Return to Transcripts main page

QUEST MEANS BUSINESS

Greek Finance Minister: No EU Bailout Needed; Japan's Finance Minister Steps Down

Aired January 6, 2010 - 14:00:00   ET

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


MAX FOSTER, HOST, QUEST MEANS BUSINESS: Crisis management, the Greek finance minister tells this program, we don't need an EU bailout.

The big freeze, freak winter weather causes chaos around the world. We're live here in London, and in Berlin.

And calling it quits, Japan's finance minister steps down after just four months in the job.

I'm Max Foster, in for Richard Quest, this is QUEST MEANS BUSINESS.

Hello, there.

There will be no bailout then for Greece. The EU won't throw its most indebted member a life line. In any case, Greece says, it doesn't need any help anyway, thank you.

That is just as well, since Juergen Stark, one of the top men at the European Central Bank has told Greece, you are on your own. In an interview with an Italian newspaper Stark said markets were deluding themselves if they thought EU states would hand over their own money to save Greece. Now, EU finance officials arrived in Athens earlier. They have gone there to examine plans for tax and spending.

Greece is facing a crisis brought on by overspending. The government has a budget deficit for 2009 equal to almost 13 percent of its GDP. And independent experts have lowered their ratings on the government's ability to honor its obligations despite the drastic public spending cuts there. Greece now says it will cut the budget deficits to 3 percent of DGP by 2012, a year earlier than its previous commitment.

Earlier, I spoke to the Greek Finance Minister George Papaconstantinou, and I asked him how the meetings with the EU officials had been going so far?

(BEGIN VIDEOTAPE)

GEORGE PAPACONSTANTINOU, FINANCE MINISTER, GREECE: Well, we are discussing the stability and growth program that Greece is due to submit to the European Commission during the month of January.

As you know yesterday we announced that we are opting for a more accelerated program of financial (ph) conservation (ph), with the deficit dropping by 4 percent point in 2010. And going below the 3 percent threshold one year earlier than previously announced, that is in 2012.

What we will be discussing with them, the explicit measures that we are going to be taking, the reforms that we have undertaken in terms of the overhaul the tax system and budgeting and we are very confident that they will look upon a very convincing program.

FOSTER: Do you want them to organize a bailout of your country?

PAPACONSTANTINOU: Absolutely not. There is no such thing on the table. In fact, we have neither asked nor expect anything of the sort. We have a very solid plan for the debt reductions, which the market, of course, will be watching very carefully as it unfolds in the next few months. But we are going to be doing this on our devices, without anybody else's help.

FOSTER: How on earth are you going to do that when the finances are in such a desperate condition? They are in a desperate condition and every time you try to address them you have this huge reaction on the streets. You have strikes and the public just won't take it.

PAPACONSTANTINOU: Well, there has not been such a reaction in the streets. And people in Greece realize very well that we are in a difficult economic situation. They also see a government which is doing needs to be done, but is also doing it in a very just way, without hurting those that are most hurt by the recession.

The kind of cuts that we are talking about, the cut in entitlements in highly paid employees in the public sector, they cut waste, they cut unnecessary expenditures and they look upon an increase, a broadening of the tax base, by tackling tax evasion, in a very specific and way that will increase our revenues.

FOSTER: OK, give us some specifics then, some specific measure you are taking which are going to address this problem deficit that you've got.

PAPACONSTANTINOU: Well, we are reducing, for example, operational expenditures in the public sector by 10 percent. We are cutting down on entitlements, which are the top of the basic pay in the public sector by 10 percent, again. We are reducing the funds going to social security because it is clear that a lot of pension funds have been overspending in the last few years. We are merging and closing down a number of government organizations which are not needed and do not give services to the citizens. We have asked every ministry to produce three-year rolling budgets with cuts. So, these are very explicit ways of going about and reducing public expenditure and thereby reducing the deficit.

FOSTER: Because what is going on in Greece, and because some would argue the government has mishandled its finances so badly the euro has been falling in value, are you concerned about a political backlash from your colleagues in the European monetary union, the Euro Zone, to you, and they may actually think, actually we have a good currency union, but because of Greece's problems it is suffering.

PAPACONSTANTINOU: Well, first of all, let's clear up something. Because I think it needs to be very clear to everyone who is listening. This government has inherited this mess. We know that we have to deal with it. But this kind of mismanagement is the result of the policies of the government which lost the elections a few months ago.

Now, we do not believe that the kind of problems Greece is facing has broader repercussions on the euro. There are, of course, questions about the euro, in general. Europe as a whole is in a difficult economic situation, with a very hesitant recovery, with serious joblessness - this is why there is going to be an emergency summit to discuss the economy.

But Europe does not have a Greek problem. Greece has a problem, which -and it is dealing with it.

(END VIDEOTAPE)

FOSTER: The Greek finance minister there.

Well, since then currency traders seem to be shrugging off worries about Greek debt. A ripple of concern did hit the euro's value for a short time. But the EU currency is now bouncing back. Right now it is actually slightly up against the U.S. dollar compared to Tuesday's level. Marty Wolf is chief economics commentator on "The Financial Times". I asked him if this is the first real test for the Euro Zone.

(BEGIN VIDEOTAPE)

MARTIN WOLF, "FINANCIAL TIMES": Well, for the first time we are having a really serious test of the no-bailout provision; the idea that somehow you could run a monetary union with countries having independent fiscal policy, and if they got into a terrible mess, nobody would rescue them. That has not been tested up to now.

Now in this crisis for the first time we have seen quite a number of countries which very significant fiscal problems. Greece is the extreme example with enormously high debt and huge deficits, and a long history of lying, let's be quite clear about their statistics. So, of course, this is the first real test. Will the country concerned be able to and willing to put through the radical and difficult measures needed to get its fiscal policy in order.

And if it doesn't, are they going to be able to stand aside and watch it go under? Could we have an Argentina, as it were, in the middle of the Euro Zone? And what would that do to the spreads and the credibility of other weak sovereign borrowers in the Euro Zone, of which there are quite a few.

FOSTER: So when you hear ministers quite confidently saying that they can handle this, the ECB doesn't have to worry at all. How - do you think they are right?

WOLF: Well, actually there are sort of two sorts of questions here. The first is can they implement the plans that they put forward, which involve quite a significant cut? I think it is something like 3 percentage points of GDP in a year, of fiscal deficit. And that involves, in very difficult economic times, taking on some incredibly powerful interest groups in Greek society. Particularly the public sector employees, most of whom, are supporters of the government. So, can they do that? That is not up to the finance minister. That is really a question for the whole government and for Greek society.

And the second question is, even if they deliver that, they will still have an enormous deficit. And they will have clearly some political turmoil. Will the markets buy it? Will the markets believe it is enough? Because it will still leave them way over the official debt limits and a long-term program of austerity and the markets may not buy it even if they do it. So, the truth is they have to say we can handle it. What else would they say? Nobody is going to promise them a bailout. But will the markets believe it? Well, we can only say we'll see.

FOSTER: If we look at the markets today the euro is down and not a good day for the euro. And there are going to be some pretty smug onlookers, particularly here in the U.K., looking at the Euro Zone and saying, well, never thought it was going to work at all. Do you think some of those predictions are coming true right now? That the Euro Zone isn't a perfect idea?

WOLF: Well, we always knew there were risks involved with the Euro Zone. I think given the incredible mess the U.K. has managed to get itself into, all on its own, I think it would be a real mistake for the U.K. to be too smug. But it is clearly true as everybody looked at it, knew very well that by going for this big Euro sandwich, included a number of really quite weak countries, who which would then encourage or allowed, however you put it, to go into these huge expansions of fiscal deficits and private sector credit.

That has now created a huge test for the ability for the Euro Zone to manage its affairs reasonably smoothly. And the truth is we don't know how this will play out. I can see and remained convinced that there were some pretty strong arguments for having the Euro Zone, but whether some of these countries can actually live with the rigors that are imposed upon them, well that has never been clear.

FOSTER: If the fiscal situation of other countries, for example, Ireland or Spain, going the same way as Greece, what does that mean for the Euro Zone. Surely that is a much more serious matter.

WOLF: Yes, basically, the point is that there are a number of countries in the periphery, if you like, of the Euro Zone, in the south (ph) and Ireland in the west, which like the U.K., have ended up with absolutely colossal fiscal deficits. Mainly because of a huge credit boom that has now collapsed, leading to a collapse in revenues, for these countries, and soaring spending, too.

Most of them have much lower debt outstanding than Greece. That is very much true for Spain and Ireland. And the country which also has very high levels of debt, Italy, doesn't have such a big deficit, so none of them is quite as vulnerable as Greece. Greece is the canary in this coal mine. But it is absolutely clear that all these countries, just like the U.K., have a huge job in getting their public finances under control. And they don't have the advantage of an exchange rate depreciation which improves their competitiveness and therefore will make it easier for the private sector economy to recover.

(END VIDEOTAPE)

FOSTER: Martin Wolf of "FT".

Well, let's take a look at how Greek stock, then, have moved in the past 12 months. And as you can see, like most stock markets around the world, Athens main index hit a low in the early part there, of 2009. In step with share prices around the world, it recovered as the year went on. Reaching a peak in October, as a new government took office there.

Soon after that, the hangover really set in though as rating agencies downgraded their verdicts on Greece's debt. It's credit worthiness as well. Debt problems in Dubai also turned an unwelcome spotlight on countries with uncomfortably high borrowings.

Now, financial markets in Greece were closed for this holiday Wednesday, but this - yeah, on this Wednesday. But Europe's main stock markets ended the session largely unchanged. Mining stocks were the main gainers, on the FTSE, as the price of copper reached 16-month highs. Elsewhere the Frankfurt DAX an the Paris CAC were up just slightly. Financial markets in Greece were closed for holiday, as we said.

Now, let's get you up to date with the news headlines. Fionnuala joins us now from the London newsroom.

(NEWS BREAK)

FOSTER: Now gridlock on the roads, but it is all systems go for the energy companies. There is a blanket of snow across much of Europe, turning up the heat on energy prices. We'll have the latest live from the U.K., and from Germany.

(COMMERCIAL BREAK)

FOSTER: Now caught in a deep freeze many Britons were stranded on Wednesday as snow and sub-zero temperatures hit large parts of the country. Up to four and a half meters of snow fell on Higherland (ph), in the north of England. Five airports were closed, train services were disrupted, and the cold weather isn't over just yet. The wave of icy weather is also hitting mainland Euro. Frederik Pleitgen is standing by in a freezing Berlin forest. But first we are going to Morgan Neill, he is at London's Gatwick Airport, which has reopened for flights earlier today after weather related halts.

But I guess it is not over, just yet, Morgan.

MORGAN NEILL, CNN INT'L. CORRESPONDENT: Not it is not, Max. Certainly not with the kind of weather conditions we're seeing. Gatwick did just reopen about an hour and a half, and we started hearing planes arriving and leaving for the first time all day. Gatwick, of course, closed late Tuesday evening because of the severe conditions as crews worked around the clock trying to clear the runways so they could get planes in and out of there.

But then the snow started falling today and really fell throughout the day. It has only stopped here in the last half hour or so. Now, the airport says they are open now and they believe they can stay open, but of course, that is going to be a struggle if temperatures continue to drop and if we start seeing more snow.

Now, as you always see when you have flight cancellations, there are a lot of frustrated passengers here today. We talked to a few of them, here is what they had to say.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It has been pretty hectic. A lot of people waiting in line and people are getting tired of standing waiting for customer service.

UNIDENTIFIED FEMALE: It is all shut down. There is no accommodation anywhere. Thompsons (ph) said. There are no trains running. We have to stay in the airport. We got a 5 pound voucher, have to buy fish & chips for 21 pounds, and a cold cup of tea.

UNIDENTIFIED MALE: We should have flown out at 9:00 o'clock this morning. But hopefully, hopefully, it will be 9:00 o'clock tomorrow, with a bit o' luck.

(END VIDEO CLIP)

NEILL: Now, of course, is wasn't just here at Gatwick that we saw delays and cancellations today. Also at Heathrow, Europe's busiest airport, there were dozens of flights cancelled and significant delays as well. We talked to some people there who said they were looking at very long lines, people trying to get whatever information they could about just what was going on with their flights, Max.

FOSTER: OK, Morgan thank you very much indeed, for joining us from London.

Fred, you are in Berlin. The weather has actually been a bit worse in Germany, but the German systems seem to be holding up a bit better?

FREDERIK PLEITGEN, CNN INT'L. CORRESPONDENT: Yes, you know, Germany has been seeing a lot of this weather for the past couple of weeks, really, Max. It has been really cold here and there has been a lot of snow. For the last night, for instance, there were to 20 to 30 centimeters of new snow around Germany.

The big issue here, of course, though, is much more the cold spell that is going on. Europe is really in a deep freeze and Germany is right at the center of it. What we have seen last night is temperatures plunge to around minus 22 degrees Celsius, so that is causing some issues.

But you are absolutely right, the Germans to have some sort of experience in dealing with all of this. Certainly, they have experienced these cold spells in the past. It is something that does happen a lot here. And really what we can see now is they were fairly well prepared for all of this. You see fairly few delays at airports. Also, some delays of train services, however, most of the train services here in this country are up and running. Now, that is not to say there are not problems going on right here.

Certainly, you can say, that daily life has gone a lot slower in the past couple of days, especially today as I said. Some of the train services here in this country disrupted, especially in the western part of Germany. However, the air travel is still going fairly well. And the situations on the roads is a little bit difficult, but not as bad as it would be in the U.K. right now.

However, one big issue that the road authorities here say they have is that they are very close, they say, to running out of salt to get rid of the ice on the roads. And they say if this cold weather continues, and it looks as though it will, this could be a major issue in the next coming days. And they are not only expecting, Max, the temperatures to stay this low, but they are also expecting more snowfall and that could be a big issue, Max.

FOSTER: OK, Fred and also Morgan. Thank you, both, very much for braving the cold for us.

But most of us will want to be heading home after a day's work and turn up the heat. Here in Britain the National Grid says it expects gas consumption to hit record levels on Thursday. Jim Boulden looks now at how economies are adapting to the freeze.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN INT'L. CORRESPONDENT (voice over): From orange juice futures to Chinese aluminum to European natural gas, soaring commodity prices are just one of the headaches facing businesses as the year kicks off with a deep freeze in the Northern Hemisphere.

And it is not just the temperature causing a fuel price spike, in places like France, German, and the U.K., it is forecast that the big freeze won't life for a while. That could put a strain on supplies, or more important, delivery of fuel.

JOHN CLARK, ERNST & YOUNG: In the short-term, there is obviously a big, you know, a big need for gas to heat homes. You know, power industry and where the temperature falls you are going to see a big pull into the market. And to get those critical volumes in you sometimes see spikes in prices.

BOULDEN: France is bracing itself for a possible record electricity demand next week. In Britain, the National Grid told power generators to use more coal and less gas to help avoid power cuts.

GORDON BROWN, PRIME MINISTER OF BRITAIN: There are always going to be difficulties when you have a long spell of bad weather. But all these problems can be dealt with and are being dealt with very satisfactory by the department of energy.

BOULDEN: Most of Britain is, again, covered with a blanket of snow. Many airports are shut up and down the country. Trains and roads are in chaos and schools are closed. One of the reasons up to 10 percent of workers couldn't go to the office in Britain on Wednesday, according to the Federation of Small Business. But the FSB says small firms are adapting quickly.

STEPHEN ALAMBRITIS, U.K. FED. OF SMALL BUSINESS: Yes, there is a bit of a hit with people not being in work, however, what tends to happen is employees are pleasantly surprised that the work is actually being done, even though the staff aren't in place at work.

BOULDEN (On camera): Done at home?

ALAMBRITIS: Done at home, using technology.

BOULDEN: Yes.

ALAMBRITIS: And what you get is a surge in applications from staff after days like this, to the boss, saying look, I have proved to you that I can do the work at home. Can I actually work from home?

BOULDEN (voice over): That is one benefit perhaps from this weather, but that doesn't help the shops looking for foot traffic during the January sales. Or restaurants counting on workers and tourists on London's usually crowded streets.

(On camera): And by way of anecdotal evidence, this is where I usually get my sandwich at lunchtime. And as you can see, it is practically empty.

(voice over): At least there are no empty shelves, yet.

RICHARD DODD, BRITISH RETAIL CONSORTIUM: There is no evidence of panic buying and I think, actually, people are pretty sensible.

BOULDEN: Britain is not known for its smooth handling of snow. The big freeze of January will test the country's fragile economy. Jim Boulden, CNN, London.

(END VIDEOTAPE)

FOSTER: A new year and a new finance minister in Japan. Just as the government faces a budget battle in parliament. The implications for an uncertain economy in just a moment.

(COMMERCIAL BREAK)

FOSTER: Japan has a new man to take over the tough task of fixing its finances. Failing health, plus the difficulties facing the world's second largest economy, drove his predecessor out of the office in just four months.

Stepping down is 77-year-old Hirohisa Fujii, who was exhausted by the task of drafting Japan's 2010 budget. He was an all-important ally to Prime Minister Hatoyama, who said he was sorry to lose him. The new replacement, well, Naoto Kan, currently the deputy premier, now takes over the role of finance minister. Kan must push through a $1-trillion budget, the country's biggest ever.

Japan's state finances -well, Japan state borrowing is now at more than 200 percent of gross domestic product. The country is again, facing deflation, which plagued the economy for a decade. Also, undergoing a severe slump in exports, because of the financial crisis and the strength of the yen.

I'm going to speak now to Director Seijiro Takeshita, he is the director of Mizuho International.

Thanks for joining us, Seijiro.

SEIJIRO TAKESHITA, DIRECTOR, MIZUHO INT'L. Glad to be here.

FOSTER: That is the on-the-record reason for him going, his ill health, he is exhausted apparently. Is that just speculation or was there something going on behind the scenes?

I think there is a lot of speculation. The timing is too bad. I would say that it is probably also due to the fact that Mr. Fujii got sick and tired of the duality of the power in Japan right now. Everybody knows that it is not Mr. Hatoyama who is really running the show. It is Mr. Ozawa. And therefore, I think, he got sick and tired. I mean, as you just mentioned, his task is hard enough. And he's got Diet to explain -- to fight off.

Basically, what the DPJ is trying to do is revert the power back to the politics. But let's not forget that Mr. Fujii was an ex-bureaucrat himself, and that is why he got the MOF, the minister of finance, in accord, to get through with this kind of a very difficult condition of the budget. Now, if he is now being tackled by his own DPJ, the real man who is running the show, then, of course, he probably would get sick and tired, psychologically, as well.

FOSTER: A lot of people losing a lot of faith in Japanese politics right now, because the economy is suffering. This is a classic example, isn't it? How badly is the economy suffering because of the politics in the country?

TAKESHITA: Well, I think lack of leadership is very grave, and I think, unfortunately, we'll see the consequences in the long run. Now, everybody knows that Japan has to go through structural transformation. And for structural transformation we need a very solid political base, because you need a long time of political, well, surveillance to go through. But that is exactly what is going on.

We are going through the popularism (sic) of politics in Japan. We got 12 prime ministers in the 18 years. And this is four times a much as Great Britain or United States, or Germany. And this is one of the reasons why we don't have a stabilized, long-term policy. And that is one of the reasons why there are lots of people who have doubts over the future growth in Japan.

FOSTER: OK, well, new year, new finance minister; tell us what you know about him. Is he a good choice?

TAKESHITA: Well, at least he is one of the major faces. He knows all the agendas. He's gone through all the policy changes. So, of course, he was probably one of the only choices. And also, he does not have antagonism with Mr. Ozawa. So, that was probably the only choice, considering the fact that we are facing Diet right in front of us.

FOSTER: OK, in terms of the Japanese economy, is there a consensus about what really needs to be done. We talk about structural reform, it is such a broad term. Where do they start? And what does this year have in store for people in Japan, and investors in Japan?

TAKESHITA: Well, basically, at this moment, what the DPJ, and also the previous government, LDP, had been trying to do is what I call put a Band-Aid over a deep wound. They were trying to do short term remedies. And unfortunately, the Japanese public had gotten used to it. They are being smeared with vested interests. It is not only the industrial side but individual side as well. Really have to open our eyes to the painful long-term policy, to basically, revert more resources (ph) into the domestic expansion side, or else I think we will be talking about the same problem, over and over again.

FOSTER: But in terms of international investors, is it a wise place to put your money. Or do you really need to be knowing where to put your money right now, because it seems pretty risky?

TAKESHITA: Well, no, I definitely think Japan is undervalued. Of course, we have our problems, as you just mentioned. But compared to the United States, for example, I think our problem is much more shallow. In other words, we have gone through the cleaning up process during the 1990s. So excess capacity, excess personnel, all theses negotiate equities that's been dragging Japan in the '90s, has been -- definitely been improved.

So from that point of view, I think Japan is definitely being oversold. And we still do have immense power and potential to go and -- especially on the domestic expansion side, as well as continuation of our added value on the export side. So it's not all pitch black, at all, I think, for Japan.

FOSTER: Hold on tight if you're an investor.

TAKESHITA: Yes.

FOSTER: Seijiro Takeshita, thank you so much.

Now, Iceland treading on thin ice with its international creditors. But the president tells us there's no way the debts will go unpaid. The lingering fallout from Iceland's banking crisis, right after this break.

(COMMERCIAL BREAK)

FOSTER: Welcome back.

I'm Max Foster in London in for Richard Quest and this is QUEST MEANS BUSINESS here on CNN.

Now, the president of Iceland says his country is not trying to wriggle out of repaying its debts. Olafur Ragnar Grimsson told CNN he and his country's government accept that they do have a responsibility to repay more than $5 billion to Britain and the Netherlands. The loans stem from compensation that the British and Dutch paid to depositors hit by Iceland's banking crisis.

All the same, a bill committing to make the payment will now be decided by referendum after Mr. Grimsson refused to sign it into law on Tuesday.

The president told CNN, whatever the outcome of the vote, Iceland will not shirk its obligations.

(BEGIN VIDEO CLIP)

OLAFUR RAGNAR GRIMSSON, PRESIDENT OF ICELAND: If the outcome of the referendum is no, which I don't think is certain at all. In a recent opinion poll in Iceland indicates it's going to be very close. Then the law from last August, which was based on agreement with Britain and the Netherlands, will stand. And in that law, Iceland recognizes its obligations under this agreement. And as I said in my statement yesterday -- and some of the foreign media has overlooked -- fundamentally, a solution of the Iceland dispute on the basis of Iceland's obligation is a key to our recovery and the harmonious relations with these countries.

(END VIDEO CLIP)

FOSTER: Well, Iceland currently owes $3.7 billion to the U.K. and nearly $1.9 billion to the Netherlands. The Dutch finance minister, Wouter Bos, told me earlier he still believes his country will get its money back.

(BEGIN VIDEOTAPE)

WOUTER BOS, NETHERLANDS FINANCE MINISTER: What I understand is that my Iceland colleagues were just as surprised in a negative way by the decision of the president as we were. And they are still -- that's what they confirmed to me. They are still very much committed to -- to actually follow up the agreement and to make sure that, in the end, one way or another, the law, you know, is going to be accepted and it's going to be executed.

FOSTER: The most likely next step, though, is referendum, as I understand it. And the referendum, if you look at -- if you go by the polls right now, simply isn't going to go through in your favor, is it?

BOS: Well, looking at the polls, probably not. I -- I think you're right in saying that it's the most likely next step. From what I understand from -- from the political situation in Iceland, there's still a lot of -- of discussion about what exactly needs to be done next. But I suppose that there will be a referendum then I think there's going to be quite a discussion. And, you know, it -- it may become relevant that -- that Iceland has seen that everything that was said before about how the IMF and the European Union and -- and international rating agencies would all make up their minds about -- about Iceland and how -- how that would possibly affect the prospects of -- of a quick recovery of -- of the Iceland economy, how -- how those speculations were not just speculations, but have become true very, very rapidly. And, you know, voters may just -- may just take that into account.

Who knows?

FOSTER: But if voters vote against it, you're not going to get your money.

So what are you going to do?

BOS: Oh, we're going to get our money. I mean one way or another...

FOSTER: What if the referendum goes against you?

BOS: Well, I mean if -- if the referendum goes against us, then I -- I think Iceland will have a -- a big problem, because they will have shown themselves to be very unreliable partners in -- in the international financial scene...

FOSTER: And what sort of...

(CROSSTALK)

FOSTER: ...for them?

BOS: ...in the long-term interests of -- of the Iceland economy and the Iceland people.

FOSTER: What sort of response will there be to that then?

What will you do and what will you get international partners to do?

BOS: Well, we're looking into various options right now, primarily with our British friends, who are facing a similar problem. But we've also decided now to -- to -- to not, you know, not sign a process of -- of -- of flattening (ph). You know, we'll take this step by step. And we're first going to see whether there is going to be a referendum and then we're going to enable our -- our Iceland friends to -- to make sure that there's a fair chance of actually the law being accepted in a referendum.

And if all that doesn't happen, then, indeed, we'll enter a next stage and -- and we'll have our options ready. But I'm not going to speculate on them now.

(END VIDEO CLIP)

FOSTER: The Netherlands finance minister speaking to me earlier there.

We're going to have a look at Wall Street now and see how the Dow is doing. There you go -- pretty much unmoved. We've been seeing the stocks really wavering, though, in and out of positive and negative territory all day. So it's pretty flat right now.

Some upbeat news for the U.S. labor market today. Payroll services from ADP say -- says that employers in the private sector cut 84,000 jobs last month. And that's the smallest number of cuts since March 2008. And the government's closely watched employment report this December is due out on Friday, so we'll get some proper numbers on the labor market then. We'll see if we can get some reaction to that, too.

Now, an arms race in the toughest of economic circumstances, as Boeing scores a major defense contract with the United Arab Emirates. We've looked at a nation that's joining the big military spenders.

(COMMERCIAL BREAK)

FOSTER: The UAE has announced a major boost to its military capabilities. The Middle East state is buying six of these -- this heavyweight C-17 Military Airlift. They're made by Boeing. The country says the aircraft will be used for a variety of strategic and humanitarian operations. The terms of the deal weren't disclosed, though.

The UAE is keeping up with a growing trend in the Middle East -- massive defense spending.

And Cal Perry looks at how and why military budgets in the region have proved to be recession-proof.

(BEGIN VIDEOTAPE)

CAL PERRY, CNN CORRESPONDENT (voice-over): An American fighter jet flies low and fast over Dubai, wooing potential buyers. American military personnel guard the newest and finest in U.S. Military equipment here in the Middle East, but this is really all about business. And here, military spending translates into vast sums of money.

GEN KHALID AL-BU AINNAIN, FORMER COMMANDER, UAE AIR FORCE: The spending is really, it's up to us. One is defensive, one is security. And, you know, that we are in the -- in the hot spot of the air and -- and the globe, where it's really -- security is really a major issue in these countries.

PERRY: Middle East nations have steadily increased defense spending from $77 billion in 2006 to $102 billion this year. The biggest buyer, Saudi Arabia, spending more than $40 billion on military equipment in 2009. Which is why here in Dubai, you see the newest in bunker busting bombs lined up to the newest in military aviation. Add to that the cutting edge of modern warfare, unmanned aerial drones.

Riad Kahwaji works for a private company that advises the world's militaries on what they should buy. This week, he's working with Middle East nations, many of whom simply want to keep other countries in the region at bay.

RIAD KAHWAJI, CEO, INEGMA: A strong, spirited defense to act as a deterrent against any threats from larger countries around them, for example, Iran. Iran is much bigger. They have a much bigger army. Their population is way much bigger. So they need something for a country like the UAE or Qatar or Kuwait, much smaller, population equal to a small province in Iran. So they need to have some kind of deterrence that would make -- make countries like Iran to think again.

PERRY: Which is one reason the United States leads the world in selling military equipment. It's where business meets foreign policy.

BRUCE S. LEMKIN, U.S. AIR FORCE: The policy piece comes in. We don't just do this in trying to sell as many things as we can. If we're not selling it, we're working with industry to get the right capabilities in the hands of our partners. And we work with the rest of the U.S. government, and particularly with the administration, on what are the objectives for the region and for the country.

PERRY: For a region that finds itself under the gun, buying more guns seems to be a business worth enormous growth potential.

Cal Perry, CNN, Dubai.

(END VIDEO TAPE)

FOSTER: Let's get back to the big talking point, then, across the Northern Hemisphere right now, and that is the -- what are they calling it, the Arctic freeze -- Guillermo?

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, exactly. That's what it is. And it's all across the Northern Hemisphere, all the way to Miami.

Now, I was looking particularly at airport activities. And I find that Great Britain is the worst spot in the world right now. I'm going to show you a little bit of Gatwick. Also, I want you to know that -- OK, look at that.

With those pictures, do you think that there are going to be normal operations there?

Also, do airports have the capability of bringing things back to normal with so much snowfall?

We're talking about almost half a meter in many spots.

Now, when you compare that with Heathrow, Heathrow was in better shape. But because the weather was a little bit kinder, even though it's not so far away from this, Gatwick Airport. They got a little bit less snow.

Now, Southern England, as we were saying, all the way to Southampton on the coast, I have some airports here. Excessive delays, Gatwick, Dublin, Belfast, Aberdeen, London Heathrow, Bristol, Amsterdam, Dusseldorf, Berlin, Warsaw. Then some have some more delays, not excessive, but significant -- Edinboro, Glasgow, Manchester, New Castle, Zurich, Geneva, Nice, Marseilles, Toulouse and Madrid -- just to name a few.

So will the cold snap continue?

Yes, indeed.

You see that?

So people gathered in Nottingham because of the bad weather. The schools closed down. So plan ahead.

I'm going to tell you one thing. There's another system on its way that it's going to bring bad weather. I'm not talking about the north only. I'm talking about areas like in Italy, because we're going to see a repetition of what we saw last week. So from Spain all the way to the Baltics. London Heathrow, excessive delays for tomorrow; Amsterdam, Paris, also. France, watch out, because it's -- whatever happened in Great Britain is ascending into France now.

Temperatures way below average, even by eight degrees. This is what I was telling you. Look, this is coming down here in England and then it's bringing from Britannia into Champagne and into Norma -- Normandy, as well, some significant snow -- 10 centimeters, 15, even 25.

What about the Alpine Region?

Even more of it -- Torino, Genoa, all the way into the Austria section, Switzerland. Look -- look how it expands in here. That's the low that is coming from Spain. The same thing we saw last week. Another low came from Spain, rose into the Alpine Region and goes into the Balkan Peninsula. And temperatures plunge again through Saturday.

Some advice -- you know, the only thing you can do is pray for some patience.

More coming up after the break.

Stay with CNN.

(COMMERCIAL BREAK)

FOSTER: Now, few of us have a job for life these days. But in Hong Kong, one man has spent half a century in his chosen profession and he obviously loves every moment of it.

For our World At Work series, Eunice Yoon went behind the scenes of the opera.

(BEGIN VIDEOTAPE)

(MUSIC)

EUNICE YOON, CNN CORRESPONDENT (voice-over): With its clashing symbols and dissonant tones, the sounds of Cantonese opera are unmistakable. Franco Yuen has entertained audiences here in Hong Kong for over 50 years.

"I first started playing in a Chinese opera when I was seven, but it wasn't until 16 that I decided to choose Chinese opera as my lifelong career," he tells me. "It was so hard in the first three years of training. I had to practice a lot of basic skills, like body training, to get used to wearing those heavy costumes and learn martial arts."

(MUSIC)

YOON: Yuen also had to master applying the opera's distinctive red and white makeup.

"Each character has a different face," he says. "Some people need to learn more styles if they play more roles. Of course, we have different makeup for young or old characters. We have to lead the audiences into different situations and environments, bright or dark, smoky or under the water. It's all fake, so we have to convince them that we're having all these experiences."

After 50 years, does he still find his job rewarding?

"The thing I'm most grateful for is the art itself is being recognized and that I could spread the spirit of Chinese culture. That's what makes me proud to be a Chinese opera actor.

(MUSIC)

(END VIDEO TAPE)

FOSTER: Wonderful now. It's a brand new year and your investment portfolio is, we hope, looking healthier than at this time last year. But plenty of risks to the economy remain and jobs have yet to return.

CNNMoney.com's Poppy Harlow has been weighing up the outlook for 2010.

(BEGIN VIDEOTAPE)

POPPY HARLOW, ANCHOR, CNNMONEY.COM (voice-over): Despite the worst recession in modern history, 2009 was a boom year for the stock market. But when it comes to the real economy, namely, your home and your job, there's still a lot of uncertainty about 2010.

UNIDENTIFIED MALE: I think my greatest financial worry for next year is just keeping my head above water. Costs are going up. Incomes are not. They're flat or they're going down. And I don't see any immediate relief in sight.

HARLOW: The 2009 recovery effort was marked by massive government aid -- TARP, the government's bank bailout plan; stimulus spending and Fed action to keep mortgage rates low. But as the government pulls back its unprecedented financial support, some economists worry about what may lie ahead.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: I think it's a little riskier for the markets in 2010. There will be a lot more angst simply because the government's pulling back the easing. The problem is we lost a lot. So it's -- recovering doesn't mean recovered. It's going to take a few years.

HARLOW: And what about the state of your job?

UNIDENTIFIED MALE: The president is most concerned about the high unemployment rate. And until everyone who wants a job has a job, the president and the entire administration will not be satisfied.

HARLOW: And although unemployment appears to have stabilized somewhat, the harsh reality is that some jobs may be lost forever.

JEFFREY JOERRES, CEO, MANPOWER: The pond is drained and companies are looking and saying, why did we have four people doing that or why were we doing that at all?

And they were able to consolidate it. And there's a whole lot more being done with less and I think that will continue. People are going to be asked to do a lot more than they were before.

HARLOW: Simply put, if you're one of the millions of Americans searching for work, a willingness to do more could be key.

JOERRES: What companies are looking for in situations like that is intellectually curiosity, the ability to learn and the collaborative, agile mindset, that whole, OK, I get it, I'm going to do this work. This may not be part of my responsibility, but I'm going to help out somebody else.

(END VIDEO TAPE)

FOSTER: Poppy joins us now from New York -- Poppy, have we got a sort of new normal these days?

People will have to work harder than ever, but they can't quit because there's no other jobs to go to.

It's a bit grim, isn't it?

HARLOW: That's a great way to put it, sort of what else are you going to do?

I mean they just came out with a job satisfaction survey here in the United States yesterday. It said it hit a record low. People aren't happy, necessarily, where they're working, but they're doing what they can to keep their jobs, because we've seen eight million jobs lost in this country over the last two years. So people are having to work double time, over time, to try to keep their jobs.

I asked people on Twitter today, are you having to work more just to keep your job?

I'll read you two interesting responses here.

The first one I got, Marketpow wrote in and he said: "Oh, for sure and for a lot less money, too. It seems like I'm working twice as much for half the money."

A tough situation there. At least you've got a job.

And victorx10 wrote in: "Yes, definitely working harder. I have anxiety issues, so you can imagine my state of mind right now."

So some interesting things people are writing in to us on the CNN Money page on Twitter, Max.

But, yes, I think it's the new normal. You've got to work twice as hard or someone else is going to be willing to do it for you -- Max.

FOSTER: But hopefully it will improve at some point and the jobs will start coming back, so people will have more choice about where they can work.

What sort of figures are you expecting at the beginning of this year on the jobs market?

HARLOW: Well, you know, we're going to get the first jobs reading for 2010 coming on Friday morning, before U.S. markets open. A lot of investors right now, before they make any major moves, are looking toward that number. What we're expecting in the latest estimate is for the unemployment rate to tick up just slightly, to about 10.1 percent. It's at 10 percent right now.

But that's not really the number -- the only number you have to look at. You should also look at the amount of people that lost their jobs in that last month. That's expected to stay relatively flat. And, of course, the unemployment rate doesn't even include, as you know, people that just gave up looking for work. So it's not exactly the best indicator. But we'll see that report -- a jobs report coming out on Friday morning -- Max.

FOSTER: Fingers crossed.

Thank you so much, Poppy.

We'll get a check on how the stock markets are faring in just a moment.

Stay with QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

FOSTER: We'll finish the show with a look at the stock markets, then, beginning, of course, in the U.S., still trading. Stocks wavering up and down all day long. As you can see, pretty much flat at this point -- marginally up.

There was some upbeat news from the U.S. labor market. That was the main bit of news really coming through today. The payroll services firm, ADP, saying employers in the private sector cut 84,000 jobs last month. On the face of it, bad news. But actually, pretty positive, actually, because it was a smaller figure than expected -- the smallest number of cuts since March 2008.

As Poppy was saying before the break, as well, we're expecting employment reports for December due out on Friday. So that's the formal market news on jobs, which everyone will be watching very closely, indeed.

Europe's main stock markets ended the session more than -- more or less unchanged, as you can see. Mining stocks there the main gainers in London's FTSE 100. The price of copper rose to a 16-month high. Elsewhere, the DAX and the CAC were up just slightly. Financial markets in Greece closed for the holiday, by the way. We were speaking to the finance minister earlier.

This is QUEST MEANS BUSINESS.

I'm Max Foster in for Richard Quest in London.

Whatever you're doing in the hours ahead, in Richard's words, I hope it's profitable.

END