UK government says must tackle social problems after riots (Reuters)

LONDON (Reuters) – Britain needs to tackle deep-seated social problems following riots and looting in English cities this week, the center-right government said on Saturday, and a U.S. street crime expert it has brought in said arrests alone would not solve the problem.

"There are communities that have just been left behind by the rest of the country. There are communities that are cut-off from the economic life-blood of the rest of the country," Finance Minister George Osborne said.

Prime Minister David Cameron, criticized by some in his Conservative party as being too liberal on crime and punishment, has taken a hard line on rioting in statements this week after returning from his summer holiday and recalling parliament.

He has also come under attack for austerity measures his government is introducing to tackle a huge debt burden.

Osborne said throwing money at the issue was not the answer and the government would press on with deep cuts to the numbers of police, who have been criticized by Cameron for their handling of the riots.

The Conservative mayor of London, Boris Johnson, has said the riots, which broke out a week ago after a demonstration against the police shooting of a suspect, weakened the case for those cuts.

Cameron has said political and economic grievances had little to do with days of looting and violence which followed in which five people were killed, calling it "criminality pure and simple" and saying gang violence lay at its heart.

He enlisted U.S. street crime expert William Bratton on Friday to advise the government on handling it.

Bratton, credited with curbing street crime as police chief in New York, Los Angeles and Boston, said he would offer advice based on his experience tackling gangs.

"You can't arrest your way out of the problem," he told U.S. broadcaster ABC on Saturday. "Arrest is certainly appropriate for the most violent, the incorrigible, but so much of it can be addressed in other ways and it's not just a police issue, it is in fact a societal issue."

Cities were largely quiet on Friday and Saturday. British police flooded the streets again to ensure weekend drinking does not reignite the rioting that shocked Britons and sullied the country's image a year before it hosts the Olympic Games.

More than 1,200 people have been arrested in connection with violence disorder and looting and hundreds have been charged. Police have set up screens in city centers showing pictures of suspects and plan to display them at soccer matches on Saturday.

THANKS

Tariq Jahan, whose 21-year-old son was one of three men who died in an apparent hit-and-run incident in Birmingham on Wednesday, told reporters he was "humbled" by the letters of support from people around the world.

"I also want to thank the young people in Birmingham for listening to what I had to say and staying calm," he said.

Osborne said lessons needed to be learned. "There are very deep-seated social problems which we need to tackle," he said in the interview with BBC radio.

"This about a far bigger challenge for our society which is dealing with people who we have ignored for too long and helping them feel they have a stake in society, feel that they know the difference between right and wrong, understand their responsibilities to other communities, not just their rights."

About 200 people took part in a demonstration on Saturday in north London calling for more support for youngsters living in grim and violent housing estates, a Reuters reporter said.

A ComRes poll for The Independent newspaper showed 54 percent of Britons say Cameron failed to provide leadership early enough to control the riots.

Most offenders are unemployed young men, though they have included a millionaire's daughter, a charity worker, a journalism student and a soldier.

The scale and ferocity of the rioting, not only in inner-city areas but also in some middle-class suburbs, has generated a debate with starkly different views, with many people saying the police should have been tougher.

The former leader of one of London's most feared street gangs said the riots were not the brainchild of gang leaders but, in many cases, the result of a build-up of frustration among young people growing up on grim housing estates with little hope.

"The fire's there, secured in a room, locked away and then someone's opened the door and it's spread through the house," Elijah Kerr, who transformed his gang into an organization helping young people, told Reuters in an interview.

(Additional reporting by Keith Weir and Stefano Abrogi in London and Ray Sanchez and Daniel Trotta in New York; Writing by Philippa Fletcher; Editing by Louise Ireland)

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Euro zone makes fresh bid to tackle Greek crisis (Reuters)

BRUSSELS/BERLIN (Reuters) – Euro zone countries continued to grapple with the thorny issue of involving the private sector in tackling Greece's debt pile as they prepared for a meeting to decide support for the country next week.

"The principle of having a euro chiefs' meeting is accepted by the main players, including Germany," said one EU diplomat, adding that it was likely to happen next week despite earlier signals from Berlin that there was no rush to finalize a second package of aid.

First, however, countries have to agree how to involve private sector investors in tackling Greece's debt burden, a key demand of Germany before it signs off more support for Athens and a step the International Monetary Fund said on Wednesday must be taken.

"Comprehensive private sector involvement is appropriate, given the scale of financing needs and the desirability of burden sharing," the IMF said in its latest review of the debt-choked country.

"Greece's debt service capacity may also need to be bolstered by combining appropriate PSI and official support," IMF officials wrote, referring to private-sector involvement.

Ratings agency Fitch cited continued uncertainty about private-sector participation and foot-dragging on giving more aid to Greece, when it downgraded the country further into junk territory.

Euro zone leaders' agreement to meet followed warnings they needed to act quickly after markets were rattled by the failure of finance ministers to reach agreement earlier this week.

Italian central bank chief Mario Draghi, soon to take the helm of the European Central Bank, and Ireland's premier both said a definitive plan was needed and quickly -- echoing a strongly-worded attack from Greece's prime minister earlier in the week.

The spotlight was taken off the euro zone, at least temporarily, after the Federal Reserve Chairman Ben Bernanke said the central bank could resort to more monetary stimulus if a sluggish U.S. economy weakens further.

Ratings agency Fitch had also countered the bleak outlook in Europe following an earlier downgrade of Ireland to junk status by Moody's when it said Italy could keep its credit status by sticking to fiscal targets.

But many remained on edge after a market attack on Italy and concerns that it too could need assistance, something that would overwhelm the euro zone's existing rescue funds.

"Moody's problem is not with Ireland, Ireland's problem is with Europe," Prime Minister Enda Kenny told parliament, as the cost of insuring Irish debt climbed.

"There is no point in having a meeting that won't bring about a conclusion in a comprehensive sense to something that is not going to go away unless it is dealt with."

WRANGLING

Should the leaders meet, they will need to pin down how private owners of Greek government bonds can be persuaded to shoulder a portion of the cost of a new package for Greece, a key demand of Germany.

They will weigh up the potential impact on markets if securing such involvement is declared a debt default by ratings agencies, as expected.

But countries had appeared to be subsiding into a bout of internal wrangling and risk creating a no-win situation.

"Markets reacted very badly after euro zone finance ministers could not reach an agreement," an EU diplomat said, referring to a finance ministers' meeting on Monday. "If they cannot agree, we take the fight to the highest level."

Herman Van Rompuy, the presides over meetings of EU leaders, had originally informed ambassadors he wanted to hold a summit on Friday evening.

But Europe's biggest economic power, Germany, which one EU official said was angry about being "backed into a corner", was reluctant, pushing the date of the gathering into next week.

STRESS TESTS

Another concern of leaders are the results of stress tests of European banks.

That could have a further impact on Italy, where bank stocks and the bond market have been hit by growing concerns that the euro zone's third-largest economy could be next in line after Greece, Ireland and Portugal to suffer debt contagion.

Draghi said Italian banks would comfortably pass the tests but echoed Kenny's call for a comprehensive EU response to the spreading debt crisis.

"We have to recognize that management of the financial crisis has not gone smoothly with partial and temporary interventions," he said in a speech.

"We must now bring certainty to the process by which sovereign debt crises are managed, by clearly defining political objectives, the design of instruments and the amount of resources," he said.

There are two main proposals on the table for securing the private sector's involvement in reducing Greece's debt burden.

One would be to buy back Greek bonds at a discount. Another is to swap Greek debt for longer-dated securities with a lower coupon.

However, it remains unclear how a buy-back of Greek bonds would be financed. It could involve using the 440 billion euro European Financial Stability Facility (EFSF).

The ECB remains vehemently opposed to any Greek plan that ratings agencies would be likely to see as a default.

ECB policymaker Jens Weidmann said the EFSF should not be used to buy bonds in the secondary market and it would be unacceptable for the ECB to accept Greek debt as collateral if the country were in default.

"The money of the (EFSF) bailout should not be used for the purchase of government bonds in the secondary market," he told Die Zeit newspaper. "Containment of the crisis should not mean that we undermine our principles. We must draw a red line."

But Germany's finance ministry said funds from the euro zone's rescue mechanism could in theory be used by members of the bloc to buy back their own bonds, suggesting a shift in Berlin's stance.

(Additional reporting by Julien Toyer and Luke Baker in Brussels, and by Noah Barkin and Gernot Heller in Berlin; editing/writing by Mike Peacock)

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Murdoch flies to London to tackle phone-hack crisis (Reuters)

LONDON (Reuters) – Rupert Murdoch was expected to fly to London to tackle a scandal engulfing his media empire while journalists prepared the last edition of a best-selling weekly they say he has sacrificed to protect plans to expand his television business.

The planned visit of the News Corp chief executive coincided with calls on Prime Minister David Cameron to speed up an inquiry into phone-hacking allegations which could jeopardize Murdoch's proposed takeover of a British broadcaster.

It has also unearthed allegations journalists working for Murdoch and others paid police for information and raised questions about relations between politicians, including Cameron, and powerful media owners like Murdoch.

Alan Rusbridger, editor of the left-leaning Guardian newspaper, said the past week had seen a whirlwind of stunning political, business and judicial developments.

"We've had both the prime minister and the leader of the opposition making the kind of statements that a week ago would have seemed suicidal for politicians, essentially conceding they had turned a blind eye to the abuse of press power because they wanted to keep in with Rupert Murdoch," he said in a video on the Guardian's web page.

News Corp, whose shares have fallen over the scandal, declined to comment on 80-year-old Murdoch's agenda.

A spokeswoman for News International, its British media arm, denied allegations an executive might have destroyed evidence relevant to a police inquiry into the allegations its reporters hacked into the telephones of relatives of troops killed in action and a string of celebrities several years ago.

News International chief Rebekah Brooks, 43, indicated more revelations may emerge in comments to News of the World staff on Friday, a day after she told them the 168-year-old newspaper had become "toxic" and would be shut.

"Eventually it will come out why things went wrong and who is responsible. That will be another very difficult moment in this company's history," Brooks said on Friday, according to a recording carried by Sky News.

Murdoch has brushed off calls for Brooks to resign due to her editorship of News of the World during some of the alleged hacking incidents.

She denies knowledge of the practice during her watch on the paper, hugely popular due to its celebrity gossip, campaigns and photos of scantily-clad young women.

Cameron, a friend and neighbor of Brooks, joined calls for her to step down on Friday at a news conference at which he admitted politicians had been in thrall to media for years and ordered a public inquiry.

Analyst Claire Enders said Newscorp was vulnerable. "As a business crisis it is immense," she told Reuters.

JOURNALISTS ANGRY

The Guardian newspaper said police were investigating evidence a News International executive may have deleted millions of emails from an internal archive in an apparent attempt to obstruct investigations.

The News International spokeswoman said the allegation was "rubbish," adding: "We are cooperating actively with police and have not destroyed evidence."

Journalists working on Sunday's last edition of the News of the World were angered by the loss of their jobs, saying they had been made scapegoats to protect NewsCorp's expansion in television.

"There are 280 journalists there who have absolutely nothing to do with the things that may have gone on many, many years in the past," chief subeditor Alan Edwards told the British Broadcasting Corporation.

A banner had been hung outside the newspaper's headquarters in east London, saying: "Break up the Murdoch Empire."

Neil Ashton, News of the World football correspondent told reporters before his final shift on the paper a lot of people on the paper wanted answers: "Rupert Murdoch is coming to London to restructure his company ... I don't know what the future holds."

Brooks denied the company, which many assume will fill the gap left by the News of the World by extending publication of its Sun daily to Sundays, was combining a cost-saving measure with a bid to remove a threat to its expansion in television.

British police on Friday arrested Andy Coulson, the former spokesman for Cameron who had resigned as News of the World editor in 2007 after one of his reporters and a private investigator were convicted of hacking into the phones of aides to the royal family.

Coulson has also said he knew nothing about the phone hacking.

PUBLIC INQUIRY

Cameron announced a full public inquiry into the hacking allegations at a hastily-convened news conference on Friday in which he was forced to defend his judgment in hiring Coulson.

The opposition Labour Party said on Saturday Cameron needed to appoint a judge quickly to get the inquiry going to avoid evidence disappearing, pointing to the Guardian reports.

"The clock runs out at the end of today," Labour Deputy Leader Harriet Harman told the BBC. "We ought to take precautionary measures."

A spokesman for Cameron said he was moving as quickly as possible. "We have already approached the Lord Chief Justice who will propose the judge," the spokesman said, adding that any destruction of evidence would be a criminal matter.

Cameron's opponents seek to block Murdoch's bid for the 61 percent of broadcaster BSkyB NewsCorp does not already own on the grounds it would give him too much political clout.

But allegations senior editors were involved in illegally accessing thousands of voicemail messages, and paying police for information, to get scoops, has raised questions about whether Murdoch's group is a "fit and proper" owner for BSkyB.

After years of allegations about hacking the voicemail of celebrities and politicians in search of stories, the scandal reached a tipping point earlier this week when it was alleged that in 2002 the paper had listened to the voicemail of Milly Dowler, a missing schoolgirl who was later found murdered, and even deleted some of her messages to make way for more.

That claim, and allegations that a growing list of victims included Britain's war dead and the families of those killed in the 2005 London transport bombings, outraged readers and caused many brands to pull advertising from the title.

A source familiar with his plans said Murdoch, who began his British media arm in the 1960s, was likely to arrive in London on Sunday morning.

Analysts and investors said the 14 billion dollar takeover deal could be jeopardized if British regulators impose tougher rules in response to new concerns around News Corp's dominance in British media.

Cameron indicated a new assertiveness toward the Murdoch empire by withholding overt endorsement of News Corp's bid for BSkyB on Friday.

"This scandal is not just about some journalists on one newspaper," he said. "It's not even just about the press. It's also about the police. And, yes, it's also about how politics works and politicians too."

News of the World and other newspapers have been accused of paying the police for information. Police said on Friday they had arrested a 63-year-old man in Surrey, southern England over allegations of inappropriate payments to police.

The prime minister's close links with those at the heart of the scandal mean he has been damaged by it but analysts say that with probably nearly four years until a parliamentary election he is unlikely to be sunk by it.

The police also face questions over why an initial investigation into phone hacking was closed after royal correspondent Clive Goodman and a private detective were jailed in 2007.

(Additional reporting by Sudip Kar-Gupta in London; writing by Philippa Fletcher; editing by Ralph Boulton)

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