09/10/2012 Newsnight


Is austerity still the answer for Greece? What would a BAE merger mean? And inside the parts of Syria still loyal to Assad. With Gavin Esler.

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Tonight, Greece gets a pat on the back from Germany's Chancellor


Angela Merkel, fork knuckling down to austerity. With more unrest on


the streets and the IMF forecasting a further downgrading in global


growth, is austerity still the answer?


The IFM now thinks it totally underestimated the impact of


austerity growth. Greece's former Finance Minister is here. The


Conservative Party Conference cheers plans to make it legally


easier to have a go at burglar Bill. Will changing the law have any


practical effect. We hear from the police minister.


The biggest defence and Aerospace merger is due to be decided


tomorrow. BAe and EADS could create a giant to rival Boeing. But at


what cost to our relationship with America. If you introduce European


Governments into that equation as well, American receipt since to


share intellectual -- receipt at this since to share intellectual


intelligence will be there. So many people have died in Syria because


of it. Because of terrorism! In ancient myths Sisyphus was


punished by the Gods, if would roll a boulder up a hill and when he got


to the top he would start again. And The person many Greeks blame


for the cuts in their living standards, German's Chancellor,


Angela Merkel, when she arrived in Athens today, she was greeted with


protests and hostility on the streets. The advise Tim came as the


International Monetary Fund published figures to suggest that


it may not just be the Greeks rolling a stone up a hill to no


effect. What is happening? They have put


out a statement saying the eurozone is the cause of acute instability


is the cause of acute instability in the world. We knew that. A few


hours ago they issued a forecast for the world economy, which we


will see as a turning point in attitudes. There is a growth


downgrade across the board they have forecast. In this country we


are going to say 0.4% shrinkage of the economy. We have suffered the


biggest downgrade in growth projections for any major economy.


But the IMF is also starting to basically put it about in politics,


it is saying to the British Government, you have to start


thinking about a plan B, abandoning your debt and deficit targets, if


things don't get any better than this. It said outright to the


American Government, that its planned, across the board cuts,


planned for next year, must be removed, or they will tank the


American economy, and possibly the world's. It is very political.


Especially with the American elections and implicit blame on


Congress. In simple terms, is this the high priest of austerity, the


IMF, saying it is not working? have just decided that their own


economics have been wrong for several years, that their maths are


wrong. Now, what it is about is how you calculate the impact of tax


rises and spending cuts, on growth. These are consult mult pliers. They


thought for every 1% of austerity you do, you lose about half a per


cent of growth. That is the British Government's methodology for


departmental spending. But they have said tonight it is more like


1.7%. That is not just a little bit more, it is in the opposite


direction. Instead of minimising the impact of austerity, as a


normal economy would, the current economic conditions aream plifying


it in a way they didn't --am plifying it in the way they didn't


think. They said you do austerity and you get growth, they now


realise you don't get growth and you can get a death spiral. There


is no country more in the grip of that than Greece. If the IMF


manages to change attitudes and its own attitudes, as a player in


Greece, there will be nobody more pleased than those who had to cope


with what we are about to show new Greece. Angela Merkel arrived, she


said, to support Greece, to support its progress on reform and


austerity. She did not find much support on the streets of Athens.


7,000 riot police were deployed, all demonstrations banned, the


square outside parliament cleared in the same old way. The Greek


Prime Minister said this weekend his country was facing a collapse,


democracy, he said, faces its greatest challenge, his coalition


had pledged to renegotiate the bail out deal, with softer conditions,


and more time to balance the books. But Mrs Merkel could offer none of


that. TRANSLATION: Despite the fact this is a difficult path, I think


it is going to prove worthwhile for Greece, for if you would not attend


to solving the problems now, they would recur at a later point in


time in a more dramatic way. many Greek, even away from the


trouble, it is dramatic already. 25% of them have had to join the


dole queues, and since the crisis, the economy has shrunk by 23%. A


country that was once peaceful and prosperous, is just depressed.


Greece is now going through a humanitarian catastrophe. The


social fabric of the country's is decaying, and may collapse. With


the huge number of homeless in the streets, with people shooting up,


with people looking into rubbish bins to get food and so on. The


place is collapsing. Two years ago, the IMF predicted that, despite the


cuts and tax rises, the Greek economy would now be growing, at 1%


a year. It is now predicted to shrink by 6% this year. Its debt


looks set to reach 171% of GDP by Christmas. And the EU, yesterday,


said Greece has until the 18th of October to implement a new round of


cuts, privatisations and reforms, only then will the 31 billion euro


bail out payment be repleased. problem, of course, if the money


doesn't come and there is no change in conditions, it is, first of all,


that everyone will get completely disillusioned with the Government


that promised they were going to achieve some negotiations in all


this, and come back with some goodies to show to the Greek


population that voted for them. The second is, they won't be able to


carry on as they are at present. I predict that at that point, if you


like, the things we have seen so far, in terms of protests, are


nothing by comparison to what we will see then.


But Greece's problem is no longer just economic. The far right party,


Golden Dawn, is coming third in the polls at 12%. Here, the activists


clash with police as they attempt to attack a migrant centre.


Meanwhile, strikes are everywhere. It was hospitals today. And Syriza


Party, the big far left party, that nearly won the last election, is


drawing a stark conclusion. When austerity come, democracy goes.


This is absolutely true in Greece. We have seen democracy


deteriorating all these years, three consecutive years. They


change the laws and when they don't change the law, they put the police


to do their dirty jobs, or they allow their -- the new Nazi party


to run the society. Today, the demonstrators brought in


some distinctly non-Neo-Nazi uniforms in fancy dress to make the


point. But worries about Greek democracy are widely shared. To be


in the European Union, you have to be a democracy. When communist


states wanted to join in the early 1990, they were shown the called


Copenhagen criteria, stable institutions, guarnteeing democracy,


the rule of law, human rights and the protection of my norts. There


is now growing concern -- my norts, there is growing concern inside and


out of Greece that the country itself may no longer meet them.


military won't standby and see all this happen. It is interesting for


me, the only way Greece can actually leave the EU is if it is


no longer a democracy. I suspect if the rest of Europe doesn't help


Greece, Greece will not be a democracy for long.


Greece is approaching some kind of end game, if the IMF, which


prescribed austerity, now says it should be taken in smaller doses,


no-one will heave a greater sigh of relief, than those trying to hold


this country together. George Papaconstantinou was the Finance


Minister of Greece when this crisis began. Let's start with the IMF,


first of all, what do you think is the impact going to be in Greece,


what we have heard tonight, which is the suggestion that austerity is


not working, simply not working? are in the fifth year of recession,


basically, growth stopped in 2008, since then we have lost a quarter


of GDP. And unemployment, as you reported, is about 23%, one in two


young people are out of job. 50% of young people is out of a job,


austerity is not working for you? It is clear that austerity by


itself cannot work. We are now beyond a point where you need to


find a way to get growth going again. Whatever you do, on


expenditures and getting revenues up. If your economy isn't growing,


it is a self-defeating process. That is where we are at the moment.


If that is where you are at the moment. Do you think Greek people


feel you are at the sharp end of an experiment going completely wrong?


I don't think there is any high mathematics behind the kind of


formulas that the IMF is using. It depends on a number of factors. For


example, are other countries growing, so you can grow by


exporting toe them? Is the confidence so the investors can


come into the country? At the moment we have not been able to get


rid of what people call a currency risk, people are afraid Greece will


exit the eurozone, so investors and assets out there are not coming in.


As long as we don't turn that, whatever we do on austerity won't


be enough. You have got to negotiate for the next tranche of


bail out money, which means negotiating for the next round of


austerity. I mean, the implication of that IMF report, one would have


thought, and you say the mathematics are not that difficult,


would be that the appetite for more austerity in Greece is absolutely


zero? Yes, because you have had wages being reduced by 40%, you


have had huge increases in taxation, and you have everyone hurting.


There is no question that, there has been an agreement, and we have


to pass these measures, but that is the first step into changing the


environment, whereby you then tell the European Parliament and the IMF


that we have done our bit. You need to help with debt sustainability,


there is a number of ways to do that, for example the money that


goes into the banks, the recapitalisation of the banks does


not count towards the national debt. The official sector agrees to also


participate, and some how get the level of the debt down. There by


you change the environment outside. So that the outside wall, the


investors -- outside world, the investors see you are out of the


hole you are in. Do you worry as a number of people in the film said,


that Greece's democracy itself is so fragile, the idea of the Neo-


Nazi party, and the far left, making a stance saying the


traditional parties haven't handled this, including your own party?


don't needing to to the extreme of what we have heard, that when


austerity comes in, democracy leaves. There is no question when


you started off with the kind of deficits and external deficits we


had, and you tried to put these into some kind of control, it hurts


everyone, it hurts everyone very badly extremes find a fertile


ground, and yes, indeed, at the moment, in the Neo-Nazi parties


polling third, that is extremely dangerous. I don't think we are


close to a coup, as some people seem to believe here. Because the


military wouldn't want to takeover that kind of mess? We do have a


stable democracy, but we are very close to the kind of social unrest,


after which you don't know where it will go. And whoever is looking at


Greece, at the whole problem, cannot simply look at where weather


the targets are met. Most of the tarts have met. We have done more,


in terms of austerity, than any other country, in the modern rather,


in a short time. We have to go beyond that, in that context we


have to take account of what is happening to the democratic process


and the social tensions in the country. Forgetting the politics of


it, as a Greek man, are you really worried about the future of your


country right now? I'm worried because I see young people that


think there is no future. I'm worried because I see


disillusionment, and I'm worried because people don't see the end of


the tunnel. It is a shame, this country has tremendous potential,


great people, fantastic natural resources. Its geopolitical place


in the world is excellent for growth and prosperity. It needs to


be given a chance. It has proven over the last two years that it is


willing to do what it take, even though it hurts. Now, it was, as


one observer suggested, tough- talking Tuesday, at the


Conservative Party Conference today. Everything from immigration and


Europe to burglars and other law and order issue, the Conservative


leadership were pretty conservative. Victims of anti-social behaviour


may in future be able to choose suitable punishments for tormenters.


Homeowners may find it less legally problematic if they tackle burglars


in their own homes. This all heads up for the Prime Minister's big


speech tomorrow. We have had some sight of the Prime


Minister's speech tomorrow. Obvious low it is all subject to rather


tedious embargos, what we will be talking about tomorrow evening is,


firstly, his speech will have a message that the coalition is the


only group in town who are determined about bringing down the


deficit. That's pose supposed to highlight the fact that last week


the lead -- that's supposed to highlight the fact that last week


the leader of the opposition gave a speech and never mentioned the


deficit once. It is supposed to highlight the difference in


seriousness and the coalition is the only group to do anything about


it. What we will be talking about tomorrow, I think, is this is a


speech different in tone than many others have come before, it is very


personal. It is the seventh speech that the Prime Minister, as was


leader of the opposition, and for two years as Prime Minister has


made. It does feel like there is elements of his background we are


learning for the first time, certainly in speech form. We will


discuss that tomorrow evening. We will also discuss what they won't


talk about in the speech, which is what we call in politics, the


process of everything, which is why they are reaching out in the way


they are. They have been in Government for two years and they


are shifting the message, it is more about the strivers, what they


call blue collar Conservatism, it is about those who want an emphasis


on crime, welfare and immigration, it is not to say the party is going


right-wing, many will say that, it is a central concern for lots out


there, it is saying, and perhaps in the past the Government hasn't


talked about it enough. We have done what the Conservative managers


don't really want us to do, which is to look at the methodology and


process behind it, and the strivers and blue collar Conservatism. In


the first two years of the coalition this chap, Burglar Bill


might have thought he was operate anything a benign climate. If you


found him on the other side of your front door, you might have felt


helpless. When we woke up in Birmingham this morning, we had


gone back to basics, batter a burglar, the Sun announced.


Householders acting instinctively and honestly in self-defence, are


victims not criminals. They should be treated that way.


APPLAUSE That is why we are going to deal


with this issue once and for all. I will shortly bring forward a change


to the law. It will mean that even if a householder, faced with that


terrifying situation, uses force, that in the cold light of day might


seem over the top, unless their response is grossly


disproportionate, the law will be on their side. Except the first


figures available show that from 1990 to 2005 there were 11


prosecutions against people defending their property. Of those


only seven were domestic burglaries. Grayling's move poses philosophical


questions, but on the numbers alone, it is clearly a signal, not a


seismic shift, for those involved in the every day fight against


crime. Battering burglar, wap loling the welfare budget,


emulating the immigration, lots of policy speeches, not that much


substance right now. The Conservatives are trying to subtley


move on to an agenda more about the every day concerns of most people's


lives. Like life on the street like this. In the past people used to


talk about whether the party would go off to the right or TUC into the


centre. Actually, the -- tuck into the centre. Actually the public's


views on crime are very tough, same on welfare and migration. The


question for the Conservatives in terms of get to go the centre, is


about what they are going to do for people on low incomes, what they


will do about things like jobs. That is the balance that the party


is trying to strike. They know a lot of their positions, like being


tough on crime, are very popular. They have been trying to balance it


out, and talking about the strivers, talking about people working hard


on low incomes. That is where they needing to to next. The challenge


for them, against the background to do things different, are big enough


things that cut through in the public and they notice them. In her


speech today, Theresa May, the Home Secretary, for the first time, made


explicit the link between bringing down immigration levels and the


positive effect that would have on people's wages. By the way, Labour


knew exactly what they were doing. According to the John Cruddas, Ed


Miliband's policy chief, Labour were using migration to introduce a


covert 21st century incomes policy. That's right, Labour, the party of


the working man and woman, admit that they deliberately used


immigration to keep down British wages. So we will reduce and


control immigration. Though their means for doing so controversial


and not proven to work yet. This is why Boris might be more than just a


pretty face. As the Mayor of London arrived to titilate conference, it


was his article yesterday, calling for much more house building, that


resonated with senior Conservatives. The bore business bandwagon may


have rolled back to -- Boris bandwagon may have rolled back to


London, but his threat remains. Those close to Cameron believe that


unless they tackle house building they will struggle with strivers,


and Boris Johnson knows that. Last week Ed Miliband laid claim to the


one-nation Disraeli mantle, today Conservatives are grumbling about


that. They say Miliband can't be Disraeli's disciple, because he


took on the vests interests in Victorian Britain, and Miliband's


interests are unions and public sector workers, until he knows he


will face them down, he can't claim to be the heir to Disraeli. David


Cameron's claim to be a modern-day Disraeli is also in the balance.


Disraeli tried to break down the boundaries between the haves and


have nots in Victorian Britain, for David Cameron today, doing exactly


like, pumping up the chances of the have-nots is in question. That is


why they are talking in this conference about the strivers.


start of David Cameron's modernisation of the Tories, people


would have said they were backward looking, the polls said he didn't


like migrants and gay people, he has dealt with those challenges,


but there is a lot of negative things he has inherited from the


past, and one is that it is a party for the rich and it doesn't care


about people working on low income. That is why they are talking about


the strivers. They have dealt with one set of challenges, but they


have such baggage from the fast they have to deal with that. When


they return to London the Conservatives' task is tough. If


catching burglars is so central to the new no-nonsense Tory offer,


many strategists and non- strategists alike, regard it to be


monumentally unhelpful, that one of their number called policemen


"plebs", even Burglar Bill would stop there, he has become a striver


at the end of his story. We have the police minister joining


us from the conference in Birmingham, Damian Green, in terms


of homeowners and burglars you have aprepared to help everyone, if


there is only one problem every two years? There may not be many


prosecutions, but a lot more people may have been arrested and never


brought to proskueing. Each one of these prosecutions does give rise


to a sense of huge unfairness for people. These people are victims of


crime and then they become criminalised. What Chris Grayling


announced today was clearly designed to shift the balance in


favour of the householder, and against the intruder. Because this


is not people taking a decision calmly, these will be people in the


heat of the moment, they will be frightened, they will certainly be


angry. And so what we are saying is you will only be doing something


illegal if it is grossly disproportionate. I think that does


move the balance sensibly. The Home Secretary, Theresa May, said today


that you are the party of law and order. But, surely you would expect


the party of law and order to have reasonable relations with the


police. And relations between you and the police right now are


appalling? Well, I have just done a number of fringe meetings today,


including one this evening put on by the Police Federation, with ACPO,


chief police officers organisation there, and the superintendant. We


all agreed that we are doing one of the biggest public sector reforms


ever, certainly one of the biggest reforms to the police ever. Cutting


by 20%? To welfare and education. We are doing it against the


background of a very tough financial crisis which we inherited,


very bad public spending numbers. Of course there are stresses and


strains. These are absolutely the necessary reforms we need to make


sure that the police can become ever more professional, and can


provide an ever-better service. The backdrop to all of this is crime is


falling and victim satisfaction is rising. So, actually it is not


unreasonable. That is because there is a lot more police on the streets


than there will be. For example, the idea that Vic imits of anti-


social behaviour should be allowed to choose -- victims of anti-social


behaviour should be allowed to choose the punishments, Theresa May


was talking about that. Isn't it to stop people becoming victims of


crime, that is why people like bobbies on the beat? People like a


lot of things, they like an attack on serious and organised crime,


that is why we are setting up the National Crime Agency, to make us


more effective against that. There are many ways in which you can


release police to do the job we all want to see them doing, actually


fighting crime. We have taken out millions of hours of form filling


from the police. It is the equivalent of adding more than


2,000 extra police on to the streets. So the way you organise


the police is important. The way the police are run is important,


that is why we have the elections next month for police and crime


commissioners, so local people, for the first time, will have a say in


how their local police force is run. Should we read what happened today


as the end of the hug-a-hoodie period of the cabinet


administration, and it is now back to "prison works" and other simple


Conservative ideas? The appeal of the Conservative Party at its best


is it chimes with the instinct of the British people. It is perfectly


possible and politically coherent to care about the NHS and to care


that immigration is high -- too high, to care about law and order


and to worry that welfare should help people who want to help


themselves, the strivers everyone is talking about here this week.


That's a very traditional set of Conservative values, which people


can hold on the left or the right- wing of the party. Just a final


thought. Did it help you and your relations with the police that


Andrew Mitchell didn't turn up at the conference today? Andrew, what


he did was wrong, he has apologised for it. The police officer he had


the row with has accepted the apology, everyone has moved on from


there. Indeed the police representatives at the meetings I


was at today were saying that. There were big important debates to


be had about the future of policing. We have all moved on from that.


the two high-tech giants BAe and EADS, should, tomorrow, be on the


way to becoming a unified European defence and Aerospace giant, but


there are reports that the deal is on the brink of collapse, because


of concerns from the French and German Governments about what the


deal means for them. Supporters of the merger say BAe will help win


sales in America, while EADS concentration on passenger


airliners compliments BAe as defence work. Opponent of the plan


worry that Britain is, yet again, selling off the family silver.


In the hey day, this was the cutting edge of aircraft


manufacturing, 18,500 planes were builter, now broke lands is a


museum. Perhaps -- Brooklands is a museum, perhaps this monument to


the past could be a warning to the future. If you want to see the


impact of megaindustrial mergers, come to the Brooklands Museum in


Surrey. This place used to make DC- 10s, Harrier jump jets and Concorde.


When they merged with BAC to form British Aerospace, this place


became surplus to requirements. It is almost inconceivable that BAe


systems and EADS, will keep factories open in all four


countries, so the political horse trading begins. At the moment there


are four factories around Europe where Typhoon aircraft are finally


assembled and flight tested. The idea you can have duplication


across Europe in the manufacturing of the aircraft and the major sub


systems, that must be a thing of the past. In Brussels to underline


the importance of the tie-up, defence ministers from Britain,


Germany and the US met at the summit. Britain's Defence Secretary


added to the air of expectancy? companies now have a very clear


understanding of the positions and the red lines of the Governments


involved. I understand that the companies have gone into board


meetings now, that started half an hour or so ago, they will go on


possibly for some hours. They will make the decision whether they


think that the parties are close enough together to warrant seeking


an extension of time from the Stock Exchange. At stake is potentially a


$45 billion defensive Aerospace giant, building some of the


politically most sensitive kit in the world. Mostly made by BAe


Systems, it is said to be the junior partner to EADS, mostly


French and German. EADS owns Airbus, the largest commercial plane maker


in the world. Just as civil aviation orders are bloom booming.


The Object is to bring together the different skills countries have to


build a better product. The other advantage is build a European


company to compete with Boeing. It is the role of governments that


intrigues most. The French Government owns 15% of EADS and has


strong input into decisions. Daimler owns 15% and the German


Government has clout there. The UK Government will block any takeover


of BAe systems using its single, But the real king maker or breaker


is the American Government. At over $700 billion a year, US defence


spending dwarfs every other country, and they are careful about who


building their aircraft and submarines. BAe does 50% of its


business with the Pentagon, only because its American division is


almost fully hived off from the European business. We have


developed, over time, a good relationship with the United States.


There will always be some issues of intellectual property, the


relationship the UK has with the United States minimises those


difficulty. If you introduce -- difficulties, if you introduce


European Governments into that equation as well, the Americans


will be more reticent to share information. Shareholders are


decidedly lukewarm, Invesco is concerned about the level of state


shareholding in the combined group will result in governance


arrangements driven more by political considerations than


shareholder value creation. Not everyone is down on the deal. The


respective chief executives, Tom Enders end and Ian King would be


big financial winners. We were told the managers would be the only


winners. Normally in mergers you get winners and losers, and you get


winners and winsers, this is a unique deal with everybody loses.


Except the management? If the tie-up collapses then senior


management in both companies may have questions to answer F it does


proceed, it will be in it the teeth of most major shareholders. All


stakeholders will want to avoid the companies ending up in the museum


of formerly great industrial players.


My guests are with me now. I wonder what you are hearing, does


it sound as if the deal is on the brink of collapse and can't be done


by tomorrow? I very much doubt that it could actually be done by


tomorrow. We will have to wait and see whether the companies deciding


to for a two-week extension under the UK takeover panel rules, or,


indeed, call it a day. The jury is out on it. They are probably still


discussing the facts in front of them, as we speak. They will


announce one way or the other tomorrow. Why do you think that


this dole is in the interests of Britain? I think we have to look


forward. Here we have two very large and very large companies. One


a global player in the defence industry, with many home markets,


not just the UK, and one who is the largest commercial aircraft


manufacturer in Europe. They want to come together, because they want


to grow together on a level playing field, and compete with the best in


the world. They are also looking at the future, in terms of the


technology that they can create together. The investment that they


can create together, and indeed the jobs and growth that will follow


from that investment. This is locking long-term, this isn't a


short-term decision, based on jobs or consolidation, this is two


companies with very little overlap coming together, if they can.


The advantages in the long-term for Britain are what you have just


heard? I'm not sure they are those advantages. They are advantages for


those firms, but there are bigger security issues at stake in this. I


think absolutely the Americans will be very concerned by this. I think,


for example, I signed an agreement with an Admiral about exchange of


nuclear information for nuclear submarines, the next follow-on


submarines who replace the Tridents, the Americans have brought forward


a missile compartment that will be shared between the nations, they


are not willing to do that with the French or the Germans. Our


relationship with the Americans in defence terms is very important.


Does it outweigh the long-term strategic planning for these two


major corporations? It is interesting them talking about


long-term strategic planning. The BA board sold 30% shares in Airbus


six years ago. When I raised the question of why are you doing it, I


was told I didn't understand, a sailor like me, they need money to


buy firms in America and show we are separate from Europe, so the


Americans will accept us there. Now, suddenly, six years later, they


seem to have changed. I'm not so sure about the long-term views he


might have. It is a simple fact, isn't it, that the Americans trust


the British a bit, and don't trust the French and Germans at all. Idea


of some kind of synergy is perhaps a bit pie in the sky? It is


certainly true the Americans and British have a very strong


relationship, but remember EADS has sold into the US helicopters, and


it is building that relationship slowly. But your guest is


absolutely right, that the political implications from the US


have to be taken into consideration here. We don't know what those are,


because they have kept very quiet, until there is a formal deal,


actually put before them. It will be complicated. And it has to be


settled. We do have to look forward, and Europe, in this case, will


probably do a lot better by standing together. Remember, too,


that the US, whilst they are our allies and friends, and we have


done and continue to do a lot with them, have not necessarily given us


the freedoms over here we would like in the UK. I have to say, also,


the way the whole thing has been put together. Invesco, it is


amazing, they are very good investors, they hardly had a talk


with the chief executive. I think there was a 90-minute discussion


with the CEO. It seems pushed together, only a number of us have


come out of the wood work and said, hang on, there are real


implications here, real implications about how it is put


together. Real concerns by some of the shareholders, it does seem to


have been rushed a bit. I think there is a sub plot as well, there


are a lot of people in Whitehall, some politicians, like the Deputy


Prime Minister, Clegg, who see European defence as the thing.


Until European defence changes, I can tell you, that is not a defence.


That will not defend you, and the Germans and French are about to


stop buying military qipt, no wonder EADS are keen to get in the


UK, because we don't spend enough on defence, but we spend something.


The Americans still spend a lot. agree we don't spend enough on


defence. The way ahead is affordability, the Government is


forced into the position it is. It is not just here, it is in the US,


Germany and France, all concern nations. We have to adapt and


change to the new conditions in front of us. As far as Invesco is


concerned, they are a shareholder today, they may not have been a


shareholder yesterday. There is a long history of disagreements


between Invesco and BAe Systems, let's not draw too many conclusions


about the particular spat at the moment. They are entitled to a view.


One of the complication in the Syrian conthribgt there are over


the last 18 months, that is -- conflict over the last 18 months,


that is however inconvenient it is for the opposition, Bashar al-Assad


does have support among Syrians. Much of the western areas of Syria


remains untouched by violence. It is the presidential ancestoral home


of the President. Another day dawns along the


Mediterranean. It starts slowly, peacefully here.


The only fighting on this part of the Syrian coast is between friends


on jetskis. Welcome to La Tachia, long a place of holiday for Syrians.


Now they are coming here from embattled cities, in if search of


refuge. There is an ease on the streets here you don't find in many


places any more. I arranged to meet a group of young


students from lackia, they come from mainly -- Latakia, they come


from mainly religious and ethnic groups. There is no trouble around


this table, the friends say they are one big family of the listen to


them, it is hard to believe war is raging about an hour's drive away?


Here is peaceful place. It is so fantastic this place, I like my


town. What if they say to you, it is too dangerous to come to Syria?


No, no. You can see in the streets, people shopping and playing and


nothing. There is nothing happening, no problem here in Latakia, they


say there is a problem like in Damascus, for example, it is not


the whole of Damascus. One area, Aleppo, not the whole city.


But this place isn't shut off from the rest of the country. When


Syria's uprising began some 18 months ago, there were also


protests here in the main square in Latakia. But they were forcefully


put down. Aside from an occasional demonstration, or an explosion


since then, this remains one of the most peaceful areas in all of Syria.


The authorities are determined to keep it that way, because this


region is too important to lose. The long shadow of the Al-Assad


family falls across this region. It is not just their political


stronghold, it is their ancestoral home. The heartland of their


Alawite sect. Like the rest of Syria, this city is mixed. Here the


Alawites are a large minority. This is the kind of demonstration they


allow here. A pro-Al-Assad rally in the city centre. It is organised by


a local youth group. They call themselves the Stand Firm


Volunteers. Why do you support Bashar al-Assad? Because it is the


President's world, a very good President in the world. Some say he


should step down and lose power? The people who say that are


terrorists. We don't believe that, he protects us, all people like


Bashar al-Assad. So many people have died in Syria over the past 18


months? Because of terrorism. That's what you often here, they


defend the President, because he defends them.


They brandish photographs of him, and his powerful brother, Maher,


who commands the elite Republican Guard. In the governor's office,


too, there is a photograph of President Assad and his late father,


on every wall. Their Intelligence Services keep a close eye on


everything here. Governor Suleiman Al-Nasser is the President's man in


the county, I ask him about what's going on. TRANSLATION: The security


here in Latakia is normal, there can be plots to harm the people of


Latakia, and like in any country the Security Services will


intervene to protect the regime and rule of law here. Drive into the


mountains above Latakia, this is where people are defending the


regime with their lives. These are Alawite lands, these poor villagers


are providing foot soldiers in the war. There is a funeral almost


every day here. But there is still powerful support for Al-Assad's


rule. He's one of them. The Al- Assads are also buried in these


hills. We were given rare access to their mausoleum in the town. A


monument to a dynasty, that has dominated Syrian life for nearly


half a century. From poor Alawite roots, Hafaz Al-Assad died as


Syria's all-powerful President, even in death he looms large. His


son succeeded him with talk of reform. Now it is often said he's


under pressure to preserve his father's legacy, a leader who rules


with an iron fist. The town of quiet the day we


visited. Since then, there have been reports of clash between


leading Alawite families, including the Al-Assads, variously portrayed


as a feud over money, power or the President's rule. Whatever it is,


it is a measure of growing unease over the high price this community


is paying in this war. This region is still regarded as the


President's last redoubt. There is even speculation it could form a


brokaway Alawite state, stretch -- a breakaway Alawite state,


stretching from the mountains to the sea. The war is reaching some


parts of the coastal region. This amateur region claims to show


destruction in mountain village, up towards the Turkish border. These


mainly Sunni enclaves have seen heavy fighting, some are now


controlled by members. -- rebels. Syria's war is often described as a


sectarian conflict. But the regime itself is accused of playing the


sectarian card, stalking fear and arming Alawites elsewhere in the


country. This man wants his identity hidden.


An Alawite, he has long been in opposition, does he see it as a


sectarian conflict? TRANSLATION: course it is not. This is the work


of the regime from. The very beginning it has been trying to


create a fear among the Alawites, to make them align with the regime.


They are not going to succeed. Latakia is regarded as an Alawite


stronghold, a very strong bastion of support for President Assad, how


would you describe it? TRANSLATION: portray, I see it as the opposite.


With all the work to make it a sectarian issue, there hasn't been


a INGle sectarian attack against all law woits. That is what they


want to observe here. This man, Nuhad Abdallah, a leading academic,


says diversity is to be celebrated, not feared. This is Jesus Christ,


this is Christ in a house of one of the Muslims. He bristles when I ask


about his Alawite roots? The issue is not Sunni-Alawites, I can assure


you very much. Most of my friends, you know, are mixed. The grandson


of 130 years of marriage between Alawites and Sunni. Inherited from


this family, so that means we have, we don't have that issue.


Many in this city, still hold on to a Syria of old. The secular mosaic


that helped define a national identity. Other parts of Syria


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