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QUEST MEANS BUSINESS

IMF Chief Christine Lagarde On Hungary's Crisis; U.S. Unemployment Rate Drops To 8.5; Samsung Versus Apple, The Galaxy Effect; Pay Now or Default Later; Interview with Thebe Ikalafeng; Marketing African Chicken

Aired January 6, 2012 - 14:00   ET

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


RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Tonight, the IMF Chief Christine Lagarde on Hungary's telling us, "We're not complacent, but we will not compromise."

Something in the U.S. economy is working, unemployment has fallen; we have the details.

And Samsung's smart phone strategy, which has overtaken Apple.

I'm Richard Quest. I mean business.

Good evening.

Let's begin tonight with Hungary, where the prime minister seems ready to backtrack on his controversial central bank law. Part of an effort to revive hopes of a bailout. The law, which critics say compromise the independence of the Hungarian Central Bank, caused the collapse of talks with the European Union and the IMF last month. Since then, Hungary's currency, florint, has plunged.

Now Fitch has thrown the country on the junk heap, too. It has cut its credit rating to BB+. Fitch is now the last of the three big agencies to downgrade Hungary to junk status. Saying a poor economic outlook, caused in part by unorthodox economic policies, meaning Hungary no longer deserves investment grade rating.

So last week the Prime Minister Viktor Orban said a failure to secure support from the IMF would be no disaster. Today he sounds rather more conciliatory when it comes to the central bank.

(BEGIN VIDEO CLIP)

VIKTOR ORBAN, PRIME MINISTER OF HUNGARY (through translator): There will be a daily coordination between economic ministry and the central bank. I told the central bank chief that we support the central bank in all things. It is the responsibility of the central bank to keep the value of the Hungarian currency. And the government will support all the necessary steps that the central bank needs to take in order to ensure that.

(END VIDEO CLIP)

QUEST: The Hungarian Prime Minister Viktor Orban.

The head of the IMF, Christine Lagarde, who is officials are due to meet Hungary next week, spoke to CNN's Robyn Curnow in South Africa about what the IMF would do next.

(BEGIN VIDEO CLIP)

ROBYN CURNOW, CNN INTERNATIONAL CORRESPONDENT: How much of a concern is Hungary's political and economic problems for you?

CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: Hungary is clearly part of the European Union. It is a country with which we have had a steady and long relationship. The finance minister of Hungary is visiting the IMF next week. I look forward to his visit, to our discussions. We will, you know, continue to entertain the relationship with Hungary.

We are obviously very concerned that whatever Hungarian legislation is vote by the Hungarian authorities is in compliance with the European requirements. We're looking into it. I know that the European commission is looking into it. And I certainly hope that the Hungarian authorities will be very keen to have their legislation in compliance with European legislation as well, particularly when it concerns the independence of their central bank.

CURNOW: What exactly we talking here, about monetary policy independence, here?

LAGARDE: Uh-huh.

CURNOW: Do you see talks being resume here, with Hungary? Between the IMF and the EU?

LAGARDE: As I said, I look forward to the visit of the finance minister next week.

CURNOW: But they had given indications, just recently, that they might have shifted their position. Do you think the IMF would be willing to say, listen, we are going to compromise on somethings, or is that independence issue particularly critical to any sort of deal.

LAGARDE: We're not complacent. We don't compromise. But equally, we never leave the table.

CURNOW: What are the time pressures, then? Is time running out for Hungary?

LAGARDE: Time is of the essence all the time. And the visit next week of the minister of finance is perfectly appropriate. Timing is good. And, as I said, we never leave the table.

(END VIDEOTAPE)

QUEST: Christine Lagarde, and you can hear more from the IMF managing director on the economic global position later in the program.

The euro sank to a 16-month low against the dollar on Friday. It slipped below 1.27 for a brief moment or three.

(DESK BELL CHIMES)

Right now it is trailing above that level, 1.2722, that is where it has been pretty much most of the afternoon. Down around half a percent on the day. What is happening with the euro is perhaps the most visible symptom, hour by hour, of the diverging fortunes of the U.S. and European economies.

It is strengthening on one side of the Atlantic, weakening on the other. We'll talk more about the U.S. again, in just a second or two, with those jobs numbers. But just one week into the new year, the euro is already down nearly 2 percent against the dollar. David Bloom is head of foreign exchange research at HSBC and told me the sell off won't last and we'll see a dramatic euro rebound before the year is through.

(BEGIN VIDEOTAPE)

DAVID BLOOM, HEAD OF FOREX, HSBC: Well, I think the animals have come back to work, in the sense we have had some people's instincts that the euro needs to go down. And the first day we saw a bit of a rally in equities and the euro do a rise. And then since then I think the market has just had it in its mind that the euro is going down and it doesn't matter what the circumstances are. So there is nothing particularly behind it besides people coming in this year and saying, I'm selling that euro.

QUEST: All right. The euro, day by day, gets caught up in individual countries bond auctions, will they succeed? Will they not succeed? The whole Eurozone crisis. But if you look at the economic fundamentals of say, Germany, in recent days-except maybe the latest manufacturing numbers.

BLOOM: Yes.

QUEST: By and large, Germany, as the dominant economy, is strong.

BLOOM: Yes, the German economy is actually performing quite well. And that is why I said it really a feeling of animal spirits that people feel they must sell the euro. That the only thing that makes sense is to sell the euro. And that is why I think it is a biased interpretation.

And I actually think that the euro might bounce and go up, once all of these people have sold. And some of the fundamental data has been OK. Some of the auctions have gone very well. Even when an auction goes well, they suddenly sell the euro again. So it feels very animalistic, as I've been saying.

QUEST: Right. Right. As that animalistic mentality takes over, does the herd follow? And by that, what happens to the exotics that often get caught on the way? The pound, the Swiss franc, the yen, where do they move-not only within to the euro, but also to the dollar? Or is everybody moving in their own parameters?

BLOOM: I think they are moving towards the dollar. The dollar is high liquidity currency of the world; 86 percent of all foreign exchange transactions are done through the dollar. But they are not buying U.S. assets. They are just being in the dollar like being in a bus stop during a storm. As soon as the storm is over, you move away.

So for the moment, while there is a crisis, while people are so concerned, they are buying the dollar. But it is not a permanent place of refuge. They not buying U.S. assets at the moment. But everybody is being hurt. The dollar at the moment is king.

QUEST: You know better than I do, currencies basically operate on the pendulum swing. They go too far one way, then they come back somewhat the other way. So, if that continues true, then the euro will reverse these losses?

BLOOM: I believe so. I think everybody is getting short. Everyone is selling the euro. And if you are optimistic, they think, how can you be optimistic? We all know it's going down. No, you don't know its going down. There is no free money. And what will happen is everyone will get short, and I absolutely agree we'll a dramatic bounce back in the euro.

QUEST: Whoa! You said "dramatic"?

BLOOM: Yes, it will, because we've had quite a big fall, everybody gets short. And suddenly it comes back 3 or 4 percent. And that is how you get hurt in financial markets. So be very careful. There is no free money out there.

(END VIDEOTAPE)

QUEST: No free money, and no money tree, I knew there was something that I had been lied about all those years ago.

Onwards and upwards, the U.S. jobs market is headed in the right direction. President Obama has good reason to flaunt the latest numbers. We'll take you through it all after the break.

(COMMERCIAL BREAK)

QUEST: A big boost for U.S. job seekers and for President Barack Obama today. Unemployment is at its lowest level since a month after his inauguration in 2009. And if Mr. Obama wins re-election in November these are the kind of numbers he might want to thank.

Over in December, 200,000 were added to the U.S., twice as many as November. And it is at the level needed to keep up with population growth of 150,000. Related to this-let me just put some this. Related to this, unemployment is now down to 8.5 percent.

So what we have is an improvement-an improving position in the U.S. Top sectors, manufacturing, health care, education. Some jobs maybe December seasonal hirings but if you take a look at the trend, we are now starting to see several months where you do get these very impressively- more impressive numbers. Total hiring for last year, 1.6 million. These lower numbers are still, of course, of some concern and worry is always that it will always fall back.

Even so, for President Obama that was an encouraging set of statistics and said there was still work to be done. The signs are encouraging.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: There are a lot of people that are still hurting out there. After loosing more than 8 million jobs in the recession, obviously, we have a lot more work to do.

But it is important for the American people to recognize that we have now added 3.2 million new private sector jobs over the last 22 months. Nearly 2 million new jobs last year alone. So after shedding jobs for more than a decade, our manufacturing sector is also adding jobs two years in a row now. So we are making progress. We're moving in the right direction.

(END VIDEO CLIP)

QUEST: Is it just the latest number that gives cause for optimism? This week ADP jobs numbers were strong, manufacturing numbers, construction numbers, were up, too. The analysts that you have heard on this program are now starting to suggest the U.S. economy is the main one gathering strength.

(BEGIN VIDEO CLIP)

JIM O'NEILL, CHAIRMAN, GOLDMAN SACHS ASSET MANAGEMENT: I think the U.S. story is hugely interesting. And of course, so many analysts, because of this European drug are worried about Europe dragging down the U.S.

What you hinted at, in a different way, perhaps than what you meant, could end up being relevant. Can the U.S. help Europe lift out of this mess? Maybe it can.

BOB PARKER, SENIOR ANALYST, CREDIT SUISSE: A number of risk factors have already been reduced. The risk of American recession is significantly reduced.

(END VIDEO CLIP)

QUEST: Joining me now, from New York, Julia Coronado, North American chief economist for BNP Paribas.

Good to see you this evening, Julia.

Now, the interesting thing about this, these numbers, the unemployment rate fell which, whilst job creation rose, and the number fell because people were actually getting jobs they weren't just leaving the job market.

JULIA CORONADO, NORTH AMERICAN CHIEF ECONOMIST, BNP PARIBAS: That's right. So, it was a mixed story this month. We did still have the labor force declining by 50,000, even though population grew by 140,000. So there were still some people leaving.

But more than half of the decline in the unemployment rate this month could be attributed to actual job creation. And that certainly is the way we want to reduce the unemployment rate. Still-a

QUEST: At these sort of numbers-I was about to say, at these sort of numbers, we are still tinkering around the very edges of that which is necessary for sizable unemployment reduction?

CORONADO: Absolutely. Absolutely. I mean, really that number because of low labor force participation the number needed to keep pace to bring the unemployment rate down as anything above 110,000, really, will bring it down. So, we are in, you know, unemployment rate reducing territory.

As you noted a few moments ago, some of the strength in December is probably season issues that will either flatten out or reverse in January. So, underlying trend I would put at somewhere between 125,000 and 150,000. So we are just barely into the territory needed to bring down the unemployment rate.

So it is interesting, you had somebody on a moment ago that said, you know that the U.S. is perhaps the outperformer and possibly the buffer. That is a little bit scary because you know what we are seeing is good and encouraging. The resilience is definitely encouraging. But really we're still only in kind of 2, 2.5 percent growth territory in the U.S.

QUEST: Hey.

CORONADO: Barely able to eke that unemployment rate down.

QUEST: Hey!

CORONADO: So, if we are the star of the show, the show must be a pretty dismal one.

QUEST: That's it. You remind me of the old saying, yes, absolutely, if this is the good news, I'd hate to see the bad.

CORONADO: Yeah.

QUEST: But, of course, your 2.5 percent is looking very good compared to a Eurozone expected to be in recession for large part.

CORONADO: Absolutely.

QUEST: But look, but come on, you had manufacturing numbers that were better. Construction numbers that were better.

CORONADO: Yes.

QUEST: Christmas sales that were better.

CORONADO: Right.

QUEST: So, the picture, if not exactly rosy, is rose, (ACCENTED ADDED)?

(LAUGHTER)

CORONADO: Yes. So the manufacturing I would completely agree. It is very encouraging to see the sector not only stabilizing but actually picking up. Because those are good jobs, fulltime, benefit paying permanent jobs. The construction I don't buy into so much. We had a really record warm December that probably mean fewer layoffs in the construction industry. Let's face it housing isn't really going anywhere. Construction is probably going to be weak.

But, you know, there are other areas of strength. We had professional jobs being added. That has been a steady source of hiring in the last few months. The restaurant industry has been strong.

QUEST: All right.

CORONADO: Those aren't great jobs, but they are there and they have been steady. And so that is all good stuff.

QUEST: You're not going to be happy-

CORONADO: We've only had a few-

QUEST: You're not going to be happy, Julia.

CORONADO: Go ahead.

QUEST: You're not going to be happy, Julia, until you have a brass band coming down Main Street, with the trumpets all the way.

CORONADO: Only the best for me, Richard. Only the best.

(LAUGHTER)

QUEST: Have a great weekend.

CORONADO: You, too.

QUEST: We thank you for that, Julia Coronado, joining us from New York.

Talking of brass bands coming down Main Street, with trumpets all the way. There are still 13 million unemployed people in the United States. And competition is fierce. You need to have extra skills to stand out. Maggie Lake has been learning the code, which opens the door to employment. She joins me now outside the New York State Department of Labor in Lower Manhattan.

MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: Richard, you know, certainly the folks down here, Julia was a little bit, sort of, cautious about her optimism, but the people we have been talking to today down here at the Department of Labor are certainly relieved to see the job picture is getting better. They understand, though, that there are still pockets of problems out there.

Let me give you a couple of other statistics. You mentioned long- term unemployed. Here are some other worrying numbers. African-American unemployment rate, 15 percent, Hispanics, 10 percent, teenagers, 23 percent. The know it is going to be-these groups know it is going to be more than just a sort of the economy picking up at 2 percent that is going help change those numbers.

They understand that the emphasis is going to be on retraining and getting the skills they need. And some of them are already doing that. Have a listen.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Hey, how are you?

LAKE (voice over): 21-year-old Zach Sims is one of the masterminds behind the new site CodeAcademy. In the first four days of 2012 alone, the free site has signed up more than 130,000 new users, eager to crack the code of learning code.

ZACH SIMS, FOUNDER, CODEACADEMY: I think we knew that programming is the sort of new version of literacy, but at the same time it is pretty staggering to see the numbers of people who have signed up.

LAKE: Proof positive that there is still a massive craving around the globe to develop the next big thing.

I think programming is really the most important skill in the 21st century. And I think people are finally starting to realize that. There are a lot of women, there are a lot of people that wouldn't traditionally to be learning to program.

LAKE: Learning code won't turn you into the next Mark Zuckerberg over night. But it is a first step and can ultimately lead to finding a job in an economy starved for computer professionals. And young people are taking notice.

New York Institute of Technology's Manhattan campus is seeing a 40 percent rise in applications. From students who might have bee lured into the once hot professions like finance, years ago.

UNIDENTIFIED FEMALE: This is not just a cycle. This is here to stay.

LAKE: The dean of the institute says demand should remain robust for years.

This is not just about coding, because coding can be outsourced. It is more the thrill of inventing and creating new technology, new software.

LAKE: On success story at the school, 21-year old Robert Pinkerton, who only weeks ago received his diploma.

ROBERT PINKERTON, NYIT GRADUATE: I graduated this December 2011, with a degree from NYIT in computer engineering and I received about 10 potential job offers, in the time of maybe a month and a half.

LAKE (on camera): Oops! What is that? What happened?

(Voice over): Meanwhile, back at the office, I took a stab at my first line of code.

SIMS: Now, you need the parentheses right next to there.

LAKE (On camera): Oh, oh, I see.

(Voice over): Zach Sims says even those who will never become crack computer programmers can still benefit from learning the code.

There was a great book a while ago called, "Programmer Be Programmed", sort of about how we have to understand the basics of everything that we are using. So we are all using the phones, we are all using computers and we don't really understand how they work. So it is just sort of a better way to live your life, to understand what you are using.

LAKE: A great resolution as we enter 2012. And my first ever computer programming grade?

SIMS: Pass with flying colors.

(LAUGHTER)

LAKE (on camera): He has to say that, he sitting right there.

(voice over): Watch out, Mark Zuckerberg.

(END VIDEOTAPE)

LAKE: And, Richard, I'm not the only one looking to take on Mark Zuckerberg. Our Mayor Michael Bloomberg Tweeted that he's going to give it a go. The hashtag, if you are interested, is #codeyear.

But listen, let's not make any bones about this. It is not necessarily turn you into a computer expert but I may enable you to say, build a website if you are a small business person out there with a trade you are trying to sell. And in this economy, if those are the kinds of things people need to do to have that literacy, to give themselves an advantage.

QUEST: Won't ask you to answer this question, but when you were doing that, Maggie, did you feel old?

We'll be back with more.

LAKE: No!

(LAUGHTER)

I makes me feel young, actually, Richard.

(LAUGHTER)

Speak for yourself.

QUEST: Ah! All right. Maggie Lake, in New York.

From iPads to I passed it. Apple serious competition.

Oh, Maggie is going to get me back for that one.

Samsung makes a smart move to take over the top spot. QUEST MEANS BUSINESS, good evening to you.

(COMMERCIAL BREAK)

QUEST: Samsung says its fourth quarter could break all previous records, adding $4.5 billion to the bottom line. It is a 73 percent rise, from last year. And interestingly analysts estimate it shifted 35 million smart phones in the past three months.

Join me at the super screen and you'll look at Samsung's crown jewels. Its most popular products. Well, the first of course, is that it is now the S2, as it is called. Look, sleek and beautiful, though, to use it. Faster than an iPhone 4S. It is a bigger screen and is reviewers have conceded it to be the best smart phone, and outsold, of course, the iPhone in some surveys in Christmas 2011.

Other crown jewels: This is the Galaxy tablet. The biggest rival to the iPad. It is smaller than the Pad, it has not been a big seller compared to the smart phone, but it was pretty much first out the gate after the iPad. And interestingly, perhaps, it is the one that has had the most staying power.

Not so successful for the Internet only laptop, in partnership with Google, this is the Chrome Book. It has cut is prices to encourage sales. But of course, the cornerstone of all home entertainment, is the Samsung LCDs and big products producing it's first Google run smart TV this year, which joined Sony and Vizio in the smart TV market.

So, a suite of offerings from Samsung, that is doing more than just rivaling and in some cases bettering, and besting Apple at its own game. John Abell is the bureau chief at Wired.com in New York, and he joins me now.

Are you surprised that Samsung is making such inroads? And seemingly at Apple's expense?

JOHN ABELL, BUREAU CHIEF, WIRED.COM, NEW YORK: Well, no the only in roads that they could possibly make would be at Apple's expense because Apple kind of rules the world right now in a lot of these places. Not TV sets yet, of course, perhaps.

And it is somewhat after three or four years of dominance really ought to step up and try and unseat Apple. It is kind of overdue.

QUEST: But one of the other important things that Samsung has very much-and I think I've got a commercial, I'm going to show, is the cool factor. Apple was always thought of as the cool, over cool, products. But I think if we show this commercial, or part of it, we can see that Samsung is now taking Apple's clothes. Let's have a watch and a listen.

(BEGIN COMMERCIAL CLIP)

UNIDENTIFIED MALE: Guys, I'm so amped I could stay here for three weeks.

UNIDENTIFIED FEMALE: Nine hours down and we're almost in the door.

UNIDENTIFIED MALE: I think two people just left.

UNIDENTIFIED MALE: Why would they be leaving when we're only nine hours away.

UNIDENTIFIED MALE: Yeah, I mean, this is an event.

UNIDENTIFIED MALE: Uh-oh, flags are saying the battery looks sketchy.

UNIDENTIFIED MALE: If it looks the same, how will people know I upgraded.

UNIDENTIFIED MALE: 4G is a 4G.

UNIDENTIFIED FEMALE: It doesn't say.

UNIDENTIFIED MALE: Whoa, what she got there?

UNIDENTIFIED MALE: Not sure.

UNIDENTIFIED MALE: What is that?

UNIDENTIFIED MALE: Guys, whoa, whoa! Hey, bro, can we see your phone?

UNIDENTIFIED MALE: Uh, sure.

UNIDENTIFIED MALE: Can I see it with my hands?

UNIDENTIFIED MALE: Have you seen this thing? Check out this screen. This thing is huge!

UNIDENTIFIED MALE: It's pretty massive.

UNIDENTIFIED MALE: And it has 4G speed.

UNIDENTIFIED MALE: It is magnificent.

UNIDENTIFIED FEMALE: It's Samsung.

UNIDENTIFIED FEMALE: Samsung?

UNIDENTIFIED FEMALE: That's a Samsung.

UNIDENTIFIED FEMALE: Yeah.

UNIDENTIFIED MALE: I could never get a Samsung. I'm creative.

UNIDENTIFIED MALE: Dude, you're a barista.

UNIDENTIFIED FEMALE: Why don't you guys just get 4G phones?

UNIDENTIFIED FEMALE: Why not just get a 4G phone?

UNIDENTIFIED MALE: Yeah, it's a Galaxy S2.

UNIDENTIFIED MALE: This phone is amazing.

ANNOUNCER: The Galaxy S2, from Samsung.

(END COMMERCIAL VIDEO CLIP)

QUEST: It's clever, isn't it? And it goes right to the heart of what Apple is saying it is all about. Or what their consumers say it is about.

ABELL: Well, sure. It does. It is very funny. I've seen all the variations of that. You know, my take away from that ad was: Gee, you don't have to wait to get one. What's wrong with them? I would say it would be more clever if they weren't going to people waiting on line for Apple phones, which actually makes them cool. It adds to the cool cache.

But, you know, fair enough. A colleague of mine just got his Nexus, and it is a lovely phone. It is a little bit bigger than the iPhone. A little bit taller and wider. It has a bigger screen as they say, but it is a bigger phone. It is 4G, which Apple has resisted so far.

But here's the thing, all of these phones are really just derivative, iterations of the iPhone. The next phone that that -- that captures the world's imagination will have to do what the iPhone did...

QUEST: Right.

ABELL: -- be completely different and unexpected.

QUEST: And a...

ABELL: Until then, we're going to get some traction, but not a huge breakaway phone.

QUEST: Right. And so what you're saying is we have a me, too, and although you may have a better me, too, the winner in this battle is the one that comes up with me new?

ABELL: Yes. Me new will be the big winner that we all talk about for time to come. And, you know, the better part is also arguably. Apple resists certain things that people really want and they say well, you know, the heck with you, this is the way we're going to do it. That's always an opportunity for Apple's competitors.

But Apple tends to be right about these things more often than not. It -- it's questionable to me whether somebody wants a seven inch tablet. You know, and, frankly, I'm not even sure the Samsung is the biggest competitor.

QUEST: Right.

ABELL: I happen to think it's going to be the Fire or the Nook, these sort of mini tablet, tablet-lite, tab lites that I...

QUEST: OK...

ABELL: -- that is call them and not another hardware guide.

QUEST: John, appreciate your insight tonight.

Joining us from New York.

Many thanks for all that.

Me too, me new, me cool.

We'll be back right after the break.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest.

More QUEST MEANS BUSINESS in a moment.

This is CNN. And on this network, the news always comes first.

In Syria, activists say 35 people have been killed in the ongoing security crackdown on protesters. The Syrian government says another 26 people died in what it's calling a terrorist suicide bombing in Damascus. The interior ministry warns Syria will strike with an iron fist, in their words, anyone who threatens its security.

Army Day celebrations in Baghdad were not spared the violence that's become common again in the country since U.S. forces left. At least three explosions went off near the Green Zone where a parade was taking place. No injuries were reported.

The former top commander of Turkey's armed forces has been charged with plotting to overthrowing the government. General Ilker Basbug is the highest ranking Turkish officer to be accused of what the government says was a broad conspiracy. He's currently in jail awaiting trial.

The radical Islamist group, Boko Haram, is now claiming responsibility for Thursday's church attack in Nigeria. The attack left at least eight people are dead according to "Agence France-Presse." It quotes a spokesman for the group saying the attack was in keeping with an ultimatum issued earlier that gave Christians until Friday to leave Northern Nigeria.

Experts in Britain say there is no need for the routine removal of breast implants made by the bankrupt French company, PIP. The British government says it will pay for the removal and replacement of implants done by the National Health Service. It says private clinics have a moral duty to do the same.

Unemployment lines are getting shorter in the United States as the U.S. jobless rate dropped to 8.5 percent in December, the lowest level in almost two years. Two hundred thousand jobs were added to the U.S. economy and that beat economists' expectations.

Italy's prime minister has warned that the euro crisis is straining relations within the bloc. After a meeting in Paris with President Sarkozy, Mario Monti has warned that divisions between groups of states are increasingly likely.

(BEGIN VIDEO CLIP, COURTESY REUTERS)

MARIO MONTI, ITALIAN PRIME MINISTER (through translator): I think the main risk is the development of deep-seated misunderstandings between populations and member states, with a return to prejudices between north and south, between old and new member states, with a very high potential for division.

(END VIDEO CLIP)

QUEST: When we come back in a moment, the weather forecast.

(COMMERCIAL BREAK)

QUEST: The weekend weather now.

And Karen Maginnis is at the World Weather Center.

It is obviously cold, but I -- I -- unless I'm mistaken, Ms. Maginnis, the wind has -- has dropped somewhat.

KAREN MAGINNIS, ATS METEOROLOGIST: It has. We are still seeing some gusty winds. And I think in the forecast, we'll still be picking up some rather gusty winds.

But at the height of this storm, the winds were gusting up to 190 kilometers per hour. Just staggering wind gusting reported, but especially at these higher peaks. That's where we saw those really strong winds.

But, yes, still some gusty winds. One weather system moved through a week or so ago. Another moved in right behind it. And now we've got that cold air that is moving towards the south. And take a look at the snow forecast over the next 48 hours, primarily through the Alps. And I point that out because we have seen a lot of problems on the roadways. There are Alpine events that have been interrupted because of the heavy snowfall. Heavy snowfall. In some places, 50 to 60 centimeters reported.

Look at the airports. In Amsterdam, windy conditions coming up for Saturday and delays could run over an hour, maybe an hour and a half.

Glasgow could also be affected, as well as Dublin, Copenhagen, Budapest. And Sofia, once again, is one of those airports that could see a tremendous volume of snowfall as a lot of that cold air sweeps toward Eastern Europe, Southeastern Europe and really is going to interrupt not just traffic in the air, but on the ground, as well. And we've already seen that.

Apparently, on the way to Zurmont (ph), we have seen some avalanches and the snowfall has been so heavy the rail were -- railways also need to be cleared off. And they're saying that some holidayers have been just stranded there because the snowfall has been so deep. It's been extraordinarily difficult.

Berlin right now is reporting zero degrees. Glasgow, this is a balmy day, 10 degrees in January. London reporting seven. Moscow is at two. Kiev is at two. And Munich at two degrees, as well.

Forecasts still not faring very well. It will be gusty in those Alpine regions. The snowfall begins to taper off, but the flooding that occurred around the Beneluks region also across the U.K. and into Ireland, this is where we have seen some of the damage from downed trees, downed power lines, the roadways that were affected. Hopefully, we'll get to see some of these pictures coming out of Austria in through the Alps here, where the wind was blowing around. And the avalanche danger in some of these areas, Richard, is four, one to five, five being the worst. They're sitting at a four right now. A woman was injured in Austria due to an avalanche.

And we'll try to keep the weather calm for this weekend -- Richard, back to you.

QUEST: Karen Maginnis, have a good weekend.

MAGINNIS: Thank you.

QUEST: Japan is starting to think the unthinkable, with soaring debt and a looming debt and crisis of default, Japan's government worries that it has all the characteristics of another Greece. That's why it wants to double its sales tax over the next three years, as CNN's Kyung Lah explains, it's pay now or possibly default later.

(BEGIN VIDEOTAPE)

KYUNG LAH, CNN CORRESPONDENT (voice-over): Japan is struggling to control its skyrocketing national debt. And one plan that's being finalized today is an increase in the national sales tax.

So take this bottle of sake, for example. It costs 1,000 yen, or about $10 US.

Japan's national sales tax is currently at 5 percent. So, on the 1,000 yen bottle of sake, I had to pay 50 yen in taxes. Now, under the current proposal, by 2014, the tax would jump to 8 percent, or 80 yen, for that bottle of sake. And by the year 2015, the national sales tax would jump to 10 percent, or I would have to pay 100 yen for that same bottle of sake. That is double what I paid today.

As you can imagine, this is highly unpopular.

(voice-over): "To be honest," says this taxpayer, "I don't want the sales tax hike, but I guess I don't have a choice."

"We can see what's happening in Greece and Italy," says Toshiko Misu, "so we're taking the debt talk more seriously, and, unfortunately, ready to accept this."

It is in the wake of that financial crisis in Greece and its spread through Europe that Japan's government fears its own ballooning debt will follow the same trend and be out of control. Japan's debt is far higher than Greece, but less risky because it's domestically owned. At a debt to GDP ratio of 200 percent, Japan still has the highest national debt in the developed world, with the fastest aging population on the planet, a demographic and taxation time bomb.

Add to that reconstruction from last year's devastating earthquake, tsunami and ongoing nuclear and energy crisis.

Japan's prime minister and his ruling party says the parliament must figure out a way to pay for everything, in addition to paying down the huge national debt before it's too late.

"The crucial moment is on the horizon," says Japan's prime minister, urging lawmakers to pass his tax plan. "We just unite and make this happen."

(on camera): A bitter pill, but one that any country with a national debt problem may eventually have to swallow.

Kyung Lah, CNN, Tokyo.

(END VIDEO TAPE)

QUEST: It seems to me the only thing Kyung Lah is going to have to swallow is a bit more sake to help take the pain out of the sting.

The U.S. markets, I don't think you're going to need too much sake, wine, beer or spirits. Just down 36 points on the Dow at the moment. That is .3 of 1 percent, 12378. The European markets, this is how we leave the week and love you at this weekend. Up for London, down in Paris, Germany and Zurich, but not that much damage for us to worry about as we head off for the weekend.

And that is QUEST MEANS BUSINESS for tonight.

Thank you for making time to join us at the start of the new year. We do hope you're going to be us throughout the course of the year. It wouldn't be the same if we didn't come together at this time evening evening.

I'm Richard Quest in London.

And whatever you're up to in the hours ahead, I hope it's profitable.

"MARKETPLACE AFRICA" next.

(COMMERCIAL BREAK)

ROBYN CURNOW, HOST: You're watching MARKETPLACE AFRICA.

I'm Robyn Curnow in Johannesburg.

Now, this area is called 44, Stanley Avenue. It used to be a neighborhood of dilapidated warehouses, old buildings, but it's been rebranded into an up and coming design district with boutiques, coffee shops and restaurants.

But rebranding something isn't as easy as just giving it a fresh new lick of paint. Rebrand marketing is the forte of Thebe Ikalafeng.

And we chatted here over coffee about how to rebrand Africa.

(BEGIN VIDEOTAPE)

CURNOW: What is Africa's brand?

THEBE IKALAFENG, FOUNDER AND CHAIRMAN, BRAND AFRICA:

Oh, Africa's brand is -- as this stage, one could say the brand it is resilient, a brand that's entrepreneurial, a brand that is creative. And that's the brand that we have.

But that's on the positive side. You know, on the -- on the negative side, you could say Africa is a brand that is much, much not together, a brand that is perceived to be corrupt, a brand that's perceived to be not in charge of its own agenda and a brand that is -- that, in many ways, has not taken advantage of the opportunities which present itself, which are inherent in Africa, a brand that is owned by others other than owned by itself.

CURNOW: So when a place like Somalia makes the news, the rest of Africa gets tainted with that brand?

IKALAFENG: The same way as when Zimbabwe makes the news, the rest of Africa gets tainted by that brand, because that is the predominant image that people get to see.

And because of lack of exposure to the broader Africa, you get people then making up their -- their minds or concluding based on just that small image.

CURNOW: We're talking, perhaps, of an outside looking in at somebody sitting somewhere else in the world and has their certain ideas of branded Africa. But the kind of attitudes and stereotypes that Africans have about each other is, I think, even more powerful.

IKALAFENG: Well, there's been a lot of surveys which have been done about Africa's perceptions of Africa themselves and Africa's call -- Africans call our confidence in their own con -- in their own countries and -- and the continent. And what's disappointing is that it's never ever 100 percent confident about the future, it's never ever 100 percent excited about -- about the continent.

But the biggest crisis, the biggest issue with Africa is that not many Africans identify with the reality of Africa, because many of us, our idea of -- of success and excellence is what the world outside provides.

CURNOW: But even a place like Zimbabwe is trying to rebranded itself. They've got a new ad campaign. I've seen it.

Do you think that it's worth trying to rebranded yourself when the politics isn't fixed?

IKALAFENG: Well, it depends on how you look at branding. Branding is not an ad campaign. Branding is not a -- is not -- is not a -- a -- a piece of digital material that you take out there. Branding is the total experience.

So the mistake that most people have when they look about branding is when they look at just the communication part of it. The communication is almost the last step.

CURNOW: For you, as a marketing man, what, for you, is going to be the big rebranding story of -- over the next five years?

IKALAFENG: Well, the big rebranding story of the next five years, or the most important one, to me, would be -- is when Africans begin to work together, because the -- because as soon as Africans begin to work together, it means we are beginning to understand what the relative strengths and weaknesses of -- of the various countries, when we are able to leverage the -- the sentence of excellence across the continent and able to take that to the world.

CURNOW: When you talk about sort of matching reality and the brand, a place like South Africa, for example, has a great brand -- Mandela, World Cup, democracy, just off of the top of my head. But recently, there have been a lot of things that might tarnish that brand, increasing corruption, political infighting.

Is South Africa as a brand losing its luster a bit?

IKALAFENG: The South African constitution, the new one that, you know, was -- was signed off by Nelson Mandela in 1996, what we are beginning to see -- and that constitution, if you will, it's the brand plan of South Africa, for lack of a better word. It's the brand blueprint of how South Africa should manifest itself and how South Africa should be experienced by the citizens of South Africa.

What you are seeing and what you see now are the challenges to corruption, the challenges to put -- to -- to leadership, you are seeing that brand being tested. You're not seeing the best side of South Africa. You're actually seeing the good side of South Africa, because it means this is a country that's is a much -- it's a maturing democracy where none of those things recent -- perhaps in many other years, would have been swept underground. They cannot survive in this new brand.

(END VIDEO TAPE)

CURNOW: Thebe Ikalafeng on changing perceptions.

Now, how's this for an example of brand recognition?

(music)

(COMMERCIAL BREAK)

CURNOW: Nando's is a South African company that sells spicy chicken around the world. And it's achieved global brand recognition by using humor, social commentary and controversy in its marketing.

(BEGIN VIDEOTAPE)

CURNOW (voice-over): As advertising campaigns go, this one hit the big time. Reaction was huge, even Nando's.

(music)

CURNOW: The portrayal of Zimbabwe's notorious president, Robert Mugabe, cavorting with five fellow dictators captured the imagination of millions.

QUINTON CRONJE, MARKETING DIRECTOR, NANDO'S: It was bigger than we have anticipated. The whole thing of dictators over the year of 2011 was a global concept. So it went really, really big, bigger than any other ad in Africa has ever done virally, which was huge for us.

CURNOW: The response in Zimbabwe wasn't so funny. Nando's pulled the ad after staff in the country were threatened by Mugabe loyalists.

(music)

CRONJE: But this viral ad soon appeared in its place.

(BEGIN VIDEO CLIP)

(music)

UNIDENTIFIED FEMALE: Hi, we're such...

UNIDENTIFIED FEMALE: Who's there on your plate?

(END VIDEO CLIP)

CURNOW: Nando's is famous for testing boundaries with its advertising. It's a strategy that's become integral to its brand.

CRONJE: Chicken is a commodity, but we fix chicken up by talking about the brand intrinsics, you know?

And we've always been about having an advertising strategy that is kind of cutting edge. We like to say what people are generally thinking, so we -- we generally kind of put it out there and get a lot of positive sentiment behind us. We like to pick things that are -- and people use the word controversy, I don't say controversy, I say things that generate healthy debate.

CURNOW: Ahmed Tilly is the executive creative director at Nando's advertising agency.

(on camera): For the World Cup, a perfect opportunity, also, for Nando's.

Don't you want to...

AHMED TILLY, EXECUTIVE CREATIVE DIRECTOR, NANDO'S ADVERTISING: Yes, I mean this entire campaign deals with the misconceptions that people have of our country.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Welcome to the nation. Our research shows that most overseas visitors believe all South African men have more than one wife. Now, this is not entirely true, but perhaps there's a point there.

TILLY: And we were having an influx of foreigners visiting South Africa. We needed to comment on it. And we did it in a way that kind of demonstrates the ignorance and the misconceptions that people have of our country. It touched South Africans because they have traveled and they have had -- they've been asked the questions -- do you have electricity in Africa, are there animals roaming the streets in Africa?

And we took that insight and basically made a campaign that was relevant to the World Cup.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Some foreigners think that all African women walk around bare-breasted all the time. Ridiculous, I know. But my Nubian queens. Nice puppies.

(END VIDEO CLIP)

CURNOW: How important is it to be cheeky, to be naughty, to push the boundaries?

TILLY: It's becoming more and more important everyday, isn't it?

I mean if you think about, it's the right fight for Nando's to be there, because they voted the brand on the method of tone over the years. It's not something we just came up with today. So it's relevant to Nando's.

But if you look at it on a larger scale, it's just getting more and more difficult to get people just to stop on television, to look, or in a newspaper, to stop and glance. And I think that's obviously one of the best things about working on Nando's, is they give us the freedom to push those boundaries and they're seeing the rewards. So I think -- I think all brands need to -- it's -- they need to go. The others are getting lost.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: How to climb your way up the corporate ladder.

Have you been working very hard without getting a promotion?

Pull the race card.

(END VIDEO CLIP)

CURNOW: Race, racism, you've poked fun at it.

TILLY: Yes, it's -- it's -- I think it's a better way to deal with it, with a sense of humor, than to sweep it under the carpet, firstly. I think it's something you can't ignore in South Africa, especially 10, 15 years ago. It was a very real thing. It still is today.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's because I'm black, right?

(END VIDEO CLIP)

TILLY: I think as a nation of people, we -- we're mature. And that's how we are allowed to talk quite a bit all the things that is not allowed - - that are not allowed to be spoken about in other markets. We take full advantage of it. We love it.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Another popular myth is that wild animals roam our streets.

(END VIDEO CLIP)

CURNOW: Are there any sacred cows?

TILLY: There are. We try to stay away from religion as far as possible, only because it's -- it's so sensitive and it -- it's not a defendable topic.

CURNOW: Religion may be out of bounds, but the death of North Korea's Kim Jong-il was an immediate branding opportunity for Nando's.

CRONJE: When we heard that Kim in North Korea had died, we generated a viral commercial that we got out within less than one hour. And it was really to say, dear North Korea, it wasn't us. We're into eradicating hunger rather eradicating dictators.

TILLY: For a brand to respond as quickly as Journal's (ph) do, certainly puts them in good stead with the consumer. They love it. Consumers love the fact that a brand can respond smart and quickly.

CURNOW: Or, as we like to say in South Africa...

(SPEAKING FOREIGN LANGUAGE)

CURNOW: Robyn Curnow, CNN, Johannesburg, South Africa.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: At this time of year, no one should have to eat alone.

(END VIDEO CLIP)

(END VIDEO TAPE)

CURNOW: That's one way to get your attention.

But that's all from us here in Johannesburg.

I'm Robyn Curnow.

A reminder, though, before we leave. You can find us online at CNN.com/marketplaceafrica.

But until next week, goodbye.

END