03/09/2014 Newsnight


03/09/2014

In-depth investigation and analysis of the stories behind the day's headlines, presented by Laura Kuenssberg.


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- western lead remembers under pressure on multiple fronts. NATO

:00:28.:00:34.

must make a decision on forces to protect Ukraine.

:00:35.:00:37.

It feels like back to the future with NATO with all this talk of a

:00:38.:00:41.

Russian threat, on that issue and ISIS, moving beyond strong words

:00:42.:00:53.

won't be easy. Rich man, poor man, how long will Germany be prepared to

:00:54.:00:57.

put up with less frugal neighbours in the eurozone. We will hear from

:00:58.:01:02.

both sides. I think a party run by an out-of-touch elite. Are they

:01:03.:01:06.

really? We will ask these two what they make of Douglas Carswell's

:01:07.:01:11.

scorn for the Tory leadership. Ship and the rest.

:01:12.:01:26.

Squeezing IS out of existence is David Cameron heaps, but deciding

:01:27.:01:31.

how to do so presents a nightmarish set of decisions. Yet British

:01:32.:01:34.

military action could be loser than we think. Newsnight understands that

:01:35.:01:39.

ministers are already considering plans to join American air strikes

:01:40.:01:43.

targeting IS in Syria, potentially without asking parliament first. Yet

:01:44.:01:49.

a simple military response seems unlikely to deal alone with the

:01:50.:01:52.

complexity of the problem. Achievable, perhaps, only by talking

:01:53.:01:56.

to those who were previously our enemies. One former British

:01:57.:02:00.

ambassador tells us tonight talking to Assad may be the only way. Er

:02:01.:02:16.

James Foley and Sotloff, pictured here in life and not in the horror

:02:17.:02:20.

of their death. A small dignity afforded to victims of a desperate

:02:21.:02:26.

situation, one where the west appears impotent to further horror.

:02:27.:02:30.

The next turn could be the spectacle of a British Jihadi killing a

:02:31.:02:33.

British hostage. David Cameron said there would be no

:02:34.:02:38.

kneejerk reaction. Today in parliament neither he nor Ed

:02:39.:02:44.

Miliband even mentioned military intervention. If I may say the way

:02:45.:02:48.

the leader of the opposition is approaching this is entirely right.

:02:49.:02:51.

We should see this crisis as one where we are there to help the

:02:52.:02:55.

people on the ground and the countries in the region that want to

:02:56.:02:58.

solve this crisis. We should not see this as one where it is a

:02:59.:03:06.

western-led intervention some how. Newsnight understands that the mood

:03:07.:03:09.

behind the scenes is stiffening and there is a growing, if reluctant

:03:10.:03:15.

realisation that Britain may have no option but to intervene militarily

:03:16.:03:19.

in Syria. This new strategy is driven by three people, David

:03:20.:03:23.

Cameron, a man called Hugh Powell, who has quietly become one of his

:03:24.:03:32.

most cocilliaries and Alex Hammond the man at the front. There is a lot

:03:33.:03:44.

mentioned at Whitehall that he should followies instincts than

:03:45.:03:47.

those around him, which I think he should. When Alex Hammond says we

:03:48.:03:52.

won't rule out air strikes by definition they are on the table? I

:03:53.:03:57.

think so. The new hawkishness is coming out in COBRA meetings, Alex

:03:58.:04:04.

Hammond harangued the generals over how to get the jets to the regions,

:04:05.:04:10.

needing for time to iron their shirts. There are mini-COBRA

:04:11.:04:15.

meetings convened by David Cameron. Who controls Syria is not easily

:04:16.:04:22.

defined. This map shows how IS forces occupy a swathe of northern

:04:23.:04:29.

Syria. The Free Syrian Army and al-Nusra have strongholds in the

:04:30.:04:33.

west, Kurdish forces control parts of the far north and then there are

:04:34.:04:37.

areas, including around Damascus where control is often ambiguous. If

:04:38.:04:42.

there were air strikes they would likely be targeted around the IS

:04:43.:04:48.

stronghold of Raqqa, where hostages are believed to be being held. As

:04:49.:04:52.

well as other command and control centres co-ordinating the violence

:04:53.:04:55.

in Iraq. He has taken his time about it, but

:04:56.:04:59.

President Obama has finally started to privately lobby Governments,

:05:00.:05:03.

including our Government, for military support. He believes that

:05:04.:05:08.

you have to strike ISIS at source in Syria. But there is a problem, where

:05:09.:05:12.

as in Iraq the Government has asked for help, that is not the case here.

:05:13.:05:18.

So he is looking to build a broad coalition to help him legitimise any

:05:19.:05:25.

air strikes. But what about shaking this hand? For some it is time to

:05:26.:05:32.

think what was once unthinkable. A deal with Syrian President Assad.

:05:33.:05:37.

The alternative to Assad at the moment is not a democratic Syrian

:05:38.:05:42.

Government, but an Islamic state. That would not be in the wider

:05:43.:05:45.

interests of the Middle East. So we have to hold our noses and talk to

:05:46.:05:50.

Assad? I would say so, but I understand the difficulties.

:05:51.:05:54.

Memories of last year's chemical weapons attacks by the Assad regime

:05:55.:05:58.

are too fresh for the Prime Minister to consider that. But unlike a year

:05:59.:06:04.

ago he no longer believes he needs the authority of MPs to authorise

:06:05.:06:09.

immediate military action. Barack Obama, who arrived in Britain this

:06:10.:06:13.

evening for tomorrow's NATO summit has made clear he's not going into

:06:14.:06:22.

Syria on his own. I'm joined by Andrew Mitchell from the

:06:23.:06:25.

Conservatives and the Labour MP, Peter Hain, both former cabinet

:06:26.:06:29.

ministers and both who voted in favour of intervention in Iraq in

:06:30.:06:32.

2003. Andrew Mitchell also voted in favour of military action in Syria

:06:33.:06:36.

last year. And with us from New York is the political columnist and Obama

:06:37.:06:41.

observer for Time Magazine, Joe Klein. Thank you for being with us.

:06:42.:06:46.

You told the House of Commons today that ISIS won't be beaten unless

:06:47.:06:50.

there are air strikes in Syria, should the UK and the US be doing

:06:51.:06:55.

this now? The only reason ISIS have been pushed back in northern Iraq is

:06:56.:07:00.

because of the air strikes there. Otherwise they were running amock,

:07:01.:07:05.

frankly, with all their mayhem and medieval barbarism, but their base

:07:06.:07:10.

is in Syria as well. If they were to be pushed and there is no certainty

:07:11.:07:14.

that this will happen out of Iraq by the Iraqi forces in the main, then

:07:15.:07:18.

they will simply regroup in Syria. So there has to be action in Syria,

:07:19.:07:24.

but I also said that it has to be with the engagment of the Assad

:07:25.:07:29.

regime, however unpalatable that may be, also Iran and the Saudis as

:07:30.:07:33.

well. You have to use this opportunity to try and get the key

:07:34.:07:39.

regional players to tackle the fundamental fault line in this

:07:40.:07:44.

region, which is the Shia-Sunni divide of which ISIS are the most

:07:45.:07:48.

extreme on the Sunni side. On air strikes how can you be sure that

:07:49.:07:53.

they wouldn't just destablise such a complex situation further. Simply in

:07:54.:07:58.

terms of the geography. As we saw in Nick's report, they are spread out.

:07:59.:08:02.

How could we be sure the strikes would be effective and what makes

:08:03.:08:06.

this worse? You have to do this with great deal of care. The start of

:08:07.:08:11.

your programme suggests we are rushing in tomorrow, I doubt that,

:08:12.:08:16.

and I would counsel against it. It has to be done with great deal of

:08:17.:08:21.

care, and not that Britain play cowboy in the region, but joins with

:08:22.:08:26.

the regional force, ISIS is a bigger threat to them than us. You are

:08:27.:08:31.

articulating the case for western air strikes alongside that

:08:32.:08:36.

engagment, is that what your leader, Ed Miliband advocates? We are all

:08:37.:08:40.

saying on the Labour side that something has to be done to stop

:08:41.:08:44.

ISIS, that should include military action, not on our own and

:08:45.:08:47.

unilaterally, not just rushing in. But supporting the Government if

:08:48.:08:51.

they come up with a careful plan, including air strikes? If Ed was

:08:52.:08:55.

consulted and it seemed a reasonable plan he would go along with it I'm

:08:56.:09:01.

sure, but not grandstanding by the Prime Minister over Syria in August

:09:02.:09:08.

like that, and he rightry lost that. You have made an eloquent case

:09:09.:09:12.

arguing strongly that the UN has to be in the lead here? This is a

:09:13.:09:16.

complex situation. I think that nothing should be taken off the

:09:17.:09:20.

table, I agree with virtually everything Peter has said, but we

:09:21.:09:23.

need to engage the regional powers and we need to engage more widely

:09:24.:09:26.

than that. That is why I think it is exthrum important that Britain uses

:09:27.:09:32.

its position as the current chair of the Security Council, uses its

:09:33.:09:36.

position to try to galvanise the UN into taking action. This is not a

:09:37.:09:40.

problem, it is a multifaceted problem, but it is not a problem

:09:41.:09:43.

that will be resolved by action just by America and Britain and it is

:09:44.:09:47.

certainly not a problem that will be resolved by smart weapons being

:09:48.:09:51.

delivered from 12,000 feet. If you look at precedents where the UN has

:09:52.:09:57.

tried to take intervention. Look what happened in Syria last year?

:09:58.:10:02.

Russia would surely veto any kind of move towards this by the United

:10:03.:10:06.

Nations, would they not. What gives you any hope at all that Putin, in

:10:07.:10:09.

his current mood, would be supportive? Well the United Nations

:10:10.:10:14.

is a hugely frustrating organisation as I wrote in this piece today. They

:10:15.:10:17.

were virtually complicit in the genocide that took place in Rwanda,

:10:18.:10:21.

but when the United Nations moves, when it gets it right it confers an

:10:22.:10:27.

awesome authority on the decisions that it is able to take. And this is

:10:28.:10:31.

such a major problem now in the Middle East that we need the sinews

:10:32.:10:37.

of the United Nations heavily involved in any resolution that will

:10:38.:10:40.

take place. It won't happen overnight, it will take a lot of

:10:41.:10:45.

negotiation, the great powers will move the position they are in during

:10:46.:10:49.

that time but not something that will be resolved in short-term. Even

:10:50.:10:52.

if the United Nations were able to get some agreement, as you

:10:53.:10:55.

acknowledge, it would take a long time. With the Prime Minister saying

:10:56.:10:58.

that right now this is a direct threat to the UK, are you willing to

:10:59.:11:02.

put British safety and what happens here, the threat to our streets in

:11:03.:11:07.

the hands of a tangled, frustrating bureaucracy like the UN? Absolutely

:11:08.:11:12.

not. Of course Britain, as part of NATO, may play a role, but I think

:11:13.:11:18.

that the United Nations confers an authority, the United Nations is the

:11:19.:11:23.

right organisation for us now to try to make significant progress and

:11:24.:11:26.

Britain has a key role to play through our diplomatic region and

:11:27.:11:30.

our role in the United Nations in trying to galvanise opinion across

:11:31.:11:33.

the region and the world focus on this very serious problem. Does

:11:34.:11:36.

President Obama have any faith in the UN being able to grasp this

:11:37.:11:42.

problem? I think he would like to have faith in the UN, but I don't

:11:43.:11:47.

think that any rational observer in the region can really have all that

:11:48.:11:50.

much faith. Although I agree that we should make that move. There are

:11:51.:11:56.

other moves that are far more important and those involved, the

:11:57.:12:03.

regional players there are on Iraq, which has already said that they

:12:04.:12:08.

wish to co-operate with us. The Arab League, I think that as one of the

:12:09.:12:15.

guests in London said that ISIS is a threat, a greater threat to the

:12:16.:12:21.

region than it is to us and I would hope that we would be able to put

:12:22.:12:29.

together a regional coalition with US, UK and some European support to

:12:30.:12:34.

take action in this case. But measured action. I think it is

:12:35.:12:38.

really clear, it has to be really clear to the American and British

:12:39.:12:44.

public that we are not talking about a cowboy, George W Bush, send in

:12:45.:12:51.

huge numbers of troops and overrun Iraq again type of operation. For

:12:52.:12:55.

this to work it has to be very targeted air strikes and the use of

:12:56.:12:58.

special operators on the ground. How close, therefore, given what you

:12:59.:13:02.

describe as President Obama's ambition for a coalition of the

:13:03.:13:07.

willing, if you like. How close do you feel he is to actually making a

:13:08.:13:11.

decision that he must act? Because the view of so far has been

:13:12.:13:16.

prevarication, real difficulty with taking a decision? Well I think that

:13:17.:13:23.

you have to remember that even George W Bush took over a month to

:13:24.:13:31.

react to 9/11. And the Afghanistan operation really should be a model

:13:32.:13:36.

here. Because it was very few boots on the ground, the strategic and

:13:37.:13:45.

tactical use of air power and against a rather weak a less

:13:46.:13:51.

daunting enemy than ISIS. It was an action that went on for years and

:13:52.:13:55.

years and years? And that is in part because it didn't remain a targeted,

:13:56.:14:02.

measured, Special Forces-led effort. I mean a lot of that has to rest on

:14:03.:14:07.

both Presidents, Bush who increased the troop levels and Obama who

:14:08.:14:12.

significantly increased the troop levels in Afghanistan. I think that

:14:13.:14:18.

the era of you know western powers launching massive assaults on

:14:19.:14:23.

Islamic countries really has to end. It has ended. Andrew Mitchell if

:14:24.:14:28.

action were to be taken without a vote in parliament what do you think

:14:29.:14:33.

the reaction would be? We have all cast our minds back to this time

:14:34.:14:37.

last year with the vote in parliament, could it happen without

:14:38.:14:39.

a vote taking place? I don't think you require a vote for certain types

:14:40.:14:43.

of military action. I think the Government would be wise to ensure

:14:44.:14:48.

that any action they take is supported by parliament, it would be

:14:49.:14:52.

a big mistake to ignore parliament in this. Peter Hain, possible

:14:53.:14:57.

without a vote in parliament? It depends what it is, if it is a

:14:58.:15:00.

question of rescuing hostages we don't need a vote in parliament, if

:15:01.:15:05.

it is a wider attack we do. The elephants in the room here is the

:15:06.:15:08.

Assad regime, there is an unwillingness and so far in London

:15:09.:15:12.

to recognise that Assad is in place, we don't like him, he is a

:15:13.:15:20.

Barrettous dictator -- barbarous dictator, but he's backed by 40% of

:15:21.:15:25.

his dictate to they might not like him but they fear ISIS more. You

:15:26.:15:30.

have to engage with him and you can't resolve the Syrian conflict

:15:31.:15:33.

without doing that. Should David Cameron be talking to Assad? We have

:15:34.:15:36.

reached a position where it is impossible to say no to almost any

:15:37.:15:40.

option in dealing with this very complex and difficult problem. Thank

:15:41.:15:45.

you very much. For a brief moment today it looked as if one of the

:15:46.:15:49.

west's other foreign policy knots might have started to untangle.

:15:50.:15:54.

Ukraine and Russia appeared to have agreed a ceasefire, within hours it

:15:55.:15:58.

emerged it wasn't really a deal at all. The Ukrainian Prime Minister

:15:59.:16:03.

scoffed at it, there was no agreement on territory at all. NATO

:16:04.:16:06.

leaders will tomorrow have to try to deal with that as well as the crisis

:16:07.:16:10.

in the Middle East. We're there ahead of the meeting in Wales. In

:16:11.:16:15.

terms of IS what chance do you think there is of any coherent, cohesive

:16:16.:16:21.

agreement in the next few days? Well, if there is going to be such a

:16:22.:16:24.

discussion it is going to be on the margins of this, it is not actually

:16:25.:16:29.

on the agenda of this summit, just before we came on air, I spoke to a

:16:30.:16:33.

couple of people in the British Government who both said to me that

:16:34.:16:37.

there has been no request for example to join American air strikes

:16:38.:16:41.

in the region. Now of course these kinds of requests might come in such

:16:42.:16:46.

informal discussions, if they did it would be far easier for the UK to

:16:47.:16:51.

say yes in the case of Iraq, Syria remains hugely problematic I think

:16:52.:16:55.

for the British Government in a legal, diplomatic, political and

:16:56.:16:58.

military sense. So it could still be a while, I think, before we see a

:16:59.:17:02.

common line emerge. In terms of Ukraine, which originally was the

:17:03.:17:05.

main issue they were going to have to deal with, we saw today with the

:17:06.:17:10.

unravelling of the ceasefire it really seems as if Putin is still

:17:11.:17:16.

setting the agenda here. The west is scrabling to catch up? Well, and you

:17:17.:17:22.

might say also the President of Ukraine also trying. He was the one

:17:23.:17:29.

who let the hare run this morning announcing on Twitter that the

:17:30.:17:32.

ceasefire had gone into effect. Then the Russians came out including his

:17:33.:17:36.

own Ukrainian Prime Minister and started to pull the thing apart. We

:17:37.:17:40.

don't know what is happening, it is true at some point many people

:17:41.:17:45.

believe that Mr Putin will try to freeze the conflict, hold on to the

:17:46.:17:50.

gains s that the recent introduction of Russian forces has allowed them

:17:51.:17:54.

to make in Ukraine. All that have is something that the leaders are going

:17:55.:17:57.

to discuss for much of tomorrow and what they can do about it. That too

:17:58.:18:01.

is an area where I don't think they are getting strong leadership from

:18:02.:18:04.

the United States, for example on the issue of should they arm

:18:05.:18:09.

Ukraine, the answer is they are not ready to take that step. That does

:18:10.:18:13.

leave Mr Putin still calling an awful lot of the shots and trying to

:18:14.:18:18.

waken the hope of the ceasefire in a week where there have been threats

:18:19.:18:22.

of further EU economic sanctions on Russia. No doubt we will hear from

:18:23.:18:26.

you tomorrow. There are, not surprisingly, nerves among Ukraine's

:18:27.:18:30.

near neighbours, a little earlier I spoke to Radoslaw Sikorski, the

:18:31.:18:35.

Polish foreign minister I started by asking him whether he thought a

:18:36.:18:41.

Ukrainian ceasefire was possible this week? It would be very good if

:18:42.:18:46.

the fighting stopped and if a political settlement could be

:18:47.:18:52.

reached. But I think we have had statements from the Kremlin before

:18:53.:18:57.

which didn't check out. Also we have to remember that President Putin has

:18:58.:19:03.

proven to be an agile tactition. But he has underestimated the effect of

:19:04.:19:08.

the loss of confidence that we have in his words. Do you trust Putin? I

:19:09.:19:16.

think it was comrade Lenin who said "trust and verify". In terms of

:19:17.:19:20.

where this is all taking place, it is in your neighbourhood, how

:19:21.:19:25.

worried are you about the extent of Putin's ambition, does Poland feel

:19:26.:19:29.

threatened? Poland is indeed a neighbour of both Russia and Ukraine

:19:30.:19:34.

and obviously when neighbours quarrel it is of concern. We would

:19:35.:19:41.

like the decolonisation of the former Soviet Union to proceed more

:19:42.:19:46.

smoothly. It is very difficult for a former colonial power to acknowledge

:19:47.:19:51.

the existence and the right to existence of a former protege. But

:19:52.:19:57.

the sooner it happens the better for the citizens, even of the former

:19:58.:20:05.

Metropolis, let alone the former colony. It looks like an awful lot

:20:06.:20:11.

more than Putin having difficulty acknowledges the decolonisation of

:20:12.:20:15.

the former Soviet Union. It looks like quite the reverse that he's

:20:16.:20:19.

actually trying to extend his power? President Putin has indeed stated

:20:20.:20:24.

his aims rather frankly in his annexation speech of the Crimea. But

:20:25.:20:31.

it is so bold and so brazen that many in Europe still can't believe

:20:32.:20:35.

it is for real. Do you believe it is for real? Yes. NATO's proposals

:20:36.:20:41.

appear to be rapid response force of several thousand troops to protect

:20:42.:20:45.

Eastern Europe. That potentially means NATO troops, Polish troops in

:20:46.:20:51.

direct combat with Russian forces since the end, then the aftermath of

:20:52.:20:55.

a Second World War. Are you aware of the significance of that, what would

:20:56.:21:02.

that mean? Well you have NATO bases, you don't think they threaten

:21:03.:21:07.

anybody, everybody understands it is not strength that invites

:21:08.:21:11.

aggression, it is weakness that invites aggression, as the

:21:12.:21:14.

Ukrainians are finding out to their cost. So NATO belatedly

:21:15.:21:23.

strengthening its eastern flank is at last beginning to level the

:21:24.:21:28.

security across the NATO treaty area with the hope of preventing what you

:21:29.:21:32.

have just described. Minister, thank you very much indeed.

:21:33.:21:35.

Thank you. Now tomorrow the head of the

:21:36.:21:39.

European Central Bank might, just might get out his chequebook to sign

:21:40.:21:44.

off a few enormous promises of money. Because, let's face it, there

:21:45.:21:50.

doesn't seem to be much chance of the eurozone's economies staggering

:21:51.:21:57.

back to health on their own. For how long for the countries who have got

:21:58.:22:01.

their act to go will Germany give cash to those who are more willing

:22:02.:22:04.

to spend it. We have been hearing both sides of the story. This is

:22:05.:22:15.

Italy. At the moment it is casting a shadow over Europe's economy. There

:22:16.:22:24.

is no better example of this economic malaise than here in

:22:25.:22:35.

Naples. In 2011 a scandal involving rubbish

:22:36.:22:40.

collection in Naples briefly captured the world's attention. A

:22:41.:22:45.

combination of bad management, corruption and poor public finances

:22:46.:22:49.

led to an unprecedented build-up of rubbish in the streets. Eventually

:22:50.:22:59.

people started to burn it in protest. Three years on, Naples

:23:00.:23:13.

still has a rubbish problem. And Italy's economy is no better. A you

:23:14.:23:19.

don't have to spend much time in Naples to see that in large parts of

:23:20.:23:24.

Italy any talk of economic recovery feels pretty meaningless, but this

:23:25.:23:28.

isn't a problem which began in 2010, it is much more long running than

:23:29.:23:35.

that. Italy has now entered a triple-dip recession, in fact the

:23:36.:23:39.

economy is no bigger than it was in 2000. Unemployment is 12. 5%, and

:23:40.:23:44.

Government debt is climbing, it currently stands at a huge 130% of

:23:45.:23:50.

GDP. But the biggest worry is what is happening with prices. They have

:23:51.:23:56.

started falling. The country has entered deflation. Falling prices

:23:57.:24:00.

suck demand out of the high street. They push down wages as profits

:24:01.:24:06.

fall, and they make debt harder to repay. Italy is already in

:24:07.:24:10.

deflation, there are fears that may soon spread to the rest of the

:24:11.:24:22.

eurozone. Italy has a toxic cocktail of deflation, high unemployment and

:24:23.:24:26.

high youth unemployment, that is the recipe for another lost decade. For

:24:27.:24:31.

the past five years there has been only one quarter in which we had

:24:32.:24:38.

positive growth and even before the crisis before 2007 there has been

:24:39.:24:44.

very low growth. We have long-running problems, at least two

:24:45.:24:49.

decades old in terms of a high public debt, low capital formation,

:24:50.:24:55.

high corruption, high public spending, high taxes and very high

:24:56.:25:02.

unemployment rates at the moment. Italy's economy faces a whole host

:25:03.:25:05.

of problems. Some of the reforms the Government is trying to implement

:25:06.:25:09.

will begin to address the long-term issues. But they won't do much for

:25:10.:25:13.

this country in the short-term. And that's the problem. The kind of

:25:14.:25:17.

things which could give Italy the shot in the arm it needs are opposed

:25:18.:25:31.

by the eurozone's largest economy. Germany's horrified by what it sees

:25:32.:25:36.

in Italy. Here things are very different, unemployment is low, the

:25:37.:25:39.

budget is in surplus, and growth has been strong. This is the Town Hall

:25:40.:25:47.

in Munich, one of the healthiest and most productive cities in Europe. In

:25:48.:25:51.

the past 15 years German economic success has been based on two

:25:52.:25:55.

pillars, a decade of flat real wages gave it one of the most competitive

:25:56.:25:59.

economies in the world and the creation of the euro locked in

:26:00.:26:06.

export markets across Europe. Germany's politicians and public are

:26:07.:26:09.

terrified that they might have to bail out other countries. The

:26:10.:26:12.

general view is that places like France and Italy just need more

:26:13.:26:18.

reform. Italy has basically done nothing over the last five years. So

:26:19.:26:24.

there have been no reforms, the political environment in Italy is

:26:25.:26:28.

very difficult, you know. The Government is changing every six

:26:29.:26:32.

months and so there is no clear strategy for this country to get out

:26:33.:26:42.

of the crisis. There is a reason Germans are uncharacteristically

:26:43.:26:46.

animated by this. What happens in Europe affects their economy. You

:26:47.:26:50.

can see this in the traditional barometer of the German economy, the

:26:51.:26:54.

car industry, which was badly hit by the crisis in Europe. Overall the

:26:55.:26:58.

German economy actually contracted in the second quarter of this year.

:26:59.:27:03.

Selling high-value products like these cars to the big emerging

:27:04.:27:08.

economies has provided Germany with some insulation against the European

:27:09.:27:13.

crisis. But with Russia and Brazil in recession, and India and China

:27:14.:27:16.

slowing, that protection is starting to wear thing. We are not in a

:27:17.:27:21.

recession yet. Even if the second, third quarter would be negative

:27:22.:27:25.

again, we at least here in Germany would not talk about a recession.

:27:26.:27:28.

This would be rather, you know, a technical or a slowdown of the

:27:29.:27:33.

economy. Tomorrow the European Central Bank will announce its

:27:34.:27:37.

latest policy steps, it is in a difficult position. The kind of

:27:38.:27:41.

policies which might provide support to countries like Italy are fiercely

:27:42.:27:50.

opposed in Germany? That's the fundamental problem, cities like

:27:51.:27:53.

Munich and Naples, with very little economies, have been placed in the

:27:54.:27:57.

same economic block. The question is can European politicians find a way

:27:58.:28:05.

to make this work with me now from the chief economics commentator at

:28:06.:28:11.

the Financial Times, the economist from the University of Sussex. And

:28:12.:28:18.

the senior economist at Berenberg Bank. Thank you for coming in.

:28:19.:28:23.

Martin Wolf, firstly these problems are tub born and arguably long-term

:28:24.:28:35.

if the eurozone can't get its act together what is the worst case

:28:36.:28:47.

scenario? I have just published a book written viewers can get a good

:28:48.:28:52.

view of things by reading it. The worst that could have happened, I

:28:53.:28:55.

don't think it is very likely, is that it breaks up. I think it is far

:28:56.:29:01.

more likely is what I have described as the bad marriage scenario. That

:29:02.:29:09.

is to say the costs of break-up are incredibly high, they see and

:29:10.:29:13.

understand that enough will be done to keep it together, and enough is

:29:14.:29:16.

consistently done to keep it together. Both by the policy makers

:29:17.:29:19.

and Governments and the European Central Bank which has acted very

:29:20.:29:23.

powerfully in the past, and might get act powerfully again. They have

:29:24.:29:27.

done enough to keep it together, but not enough either collectively, they

:29:28.:29:32.

have to do some things together, or individually to make this really a

:29:33.:29:38.

prosperous union. They are in my view likely to remain, the most

:29:39.:29:43.

likely by far is just in a very uncomfortable relationship. What are

:29:44.:29:48.

the consequences for the continent of staying in a terrible marriage,

:29:49.:29:51.

as you cry it, very unhappily, what does it mean in brass tacks? I'm

:29:52.:29:57.

assuming that there are obviously political and social consequences

:29:58.:30:00.

which others can probably talk more about than I can. I have spent

:30:01.:30:03.

recently the summer in Italy it is clear this is a very depressed

:30:04.:30:07.

country. They have experienced really five years of recession and

:30:08.:30:11.

the economy is now about as big as it was 15 years ago. Unemployment is

:30:12.:30:15.

very high, youth unemployment is very high. A lot of people are

:30:16.:30:18.

leaving. It is a very depressed state. But remember at the same time

:30:19.:30:22.

that this is an ageing continent, I tend to think that very old people

:30:23.:30:27.

and elderly people will not start revolutions, the young are

:30:28.:30:34.

remarkably acquiescent. That is an astonishing thing for me. There is a

:30:35.:30:39.

reasonably, overwhelmingly probable that they will go on like that.

:30:40.:30:43.

Isn't the question though for Italy, France and Spain, is they could get

:30:44.:30:47.

out of an unhappy marriage if they went about some serious reform and

:30:48.:30:51.

actually showed discipline? I think it depends what kind of reforms we

:30:52.:30:58.

are talking about. So Italy remember is a country that only Haiti and

:30:59.:31:04.

Zimbabwe have grown less than Italy in the last 20 years. Zero

:31:05.:31:09.

productivity growth in the last 20 years. My real problem, even with

:31:10.:31:12.

the report we have just heard is the diagnosis of what the differences

:31:13.:31:15.

between say a country like Germany and Italy is just wrong. Then the

:31:16.:31:19.

medicine has been wrong and the patient has been getting sicker. In

:31:20.:31:26.

what sense? How do you increase your competitiveness, what does it mean?

:31:27.:31:30.

It means having productive companies and being able to produce the kind

:31:31.:31:34.

of goods that the world wants to buy, both products and services. So

:31:35.:31:40.

Germany wins procurement contracts in the UK, Seimens recently, not

:31:41.:31:46.

because they paid their workers less during the whole the reforms, but

:31:47.:31:49.

because Germany over the last decade has been investing massively in

:31:50.:31:52.

precisely those areas that make you competitive. Except if you look at

:31:53.:31:59.

who is doing well now look at the UK and other countries in northern

:32:00.:32:04.

Europe where there have been reforms and changes, If you look at private

:32:05.:32:09.

business investment in the UK it is scary. But the economy is growing

:32:10.:32:12.

here? First of all it depends, we want to look at something more than

:32:13.:32:16.

just a quarter. And I think, at least, that the UK is growing

:32:17.:32:22.

because of debt-driven consumption and Mark Carney is right to worry

:32:23.:32:28.

about that. Tomorrow the European Central Bank boss takes to the stage

:32:29.:32:33.

and has a big opportunity to write off some IOUs to get everybody

:32:34.:32:36.

spending again, what do the markets want him to do? The markets since

:32:37.:32:41.

the speech a couple of weeks ago expect him to do big things, pretty

:32:42.:32:45.

much something as big as he did in 2012 when in London he announced

:32:46.:32:49.

what is called ONT, these potentially unlimited bond purchases

:32:50.:32:53.

which were actually never activated but which changed the whole eurozone

:32:54.:32:58.

story from a downward spiral to at least for a while an upward spiral.

:32:59.:33:03.

They expect a big message from him. If he doesn't deliver it could be

:33:04.:33:06.

short-term trouble in the markets tomorrow. I think it is unlikely he

:33:07.:33:15.

will deliver what the markets hope a huge bond-buying programme, he is

:33:16.:33:18.

preparing the ground but it would be astonishing if he would be, it would

:33:19.:33:23.

be a game-changer economically, politically is another matter. The

:33:24.:33:26.

extend of the unhappy marriage, surely it is time for the ECB to

:33:27.:33:34.

take bold action and get out the big bazuka again. In the eurozone we

:33:35.:33:40.

have double trouble, on the one hand we have inflation far below the

:33:41.:33:44.

target. Clearly there is a point for the ECB to do more. They had already

:33:45.:33:48.

made some announcements in June but things got worse. What got worse has

:33:49.:33:52.

nothing to do with deflation, it has to do with something that happens

:33:53.:33:57.

outside the eurozone with the Ukraine crisis, that is not squarely

:33:58.:34:03.

in the remit of the Central Bank t increases the pressure on the ECB to

:34:04.:34:07.

do more. In terms of getting out of this, whatever the ECB does tomorrow

:34:08.:34:13.

or in October, is it actually possible for them to write blank

:34:14.:34:17.

cheques and give IOUs and get out of this crisis in this sway or is it

:34:18.:34:21.

fundamentally the problem that there are countries in northern Europe

:34:22.:34:24.

where the economies are so different to those in southern Europe that

:34:25.:34:27.

something much more radical has to happen? Think of the US that

:34:28.:34:33.

underwent a $4 trillion quantitative easing cycle, that is not what is

:34:34.:34:37.

making today the US grow at a 3% rate, it was the fiscal stimulus

:34:38.:34:41.

that stimulated that. I think quantitative easing is important

:34:42.:34:44.

mainly to calm down the financial markets, but what gets your real

:34:45.:34:49.

economy growing, what gets jobs and good jobs, high-quality and

:34:50.:34:52.

well-paying jobs in the future which is what Portugal, Italy, Greece and

:34:53.:34:56.

Spain need, is not quoting which also -- quantitative easing which

:34:57.:35:00.

also ends up in the banks but serious spending both public and

:35:01.:35:03.

private sector spending. Today we have record level hoarding rates in

:35:04.:35:12.

Europe. I think it is 1. 5 trillion euros-worth being hoarded. Huge

:35:13.:35:15.

amounts spent on boosting stock prices. Do you agree with that? In

:35:16.:35:20.

the long run I would agree with this, but we need competitiveness

:35:21.:35:23.

quickly and growth quickly. I think these things will not deliver

:35:24.:35:27.

quickly enough. Do Germans have the patience for this? I think the

:35:28.:35:30.

Germans have shown throughout the crisis that they are ready to help

:35:31.:35:36.

the other countries. In return for reforms. We have demonstrated that

:35:37.:35:39.

we can get countries reforming and deliver results. Countries like

:35:40.:35:45.

Spain, Portugal, Greece, Ireland, the countries that had a package

:35:46.:35:50.

financed by German tax payers are now growing rapidly, some countries

:35:51.:35:55.

almost as fast as the UK. I think he can do things but he won't, but he

:35:56.:35:59.

can do things which will help a little, but he can't fix the

:36:00.:36:04.

problems identified. There are huge structural problems and huge

:36:05.:36:08.

competitiveness problems and they are going to be taking years and

:36:09.:36:12.

years to solve. But the structural problems are not just about labour

:36:13.:36:15.

market rigidites and corruption, it is actually again about investment,

:36:16.:36:19.

until you have proper public and private sector investing and R and

:36:20.:36:23.

human capital formation and education, training you will not

:36:24.:36:31.

have... Thank you all very much. It can be pretty impole light to leave

:36:32.:36:36.

a party early. It is certainly downright rude to trash the host

:36:37.:36:41.

after you have gone. That seems to be what Douglas Carswell is intent

:36:42.:36:44.

on doing. Telling Newsnight the party he had been in for years until

:36:45.:36:48.

just last week was run by out-of-touch elites, but having left

:36:49.:36:51.

the Conservatives to run for UKIP, he now has to persuade people in

:36:52.:37:03.

Essex his new found boldness is worth their vote. Things go up and

:37:04.:37:11.

down in politics, but the basic picture stays the same, occasionally

:37:12.:37:15.

the whole political system is thrown up in the air. In Essex right now

:37:16.:37:18.

there is a by-election doing just that. As we visit UKIP's campaign is

:37:19.:37:26.

under construction, quite literally. I see the plumbing and heating has

:37:27.:37:33.

arrived. Hello Douglas. Welcome. The team, plumber and all are digesting

:37:34.:37:39.

another opinion poll. This one gives Carswell a 32% lead. Can we talk

:37:40.:37:43.

about the type of party you have joined, you talked about having a

:37:44.:37:47.

five-year-old daughter and you have seen what feminism has to offer.

:37:48.:37:53.

These are people until recently were calling women "sluts"? When you

:37:54.:37:57.

discover people with those noxious views you have to make sure they

:37:58.:38:01.

know it is intolerable, you cannot have people who hold those views

:38:02.:38:04.

seeking public office or helping others seek public office. Carswell

:38:05.:38:08.

is feared in this by-election because of how well he already knows

:38:09.:38:13.

the electorate. He's not Conservative any more? I know, but

:38:14.:38:18.

he's a Conservative at heart, oh I'm on camera. Are you a Conservative at

:38:19.:38:25.

heart? I'm a free market Gladstonian liberal. 'S independent. I'm

:38:26.:38:30.

independent. I don't mind the UKIP thing to stop these foreigners

:38:31.:38:36.

coming in basically. Too many and this euro thing I don't think we

:38:37.:38:39.

should be dictated to by them either. You don't quite agree with

:38:40.:38:44.

her on the foreigners' point? We need to control our borders.

:38:45.:38:47.

Controlling our borders doesn't mean not letting anyone in. We have too

:38:48.:38:52.

many haven't we. Have we got too many? We have a shortage of GPs, if

:38:53.:39:00.

you can get a good GP to come to this place and deliver healthcare,

:39:01.:39:03.

it shouldn't matter where they come from. He would like to have Ed

:39:04.:39:08.

Miliband as Prime Minister? You heard it your safe, how different

:39:09.:39:11.

are Ed Miliband and David Cameron. Do you think Ed Miliband is really

:39:12.:39:15.

free market? Is George Osborne that free market, look at the gene

:39:16.:39:18.

market, look at the nationalised banks. They are not really that

:39:19.:39:28.

different. . The seat was Labour in Clacton until Carswell turned it

:39:29.:39:32.

Tory, remaining Labour supporters are flirting with UKIP, the question

:39:33.:39:35.

is whether a UKIP fronted by Carswell can now attract these

:39:36.:39:40.

one-time Labour voters. Do you usually vote Labour? I have voted

:39:41.:39:45.

Tory? Are you disappointed with the Government? Yes. Are you going to

:39:46.:39:49.

come back to Labour this time? Yes I am. I'm local boy, that would be

:39:50.:39:53.

great, I will leave you one of the leaflets. What are you saying to

:39:54.:39:57.

people who say they were Labour and thinking of going to UKIP. Why stick

:39:58.:40:01.

with Labour? What is the difference between UKIP and the Tories, the

:40:02.:40:04.

same policies and the same sessions and the same people now. If you are

:40:05.:40:08.

not that way inclined and you are usually a Labour voter stick with

:40:09.:40:11.

Labour, because you know the Government has left Clacton behind.

:40:12.:40:14.

There is no economic recovery here. But the difficulty for you is if

:40:15.:40:18.

there is a Douglas Carswell victory, a UKIP victory, that will help Ed

:40:19.:40:23.

Miliband won't it? I don't know. I want Labour to win the election, if

:40:24.:40:26.

that helps Labour win the election then all well and good. You are a

:40:27.:40:30.

sacrificial Lambert? I wouldn't put it like that, we are fighting for

:40:31.:40:36.

every vote in Clacton. No love lost in Tory HQ, they haven't chosen a

:40:37.:40:40.

candidate but they were changing the locks when Newsnight visited, a bit

:40:41.:40:45.

late, this horse has already bolted. Strange though it may sound, there

:40:46.:40:50.

was basically no Tory activity by the seaside, no liberal or Green

:40:51.:40:55.

candidate selected either. Back in London I was able to ask one

:40:56.:40:59.

euro-sceptic minister whether Carswell had been right or indulge

:41:00.:41:03.

gent? I think it is DLEEP counter-productive what he has done.

:41:04.:41:08.

I'm sure the voters in Clacton are seeing what is going on

:41:09.:41:10.

internationally. They want strong and firm Government which is what

:41:11.:41:13.

they have right now. They will be more concerned with the future, the

:41:14.:41:17.

economic security of hard-working families, about jobs, international

:41:18.:41:26.

security. For the next election you have them saying they will vote to

:41:27.:41:31.

go out of Europe, MPs saying that, they are going out? I think it is

:41:32.:41:36.

about the economic future of the country. If we talk about UKIP right

:41:37.:41:40.

now a vote for UKIP is effectively going to lead to a Ed Miliband-led

:41:41.:41:46.

Government. Carswell has up in his UKIP HQ a poster ofdy and Gladstone.

:41:47.:41:53.

The free marketeer won three elections while the then Tory Party

:41:54.:41:59.

was split. Carswell might split it again. There is a full list of

:42:00.:42:03.

candidates for Clacton available on the BBC website. We will return

:42:04.:42:05.

there before the election to speak to the others. The impact of

:42:06.:42:09.

Carswell's defection has reached way beyond the corridors of Westminster

:42:10.:42:13.

or the streets of Clacton. This week resulting in an extraordinary spat

:42:14.:42:18.

over the future of the party on the newspaper columns and blogs of

:42:19.:42:22.

Conservative commentators. Parris pass has been busy predicting a

:42:23.:42:26.

schism in the party. He says it is inevitable and that Carswell and his

:42:27.:42:30.

crew should go to UKIP by all means stay there. Also with us is the

:42:31.:42:33.

prominent backbencher, Bernard Jenkin, a well known euro-sceptic

:42:34.:42:38.

who take as rather different view. Firstly to you matters Matthew

:42:39.:42:43.

Parris, surely the Tory Party can't afford to send a big chunk of its

:42:44.:42:46.

grassroots, Carswell and others and people on the very euro-sceptic or

:42:47.:42:50.

anti-euro wing of the party and just do without their support. They can't

:42:51.:42:54.

afford that can they? It wouldn't be such a big chunk as people might

:42:55.:42:58.

have you believe, but there would be 30 or 40 and they would go. The

:42:59.:43:04.

alternative is that they give the impression of dragging the

:43:05.:43:07.

Conservative Party to the right and if the Conservative Party is

:43:08.:43:12.

reported to have dragged to the right the loss that we would have in

:43:13.:43:16.

the centre, the loss that we would have from floating voters and the

:43:17.:43:20.

loss that many of us would have in what we believe would be

:43:21.:43:23.

incalculable. You say losing 30 MPs wouldn't be a big deal. At the last

:43:24.:43:27.

election the Conservatives didn't even man to get a majority, that is

:43:28.:43:30.

really important isn't it? I don't think 30 MPs are going to cross the

:43:31.:43:33.

floor. I don't think any more MPs are going to cross the floor, but

:43:34.:43:38.

what I do think is the Conservative Party steadfastly and in an

:43:39.:43:45.

unpanicky way needs to project an image of moderation, the moment we

:43:46.:43:48.

stop doing that and start flirting with the right as a party we have

:43:49.:43:54.

lost it. Bernard Jenkin, do you deny that beyond Douglas Carswell and as

:43:55.:43:59.

Matthew would suggest a small group of people there is a genuine

:44:00.:44:02.

disconnect between the leadership and the grassroots? In most parties,

:44:03.:44:06.

particularly parties in Government there is always a tension between

:44:07.:44:11.

the grassroots and the party leadership, because the party

:44:12.:44:16.

leadership's perspective is inevitably different from the

:44:17.:44:18.

grassroots. What is happening here is big. The one thing we are all

:44:19.:44:22.

agreed about, listen to your previous package about the state of

:44:23.:44:26.

the eurozone. The European Union is in a terrible mess and even George

:44:27.:44:32.

Osborne is now saying that the problems of the eurozone are so

:44:33.:44:36.

preoccupying the eurozone they are sidelining the concerns of member

:44:37.:44:40.

states like the United Kingdom. Doesn't that mean the people in your

:44:41.:44:44.

party have to concentrate in making the current relationships work

:44:45.:44:46.

rather than doing what Douglas Carswell has done and walk away from

:44:47.:44:51.

it completely? I have no brief for Douglas Carswell, I believe his

:44:52.:44:54.

action has been catastrophically bad for the country and the things he

:44:55.:44:57.

says he believes in. What is happening in the Conservative Party

:44:58.:45:00.

is we need to modernise our relationship with the European

:45:01.:45:03.

Union. It has always been the case that very often the backbenches have

:45:04.:45:08.

been ahead of where the establishment needs to be and we

:45:09.:45:11.

have seen that in every major development of policy down the ages.

:45:12.:45:15.

Matthew Parris that sounds reasonable to you doesn't it? It is

:45:16.:45:19.

an act of treachery what Carswell has done. I'm not going to start

:45:20.:45:27.

calling names, it is odd, politicians often accused of being

:45:28.:45:31.

uncivil to each other, you are a journalist now Matthew you can throw

:45:32.:45:36.

these brickbats around, I think it is just destructive and silly. You

:45:37.:45:40.

won't describe it as an act of treachery, he has wrapped himself in

:45:41.:45:43.

the Tory colours and elected as a Tory. I think he has made a

:45:44.:45:48.

terrible, terrible error and I'm not defending it, I think he's wrong and

:45:49.:45:52.

I think he will deeply regret what he has done. Will the rest of the

:45:53.:45:56.

party also regret being dragged further to the right and end up in a

:45:57.:46:00.

schism with the party split into two? I think this is a nonsense,

:46:01.:46:03.

most of the country wants a different relationship with the

:46:04.:46:05.

European Union. Most of the Conservative Party wants a different

:46:06.:46:07.

relationship with the European Union. And so does the Prime

:46:08.:46:12.

Minister. And he will try to negotiate that and the result of his

:46:13.:46:16.

negotiation will be put to a referendum. So we have to support

:46:17.:46:20.

him, don't we as Conservatives? We have to hope that's going to win. Do

:46:21.:46:26.

you really hope's going to win the election? I'm rather hurt by that

:46:27.:46:31.

accusation, we have known each other for a great many years but I really

:46:32.:46:34.

want to win this election, I really think it will be a disastrous result

:46:35.:46:38.

for this country if we don't win the election. That is why I'm furious

:46:39.:46:42.

with what Douglas Carswell has done. Isn't the best way. Calling him a

:46:43.:46:46.

traitor isn't the best way. Isn't the best way to bring about what you

:46:47.:46:49.

say you want, which is a resounding victory for David Cameron to support

:46:50.:46:53.

him up to the hilt. I do support him. Up to the hilt. I regularly

:46:54.:46:58.

talk to him and I support him. But the problem we have got is we

:46:59.:47:02.

haven't actually got a policy on what our relationship with the

:47:03.:47:05.

European Union should be, that's a perfectly legitimate argument. Today

:47:06.:47:10.

we had the port services regulation stopped in committee because we

:47:11.:47:13.

couldn't even get the papers that the European Union is discussing

:47:14.:47:16.

that we're meant to be scrutinising on the port services. It will cost

:47:17.:47:20.

hundreds of thousands of jobs in this country, the unions and

:47:21.:47:25.

industry against the directive, this is a mad way to legislate. We have a

:47:26.:47:29.

good flavour of the debate inside the same party that you support.

:47:30.:47:33.

Thank you both for coming in. That is it for tonight. Do you remember

:47:34.:47:41.

John Redwood's mimed Welsh National anthem, the US Ambassador to the UK

:47:42.:47:46.

has tried to learn the language ahead of the summit in Newport. He

:47:47.:47:50.

has bravely published this video about how he has got on. Take a

:47:51.:47:58.

look, and good night. Hello, how was that. A longer "o". But just one

:47:59.:48:13.

"l". Hello (in an accent) I forgot it. (Speaks Welsh). All Welch people

:48:14.:48:46.

say z-e-eta we would say Z-a-t-a. Good evening a check on the weather

:48:47.:48:58.

for Thursday, to be honest for a lot of us Thursday is going to be

:48:59.:49:01.

similar to what we had on

:49:02.:49:02.

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