Return to Transcripts main page
Quest Means Business
Germany Commemorates 20th Anniversary of Berlin Wall Fall; Kraft's Bid for Cadbury Unveiled
Aired November 09, 2009 - 14:14 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Good evening to you, Hala. It is worth pointing out that we will be back in Berlin the moment those dominoes start falling. And over the next 60 minutes, when they continue to fall as each section of the Wall is unveiled and revealed as dominoes fall, we will take you back there while we wait for those events in Berlin.
Good evening from the world of business where Kraft's bid for Cadbury's was unwrapped. It still leaves a bitter taste in the mouth.
It was a taxing G-20, I should know, I was there.
I'm Richard Quest, on both sides of the Atlantic, it's busy, we mean business.
Good evening. The U.S. food giant Kraft is hungry for growth. Its campaign to buy the chocolate-maker Cadbury has turned serious, and it has now turned hostile. The British company's response was equally belligerent. Today was the day when Kraft had been told to put up or shut up. They chose to put up. But as Jim Boulden now explains, it's all about the price of the chocolate.
JIM BOULDEN, CNN INTERNATIONAL ANCHOR (voice-over): Monday was known as put up or shut up day. Deadline day for Kraft to decide whether to launch a takeover attempt of Cadbury. And the American food giant Kraft decided to put up.
Kraft's interest in British confectionery giant Cadbury is now officially hostile, meaning it will go directly to the Cadbury shareholders with an offer at slightly less than its initial offer in September. A proposal that then was rebuffed.
No surprise Cadbury's board called the latest offer, quote, "derisory," and told its shareholders to reject it.
So what is at stake? Kraft, the owner of Oreo Cookies, Ritz Crackers, and Philadelphia Cream Cheese, along with other Nabisco brands, may be a huge food conglomerate, but its confectionery arm is not as big as Cadbury's.
JENNY WIGGINS, FINANCIAL TIMES: Cadbury's sales growth is on track to hit around 6 percent this year, whereas Kraft is down at around 2 percent. And under Irene Rosenfeld, Kraft is trying to become a much more dynamic company and owning brands like Cadbury, which have great marketing and have generally been very well-managed, would really give it a boost.
BOULDEN: Cadbury shares jumped 38 percent in September when Kraft disclosed its informal and friendly takeover offer. That put Cadbury in play and put a spotlight on what some analysts say is the gem in the confectionery crown: gum, Cadbury owns the Trident brand.
ALLYSON STEWART-ALLEN, INTERNATIONAL MARKETING PARTNERS : The reason it's about chewing gum and not just chocolate, is because actually that's the fastest growth category in the portfolio of what Cadbury has. And that's why it's so interesting to Kraft also, because Cadbury has a presence in emerging markets, where Kraft would have to build that from scratch and it would be expensive and it would take a long time.
BOULDEN: The 185-year-old chocolate-maker is an iconic British brand. Its dairy milk bars are a national treat. Cadbury also has supply chains in key markets like India and Mexico, places Kraft would surely love to sell its very American brands.
Now it's up to Cadbury shareholders to reject or accept this bid, wait for a higher offer from Kraft, or, go it alone.
QUEST: Jim Boulden reporting.
If the Kraft bid was meant to melt shareholders' hearts, there is no sign that it's working. Cadbury shares were pretty much unmoved at the close. Seven pounds sixty-one, 761 pence, markedly higher than the value of Kraft's offer at the moment.
And that's the way the share price has moved over the last few months. There you have the indicative bid early, whoosh, straight up it went. It has remained in that area ever since. And that, of course, tells us a lot about whether or not they expect further offers, white knights, or an improvement in the offer.
Jim Boulden is here. As Jim mentioned, the stock reaction was different after it first revealed its interest in the deal. Jim joins me now to talk about this. The fact it's higher than the offer -- well, there's a lot to get into.
First of all, the fact it's higher suggests that the market doesn't believe this is the end of it.
BOULDEN: Kraft is making a very, very, very critical decision here, which is that we don't think if you're Kraft that someone is going to come in at a much higher bid. And of course, we always have this horsetrading, don't we? But obviously they're leaving themselves some room to go higher, but they don't see a knock-out bid coming from another player.
QUEST: I heard this morning, of course, that if it wasn't over 8 pounds a share, then they might as well not have bothered. But by not even increasing it at all, what is it telling us?
BOULDEN: It's telling us that they don't think someone else is going to come in and give a white knight bid. So they've gone back to the shareholders of Cadbury, and they've actually gone a little bit lower. They've actually said, if you didn't -- look, if you didn't like it two months ago, you're not going to like this any better.
So that's why we saw, of course, the Kraft board in 45 minutes reject this.
QUEST: The Cadbury's board.
BOULDEN: Sorry, Cadbury's board...
QUEST: I'm having the same difficulty, Kraft and Cadbury. I'm trying -- I constantly try to remember who is the suitor and who is under attack. And I can't gauge also whether or not this deal makes sense in the sense that they're both in the same business, there are certainly synergies and there are certain product similarities. But there are also great loyalties.
BOULDEN: Well, people love Cadbury's here. But one analyst said to me, don't forget, it's not a British company anymore, it's international. It's in 60 countries. They make a lot of stuff outside of the U.K. So it's no longer about it being a small British company making chocolates. It's the second-biggest confectionery in the world.
It is in places Kraft couldn't dream of getting into right now. So it is about loyalties, but it's also about distribution. It's about where Kraft wants to go as a huge company. And you would have to say then you'd have to think, why wasn't Nestle interested? Why isn't Mars interested?
QUEST: So why? Answer your own question?
BOULDEN: Well, this deal, regulatory issues would not really apply. Analysts tell me that wouldn't be the case...
BOULDEN: Because of confectionery -- because it's confectionery and Kraft...
QUEST: ... foodstuffs rather than...
BOULDEN: Yes, yes. And when we think of Kraft, we think of cookies, or as we Americans call them, cookies...
QUEST: Time, gentlemen, please. Biscuits.
BOULDEN: Macaroni and cheese and this kind of stuff, that is what Kraft is know for. It's not known as much for its candy, until it bought, of course, Nabisco.
QUEST: So no we're into a hostile takeover. The rules kick in. The takeover panel deadlines and timetables.
QUEST: We're into a very, very clearly defined area.
The institutional sales, and it's worth pointing out...
BOULDEN: Oh yes.
QUEST: ... we telephoned all of the major institutional shareholders today to ask what they thought about the bid. Needless to say, to a person, they said they weren't talking at this point.
BOULDEN: In the last two months you saw that share price. We know who bought in that last two months. That was the hedge funds. They bought into that price, they have a lot of Cadbury shares. They're the ones who are going to have to make a critical decision, are they going to sell at this price because they could have made some money if they got very quickly?
Or are they going to just say, no, we think another bid is going to have to come from Kraft in order to make this go through more of the shareholders as well.
QUEST: All right. Jim, we thank you for that. You're going to keep across this, aren't you?
BOULDEN: We know now the deadline. So we know every time something has to happen.
QUEST: Absolutely. I'm not going to ask if you're a better man how it's going to go, because...
BOULDEN: You did that to me last time.
QUEST: All right. Jim Boulden there.
Now, the European markets, it's not that Kraft was in a bind with this, the investors in Europe were looking for value. And they started the week in fine style. London's FTSE -- come and join me over at the displays where we see -- over here. London's FTSE was up 1.8 percent. It was the banks, commodity stocks led the gains.
The G-20, you'll be aware, pledged to maintain stimulus and that was very much a factor that helped the banks. RBS was up 6.3 percent. BHP Billiton, Xstrata, the mines a good session, the mines were up about 4.5 percent on average.
In Germany, I think we can allow the Xetra DAX in Frankfurt to have the best of the session, whether or not it was because of the celebrations in Berlin.
The banks were the -- very much important point, Commerzbank gained 5.7 percent. Deutsche Bank was up 3.4 percent. The biggest insurer, Allianz, was up 4.3 percent. Now that was because their profits beat estimates. So Allianz gave the market a good, strong -- and we saw industrial production, if that wasn't enough, for September up 2.7.
Join me in Paris, as they say, where we had the CAC 40 up 2.1 percent. Banks up around 4 percent overall. ArcelorMittal, which is, of course, the largest steelmaker, gained some 4 percent.
The Bank of France predicted the economy would grow just about a half a percent in Q4. And the interesting thing about that, of course, it would reaffirm the idea that France is well and truly out of recession, as indeed, of course, is Germany.
Let's go back to the live picture from Berlin and show you what is happening in Berlin at the moment. We are waiting for the dominoes to be felled. Lech Walesa, the former leader of Poland, of course, is about -- former president of Poland waiting to push the first domino.
There are a thousand of these dominoes that stretch just over a kilometer-and-a-half or so along the old Berlin Wall route. They're made of polystyrene, which is quite interesting that they're managing to remain upright of their volition in the cold weather that you can see. They have been painted by students.
And Fred Pleitgen is joining us now from Berlin. Fred, are we any nearer to the first domino being pushed?
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Hi, Richard. Yes, we're expecting the first dominoes to be pushed over any minute now. That row of dominoes that you see right there, of course, is very close to the Brandenburg Gate. Right there you see Lech Walesa, the former head of the Polish Solidarity movement, who is going to be pushing over one of those first dominoes.
He, of course, is someone who is very much admired by many Germans because he was so instrumental in bringing about the change here in Europe, of course, starting out there in Poland. And there is many people who believe that really the change that happened here probably would not have been possible if it hadn't been for the events that happened in Poland prior to all of that.
Of course, this all happened in the summer of 1989 when the Polish Solidarity movement began by demanding free elections, by demanding more rights. And that, of course, is something that then transcended all the way over here.
What you're seeing right now is the German house of parliament, the Reichstag, which, of course, for a long time was a symbol of the destruction of Germany after World War II, that building was completely destroyed. It then stood right at the Berlin Wall.
What you're seeing there right now, those dominoes where the flags are being waved, that is actually where the Berlin Wall used to run past in this city. It was right near the Reichstag, the Reichstag was on the west side of the Wall. And right there was the border between East and West Germany.
And now as we're waiting for those dominoes to be toppled, of course, you can see the people who were standing out there are getting more and more excited as they're waiting for that moment, even though, as you can see from all of those umbrellas there, Richard, the weather here in Berlin is absolutely miserable.
You can see there Lech Walesa sort of looking into the crowd under his umbrella as well, getting ready to topple that first domino, as we wait to see this installation (ph). I'm actually very curious to see if it will actually work, if all of these dominoes are going to be toppled, if all of that is going to work out.
The interesting thing is, Richard, that all of these are going to be toppled in three different phases. And each of them are going to be pushed over by someone who had something to do with that change that occurred here in Europe at that time.
Also some of them are actually going to be toppled over by young people, by students to symbolize the now unified Germany, how Europe and Germany has grown together. So certainly we are looking forward to that, waiting to see when these events will get under way.
I assume that it's going to be in the next couple of minutes. I see that the whole ceremony was a little bit behind schedule in part due to the lousy weather here in this city. It's a very interesting installation. It's about 1,000 dominoes, and as you can see, all of them look very, very different.
They were each painted by different people, a lot of them were painted in -- by students -- by school students here in Germany, but also across the world. Some of them were painted by artists, some of them were painted by political activists. So each of them looked different.
And the interesting thing about these dominoes, Richard, is that some of them were painted by people in countries where walls still divide people. So for instance, you have one which is actually standing right at the Brandenburg Gate, which was painted by a man from South Korea, where, of course, the North and South are still divided.
And there we can see Lech Walesa again, getting a little impatient there. I interviewed him just a couple of weeks ago in Warsaw, and he is a man who knows exactly what he wants. He is someone who told me when interviewed him, he is ready for a fight -- Richard.
QUEST: Now Lech Walesa wearing his trademark cap there. Fred, you -- and forgive me if you've talked about this many times during the course of the day, but, Fred, you have -- you actually used to live on the other side of the Wall at one particular point in your life. And you used to go backwards and forwards through Checkpoint Charlie I seem to remember you telling me.
PLEITGEN: Yes, certainly, that was certainly a very privileged part of my growing up, if you will. My parents, my dad was actually the bureau chief for ARD, West German TV, and he was working in eastern Germany. And so we lived in the eastern part of Berlin, but all of us went to school or Kindergarten on the west side of the city.
So as you said, indeed, this is true. I did go through the Berlin Wall every morning. My mom brought me back and forth. And one of the things that she always hated going through the Berlin Wall is that every time she went through, the border guards always made her show her left ear.
And she was absolutely fed up with it after a while. At some point she just freaked out on them and said, by now, you must know what my left ear looks like. But they never relented. They always wanted to see it. And it was really a horrendous process, trying to get through that border every morning.
And you know, when I think back on those days, I mean, back then it seemed like an absolutely normal thing to me. But of course, it was something that was very unique in the country.
Now we can see, again, the people waiting for those dominoes to be toppled over. It's very, very wet down there. The weather is absolutely miserable. You're now looking at a shot which is actually very close to the -- to the Brandenburg Gate. That, of course, where one of the thickest parts of the Berlin Wall used to stand. What you have to know about that segment of wall that stood at the Brandenburg Gate is that it was exceptionally thick because the East Germans thought that if there was ever an advance on the eastern part of Germany, they wanted it to be so sturdy that tanks couldn't actually pull through there. It was actually built in the very early stages of the cold war -- Richard.
QUEST: And it is worth pointing out that -- we're going to stay with these pictures. Anybody over a certain age will understand why we are staying with these pictures. A continent changed. Perhaps it didn't change overnight. The changes that we're seeing -- that we saw came in from Hungary, from Czechoslovakia and from all those countries which had already started that process (INAUDIBLE) for Mikhail Gorbachev and glasnost and perestroika itself. But the change started and tonight is always regarded as the anniversary.
So forgive us. It took three decades to get here, but we're not going to leave it before we see those dominoes fall -- at least not -- not in the next five or 10 minutes.
And Fred Pleitgen, the -- the mood of the people in Berlin -- I went to Berlin in the old days, before it was one of -- very much a (INAUDIBLE) one side of the wall and the other.
But now, do they believe that their political leaders have served them well?
PLEITGEN: Well, I mean, that's a very good question. I'm sure not all of them believe that their political leaders have served them well in the past 20 years. You know, outgoing that you have to know about Germany after the fall of the wall and really since unification, is that there were a lot of hopes and dreams that, certainly, in this country, were not fully fulfilled. If you just look at the eastern part of this country, it still has much higher unemployment than the western side of the country; also, people there are actually paid less to do the same kind of jobs that people do in the west.
So certainly the economic equality is something has...
QUEST: They're starting to fall...
PLEITGEN: -- yet to materialize.
QUEST: They're just -- Fred, Fred, I'm interrupting you.
QUEST: Apparently the dominoes are about to fall.
QUEST: This is something that we don't want to miss (INAUDIBLE)...
PLEITGEN: All right. Here we go.
QUEST: ...to join the commentary on this.
(LIVE FOOTAGE OF DOMINOES FALLING AT THE BERLIN WALL)
QUEST: There you had the dominoes. They fell and with a minor hiccup on our picture, the beginning which, of course, because of the bad weather there. But you saw the dominoes fall right the way across what was the old -- 1.5 kilometers of the wall -- of the old wall is -- was, rather -- dominoes. I have to say those who are concerned that they weren't going to fall, it is a well science -- an art setting those things up, if you've ever seen those major demonstrations where tens of thousands -- Fred Pleitgen, are you still there?
PLEITGEN: I certainly am, Richard.
That certainly was some sight. Now, as you can see, they're still falling right now. Look at that. And it seems to be working very well, actually. I also, just like you, was not really sure that it was actually going to happen. There we go. Now it appears as though they're coming to an end there.
But certainly that was a -- a wonderful sort of scene that we saw there with those dominoes falling over. Of course, as you can see, it's right next to the river that goes through Berlin, the Spree, which, of course, in part, was also a border between East and West. Part of that river was also the demarcation zone between the East and the West.
And there you can see those dominoes have now toppled, of course. That is to reenact the fall of the Berlin Wall, but also the sport of domino-like toppling of one communist government after the other in that summer and autumn of 1989 that so transformed Europe.
So, certainly, there's a lot of symbolism in what's going on there in Central Berlin right now with those dominoes falling over.
And, as you can see, really, hundreds of thousands of people who are out there to witness all of this. And I believe part -- some of those dominoes are going to be toppled over at a different place. This is all going to happen in three phases. This, of course, was the first phase right here, as Lech Walesa tipped over...
PLEITGEN: -- the first of these dominoes and they all fell. And now the people are in there, again -- Richard.
QUEST: Yes, you've answered the question and the picture makes it clear. I wasn't quite sure. I heard a sort of a gasp. I thought maybe that more dominoes had fallen than they had intended in this particular -- it's going to happen in three phases. You're right. The first phase has just fallen.
It is all to do with people who were involved in the -- in the various freedom movements, whether by allowing free -- more travel in their own countries -- the Hungarians and then the Czech Republic, as it now is.
Frederik Pleitgen joining us from Berlin.
We thank you, Fred.
Come back when we see the next set of dominoes and our hearts can be in our mouths as we wait once again to see if that actually works and see how that goes.
Now, there's a lot of business news that we need to get to. In just a moment, why the International Monetary Fund wants to be seen as a recovery doctor. The governments argue over the antidote to the future of meltdowns. The IMF's managing director -- there you see him -- Dominique Strauss-Kahn, joins us.
And we'll update you on New York's markets, which are open and doing business.
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
The price of gold hit a new high on Monday. It jumped to a record $100 -- I beg your pardon. It jumped a record $111, but the rise came at another's expense. The price of gold now over $1,100.
The U.S. dollar continued a running trend, falling against the euro and hitting a three month low against the pound.
A safe haven suddenly looked increasingly risky.
For this week's Biz Clinic, Andrew Stevens looks at what the dollar's decline means for investors.
ANDREW STEVENS, CNN CORRESPONDENT (voice-over): For decades, it's been the currency of choice around the world. But with the challenges now facing the U.S. economy, some experts are saying the dollar's heyday has passed.
KIRBY DALEY, SENIOR STRATEGIST, NEWEDGE GROUP: We are not in a dollar crisis yet, but we should be in the next couple of years, without a doubt.
RICHARD YETSENGA, HSBC, ASIAN FX STRATEGY: In global currency markets at present, the sight of the U.S. dollar really is the big key question that investors need to have a -- a strong view on.
STEVENS: The United States did recently see better than expected growth figures, a sign the country may be emerging from the recession. But there are still concerns about jobs and few expect the Fed to hike interest rates any time soon.
Meanwhile, against its main rival, the euro, the dollar has seen a steady decline in recent years. In 2007, it was former Fed Chairman Alan Greenspan who said it was "absolutely conceivable that the euro will replace the dollar as a reserve currency."
(on camera): So, the bottom line -- where does this leave investors who earn U.S. dollars or who live in a place like Hong Kong, where the currency is pegged to the U.S. dollar?
DALEY: If you are truly bearish on the outlook for the U.S. dollar, then you may consider opening the type of brokerage account that allows you to buy currency forwards and get into the currency market and hedge against a currency that you think is going to perform well against the U.S. dollar.
STEVENS: So, try to broaden out to other currencies that you think will outperform the dollar.
But what are those currencies?
YETSENGA: In this part of the world, the Chinas, the Koreas and in other parts of the world, the Russia is markets where we think there are opportunities not just from currency appreciation against a weaker dollar, but good domestic asset returns, as well.
STEVENS: Another thought, many experts say, take a look at the yellow metal -- consider buying gold.
DALEY: Many investors are -- and analysts are advocating hard assets again, like gold, to protect yourself. And I would rather buy gold in triple digits, meaning under $1,000.
STEVENS: After all, gold is viewed as a safe haven play. But experts do caution as with any investment, there's no sure bet.
Bigger picture, the experts say the key is to diversify and think long-term.
YETSENGA: For investors who historically have been quite dollar focused, we think this is a time when they should be spreading their horizons and looking overseas.
DALEY: Because holding U.S. dollars 100 percent in your portfolio over the next couple of years will likely lead to problems.
STEVENS: Just a few options for investors if the dollar continues its decline.
(END VIDEO TAPE)
QUEST: Now, let's put it into perspective. Imagine if banks, which, bailed out, could be made to pay for it in advance. It's a fascinating idea. It's called the transaction tax. And Britain's prime minister, Gordon Brown, says and perhaps suggested it could become a reality.
He's floated what's become known as the Tobin tax, or a transaction levy. The substantial idea is that there is a levy on financial institutions on the work that they do.
It was a core part of a lot of the discussions at the G20 at St. Andrews in Scotland.
We need to know a little bit more about it.
For example, this is the man from which the name Tobin tax comes from, James Tobin. He was an economist who, in the 1970s, proposed that there should be a tax on currency and foreign exchange transactions. Now he wasn't doing it as a revenue raising exercise or, indeed, to try and -- to try and prevent banks from going bust and paying for bailouts. He was doing it to reduce volatility. It was an idea that went nowhere very fast.
The Swedes, however, have tried to introduces such taxes. They did it on levies, on shares and bonds and derivatives trading. It was not a success. What it was felt was in Sweden that it no only distorted the market, it actually put Sweden at a structural disadvantage against other financial markets, where, of course, it didn't have the tax.
They scrapped it in 1991.
Bring in the British prime minister, Gordon Brown. Gordon Brown suggested at the G20 that the Tobin tax or some form of transaction tax should be looked at again. And, indeed, the IMF has now been charged with doing just that. What Mr. Brown basically said was that the tax could be a way for banks to pay for their own bailouts in the future, providing it was universal.
Believe me, when Gordon Brown announced the possibility of the transaction tax at the G20, it was like pulling a pin on an economic hand grenade.
QUEST (voice-over): They came to Scotland to discuss economic recovery and promptly found all the talk was about the transaction tax. The concept is simple -- tax the financial world to prevent unnecessary risk and if and when things go wrong, use that money to pay for the rescue.
It's an idea that's been rejected by countries with large financial sectors, like the U.S. and Britain, who claim they would be hurt most.
This time, it was the British prime minister who raised the tax, promoting a new social contract between society and the financial world.
GORDON BROWN, BRITISH PRIME MINISTER: I think we should discuss whether we need a better social contract to reflect the global responsibilities of financial institutions to our society. There have been proposals for an insurance fee or a resolution fund or contingent capital arrangements or a global financial transactions levy.
QUEST: The IMF has been asked to study how such a levy might work and its effects. The Fund will report back in time for the G20 leaders' summit next June.
DOMINIQUE STRAUSS-KAHN, MANAGING DIRECTOR, IMF: I'm in favor of a system which will have to have the financial sector, which is a risky sector, to take less risk and not to put at risk the global economy. It does not mean that the financial sector will -- will not take any risks (INAUDIBLE) to finance risky investment. But they have to have a limit of this risk or at least they have to pay some kind of (INAUDIBLE) tax that we'll be working on if they take too much risk.
QUEST: Amongst those countries giving support for a new levy is France. The French finance minister has been one of the strongest critics of the way the banks behaved by taking on too much risk.
CHRISTINE LAGARDE, FRENCH FINANCE MINISTER: I think going forward, it would be only fair if the banking system itself was to care for itself and provide for the appropriate level of insurance against similar risk. It's in that -- you know, with that perspective that I consider that transaction tax as quite appropriate in terms of exploring a new project.
QUEST: The transaction levy will go nowhere without the backing of the United States. And the Treasury secretary said the U.S. will not support a day to day tax.
However, the Obama administration is not against the basic principle of getting the financial world to protect taxpayers in the future.
TIMOTHY GEITHNER, TREASURY SECRETARY: We've put forward in the United States a set of proposals for doing that. And the basic principle, analyze the proposals to make sure, again, if the government has to step in in the future to can -- put out a financial fire, that it does so in ways that don't -- that doesn't put the burden on taxpayers, that the financial system bears the cost of that. That's a basic principle and we've had legislation up before the Hill for several months now in support of that.
QUEST: Whatever positions governments officially take, in the end, this concept may well fail on practical ground. The governor of Argentina's central bank believes it's simply too complicated.
MARTIN REDRADO, ARGENTINA CENTRAL BANK GOVERNOR: Very nice idea. Very good academic idea that we have studied, economists in universities and so forth in the last decade. It's very difficult to implement.
QUEST (on camera): Do you get the feeling that such an idea is moving its way up the agenda?
REDRADO: It is moving away up the agenda. But I think when we come to the implementation, the operational way, is it going to get in trouble.
(END VIDEO TAPE)
QUEST: Now, as we made clear there, of course, the idea is that the IMF will now report back on the feasibility of such a tax.
The managing director of the IMF, Dominique Strauss-Kahn, is, by and large, against the idea of a Tobin tax, believing it doesn't work.
However, that hasn't prevented him from generally saying that there is merit in looking at the whole project.
STRAUSS-KAHN: The so-called transaction tax, Tobin tax, is, in my view, absolutely impossible to implement because so many innovation has been made by the financial sector that it's too easy to avoid it.
But we have been asked by the heads of state of government that work with the IMF to work on an IMF tax on the financial sector, to make some incentives to individuals or companies to take less risk. We're working on that and we will deliver.
QUEST: You'll agree, though, that judging by what the prime minister, Gordon Brown, said today, and judging by what Alistair Darling said, it's on the agenda.
STRAUSS-KAHN: Yes, it is.
QUEST: It's now -- and it's moving up the agenda.
STRAUSS-KAHN: It is on the agenda. It has been -- it wasn't a communique of Pittsburgh. There's no -- no big news and I'm very happy to have the support of Gordon Brown on this. We have been asked to deliver at the head of states meeting in June, (INAUDIBLE) the finance minister meeting in April. We will deliver something which is twofold. On the one hand, trying to...
QUEST: But are you in favor of it?
STRAUSS-KAHN: Yes, of course. I'm in favor of a system which will have to have the financial sector, which is a risky sector, to take less risk and not to put at risk the global economy. It does not mean that the financial sector will -- will not take any risk. They are here to finance risky investments. But they have to have a limit of this risk, or at least they have to pay some kind of (INAUDIBLE) tax -- that's what we're working on -- if they take too much risk.
QUEST: Let's talk about the new role of the IMF. I see now the framework is starting to be fleshed out. It seems that countries are going to be asked to provide for those economy policies for consultation and discussion.
This is a major new area for the IMF.
STRAUSS-KAHN: Absolutely. We are going to take all the figures given by the countries, all the policy they have in mind for the coming two or three years and try to see if it adds up. Of course, it won't add up, because if you take what Britain and China and Brazil wants to do in these three coming years, they have no reason to add up.
So we'll see the inconsistency, put it on the table and say, you guys now have to fix it.
And this kind of cooperation will be very helpful to avoid future crises.
QUEST: So if you're not going to be the -- the recovery policemen, are you at least the recovery mon -- monitor?
STRAUSS-KAHN: I would like to be the recovery doctor, giving you advice, but being friendly, as a doctor should be.
QUEST: Being prepared to prescribe when necessary?
STRAUSS-KAHN: Yes, to prescribe some time, you know, medicine that seems a bit bitter, but nevertheless, you have to take it.
QUEST: This is a new role for you.
STRAUSS-KAHN: Yes, it's a new role for the IMF and it's also a new IMF.
QUEST: And it's going to take you into more controversy, especially as countries at different sections of the economic cycle -- some are growing...
QUEST: ...some are...
STRAUSS-KAHN: That's right. But it's better to have the controversy discussing around the table then don't -- not to see the controversy, just be blind and then have the crisis. We are here to try to avoid crisis and to fix crises when they happen, but first to try to prevent crises.
(END VIDEO TAPE)
QUEST: The managing director of the IMF, Dominique Strauss-Kahn.
And on tomorrow's program, we'll talk to the finance minister from India, who had some particular thoughts about Dr. Strauss-Kahn and his prescriptions for medicines. That's tomorrow night's program. We trust you'll join us for that.
Deadly (INAUDIBLE) there have been in El Salvador and a tropical storm soon making landfall in the United States.
Guillermo is as busy as ever...
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes.
QUEST: ...at the World Weather Center.
ARDUINO: And I'm happy that you connect the two of them, because there were some misconceptions about them and that -- because there were indications that Ida had caused these problems in El Salvador, which is not the case. In fact, we had a tropical wave here that dumped a lot of rain and caused the mudslides and all the deaths associated with this.
Now, look at Ida -- and this is a big story -- that fortunately and hopefully, it's getting a little bit better, because it went through Mexico coast. It caused floods over there.
But then, it's moving to the United States now. And we're going to see the impact in the United States on a tropical storm basis. So -- but it's weakening right now. It was a hurricane before. The National Hurricane Center has changed the hurricane watches posted in here into tropical storm force winds and tropical storm warnings, which means that conditions within 24 hours of tropical storms are going to be observed in the area.
And then it's going to interact, hopefully and thankfully, with this front that is going to drag it away. But it's coming to a territory that has been saturated with a lot of rain lately. So, also, there are question marks concerning what's going to happen after it makes landfall. It's very clear the front is going to drag it away and it's going to cause, again, a lot of rain over there.
And the rain that is falling in -- in Germany. And we are seeing some rain going to London in the next two days or so.
We have more weather coming up tonight, so stay tuned to us.
After the break, more QUEST.
QUEST: There is no place more symbolic of the divided Berlin than the Brandenburg Gate.
Our Becky Anderson is at the gate.
We join her now to see how connect the world (ph) Becky Anderson will cover the rise and fall of the Berlin Wall -- good evening, Becky.
BECKY ANDERSON, CNN CORRESPONDENT: That's right, Richard.
Thank you very much, indeed.
It's a -- it's a cold and fairly wet night here in Berlin, but nothing can dampen the spirits of the hundreds of thousands of people who have gathered here behind me at the Brandenburg Gate, as you say. The site -- well, certainly just along here -- the site of the Berlin Wall for the 20th anniversary of the fall of that wall. As Berliners are very fond of saying, the wall was a symbol not just of a divided city, but of a divided country and a divided continent.
We've heard tonight from the leaders of Germany, of France, of the U.K. and from the secretary of State, Hillary Clinton, who introduced a video from President Obama here tonight.
But perhaps the stars of the show, aside from Jon Bon Jovi, who we just heard from, and Paul Van Dyke, the musician and D.J. who we're about to hear from now. That's the stars of the show.
We'll look just behind me here. What you can see are these white columns -- are part of 1,000 dominoes -- two-and-a-half meters high. They've been designed by young people here. And their perceptions about the way the wall was and the way that the world is now.
They will be knocked down shortly and that will be very symbolic for those who are here tonight, a sense of as the wall came down 20 years ago, the domino effect through Berlin, through this country and through the rest of the world.
We're here in an hour with a special edition of "CONNECT THE WORLD" for you, the viewers.
Join us please then -- Richard.
QUEST: That is one hour from now.
Becky Anderson in the west of Brandenburg, but with a warm welcome to one and all.
Many thanks, indeed.
And that's QUEST MEANS BUSINESS for this Monday night.
I'm Richard Quest.
I thank you for your time and attention.
Whatever you're up to in the hours ahead, I do hope it's profitable.
Christiane is next with "AMANPOUR" from New York.