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QUEST MEANS BUSINESS
Possible Eurozone Agreements Reached by France and Germany; Italy Announces New Austerity Measures; SAP Makes Bold Moves; "Future Cities" Goes To Dublin
Aired December 5, 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 INTERNATIONAL ANCHOR: Pens at the ready - Merkel and Sarkozy agree on the European rewrite. Scissors at the ready - Italy unveils radical austerity cuts. And ready for court? The Russian opposition leader tells me he will contest the results of Russia`s elections.
I`m Max Foster in for Richard Quest. This is "Quest Means Business".
Hello to you. No more rule breaking, no more leniency, and no more spiraling budget deficits. That`s the message tonight in Paris and in Rome as European leaders accelerate their efforts ahead of Friday`s crucial summit. Also tonight, the IMF has just approved the latest tranche of Greek bailout funds worth nearly three billion dollars. Italy badly - or Greece badly needs those funds to pay public sector wages and meet its debt obligations. The Eurozone approved its share of the package just last week.
Now, Angela Merkel and Nicolas Sarkozy rewrote the rulebook this afternoon. It`s historic stuff, really. They are now united in their belief that changing Europe`s treaty is the only way forwards. And they unveiled their proposals together in Paris today.
(BEGIN VIDEO CLIP)
ANGELA MERKEL, GERMAN CHANCELLOR (through translator): We need to bring about structural changes, which go beyond just agreements and we need treaty changes and we need binding restrictions on debts, which are defined in a single way - Europe - and which can be looked at by the European court of justice so that it is quite clear that each country undertakes to abide by these criteria and to support the stability pact.
NICOLAS SARKOZY, FRENCH PRESIDENT (through translator): To risk us diverging is to risk destroying Europe. The crisis requires of us an extra commitment towards - for unity. And the Europe that will not redo the mistakes of the past.
(END VIDEO CLIP)
FOSTER: Proposed changes including a golden rule across the Eurozone to ensure all countries` budgets are balanced. The countries that break European deficit rules now will face automatic sanctions. Theoretically, that would mean sanctions all round, including for France and for Germany. Only three Eurozone countries -- Luxembourg, Finland, and Estonia - have deficits within the EU`s limits - three percent of GDP.
Now, meanwhile, Italian Prime Minister, Mario Monti, has revealed his plans to get Italy`s economy in line. He`s now presented his austerity measures to both houses of parliament. Almost 40 billion dollars in total. Mr. Monti says he cannot afford to let Italy turn into another Greece.
(BEGIN VIDEO CLIP)
MARIO MONTI, ITALIAN PRIME MINISTER: We have our neighbors of Greece who show us all, not only Italy, what may happen if a country does not go solidly, firmly, consistently, and permanently on a consolidated situation of public accounts.
(END VIDEO CLIP)
FOSTER: Well, Italians may have little to cheer about, but the markets are celebrating. Traders have been hoping to see Europe run as a tighter ship and stocks are continuing their gains on that news. The major markets finished slightly up between a quarter and one percent.
Now, Nina dos Santos was watching the press conference in Paris. She`s in the French capital for us tonight.
So, more or less than you expected at that meeting, Nina?
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: Yes. Well, a little bit more agreement than, perhaps, many an economist was expecting, Max. What we saw is eventually them coming out with this five-part plan that they`re going to be putting forward towards their EU colleagues when they meet for a pivotal final summit to close the year and, hopefully, try and draw a line under all of these Eurozone debt problems.
Now, let me run you through some of the salient points, Max. What we`re talking about here is - as you were saying before - stricter rules to make sure and force countries to balance their budgets, or at least make sure that, to a certain extent, the deficit doesn`t run over three percent of GDP, which is a tough call, because countries like - for instance, France, where I am - haven`t actually balanced their budget since back in the 1970s. That just goes to show how much time it`ll take to get these rules implemented and adhered to.
Also, they`re planning on making the Eurozone bailout fund - the so- called EFSF, the Eurozone Financial Stability Fund - a permanent vehicle. And that will be coming into place a year earlier than planned. Just goes to show exactly how much is needed to be done, now, to try and solve this crisis, which has become, let`s say, a global crisis of epidemic proportions, because the U.S. Treasury Secretary will be arriving here in the French capital tomorrow, to try and press home that message, Max.
FOSTER: Nina, thank you very much indeed. Well, these politicians are taking these decisions, knowing it means hardship and heartache for their fellow countrymen.
In Italy yesterday, we saw how that responsibility is now taking its toll.
(BEGIN VIDEO CLIP)
FOSTER (voiceover): That`s Italy`s Welfare Minister, Elsa Fornero, as she was in tears as she went through the cuts coming to Italy`s economy.
(END VIDEO CLIP)
FOSTER: Well, for Europe`s sake, Italy is simply too big to fail. It almost has no choice but to go ahead with this painful austerity program. Antonio Tajani is the vice-president of the European Commission and a former minister in Silvio Berlusconi`s government. He joins me now, live from Paris - from Brussels, even.
Thank you so much for joining us. What do you make of the latest developments in Italy?
ANTONIO TAJANI, VICE-PRESIDENT, EUROPEAN COMMISSION: Good evening, everybody. But this is the first step for good solution for Italy. This set of measures concerning taxes, pensions, reforms, public administration, liberalization, and incentives to family is ambitious. But I think it is going in the right direction, but for Italian people, is not easy. Is very important for Euro, is very important for Europe, is very important for markets, because, I think, after this package, market are very happy.
This package is around 20 billions of Euro or 1.3 percent of GDP. Is good for the line with the European Commission`s recommendation. And I think the first step, now, is very important - the implementation of this package is important also for next month. A good work for - in favor new labor market area. Is important to change this, because is a priority if we want to change Italian situation. If you want to work a good in favor a Euro, in favor Eurozone, is important to work against the public debt. In favor growth for jobs, of course, but in the same times, are very important new reforms. Also in labor market area.
FOSTER: And certainly, from a European perspective, then, you`re saying it`s effective and it, perhaps, not works, but the question within Italy - for Italians is - Is this a plan for Europe? Are we suffering harder than we would just to keep Europe in line? How much support would Mario Monti have going forward? Because there`s going to be immense pain and some anger that this is Europe`s fault, not Italy`s fault.
TAJANI: But I think this work is very important, not only for Italy, but also for Europe. Italy`s the third European economy. In Italy, there are a lot of companies. A lot of mostly medium-sized enterprise for this is very important. This first step. And the next steps are very important, not only for Europe, but also for all European Union - for this European Commission.
Now, it say people after the first text - the first draft, I think that in next weeks is possible also to improve this policy in Italy. For us, is very important. The new rules for a pension system - now it`s important to change it - new system based on the contribution. It also is important to increase the age of the pension age, in particular for women. I think this is good for the Italian budgets.
FOSTER: OK. Antonio Tajani, thank you very much indeed for joining us from the European Commission, then.
And the bond markets eased off on Italy after hearing news of that plan. They were pleased, too, it seems. The yield on the Italian 10-year debt fell sharply today. It`s now below the six percent mark. Spanish yields fell, too. So the spread between those countries and France and Germany is now narrowing. However, if you look at the short-term debt auctions, investors are still only interested in the safe havens.
France sold around 10 billion dollars worth of treasury bills this morning and the rates on the coupons that are due in three months fell to their lowest level this year - just under a quarter of one percent. Now in Germany, rates are even lower. They sold around three and a half billion dollars of six-month bonds and, look at the rates, 0.0005 percent. That`s three zeros, so investors are basically paying for the privilege of storing their money in Germany for the time being, at least.
When we`re looking for clarity on the bond markets, we can always turn to Mohamed El-Erian. He is a CEO of the bond traders PIMCO, one of the biggest players in the world bond market. Thank you so much for joining us.
If you can, explain the current mood towards Italian debt, for example. This is what everyone`s focused on today.
MOHAMED EL-ERIAN, CEO, PIMCO: As you say, it`s good to see the 10- year rate below six percent. And that`s happening for two reasons - first, Italy has announced a credible and large program, and second, the markets are welcoming what they heard from President Sarkozy and Prime Minister Merkel. So the markets think, "Finally, Europe is getting beyond denial. Finally, Europe is getting beyond underestimating - is getting serious about understand the urgency".
So, that`s the good news. What now remains to be done is a long list. And I think the market is nervously looking at whether Europe will be able to continue to build on this momentum that is finally being achieved.
FOSTER: I presume you`re looking ahead to Friday, then, when the main meeting is. And this really needs to be set into stone, doesn`t it? So, if what Sarkozy and Merkel decided today is agreed by everyone else on Friday, is that the next positive step?
EL-ERIAN: Well, there`s four elements. One is France and Germany have to get other countries to buy in. And you have to get to a critical mass. And a critical mass is somewhere between nine and 17 countries. Second, Mr. Monti in Italy has to convince the Italians that this is not just about austerity, but also about growth. Thirdly, the other Italian - the other Mario - Mr. Draghi at the ECB has to be convinced to take his institution all-in. The ECB needs to come be all-in. And finally, you need to stabilize the banks.
So, it`s a long list, but the good news is, we have momentum. So, there`s very little room for slippage, because if they slip, the consequences will be severe.
FOSTER: OK, Mohamed. Stay with us a moment. We just had some news just come in to us. I just want to show people this. The Financial Times is reporting that the ratings agency, Standard and Poor says there is now a 50-50 chance that Germany and France will have their credit ratings downgraded in the next three months. It`s reportedly rating Germany, France, and four other triple A European economies as credit watch negative. That means there`s a 50 percent probability they`ll be downgraded in 90 days.
In other countries affected - Austria, Finland, The Netherlands, and Luxembourg. In the case of Germany, S&P is saying the potential consequences of the Eurozone crisis is putting its credit rating at risk. They`re saying it will review the situation after the crucial European summit later this week.
Mohamed, what do you make of that? Because this is the sort of information you have to trade on, isn`t it?
EL-ERIAN: Oh, absolutely. And there was always a risk out there. Which is that the healthy balance sheet in the system will get dragged down by the unhealthy balance sheet. We all want the healthy balance sheets to pull up the unhealthy balance sheets, but the opposite risk is always there. And S&P is saying, "Hey, guys, that risk is out there and pay attention".
Critically, it comes down to what the periphery is going to do. And, you know, there`s one discussion that no one wants to have, which is when do you start debt reduction? So we`ve talked about it a little bit in Greece. The question is, do you need beyond Greece? Are there other countries where you`re going to have to reduce the stock of debt, because otherwise it will contaminate the healthy balance sheets?
FOSTER: Mohamed el-Erian, thank you very much, as ever, for joining us on the program.
All right. Well, SAP is splashing out. Next, one of the company`s CEOs will tell us why it`s spending three and a half billion dollars on a push into the cloud.
FOSTER: Russia`s ruling party is losing its parliamentary clout, it seems. Preliminary numbers from weekend elections show United Russia is set to lose its absolute majority in the state duma (ph). The party headed by President Dmitry Medvedev and Prime Minister Vladimir Putin may have lost more than 60 of its 300 seats. If that`s the case, the party will lose its power to make unopposed changes to the constitution.
This is a breakdown of those early results. According to the Russian Central Election Commission, shows United Russia winning just under 50 percent of the vote. It puts the Communist Party as runner-up with nearly 20 percent. United Russia advisor, Dmitry Polikanov, says the greater spread of votes across parties is evidence that Russia`s political reforms are working.
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DMITRY POLIKANOV, ADVISOR, UNITED RUSSIA PARTY: No party has a kind of right for eternal rule. And it is clear that the economic situation in Russia has changed - that we have actually promoted the political reform and therefore stimulated the competition and political rivalry in the country. So, to - well, in our opinion, the result of the elections indicate that the political system is developing and this is good. It shows that our political reform, which was initiated by President Medvedev and supported by United Russia, has brought its fruit.
(END VIDEO CLIP)
FOSTER: And we will be speaking to a key member - opposition member - who was involved in those elections and has some things to say about it. But first, we`re going to go to the software company, SAP, which is reaching for the clouds. It`s shelling out nearly three and a half billion dollars for California-based SuccessFactors, which specializes in HR programs, which are entirely web-based. In other words, in the clouds.
SAP`s CEO - Co-CEO, Bill McDermott, joins us from the company`s U.S. headquarters. Thank you so much for joining us. What can we read into your strategy by this deal?
BILL MCDERMOTT, CO-CEO, SAP: Well, we`ve had a strategy we announced early in 2010 to lead in business applications, analytics, mobility, and in-memory computing with our HANA appliance. And that changes everything. But we also said we have to go long in the cloud. And we have innovated our own cloud solutions.
But we needed a catalyst to give us enough feet on the street, enough market knowhow, and enough domain expertise to take that cloud DNA and permeate it throughout SAP. And that`s why we chose SuccessFactors. This company has grown at 75 percent on a compounded annual basis for 10 years because their customers love them. And they`ve got 15 million very satisfied users. And that`s number one in the world, by the way.
FOSTER: The thing about a cloud is - it has to be trusted, doesn`t it, by the customers? Because there`s wariness about it. You`re making a big bet on this. So, what do you think your big challenge is?
MCDERMOTT: Well, we follow the trends very nicely on this one. Line of business executives, whether it`s the head of sales or the head of human resource, capital management - they feel very comfortable with that data and those procedures in the cloud. And that`s why SuccessFactors has been so successful for so long. So we went after a line of business area that`s growing very fast, where this is the demand the executive has for quick, up and running, easy to consume cloud-based solution. And SuccessFactors is the de facto standard in that space. And that`s why we wanted them.
FOSTER: You`re investing a lot of money, of course - uncertain times. We`ve been talking on the program already about a very uncertain time for Europe. A big market for you, of course. You confident you can ride this one through with this massive investment?
MCDERMOTT: Leaders make decisions in difficult times that are good for their company in the long term. We believe that not only will this manifest itself successfully short term, but long term. As you look out five or 10 years, this is going to go down as one of the best moves we ever made. So we always look at the crisis of the day, and we don`t get swayed on that based upon our strategy. We stick to our strategy. This was critical to our strategy and we moved on it.
FOSTER: Bill McDermott, thank you very much indeed for joining us on the program.
Well, Ireland`s government is deepening its austerity measures today. It announced a further public spending cuts to meet targets required by its bailout lenders. It will announce details of their - of tax rises later in the week. Prime Minister Enda Kenny has warned the people of Ireland that the hard times will continue for some time yet.
(BEGIN VIDEO CLIP)
ENDA KENNY, IRISH PRIME MINISTER: Our economy was in deep crisis. And while steps to recover from the crisis have been taken, we remain in crisis today. I would love to tell you tonight that our economic problems are solved and that the worst is over. But for far too many of you, that is simply not the truth. If you are unemployed, you are one of the many who still can`t find work. If you are in business, you may still not be able to get the credit you need or to get paid on time.
(END VIDEO CLIP)
FOSTER: Well, we`ll be heading back to Ireland next as Dublin becomes our future city.
(BEGIN VIDEO CLIP)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: The Celtic tiger has fled, but Dublin`s contemporary architecture lives on. "Future Cities" after the break.
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FOSTER: Well, it`s not just about budget cuts. One year after Ireland had to ask for a bailout, it`s working hard to regain its financial independence. CNN`s Jim Boulden finds the Irish capital is making the most of what`s left from the good times to reinvent itself as a future city.
BOULDEN: Dublin. A city reflecting on turbulent times. Few places were hit harder by the economic crisis than the Irish capital. For two long years, the Emerald Isle was down on its luck as debts, banks, and bailouts dominated national headlines.
ANDREW MONTAGUE, LORD MAYOR OF DUBLIN: We had an awful tough time between 2008 and 2010 because there was one financial catastrophe was announced after another. And every time people were beginning to get their confidence back, we`d be hit again. Thankfully, for the last year, we haven`t had the same knockbacks.
BOULDEN: A year after the EU and International Monetary Fund bailout, there`s a sense that the worst may be over. In Dublin`s city center, retail is picking up. While the odd shop stands empty, acting as a reminder of the crisis, others have been given a new purpose. At the height of the boom, this was a luxury furniture shop. Now it serves as a pop-up art gallery.
Irish economist, David McWilliams, says in the aftermath of the crisis, Dublin`s entrepreneurs are seeing new opportunities.
DAVID MCWILLIAMS, IRISH ECONOMIST: As rents come down, it gives people the opportunity to set up businesses they never did - set up ventures they never did - in the city. So I think it`s fantastic for the city that rents are falling.
BOULDEN: The much-maligned property market is also seeing signs of gradual recovery. Take the suburb of Balmain. This neighborhood was constructed at the height of the boom. When I visited the area in 2009, it was a ghost estate. Half of the houses here were vacant.
Since then, Balmain has become a success story. The developer says that this is now 99 percent occupied. But that`s because the original plan to sell these homes is dead. Most people here rent.
Closer to the city, in Dublin`s Docklands, demand for apartments built during the boom is now high.
MONTAGUE: I think one place we got it right is the Docklands area - the Grand Canal dock, because we have fabulous apartments - and they`re big apartments. So we`re getting that quality of life there and, even in the downturn, that`s a great neighborhood. It`s really buzzing.
BOULDEN: More than a decade of economic growth saw the Docklands undergo a dramatic transformation. Since the mid 90s, the population has doubled. Multinational banks and new media companies have moved in.
Before the boom, this area was an industrial wasteland. As the Celtic tiger roared, this place became a playground for designers and architects. Landmarks designed by the likes of Daniel Libeskind, an acclaimed American architect and artist. Santiago Calatrava, who is among the world`s top designers. And Kevin Roche, one of Ireland`s most acclaimed international architects - they were all commissioned to give this district a feeling of grandeur.
The crisis hit before Dublin`s showpiece district could be completed. Although some projects have fallen by the wayside, the Docklands are a testament to Dublin`s high times.
LORETTA LAMBKIN, DUBLIN DOCKLANDS DEVELOPMENT AGENCY: I think there`s a legacy here in the Docklands for the city of Dublin and the infrastructure that`s been put in place during the time of the Celtic tiger - it`s that mixture of the old and new which has really made the Docklands a very different place.
BOULDEN: The Docklands are sometimes seen as a symbol of Dublin`s growth as well as its over-inflated ambition of the boom years.
David McWilliams is optimistic the district has a positive role to play in Dublin`s future.
MCWILLIAMS: The city has changed immeasurably during the boom. I mean, you can look behind us. All this stuff here - none of this was here. None of it at all. I`m looking down at the O2 there, which is a huge concert hall. When I was a kid, there were no gigs in Dublin. Now you can see any band you want at any stage. And this is all a function of the last 10 years.
So, when people - and they rightly say that the city is bankrupt - but there are some positive things that have come out of it. And those positive things will be, I think, the platform off which the city will reinvent itself.
BOULDEN: Dublin is beginning to shake off its hangover from the party that went too far. Though the city has had to revise its ambitions and learn from past mistakes, the building blocks for its long-term future are still in place.
The next boom may be some way off, but when it comes, Dublin should be ready.
FOSTER: Welcome back. I`m Max Foster. More QUEST MEANS BUSINESS in just a moment. But first here are your news headlines.
The leaders of France and Germany have come out with their wish list ahead of a key E.U. summit on the European debt crisis this week. And Nicolas Sarkozy and Angela Merkel say they want a new E.U. treaty by March, with strict budgetary rules. They held crisis talks in Paris on Monday.
Italy`s new prime minister says Rome is doing its part to help solve the debt crisis. Mario Monti has presented lawmakers with a strict new austerity plan of tax increases and pension reform that his cabinet approved on Sunday. Mr. Monti says Italy risks a Greek-style collapse if parliament doesn`t pass it.
Afghanistan`s president says that without (inaudible) support, the Taliban could return to power. The warning comes during a summit in Germany into sustaining the Afghanistan government. Delegations from 85 countries are taking part, but Pakistan is not. It`s still very angry with the NATO strike that killed 24 of its soldiers just over a week ago.
U.S. space agency scientists have discovered a planet that might have a lot in common with Earth, located some 600 light years away. Kepler-22b is the first confirmed planet in the so-called habitable zone. Much more data is needed, but researchers say their modeling suggests it might have a surface temperature of around 72 degrees F. or 22 degrees C.
As we told you earlier, Russia`s ruling party has suffered a setback in parliamentary elections with a significant drop in its majority. A second look at how the economy is faring.
Well, the World Bank says the high-energy costs will help Russia`s economy to grow 4 percent this year, far outpacing Europe and the U.S. That`s still less than previous predictions, and the World Bank cut its forecast for Russia in September, warning that the country is leaking capital.
You just need to look at the Moscow stock index to see that. The RTS is down 26 percent of its year-to-date, high in April, though it did make modest gains today.
And the White House has just expressed serious concerns about the conduct of the Russian elections, and they`re not the only ones. The columnist Grigory Yavlinsky is the founder and leader of Russia`s Yabloko party, which the Central Election Commission says won 3.3 percent of the votes. Yavlinsky told me his party has evidence of voting irregularities.
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GRIGORY YAVLINSKY, LEADER, YABLOKO PARTY: We have the evidence that the result of the vote that changed and a lot of votes which were given for the different parties we were the redistributed in order to support the party of power, United Russia.
And we also have the evidence that the votes which regulate (ph) through the Russian United Democratic Party, Yabloko, were just redistributed in favor of the other parties, which are supportive to the government.
FOSTER: And yet there does seem to be a response from the public to suggest that they`re less happy with the ruling -- the rulers in Russia right now than they have been in past. So do you think they have expressed a message at all through this election?
YAVLINSKY: Yes, the overall view of the public in Russia is much less support to the party of power, United Russia, which is the party of Mr. Medvedev at the moment, and which is supporting Mr. Putin. But the support from the public and from the people in the country is much less than before.
FOSTER: Why is that, do you think? Is that a problem with leadership or the fact that the economy, having had so many fantastic years of growth, is now starting to turn a little?
YAVLINSKY: There are different reasons for that. One of them is that there is no rule of law in the country, and now the people more and more understand that it is not acceptable in the 21st century to live in the country like Russia without rule of law.
Secondly, for the people, is not acceptable, the situation when in such country like Russia, you have no independent justice. And it`s very difficult to take part in the economy or in whatever activities, when you have no independent rule of law and justice.
And the third is property rights. The property rights in Russia is still very questioned, especially the private property rights. All these things, they mean together making people very nervous.
FOSTER: Do you plan to go through this process again? Do you plan to run for president as planned?
YAVLINSKY: This is a very big question, Marv (ph), because it is not clear whether it will be a possibility for the democratic opposition to take part in the presidential elections because the legislation in Russia about the taking part in the presidential elections is extremely suppressive. And it`s -- makes a lot of obstacles for the independent candidates for presidency in Russia.
(END VIDEO CLIP)
FOSTER: I think the Eurozone may be shaking in its shoes over the future. Meanwhile, the Wall Street remains hopeful that the continent can get its fiscal act together. We`ll take you live to the New York Stock Exchange next.
FOSTER: Wall Street`s explaining its winning streak at the start of a crucial week, of course, the Eurozone debt crisis. We go live to New York and speak to CNN`s Karina Huber, there at the stock exchange
Karina, is it all about the Eurozone this week, or is there some U.S. news coming through, too?
KARINA HUBER, CNN BUSINESS CORRESPONDENT: Well, it`s a very late week for economic data (inaudible) the driver is Europe. And, you know, we got off to a roaring start this morning. But now the Dow has lost about half of its gain, this on a portion (ph) of "Financial Times," that Standard and Poor`s may be putting France and Germany`s credit ratings up for review.
You know, France wouldn`t be a big surprise, but Germany wouldn`t be. So that would be -- set a slice (ph) into the rally a little now that European markets are closed. Nevertheless, we are in positive territory with the Dow up 68 points and bank shares are really shining today, benefiting from the European news.
JPMorgan Chase is the biggest gainer among the blue chip index right now, up by 3.6 percent. The other financials are ranging up by 3 to 5 percent. So they`re really doing quite well today. Keep in mind also, stocks are coming up, a huge week, last week the Dow gaining 800 points and clawing back into positive territory for the year.
And as I mentioned, Europe will likely stay in the spotlight for much of this week, as I mentioned, very little econ data and lots of activity happening in Europe. And, overall, investors here seem optimistic that we might see a turnaround.
FOSTER: Yes, there was such a (ph) bond trade earlier, saying there`s a sense of momentum now in Europe, that things are starting to change for the better. Is it the same for the stock traders as well?
HUBER: Yes, that`s what I`m hearing from some of the traders, I mean, cautious optimism seems to be the sort of sentence of the day. You know, on the one hand, we`ve seen in the past that strong words (ph) coming out of Europe being derailed, you know, just last month.
We thought there was a done deal in Greece and then, all of a sudden, the Greek prime minister called for a referendum, which, of course, threw global markets for a loop. So, you know, cautious optimism seems to be the words of the day. Spoke to one trader who said today that -- don`t expect the light of the tunnel -- light at the end of the tunnel to be a freight train.
So, you know, basically more optimistic because there`s a sense that European leaders are really serious this time. And one reason things could be different is Merkel and Sarkozy are saying they may consider less than unanimous consent for the changes to the E.U. treaty.
That means it`s less likely for a country like Finland or Slovakia to hijack the agenda like we saw in the past. But, as I mentioned, cautious optimism rules the day.
FOSTER: Karina, thank you very much indeed. Long may it last.
Now this thing here, the big board which monitors the latest Dow moves of course, elsewhere keeping tabs on stock performances, though, is a bit more low-tech. This is the equivalent in Myanmar, but probably not for much longer.
CNN`s Paula Hancocks looks at how one of Asia`s smaller economies is working to jumpstart its financial hub.
(BEGIN VIDEO CLIP)
PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT: This is the Myanmar Security Exchange Center and it`s the closest that this country has to an actual stock market. Now you can see, it`s currently under refurbishment. But when it was open, this is how they would actually monitor all the world markets, this whiteboard was the way that they did that.
Now the center itself was open back in 1996. But at this point, they still only have two companies that are listed here, that`s a forestry company and also a bank. Now they`re hoping that this stock market will be fully functional by 2015.
So what you had to do if you wanted to buy stocks in either one of those shares, you had to physically come into this building. You hand over cash and then you`re given a certificate. But we are being told that the demand by far outweighs supply at this point, as the dividends, we`re being told, are pretty good.
This is, though, is not what you`d call brisk, sometimes two customers come in one month. Then no one else for another two months. But there are still many problems currently in Myanmar. For example, there are multiple exchange rates in the country. The official rate is around 7 kyat to 1 U.S. dollar. But, unofficially, it can be more than 100 times that level.
There are also strict government controls on banking. Myanmar has now asked the IMF, the International Monetary Fund, for advice on kickstarting the economy. One man behind that effort is chairman of the first private bank here in Myanmar.
SEIN MAUNG, CHAIRMAN, FIRST PRIVATE BANK: There are a lot of sectors, (inaudible) sectors that U.S. does not (inaudible) invest. There`s for one mining (inaudible), for one. And even (inaudible) culture (ph). So it`s high time to start doing something, some (inaudible).
HANCOCKS: Local residents say that they have actually noticed more businessmen here in Yangon over the past year since these reforms have started to happen. Obviously, businesses around the world don`t want to be left behind if and when these sanctions are lifted -- Paula Hancocks, CNN, Yangon, Myanmar.
(END VIDEO CLIP)
FOSTER: Very rare insight there. We`re going to cross to China now, well, Jenny Harrison`s actually at the CNN Center, but she`s talking about China because more fog.
JENNY HARRISON, CNN METEOROLOGIST: Yes, well, actually more ditto (ph), Max, but you`re right. Fog is -- well, smog is fog with the pollution. Of course, that`s factored in as well, you know, not many good coverlays (ph) at all, in fact, very bad on the roads, on the major highways, had to be closed because of the danger because literally visibility was just zero.
And also flights -- I`m afraid inward-outward bound, 200 flights canceled, 125 were delayed. As you can see here on the satellite, this bright white, this is actually the fog and the low cloud to the south of Beijing. And then where it actually looks clearer on the satellite, all of this is actually the haze or the smog, as I said, really again low cloud, but with the pollution mixed in.
And, yes, this is giving rise to huge problems. It is quite common this time of year, it has to be said, and we do, of course, have the pollution problems in Beijing throughout the year, again, the summer months.
But have a look at this picture to give you an idea, just difference. So back in August, (inaudible) -- there we are, beautiful picture, good, clear sunny skies, and then at December, the first look at this, you can barely see these buildings at all. As I say, that because the smog.
Just to point out that actually the Chinese authorities and then the U.S. embassy that`s based in Beijing, they have slightly different scales to measure in the pollution. And the U.S. embassy is saying at the moment that these conditions are considered hazardous, particularly, of course, for people with bad health. The tiny particles are the ones that are so very dangerous.
So what we need to clear this, we need some brisk winds. We need a low pressure system to come through. And we`re spot of (ph) going to see a little bit of that. We have been seeing quite a bit of snow across the region. There is an area of low pressure working its way east, was -- but it`s a little bit to the south.
And, in fact, the high pressure to the north is really the dominating weather pattern, and that means light winds. It also means some very cold air in place. And, of course, Beijing just to the east of the mountains, so you tend to get this sort of stagnant air mass that really is in place.
And right now we are still at freezing in Beijing, and those temperatures could even go down, of course, in the next few hours before we get to the morning daylight hours. This is the snow in the forecast for the next 48 hours, working its way east. It was not huge accumulations and, as I say, hopefully some of that wind will come through in the next couple days and improve conditions.
As for conditions in Europe, Max, not too good, more really unpleasant weather to cut across the U.K. and, of course, central area of Europe. But we`re getting some snow to the Alps, probably too much within a few days, but, you know, things are changing. I`ll have more on that (inaudible).
FOSTER: Because it is very cold. Jenny, thank you very much indeed.
Now, Richard Branson is intensifying his battle against global warming. The Carbon War Room, funded by the billionaire, has launched a website aimed at transforming how the aviation industry fuels its planes.
Branson`s announcement is timely, comes at the start of a second key week of its urban climate talks in South Africa. Branson, (inaudible) down the line from his home in -- on Necker Island, stresses the airline industry should aim for 50 percent sustainable fuels by 2020.
RICHARD BRANSON, ENGLISH BUSINESS MAGNATE: The exciting thing about the industry is that it -- once you`ve got the right fuels, you`ve only got 1,800 petrol pumps that, you know, around the world to fill up airplanes with.
So I think, maybe saying (ph) put the clock forward to 2020, the industry could go from being a polluter in the world, emitting 3 or 4 percent of the carbon output, to being one of the cleanest industries in the world.
FOSTER: But isn`t this website a bit of a PR campaign in that respect as the airlines come under so much pressure because of the environmental damage they cause? This is just another sign that you`re trying to do something about it, but not actually doing anything about it just yet?
BRANSON: Well, the Carbon War Room is a not-for-profit organization that is set up by a lot of entrepreneurs and businesspeople to try to get a whole mass of industries to get out there and deal with the problem of global warming whilst governments that don`t seem to be, you know, grasping it themselves.
And the most practical way of dealing with the problem of global warming is to come up with green fuels, come up with, you know, clean fuels for planes, for boats, for cars. And, in that way, I think, you know, the industries don`t suffer.
If anything, I think we might be able to bring the cost of travel down. But bring the cost of travel down by people traveling on the clean planes rather than on dirty planes.
FOSTER: And as you say, very few filling stations compared to the auto industry. So once one of these fuels does emerge, pretty quick to change the entire global industry over, whereas the car industry will be trying to catch up if that happens.
BRANSON: Yes, and that`s the exciting thing for the airline industry is that once the amount of money that these clean fuel companies can make is absolutely enormous. I mean, Virgin Atlantic alone spends $2 billion a year on fuel.
If we could switch that to a new clean company, they can get out there and they convert the unwilling (ph) plants and the other plants around the world. They`ll have the resources and the money to do it. And so, hopefully, we can actually get this geared up and get these fuels into our planes as soon as possible.
FOSTER: Richard Branson there, speaking from the lovely Necker Island. Now we`re counting the days in a crucial week for the euro, and we`ve got another door to open on our Advent calendar for you. This is QUEST MEANS BUSINESS.
FOSTER: Italy will save $40 billion through its new austerity package. That`s good news for the market and bad news for Italians. To mark that bittersweet news, we`ve got a chocolate euro coin for every billion dollars saved. We`re using these to help us count down to Europe`s deadline day this Friday.
Last week, Olli Rehn warned us that we only had 10 days to save the Eurozone. So here`s a reminder of what he said.
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Economic and Monetary Affairs Commissioner OLLI REHN: We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union.
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FOSTER: Well, that was Wednesday. That means we have four days to go, and another window to open on our festive calendar. It`s Europe`s quest to save the euro. Now on Wednesday there, we had the intervention from central banks to boost liquidity.
And on Thursday, December the 1st, check out the sound effects, we heard the first talk of stronger fiscal union from Europe`s leaders.
Whilst the following day on December the 2nd -- there we have it -- a gift for the markets. Europe finished higher for its best single week of gains since 2008. And today, where are we, December the 5th, the so-called "Save Italy" plan unveiled in parliament by Mario Monti today, $41 billion of cuts and new taxes, literally an eye-watering amount.
The welfare minister was in tears as she announced it. However, we have heard Mohamed El-Erian on this program tonight, saying it shows Europe is no longer in denial. So who knows that where we might be now if Europe had faced facts a little sooner. Its critics say it has -- had it all wrong, really, from the start. And as Jim Boulden reports for us now, it is now paying that price.
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BOULDEN (voice-over): It`s easy to visualize Europe. Just show a horde of euro coins being minted. It is, after all, the very symbol of unity of the 17 countries that share one currency. So why, then, is the same currency tearing at the very fabric of the Eurozone?
Euro-sceptic Norman Lamont has always said the euro was a mistake..
NORMAN LAMONT, FORMER CHANCELLOR OF THE EXCHEQUE: See, when the euro was set up, a lot of people said, well, it`s very good. You have a currency without a government. That`s a plus part, not in the -- plus point, not a minus point. Financially, it`s turned out to be a minus point because no one is in charge.
BOULDEN (voice-over): The euro did come with its own central bank based in Frankfurt to placate a German citizenry giving up their beloved strong and stable Deutschemark. But the euro meant monetary union, not fiscal union. Each country retained their own tax policies, budgets, banks, finance ministers, et cetera, and each country sells bonds.
Greek bonds always gave a little more back to investors who happily bought them up, allowing Greece to happily increase its debt. After all, Greece shared the same currency as the Germans, and certainly couldn`t go bust. Not true. Once the economic crisis hit in 2008, the euro cracks started to appear.
And Europe`s politicians are still trying to find the patch.
JACEK ROSTOWSKI, POLISH FINANCE MINISTER: That has taken too much time. It will take a bit more time. Fortunately, the European central bank has given us more time by intervening on the Italian and Spanish bond markets and providing a kind of protective shield while we can take the -- while the political process can work to bring about the decisions that are necessary.
BOULDEN (voice-over): And it`s clear time is running out.
ANDERS BORG, SWEDISH FINANCE MINISTER: This is a crossroad for Europe, and there are some very heavy political decisions that will have a long impact that will have to be made.
BOULDEN (voice-over): It appears Europe has a stark choice, change the rules and let countries leave the euro, or go the whole way and create a fiscal union. In other words, one big budget, or at least a budget czar of sorts that could veto spending in any country.
LAMONT: I think there are two alternatives. They are, bluntly put, cough up or break up.
BOULDEN (voice-over): Clearly, muddling through is not an alternative -- Jim Boulden, CNN, London.
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FOSTER: A similar look (ph) at the big board as we close the show for you. The markets are up pretty significantly, as you say, up 2/3 of 1 percent, but had come off a bit because there`s a report in the "Financial Times" that people have been reading, talking about Standard and Poor`s warning on German debt, other debt as well.
But the big surprise is German debt. There have been some financial shares doing pretty well today. JPMorgan Chase, Bank of America, both up by around 3 percent. Tech companies also rising, Microsoft and HP both up more than 1.5 percent.
That is QUEST MEANS BUSINESS. I`m Max Foster in London. Thank you so much for watching. Stay with CNN.