08/06/2012 Newsnight


Spain goes cap in hand to Europe. The first bailout of many? What does it mean for Greece? What do this and Syria say of Western weakness? With Gavin Esler.

Similar Content

Browse content similar to 08/06/2012. Check below for episodes and series from the same categories and more!



Tonight, Spain is reported to be on the verge of formally seeking a


multibillion euro bail out. The details are muark year, but the


consequences are grave. Will it be enough to end the problems in the


eurozone's fourth-biggest economy, where does it leave the EU, and is


it just a start of a new phase of the mess. We will hear live from


Madrid and Athens. While the US and UN try to figure out way forward


for Syria, a BBC correspondent travels to the scene of the latest


massacre. I have seen appalling things, there are bits of people's


brain lying on the floor. In the corner there is a mass of congealed


blood. The from the world economy, to war and peace, we will ask if


the failure of leadership lies with our institutions, our economic


model, or maybe even our ideas of democracy.


Good evening, the eurozone's fourth-biggest economy stands on


the brink tonight of asking for bail out of its banks. It was


reported today on a conference call of eurozone finance ministers,


tomorrow Spain will formally ask for financial help. The problems


for the Spanish banks and Government are profound, and could


lead to problems for the whole world. We will hear the view from


Madrid and Athens in a empt mo, and consider whether the failures of --


in a moment, and consider whether the failures are a wider problem of


financial institutions. What is going on, it is counter


rumour and rumour today? It is more than rumour. The Reuters news


agency at noon reported, this is a quadrupled-sourced report, a


Spanish request for an aid package, the announcement expected Saturday


afternoon, the Government of Spain has realised the serious of the


problem it is said by a senior German official. This is followed


by denials by Spanish ministers, they don't need a bail out and they


are not asking for one. More or less the whole of the pro-


Government Spanish press accuseded the news agency of spreading false


information. But I think my best guess is come 1.30 tomorrow


afternoon there will be a conference call and Spain will ask


for a bail out. The size of it we don't know, we know the IMF will


publish a report on Monday that they need at least 40 billion. That


is probably a severe under estimation. What will be


significant for the rest of us in this bail out? It is about how much


Germany it prepared to move. Most people in the international


community believe Germany is about to move, make concessions, not just


to Spain, but ultimately in the next nine days, to Greece as well.


But the form it takes has to looks a minor and meagre as possible. It


is about what conditions German tax-payers' money moves to the


south to underpin the rescue of these southern economies, as I have


# Down down # Deeper and down


With Spain's economy plummeting confidence collapsing, what they


are waiting for in Brussels is a request, in Washington they are


getting tired of waiting. These decisions are fundamentally in the


hands of Europe's leaders, fortunately they understand the


seriousness of the situation, and the urgent need to act.


Here is why it is urgent, the ratings agency, FITCH, just slashed


Spain's credit rating, citing policy mistakes at European level,


predicting it will take up to 100 million euros to save them, pushing


the country's debt to 90% of GDP, and they don't just need a bank


bail out. For the banks alone we are looking to 250 billion euros,


that is quadruple what the IMF is saying. On top of that you need to


plug the gap on the public and external debt positions, that will


be a few hundred billion more euros. The money exists to bail out Spain,


but up to now, to get that kind of money, you have to cut spending,


raise taxes, and Spain is already looking fra,, and -- fractious, and


while Europe is haggling over, that the there is fears of a pan


Mediterranean Northern Rock. People are worried their country is


leaving the eurozone and their savings will be devalued away. The


only way poor countries could stand behind a bank guarantee and say


your deposits are worth the same in the new currency as in euros, is


you have a Central Bank willing to print unlimited funding.


temperature is rising because of the upcoming Greek election, a left


victory there could spark a eurok sit crisis.


-- exit crisis. That has put Germany's Angela Merkel under


intense private pressure to lay off southern Europe to relent on the


austerity conditions. Today, President Obama, dispensed with


private diplomacy. If you are engaging in too much austerity too


quickly and that unemployment rate goes up to 20-25%, then that


actually makes it harder to then pay off your debts. And the markets,


by the way, respond in this when they see the downward spiral


happening, they are making a calculation, if you are not growing


at all, if you are contracting, you may end up having more trouble to


pay us off, we will charge you even more. All permanent solutions


involve German tax-payers putting their euros, either at risk, or


effectively on a conveyor-belt to southern European Governments in


large amounts. They are saying, you are asking us to put our own


solvency on the line, to underwrite southern Europeans who we don't


completely trust, and with good reason. We have seen how they have


backsliden on various agreements. The German response is not, no


never, it is, we will do it if, in response, we get a political union


in Europe, in which we are guaranteeed that say the Spanish


and Greeks, there is a central control over how they spend. It is


logical for the Germans to hold out for a long-term solution. But the


longer they do, the greater the chances are that Europe hits some


short-term systemic crisis. For a crisis like that you need a


Government, a Central Bank, and a tight group of politicians, who can


make the rules up as they go along. All of which Europe just doesn't


have. And those who get to hear the inner


most fears of global leaders know the danger is rising.


I heard a senior American make exactly that point just over the


weekend. There was an American policy maker who said he speaks to


the Germans all the time, and they say that they understand it looks


like too little too late, but they will do just enough to avoid


catastrophe. The American response was, that is how you get a


catastrophy. This new phase of crisis denial,


and microfoam diplomacy finally pushes Europe to a solution, we


can't go on with the status quo. In Madrid we have Schwartz swart


Schwartz, a free market economist and former -- Pedro Schwartz, a


free market economist, and joined by our guest in Athens. Professor


Schwartz, how do you think any bail out to Spain might work? Well, the


intention is to bail out some of the banks, those that were savings


banks, some of them should have been shut down totally. But they


are being kept alive, and so, those banks need money. The IMF has


spoken of 40 billion. A large sum, I must say. I think that it is


right that with 40 billion, and closing some banks, if possible,


the banking sector in Spain would be saved, because we have something


like seven large banks, the ones known around the world, Santander


and others, that are solid and can get out of the difficult them thems.


The problem is, how to get that money, because the Spanish


Government doesn't want to looks a if it is being bailed out itself.


So the money will have to go to some interimmediate institution,


and that could be what is called a frog, a bank money a keeps banks


afloat and coming from the rest of Europe. Is Spain really any


different from Greece, Ireland or Portugal, in other words, why


should you get any softer conditions than any of these other


countries if you want the money? The plan that is being set in train


by the Government, could perhaps be taken a bit further down. Some of


the awen tos me in Spain are doing pre-- autonomies in Spain are doing


that. To say we want -- the right recipe is to abide by the rules,


the Greeks, perhaps, cannot do it, but the Spanish can, and are doing


it. They are abiding by the rules, we are abiding by the rules. And I


think if you look at our foreign accounts, the deficit of the


balance of payments has been reduced and soon there are will be


a positive balance of payments for pain. I think that keeping to --


Spain, I think that keeping to the same lines is the right thing to do,


and not to organise a super-Europe, with a super-politician in Brussels,


whom many of us don't trust. With the Greek elections little over a


week away, how do you think this will be seen in Greece,


particularly if the conditions on which Spain gets money are


different, perhaps softer than the austerity which you have gone


through? Can I first just say that the Spanish, are indeed abiding by


the rules. This means they have 25% unemployment overall, and 50% youth


unemployment, the rules are not working in Europe, austerity has


failed. The crisis has the same fundamental cause to it. Spain is


not different to any other country in the periphery. The way it will


play in Greece will be mixed. A lot of Greeks will be hoping that some


how this will mean that austerity will be lessened. That this will


lead to a softening of German attitudes across the eurozone. My


own view is this is misguided, I don't think this will happen. This


is wishful thinking. It is more like had hely that if Spain does


ask for -- likely that if Spain does ask for a bail out and it is


brought to pass, this will lead to an unravelling of the eurozone in a


big way. Do you think Germany is reaching a point where they are


thinking, Spain is savable, but let's cut Greece adrift, it is time


for you to be out of the eurozone? I think the situation has been


allowed to fester for so long, that things that would have happened two


years ago and possibly rescued Spain, or stablised the situation


as a whole, are now not possible. If Germany thinks cutting off


Greece and saving the rest they haven't thought it through. The rot


is going on too long. What is necessary to rescue the eurozone is


massive restructuring of the whole thing, it is not just letting the


Greeks go, it is a Marshall Plan, a bank reorganisation across Europe,


it is debt forgiveness, we are talking big things if the eurozone


will be resolved. Let's go back to Madrid. I'm glad to see there is no


power cuts in Madrid, we can now see you clearly? I'm very sorry,


I'm in my house. That is good news for the economy, at least. Do you


detect any significant change from Berlin, in the way that they are


approaching this, because that is the big signal that everyone,


particularly the Americans, as we know, are looking for? Apart from


the Americans, that is the President Obama, who believes in a


certain kind of economics. Here we need from the Germans help for some


banks, as I said, that is not as much money as people have said. The


Spanish Government, I think, can go on with cuts and at the end of the


year, can show that it is getting on the right way. I don't think


that recreating a Europe that intervenes everywhere, and having a


European minister of finance, in Brussels, whom many of us will not


trust, is the right way. The rot in Greece was started with the Greeks,


not with the union. It is the Greeks and the Spanish who changed


the way ...I Want to hear another word from Costas Lapavitsas? I find


it incredible that two years in to the crisis, it is the tired old


mantra, it is the fault of the Greeks. It is the structure of the


eurozone itself. We are going to have to leave it


there. We have run out of time. Thank you very much.


In Syria there was renewed fighting today in the capital, Damascus, an


apparent shelling of the city of Homs by Government forces. The grim


pictures and stories emerges have so far failed to prod the rest of


the world into anything resembling a solution, despite the next round


of diplomacy in New York. UN observers risked their lives to


enter the village of the latest massacre, Qubair. How significant a


moment was it that they were risking their lives and managed to


get there? In one sense, you could say they got there too late.


Because of the obstruction that took place yesterday, you see a


room covered with blood stains, is this a room in which a family was


massacred, or was it a room in which people were brought to


treatment by those trying to help those who survived what happened.


It is very hard to tell. The key point is they did get there. This


UN mission, however ineffective it may be, or seem to be, remains a


slither of hope, if you like, that there is some sort of diplomatic


platform around which the key countries with an interest in Syria


could still rally the Russians and the Chinese, afterall, agreed to


the mission going in. They are the leaders of the awkward squad in


this particular equation. That is a key point, the mission itself have


said it was critical they weren't allowed in yesterday, they want to


maintain their access. It could be one of the few breaks on the


gradual deterioration of the situation that they do. Gradual


deterioration, even from this distance, it seems obvious, that on


the ground, things are just getting worse? The pattern of the conflict


is shifting, I think. We are seeing certain evidence of escalation,


clearly these shabiha, these militia groups seem to be operating


in a more semi-autonomous way, there is a communal at this timeor


at that time building up between certain families and clans and


neighbouring villages, on a pattern that might have been seen in will


he be I don't know on the civil war and the Bosnian war in the 1990s.


There is some evidence of more advanced weaponry getting through


to the opposition, Syrian armoured vehicles, a lot of videos appearing


of armoured vehicles being destroyed. Sometimes by seemingly


advanced anti-tank weapons. All of that could mean the regime sub


contracts the war more and more to militia groups, more like a Libyan


pattern, armed men in pick-up trucks. All of that is a bad sign.


Are there still serious diplomatic options here? There do seem to be


some. There is still some scope, the UK and France clearly very


disappointed with what's happened in recent days. They seem to be


pinning their hopes still on trying to pressure the Syrian regime


through coalitions of the willing. The EU, the Arab League, have gone


further than the UN Security Council because they are not bound


by the same dynamics, they might explore further in that direction.


Mr Annan seems to be pushing the Contact Group, regional powers,


including Turkey and Iran, the Americans and British don't like it.


He is still thinking about it, as became apparent today in this


stream of consciousness. All these questions are now being discussed,


and we are also exploring how we can work with other Governments in


the region and around the world to achieve our goals. One thing which


Syria, the eurozone crisis, and a global economic slowdown have in


common, is a desire for leadership. Is the apparent lack of leadership,


inadequate institutions, flaws in the United Nations, and the EU, is


it inadequate politicians always chasing the next election, or a


design flaw in the way democracy works. Our guests are with me now.


Timothy Garton Ash is a passionate advocate of the ideals in the EU,


and Gisela Stuart is a former minister, fallen out of love with


the EU project. Tom, in terms of the institutions,


we heard our contributor from Madrid saying people don't trust


the people in Brussels, is this a worldwide phenomenon. The big


institutions just aren't working? really can't speak from a European


perspective, but from an American point of view, what we see is a


terrible combination of really deep holes, and really weak leaders.


Deep holes and weak leaders, you know, can really give you a


dangerous crisis right now. I think that, from the American point of


view, we have a new generation in power now, in the United States. We


have gone from a generation that believed in save and invest, our


greatest generation, to a generation that believed in borrow


and spend. My generation, the baby boomer generation, we're now paying


the piper for that. It is the people's fault? With the leaders,


we elect them and say what they can and can't do. There is a timidity,


I see the exact same thing, it is a bit of a howler to watch my


President lecture your President, my President who rejected his own


deficit commission. We're always good at spending other people's


money. I wondered if you thought, specifically on the EU, you are


obviously in favour of the project, do you think it has been totally


oversold bit political elite, it is just not living up to what people


said it would do? It is important to say the three biggest economies


and political countries in the world, namely, the United States,


China and the EU, are all in major crises of their political economy.


Tom described the American crisis, and Chinas a democratic crisis. In


Europe we have European Monetary Union and policies, our politics


are still national. These are democratic national politics, and


the biggest problem s the real question is, can you find a deal


that will be acceptable both to the Spanish voters and to the German


voters? That is the European crisis. There is way of positively looking


at that, which is saying, actually, that means we still like our nation


states. Broadly we trust them more than some other international body,


that may be a good thing in terms of how we get on in Britain, or how


French people think about France, but it is pretty bad if you are


trying to run 27 countries all together? The nation state has an


extraordinarily important function, arguably, with exception of the


Balkans, most 1945, Europe had functioning nation states. What we


now have is a construction of a financial union, without a


political union. Which is trying to overcome the nation state, it is


not taking its people with it, and above all, it is incapable of


regaining competitiveness. If it was the United States of Europe,


France, Spain, all these countries, would still have their economic


problems, because you have a single currency construction, which is


simply not working. Do you think that people simply distrust


eliteings in all the countries. -- elites in all countries. We


distrust international elites and elites in our own classes, because


they are not doing what we want them to do? You could look at it


broadly about not distrusting them, but individuals are so in power now,


there is so much transparency, to be in public life, everyone


blogging, tweeting, taking pictures. To be a leader now is a lot harder,


it is extremely noisy out there. it also, is it the leaders broadly


know what they should be doing, but they are terrified of the voters.


Because in your Congress every two years they have to be re-elected.


You can't take tough decisions if you have a two-year time frame?


think our leaders now, presidential and congressional, are misreading


the public mood. The public are away head, they understand the


problem, they want to be led. Good policy here is the best politics.


Do you agree with, that that the people are ahead of the


politicians? Can I pick up on that. The hod of the euro group says they


know what they need to do, they don't know how to do it and get re-


elected. That is the challenge. The key to this moment is one person,


Angela Merkel. If Angela Merkel from the beginning of the crisis


had said, my dear compatriots, we have to save the eurozone, because


it is in our own economic and national interest, we would be in a


different place today. So I think it is the challenge of persuasion


by democratic national leaders, and the eurozone will stand or fall on


democratic national politics. talks of Europe, but she thinks of


Germany, that is hardly surprising, that is what leaders do? It is


shocking that we said the politicians know what the right


answers are, but they can't do it because they can't take the nation


with them. The question is I as a politician take money out of your


pockets in taxes and do things, and that is what you elect me to do.


So-to-think that Germany could continuously rescue Spain and


Portugal, Angela Merkel knows, she knows that they have poured


millions into East Germany and it hasn't made them competitive.


don't disagree, because if she doesn't persuade the German people,


then the thing will go down. Actually the Irish have just voted,


in a referendum for a Fiscal Compact, let's agree you need to


ask the people. Ireland is still in recession, they have not resolved


the problem. Unlike places like Iceland, it has not been able to


devalue. Ireland hasn't been solved. Do you want to tell the Irish to


vote again, because they gave the wrong answer, they said yes?


need to allow countries to leave the euro, because the current


construct will not survive. We can either delay the day of reckoning,


or we can draw the logical conclusion and say this construct


doesn't work. I'm all in favour, if they vote for it. Do you see, while


you said the people may be ahead of the politicians, maybe not


everywhere. But to take Greece, for example, the fate of much of Europe,


and perhaps the world economy, depends on a very few voters in a


very small country, lovely though it may be, that seems rather odd,


does it not, that they decide how the eurozone should continue, which


affects all of us? It certainly seems odd to me. I agree with what


was said about competitiveness. Ultimately, can you make stuff that


other people want to buy? Can you have a currency and an economy that


is aligned with that? What worries me when I look at Europe today, is


not banks that are too big to fail, I say is this problem too big to


save. I do have sympathy with Merkel. I agree with what Tim said


too. She's damned if she does and if she doesn't. She needs Europe


for a thriving German economy. But at the same time, what confidence


would you have that the Greeks really get it and can produce a


competitive economy in this construct. I really think the


crisis retina, the choice for Europe today, they are going to


have a political crisis, as they inflict the pain, or they can have


an economic crisis, or maybe both. I'm fastening my seatbelt, I tell


you. In terms of Angela Merkel, you said


it is up to her, she could have played it differently, she could


indeed have played it differently, but in all the countries we have


been talking about, the U state and Germany, constitution -- United


States and Germany, constitutions are written so Angela Merkel can't


be a really powerful Chancellor, she has so many people to look


after and bring with her, it is very difficult? It is very


interesting, as Tom knows better than anyone, the United States has


an increasingly dysfuntional political system, because it has


almost too many checks and balances and lobbies. The German political


system was designed to ensure that no Adolf Hitler would ever come to


power again T has been immense number of checks and balances, that


makes it very difficult to move. That is indeed one of Merkel's


problems. That she's not in the position of a French President, or


a British Prime Minister. Nonetheless, I think if she started


to try to persuade her compatriots, three or four years ago, that it


was in their own national interest. Let me bring in Tom there, you


could say the American constitution was to prevent another George III.


You have gridlock, and a lot of people complain about, but it is


what makes America tick? We have divided powers, but what we didn't


anticipate was this level of money in politics, this kind of media,


that fragments it, politicians are finding it difficult these days any


way to trump the other. Do you realise what we are doing, we are


having an election, you have your crisis over here, we have an


election, and we are saying in five months when we finish the election,


you keep it on hold. After our election, and one party spends a


billion dollars smeerg the other, then we will get together and solve


the problem -- smearing the other, then we will get together and solve


the problem. Good luck, we are doing things so detatched from the


reality. The voters at the moment are ahead of uss, people know -- us,


people want to know what is going on. If you have to increase taxes


and reduce public spending, people are prepared to take the pain if


the result will get you competitiveness. What we have


currently in Greece and Spain, they can cut their public spending, they


can increase the taxes, but where they will not become competitive,


that is where democracy suffers. Coming up in a minute, the review


show, matter that is in Glasgow. Tonight's review show is a book


special, we're going to be looking at the latest offerings from a


quartet of literary big names. Martin Amis tackles the state of


England, we have the retail of the life of Roger Casement, and Lionel


Shriver creates her own corner of Europe in the new Republic, all


that and music from Paul Buchanan. That is all tonight, we leave you


with the final farewell from the Bee Gee RobinGibb. This is the song


Download Subtitles