10/11/2011 Newsnight


10/11/2011

News analysis with Emily Maitlis. How can economic collapse across Europe be prevented and will the European Central Bank intervene in a significant rather than piecemeal way?


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Tonight, warnings of a new recession for Europe. As investors

:00:09.:00:13.

and the commission cut growth forecasts across the EU, is the

:00:13.:00:18.

euro itself about to crack? We will hear tonight from Rome, Berlin and

:00:18.:00:23.

New York. The man who knew too much,

:00:23.:00:26.

apparently not, James Murdoch says the truth of widespread phone

:00:26.:00:30.

hacking was hidden from him. But the News International boss

:00:30.:00:34.

apologises for the revelations broken by Newsnight, that lawyers

:00:34.:00:38.

of phone hacking victims were put under surveillance by News of the

:00:38.:00:41.

World. I want to say for the record it is appalling, something I would

:00:41.:00:43.

never condone, and the company should never condone, it was

:00:43.:00:48.

shocking when I found it out. parliament, frustration. But did it

:00:48.:00:52.

really merit this. Mr Murdoch, you must be the first Mafia boss in

:00:52.:00:56.

history who didn't know he was running a criminal enterprise.

:00:56.:01:01.

Watson, please, I think that is inappropriate, Mr Chairman. We will

:01:01.:01:05.

hear from a News International executive and a victim of hacking.

:01:05.:01:10.

Also tonight, the battle of the oligarchs, from the creme Len to

:01:10.:01:18.

the alps to the courts. Abramovich versus Berezovsky.

:01:19.:01:23.

Hello and good evening, what if it is already too late? Despite calls

:01:23.:01:27.

from politicians to act now to save the eurozone there are some voices

:01:28.:01:31.

now admitting that the chance may have already been missed. Today the

:01:31.:01:34.

European Commission downgraded its growth forecasts and admitted

:01:34.:01:37.

Europe was at risk of a new recession. A banker is now in

:01:38.:01:47.
:01:48.:01:48.

charge of Greece. The country recognised Lucas Papademos as their

:01:48.:01:52.

head. The market seemed reassured by the changes, even with

:01:52.:01:56.

Berlusconi agreeing to go. Is it too late to prevent a recession?

:01:56.:01:59.

There are people in the markets who believe this problem of Italian

:01:59.:02:04.

sovereign debt may be yesterday's problem. That the movements in the

:02:04.:02:08.

price of Italian debt, certainly its short-term debt, may be

:02:08.:02:11.

signalling something else, which is trouble in the banking system,

:02:11.:02:16.

primarily in the Italian banking system, more widely in the European

:02:16.:02:18.

banking system. This short-term debt is a key instrument that banks

:02:18.:02:23.

use to trade with each other. We have had, tonight, it is not often

:02:23.:02:28.

I read out notes from analysts, we had a note from analyst at

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Schroders, this is a company that manages �300 billion worth of

:02:33.:02:36.

people's money, saying this, politicians have missed their

:02:36.:02:39.

opportunity to prevent a European credit crunch, and following

:02:39.:02:43.

yesterday's events, the banking system in Europe is now likely to

:02:43.:02:46.

experience a serious shock from the fal fall-out of the country's bond

:02:46.:02:52.

market collapse. That is a fairly clear bet, or

:02:52.:03:02.
:03:02.:03:03.

wager, on another Liamman in Europe. To stop it -- Lehman in Europe, the

:03:03.:03:06.

action to stop it, the solutions are as political as they are

:03:07.:03:14.

economic. The German nightmare about money,

:03:14.:03:22.

is coloured in black and white. By what happened in the 1920s. In the

:03:22.:03:26.

Weimar Republic, the Central Bank printed money, and hyperinflation

:03:26.:03:30.

followed, children used bank notes as toifplts they weren't much use

:03:31.:03:35.

for anything else. Those cultural scars explain why Germans are so

:03:35.:03:39.

nervous about letting the ECB take the extraordinary measures other

:03:39.:03:42.

central banks have taken. Instead the technocrats at the European

:03:42.:03:46.

Central Bank are attempting, not very successfully, to keep a lid on

:03:46.:03:51.

things, with a short-term fix. ECB has been coming in, day-to-day,

:03:51.:03:55.

since the beginning of August, and buying Italian and Spanish

:03:55.:03:59.

Government paper, trying to keep the prices up and yields down. This

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way the price of Italian debt is affordable. In reality the

:04:02.:04:07.

programme is not transparent. The banks don't know when the ECB is

:04:07.:04:10.

coming, what the point of the programme, and when it will stop.

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This graph those what the ECB is doing, buying up loans from Greece,

:04:15.:04:19.

Ireland and Portugal, and since August, big time from Italy. But

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Italy as another 300 billion euros of debt to roleover this year,

:04:23.:04:28.

nobody else is buying. What they note -- roll over this year, nobody

:04:28.:04:37.

else is buying. What they need is to have a reserve of thrillions,

:04:37.:04:42.

and then the markets would know where the ECB is going and know it

:04:42.:04:48.

is at affordable levels. There is a problem, board members and other

:04:48.:04:51.

European traditionalists, thinks it breaks the treaty law and the

:04:51.:04:54.

spirit on which the euro was founded. The other option, already

:04:54.:04:58.

offered to Italy, but refused, is a short-term credit line from the IMF.

:04:58.:05:04.

That comes at a price too. The IMF mission in Rome, already demanding

:05:04.:05:11.

specific privatisations, and more refoerms. -- reforms. It would be

:05:11.:05:16.

very difficult for the IMF to fund the entirety of a bailout of an

:05:16.:05:22.

economy. That is as rich in Germans of GDP per capita, as Italy, other

:05:22.:05:26.

economies are much poorer economies contributing to the IMF, would feel

:05:26.:05:31.

uncomfortable with that. If the short-term threat is contagion from

:05:31.:05:35.

geez Greece, -- Greece, then getting Greece under control will

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help. The new Prime Minister was swoorn in there today. Can the

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banks losing money under the private sector involvement lose

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more? No says the man who rep presents them. I think for Greece

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the 50% nominal reduction is the beard line of what could be

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reasonable as voluntary, any reduction in value and losses

:05:57.:06:06.

clearly would be there with markets that are non-voluntary. In the

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short-term there is a mismatch, everybody thinks the ECB will move,

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those in politics think it won't. Markets have given up on

:06:16.:06:19.

Governments, given the mess in Italy and Greece in the past week,

:06:19.:06:22.

markets have moved on that a single Government can change situations.

:06:22.:06:25.

It doesn't really matter who is running Greece and Italy in the

:06:25.:06:28.

near term, what is what matters is the ECB coming in and trying to

:06:28.:06:32.

deal with the situation. Italy too has its nightmare images of the

:06:32.:06:37.

past. Burning money to control inflation. Tonight, something more

:06:37.:06:43.

valuable than money is smoldering, the credibility of the eurosystem.

:06:43.:06:50.

We will be hearing about that a little later from Paul. Joining

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from Rome, Federica Mogherini, an Italian member of parliament,

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Michael Barrymore, and Gillian Tett of the Financial Times, and here in

:06:57.:07:02.

the studio, Alan Brown from Schroders, mentioned in the report.

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I will start with you, Alan, one of these lines in the report is that

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Europe is essentially missed -- has essentially missed the opportunity

:07:12.:07:16.

to prevent a credit crunch. Do you believe it is too late to avoid

:07:16.:07:20.

recession? I believe we are at the early stages of a credit crunch

:07:20.:07:24.

right now. I believe the real politics is that it is virtually

:07:24.:07:27.

impossible for politicians to get ahead of the game at this stage. I

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almost feel that we have to almost reach the train wreck before

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politicians will actually be empowered to take the actions that

:07:34.:07:39.

most of us in the markets believe are necessary. Where is the train

:07:39.:07:43.

wreck, how far away are we from that? We are already

:07:43.:07:45.

extraordinarily close. The focus is on Italy because that is where the

:07:46.:07:50.

large money is. We are talking about debts of 1.9 trillion. We are

:07:50.:07:55.

talking about the Italian economy going back into recession, and the

:07:55.:07:59.

yield on Italian bonds today would be completely unsustainable for

:07:59.:08:03.

Italy's finances, if they were maintained at that level for any

:08:03.:08:09.

length of time. Mogherini, David Cameron, our Prime Minister, --

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Federica Mogherini, David Cameron, our Prime Minister, pointed the

:08:11.:08:17.

finger and said Italy was a clear and present danger, a major part of

:08:17.:08:19.

the problem? We are aware of the fact that we have a responsibility.

:08:19.:08:24.

We as politicians, even being in opposition, it is hard for me to

:08:24.:08:27.

share the responsibility with Berlusconi's Government now, but we

:08:27.:08:31.

are aware of the fact that politics and the Government has a

:08:31.:08:35.

responsibility, and that we have to fix the problem. Not only for Italy

:08:36.:08:39.

but for the eurozone, for the European Union, and for the world,

:08:39.:08:43.

probably, because we see how the markets are interlinked. We are

:08:43.:08:47.

trying to do our best to speed up the process. To have a different

:08:47.:08:53.

Government in a couple of days, not more. To do whatever is needed to

:08:53.:08:56.

recover and make sure that it is not too late. Hopefully we are

:08:56.:08:59.

still in time. It is interesting, the point that Paul made in his

:08:59.:09:02.

report is that markets have essentially given up on Governments

:09:02.:09:07.

now. As a member of parliament, how do you respond to that? That is

:09:07.:09:13.

very sad, I have to say. But Italy has had, and still has, partly, a

:09:13.:09:15.

credibility problem, that is peculiar to our political scene in

:09:15.:09:20.

the last months and years. I believe that with the choice of

:09:20.:09:24.

having Mario Monti as the next Prime Minister, given that it is

:09:24.:09:27.

the choice, because it is not given for granted yet, but still it looks

:09:27.:09:33.

like it will happen in the next 48 hours. I think that will be the

:09:33.:09:38.

right choice. Also considering what was said before, he is, for sure,

:09:38.:09:43.

the right person to reassure the markets, and to try to solve our

:09:43.:09:47.

problems, even if his point of view is not a political one, but more of

:09:47.:09:50.

a technical one. I think this is the right choice at the right

:09:50.:09:55.

moment, finally. Gillian Tett, in New York, I know you have been with

:09:55.:09:59.

Alan Greenspan today and talking to Obama's people, viewed with that

:09:59.:10:02.

distance and perspective, is the solution more obvious? Well, I

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think the sense of fear is palpable. In fact, Alan Greenspan told a

:10:08.:10:12.

meeting earlier today as far as he's concerned Europe is America's

:10:12.:10:15.

biggest economic problem right now. In a sense there is real concern

:10:15.:10:18.

about contagion, that the global economy could be pulled into a

:10:18.:10:22.

slowdown f not recession, as a result. And we're heading for

:10:22.:10:26.

financial market turmoil. The Americans, perhaps, more than

:10:26.:10:31.

anybody, know that when markets are losing confidence, what you need is

:10:31.:10:36.

clear action, decisive action, and preferably action that surprises

:10:36.:10:40.

the market on the upside, doing more than they ask for. They know

:10:40.:10:45.

what to do, that is what they did with the bailout programme in 208,

:10:45.:10:51.

to top the panic after Lehman Brothers. What is causing concern

:10:51.:10:54.

here, is they don't see any sign that the European leaders have

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their version of a bailout. What would that be? It would be clear

:11:00.:11:04.

measures to draw a line in the sand, to joined pin the eurozone bond

:11:04.:11:07.

markets, to force the banks to come completely clean about their

:11:07.:11:11.

exposures to sovereign debt, and if necessary to inject more capital

:11:11.:11:14.

into the system. Then, to start talking about whether the eurozone

:11:14.:11:19.

is going to create more co- ordinated fiscal policies going

:11:19.:11:22.

forward, or address the fundamental structural problems that are

:11:22.:11:25.

plaguing the eurozone now. Essentially yolking an economy like

:11:25.:11:29.

Italy, which is very unproductive, where productivity is not grown

:11:29.:11:33.

over the last decade, with Germany, where productivity has grown 9.4%

:11:33.:11:40.

in the last decade. There are big structural problems exposed.

:11:40.:11:43.

Michael Barrymore, isn't the solution staring us in the --

:11:43.:11:47.

Katinka Barysch, is the solution staring us in the face, I can see

:11:47.:11:51.

Gillian nodding her head. The IMF have been ruled out, none of the

:11:51.:11:55.

poorer countries want a fund that bails out Europe, essentially, the

:11:55.:12:02.

buck is right in your corner, isn't it? Yeah, and I'm in Berlin, the

:12:02.:12:07.

world is staring at Berlin for a solution, and I'm in Berlin and

:12:07.:12:10.

everybody seems to be staring at Frankfurt. Now, one thing that I

:12:10.:12:19.

have picked up here over the last couple of days is there is an

:12:19.:12:22.

acceptance in the German political circles that the ECB has to do

:12:22.:12:28.

whatever it takes to tide us over this particular part of the crisis.

:12:29.:12:31.

Although you will always hear German politicians say that they

:12:31.:12:40.

are against the the central banks buying dodgy Government bands,

:12:40.:12:45.

there is an acceptance. There is an awful lot of communication going on

:12:45.:12:48.

between Frankfurt and the German Government at the moment, not the

:12:48.:12:52.

ECB and the German Government, but also the Bundesbank, the German

:12:52.:12:56.

Central Bank and the German Government, there was a falling out

:12:56.:13:00.

recently, because the German Bundesbank wrecked a plan to use

:13:00.:13:03.

special drawing rights of artificial currency that all IMF

:13:03.:13:07.

members hold, to boost the European Financial Stability Fund. There is

:13:07.:13:10.

bad blood even between those authorities. It is all in Frankfurt

:13:10.:13:13.

at the moment. Having said that, I think that a lot of German

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politicians, sorry? Just to say, are you saying the ECB is not in

:13:19.:13:23.

the picture at all. Nobody is talking about the ECB now? They are

:13:23.:13:28.

talking about the ECB, but the Germans are the people who

:13:28.:13:32.

basically invented independent central banks and they are not

:13:32.:13:37.

necessary happy with all the ECB does. I have met some people who

:13:37.:13:44.

are very close to the Government and are very unhappy with the ECB

:13:44.:13:48.

druging its feet. Exactly what Gillian has just said, and what the

:13:48.:13:51.

market analyst also said, they should make a very clear statement

:13:51.:13:55.

that they are now going into the market, they don't disclose the

:13:55.:14:00.

sums, they just say we will back the Italian bonds. That they stop

:14:00.:14:03.

dithering, they are buying bonds at the moment, they say they don't

:14:03.:14:08.

like it, they don't know how long it will take. The German

:14:08.:14:10.

politicians aren't necessarily happy with this, but this is a

:14:10.:14:13.

country where you don't criticise central banks openly, it is not

:14:13.:14:17.

done. I take it back to Gillian Tett, although it seems like the

:14:17.:14:20.

obvious solution, there is no direct chain of command between the

:14:20.:14:24.

German Government and the ECB, it simply can't be done? There is no

:14:24.:14:28.

direction and command. But frankly, all eyes now on Mario Draghi. This

:14:28.:14:34.

really is his historic moment. It is worth bearing in mind for the

:14:34.:14:39.

ECB to step in and underwrite the Italian and Greek bond markets is a

:14:39.:14:43.

huge psychological step. For the US Congress, in late 2008, it was a

:14:43.:14:47.

huge psychological step for America to essentially nationalise, or use

:14:47.:14:51.

public money to bail out the banking system. Psychological steps

:14:51.:14:55.

can occur, in a crisis. It wouldn't be impossible to imagine this. But

:14:55.:15:00.

the really big question now is will Mario Draghi, because he's Italian,

:15:00.:15:04.

feel he has to be more German than the Germans to get credibility? Or

:15:04.:15:08.

is he willing to really role the dice and do something bold and

:15:08.:15:11.

dramatic. He does come from the private sector background, it is

:15:11.:15:14.

worth rembering that. He has worked at Goldman Sachs before. He knows

:15:14.:15:17.

what happens when traders get involved, and maybe just maybe a

:15:17.:15:21.

point will come where he says he's going to behave like a trader, he's

:15:21.:15:26.

going to do something bold and dramatic and make my mark. Time to

:15:26.:15:29.

break the rules? Absolutely, it is breaking the rules. Under the

:15:29.:15:35.

Lisbon Treaty, the ECB is not allowed to go out and monetise debt

:15:35.:15:40.

in the system. It means tearing up rules. That is why we will get to

:15:40.:15:44.

the 11th our and 59th minute before we get it. We have further to go

:15:44.:15:47.

with this, stay with us. We will be talking about the future of Europe.

:15:47.:15:50.

Meanwhile it has been reported that France and German officials have

:15:50.:15:54.

held discussions on the prospect of a smaller eurozone w some countries

:15:54.:15:58.

leaving the currency all together. The discussions are still highly

:15:58.:16:01.

theoretical and have been denied by the German Chancellor herself, but

:16:01.:16:06.

much of the focus in the midst of Europe's worst crisis since the ske

:16:06.:16:16.
:16:16.:16:20.

Second World War, will be clearly The sovereign debt crisis has

:16:20.:16:24.

pulled Europe's long-term problems well into the short-term. A

:16:24.:16:30.

currency union without a tax union, a half cocked Central Bank, a huge

:16:30.:16:36.

competitiveness gap, a social model, but no-one left to pay for it. From

:16:36.:16:39.

the politicians, always the same plea, give us breathing space to

:16:39.:16:43.

make the long-term structural reforms. But 18 months of

:16:43.:16:49.

indecision has removed the breathing space. Europe now has to

:16:49.:16:53.

do structural reform in the worst of circumstances. The European

:16:53.:16:56.

Commission slashed its growth forecast for 2012 today by more

:16:56.:17:02.

than two-thirds, from 1.8% to 0.5%. It predicts recession in Italy,

:17:03.:17:06.

stagnation in Spain, sharp slowdowns in German and northern

:17:06.:17:11.

Europe, and stagnation in the UK for the first half of next year.

:17:11.:17:15.

It makes it worse for all of Europe, not just a southern European

:17:15.:17:19.

problem. GDP is not growing and their dynamics look worse, on paper

:17:19.:17:25.

all the countries have a lot more fiscal tightening to do. It pushes

:17:25.:17:28.

them into a fiscal spiral, they are cutting and the economy is pushed

:17:29.:17:32.

into recession, and it is hard to get out of the mess. On paper it

:17:32.:17:36.

makes growth worse. What are the long-term options, the eurozone

:17:36.:17:42.

could go for fiscal union, but discussions focus lately on who is

:17:42.:17:46.

in and who is out? The best scenario for the eurozone is the

:17:46.:17:50.

most highly indebted economies leave. And you are left with a much

:17:50.:17:54.

stronger core eurozone involving Germany and some of the other

:17:54.:17:57.

northern countries. That could then perhaps make convincing steps

:17:57.:18:02.

towards a fiscal union, which means this situation doesn't arise again.

:18:02.:18:06.

If the eurozone did break up, the collapse in asset prices on the

:18:06.:18:10.

periphery, might be enough to take down a large part of the banking

:18:10.:18:15.

system, here and across the world. The dreaded credit event, or Lehman

:18:15.:18:22.

moment. That would beanter mount to default, the nomination -- be anter

:18:22.:18:28.

mount to default, the new thing would be more than the nominations

:18:28.:18:32.

of the current area countries. They are in the euro, one is a key

:18:32.:18:37.

country in the world, any redenomination would produce

:18:37.:18:41.

significant loss. There is one other option, Germany leaves the

:18:41.:18:46.

euro, and forms a new currency block around the new reborn damp

:18:46.:18:50.

mark with other countries, like Austria, Finland and the

:18:50.:18:53.

Netherlands. That option is looking more and more feasible the longer

:18:53.:18:58.

this goes on. If Germany is forced into much larger bailouts, much

:18:58.:19:03.

larger contributions to other countries, than it is comfortable

:19:03.:19:11.

with, it might be in the end it chooses to leave the eurozone.

:19:11.:19:15.

would be Europe, but not as we know it. Paul Mason there, the guests

:19:15.:19:21.

are still with me. Federica Mogherini, an Italian MP,

:19:21.:19:24.

Katinka Barysch from Berlin, Gillian Tett from the FT in New

:19:25.:19:34.

York, and Alan Brown of Schroders. I will throw this to you, Bill Cash,

:19:34.:19:44.

In Berlin r they privately considering this smaller Europe?

:19:44.:19:49.

Some people are very publicly considering it, there are some

:19:49.:19:55.

prominent commentators, the former head of the employers' federation,

:19:55.:20:03.

who say we need the euro nord that is only with the stability

:20:03.:20:06.

orientated immediate neighbours, and we kick the southern Europeans

:20:06.:20:09.

out. That is a minority view. Within Government circles there is

:20:09.:20:13.

no talk about breaking up the eurozone. They are, of course,

:20:13.:20:19.

discussing the idea that eventually maybe we need a clause in the

:20:19.:20:21.

European treaty that allows countries that don't want to stay

:20:21.:20:25.

in to leave. This is a very long- term sort of thing. As a solution

:20:25.:20:28.

to the crisis, in Government circles people are not talking

:20:28.:20:33.

about a break up of the eurozone, partly because there is a feeling

:20:33.:20:36.

of solidarity, partly because they know for countries such as Greece

:20:37.:20:41.

to be out there on its own would be very, very tough, and they know

:20:41.:20:48.

there would be mayhem. How do you disentangle what is a drachma-

:20:48.:20:53.

eurobond and a damp mark euroband, how do you have capital controls in

:20:53.:20:57.

the monetary union. They know if parts of the periphery breaks away,

:20:57.:21:01.

the rest of the eurozone will have a currency that is exceedingly

:21:01.:21:05.

strong, for an export-orientated economy, such as gaeerm Germany,

:21:05.:21:12.

that is a scary thought. Is it inconceivable? No, since 1945, on

:21:13.:21:17.

the narrowest of definitions, 69 currencies an the world, many odd

:21:17.:21:21.

and small, have come to an end, and the sun still rises in the morning.

:21:21.:21:25.

It doesn't have to be a calamity, but it has the potential. It

:21:25.:21:29.

becomes one if, in the removing say Greece from the eurozone, we then

:21:29.:21:34.

end up with a contagion, leading to a domino collapse of all the other

:21:34.:21:41.

perrif kal economies. Is Italy on the in-- Periphery economies.

:21:41.:21:50.

Italy on the in or outside? I think it is on the inside, it is running

:21:50.:21:55.

a much lower deficit than the UK. It is the governance structures of

:21:55.:21:58.

Europe which unfortunately are making it so difficult for the

:21:58.:22:03.

European economy, at large, to cope with this problem. Federica

:22:03.:22:08.

Mogherini, do you think that once the political structures change, by

:22:08.:22:12.

that, the euphamism is Berlusconi is gone, could Italy find itself

:22:12.:22:17.

back on the inside? Absolutely, I think the Italian economy, and the

:22:18.:22:23.

banking system are stronger than they have been described so far. I

:22:23.:22:28.

think with the right reforms and measures, both long-term, mid-term

:22:28.:22:33.

and very short-term, we can do much better than we have done so far.

:22:33.:22:41.

And I think that Italy is ready to be back on its feet again. And be

:22:41.:22:47.

part of the eurozone as it should be and it is now. I started by

:22:47.:22:50.

saying this is all highly theoretical, of course, is it

:22:50.:22:54.

possible to have a controlled break-up, does it make any economic

:22:55.:23:00.

sense? It is not highly theoretical, I can tell you that here in New

:23:00.:23:03.

York there are banks and asset managers doing all sorts of

:23:03.:23:08.

internal fire drills for a potential break-up and exit of one

:23:08.:23:12.

or two members. I was chatting with asset managers, people who control

:23:12.:23:15.

some of the biggest pots in the world, going down the list saying

:23:15.:23:18.

do you draw the line of groz and Portugal, what about Ireland, if

:23:18.:23:22.

there is some kind of exit of members. People are certainly

:23:22.:23:28.

talking about it. Any kind of exit or break up will be messy. People

:23:28.:23:33.

know that, and the great lesson of Lehman Brothers back in 2008, when

:23:33.:23:35.

it collapsed, of the interconnectiveness of the

:23:36.:23:39.

financial system today means there are often very unexpected shocks

:23:39.:23:42.

that no-one has thought of when something happens, that is what

:23:42.:23:45.

people are worried about. This couldn't happen without a

:23:45.:23:49.

substantial number of banks going under, could it? Banks may need

:23:49.:23:52.

more capital, but they don't necessarily have to go under.

:23:52.:23:58.

your view the same, Gillian? It is unclear, that is exactly why people

:23:58.:24:02.

are so concerned. There are already people looking at the linkages

:24:02.:24:07.

between the banking system and trying to work out exposures. One

:24:07.:24:11.

tiny example, at the moment public entities, state entities don't post

:24:11.:24:14.

any capital when they post derivatives deals, nobody thought

:24:14.:24:19.

we would be in situation where people could default. What are the

:24:19.:24:22.

reprecussions if people did default and didn't pay back the money they

:24:22.:24:32.

owed, we don't know. Economically you can see how it is ethically,

:24:32.:24:36.

but it could be catastrophic. You have the illusion of parity, France

:24:36.:24:41.

and Germany, standing strong side by side together. If it emerged

:24:41.:24:45.

that France was not as strong as Germany, that is pretty much the

:24:45.:24:55.
:24:55.:25:01.

end of post-war Europe, isn't it? My generation grew up with the

:25:01.:25:05.

conviction that in European integration the direction is always

:25:05.:25:10.

in one way, towards more integration, more harmony, more

:25:10.:25:15.

solidarity amongst the European people. For the first time in my

:25:15.:25:19.

lifetime, we are staring at the real possibility that we might go

:25:19.:25:23.

back wards, that countries might opt-out, that there might be chaos.

:25:23.:25:26.

There is bad blood in the European Union already, we don't like each

:25:26.:25:31.

other as much as we thought. This is much more about banking sector

:25:31.:25:36.

chaos, and finance. This is about the European identity. And what we

:25:36.:25:40.

are seeing already now, that we tried to hold the euro together. We

:25:40.:25:45.

might just be able to do the things that are necessary to save this

:25:45.:25:48.

currency, but it is eroding the political fabric on which the

:25:48.:25:53.

European Union is based. So whichever way this goes, we will

:25:53.:25:58.

come out with a European Union that looks very different from this

:25:58.:26:00.

harmonious, nice place we thought we were in when we started this

:26:00.:26:07.

crisis. Thank you very much.

:26:07.:26:12.

James Murdoch has accused former News International employees,

:26:12.:26:15.

including a company lawyer, of misleading him about the phone

:26:15.:26:18.

hacking controversy. He returned to Westminster today to answer more

:26:18.:26:22.

questions from a select committee of MPs, who repeatedly insisted he

:26:22.:26:28.

hadn't been told of the so-called "for Neville" e-mail, which

:26:28.:26:31.

suggested phone hacking was widespread at News of the World.

:26:31.:26:37.

Tonight Tom Crone hit back and accused James Murdoch of giving

:26:37.:26:40.

disingenious evidence. James Murdoch was fighting for his

:26:40.:26:44.

corporate reputation today in parliament. Recalled to explain

:26:44.:26:48.

inconsistencies in evidence about who knew what, when, at News

:26:48.:26:52.

International about phone hacking, the stakes couldn't have been

:26:52.:26:55.

higher. Did you mislead this committee in your original

:26:55.:26:59.

testimony? No I did not. When James Murdoch gave evidence at the select

:26:59.:27:02.

committee today, it immediately became apparent there was a

:27:02.:27:05.

straight conflict. Either his account of what he knew about the

:27:05.:27:08.

extent of phone hacking was correct, or the account given by the in-

:27:08.:27:13.

house lawyer and former editor, a couple of weeks ago was correct.

:27:13.:27:17.

There was straight contradiction. If Mr Brown and Mr Myler are

:27:17.:27:19.

telling the truth, you are not telling the truth, if you are

:27:19.:27:23.

telling the truth, they are not telling the truth. At the centre of

:27:23.:27:27.

the story are three men with delivering recollections of the

:27:27.:27:32.

events. James Murdoch who sat way above News of the World in the

:27:32.:27:37.

parent group, Tom Crone, News of the World's vastly experienced

:27:37.:27:41.

legal adviser, and Colin Myler, brought in to clean up the mess

:27:41.:27:46.

after the phone hacking scandal, that led to the conviction of Glenn

:27:46.:27:54.

Mulcaire and Clive Goodman. It is the case of Gordon Taylor has most

:27:54.:28:00.

dangerous for James Murdoch. Police have discovered a transcript of a

:28:00.:28:06.

message left on his phone with a "for Neville" message for him on

:28:06.:28:13.

the phone. The case seemed to look bad. On the 24th of May, Tom Crone

:28:13.:28:23.
:28:23.:28:34.

Sure enough their barrister, Michael Silverleaf, delivered his

:28:34.:28:44.
:28:44.:29:05.

considered written opinion on the Tom Watson MP, who has been like a

:29:05.:29:10.

dog with a bone on this inquiry, asked him whether the QC's advice

:29:10.:29:14.

was discussed at a meeting on the 10th of June, with News of the

:29:14.:29:18.

World's legal adviser, Tom Crone, and editor, Colin Myler. There was

:29:18.:29:22.

no mention of a culture of legal information discussed at that

:29:22.:29:26.

meeting. Certainly not. Do you still maintain that neither Crone

:29:26.:29:31.

or Myler mentioned this, even in passing, given the strength of

:29:31.:29:35.

words used? That is exactly right, they did not mention it. Despite

:29:35.:29:39.

this information going to the very heart of the problem, you and they

:29:39.:29:45.

were meeting to discuss, namely that Taylor settlement, they didn't

:29:45.:29:49.

raise anything within the Silverleaf opinion? They gave me

:29:49.:29:51.

sufficient information to authorise the increase of the settlement

:29:51.:29:54.

offers that they had already made, that they had commenced making,

:29:54.:30:00.

some weeks before, without my knowledge. They left that meeting

:30:00.:30:05.

with the authority to continue to negotiate. But in September Tom

:30:05.:30:09.

Crone told the committee that James Murdoch had been told about the

:30:09.:30:12.

"for Neville" e-mail, and seemed to indicate others at the News of the

:30:12.:30:16.

World knew. James Murdoch said he got that wrong. With respect to my

:30:16.:30:19.

knowledge, I thought that was inconsistent and not right. I

:30:19.:30:25.

dispute it, vigorously. You think Mr Crone misled us. It follows that

:30:25.:30:35.
:30:35.:30:43.

I do, yes. Tom Crone hit back I need to tell you that I have met

:30:43.:30:46.

Neville Thurlbeck, and although the meeting was supposed to be in

:30:46.:30:49.

confidence, I think there is a public interest in revealing what

:30:49.:30:54.

he said to me. Mr Thurlbeck told him that Tom Crone had shown the

:30:54.:30:58.

damaging e-mail to James Murdoch, and he said the company was not

:30:58.:31:03.

ware of concerns he had raised. fully sympathise and understand why

:31:03.:31:07.

News International have made this decision to dismiss me. Because it

:31:07.:31:14.

was based from a position of ignorance. They have been deprived

:31:14.:31:19.

of vital information. That I have provided and offered to the News of

:31:19.:31:23.

the World. I have spoken to Neville Thurlbeck over the past couple of

:31:23.:31:26.

days. It is clear he maintains his innocence. He says his concerns

:31:26.:31:31.

about the called "for Neville" e- mail were ignored by management. He

:31:31.:31:36.

says it rather seemed their purpose that it absorbed all the pressure.

:31:36.:31:42.

He had a colourful turn of phrase for this, he said the "for Neville"

:31:42.:31:51.

e-mail was like nag net for the iron filings of the mission.

:31:51.:31:59.

Reported a News of the World investigator who followed leading

:31:59.:32:03.

phone hacking lawyer, Mark Lewis in Manchester. Mr Murdoch was asked

:32:03.:32:08.

about this today. Are you aware that Mr Lewis's family was tried by

:32:09.:32:11.

private investigator, including his 14-year-old dau, would you agree

:32:11.:32:15.

with me that is completely despicable and has no place in the

:32:15.:32:18.

practices of a modern media corporation. I totally agree with

:32:18.:32:21.

you. I wasn't aware of the allegation, if it is the case, as I

:32:22.:32:25.

have just said the whole fair is not acceptable and not on. Once

:32:25.:32:30.

again he seemed to put the blame on Tom Crone. That was absolutely not

:32:30.:32:34.

a corporate activity that was condoned, it is absolutely not

:32:34.:32:38.

appropriate. Mr Crone and the other person did not do that with any

:32:38.:32:42.

authority or knowledge by me, and I would never condone that behaviour.

:32:42.:32:47.

Again a dispute. Tom Crone seemed to deny arranging for this to

:32:47.:32:52.

happen in September. Did you arrange for the lawyers of phone

:32:52.:32:56.

hacking victims to be monitored by private detectives? No. Did you

:32:56.:33:00.

arrange for a dossier to be kept on them and follow up on their private

:33:00.:33:04.

lives? No. Many other private detectives were named in parliament

:33:04.:33:09.

today by Tom Watson. It seems it is rarely a week goes by without some

:33:09.:33:14.

new revelation about hacking, or at least highly questionable

:33:14.:33:16.

journalistic ethics. For News International it is the front page

:33:16.:33:21.

lead that refuses to die. Joining me now is Roger Alton, executive

:33:21.:33:26.

editor of the Times, and Chris Bryant, the shadow Justice Minister,

:33:26.:33:30.

who has had his phone hacked himself. Chris Bryant, the select

:33:30.:33:34.

committee got no further today. We have ended up with one person's

:33:34.:33:39.

word against another? We did get somewhere. We got some apologies

:33:39.:33:44.

from James Murdoch. We learned he hasn't the faintist idea what goes

:33:44.:33:49.

on in his own organisation. We learned he doesn't refer to it as

:33:49.:33:53.

his organisation, but as "it company", as if it is nothing to do

:33:53.:33:57.

with him. We learned that somebody at News International has been

:33:57.:34:01.

lying. Personally I suspect all of them have been lying to various

:34:01.:34:04.

different degrees. James Murdoch had to portray himself today as

:34:04.:34:07.

either being incompetent or a liar, he chose to go for being

:34:07.:34:12.

incompetent. It is extraordinary, Roger Alton, the kind of

:34:12.:34:17.

inconsistencies that remain. This jump in the amount of money, to

:34:17.:34:22.

�750,000, that James Murdoch didn't think to ask about? It was damages

:34:22.:34:27.

plus costs. Mr Murdoch had been advised that it was a good thing to

:34:27.:34:33.

do to settle, the cost might go higher. That was an award that

:34:33.:34:37.

could be done to Gordon Taylor. I think he was right to do that. He

:34:37.:34:41.

said in the hearing he didn't want to drag the company's name through

:34:41.:34:46.

the courts. I think the arguments for settling were perfectly fine.

:34:46.:34:50.

The idea it was a bribe or hush money doesn't wash. It certainly

:34:50.:34:53.

does wash, what you have just said is a complete load of nonsense, you

:34:53.:34:57.

know it yourself. The truth of the matter is when somebody makes a

:34:57.:35:02.

claim about a newspaper, and the newspaper decides to make an offer,

:35:02.:35:07.

let's say they offer �100,000, they might then take into consideration

:35:07.:35:11.

that if it went to court there would be additional costs. You

:35:11.:35:17.

wouldn't add on the total costs of both sides, and then give all that

:35:17.:35:21.

money to the litigant. Because it is, in a sense, you wouldn't be

:35:21.:35:27.

saving yourself any money, would you be - you would be better going

:35:27.:35:31.

to the court. It was part of buying the silence and the cover-up

:35:31.:35:33.

organised by people at the very top of the organisation. There clearly

:35:34.:35:38.

wasn't a cover-up, what James Murdoch admitted today was that the

:35:39.:35:43.

company hadn't dealt with issues of governance, sufficiently he

:35:43.:35:47.

admitted that. Don't you think that is extraordinary Can I finish, he

:35:47.:35:51.

had two things to do today, one to deal with the questions of his own

:35:51.:35:54.

personal integrity, which I believe he Z and the other was to deal with

:35:54.:35:57.

questions around how News International runs itself. He admit

:35:58.:36:01.

add lot of things had gone wrong. There was a culture in the company

:36:01.:36:05.

of keeping stuff from the boss, and there was a culture in the company

:36:05.:36:08.

of being too aggressive. Not just keeping stuff from the boss, but a

:36:08.:36:12.

boss not asking or checking or being curious about the Gordon

:36:12.:36:15.

Taylor payment? He said himself he should have been more curious. He

:36:15.:36:19.

admitted that. He didn't say that, that is completely untrue. That is

:36:19.:36:21.

exactly what he didn't say. He said there was no problem with

:36:21.:36:25.

governance in the organisation, it was a matter of transparency.

:36:25.:36:31.

saying there is a problem with governance. He used a whole load of

:36:31.:36:34.

language that is management speak for avoiding responsibility. This

:36:34.:36:41.

was his organisation, his employees. If I were a shareholder in BSkyB or

:36:41.:36:45.

News Corp, I would be saying, frankly, this man doesn't know what

:36:45.:36:50.

is going on under his fingertips. You have to accept one of the two,

:36:50.:36:54.

either he does no know and isn't saying t or he doesn't know how his

:36:54.:36:59.

company is run. He's a News International executive. He has run

:36:59.:37:05.

the company really well, and it is extremely good company. Extremely

:37:05.:37:09.

huge amount of good people there. There is a problem, nearly 6,000

:37:09.:37:12.

people had their phones hacked. Hundreds of people were harassed

:37:12.:37:16.

and intimidated by being trailed. Members of the Government, members

:37:16.:37:20.

of all political parties. Members of the Royal Family. The

:37:20.:37:24.

Metropolitan Police were corrupted, individual police officers were

:37:24.:37:30.

bribed, for informationle all of this done by an organisation --

:37:30.:37:36.

information, all of this done by an organisation you think is extremely

:37:36.:37:39.

well run. He said problems about the running of the company, James

:37:39.:37:43.

Murdoch said they were being addressed, he apologised for things

:37:43.:37:47.

like surveillance. We know in the last decade there was problems

:37:47.:37:50.

within the News of the World for accessing illegal information. That

:37:50.:37:54.

is been dealt with and the paper has been closed. We have heard this

:37:54.:37:57.

from people from News International for years now. It is only because

:37:57.:38:00.

some people took News International to court that some of the material

:38:00.:38:03.

came out. It is only because the Guardian mounted an investigation,

:38:03.:38:10.

which was vigorously and aggressively poo pooed by By the

:38:10.:38:12.

News of the World and the Independent. On the main subject,

:38:12.:38:18.

the central issue, on which the select committee kept going at, is

:38:18.:38:23.

that e-mail that Crone and Myler both say James Murdoch knew about,

:38:23.:38:29.

he denies it. We are no further on. It is inconceivable he didn't know

:38:29.:38:35.

about it. There is no rational for paying the �750,000, or the deal

:38:35.:38:40.

with Max Clifford, which he believe to be more than that number. There

:38:40.:38:46.

is no rationale or that, except to keep out of the public domain that

:38:46.:38:51.

there was not just one rogue reporter, that it was endemic in

:38:51.:38:54.

the newspaper. That was the argument James Murdoch, Rupert

:38:54.:39:00.

Murdoch, and Peter Brookes, and Andy Coulson, awe relied on. Isn't

:39:00.:39:06.

it a sign of -- All relied on. Isn't it a sign of the frustration

:39:06.:39:09.

of the parliament when Tom Watson made the comment about the Mafia,

:39:09.:39:13.

the Mafia kills people? It was colourful language, I have been

:39:13.:39:16.

accused that have in the past. So has the Sun and the News of the

:39:16.:39:22.

World, indeed, when the committee produced its rorp, just before the

:39:22.:39:25.

last general election d report, just before the last general

:39:25.:39:29.

election, and said it was inconceivable that people at the

:39:29.:39:34.

News of the World didn't know about the "for Neville" e-mail. They

:39:34.:39:38.

attacked certain people out of the newspaper, and bringing to light

:39:38.:39:43.

the truth, that was what they did. Indeed Murdoch said, one of the

:39:43.:39:46.

problems they had done had been far too aggressive, when the company

:39:46.:39:51.

had been criticised, this was wrong. He admitted it was wrong. One of

:39:51.:39:56.

the reasons is people have always attacked in ferocious terms the

:39:56.:39:59.

company. That is why they were overdefensive and not dealing with

:39:59.:40:04.

the problem. They are dealing with the problem now. They had committed

:40:04.:40:09.

crimes and covered them up and then lied. Something they vigorously

:40:09.:40:15.

deny? No, they own up to it. saurvilleence he has apologised for,

:40:15.:40:19.

the phone -- surveillance he has apologised for, the phone hacking

:40:19.:40:24.

leading to two arrests and a number of arrests, this as a resulted in

:40:24.:40:28.

the ending of the BSkyB deal, and closure of certain places and the

:40:28.:40:34.

loss of jobs. If it were true what Mr Murdoch is saying, why wouldn't

:40:34.:40:37.

he pay every single person who was litigating against him and the

:40:37.:40:42.

whole costs of going to court. think it is time to move slightly

:40:42.:40:46.

away from this, there is nowhere else for it to go. Of course you do,

:40:46.:40:50.

there is people to go to prison yet. It has been described as the

:40:50.:40:56.

largest private lawsuit in the world, an epic legal battle between

:40:56.:41:01.

the superrich tycoons, Roman Abramovich, and Dimitar Berbatov,

:41:01.:41:07.

which has been riveting a packed courtroom. Allegations of extortion

:41:07.:41:12.

and corrupt deals with the Kremlin have been bandied around over a

:41:12.:41:16.

disputed �3 billion, that has provided an unprecedented glimpse

:41:16.:41:24.

into the lives of the oligarchs and how Russia is run. The most

:41:24.:41:32.

flamboyant of Russian Tyrone Koons versus the quietest, one of the

:41:32.:41:42.
:41:42.:41:43.

Kremlin's bitter -- Berezovsky versus Abramovich, a battle of

:41:43.:41:50.

basic human values, according to the Berezovsky. TRANSLATION:

:41:50.:41:54.

trust Abramovich in an eastern manner, like a son, a lot of years,

:41:54.:42:00.

and then he betrayed me. Battle between past and future, according

:42:00.:42:05.

to Abramovich. TRANSLATION: time had past, his period in post

:42:05.:42:11.

communist history was over, Russia had moved on, I had moved on.

:42:11.:42:16.

battle over a �3 billion claim that the owner of Chelsea Football Club

:42:16.:42:20.

describes as wholly without merit. For the past six weeks the high

:42:20.:42:24.

flying tycoon has been grounded in London, confined, like his rival,

:42:25.:42:28.

to an English court radio. They have both had to squeeze their

:42:28.:42:33.

bulky body guards into the public GALry they have both been pummelled

:42:33.:42:40.

relentlessly in the wins box, by Britain's two cleverest barristers.

:42:40.:42:43.

Why on earth is this taking place in London. As Abramovich says in

:42:43.:42:48.

the witness statement, the claims in these proceedings have virtually

:42:48.:42:54.

no connection with England. He doesn't even live here, yet by an

:42:54.:42:58.

extraordinary stroke of bad luck, from his point of view, Abramovich

:42:58.:43:03.

happened to be out shopping with his body guards here on Sloane

:43:03.:43:07.

Street in Kensington, one day at 2007, at exactly the same time as

:43:08.:43:17.

Boris Berezovsky was out shopping with his. Berbatov, leaving Dolce &

:43:17.:43:21.

Gabbana, caught side of Abramovich two doors away, and grabbing the

:43:21.:43:26.

writ he wanted to serve on his rival for months, he rushed into

:43:26.:43:34.

Mez and tried to thrust it into Abramovich's hands. Four years of

:43:34.:43:38.

legal wrangling later, and that writ has led us to the High Court.

:43:38.:43:41.

Where not just the relationship between two extraordinary

:43:41.:43:45.

characters, but one of the murkyist and most fascinating periods of

:43:45.:43:50.

recent Russian history is being brought under the forensic light of

:43:50.:43:56.

English justice. A Perth period in the dark dawn of capitalism, when

:43:56.:43:59.

many ordinary Russians' lives collapsed. When their country's

:43:59.:44:07.

vast national resources were sold off to a pittance to those with the

:44:07.:44:17.
:44:17.:44:23.

governance and connections and the The question for the court, how did

:44:23.:44:29.

Berezovsky, the avuncular maths professor, turned car dealer and

:44:29.:44:33.

politician, work together with Abramovich, the youthful plastic

:44:33.:44:37.

dock manufacturer, turned oil trader, with partners in the

:44:37.:44:42.

sidneft oil company, or not. Certainly when Berezovsky needed a

:44:42.:44:48.

few more millions or hundreds of millions to sustain his lifestyle

:44:48.:44:52.

and public persona, Abramovich forked out. Berezovsky says the

:44:52.:44:56.

cash was his share of joint profits. Abramovich says he was simply

:44:56.:45:00.

saying one of President Yeltsin's most powerful courtiers to protect

:45:00.:45:07.

and intervene for him, in a chaotic, dangerous world. Abramovich's

:45:07.:45:14.

barrister called medieval. In our own national experience we have to

:45:14.:45:18.

go back to the 15th century to find a comparable problem. I hope I

:45:18.:45:25.

won't have evidence from the 15th century. No, your lady has read

:45:25.:45:28.

Shakespeare, no doubt. energetic Vladimir Putin makes the

:45:28.:45:34.

story even more Shakespearian. Berezovsky believed he had made the

:45:34.:45:38.

new President, a former little known spy chief, that he had helped

:45:38.:45:42.

promote. But the king turned on his maker.

:45:42.:45:47.

The turning point, the court heard, was the sinking of the Russian

:45:47.:45:52.

submarine, the Kursk. Berezovsky's TV channel attacked the Kremlin's

:45:52.:45:55.

sluggish response, Putin was furious, two months later,

:45:55.:46:00.

Berezovsky, fearing for his safety, left Russia, never, so far, to

:46:00.:46:04.

return. For the court, this is simply a commercial case about a

:46:04.:46:09.

business dispute. For anyone interested in Russia, it is also

:46:09.:46:14.

deeply political. Pitting Boris Berezovsky, now one of the

:46:14.:46:19.

Kremlin's most implacable enemies, against Roman Abramovich, who is

:46:19.:46:24.

always -- who has always tried to steer clear of controversy, and

:46:24.:46:30.

keep the best possible relations with Vladimir Putin. Late in 2000

:46:30.:46:34.

Abramovich also entered politics, serving Putin as governor of the

:46:34.:46:39.

reindeer herders and one of the remoteest provinces, Chukotka.

:46:39.:46:45.

Later it was heard that after a meeting with the Kremlin in the

:46:45.:46:53.

French Alps, Abramovich agreed to pay a staggering $1 billion dollars

:46:53.:46:59.

as a final pay off for the protection he no longer needed.

:46:59.:47:03.

Berezovsky says Abramovich was buying him out of his business at a

:47:03.:47:07.

knockdown price. Saying if he didn't accept the terms, Vladimir

:47:07.:47:17.

Putin might jail one of his friends. A secret recording, according to

:47:17.:47:20.

Berezovsky proves Putin's involvement. If President Putin

:47:20.:47:25.

wanted someone to be arrested, if not they wouldn't. That's right,

:47:25.:47:28.

isn't it No, that is not right, this just says that President Putin

:47:28.:47:31.

is the most well informed person, that doesn't mean that he

:47:31.:47:37.

influences who should be arrested and who shouldn't. Abramovich, keen

:47:37.:47:43.

to stress the lawlessness of Russia in the 1990s, is keen to stress its

:47:43.:47:47.

lawfulness today. But whatever the rights and wrongs of this case,

:47:47.:47:50.

which continues, at least until Christmas. The fact that there are

:47:50.:47:54.

other similar Russian disputes, engaging the English courts, tells

:47:54.:47:59.

another story. It suggests there is still little reliable justice in

:47:59.:48:03.

Russia. Takes these cases on is lucrative legal business, but

:48:03.:48:07.

whether it ultimately enhances or diminishes the reputation of the

:48:07.:48:11.

In-depth investigation and analysis of the stories behind the day's headlines with Emily Maitlis. How can economic collapse across Europe be prevented and will the European Central Bank intervene in a significant rather than piecemeal way?