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CONNECT THE WORLD

Small Steps Back From Abyss; European Commission Issues Wake Up Call; Break in Impasse in Italy; Analysis of Murdoch's Testimony

Aired November 10, 2011 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MAX FOSTER, HOST: On the brink, markets stabilize as two troubled countries break their political deadlocks.

And others shoot down rumors that they're planning to split the Euro Zone in two.

Live from London, I'm Max Foster. Also tonight, James Murdoch called a "mafia boss" by a British MP. How he's defending himself in the widening phone-hacking scandal.

And turmoil on an American campus. Students riot after Penn State fired its legendary football coach.

We begin, though, with small steps back from the abyss for two countries at the heart of the Euro Zone debt crisis. The political uncertainty in Greece and Italy is easing a bit, and that's helping to appease worried investors.

US markets closed just moments ago, and after a steep drop yesterday, the Dow posted triple digit gains. That's partly because Italian bond yields have pulled back and a front-runner has emerged to replace Prime Minister Silvio Berlusconi.

Investors also relieved by progress in Greece, where an economic heavyweight has been named as interim prime minister. Former European Central Bank vice president Lucas Papademos will be sworn in on Friday. He's expected to push through a controversial EU bailout package.

But a new warning today leaves no doubt about the trouble that still lies ahead for the European Union as a whole. The European Commission today issued a wake-up call, predicting stalled growth could push the EU back into recession in 2012.

Let's get details now on the apparent break in the political impasse in Italy. As Matthew Chance now reports, crucial reforms could be approved even sooner than we'd expected.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Amid market turmoil, the political situation here in Italy moving at a much faster pace than anyone expected.

If all goes according to plan, the country's austerity budget should pass into law as early as Saturday, opening the way for Silvio Berlusconi to make good on his commitment to resign.

The expectation is that a new government of technocrats will be appointed by the Italian president shortly afterwards to steer this country through its economic crisis. The man tipped to be the next prime minister is an academic and former EU commissioner, Mario Monti.

On Wednesday, Mr. Monti was made a senator for life by the Italian president, fueling those rumors he'll soon be tapped to lead the country.

One point to remember, though, is that this crisis in Italy is not just about personalities. Economists say whoever emerges as prime minister at the weekend will still have to implement painful and immediate reforms to bring Italy's burgeoning debt under control.

Matthew Chance, CNN, Rome.

(END VIDEOTAPE)

FOSTER: Some economists say Italy is not only too big to fail, but also too big to save. That is, its debt is simply too massive to bail out. Yet, any default would have unthinkable consequences for the world economy at large.

So what are the options for resolving the crisis? Well, Nina Dos Santos takes a look.

(BEGIN VIDEOTAPE)

NINA DOS SANTOS, CNN CORRESPONDENT: Let's take a look at the end game scenarios for Italy. This is the Euro Zone's third-largest economy. The question is, can it save itself, or is it heading down the path to a certain bailout?

First of all, what Italy can do to save itself is to implement its current economic plans at all costs as soon as possible. This includes narrowing the deficit or the gap between spending and earning to zero by the year 2013, one year earlier than originally forecast.

Many are saying given the nature of Italy's fractious politics, with a change of leadership at the helm, it's going to be difficult to try and implement those over the near and long term.

Another issue is the potential extension of a line of credit or a loan to Italy. This idea was first floated at the G20 summit in the south of France in November. We're talking about a line of credit that could be worth about up to $100 billion here, though the leader of Italy, Silvio Berlusconi has so far rejected that idea.

What Italy really needs to do is try and bring down the immediate costs on its public borrowings, borrowings that stand at about five times the total debt load of Greece at about $2.9 trillion.

Now, the ECB has been buying bonds of countries like Italy and also Spain to ease pressure on the bond markets to bring down the yield or the immediate cost of borrowing on this country's bonds.

We have had some respite for Italy. In its latest auction of notes, it paid almost one percent less than people were expecting when it undertook that.

And Mario Draghi is the man in charge of the ECB. He's also somebody who knows Italy very well.

Now, if we aren't able to implement one or all three of those previous recommendations from economists, well, that's when Italy enters bailout territory.

And this is where many questions remain unanswered. Namely, do we have enough money to bail out Italy or will Italy be bailed out before it actually has to bail out of the Euro Zone altogether?

Nina Dos Santos, CNN, London.

(END VIDEOTAPE)

FOSTER: Well, the US Treasury Secretary says European leaders are moving in the right direction to contain the debt crisis, but he wishes they'd move a little faster. Timothy Geithner talked with CNN's Jessica Yellin.

(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, US TREASURY SECRETARY: It's already having an effect on growth around the world. Growth is slower in the United States, slower than it needs to be, in part because of the effect of Europe on us.

So, it's one reason why it's so important to us that they get their house in order and move more quickly. So, it's already putting pressure on us.

But European leaders have the ability to contain this. They have the ability to get on top of this. They have the ability to solve this problem. They just need to move a little more quickly to do this.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: You keep saying they have the ability.

GEITHNER: They do.

YELLIN: Are they doing it?

GEITHNER: They are, and they're moving. I said, it's -- again, it's slower than people would like, slower than their own people would like in Europe, if you listen to the Europeans.

YELLIN: Slow than you would like.

GEITHNER: Of course. But -- and slower than, I think , they would like. But they're moving and they're making progress. They've just got to keep doing it, and they just need to put together a stronger package of commitments.

(END VIDEO CLIP)

FOSTER: Worries about Europe's debt crisis took on another dimension today after reports that two powerhouses are considering a radical split in the Euro Zone.

A report said France and Germany recently discussed a two-tier Euro Zone that would basically separate the strong economies from the weak, with the strong making the important financial decisions.

French officials and German chancellor Angela Merkel herself deny any intent to create such a system, but the concept has been out there for a while, so tonight we're going to discuss it with Kirsty Hughes, she's a senior associate fellow with the Center for International Studies at the University of Oxford. Thank you so much for joining us.

It already exists, doesn't it? Isn't France and Germany making all the decisions here anyway?

KIRSTY HUGHES, CENTRE FOR INTERNATIONAL STUDIES, UNIVERSITY OF OXFORD: We already have what people call a direct wire of France and Germany, with Germany the dominant of the pair, obviously, making a lot of the decisions.

And that's already upsetting quite a few of the other 15 in the 17 country Euro Zone, and a lot of the other 10 who are in the 27 EU, but not within the Euro Zone.

So, you've already got quite a lot of splits within in the EU.

FOSTER: And then you've got splits between Germany and France as well, so what sort of model is being discussed behind the scenes, do you think?

HUGHES: I think there's two things going on here. One is that we are seeing a stronger two-tier EU emerge out of crisis, in terms of a stronger differentiation between the Euro Zone 17 and the 10 outs. But at least 7 of those 10 outs are meant eventually to join the euro, if it doesn't collapse in the meantime.

The rumors that have been flying around today are saying maybe Merkel and Sarkozy were practically split within the 17-country Euro Zone.

FOSTER: So, creating a smaller Euro Zone, a central Euro Zone? A different system? How would it look?

HUGHES: Well, I think it's very difficult to imagine. It's just one week since, of course, they said Greece could, perhaps, leave the Euro, so that gave the game away that you're not in the Euro forever.

I think it's very hard to imagine, really, a northern Euro Zone of Germany, the Netherlands, Finland, and leaving out Italy, Spain, and Greece. That's what some of the people have been saying might happen, but as you said, it's been denied.

FOSTER: Why can't it happen?

HUGHES: I think it would destroy the EU. The EU is set up in order to bring European countries together, and the Euro was meant to be the avant-garde, pushing the pace on political integration.

Now, the Euro Zone is in crisis. Merkel wants it to become tight with more budgetary discipline, so you don't have deficits and financial crisis in the future. And so, there is going to be a treaty change discusses in a few weeks time at the next big EU summit.

But if you actually decided, well, we're only going to keep in the strong ones and get rid of the weak, I mean, Italy was one of the founding members of the EU, one of the six --

FOSTER: Those debts are too high. They're always too high.

HUGHES: But if it came out of the Euro Zone, you wouldn't have an EU anymore.

FOSTER: OK.

HUGHES: So, it's the future of the EU as a political organization --

FOSTER: But you would have an EU, wouldn't you? Britain's in the EU. You'll just have a different currency zone?

HUGHES: I don't think you would. Firstly, Britain is very much now on the margins of the EU. It's rather put itself there, it wants to maintain the single market, but it doesn't want political integration.

Italy's always been part for saying this is a political project and we're part of this. So, if you said you can't be in the key project of the EU, you'd split it in two and it would start to fall apart, I think.

FOSTER: Kirsty Hughes, thank you very much, indeed, for joining us.

Well, coming up, an embarrassing moment for a US presidential hopeful.

(BEGIN VIDEO CLIP)

RICK PERRY, REPUBLICAN US PRESIDENTIAL CANDIDATE: Commerce, education, and the -- what's the third one there? Let's see.

(LAUGHTER)

(END VIDEO CLIP)

FOSTER: Texas governor Rick Perry promises to close down three branches of government, but he can only remember two of them. An excruciating moment in the presidential campaign.

As one of America's most successful football coaches is brought down by a scandal, we'll hear from the man attempting to fill the void.

And Britain's phone-hacking hearing takes an unusual turn. Find out why James Murdoch isn't so keen on being compared to a mafia boss, coming up in just a moment.

(COMMERCIAL BREAK)

FOSTER: I'm Max Foster in London, you're watching CONNECT THE WORLD, and here's a look at other stories we're following this hour.

The fiery youth leader of South Africa's ruling party has been suspended for five years and must resign from his position. The party's disciplinary committee found Julius Malema guilty of sowing divisions within the African National Congress. His supporters say it's an attempt to silence him, though. Malema is promising to appeal.

To American politics, now, and one of the most painful 54 seconds you're likely to watch. This is the debate between the Republican candidates who hope to challenge Barack Obama in the next presidential election. Let's take a listen to Texas governor Rick Perry squirming during Wednesday night's face off in suburban Detroit.

(BEGIN VIDEO CLIP)

PERRY: And I will tell you, it's three agencies of government when I get there that are gone. Commerce, education, and the -- what's the third one there? Let's see.

(LAUGHTER)

RON PAUL, REPUBLICAN US PRESIDENTIAL CANDIDATE: You need five.

PERRY: Oh, five, OK. So, commerce, education, and the --

UNIDENTIFIED MALE: EPA?

PERRY: EPA, there you go. No, OK --

(LAUGHTER)

(APPLAUSE)

UNIDENTIFIED MALE: Seriously? Is EPA the one you were talking about, or -- ?

PERRY: No, sir. No, sir. We were talking about the -- agencies of government -- the EPA needs to be rebuilt, there's no doubt about that.

UNIDENTIFIED MALE: But you can't name the third one?

PERRY: The third agency of government --

UNIDENTIFIED MALE: Yes.

PERRY: I would -- I would do away with the education, the --

(LAUGHTER)

PERRY: Commerce, I -- commerce. And let's see. I can't. The third one, I can't. Sorry. Oops.

(END VIDEO CLIP)

FOSTER: Painful. Now, what had been a recovery operation in eastern Turkey is now a rescue effort once again after the second serious earthquake in less than a month. Emergency crews have freed more than two dozen people since last night's quake, but many more may be trapped under the piles of rubble in the city of Van.

Let's get more on the recover operation underway there, now, with journalist Gul Tuysuz. Gul, how are they doing?

GUL TUYSUZ, JOURNALIST: The rescue efforts are ongoing. It's getting very chilly here in Van, and they are expecting snowfall tomorrow and maybe even later tonight.

That is going to complicate the rescue efforts, it's going to slow them down, and it's going to make life very, very difficult for the people who are living in tents and are now very afraid of going back into their homes.

FOSTER: OK, Gul, thank you very much, indeed, for that update. Lots more work to be done there.

Now, the American state of Alaska is no stranger to snow, but scenes like this are certainly out of the ordinary. A massive storm with hurricane-force winds has battered its western coast, blowing snow and taking down power lines. The worst is now over, with no reports of injuries, but flooding could still prove a threat there.

And sad news from Africa, where the Western Black Rhino has now been declared officially extinct in the wild. Many rhinos are poached for the commercial value of their horns. As a result, conservations have been forced to take drastic action, such as airlifting the animals to safety as seen here in these extraordinary images in South Africa.

Now, they've lost the man who's transformed their university football team into a force to be reckoned with, and Penn State students weren't afraid to show their anger about it. Up next, we'll show you whether the damage to its reputation could be a lot worse.

And a shocking statistic. In Africa, a child dies from malaria every 45 seconds. Mosquito nets can help in the fight, but what's really needed is a vaccine there. Now, scientists say they've made a breakthrough. The exciting development ahead.

(COMMERCIAL BREAK)

FOSTER: The Penn State campus is in turmoil after the American university fired its legendary football coach and its president on Wednesday in the wake of an horrific sex abuse scandal.

(BEGIN VIDEO CLIP)

JOHN P. SURMA, JR., VICE CHAIRMAN, PENN STATE BOARD OF TRUSTEES: Dr. Spanier is no longer president of the university. Joe Paterno is no longer the head football coach effective immediately.

(CROWD SHOUTING)

(END VIDEO CLIP)

FOSTER: Students, shocked at the firing of Joe Paterno, vented their anger last night on the streets of State College in Pennsylvania. Neither Paterno nor Graham Spanier were facing any charges over the scandal. Questions remain over whether they did enough to stop the alleged sexual abuse of young boys by a former assistant coach.

Here's Jason Carroll with what we do know.

(BEGIN VIDEOTAPE)

JASON CARROLL, CNN CORRESPONDENT (voice-over): The allegations of rape and sexual abuse by Jerry Sandusky stretch as far back as 1994, when he met his first alleged victim, a ten-year-old boy, through his charity for troubled youth, The Second Mile.

LINDA KELLY, PENNSYLVANIA ATTORNEY GENERAL: This is a case about a sexual predator accused of using his position within the community and the university to prey on numerous young boys for more than a decade.

CARROLL: And at least three times, Sandusky's alleged abuse was seen by or reported to employees at Penn State.

In 1998, at this indoor practice facility, it's alleged that Sandusky inappropriately touched an 11-year-old boy in the shower. The boy's mother reported the incident to university police. That prompted an investigation by the university that included listening in on phone calls of the mother confronting Sandusky.

According to the grand jury report, Sandusky replied, "I was wrong. I wish I could get forgiveness. I know I won't get it from you. I wish I were dead."

Sandusky also admitted the incident to the Pennsylvania Department of Public Welfare, saying it was wrong. But despite that admission, no charges were filed, and he was simply advised not to shower with children again.

ANNOUNCER: Joe Paterno!

CARROLL: Despite being the one-time heir apparent to head coach Joe Paterno, Sandusky retired the year after this incident, but maintained an office and access to university buildings as a professor emeritus at Penn State.

In 2000, at another athletic facility, a janitor allegedly saw Sandusky in the showers, quote, "with a young boy pinned up against the wall, performing oral sex on the boy." The janitor told his immediate supervisor what he saw, but neither man reported the incident to Penn State authorities or law enforcement.

Then, in 2002, an alleged incident at the same athletic facility.

KELLY: Sandusky was seen committing a sexual assault on a young boy of about ten years of age, was reported to university officials by a graduated assistant who happened to be in the building late one Friday evening.

CARROLL: That graduate assistant, Mike McQueary, reported the incident to Paterno. Exactly what he reported is in dispute. Paterno said in a statement, "It was obvious that the witness was distraught over what he saw, but he at no time related to me the very specific actions contained in the Grand Jury report."

The "New York Times" reports that a person familiar with McQueary's version of the conversation said Paterno was given explicit details of the assault.

Paterno's statement goes on to say, "Because Sandusky was already retired at that point, he referred the matter to university administrators, specifically Timothy Curley, Penn State's athletic director.

He and Gary Schultz, senior VP for finance and business, took away Sandusky's locker room keys and banned him from having children in the football building, but never reported the incident to law enforcement or child protective services.

KELLY: Their inaction likely allowed a child predator to continue to victimize children for many, many years.

CARROLL: In total, Sandusky faces 40 charges tied to sexual assault on eight boys. Curley and Schultz are charged with failing to report abuse and lying to a grand jury.

Jason Carroll, CNN, State College, Pennsylvania.

(END VIDEOTAPE)

FOSTER: We're going to get more on this, now, from "World Sport's" Mark McKay, because Mark, this time last night, Joe Paterno had announced he would retire at the end of the season, we were talking about that. But Penn State seems to have had the last word.

MARK MCKAY, CNN SPORTS CORRESPONDENT: They have, Max. And you know, as we visited each and every night this week, this story has had unique twists and turns of its own.

Tonight, Penn State is no longer without (sic) its legendary coach, the Board of Trustees meeting on Wednesday and firing Joe Paterno.

The 84-year-old coach admitted to being saddened and disappointed by the sacking, but also said that he appealed for calm among the student body, as we've seen, who took out some of their frustrations in the hours after the announcement that Mr. Paterno had been fired in a violent manner around campus.

Against this disturbing backdrop, the university's football program does have a game this Saturday against Nebraska, and the job of leading the team in the post-Paterno era has fallen on Tom Bradley.

(BEGIN VIDEO CLIP)

TOM BRADLEY, INTERIM HEAD COACH, PENN STATE: First off, I grieve for the victims, I grieve for the families. I'm deeply saddened by that. It's with great emotion that I say that. And the football part, we will get working on that right away.

Right now, I think you should know where our team is toward this whole issue, and it's toward those children, it's toward their families, and our thoughts and our prayers are with them.

(END VIDEO CLIP)

MCKAY: Mr. Bradley has been on Penn State's coaching staff, Max, for 33 years. He says he takes the job replacing Joe Paterno with mixed emotions, and that's understandable.

FOSTER: Yes, Mark, it's worth remembering what's at stake here, I guess. We talked a bit about this, as well, that Penn State made a profit of $15 million, didn't it, from its football program last year?

To put all of this in context, and that's more than each one of America's professional baseball teams. More than 20 out of 32 of America's football teams, and moving further afield, more than some of the Premier League's biggest football clubs, as well, including Liverpool, Tottenham Hotspur.

Mark, could Penn State's program actually survive this scandal, do you think? It's getting big, isn't it?

MCKAY: It is. It has really developed into something that has caught the attention of sports fans and non sports fans, not only here in the United States, Max, but around the world.

But we're learning it's more than just football. Remember, we are talking about a university here. In just a few hours, we heard from the man that will lead the university as a whole into the next stage, that being interim president Rodney Erickson.

He has called it one of the saddest weeks in the history of Penn State University, but a university instead that has had a storied tradition for 150 years. He promised to rebuild the trust and the confidence that so many people have had in Penn State University.

And many of those involved in this post-Paterno era and going forward has said, it's not about the football games on the field, it's not about the sport. They are certainly -- their mind is -- their minds are on the victims in this terrible tragedy that played out both on and off campus.

I invite you to stay tuned for "World Sport." We're about an hour and five minutes away. We will have the very latest concerning a Major League baseball player who's been kidnapped in his native Venezuela. Max, I think someday --

FOSTER: Look forward to it, Mark. Thank you --

MCKAY: Someday we'll get back to talking about what's happening on the pitch, but seems like you and I --

FOSTER: Yes, I know.

MCKAY: -- have been visiting on the sadder side of sport.

FOSTER: I know, it's been -- it's been grim, and it's turning bigger all the time. Well, keep on top of it, Mark. Thank you very much, indeed, for that.

Do stay with us here on CONNECT THE WORLD as well. In just a moment, the comment that made James Murdoch cringe. Britain's phone-hacking hearing continues with the News International chief back in the firing line.

Mosquito nets are vital in the fight against malaria, but a scientific breakthrough means trials on a vaccine could start within two years. We'll tell you what researches have discovered and why it's so important for the world.

And as Leonardo Da Vinci's masterpieces go on show, we'll discover how the artist mastered much more than just painting.

(COMMERCIAL BREAK)

FOSTER: You're back with CONNECT THE WORLD on CNN, the world's news leader. Let's check the headlines for you this hour.

It's not a done deal, but former European Commissioner Mario Monti has emerged as the front-runner to replace Italy's prime minister. Silvio Berlusconi has promised to resign once Parliament passes austerity measures.

A former banker and economics professor will take the reins of the Greek government on Friday. Lucas Papademos was named the interim prime minister after days of political wrangling. He says the transitional government must focus on enacting the EU bailout plan.

Hundreds of rescuers have arrived in Van in Turkey to help in the search for earthquake survivors. At least ten people were killed in Wednesday's 5.7 quake. Nearly 30 people have been pulled alive from the rubble of collapsed buildings.

Liberian president Ellen Johnson Sirleaf has won reelection. The runoff poll was boycotted by the opposition. Fewer than four in ten voters cast ballots in the disputed election. Sirleaf won the Nobel Prize earlier this year, the Peace Prize after -- for her work on women's rights.

And just a day after Joe Paterno, one of America's most successful college football coaches was fired, his successor has said his thoughts are with the victims of a child sex abuse scandal sending shockwaves through Penn State University.

An Omerta Code of Silence, bound together by secrecy with no regard for the law. It sounds like the mafia, but one British lawmaker says it's how News International has been operating.

It was a day of drama for the British parliamentary committee on phone-hacking. Back in the hot seat was News Corps' third in command, James Murdoch, recalled without his father this time, to explain more of what he knew and when.

CNN's Atika Shubert has been following the day's developments for us. She's with us from London's Abingon Green outside Parliament. Atika, and certainly it was a great sort of TV event, wasn't it? It was quite exciting at one point.

ATIKA SHUBERT, CNN INTERNATIONAL CORRESPONDENT: It was quite exciting, a lot of verbal fireworks, especially from Labour MP Tom Watson.

But James Murdoch was very confident in his defense, he stood his ground, he insisted that he had not been shown any e-mail or any other document that was circulating in around 2008 that gave any indication that phone-hacking had gone beyond one reporter.

He insists he didn't know the scope of the problem until late 2010, and Labour MP Tom Watson did not take well to that. Here's a quick listen to that exchange.

(BEGIN VIDEO CLIP)

JAMES MURDOCH, NEWS INTERNATIONAL: And if I knew then what I know today with respect to the relevant leading counsel's opinion, the details and import of the For Neville documents, the company would have acted differently, and probably in a way similar to that as which we've acted in the last year to really move as aggressively and determinately as we can to sort this out and make sure we put it right.

TOM WATSON, BRITISH PARLIAMENT MEMBER: You must be the first mafia boss in history who didn't know he was running a criminal enterprise.

MURDOCH: Mr. Watson, please. I think that's inappropriate.

(END VIDEO CLIP)

SHUBERT: You can hear at the very end of that gasps from other MPs who clearly felt that Watson -- Tom Watson went a little bit over the line there.

But if his reaction is anything to judge by, it perhaps shows that MPs were not impressed by James Murdoch's testimony today, Max.

FOSTER: And I gather e-mails have been drawn into this police investigation into phone-hacking?

SHUBERT: That's right. In fact, Tom Watson pointed out that there are now indications that his e-mails may have been hacked as well. And it certainly shows that we're not simply talking about phone hacking, listening to voice messages. In fact, the kinds of illegal surveillance and information-gathering goes much further than that.

(BEGIN VIDEOTAPE)

SHUBERT (voice-over): They're called the Dark Arts, the shady, often illegal ways of mining information practiced, it now appears, to an industrial scale in Britain's tabloid press.

The phone-hacking scandal exposed one of the so-called Dark Arts, listening in on private voice mail messages, but that's just the tip of the iceberg.

SHUBERT (on camera): Now, the word "blagging" used to mean a white lie or a bluff, but it can also be illegal. In fact, Britain's Information Commission put out this report in 2006.

Now, they worked together with police to apprehend one private investigator who had more than 300 journalists as clients. And his specialty was blagging. In fact, he drafted a manual for trainees on blagging.

SHUBERT (voice-over): Want to find out an unlisted address or number? Try this one. Pretending to be a British Rail lost property employee attempting to return a lost wallet. Do not, it says, ask directly for the address or phone number as this is too direct. And be polite.

What about bank details? Well, you might play a British telecom employee trying to credit your account for over-charging you last month. To convince a suspicious customer, the manual suggests tapping out the calculations next to the phone for the subject to hear.

Then, there is plain old corruption. Paying off crooked cops or other employees to gain access to car registrations, medical records, or PIN numbers.

So, what's the punishment for all this? The private investigator in this case received a fine of just 5,000 pounds, less than $10,000. The Information Commission wants jail time, not just for private investigators, but also the reporters who employ them.

DAVID SMITH, INFORMATION COMMISSIONER'S OFFICE: When someone is making a business out of it, making hundreds of thousands of pounds a year, then a 5,000 pound fine is just written off as a business expense. They pay it and they move on.

But the possibility of them going to jail and having a criminal record which stays with them for life is a real deterrent.

SHUBERT: There is a loophole for journalists, however. Public interest.

SMITH: Where there's a public interest in journalists exposing corruption and they obtain information to do that, then clearly they shouldn't go to jail. They're doing their jobs there.

But if knowingly they use deception, trickery, or corruption to get hold of information as entertainment to help sell their newspapers or magazines, then no, they should face the same criminal penalties that anyone else would.

SHUBERT: The Association of British Investigators says the hacking scandal has tainted their profession, but also says government and corporations should allow more legal avenues to access data for legitimate reasons.

TONY IMMOSI, ASSOCIATION OF BRITISH INVESTIGATORS: Where the investigators need to be given freer access to databases to eliminate the criminality that we were aware of by these people who have been conveniently labeled private investigators because they can, because it's not regulated --

SHUBERT (on camera): Right.

IMMOSI: -- but are no more investigators than a common criminal. They are information brokers. The word "private investigator" has now been corrupted and has become a dirty word.

SHUBERT (voice-over): But phone-hacking and blagging may be in the past. The Information Commission now fears that the insatiable demand for information is leading some to use viruses and spyware to read e-mails and obtain passwords.

The bottom line, millions are made from mining information. So long as salacious headlines keep pulling in readers, there will be a demand for the Dark Arts.

(END VIDEOTAPE)

SHUBERT: Now, just to give you an idea of the scope of the problem, with the phone-hacking investigation alone, the estimate is 6,000 victims of phone-hacking. So there is still a lot to uncover, Max.

FOSTER: OK, Atika, thank you very much, indeed.

Let's get a bit more on this, now, from broadcaster Steve Hewlett, a media commentator here in the UK. How do you think he did, first of all, James Murdoch today?

STEVE HEWLETT, WRITER AND BROADCASTER: Well, in many ways, he did pretty well. I mean, the -- they tried and tried and tried, but in the end, they couldn't quite put a glove on him, if you forgive the term, in terms of whether he knew more than he said he had.

(CROSSTALK)

FOSTER: What's --

HEWLETT: Well, these. He's always maintained that he had -- that whatever else he knew, he had no idea that there were more people involved in phone-hacking than the one rogue reporter, and he's always maintained that.

And the reason that the Gordon Taylor settlement, which is what all the questions are about, is so critical is first of all, it's the first connection James Murdoch has with this problem.

Remember, when it's all going on in 2002, 03, 04, 05, 06, he's away running Asia, he's running B Sky B, the satellite TV company. He's not even in the company.

So, he gets given News International to look after. The first connection he has with phone-hacking is when he's asked to sign off this deal.

Now, the suspicion always was with this deal that it was signed, it was settled out of court, in order to prevent really damaging information that would demonstrate that the "News of the World" had a really big problem of unlawful activity coming into the public domain.

We now know that, of course, that is true. That is in fact why it was settled. The question to James Murdoch is, did he know that when he authorized this extraordinarily large legal settlement. He's always maintained that he didn't. Others have said, well, he must have done.

To be frank, they've had two goes at him in the committee --

FOSTER: And they haven't gotten the evidence yet.

HEWLETT: They're nowhere near pinning it on him, no. But here's the other thing. But he is between a rock and a hard place, because on one hand, if he saves himself morally, he condemns himself in terms of business competition.

FOSTER: Yes, we should explain that, because he's accepting that phone-tapping took place.

HEWLETT: Yes. Phone-hacking.

FOSTER: Phone-hacking. But he's saying he didn't know about it. From an editorial point of view, that's one view, but he's a chief executive.

HEWLETT: Well, OK. Here's how implausible that sort of sounds. But look, take him at his word, it may be true.

There's this e-mail, the For Neville e-mail, which -- is this the evidence that shows that the "News of the World" was involved in hacking Graham (sic) Taylor, the boss of the Professional Football Association's telephone, or mobile phone.

FOSTER: And he said he didn't see it.

HEWLETT: Well, no, he said he didn't see it, but he knew that it demonstrated that the "News of the World" were involved in it. But it also shows that other people were involved.

Now, he claims that he was told the first bit, that it proved the "News of the World" were involved. But it didn't show the others. But the critical thing is, what he didn't do, the next question for him is fatal.

So, OK, even if you take him at his word, if he knew nothing else, once you know that the boss of the PFA, the Professional Football Association, has been hacked, and currently the line is there's only one rogue reporter, the Royal editor, you might say, and I might say, and many of your viewers might think, why would the Royal editor be hacking phone of the Professional Football Association. Does not make sense.

So, did he ask the question, OK, so, in that case, who, why, where, how often, how much? No.

FOSTER: OK. Let's get away from the detail for a moment, though. But if he -- if phone-hacking is a terrible crime, journalistically unsustainable -- you can't do it.

HEWLETT: Well, it's illegal.

FOSTER: He was in charge of the company.

HEWLETT: Yes.

FOSTER: Whether or not he knew about it, doesn't he have to take the rap?

HEWLETT: Well, in fact, in fairness to him, he wasn't in charge of the company when it happened. That's why --

FOSTER: There's so many gray areas.

HEWLETT: Well, it all happened before that. But they could have -- in business terms, he condemns himself --

FOSTER: Yes.

HEWLETT: -- because there are all sorts of questions he should have asked. He signed off a legal settlement on the basis -- worth nearly a million pounds when you wrap it all together -- on the basis of a counsel's opinion, a legal opinion, which he has maintained all along he never read.

FOSTER: OK. Let's take this away from News International and James Murdoch, then, because you would have been discussing this with various media executives outside News International. Has the media industry learned anything from this? What does this mean for journalistic ethics?

HEWLETT: Well, OK. The thing you have to realize, I think, is that it's not just bad practice, which probably extended well beyond the "News of the World."

It's the kind of fatal combination of News International and their dominance, the dominant position of Rupert Murdoch, essentially, in the UK media market, and in particular the newspaper market. It's the combination of these practices with that sense of political dominance.

And it's almost as if the "News of the World" is, if you like, the provisional wing of News International, and it was the use of the journalistic resources and some of these illegal activities --

Which, by the way, I think most journalists would say in some -- if you were investigating terrorism or child abduction, some of these acts -- some of these techniques, you would say, well, on balance, it might be illegal or unlawful, but you might see a public interest for breaking the law in those circumstances.

But the wholesale use of these things, and in particular, the targeting of these techniques and covert surveillance and whatever on people who were political enemies or business enemies of News International, that's what really stinks.

FOSTER: They crossed the line.

HEWLETT: They crossed the line, and the combination of media dominance and bad behavior, that's why this is so toxic.

FOSTER: OK. Steve Hewlett, thank you very much, indeed, for joining us.

HEWLETT: You're welcome.

FOSTER: Well, ahead on CONNECT THE WORLD, scientists make a key discovery in the hunt for a malaria vaccine. Researchers say they've uncovered the fatal chink in the armor of the disease. Much more on the breakthrough and what it could mean for the world, coming up in 90 seconds.

(COMMERCIAL BREAK)

FOSTER: British scientists say they've made a critical discovery in the search for a malaria vaccine. Every year around the world, hundreds of thousands of people die from the disease. Most of the victims are young children in Africa.

Researchers from the Sanger Institute in the UK say they've pinpointed the Achilles heel of the mosquito-borne disease. And here's what they found. Malaria is spread by a parasite, which invades human red blood cells. So far, it's proved difficult to stop the organism entering the cells because it's so adaptable.

But new research has identified a single red blood cell receptor that's essential for malaria infection. If you block that interaction, you stop the parasite invading the red blood cell.

So, the idea is to create a vaccine that would make the immune system ready to block parasites invading red blood cells.

Joining me now for more on just how big a deal this is, Sarah Kline, executive director of Malaria No More UK. Thank you for joining us. It is complicated, but in laymen's terms, is this a breakthrough?

SARAH KLINE, EXECUTIVE DIRECTOR, MALARIA NO MORE UK: It is a breakthrough. It's extremely exciting part science. We've never been able to tackle a parasite in this way. We're obviously hopeful of a vaccine. We don't have a vaccine.

FOSTER: What's new about it, exactly? What didn't you know before?

KLINE: The whole point is being able to pinpoint how the parasite enters the red blood cell. What is it that makes it possible for parasites to enter the cells.

FOSTER: And you've worked it out. Or they've worked it out.

KLINE: And that's what they've worked out, and this is fantastic news from the Sanger Institute.

FOSTER: So, now it's a case of blocking it.

KLINE: That's right. So, what we're trying to do is find a way in which you stop the parasite from being able to reproduce in the human body and therefore create the disease that goes on to so sadly kill so many people.

FOSTER: And is there any progress towards that?

KLINE: Yes, there is progress. We obviously have at the moment drugs that we can use to try and stop people from suffering from the disease. And even before that, you can find ways to prevent the disease, if you use insecticides, whether it's spraying your house, or using a net.

FOSTER: In terms of this breakthrough, how far down the line until it's used as a treatment?

KLINE: Well, that's the big question. It will take a while now, but we -- the next stage would be to develop it in such a way that we can start doing tests with human trials. That may be a couple of years away or more.

And then it takes a good amount of time, we're talking at least 10, 20 years, before you can see a vaccine that's in production and being used on the ground.

FOSTER: But what's interesting about this is just a couple of weeks ago I was speaking to the chief executive of GlaxoSmithKline --

KLINE: Yes.

FOSTER: -- who also made a breakthrough. So, research is developing pretty fast. What makes this progress different from the Glaxo?

KLINE: So, with the Glaxo, what we found is that as they got to third stage trials, so they've already been trialing their vaccine in humans in Africa.

FOSTER: Much further ahead.

KLINE: Much further ahead.

FOSTER: But they're using a different strategy.

KLINE: They are. It's a different kind of a vaccine, but the principle is still the same, it's about how you stop the parasite invading red blood cells and, obviously, effecting humans and killing them.

FOSTER: But still, what's extraordinary is this massive research, but nets are still the answer right now.

KLINE: Well, it's massive research on how the parasite reproduces. It's such a complicated organism, and its whole life cycle is so complicated that being able to do this science is incredible.

But yes, at the moment, there's some very basic things. Malaria No More UK, our colleagues in the US, we work to try and stop people catching malaria, so that means using nets, using insecticide sprays. And if they think they've got it, make sure they're diagnosed correctly and then treated. And those things are important right now.

FOSTER: We want to bring this home to people watching, because it's worth noting just how much of a scourge malaria is. According to the World Health Organization, a child in Africa dies every 45 seconds from malaria, and more than three billion people, that's half of the world's population, are at risk, we're told.

The disease can severely impact a country's economy, and the WHO, World Health Organization, says malaria can decrease GDP by as much as 1.3 percent. In terms of global problems, this is right up there, eh?

KLINE: It is right up there. It's one of the most serious diseases, particularly on the African continent, where it kills most people. But also across Asia. We have large numbers of people suffering from malaria each year, about 250 million people get malaria.

In Ghana, where we work a lot, about 40 percent of hospital admissions are due to malaria. So, it's a huge drain on their economy, it stops people working, it stops kids going to school, and it tragically kills particularly young children and pregnant mums.

FOSTER: And on a less important level, but travelers -- world travelers are also concerned about visiting countries --

KLINE: Yes.

FOSTER: -- where malaria's a problem. So, is this good news for them, as well? Is there going to be a treatment for them?

KLINE: It could be. At the moment, it's not. It is possible, in fact, that eventually a vaccine could help prevent people who are traveling from getting the disease. But at the moment, they do need to take care.

Here in the UK, we've seen a 30 percent rise in the number of British people catching malaria since 2008. They're traveling abroad, they don't realize, they really do need to protect themselves.

FOSTER: Sarah Kline, thank you very much for joining us. Good news.

KLINE: Thanks.

FOSTER: Up next, we'll travel to the birthplace of Leonardo Da Vinci to discover how the artist was a master of all trades.

(COMMERCIAL BREAK)

FOSTER: Well, it really is the hot ticket for art lovers across the globe. The Leonardo Da Vinci exhibition at London's National Gallery has brought together nine of his paintings for the very first time. But as Nick Glass discovered, the Renaissance master was so much more than just an artist.

(BEGIN VIDEOTAPE)

(CHORAL MUSIC)

NICK GLASS, CNN INTERNATIONAL CORRESPONDENT (voice-over): An awe- inspiring collection of paintings by the artist many consider to be the greatest master of them all.

The National Gallery in London's Leonardo Da Vinci exhibition brings together nine of his paintings under one roof.

RICHARD STEMP, RENAISSANCE SCHOLAR: I think the exhibition is remarkably important. It is the first major exhibition of Leonardo Da Vinci's art in Britain for a very long time.

GLASS: But why are we and millions of others still fascinated by him and his work? To try to understand Leonardo Da Vinci, why he still exerts such a mesmerizing spell over us, you have to go to Italy. You have to stand in the same piazzas as he did.

You have to immerse yourself in his landscape.

GLASS (on camera): So, this is what art lovers pretty much fantasize about, having a gallery like the Uffizi pretty much to themselves. Raphael, Botticelli, Michelangelo and, of course, Leonardo.

MINA GREGORI, LEONARDO EXPERT (through translator): Leonardo is first. After him came Michelangelo and Raphael, but he started everything.

GLASS: The town in the valley below is called Vinci. It's the town that gave Leonardo his name, Leonardo Da Vinci, Leonardo of Vinci. But his story begins in the olive groves above, and in this particular house where he was born in 1452.

And this is the baptismal font used to baptize the young Leonardo.

GLASS (voice-over): In the 67 years allotted to him, he would become the most celebrated man of his age and, ultimately, perhaps the man of his millennium.

No one is certain whether this famous self-portrait is actually by Leonardo, but it presents us with the face of an Old Testament profit.

GLASS (on camera): In a sense, there were multiple Leonardos. He was a scientist, he was an engineer, he was an anatomist.

He was also a philosopher, a writer of copious notebooks, a brilliant conversationalist, and an accomplished musician.

And he invented machines, contraptions.

GLASS (voice-over): There are museums devoted to Leonardo's machines all over the world. One of them in Vinci.

UNIDENTIFIED MALE: He's an incredible mind, not only in terms of mechanics, physics, but art as well. So, we're just trying to get a feel for Leonardo Da Vinci.

UNIDENTIFIED MALE: It seems like he was using both lobes of his brain. I mean, very engineering-wise, but yet artistic as well.

UNIDENTIFIED FEMALE: Artistic, yes.

UNIDENTIFIED MALE: It seems like that's an uncommon --

UNIDENTIFIED FEMALE: That's a rare combination.

UNIDENTIFIED FEMALE: He wasn't just a scientists or just a painter. He was somebody that we don't seem to have the equivalent of in our own century.

GLASS: Whether it's his drawings or his paintings, his exploration of anatomy, nature, and science, the consensus is, he was a man of rare genius.

PIETRO MARANI, LEONDARDO EXEPRT (through translator): He doesn't differentiate between drawing a flower and drawing a machine. Both have the same importance. They are part of a whole. Leonardo was interested in the whole.

(END VIDEOTAPE)

FOSTER: Well, CNN does provide you with rare access to this amazing Da Vinci discovery on our special, "Leonardo: The Lost Painting." It debuts on Friday, 4:30 in the afternoon in London, 5:30 Berlin, 8:30 Abu Dhabi, right here on CNN.

Now, for our Parting Shots, we couldn't resist these latest pictures of Britain's favorite royal couple. They've just come into us. The Duke and Duchess of Cambridge were at an event tonight.

They were attending the National Memorial Arboretum Appeal, of which Prince William is patron. He paid tribute to British service men and service women, saying, "The example of dedicating one's life to helping and protecting others and the service of our country remains core to our values as a nation."

Sinead (ph) is developing the Arboretum, home to the Armed Forces Memorial, into a world-renowned center for remembrance.

Now, of course, the focus, as always, was on what the duchess was wearing. We heard some journalists describing it as a moonlit silver. I'm not an expert, but it's definitely silvery of some sort.

Regardless, all eyes on a particular part of the dress, as well. Rumors continuing to swell, foundationless, as we can tell, the pitter patter of tiny feet, as all the newspapers are talking about. But she's looking as slim as ever to me. But those pictures just come into us.

I'm Max Foster, thank you for watching. The world headlines and "BackStory" follow this short break.

END