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QUEST MEANS BUSINESS

Greek Protestors Clash Police, The Parliament Passes Deficit Cutting Measures; Just What Would It Cost to Dismantle the Eurozone? The Q- 25; Citigroup Settles SEC Charges; Interview with Julia Gillard; Rugby Revenue; Recovering from Default

Aired October 19, 2011 - 14:00:00   ET

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


MAX FOSTER, CNN ANCHOR, QUEST MEANS BUSINESS: Rage against the cops. Strikes hit Greece ahead of key austerity votes.

Call in the cavalry. Sarkozy heads to Frankfurt to revive stalled rescue talks.

And Europe needs you to kill off the euro. There is a new price for the best Eurozone end game.

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

The (UNINTELLIGIBLE) is out but the stakes have never been higher. On the eve of a crucial vote in Athens the Greek people are lashing out. Frustrated with a crisis that threatens their country and the rest of the Eurozone. There are reports of violence in Athens as police fought with protestors that gathered outside the parliament as politicians began debating the latest round of austerity measures. Those are part of Greece's bailout conditions.

At least six protestors and 15 police officers have been injured. Just a few blocks away other parts of the capital were like a ghost town. Workers across all industries are in the middle of a 48 hour general strike. Diana Magnay is in Athens for us tonight.

Diana, how does this feel compared with the last set of demos on this scale?

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Hi, Max.

Well, the smell of teargas hangs heavy in the air right now. Compared to the strikes that took place in June when the second bailout was agreed, the level of violence that we saw today wasn't as extreme as it was then. Then you still had people and fires burning on Syntagma Square below me. Now, the sort of municipal workers are coming and clearing this out, even though, incidentally the garbage has been piling up on the streets for the last couple of weeks, because garbage workers haven't been clearing that out.

So, there has been, of course, as you said, various-I mean, really, quite a few hours of sort of fighting between police and between protestors. But what was striking about today was the shear number of people who came out onto the street. You know, way over 70,000, say, police organizers say, 120,000. The streets really were full of people. All of whom were angry at the kind of measures that are being debated in the parliament right now. They are furious at their government for having what they see as sold them out to the rest of Europe. And are looking, however, to answers from Europe at this weekend's summit. Answers that can get Greece out of the crisis in which it finds itself, Max.

FOSTER: These are live pictures we are seeing next to you, Diana, of the debate in parliament. What are the chances that the demonstrators could get their way, because I know the government has got a majority? But it is very slim, isn't it? What are the chances this austerity budget doesn't get through? These austerity rules?

MAGNAY: It is a small majority. It has 134 seats in the 300 seat parliament. But no body is talking about this vote not going through. Even the protestors say they accept that this one probably is going to go through. What they are saying is simply we will continue to fight it, irrespective of the fact that these measures will be passed, we will continue to fight our government. So, I think there is no concern that this vote won't be passed and that the next traunch of money will be coming to Greece to stop it from an eminent default.

But the question is, of course, one to be decided in Brussels, in Berlin, in Paris, how Greece's future looks. And whether an orderly default can be orchestrated somehow, how to recapitalize the banks; all of these questions which really dictate the fate of the Greek people, Max.

FOSTER: If the law doesn't get approved, effectively Greece is bankrupt, right? This week it goes out of business?

MAGNAY: Well, it says it will run out of money in November, to pay for salaries and all the rest of it. So, yes, effectively, that is that. There will be a loss on Greek bonds. The country will default and the possible risk of a contagious default will spread across the Eurozone. So that really is the worst possible scenario and something that parliamentarians in there are fighting hard to avoid. And, of course, that is also the focus of this weekend's summit in Brussels.

FOSTER: Yes, that is a crucial one, isn't it? Diana, thank you very much, indeed.

Now, Greece is hoping it can get on top of the chaos. Of course, not least to keep hold of one of its most valuable resources and that is tourists. The money it makes from tourism has gone up more than 14 percent in the first part of this year. But angry scenes on the streets of Athens won't help. John Defterios asked the Greek tourism minister about the uptick and why structural reforms to the economy aren't coming faster.

(BEGIN VIDEOTAPE)

PAVLOS GEROULANOS, CULTURE & TOURISM MINISTER, GREECE: I understand that there is frustration as to the pace, but we are working on a two-level process. On the one level we are trying to solve and economic situation that we have on our hands right now. But at the same time we are trying to solve structural problems that existed in Greek society for the past 20 to 30 years.

Very few people are paying attention to the much more important job that is being done. To the job that will sustainably keep Greece on a growth pattern, which is to change all the mistakes we have done in the past.

JOHN DEFTERIOS, CNN INTERNATIONAL CORRESPONDENT: Would you rule out default then? With this sort of environment, with the emotions swinging here, in the country, but also within the Brussels community?

GEROULANOS: Well, we certainly rule out a situation like this, out of our choices. There is absolutely no choice that the Greek government is pursuing that would involve something like that. If something like that would happen it would be a mistake and an accident, which would happen primarily because of the indecisiveness we see on institutions that have a very immediate impact on Greece's economic policy.

DEFTERIOS: It is fascinating. When you are in Athens, they say you want a cultural experience, and you are in Syntagma Square and you see the rioters on the streets, it is not the most peaceful city break experience. How do you market yourself right now, with this sort of chaos?

GEROULANOS: Well, you have to admit that the demonstrations are part of a culture, as well. And the Mediterranean countries do have a long experience of demonstrations of this sort.

Last year, I would say, this was a problem because people saw in the media scenes that scared them. Although, last year we had-we had no growth in 2010, in tourist arrivals. This year we have double digit growth both in arrivals and in income. And that is very positive.

DEFTERIOS: Is that one-off because of the Arab Spring, or how do you sustain this?

GEROULANOS: All of the benefit of the growth of Greek tourism we would attribute about 25 percent of it to the Arab Spring. We do not like to see our neighbors' problem as an opportunity for us. And that is why I immediately went to Egypt when they had these problems and I suggested that we work together for the long-haul markets.

DEFTERIOS: We are in the third year of a recession, here. Do we have another two years, from your vantage point? Even with the increase of tourism revenues? It is a very severe recession.

GEROULANOS: It is a very severe recession. But I don't believe that we should look at it in those terms. Everybody, right now, I think is waiting to see how far we are willing to go with the changes that we need to make. If we persuade them that the changes we are making are credible and long-term they will start coming in. And once they start coming in then I believe that the growth will be very significant.

DEFTERIOS: It seems to be tearing society in the meantime. There is a lot of resistance to change.

GEROULANOS: It is pressing society very burdensomely. There is no question that these measures are costing Greeks tremendously. I do believe, however, that although there is a reaction to the measures, there is also a very good understanding that things could not continue the way they were going before. That these-that this crisis is an opportunity to revalue what we actually appreciate in the things we do.

(END VIDEOTAPE)

FOSTER: Now we were just speaking to Diana about that debate going on in the parliament building behind her in Athens. And we are just getting reports now, from Reuters, that the Greek government has secured enough votes already to pass those austerity laws, in the very first reading.

These are live pictures for you, from the scene, in they're-in Athens, in the parliamentary building there. And it seems that they have got enough money-they have got enough votes to pass these budget cutting rules, the austerity laws, increases in taxes, more job cuts, and lower wages for public workers, and it is vital, really to then go on to secure a European bailout. But we'll find out details on how tight it was, because the government has only got a slim majority. More details coming up for you.

And things are getting seriously urgent for the Eurozone as a whole, not just in terms of Greece. If you need proof, how about his for a dilemma? Nicolas Sarkozy has left behind his heavily pregnant wife so he can meet with Angela Merkel, in Frankfurt.

The French president is getting into a car, you can see here, on the right. Left the Paris clinic, where his wife, Carla Bruni is due to give birth, according to French media, perhaps as soon as today. Instead, Mr. Sarkozy has now arrived in Frankfurt for talks with the German chancellor ahead of Sunday's crucial EU summit. The two countries are still not in agreement about how to prop up Europe's vulnerable banks.

Now banks lead the way as European markets managed to score some modest gains. By the end of the day they were boosted by some newspaper speculation here in England. The big three finished up by half of 1 percent, or better. "Guardian" newspaper reported that a deal had already been struck to expand the EU's bailout fund this Sunday. That report was denied by officials but banks enjoyed the chance to be optimistic regardless. In France SNP (ph), Paribas was up more than 6 percent.

Coming up, a big face off in Washington. It is all about the U.S. debt debacle. A former White House economic advisor joins me next to talk about it.

(COMMERCIAL BREAK)

FOSTER: Now the Eurozone isn't the only one with a looming deadline. The United States is facing a debt showdown as well. The arena, Washington; the goal, to hammer out trillions of dollars in debt reductions.

Here is what is happening today: The so-called congressional Super Committee is meeting. This is the group that is charged with finding ways to squeeze trillions of dollars out of U.S. government deficit. They will hear from three Republicans and three Democrats, called the Gang of Six, who earlier had unsuccessfully tried to come up with a deficit reduction plan.

On top of all of that, a move by China is adding to the atmosphere of uncertainty. Beijing has cut its holdings of U.S. debts to their lowest in a year. Economists Todd Buchholz is a former director of economic policy at the White House; and author of "Rush: You Need-Why You Need and Love the Rat Race". He joins me now in our London studio.

We are going talk about your book. Very interesting book, in just a moment, but first of all, I just want to ask you about the Super Committee. I've been told it is unprecedented, this, this set up. But there is a precedent, isn't there?

TODD BUCHHOLZ, FORMER WHITE HOUSE ECONOMIC POLICY DIRECTOR: Well, we did have after the fall of the Soviet Union, a lot of disputes in the U.S. about which military bases could be closed. We called it the peace dividend. Well, the problem with throwing that to Congress is that each congressman would want to protect a military base in his district.

So instead they created a commission and said, all right, let's have some adults get together and put together recommendations and Congress, instead of cherry picking which one should keep open, which ones should close, would instead have a simple yes or no, on the overall proposal.

So there is something similar about this Super Committee where you really don't let the individual congressmen have their way, but instead you give authority to a committee.

FOSTER: Are you hopeful for it? It is a tough task, isn't it?

BUCHHOLZ: It is a tough task. And it is a short amount of time and there are a lot of partisans on each side. I'm optimistic they will come up with something. But how credible will it be?

FOSTER: There just doesn't seem to be any agreement on anything right now in Washington. Is that your feeling?

BUCHHOLZ: Well, there is not much agreement. There is less agreement in Washington than among the American people. The American people feel very strongly, we must do something. We are going bankrupt. We don't want to be Athens, Greece. And yet Congress is still divided.

I-I-ultimately I think there will be a plan. But I don't think it will have as much credibility as it should. They will change the dates a bit. They will claim to save money because, what? We won the war in Afghanistan? Or maybe, we are going to win the war in Uganda? So there will be military savings that are rather stealthy. But they will be able to claim them on paper. I'm not sure it is going to be all that solid a plan, from the point of view of financial analysts, from the point of view of bond vigilantes.

FOSTER: Not going to be convincing?

BUCHHOLZ: I don't think it will be too convincing.

FOSTER: You mentioned Athens there. Just explain to-I mean, we are talking about Athens, the situation there is dreadful for those people out demonstrating. You can have sympathy for their particular case, can't you? But what does this mean for the rest of the world? What does it mean for America?

BUCHHOLZ: Well, it is a warning for America. Because if you look at America's ratio of debt to GDP, we are Athens in 20 years. And so we could-why can't America. We see Occupy Wall Street? Why can't we have riots in the streets based on spending cuts? So, I think, obviously, Athens is a tragic situation that needs to be cured, rectified. The Eurozone might need to be torn up.

But it also serves as a warning to the United States and to the U.K. And it in that way, what is going on in Athens is actually helpful for the rest of the world, more than it is hurtful.

FOSTER: I want to ask you a quick question about your book, because in this country, we keep getting told we are working too hard. We should have better work life balance. You are coming up with a counter argument to that?

BUCHHOLZ: Yes, in my book, "Rush", I argue that we need stress, we need to be running around. You know, we could go back to a simpler life, Max. We could have a life where there were no off-scroll back the clock a 100 years ago. There were no cell phones. There was no traffic. No one interrupted you during the dinner hour at home. And yet life expectancy was 48 years of age. So, that simpler life, where we meditate, where we were all more relaxed? We'd be dead. At least those of us who are over the age of 40, would be dead.

Better to be alive and moving around and staying busy.

FOSTER: I can agree with that. Being busy is good.

(LAUGHTER)

BUCHHOLZ: All right.

FOSTER: Thank you so much for joining us, Todd Buchholz. Thank you very much.

Now we are just going to take you to Athens now. We were talking about Athens there. We just had the vote there. And according to Reuters the Greek lawmakers have given initial approval for an austerity law, cutting wages, and hiking taxes there. It has come sooner than we expected, actually. It could have come yesterday-tomorrow, rather. It is crucial for the country, of course, to get this next batch of bailout funds from Europe. And they needed this law to be passed as a result. As we understand it all 154 of the ruling Socialist Party deputies voted in favor of the law. It has a small majority but it worked for them in the end.

We'll bring you more details on this. You can see some business being tied up, still, there in Athens.

Coming up, it may sound like deep chic for the X-factor generation, but a brand new competition is serious business for the Eurozone. Find out what you will need to win the Wolfson prize, next.

(COMMERCIAL BREAK)

FOSTER: Thinking the unthinkable. While all the talk has been about saving the euro, one man wants your ideas on how to end it. Simon Wolfson, the mind behind British retail chain, Next, has just launched the Wolfson economics prize. It is the second-largest ever, after the Nobel Prize. And CNN's Felicia Taylor talked to the man himself about why it could be a risky proposition.

(BEGIN VIDEOTAPE)

FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT (on camera): I'm just about to speak to one of England's leading businessmen. Lord Simon Wolfson has just announced a prize worth 250,000 pounds, that is the same as 286,000 euros, for the one person who can come up with the best plan to effectively wind up the euro in an orderly way. Let's find out why he thinks it is so crucial.

SIMON WOLFSON, CEO, NEXT GROUP: The worst scenario is that we have an international banking failure. And let me just sort of talk through the stages from homeowner to multinational bank. Let's say you have some one from a country that falls out of the euro. And they wages are redenominated in a new currency and devalues against the euro.

The question comes, how do they pay their mortgage back? Because their mortgage was given to them in euros. If you say, well, their mortgage goes into the new currency. It is not a problem for the mortgage payer. But then the bank that owns the mortgage suddenly has got an asset that has devalued 30 percent.

If that happens to too many banks, we could end up undermining the financial stability of the banking system. And an event like that would make Lehman's look like a small garden party.

TAYLOR: To avoid a catastrophe, Wolfson says there needs to be a plan. Especially since euro leaders can't really discuss the possibility of a country exiting the euro, because that in itself could be a red flag.

WOLFSON: As soon as they start talking about it people will assume that that is the end. And that, you know, to a certain extent the governments of Europe are almost constrained into as to what they dare think about. And that is one of the reasons why I think it is important for private individuals, and think tanks, to sponsor this type of thought. So that people can think, well, you can think about it, without it being dangerous. Because if a government starts thinking about it people assume that the government wants to leave.

TAYLOR: Indeed, the president of the European Commission, Jose Manuel Barroso, has called on European nations to have a stake in rescuing Greece. And that includes keeping it in the monetary union.

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: We are many countries, some of them in very different fiscal positions. So we need to bring the countries together.

TAYLOR: Yet, there has already been plenty of speculation about how a country might exit the euro. And initially 200 leading economists will receive a packet with details of how to apply for the Wolfson's economic prize. Lord Wolfson has specific criteria that he wants addressed.

WOLFSON: What are the stable currency blocks that could emerge from the Eurozone? So if the Eurozone does break up, should it break up into 12 currencies, or two or three? And that identifying which areas might be stable currencies zones is going to be a first important task.

Secondly, you need to think about what is going to happen to sovereign debt. Thirdly, you need to think about what happens to domestic debt, and particularly to domestic mortgages.

TAYLOR: But this is uncharted territory as there is not rule book to guide how a country could exit the European currency. And Wolfson, himself, predicts that at the end of the day it won't happen.

WOLFSON: My gut feeling is the Europe will work as hard as it can to preserve the euro. Because the problem that I foresee is that one country falls out, it raises the specter, and all of the other weaker countries are then falling out. And as soon as that happens you are going to get massive withdrawal of savings from the banks in that country. And so one country falling out could actually precipitate other countries falling out of necessity.

TAYLOR: Entrants have until the end of January 2012 to submit their ideas. Felicia Taylor, CNN, London.

(END VIDEOTAPE)

FOSTER: Well, if a government is just talking about the possibility of winding up the euro it is serious business with potentially devastating consequences. With that in mind, CNN's Nina Dos Santos took me through some of the hazards of a Eurozone end game.

(BEGIN VIDEOTAPE)

NINA DOS SANTOS, CNN BUSINESS CORRESPONDENT: Well, for the moment, the laws that govern the Eurozone don't actually provide for a Eurozone member state deciding to leave of its own volition, or indeed being expelled by others. And then one would assume that if the Eurozone were eventually be disbanded you would have to have all 17 countries agreeing to do so.

FOSTER: So, we haven't got a clue?

NINA DOS SANTOS: At the moment-

FOSTER: Can we put together some sort of rough cost, because I'm sure someone is doing it out there?

DOS SANTOS: What we do know, ironically enough, Max, is that we have a clear idea of how much it could cost to shore up the euro. If you look at the EFSF, that could be boosted to just shy of $3 trillion. That is what it may cost to shore it up. But really, in terms of disbanding this, the cost could really-

FOSTER: It could be much, much higher?

DOS SANTOS: They could be immense.

And let's take a look at the kind of things that countries would have to pay for. For instance, printing new money. This is a drachma. We haven't seen one of these in a good 10 years or so. If Greece were to decide to exit the Eurozone it would have to reprint new money. The other significant cost would be creating new central banks across all of these territories. Currently that is the job of the European Central Bank to set interest rates.

FOSTER: So that would be disbanded, which would have a cost. Then you have an additional cost of setting up the whole new set of central banks and the systems behind that.

DOS SANTOS: Yes, and then the concern is that it wouldn't really solve the entire problem. Now, in the Olive Belt, these are countries such as for instance, Italy, Spain, also Greece, the countries-

FOSTER: The troublemakers.

(LAUGHTER)

DOS SANTOS: Where the deficits have been really yawning for a number of year's time. What has happened is that these countries are finding it increasingly expensive and difficult to sustain their debt on the open market, having to pay high interest rates each time they issue bonds. Obviously, it would become more expensive for them to do so.

And then we have to remember about the consumer and the banks, as well. Because it would cost them more money to service their mortgages that will probably in euros, if they start to earn in drachmas.

FOSTER: So a Greek who now has drachmas as the national currency may have a legacy mortgage in euros. So we don't know how they are going to resolve that. We don't know how they are going to cope with the ups and downs of a comparative currency movement.

DOS SANTOS: Yes, because we wouldn't know exactly how much a drachma would be worth, say.

The other thing we must remember is that we saw this similar sort of situation in Iceland, when Iceland's economy melted down, a lot of the Icelanders actually had mortgages that were in euros. And it became unsustainable for them to pay that debt down.

And then, of course, the big question is how would the markets react? That really is-

FOSTER: I'd hate it. They wouldn't know what is going on. They couldn't cost it.

DOS SANTOS: Well, we'd have an issue of inter-bank trust. So the banks wouldn't know what is on each other's balance sheets. We would also have an issue of trust when countries issued bonds, it would be very, very expensive for them to do so.

But let me just show you this enlightening comment that I pulled off the Internet. Thought you might like this. You remember the saying, don't make a drama out of a crisis. Well, one anonymous blogger I found had come up with this interesting scenario, telling Greece not to make a drachma out of a crisis.

FOSTER: I think anonymous blogger has come up with a classic. We'll hear it again.

DOS SANTOS: Shame he's anonymous.

(END VIDEOTAPE)

FOSTER: Indeed. Now after two days of our Q25, we are neck in neck, six reds, six greens. We will continue our journey through earnings season after the break.

(COMMERCIAL BREAK)

(NEWSBREAK)

FOSTER: Welcome back.

I'm Max Foster.

More QUEST MEANS BUSINESS in just a moment.

But first, these are the news headlines for you.

In Greece, violence between protesters and police on day one of a two day general strike. Clashes began outside the Greek parliament, where politicians are debating a new round of austerity measures. We're now hearing reports that the government has secured enough votes to pass the cuts in their very first reading.

French President Nikolas Sarkozy has left the Paris maternity clinic where local media say his wife, Carla Bruni, is checked in. Their first child is expected soon. But Mr. Sarkozy has pressing business in Germany. He's attending a crunch set of talks on the Eurozone debt crisis ahead of this weekend's EU Summit.

Turkish warplanes hit Kurdish militant targets in Northern Iraq in retaliation for guerilla attacks that left 24 soldiers dead and 18 others wounded earlier today. U.S. President Barack Obama condemned the Kurdish assaults as an outrageous terrorist attack. The Kurdish Workers Party, also known as the P -- PKK, claimed responsibility.

Police in the U.S. state of Ohio say they've now accounted for most of the 50 or so exotic animals freed Tuesday from a local reserve. A monkey and a wolf are still missing, but most of the others were put down. Police say it appears their owner released the animals, then committed suicide.

Now, we are heading into the halfway point of our Q-25 this week. The Q-25 is a segment we bring you every earnings season to help make sense of overall profits' trends. We pick 25 of the highest profile companies reporting during profit season and put them through a set of very challenging tests. If the company's earnings reports outperforms, they get a green chip. If the company disappoints, they get a red. Anything in between, we throw up for debate.

Maggie has been here all week following all the action -- so far, Maggie, we've handed out 12 chips, haven't we, six of each?

So we're neck and neck at this point.

We're going to start, though, with a company that resides on this side of the pond. So I'm just going to take us through BSkyB. It's the U.K. media group controlled by Rupert Murdoch's News Corp. And BSkyB reported more than 1 percent drop in its first quarter net profit. Revenues did jump, though, 9 percent. And its total client base did rise during the quarter, but at a slower pace than the same time last year. The company is cautioning that its earnings outlook remains challenging because of the state of the U.K. consumer right now.

Still, average revenue per customer did rise slightly. We decided to give the company a grudging green. It wasn't grabbing lots of headlines here in London, but we were following that in some detail.

All right, we're going to go to the rest of the Q-25 companies now, beginning with a major U.S. financial institution. That is Morgan Stanley. We've been looking at these financial companies this week, haven't we -- Maggie?

So where would you see Morgan comes in on this?

MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: Yes, Morgan Stanley was interesting. Investors really liked this one. Their equity trading did well in a really tough environment, or at least better than its peers. And it scored OK for us. It was up for debate. Three out of five and -- and I know we were divided. So many people thought it should get a green. Here is my problem with that. This is a very difficult environment. Part of what tipped it to three to five was that it beat expectations. But let's face it, some investors were marking Morgan as dead a couple of weeks ago, a lot of concerns about its viability. So the bar was set really, really low.

And when you're looking at a situation where some accounting, complicated accounting issues have made figuring out these results really difficult, we don't really know what the exposure is in Europe and the banks themselves don't really know what the business model is, I think it's kind of hard to give this a green.

I'm -- I'm going with a red. FOSTER: Yes, it's a great -- it's where it falls in comparison with the other banks, right?

So, you know, it would be unfair to give it a green compared to the others, I guess.

Apple, four out of five. It's an automatic green, isn't it, Maggie?

It's doing so well at the moment. But, you know, there's -- there's a bit of debate there.

Four out of five?

LAKE: Yes, four out of five so it gets an automatic green from us. Investors really not happy with this today, though. For the first time in 10 years, they missed estimates. It's absolutely unheard of. I mean this is the one you could go to the bank with.

But this is another case where you've got to watch this expectation component. Just because the analysts get it wrong doesn't necessarily mean that it's going to reflect something about their core business.

Apple is priced to perfection. Longer-term, it's going to be a stock to watch. But they are still rocking on these results. They certainly handily beat their own guidance, if you paid attention to that. And part of the iPhone disappointment was that everybody was holding back for the latest model, the 4S.

So heading into the holidays, they look great. This one gets a green.

FOSTER: Yes, you expect sort of Apple to get green, I guess, Maggie.

But Intel is another -- another company who is doing incredibly well, often under the wire.

But five out of five?

LAKE: Five out of five for Intel. I thought the PC business was dead, right?

That's what everyone is telling us. So this was a -- a surprise that they did so well on so many of the components. Analysts also surprised at this.

Listen, Intel is benefiting from what a common theme in our greens have been and that is global exposure, especially to countries like China and India. They did really well there.

But the other thing I want to point out, even though this wasn't up for debate, Max, is their emphasis on these Ultrabooks. These are these really light, thin laptops that are out there competing with the MacBook Air. They're really bullish on that. They think it's going to be a good growth area for them. They're -- they're positive about their guidance. They say it could make up 40 percent of the consumer PC market by the end of next year. That's really big. It's a big shift. And they -- they say they're -- they're hooked into that.

So they're a green.

FOSTER: I guess they've got to take a risk somewhere, haven't they?

That's what Apple has been doing all this time.

Railroad CSX, two out of five.

Where are we going to go with this one, then?

LAKE: Yes.

(LAUGHTER)

LAKE: The railroads have gone some place, but we had a hard time. And listen, this is an important sector. It was -- we felt like it was important for -- for us to put it in there. It's a good barometer of economic activity. Even the consumer, to the extent that retailers ship a lot of their stuff.

This one was so lukewarm. This was so hard to know where to go down on. It got two out of five. The ones it missed, it only missed by a little bit. But when we looked in the details, there wasn't anything to get excited about. You know, we couldn't see any positive guidance. There's what anything that indicated a growth story there.

So they're kind of hanging in there, but it's unclear what's going to happen. So we were very, very divided, but in the end, we thought a reluctant reed.

FOSTER: A reluctant red.

Maggie Lake, thank you so much.

We continue to look at the Q-25 and back with you throughout that.

Thank you so much for that.

We're going to have a look at the U.S. markets now.

We're going to go back to New York.

Alison is standing by there for us.

We want to start with the latest from Citigroup today and new developments on the fallout from -- from the housing crisis -- Alison.

ALISON KOSIK, CNN CORRESPONDENT: Exactly, Max. And you're talking about the latest bank that the U.S. Securities and Exchange Commission is going after, and that is Citigroup. Citigroup agreeing to pay $285 million to the SEC to settle charges.

Now, this involves a security known as a collaterized -- collateralized debt obligation that the bank sold to investors right as the U.S. housing market began to show signs of distress. The CDO defaulted within months of its sale.

Now, the SEC charged that Citi misled investors and bet against them, raking in $160 million in fees and profits.

So today, the SEC says Citi agreed to go ahead and settle the charges and the money will be returned to investors.

Citi shares are actually -- they've just dipped into the red. They've been up most of the day just because investors usually like to see these matters settled rather than having them dragged out through the legal system -- Max.

FOSTER: Yes, so that's some corporate news.

The big economic news was these inflation figures, right?

KOSIK: Oh, yes. And do you know what?

At first glance, it looks like a pretty tame report on consumer inflation. Prices rose by .3 of 1 percent last month. But the number was virtually flat when you struck out food and energy prices. And that's really why we haven't seen much of a reaction from investors.

But the government is at least acknowledging that prices have spiked this year. Prices are up almost 4 percent from a year ago, those prices being driven by higher food and fuel prices. That's the highest annual rate in three years. These numbers come out the same day the government announced it's raising Social Security payments for the first time in three years to account for the higher cost of living.

So the short-term not much of a concern. But long-term, at least, it's kind of a nod from the government acknowledging that prices have risen significantly -- Max.

FOSTER: Good stuff.

Alison, thank you very much, indeed, as ever.

Up next, we visit the place known as the -- the lucky country. Mining wealth is helping Australia dig its way out of the global economic mire. We speak to Prime Minister Julia Gillard on making the boom times last.

(COMMERCIAL BREAK)

FOSTER: Britain's Queen Elizabeth II is in Australia for a 10 day visit. It's her 16th official tour Down Under. She's there to open the Commonwealth Heads of Government meeting late next week. The 85-year-old monarch was greeted in the capital, Canberra, by Australia's prime minister, Julia Gillard, who happens, also, to be a Republican.

Well, the prime minister has had a rocky few months politically, leading to a an unpopular campaign for a national carbon tax. But Julia Gillard is keen to emphasize a major success.

The economy quickly returned to growth from the depths of global financial crisis thanks to its plentiful natural resources and a hungry Chinese market. The IMF expects GDP to grow by more than 3 percent next year.

Miss. Gillard spoke to Anna Coren about how the country is defying the global gloom.

(BEGIN VIDEOTAPE)

JULIA GILLARD, AUSTRALIAN PRIME MINISTER: We're not immune from world events. Clearly, we're not. But if you look at circumstances of our economy, I believe that the resources boom we're seeing will continue. I'm very confident about the ability of our nation to continue supplying resources to China for its urbanization and growth. So that will continue to be a strong part of our economy. That means it's likely that our dollar will continue to be high. That puts pressure on tried exposed sectors, like manufacturing and tourism. And we are working very strongly within Australia to harness growth and opportunity for those sectors of our economy, as well.

I'm very determined, as prime minister, that in the days of the resources boom and in the days that lie beyond it, we have a diversified economy that is offering opportunity for all. I want to come out of this period of transformation and change with a more diversified economy, not a less diversified economy. And our economic strategy is increasingly calibrated to do that, things like the Minerals Resource Rate Tax are part of that, using tax from the turbo-charged section of the economy to foster growth in other sectors.

And, of course, I want us to have a clean energy future, too, which is why we've been so determined to put the price on carbon.

ANNA COREN, CNN CORRESPONDENT: Well, you went to the election last year saying there would be no carbon tax. There is now a carbon tax. It certainly was a win in parliament. But as far as your credibility goes, it's certainly taken a hit.

The majority of Australians don't want a carbon tax.

How do you think you will be judged?

GILLARD: Big changes are about the right thing for the nation's future. I mean you don't step up to the position of prime minister to run this as a constant opinion poll, asking the Australian public what they want and just saying well, whatever today's opinion poll turns up, I'll do, even if tomorrow's opinion poll turns up complete -- something completely different. That's not what leadership is about.

Leadership is about designing what is right for the country's future. And I've always believed putting a price on carbon was the best way of us facing the challenge of climate change and that climate change is a real risk to our country's future.

So during the election campaign, I talked about an emissions trading scheme. In this parliament, what we have achieved is a fixed price on carbon, effectively a tax for three years, followed by an emissions trading scheme. And I'm happy to be judged on it.

COREN: What do you say to people who believe that -- that why should Australia have to pay for a price on -- on carbon when the big polluters, it's India, China and the United States, don't?

GILLARD: Well, I think that's misunderstanding the actions that are happening around our world to cut carbon pollution, including being taken by the United States, by China and by India. I mean we live in a nation where we generate more carbon pollution per head of population than anybody else in the developed world. And the real risk for us is that we get left behind with an old-fashioned economy that generates a lot of carbon pollution whilst the rest of the world moves on.

So, from an economic standpoint, we've got to start the transition to a cleaner energy future. From an environmental standpoint, I believe most Australians say climate change is real, we are causing it, carbon pollution is causing it and they want to do something to address that climate change.

(END VIDEO TAPE)

FOSTER: The Australian prime minister there speaking to Anna.

While natural resources may have insulated Australia from losing out economically, they didn't help avoid defeat in the Rugby World Cup. Australia fell to host New Zealand in a semi-finals last weekend. But it is the hosts who are hurting financially.

New Zealand's Rugby Union chief says the event has run at a $10 million loss.

That's something the boss of the next Rugby World Cup, being staged in England, wants to avoid.

CNN's Alex Thomas met a man who's in charge of the event in four year's time.

(BEGIN VIDEOTAPE)

ALEX THOMAS, CNN CORRESPONDENT: One of the most important things of any major sporting event is for the organizers of the next one to learn as much as possible. And that's something that Paul Vaughan has been doing, CEO of the England 2015 Tournament. You're going to host the world's rugby teams in four years' time, Paul.

What have you learned from how New Zealand have done it?

PAUL VAUGHAN CEO, ENGLAND 2015: This is the world's third largest event after the FIFA World Cup and the Olympics. This is number three. And we're going to make into the biggest event we possibly can.

New Zealand is a small country and they have done an amazing job and actually embraced the whole thing across the whole country with four and-a- half million people behind this. Their -- their mantra of a stadium of four-and-a-half million is brilliant. They've embraced it in terms of changing the school holidays. They've changed the oyster season so that it all works for the World Cup. They have actually got behind it so well, it is amazing.

I don't think we'll be able to do as well as that, but we'll have to do it differently. And, you know, I've been learning a lot of what they've done in terms of how you engage with people and how you engage with the fans and how you look after the teams.

Teams are the important pieces, but the fans are also just as important. And it's -- it, you know, we've got to make sure that they're in great places, great venues, people enjoy themselves and actually come together at least once every four years from around the world.

THOMAS: The one thing that New Zealand has excelled at is the mood and the spirit, as you say. But we've got to live in the real world. And the bottom dollar is also important.

Do you think that's somewhere that England can excel at?

VAUGHAN: Well, it's important for us to actually make our numbers work. And we've got to keep our costs under control, but we still want to deliver the best possible tournament. Which is why we're going on a strategy of -- of delivering about just under three million tickets available to -- to the -- to the public.

And at the end of the day, we want to fill our stadia. We want everybody to come along. We want to make sure that it will be the largest attended Rugby World Cup ever and it will deliver revenue which will go and be invested into the world game. This -- this -- and that the money will go into the IRB's coffers. They will then invest it in the development of the game worldwide, which is actually a fantastic thing for the sport.

THOMAS: And are you confident they'll get the structure right and give you the right tools that you like to work with in four years' time?

VAUGHAN: Yes, very much so. We've -- we've got a working relationship. Bernard Lapasset, the chairman of the IRB, said earlier on that we've already been working at the (AUDIO GAP) for two years, which we have. We run the (AUDIO GAP) in 2009. So we've been gently working through a lot of the early issues and putting structures in place that will actually help us deliver a fantastic tournament.

We've got the benefit of everything they've done here in New Zealand. we've also got the benefit of everything they did in France.

So we've got all the information. We've got the documents. And, you know, hopefully, we'll add to it and pass it on to Japan in 2019, because it's obviously very key that Japan do a better job than we do.

(END VIDEO TAPE)

FOSTER: Well, there you are, the head of rugby in four years' time, the World Cup, that is.

The coldest air, meanwhile, of the season has been sweeping across Europe this week. I can vouch for that.

Pedram joins us from the Weather Center to explain -- hey, Pedram.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Hey, Max.

I hope you've got your sweatshirt out and ready, at least for the overnight hours, because, you know, sitting at this hour, the late evening hours down to seven across London. And the same score coming out of Paris.

And temperatures not too bad just yet. But we think this, the next 24 or so hours, the overnight temperatures are going to be the coolest we've seen in several months. And, in fact, a little interesting fact to share with you here momentarily. but with the wind chill, feeling like five out across where Max is currently as of this hour.

And again, you can see the blue colors here are the coolest temperatures working their way across Central Europe. And it actually begins to moderate a little bit over the next couple of days. And with the cool temperatures, we're still going to see clear skies. That's the good news.

And an interesting photograph here coming out of Central Germany Central Germany showing you a foggy autumn morning, of course, clear skies. And we talked about the prime ingredient to get that low level valley fog to set up. And it really makes it a beautiful time of year if you enjoy the crisp -- the crisp air across portions of Europe.

But again, the storm pushes to the south. The cold air comes in. Now, we were discussing these cold temperatures. Now, across London, just look at some of the obsessiveness. The low temperature this morning went down officially to 4.4 degrees. This is the coldest temperature in over five and-a-half months, or, to be exact, since the 4th of May earlier this year. So, yes, this is going to be a cool spell over the next couple of days. And, Max, tomorrow morning, possibly even cooler, down to three degrees.

But notice the sunshine is there and the temperatures are going to begin to moderate. So some better news here for the weekend.

FOSTER: Yes, it's been sunny. That's been true.

Thank you very much, Pedram. now, we're learning lessons from the past with a Greece at risk of bankruptcy. We looked at the price Argentina continues to pay a decade on from their big default.

(COMMERCIAL BREAK)

FOSTER: Recapping on the dramatic date -- day, really, here in the Greek capital of Athens, where politicians have been debating a new round of austerity measures. All 154 ruling party deputies voted in favor of the new cuts. That gives the government enough votes already to pass the new bill, in its very first reading.

These measures are part of the EU's conditions for a Greek bailout. And it now goes over to the EU, really.

Outside the parliament, however, there were chaotic scenes today. Police fought running battles with some demonstrators. Fifteen officers and at least six protesters were injured during that -- the day of unrest there. This is part of a 48 hour general strike that saw thousands of people gathered outside parliament. Organizers said more than 100,000 protesters were on the streets.

Now, there's growing speculation Eurozone leaders will not be able to pull Greece back from the brink of default. We thought we'd take a look at how the situation there compares with a country that collapsed into a disastrous default a decade ago. And that was Argentina.

The South American nation had a tool Greece doesn't have, though. They could devalue their currency, whereas Greece is tied to the euro.

Let's look at how their debt levels compare. In 2001, Argentina's debt was 54 percent of GDP. Last year, Greece's debt accounted for 143 percent of GDP.

When Argentina defaulted, its entire external debt was $138 billion. Greece's debt is almost four times as much, $533 billion as fast (ph).

Argentina has seen huge economic growth since it defaulted nearly 10 years ago, though. But it has come at a high price for its people -- literally.

Brian Byrnes reports on Argentina's skyrocketing inflation.

(BEGIN VIDEOTAPE)

BRIAN BYRNES, CNN CORRESPONDENT (voice-over): In December, 2001, Argentina declared the largest debt default in history, $100 billion. The move ushered in an era of utter chaos -- five presidents in two weeks, deadly riots and dire poverty.

Argentina's enormous debt load, high public spending and overvalued currency had brought it down -- burdens similar to those now carried by Greece.

Many have suggested recently that Greece follow Argentina's lead and default and devalue. While Greece's future remains murky, Argentina's recovery over the past decade has been remarkable, with its agro-based economy expected to expand 8 percent this year.

But that growth has come with a cost -- inflation.

VERONICA AMSING, TEACHER: The government insists that we only have an 8 -- 8 percent inflation, but we all know it's -- it's 25 percent.

BYRNES: Veronica Amsing shops daily at this suburban Buenos Aires supermarket. She recently received a 20 percent increase in her teacher's salary, but still he had to cut back.

AMSING: We used to do barbecues every week and it's no longer the case. I mean meat has gone up a tremendous -- tremendously. And, also, dairy products -- products, as well, like milk and cheese.

BYRNES: The Argentine government has been repeatedly accused by economists, investors and the International Monetary Fund of underreporting inflation data.

Shop owner Rafael Aragona (ph) says when food companies and suppliers raise their prices, he has no choice but to raise his, too. He's convinced the government is lying about inflation.

(on camera): So while the exact level of inflation in Argentina remains unknown, what is known is that the Argentine government has worked to silence those who report on inflation statistics. They have subpoenaed information from journalists and levied huge fines against analysts.

(voice-over): Orlando Ferreres is a former Argentine deputy economic minister. Earlier this year, the government filed criminal charges against him and fined him $235,000 for publishing inflation numbers that contradict the official stats.

ORLANDO FERRERES, ECONOMIST: This is strange. For us, we don't understand very well the idea, also, the population could check easily in the supermarket the price of -- of goods. Then all the population knows that the inflation is about 23, 25 percent or more.

BYRNES: Those numbers would give Argentina the world's second highest inflation rate. But aside from at the supermarket, inflation seems to have had little impact politically. Polls indicate President Cristina Fernandez de Kirchner will be reelected with more than 50 percent of the votes on Sunday. Her biggest challenge in the next four years will be not only to stem inflation, but to restore confidence in the statistics the government uses to measure it.

Brian Byrnes, CNN, Buenos Aires.

(END VIDEO TAPE)

(COMMERCIAL BREAK)

FOSTER: A very choppy session on Wall Street and it's currently down, lingering concerns, really, about whether or not this European debt situation is going to be sorted out. European leaders gathering as we speak, really, to try to address that. A big weekend meeting, as well.

Let's have a look at the European markets.

A bit more easygoing for investors over this side of the pond. The major indices gradually made their way to gains around .5 of 1 percent. Banks were the main beneficiaries of a report suggesting the EU bailout fund was ready for a major expansion at this weekend's EU Summit.

That is QUEST MEANS BUSINESS.

Thank you so much for watching.

I'm Max Foster in London.

END