:31.There is bad blood in the European Union already, we don't like each

:25:31. > :25:36.other as much as we thought. This is much more about banking sector

:25:36. > :25:40.chaos, and finance. This is about the European identity. And what we

:25:40. > :25:45.are seeing already now, that we tried to hold the euro together. We

:25:45. > :25:48.might just be able to do the things that are necessary to save this

:25:48. > :25:53.currency, but it is eroding the political fabric on which the

:25:53. > :25:58.European Union is based. So whichever way this goes, we will

:25:58. > :26:00.come out with a European Union that looks very different from this

:26:00. > :26:07.harmonious, nice place we thought we were in when we started this

:26:07. > :26:12.crisis. Thank you very much.

:26:12. > :26:15.James Murdoch has accused former News International employees,

:26:15. > :26:18.including a company lawyer, of misleading him about the phone

:26:18. > :26:22.hacking controversy. He returned to Westminster today to answer more

:26:22. > :26:28.questions from a select committee of MPs, who repeatedly insisted he

:26:28. > :26:31.hadn't been told of the so-called "for Neville" e-mail, which

:26:31. > :26:37.suggested phone hacking was widespread at News of the World.

:26:37. > :26:40.Tonight Tom Crone hit back and accused James Murdoch of giving

:26:40. > :26:44.disingenious evidence. James Murdoch was fighting for his

:26:44. > :26:48.corporate reputation today in parliament. Recalled to explain

:26:48. > :26:52.inconsistencies in evidence about who knew what, when, at News

:26:52. > :26:55.International about phone hacking, the stakes couldn't have been

:26:55. > :26:59.higher. Did you mislead this committee in your original

:26:59. > :27:02.testimony? No I did not. When James Murdoch gave evidence at the select

:27:02. > :27:05.committee today, it immediately became apparent there was a

:27:05. > :27:08.straight conflict. Either his account of what he knew about the

:27:08. > :27:13.extent of phone hacking was correct, or the account given by the in-

:27:13. > :27:17.house lawyer and former editor, a couple of weeks ago was correct.

:27:17. > :27:19.There was straight contradiction. If Mr Brown and Mr Myler are

:27:19. > :27:23.telling the truth, you are not telling the truth, if you are

:27:23. > :27:27.telling the truth, they are not telling the truth. At the centre of

:27:27. > :27:32.the story are three men with delivering recollections of the

:27:32. > :27:37.events. James Murdoch who sat way above News of the World in the

:27:37. > :27:41.parent group, Tom Crone, News of the World's vastly experienced

:27:41. > :27:46.legal adviser, and Colin Myler, brought in to clean up the mess

:27:46. > :27:54.after the phone hacking scandal, that led to the conviction of Glenn

:27:54. > :28:00.Mulcaire and Clive Goodman. It is the case of Gordon Taylor has most

:28:00. > :28:06.dangerous for James Murdoch. Police have discovered a transcript of a

:28:06. > :28:13.message left on his phone with a "for Neville" message for him on

:28:13. > :28:23.the phone. The case seemed to look bad. On the 24th of May, Tom Crone

:28:23. > :28:34.

:28:34. > :28:44.Sure enough their barrister, Michael Silverleaf, delivered his

:28:44. > :29:05.

:29:05. > :29:10.considered written opinion on the Tom Watson MP, who has been like a

:29:10. > :29:14.dog with a bone on this inquiry, asked him whether the QC's advice

:29:14. > :29:18.was discussed at a meeting on the 10th of June, with News of the

:29:18. > :29:22.World's legal adviser, Tom Crone, and editor, Colin Myler. There was

:29:22. > :29:26.no mention of a culture of legal information discussed at that

:29:26. > :29:31.meeting. Certainly not. Do you still maintain that neither Crone

:29:31. > :29:35.or Myler mentioned this, even in passing, given the strength of

:29:35. > :29:39.words used? That is exactly right, they did not mention it. Despite

:29:39. > :29:45.this information going to the very heart of the problem, you and they

:29:45. > :29:49.were meeting to discuss, namely that Taylor settlement, they didn't

:29:49. > :29:51.raise anything within the Silverleaf opinion? They gave me

:29:51. > :29:54.sufficient information to authorise the increase of the settlement

:29:54. > :30:00.offers that they had already made, that they had commenced making,

:30:00. > :30:05.some weeks before, without my knowledge. They left that meeting

:30:05. > :30:09.with the authority to continue to negotiate. But in September Tom

:30:09. > :30:12.Crone told the committee that James Murdoch had been told about the

:30:12. > :30:16."for Neville" e-mail, and seemed to indicate others at the News of the

:30:16. > :30:19.World knew. James Murdoch said he got that wrong. With respect to my

:30:19. > :30:25.knowledge, I thought that was inconsistent and not right. I

:30:25. > :30:35.dispute it, vigorously. You think Mr Crone misled us. It follows that

:30:35. > :30:43.

:30:43. > :30:46.I do, yes. Tom Crone hit back I need to tell you that I have met

:30:46. > :30:49.Neville Thurlbeck, and although the meeting was supposed to be in

:30:49. > :30:54.confidence, I think there is a public interest in revealing what

:30:54. > :30:58.he said to me. Mr Thurlbeck told him that Tom Crone had shown the

:30:58. > :31:03.damaging e-mail to James Murdoch, and he said the company was not

:31:03. > :31:07.ware of concerns he had raised. fully sympathise and understand why

:31:07. > :31:14.News International have made this decision to dismiss me. Because it

:31:14. > :31:19.was based from a position of ignorance. They have been deprived

:31:19. > :31:23.of vital information. That I have provided and offered to the News of

:31:23. > :31:26.the World. I have spoken to Neville Thurlbeck over the past couple of

:31:26. > :31:31.days. It is clear he maintains his innocence. He says his concerns

:31:31. > :31:36.about the called "for Neville" e- mail were ignored by management. He

:31:36. > :31:42.says it rather seemed their purpose that it absorbed all the pressure.

:31:42. > :31:51.He had a colourful turn of phrase for this, he said the "for Neville"

:31:51. > :31:59.e-mail was like nag net for the iron filings of the mission.

:31:59. > :32:03.Reported a News of the World investigator who followed leading

:32:03. > :32:08.phone hacking lawyer, Mark Lewis in Manchester. Mr Murdoch was asked

:32:09. > :32:11.about this today. Are you aware that Mr Lewis's family was tried by

:32:11. > :32:15.private investigator, including his 14-year-old dau, would you agree

:32:15. > :32:18.with me that is completely despicable and has no place in the

:32:18. > :32:21.practices of a modern media corporation. I totally agree with

:32:22. > :32:25.you. I wasn't aware of the allegation, if it is the case, as I

:32:25. > :32:30.have just said the whole fair is not acceptable and not on. Once

:32:30. > :32:34.again he seemed to put the blame on Tom Crone. That was absolutely not

:32:34. > :32:38.a corporate activity that was condoned, it is absolutely not

:32:38. > :32:42.appropriate. Mr Crone and the other person did not do that with any

:32:42. > :32:47.authority or knowledge by me, and I would never condone that behaviour.

:32:47. > :32:52.Again a dispute. Tom Crone seemed to deny arranging for this to

:32:52. > :32:56.happen in September. Did you arrange for the lawyers of phone

:32:56. > :33:00.hacking victims to be monitored by private detectives? No. Did you

:33:00. > :33:04.arrange for a dossier to be kept on them and follow up on their private

:33:04. > :33:09.lives? No. Many other private detectives were named in parliament

:33:09. > :33:14.today by Tom Watson. It seems it is rarely a week goes by without some

:33:14. > :33:16.new revelation about hacking, or at least highly questionable

:33:16. > :33:21.journalistic ethics. For News International it is the front page

:33:21. > :33:26.lead that refuses to die. Joining me now is Roger Alton, executive

:33:26. > :33:30.editor of the Times, and Chris Bryant, the shadow Justice Minister,

:33:30. > :33:34.who has had his phone hacked himself. Chris Bryant, the select

:33:34. > :33:39.committee got no further today. We have ended up with one person's

:33:39. > :33:44.word against another? We did get somewhere. We got some apologies

:33:44. > :33:49.from James Murdoch. We learned he hasn't the faintist idea what goes

:33:49. > :33:53.on in his own organisation. We learned he doesn't refer to it as

:33:53. > :33:57.his organisation, but as "it company", as if it is nothing to do

:33:57. > :34:01.with him. We learned that somebody at News International has been

:34:01. > :34:04.lying. Personally I suspect all of them have been lying to various

:34:04. > :34:07.different degrees. James Murdoch had to portray himself today as

:34:07. > :34:12.either being incompetent or a liar, he chose to go for being

:34:12. > :34:17.incompetent. It is extraordinary, Roger Alton, the kind of

:34:17. > :34:22.inconsistencies that remain. This jump in the amount of money, to

:34:22. > :34:27.�750,000, that James Murdoch didn't think to ask about? It was damages

:34:27. > :34:33.plus costs. Mr Murdoch had been advised that it was a good thing to

:34:33. > :34:37.do to settle, the cost might go higher. That was an award that

:34:37. > :34:41.could be done to Gordon Taylor. I think he was right to do that. He

:34:41. > :34:46.said in the hearing he didn't want to drag the company's name through

:34:46. > :34:50.the courts. I think the arguments for settling were perfectly fine.

:34:50. > :34:53.The idea it was a bribe or hush money doesn't wash. It certainly

:34:53. > :34:57.does wash, what you have just said is a complete load of nonsense, you

:34:57. > :35:02.know it yourself. The truth of the matter is when somebody makes a

:35:02. > :35:07.claim about a newspaper, and the newspaper decides to make an offer,

:35:07. > :35:11.let's say they offer �100,000, they might then take into consideration

:35:11. > :35:17.that if it went to court there would be additional costs. You

:35:17. > :35:21.wouldn't add on the total costs of both sides, and then give all that

:35:21. > :35:27.money to the litigant. Because it is, in a sense, you wouldn't be

:35:27. > :35:31.saving yourself any money, would you be - you would be better going

:35:31. > :35:33.to the court. It was part of buying the silence and the cover-up

:35:34. > :35:38.organised by people at the very top of the organisation. There clearly

:35:39. > :35:43.wasn't a cover-up, what James Murdoch admitted today was that the

:35:43. > :35:47.company hadn't dealt with issues of governance, sufficiently he

:35:47. > :35:51.admitted that. Don't you think that is extraordinary Can I finish, he

:35:51. > :35:54.had two things to do today, one to deal with the questions of his own

:35:54. > :35:57.personal integrity, which I believe he Z and the other was to deal with

:35:58. > :36:01.questions around how News International runs itself. He admit

:36:01. > :36:05.add lot of things had gone wrong. There was a culture in the company

:36:05. > :36:08.of keeping stuff from the boss, and there was a culture in the company

:36:08. > :36:12.of being too aggressive. Not just keeping stuff from the boss, but a

:36:12. > :36:15.boss not asking or checking or being curious about the Gordon

:36:15. > :36:19.Taylor payment? He said himself he should have been more curious. He

:36:19. > :36:21.admitted that. He didn't say that, that is completely untrue. That is

:36:21. > :36:25.exactly what he didn't say. He said there was no problem with

:36:25. > :36:31.governance in the organisation, it was a matter of transparency.

:36:31. > :36:34.saying there is a problem with governance. He used a whole load of

:36:34. > :36:41.language that is management speak for avoiding responsibility. This

:36:41. > :36:45.was his organisation, his employees. If I were a shareholder in BSkyB or

:36:45. > :36:50.News Corp, I would be saying, frankly, this man doesn't know what

:36:50. > :36:54.is going on under his fingertips. You have to accept one of the two,

:36:54. > :36:59.either he does no know and isn't saying t or he doesn't know how his

:36:59. > :37:05.company is run. He's a News International executive. He has run

:37:05. > :37:09.the company really well, and it is extremely good company. Extremely

:37:09. > :37:12.huge amount of good people there. There is a problem, nearly 6,000

:37:12. > :37:16.people had their phones hacked. Hundreds of people were harassed

:37:16. > :37:20.and intimidated by being trailed. Members of the Government, members

:37:20. > :37:24.of all political parties. Members of the Royal Family. The

:37:24. > :37:30.Metropolitan Police were corrupted, individual police officers were

:37:30. > :37:36.bribed, for informationle all of this done by an organisation --

:37:36. > :37:39.information, all of this done by an organisation you think is extremely

:37:39. > :37:43.well run. He said problems about the running of the company, James

:37:43. > :37:47.Murdoch said they were being addressed, he apologised for things

:37:47. > :37:50.like surveillance. We know in the last decade there was problems

:37:50. > :37:54.within the News of the World for accessing illegal information. That

:37:54. > :37:57.is been dealt with and the paper has been closed. We have heard this

:37:57. > :38:00.from people from News International for years now. It is only because

:38:00. > :38:03.some people took News International to court that some of the material

:38:03. > :38:10.came out. It is only because the Guardian mounted an investigation,

:38:10. > :38:12.which was vigorously and aggressively poo pooed by By the

:38:12. > :38:18.News of the World and the Independent. On the main subject,

:38:18. > :38:23.the central issue, on which the select committee kept going at, is

:38:23. > :38:29.that e-mail that Crone and Myler both say James Murdoch knew about,

:38:29. > :38:35.he denies it. We are no further on. It is inconceivable he didn't know

:38:35. > :38:40.about it. There is no rational for paying the �750,000, or the deal

:38:40. > :38:46.with Max Clifford, which he believe to be more than that number. There

:38:46. > :38:51.is no rationale or that, except to keep out of the public domain that

:38:51. > :38:54.there was not just one rogue reporter, that it was endemic in

:38:54. > :39:00.the newspaper. That was the argument James Murdoch, Rupert

:39:00. > :39:06.Murdoch, and Peter Brookes, and Andy Coulson, awe relied on. Isn't

:39:06. > :39:09.it a sign of -- All relied on. Isn't it a sign of the frustration

:39:09. > :39:13.of the parliament when Tom Watson made the comment about the Mafia,

:39:13. > :39:16.the Mafia kills people? It was colourful language, I have been

:39:16. > :39:22.accused that have in the past. So has the Sun and the News of the

:39:22. > :39:25.World, indeed, when the committee produced its rorp, just before the

:39:25. > :39:29.last general election d report, just before the last general

:39:29. > :39:34.election, and said it was inconceivable that people at the

:39:34. > :39:38.News of the World didn't know about the "for Neville" e-mail. They

:39:38. > :39:43.attacked certain people out of the newspaper, and bringing to light

:39:43. > :39:46.the truth, that was what they did. Indeed Murdoch said, one of the

:39:46. > :39:51.problems they had done had been far too aggressive, when the company

:39:51. > :39:56.had been criticised, this was wrong. He admitted it was wrong. One of

:39:56. > :39:59.the reasons is people have always attacked in ferocious terms the

:39:59. > :40:04.company. That is why they were overdefensive and not dealing with

:40:04. > :40:09.the problem. They are dealing with the problem now. They had committed

:40:09. > :40:15.crimes and covered them up and then lied. Something they vigorously

:40:15. > :40:19.deny? No, they own up to it. saurvilleence he has apologised for,

:40:19. > :40:24.the phone -- surveillance he has apologised for, the phone hacking

:40:24. > :40:28.leading to two arrests and a number of arrests, this as a resulted in

:40:28. > :40:34.the ending of the BSkyB deal, and closure of certain places and the

:40:34. > :40:37.loss of jobs. If it were true what Mr Murdoch is saying, why wouldn't

:40:37. > :40:42.he pay every single person who was litigating against him and the

:40:42. > :40:46.whole costs of going to court. think it is time to move slightly

:40:46. > :40:50.away from this, there is nowhere else for it to go. Of course you do,

:40:50. > :40:56.there is people to go to prison yet. It has been described as the

:40:56. > :41:01.largest private lawsuit in the world, an epic legal battle between

:41:01. > :41:07.the superrich tycoons, Roman Abramovich, and Dimitar Berbatov,

:41:07. > :41:12.which has been riveting a packed courtroom. Allegations of extortion

:41:12. > :41:16.and corrupt deals with the Kremlin have been bandied around over a

:41:16. > :41:24.disputed �3 billion, that has provided an unprecedented glimpse

:41:24. > :41:32.into the lives of the oligarchs and how Russia is run. The most

:41:32. > :41:42.flamboyant of Russian Tyrone Koons versus the quietest, one of the

:41:42. > :41:43.

:41:43. > :41:50.Kremlin's bitter -- Berezovsky versus Abramovich, a battle of

:41:50. > :41:54.basic human values, according to the Berezovsky. TRANSLATION:

:41:54. > :42:00.trust Abramovich in an eastern manner, like a son, a lot of years,

:42:00. > :42:05.and then he betrayed me. Battle between past and future, according

:42:05. > :42:11.to Abramovich. TRANSLATION: time had past, his period in post

:42:11. > :42:16.communist history was over, Russia had moved on, I had moved on.

:42:16. > :42:20.battle over a �3 billion claim that the owner of Chelsea Football Club

:42:20. > :42:24.describes as wholly without merit. For the past six weeks the high

:42:25. > :42:28.flying tycoon has been grounded in London, confined, like his rival,

:42:28. > :42:33.to an English court radio. They have both had to squeeze their

:42:33. > :42:40.bulky body guards into the public GALry they have both been pummelled

:42:40. > :42:43.relentlessly in the wins box, by Britain's two cleverest barristers.

:42:43. > :42:48.Why on earth is this taking place in London. As Abramovich says in

:42:48. > :42:54.the witness statement, the claims in these proceedings have virtually

:42:54. > :42:58.no connection with England. He doesn't even live here, yet by an

:42:58. > :43:03.extraordinary stroke of bad luck, from his point of view, Abramovich

:43:03. > :43:07.happened to be out shopping with his body guards here on Sloane

:43:08. > :43:17.Street in Kensington, one day at 2007, at exactly the same time as

:43:17. > :43:21.Boris Berezovsky was out shopping with his. Berbatov, leaving Dolce &

:43:21. > :43:26.Gabbana, caught side of Abramovich two doors away, and grabbing the

:43:26. > :43:34.writ he wanted to serve on his rival for months, he rushed into

:43:34. > :43:38.Mez and tried to thrust it into Abramovich's hands. Four years of

:43:38. > :43:41.legal wrangling later, and that writ has led us to the High Court.

:43:41. > :43:45.Where not just the relationship between two extraordinary

:43:45. > :43:50.characters, but one of the murkyist and most fascinating periods of

:43:50. > :43:56.recent Russian history is being brought under the forensic light of

:43:56. > :43:59.English justice. A Perth period in the dark dawn of capitalism, when

:43:59. > :44:07.many ordinary Russians' lives collapsed. When their country's

:44:07. > :44:17.vast national resources were sold off to a pittance to those with the

:44:17. > :44:23.

:44:23. > :44:29.governance and connections and the The question for the court, how did

:44:29. > :44:33.Berezovsky, the avuncular maths professor, turned car dealer and

:44:33. > :44:37.politician, work together with Abramovich, the youthful plastic

:44:37. > :44:42.dock manufacturer, turned oil trader, with partners in the

:44:42. > :44:48.sidneft oil company, or not. Certainly when Berezovsky needed a

:44:48. > :44:52.few more millions or hundreds of millions to sustain his lifestyle

:44:52. > :44:56.and public persona, Abramovich forked out. Berezovsky says the

:44:56. > :45:00.cash was his share of joint profits. Abramovich says he was simply

:45:00. > :45:07.saying one of President Yeltsin's most powerful courtiers to protect

:45:07. > :45:14.and intervene for him, in a chaotic, dangerous world. Abramovich's

:45:14. > :45:18.barrister called medieval. In our own national experience we have to

:45:18. > :45:25.go back to the 15th century to find a comparable problem. I hope I

:45:25. > :45:28.won't have evidence from the 15th century. No, your lady has read

:45:28. > :45:34.Shakespeare, no doubt. energetic Vladimir Putin makes the

:45:34. > :45:38.story even more Shakespearian. Berezovsky believed he had made the

:45:38. > :45:42.new President, a former little known spy chief, that he had helped

:45:42. > :45:47.promote. But the king turned on his maker.

:45:47. > :45:52.The turning point, the court heard, was the sinking of the Russian

:45:52. > :45:55.submarine, the Kursk. Berezovsky's TV channel attacked the Kremlin's

:45:55. > :46:00.sluggish response, Putin was furious, two months later,

:46:00. > :46:04.Berezovsky, fearing for his safety, left Russia, never, so far, to

:46:04. > :46:09.return. For the court, this is simply a commercial case about a

:46:09. > :46:14.business dispute. For anyone interested in Russia, it is also

:46:14. > :46:19.deeply political. Pitting Boris Berezovsky, now one of the

:46:19. > :46:24.Kremlin's most implacable enemies, against Roman Abramovich, who is

:46:24. > :46:30.always -- who has always tried to steer clear of controversy, and

:46:30. > :46:34.keep the best possible relations with Vladimir Putin. Late in 2000

:46:34. > :46:39.Abramovich also entered politics, serving Putin as governor of the

:46:39. > :46:45.reindeer herders and one of the remoteest provinces, Chukotka.

:46:45. > :46:53.Later it was heard that after a meeting with the Kremlin in the

:46:53. > :46:59.French Alps, Abramovich agreed to pay a staggering $1 billion dollars

:46:59. > :47:03.as a final pay off for the protection he no longer needed.

:47:03. > :47:07.Berezovsky says Abramovich was buying him out of his business at a

:47:07. > :47:17.knockdown price. Saying if he didn't accept the terms, Vladimir

:47:17. > :47:20.Putin might jail one of his friends. A secret recording, according to

:47:20. > :47:25.Berezovsky proves Putin's involvement. If President Putin

:47:25. > :47:28.wanted someone to be arrested, if not they wouldn't. That's right,

:47:28. > :47:31.isn't it No, that is not right, this just says that President Putin

:47:31. > :47:37.is the most well informed person, that doesn't mean that he

:47:37. > :47:43.influences who should be arrested and who shouldn't. Abramovich, keen

:47:43. > :47:47.to stress the lawlessness of Russia in the 1990s, is keen to stress its

:47:47. > :47:50.lawfulness today. But whatever the rights and wrongs of this case,

:47:50. > :47:54.which continues, at least until Christmas. The fact that there are

:47:54. > :47:59.other similar Russian disputes, engaging the English courts, tells

:47:59. > :48:03.another story. It suggests there is still little reliable justice in

:48:03. > :48:07.Russia. Takes these cases on is lucrative legal business, but

:48:07. > :48:11.whether it ultimately enhances or diminishes the reputation of the