09/10/2012 Newsnight

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