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QUEST MEANS BUSINESS

Europe Braces for Imminent Downgrade; Greece Debt Talks in Trouble; Austria Also Loses Triple-A Rating; JPMorgan Earnings Slump; US Markets Down; France Reacts to Downgrade; Top Tweets; Murdoch Admits MySpace Mistake

Aired January 13, 2012 - 14:00   ET

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


MAX FOSTER, HOST: Downgrading Europe. France and Austria could be about to loose their Triple-A ratings.

An uncomfortable pause in Greece. Crucial debt talks edge closer to collapse.

And countdown to shutdown. I speak to Nigeria's finance minister as unions threaten to cripple oil production.

I'm Max Foster. This is QUEST MEANS BUSINESS.

Hello to you. Tonight, Europe is braced for an imminent downgrade. Reports citing unnamed eurozone officials say Standard & Poor's will strip Austria and France of their Triple-A ratings after the US markets close.

Those countries are among six eurozone states that currently hold S&P's highest sovereign debt rating. Standard & Poor's has declined to comment on the reports. Last month, it put 15 of the block's members on downgrade watch due to the escalating debt crisis and deteriorating economic outlook.

Today, French budget minister Valerie Pecresse insisted the country's finances are in good shape.

(BEGIN VIDEO CLIP)

VALERIE PERCRESSE, FRENCH BUDGET MINISTER (through translator): Today, France is a safe bet. It can repay its debt, and the news considering our deficit is better than expected.

(END VIDEO CLIP)

FOSTER: Well, Veronique de Rugy is an economist and senior research fellow at George Mason's University -- George Mason University's Mercatus Center. She joins me, now, from Washington. Thank you very much, indeed, for joining us.

I guess the crucial thing here is -- if the downgrade happens, it's to what level? How many points do we think it might be downgraded?

VERONIQUE DE RUGY, SENIOR RESEARCH FELLOW, MERCATUS CENTER: I think the rumors are that it's going to be better than the fears that the French banks had and people in the eurozone had. It looks like they're only going to be -- they're going to be downgraded one notch. So probably they're going to get a Double-A-plus rating, now.

FOSTER: I just heard, as you gave us an answer, from the AFP News Agency, the main news agency in France, that the country has, indeed, lost its Triple-A rating. So, quite a moment in this economic story across the eurozone, right?

DE RUGY: Yes, absolutely. As you said, this was expected. It doesn't make it good. Even though there's some sense of relief that it could have been an even bigger downgrade, this is not good.

FOSTER: In terms of what this means for France, it does play into a presidential election. Huge impact on the future of Europe, really. A major country now discussing economics in a major way going into the election. What will this have in terms of -- what impact will it have in terms of leadership, do you think?

DE RUGY: It's unclear how the French people are going to perceive this. Nicolas Sarkozy, the president of France, already in big trouble electorally. It's not as if the Socialists on the other side really have a better program. They haven't really changed their program in the last 20 or 25 years.

That being said, we also don't know exactly what the economic consequences will be for France, because it is a rich country.

However, one thing we are sure that it's going to have dramatic consequences and potentially really extreme consequences for the whole eurozone as -- because of this downgrade, the borrowing capacity of the zone is going to decrease, which makes it very hard for the three countries that were already in big trouble, Greece, Italy, and Portugal, to actually have access to this capital that they need.

Greece could face an extremely messy default. And that could take the eurozone in a worst-case scenario. And we don't know.

FOSTER: Just to confirm, AFP News Agency quoting the finance ministry saying France has lost its Triple-A, but we don't know how many notches just yet. I presume this means -- an immediate impact, as it were. People will be selling French bonds?

DE RUGY: Yes. Not just French bonds, because it is going to impact the whole eurozone. There will be some flight to safety, probably very beneficial for the US, and so we may see some decreasing interest rates here.

That being said, the good news for the US is only going to last as long as we look not as bad as the Europeans.

FOSTER: And how dependent is France on its borrowings? Because those borrowings have just become more expensive, haven't they?

DE RUGY: Yes. It is -- it is not a good thing. I actually think that it may not have as dramatic an impact on France.

Also, remember Fitch, the other rating agency, just confirmed the Triple-A rating for the French -- for France for 2012, which probably is going to make reading credit ratings -- it's going to make them even more obscure than they already were.

So, it's unclear how big an impact it will have for France per se, but we know that it was going to reduce the ability of the eurozone to actually borrow money for France -- for France to borrow. It's going to increase the cost of borrowing, which could have dramatic consequences for countries who were already struggling.

FOSTER: And just quickly, if France is downgraded, that would suggest that the EFSF would have to be downgraded, as well, because it becomes less of a safe bet, right?

DE RUGY: Yes, and from the estimate I've read, it means probably that the ability to borrow, the EFSF, is going to be reduced by something like $300 billion, $220 billion of which would have benefited Greece, Portugal, and Italy. It's a big deal.

FOSTER: OK. Veronique de Rugy, thank you very much, indeed, for joining us from Washington.

Another big story happening tonight is that Greece was the trigger point, really, of the European debt crisis, and today, negotiations to prevent it defaulting edged closer to collapse. CNN's Jim Boulden joins us, now. This is a very gloomy Friday, Jim.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: It's a gloomy Friday because these talks have been going on since the end of October.

Let's remind people that Greece has to have a voluntary agreement with the vast majority of its banks, hedge funds, insurance companies, whoever owns the debt, to agree to give them a 50 percent cut, basically save Greece $100 billion.

This is one of the main planks of the second bailout agreed by the eurozone and the IMF back in October. I don't want to confuse people too much, but this is money that Greece needs from March onwards.

FOSTER: So, it's got enough money until March.

BOULDEN: It's fine until March. It's getting the first tranche money that's been coming through. It got another tranche in December. But Greece has a lot of paper to pay in March. It may not be in the market, but it has to pay back the bonds that it's already sold, obviously, and there's a big chunk. I think $18 billion, $16 billion in March. So, it needs the money to do that.

Now, it's very complicated, but people need to watch this, because if it cannot get enough banks to agree, they might need to change Greece law and force the banks to take a loss. That's not voluntary. That's mandatory. That's a default.

FOSTER: And in terms of getting the next tranche of money, France is going to be a bit less interested in foreign problems when it's got its own problems today.

BOULDEN: You could argue that. I think the downgrade's going to be more politically important to France than it is economically, because a lot of times, you need more than one rating agency to actually downgrade.

The US lost its Triple-A rating by one of the agencies. They're going to benefit from this, if nothing else.

FOSTER: We're hearing from the German government that there's a view that we shouldn't put too much emphasis on the ratings. That's political, though, I guess.

BOULDEN: Well, they've been saying that for a couple of years because they've been really -- first, the ratings agencies got slammed when the economic crisis hit because they didn't show us that this was coming.

FOSTER: And now they're doing it too soon.

BOULDEN: Well, people in the markets will say the ratings agencies aren't telling us anything we don't already know. If we don't know this, then we're in trouble.

But listen, we've just got a sound bite in from the former prime minister of Greece, who was the head of the PASOK Party, George Papandreou. This is what he had to say about the talks breaking down in Athens this afternoon.

(BEGIN VIDEO CLIP)

GEORGE PAPNDREOU, LEADER, PASOK PARTY (through translator): It is necessary for us to work closely together, as I have said, with no second thoughts, without thinking of our own interest.

We must set these things aside to serve the national cause, to not let these sacrifices of the Greek people go to waste. To justify these sacrifices by doing what's best for the country.

(END VIDEO CLIP)

BOULDEN: Let's point out, though, that talks are set to resume again next week, probably Wednesday. So, it's not over yet, but the markets certainly hoped that this deal would have been agreed to by now.

FOSTER: I want to bring you to more immediate matters, because all across the wires, we're now hearing from EU sources that Austria has lost its Triple-A rating. You were expecting that, though.

BOULDEN: Yes, Austria and French -- France were the two that were mentioned the last couple of hours. It's almost important to note that the same sources have been saying Germany and the Netherlands haven't --

FOSTER: Yes.

BOULDEN: -- lost their Triple-A rating. So, it's important to show that they are picking a few of the 15 that they warned back in December, Standard & Poor's, not all the 15 or the 17 that they were warning about before.

FOSTER: France also saying no more austerity measures, despite the downgrade, so they're not going to be reacting to this.

BOULDEN: The issue might actually be the EFSF, as you pointed out to our guest, because then you have -- their bonds are very important. They're the bonds that they sell in order to bail out Portugal and bail out Ireland.

Now, that's going to make it a little bit more expensive for those bonds into the market. Just a little bit more expensive. I think the way to put it, it's another hurdle to solving this problem. This isn't something people wanted to say -- to see, but we've known since early December that this day was coming.

FOSTER: And we should probably just mention Italy, because that's where we get really concerned, isn't it? They're heading into B grade territory.

BOULDEN: Yes. Italy is, what? A, according to my notes. If they go into B, then they're in the second tier, and there are definitely going to be insurance companies --

FOSTER: Selling off.

BOULDEN: -- pension funds, who probably aren't allowed to hold something B. But it may be that you still need two ratings agencies to move it to B in order -- until they sell.

FOSTER: Jim, thank you very much, indeed. Now, across the Atlantic, JPMorgan shares are down by around 3.5 percent, and the bank's net profits sank 23 percent in the final quarter of last year to $3.7 billion. Profits more than halved of its investment banking arm.

The bank's asset management center also performed poorly, bringing in 40 percent less cash than in the same quarter of 2010.

JPMorgan is the first major US bank to release its Q4 figures. Alison Kosik is at the New York Stock Exchange. So, is that better or worse than you expected, Alison?

ALISON KOSIK, CNN CORRESPONDENT: I didn't even hear -- I didn't hear what he had just said.

FOSTER: All right, I --

(CROSSTALK)

KOSIK: Max, I think you were asking me about -- go ahead.

FOSTER: JPMorgan.

KOSIK: Yes, yes. JPMorgan's results coming in worse than expected. It's why we're seeing JPMorgan shares down 3.5 percent.

But the overall market, you look at the numbers right now, the major averages are down significantly, the Dow down 95 points, the S&P 500 down about 10. This is all relating to the reports of the S&P downgrade on Austria, on France, and possibly Italy.

But you know what? You can view this as a good sign that we're not seeing as big of a market reaction as you'd expect. There seems to be a sense, at least through the markets, that things seem to be stabilizing here, at least. Adjusting to each headline that comes out.

Investors basically had a heads up about what was coming, as you said. They knew that this could come around after hearing what -- that these countries were on watch in December, so traders really did not take this as a big surprise. Some say they'd been expecting this news for months.

Once again, JPMorgan's earnings, that has a factor in today's losses, definitely hurting the entire financial sector. Remember, JPMorgan tends to be thought of as the healthiest of the big banks, and today's results, Max, have investors worried about the others that are reporting next week, like Bank of America, CitiGroup, and Wells Fargo.

CitiGroup and Wells Fargo, which report their results next Tuesday, both of those are down as well. Wells Fargo down about a half a percent and CitiGroup down about 3.33 percent, so we're definitely seeing the financial sector getting hit hard on the tail of that JPMorgan report. Max?

FOSTER: OK, Alison, thank you very much, indeed. Much more on this breaking news out of France for you. We'll be live in Paris after the break with reaction from Paris, Senior International Correspondent Jim Bittermann will be joining us.

(COMMERCIAL BREAK)

FOSTER: France being downgraded. For reaction from Paris, Senior International Correspondent Jim Bittermann joins us, now. We've got confirmation, now, right, Jim?

JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Right. In fact, we've got confirmation from the French finance minister himself, who was in an emergency meeting at the Elysee Palace this afternoon with President Sarkozy and then went directly from that over to French television.

And I think they wanted to head off the official announcement from New York by making it look like they're in control of the situation, at least a little. And in fact, he went on French television this evening in the big 8:00 news, which is the major news block here, and announced that, in fact, France had been downgraded one notch to Double-A-plus.

And then went on to explain the reaction to that. He says it's not good news. He said the government's going to continue on the course it's set towards reforms and basically said that it's the government and not the markets which is setting financial policy, Max.

FOSTER: And in terms of economics, what does this mean? Is there a concern about the affordability of France's debt right now?

BITTERMANN: Well, we heard earlier this afternoon from the government spokesman who said, look, this does not mean that France is not going to pay its debt, that it's solid and all the rest of it.

And as you've been talking, I think you've heard that, in fact, the markets have pretty much factored in this downgrade over the last four weeks or so. President Sarkozy himself anticipated it back in mid-December and said, while this would be bad news and make things difficult, it wouldn't be insurmountable.

It is going to cause problems, though, because it basically means that everything the government does, and in some things that the private sector does, that there could be increased interest rates at a time when growth here is pretty much flat.

And as a consequence, it's going to be another weakness in the French economy. And of course, the French have been totally implicated -- totally engaged in this effort to shore up the bailout funds for Europe.

So, from that standpoint, if France looks weak, then you have to say, well, is this European bailout fund, has that been weakened, as well, Max.

FOSTER: And does it strengthen or weaken Sarkozy going into the election?

BITTERMANN: I would say very much so. In fact, the opposition, his opposition, there are a lot of opponents out there that would like to bring him down. And in fact, this afternoon, all afternoon long, as soon as this rumor started this afternoon, they have been on television saying this is proof of the failure of Sarkozy's policies.

We heard this morning at the European American Press Club from Marine Le Pen, the Front National candidate, even before this news came out, she was saying that France has no business in the euro and should pull out of the euro and all of that.

Now, of course, she's been back on television as this announcement came to light this afternoon and she's been back on television and saying this is a complete failure of the government's financial policies.

So, I think that for Sarkozy, it's going to be a big blow politically. We'll see how it plays out. It's still 100 days before the elections here, but nonetheless, it's going to be something that he very much worked for, he was -- he said he was going to keep France in that Triple-A box, but in fact, it looks like he hasn't been able to pull that off, Max.

FOSTER: OK, Jim in Paris, thank you very much, indeed, for that update. We'll be back with an interview with the Nigerian finance minister after the break, who's got a whole set of different problems in her country.

(COMMERCIAL BREAK)

FOSTER: Tonight, our Tweets from the Top reveal more frustration in China. Twitter founder Jack Dorsey, who's on business there, writes, "Hello, Shanghai. Twitter is blocked here in China, so I can't read any tweets."

Economist Joseph Stiglitz is focused on Europe, though. He writes, "I'm convinced that if Germany, France, Spain, and Italy were to implement the financial transaction tax together, it would work."

And Rupert Murdoch tweets, "Many questions and jokes about MySpace. Simple answer, we screwed up in every possible way, learned lots of valuable, expensive lessons."

Let me know your thoughts @MaxFosterCNN.

Now, it certainly was an expensive mistake for Murdoch. News Corp sold MySpace in June for less than a tenth of the $580 million it paid for it. John Abell is the New York Bureau Chief of tech site Wired.com. He joins us now.

I guess we all knew it was a big mistake, but finally an admission from the man at the top.

JOHN ABELL, NEW YORK BUREAU CHIEF, WIRED.COM: Yes, not so much an admission, I guess, as a soul -- soulful confession. Everyone sort of knew it was a bad idea. But it's really nice to see the guy at the top sort of fall on his sword and say, "You know what? We really screwed up. We learned something, but we really screwed up."

FOSTER: How did they screw up? Because -- was it -- was it the fact that Facebook was just better and better run, or the herd mentality just lent towards Facebook and it just grew out of there?

ABELL: Well, my own view of it was -- is at the time, it probably wasn't a bad idea. We can always argue about whether people overpaid for things. AOL overpaid for stuff, Yahoo overpaid for stuff. But they were using hyper-inflated, per-dot-com boom money.

Murdoch News Corp has always used real money that they've made the old fashioned way, so they wanted to buy into the game in a big way. They wanted to establish their beachhead. MySpace was the leader at the time. So, apples to apples, it made perfect sense.

What they didn't know, what no one knew, was that Mark Zuckerberg would eat everybody's lunch in a few years. So, whatever. You chalk it up to experience and you move on.

FOSTER: What is the value in MySpace now, because it's still an ongoing business worth millions of dollars. So, what is the value he's got there, now, Murdoch?

ABELL: Well, he doesn't have any stake in MySpace anymore. An equity firm, which includes, ironically, Justin Timberlake, bought it, and they'll do something with it.

There's a community there. There's still a community there. There's lots of people that hang out there, independent bands hang out there. So you can do something with it, you just have to be much less ambitious than they wanted to be, than they were, which was the world's leading social network for several years.

FOSTER: And what did we learn about social networking through the battle between MySpace and Facebook?

ABELL: Well, you can say that you could learn how to do everything right, even if you are annoying your customers and the tech press by following what Facebook has done, and you could say we can learn everything that you could do possibly wrong with MySpace, which had a perfect lead and lost it, really, through its own fault, not through the fault of Mark Zuckerberg.

One tiny thing is that they allowed people to sort of tart up their pages in ridiculous ways, and it would almost give you epilepsy. So, I think a lot of people just turned away from what looked like a very cluttered playground of small children.

Facebook looked mature at the time. It started out as an Ivy League network. Now, of course, Google Plus is going for an even more, quote- unquote, "adult crowd."

FOSTER: OK, John Abell, thank you very much, indeed, for joining us with that.

Now, as Europe grapples with its debt downgrade, we'll look at how the US is coping five months on from its own Triple-A downfall.

(COMMERCIAL BREAK)

FOSTER: Welcome back, I'm Max Foster, these are the news headlines this hour.

France's finance minister has confirmed the ratings agency, Standard & Poor's, has downgraded its credit rating. France will be downgraded one notch, from Triple-A to Double-A-plus. The downgrade will make it harder for France to borrow money. AFP is also citing an EU source saying S&P has downgraded Austria.

Efforts to write down Greek debt are faltering. Talks between the Greek government and its creditors have stalled. Their proposed deal would have seen banks take a voluntary 50 percent haircut, reducing Greece's debt load by $126 billion.

Anti-government protesters in Syria turned out in large numbers this Friday to show support for the Free Syria Army. A major anti-government group has agreed to join forces with the group of armed deserters for a common cause, that of toppling Bashar al-Assad's regime.

UK and Pakistani officials are denying the prime minister of Pakistan made a panicky phone call to the British High Commission. A news report said Yousuf Raza Gilani had expressed fears about an imminent military coup. On Friday, Mr. Gilani appeared -- appealed to Pakistani lawmakers for support, saying they have a choice between dictatorship and democracy.

Thailand has arrested a Lebanese man for allegedly trying to carry out terror attacks. Israel and the US say that citizens may have been the intended targets. The Thai government believes the suspect has ties to Hezbollah, which has no known presence in Thailand.

A Peruvian court has sentenced Joran van der Sloot to 28 years in prison for killing a 21-year-old Peruvian woman. Van der Sloot appeared visibly upset as the judges handed down the sentence. The court also ordered him to pay almost $75,000 to the family of the murdered woman, Stephany Flores.

Well, the rumors are true. France has confirmed that it has been downgraded by Standard & Poor's. The ratings agency is rumored to be dangling the ax over several other eurozone countries and now, most dramatically of all, France is now losing its Triple-A status.

As we'll see, that could have serious knock-on effects. The most obvious effect will be on borrowing costs. The Triple-A rating is the gold standard that let's investors lend with confidence. At the very least, this will make short-term borrowing for the downgraded countries.

Now where things could get really messy is with the institutions backed by downgraded countries. And there's no institution more important than the European bailout fund, the EFSF. It's imperative for that to have a AAA rating status and if it's guaranteed by countries that have just been downgraded, the fund itself could be next. Both its credibility and its firepower would take a massive hit.

Now, confidence is also a factor. We heard Mario Draghi yesterday say that low confidence is holding back the recovery. This won't do any -- do confidence any favors. It doesn't mean stocks will collapse. In fact, in the past, we've seen stocks rise in countries after they have been downgraded.

But the political pressure on Europe's leaders will be massive, particularly people like French President Nicolas Sarkozy. Losing the AAA rating is a very sensitive issue in France, with an election coming up and Sarkozy struggling in the polls. This could be a major blow for one of the rescue plan's main architects.

Now, the U.S. lost its own prize AAA rating from Standard & Poor's in August last year.

Maggie joins us now from New York looking back on that. She's got some experience.

MAGGIE LAKE, CNN CORRESPONDENT: Yes, that's right. And here we go again, Max.

But it is important to sort of put this in context and remember what happened. This was when it was unthinkable that these AAA countries would have their ratings at risk. There was so much angst, you'll remember, and market swings, big moves back then, because this was really the first time we were sort of crossing into that threshold of this new reality we find ourselves in.

But in -- right away -- I mean we just talked about the political blow, the political pressure. Right away at the time -- although there was a lot of talk about that, as well, in the U.S., President Obama came out and pretty much downplayed the change in rating.

Have a listen to that then.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Markets will rise and fall, but this is the United States of America. And no matter what some agency may say, we've always been and always will be a AAA country.

(END VIDEO CLIP)

LAKE: Now you might expect that a politician would say that. We're hearing echoes of that, indeed, coming out of France today. But take a look at the market reaction, what happened in the markets, because, of course, the fear was that this was going to ratchet up borrowing costs, make it difficult.

This is a chart of the 10 year Treasury yield, the benchmark interest rate here. And, in fact, what happened is, for the most part, borrowing costs actually fell. It was exactly the opposite of what people predicted.

Now, of course, it -- it's not to say that that's going to be the case for France or for these European countries should they be downgraded. In many cases, this is the U.S. sort of winning the ugly contest here and it's the best out of a bunch of worrisome countries. So that's not going to be able to happen again and again.

The other important distinction here, Max, while that may be the sort of similarity, the -- the difference is that that downgrade was really seen as a slap on the wrist politically. S&P, the ratings agencies didn't like the politics that were paralyzing Washington as much as it was about the sort of whether or not the U.S. would really pay its bills.

A little bit more of a complicated story in Europe, where you've got these many countries working together to try to solve the crisis. As you mentioned, what happens to the fund.

Does that rating gets changed as a result?

So much more complicated here and maybe more room for market reaction down the road, although today everyone sort of taking it in stride.

FOSTER: Maggie, thank you very much, indeed.

And the German government again reiterating tonight that it thinks downgrades are overrated.

Well, after the break, Nigeria's battle to top an oil shutdown. We'll hear from the country's finance minister, after the break.

(COMMERCIAL BREAK)

FOSTER: Strikes and protests in Nigeria are on hold as union leaders go back to the negotiating table. Striking workers are still threatening to stop the flow of Nigerian oil unless a deal is reached. Protesters blocked the streets for a fifth day on Friday, with many calling for President Goodluck Jonathan to step down.

They're unhappy about the lack of accountability from his government and the decision to end fuel subsidies.

In solidarity with protesters, a major oil union has threatened to halt all production from Sunday. That move has already sent global oil prices rising. Last ditch talks to avoid a shutdown will start again tomorrow. A union official told protesters to use the two day break to stock up on supplies.

Nigeria's finance minister says talks with U.S. may not begin until Saturday night. With a shutdown due to start on Sunday, I asked her earlier if that was too late in the day to stop it happening.

(BEGIN VIDEOTAPE)

NGOZI OKONJO-IWEALA, NIGERIAN FINANCE MINISTER: Well, I mean that -- that they are taking the view that, you know, you've got all night, you're all -- all morning, you know, to keep talking, all early morning.

FOSTER: But how likely do you think it is that the production system will be closed down, which will have not just a huge impact on Nigeria, but on Africa and the world as a major oil exporter?

OKONJO-IWEALA: Well, look, we prime minister to avoid that. I cannot tell you how likely. What I can tell you is that we are optimistic that we'll come to a conclusion. I can tell you what we -- we are hoping that this will be resolved so we -- it doesn't have to come to that.

FOSTER: What about temporarily, at least, reinstating the fuel subsidy whilst you can work out some sort of better way forward, because this clearly isn't working?

OKONJO-IWEALA: This is -- no, no. I want to correct that, please. You know, the wrong impressions are being given. The governments are able -- are in negotiation. I mean allow that to work. This is a -- an issue between the Nigerian people and its government, between the labor and -- and -- and the government.

FOSTER: It's also to do with the industry...

OKONJO-IWEALA: And they are talking and it's going well.

FOSTER: -- the Nigerian oil industry, as well...

OKONJO-IWEALA: You're giving the impression that...

FOSTER: They're threatening to close down the...

OKONJO-IWEALA: -- that it's not (INAUDIBLE).

FOSTER: -- production system.

OKONJO-IWEALA: The discussions are -- are going on in an encouraging atmosphere. So they have to be allowed to mature. Trying to jump in, you know, suggestions that are not workable.

Look, the president of Nigeria, President Goodluck Jonathan, wants to resolve this issue. And -- and he knows that Nigerians want to get back to work. And that's what we are going to try and do. We are all Nigerians and we have the same objective, of getting a resolution. That's what we are focused on.

We are not focused on, you know, negative outcomes.

FOSTER: The problem with the -- the getting rid of the -- well, getting rid of the subsidy has meant that, obviously, prices across the board have flown out of control in many shops. And that's having a huge knock-on impact, which you couldn't really have predicted before it was taken away.

OKONJO-IWEALA: This...

FOSTER: So it's having a much more severe in -- effect than I presume you planned.

OKONJO-IWEALA: No, this is not the first time that the subsidy has been removed in Nigeria. For two decades, every single government has done this. There's a very short memory, you know, and it's always the result of the resistance and a strike and so on.

Please, go back and do the research and you will find this is the case, you know, because it's a very emotive issue for Nigerians because of the issue of lack of trust between the government and its people.

It is to now try to move this forward, regain the people's trust. We cannot feel because of mistakes in the past, the country should not move forward, we should remain mad in -- in -- in issues that don't work.

We need to understand the anger and pain of the Nigerian people. We fully do that. We are all Nigerians.

You know, and then we need to take the vote -- the decision, you know, that recognizes the pain of the people but at the same time, tries to resolve the issues that we have. That's also what we prime minister to do.

So, you know, this is something that has to be -- to be resolved in this country. And I think with the negotiations going on, we will find a solution.

I just want to mention to you that the transporters in the country, they have -- many of them have said that they are bringing their -- their prices down. The National Union of Transport Workers has undertaken to bring its price down by 20 percent. In many states, like in the southeastern states, they have agreed to bring down prices.

This is happening in place after place in the country.

So once that takes effect, it will also have a knock-on effect on other prices in the economy and they'll come down.

FOSTER: Well, that's the finance minister.

The head of Nigeria's central bank says he's hopeful there'll be progress from this weekend's talks. Earlier, he told CNN's Becky Anderson what he was hoping to achi -- hoping to see.

(BEGIN VIDEO CLIP)

SANUSI LAMIDO SANUSI, GOVERNOR, NIGERIAN CENTRAL BANK: What should, I think, happen, is have an agreement on what the level of subsidy will be in the short- to medium-term, probably some commitment of certain deliverables from government and then hopefully a time line for the final removal of -- of these subsidies or at least their reduction to a level where it is no longer economically profitable for anyone to smuggle and to -- and to abuse the process.

So I -- I think that the labor, the (INAUDIBLE) the governance are all committed to reaching a compromise. It is in nobody's interests, at this point in time, for the system to continue being overheated. Certainly nobody should continue to risk the loss of life.

(END VIDEO CLIP)

FOSTER: That is the governor of Nigeria's central bank speaking to banker. And you can see that interview in full tonight on CONNECT THE WORLD. That's in just over a couple of hours from now, 9:00 p.m. in London, 10:00 p.m. In Abuja, right here on CNN.

We've got the weather for you now.

Jenny is at the Weather Center.

And you don't want to be flying over the Midwest of the U.S. right now.

JENNY HARRISON, ATS METEOROLOGIST: No, it's not been a good Friday so far, Max.

Winter, of course, so that's what's going on. You know, there it is winter.

Well guess what?

It's arrived, I think, really, at the end of this week.

And you can see it on the satellite. All of these clouds -- that is the main area of low pressure. Very strong winds as well as the first sort of real snowfall all but the season.

So the winds coupled with the snow are really what's been causing the delays.

These are the airports reporting delays right now. You can see certainly a lot of them up into the Northeast. And they are sort of coming and going into, you know, are they in place, are they not?

So the best advice, of course, is to assume there will be some delays, but, also, of course, get to the airport in plenty of time and, of course, check ahead with your airline, too, because these lows are going to last throughout Friday, probably into Saturday, if you're coming or going to the US.

This is a system, now, the winds, when I say strong, I mean gusting to around 80 kilometers an hour. And it's very cold, as well.

So when you put the snow with winds like that, it feels like this. It's around minus 13 Celsius in Chicago right now. Minus six across in New York.

And that cold air with those strong winds, even, unfortunately, all the way this far south, so it feels like minus two Celsius right down there in Atlanta.

But look at the snow in the last 24 hours. As I say, the first sort of proper snowfall of the season. Chicago, for example, 15 centimeters, which is around six inches. And then one of the highest totals, 23 centimeters there, Elkhart in Indiana.

This is a system, it's moving very quickly. So for the next 48 hours, we don't really expect to see huge amounts of snow. It's just that with those strong winds, it will be causing some very dangerous conditions. You can see the warnings in place next and right up there into the far northeast. And the delays will continue as we go through Friday. And the overnight hours, some other airports may well begin to really feel the impact. Some will be 45 minute delays there. And Chicago, for example, an hour-and-a-half.

So, as I say, be prepared for all of that.

But it's a south weaving system. But it's going to be cold in the wake of it. Mostly clear, though, really, once that system has gone through. And as for the temperatures on Saturday, rebounding a bit in the south. Ten Celsius in Atlanta. Still cold in Chicago at minus five.

And for Europe and the weekend ahead, it's a very unsettled picture across those central regions. It is cold. We are still seeing that snow actually much of the central region and the east of Europe.

And then we've got this high pressure build again. So it stays dry, some sunshine, quite a bit of low cloud and some fog. And it's what is known as an Omega Block. It's the shape of this -- this blocking area, look, that gets set up and what happens. This is the jet stream.

So it's being blocked from pushing further south. So all these systems swing across the top and then head toward the east. So it's also very cold across those regions.

There's the snow. There you can really see quite clearly this Omega high, as I say. And that's when the rain is coming in.

Winds not too bad, fairly brisk right now in Copenhagen. But they should be easing as we go through the weekend -- Max.

FOSTER: Jenny, thank you very much, indeed, for that.

Now, before we go, a recap of the downgrades in Europe this hour.

France's finance minister has confirmed the ratings agency, Standard & Poor's, has downgrade its credit rating. France will be downgraded one notch, from AAA to AA+. AFP (ph) is quoting a new source saying S&P has also downgraded Austria.

That is QUEST MEANS BUSINESS.

I'm Max Foster in London.

Thank you so much for watching.

And we'll be back in a moment with MARKETPLACE AFRICA.

(COMMERCIAL BREAK)

ROBYN CURNOW, HOST: Hello and welcome to MARKETPLACE AFRICA.

I'm Robyn Curnow in Johannesburg.

There have been protests and strikes in Nigeria this week after the government decided to scrap fuel subsidies. Nigeria is Africa's largest oil producer. It exports around $200 million worth of oil every day.

But despite that great wealth, most Nigerians still only earn about $2 a day.

Now that fuel prices have doubled overnight, most Nigerians are very angry.

Well, Vladimir Duthiers is in Lagos for us.

(BEGIN VIDEOTAPE)

VLADIMIR DUTHIERS, CNN CORRESPONDENT: So this is what it's all about. We're standing here in a fuel station, a petrol station, in Lagos, Nigeria. Normally on a day like today, this place would be packed full of cars, full of motorcycles, people in line waiting to get some fuel.

On a day, today, it's a strike day, so it's closed. But if you look up here, this is really what we're talking about. The price of a liter of petrol right now is 141 naira. About two weeks ago, it was 65 naira.

Most people that we talk to say the only benefit to them being part of a country that has so much oil is the fact that they can buy petrol for a fairly cheap price.

The government has kept those prices cheap for the last five years. They say they can't do it anymore. They say that right now, they need to take the money that they would normally be spending on the fuel subsidies and use it to build up the infrastructure of Nigeria.

But most Nigerians we talked to are not buying it. They're angry and that's why they're taking to the streets.

UNIDENTIFIED MALE: the effect on the economy on the masses is quite harsh. It's very oppressive. The costs of transport have doubled, food, everything, because PMS (ph), people are out of their work, because we don't have power in the country. We need fuel to power to run the economy and this is all must be here again to -- to risk.

UNIDENTIFIED MALE: it's all about good governance and accountability. We want a situation where our leaders to come and account to us how they've been spending our money. Every year in Njabo (ph), just over four (INAUDIBLE), which is about $3 billion, which passes.

And at the end of the day, you know, the young people, they don't see how the money is being used.

DUTHIERS: I'm standing in the shadow of Banana Island, one of the wealthiest enclaves in Lagos Nigeria. While everybody has been affected by the removal of the fuel subsidies, most people that are hardest hit are those that are struggling to get by on just a few naira a day.

Many of them are small business owners that own little businesses on the side of the road.

We talked to somebody the other day who told us that because of the increase in fuel prices, that some of their family members can barely afford to eat every day.

DUTHIERS: So now you...

ZEINAB ADAMS, STREET VENDOR: It's just...

DUTHIERS: -- you've increased the price of bread.

ADAMS: Yes.

DUTHIERS: Have you seen that, too, that people can't afford to buy as much bread from you?

ADAMS: Yes. Some, like when I told somebody, this is 70 or 100 naira, he will say ca -- he will just, you know, feel sad. When he feels sad, sometimes he'll give me garri. Then some will say give me biscuits. They will -- they will buy waster finish. They will live on (INAUDIBLE) bread, because they cannot afford it. The money is not enough.

The way they expected it, it was not like that. It has been increased. So they can not afford it.

YUNJI LARDNER, BUSINESSMAN: The, Nigeria has been like, over the last 50 years, like a giant Ponzi scheme, right?

DUTHIERS: Yes.

LARDNER: The chickens are coming home to roost now, right?

It's unfair to blame President Jonathan and this particular administration, because really he's sitting on top of that Ponzi scheme.

It's just that now, you know, he's left holding the can.

So the question now is can his administration rise to the challenge of providing an alternative vision for Nigerians?

DUTHIERS: What is -- what is the informal sector?

Talk to me about that.

TUNJI LARDNER, BUSINESSMAN: The informal sector is the okada guy, the little kiosks you see, those young men you see plying the streets selling stuff. Aggregately, they add up to a sizeable chunk of economic activity in Nigeria.

And the reason why this subsidy issue is particularly painful to them is because petrol, HGO (ph), is the fuel that drives their businesses. It is not just a function of cars, it is the little generators that they own that power their small saloons, that power their small barber shops, that power their small mom and pop shops, that power the refrigerator they use in selling their beer.

And so it's at the very heart of it. And at night, there's a very little generator they use in powering their homes.

Why?

Because of the systemic collapse of the infrastructure over the last 50 years, exacerbated particularly over the last 12 years. Under the last one regime of President Obasanjo, they spent $16 billion in pro -- in the provisioning of power and nothing came out of it. We still generate way below 5,000 megawatts of electricity a year.

DUTHIERS: Right.

LARDNER: So the rest of that is subsidized, indeed, by Nigerians, right?

If you aggregate all the numbers of generators we have, we're probably generating close to 30,000 megawatts. But those -- that 30,000 megawatts is privately owned.

So you have a state that has failed to produce the social goods and services, right?

And everybody is their own independent state. They provide their own water, their own lights, their own food. There's nothing they get from the -- from the -- from the government.

And this -- this is the one thing, in the public opinion, that they derive from being an oil producing country. That is why it is a deeply emotional issue, right. It's beyond the reason of pure economics.

In this instance, as they always argue, change happens when the -- the cost of change, right, is cheaper than maintaining the status quo. Right. I think the status quo is untenable, right. And this is a magical moment for the administration for the administration of President Goodluck Jonathan to first transform himself and then be the transformational leader he claims to be and come forth and stand with the people and put in place a legal, rational basis for rewriting the social contract between the government and Nigerians.

(END VIDEO TAPE)

CURNOW: Vladimir Duthiers there in Lagos.

Now, from one financial trouble spot to another, as the Eurozone crisis continues, I sit down with the head of the IMF to talk about what economic lessons Europe can learn from Africa.

(COMMERCIAL BREAK)

CURNOW: During a recent trip to Lagos last month, the head of the International Monetary Fund, Christine Lagarde, praised Nigeria's efforts to transform its economy.

Obviously, with the recent violence and protests, many Nigerians might disagree with her.

But she was also recently in South Africa.

And I sat down with her and began by asking her what challenges African economies like Nigeria face.

(BEGIN VIDEOTAPE)

CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: The first message that I gave to both the Nigerian, the Niger and the South African authorities is to rebuild the buffers that have been used during the financial crisis, wherever they could, to, you know, have reserves available.

The second message is make sure that the growth that you encourage, by whichever way or ways are available to you, it's a growth that is inclusive, that is creating jobs, because jobs are really at the heart of any development policies at that moment in South Africa, but in other countries, as well.

CURNOW: Easy to say that.

LAGARDE: Yes. But in all places, there is a vibrant youth that is expecting the leadership of those countries to actually open the economies so that they can actually express their talent and -- and find ways to get integrated in the job market.

CURNOW: More than ever, the Eurozone crisis has put it to African leaders that they have to look East.

How significant is that?

LAGARDE: All countries are interconnected. There is no question that a crisis in one particular part of the world is going to effect those countries, but also all other countries, especially it is a large volume of trade between those countries.

When I look at South Africa, I know that there is about 30 percent of trade going to Europe. So if something goes wrong in Europe, it will have an effect on South Africa. Why is why any solution will require the cooperation of all players. And I understand perfectly that South African authorities are concerned about the way the Europeans are dealing with their crisis and prime minister to addresses solutions.

CURNOW: Many people here have watched with fascination how Portugal has turned to Angola for some sort of financial help.

Dusts shifting, perhaps, the power relations on a global scale?

LAGARDE: There is, at the moment, a major reengineering between advanced economies, emerging markets, developing countries. And, clearly, emerging markets are playing a role that is much bigger, much more important in terms of leadership than they did, say, 10, 15 years ago.

So is there a -- a reorganization happening as we speak, which is good, in the main, because there were massive imbalances and those imbalances are -- are not good for the global economy.

But it is difficult and it's a transition phase that is complicated to deal with.

CURNOW: Does Africa and do African economies have a role to play that's positive?

Is there -- is there something to be learned from -- from African economies over this?

LAGARDE: Well, first of all, the African continent, in and of itself, has had a growth rate that was significantly higher than that of Europe and that of the United States, lower than some of the big emerging markets such as China, India or Brazil, but in the range of 6 percent lately.

I think that's one reason to be optimistic about Africa.

The second reason to be optimistic about Africa is that it holds significant commodities, raw materials that are so needed for the growth of other countries. If you look at the volume of trade between, say, China and South African countries, such as South Africa, the volume of trade amongst African countries, in terms of intra-regional trade, that is growing, as well.

So those are alternative sources of growth that differ from the traditional trade links with, say, Europe. And -- and these are new opportunities for African countries to actually develop and -- and strengthen.

(END VIDEO TAPE)

CURNOW: Well, that's it from us here in Johannesburg.

I'm Robyn Curnow.

And from the MARKETPLACE AFRICA team, see you again next week.

END