captioning sponsored by macneil/lehrer productions >> ifill: pakistan's prime minister ruled out "business as usual" with the united states after a nato attack killed 24 pakistani soldiers over the weekend. good evening. i'm gwen ifill. >> woodruff: and i'm judy woodruff. on the newshour tonight, we assess what the growing tensions mean for an already shaky u.s. pakistan relationship. >> ifill: then we update the g.o.p. presidential contest, as former house speaker newt gingrich surges to the top. >> woodruff: ray suarez looks at the ruling by a new york judge, rejecting a huge settlement between citigroup and the securities and exchange commission in a mortgage-backed securities fraud case. >> ifill: jeffrey brown interviews european commission

president jose manuel barroso about europe's debt woes and its troubled currency. >> woodruff: and margaret warner gets a preview of the global climate talks, beginning today in south africa. >> ifill: that's all ahead on tonight's newshour. major funding for the pbs newshour has been provided by: >> intelligent computing technology is making its way into everything from cars to retail signs to hospitals; creating new enriching experiences. through intel's philosophy of investing for the future, we're helping to bring these new capabilities to market. we're investing billions of dollars in r&d around the globe to help create the technologies that we hope will be the heart of tomorrow's innovations. i believe that by investing today in technological advances here at intel, we can make a better tomorrow. >> and by bnsf railway.

>> the william and flora hewlett foundation, working to solve social and environmental problems at home and around the world. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> woodruff: outrage blazed in pakistan today over a deadly cross-border air raid from afghanistan. the weekend strike threatened to deepen a growing divide between washington and islamabad. >> reporter: protestors throughout pakistan raged against the united states and nato today over air strikes that killed 24 pakistani soldiers at two border outposts on saturday. the chant in karachi, pakistan's largest city, was,

"whoever is a friend of america is a traitor to the land." the pakistani bases, just 00 meters from the afghan border in the moman agency, were hit by helicopters and jets. u.s. and afghan special forces had reported taking fire from inside pakistani territory as they raided a taliban hideout in afghanistan. back stany officials claim the attack lasted two hours, despite their pleas to stop. nato called it tragic and unintended. but pakistan shut down two border crossings used to ship tons of war materiale into afghanistan every day. it also said it was closing a base used by the c.i.a. to conduct drone aircraft strikes. with that trucks stacked up waiting to transit the famed khyber pass. >> the government of pakistan ordered us to take this stuff

back. they have been bombed. someone returned. they're just sending it back. >> woodruff: the slain pakistani soldiers were mourned yesterday in... with the powerful arm army chief of staff in attendance. anger boiled throughout the nuclear armed nation as china and russia expressed solidarity. >> we take this matter very seriously. >> reporter: but in washington the obama administration scrambled today to contain new damage to the already frayed u.s.-pakistan alliance. white house spokesman jay carney. >> it continues to be an important, cooperative relationship that is also very complicated. it is very much in america's national security interest to maintain a cooperative relationship with pakistan because we have shared interests. >> woodruff: in fact, the weekend strikes were the latest in a series of incidents that have taken relations with pakistan to new lows. in january, a c.i.a. contractor was arrested after

killing two pakistanis in the eastern city of lahore. in may, the u.s. did not inform pakistan when navy seals crossed the border deep into pakistan to kilo osama bin laden. and continuing pakistani support of militants who attack american and nato forces in afghanistan has brought sharp rebukes from u.s. officials. for now both nato and the u.s. have promised investigations of saturday's air strike. in the meantime, the short-term fallout could be severe. pakistan's participation in an upcoming conference on stabilizing afghanistan is in doubt. and intelligence-sharing between the u.s. and pakistani militaries has been abruptly halted. and for more on this escalating dispute between official allies, we turn to shuja nawaz, the director of the southeast asia center at the atlantic council. he has written extensively on the pakistan military.

and stephen cohen, a senior fellow at the brookings institution and the author of numerous books about pakistan, india, and south asia, including a forthcoming one on the future of pakistan. gentlemen, good to have you both back with us. shuja nawaz, to you first. late this afternoon the associated press reported quoting defense officials as saying perhaps this was a case of mistaken identity. what is known at this point? >> at this point all that we know is that there was a fire fight perhaps in the border region and that the forces asked for support. it was u.s. air support that came in. and went and hit the targets, two of them both were pakistani military posts. >> woodruff: this late report, steve cohen says in effect there was an attack on a joint u.s.-afghan group and they

asked the pakistanis to confirm what had happened. and in looking for the source of it, they came upon what was an established... they came upon what they thought was an encampment of insurgents but this report is now saying perhaps this was.... >> yeah, at this stage in this crisis and in all crises like it, we don't know what the truth is. half of what you hear is false. we don't know what you do hear is accurate. there could have been in the past insurgents, taliban groups operating from the pakistani side which would give the americans and nato forces and the afghans a reason to attack. maybe this time there weren't. we just don't know what the facts are. >> woodruff: how does either side get to the bottom of this? >> i think there needs to be a very swift investigation from the u.s. side first. that's been promised. with all this new information that is now emerging, there's quite clearly a desire to walk

this crisis back from the edge of the precipice. because the next step pakistan's part which would be to close the air link to afghanistan would really rupture this relationship. at this point, it is not in pakistan or the united states' interests to have this relationship break apart. it's very critical for pakistan to attend the conference with afghanistan that starts december 5. it's very critical for pakistan to continue to receive u.s. military assistance and economic assistance. but now the hands of the government are forced and the military in pakistan. >> woodruff: that raises the question, steve cohen, how easy will it be to dial back the anger, the emotion in the streets of pakistan right now? >> some of that anger is manufactured by the government. very effective in its manipulation of the press. i'm not that concerned about that. i think the larger issue is

that pakistan believes it has to support the taliban and other groups in afghanistan to preserve its negotiations at the bond nor iations. our interests and the pakistani interests won't be similar as long as they do that. they believe they need to use these groups to get a place at the peace process. our view is that supporting these groups is not the right thing to do. >> woodruff: is that something that seriously is in jeopardy of going away? >> i think the pakistanis believe that there's their only viable instrument in long term strategic negotiations so they will continue to support them. that's been the case all along, the different goals in afghanistan and these different instruments in afghanistan. >> woodruff: shuja nawaz, what is at stake here from the pakistani side? as we pointed out, this is a nuclear country. everybody talks about the fact that pakistan has nuclear capability. how much is that a factor in this right now shaky relationship? >> well, this year we've seen a series of events that has

taken pakistan by surprise. and it's the cumulative effect of those. in your own report you mentioned a number of those events. the raymond davis affair, the drone strikes after he was released, whether it's the raid on a town. all of those had really created and deepened the mistrust between the two countries. secretary clinton had done a great job in trying to rebuild these relationships after her trip while being fairly frank and forthright about what the u.s. expected pakistan to do. in return. this latest episode has really angered the pakistan military but it's also empowered the opposition politicians in pakistan who are using this as a stick to beat the government. so even though steve cohen is referring to manufacturing this public opinion, there is a political dynamic at work

inside pakistan's domestic politic that we must be aware of. that's forcing the military and the civilian government to take a much tougher stance than they might normally do. >> woodruff: how much more difficult does that make it to figure out a way through this? >> well, behind all of this victim psychology especially on the part of the pakistanis but occasional us there's the fact that pakistan is a weaker and weaker state year by year. stuj a and i have co-authored a book which states that pakistan is stable for five years. we're not worried about the long-term. but it's a danger to everybody beginning with pakistan. >> woodruff: what do you see as the next step here, steve cohen? >> i think we're muddling through both in policy and in terms of developments in pakistan. i don't think there's any clear policy. in the u.s. government there's clear division over how to deal with afghanistan and pakistan. in pakistan i think any notion

of working with the americans is now anathema except for the limited section of the military. i don't see any clear solution to this. we're going to struggle with a failing pakistan not a failed pakistan but a failing pakistan for the next four or five years if not longer. our policies are inconsistent to the whole region. >> woodruff: you're saying regardless of which administration, who's in power in the white house? >> from what i've heard of the republican candidates they're all over the place in terms of dealing with pakistan. >> woodruff: and in terms of what happens next, can the u.s., by saying this may have been a case of mistaken identity, can they bring the pakistanis back to at least having a discussion about how this happened? >> i think so. i think it's very necessary if indeed that is the case to be open about it. and especially in the closed- door meetings that are likely to occur at the higher level. to give them a face-saving way of easing out of this crisis so that they can ratchet down

their own rhetoric and their actions because, as i said, they've now used a very serious weapon which is closing down the land route. if they would close down the air route, then things are going to completely rupture between the two states. and it's not in pakistan's interest and not in the united states' interest for that to happen. >> woodruff: what would you add to that? >> i agree with that. i think this will blow over maybe in a month or two and we're return back to normalcy of inconsistent hostility between parties. it's like a bad marriage. they can't live with each other or without each other. a truly failed pakistan will not be in anybody's interest. that's the view of the chinese and the indians towards pakistan. the indian relations with pakistan are much better than our relations with pakistan which is a bizarre but welcome development. >> woodruff: i hear you both saying there may be a short-term solution, resolution to this but in the longer term the complicated relationship continues.

>> yes. because pakistan's regional interest are at variance with the united states' interests in the region. and the u.s. has to take cognizance of that. once we recognize that situation, i think the u.s. will in a much better position to deal with?hhakistan. >> woodruff:

are you excited about today? >> very excited. very, very excited. >> reporter: turnout was so high that the voting hours have been extended. last january, this was still effectively a one-party police state. egyptians can scarcely believe the changes. >> we were afraid coming in here at the beginning but they gave us the ballot paper nicely with no supervision and no pressure. not like in the past. >> reporter: a lot of

egyptians can't read or write. how are they going to vote? for a symbol instead. on this party ticket you can vote for a tank. up here there's a pair of sunglasses. there's a pyramid. there's a rocket over here. if you want to vote for the muslim brotherhood who are expected to win today, they're represented by a set of scales. the islamist brotherhood was outlawed for decades. today it was busy leafletting voters under the army's gaze. >> this image we have was caused by the media and by the past regime. they never gave the muslim brotherhood a chance at anything. very unfair. >> reporter: these elections are historic. no question. but there's also a great deal of uncertainty here. for a start, nobody knows how long the parliament that is being elected will be allowed to sit for and egypt's generals who run the country still haven't confirmed that a government will be formed from whoever wins this election. still this is a beginning on

egypt's bumpy road to democracy. and today's elections even thined the crowds in tahrir square. some are boycotting the polls and demandingy egypt high school military leaders step down now. but thousands disappeared to vote instead. >> holman: the day's voting was free of violence, after recent clashes between protesters and police. elections also went ahead in the democratic republic of congo for only the second time since the african nation's civil war ended. voting proceeded despite missing ballots and violence that killed nine people over the last 24 hours. president joseph kabila was expected to win a second term, but some opposition groups threatened to reject the results. that prospect raised fears of new conflict. attacks in iraq ramped up today, weeks ahead of the final u.s. pullout of troops. the worst attack was outside a prison in taji, just north of baghdad, where at least 19 people were killed in a suicide bombing.

another attack hit in the heart of the green zone, the heavily fortified area of baghdad where many government offices are housed. this was the first full day of the arab league's economic sanctions against syria. 19 members-- nearly all of the bloc-- approved the penalties yesterday after syria refused to end its crackdown on civil protest. meanwhile, the violence continued. activists reported more than 30 people were killed by government forces on sunday. members of the occupy protests in philadelphia and los angeles still were in place today after evacuation deadlines came and went. in philadelphia, protesters rallied in anticipation of the cutoff time sunday afternoon, but police never moved in, and there were no arrests. and in los angeles, demonstrators filled streets around city hall hours after a midnight deadline. four people were arrested for failure to disperse as police attempted to clear nearby streets. a leading liberal voice among house democrats is retiring after more than 30 years.

barney frank of massachusetts announced today he won't run in 2012. he is 71. frank was one of the first openly gay lawmakers in washington. after the 2008 financial collapse, frank helped push through tough new restrictions on banks and wall street-- legislation that bears his name. but in newton, massachusetts today, he said legislating has become far too difficult. >> the leverage you have within the government has substantially diminished. the anger in the country, the currents of opinion are such so that the kind of inside work i have felt best at is not going to be as productive for the foreseeable future. not until we make some changes. >> holman: frank also cited a redistricting plan that moved hundreds of thousands of new voters into his district. those are some of the day's major stories. now, back to gwen. >> ifill: we turn to the republican presidential race, where newt gingrich, suddenly ahead in the polls, picked up a key endorsement over the

weekend. >> thank you to all of you for coming today. >> ifill: candidate gingrich got a big boost sunday from new hampshire's most influential newspaper. newt gingrich is by no means the perfect candidate, the paper's page one endorsement read. we would rather back someone with whom we may sometimes disagree than one who tells us what he thinks we want to hear. that not so subtle shot was directed at former massachusetts governor and new hampshire frontrunner mitt romney who has yet to definitive break out from the republican pack. but gingrich disagrees with both the union leader and some of his republican competitors on at least one key issue. immigration. during last week's debate he repeated his support for granting legal status to some residents who arrived in the country illegally. >> if you've been here 25 years and you have three kids and two grand kids, you've been paying taxes and obeying the law you belong to a local church, i don't think we're going to separate you from your family, uproot you forcefully and kick you out.

>> ifill: while the former house speaker's position puts him in step with previous republican presidents including reagan and bush, it plays him at odds with his current rivals. >> we're going to say to the people who have come here illegally that now you're all going to get to stay or some large number are going to get to stay and become permanent residents of the united states. that will only encourage more people to do the same thing. >> ifill: romney however once embraced the gingrich approach. this adds to a story line democrats are anxious to promote that romney shifts positions. this ad was released today. >> is mitt willing to say anything. >> ifill: a surging gingrich follows bachmann, perry and cain as the latest republican to challenge romney's uncertain lead in the polls. the voters weigh in five weeks from now. we are joined now by joe mcquaid, publisher of the "new hampshire union leader." and susan page, washington bureau chief for "u.s.a. today." welcome to you both. mr. mcquaid, should we be surprised at your endorsement?

>> well, apparently some in the media were. i got an awful lot of telephone calls this weekend. and emails. but it wasn't a surprise to us. we watched all the candidates and watched them in the so- called debates. and selected the guy that we think is the best representative of the republican party. >> ifill: as we mentioned in the set-up piece we've had a different front run er in the republican race every couple weeks. is newt gingrich the latest flavor of the month or is there something more enduring there? >> i think it's more enduring. i have to quarrel with one part of the set-up piece which said that the gingrich disagrees in one major area with the union leader on immigration. i don't know where that came from. we had an editorial in sunday's paper outlining his remarks about people who have been here to for 25 years. we find nothing at all wrong with that. >> ifill: why wasn't this immigration deal... why wasn't

this a deal-breaker is the term i'm looking for among so many conservative voters even if you agree with him on this one slice of the issue. we heard from mitt romney and michele bachmann this was a betrayal. >> you heard from mitt romney and you also heard the earlier version of mitt romney in which he had given, outlined the same kind of stance both to tim russert and to other people. somebody asked me today, didn't gingrich's stand go against the grain of the republican party? and i asked, wasn't that what the presidential primary system was all about, to gauge the grain of the party? so we have gingrich out there with a position. romney out there with a position of the week. and others. we'll have to see what the voters say. >> ifill: a lot of tea leaf readers are saying that your endorsement is as much anti-romney as pro gingrich. it sounded a little bit that way from some of the things you just said. >> well, more from what i just said than i hope.

i thought it was more subtle in the editorial relative to people with whom we disagree. >> ifill: you were subtle but you meant romney. >> i did. you picked me up on that. >> ifill: i did. however, the argument you seem to be making as well is that you are... whether you're anti-romney or pro gingrich, you're mostly anti-obama. you think that newt gingrich is the best person to defeat him? >> i'm really the odd guy out in that soup, i guess. i think that gingrich has the history, the expert he's. you ran a piece earlier on pakistan. gingrich has been saying that we really have to fundamentally look at what we're doing in the mideast relative to pakistan and afghanistan. pakistan is the real source of the issues with afghanistan. i think he is refreshing and wants to take a look at all of our commit manys overseas. he's a guy with ideas. i think it's ideas that as you

get closer to the top of the heap, you get crimped in by what your pollsters tell you on issues. you don't want to go outside of those margins. gingrich doesn't know any margins. i think he probably colored outside of the margins as a kid. >> ifill: susan page tony perkins of the family research council was quoted as saying under normal circumstances gingrich would have real problems with the social community. >> it's like the three-married gingrich will be the social conservative candidate. it's hard to overstate how important this endorsement by the union leader is for newt gingrich. for one thing, we heard mr. mcquaid talk about the subtlety of the union looder endorsement. subtlety is not what the union leader is known for. we expect to see the union leader hammer home this endorsement for the next six weeks until the voting. i think it also helps newt

gingrich in iowa. it's a conservative stamp of apofl for newt gingrich that says you're looking for an alternative to mitt romney, newt gingrich will be your guy. >> ifill: people who don't go to new hampshire like we do every four years and know the power of the union leader. why is it influential? >> the union leader is the biggest newspaper in the state for one thing. and for another, it presses the point over and over again with mr. mcquaid does what he's done in past, we'll see more front page editorials accompanying... trumpeting newt gingrich. it will give a lot of coverage to newt gingrich and a lot of favorable coverage to newt gingrich. that makes it important. in fact we saw an analysis by nate silver today that said that the union leader doesn't guarantee someone a victory in the new hampshire primary but it probably boosts the candidate by about 11 points. 11 points! that is a big gulf in politics. >> ifill: how real is this surge, this gingrich rise in the polls? we've seen so many other rise and then fall?

>> it's pretty clear that there's a group of republican voters who do not want to vote for mitt romney. maybe they'll support him if he gets the nomination but they are looking for an alternative. they thought they had one in michele bachmann. and then in rick perry. then in herman cain. those candidates have all but collapsed so newt gingrich is the latest one. maybe the last one. it's hard to look in the field and see who else could emerge as that contender? so maybe his timing has turned out to be just right. >> ifill: at the very least the voters will weigh in at some point. mr. mcquaid, what are the voters in new hampshire saying at this point? are they lining up behind you or still keeping... famously keeping their minds open on this? >> they're famously keeping their minds open. there was a poll last week by a tv and the university of new hampshire which said only 16% of the people who intended to vote were strongly committed to their particular candidate. i've got a challenge susan on one point. i will be doing front page editorials but the news coverage for gingrich will be

the same as the news coverage for the other major candidates. no more, no less. >> ifill: is new hampshire in your opinion a must-win for romney or is it worse of a loss for romney than it would be a win for gingrich or anyone else? >> it's the expectations game, gwen. it's what you in the media and what the pollsters all say it's going to be. we've had people win the new hampshire primary who, if you ask anybody in the street, they'll say they lost. lbj. ed muskie. the expectations for romney i think would be pretty high. he's from next door. he has a house in new hampshire. he has spent considerable time in new hampshire. even brought me a of coffee at the red arrow diner. he's a well known quantity. he's got a big, wealthy-on ergs here. i asked him last week why his team continues to fire at rick perry. this may not be true any longer.

but as of last week he said because he's got the money. i think you're going see that with perry and romney and big tv campaign ads. gingrich is catching up but he doesn't have nearly as much cash on hand as they do. >> ifill: joe mcquaid, that cup of coffee didn't take mitt romney very far at least not yet. thank you very much for joining us tonight. and susan page of usa today as well. >> you're welcome. >> woodruff: now, a federal judge rejects a settlement between the government and a major wall street bank over mortgage deals dating back to the housing bust and the financial crisis. ray suarez has the story. >> suarez: citigroup and the securities and exchange commission had sought court approval for a $285 million settlement. the settlement was reached after the s.e.c. accused citi of failing to disclose to investors that it was betting against a billion-dollar subprime mortgage investment.

but today, u.s. district court judge jed rakoff in new york rejected the deal with pointed criticism, saying it was "neither fair, nor reasonable, nor adequate in the public interest." rakoff was also critical since citigroup did not acknowledge fault. the judge wrote that he could not approve it because "the court has not been provided with any proven or admitted facts upon which to exercise a modest degree of independent judgement." the s.e.c. disagreed strongly with his ruling, an order that may have significant implications. we get more on all this with edward wyatt of the "new york times." and jacob frankel, a former federal prosecutor at the s.e.c. who's now in private practice at shulman rogers. edward, let's start with you. explain the machinery here. why did judge rakoff have to sign off on this deal in the first place once it was negotiated between thering bank and a regulator?

>> well, the s.e.c. brought the case in federal district court. it was asking for an injunction which would prevent citi group from violating the securities laws again. because of that and because it's a federal agency it had to get a judge's approval for the decision. now judge rakoff has been a frequent critic of the s.e.c. in these types of settlements. he has raised points in rejecting settlements before saying that the s.e.c. wasn't being strong enough and it wasn't proving anything to him. that's what he said here. there's no way that i can tell that citigroup actually did these things and therefore i don't have any basis to judge whether this settlement is in the public interest. >> suarez: even on the occasion when a settlement is rejected by a federal court, is it rebuffed with this kind of thoroughness and this kind of language? >> well, certainly when judge

rakoff rejected a settlement with bank of america over its acquisition of merrill lynch and not telling shareholders about certain things that it knew about merrill lynch beforehand, he has used very pointed language and has raised questions about particularly the aspect of the settlement in which the company neither admits nor denies the charges. this is a typical s.e.c. settlement. it allows companies to do this because it's a way to get a settlement and avoid a trial that would be very expensive for the s.e.c. and beneficial to a company that has deep pockets like citigroup or goldman sachs. >> suarez: jacob frankal, this is a world you know well. what did you see in the 15-page order entered today by judge rakoff. >> what i saw was the judge saying to the s.e.c.-- and really to citigroup as well-- you did not tell me, the jumg,

enough to be able to sign off on the settlement because this practice of the s.e.c. settling cases without admitting or denying allegations although judge rakoff certainly did criticize that methodology, the fact is that it's very important for the s.e.c. and really for the federal judiciary from a program perspective because this is an agency that brings hundreds upon hundreds of cases every year and settles most of those cases before they're brought. i think really what the judge was responding to was the s.e.c.'s brief in which it basically said, well, we think this is a fair settlement. so take our word for it. and the judge is saying, no, i have a duty to the american public to look deeper, to look beyond. there's plenty of language in there that suggests to me that the exact settlement terms that were agreed on between citigroup and the s.e.c. are the terms that he ultimately will accept if he gets the

additional information that he is looking for from both parties. >> suarez: so judge rakoff is reacting to the structure, the way these things are done rather than the particulars of the deal that the s.e.c. struck with citigroup? >> i think what he wants to be able to do is to kick the tires. he was talking about accountability and transparency. he wants to make certain that this is a fair settlement for the american public because again the s.e.c.... the s.e.c.'s responsibility in bringing a case relates to the integrity of the markets. they're not representing a private plaintiff alleging monetary damages. what they're basically saying here is we believe that an institution, a prominent institution violated certain provisions of the federal securities laws. after investigating, determining there was appropriate to bring a case, what they've done is they've agreed on a compromise of that case. that's exactly what was put in front of the judge.

the judge is saying, i really need to know more about what is underlying this case in order to sign off on this agreed resolution. >> suarez: edward wyatt, again and again judge rakoff returned to the opaque nature of the deal between the bank and the regulator and also that lack of admission of guilt. but if you were to go for guilt either in court or for an admission from the company, would the s.e.c. be able to bring as many actions or would each one be slower just of necessity? >> well, the s.e.c. says that it would be able to bring far fewer actions because of the cost in manpower, taking a case to court. that it couldn't bring anywhere near the number of cases that it brings now. but what judge rakoff has done has said the public needs to be able to tell whether or not citigroup in this case did these things. and he goes even further in making a point about the separation of powers between the judiciary and the

executive branch. saying you can't just come to a judge and ask them to rubber stamp your decision. the potential for abuse is rampant there, that the executive branch could punish people without providing any real evidence. i as a judge am not going to say, yes, i approve this unless you give real proof that there is something here that was done wrong. >> suarez: jacob frankal, what do you make of that point? the judge says don't try to make me the enforcer of something that you won't let me know what's inside it. >> that's exactly the point but i think to the question you just posed to edward is that there would be gridlock and chaos in s.e.c. litigation brought in the federal courts if parties were required to admit that there be some type of admission, some type of culpability because that admission would have a

collateral effect in all other litigation. it would take away the incentive of any party accused by the s.e.c. to settle. so i really do think that it would be an undue burden on the federal courts. i think one of the things that the s.e.c. would do ultimately would consider bringing these cases in an administrative forum which would mean probably the need to add 30 administrative law judges which is why ultimately i truly believe that this is a settlement that will be accepted once the judge is satisfied about the underlying basis for the settlement as proposed. >> suarez: how long before we know how this all ends up? >> i think a lot of this may play out behind the scenes. in other words not in open court. i mean, i think within the next four to six weeks, although we're coming up on the holidays, you know, it could be early january but i don't think it will be that long before it resolves. >> suarez: jacob frankal, edward wyatt, gentlemen, thank

you both. >> thank you. >> ifill: next, a debt crisis in europe that until now has threatened individual countries now threatens their common currency. jeffrey brown has our story. >> brown: mounting fears for the fate of the euro zone dominated an annual summit held today as president obama hosted leaders of the european union. the president again pressed for a resolution to europe's banking and debt crisis when it would prevent its further spread worldwide and here in the u.s. >> if europe is contracting or if europe is having difficulties, then it's much more difficult for us to create good jobs here at home because we send so many of our products and services to europe. it is such an important trading partner for us. >> brown: just a few weeks ago at the g-20 summit in france, a deal seemed to be in hand. but the situation has deteriorated since then. skeptical markets have been

bidding up interest rates and borrowing costs for italy and other troubled states. and even germany with one of the strongest european economies had trouble raising funds in a government bond option last week. moreover, the crisis has claimed new political casualties. on november 9, greek prime minister resigned in the face of new european bailout plan. two days later the italian prime minister was forced out as well. last week's spain conservative popular party swept the ruling social i haves out of power. in all at least eight governments in the euro zone have fallen since february. in addition to spain, italy and greece, new leaders have taken power in slovakia, denmark, portugal, finland and ireland either through elections or parliamentary actions. in recent days the problem has become systemic. raising questions as to whether the euro system itself can survive. today the organization for economic cooperation and development warned that the

euro crisis remained, quote, a key risk to the world economy. and the credit rating agency moody's said the crisis may lead multiple countries to default or leave the euro. joining us now is president of the european commission, the executive arm of the e.u.. he's a former prime minister of portugal. welcome to you. >> thank you. >> brown: this is from the economist magazine just out. without a dramatic change of heart by the european central bank and european leaders, the single currency could break up within weeks. that's just one of many assessments. some of them even more dire. do you agree? is the euro in danger? i would not say the euro. but the financial stability, in fact, is affected now severely. i think that there is a problem. we recognize the problem. we are not complacent about it. at the same time, i want to tell you that i firmly believe

that the determination of tall european leaders that government and institutions should do whatever is necessary to protect europe. >> brown: explain the problem. for an american audience, what is the fundamental problem facing europe right now? >> the problem is the following: we have some countries at high levels of debt and so we have a problem in terms of assuring the sustainability of this debt. at the same time differently from the united states that has also has a debt that is bigger compared to the g.d.p. than coverage the european union. we have 17 member states in the euro area and 27 for the european union. so we have been reacting in an unprecedented manner. it is an unprecedented challenge to combine the reduction of the debt with some measures to enhance growth. but of course without... we are not completely integrated

as a country like the united states. we have a common currency but not a common treasury. now we are creating those instruments. this takes time because democracy is slower than markets. but i believe with we are going to overcome this crisis. >> brown: some of these steps being talked about are quite unprecedented including a solution on the table is now more integration through a fiscal policy, a fiscal union. essentially requiring countries to get approval for their budget and tax policies. now, are european countries ready for something like that which means giving up a certain amount of sovereignty? >> i think so. already now in the european union there is a pooling of sovereignty. we have an independent central bank. we have the commission that is a international institution that is independent from the member-states that puts the proposals on the table that afterwards have to be approved by the member-states. sometimes by qualified majorities. it means that the country may

be outnumbered, but you already have some mechanisms of pooling sovereignty. but now for the currency, my answer to you is, yes, member- states are now ready to accept a higher level of integration because we know now by experience that without more december olympian, more convergence, the euro will be at risk. i see now that there is a willingness to do that that before this crisis was simply not there. >> brown: hasn't part of the problem been precisely the differences among countries in europe, very strong ones and the very weaker ones? some people have wondered if this crisis is bringing out a fundamental flaw in the whole system that doesn't allow the kind of actions we're talking about. >> it's true that there are differences. that explains why sometimes decisions take longer than what we would have liked. at the same time i can tell you that everybody wants to keep the euro, from germany to

greece, nobody wants to leave the euro. i can tell you that the level of inter-dependence integration of the european union is so important that the perspective of going back on these acheechls is simply too costly for everybody. >> brown: what would the consequences be? >> look, it would be extremely damaging because it could mean a break-up of the market. the market is 500 million that is the biggest in the world in terms of value. bigger than any other. so it would be a catastrophe i think. but i think we are not going that way. in fact if you look at europe, nobody is is proposing it. the debate is how are we going to further integrate? what competences could we accept to be done... to be at the european level instead of national level? but all the member-states are now ready to consider this. but of course at the same time

we have to consider more immediate measures. >> brown: but you mentioned germany earlier. much of the concern now is that germany, the richest european country, is resisting stronger actions that many people think are necessary. issuing euro-bonds or having the european central bank play a much stronger role. they fear that more of it is going to fall on them, right, to bail out weaker countries? are they an impediment now? >> germany is the country that is giving more support in financial materials because the financial support or so- called bailout program, they are financed in a pro rata to the g.d.p. so germany by far is the biggest contributor. i can tell you from my contacts in the german government and also by their commitments formerly, explicitly, they say that they are ready to do whatever is necessary to perfect the euro and the financial stability. of course i have to frank with you. not all the member-states agree exactly on what is the

best way to do it. and behind the process of reaching that consensus. because some of those measures are indeed very important. i have no doubt about the german determination about protecting... because it will also damaging for germany. germany exports more for the other countries in the european union than all the rest of the world. so to be a full crisis in the euro area would be damaging for the business and for the workers in germany as well. >> brown: let me ask you finally, you say some of these measures will take time. is there time? i mean, all of these dire warnings say within weeks, some within days, some within months that a real crisis could unfold. >> the governments are unaware of this timing issue and the urgency. besides there is a meeting at the ministerial level in brussels. on the 9th of december, there will be a summit of the european union.

i believe progress will be achieved there. i think i can tell from my contacts and i'm telling my full independence because these decisions, some of them, are to be taken by the member- states that i i trust that they understand the magnitude of the problem because it's a serious problem and also the urgency of addressing it. >> brown: the e.u. commission president, thank you very much. >> thank you. >> woodruff: finally tonight, what's behind the long struggle to reach a new international agreement on reducing greenhouse gases. margaret warner has our update. >> warner: it's been nearly 15 years since leaders from 37 industrialized countries agreed to reduce their carbon emissions as part of the so-called kyoto protocol. but countries would no longer be bound by the accord after december, 2012, even as greenhouse gases are reaching record levels in the atmosphere.

for its part, the u.s. never participated in the kyoto treaty after congress refused to ratify it. in 2010, house democrats passed a cap-and-trade bill to reduce heat-trapping emissions in 2009, but it collapsed in the senate last year. today, negotiators from around the globe kicked off a meeting in durban, south africa, to tackle the issue. but disagreements were apparent at the outset. for more, i'm joined by juliet eilperin of the "washington post." welcome back. >> thanks so much. >> warner: give us a flavor of the disagreements that were immediately on view on day one of this two-week conference. >> you can see how far apart the major countries are when you have, for example, the canadian environment minister back in t.w.a. saying that kyoto is the past and you had the lead european union negotiators saying the countries are running from kyoto and urging them to go forward along with the e.u. to a second commitment period.

there's a big gulf between many of the countries. >> warner: the e.u. would officially like to extend kyoto beyond next december. >> they are the only ratified party right now that is willing to commit to a second round. >> warner: if they don't get that, what ideally at least in the eyes of the u.n. climate, people who convene this, would durbin achieve? >> well, what they're really hoping to achieve on a broad level is an agreement to essentially talk about a new agreement that would be forged by 2020. that basically could the world come together and could all the major players agree that they would be legally bound by something else as we go forward. >> warner: let's go back to the 97 kyoto agreement that the e.u. negotiator said was the past, the canadian. how successful was it? in other words, how many of the countries that set binding targets for themselves met them? >> well, we've had micked results. frankly the economic recession that we've seen in the last couple years has helped curb

emissions somewhat recently. so by the end of 2012 there's some countries that, for example, were not on a path to meet their commitments such as japan which may come in under the deadline but you had.... >> warner: because of the economic slowdown. >> because of the slowdown. that they actually weren't as high. but you have countries like canada, for example, that as of 2009 was more than 28% above its 1990 levels. it had pledged to cut its emissions by 6%. so while the e.u. in some countries have met it, most countries have gotten well above that. >> warner: is it technically more difficult to do than anybody thought or is it a question of political will. >> to a large extent it's a question of political will. there were divisions about whether to adopt binding emissions across an entire nation. if you're not willing to do that it becomes very hard to cut it. of course when you're talking about transforming the energy sector, that is a major task. it does involve in economic disrupg which some countries have been unwilling to do.

>> warner: a very big picture. the u.s. where do our emissions stand today compared to, say, '97? >> as of the end of 2009 which is unfortunately the most up to date statistics we have, we were more than 5% above our 1990 levels. to put it in perspective when we helped forge the agreement even though we didn't ratify it, we had ledged to cut our emissions by 7% below that. there's no question we would miss our target as well. >> warner: meanwhile that's the latest science on climate change? i know that the u.n. panel, the inter-governmental panel, came up with a fair dire one just last week. >> absolutely. it came up with a new report saying that there's no question that we're going to face, for example, increased heat waves going forward, intense precipitation that would be less frequent so you would have the kind of flooding that we've seen across the country. they warned that we'd have a number of extreme weather events that would intensifys a we go forward. in addition, the international energy agency just came out with a report saying that we're headed for a temperature

rise that would be nearly 11 degrees by the end of the century which is far far above what these negotiators in durbin have pledged to reach. >> warner: the other thing that has happened recently is the controversial emails among climate scientists that came out in 2009. a new batch came out also recently in the last couple of weeks. was there anything in those that in any way affected the debate going into this durbin meeting? >> it hasn't significantly affected the debate. it's certainly added fodder to those who were skeptical about the connection between human activity and climate change but in terms of the emails there weren't revelations that it was presumably from the same batch that were stolen back in 2009 and released then. and so while, for example, it caused a minor debate here in the united states, it didn't significantly afokt what what we're seeing now in durbin. >> warner: what happens if a year from now in november 2012 we're sitting here and there has been nothing agreed that

would replace or extend kyoto the following month? what happens? >> well, there was a more informal agreement that was reached last year when delegates met in cancun at these same u.n. climate talks. there individual countries including all of the major emiters did create new climate goals for themselves. >> warner: goals? >> exactly. so they're not bound up in a legaly binding treaty. for example, the united states has pledged to reduce its emissions 17% below 2005 levels. it gave itself a new baseline to play with more. and other countries did the same, even china adopted ones. now they're working out for example how they're going to measure and verify those reductions so there is something in place. but it's not nearly as strict as what we've seen under the kyoto protocol. >> warner: briefly, in the meantime american public opinion is less alarmed than it was about chime at change. >> what we've seen is among the most conservative of americans they've become less concerned with climate change and are more skeptical of the

connection between human activity and what's happening despite the science. overall we simply haven't seen the kind of voter intensity we see on other issues such as the economy that would really propel politicians to act. >> warner: juliet eilperin, thank you. >> thank you. >> ifill: again, the other major developments of the day. pakistan rejected "business as usual" with the united states after a nato attack killed 24 pakistani soldiers over the weekend. stocks soared on news of record retail sales after thanksgiving. the dow industrials gained 290 points. and millions of egyptians voted in the country's first parliamentary elections since president hosni mubarak was ousted. online, we look at a clinical trial for a drug, once hailed for its promise in preventing h.i.v., now being shut down. kwame holman explains why.

kwame? >> holman: researchers had high hopes for the gel tested on women in africa, but early results showed it was ineffective. that's on our global health page. and on our making sense page, paul solman answers a reader's question about whether the u.s. is addicted to war, and if americans think about the cost. all that and more is on our web site, newshour.pbs.org. gwen? >> ifill: and that's the newshour for tonight. i'm gwen ifill. >> woodruff: and i'm judy woodruff. we'll see you online and again here tomorrow evening. thank you, and good night. major funding for the pbs newshour has been provided by: >> intel. sponsors of tomorrow.

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