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Greek Debt Crisis Becomes Political Crisis; Papandreou Calls for National Referendum on Bailout

Aired November 1, 2011 - 15:00   ET


MAX FOSTER, CNN ANCHOR: Referendum in doubt. A former Greek finance minister tells CNN the vote may not happen now.

Turmoil on the markets. Bank shares plummet around the world.

And people before finances. Thousands protest in Nice, just days before the G20 summit.

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

Tonight there is turmoil on the world's trading floors as Greece goes back to the brink. This time it seems there could be a real danger it could jump over the edge. Now the shockwaves from the Greek bombshell are still rippling around the world. The Greek government, which says it will call the referendum appears close to collapse. Opposition is mounting within Greece and there is a rumor going around that the referendum is already dead.

This is what we know: Greece's beleaguered prime minister, George Papandreou is meeting cabinet ministers at the moment. He faces a no- confidence motion later this week. Opposition lawmakers are already calling for him to step down and hold a snap election.

On Wednesday Mr. Papandreou will hold emergency talks with the leaders of France and Germany for a meeting in Cannes ahead of the planned G20 summit. Nicholas Sarkozy and Angela Merkel held and emergency meeting of their own earlier. They say they are determined to see the bailout plan is implemented without delay. If the referendum goes ahead it will be held in January. We don't know yet what the question will be.

Elinda Labropoulou joins me now from Athens.

Linda, first of all, give us a sense of the fragility today of the Greek government.

ELINDA LABROPOULOU, JOURNALIST: Well, it has been a very turbulent day simply because in the last 24 hours since the referendum was announced we went from a state of semi-stability, we had the EU summit, decisions were made, so people knew where they were heading. So now with this call for a referendum, all that has changed, all that has turned around in less than 24 hours.

In those 24 hours we had one ruling-Pasok MP defect. Which leaves the ruling party with 152 in parliament-and that is of a parliament of 300. And that is ahead of a vote of confidence that is to take place on Friday. So that is a very slim majority that the ruling party has in parliament. And the voices for both not-supporting prime minister's decision to hold the referendum and possibly for the prime minister to step down, have also been increasing in that time.

The opposition has been calling-the main opposition has been calling for a snap election. And so there has been a lot of, a lot of movement let's say in the political world, in Greece, so much as in the Greek stock market, and the global markets, as you know.

FOSTER: If Papandreou can keep his job-it's a hell of a job right now, isn't it? This meeting with the leaders of France and Germany-I mean, I dread to-I'd love to be a fly on the wall in there. What could he possibly say to reassure them?

LABROPOULOU: Well, in the sense of reassuring them, I suppose what he can say is that he couldn't do the job differently. Because the reason Papandreou decided to call the referendum, from what he has said, is that he felt that the did not have support from the people, from the Greek people to see the measures that need to be implemented as part of this bailout package-go through.

As a result he felt that this was the last card that he had. That this was the ultimate move that he had, so either people will be with him and therefore the measures, the austerity measures will pass and people will support him and see Greece through this difficult period. Or otherwise, effectively his job is done because he cannot follow the policy that he had in mind, otherwise. So, I guess this is likely to be what he will try to persuade the politicians at the G20 tomorrow.

FOSTER: What has probably infuriated them, though, more than anything that it was out of the blue. And it was this bizarre announcement that came out of nowhere. And Merkel and Sarkozy were caught out by that, including many people in Greece. Is there reason, do you think, why he just announced it in the way that he did?

LABROPOULOU: I've been hearing the same thing. There are even rumors that even the finance minister was not aware of the referendum. That he was just aware of this vote of confidence, but not a referendum.

I can't see a specific reason apart from causing even more turmoil that he did, or possibly thinking that some of his own politicians wouldn't support him, which is in fact, what happened.

FOSTER: OK, Elinda, thank you very much indeed. Speaking to you lots more over the week, I'm sure, to try to get to the bottom of all of this.

Well, the impact from this crisis is being felt around the world, not the least on Wall Street. Seeing a sharp sell off across the major indices there. The one thing that is up in the market is the VIX, it spiked 20 percent. Traders also looking at the latest reading on U.S. manufacturing, it showed activity as pretty sluggish. Felicia joins me now.

What a day.

FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT: Oh, what a day is right. It is almost unbelievable that we are back at this place.

October was a pretty good month. But November is off to a very rocky start in Europe. Shares in Frankfurt and Paris loosing more than 5 percent in a single day; a huge chunk has been taken out of October's gains. But there are even greater losses for the Athens composite and the Italian index. Athens composite was down about 7 percent and the Italian index was off almost about the same.

So, really, financial stocks were the biggest losers around the region. French banks suffered the most. You can see Societe Generale was down more than 16 percent. BNP Paribas was also down with double-digit losses. The National Bank of Greece and Italy's Unicredit, also taking a hanner-hammering-excuse me. The National Bank of Greece down 14.5 percent. Unicredit down 12-almost 12.5. And the Commerz Bank was down about 9.5 percent as well.

Italian bond yields, that is what it cost Italy to borrow on the open market, it added a 0.10 of a percent; now above that key level of 6 percent. It actually traded between 6.2 and 6. 3 percent for the majority of the session. The difference between Italian and German borrowing costs, that is the spread, now at a euro area era high. It is heading towards what people have coined the unlucky 7 percent. That is a level that is though unsustainable. Greece, Ireland and Portugal needed bailouts within, literally weeks of hitting 7 percent.

What was achieved in Brussels, just days ago, somewhat-you know, people would have described as almost an organized, voluntary, partial default. Now totally disorganized and the most important thing is that fear factor, the uncertainty, is back in the game. And that is exactly what we did not want to see. We had a deal last week. Suddenly we don't have a deal. The uncertainty is back in the marketplace, you can expect the market to continue this volatility, Max.

FOSTER: Felicia, thank you very much.

Germany's Angela Merkel called Italy's Prime Minister Silvio Berlusconi earlier. And official told CNN Mr. Berlusconi promised rapid implementation of the measures it agreed on last week. The official said Berlusconi will head to Cannes on Thursday.

Ken Rogoff is a Harvard professor and former chief economist at the IMF. He joins me now from (UNINTELLIGIBLE), down in Massachusetts.

Thank you so much for joining us, Ken.

And Felicia has got a good point brining up these Italian bond yields, because the distraction almost is Greece right now, but the big economic story continues to be Italy, right?

KEN ROGOFF, ECONOMIST: Oh, absolutely. There was euphoria after the meeting in Brussels a few days ago. But frankly, I think the big piece of news was more that U.S. growth was a little better. And it is pretty clear that they are still very, very far from a solution and it is boiling over, very, very fast.

FOSTER: What do you make of these Italian bond yields? Are you worried about that in terms of European futures?

ROGOFF: Well, absolutely. I mean, if Greece were to default, it Portugal were to default, and even if they were to leave the euro, it would still remain intact. I mean, Italy is a whole other matter. It is just too big. If Italy goes it is even hard to keep France.

And I think these high yields partly reflect concern about the government, but also concern about does it have the wherewithal to stop a bank run if investors loose confidence that Italy will stay in the euro. And you can say, of course, it will. Will, you know, you never know. And once there starts to be doubts and suspicions the European politicians and leaders really need to plug them quickly. And they are having difficulty doing so.

FOSTER: What do you make of what's happened over the last day or so here in Europe? There is a great deal of concern that there is no great leadership. If they can come up with this fantastic agreement that makes the markets rally and then Greece can go off and do what it did, yesterday, that there is really no scope for strong political leadership in Europe, which is what it needs right now.

ROGOFF: Well, I don't think it's a personality question. I think it's the structure of the euro, requiring unanimity for so many things. Among the 17 euro members sometimes even among all 27 members of the European Union. It is very, very difficult to work with.

Frankly, I'm very sympathetic to what the Greek prime minister did. It is a gambit, as we say in chess. You know, he hopes to come back with a strong hand because he realizes the program is not really politically sustainable. Not without a lot bigger haircut on the bond holders.

FOSTER: If he manages to keep his job until the referendum and the Greek public vote no, help me understand what happens, technically, then. Do they effectively become bankrupt over night and then the rest of the world has to live with the repercussions?

ROGOFF: Yes, I mean, I think what we are seeing is the possibility that Greece might hit its official bankruptcy. It is clearly in bankruptcy already, but it might really catalyze into something more disorderly very, very fast as opposed to over another year or two. And it is hard to know what direction it will go. Certainly there is a distinct possibility that over the longer term Greece will end up out of the euro, back on the drachma.

FOSTER: And what impact would that have on Europe and the rest of the world?

ROGOFF: Well, you know, the big question is where is the firewall? Where is Germany going to draw the line? Are they going to protect Italy and Spain? Are they going to protect the banking system? So far their strategy is just to say, everybody is fine. They have even gone to these absurd lengths to call the 50 percent write down forced on Greek debt holders, voluntary, in order to claim no one is being forced to do anything.

They don't really have a clear plan of where to draw the line. That is the big problem in Europe today. The have got to figure that out. And then, ultimately, you need, I think, a new constitution. The system does not work.

FOSTER: OK, Professor Rogoff, thank you very much indeed.

A lot to discuss in Cannes this week. Emergency talks will be held on Greece ahead of the G20 summit this week. We'll be live in Berlin next with the latest on where this leaves Germany.


FOSTER: Turmoil in Europe, and in particular Greece, today. Some question about the future of the Greek government after the prime minister called a referendum on the Greek bailout last night. And lots of debates going on in Athens and there will certainly be debates going on in Cannes over the week at the G20 meeting. We know that the prime minister of Greece will be meeting with the heads of Germany and France, tomorrow, in an emergency meeting.

Well, a short while ago CNN's Hala Gorani spoke to Petros Doukas. He is the former deputy finance minister of Greece.


PETROS DOUKAS, FMR. DEPUTY FINANCE MINISTER, GREECE: It's a gross miscalculation. But his psychology says that he may try at least for the next two days to push through that, but I think the opposition forces in Europe, in Greece, and the markets are telling him to backtrack immediately, push through the reforms and get it on with it and stop playing these games.

He is under very, very mental strain and pressure because he feels the opposition parties are playing it safe. That they know that he will push through reforms and they are not supporting him because it is unpopular to support such unpopular reforms.

So, he says, I'm not going to let you do that. I'm going to put through a referendum so you will be taken to task. But it is not working. It is a very bad gamble. It is not the sort of thing a prime minister should do.

HALA GORANI, CNN INTERNATIONAL ANCHOR: So, do you think he's going to backtrack on the referendum, himself, or do you think the referendum will not happen because he, Papandreou, will not survive politically?

DOUKAS: Actually, it could be either, or. Both options are there. I think, mostly likely, he will be forced to have elections. He doesn't have the clout as things stand now to continue to govern. So I think the pressures will make him yield, and either try to find a new prime minister, who has greater support among opposition parties. Because we will need some form of coalition government to go through, not one single government can handle such heavy, and very heavy, burden.

Or he will just go directly for elections, as a lot of party members are calling, and all the opposition is calling. I think the place is not governable under his prime ministership (sic).


FOSTER: As we have been reporting, Greece's prime minister must face the leaders of France and Germany before he can go to the Greeks. They have called him to Cannes for an emergency meeting on Wednesday. Angela Merkel and Nicolas Sarkozy issued a statement making it clear they are more determined than ever to see their bailout plan go through.

CNN's Fred Pleitgen is in Berlin.

Angela Merkel, actually, her language has been quite tempered, really. She must be furious?

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: She certainly must be furious. And one of the ways that you can tell that certainly the Germans were not amused by what was going on today, or what was coming out of Athens, was the fact that it did take them a very, very long time to come up with a response.

For the better part of a day all you would get out of the German government was that this seems to be an internal Greek matter. That they had not been informed about this in advance. And then of course, during the day you had an emergency phone call that too place between Angela Merkel and French President Nicolas Sarkozy.

And after that you had the combined statement, that you were just talking about, by France and Germany, talking about this meeting that is going to happen tomorrow at the Cannes, at the venue of Cannes summit, where Angela Merkel, Nicolas Sarkozy, the heads of the IMF, the heads of the European Union, as well as Greek representatives, and of course, George Papandreou, are going to be talking about this matter. And certainly the Germans are going to have a few things to say to George Papandreou.

Because one of the things that you have to keep in mind, Max, is that the agreement that was reached last week, at the Eurozone summit, that had to do with haircuts on Greek debt, things like recapitalizing European banks, that whole structure had Angela Merkel's handwriting all over it. If you look at what the Germans had pushed through in their parliament before heading to Brussels, it was almost exactly what was then negotiated in Brussels.

So, the Germans were very happy with the deal that was reached. It was a very complex deal. It took a lot of negotiating. And so at this point to call all of that into question is certainly something that is not going down well at all here among Berlin politicians, and of course, in all of Germany, Max.

FOSTER: Fred Pleitgen, thank you very much indeed.

Well, Constantine Michalos is the president of the Athens Chamber of Commerce and he joins us now on the telephone from Athens.

Thank you so much for joining us.

A lot has changed in Greece over the last 24 hours, for the better or the worse, in your view?

CONSTANTINE MICHALOS, PRESIDENT, ATHENS CHAMBER OF COMMERCE: Well, I think for the worst. We were all stunned both locally and internationally when the prime minister came up with the statement concerning the referendum during his speech to the parliamentary group of the governing party.

And it is now clear and evident that there wasn't any communication whatsoever, even with his closest cabinet allies, and also with the EU leaders, and especially Mr. Sarkozy and Mrs. Merkel, who I agree with you, just listening to your report, that they will be absolutely furious tomorrow during the G20 meeting.

Now there have been various developments and rumors, so far, concerning the vote of confidence. There is apparently a group of about seven government PMs who are waiting. They are on a standby basis. But obviously because Greece needs to be represented tomorrow at the G20 meeting, there is no point in proceeding with whichever action they feel is the right one until he returns from G20.

I will agree with the previous speaker, the former minister of finance, Mr. Doukas, that Mr. Papandreou committed political suicide with the gross political mismanagement that he showed yesterday. And I think what we need at the moment is a government of consensus. We need cooperation. We need seriousness, above all, in order to regain our credibility gap, which has been created with our EU partners as of yesterday.

Because the Dutch came out earlier on today and clearly indicated that as long as the referendum announcement is materialized, they consider that as a breaker to the basic agreement, which was reached late last week at the summit conference in Brussels, and anyone can imagine what that means for Greece.

FOSTER: Greece, the cradle of democracy, what is so wrong with going to the people and asking them what they think of this bailout, when it is clear so many members of the public are against it? What is he doing so wrong?

MICHALOS: Absolutely nothing wrong at all. It is just it came too late. This was an issue that should have taken place three months ago, before the negotiations began, before there was a majority vote in the Greek parliament, two weeks ago, before the prime minister and the minister of finance went to Brussels and the economic (ph) conference, before the EU leaders agreed, the package that was agreed. And they went on to their individual 16 different parliament houses in order to have this agreement endorsed.

You can imagine that it is all very well to discuss about some democratic ethos at this particular point, but this should have taken place earlier on. This is a decision which has been reached. It is a decision that the European Union is working by and it is not an alteration which the prime minister is attempting that will hurt Greece alone.

This is hurting the whole of Europe. We are seeing today the behavior of the markets, the financial markets are in the doldrums. The real economy on a European level has completely stagnated. And the euro, of course, stands seriously threatened as a result of this gross act of irresponsibility and political mismanagement by Mr. Papandreou.

FOSTER: OK, Constantine Michalos, from the Chamber of Commerce in Athens. Thank you very much indeed for joining us.

Well, the people of Greece may decide the future of their country it seems, which also means the fate of the euro now potentially lies in the hands of the Greek people. So we wanted to hear from them.

Tina Tavridou is a professional, living in Greece and tells us she can't even turn on the TV these days.


TINA TAVRIDOU, GREEK CITIZEN: I have stopped watching the news everyday because I don't want to be too depressed. I do not want to leave Greece. It is where I am happy, but everyday it gets harder and harder to survive, to make ends meet.

Cuts have to be made, I also understand that it is the economy, in general, is affected because when you cut from one point, then businesses shut down, then there is not money flow, not cash flow in the market. And every thing shrinks and shrinks and shrinks. And you wonder how much can it shrink before families are homeless on the streets. We haven't really seen many Greek families being homeless, but the way things are going, we might start seeing that.

If we go back to drachma and everything is like four times more expensive we can forget the idea of buying a new-upgrading a computer for five or perhaps even 10 years.



FOSTER: There is concern for many MF Global's customers today. After regulators said the company had failed to protect their accounts, the securities firm declared bankruptcy on Monday; the high-profile victim of the Eurozone debt crisis.

MF Global is lead by the former New Jersey Governor Jon Corzine, seen here on the campaign trial. He is also a one-time CEO of Goldman Sachs. CNNMoney's Paul LaMonica joins me now from New York.

We got more details today, didn't we, about the company? What did you find out?

PAUL LAMONICA, CNNMONEY.COM CORRESPONDENT: Yes, M F Global, clearly it seems like when it rains it pours. We have seen that the New York Stock Exchange has said that it believes the stock should be suspended indefinitely from trading on the New York Stock Exchange.

It has been halted since the rumors yesterday morning about the bankruptcy and then the eventual bankruptcy filing. MF Global still continues to find trouble with many of its trading partners. Several other exchanges also suspending it from doing business. So things do not look very promising right now.

FOSTER: And something about the separation of funds within the accounts, is that right?

LAMONICA: There is that, as well, yes. There is, you know, dare I say it, a little bit of a whiff of the Madoff scandal, if you will. Potentially with MF Global right now a lot of people are wondering about money that is missing and that just adds to the woes for this company. I would suspect that that may be one reason why there has yet to be an actual deal to purchase some of the assets of MF Global.

Because if you will remember the rumors before the bankruptcy was that maybe they would do some sort of prepackaged bankruptcy, but also get acquired as part of that reorganization. And that did not happen. There were several banks that were said to be interested in buying MF Global, but all backed out.

FOSTER: OK, Paul LaMonica. Thank you very much indeed for joining us from CNNMoney.

As you have just seen with MF Global, Greece isn't just Europe's problem. Next we will look at how investors on Wall Street are reacting.



FOSTER: Welcome back.

I'm Max Foster.

More QUEST MEANS BUSINESS in a moment.

First, your new headlines.

A bad gamble -- that's how Greece's former deputy prime minister describes a proposed public vote on Europe's aid package. But he went on to say that the referendum may not take place because the Greek prime minister is under tremendous pressure to back track. George Papandreou shocked EU leaders and markets when he announced the vote earlier.

Three former Pakistani cricket players will be sentenced over the next two days for cheating. Former captain, Salman Butt, and fast bowler (ph), Mohammad Asif, were found guilty of plotting to cheat and take bribes in a match against England last summer. Mohammed Amir plead guilty earlier.

The main airport in Warsaw, Poland will be closed overnight after a plane made an emergency landing on its belly there earlier. An airport spokeswoman says the Boeing 767 had problems with its landing gear. She says none of the passengers were hurt. The flight originated in the U.S. state of New Jersey.

The widespread flooding in Thailand is taking a toll on the world economy. Ten thousand factories north of Bangkok are closed because of the high water. Toyota, Honda, Panasonic and others are now reporting a shortage of parts.

As we showed you earlier, European stock markets plunged today on news of the Greek referendum. Across the Atlantic, it's not looking too good, either, as Ali could -- Alison can tell us from the New York Stock Exchange -- Alison.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, investors, Max, woke up to the surprise of this referendum vote. We wanted to get more on what really the sentiment is with Stephen J. Guilfoyle.

He's with Meridian Equity Partners.

You know, what was it like waking up, thinking that the European debt deal was a done deal, but it really wasn't?

STEPHEN J. GUILFOYLE, MERIDIAN EQUITY PARTNERS: Well, this morning - - it really came out last night, but we didn't react to it last night. We reacted to it this morning.

It was -- we had negative numbers, also, out of China in the PMI and Great Britain had a negative PMI today. So we had negative news with this on top of it. It -- it was a pretty good kick in the teeth this morning when we came in and we saw where the futures were trading.

KOSIK: OK. But we also saw the market come back a little. But now we are down quite a bit right now, more than 200 points. But we have seen it come back.

What -- what is the reason for that?

GUILFOYLE: Well, there was a report coming out of Greece that a member of the Socialist Party over there, who would be a lawmaker, but no name attached, had said something to the effect of this referendum being a -- dead, they weren't going to do it.

Now, we don't know if it's true. We've seen little blips and headlines around, but we don't know if it's true. And the market rallied off 12015, which it's bounced off of three times today. It bounced off of that level, got up into the 12030s. Then people said, you know, we don't have any quantifiable evidence of this actually being said today and we've been languishing in the 12020s ever since.

KOSIK: With so many questions, is this a -- is this a sell-off that has legs at this point?

GUILFOYLE: It certainly could be if there really is a referendum vote. I think the Greek people will probably vote against the deal they have in place right now, otherwise this wouldn't be spoken about. And they also have a confidence vote in their own government coming up this Friday.

So Greek -- Greece could default -- everything could fall apart right before your eyes.

KOSIK: And what do the markets really want to see?

GUILFOYLE: Well, the markets want to see everything put away nice and tidy. That's what they always want. They want the news to be out, the news to be over and the news to be positive. So if you get all those things, which I -- personally, I'm skeptical of, well, then the market will move on from here. But I don't think that will happen.

KOSIK: All right, so, Max, what you see here is a market that's really being moved by rumors and headlines at this point -- Max, back to you.

FOSTER: Alison, just a quick question. Obviously, that's one view there.

But is there something that you understand real -- really convinced the markets in any way?

We've got a big meeting tomorrow. We've got the G-20 that follows at the end of the week.

KOSIK: Good point.

You know, let's ask Stephen that.

You know, is there one thing that will really convince the markets?

We do have a Fed meeting wrapping up tomorrow.

GUILFOYLE: Yes, we do.

KOSIK: We've got the G-20 coming up, which the -- the leaders there could put pressure on Papandreou.

You know, what else is the market looking at?

GUILFOYLE: You're absolutely right. This -- this whole Greek situation will probably roll into that G-20 meeting. And our own FOMC, tomorrow, we'll get the information around 12:30, what they say.

Now, will they change interest rates?

I doubt it. Will they -- they'll probably talk about successful or not successful Operation Twist has been, which it's been moderately successful. And they'll probably try to pave the way for maybe some inflationary talk, try and maybe raise the target for inflation, so that in the future, when they feel they need to print money, they'll go ahead and do that.

KOSIK: So you think that there could be another QE -- QE3 coming?

GUILFOYLE: I think there certainly could be. It's not unlikely. A lot of the central banks around the world are printing money right now. And if we have a downward fourth quarter, which a lot of projections are showing, and a poor first quarter, you could probably see it early in the year.

KOSIK: OK. And, of course, the Fed decision, Max, comes out tomorrow afternoon -- Max.

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

Well, turmoil in the Eurozone may hem in the world's markets. The wealthy are turning to the art market as a safer place for their money.

But will the move pay dividends?

We'll take a look after the break.


FOSTER: Greece's call for a referendum on the euro bailout came out of the blue and shows how unpredictable the Eurozone is right now. It's having a big effect on the stock markets. And many wealth people are now turning to the art market as a safer place to invest, with a sculpture by Degas expected to make between $25 and $35 million U.S. at Christy's later in New York, it could be a profitable move.

CNN's Felicia Taylor has more.


FELICIA TAYLOR, CNN CORRESPONDENT: With stock prices that remain volatile and interest rates that are at historic lows and, frankly, housing prices that are still pretty depressed, some people believe the art market is a place you can really turn a profit.

We're about to meet one collector that's going to tell us why.

KENNY SCHAETER, ART DEALER: There's a fear of inflation. Commodity prices are under pressure. It's this confluence of all of these negatives together which contributes toward making art the most desirable, as an investment, than it's ever been.

I'm very interested in art that's undervalued or under appreciated at a given time. So when this piece was made, it was somehow not a Warhol and not a Bascad (ph), but it was less than the two.

TAYLOR: And, roughly, what did you pay for it?

Roughly, what would it be worth in today's dollars?

SCHAETER: I paid under -- or well under $1 million. And today, it would be worth about five times that.

TAYLOR (voice-over): A handsome profit. But less pricey works of art may not earn the same rate of return.

UNIDENTIFIED MALE: I think you've got to look at the art market in three ways. First of all, the top end, you're going to see a very increase in prices. In the middle and the bottom end, I think you're going to see prices either hold or drop.

UNIDENTIFIED MALE: Thank you very much, madam.

UNIDENTIFIED MALE: Now you've got Qatar who's coming in and spending $1 billion to $2.5 billion of a $10 billion market. So they are looking at about a quarter of the market.

You've got Abu Dhabi who are adding to their museums. You've got new museums already that are going to be created in -- in Saudi and India. They're all looking at the same works of art. And I think you'll see prices at the very top end perhaps hitting $200 million or maybe even $1 billion for a single work of art.

TAYLOR: Not even the financial crisis stopped record breaking sales.

PILAR ORDOVAS, GALLERY OWNER: So if you take the Eastaner (ph) on auction, where the provenance was impactful, where the work had not been in the open market for many, many years and, obviously, it had the attraction of (INAUDIBLE), we saw the best performance of any single owner's sales to happen in history at the worst possible financial time.

TAYLOR: And it's the new high end buyers who are changing the name of the game.

UNIDENTIFIED MALE: I think it will hold quite well. I wouldn't say that art is necessarily going to produce stellar results. I mean you might see 10 to 15 percent growth. But in this climate, that's pretty good when -- when people are getting .5 percent on their money.

TAYLOR: Pretty good, indeed. But only if your pockets are deep enough.

Felicia Taylor, CNN, London.


FOSTER: Indeed.

Now, it's into the deep end for Mario Draghi. His first day as president of the European Central Bank coincides with one of the most dramatic times in the history of the euro. Not only is Greece's (INAUDIBLE) referendum putting the future of the bloc in jeopardy, stock markets and the euro currency are plunging and anti-capitalist protests are being held across the world, including outside the ECB headquarters in Frankfurt.

Draghi replaces Jean-Claude Trichet.

Our Richard Quest spoke to him on his last day on the job.


RICHARD QUEST, HOST, "QUEST MEANS BUSINESS": Should those people who have suffered as a result of the crisis -- and we see some of the protesters outside and we see them in Greece and we now see Occupy Wall Street.

What would you say to those people who are feeling the pinch and say that the system hasn't worked for them and they're protesting?

JEAN-CLAUDE TRICHET, OUTGOING ECB PRESIDENT: Well, I have to say that we certainly would say the system has to be much more resilient.


FOSTER: Well, Deutsche Bank's chief economist, Thomas Mayer, has high pursue for Trichet's performance as head of the ECB.

He told Richard's lot -- Richard last week that this -- that his one complaint, though, is Trichet's response to the unfolding crisis in Greece.


THOMAS MAYER, CHIEF ECONOMIST, DEUTSCHE BANK: He was early to recognize the threat that came from the collapse of the American mortgage market. He was early on the ground to support the banking system with sufficient liquidity in -- as early as August, 2007.

When you then look at the -- his further performance in the course of the euro crisis, there, I think some question can be raised -- was it such a right judgment to very forcefully resist any debt restructuring in the Euro Area, even for countries that were visibly insolvent, he insisted that this was not the case, that this should not -- not be done, therefore.

And was it correct when you look back to insist, for a long time, that current account imbalances within the Euro area do not matter?

It was also a line that -- that he has taken.

So these are, I would say, questions of the stance that he pursued that he you can raise now.

QUEST: Because in the event of the debt restructuring, we've ended up at exactly the position that many people, like yourself, said was going to happen, there would have to be a massive restructuring of Greek debt. And they could arguably say that if he had gone along with that or even put forward that earlier, a lot of pain could have been alleviated.

MAYER: I would think so. The extended argument from the official side was that one should give time. However, as it became so obvious that they were giving Greece the wrong medicine, treating a solvency problem as a liquidity problem, they did not gain time, they lost time. And the infection from the Greek patient moved on to infect others, notably now Italy.

So I think an earlier operation on the Greek patient would probably have spared some of the problems.


FOSTER: Well, you're watching QUEST MEANS BUSINESS.

Up ahead, with the Eurozone looking ever more fragile, CNN talks to the young people there. Today, we've traveled to Munich.


FOSTER: The financial and political turmoil we're seeing in Europe sets an alarming backdrop to Thursday's G20 meeting in Cannes. Anti- capitalist protests are already gathering in nearby Nice.

CNN's Dan Rivers is there.

What sort of numbers are we talking about -- Dan?

DAN RIVERS, CNN CORRESPONDENT: Oh, it's not that many, Max. The same sort of maybe 2,000, 3,000 on the march today. It's been very good- natured, though, none of this trouble that has marred previous G20 summits. As you can hear, the concerts at the kind of end of this march is still underway here. They marched about five kilometers around Nice.

They were allowed nowhere near Cannes, where the G20 will be held itself. The police -- about 12,000 police in all across the area, letting them nowhere near.

I spoke to one of the leaders of one of the social justice movements here, Thomas Coutrot, from ATTAC.

Here's what he said.


THOMAS COUTROT, CO-PRESIDENT, ATTAC FRANCE: We think it's time to impose very harsh regulations on the financial sector, because we have seen this huge financial crisis in -- in 2008 and the banking sector was -- was rescued with a huge package of money from the public funds, from the governments and from taxpayers.

And now, this crisis is worsening again. There are new rescue packages in Europe, in -- in the US. And we see huge speculation on -- on sovereign debt in Europe, on -- on commodities throughout the world, on food, raw materials.

And I think it's time to stop with that. People don't want that anymore.


RIVERS: To give you a flavor of some of the kind of slogans on the banners here -- "people first, not finance," "they are 20, but we are billions," "change the system, not the planet." That gives you an idea, Max, of the kind of message that they are hoping to get through to the leaders who will meet 30 kilometers down the coast in Cannes.

FOSTER: Well, as you say, they're not going to get anywhere near them, are they?

So would the leaders even notice?

RIVERS: They're going to -- I don't think they will, no. I mean I don't think the leaders will probably even be aware, unless they watch a broadcast like this, that this kind of thing is going on. It -- Cannes itself has been really completely sealed off this week. You've got to have a special pass to get in, even if you're a resident. And anyone that looks like they're going to be a protester has been kept well away.

It's about this kind of thing we saw in Deauville (ph) in -- in April and May earlier this year at the G8. Deauville itself was completely devoid of any kind of protest. And I think they're getting quite expert in -- in being able to post the troublemakers, stop them even getting in the region, arresting them before they even get down here. And then those that are here are kept well away.

But I mean I -- I -- you know, I want to stress that the general sentiment here, Max, is very good-natured. And it is politically charged, as well. They're not -- they're not here to cause trouble. They're here with a political message. And the message is they feel that these austerity cuts are going to benefit the banks and the bankers at the expense of ordinary people.

FOSTER: OK. Dan, thank you very much.

Back with you over the next few days as those demonstrations continue.

Well, the Eurozone debt crisis taking another worrying turn then. Troubling times for many. And for the young people of Europe, the future is looking ever more bleak. They're out of work, they're out of pock -- pocket. And they say nobody is listening to them.

So CNN's Diana Magnay is taking to the road, traveling through the heart of the Eurozone. She'll be talking to young people at town hall style meetings organized through social media.

Yesterday, she was in Berlin. Today, she's in Munich.

What sort of stories have you been hearing -- Diana?


Well, I talked to a bunch of students. All of them said, you know, we are the generation who are going to have to pay, so we'd like to be better informed and more involved. They said it was very difficult to really join the dots as to what the problems were in the Eurozone. They said that it was a discussion point amongst their peers.

But, you know, people don't really know what to make of it and what the solutions are. This is why, in the context of the referendum, they were very clear. They said that it is very dangerous to go down a populist road if our fate, the fate of Europe, now lies in the hands of the Greeks, the Greeks are just as unable to join the dots about what's right and wrong as we are. And everybody, in the first instance, votes according to their national interests before they vote according to a European interest. And (INAUDIBLE) to the young people said that they found that extremely dangerous, extremely worrying for their future -- Max.

FOSTER: Is there anger with the older generations who've left them in this mess?

MAGNAY: Well, I think that the Germans that I spoke to are very sort of rational about it. The people that I spoke to said, you know, we're going to have to work until we die. And they sort of -- I mean it's in -- tied in quite nicely, in a way, with the whole seven billion turn that we had this week, because they said, you know, there is an older demographic. We are going to have to keep working. It's not so much (INAUDIBLE) the path, but just because the whole environment is changing.

They said that they can't really see any alternative to the financial system. They have sympathy with the Occupy movement. They were disappointed that no one pitched up to the Occupy movement, apparently, in Munich, whereas in Berlin, we saw about 10,000 people on the streets.

But they said they wanted to see one kind of leader arise out of that movement to unite it, because, at the moment, it's too much of a disparate voice.

So there was a whole sort of full range of opinion. But I've got to say that these guys, they were all students, they were all pretty positive about their job prospects in the future because, they said, we're going to have to have jobs, because we're the ones who are going to have to be paying for all of those pensioners as the demographic changes.

So they weren't particularly worried. They said highly qualified people are going to find jobs. And that's certainly the case in Germany. You know, youth unemployment here is below 10 percent. But it's not the case on the route that we're going to be traveling further down Europe. We're going to be in Milan tomorrow, in Marseilles on the next day and then we're ending up in Barcelona on Friday, where youth unemployment is almost 48 percent.

So I'm sure this picture will change dramatically as we pass down through the continent and just a -- a pitch to all of you who are listening. Please Tweet us on our journey so that we can hear your views or join us on the town halls.

My Twitter name is @dianamagnaycnn or @philhanncnn (ph) is my producer. And we want to hear from you or we want you to come to our town halls. We'll be in Milan tomorrow. Please join us.

FOSTER: Great stuff.

Diana, thank you very much, indeed.

Do get in touch with Diana or Phil (ph) if you can.

Now, the uncertainty around Greece's Eurozone future has been a major blow to both confidence and the financial markets in Germany. Medium sized businesses are proving to be resilient against the crisis, though.

Let's hear more now from Fred Pleitgen, he's in Berlin, on why.


FREDERIK PLEITGEN, CNN CORRESPONDENT (voice-over): Even in these uncertain economic times, business is booming at Voltran Office Communications, a midsized company in Berlin that provides printers and office software.

But owner Mathias Wolfram tells me even though his firm is growing, he's concerned.

"We have good planning. Our budget is good and we have lots of orders," he says, "but it's impossible to say how things will be in a year because we don't know what will happen with the European economy.

One thing Wolfram is doing to make his company fit in case there is a crisis is increasing the firm's capital equity. "If you have a good capital stock, of course, the banks will look at you differently," he says. "You have a better rating and it is possible to get loans even when the institutes are reluctant to lend.

Germany is Europe's economic powerhouse and the second largest exporter of good in the world. But even in the land of Mercedes and Volkswagen, small and medium sized businesses, what Germans call the mittelstand, are the motor and backbone of the economy.

And now that European banks face uncertainty because of the Eurozone bailout, once again, the mittelstand seems well prepared, as most companies have been increasing their capital stock consistently for years, says Stefan Marotzke, of the Union of German Savings Banks. "Right now, midsized companies have a capital stock of about 18 percent," he says. That is an absolute record and it shows that even in difficult times, companies have been building their equity capital.

But, of course, a strong capital stock alone does not guarantee a company will survive the harsh economic times. Mathias Wolfram says for a company like his, every day is a battle to stay ahead of the game.

Fred Pleitgen, CNN, Berlin.


FOSTER: All right. We want to bring you up to date on the terrible situation around Bangkok, with all that flooding, of course. We've been keeping you up to date on that.

And Guillermo has the latest for you now from the Weather Center -- hi, Guillermo.


I -- I want to tell you that, weather-wise,


I want to tell you that, weather-wise, we're fine in Thailand. The problem is the existing waters that we have over there. So the high pressure will remain. Bangkok will be on the dry. The rain will stay to the south, we think at least through midweek but probably through the weekend, because that high is going to stay there.

You see no precipitation at all for Bangkok.

But we need to -- to know now that the government and the metropolitan offices there are talking about mandatory evacuations and also a special watch for some areas, in this casein orange, and monitoring the situation all the way north, I would say within the barrier, but it's to the north of Bangkok.

So in some instances, like here, where we have mandatory evacuations, we're talking about water levels at one meter, 20 centimeters, while everywhere else, especially the areas in special watch, we're talking about 20 to 30 centimeters.

Also, I want to take you to the Arabian Peninsula. We have winds here into Oman, especially as you see in parts of Yemen, too, there on the border.

But it's been raining a lot. If you compare what we expect in the annual average, we have a more, in this case, in 24 hours here in Oman and also in another locale near the border with Yemen.

The situation will continue because here we may have a tropical cyclone in the making, even though it's not confirmed by the Joint Typhoon Warning Center yet. But we are going to see these conditions coming up.

Now, if you are watching what's going on in Turkey and especially into the Middle East, you need to know that in two days, probably, here in Israel, also in Lebanon and in parts of Syria, we will see some severe storms popping up. but overall, Europe is stable. We see windy conditions in Barcelona, also Dublin. And we're going to get some rain over there.

But things are a little bit quiet overall. We will see some delays probably in Dublin, Amsterdam and London with breezy conditions -- Max.

FOSTER: OK. Guillermo, thank you very much, indeed, for that.

We'll be back in just a moment with the very latest on the markets for you. A bad day on Wall Street.


FOSTER: French President Nicolas Sarkozy is voicing his concerns over word that Greece will seek a referendum on its bailout package. Speaking a short time ago, Mr. Sarkozy said pressing ahead with the deal was the only way to resolve the debt crisis. He added: "To give a voice to the people is always legitimate, but the solidarity of all the Eurozone countries cannot be exercised without everyone consenting to the necessary efforts."

I'm sure he'll be having some strong words when he meets George Papandreou, the Greek prime minister, along with the German chancellor tomorrow at the emergency meeting that they've all called.

Let's take a look at the numbers on Wall Street, though, because they really tell the story of today. All that excitement about the euro deal has gone away this last couple of days, down 2.5 percent, the Dow, as we go into that emergency meeting tomorrow and the G20 at the end of the week.

Financial shares are some of the worst performers because they're going to be worst affected by any euro fallout. JPMorgan and Bank of America are currently down more than 4 percent.

Now, the damage was far worse here in Europe earlier on. Take at look at these numbers. Losses of 5 percent or more in Paris, Frankfurt and, of course, Athens. Down at least 7 percent, just like we're seeing on Wall Street. It was financial shares at the bottom of the pile. Societe Generale lost more than 16 percent in Paris.


I'm Max Foster in London.

Thank you so much for watching.

The closing bell on Wall Street and your news headlines are next.