06/06/2012 Newsnight


06/06/2012

With Kirsty Wark. As speculation grows about a bailout for Spain, how close is Europe to a wider banking collapse?


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Tonight, is Spain too big to fail? Its leaders say their banks need

:00:13.:00:18.

help from Europe, they won't accept more austerity in return. Who will

:00:18.:00:22.

blink first? Meanwhile on the ground, the crisis

:00:22.:00:25.

intensifies, Paul Mason is just back from Seville, some are taking

:00:26.:00:30.

matters into their own hands, occupying houses and land. Did any

:00:30.:00:33.

of you ever think you would be living in a squat? No. TRANSLATION:

:00:33.:00:38.

We are here to fight or a roof, a roof over our heads, this is my

:00:38.:00:42.

house now, nobody can throw me out, let's see them try. We will get the

:00:42.:00:46.

Spanish Government view s and hearing from the head of the Berlin

:00:46.:00:52.

stock exchange. What if the answer to save the euro looks like this,

:00:52.:00:59.

will more integration choose Britain to be in or out of Europe.

:00:59.:01:03.

The row over unpaid security stewards, we speak to the company

:01:03.:01:07.

who provided them, an isolated incident, or something rotten in

:01:07.:01:13.

the Government's Work Programme. How was the Jubilee reported abroad,

:01:13.:01:23.
:01:23.:01:26.

from ten sea to Taiwan. Good evening, Spain's banks need

:01:27.:01:30.

more money from Europe, that is not in doubt. How much and by the

:01:30.:01:33.

method which it happens is far from decided. The Spanish Government is

:01:33.:01:37.

reluctant to accept a bail out for fear of the political reprecussions,

:01:37.:01:43.

and the pain of even more austerity. Efiguress in Brussels, Berlin and

:01:43.:01:46.

Madrid tonight are pouring over their options. Can a special case

:01:46.:01:51.

be made for Spain, direct help for its banks with few conditions. With

:01:51.:01:55.

the stand-off going on, how close are we to a wider banking collapse.

:01:55.:01:59.

Paul Mason is here. What sort of plans are being mooted in Spain

:01:59.:02:03.

tonight? A big turn around, 48 hours ago it was, we don't need a

:02:03.:02:07.

bail out, our banks are fine. Now it is, please can we have a bail

:02:07.:02:14.

out, and give it to us unconditionally or Europe gets it.

:02:14.:02:17.

How much? 40 billion, more economists think, some think 400

:02:17.:02:22.

billion. The point is, they want the money without the attached

:02:22.:02:26.

austerity that Greece, Ireland and Portugal got made to. Do the

:02:26.:02:29.

Financial Times, usually well informed out of Brussels, thinks

:02:29.:02:33.

and reports that what is on offer now is that the Europeans are going

:02:33.:02:38.

to give Spain quite a bit of money, unconditionally, at a state level,

:02:38.:02:41.

that is it gets given straight to the banks, and the reason is s

:02:41.:02:45.

because they have done so much austerity that they can have it

:02:46.:02:49.

safely. So the Europeans are prepared to say what the markets

:02:49.:02:54.

are not prepared to believe. As you say, Greece in particular is

:02:54.:03:00.

watching this carefully. If Spain gets this money, with no strings

:03:00.:03:05.

attached, will that be a game- changer? Massively. For two reasons,

:03:05.:03:10.

first of all, Spain is on the verge of losing its ability to borrow.

:03:10.:03:14.

The markets look at it and say your public finances are not sustainable.

:03:14.:03:17.

They look at the autonomous regions, not making the cuts required. Then

:03:17.:03:21.

you look at Greece, Greek voters are right now trying to weigh up a

:03:21.:03:24.

gamble, one party is telling them if you don't vote for austerity, we

:03:24.:03:29.

will get kicked out of the euro, disaster, the left is saying, no,

:03:29.:03:32.

the Germans will blink, and the Germans will come back to the table

:03:32.:03:36.

if you vote for us. What will it look like in Greece if, over the

:03:36.:03:42.

next 48, 72 hours, they do blink. Big stakes here, for the entire

:03:42.:03:48.

euro zone. Paul has spent the weekend amongst

:03:48.:03:53.

Spaniards on the streeds Andalucia, struggling with the economic crisis

:03:53.:03:56.

-- streets of Andalucia, struggling with the economic crisis. This is

:03:56.:04:06.
:04:06.:04:06.

his film. In the province of Andalucia, the

:04:06.:04:15.

posh do weddings in style. And so do the protestors, here enacting

:04:15.:04:21.

the marriage of a corrupt state to failing bank.

:04:21.:04:26.

Protestors banging pots and pans, are becoming common now, an echo of

:04:26.:04:32.

the revolt in Argentina, ten years ago, when it went burst.

:04:32.:04:37.

They try to keep it light, but, as the crisis hits, there is simmering

:04:37.:04:43.

anger. Many people are losing their homes,

:04:43.:04:51.

people with children and it is now on the streets, living on charity.

:04:51.:04:56.

Spain's economy is in recession. Many of its banks need a bail out

:04:56.:05:00.

fast. One in four adults is unemployed. Spain has become the

:05:00.:05:04.

test case for the European mantra of austerity.

:05:04.:05:11.

The irony is, Spain's banking crisis is solvable, although with

:05:11.:05:15.

large amounts of money. The problem is with the real economy, it is

:05:15.:05:19.

shrinks fast, and theory dictates that people's wages and benefits

:05:19.:05:25.

have to shrink as well. How low can it go, with any market in Spain,

:05:25.:05:31.

most things are all right one or two euros.

:05:31.:05:41.
:05:41.:05:47.

This block of luxury flats was empty for three years. The owner

:05:47.:05:53.

has gone bankrupt. Now it has been occupied by people's whose own

:05:53.:05:57.

homes were repossessed. These women were among the first to move in.

:05:57.:06:02.

They are not habitual rebels. Did any of you ever think that you

:06:02.:06:09.

would be living in a squat? TRANSLATION: At first, the truth is,

:06:09.:06:16.

I was frightened. Because I didn't know what could happen.

:06:16.:06:20.

TRANSLATION: We're here to fight for a roof, a roof over our heads.

:06:20.:06:25.

This is my house now, nobody can throw me out. Let's see them try.

:06:25.:06:29.

The way it is going in this country, things are going to end badly. We

:06:29.:06:34.

will be biting chunks out of each other, just for a bit of meat.

:06:34.:06:41.

Everywhere you go in Spain there's a small savings bank, a Caja, now

:06:41.:06:46.

many of them are bust. One bank alone, Bankia, needs 24 billion

:06:46.:06:52.

euros to stay afloat. Spain wants the EU to give tax-payers' money

:06:52.:06:57.

directly to these banks, so their bad debts don't get transferred on

:06:57.:07:01.

to the Government's books. On the face of it, what could be simple

:07:01.:07:04.

letter, you bail out the Spanish banks direct, with EU money,

:07:04.:07:08.

bypassing the Government, avoiding the need for austerity, and

:07:08.:07:14.

firewalling Spain from Greece. What's the problem? That's the

:07:15.:07:24.

problem. This is unfinished skyscraper was built by one bank,

:07:24.:07:28.

sold to another, and is now owned by a third. Many in Seville see it

:07:28.:07:33.

as a giant folly, for, as those who have covered the story know, the

:07:33.:07:42.

Cajas were politically controlled. The Cajas were banks who used

:07:42.:07:50.

regular economic rules, but with a political background. So, it's like

:07:51.:07:58.

getting politicians to grow your money. That is a CAJA? And when

:07:58.:08:03.

they need to be bailed out by 24 billion euros, where are the

:08:03.:08:09.

politicians? They are in the same place. Do people recognise this?

:08:09.:08:15.

And maybe they should be answering some questions in parliament, and

:08:15.:08:23.

maybe on trial. Europe goes pump 100 billion euros of tax-payers'

:08:23.:08:28.

money into these banks t leaves the political apppointees who created

:08:28.:08:38.
:08:38.:08:43.

the mess unscathed, often with multimillion pay-offs. Andalucia's

:08:43.:08:49.

land is rich. But decades under General Franco left it

:08:49.:08:52.

underdeveloped, with EU membership came infrastructure. It is a region

:08:52.:08:55.

where the state is the biggest employier, and the state is cutting

:08:55.:09:03.

back. This farm had been abandoned to lie

:09:03.:09:08.

fallow, now it too has been occupied by members of the Land

:09:08.:09:12.

Workers' Union, and their supporters.

:09:12.:09:15.

TRANSLATION: The crisis happened because the majority of people who

:09:15.:09:18.

worked in the countryside left to go and work in the construction

:09:18.:09:22.

boom. Only a few of us stayed behind. They brought in migrant

:09:22.:09:26.

labour, and machinery to help with the crops. Then the property boom

:09:26.:09:30.

collapsed, and all those people who left wanted to come back to the

:09:30.:09:34.

land. They are trying to run it as an organic farm, this is as much a

:09:34.:09:38.

political gesture as an economic one. Land occupations were the

:09:38.:09:41.

scene of some of the bloodiest events in the civil war in the

:09:41.:09:46.

1930s. TRANSLATION: I believe it will all

:09:46.:09:50.

end with occupations, farplgs, parliamentary partys and factories,

:09:50.:09:56.

there is no other -- apartments -- farms, apartments, factories, there

:09:56.:09:59.

is no other way. We have to go out on the streets, fill the city

:09:59.:10:09.
:10:09.:10:14.

centres and occupy the land. Nobody will give us anything.

:10:14.:10:20.

For now, what's holding Spain together is the strong social bonds,

:10:20.:10:25.

family, religion, tradition, the welfare system, the minimum wage.

:10:25.:10:30.

The statue depicts Our Lady of Hope, for many of these young people,

:10:30.:10:35.

hope is all they have got. 51% of Spaniards under the age of 24 are

:10:35.:10:40.

unemployed. TRANSLATION: We're following the

:10:40.:10:46.

wrong path. The problem isn't public deficit, it is unemployment.

:10:46.:10:50.

The more we strangle public spending, the more we damage our

:10:50.:10:55.

chances of recovery. We need to recover confidence, and increase

:10:55.:11:01.

consumption. It is a vicious circle. What we need is a system like the

:11:01.:11:11.
:11:11.:11:15.

New Deal. We are condemning Spain to a lost decade, like Japan had.

:11:15.:11:20.

For now, the sun is free, and so is lunch, if you can catch it. But

:11:20.:11:24.

this is a wasted generation. It is beginning to dawn on them things

:11:24.:11:28.

could get worse before they could get better. A combined banking and

:11:28.:11:31.

sovereign debt crisis for Spain would, even though, be cheaper than

:11:31.:11:36.

Greece to solve. But bigger than Lehman Brothers, if they failed to

:11:37.:11:41.

solve it. That is where Spanish people are scared.

:11:41.:11:51.
:11:51.:11:55.

What they are scared of, above all, is that the delicate social balance

:11:55.:12:02.

they had will suddenly come to an end. Joining me now from Madrid is

:12:02.:12:06.

Jose Maria Beneyto, a spokesman for foreign affairs in the parliament.

:12:06.:12:10.

Joining me from Berlin, Artur Fischer, chief executive of the

:12:10.:12:17.

Berlin stock exchange. In the studio I'm joined by the director

:12:17.:12:21.

of the Global Economic Governance Program in Oxford. First of all,

:12:21.:12:25.

Jose Maria Beneyto, Spain is in crisis you do need money now. How

:12:25.:12:30.

much money do you think you need, and are you prepared to accept any

:12:30.:12:38.

conditions attached to that money? Well, the first question is whether

:12:38.:12:42.

indeed Spain needs money and touch. This is very difficult to know at

:12:42.:12:49.

this stage. What has emerged is the need to get money for the

:12:49.:12:54.

capitalisation of Bankia. This is the real problem right now. And

:12:54.:13:01.

this was unexpected. Because it is a new story which came in the last

:13:01.:13:05.

weeks. This is a real problem now. Anything else at the moment is a

:13:05.:13:08.

bit of a speculation. Would you accept any conditions attached to

:13:08.:13:15.

any money coming to Bankia, particularly? That's not for me to

:13:15.:13:23.

decide on that. The reason I ask, the reason I ask Mr Beneyto is

:13:23.:13:27.

because Bankia was severely mishandled, politicians were also

:13:27.:13:31.

involved in the problems of Bankia, and European tax-payers wonder why

:13:31.:13:37.

on earth they should give money to a failed bank, when it is throwing

:13:37.:13:42.

good money after bad? Well, banks have been having troubles all

:13:42.:13:47.

around Europe. You know, this is not the only case, in Spain. If you

:13:47.:13:54.

look into the banks in Germany, the problems there were even much

:13:54.:13:58.

higher, and there were banks managed by politicians. In many

:13:58.:14:03.

other places in Europe, in France or Italy, this is not something new.

:14:03.:14:09.

So the issue here is not whether Bankia was particularly bad low

:14:09.:14:14.

mismanaged, it is an issue whether -- badly mismanaged, it is an issue

:14:14.:14:18.

whether or not we should have a common system in Europe for banking

:14:18.:14:22.

rescue. This is the real problem at the moment. Artur Fischer, from

:14:22.:14:27.

your point of view, will Germany blink first and allow money to go

:14:27.:14:34.

to Spain to help it out of its crisis? I believe it is the first

:14:34.:14:37.

test will be on Thursday, when Spain will ask the market, I

:14:37.:14:45.

believe, for another ten billion. Hopefully Spain will be able to get

:14:45.:14:51.

that money in the markets below 7% .% obviously is a barrier. If that

:14:51.:14:55.

doesn't happen, then things might accelerate quite swiftly. In that

:14:55.:15:00.

case, I believe Germany will play by the rules, which means we have a

:15:00.:15:04.

rescue fund, money will be lent only to a Government, not to banks.

:15:04.:15:09.

However, I believe also that in Spain we have a completely

:15:09.:15:16.

different problem. -- to Greece. The Spanish Government is saying it

:15:16.:15:22.

doesn't a bail out, the idea is the banks to be recapitalised, you

:15:22.:15:26.

don't think that will happen? simple, if Spain has to pay more

:15:26.:15:30.

than 7% there will be no other choice. Obviously if it is higher

:15:30.:15:34.

than 7%, then you need to take a loan out to pay the interest,

:15:34.:15:37.

nobody would do that. Do you think it is possible that Spain would

:15:37.:15:41.

have a bail out without conditions attached, the Financial Times is

:15:41.:15:46.

talking about a possible bail out without the kind of austerity

:15:46.:15:49.

measures that applied, for example, to Greece? I think there is a

:15:50.:15:54.

middle ground here. I believe from what I hear that the German

:15:54.:15:58.

Government understands that the Spanish Government has done a lot

:15:58.:16:02.

of things absolutely correctly and riot, and they have started the

:16:02.:16:06.

special measures to cut down costs some time ago. Therefore, again, as

:16:06.:16:10.

I said earlier, the situation in Spain is quite different. However,

:16:10.:16:14.

the banks need to be restructured, that is something which has to be

:16:14.:16:18.

put in place. Let's come do you now on this.

:16:18.:16:21.

Two different things here, of course, there is the short-term

:16:21.:16:24.

problem with Bankia, there is also the possibility of a bail out,

:16:24.:16:27.

without conditions attached, that would be a big moment, wouldn't it,

:16:27.:16:31.

it would be a game-changer? would be, at the moment we are what

:16:31.:16:36.

we are seeing is a very dangerous brinkmanship, it is a three-way

:16:36.:16:39.

brinkmanship, the European Central Bank is sick of the European

:16:39.:16:42.

leaders not making decisive moves. So the European Central Bank has

:16:42.:16:46.

said we are going to stop doing pain relief for Europe, and force

:16:46.:16:52.

the politicians to do something decisive. The eurozone politicians,

:16:52.:16:55.

playing brinkmanship with Spain, they want to force Spain to accept

:16:55.:17:00.

conditionality in return for a loan. Artur Fischer has said it has done

:17:00.:17:06.

a lot towards this already, it sounds as if there will be an

:17:06.:17:11.

accord? What Spain knows that is that Germany cannot afford to let

:17:11.:17:15.

Spain go. Spain knows if there is any moment to negotiate without

:17:15.:17:21.

conditions now is the moment. will blink first? Germany? We will

:17:21.:17:25.

see a slightly political fudge, we will see probably a loan from the

:17:25.:17:28.

European rescue fund, with some light conditionality, which some

:17:28.:17:32.

how the Spanish Government finds acceptable. What we won't see is a

:17:32.:17:35.

solution to the underlying problem. Which is that both the Government

:17:35.:17:40.

and the banks are broke. So they are all playing with fire?

:17:40.:17:45.

They are. Jose Maria Beneyto what do you make of that analysis?

:17:45.:17:52.

I think is that Spain needs time. The crisis has been not just a

:17:52.:17:57.

Spanish crisis, it is a crisis around Europe. If Spain fails, the

:17:57.:18:02.

consequences will be very, very relevant for the rest of the

:18:02.:18:05.

European countries, including Germany. Do you believe that if

:18:05.:18:11.

Spain does fail, the whole eurozone fails? What I think is that we are

:18:11.:18:16.

very clearly on the same boat, as we were from the very beginning in

:18:16.:18:20.

the monetary union. So things have happened as they have happened, the

:18:20.:18:27.

Spanish Government has made very strong efforts, it has done all the

:18:27.:18:30.

homeworks, it is probably the country in the world which has done

:18:30.:18:36.

the most reforms in the least time, concerning the size of Spain. We

:18:36.:18:41.

have done the labour reform, we have done a cap on the expenses of

:18:41.:18:49.

the autonomous communities. Sorry to interrupt you, I would say two

:18:49.:18:52.

of the semi-autonomous regions were meant to cut their spending last

:18:52.:18:57.

year and they increased their spending? No, what they did, they

:18:57.:19:03.

didn't increase their spending, what happened was that when the

:19:03.:19:08.

accounts were made public, there was more deficit than expected from

:19:09.:19:13.

last year. The revenues had been less. So it is the entire problem,

:19:13.:19:19.

it is a dynamic situation, and if you don't find a solution, then, of

:19:19.:19:25.

course, your revenues will be less and less. Artur Fischer, what about

:19:25.:19:29.

this point, though, that if the special measures are given to Spain,

:19:29.:19:32.

it could possibly affect the outcome of the Greek elections.

:19:32.:19:39.

Because the left in Greece will say, hang on in there, we don't need to

:19:39.:19:43.

accept these austerity measures, because Germany will blink. Angela

:19:43.:19:50.

Merkel will blink, and we will be OK? Actually, there is a potential

:19:50.:19:58.

that could happen. But I believe in crease, the vote will be whatever -

:19:58.:20:01.

- increase, the vote will be whatever it will be, either Greece

:20:01.:20:04.

will vote for the austerity measures or they will not be

:20:04.:20:07.

provide with any other money, in that casek they will most likely

:20:07.:20:14.

have to leave the euro. In Spain it is different, the Spain yards are a

:20:14.:20:16.

proud people, the Government has promised to see through this crisis

:20:16.:20:20.

on their own, and the Government has been in for half a year. It

:20:20.:20:25.

looks like they can't, and for that reason I believe the first step is

:20:25.:20:32.

that Spain asks the fund to release money, and then the next step to

:20:32.:20:37.

accept some, probably very light measures, which are imposed. Very

:20:37.:20:41.

briefly? There is one positive point that has emerged today, which

:20:41.:20:51.
:20:51.:20:52.

is the idea that the Europeans collectise all the excess debt to

:20:52.:20:55.

take the Government off burdens and leave them better able to sort out

:20:55.:21:05.
:21:05.:21:05.

their banking systems, without that we are in a dangerous space.

:21:05.:21:10.

have had reports in from activists saying scores of people have been

:21:10.:21:15.

killed in a village in Hama province, hard to verify, the

:21:15.:21:22.

killings come less than two weeks after news of a massacre in Houla,

:21:22.:21:29.

over 100 people were killed, over half of them children. Activist

:21:29.:21:35.

groups are saying between 78 and 87 people were killed in this village,

:21:35.:21:39.

either shot at close range or stabbed to death, or hacked to

:21:39.:21:43.

death by shabiha, that is the Government militia, which has been

:21:43.:21:46.

widely blamed, certain lie by activists and much of the outside

:21:46.:21:53.

world for the killings and Houla. We obviously can't confirm these

:21:53.:21:58.

report, nor is there any video on the Internet to back it up. But

:21:58.:22:03.

these same groups were the first to come out with the news about Houla,

:22:03.:22:07.

which UN observers, the following day, coroborate. We will be waiting

:22:07.:22:11.

to see obviously whether the observers go there tomorrow, and

:22:11.:22:16.

confirm these kind of figures. It sounds like Houla on a slightly

:22:16.:22:21.

lesser scale. As many as 87 if not more. Is there any other reaction

:22:21.:22:24.

tonight? The Government is giving its view, which is now coming out

:22:25.:22:29.

in flashes on the Syrian state TV screen. Saying that Government

:22:29.:22:34.

forces in response to pleas from local people, intervened to attack

:22:34.:22:38.

what they are calling a nest of terrorists in that village, they

:22:38.:22:41.

clashed and killed a number of these called terrorists, seized

:22:41.:22:46.

guns and so on. And that, in the process, they came, they say,

:22:46.:22:49.

across the bodies of two women and a number of children, bound hand

:22:49.:22:53.

and foot, who the coroner, according to this official version,

:22:53.:22:58.

said had been killed at 10.00am, yesterday, or today, rather, in

:22:58.:23:02.

other words when the called terrorists were still there. In

:23:02.:23:04.

other words the Government is blaming terrorist armed groups or

:23:04.:23:07.

the rebel fighters for this massacre, as the Government itself

:23:07.:23:11.

is calling it. And linking it to the impending meeting of the

:23:11.:23:15.

Security Council tomorrow. Which will be addressed by Kofi Annan, as

:23:15.:23:20.

everybody looks for a way out of this horrible drama. Thank you very

:23:20.:23:26.

much for joining us. Back to Europe now, Britain may be

:23:26.:23:29.

outside the eurozone, probably relieved to be a second teir player

:23:29.:23:34.

in this crisis. But tomorrow afternoon David Cameron will be

:23:34.:23:38.

sitting face-to-face, toe-to-toe with Angela Merkel with a following

:23:38.:23:41.

wind from Barack Obama, more or Liz telling the German Chancellor to

:23:41.:23:46.

come up with a plan to solve the eurocrisis and deliver long-term

:23:46.:23:51.

future for the single currency, perhaps in the form of stronger

:23:51.:23:54.

integration. The moment could welcome when Britain has to decide,

:23:54.:24:01.

once and for all, Europe, in or out. Here is David Grossman.

:24:01.:24:05.

For a whole extra long weekend it was almost as if the EU didn't

:24:05.:24:10.

exist. For four rather soggy days we were back in the Britain that

:24:10.:24:14.

George VI pass today his daughter. The British show no great desire to

:24:14.:24:19.

fly the EU flag at the best of times, this weekend, forget it. But,

:24:19.:24:24.

as the parade routes return to normal, so does politics. For the

:24:24.:24:28.

politicians, business as usual on the eurocrisis, is, well, trying to

:24:28.:24:32.

keep their options open for as long as possible. In a comparatively

:24:32.:24:35.

short period we could be looking at one end, the complete break up of

:24:35.:24:41.

the entire European project, or, at the other end, a new, vast

:24:41.:24:45.

superstate. However, whilst a certain amount of ambiguity suits

:24:45.:24:48.

our leaders, increasingly backbenchers are looking for

:24:48.:24:54.

clarity and precision. The Conservative backbencher,

:24:54.:24:58.

Douglas Carswell has won a place in the parliamentary ballot to

:24:58.:25:01.

introduce a piece of legislation, and consulted the public as to what

:25:01.:25:05.

law they would like. The overwhelming winner, he says, exit

:25:05.:25:09.

from the EU. So far we have seen almost no leadership at all. We

:25:09.:25:13.

have seen all the old certainties and cliches of the past 40 years

:25:13.:25:16.

recycled, different ministers, they wear different colour rosettes on

:25:16.:25:22.

election day, but no new thinking. I mean this really should concern

:25:22.:25:26.

us. Events are changing fast in Europe, and yet we're getting the

:25:26.:25:31.

same sold out of date platitudes and cliches recycled as if they

:25:31.:25:35.

will see us through, they will not. The Prime Minister is in Norway

:25:35.:25:39.

tonight, on his way to a meeting with the German Chancellor tomorrow.

:25:39.:25:43.

Last night there was a phone call with the American President. The

:25:43.:25:48.

subject under discussion, of course, the eurozone. I did have a

:25:48.:25:51.

conversation with President Obama yesterday, he very decently held

:25:51.:25:56.

off the phone call until after the red arrows had finished going over

:25:56.:26:02.

bucking hall palace, only just. We do -- Buckingham Palace, only just.

:26:02.:26:07.

We do share some similar views, as I said, there is the urgent action

:26:07.:26:10.

to deal with the financial crisis in Europe. We have seen interest

:26:10.:26:14.

rates rise so high that it is causing real problems for countries.

:26:14.:26:18.

That is why you need a conclusive resolution of the Greek issue. You

:26:18.:26:22.

need the firewalls, you need the bank recapitalisations, all those

:26:22.:26:26.

things have to be done. But that is only about stablisation, we then

:26:26.:26:30.

need to make sure we have long-term growth plans.

:26:30.:26:34.

For some in his party, Norway was a good place for David Cameron to go

:26:34.:26:38.

and see for himself. It provides, they think, a good blueprint of

:26:38.:26:43.

where Britain could go. Trading with Europe, but outside the EU.

:26:43.:26:49.

Norway is in the European Economic Area, alongside Iceland and

:26:49.:26:56.

Liechtenstien. According to one academic, this middle way utopia is

:26:56.:27:01.

a losery. There is a gap in the model between formal serenity and

:27:01.:27:08.

actual dependance on Brussels on the other side. You could say in

:27:08.:27:11.

the places and Britain for those considering it, even outside the

:27:12.:27:15.

European Union, you can't be outside the European integration

:27:15.:27:18.

processes, that is something you have to participate in if you don't

:27:18.:27:24.

want to be totally isolated. Sonar way is really participating in

:27:24.:27:28.

European integration, although we have kept some formal serenity.

:27:28.:27:32.

Others, though, think a better example of Britain's post-crisis

:27:32.:27:36.

relationship with the EU is not looking north to nor way, but south

:27:36.:27:42.

to Switzerland. The Swiss are in the European free trade association.

:27:42.:27:45.

I think a Swiss-type relationship with the European Union very much

:27:45.:27:50.

has to be on the cards. One of the reasons why the Swiss are

:27:50.:27:53.

prospering is because by being outside the European Union, not

:27:53.:27:58.

only do they have free trade with the European Union, but they arery

:27:58.:28:02.

to -- free to trade with the rest of the world, and it is outside the

:28:02.:28:05.

world there is growing, it is countries outside the European

:28:05.:28:08.

Union that are growing fast. If we can find a way of trading freely

:28:08.:28:11.

with the European Union, being free to trade with the rest of the world,

:28:11.:28:17.

we will be on to a winner. The big problem, right now, is, of

:28:17.:28:21.

course, is that no-one can predict what will happen with the EU and

:28:21.:28:24.

the eurozone, and Britain's relationship with both. The only

:28:24.:28:31.

scenario we can perhaps safely discount is this one.

:28:31.:28:36.

Daniel Hannan is a Conservative MEP, who supports a UK exit from the EU,

:28:36.:28:42.

and Menzies Campbell, leader of the Liberal Democrats, who have always

:28:42.:28:46.

enthusiastically usual guiseed the EU benefits. Menzies Campbell

:28:46.:28:52.

tomorrow morning in the Times, David Owen planned to offer a vote

:28:52.:28:57.

on EU to Britain. Do you think a vote on EU membership is inevitable

:28:57.:29:01.

now? I don't think it would be the time to call it now at the moment.

:29:01.:29:04.

People's views would inevitably be covered by what has happened in the

:29:04.:29:14.
:29:14.:29:17.

most recent past. You have to remember for the past 40 years we

:29:17.:29:20.

have participated in the biggest single market in the world, 50% of

:29:20.:29:24.

our exports go to the European Union. It is said that three-and-a-

:29:24.:29:26.

half million jobs in this country depend upon the European Union.

:29:26.:29:30.

More to the point, perhaps, since the end of the Second World War,

:29:30.:29:34.

the European Union's been an important component in the

:29:34.:29:38.

maintenance, not just of economic opportunity, but of political

:29:38.:29:42.

stability. Against that background, then, a referendum on Europe, in my

:29:42.:29:46.

view, is something which those of us who support Europe should not be

:29:46.:29:51.

afraid of. Because I believe in an argument of the kind I have

:29:51.:29:55.

described, that the view would prevail that Britain should remain

:29:55.:29:58.

within the European Union. We would have a clearer picture, Daniel

:29:58.:30:02.

Hannan. Can you sketch out, from your point of view, how it would

:30:02.:30:10.

work, if Britain left Europe? may on the referendum, it is a bit

:30:10.:30:14.

much to say it is the wrong time. It is always the wrong time, we

:30:14.:30:17.

used to be told it was the wrong time because Europe wasn't an issue,

:30:17.:30:20.

now we are told it is the wrong time because Europe is an issue.

:30:20.:30:24.

Let the people decide. How would it work? You could do worse than

:30:24.:30:27.

looking at the two examples you cited in your film there, Norway

:30:27.:30:31.

and Switzerland. They are in the European free market, but outside

:30:31.:30:34.

the common agricultural policy, and the common fisheries policy. They

:30:34.:30:37.

pay only a token contribution to the EU budget. They control their

:30:37.:30:42.

own borders and human rights issues. In Switzerland it is completely

:30:42.:30:45.

different, Switzerland doesn't regard itself as being a force in

:30:45.:30:53.

the world, the UK does? It is the absolute rule of this, when you are

:30:53.:30:55.

discussing aspects of their relationship with the European

:30:55.:30:57.

Union, you are always told a separate thing about the country.

:30:57.:31:01.

You asked me about what would be the motdle for us -- model for us,

:31:01.:31:06.

the key thing is both Norway and Switzerland export substantially

:31:06.:31:10.

more per capita to the European Union than we do. They sell more in

:31:10.:31:14.

percentage terms from outside than we do from the inside. Which is

:31:14.:31:18.

what makes a nonsense of the claim about three-and-a-half million jobs.

:31:18.:31:23.

My job depends on it, and a couple of other eurocrats and others.

:31:23.:31:28.

would lose your job? Free to trade with the rest of the world, outside

:31:28.:31:33.

the euro. Let's put that to Mr Campbell, what you were talking

:31:33.:31:38.

about, jobs depending on it, Daniel Hannan's point is more jobs would

:31:38.:31:41.

be cailted and there would be greater -- created and there would

:31:41.:31:45.

be greater flexibility to trade outside the European Union? We are

:31:45.:31:49.

free to trade with north and south America, which explains why the

:31:49.:31:52.

British Government for example, hold on, let me finish. Let him

:31:52.:31:58.

finish. In the last few months has been exercising very strong

:31:58.:32:02.

diplomatic activity, in relation, for example, to Brazil. We are not

:32:02.:32:05.

prevented from trading with other parts of the world. But the

:32:05.:32:10.

European Union does allow us access to a single market, with freedom of

:32:10.:32:15.

capital, freedom of persons and freedom of services. Let's move

:32:15.:32:19.

this on politically. They are not bound by the common external tarrif.

:32:19.:32:22.

There is no doubt, is there not, that Barack Obama look at Britain

:32:22.:32:27.

as being part of a European bloc, we are more powerful because we are

:32:27.:32:31.

part of that bloc? At the risk of stating the obvious, you are more

:32:31.:32:35.

influential in the world if you have your own foreign policy rather

:32:35.:32:39.

than contracting it out to Baroness Ashton and the EU diplomatic

:32:39.:32:43.

service. To make the most obvious point, when we joined the European

:32:43.:32:46.

Union, we thought there would be a trade off of economics versus

:32:46.:32:50.

politics. Yes, we would lose a bit of sovereignity, and democratic

:32:50.:32:54.

self-rule, that was a bad thing, on the other hand we would be, we

:32:54.:32:58.

thought, gaining access to this vast, growing market. It doesn't

:32:58.:33:01.

look that way today. The European Union is dwindling as a percentage

:33:02.:33:04.

of the world. It was 38% of the world economy in western Europe

:33:04.:33:11.

when we joined, it is now 25%, it will be 15% in 2020. We crazely,

:33:11.:33:14.

while shackling ourselves into the European Union, turned our backs on

:33:14.:33:19.

the developing markets and the Commonwealth and wider anglo-sphere,

:33:19.:33:29.
:33:29.:33:31.

which is where the growth is. idea that by walking out we would

:33:31.:33:37.

some how, overnight, achieve something infinately better, simply

:33:37.:33:41.

isn't supported other than anything other than speculation, we have the

:33:41.:33:44.

opportunity to trade elsewhere in the world. We also, through the

:33:44.:33:48.

European Union, have the capacity to protect ourselves, when we are

:33:48.:33:54.

the subject of the kind of thing, happened not all that long ago in

:33:54.:33:58.

this country, when the Americans used restrictions against cashmere

:33:58.:34:01.

exports in Scotland to boost their claim that there should be a

:34:01.:34:06.

different policy in relation to bananas. We couldn't write of the

:34:06.:34:09.

rules in the single market, that would be a problem for us, we would

:34:09.:34:13.

be excluded? Our exporters would have to meet EU standards when

:34:13.:34:17.

selling to the EU, just as they meet Japanese standards selling to

:34:17.:34:21.

jappafpblt I come back to the point, Norway and Switzerland sell more to

:34:21.:34:25.

the EU, Norway two-and-a-half times as much per head as we do, and

:34:25.:34:29.

Norway four-and-a-half times. They are in splus plus, we are in --

:34:29.:34:35.

surplus, we are in deficit. We have run a cumulative trade surplus with

:34:35.:34:40.

every continent in the world, except Europe. Are we really to

:34:40.:34:44.

believe that four million Norwegians, seven million Swiss,

:34:44.:34:49.

relying on trade agreements, furnishing their people with the

:34:49.:34:53.

highest standards in Europe, wouldn't be able to survive running

:34:53.:34:58.

its own affairs in its own interest is the United Kingdom.

:34:58.:35:01.

The Diamond Jubilee wasn't a picnic for everybody, thousands worked

:35:01.:35:04.

hard stewarding the whole affair, keeping audiences safe, happy and

:35:04.:35:08.

in the right place. Now Lord Prescott is has been leading the

:35:08.:35:13.

cause for a stewards inquiry, after it emerged that unemployed people

:35:13.:35:16.

from Bristol, Bath and Plymouth, were bused to London, and left

:35:16.:35:19.

under London Bridge to spend the early hours of the morning, and

:35:19.:35:25.

paid nothing for their stewarding efforts. It was, according to the

:35:25.:35:29.

Government's work programme, work experience, for others it was

:35:29.:35:32.

nothing but a horrible experience. 700 boats, a million people lining

:35:32.:35:38.

the Thames. Thousands of street parties across

:35:38.:35:43.

the UK. It was a very British Jubilee, in very British weather.

:35:43.:35:48.

But, as the long weekend came to a soggy close, we began to learn more

:35:48.:35:53.

about the treatment of security staff working behind the scenes.

:35:53.:35:57.

In the early hours of Sunday morning, coachs from Bristol, Bath

:35:58.:36:01.

and Plymouth, arrived here at London Bridge, full of, mainly

:36:01.:36:05.

young people, ready to carry out a day's work, as trainee stewards.

:36:05.:36:09.

Many were here as part of the Government's work experience

:36:10.:36:12.

programme, knowing they wouldn't get paid, but hoping for something

:36:12.:36:18.

permanent in the future. Some of those coaches arrived at

:36:18.:36:21.

3.00am, earlier than expected. Workers were told they should get

:36:21.:36:24.

some rest for a few hours under the bridge, before starting a full

:36:24.:36:30.

shift in the rain. If I do that there is jobs that I can do, paid,

:36:30.:36:35.

come off of benefits, I have been on benefits for a little while now.

:36:35.:36:39.

I'm getting fed up of being one of these people that cannot get a job.

:36:39.:36:42.

There is no jobs out there, not really, you know, it is hard to

:36:42.:36:47.

come across a job, and I thought, well, this job seems really good, I

:36:47.:36:52.

got offered the job, I took it. I think they took advantage of people.

:36:52.:36:55.

The stewards were taken on as part of the Government's Work Programme,

:36:55.:37:00.

they were directly employed by a firm called Close Protection UK,

:37:00.:37:04.

which Newsnight has learned, has also won two separate contracts to

:37:04.:37:09.

supply security staff for the Olympic site. The company's

:37:10.:37:14.

contracted and gets paid to take these people on, was it paid to

:37:14.:37:18.

take unpaid labour? Secondly, they have an obligation to make sure

:37:18.:37:21.

they look to the social welfare of the people that they are involved

:37:21.:37:25.

in. They totally failed in. That they looks a if they are in breach

:37:25.:37:29.

of their contract. This isn't just about, you know, a few volunteers

:37:29.:37:33.

going together and hoping for a job, clearly they were. This company is

:37:33.:37:38.

being paid, and has abused its position n my view. Close

:37:38.:37:42.

Protection UK has apologised for what it says is a small number of

:37:42.:37:52.
:37:52.:38:01.

staff who complained. In a This case raises more questions

:38:01.:38:05.

about the Government's welfare-to- work policies, one of the scheme's

:38:05.:38:09.

largest private contractors A4e, is currently the subject of two police

:38:09.:38:13.

investigations over allegations of fraud. And the Government was

:38:13.:38:16.

forced to change a related work experience scheme earlier this year,

:38:16.:38:22.

after more protests over the use of free Labour. In this separate case,

:38:22.:38:27.

described as an isolated incident by the Government, the charity

:38:27.:38:30.

Tomorrow's People, placed the Jubilee workers with Close

:38:30.:38:34.

Protection UK, the organisation, run by the Conservative peer,

:38:34.:38:38.

Baroness Scott, is being paid �3 million this year for Government

:38:38.:38:42.

work. There is a lot riding on this for the Government, it launched the

:38:42.:38:46.

flagship work programme a year ago this -- Work Programme, a year ago

:38:46.:38:50.

this week. The promise, to help more than two million people into a

:38:50.:38:54.

job by 2016. It will be the unemployment statistics that decide

:38:54.:38:58.

the success or failure of that policy. If those numbers start to

:38:58.:39:04.

fall, those allegations of exploitation, could be quickly

:39:04.:39:08.

forgotten. I'm joined from Liverpool by Baroness Scott, who is

:39:08.:39:13.

the CEO of Tomorrow's People. Baroness Scott, what due diligence

:39:13.:39:20.

did your company do before you sent these unemployed people to work

:39:20.:39:26.

with CPT? Well, our relationship with CP UK, has been going on now

:39:26.:39:29.

for six months. We have placed people with them, locally, in the

:39:29.:39:35.

Plymouth, Bristol and Bath area. All our experience of them is they

:39:35.:39:38.

have honoured every obligation to look after them, and have a duty of

:39:38.:39:42.

care, and provide them with good training. This was a distance they

:39:42.:39:48.

had to come from Bath and Plymouth. Was due diligence done by Close

:39:48.:39:52.

Protection UK about bringing these unemployed people to London, making

:39:52.:39:59.

sure their four-day work experience, including the overnight, was

:39:59.:40:02.

properly managed, and their welfare was properly looked after? If you

:40:02.:40:06.

will allow me to finish, all our experience gave us confidence that

:40:06.:40:10.

the preparations they had made for the trip to London, and the

:40:10.:40:14.

experience would be met in the same way as it had been locally. And

:40:14.:40:19.

what happened was...You Didn't do due diligence on this particular

:40:19.:40:24.

trip? We did due diligence on CPUK and we had every confidence that

:40:25.:40:28.

the arrangements in place were in the best interests of our clients.

:40:28.:40:32.

You said the experience over the last six month, I didn't ask that,

:40:32.:40:36.

I asked what due diligence you did on their preparedness to actually

:40:36.:40:42.

prepare for this trip to London, by these people, on buses? All the

:40:42.:40:47.

information we received and saw from CPUK was that the same level

:40:47.:40:51.

of care and duty of care to our clients on this trip would be the

:40:51.:40:56.

same as those locally. You saw the paperwork? My staff were in liaise

:40:56.:41:00.

on with them. As I understand it, all the due diligence and the duty

:41:01.:41:06.

of care, we had every confidence. The thing is that Tomorrow's People

:41:06.:41:10.

as a charity and provides people for the Work Programme, and it gets

:41:10.:41:15.

�3 million, and there is one person on �100,000 and eight people on

:41:15.:41:19.

�50,000 a year, and when you look at what happened to unemployed

:41:19.:41:23.

people w no power in this situation, who desperately want jobs, it could

:41:23.:41:27.

be seen as ripe for exploitation, it could be seen that way? No, it

:41:27.:41:31.

depends on how you want to look at this. At the end of the day, let me

:41:31.:41:35.

be clear, what happened when the coach dropped these people off,

:41:35.:41:39.

earlier than they should have done, and didn't allow them to stay on

:41:39.:41:44.

the coach was unacceptable. CPUK have issued an unreserved apology,

:41:44.:41:48.

we do the same. What we have to do is be really careful, work

:41:49.:41:53.

experience is a vital element in an unemployed person's journey towards

:41:53.:41:58.

getting to work. And we have got to be really careful. We do not give

:41:58.:42:02.

the impression that work experience is not valuable and it is

:42:02.:42:06.

exploitation. What this does appear to look like, is that it was sloppy

:42:06.:42:10.

and it didn't really matter, and what I was wondering was, in the

:42:10.:42:14.

light of what has happened, have you changed your relationship with

:42:14.:42:17.

CPUK, and are you going to make sure that something like this could

:42:17.:42:22.

never, ever happen again? The first thing we have done is we have spent

:42:22.:42:25.

our time speaking to every client who was involved in the work

:42:25.:42:30.

experience in London, to make sure they are OK, and to get their

:42:30.:42:34.

feedback. That's involved our staff doing that. We are now looking at

:42:34.:42:38.

our elements of the experience, and of all the arrangements in place,

:42:38.:42:43.

and I can tell you that we will not allow this to happen again in the

:42:43.:42:50.

way that it did. But, let me tell you also, that having spent,

:42:50.:42:53.

Tomorrow's People, 30 years, really understanding what it is like for

:42:53.:42:56.

unemployed people, we have been told by the majority of clients

:42:56.:43:00.

that were on this experience, that notwithstanding the situation that

:43:00.:43:04.

happened that shouldn't have done, they would be livid if this

:43:04.:43:08.

prevents them, or spoils the opportunities that CPUK are going

:43:08.:43:15.

to present them with the Olympics. Thank you very much.

:43:15.:43:20.

The weekend Diamond Jubilee coverage of the River Thames pagent

:43:20.:43:27.

on television attract 717 million people in the UK. How was it

:43:27.:43:32.

reported elsewhere in the world. We have been trawling the tapes and

:43:32.:43:35.

will go over at the Newsnight Jubilee Desk.

:43:35.:43:38.

Thank you, you know what, conditions are terrible here, but

:43:38.:43:43.

we are not going to let the weather dampen our enthusiasm. If I had a

:43:43.:43:47.

�1 for every time I heard that last weekend, I would be richer than the

:43:47.:43:54.

man with the kaing gull concession on the South Bank -- kag ol

:43:54.:43:57.

concession on the South Bank. I have been up four straight nights

:43:57.:44:01.

covering the Jubilee. What have others made of the party thrown by

:44:01.:44:05.

Great Britain. It was a magnificent spectacle, you could almost see

:44:05.:44:14.

through the inside of a car wash, that is England in juend. When an

:44:14.:44:21.

oskes tra starts up, first Charles -- orchestra starts up, Prince

:44:21.:44:26.

Charles takes up his sword, and then Camilla takes a lead, then the

:44:26.:44:30.

family dances. They are not dancing, they are shivering. From New

:44:30.:44:34.

Zealand, home of rugby players and Shaggy shepherds, a complaint about

:44:34.:44:40.

the British weather. Dozens of rowers in the Queen's

:44:40.:44:43.

Diamond Jubilee pagent, including a New Zealander, caught hypothermia

:44:43.:44:47.

during the seven hours they were on the Thames. Organisers had been

:44:47.:44:52.

worried the choppy tide might be a safety risk for the Kiwi crew, it

:44:52.:44:57.

was the cold conditions that caused trouble in the end. And Moscow got

:44:57.:45:03.

right behind the spectacle, talking about Britain's "pompus

:45:03.:45:10.

festivities", oh those Russians. It's brilliant to be British, and

:45:10.:45:14.

with 60 years of Her Majesty on the throne, there is no better time to

:45:14.:45:18.

fly the flag and mark the occasion with a huge celebration. That is if

:45:18.:45:22.

you can forget about the job cuts, slashed wages, petrol hikes and

:45:22.:45:26.

rising education costs, in fact, unless you are among the Royal

:45:26.:45:32.

Courts, you might be finding it hard to get festive.

:45:32.:45:39.

Not to be outdone, Italian television hired Lord Sugar for

:45:39.:45:48.

their coverage! The Queen's Diamond Jubilee celebrations got off to a

:45:48.:45:55.

wet and windy start in London at the weekend. Looks like a trip to

:45:55.:46:01.

the tower,or Taiwanese TV, less say Her Majesty is more. Which of us

:46:01.:46:05.

will easily forget that extraordinary concert at Buckingham

:46:05.:46:09.

Palace, that said, there have been some complaints about the BBC's

:46:09.:46:14.

coverage, its tone, the level of knowledge. We have the little royal

:46:14.:46:18.

teabags here. They are just chilling out. This is one of the

:46:18.:46:22.

more unusual things. If you have eaten too much you can vomit into a

:46:22.:46:28.

Jubilee sick bag. How lovely is that! National Theatre, the Royal

:46:28.:46:34.

Festival Hall, we have some Semaphore on the Royal Festival

:46:34.:46:39.

Hall. You can understand that, can't you? I haven't got a clue.

:46:39.:46:44.

More than ten million viewers watched the river pagent. There

:46:44.:46:49.

have been over 2,000 complaints to the BBC. But director-general, Mark

:46:49.:46:52.

Thomson, said he was very proud of the coverage. That's just about all

:46:52.:47:00.

from Newsnight tonight, before we go, the science fiction and fantasy

:47:00.:47:07.

writer died tonight. We leave you with classics from Fahrenheit 451.

:47:07.:47:14.

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