‘These two things (terrorism and Kashmir) are separate’

•Shekhar Gupta: He must have had great skills for I don’t think Krishna Menon made friends easily.

Peter Mandelson: But then that is what some people said about my grantd father as well. They weren’t really right about that. We have a wonderful photograph of the new flag being put above the India House; my grandfather representing the british governmetn and Krishna Menon repersenting India.

•Shekhar Gupta: So from Krishna Menon to Kamal Nath we have come a long way…because kamal nath is somebody who makes friends easily.

Peter Mandelson: He does make friends easily. He is a clever,charmig,difficult guy when you are negotiating with him. He is very dogged. He has a particulr view and it is diffult to get hiom to move off that ground. He represents the interests as he sees it of his country,in our case the trade negotiations of his farmers.

•Shekhar Gupta: How so much you may have sparred. I know that he also respects you a great deal.

Peter Mandelson: Yes,there wasn’t so much that separated us,except at the end when I thought that we should have done this deal. I saw his point of view,Idnia’s point of view,on agriculture to a great extend and I took a view in the world trade talks which that we in the developed world are not entitled to ask for the same bck as we were giving and that actually what we were giving meant we had to be rather more modest in our demands. But,secondly,there is a lot at stake in the world trade system and for the sake of the system we needed to do a deal over the liberalisation,over the tarrifs and other things. The system was very important and I think with the global economic downturn,the huge problems facing the global economy we need that deal,as we need other deals in order to keep the global economy open for business,because that is where prosperity comes from.

•Shekhar Gupta: And I suppose you got to know eahc other so well,sparring at that level that you were able to negotiate that India-EU trade deal so well.

Peter Mandelson: Well,both of us where keen. Both of us felt that the global deal was the biggest thing we could achieve,although we had different views as to the terms on which we should do that deal. But that wasn’t incompatible with takign openness and trade liberalisations further between europe and India and if anything the ambition that we sought on the bilateral would in time lead to the multi-lateral.

•Shekhar Gupta: you remember any interesting moments dealing with him durign the negotiations.

Peter Mandelson: He could certainly talk. Could he talk? We have the expression talking the hind legs off a donkey. When he wanted these talks to go up to and beyond the point where time allowed us no further opportunity,if he needed to he would. Then he would probably say that about one or two others as well.

•Shekhar Gupta: But Indians are good negotiatiors?

Peter Mandelson: They negotiate like lawyers. And when you carve out your position here and make your demands here and then people move towards your position,suddenly you have moved over there…goal post shifting. You learnt that from us?

•Shekhar Gupta: I think most of it. We make out choices. Sometimes we blame anything we learnt from anywhere on you,sometimes we don’t. Sometimes we say it’s original,it’s just our skill where we taught you a bit of it.

Peter Mandelson: kamal wasn’t beyond,saying where did you think I got that from?

•Shekhar Gupta: Peter,you are also the comeback kid twice over in UK politics. Your previous comeback and all the controversies we all know about. But this comeback in the month of October in deep crisis. But,first of all,what was the Mandelsonian thing that you did that Gordon Brown brought you back? You have been on the other side in the party… And second how do you look at what is being done to fix the crisis since then.

Peter Mandelson: I have never been on the other side in the party in policy terms in ideological term.

•Shekhar Gupta: I party politics terms? In terms of Blair versus Brown at one point.

Peter Mandelson: But that is personalities. And you know that personalities with a party,policies come between parties some times. We fell out big time,all those years back in 1994 when Tony Blair went ahead of Gordon for the leadership and he wasn’t pleased. He wasn’t happy with me because we had been very,very close friends,very strong political allies. But the three of us had been,and the two of them couldn’t go ahead together and one of them had to be leader. It was very,very difficult and I spent those years,over a decade and more,pretty much the target,the butt of his supporters. I don’t know whether he was always knowledgable or involved in what went on in the machinations against me.

•Shekhar Gupta: You were called many interesting things. The Prince of Darkness?

Peter Mandelson: But what I was called was the least of my problems. It was more when I was being sort of set up that the danger really arose. But that is all behind us. The ‘Prince of Darkness’ is now called the ‘Prince of Stability’. I prefer that.

•Shekhar Gupta: That is an interesting one,because this crisis has worked well for labour,it has worked well for you.

Peter Mandelson: It worked well for me in the sence that I was busy doing a job which I was enjoying. I represented 27 European countries in international trade. And they gave that competence for that negotiation and policy making to me.

•Shekhar Gupta: But what is that special thing that Peter Mandelson has on his CV that Brown had to call him back and say there is a crisis I need you help.

Peter Mandelson: Experience,tough-minded political judgement and an ability also to give him some fairly frank advise. You know,when you have been so close to somebody,although that relationship has been severed,you never lose completely what you originally had…that ability to talk. What collapsed during that period was trust,the confidence. Now,we were both surprised I think at how we were able to rebuild that trust the way we did. We have a very trusting and very frank relationship.

•Shekhar Gupta: tell us what have you done together in these weeks that has given people some comfort,that’s given markets some comfort and certainly improved Labour’s position in polls.

Peter Mandelson: People in Britain are really worried about what’s happened economically and they are uncertain about what the future is going to hold. I mean they see these very radical actions being taken by the government,first of all to save the banks from collapse.

•Shekhar Gupta: The Central Bank has lowered interest rates to the lowest in 400 years.

Peter Mandelson: Yeah,but to be honest lowering interest rates are losing their traction. We are still left with the huge problem,which is that the banks don’t know what they are worth. They don’t know what is the value of the assets they have on their balance sheets,they don’t know what capital they have availbel,because they don’t know what claims are going to be made on the them agaionst the value of the asssets they have. Now,in that situation they are like frozen. They are not bust,they are scared,they are uncertain. They don’t know how much to lent,they know they have lent a lot probably too much to too many people at too low a price on all sorts of risky options in the past and now they are reacting to that. But the reason why they cant find an equilibrium is because of that lack of knowledge on their part about how much capital they have,what it’s worth and what value can be attached to their assets for against which they can do their lending.

•Shekhar Gupta: And what are you doing to fix it now.

Peter Mandelson: We are dojng a numbr of things. First of all we are insuring them against their bad assets. Where the assets fall below a certain level we have indicated that we are willing to buy those assets from them. Which may not be such a bad bet for the taxpayer in the long term because those assets will probably appreciate in value,but to what level and over what period of time,we probably don’t know. We are injecting fresh liquidity to the banks. We are changing the financial services authority,changing the capital requirements of the banks so that they are able to lend against sightly lower capital ratio than previoulsy.

So we are doing a number of things. People ask how much is this going to cost you and when is this going to work. My answer to that is if we don’t do this it will cost us a very,very great deal more to fix than we are spending or borrowing to take the action now. Secondly,in a economy like our,or yours in India,we can’t afford the banks to collapse. They are the corner stone of the economy,the foundation.

•Shekhar Gupta: but you know,as a die hard labour loyalist is there a sense of irony in the government coming back in out lives?

Peter Mandelson: I am a new labour man. I am a reformist,I am a morderniser,I didn’t think I’ll be coming back to a government to preside over the implementation of an earlier manifesto of the labour party which I thought we had buried. But anyway we are doing it temporarily and for the best reasons.

•Shekhar Gupta: But,you are convince that you are doing it temporarily?

Peter Mandelson:: Of course.

•Shekhar Gupta: you do not see this as a victory of what you believed in the past;

Peter Mandelson: This is not the beginning of the socialisation or the sovietisation fo the british economy. Let me assure you that

•Shekhar Gupta: the beginning of the return of sovietisation. In fact V S Naipaul told me on this show ‘ you guys don’t understand marxism because you were never a marxist country. We were a marxist country.’ We means who? He means britain was a marxist country.

Peter Mandelson: Well of course marx was a great globaliser. He saw the globalization of the economy and the globalization fo the proletariat. I am a globaliser as well,but it doesn’t make me a Marxist. But I think the worst we can do in these circumstance is draw a wrong conclusion of what’s happening in the global economy and that is that we should try to deglobalise it. We can’t. And in the attempt of doing so we would just create so much economic disruption.

•Shekhar Gupta: so this is like a life saving steroid therapy?

Peter Mandelson: You could put it that way,but with a little bit of surgery I suspect in the case of some of out banks and their practices. And a bit of reengineering of the economy. But that is the role of the government,you need a smart government to step in a do that. Not to sort of replace the private sector,nor to sort of close down the markets. But to say where markets fail you need a government,a smart government that’s got to come in a help out. Also a governemt that looks to the longer term.

•Shekhar Gupta: But not to nationalize?

Peter Mandelson: Not for the sake of it,no. and not permanently.

••Shekhar Gupta: You are a frequent visitor to India,you understand the Indian mood,the Indian sensitivity. You also know that India is hurting right now. You have been talking to people about what happened in Mumbai and what is the mood here. What sense do you get?

Peter Mandelson: Huge anguish,a revulsion that we share,a real feeling,a real desire to get those who are responsible all of them. Not just the people on the ground,many of who have been killed. I mean the people who were associated with commissioning it or enabling it to happen. I understand that anger. Don’t forget that I was the northern Ireland secretary,I came in at a time when the violence was subsiding and we’d put the peace process in place. But every time there was a killing,even on the more infrequent occasions,I felt that anger. I felt my first duty was to protect people,my first duty was to help the authorities bring people to justice,my first duty was to make sure that that justice was delivered to those indivduals. As far as I am concerned thre are no hiding places for these people,there are no safe havens and every one,every government that has a share responsibility here needs to know that.

•Shekhar Gupta: And can there be any justification for terrorism.

Peter Mandelson: Absolutely not. Just creating dozens,scores,hundreds of innocent victims for what?

•Shekhar Gupta: There has been a lot of anger,disappointment in India by some of the statements made dy your colleague,some references made by him in an article in the guardian. Where the imoplication as is being read in India is as that until you solce the Kashmir problem people in Pakistan will have justification to carry out terror attacks against India.

Peter Mandelson: David Miliband said absolutely no such thing. Nor does he think it,he deosn’t believe it,he would be appalled if people thought he thought that. I know David very well so I can tell you that.

•Shekhar Gupta: But that article sid that the trouble in Kashmir is one of the main calls to arms and you fix it.

Peter Mandelson: there are two separate things and you shouldn’t be confused. One,terrorism has no justification. You block it,you stop it and when it comes after you,you go after it. The second,unrelated thing is where there is conflict,how can you help resolve it. How can you put a process in place. Now,these two things are separate. I discovered that in northern Ireland. You think we have up chasing terrorists in northern Ireland just because we wanted peace? Of course,we didn’t. Didn’t stop us putting a peace process in place. The two things are separate.

••Shekhar Gupta: But this is a bit more nuanced in India vis-à-vis say a group like lashkar a toiba,which is not a kashmiri group,which doesn’t just aim a t “liberating Kashmir”,they have more complicated agendas.

Peter Mandelson: These people are destroyers. There are people who were destroyers,set up years ago for other purpose with the backing and involvement of people who should have known better at the time and certainly should have learned since. And we know about these people,there is no excuse for them,no defence and no justification. They are killers,there is no ideology,they are not freedom fighters.

•Shekhar Gupta: So there has been no nuancing of the british position between Gordon brown and David Miliband.

Peter Mandelson: No absolutely now. And I would not want anyone to think that David Milibad who is a friend and most importantly Britain foreign secretary woulod give any support,any excuse or rationalization for killers. I know that he made it very clear when he went to Pakistan and said to the government there,the head of the army and the national leaders that you got to crack down,you got to put these people behind bars and there’s got to be proper prosecutions. I understand those who say bring them over here we will give them justice. To be honest, I think the best thing we an have is for them to receive justice. Full stop. That is the most important thing.

•Shekhar Gupta: you think nobody should make a big prestige issue of where they are brought for justice?

Peter Mandelson: Not if it is going to prevent the prosecution from taking place. If you make a great political or diplomatic thing about where the justice is going to take place and whilst you are arguing about that the justice is not implement and not transacted. Who benefits from that? People who are left in their semi luxurious villas enjoying their semi freedom? Who wants that? I don’t want that.

•Shekhar Gupta: As a member of the cabinet who was brought back for his experience – if Peter Mandelson was brought back for his experience then it must be a very young Cabinet — you would say there has been no shifting of goal posts on this by the UK government.

Peter Mandelson: Absolutely not,and nobody should believe that. Look this is a very emotional situation,who wouldn’t be emotional.

•Shekhar Gupta: I’ve never seen India more angry in my life

Peter Mandelson: Who can blame India? We read first hand reports of people who were locked up in hotel rooms for 48 hours and more,of what they went through. It’s not just the tyranny excercised by these terrorists but the cruelty to the individuals who were caught up .

•Shekhar Gupta: Thirty-three of those who got killed are Muslims. It’s an unfortunare number,but their percentage among the people killed is much higher than their percentage in India’s population.

Peter Mandelson: But this killing doesn’t know any boundaries,religious,ethnic or national. Once you let a killing like this out of a bottle,it’s a genie,it just builds and it swallows you. You have to take it out. And that is what Britain bilives and that this where Britain stand full square behind India.

•Shekhar Gupta: I heard that expression when tony blair came here after the parliament attack and ssaid we stand full square behind India. And we have it on you authority that nothing has changed since Gordon brown’s visit.

Peter Mandelson: Nothing.

•Shekhar Gupta: So if we read something in a statement its misreading it or reading too much into it.

Peter Mandelson: depends what sort of interpretation is put on the statement.

•Shekhar Gupta: Many interpretations on Miliband’s statement has been that the position has shifted from “there is no justification of terrorism” to “you must understand terrorism is because of Kashmir”.

Peter Mandelson: These two things are separate. I can just repeat what u have said.,Just because you want to help people move towards resolving a dispute or putting in place a process by which that may be achievable,doesn’t mean to say for one solitary moment that you defend or justify terrorism. Period.

•Shekhar Gupta: That’s very reassuring. Before we conclude,you have known many people from the Obama team,what conversations have you had with them. Are we looking a new push in terms of fixing the global economy?

Peter Mandelson: I haven’t spoken to them since last summer. The United states in fixing the global economy is,as it is in all these situation,the indespensible nation. We are not going to be fix this without the US. What we look to Mr Obama’s administration to do and what I think we are entitled to expect is not just a sense of commitment and responsibility but a desire to act with others in carrying out that responsibility.

You know what I mean,the United States is facing this huge problems in its banking system. Don’t forget all this started in the US and then affected the rest of the banking system and is now infecting the whole of the real economy. They have the biggest challenges,the biggest problems of all of us. Any chance of a successful solution has to start in the US. All I am saying is work with us in what you are doing. Because the global financial system is so interlocked,so interdependent that you can’t separate out or segment bits of the banking system here,bits of the banking system there,action over here,completely divorced from what’s happening. The world isn’t like that anymore.

•Shekhar Gupta: Do you find the Obama stimulus package encouraging?

Peter Mandelson: I do find it encouraging,but I am also struck by the number of commentators in the US who are saying that $800 billion is not enough. But it requires not just scale,it requires smartness and ingenuity and that’s what we have learnt in Britain. We took our actions that we did in autumn with the banks and we have announced today another series of measures,quite tough measures. Why? Partly because the situation has deteriorated since then,partly because we are discovering and learning things now that we didn’t fully realize then. Partly because you look at the experience of what you have done and you think well it has to be adjusted this way and in that way and you do so. The key thing is to keep moving it forward rather than to be like a rabbit in the headlights,transfixed.

The argument that we have with our Opposition,the Conservatives,who say well the recession is the recession it got to take its course,or they say all this us costing too much and how much further are you going to do for the banks . Its all basically saying “stand back” or don’t do so much or don’t take such risks. My answer to that is the more inactive we are,the more deeper down in the hole we are going to get and the more expensive it is and longer its going to take to climb out of that hole. So we better start working on it now.

•Shekhar Gupta: And the hole may close in on you.

Peter Mandelson: People are very frightened and you lose confidence,fear takes over your economy. People have to get a sense that the government is there and it knows what it is doing,its on top of the job where it knows it can do differently or better,it does it. Otherwise people are just going to say we are on our own. And in an economy or society where the people feel they no longer have a government which is going to provide them security,whether it be physical security against terrorists or financial security against failing banks or both,that’s when you society starts breaking up.

•Shekhar Gupta: Looking one year ahead,do you see recession still running it course or do you see the combined might of all big governments. Do you think at the end of the day the governments win.

Peter Mandelson: We are facing a tough and rocky road ahead and in my view some economies will get through it more easily and quicker than others. I suspect that India,China,some of the emerging economies will get through it.

••Shekhar Gupta: Because of domestic demand and lower scale,I think?

Peter Mandelson: Bigger markets,faster rate of growth in the first place and stronger prospects. You attract investors,but even so you can’t decouple yourself from the international economy. India will find that demand internationally is falling considerably,investment from the developed world in India and other developing economies is going to be cut considerably. There is no free pass or free run for anyone in this.

But whilst I think we have a very tough year and we are going to see losses in investment next year as well,its probably that a country and economy like India will be able to recover faster. But it is not going to be painless for anyone.

•Shekhar Gupta: Those are very reassuring words. We know you have got your job cut out. You and bunch of others,maybe a half dozen people will basically decide whether we get out of this hole or we go deeper.

Peter Mandelson: We will do our best. Wonderful meeting you in Delhi and keep coming.