18/06/2012 Newsnight


In Athens the pro-bailout parties win, but Spanish bonds explode. Meanwhile, in Egypt the military moves the goalposts on the elections. With Paul Mason and Kirsty Wark.

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Greece votes to stay in the euro, and suffer.


But does Europe even want them any more?


The Conservative New Democracy leader wins the election, and is


tonight, trying to form a coalition. But Angela Merkel hasn't helped the


mood here. She says Europe will not change the punishing bail out terms


for Greece. TRANSLATION: We agreed on a Greece


programme, and the framework needs to be adhered to, this means we


must be sure that Greece sticks to its commitments.


I will be speaking live to one of the architects of the new


Government's economic programme, and to a candidate from the


defeated far left party, Syriza. Meanwhile, with the Spanish crisis


turning to open violence, the value of their bonds crash through the


point where borrowing becomes unsustainable.


Here we will be talking to the man who negotiated the bond default in


March, will he have to do it all again for Spain. Is there anything


Governments can do to save us from a decade of economic pain, we will


drill into big economic brains. We are at the Egyptian elections


too, where it looks like the Muslim Brotherhood will win the president


circumstance but the military won't hand over power. We will hear from


Cairo and Washington. Good evening from Athens, where the


Conservative winners of last night's election, are trying to


form a coalition that can keep Greece in the euro. Investors


across the world breathed a sigh of relief, that the far left party,


Syriza, failed by less than three points, to top the poll.The way was


open, it seemed this morning, for a new Government to renegotiate the


terms of austerity with Europe, and with the IMF. But, tonight, in


Mexico, Chancellor Merkel, said no. Without changes to the bail out


terms, it is hard to see where Greece goes next. Meanwhile, with


Spain's cost of borrowing moving deeper into the danger zone, the


rally on the global stock market looked about as energetic as the


tourists do, as they struggle up this thing behind me.


Who would want to govern Greece? What would the new Government ask


from Brussels and the IMF? Will Spain wreck the whole thing any


way? I will explore these questions in a moment, with representatives


of the two main parties, and a financial journalist who thinks she


knows what is on the table. First, here is what has happened in the


last 24 tumultuous hours. Last night Greece came within three


percentage points of a far left Government. The nearly-man, Alexis


Tsipras, mobbed as he arrived to concede defeat. REPORTER: Is the


fight against austerity over now? Is the fight over?


The markets open, the polls close, what the markets wanted was


certainty, but they haven't got it. APPLAUSE


The only certainty is that Greece remains capable of blowing up the


euro, despite last night's result. The Greek system gives the winning


party 50 extra MPs, so New Democracy's 30% translates into 129


seats. To form a Government tkpwhok needs -- New Democracy needs a


coalition with PASOK, the Socialist Party, and to be sure, a small


Marxist party called Democratic Left. Syriza, the main far left


party got 27%, with 71 seats it becomes the opposition. Together


with 18 fascist, 12 hardline communists, and 20 Conservatives


who opposed the bail out. But Athens awoke today to the same


problems that have sapped the will of politicians for two years. The


austerity demanded by the IMF and EU has pushed the economy into a


death spiral. The current bail out deal means 1 billion worth of cuts


to come. -- 11 billion worth of cuts to come. It all depends on the


11 billion worth of cuts in the next month, if the Europeans and


the IMF will insist on that, we will see a backlash on that. If


they cut Greece some slack and spread it out over the next few


years, and are able to balance it with other measure, maybe tax cuts


and maybe more money for growth, then perhaps you can see a quieter


summer. Cutting Greece some slack sums up


the problem, Mr Samaras wants to form a coalition around an


alternative strategy to balance the country's books. With tax cuts


instead of tax rise, paid for by much more rapid reductions in


public spending, and rapid privatisation. What they need from


Brussels is time and money.What Greece needs from the core of


Europe is not only further help in terms of debt forgiveness, but more


particularly a demand boost. The problem in Greece and the periphery


of Europe is lack of demand. Europe needs to provide assistance,


speeding up the release of European Union structural funds, also


providing help, backed by the European Investment Bank. Trying to


get some demand into the Greek economy. But the reality of the


situation is, whatever the core of Europe provides in the near term,


is unlikely, in my view, to get Greece out of a recession. At the


G20 Summit in mexko, the leaders arrived, knowing the election


result in Greece had bought time, but little else. The German


Chancellor put paid to any talk of an easier time for Greece.


TRANSLATION: We will discuss with Greece if they can participate in


growth impetuouss within the growth programme designed for the entire


European Union, but it changes nothing of the decisions of the


memorandum of understanding, what we voted on in the German Bundestag.


Spain's headline cost borrowing surged to 7.29% this year, the


highest since joining the euro. Experts point to 5.5% for borrowing


over two years, that is the equivalent of acute chest pain.


have seen spiralling downward political and economic problems,


feeding debt and banking problems. That self-feeding downward spiral


needs to be stopped. Not just through help to the banks, but the


core of Europe needs to provide a marshall type plan, providing a


European fiscal boost, that helps, not only Spain, but the periphery


of Europe. Despite the problems in yuerpbgs the key issue is Germany


and the European Central Bank have it within their remit to give a


boost to the periphery of Europe, that pulls us back from the brink.


On the streets of Athens, the problems of poverty, crime and


dislocation, are all too clear. One in five adults is unemployed. There


is a yearning for order and stability that the in coming


Government has to meet. Soon the global media circus will


leave Greece, but another narrative, hidden for now, will remain. It is


a narrative of street fights, between fascists and migrants.


Between anarchists and riot cops. It is worth rembering that the


political class, both here in Athens, and at the G20, has no


direct experience of this whatsoever.


More than one third of voters here voted for the Marxist left, more


than half voted for parties opposed to what will happen next.


So discontent continues. So does the crisis.


Joining me here, beneath the Acropolis, are the New Democracy MP,


and one of the architects of his economic policy. Aristides Baltas,


a candidate for the far left Syriza Party, and Professor of fill loss


pee of the national technical unit in -- philosophy in the national


technical unit. And a journalist who has covered the crisis from the


start. You heard Angela Merkel, it is game


over, she says there is no change to the memorandum of understanding,


what can a New Democracy-led Government now do? It is a given


that everyone in Europe wants the Greek programme to succeed. In


order for the Greek programme to succeed, we must restart the


economy after five consecutive years of recession, we need to


enhance the growth programme. We need to increase the safety net of


the society, when one out of four Greeks live below the line of


poverty. We have had a number of comments from a number of European


leaders, we are confident there is a basis for discussion. It seems


Merkel has stopped the whole thing tonight. You have heard from a


number of European leaders, when she says categorically we may give


you structural funds, but knot no changing to the timing and the


amounts, what can you do? There is sufficient basis for discussion, we


will approach the negotiation, taking as a given that everyone in


Europe wants the programme to succeed. How much time have you got,


you must know now you are on the brink of power, how much money is


left in the coffers here in Athenss? We have enough liquidity


for 30 days. We expect the troika to come after the new Government


has been formed, to discuss for the next tranche. As part of the next


tranche, it was already in the praj to finalise a lot ofish --


programme to finalise a lot of issues in the programme. There is a


lot of issues to be resolved, without changing the programme,


still open for discussion. The base, I need people to remember, without


the economy reconversation, without the economy restarting, 2013 it is


expected to be the sixth consecutive year of recession, no


fiscal programme could ever meet these objectives. You lost,


commiserations, I should have said congratulations to you, Mr


Mitarakis. You lost, more than a million people vote Ford you, quite


unexpectedly, -- for you, quite unexpectedly, even for yourselves.


What can you offer them, if you are sitting outside Government,


steadfastly refusing to take part. Surely the dented shield is better


than nothing for the people you represent? This is not the question,


I think. The question is we cannot participate in a Government with


the disagreements so much. The whole strategy up to the elections


and now is to try to preserve as much as possible the kind of


confidence we have been winning over these months. As you said


before about Miss Merkel is, I think, a proof, that the kind of


strategy we are pursuing, in a sense, was better than the New


Democracy strategy. What I mean is, it was not only Merkel, but all


kinds of political leaders in the European Union, said various things


about the Greek problem. In our case, what we said is we start from


a point of this slippery slope we have been following up until now.


We stop the mem da programme at that point and start negotiate d


memrand dumb programme at that point and start negotiating then.


You broke the story for your paper, what do you think is going on?


There is grounds for the new Government to make proposals. The


people who voted for Syriza in Greece are in favour of radically


changing that programme. So the new Government will enjoy a lot of


support in doing that. I know that they have done their calculation,


and there has been continuity for the last couple of years in this


Government. They, I understand, will be asking for a two-year


extension of the bail out programme. Theoretically it ends in 2014, from


the eurozone side, they would like it to go to 2016. That costs money,


doesn't it? Unfortunately, it does. Officials calculate it will cost


around, if not more than 16 billion euros, for those two years. When


you extend the programme, and postpone meeting fiscal targets and


cuts, that is money, that needs to be covered. 16 billion, Mr


Mitarakis, does that sound right to you, you postpone the terms of the


bail out for two years s that on the table right now? The critical


issue is how fast can we restart the economy, how fast can we become


for business friendly. Fiscal figures are driven by GDP, and it


is deeper than ever imagined. Lagarde said we have to review


right now, and we have to look at the changes. The view from you now


is it will cost Europe and the IMF money to dig you out of the hole?


Our objective is not more money but that it works, that is the starting


point. We think there is a lot of structural reform ones the table


that needs to happen, we need more efforts in privatisation, and in


using the funds already committed to Greece. We need to change on the


ground the business environment. We are not attracting any investment


at this stage. This is all economic speak, isn't it. We all know,


because we frequent those streets out there, that they are very


gritty streets right now. There is anger and violence. I want to start


with you Professor Baltas, your party has been a party of the


street and the election, is it time now that you basically, are you


going to change that. Because with fascists running around the streets,


and anarchists, it is playing with fire, isn't it? That is a very big


problem. I think it is much more complicated than it has been taken


to be. It is not just the political position of Nazi ideology, it is


roots and values of the Greek population, it is related to misery


and frustration. It is related to sub cultures developing. We need a


more general kind of policy to attack the problem. I think that in


all kinds of ways, we are more effective addressing these problems


than, let as say, the Conservative Government, which can


sometimes...Can It be contained? think it can be. Do you think so Mr


Mitarakis? In order for it to be contained, you cannot have 50 pest


youth unemployment, you need jobs and ho. In order to give people


hope you need the private economy running. That is the difference


with Syriza, we believe in investment, privatisation,


business-friendly country. should we judge your Government f


you form a Government this week, what is the target for youth


unemployment, the target for adult unemployment, if we come back in a


year's time? 12 months from today we would hope youth unemployment to


have created 150,000 jobs, 10% of the population, that is the


objective, that is what we will strive for. Can you tell us what


you think, objectively, will happen, will they make it to a Government


they will make it to Government this week, I think that is very


clear. I think it will happen soon. I think we will have a new Finance


Minister from this country speaking to his counciller parts in


Luxembourg on Thursday, will they does. Is it going to be you, the


have no idea who Mr Samaras will appoint, it is not a matter of


faces but policies. Thanks to my guests in Athens, and good night,


over to Kirsty in London. Despite the desperate firefighting


for Greece, Ireland and Portugal, the European bail out of Spain's


banks, European Summits and the European election going the way


European leaders wanted, the crisis is unrelented. Spanish borrowing


prices rose sky shy and markets tumbled. Merkel -- sky high, and


centre of the attention the world possibility of a two-year extension


set with the Spanish bail out. They got their banking bail out with


fewer strings attached, and a lot of the people in Greece will expect


some sort of concessions. We heard it already there, from the European


body politic, for delivering a pro- bail out victory. In Ireland they


have been the good boys. Do you think Angela Merkel is serious, or


this is an opening gambit? years ago she said no bail outs


full stop, she said the European Financial Stability Facility was


temporary, now permanent. She has said a lot that has changed in the


last few years. The Irish are hoping to cash into the concessions.


The Irish media reporting that there would be an extension of


their bond repayment, 15 to 30 years. That would have a positive


impact on the Irish day-to-day spending, they might be able to get


back to the markets. Which sets a good precedent for Portugal, they


can continue to be the good poster boy in all the crisis. With all


this going about, why is the intensity about the European crisis,


there is no let up? It is all about the markets. The new term is "sub


bored nation", the markets are very worried that the money they have


lent to countries like Spain will be lower down the pecking order, as


pardon of the sub bored nation. If the banks have lent money to Spain,


they would be lower down the pecking order, They get paid first,


the ECB, then the other banks, they are less likely to lend to Spain


then. If they do lend it will be on a higher interest rate. That is


what we saw today. Trying to explain what is happening


in the bond markets is the outgoing head of the Institute of


International Finance, a global body that represents banks and


other financial institutions, which negotiates with Governments over


default, including the Greek default earlier this year. You


applaud the banking bail out of the Greeks last week, the Greeks appear


to have done the right thing by the European leaders, why is the


European crisis no better? I do think that the developments in


Greece over the weekend were clearly a positive development for


Greece, Europe and the global economy. But I think we are at a


stage now where solving the euro zone seven debt crisis will require


more than individual actions of countries like Germany, Greece,


Spain, Italy, it will require concerted effort by the entire


European leadership to frame a solution, and sub lement it with


other issues. We will continue to swim upstream and not make the


progress needed to calm market anxieties, if not. Let's look at


the Spanish bond problem, 7.25%, you can get an insecured loan less


than that here. Who will invest in Spain? Markets are deeply troubled


at the moment, if one steps back from the current market anxiety,


arguably some what overdone, one sees that Spain has a much more


manageable debt to GDP ratio than Greece. It is well under where


Greece is, Greece is 150%. Spain has a serious but localised problem


in the savings banks, the core banks of Spain remain strong. It


underscores the importance of eurozone action. We need a clearly


game plan towards fiscal union, well articulated, with time lines.


We need a clear game plan towards banking union, well articulated,


with a time frame. We need more flexibility in the instruments that


Europe has. We need to inject funds directly into the banks, rather


than weaving them through sovereign buckets, which elevate budget


ratios. That is the model in America, you have the fiscal union,


but, essentially it means that Germany will have to pay up. They


will have to be the one that pays up for the southern countries, yes?


Germany, I think, has benefited tremenduously from the eurozone


arrangements. Germany has impressively low unemployment right


now, Germany has a remarkably strong export record. Part that


have is due to the discipline in Germany labour wage and fiscal


policies over recent years, part of it is due to the creation of the


euro. They have benefited substantially and will continue to


as long as they invest in the future of Europe. Germany and other


countries will have to lean forward and provided a decisional support


to countries like Spain, Italy and Greece. Aren't they going to


squeeze them hard. Isn't it if that is the case Germany will demand a


lot more control? Well, I think Germany already has perhaps


arguably a bit too much influence. The fact of the matter is, that


these programmes need to be broadly designed when Chancellor Merkel


says, and I understand the necessity of her statement, when


she says Greece needs to follow the framework of the programme, I read


between the lines some flexibility between the words "framework" and


the precise details. It is absolutely essential that Europe


recognise that the Greek economy has contracted and is contracting,


at a much more severe pace than anticipated when the programme was


designed. It is only common sense to extend the near term budget


targets some what supplement by additional funding. It need not be


large amounts, we are talking about 20 billion euros. You are talking


about spend, in order to create growth you must spend? That is part


of it, in order to create growth it is not just about spending, but


creating an atmosphere of confidence that investors can come


back in. It is about capitalising, and recapitalising the bank. You


can get credit flowing. It is about European, Greek and global


investors having confidence again, not just in Greece, but the


eurozone as a whole. It is not just about spending money in Greece, it


is about investors feeling confident, that they see a long-


term game plan. What about your members in the banks that you


represent, they took a bath in Greece, are they going to have to


take a bath again with subordination? No, but


subordination is a concern. Certainly the investors, the banks,


the insurance firms, the pension funds, took a very deep bath in the


case of Greece. But Greece had a debt-to-GDP problem, that was miles


beyond the debt-to-GDP problem for any other country in Europe. You


raise a valid point that the previous commentator on


subordination, I think European officials would be wise to step


back and stop insisting on primary status of hair claims against the


sovereign relative to private sector claims. Will this only


undermine the goal of rebuilding confidence among private investors.


Ultimately it is only the private investors who will alleviate the


burden off the back of the German, Dutch and other European tax-payers.


In order to encourage them to come back in, and stay in the game of


funding sovereign debt, this issue of subordination has to be


addressed. To ask why this is the crisis that


won't die, we have, in Chicago, President Obama's economic adviser


until last summer, and the editor for the Financial Times, and the


chief economist at Germany's oldest private bank.


We will talk about subordination later. From America's point of view,


tell me how does it look from America, you advised President


Obama on policy, what looks scariest about Europe to you?


the US, clearly the scariest thing would be if there were some kind of


financial meltdown and the contagion leaped across the


Atlantic into the financial markets in the US. Easily that could happen,


that makes everybody on edge. The second-most scary thing would be if


the continued stumbling and shrinking of the European economy


means that the world economic growth is just not strong enough to


get anybody feeling healthy. That would also be a concern, but both


of those are pretty serious matters. The European economy stumbling,


sinking, we have got politicians in the G20, we have been here so many


times before. Politicians don't seem to be able to make a


difference, is the only difference to be made the markets? No, I think


there are ideas floating around. Some constructive ideas about


pooling the debt overall, talk about banking union where you would,


in a sense, water down national regulation, have EU-wide


supervision. You would also inject money directly into the banks to


resolve this serious problem. She is are huge steps, you thought


Maastricht was big, this is even bigger. It is interesting you say


that, presumably, in order for that banking union to take place, there


would have to be more regulation, and the regulation would probably


be designed by Germany? It would be designed at European level. The


French, for example, President Holiday, recently elected, this is


his big new idea. The problem is there is a lot of big ideas at the


same time. No clear game plan, just over 20 years ago we had the great


upheaval in Europe with the collapse of communism. The


Americans came in with a five-point plan for German unification, all


done, bang. Pooling the debt, a good idea? Not at the moment. There


will be some pooling of debt over time. But, if we pool the debt up


front, those who are the paymasters lose control. There is always a


give and take. There is some pooling of debt, and some


establishment of rules to prevent future debt crises. It is a process,


there is no silver bullet to solve it once and for all, but it is a


process that will move on. You want other people to bleed before


Germany pays the debt? No, it is not other people bleeding, but it


is other people accepting fiscal rules, which, in the future, is


fiscal debts in the future need to be smaller. That is the problem,


Germany approaches is step by step, but the markets have always been


ahead of the politicians. What do you think of the idea that there


will be a pooling of the debt and a banking union in Europe S that what


you would like to see? I understand exactly why the Germans don't want


to get on a permanent subsidy type of relationship in the European


Union. The only problem is, there is an old American movie, The


Godfather, and the two families are fighting, and they say, look this


is the business we have chosen, if you are trying to have a monetary


union in which there isn't a fiscal union, we know a lot about how you


hold together very different economies, and the problem is, it


is not cheap. Either they are going to be permanent subsidies, or there


will be a very extended decade-long austerity crisis, in which they try


to grind down the wages, or else there is going to be inflation,


those are our only choices. This is the missing ingredient, growth.


Where is the growth going to come from? Right now Greece, with its


austerity package, has lost, in effect, 30% of its output, GDP.


That is an incredible adjustment, and you are seeing the results, on


the streets. Violence, a society collapsing. What you heard from


that Greek newspaper editor is that if there isn't a slacking off, if


there isn't extra time for repayment in order to inject some


money into the economy, there will be trouble in the streets? That is


why there needs to be grand bargain between having fiscal discipline,


austerity on the one hand, dealing with the welfare state, pension


reform, but at the same time a commitment to growth. That, I would


submit, requires Germany to reflait its economy. Which is exactly what


Germany is aiming for, the grand bargain, but in politics it is


often not possible to strike the grand bargain at one point. It is a


process towards that. As to reflating the German economy, they


are doing a lot of it. Do you the Germans would be happy to see


Greece go and concentrate on Spain? The Germany vision is clear, those


who sign up to the rules of the club, and they include those


without a big budget deficit, all those countries will be kept in


with German help. It is up to the people of Greece to decide, they


voted for it. Germany has been benefiting hugely in terms of your


exports? It has been benefited by being an open economy versus Europe


and the world, it is supporting neighbours in Europe quite a lot,


but it asks for a quid pro quo. From where you sit, do you think,


as a case of either the euro implodes, or, Germany has to, as it


were, pay up, there has to be some grand gesture before the banking


union takes place. Germany has to pay up in the short-term?


Unfortunately, I think if they haven't gotten to that point, they


probably will get to that point quite soon. I think you can see why


the Germans are frustrated about the budget deficit issue. But there


is a deeper problem, which is that countries are locked in at fixed


exchange rates, that are the wrong rates. They are not competitive, so


it is going to be really difficult for those countries to grow, or to


balance their budgets. If they are not growing, they will not have any


improvement in their deficit situation. That was an inherent


problem, wasn't it? Right from the outset, yes it was. Let me be clear,


I don't want to sound too hard on the Germans here. We need to


remember that Germany, under Chancellor Schroder, took some very


tough decisions in terms of reforming labour markets and having


wage restraint. You can understand why the Germans feel frustrated and


why it is so difficult for Chancellor Merkel to sell what will


be necessary to save the euro. if you look at the results, first


of all, you see, that whenever the crisis came to a head, the Germans


did offer more. They just have to see the other side of the bargain


before they do it. And as to the German experience, it is definitely


reforms pay off. What we are seeing across much of the eurozone


periphery, is now the kind of labour market reforms, situation of


improving competitiveness, that will likely to turn Spain and Italy


into booming economies in a while. How -- How do you deal with the


debt mountain, are the Germans prepared to write it down 60% to


mutualise it, so these countries have some way of surviving. Would


you be prepared for a broad writedown? I don't think there is a


need. Spain has less public debt than Germany and Britain. What we


need is a firewall against financial market panic, that is the


European Central Bank. And fiscal and labour market reforms, which is


what Spain is getting. And we need to deal with the banks. The


Americans dealt with the banks. In 2009, the Europeans poo pooed it as


a marketing idea, and two years on we are still in this place.


In modern Egypt, there have always been two significant, often


adversarial powers, the military, the backbone of the state, and


religion, lately in the form of the Muslim Brotherhood. The two are in


the run-off for the presidency. It seems the Brotherhood may have won,


but it is increasingly doubtful if the army is prepared to hand over


real power. 18 months ago in Tahrir Square


behind me, there was a drama that caught the imagination of the world.


The Egyptian revolution. There was a blueprint set out for how power


was to be transferred. That involved the ousting of President


Mubarak, the holding of parliamentary elections, and the


climax of the process, at the weekend, the holding of these


presidential elections, in their second round. What became clear,


though, as the weekend unfolded, was those two key forces would


fight for the destiny of the nation, but the Muslim Brotherhood and the


military had very different ideas how this would end. This is Zagazik,


a Nile delta town, far from Tahrir Square, where we watched the


weekend's voting with all the telling symbolism. The polling


station was secured by the army. Knowing an important voter was on


his way, the Colonel in charge posted an armed soldier to stand


guard over the ballot box. There was outrage. The law says the army


shouldn't be inside the actual voting room. But, the soldiers


stayed. Rules though, were being bent here


by the Muslim Brotherhood too. We're not actually supposed to be


in here, we didn't get all the accreditations that Egyptian


officialdom demands for filming in a polling station. But a member of


the Muslim Brotherhood has wafted us in, and in the process,


demonstrated their power. Then the tumult moved outside. Mohammed


Morsi was arriving, the presidential candidate from the


Brotherhood. It was his turn to define the moment. He joined the


queue taking more than an hour to vote.


The Brotherhood has waited 84 years to govern Egypt, a few more minutes


hardly mattered. Casting his vote at last, Dr Morsi


could underline the contrast with his rival, who, elsewhere, swept


straight to the front. But if this gesture was meant to


sway ordinary Egyptians, one who had been further down the cue,


wasn't having it -- queue, wasn't having it. After they destroyed


everything, we need a strong man. I said Mr Shafiq is a stronger man.


The confrontation between an authoritarian establishment and the


Brotherhood, has been sharpened by a court decision, dissolving the


parliament, elect just months ago. He asked one of the Brotherhood's


unseated MPs, whether they think Egypt's military has any intention


of letting them run the country. TRANSLATION: The Military Council


has said over and over that they are unbiased towards all the


candidates, that is what we hope for.


They should fulfil their role in protecting the country, they have


announced they will support the candidate who win, I hope that is


what they will do. Not far way is Herriya, it is rural


Egypt, where people struggle on the bread line. Many familiar lose here


are sustained on a few pounds per day. Once underground, the


Brotherhood and its charities have been working openly for the past 3


years. It helps people with -- 13 years, it helps people with you


money and good works, that earned Dr Morsi the support of many.


TRANSLATION: We believe Dr Morsi will make a difference. He comes


from a village nearby, he understands our problems.


TRANSLATION: I voted for Dr Morsi, so he would improve the country.


Gotd will give the election to the person who deserves it and the


youth will find jobs. A few miles away from the candidate's birth


place, support is not solid. The Brotherhood accuses supporters of


the rival candidate of rationing water to the farmers in a bid to


get their votes. We were finding farmers saying they wouldn't vote


at all. TRANSLATION: I have never voted and I never will. If all the


candidates want is power, then I say God take them now before the


result has come out. Take his soul away. That other precious liquid,


petrol, is in short supply here. They don't like foreigners filming


this kind of thing. Months of political turmoil have


left people tired and edgey, and we seemed to be part of that problem.


No, no, no. Many have ceased to believe that


politics is the way back to normalty. Turnout was low, under


50%. And the Armed Forces seemed to have gambled that their latest


steps wouldn't touch off a strong reaction. We met a key former


general at the Cairo Yacht Club, a place frequented by the city's


elite. Even just before the polls had closed, it was becoming clear


that the military intended to draft the new constitution, retaining


sweeping powers, if Mohammed Morsi, the Brotherhood man, won the


election. Dr Morsi has insulted the army when


he mentioned that if he comes as President of the Country, he will


make many changes in the army, and fire some generals, and he would


shuffle the high ranking officers and all that kind of stuff. What is


the right balance of power do you think, between the military and the


civilian leadership in this country? They will insist to have


two things in the institution, in regard to the army. The first one


is the President cannot declare war against any country, unless goes


back to the army and consults them first. Number two, is the military


budget. Now there is a lot of talk here in Egypt about the issue of


the military budget has to be announced clearly, publicly, to


everybody. I don't think they like that, I don't like that, personally.


As polling was coming to an end. We dropped in the headquarters of


Ahmed Shafiq, the former air force General, whose the country's


establishment had pinned their hopes on. The contrast with Dr


Morsi's team, well to do ladies and others have been among the great


supporters. The Egypt I used to know is centuries old and is my


Egypt. But for the other candidate I don't know what it's going to be.


But it won't be like the Egypt I used to know. But something wasn't


right. A report came in that the Shafiq campaign had failed to post


observers at many polling stations. It was an embarrassing lapse.


The low turnout would mean the winner could hardly claim to have


the country behind him. As this process comes to its climax,


the striking thing is the degree to which the Egyptian people seem to


have lost the enthusiasm that was being expressed little more than a


year ago in Tahrir Square. There is widespread apathy, cynicism, and it


has taken the shine off this process.


After dark, the military issued its new decrees, despite months of


insisting it wouldn't wait to hand the ship of state to an elected


helmsman, it seized essential Government powers, those of


legislation and budget. Captain Hassan has been skippering


Nile pleasure boats for 18 years. He had wanted Mr Shafiq to win, and


he didn't fancy trading places with the new President.


TRANSLATION: I'm the boss of the boat, he's the boss of the country.


I'm only responsible for what happens on this boat. He's


responsible for the country. This boat offers fine dining,


traditional music and belly dancing. The tourist trade has already dived,


so most of these customers were Egyptians.


But now even they, fearing rising crime, are going out less. So this


show struggles on, and Egypt itself continues its national duet,


between generals and Islamists. One that is entering a new and more


dangerous phase. Just coming to you now, what is the


latest what will happen dou, think, tonight? Dr Morsi is pretty clearly


the winner. The army said today they will hand over the power of


the presidency to him at the end of June. But all of these amendments


and restrictions they have put on the constitution and the drafting


of the new constitution means he will be a pretty powerless figure.


So the Muslim Brotherhood has called a million man march tomorrow,


it has said MPs will have a sit-in Tahrir Square until they change the


parliament. The stage is set for confrontation between the two for


example but the army hoping recent signs of apathy, including low


turnouts when the Brotherhood has called protests before, shows that


the country hasn't the stomach to back them in the quest for real


power. The last thing in Tahrir Square is the army didn't move on


the protestors. If the Muslim Brotherhood is calling for a


million men on the street, will the army stand back? I think what is


most likely to happen is the Brotherhood will have difficulty


producing the huge numbers it says it is calling on to the streets.


That is the evidence of all the recent demonstrations when they


have tried to do that. There will be some sort of arbitrage. Lots of


questions are unclear, particularly about the drafting of the new


institution, whether MPs might be able to go back to the parliament.


I think what will happen is some form of negotiation empowered with


mass protests, with counter moves by the army, in which these two


forces continue struggling to try to divide power. It could be Dave


and hot summer here. We go straight to Cairo to speak to a


representative of the Muslim Brotherhood, and to Washington to


speak to Philip J Crowley. It looks like you have won, you are asking


for a million people out on the street tomorrow, are you expecting


a peaceful protest? Unfortunately, not all the facts have been


properly portrayed. The call for the million man march tomorrow was


done by a different group and the Muslim Brotherhood backed it. This


march is in protest for the various declaration, including the


constitutional declaration that the army has issued yesterday, as well


as the verdicts and different laws issued today by the SKAF council,


all of which are unlawful and illegal and have no basis. It looks


like your man has won, but the danger is he will have won very


little, because if you cannot change the constitution, if you


can't change the military budget, if you can't change the security


issues, he will have no power? self-appointed, or the Mubarak-


appointed SKAF council is issuing all of these, it cannot overturn


the voting power of the parliament or the President. This is a


people's-elected choice. Both the parliament and the President and an


opinion or decree from an appointed council, cannot overturn or be


above the will of the people. We standby this and believe parliament


is still in session, as well as all of the powers. The point is


parliament has been dissolved on a technicality, parliament is not in


session? That is not quite true, there was a verdict by the


constitutional court for the dissolvement of parliament. This


has been acted on by SKAF as if it is a Israelty. The head of the


parliament has -- reality. The head of the parliament has announced it


on television and all parties have denounced the same accusations and


declarations from SKAF, we will take this according to the next


chapter of negotiations and discussions with SKAF and what will


happen next with it. From where you are sitting, this looks incredibly


volatile, what do you think the west should do about this? Well, it


is the worst possible outcome, in terms of say the United States


having promoted and encouraged Egypt to go through a democratic


transition, it appears there will be a transition, but it will not


necessarily be democratic. The problem right now is you do


have a crisis of governance. Unfortunately you don't necessarily


have an institution that can resolve this confrantation. We in


the United States, 2 -- confrontation. We in the United


States had a case two years ago called Marbury versus Madison, when


you have a conflict between the legislature and the party, the


court steps in. When you have a nominally dissolved parliament, you


don't necessarily have an institution to resolve it. It is a


lot of complexties about how Dr Morsi will respond to it and SKAF


and what the nature of it will be. The Muslim Brotherhood looks like


it has won the election, should President Obama endorse Dr Morsi?


Well, we will see to what extent it is judged to be free and fair. From


every indication this is a reasonable result. The question is,


you have an elected President, what kind of powers will he have? The


dilemma for the United States, having a strong relationship with


the Egyptian military. Yet up the military basically saying -- yet


you have the military basically saying we are above the law and we


don't believe in the civilian laws will present a policy problem for


the United States. Will you be calling on the support of President


Obama and America? Of course we will be calling for support all the


Allies of Egypt who have declared their support publicly for the


democratic transition of Egypt. What happened in the last couple of


days is nothing short of a military coup. We believe that any power


standing by the value of demok say wants to uphold it around the --


democracy wants to uphold it around the world, should standby us. I


would like to also correct your point that this is not a


confrontation between the military and religion. It is a conflict


between military dictatorship and civilian democracy. We believe the


entire international world, that upholds the genuine true value of


democracy, should support Egypt and provide a peaceful end to this


conflict. That's all from Newsnight tonight.


The death of Welsh actor of Brian Hibbard. Here he is in 1963, with


ace axe pel la group named after the miners striking.


# Looking from a window above # It is like the story of love


# Can you hear me # Came back only yesterday


# Moving further away # Want you near me


# All I needed was the love you gave


# All I needed for another day # And all I ever knew


A fine spell of weather, although brief, sunshine to look forward


through the day. We will start the day with some showers across


Scotland. Transferring their way west to east. Most other places


will settle into a reasonable afternoon. A bit of fair weather


loud inland, the odd isolated shower. Nearly all of us will avoid


these. Racing at Ascot will dodge the showers. Light winds, sunny


spells, temperatures nudging 20 degrees. That sunshine is strong at


this time. If you are heading to the beach it is good across the


south west of England and Wales. Some of the best sun on the coast.


The odd isolated showers over the high ground. For Northern Ireland a


few showers, but not of the intensity which we saw during the


course of the day. A good few of us will stay drive. For Scotland most


of the showers on the eastern side, the odd sharp one, not ruling out


thunder here. Some sunshine inbetween. Further ahead to


Wednesday, another fine day for most of us, temperatures just on


the rise, up into the high teens, and the low 20s in some places too.


One or two spots could reach 22 or 24 degrees. Wednesday the best day


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