:00:08. > :00:12.For a currency we're not even members of, the euro is turning out
:00:12. > :00:15.to have a powerful sway in British politics. As European leaders
:00:15. > :00:20.discuss yet another treaty change, significant numbers of Conservative
:00:20. > :00:24.MPs are demanding to know just what David Cameron is going to do to
:00:24. > :00:27.stand up for Britain. There is no sign it is causing
:00:27. > :00:34.Angela Merkel and Nicolas Sarkozy sleepless nights, they say they can
:00:34. > :00:38.keep the euro alive. But what if they are wrong. We roll the dice on
:00:38. > :00:43.eurogeddon with two money men and a politician. How do you handle the
:00:43. > :00:46.collapse of a currency. If we get into a situation of slightly more
:00:46. > :00:50.doom what would you tell politicians to say? Don't say
:00:50. > :00:54.anything unless you have to. Seriously, if you start saying we
:00:54. > :00:59.have stress tested all the banks and we think there is an 87% they
:00:59. > :01:03.are all fine! We will ask two leading economists if the leaders
:01:03. > :01:09.of Europe will find an answer to avoid such clamty. It is the
:01:09. > :01:14.particle that has eluded scientists for 30 years or more. Newsnight
:01:14. > :01:24.learns next Tuesday physicists will announce they have found the first
:01:24. > :01:28.
:01:28. > :01:31.signs of the Higgs boson particle. Why do people less and less think
:01:31. > :01:34.that public debt is the responsibility of the state.
:01:34. > :01:39.One after another they stood up and asked questions, one after another
:01:39. > :01:43.they got little or no answer, certainly little or no detail. The
:01:43. > :01:48.Prime Minister got the benefit of the doubt for now, as the depth of
:01:48. > :01:53.anxiety in his party about Europe was made plain toness the House of
:01:53. > :01:59.Commons today. We have learned most of the details of the Merkel-
:01:59. > :02:05.Sarkozy plan to save the euro, but we don't know if Britain can
:02:05. > :02:09.participate in the new treaty they have a greed to save the euro.
:02:09. > :02:13.Our economics editor is here. You have seen the letter, haven't you?
:02:13. > :02:17.It is stun to go see history, and the future history of Europe
:02:17. > :02:21.written down in black and white, eventhough it doesn't contain much
:02:21. > :02:26.more than what was announced on Monday. There was a slight
:02:26. > :02:30.political Higgs boson in this letter, in the form of a term, that
:02:30. > :02:35.the stability and growth union, we now think we are building. The
:02:35. > :02:39.letter just spells out what they have said, they will try a treaty
:02:39. > :02:42.change with all 27, 17 if they have to. There will be punishment for
:02:42. > :02:49.states who break the rules and break the 3% limits on deficits.
:02:49. > :02:54.Then it talks about the core, the euro core doing all these things,
:02:54. > :03:04.convergance on economic policy, financial regulation, Labour
:03:04. > :03:06.
:03:06. > :03:11.markets, corporate tax, and financial transaction tax. The cap
:03:11. > :03:15.stone is the stability and growth union. I have been asking old hands
:03:15. > :03:19.and said what is it? The stability and growth pact is for the 27, it
:03:19. > :03:24.is about balancing your books and growing, we are a member of that.
:03:24. > :03:28.But a union based on it is quite weird. And it has made me think
:03:28. > :03:32.there are three things going on. There is this 17 project, that is
:03:32. > :03:35.there, they have had it before, Britain won't be in it. There is
:03:35. > :03:38.the 27 project they have said they are trying to do. When you start
:03:38. > :03:42.hearing the thing in the middle called a union, that is where I
:03:42. > :03:45.think, the letter hadn't been published at the time when the MPs
:03:45. > :03:50.had begun laying down their questions, where the questions do
:03:50. > :03:54.really become acute, what is it? What is the stability and growth
:03:54. > :04:00.union? Presumably it is the inner core
:04:00. > :04:05.isn't it? No the inner core is the eurogroup. What is it? It is
:04:05. > :04:11.difficult to tell. One slightly helps it is a mistranslation, it
:04:11. > :04:16.really means somebody else. I don't know!
:04:16. > :04:19.The eurosummit presents itself as an opportunity irresistable for
:04:19. > :04:23.euro-sceptics, time to shout loud and proud for repatriation of
:04:23. > :04:28.powers and a rush to referendum. The greatest champion they found
:04:28. > :04:31.today was the Mayor of London, Boris Johnson. We watched events
:04:31. > :04:35.unfold. As everybody knows they are
:04:35. > :04:39.gentleness themselves, unless you get on the wrong side of them.
:04:39. > :04:42.Perhaps this is why British politicians find this breed so
:04:42. > :04:46.irresistable, that and the association with Churchill. Peter
:04:46. > :04:51.Mandelson, who knows something about PR, enlisted a bulldog for
:04:51. > :04:58.new Labour's cause. And today, a Conservative MP, famous at
:04:58. > :05:02.Westminster, both for hipets and loyalty to you know who, urged her
:05:02. > :05:07.successor to channel his inner canine at the Brussels summit.
:05:07. > :05:10.the Prime Minister do Britain proud on Friday, and show some bulldog
:05:10. > :05:16.spirit in Brussels? I can guarantee to Moy honourable
:05:16. > :05:20.friend that is exactly what I will -- my honourable friend, that is
:05:20. > :05:24.exactly what I will do. The British national interest means to resolve
:05:24. > :05:28.the crisis in the eurozone, freezing the British economy, and
:05:28. > :05:33.freezing economies right across Europe. Resolving the crisis is
:05:33. > :05:37.about jobs and growth and business and investment right here in the UK.
:05:37. > :05:40.That is not quite the bulldog spirit many of his backbenchers are
:05:40. > :05:45.hoping for. They want him to go further, not just hold the line but
:05:45. > :05:49.growl and bear his teeth, a difference -- bare his teeth, a
:05:49. > :05:52.difference Ed Milliband was keen to exploit. He was telling his
:05:52. > :05:56.backbenchers that the opportunity of treaty change, would mean in the
:05:56. > :06:00.future, the repatriation of powers. That was his position of six weeks
:06:00. > :06:04.ago, today he writes an article in the Times, a 1,000-word article,
:06:04. > :06:07.not one mention of the phrase "repatriation of powers", why does
:06:07. > :06:12.the Prime Minister think it is in the national interest to tell his
:06:12. > :06:16.backbenchers one thing to quell a rebellion on Europe, and tell his
:06:16. > :06:20.European partners another. Labour leader knows some on the
:06:20. > :06:23.Tory benchers are not convinced Mr Cameron has a clear negotiating
:06:24. > :06:27.position. Something Conservative commentators are now drawing
:06:27. > :06:30.attention to. In the light of what's happened in the past, when
:06:31. > :06:35.prime ministers have talked tough in Britain, and then gone to
:06:35. > :06:37.negotiate in Brussels, do you think Conservative politicians are
:06:37. > :06:41.prepared to trust the Prime Minister at this stage? Absolutely
:06:41. > :06:44.not. Actually I think there is quite a lot in Ed Milliband's
:06:44. > :06:49.criticism that there is a tendency to say one thing to backbenchers,
:06:49. > :06:52.and to hope, to be able to, when it comes to it, to say something
:06:52. > :06:56.different to European leaders. I think the more times that happens,
:06:56. > :06:59.the greater the danger that the parliamentary party and the
:06:59. > :07:04.Conservative Party in general switches decisively into the whole
:07:04. > :07:09."get out of the EU" camp. One of the party's big beasts is talking
:07:09. > :07:15.tougher still, by using the "r" word. It is absolutely clear to me,
:07:15. > :07:22.that if there is a new treaty at 27, if there is a new EU treaty that
:07:22. > :07:27.creates a kind of fiscal union, within the 27 countries, or within
:07:27. > :07:33.the eurozone, then we would have absolutely no choice, either to
:07:33. > :07:38.veto it, or put it to a Reverend DUP. The London ofgs of the --
:07:38. > :07:45.Referendum. The London office was once the Conservative Party office,
:07:45. > :07:48.there could be a similar takeover in Europe, with the 17 fiscally
:07:48. > :07:52.joined and marginalising countries like Britain on the outside. Some
:07:52. > :07:56.have said the British Government is rudderless at the moment, and
:07:57. > :08:01.unprepared for what is coming next, and despite the bulldog rhetoric
:08:01. > :08:04.from Mr Cameron, his bark will turn out to be worse than his bite.
:08:05. > :08:10.In an interview to be published tomorrow, the cabinet minister,
:08:10. > :08:20.Owen Paterson, warns that fiscal union would create a new block.
:08:20. > :08:25.
:08:25. > :08:29.Asked if that should trigger a -- British referendum, he replied :
:08:29. > :08:31.As Mr Paterson's parliamentary aide has been telling me tonight, Tories
:08:32. > :08:36.see this summit as a unique opportunity, they don't want the
:08:36. > :08:38.Prime Minister to miss it. reality is, that in order to have a
:08:38. > :08:42.new treaty there has to be unanimity amongst the 27, that is
:08:42. > :08:46.the opportunity which has presented itself today, which may never
:08:46. > :08:50.present itself again. We have to use the opportunity, where we could
:08:50. > :08:54.say no, to extract from our partners the things we want to
:08:54. > :08:59.protect British interests, jobs and prosperity. I'm sure that's on the
:08:59. > :09:02.Prime Minister's mind. Your boss, Owen Paterson, was a rebel at the
:09:02. > :09:07.time of Maastricht, unhappy with the Conservative's position. Does
:09:07. > :09:10.he regard this as a resigning matter potentially? I don't think
:09:10. > :09:13.anyone's in the position of resigning or anything. We are
:09:13. > :09:18.talking about backing the Prime Minister as he goes to the summit,
:09:18. > :09:22.to try to get powers back for Britain and out of the eurozone,
:09:22. > :09:27.and which they have inflicted on themselves by not obeying their own
:09:27. > :09:31.rules. Tonight euro-sceptic Tories joined forces with a meeting to
:09:31. > :09:35.agree their tactic, securing a deal in Brussels will be hard enough,
:09:35. > :09:40.selling it at Westminster could be even tougher. With us now to
:09:40. > :09:46.discuss David Cameron's dilemma are Sir Malcolm Rifkind, John Major's
:09:46. > :09:51.Foreign Secretary in the 1990s, and remembers all too well the party's
:09:51. > :09:54.battles over Europe, and Nadine Dorries, an MP who doesn't yet bear
:09:54. > :09:59.those scars. Do you firstly believe that David Cameron will go to the
:09:59. > :10:08.meeting and defend British interests? To an extent. Do you
:10:08. > :10:13.want the euro to survive? I think it is time for the euro to
:10:13. > :10:17.dismantled in an orderly way. the member states of the euro to
:10:17. > :10:20.decide they didn't agree with you, they wanted it to survive and came
:10:20. > :10:25.to some arrangement between themselves about co-ordinating tax
:10:25. > :10:31.and the like, that would be all right, or not? Then it's time for a
:10:31. > :10:35.referendum. On that third point, which seems a quite likely outcome,
:10:35. > :10:40.if the Merkel-Sarkozy letter is put into effect, it would change the
:10:40. > :10:44.game, wouldn't it? Not in a sense that is being implied. Let's be
:10:45. > :10:48.very straight forward as to where we are. Europe is in an incredibly
:10:48. > :10:53.fragile state. If the European Summit collapses on Friday, because
:10:53. > :11:01.of a lack and inability to reach agreement, that is very serious,
:11:01. > :11:04.not just for the eurozone countries, for Britain as well. Now that means
:11:04. > :11:07.that the tough approach required by David Cameron is perfectly
:11:07. > :11:11.reasonable if he concentrates on issues relevant to the crisis, such
:11:11. > :11:14.as the potential threat to the City of London. If he make that is a
:11:15. > :11:18.condition for his consent, then he's entitled to be as tough as
:11:18. > :11:23.required. But if we were to have debates and discussions on fli,
:11:23. > :11:27.about whether we should re-- Friday, about whether we should repatriate
:11:27. > :11:32.the Common Fisheries Policy or the Working Time Directive or things of
:11:32. > :11:38.that kind, the rest of the world would be aghast if the European
:11:38. > :11:42.economy was veering towards problems. I think Malcolm is
:11:42. > :11:47.falling victim to making outrageous claims. All we need to do to defend
:11:47. > :11:52.the City from the transaction tax is to say no. All this flim flam
:11:52. > :11:56.about the Prime Minister going to defend, he will come back on Friday
:11:56. > :12:00.waving a flag with prosperity of our time on it, defending the City.
:12:00. > :12:04.This will be the story that comes back. That is a good thing isn't it,
:12:05. > :12:10.if he has done that? There is no saving to be done, we will say no,
:12:10. > :12:14.we won't have the transaction tax. If he does that he's looking after
:12:14. > :12:17.British interests by his own lights? He can do that in 30
:12:17. > :12:20.seconds. The big issue that needs to be debated is whether or not
:12:20. > :12:25.there will be a eurozone a block of 17 countries, if there are, and
:12:25. > :12:30.that is what is decided and we are part of the 27 of the outer ring,
:12:30. > :12:36.then that, inner union, will affect our economy, and that will be bad
:12:36. > :12:40.for us, that's what we want him to defend. We want him to defend us
:12:40. > :12:44.from that happening. So stop the 17? There is only one outcome for
:12:44. > :12:50.us. If the 17 have a union, and let's admit, two other countries
:12:50. > :12:55.have already been taken over by technocrats. We need that
:12:55. > :12:59.referendum. The British people have no say on this. I'm so sorry,
:12:59. > :13:05.Malcolm Rifkind can speak for himself. There is a fundamental gap
:13:05. > :13:09.with the real world in what we are being told. The reality is that no-
:13:09. > :13:13.one country, whether it is the UK or any other country, can simply
:13:13. > :13:16.dictate to all the rest, even the Germans can't do that, they have to
:13:16. > :13:20.get agreement from their allies. The idea that David Cameron goes to
:13:20. > :13:23.a summit and says he's going to veto the summit, this agreement,
:13:23. > :13:25.and everybody else wishes to go forward, regardless of the
:13:25. > :13:28.implications for the European economy, regardless for the
:13:28. > :13:31.reactions of the markets, including our interest rates, as well as
:13:31. > :13:36.those in other countries, unless you give me concessions on matters
:13:36. > :13:40.that are not relevant to this immediate European crisis. We all
:13:40. > :13:44.know perfectly well that if there is to be a repatriation of powers,
:13:44. > :13:48.that will be a lengthy negotiation, even if it was successful. I was
:13:48. > :13:52.Margaret Thatcher's Europe minister, it didn't come much tougher than
:13:52. > :13:56.Margaret Thatcher. When she went into a negotiation, she never made
:13:56. > :13:59.unrealistic demands, she never said she insisted on this, regardless of
:13:59. > :14:03.the consequences for the British economy, never mind your own
:14:03. > :14:08.economies. What she said was, she identified what was deliverable,
:14:08. > :14:14.and what's deliverable on Friday is agreement on dropping this
:14:14. > :14:18.ridiculous transaction tax, what is deliverable on Friday is an
:14:18. > :14:23.understanding that there are other issues, important to the UK, which
:14:23. > :14:26.may need to be considered. Angela Merkel has already quoted that she
:14:26. > :14:31.will being will to give constructive consideration to the
:14:31. > :14:34.kien of changes on the -- kind the changes on the employment directive
:14:35. > :14:38.David Cameron has been raising. You have to be negotiating in a
:14:38. > :14:42.sensible, practical way, not saying you demand this or that, regardless
:14:42. > :14:45.of the consequences, that is not the real world we live in. When you
:14:45. > :14:50.have already made the statement that if there is to be any further
:14:50. > :14:54.loss of sovereign power, or power, to Europe, then we will have a
:14:54. > :14:58.treaty, or a treaty. That is the law. We will have a referendum, we
:14:58. > :15:03.are now in that position. If there is a block of 17 countries in a
:15:03. > :15:08.union, that will impact on us, and on our economy. It will bring about
:15:08. > :15:13.changes to our economy, and therefore, we have to have a
:15:13. > :15:17.referendum. People out there in 1973 voted for a Common Market.
:15:17. > :15:20.They didn't vote to be part of a two-tier eurozone, where 17
:15:20. > :15:25.countries in effect become one country, we are on the outer ring.
:15:25. > :15:30.They didn't vote for that. The act you and I voted for, and is now the
:15:30. > :15:34.law of the land, says if the United Kingdom Government proposes to
:15:34. > :15:38.surrender or transfer sovereignty to Europe, in any new area, there
:15:38. > :15:42.must be a referendum. That is not what is being proposed on Friday.
:15:42. > :15:48.If those countries are in the eurozone, which are only 17 of the
:15:48. > :15:52.27, if they wish to transfer more of their power to Brussels, that is
:15:52. > :15:55.their business. The change of power been the European Union is
:15:55. > :15:58.something people should surely be allowed vote on? I'm not saying
:15:58. > :16:03.they are not important issues, I'm saying the obligation to have a
:16:03. > :16:09.referendum, is not when there is any kind of any change in Europe,
:16:09. > :16:13.it is when there is a surrender or a desire to surrender sovereignty
:16:13. > :16:21.by a British Government. This is a new situation, the 17 countries
:16:21. > :16:25.becoming one union is very knew. New. They are already one country.
:16:25. > :16:28.What is being proposed is very different. This hasn't been on the
:16:28. > :16:32.table before. It is going through at a speed that people can't
:16:32. > :16:36.understand what is happening. Even the use of the word "sovereign", my
:16:36. > :16:40.constituents ask what does it mean, when it is explain it is the
:16:40. > :16:43.transfer of our powers for someone else to be making our policies and
:16:43. > :16:46.dictating to us. They don't like the sound of that. This is all
:16:46. > :16:50.moving very fast, we need to acknowledge what people want and
:16:50. > :16:56.give them the referendum. It is very important for people like
:16:56. > :17:02.yourself not to mislead the public, and imply something. For give me,
:17:02. > :17:05.let me -- Forgive me, let me finish the sentence, and not imply that
:17:05. > :17:09.transferring British sovereignty is in practice that, that is not a
:17:09. > :17:17.proper way to try to take the debate forward. We will know in a
:17:17. > :17:21.cop of -- couple of days, and the euro may collapse any way. The make
:17:21. > :17:25.or break meeting will roll into other meetings. Confidence is all,
:17:25. > :17:29.supposing the joint strategy of Merkel-Sarkozy fails, what then?
:17:29. > :17:35.There are emergency plans being laid in the UK and the EU, but they
:17:35. > :17:38.are secret. We asked Paul Mason to try to war game a eurogeddon
:17:38. > :17:42.scenario. Here at the Treasury, though they hope tomorrow's summit
:17:42. > :17:47.will be a success, they are planning for all eventualities,
:17:47. > :17:53.including a euro break-up. Most people are oblivious, and results
:17:53. > :17:57.will remain behind closed doors. are undertaking extensive
:17:57. > :18:02.contingency planning to dial with all potentially outcomes of the
:18:02. > :18:07.euro crisis. To show what might be happening behind closed doors, we
:18:07. > :18:13.have assembled three people whose real life roles might have involved
:18:13. > :18:17.them in this kind of contingency planning. Kitty Ussher was a
:18:17. > :18:21.Treasury minister under Gordon Brown, Sir Martin Jacomb sat on the
:18:21. > :18:26.board of the Bank of England, Jon Moulton is a prominent investor. In
:18:26. > :18:30.this room, I will ask them, in real time, to confront one of the
:18:30. > :18:39.scenarios Britain might face. Good morning everybody and welcome.
:18:39. > :18:44.Thank you for coming. There have been some events. The sin flairyo
:18:44. > :18:50.begins with a Greek -- the scenario begins with a Greek default and an
:18:50. > :18:53.exit from the euro, not a catastrophy for Britain but
:18:54. > :18:58.bringing fears. There is now a 90% chance of a Greek default before
:18:58. > :19:03.the end of January, in an hour's time the PM and the cabinet
:19:04. > :19:08.secretary walk through that door, we have to come up with a response.
:19:08. > :19:14.I think the first duty of the British Government, and the Bank of
:19:14. > :19:18.England, and the other regulators, including the FSA, is to make sure
:19:18. > :19:23.they safeguard the British banking system. Because without that
:19:23. > :19:30.everything fall ace part. completely agree with that. If we
:19:30. > :19:34.think that Greece is very likely to default, questionable -- question
:19:34. > :19:37.is how much exposure do we have to Greek debt, that will be worthless.
:19:37. > :19:42.It is all about the financial system and the knock-on effect,
:19:42. > :19:46.Greeks failing to pay their debts, meaning that Cypriot banks fail,
:19:46. > :19:51.German banks fail, French banks fail, and then all of a sudden you
:19:51. > :19:57.have massive exposure from the UK to a relatively small event and a
:19:57. > :20:03.country that is less than 3% of the European GDP.
:20:03. > :20:08.What do we do, in the next 30 days. If the main focus is banking, what
:20:08. > :20:14.practically do you do? There needs to be a new stress test regime for
:20:15. > :20:20.all the major financial institutions. Their books need to
:20:20. > :20:23.be put through the wringer in the light of the new environment. The
:20:23. > :20:27.worst possible case scenario needs to be modelled to see if they can
:20:27. > :20:33.remain trading. The problem is most of them will fail that test. So if
:20:33. > :20:37.it is done properly. So the only thing the Government can do is
:20:37. > :20:40.promise absolutely, we will do whatever we have to do to print
:20:40. > :20:46.money, chuck money in all directions, support everything.
:20:46. > :20:49.Because there will be no practical alternative. But, in the end, our
:20:49. > :20:58.trouble shooters were clear about the action Government will have to
:20:58. > :21:01.take. We have no choice, we have to bail out the systemically important
:21:01. > :21:05.banks. That is true, but two of our British banks are already
:21:05. > :21:09.nationalised, RBS, Lloyd's and Barclays is perfectly well
:21:09. > :21:19.capitalised. I don't think there is a risk of that, provided nobody
:21:19. > :21:23.makes a big of -- as big a mess of it. It is different from 2008
:21:23. > :21:27.because there is advanced discussions about how to pay for
:21:27. > :21:31.bailouts. There are living wills for institutions to work out how to
:21:31. > :21:37.have a structured dissolution, we know we can allow banks to fail if
:21:37. > :21:40.we need to. Is anybody prepared to allow a UK bank to fail at this
:21:40. > :21:45.jubgture? You can't allow a bank that is systemically important to
:21:45. > :21:50.fail. You can certainly allow it to go into a situation where there are
:21:50. > :21:53.living wills taking effect, and all the shareholders lose all their
:21:53. > :22:01.money. We are looking at a situation where losses beyond the
:22:01. > :22:04.equity are all too conceivable. That is really very difficult.
:22:04. > :22:10.Wiping out the shareholders won't be enough and the banks won't be
:22:10. > :22:16.able to repay their debt in full. That means the banks will need
:22:16. > :22:20.support to keep systemically banks going. What do we tell the British
:22:20. > :22:22.public about who is first in the queue about losing their money?
:22:23. > :22:26.don't think we tell the British public anything. I'm pointing out
:22:26. > :22:30.that you a former minister, you don't tell them anything? Not at
:22:30. > :22:35.this stage, unless you want a run on a bank. I don't think we are
:22:35. > :22:38.near that kind of danger. But the contingency planning should have
:22:38. > :22:43.one thing, first and foremost, at the top of the list, that is the
:22:43. > :22:46.ability of businesses to operate their normal banking mechanisms and
:22:46. > :22:49.consumers to have access to their cash. That is the most important
:22:49. > :22:54.thing. You have to prepare them for something, it is almost
:22:54. > :22:58.inconceivable event we are talking about, won't lead to the
:22:58. > :23:03.deleverageing further of banks, banks getting smaller, less credit
:23:03. > :23:09.into the economy, and a weaker economy.
:23:09. > :23:14.At this point, in the scenario, the IMF and OECD warn that British
:23:14. > :23:21.growth will be lower, Britain's budget, already tightened last week,
:23:21. > :23:28.would then need tightening some more. Other fiscal trajebgt trees
:23:28. > :23:33.for a Greek exit and dire situation economically. Would we have to say
:23:34. > :23:43.to the Chancellor, you need some kient of Plan B, even if it is only
:23:44. > :23:53.
:23:53. > :24:01.Plan A+ plus, even if he has to tighten it even more. I would say
:24:01. > :24:07.that taxes were easing, in so far as it would affect effective
:24:07. > :24:10.business, that mean any of those retired or on benefits, we shall
:24:10. > :24:13.continue to:. The Government will have no money, no money coming from
:24:13. > :24:17.exports, consumers haven't any money, business has some money, but
:24:17. > :24:20.they are too frightened to invest it, given what is going on. The
:24:20. > :24:25.only option the Government has is to create markets to give business
:24:25. > :24:31.the confidence to invest, that is the only way we will getting a gate
:24:31. > :24:35.demand, growth into the economy, given that -- aggregate demand,
:24:35. > :24:40.growth in the economy. Very hard to say we shouldn't be pushing
:24:40. > :24:43.everything we can to make productive industry activity to
:24:43. > :24:48.return to the UK in volume. They are saying, hold on a minute,
:24:48. > :24:52.what you told us in November, it is worse than that, and you have never
:24:52. > :24:56.touched the NHS, you have two aircraft carriers you seem to want
:24:56. > :24:59.to build despite the fact you will never use them. Who will tell the
:24:59. > :25:04.PM that the NHS will have to be, do we have to think about that?
:25:04. > :25:07.Somebody will have to. contingency planners were by now at
:25:07. > :25:14.the political heart of darkness, this was the mildest of the
:25:14. > :25:20.scenarios we had come up with. Worse, we made the crisis using the
:25:20. > :25:24.roll of the dice, and the more impotent they felt. The list of
:25:24. > :25:27.scenarios is bigger than in the last 20 years, we could go this way,
:25:27. > :25:31.that way, the euro could fail, high interest rates, low interest rates.
:25:31. > :25:34.It is terribly difficult, I think we really want a Government that
:25:34. > :25:41.looks down at all possiblities. Thinks about them all, tries to
:25:41. > :25:45.respond. They will probably fail, but they have to at least try.
:25:45. > :25:48.All the Prime Minister and cabinet secretary are on their way. By the
:25:48. > :25:53.end the solutions for the worst case were not much different than
:25:53. > :25:58.for the mildest. Save the banks, take hard fiscal choices and let
:25:58. > :26:02.others worry about saving the euro. How likely is that sort of
:26:02. > :26:09.situation to come to pass? And what can, or should be done to prevent
:26:09. > :26:12.it? These two may be able to shed some light, We have the chief
:26:13. > :26:18.economics commentator of the Financial Times, spending ten years
:26:18. > :26:21.as a senior economist at the Central Bank. Ian Bremmer is
:26:21. > :26:25.President of Eurasia Group. Apparently there is a lot of this
:26:25. > :26:28.modelling going on, what sort of thing are they planning for?
:26:28. > :26:32.suspect that they are not really planning for these sorts of
:26:32. > :26:36.disasters. They might be planning for a Greek exit. But in the
:26:36. > :26:41.eurozone, I think they are planning for the thing to continue. What
:26:41. > :26:44.they are trying to do is set up a situation in which the European
:26:44. > :26:47.Central Bank engages really seriously. There have been some
:26:47. > :26:50.indications in the last week that is what will happen. They think
:26:50. > :26:54.they will get through with it. Is that right? That is a very good
:26:54. > :26:57.question. I don't think they are planning, seriously, for a break up.
:26:57. > :27:03.We will come to the point of whether it will work or not in a
:27:03. > :27:08.second or two, but the companies you advise, they are presumably
:27:08. > :27:11.strategyising things, through modelling -- strategy guiseing
:27:11. > :27:18.things through, modelling things. They are getting a lot of questions
:27:18. > :27:23.about what is the likelihood of a eurozone break-up. It is thinkable,
:27:23. > :27:28.but thinkable, a war between Israel and Iran is thinkable, that doesn't
:27:28. > :27:33.mean we think it is a likely scenario. The euro breaking up
:27:34. > :27:39.doesn't seem likely for the time frame these folks are considering.
:27:39. > :27:44.Time frame? Over a year. Muddle through is the most likely outcome,
:27:44. > :27:49.especially moving towards a fiscal pact on Friday. That was a model of
:27:49. > :27:53.a Greek default rather than the whole of the euro breaking up. What
:27:53. > :27:59.is your prognosis, one year, do you want to raise him another year or
:27:59. > :28:02.two? I think that they have the resources and almost certainly the
:28:02. > :28:06.will. They have the resources because they have a Central Bank
:28:06. > :28:11.that will create money that people will hold. There is no doubt people
:28:11. > :28:16.will hold the euro. If the European Central Bank is brought in to
:28:16. > :28:19.purchase and intervene in the debt markets, the public debt of most of
:28:19. > :28:24.these countries rolls over slowly, it will continue to pay high
:28:24. > :28:26.interest rates for a long time. As long as the political process and
:28:26. > :28:31.the affected countries are reasonably stable, they can keep
:28:31. > :28:34.the things going for quite a while. The thought it will all end
:28:34. > :28:39.tomorrow strikes me as wildly implausible. He says not worrying
:28:39. > :28:44.about it for a year or so? I would say longer than that. I'm not
:28:44. > :28:48.worried about break up for a year or so. A default by a country is
:28:48. > :28:51.possible in that period, d doesn't lead to break up. We have to be
:28:51. > :28:55.clear that there is a tremendous investment here, in Britain we tend
:28:56. > :29:01.to assume it will all be over much too easily. I think that is right.
:29:01. > :29:04.I also think the willingness of the Germans to ultimately backstop the
:29:04. > :29:09.eurozone is very different from the willingness of the Germans to say
:29:09. > :29:14.they will do that, and the ECB should be the lender of last resort,
:29:14. > :29:22.taiinging away all moral hazarz. When you are playing -- taking away
:29:22. > :29:32.all the moral hazarz. I understand that Merkel has not said let's do
:29:32. > :29:32.
:29:32. > :29:37.eurobonds. She has said let as not do them now. There is enormous
:29:37. > :29:42.support for the continent of Europe. What about the letter that Merkel
:29:42. > :29:45.and Sarkozy have sent to Mr Van Rompuy, there are various tactics
:29:45. > :29:49.in there, applying to the 17 members of the eurozone. Do they
:29:50. > :29:53.strike you as coherent and likely to work or feasible? I think they
:29:53. > :29:58.are sufficiently coherent to work for the time being. What we are
:29:58. > :30:03.doing is we are buying ourselves more capacity to muddle through.
:30:03. > :30:06.The most important point is on Monday the ECB will feel they can
:30:06. > :30:12.turn the taps on to a greater degree. That is what the markets
:30:12. > :30:16.are looking for. They want to see what the ECB can do next week, they
:30:16. > :30:19.will not provide the bazooka, but they can provide more time. They
:30:19. > :30:24.are doing enough to probably make it survive, we can't give a precise
:30:24. > :30:31.date, of when that will fail, but, they are not beginning to do enough
:30:31. > :30:34.to make it work well. The question is can you keep currency union
:30:34. > :30:38.together, for very long, nobody knows what the period will be, if
:30:38. > :30:42.significant numbers of players feel it is not really working for us. I
:30:42. > :30:46.think it is very, very likely there will be a situation that a lot of
:30:46. > :30:49.countries will feel that. The problem with acting on that is
:30:49. > :30:54.leaving is also an absolute disaster. What you have in the real
:30:54. > :30:57.nightmare to me, in fact, the most likely nightmare, is you have a
:30:57. > :31:01.eurozone that just really doesn't work very well. In all sorts of
:31:01. > :31:06.ways it really doesn't work very well. It doesn't grow, the
:31:06. > :31:10.adjustments don't work, and some countries in permanent recession,
:31:10. > :31:15.but they don't have the nerve to leave. It is a very miserable
:31:15. > :31:24.marriages, and they can go on for a very long time. The Greeks are
:31:25. > :31:30.taking pain, and 7% of Greeks -- 78% of Greeks are in support for
:31:30. > :31:33.the euro. There is no massive support among the peripheral
:31:33. > :31:38.countries taking massive economic strain to move away from the
:31:38. > :31:47.eurozone. It seems a prerequisite with
:31:47. > :31:52.keeping the patient on the life support, never find taking it for a
:31:52. > :31:55.walk, that democracy is suspended? The question is how much democracy
:31:56. > :31:59.did you give up. I believe part of the problem in the eurozone is not
:31:59. > :32:03.the lack of fiscal union it is the lack of a children's table. When I
:32:03. > :32:07.was a kid growing up, you didn't give me sharp untensils because the
:32:07. > :32:10.family pet would have been damaged, over time that changes. In Europe
:32:11. > :32:15.that hasn't been the case, there will be a symmetry in the
:32:15. > :32:20.fundamentals of the union whatever we do. Is it ever going to work
:32:20. > :32:24.really well? Probably not, there are gigantic problems inherent in
:32:24. > :32:26.putting these countries together. They have incredible
:32:26. > :32:30.competitiveness problems which they will find difficult to resolve.
:32:30. > :32:32.Obvious low they find Governments imposed upon them they haven't
:32:33. > :32:37.chosen. They didn't like the democratic Governments they had
:32:37. > :32:40.before. As Ian said, once you went into the currency union you gave up
:32:40. > :32:45.an awful lot of sovereignty, they are discovering they are losing
:32:45. > :32:49.more and more. Can such a structure operate, yes, is it democratic in
:32:49. > :32:52.the way we think about it, not in my view, that is why I'm happy we
:32:52. > :32:57.are not part of it. You can take your hand out from
:32:57. > :33:01.country the back of the sofa, a respected scientist at the CERN
:33:01. > :33:06.particle physics laboratory has told Newsnight, exclusively, that
:33:06. > :33:09.he expects to see the first glimpse of the Higgs boson next week, when
:33:09. > :33:13.they reveal their latest data. They have spent 30 or so years and
:33:13. > :33:18.countless millions looking for this missing piece of the jigsaw in our
:33:18. > :33:23.understanding of particle physics. The famous boson is named after
:33:23. > :33:28.Peter Higgs, an Edinburgh University physicists who first
:33:28. > :33:31.proposed its existence in the 1960s. Our science editor has the story.
:33:31. > :33:37.Tremenduously exciting? I spent the day at CERN yesterday, there is a
:33:37. > :33:41.real sense of excitement, a buzz in the cannot teens there. There are
:33:41. > :33:47.are you -- canteens there. There are rumours on the Internet. This
:33:47. > :33:51.is all because there is an announcement next Tuesday, the
:33:51. > :33:55.press have been invited long, and two separate teams who have been
:33:55. > :34:01.looking for the Higgs boson will present their data. Finding Higgs
:34:01. > :34:04.boson has been described as the Holy Grail of physics. If it exists
:34:04. > :34:13.it helps us understand the standard model. It will be the crucial
:34:13. > :34:16.missing piece in the jigsaw of the standard model. That is the process
:34:16. > :34:20.physicists understand the way particles fit together. Without the
:34:20. > :34:23.Higgs, this standard model doesn't make sense. The two teams of
:34:23. > :34:27.scientists are going to be reporting, independent of each
:34:27. > :34:33.other, using different detectors. Now, officially, these two teams
:34:33. > :34:40.don't talk to each other, they are sworn to secrecy, all the are you
:34:40. > :34:43.mores are of a possible sighting of the -- are are you mores are the
:34:43. > :34:47.possible sighting of the Higgs boson. The teams are focusing in,
:34:47. > :34:52.ruled out ranges of mass, where they have seen no sign of the Higgs.
:34:52. > :34:57.What does the Higgs look like? Women come on to that. I asked the
:34:57. > :35:03.former head -- We will come on to. That I asked the former head of
:35:03. > :35:07.theoretical physics at CERN how close does he think we are of
:35:07. > :35:12.seeing boson? I think we will get the first glimpse, the experiments
:35:12. > :35:15.have looked high and low for this missing piece, it could be that it
:35:15. > :35:19.weighs several hundred times the proton mass, that seems unlikely.
:35:19. > :35:23.There is a whole interimmediate range where we know it cannot be.
:35:23. > :35:28.Then there is a low mass range, which is actually where we expect
:35:28. > :35:32.it to be, it seems maybe there is some hints emerging there. That is
:35:32. > :35:36.what we will learn on Tuesday. lot of stuff about seems, he's not
:35:37. > :35:41.saying they have found this thing, is he? It is not definitive yet.
:35:41. > :35:45.They can't claim to have found the Higgs boson, that is because there
:35:45. > :35:53.isn't enough experimental data from the Clydeer to claim what is called
:35:53. > :35:59.a discovery. It will be a significant milestone. What is this
:35:59. > :36:09.thing? It is notoriously difficult to define. We asked Peter Higgs to
:36:09. > :36:13.tell us how it worked. This is the best he could do. Waves in this
:36:13. > :36:23.qant fee that oscillates up and down -- quantity that oslails up
:36:23. > :36:29.and down the trofs. That caused a lot of giggles. Professor John
:36:29. > :36:33.Ellis does a pretty good job. standard model is a bunch of
:36:33. > :36:40.building bricks, blocks like the electron, that is a thing that goes
:36:40. > :36:50.around at tomorrows, the Quarks are things that make up -- atoms, the
:36:50. > :36:55.Quarks are things that make up the atoms. The whole thing would fall
:36:55. > :36:59.down if we can't have a cap stone, sitting there, in the middle there,
:36:59. > :37:04.that cap stone tells us which particles have mass, which don't,
:37:04. > :37:14.that cap stone, which makes a whole standard model hang together, that
:37:14. > :37:14.
:37:14. > :37:19.is the Higgs boson. I do hope they recognise it when they find it.
:37:19. > :37:23.will hear more next week if they see hints of the Higgs boson.
:37:23. > :37:28.are becoming an increasingly self- reliant, some would say hard-nosed
:37:28. > :37:32.society. The latest attempt to see what the British public feel about
:37:32. > :37:37.the world they live in, is more of us feel unemployment benefits are
:37:37. > :37:41.too high, and the proportion who think taxes should rise to improve
:37:41. > :37:45.public services has halved. The Prime Minister really took the
:37:45. > :37:48.findings that he has his finger on the pulse, claiming people want to
:37:48. > :37:55.end the something for nothing society. Steve Smith, so interested
:37:55. > :37:59.in the Big Society, we have dubbed him Citizen Smith has more.
:37:59. > :38:05.Previously, have you seen our Citizen Smith feature before? No,
:38:05. > :38:15.in that case it is a much-loved and award-friendly segment, about David
:38:15. > :38:27.
:38:28. > :38:32.Cameron's Big Society at the grass roots.
:38:32. > :38:36.Ahmed Kabba, originally from Sierra Leone, but has lived here for 20
:38:36. > :38:40.years, was one of the Guinea pigs on the first community organiser
:38:40. > :38:44.course this autumn. He was learning how to recruit his neighbours to
:38:44. > :38:51.get things done in their community. Which happens to be the challenging
:38:51. > :39:01.Inner London postcode of Peckham. The PM himself called in at Ahmed's
:39:01. > :39:06.
:39:06. > :39:13.local cafe, to see how he was We couldn't think of a better idea,
:39:13. > :39:20.so we rewound the same scenario. Ahmed was so keen on recruiting he
:39:21. > :39:27.had a go with me. Show me what you do? Hello, how are you. How are you
:39:27. > :39:31.doing? So-so. Do you live local? I'm a community organiser. What is
:39:31. > :39:35.that? It is reaching out to the local community and asking specific
:39:35. > :39:40.questions, about your vision. you get a sense from people,
:39:40. > :39:45.perhaps the ones who are working here, that they resent people who
:39:45. > :39:49.are on benefits? Is there any sense of that, as in this survey or not?
:39:49. > :39:54.I haven't had anything like that in terms of people on benefit, or what
:39:54. > :39:57.people are doing down the street. The concern they will have is not
:39:57. > :40:01.about individuals, it is about collective community, in terms of
:40:01. > :40:05.anything that is happening around them that they don't like, or they
:40:05. > :40:09.would like to see improved. But others see things differently,
:40:09. > :40:15.more than half of us think that unemployment benefit is too
:40:15. > :40:20.generous. Rewind back to 1983, and just over a third of us did.
:40:20. > :40:24.Only 31% support tax rises to pay for health and education. It used
:40:24. > :40:30.to be 63%. People increasingly are looking to
:40:30. > :40:33.others to be more self-reliant, and look less to Government to solve
:40:33. > :40:38.problems. Whilst they are still concerned about the gap between
:40:38. > :40:43.rich and poor, everybody thinks the gap is too wide. They think
:40:43. > :40:47.unemployment benefits are too high and discourage people from finding
:40:47. > :40:51.work. And there is no appetite from Government to do more
:40:51. > :40:56.redistribution of wealth from rich to power. On Twitter David Cameron
:40:56. > :41:01.said people were making it clear they had enough of the something
:41:01. > :41:07.for nothing culture. Not everyone thinks it is good for Government?
:41:07. > :41:10.It is good for Cameron's talk about benefits being too much and the
:41:10. > :41:16.state support, I don't think it is useful for people want to go
:41:16. > :41:18.collaberate, it speaks to a society where people are circling their
:41:18. > :41:21.wagons and thinking about themselves and their families,
:41:21. > :41:26.rather than cleaning up the local graveyard. Good for him in the
:41:26. > :41:31.short-term, but in the long-term not so good. Unfortunately this is
:41:31. > :41:35.hardly the first time in living memory that Britain has been in a
:41:35. > :41:38.recession. What you are seeing is a similar hardening of public
:41:38. > :41:45.attitudes towards people on benefits, towards the size of the
:41:45. > :41:49.state, generally. That happened in the late 1970s, when Labour was
:41:49. > :41:52.seen simply as being profligate. That comes in at the end of the
:41:52. > :41:59.Social Democratic periods, it reflects what was going on two or
:41:59. > :42:03.three years ago more than what's happening now. Stkph Ahmed Kabba
:42:03. > :42:08.and others -- Ahmed Kabba and others are fired up by community
:42:08. > :42:13.organisers, but the problem is the Big Society, might not be as big
:42:13. > :42:17.hearted as people wish. Two local MPs are with me now,
:42:17. > :42:22.Margaret Hodge, and Jesse Norman, who has published books about
:42:22. > :42:28.compassionate Conservatism and the Big Society. What do you think has
:42:28. > :42:33.happened? This was a snapshot, it was, July 2010 when Jesse and I had
:42:33. > :42:37.been out on the stomp. At that point we were coming out of the
:42:37. > :42:41.previous recession, people were feeling very insecure. You are
:42:41. > :42:45.looking cynically at me. We know roughly when it was taken, what
:42:45. > :42:54.does it tell us about what has happened? At that time people were
:42:54. > :43:00.feeling insecure. They were feeling angry. Therefore you come in on
:43:00. > :43:04.yourself in that sort of an environment. You tend to think
:43:04. > :43:07.other people are getting everything, I'm not getting enough myself. That
:43:07. > :43:13.was an attitude at that time. I think the contributor who talked
:43:13. > :43:16.about the end of the Labour Government, when things were better,
:43:16. > :43:23.you know the investment in schools had gone up, the investment in
:43:23. > :43:28.hospitals had gone up. I think it was a different era, at a snapshot.
:43:28. > :43:33.What is your analysis? My analysis is people were looking ahead and
:43:33. > :43:37.looking at a long dark tunnel of economic stagnation. It is hardly
:43:37. > :43:41.better since? No. They found an awful lot of money spent over the
:43:41. > :43:44.past few years had been wasted, and they thought maybe Government is
:43:44. > :43:49.not doing the job it should be doing and we need to look for
:43:49. > :43:54.alternatives. That is why there is a turning away from retis tribbuegs
:43:54. > :43:58.and on to community. Let's -- Redistribution to the community.
:43:58. > :44:02.Let's not let into party politics. There may be other things, it may
:44:02. > :44:07.be a matter of politics or economics, it may be that society
:44:07. > :44:12.has in some way matured into a different sort of being, to the
:44:12. > :44:16.sort of people, perhaps we are slightly older than you, but people
:44:16. > :44:22.we grew up with? The attitudes towards benefits have changed. They
:44:22. > :44:26.started to change, when Labour came in we started saying work is the
:44:26. > :44:30.root out of poverty. We started creating that different settlement
:44:30. > :44:35.out of welfare state from where we were in the post-war era. We
:44:35. > :44:43.shouldn't be surprised of that. To inject a fact into this,
:44:43. > :44:48.unemployment benefit, in the 1970s was about 12.5% of national average
:44:48. > :44:52.male earnings. Now it is 7% of average national male earnings. It
:44:52. > :44:58.has got less generous, that doesn't mean the attitude is less there,
:44:58. > :45:00.and there are few people who ought to be working who presently are
:45:01. > :45:05.working. Do you get a sense we are less kind to one another, this
:45:05. > :45:10.slogan your leader had, I'm not being party political here, "we are
:45:10. > :45:15.all in it together", people feel it less now? I don't think so. I think
:45:15. > :45:20.they look around, it is a matter of politics, looking at the past,
:45:21. > :45:25.looking at the future. It is culture also, they can see crony
:45:25. > :45:30.capitalism that has sprung up. People who have been taking very
:45:30. > :45:36.hygiene fits in some case s which they didn't seem to be deserving.
:45:36. > :45:38.You are getting a recalibration of values. I don't think people are
:45:39. > :45:43.becoming celebration, but they are taking the compassion they have and
:45:43. > :45:47.focusing on the community, and not trusting the state to do things it
:45:47. > :45:51.can't do. Does Britain feel like that to you? It is a more
:45:51. > :45:57.compassionate and caring place than it was? It does, oddly, it is a
:45:57. > :46:01.country looking hard at the sources of what actually matter in people's
:46:01. > :46:04.lives, and coming to the conclusion that it is not just about money but
:46:04. > :46:08.linkage and community. I think it is about insecurity, people's
:46:08. > :46:13.living standards going down and they turn in on themselves, that is
:46:13. > :46:17.what's happening. On the role of the state and public expenditure,
:46:17. > :46:22.the concept is one that people recoil from, but the reality is one
:46:22. > :46:27.they like. For example, in that survey, they like the NHS, they
:46:27. > :46:30.were happy with it. People want a copper at the end of their street.
:46:30. > :46:34.People want youth facilities in their communities, and they want
:46:34. > :46:42.the parks well looked after. There is a complicated set of attitudes
:46:42. > :46:47.going on here. If you were to take a snapshot in a year's time about
:46:47. > :46:49.attitudes today. You have high unemployment, and they will change
:46:49. > :46:54.again. We will only engage with what we have, is Britain a better
:46:54. > :47:04.place than it was, do you think? Britain a place in terms of the
:47:04. > :47:04.
:47:04. > :47:08.public space? Yes. If you think about into 1997, you think we had
:47:08. > :47:18.outside toil lets in schools, we don't have that now. We did have
:47:18. > :47:18.
:47:19. > :47:22.hospitals falling apart. We don't have that now. You are asking does
:47:22. > :47:25.Britain feel like a place where values are cherished. It doesn't
:47:25. > :47:29.feel like that, but it is recognising the problem and moving
:47:29. > :47:35.in the right direction. I don't know what that means? People are
:47:35. > :47:39.realising. I have to stop you there, apparently we have run out of time.
:47:39. > :47:49.That is all from Newsnight tonight, if only we had more time we could
:47:49. > :47:50.
:47:50. > :47:54.depress and worry you further. We can't. Good night.
:47:54. > :47:58.Some pretty wild weather on its way through tomorrow. It starts off
:47:58. > :48:02.snowy across many northern parts of Scotland. That will turn back to
:48:02. > :48:06.rain before severe gales keep in later on in the day. Heavy rain
:48:06. > :48:11.sweeping across the country, out of Scotland and noerm, into England
:48:11. > :48:18.and Wales. For parts of the Midlands it will turn wet, the band
:48:18. > :48:23.of rain sweeping through will last all day. Ahead of that, cloudy with
:48:23. > :48:26.dribs and drabs, mild, but tempered by the strength of the wind. Wet
:48:26. > :48:31.weather sweeping into south western parts of England later on in the
:48:31. > :48:35.afternoon. It clears through Wales, behind that things will brighten up
:48:35. > :48:38.with sunshine tofl developing across northern parts of Wales. For
:48:38. > :48:42.Northern Ireland sunshine but very strong winds, potentially damaging
:48:42. > :48:47.gusts along the north coast. Scotland where we are most
:48:47. > :48:51.concerned, gusts of up to 80 miles an hour or more. There could be
:48:51. > :48:56.damage construction or power outages, a red warning in force. We
:48:56. > :49:00.are highly confident that there will be some significant damage and
:49:00. > :49:06.disruption from this weather event. Looking further ahead into Friday,