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QUEST MEANS BUSINESS
Disagreement About Fed Rate Hike Timing; US Stocks Stabilize; FTSE Has Best Week Since 2011; Osborne Says EU States Want to Engage in Negotiations; Britons Debating Exit From EU; Eurogroup President Calls EU Recovery Path "Strong"; Turbulent Times Ahead for Latin America
Aired October 9, 2015 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Dow Jones Industrials rising on Wall Street, bringing an end to a week which has seen the Dow rise all five days. First time for
some weeks that we've had such a strong, robust session.
QUEST: The number may not be the high -- that's right, hit the gavel, bringing trading to a close on Friday, it's October the 9th.
Tonight, the single biggest question in global economics: I'll ask the Fed vice chair, Stanley Fischer, how close are we to a Fed rate rise?
Chancellor Merkel wants answers from the UK and Brexit. I'll get them from the British chancellor of the exchequer.
And the eurogroup president tells me Europe's asylum policy has exploded in the midst of the migrant crisis.
I'm Richard Quest, live at the -- Lima Peru for the IMF annual meetings, where of course I mean business.
Good evening from Lima, where it's late afternoon here in the Peruvian capital. And tonight, we have a bevy of minsters. I'm not sure what the
collective noun for central bankers and finance ministers is. Maybe we just call them an IMF of the lot.
Tonight on this program, you're going to hear from the finance minsters and you're going to hear from the United States. You're going to hear from the
UK. You'll hear from the eurogroup, and you'll hear from the eurozone, as well as New Zealand, Australia, and Colombia, all of which we'll be trying
to put together where we stand in the global economy.
And as you can see from the map, it is a very full range of which you're going to get the difference of opinions, from developed to developing to
those that, perhaps, are leading the way.
The tiny move that looms large across the global economy at the moment is when will the Fed raise interest rates? The latest minutes show that the
US Federal Reserve has been very concerned about international developments, cautious about the global economy.
Now, if you take what most private economists believe, well, conditions will be ripe by the end of the year. According to some of the latest
minutes, there's disagreement amongst Fed members, FOMC members.
The New York Fed president, William Dudley, says it could happen this year and warns it's too early to commit. The Chicago Fed president, Charles
Evans, says rates could stay below 1 percent until the end of next year and says the speed of hikes is more important than timing.
Joining me is Stanley Fischer, the vice chair of the US Federal Reserve. I will give you the phrase before you say it, that the move is data-
STANLEY FISCHER, VICE CHAIRMAN, US FEDERAL RESERVE: Thank you.
QUEST: What does that mean in terms of where we stand at the moment and what from your point of view is the latest thinking between now and the end
of the year?
FISCHER: Well, the -- minutes of the meeting that took place in September have now come out, and the indicate that people had to fill out forecasts
based on what they thought was appropriate policy. In those forecasts, 13 out of 17 thought that the interest rate would be raised before the end of
Now, they don't commit the committee to doing anything, but that is an indication of the underlying thinking of the people on the committee. We
didn't raise the rate in September because we wanted to take time to appraise what had happened in China in particular, but around the rest of
the world in the last few weeks before the meeting.
QUEST: And as we look at those -- that statement that came out after the last FOMC meeting, there was much surprise that so much importance, if you
like, or so much reliance had been given on China, on international events, and the macro -- the global economic situation.
FISCHER: Yes, the Fed has in the past paid less attention to global developments, but the United States is increasingly integrated into the
world economy, as are all other countries. And we've now reached the stage where what happens abroad does matter for what happens to the United
QUEST: So, with that in mind, one could expect -- and extrapolating from your answer, one could expect to see international invents and global
economic matters playing more into Fed decisions.
[16:05:07] FISCHER: Yes, I think more than they used to.
QUEST: So, taking that -- and I realize, if I asked you the question when are you going to raise rates, you're going to say --
FISCHER: Whatever you say, Richard.
QUEST: No, but what I mean is, it's a moot point whether it's December or into next year, you're still looking at the unemployment question, you're
still looking at the inflation question, and you're still looking at, for example, what's happening with oil.
FISCHER: All those things, what's happening with oil and a few of the other things because we're interested in what inflation is going to be.
Our target is 2 percent inflation. We're not there yet. We need to be confident that over the course of time, a couple of years, inflation will
return to the 2 percent target.
And aside from that, we of course have an unemployment target. We're close to what most people think -- should be our target. And we want to be sure
that we don't get blown away from that.
QUEST: This is a fascinating environment that we're in at the moment, bearing in mind this low inflation, low unemployment, and still -- and
extremely low interest rates. And I'm wondering how much more difficult it is for central bankers to manage economies in this low inflation
FISCHER: The low inflation is -- is itself not a problem except for one thing, which is that it's very difficult to get the interest rate to go
below zero. And if the inflation rate -- the real interest rate to go below zero. And if the inflation rate is around zero, then it's very hard
to get positive interest rate.
QUEST: Here at the IMF, there's been --
QUEST: -- huge amount of talk about the effect of US monetary policy on the emerging markets. Now, of course, the US's main concern, the Fed's
main concern is the US economy. And by that, of course, the global economy.
So, how concerned and how much are you going to take into account the effect that -- in terms of communicating with countries, communicating
decisions with emerging markets? How important is it for you?
FISCHER: The law requires us to focus on United States unemployment, United States inflation. That is what we shall do. But of course, we
don't want to have any unnecessary volatility of interest rates or of the markets. And we certainly don't want to do damage to the rest of the
So, we try to make it clear what we're doing. And it's been noteworthy that in terms of what we hear from foreign central bankers, that many of
them are saying, OK, you've told us it's likely to happen. We're ready for it, please do it at some point.
And we will do it probably at some point, but we're not going to do it at a time that is not suitable for the United States economy. That's our main
job. That's, in fact, our whole job. So, we take them into account. We do our best to help, but that's as far as we can go.
QUEST: And that is, indeed, as far as we can go, sir. Thank you very much for joining us. I know it's a -- you -- it's good to have you. Thank you
FISCHER: Good to see you again, Richard.
QUEST: Good to see you, sir. Thank you very much. The vice chair from the US Fed, Stanley Fischer, joining us in Lima.
The Dow Jones Industrials closed the week five days in a row, five consecutive days the market was rose. It was up some 30-odd points at the
closing bell when all was said and done. Incidentally, on the European markets, the FTSE had its best week for some years, for some five years, or
four years or something. It's the best week on the FTSE since 2011.
Coming up after the break, the British chancellor of the exchequer, George Osborne, talks about the negotiations between the UK and European partners
as they try to renegotiate Britain's terms for EU membership. It's QUEST MEANS BUSINESS, we are in Lima.
[16:09:20] (COMMERCIAL BREAK)
QUEST: Suitable music from suitable places. Machu Picchu, which is still one of the seven wonders -- new wonders of the world, and definitely
extraordinary to visit.
Now, the British chancellor of the exchequer, George Osborne, repeated the mantra that the UK wants to be in Europe, not run by it. He says that EU
partner countries will have to accept that Britain has a legitimate case to make in its negotiations and, indeed, many have accepted this. Angela
Merkel met David Cameron on Friday to ask for more details of what the UK wants.
As we discussed with Governor Mark Carney on last night's program, all Britain -- all business in Britain are waiting for is the answer to one
simple question: should the United Kingdom remain a member of the European Union or, indeed, should they leave?
The issue, of course, will be put to the British people in a referendum that the government has committed to hold before the end of 2017, although
most seem to believe that it will actually be held sometime in 2016. I asked George Osborne, the UK finance minister, the current state of
GEORGE OSBORNE, UK CHANCELLOR OF THE EXCHEQUER: We're going to have a referendum on British membership of the EU by the end of 2017. So, that's
the backstop. And we are now in the foothills of that negotiation.
We're doing the technical negotiations and discussions with the European Commission and the European Council. We're talking to individual member
states, like Germany.
QUEST: What reaction?
OSBORNE: It's pretty positive. I think a year ago, you might have perfectly reasonably asked me, who's even going to entertain this
negotiation? The truth is, all the other 27 member states have accepted that Britain has a legitimate case to make, that they want to engage with
us on that.
And I would say it comes down to this: A, can we work together to make the European Union as whole more competitive? B, can we resolve the issues
between those who are in the eurozone and those who aren't?
C, can we make sure that when people move into Britain, they are not just coming to collect welfare payments? And D, can we deal with some of the
issues around sovereignty and have a close union and the role of national parliament? That's Britain's agenda, and I don't see why anyone in Europe
wouldn't support that.
QUEST: But you're going to have to do more than just tinker, aren't you? I mean, the Brit -- to go this far and to go to the British people with
such a fundamental question, it's going to have to be more than just the threads at the edge.
OSBORNE: Well, what it needs to be is a better relationship between Britain and the rest of the EU. And a better deal for the whole of the
European Union. Our issues around jobs and prosperity and investment are ones that would apply equally in other European Union member states. We've
got to make sure Europe is not a source of unemployment and stagnation, but a source of jobs and growth.
[16:14:53] QUEST: Has your job been made easier or more difficult by the diametrically opposed view, now, of the Labour Party, where there had been
maybe on certain areas an element of consensus around a market capitalist economy? The two major parties in the UK have gone in absolutely -- or
seemingly, potentially, different directions? You'd agree.
OSBORNE: Well, look, the Labour Party in Britain has chosen a leader from the far left. But I have to say, they're not taking their voters with
them, and they're not taking quite a lot of Labour members of parliament with them. So, it's not a great situation for them.
I would say our job is just to hold to the center, continue to speak for the majority of British people, and I think the majority of British people
want us to try and achieve a better relationship with Europe, and if we can do that, then I think they will support us in our continued membership.
But we have to show that Britain is in a position where we're in Europe but not run by Europe. In other words, working in Britain's national interest.
And that's what we are negotiating hard for.
QUEST: The British chancellor of the exchequer, the finance minister, George Osborne. John Authers has been a senior investment commentator for
"The Financial Times," author of "The Long View."
JOHN AUTHERS, SENIOR INVESTMENT COMMENTATOR, "FINANCIAL TIMES": Indeed. Indeed.
QUEST: So, when we look at what's happening -- let's just, before we talk about the emerging markets and all that, the UK and its negotiations with
Europe, how difficult is going to prove to be to get a deal with Europe that they can put to the British people?
AUTHERS: Exceptionally difficult, I would think. We've already discovered how difficult it is to swallow a deal with Greece, a country the size of
Greece. There's obvious long-seated cultural antipathies going on when it comes to trying to make concessions to the British. Many people feel that
the British are trying to have their cake and eat it anyway.
It's extremely difficult. So, I think the risks of a Brexit, which you do hear talked about by the kind of people I talk to on the markets, the risks
of a Brexit are rising steadily.
QUEST: And that, of course, if those are rising, eventually --
QUEST: -- they start to feed into the wider economy and into investment decisions.
QUEST: And we're not seeing that yet.
AUTHERS: No, right.
QUEST: But this could riven Britain, couldn't it? It could halve it, in part.
AUTHERS: Well, if we leave Britain, presumably -- sorry, if we leave Europe, then presumably Scotland leaves the UK, and indeed, quite
literally, it splits us in half. It's just the sheer uncertainty that creates is very problematic for the economy and for markets.
QUEST: Here at the IMF --
QUEST: -- one of the interesting things has been the -- lack, if you like, of crisis.
QUEST: This time. There's no crisis. And yet --
AUTHERS: A general gloom, no more than that.
QUEST: That. There's a general gloom, there's a general feeling that things could get very nasty very quickly.
QUEST: But we're not there. Would you agree?
AUTHERS: I'd agree with that. I think the critical thing here is China. There's a really very strong PR offensive from China saying actually we do
have this under control. We might have given you the impression a couple of months we didn't. We do.
And that's having a big effect on sentiment. That and the fact that we've seen markets bounce for a while, and people will reverse engineer what the
markets are doing to reality.
QUEST: Except, of course, when you put this measure --
QUEST: -- that they've got here, everybody is saying that the chorus from the hymn sheet seems to be -- China slowing down is a good thing, and we're
all rather glad it's happening, but we need to manage it and be careful about it.
AUTHERS: That, I have to say, is pretty much my perception as well. And it worries me. It's not so long since we all thought that we totally
relied on China to keep churning it out at 10 percent per year, and now we're trying to persuade ourselves otherwise.
What's very important to note: you don't hear that here in South America. They are very dependent on China. Arguably, they're more dependent on
China than China is itself. They are exceptionally concerned about how to manage the slowdown they're seeing.
QUEST: And we're glad you're here, sir.
AUTHERS: Thank you
QUEST: Thank you very much, indeed, for joining us.
As the ministers have been grappling with that very issue of the China slowdown and what happens next, one area of the world has perhaps enjoyed a
certain amount of relief. The eurozone isn't the crisis and topic of conversation that it's been before, as I heard from Jeroen Dijsselbloem,
the president of the eurogroup.
JEROEN DIJSSELBLOEM, PRESIDENT, EUROGROUP: It does make a nice difference. Though my point was already last year that Europe and the eurozone in
particular was recovering quite strongly, and not everyone believed me last year. This year, I think, the evidence is a little stronger. Growth rates
are still going up, even though the IMF is a little more gloomy than we are in Europe.
But the recovery path is strong. So now there's more focus on whether China will manage its transformation properly and what the effects will be
in emerging markets. Of course, that will also affect Europe. But I'd rather be on the optimistic side than on the pessimistic side.
QUEST: Just as you were coming out of this crisis of eurozone, straight into the migrant crisis --
QUEST: -- which is unbelievably heartbreaking --
QUEST: -- at all sorts of levels. And I wonder, as the negotiations continue, whether to not Europe has been found wanting.
[16:20:02] DIJSSELBLOEM: Well, we've had European asylum policy, but it basically has exploded. It doesn't function any more. The Dublin treaty
that we had dealing with asylum-seekers is now dead. We have to be fair. We have to design a new European asylum policy, which will have to be a
common policy much more than in the past.
QUEST: Can you do that, bearing in mind those nations -- Hungary, Poland, and others -- that are absolutely, implacably against this idea of a common
policy that requires quotas, even though you manged to get quotas through on a majority voting basis?
DIJSSELBLOEM: Yes. I think the quotas are only part of the solution. I think we will also have to invest much more in the region to make sure that
there is also a refuge for people in the region at a better standard than there is now.
We will have to do more to protect our outside borders. I think that's inevitable. The current amounts, the current numbers are so high, I don't
know how we can manage that if it continues at this sort of high level. So, there are at least three or four challenges at the same time.
QUEST: Can Schengen survive this?
DIJSSELBLOEM: I think so. I want it to survive. I think it's crucial. But it will require a lot more cooperation between countries at a European
level, much more common policy-making than we've done in the past.
QUEST: Well, it's the economic front, the migrant question, it all comes back to how far -- every road eventually leads us to ask how far European
countries, EU countries, are prepared to hand more to the center? Really, doesn't it? That's really what it always comes back to.
DIJSSELBLOEM: No, I wouldn't agree. I thin that Europe is part about handing over authority to the center, but a larger part even is about
working together between countries. At the moment, in the way we deal with the asylum crisis, we will have to do both. We will have to work between
countries very closely, much more. And some authority will have to be given to European institutions.
But just federalizing is not the answer, has never been the answer in Europe. It's always a combination of working between countries and the
QUEST: That's the president of the eurogroup, Jeroen Dijsselbloem, talking to me now. We're going to go from Europe back into the continent of South
America. The Colombian finance minister is with us after the break. A good example, he says, of those countries that put their house in good
order, so they are ready to face the slowdown from China.
[16:25:14] QUEST: The deputy prime minister and the finance minister from Mexico, who is here, has been warning that emerging markets in Latin
America are experiencing times of great volatility and challenges.
Now, the so-called Pacific Alliance, which includes Mexico, Chile, and Peru, met on the sidelines. Colombia, Chile, Peru, and Mexico. And the
top of the agenda is how to work together to confront economic challenges.
I spoke to Colombia's finance minister. The country is experiencing some deep economic problems as a result of lower commodity prices hitting the
price of oil. Also, of course, the slowdown in China. And I needed to know whether he believed this continuing issue, this economic problem, was
about to take its toll.
MAURICIO CARDENAS, COLOMBIAN FINANCE MINISTER: Yes, yes. Although only time will tell. Because we're waiting to see what happens with interest
rates in the US. We think that countries like us, Colombia, are well prepared. We can deal with that and that capital will still flow in, into
our countries. But there is a big uncertainty, and I think that's creating a type of noise.
QUEST: But you're being hit from several sides, aren't you? First of all, you're being hit from the possible rate rise. You're also being hit on the
oil export front and on the currency front. And you've got to keep interest rates high because of inflation. So, whichever way you look,
you're being clobbered.
CARDENAS: Yes, but what's our strategy? We said stick to the fundamentals. So, we've cut the budget. We raised taxes. We also had to
raise interest rates to deal with the accelerating inflation. So, we are saying it's -- you have to basically go back to your fundamentals and make
sure that your house is in order, and that will make you ready for the turmoil.
QUEST: In that scenario of raising interest rates, which of course raised the currency, but the currency is weak to start with, how much importance
do you put on protecting the currency in terms of all the other macro economic issues that you have to deal with?
CARDENAS: We're allowing the exchange rate to freely float. We think it's actually good for the country to have a more depreciated currency. We were
beginning to have a Dodge disease type of problem when oil prices were very high. So this is an opportunity.
A weaker currency will help many sectors of the Colombian economy. We'll reduce our current account deficit. It's going to be good for growth. And
QUEST: But you don't know how bad it's going to be, do you, in terms of the China slowdown and all these other effects? It's still playing into
the markets, into the economy.
CARDENAS: Yes, but so far, so good. I mean, we grew almost 3 percent in the first half of this year in a region that is not growing at all. We're
again one of the top performers despite the fact that our terms of trade fell by almost 40 percent.
QUEST: Do you think the public have cottoned onto this idea that it's -- that a properly-managed economy will have tough times, but it could be a
great deal worse?
CARDENAS: Well, a good managed economy will be successful despite what happens in the world. And I think it's -- again, it's your fundamentals.
If you have low debt, a low fiscal deficit, low inflation. And a country with good upsides, peace, infrastructure, will continue to grow.
QUEST: The Colombia finance minister talking to me. I promised you at the beginning of this program that we were going to take you right around the
world and you were going to hear how the various effects of the economic slowdown are being felt.
You've heard from the United States, you've heard from Europe, Latin America. In the second part of this program, the trans-Tasman view,
ministers from New Zealand and Australia, they join us to put their perspective on QUEST MEANS BUSINESS. Good evening from Lima.
[16:32:46] RICHARD QUEST OF "QUEST MEANS BUSINESS" SHOW: Still to come on "Quest Means Business," ministers join us from Australia and New Zealand
and we'll hear how the trans (ph) countries are being affected by the slowdown in China.
And the head of Europe Economic Affairs, he tells us perhaps too little too late. Get your house in order or time's running out. All that's still to
come, but this is CNN an on this network the news always comes first.
The United States will pause its program to train rebels in Syria after a criticism that only a handful of recruits have been found.
The U.S. defense secretary says the United States is looking for ways to improve the program which is costing nearly $1/2 billion. Ash Carter said
the strategy so far had not been working as intended.
ASH CARTER, U.S. DEFENSE SECRETARY: I wasn't satisfied with the early efforts in that regard and so we're looking at different ways to achieve
the - basically the same kind of strategic objective which is the right one which is to enable capable, motivated forces on the ground to retake
territory from ISIL and reclaim Syrian territory from extremism
So we have devised a number of different approaches to that going forward.
QUEST: The escalating conflict between Israelis and Palestinians has now spread to Gaza. Israel's military says troops fired at protestors who were
throwing stones and rolling burning tires as they approached Gaza's fortified border with Israel.
Palestinian medics say seven people were killed.
Tunisians took to the streets to celebrate after the Nobel Prize for Peace was awarded to Tunisia's National Dialogue Quartet.
The group helped build democracy in the country after the revolution. One winner said this is a crucial day for Tunisia.
WIDED BOUCHAMAOUI, NOBEL PEACE PRIZE WINNER, VIA INTERPRETER: It is something incredible. It is a very important day.
This is the recognition of the Quartet, but also the recognition of the Tunisian Organization. I would like to congratulate the Tunisian people -
the Tunisian youth - and dedicate this prize to those who were killed and who fought for Tunisia.
[16:35:23] QUEST: Of course the price of oil - the falling price of oil - has been so much on the mind of the global agenda when it comes to
Well this week saw a rise of up to 12 percent in the price of oil. Largely on the back of more fears of what's happening in the Middle East and the
realization that the U.S. production is slowing down. Something like back to 100,000 barrels a day.
West Texas crude actually rose on the day whilst Brent was down. And that gives you some idea of the turmoil at the moment within the market.
Those countries that are most affected by commodities - of all of the advanced nations, perhaps none more so than Australia.
The Australian economy is now expected to grow at a much slower pace than previously forecast by the government. There has been political turmoil
with the ousting of Tony Abbott as the prime minister and the installing of Malcolm Turnbull as his replacement.
And now the question is how the Reserve Bank of Australia will keep growth growing at a time when everything seems to be slowing down.
These royal (ph) issues I put to the finance minister of Australia, particularly the idea the country was being very badly hit.
MATHIAS CORMANN, AUSTRALIAN FINANCE MINISTER: Australia continues to grow. We are in our 25th year of continuous growth, and unlike other commodity-
based economies around the world which are in recession, that we continue to grow.
And of course, you know, one of the reasons is we've pursued a very ambitious free trade agenda including in relation to China.
And of course what we're looking at doing in relation to China is to broaden our access to that market beyond resources and our China/Australia
Free Trade Agreement is a very good way of achieving just that.
QUEST: Of all the nations that are - the advanced nations, the OECD countries - in many ways that where we can see the most visible effect of a
slowdown in China.
Australia is there, isn't it? I mean, you're seeing it right across from the cut in commodity prices, to the mining jobs right the way.
It's a serious matter.
CORMANN: Well our trade relationship with China is certainly the most important trade relationship we have. And, yes, China's ongoing success is
very important to Australia.
But what I would say is that China, despite all of the commentary, continues to grow strongly by international standards and clearly they're
going through a transition to more sustainable growth, but we are quite optimistic about what lies ahead.
QUEST: Do you expect the federal budget to have to be impacted because of this slowdown?
CORMANN: Well, as I say, our economy continues to grow. We have an orderly and methodical process in terms of making updates to our - the --
budget position and the next update will be in December of this year.
(Inaudible) economy and fiscal outlook and we will be considering these sorts of questions in that context.
QUEST: Do you think it's - the Australian people need to be prepared for some hard times?
CORMANN: Well, the Australian people and all of us, we're focused on doing everything we need to do to be the most successful we can be.
I mean, obviously we're always facing some challenges, but there are also a lot of opportunities for us.
We are part of the Asia-Pacific where most of the global economic growth will continue to be generated in the years and decades to come, and we are
focused on putting ourselves in the best possible position to take advantage of these opportunities.
QUEST: On the question of trade - TPP - Trans-Pacific Partnership - trade partnership - this has now been agreed. We don't really know what's in it.
To quote Hillary Clinton before she agreed to - "Until I've had - the lawyers had to look at it."
Madame Lagarde said the lawyers - I'll know what I think about it when the lawyers have seen it.
CORMANN: Oh well, Australia's a trading nation, and whatever initiative around the world frees up, trade is good for Australia and this is of
course an opportunity for Australia to improve our access to about 40 percent of the world markets through this TPP agreement.
And so we are very supportive and we are very pleased that this has been successfully (AUDIO GAP) concluded.
QUEST: It's successfully concluded, but it's not a done deal yet because in the United States of course, the president's going to have problems not
only with his own party and some of the Republican Party and even Hillary Clinton says that she is against it.
Are you worried about the U.S. ratification process?
CORMANN: Well obviously every government has agreed and it's now a matter for all of us domestically to go through our domestic processes.
And I'm sure that the Americans will do that in the appropriate way.
QUEST: The whole issue of the TPP - the Trans-Pacific Partnership for Trade is one of the biggest potential benefits for Pacific nations, but at
the same time, the issue of whether or not the U.S. can get it through is of great concern.
[16:40:10] QUEST: Joining me now is New Zealand's Deputy Prime Minister Bill English and the finance minister. Sir, good to see you.
BILL ENGLISH, NEW ZEALAND DEPUTY PRIME MINISTER AND FINANCE MINISTER: How are you?
QUEST: The Trans-Pacific Trade Partnership - the TPP - we know now really - well, we don't know the details, you may know more about it than I do in
terms of the minutiae of it - but how concerned are you at the ability of the Americans to get it through Congress?
Because if they don't, you guys will all go home.
ENGLISH: Well, we're pretty positive. I mean, it's being negotiated with Congress in mind. The Americans obviously - administration - very
sensitive to that.
And secondly we've seen a gathering of political will in the U.S. So they seem to be either (ph) a leader in the Asia-Pacific.
And getting this signed has been a big step and we see no reason why they would - why the political establishment in the U.S. would change its mind
about the importance of getting the TPP through as an expression of their leadership.
QUEST: The TPP is - I mean - is it quantifiable for you as to its importance?
ENGLISH: We've had a pretty good guy (ph) quantifying it and it has significantly been official for us as I think it is for everyone there, and
that's why they've signed it.
All political leadership these days is under pressure to deliver growth for the pop wot (ph) of voting public and a TPP would help them with that.
QUEST: On the opposite side of this, as we've seen the China slowdown, I've read the hint (ph) sheet - the chorus goes something like `China is
slowing down, that's a good thing, needs to be managed.'
ENGLISH: Well, I actually think the composition of Chinese growth matters more than the GDP number which is a pretty slippery one to get hold of.
And so, you know, we need to understand what consumers are doing because we're selling them food. And that's pretty positive.
QUEST: So if there is a shift from an investment basis of a budget to a consumption model of the economy, that should be - although you may take a
temporary hit at the moment if it slows down, longer term you would be optimistic?
QUEST: But -
ENGLISH: A mit (ph) shift is going on.
QUEST: -- or is there a `but' there?
ENGLISH: No, we are optimistic. Well, there's but only insofar as everyone seems to worry about the GDP number.
We worried about the Chinese consumer, and the Chinese consumer is positive as are (AUDIO GAP) bigger part of the economy that's been going on for some
time and we benefit from.
As with others, we sell them products and increasingly services.
QUEST: Christine Lagarde says that if the membership of the Fund feels she's fit for purpose, she would be willing to stand - if, you know - if
called she will serve.
Would New Zealand be in favor of her having a second term?
ENGLISH: Well, look, she's built a credibility of IMF in difficult circumstances and seems to be well regarded by the membership, so we'll
wait and see what her official position is.
QUEST: Well, that's the closest to a yes as we're going to get.
ENGLISH: Thank you.
QUEST: Thank you, Prime Minister. Thank you very much indeed for joining us.
QUEST: As we continue, the big issue is getting corporations to pay their taxes. And now the OECD along with everybody else has come up with a plan
that they say will do the trick.
We'll talk about BEPS after the break.
[16:46:03] QUEST: The OECD secretary general is calling it the biggest revolution to the tax code for 100 years. G20 finance ministers have
approved a radical change to tax evasion rules and regulations.
The goal of course is to clamp down on the sort of corporate practices companies like Google, Apple and McDonald's are said to have engaged in.
Trying to find the best place to do business and then so arrange their tax affairs just to pay just about no tax.
Now under a process known as BEPS, the OECD, along with the G20 ministers says it's time to put a stop to it all.
They believe they could raise $100 billion in increased tax revenues.
The OECD Secretary-General Angel Gurria explained how he was going to do it.
ANGEL GURRIA, SECRETARY-GENERAL, OECD: This a big deliveroom (ph). This is really major. This is the greatest revolution to the international tax
regime in 100 years.
QUEST: The gist of it is that the G20 countries have now said that they will not let you shop around and do a better deal to pay for no tax?
GURRIA: Absolutely. They will pay one's fair share - that's all we're seeking. And at the same time, all those practices that were putting money
from one side, sneaking it to another, transforming it into a steady flow of interest payments which were deductible or dividends which were tax
All that will be finished because there'll be nowhere to hide. Everybody will be practicing the same rules. Not the same rates of tax -
QUEST: I was about to say, --
GURRIA: -- that you're going to be -
QUEST: -- because you clearly want to maintain a competitive regime -
QUEST: -- where countries can -
GURRIA: That's a sovereign right. Everybody, every country, if they can make their own public finances work, they can set whatever level as long as
they apply to everybody.
QUEST: Do you believe that this will put an end to the Google, or the Apple situation of setting up overseas, paying no tax.
GURRIA: This is the whole idea. Absolutely yes. And we're going to follow it, we're going to monitor it and we're going to be looking at the
performance of each one of the countries but also of the companies themselves.
We now have a lot of corporations from the companies understand that perhaps, you know, this is finished.
QUEST: There's one problem of course. And that is that these companies and their advisors spend billions trying to circumnavigate these
Who - you may be ahead now but they will be ahead before long.
GURRIA: Ah, well first of all, we've been looking at as I said 15 different ways. For example, -- transfer pricing, -- for example you
mention treaty shopping.
For example, how do you tax digital companies? With no visible place of nationality and with their assets up in the ether, you know, well, there
are ways to do it, we are proposing how to do it and then the question is how to pull off.
QUEST: Angel Gurria of the OECD. There's a proposal for the future that Europe should have its own finance minister. The European Commissioner of
Finance Pierre Moscovici tells us why Europe needs another finman (ph), after the break.
[16:52:18] QUEST: European markets were up the best part of 5 percent on average across the board. The London FTSE by the way had its best trading
week for some four years.
As the market rose sharply, fears seem to be abating.
Europe could do with a finance minister of its own, so believes Pierre Moscovici the European Economics Commissioner at the E.U. level.
He says it would help the recovery get going stronger and faster. At the moment, Pierre Moscovici believes, it's simply not good enough.
PIERRE MOSCOVICI, EUROPEAN ECONOMICS COMMISSIONER: I'm here in these meetings here and for the first time for years, Europe is not a part of the
problem, a part of the solution.
Recovery is on its way in Europe. But the problem is that it's sluggish - it is too slow and it's too low. And we need to enhance our potential
And that's why we need to go on with fiscal consolidation without contradiction with growth. We need to pursue structural reforms on a labor
market first but also in education which is the basis of everything.
And third we need to muscle our capacity to invest. And that's what the UNCA (ph) plan of 350 billion euros --
QUEST: How much of that has been spent of that, sir?
MOSCOVICI: No, it's just the beginning because it was just adopted before the summer. Now the structures are in place, projects are being developed
and I'm confident that this will be a success. We will measure that in two years from now.
QUEST: A European finance minister. You'd like to see a European finance minister?
MOSCOVICI: Yes because, you know, Greece - we're now also on the way to find a solution for Greece. I'm more optimistic than ever about our
capacity to have a successful program and successful reform in Greece.
But the management of the prices was sold (ph) up. I'm a commissioner for less than a year now, and during the period from November to August, we had
20 Eurogroups. That's why we need to change the governance of the Eurozone.
For me it means having a common budget, a common treasury for the Euro area, then common economic policy and yes, a sort of finance minister for
QUEST: Isn't that you?
MOSCOVICI: For me because it's one matter (ph) in this mandate, I'm afraid but it should be yes in my view but it's personal - the commissioner in
charge of everything (ph). Why? Because the commission is in charge of the general interest in Europe and nobody else can do that as well.
QUEST: You have just basically federalized the European budgetary system with that idea - with that idea.
MOSCOVICI: Not exactly, but you know, we have a single currency and we have a federal institution which is - and you mentioned it - the ECB.
[16:55:05] And there cannot be asymmetry or a dissymmetry between monetary policy and fiscal policy.
And it's me (ph) have integrated on currency. We also need to integrate more fiscal (inaudible).
MOSCOVICI: Yes, we need that.
QUEST: I can hear the country screaming!
QUEST: No, I'm not meaning old-fashioned federalism. We're not going to have a budget which would represent 10 percent of the GDP or even 3
But if we want to stabilize our economy, if we want to finance investment, if we want to finance a common scheme to fight unemployment, then we need
the budget - a limited budget - with all resources.
It's not for tomorrow. It doesn't have to be added to national expenses, but it can be derived from it.
QUEST: Pierre Moscovici on the finance minister and that's a battle royal that'll be had. We'll have a "Profitable Moment" after the break.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: As a classic bricks and mortar bank, how do you handle the agile disruptors, if you will, -- those
online financial service companies that are coming into the market but don't carry your overhead?
FEDERICO GHIZZONI, CEO, UNICREDIT: I think at the very beginning a few years ago we were looking to them as a threat. Now I said but this is not
the case. I mean, let's turn our view.
And now, like you say, we see decent opportunity. We are actually financing a number of startups. We are helping them to develop.
DEFTERIOS: That's very different thinking from a CEO in Italy of a large bank that says I'll embrace these players, and not only that, I'll even
invest as a startup player.
GHIZZONI: Well I don't know if it's different, it's what we strongly believe. And by the way, you saw internally we set up three years ago an
R&D department. It's quite unusual for the banking sector.
QUEST: Tonight's "Profitable Moment." This IMF and World Bank won't go down in history as one of the most exciting or the most important, but it
is a sharp reminder that the hard work of reforming the international economy goes on regardless.
And it's also a reminder that those countries like Peru which have done the hard work are reaping the benefits and are in a very good position to
weather the inevitable storm and slowdown that's coming as a result of China.
And that's "Quest Means Business" for tonight. I'm Richard Quest in Lima, Peru. Whatever you're up to in the hours ahead (RINGS BELL), I hope it's
I'll see you back in New York next week.