28/06/2012 Newsnight


28/06/2012

Analysis of the stories behind the day's headlines with Gavin Esler. How low can bankers go in the public esteem? Plus Joseph Stiglitz assesses the world economy.


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Transcript


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A sewer much systematically and amoral dishonesty, some of the

:00:16.:00:20.

choice descriptions of some of our bankers. The shock waves from

:00:20.:00:24.

Barclays continues as there are calls for a criminal investigation,

:00:25.:00:29.

and civil lawsuits for fiddling a key lending rate. Bob Diamond says

:00:29.:00:35.

the decision to manipulate the market was wrong, but who took it?

:00:35.:00:41.

Have the people who have almost bankrupted the world economy proved

:00:41.:00:46.

themselves morally bankrupt? Another last-chance saloon in

:00:46.:00:49.

Brussels, with Angela Merkel refusing to budge a centimeter, we

:00:49.:00:53.

will discuss the German Chancellor's stubbornness, or is it

:00:53.:01:00.

admirable consistency, with one of her ministers and a noble prize

:01:00.:01:07.

winner, who thinkss the policies are suicide. As Julian Assange goes

:01:07.:01:13.

to Sweden tomorrow night e gives Newsnight his response. You have

:01:13.:01:17.

been summoned to bell gravia police station tomorrow, are you going to

:01:17.:01:25.

go? Our advice is internationally and domestically in the UK takes

:01:25.:01:30.

precedent to extradition law, the answer is certainly not. Have the

:01:30.:01:33.

scientists finally run the God particle to ground, and can we

:01:33.:01:43.
:01:43.:01:45.

explain what it does? Good evening, systematic greed, systemic failure,

:01:45.:01:50.

like an epitaph to an age of irresponsibility, just a few of the

:01:50.:01:56.

comments on the latest crass and potentially illegal activity in the

:01:56.:01:59.

banking sector. With calls for banking boss, Bob Diamond to resign

:01:59.:02:03.

were will it lead. While they promised a bottle of champagne for

:02:03.:02:08.

their mates, how much more will the taxpayer tolerate. We begin with

:02:08.:02:12.

our Economics Editor, and Bob Diamond's most public response to a

:02:12.:02:17.

letter to the chairman's committee. What did Mr Diamond have to say?

:02:17.:02:24.

Bob Diamond refers to two things that Barclays did in manipulating

:02:24.:02:27.

this key interest rate, The Libertines. They did it for one

:02:27.:02:31.

machine, to enrich themselves, boost their own trades. Diamond

:02:31.:02:34.

says it was done by junior people, we have collaberated with the

:02:34.:02:38.

inquiry, let's get on with it, the Serious Fraud Office can do what

:02:38.:02:42.

they want, we're sorry, we have taken the fine. Then he refers to

:02:42.:02:46.

the second reason. The second reason was that this interest rate

:02:46.:02:50.

is a good barometer for the financial health of banks. And at

:02:50.:02:55.

one point, between 2007-2009, Barclays were coming out of the

:02:55.:02:58.

daily interest rate setting looking bad. It looked like they were a

:02:58.:03:02.

bank in trouble. Therefore, they expressed, the senior management,

:03:02.:03:04.

expressed their concerns. This is what the Financial Services

:03:04.:03:08.

Authority had to say yesterday, they said senior management

:03:08.:03:13.

concerns resulted in instructions being given by less senior managers

:03:13.:03:15.

to reduce The Libertines submissions, that is fiddle the

:03:15.:03:20.

rate, they say the origin of the instructions is unclear. In today's

:03:20.:03:24.

letter Mr Diamond says he accepts the decision to lower submission

:03:25.:03:26.

was wrong. He also intimate that is decision

:03:27.:03:30.

was discussed with the Bank of England, and even with politicians,

:03:30.:03:37.

for example the Brown -Darling administration at the time. Junior

:03:37.:03:42.

bank managers do not have discussions with Gordon Brown and

:03:42.:03:45.

Mervyn King and discuss whether or not they can legitimately mess

:03:45.:03:48.

around with The Libertines, that decision had to be taken by

:03:48.:03:51.

somebody senior. I asked them the question tonight, who was it? And

:03:51.:03:55.

it is, as it is like for the last 48 hours, it is like asking

:03:55.:03:59.

children in the playground who has done the naughty thing, nobody

:03:59.:04:03.

wants to answer and we are waiting for an answer.

:04:03.:04:07.

The markets, Barclays' shares closed down 15%, and the political

:04:07.:04:12.

response has been absolutely vehement? The normal choreography

:04:12.:04:17.

of this is outrage, and then you take a fine, you collaberate with

:04:17.:04:21.

the SFA, somebody gets prosecuted down the line. Then politicians

:04:21.:04:26.

stand up and say we mustn't let this damage the status of the City

:04:26.:04:30.

of London, and Barclays is an important institution, blah blah.

:04:30.:04:34.

Instead today, they said the absolute opposite, they went for

:04:34.:04:37.

the jugular on Diamond and the Barclays senior management. We

:04:37.:04:42.

heard David Cameron and Osborne go for him by name. The reason is

:04:42.:04:46.

pretty clear, this is a systemic, reputational hit for the City. It

:04:46.:04:54.

is making the City and done as a vein -- London as a venue for doing

:04:54.:04:56.

business very shaky, there is worry throughout the industry about it.

:04:56.:05:00.

That is why the politicians are so hard on them.

:05:00.:05:04.

What exactly is going on at Barclays and how did traders fix

:05:04.:05:12.

the InterBanking lending rate, LIBOR? Make no mistake about it,

:05:12.:05:17.

this rate-fixing scandal will hit the banking sector, starting with

:05:17.:05:20.

Barclays chief, Bob Diamond, like a nuclear bomb. It could prove as

:05:20.:05:25.

destructive to the industry as the financial crisis of 2008. Even

:05:25.:05:31.

though the collusion started in 2005, its origins can be traced

:05:31.:05:36.

back to 1987, Big Bang, swept aside the bowler hatted brigade, and

:05:37.:05:43.

opened up the City to a world where laissez faire ruled, and markets

:05:43.:05:48.

would clarify and lickify. It started with Barclays, Barclays'

:05:48.:05:52.

fair price was in free fall, as the extent of the problem dawned on the

:05:52.:05:57.

market, which doesn't fancy the bank without Bob Diamond at the

:05:57.:06:01.

helm. The next wave is imminent, Barclays got a smaller fine

:06:01.:06:05.

yesterday, in return, no doubt, for squealing on other banks, watch out

:06:05.:06:09.

RBS and Lloyd's. That makes the prospect of US-style lawsuits more

:06:09.:06:14.

likely, benefiting lawyers mostly. One can see an outward mushrooming

:06:14.:06:19.

effect on this, armed with these admissions from Barclays and the

:06:19.:06:22.

evidence obtained from Barclays, e- mail, taped transcripts of

:06:22.:06:25.

conversations between traders, that a powerful case could be built

:06:25.:06:29.

against the others. That, in my view, would concentrate the find of

:06:29.:06:32.

the others, and they will have a choice. Do we too come clean and

:06:32.:06:36.

get the discount for an early admission, or do we tough it out

:06:36.:06:39.

and try to say we weren't a party to this.

:06:39.:06:43.

Then there is the long-term damage to the City of London's reputation.

:06:43.:06:49.

It has already been hit by scandals at AIG, JP Morgan and UPS, will it

:06:49.:06:54.

still account for 10% of British GDP in a decade. The wider economy

:06:54.:06:59.

won't escape either, this scanned kal will almost certainly lead to

:07:00.:07:06.

tighter regulation for banks, which means less profits and less lending

:07:06.:07:09.

to customers. It is the bald eagle bank in the

:07:09.:07:14.

firing line, when a UK Prime Minister, arriving at an EU summit,

:07:14.:07:19.

subjects that a banking boss has serious guess -- suggests that a

:07:19.:07:23.

banking boss has serious questions to answers, it is a message, go,

:07:23.:07:27.

and go now. As I said today people have to take responsibility for the

:07:28.:07:31.

actions and show how they will be accountable for those actions, it

:07:31.:07:35.

is important it goes all the way to the top that have organisation.

:07:35.:07:40.

Other Tory MPs weren't as polite, calling directly on Bob Diamond to

:07:40.:07:46.

resign. The opposition said it was time white collar criminals went to

:07:46.:07:49.

jail. I do want to see criminal prosecutions, and those who have

:07:50.:07:53.

done the wrong thing, those who have committed what I think are

:07:53.:07:58.

atrocious acts, brought to justice. Things stepped up a gear today, Bob

:07:58.:08:01.

Diamond confirmed that he will appear before MPs on the Treasury

:08:01.:08:04.

Select Committee, in the next fortnight. Just's did last year,

:08:04.:08:10.

when he said banker bashing had to end. He will be joined, no doubt,

:08:10.:08:14.

by his chairman, Marcus Agius, seen here on the left, who is running

:08:14.:08:18.

the board at Barclays at the height of this scandal, his head may also

:08:18.:08:23.

be on the chopping block. Today also saw the British Bankers'

:08:23.:08:27.

Association, under whose auspices LIBOR rates have been set for three

:08:27.:08:31.

decade, call on the Government to assume responsibility for them in

:08:31.:08:35.

the future. Meanwhile the FSA is said to be in talks with big banks

:08:35.:08:38.

for financial settlement for small firms, in particular, the City

:08:38.:08:42.

watchdog is also set to announce tomorrow, a new mis-selling probe

:08:42.:08:45.

into the banks, which would sully their reputation even further. At

:08:45.:08:51.

the moment there is something of an omerta going on between the banks,

:08:51.:08:55.

as they lift up stones in their banks to see what traders have or

:08:55.:08:58.

have not been up to, and whether the regulator has any evidence of

:08:58.:09:04.

it. Banks are looking nervously at each other to see which one breaks

:09:04.:09:09.

rank first, and lead to a settlement that makes the PPI pay

:09:09.:09:12.

outs look like pocket money. Tonight it is clear why the scandal

:09:12.:09:17.

happened in the first place, investment bankers who gamble with

:09:17.:09:22.

larger sum, are allowed to work in a set of lower expectations than in

:09:22.:09:26.

the general public -- those who deal with the general public.

:09:26.:09:31.

will take an integrity test in this sector, we help people understand

:09:31.:09:34.

what is integrity and they can prove and demonstrate it, there is

:09:34.:09:37.

no requirement in the wholesale market. We should be applying the

:09:37.:09:41.

same principles now applied in the retail sector to the wholesale

:09:41.:09:44.

sector. Make sure professional people belong to professional

:09:44.:09:48.

bodies, abide by that Code of Conduct, and take integrity

:09:48.:09:53.

properly and for what it is worth. This led to the kind of unethical

:09:53.:09:57.

behaviour at the heart of this scandal, this is something I

:09:57.:10:01.

prepared earlier. John and Simon work at separate parts of the bank

:10:01.:10:05.

and shouldn't be in touch professional ever. John has made

:10:05.:10:09.

bets on a derivative linked to The Libertines rate, needs the rate to

:10:09.:10:14.

go down. John illegally contacts Simon, a colleague whose job it is

:10:14.:10:18.

to set The Libertines rate. Simon is supposed to ignore all

:10:18.:10:23.

communication from John, in this scandal doesn't. At the daily LIBOR

:10:23.:10:27.

fixing session, Simon suggests a lower rate than it should be,

:10:27.:10:31.

knowing it will help John and the bank. Even if it will only work for

:10:31.:10:37.

a few days a month, tiny changes can be worth millions to John and

:10:37.:10:42.

billions to the bank. We will never know how much loss was minimised as

:10:43.:10:47.

a result of this be backle. But it the fall-out means things will

:10:47.:10:51.

never be the same for the banking sector again.

:10:51.:10:58.

The Treasury Minister, Mark Hoban is with me. Is Bob Diamond a fit

:10:58.:11:03.

person to run a major bank? He has questions to answer, why did it

:11:03.:11:07.

happen, why wasn't it identified by its own staff and what change has

:11:07.:11:10.

happened since it happened, what change in procedures, has the

:11:10.:11:13.

compliance operation been beefed up. All these questions need to be

:11:13.:11:16.

answered by Bob Diamond. It is important he goes before the

:11:16.:11:20.

Treasury Select Committee to hear from him what has changed. He can

:11:20.:11:24.

run a major bank for the next couple of week, either somebody who

:11:24.:11:27.

knew what was going on, which would be terrible, or he didn't know what

:11:27.:11:30.

was going on, which would be incompetent? We need answers from

:11:30.:11:35.

Bob Diamond. Barclays did identify this, and raise it with the FSA, we

:11:35.:11:39.

need to get some answers about this. You are prepared to wait for the

:11:39.:11:43.

Treasury Select Committee to have a chat with him in a few weeks time,

:11:43.:11:46.

you presumably meet these people all the time, you have met Bob

:11:46.:11:50.

Diamond? On the basis of what you know, would you be perfectly happy

:11:50.:11:53.

to trust him with running a major British bank? It is very clear, as

:11:53.:11:57.

the Prime Minister said today, that Bob Diamond has questions to answer,

:11:57.:12:00.

we should get those answers from him. Also, there are other banks

:12:00.:12:04.

involved in this. This is part of a long-running investigation, we need

:12:04.:12:11.

to get to the bottom of this. What has happened. A number of

:12:11.:12:15.

Conservative MPs, who I presume you respect highly, say this man should

:12:15.:12:20.

just go? The chairman of the select committee has invited Diamond in

:12:20.:12:23.

front of his committee to get some answers. There is clearly

:12:23.:12:29.

identified a gap in regulation, the regulatory system that Ed Balls

:12:29.:12:34.

designed made sure LIBOR was not regulated. We need to resolve this.

:12:34.:12:40.

People rely on this. Is this a regulatory lapse or complete moral

:12:40.:12:42.

lapse, that there is something absolutely rotten, somewhere in

:12:42.:12:45.

Barclays Bank? I think there are two issues, what happened in the

:12:45.:12:49.

individual banks and how do we get to the bottom of that, but also,

:12:49.:12:53.

why is it this area of market activity was not properly regulated,

:12:53.:12:58.

it was a gap in the regulatory regime we inherited from the

:12:58.:13:02.

previous Government and we are seeking to close it. George Osborne

:13:02.:13:06.

said today we will regulate LIBOR and lock at what needs to be done,

:13:06.:13:11.

and look at criminal sanctions to be put in place. The chairman is in

:13:11.:13:15.

charge of corporate governance, should Marcus Agius think of going,

:13:15.:13:18.

clearly nobody was at the helm here? I think the answer is we need

:13:18.:13:22.

to get to the bottom of this, there are questions Barclays needs to

:13:22.:13:27.

answer, the FSA report takes us so far. Things clearly went astray in

:13:27.:13:31.

Barclays, we need to know why that happened, why it wasn't picked up

:13:31.:13:35.

sooner and what has changed. Would you like to see criminal

:13:35.:13:38.

prosecutions, fraud is fraud, there may be no specific offence you can

:13:38.:13:41.

put your finger on that was mentioned in this, but if people

:13:41.:13:45.

had been cheating and fixing rates, that is presumably, potentially

:13:45.:13:49.

fraud, isn't it? I think the hypocrisy of the Labour Party today

:13:49.:13:52.

calling for criminal sanctions when their rules didn't actually allow

:13:52.:13:57.

criminal sanctions to take place. You can score points if you like.

:13:57.:14:01.

This is the worst abuse of trust in a British bank in living memory I'm

:14:01.:14:04.

asking you as a Treasury Minister what you can do about it? With what

:14:04.:14:06.

we need to do, is there is action going on in individual banks

:14:07.:14:10.

looking at individual people, the FSA haven't completed their

:14:10.:14:13.

investigation, not just of banks but individuals, but we also need

:14:13.:14:17.

to look at every angle possible that we can take criminal action

:14:17.:14:21.

where fraud has been committed. would support the potential for

:14:21.:14:24.

criminal action, you think that would be a good idea if there was

:14:24.:14:28.

found to be fraud committed. You were clear on that, yes? Yes.

:14:28.:14:33.

bonuses should be clawed back from some of these people? The changes

:14:33.:14:38.

we introduced ensure bonuses can be clawed back, previously bonuses

:14:38.:14:42.

were paid in cash and couldn't be Claude back, we have introduced

:14:42.:14:47.

rules -- clawed back, we have introduced rules for them to be

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clawed back. The very reputation of the City of London is at stake

:14:50.:14:54.

here? I agree, that is exactly why we have taken action, since we came

:14:55.:14:58.

into office, to change the regulatory system in the UK, put

:14:58.:15:02.

the Bank of England in charge of banks, give regulators more power

:15:02.:15:07.

to intervene quickly and not allow problems to fester. We need to do

:15:07.:15:13.

that for London to maintain its reputation. London is a big ployer,

:15:13.:15:16.

two million people involved in financial services across the UK,

:15:16.:15:21.

we need to sort this out to make sure the reputation stays strong.

:15:21.:15:28.

Are you concerned that we ain't seen nothing yet, we have seen HSPC

:15:28.:15:33.

and RBS are subject of inquiries? There are inquiries across a range

:15:33.:15:37.

of banks, we need to get to the bottom of it, Barclays is the first

:15:37.:15:40.

one where a fine needs to be announced. Do you think the people

:15:40.:15:45.

in charge of banks in Britain act morally, or simply in their own

:15:45.:15:48.

personal interest, is there a greed culture that needs to be addressed?

:15:48.:15:51.

Alistair Darling mentioned it today in the House of Commons. He said in

:15:51.:15:53.

the run up to the financial crisis there was a culture of anything

:15:53.:15:58.

goes. We saw that in the way which LIBOR has been manipulated, we saw

:15:58.:16:03.

some of the huge gambles that bankers took in the run up to the

:16:03.:16:08.

financial crisis. We need to tackle it and reform regulation, and

:16:08.:16:14.

tackling investment sides of banks as we did through the Vickers

:16:14.:16:18.

report. Samuel Beckett's great play,

:16:18.:16:23.

Waiting for Godot was described as a piece of theatre where nothing

:16:23.:16:29.

happens twice. European Summits seem to be like, that nothing

:16:29.:16:34.

happens more or less perpetually. We are in Brussels. Has anything

:16:34.:16:42.

happened tonight? I think it has. I beg to differ on the Beckett

:16:42.:16:47.

analogy, at least so far as the politics and diplomacy are

:16:47.:16:53.

concerned. Six months ago we were here, Europe was rallying behind an

:16:53.:16:56.

austerity pact, tight controls over Government spending under the

:16:56.:16:59.

leadership of France and Germany. Today France has a different

:16:59.:17:03.

President, Germany is isolated, the French have joined in the pressure

:17:04.:17:07.

for measures to alleviate the economic crisis, the called growth

:17:07.:17:14.

package. Germany has come here, intent on signing that off, about

:17:14.:17:19.

�100 billion worth of stimulus for the European economy. Where they

:17:19.:17:23.

have failed and the Beckett analogy is appropriate, is tackling the

:17:23.:17:27.

underlying economic causes, and trying to get their own heads

:17:27.:17:29.

straight about whether it is the short-term or long-term solutions

:17:29.:17:32.

that are really the issue. Tonight they have been failing to agree on

:17:32.:17:37.

all sorts of things, because of battle on precisely those grounds,

:17:37.:17:40.

is it the short-term crisis that needs tackling now, or the long-

:17:40.:17:43.

term package that needs to be passed through. That is a battle

:17:43.:17:49.

between Germany and Italy. First the mighty Germans dealt with

:17:49.:17:54.

Greece. To the delight of their leader. Tonight, it was Italy, and

:17:54.:17:58.

then they hoped Spain. In the footy as in politics, Germany likes to

:17:58.:18:05.

call the shots. But unlike the beautiful game, in Brussels, Angela

:18:05.:18:09.

Merkel must take them all on at the same time. So she is now a minority

:18:09.:18:13.

of one. It is basically the other big three, the French, the Spanish

:18:13.:18:16.

and the Italians against her, and she doesn't have allies here they

:18:16.:18:21.

European Commission, she doesn't have allies at the IMF. Every

:18:21.:18:23.

international institution, she doesn't have allies outside in the

:18:23.:18:27.

G8, the UK and the US are pressuring her now. Not even here

:18:27.:18:30.

in Brussels, but in the world now she's incredibly isolated. She's

:18:30.:18:34.

beginning to feel the pressure. My discussions with German officials,

:18:34.:18:37.

they get very defensive. They really feel the pressure right now

:18:37.:18:41.

that they are in a corner by themselves.

:18:41.:18:45.

Arriving, the German leader delivered a positive message about

:18:46.:18:50.

funding growth programmes. An olive branch to those countries that

:18:50.:18:57.

think her vision of austerity stifles any growth. TRANSLATION:

:18:57.:19:00.

Today we will talk about the pact for growth and jobs. We have

:19:00.:19:03.

created a good programme here, in particular, with regard to

:19:03.:19:08.

investment in the future. And moreover, what will create more job

:19:08.:19:12.

opportunities, especially for young people. I hope that we will be able

:19:12.:19:16.

to agree on this today, and with that, make an important signal.

:19:16.:19:20.

Also for the fiscal pact that we need solid budgets on the one hand,

:19:20.:19:24.

and on the other hand, growth and jobs.

:19:24.:19:29.

Of course, everybody here wants Germany to take a bigger role in

:19:29.:19:32.

underwriting the debts of weaker EU countries, but Angela Merkel has

:19:32.:19:36.

come here today saying her position is essentially unchanged, she is

:19:36.:19:39.

prepared to work towards fiscal union, but only in the very long-

:19:39.:19:46.

term, and with a host of safeguards about the way other countries spend

:19:46.:19:51.

European money. What we want first is tighter, stricter, long-term

:19:51.:19:56.

rules so this never happens again. Once we get those rules, then we

:19:56.:19:58.

can start talking about solidarity and sharing. In that sense, it is

:19:58.:20:02.

not a question of backing up on something right now, we need

:20:02.:20:05.

incentives for good public management of money. That is what

:20:06.:20:11.

the Germans the Finns and the Dutch are calling for. That sounds like a

:20:11.:20:14.

continuation of the argument we have heard for months now, which

:20:14.:20:18.

comes first, the rigour or the solidarity, is it possible to

:20:18.:20:22.

achieve agreement on that? Probably, that means the chicken has to come

:20:22.:20:28.

out at the same time as the egg. this summit fixture, Germany's

:20:28.:20:33.

opponents want to change the rules. There are several proposals, a

:20:33.:20:38.

banking union including rules on savers and deposits, a joint

:20:38.:20:41.

European Treasury Department, scrutinising spending plans and

:20:41.:20:44.

enforcing bugetry discipline. For future national budgets to be

:20:44.:20:49.

planned at the European level. But in this game, Germany controls any

:20:49.:20:54.

movement of the goal posts. It is not ready to do so, leading to

:20:54.:21:00.

growing anxiety in Spain and Italy. There does seem to be movement on

:21:00.:21:04.

the Spanish, Italian issue, Mario Monti, uncharacteristically, for

:21:04.:21:08.

the very boring economist as he is, has started pounding the table

:21:08.:21:12.

saying he needs something, his tenure is almost up, he only has

:21:12.:21:16.

six months left as Italian Prime Minister, you remember what Italy

:21:16.:21:21.

is like before me, it will be like that after me, if we want Italy

:21:21.:21:25.

solved we need to do it now, I needing to home to say all the hard

:21:25.:21:29.

work was worth something. Could the meeting help the Italians while the

:21:29.:21:33.

bigger debate is going on? There are a couple of proposals,

:21:33.:21:39.

including this one from the Finns. What Finland has proposed is

:21:39.:21:43.

something called the a covered bond, it is something done in the early

:21:43.:21:47.

1990s, the state issues a bond that is covered, or guaranteed with

:21:47.:21:53.

assets, or equity, or, for instance, earmarked taxes, once that has

:21:53.:21:58.

happened, then the long-term crisis mechanism, which we call the ESM,

:21:58.:22:01.

comes and backs it up. This could be something that brings the

:22:01.:22:05.

interest rates down n that sense it is a compromise but not something

:22:05.:22:09.

that Germany needs to back down on. That type of short-term measure

:22:09.:22:13.

won't bother David Cameron. But in the bigger, long-term agenda of

:22:13.:22:17.

financial integration, there is a fork in the road looming for

:22:17.:22:22.

Britain. One that may well require a national vote. We're saying to

:22:22.:22:27.

the eurozone countries they do need to do more things together, to

:22:27.:22:29.

strengthen their currency and make sense of their currency, but

:22:29.:22:33.

Britain will stay out of that. We want Europe to work for us as a

:22:33.:22:38.

single market, as place where we trade, as place where we co-operate,

:22:38.:22:41.

I'm going in there to make sure we get the safeguards to make sure

:22:41.:22:45.

that can keep happening. Tonight the struggle to win through had

:22:45.:22:50.

gripped the Council of Europe. But it was the football that had

:22:50.:22:54.

mesmerised the waiting press and officials. In this game, outcomes

:22:54.:23:00.

can still surprise. In the contest of European Summitry,

:23:00.:23:03.

the difficulty of reaching atreatment, and the slowness of

:23:03.:23:07.

change, are realities that are all too familiar.

:23:07.:23:12.

With me is the Nobel Prize-winning economist, Joseph Stiglitz, who has

:23:12.:23:18.

written a new book, The Price of Inequality, he argues an

:23:18.:23:22.

increasingly divided society is endangering our future. We have

:23:22.:23:25.

Peter Altmaier, the German Minister for the Environment. He joins us

:23:25.:23:29.

from Berlin. Angela Merkel has been very

:23:29.:23:32.

consistent over the years, but that consistency has brought us three

:23:32.:23:36.

years of summits, with the euro repeatedly on collapse, what will

:23:36.:23:41.

be different this time? We have accepted a number of proposals from

:23:41.:23:48.

our European partners over the last two-and-a-half years. We have

:23:48.:23:52.

created huge rescue operations and funds. German tax-payers' money is

:23:52.:23:57.

involved at a scale of several hundred billion euros. We have now

:23:57.:24:01.

been ready to accept a gross package, that is financed by

:24:01.:24:07.

European tax-payers' money, but we have to insist at the same time

:24:07.:24:12.

that something is also done in implementing on a national level in

:24:12.:24:15.

these countries, in order to restore the confidence of

:24:15.:24:18.

international financial markets. People will understand Angela

:24:18.:24:23.

Merkel's political problems. How she has to convince German voters

:24:23.:24:27.

and tax-payers. However, you are isolated. Debt mutualisation is

:24:27.:24:30.

supported by the council President, the commission President, the

:24:30.:24:33.

Spanish Prime Minister, the French President, the Italian Prime

:24:33.:24:38.

Minister, they are all wrong, are they? No, they are not wrong. But

:24:38.:24:42.

this is the normal kind of procedure in European Summits. I

:24:42.:24:46.

can remember over the last two-and- a-half years, several summits where

:24:46.:24:50.

it seemed to be the case that we would be isolated. But at the end

:24:50.:24:57.

of the day, we were able to organise an enormous and large

:24:57.:25:00.

consensus, that happened last year in November, when all countries

:25:00.:25:04.

agreed on the German-French proposals, and just two countries

:25:04.:25:10.

stayed away, the UK and the Czech Republic. I'm basically optimistic,

:25:10.:25:14.

this summit can become a success story. We are on the first day and

:25:14.:25:18.

we will have very, very tough talks and negotiations, but it can lead

:25:18.:25:25.

us to a consensus. OK, but Frau Merkel is talk about others

:25:25.:25:29.

offering eye wash and fake solution, but the German solution over the

:25:29.:25:32.

two-and-a-half years you are talking about has got us to the

:25:32.:25:36.

state where Greece is ruined, Italy and Spain find it difficult to

:25:36.:25:39.

borrow, and democracy itself is under threat in some of those

:25:39.:25:44.

countries? In Greece we have seen a national parliament election, where

:25:44.:25:49.

reasonable, pro-European parties have made it. And extreme party

:25:49.:25:57.

could have won? But they didn't win, they lost as a matter of fact. In

:25:57.:26:02.

Italy and Spain we have Governments really interested in achieving

:26:02.:26:06.

progress. I'm basically optimistic, and if we can manage tonight and

:26:06.:26:13.

tomorrow to come to conclusions about the long-term reforms of the

:26:13.:26:17.

European Union, I'm optimistic we can convince markets to restore

:26:17.:26:21.

confidence and trust in countries like Spain, and we have made it

:26:21.:26:26.

clear, if Spain would apply for money under the fund, we would be

:26:26.:26:33.

prepared to consider that. OK, let me bring in Joseph Stiglitz here,

:26:33.:26:36.

you have also been very consistent in what you have written about

:26:36.:26:40.

austerity. You have said it is effectively suicidal. Wouldn't you

:26:40.:26:43.

accept that Angela Merkel's position, if she were to say, let's

:26:43.:26:47.

give a lot of money to southern European economies, we don't think

:26:47.:26:51.

they have been run very well, that would be suicidal? Part of the

:26:51.:26:55.

problem is the diagnosis of the underlying problem. Spain and

:26:55.:27:01.

Ireland had a surplus before the crisis. They have a deficit because

:27:01.:27:09.

Europe is in recession. It is the recession that caused the deficit,

:27:09.:27:16.

not the other way around. If you begin with the wrong diagnosis you

:27:16.:27:20.

will get the wrong prescription. Germany has been giving them the

:27:20.:27:22.

wrong prescription. The German prescriptions over the last three

:27:22.:27:25.

years have led to a depression in Spain. One out of two Spanish

:27:25.:27:30.

people are out of work. They want to work, the young people. The

:27:30.:27:34.

unemployment rate has gotten consistently higher. Its not

:27:34.:27:38.

approach -- it is now approaching one out of a four. Those

:27:38.:27:44.

prescriptions have not worked. The case of Greece. They say they are

:27:44.:27:49.

having reform. Number one in the OECD in having reforms. You can't

:27:49.:27:53.

do everything overnight in a democracy, but they have done a lot.

:27:53.:27:59.

Number one in reform. Let me bring in Peter Altmaier on that,

:27:59.:28:02.

austerity may be right for a healthy economy like Germany, but

:28:02.:28:09.

it has been terrible for Spain and Greece? We have agreed on a gross

:28:09.:28:15.

package. This is on the agenda today and tomorrow. First thing,

:28:15.:28:19.

second thing, in Greece some reforms have been implemented, and

:28:19.:28:25.

for the first time we see some signs of a growing economy again.

:28:25.:28:31.

There is a decrease of self- percentage in Greece of growth?

:28:31.:28:34.

depends on the month you are considering, and we have the

:28:34.:28:38.

impression that the Greek economy is strarting to recould have. In

:28:38.:28:42.

Spain we have -- starting to recover. In Spain we have to admit

:28:42.:28:45.

it is just a couple of months since the new Prime Minister has taken

:28:45.:28:49.

over, and he has then introduced a number of reforms, it is probably

:28:49.:28:53.

much too early to see the real effect of these reforms. What we

:28:53.:28:57.

have to provide is solidarity. We made clear we want to preserve the

:28:57.:29:02.

euro as a common currency, for all 70 member states. What we made

:29:02.:29:08.

clear is Germany is prepared to encourage growth by spending more.

:29:08.:29:13.

What we have made clear is all countries have to undergo reforms.

:29:13.:29:16.

Joseph Stiglitz, if you were talking to the German taxpayer

:29:16.:29:21.

tonight who is funding all of this, what is in it for them? Why should

:29:21.:29:24.

they do this without the austerity and the reforms? Because of the

:29:24.:29:29.

cost of the break-up of the euro for Germany is very, very high.

:29:29.:29:33.

Let's talk about the growth part. Everybody agrees that you need

:29:33.:29:38.

growth. They agreed on that last July. A year ago. Nothing happened.

:29:38.:29:44.

What about the agreement they are talking about right now. $150

:29:44.:29:54.
:29:54.:29:54.

billion or so. Most of that is old money repackaged. I know the

:29:54.:30:00.

political ways. We are known in our country to repackage money?

:30:00.:30:05.

estimation is $10 billion is really new money. Is part of your point

:30:05.:30:10.

that Germany has benefited from being in the euro, you are writing

:30:10.:30:15.

about inequality in all sorts of ways, does Germany have a moral

:30:15.:30:19.

duty to end some of the inequality by spreading the money around?

:30:19.:30:24.

think it is in their self-interest, if they could understand their

:30:24.:30:27.

enlightened self-interest, rather than the short-term self-interest.

:30:27.:30:30.

I think it is in their long-term self-interest in doing this. I do

:30:30.:30:35.

think there is a sense of solidarity. By solidarity I don't

:30:35.:30:40.

mean tying your legs together as you go over the cliff, a suicide

:30:40.:30:44.

pact. I mean solidarity helping some countries who are having

:30:44.:30:48.

difficulty, because of a global downturn caused by the United

:30:48.:30:52.

States. Let me bring in Peter Altmaier, it would be in your own

:30:52.:30:55.

interest to spread money around, not just an act of charity? Indeed,

:30:56.:31:00.

I whole heartedly agree. We are interested in preserving the euro.

:31:00.:31:04.

We are interested in providing solidarity to the other countries.

:31:04.:31:09.

But if it is true that the crisis is the result of the fact that we

:31:09.:31:15.

have spent too much money over too many years, then we cannot cure

:31:15.:31:19.

that crisis by spending even more money that does not exist. That is

:31:19.:31:24.

where you came in on the problem? That is the fundamental

:31:24.:31:26.

misdiagnosis. You heard our discussion earlier about Barclays

:31:26.:31:30.

Bank and the culture of greed that has infected the banks. What do you

:31:30.:31:35.

make of that, are you at all surprised some people were fiddling

:31:35.:31:42.

The Libertines rate? I knew about that earlier -- The LIBOR rate?

:31:42.:31:45.

knew about that earlier, there was no surprise. It is a pattern of

:31:45.:31:48.

behaviour we have seen in banks all over the world N my book I talk

:31:48.:31:57.

about it as moral depravation. It wasn't as good as the word you used

:31:57.:32:00.

"the sewer". Do you think they live in a different moral universe than

:32:00.:32:08.

the rest of us? I think they do. It is partly a result of a culture and

:32:08.:32:16.

set of incentives that have been provided for them. The incentives

:32:16.:32:21.

to, a culture of greed, a framework that allow them to get away with it.

:32:21.:32:27.

You will have heard this argument repeatedly in the United States, by

:32:27.:32:30.

Conservative economists who say it is not a culture of greed but a

:32:30.:32:34.

culture of aspiration. It is good people are unequal, because people

:32:34.:32:37.

at the bottom aspire to get to the top. That is how the United States

:32:37.:32:43.

economy has grown for two years, that is the argument? The problem

:32:43.:32:46.

that this Barclays scandal brings out so clearly, is that a lot of

:32:46.:32:52.

what was going on is what I call rent-seeking, in other words, it

:32:52.:32:56.

wasn't creating more wealth, it was manipulating the rules of the game

:32:56.:33:01.

to steal somebody else's money. It wasn't growing the pot. It was

:33:01.:33:06.

getting a larger share of the back, and in doing that weakening the

:33:06.:33:09.

economy. This is a really important point, the kind of thing they do

:33:09.:33:13.

weakens the economy. That's why I have been arguing that we could

:33:13.:33:17.

have a stronger economy, more growth, with more equality.

:33:17.:33:21.

Just as we round up our conversation, Mr Altmaier, we have

:33:21.:33:25.

17 countries in the eurozone right now, do you think in five years

:33:25.:33:32.

time there is still going to be 17 countries in the eurozone? I would

:33:32.:33:36.

say 17 countries or even more. think it will become so popular

:33:36.:33:40.

that people will be clamouring to join the euro zone rather than get

:33:40.:33:45.

out of it? There are many countries interested in joining the eurozone.

:33:45.:33:51.

It is my view that the eurozone has been stablised over the last few

:33:51.:33:57.

days not destablised. Greece is a now a reliable partner, in Spain

:33:57.:34:00.

and Italy we have to cope with the spread in interest rates, but these

:34:00.:34:04.

are sound economies and we can overcome the crisis. They would be

:34:04.:34:09.

sound economies if the policies of austerity were not being imposed on

:34:09.:34:17.

them. If there was real commitment to growth, which would require a

:34:17.:34:20.

European solidarity fund for stablisation. If there were a

:34:20.:34:25.

guaranteed fund for all the banks. Without that money will flow from

:34:25.:34:30.

these countries to Germany, which has, in effect, because the German

:34:30.:34:37.

Government is backing the Germany banks, there is an implicit subsidy

:34:37.:34:42.

toe German banks and an unlevel playing field F you address the

:34:42.:34:44.

fundamental problems, then the strengths of the European countries

:34:44.:34:49.

are very strong. Do you think we see every day, politicians in

:34:49.:34:51.

Europe and we will hear it again tomorrow, this is a political

:34:51.:34:54.

project, we are committed to it, the answer is more Europe. We will

:34:55.:34:58.

hear all of that, is that encouraging to you, given that the

:34:58.:35:01.

economics are not quite going in the way you have described? I have

:35:01.:35:05.

heard them saying that for now for a long time. Having heard,

:35:05.:35:11.

particularly from Germany, the kind of solidarity, the kind of real

:35:11.:35:16.

agreement on, and an understanding, of really the basic of what needs

:35:16.:35:19.

to be done. It is not that complicated, from an economic point

:35:19.:35:23.

of view. If you have a single market, if you have money that can

:35:23.:35:28.

flow easily around that single market, you have to have a single

:35:28.:35:32.

banking system, single guarantee, and a single regulator. I agree,

:35:32.:35:36.

you need a framework that works. You need a solidarity fund for

:35:36.:35:43.

growth, a single one. We will leave it there.

:35:43.:35:47.

The WikiLeaks founder, Julian Assange, is tucking up for his

:35:47.:35:50.

ninth night at the Ecuadorian embassy in ens can heingen to

:35:50.:35:57.

tonight. Earlier today the embassy had a visit from two Metropolitan

:35:57.:36:01.

Police -- Metropolitan Police Officers. They want him to be

:36:01.:36:05.

extradited to Sweden where he can face charges of sexual assault.

:36:05.:36:11.

Holed up inside behind drawn curtains, and sleeping, apparently,

:36:11.:36:15.

on an inflatible mattress, Julian Assange is under diplomatic

:36:15.:36:18.

protection. Police can't arrest him unless he steps outside. The

:36:18.:36:23.

pressure on him is building. At 9.00am, two police officers turned

:36:23.:36:28.

up at the embassy, with a letter, ordering Julian Assange to appear

:36:28.:36:35.

at bell gravia Police Station some morning from 11.30am, where from he

:36:35.:36:40.

will be put on a plane, so, will he surrender. Mr Assange you have been

:36:40.:36:50.
:36:50.:36:50.

summited to appear at Belgravia Police Station tomorrow, will you

:36:50.:36:56.

go? Our advice is that the answer is almost certainly no, because the

:36:56.:37:01.

law takes precedence over extradition law. It was the release

:37:01.:37:05.

of this shocking footage that first brought WikiLeaks to international

:37:05.:37:08.

attention, and embarrassed the American Government. It shows the

:37:08.:37:13.

killing of a group of Iraqis, including two journalists, by a US

:37:13.:37:17.

helicopter gunship, after fight anything Baghdad in July 2007. A

:37:17.:37:22.

flod of secret US documents on the wars -- flood of secret US document

:37:22.:37:32.

ones the wars in Afghanistan and Iraq arrived, and classified cables.

:37:32.:37:35.

Julian Assange said America convened a secret Grand Jury to

:37:35.:37:38.

tart him and other members of the group. In the United States, since

:37:38.:37:44.

at least the beginning of 2011, a US Grand Jury has been impanelled

:37:44.:37:49.

in Washington, it has been pulling in witnesses, and false testimony

:37:49.:37:55.

from these witnesses, and speened records from Twitter, and they have

:37:55.:38:00.

been working with the FBI. Earlier this year, confidential e-mails

:38:00.:38:04.

appeared from a defence intelligence company that does work

:38:04.:38:08.

with the Pentagon. Julian Assange say they bolstered his fears. One

:38:08.:38:13.

reads, "not for publication", they have a sealed indictment on Assange,

:38:13.:38:18.

another says that he will make a nice bride in prison, screw the

:38:18.:38:21.

terrorist, that he will be eating cat food forever. He's a criminal

:38:21.:38:24.

and should be hunted down and grabbed and put on trial for what

:38:24.:38:31.

he has done here. This guy is a traitor, a traessonist, and broken

:38:31.:38:37.

every law in the United States, shoot the son of a BEEP. We have

:38:38.:38:40.

criminal proceedings under way. Julian Assange sent us a selection

:38:40.:38:44.

of television interviews which showed the depth of feeling against

:38:44.:38:48.

him. He has still not been charged with anything. But the man who is

:38:48.:38:53.

the source of the biggest leak of US state secrets in history has

:38:53.:38:59.

been charged with aiding the enemy. Numerous individuals have said they

:38:59.:39:02.

were compelled to testify before a Grand Jury. On top of that we have

:39:02.:39:06.

had the Bradley Manning proceedings, I have been observing them on

:39:07.:39:10.

behalf of WikiLeaks. Our concerns about the risk of extradition were

:39:10.:39:14.

confirmed in those proceedings. Whatever the reality, Julian

:39:14.:39:22.

Assange, a deeply devisive figure, is now he is centre of an exorder

:39:22.:39:28.

knee -- extraordinary legal battle. He lost his battle in the High

:39:28.:39:32.

Court, and then he walked into the Ecuadorian embassy. The last week

:39:32.:39:36.

has confirmed a lot of what we know about Julian Assange and his

:39:36.:39:40.

organisation, which is they think they are above the law, whether

:39:40.:39:43.

laws about dealing and trafficking Government information, or whether

:39:43.:39:50.

you should be accountable to the same laws as the rest of them.

:39:50.:39:53.

women accused Julian Assange in Stockholm of sexual offences, that

:39:53.:39:59.

is why the Swedish authorities want to question him. Their lawyers say

:39:59.:40:09.
:40:09.:40:12.

with his asylum appeals he has created a diversion. What do you

:40:13.:40:18.

say to the women and their lawyers in Sweden that they should have a

:40:19.:40:26.

right to charge you? I haven't been charged. You have nothing to say to

:40:26.:40:29.

the two women? What has been said in public record is sufficient.

:40:29.:40:33.

Julian Assange says he's safer in the UK than Sweden, because it is

:40:33.:40:37.

hard for the US to extradite him from here, while he still faces

:40:37.:40:40.

judicial proceedings in Stockholm. Can he really avoid being put on

:40:40.:40:45.

that plane to Sweden? Exdor is still making up its behind --

:40:45.:40:50.

Ecuador is still making up its mind on his asylum claim, even if it

:40:50.:40:53.

does take him in, how does he get there, with the police poised to

:40:53.:40:58.

arrest him. If you think a solution to the eurozone's problems is

:40:58.:41:01.

elusive, how about the attempt to figure out whether a fundamental

:41:01.:41:07.

particle, known as the his bos son, sed said to be the Kiev figuring

:41:07.:41:13.

out the universe, even exists. What what have you been hearing? Towards

:41:13.:41:23.
:41:23.:41:26.

the end of last year we had the first tantalising glimpses of the

:41:26.:41:30.

Higgs Boson, it is the missing piece in a jigsaw of the standard

:41:30.:41:36.

model, where fist siss understand how the fundamental particles of

:41:36.:41:41.

the universe interact. If they can't find it they are in trouble,

:41:41.:41:44.

and they will have to re-think everything. We will have the

:41:44.:41:51.

results soon from SERN, smashing together beams of protons, two

:41:51.:41:58.

teams working separately looking in the debris to see can they find a

:41:58.:42:03.

sign of the Higgs Boson. These two teams have been gathering data at a

:42:03.:42:09.

high rate, more in the first few months n2012, than they did -- in

:42:09.:42:13.

2012, than they did in 2011. Next week we will get a significant

:42:13.:42:18.

update in the hunt for the Higgs. One respected scientist told me

:42:18.:42:21.

that what we will see is what anybody with any sense will regard

:42:21.:42:26.

as the real deal. I don't think they are going to announce a formal

:42:26.:42:30.

discovery that they found the Higgs Boson. The reason for that is an

:42:30.:42:33.

official discovery requires a level of certainty in their result,

:42:33.:42:41.

called a five sigma level, a five- star rating, last year one had a

:42:41.:42:46.

two-and-a-half-star rating, and the other three-stars, that is about

:42:46.:42:49.

three-stars. This time I'm told both teams have done better. Last

:42:49.:42:57.

year it was a two or three-star significant ma leak in each

:42:57.:43:07.
:43:07.:43:07.

experiment. Now I'm expecting four stars in each experiment. The

:43:07.:43:12.

calibrations from the teams don't want to collaberate their date tax

:43:12.:43:17.

they want to individually analyse the data until they individually

:43:17.:43:25.

get to the five-star level. Of course, we who are not members of

:43:25.:43:29.

the team, know we will get the computers out and do the

:43:29.:43:33.

calculation, I'm pretty sure we will conclude that the hix has now

:43:33.:43:40.

reached the level of -- Higgs has now reached the level of a five-

:43:40.:43:44.

star level. Have they found this thing or haven't they? They are

:43:44.:43:47.

holding back. The reason they are officially holding back, is to

:43:47.:43:52.

announce a formal discovery of the Higgs Boson is a really important

:43:52.:43:58.

moment in modern physics and they want to get it right. They are

:43:58.:44:01.

withholding as much more international politics as science,

:44:01.:44:07.

each team wants to claim discoverry, and neither wants to combine their

:44:08.:44:11.

teams, several countries has money behind one team, the UK has money

:44:11.:44:16.

in both teams and doesn't mind much if they have to combine data for

:44:16.:44:20.

the discoverry some want to wait until both teams have enough to

:44:20.:44:26.

claim the five-star rating. That won't come until later this year.

:44:26.:44:30.

Before we look at the front pages, here is an extraordinary image that

:44:30.:44:34.

has come too late for the papers, Nadal crashing out of Wimbledon in

:44:34.:44:39.

the second round to Rosol. A relatively unknown player who is

:44:39.:44:47.

ranked 100th. You don't see that very often. Now

:44:47.:44:54.

the front pages. The Times has RBS facing a �150 million fine as the

:44:54.:45:04.
:45:04.:45:04.

Apology for the loss of subtitles for 56 seconds

:45:04.:46:00.

That's all from Newsnight tonight, after almost 70 years, the

:46:00.:46:06.

surviving scam bomber Boys, finally saw a memorial unveiled in their

:46:06.:46:10.

honour today. We wanted to leave you with pictures of poppies being

:46:10.:46:15.

dropped from a Lancaster to commemorate the event, and a report

:46:15.:46:20.

on a real bombing raid in 1948. master bomber is calling again,

:46:20.:46:26.

giving us, once again, our height, our bombs are going, the flack is

:46:26.:46:29.

bursting under us, we are going over the top now, fire, I don't

:46:29.:46:35.

know how we can stand this, we are sinking with the flack. How steady

:46:35.:46:41.

and calm are the skipper and crew. Now the bombers are bursting there

:46:41.:46:47.

now flash, flash, flash, crash. I'm sorry, I tried to be contained,

:46:47.:46:51.

and steady on this commentry, it is more than I can do. It is a

:46:52.:47:01.
:47:02.:47:04.

staggering sight that we can see in the sky.

:47:04.:47:14.
:47:14.:47:23.

The storms have cleared away and tomorrow is cooler and fresher. For

:47:23.:47:27.

the Midlands it is noticably cooler today, the band of cloud in the

:47:27.:47:31.

south-east of England threatens to bring a little rain at Wimbledon

:47:31.:47:35.

tomorrow. A lot of cloud for the south west and Wales and the North

:47:35.:47:41.

West of eing lan. -- England. Northern Ireland, again a few

:47:41.:47:46.

showers around, but again, not as heavy or thundery as we have seen

:47:46.:47:49.

it today. In Scotland we will see quite a lot of cloud, showers

:47:49.:47:53.

across the central belt, and across the south west. It could be a

:47:53.:47:57.

little on the heavy side. Of course, it will be rather cool as well. We

:47:57.:48:07.
:48:07.:48:10.

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