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Quest Means Business
Debt Deal Delay; Hair-Raising Crisis; Murdoch Faces Investors; The Q-25; CNN Freedom Project; Interview with Olafur Ragnar Grimsson; Interview with Mira Sorvino; In Focus: Trucking Industry in South Africa; Interview with Van Rex Gallard
Aired October 21, 2011 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN ANCHOR: Delayed and divided -- Eurozone finance ministers kick off marathon crisis talks with no clear plan.
How to survive a financial meltdown -- we'll get the view of Iceland's president.
And shareholders' revolt -- the Murdochs are in the firing line right now at their annual meeting.
I'm Max Foster in for Richard Quest.
This is QUEST MEANS BUSINESS.
It is a disastrous delay. Just meters from the finish line, Europe's leaders are stuck squabbling with each other, torn over the last minute over how to fix the debt crisis. The divisions are now so serious, they're already missing deadlines that haven't even arrived yet. Emergency talks among financial ministers are already underway. We now won't hear a definitive plan for the Eurozone until at least Wednesday. That's because France and Germany can't agree on enough to iron out a deal by the end of Sunday's meeting.
And that summit was supposed to be the be all and end all. Euro Group president, Jean-Claude Juncker, says the whole thing looks disastrous.
Now, finance ministers are now scrambling to limp over these last few hurdles. If they don't make it to the end in time and in one piece, we could see a very disorderly default from Greece and all that that would entail.
Now, a wide variety of reports suggest that there are three main sticking points.
First, the EU bailout fund, the EFSF. Now, France and Germany have been arguing about this for weeks. France essentially wants to turn it over to a bank backed by the ECB and a limitless supply of euros.
Germany says that's a step too far.
And sandwiched in between those two countries is Belgium. Today, its finance minister came down on the French side, though, of the argument. He says the ECB should partner with the fund.
Next hurdle, Greece. It obviously can't pay all its debt back, so banks will have to take a haircut of some degree. What's up for debate is how to -- how drastic it should be. Twenty-one percent is the number that was agreed back in July. But the Germans say that's not enough, whilst France is reluctant to go too much higher. Its banks have a lot of exposure to Greek debt. It's why if they lose out too heavily, France's AAA credit rating could be under threat.
And the last hurdle that we're talking about right now, the banks, well, they may seem the smallest hurdle of the lot at this point. The EU has already agreed in principle that the banks need around $125 billion in extra cash. But if they can't get over those first two hurdles, these two, they may never even make it this far.
Now, there are plenty of other proposals still floating around, including one from the private sector. Ten of Europe's biggest financial companies have reportedly written to Brussels to ask the EFSF to offer partial insurance against sovereign debt.
Earlier I spoke to James Ashley.
He's the senior European economist at RBC Capital Markets.
I asked him what the markets were assuming was going on behind those closed doors in Brussels.
(BEGIN VIDEOTAPE)
JAMES ASHLEY, SENIOR EUROPEAN ECONOMIST, RBC CAPITAL MARKETS: I think there are some fairly deep and profound differences of opinion amongst politicians and -- and officials. And markets are assuming that they're wrestling with those differences of opinion and trying to come up with a solution which will be reasonably comprehensive.
Now, the idea had been that it would be this Sunday for that. It actually looks less likely now. It appears that the second summit, which has been scheduled for Wednesday of next week, will be the time when we see the really substantive announcements being made.
FOSTER: As we understand it, the split between France and Germany is based around whether or not the European Central Bank would have a role with the bailout fund. The Germans don't want to give the bailout fund a sort of banking license.
So what are they, in essence, arguing about here?
Is this just politics or does it matter in terms of economics?
ASHLEY: No, this is more substantive. I mean I -- I'm saying there is a lot of politics involved in this at the same time. But, actually, there is a really quite deep and profound point at stake here. And what we've seen is that as the crisis has progressed, the distinction between fiscal and monetary policy has become more and more blurred aggressively as each of the bailouts has been announced and as the ECB has got more and more involved in -- in providing a backstop to the financial markets and buying up sovereign debt within the Euro Area.
What we're now at the point of is where the French, it would seem, are proposing that the bailout fund, this ESFS, should be given access to the ECB's balance sheet.
And given that the ESFS is inherently a fiscal vehicle, that would mean that you have a complete blurring of fiscal and monetary policy and the Germans are objecting to that. They want to maintain the distinction. Even if the lines have become blurred over the course of the crisis, there is some distinction, still, and the Germans really don't want to go any further in terms of blurring those lines.
FOSTER: This is interesting, isn't it, because when we talk about the difference between the Eurozone and America, you have a -- a joint fiscal monetary policy in America. You don't in Europe. And that's partly the problem, some economists are arguing. And what you could have here, if the French get their way, is a -- a massive change, as you say, in terms of policy, fiscal and monetary policy coming tonight for the first time.
ASHLEY: I -- I certainly think there -- there are big institutional questions here. And part of the problem is that if you were in a situation where the euro was a single country, then you would not really have -- be having to worry about the ECB getting involved to the same extent that we worry about it now, because there wouldn't be the same issues of cross- border transfers.
If the ECB is involved now, you have a question of if it buys up Italian paper or French paper, well, that, in effect, is some sort of subsidy which comes at the cost. And the cost comes to maybe the Germans or maybe the Finns. And I think it's those sort of issues that really complicate the matter and make the decisions and the processes all that much more difficult.
(END VIDEO TAPE)
FOSTER: The epicenter of this crisis is, of course, Greece right now. Banks have already accepted they'll need to take a haircut on its debt.
The question is, how much?
Nina dos Santos found a banker willing to take a real-life haircut, would you believe, to explain the situation.
(BEGIN VIDEOTAPE)
NINA DOS SANTOS, CNN CORRESPONDENT: As EU leaders battle to try and solve the Eurozone's financial crisis, holders of Greek debt are trying to figure out how much of a haircut they're going to have to take.
We're not talking about your average short back in size (ph) here. What we're actually talking about is something altogether more complicated and certain to cost plenty more money.
Michael Hart is FX strategist at Roubini Global Economics.
And together, armed with a wig and a sharp pair of scissors, we're going to be examining how much money Greek bondholders are going to have to chop off the value of their investments.
So, Michael, the big moment has come.
Are you ready for your haircut?
MICHAEL HART, ROUBINI GLOBAL ECONOMICS: Yes, let's do it.
DOS SANTOS (voice-over): We quickly discovered that just as with Europe, one size doesn't always fit all. And that applies to wigs, as well.
(on camera): We're going to go. I think you're ready.
HART: For what?
DOS SANTOS: For your haircut.
(voice-over): With its economy shrinking and its deficits widening, Greece can't pay back all of its 350 billion euros of debt. If investors want to see at least some of their money back, well, it's likely they'll have to take a write-down of, say, 10 percent, 21 percent, 50 percent, or maybe even more.
(on camera): Realistically speaking, what does a 10 percent haircut mean, Michael?
HART: I think 10 percent really won't cut it for investors or for Greece. If you think about what affects debt sustainability, it's really a number of factors -- economic growth, fiscal performance, the interest rate Greece has to pay. And Greece has underperformed on a lot of these elements so far.
DOS SANTOS: Now we've already had about a 21 percent haircut.
What does that mean?
And that was, lastly, voluntary, wasn't it?
HART: Well, this still has -- has to work itself out. And when we talk about this agreement, it's also important to remember that those 21 percent are in terms of net present value. So that's not something that will necessarily feed into the debt to GDP ratio.
DOS SANTOS: I think you need a little bit more off the back here, by the way. I'm going to cut off a 50 percent chunk.
Is that realistically what we're talking about?
HART: When we talk about 50 percent, we're closer to -- to a real cut. But there is another snag here. And that is that out of the $350 billion that Greece has in debt, some $130 billion are now owed -- owned by the official sectors. So in order to get a 50 percent reduction on the total debt, you would actually need 70 to 80 percent on the bond debt.
DOS SANTOS: OK. I'm taking off 70 to 80 percent. Before we finish this segment, is Greece going to default on all of its obligations?
Is there a risk, say, it could go bald?
HART: I think, you know, what we do need in this case is really a scalping. There is the issue of contagion to other countries. There is the issue of precedent. And solving the debt problem is not the only problem that Greece faces. There is also the competitive message here. And there are some harsh adjustments that line -- lie ahead of us.
DOS SANTOS: So, Michael, is there anything that you think governments can do to make this haircut look more attractive?
HART: Well, I'm not really sure about that. But one effective way to achieve the desired outcome would be for Greece to actually start threatening to default.
DOS SANTOS: And that could mean going back to (INAUDIBLE) one.
Nina dos Santos, CNN, London.
(END VIDEO TAPE)
FOSTER: Very creative with Nina today.
Fantastic stuff.
Now, we're just getting some reports. We need to bring you this, because we're getting some reports citing diplomats, Eurozone ministers have agreed to to unlock 8 billion Euros of debt -- well, alone, basically, for Greek debt. So an 8 billion dollar euros debt loan for Greece. That's what we've got that at the moment. We're going to bring you more on that as we get it.
European stocks finished sharply higher today, boosted by hopes that a resolution to the Eurozone debt crisis is around the corner. Investors' optimism grew as finance ministers began meetings aimed at solving the region's financial troubles.
The London FTSE rose 1.9 percent.
The Paris CAC bumped up 2.8 percent.
The DAX in Germany added nearly 3.6 percent.
Just ahead, a galvanizing moment for shareholders -- Rupert Murdoch faces his investors and the mood is angry. We'll show you why.
(COMMERCIAL BREAK)
FOSTER: Anger is in the air. Investors are in revolt. It has all the makings of a Hollywood screenplay. Yet it's all too real for Rupert Murdoch. He's under fire from shareholders who are holding their shareholders their annual general meeting. Many are accusing him of poor performance, amid calls for him and his sons to step down.
(BEGIN VIDEO CLIP)
STEPHEN MAYNE, DIRECTOR, AUSTRALIAN SHAREHOLDERS' ASSOCIATION: And we have a gerrymander where 70 percent of the shares don't get a vote. And you're the longest serving CEO. It's time to get on the governance high road. It's time to actually embrace good governance. The returns haven't been there.
(END VIDEO CLIP)
FOSTER: Well, protesters outside the meeting venue are sending a message to News Corporation's board and investors.
CNN's Casey Wian is also there.
And I spoke to him earlier about what's at stake.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT: Max, what you've got is an investor revolt against Murdoch family control of News Corporation. Several big institutional investors, including the California Public Employees Retirement System, say they're going to voting against the Murdoch family and other board members being able to remain on the board at this meeting today.
What they are upset about is the phone hacking scandal that erupted in Britain over the summer. They're also, many of them, upset about the relative performance of this company's stock over the past several years in -- in relation to other media companies.
Now, it's going to be very difficult, even the most ardent critics admit, to actually force any kind of change in leadership at News Corporation at this meeting. That's because the Murdoch family controls 40 percent of the company's voting stock. Another 7 percent of the voting stock is controlled by the Saudi royal family and they have publicly expressed their support for the Murdochs.
Even so, we spoke earlier with a British member of parliament, Tom Watson, who traveled here from London to be at this meeting. He is very upset about, of course, the phone hacking scandal and about the way this company is being run.
(BEGIN VIDEO CLIP)
TOM WATSON, BRITISH M.P. CULTURE, MEDIA AND SPORTS COMMITTEE: This company has no corporate governance arrangements that we know to be usual and normal. Terrible things happened as a result of it. And, you know, what here is, is a $32 billion trans global media empire that is run, currently, like a dysfunctional family firm. It need reform. And I'm sure that many of the independent investors will make that point loud and clear today.
(END VIDEO CLIP)
WIAN: Now, we are also also expecting labor groups here in the United States and those supporting the Occupy Wall Street movement to be protesting here outside of Fox studios, which is near to where the News Corporation is taking place. They're just beginning to gather behind me now. We're also expecting a shareholder resolution to be put forward requiring an independent chairman of the board of directors of News Corporation. And if that resolution is successful, of course, that would require that Rupert Murdoch step down from at least that role in the company -- Max.
FOSTER: So as you say, because of the nature of the control...
(CROSSTALK)
FOSTER: -- do control it, even if they don't own most of the shares. But so I guess today is really to get a sense of the anger amongst the wider shareholders, right?
WIAN: Absolutely. Even though they don't think they have the numbers to actually oust the Murdoch family from the board of directors, they do think that they can send a strong signal that investors are angry and they do not want the practices that have been going on at this company for years to continue.
They also think it may have some impact down the road on the -- on the family's plans to keep this company in family control. They -- they believe, the opponents of the Murdochs do, that they may be able to force some sort of independent control of this company once Rupert Murdoch does retire.
(END VIDEO TAPE)
FOSTER: Now, that's the story from the AGM there.
We're going to bring you more details on that as we get it. It's still ongoing as it is.
Casey is in there. We'll bring him out and find out what happened in there, how much anger was there.
At the moment, though, we're wrapping up another edition of the Q-25 today. The Q-25 is our exclusive index to help you make sense of the earnings season. We pick 25 companies in a wide range of industries and debate whether their earnings merit a green chip or a red one.
Here is the criteria used to judge whether a company meets or falls short of our exacting standards. Because of the breaking news out of Libya yesterday, we were not able to bring you the Q-25. But here are the five companies included in the index that actually reported on Thursday.
Now, the phone giant, AT&T, received only one out of five of our criteria. It gets an automatic red.
Internet retail firm eBay, met only three out of five criteria, but its profit and revenue beat our targets. It gets a green.
Credit card giant, American Express, saw profit growth of more than 12 percent. It gets an automatic green for that.
Drug giant, Eli Lilly, met only three out of five of our target because of concerns about a blockbuster drug going off patent. We gave it a red, though.
And Southwest Airlines met only two out of five of its targets. But it gets a green thanks to the company's solid forward guidance.
And that's really been an ongoing theme, wouldn't you say, this week - - Felicia?
It's about guidance.
FELICIA TAYLOR, CNN CORRESPONDENT: Yes, absolutely. And especially when it's forward guidance and it's positive. That's what people are -- are looking at, because, obviously, the last couple of years haven't been the best that we've seen.
So if, going forward, companies are seeing positive signs in their growth ability, then that's a very good thing.
FOSTER: And what have you got on the table?
TAYLOR: That's a good thing.
FOSTER: It smells good.
(LAUGHTER)
TAYLOR: Come and join me.
(LAUGHTER)
FOSTER: What have we got here?
Have we got (INAUDIBLE)?
TAYLOR: Well...
FOSTER: We're winding things up on a Friday today. So Felicia came up with this brainwave.
TAYLOR: Brainwave. Light bulb. A light bulb went on.
OK, so let's start with GE.
FOSTER: OK. Yes.
TAYLOR: This isn't my favorite company. I mean they are energy, aviation, financial services and they make light bulbs. This is not a G.E. light bulb. They're usually a lot bigger. But, however, that's what they do.
They've had really strong -- they've had problems in -- in pushing up their stronger margin growth. That's where the problems have been.
Financial services continue do to OK, but that's their problem. They're expecting about, I think it's quite a big bid for foreign sales to boost growth. And that's the only thing that kind of puts it forward is that forward guidance. The stock has hit a 52-low and it's stayed at those lows for some time.
So it's a grudging green.
FOSTER: A grudging green.
So it's marginal?
TAYLOR: It's really marginal for me.
FOSTER: OK.
TAYLOR: Yes.
FOSTER: Let's talk chips.
TAYLOR: Let's talk chips. McDonald's, now this is a company I love.
FOSTER: I guess we want to wait for them, isn't it?
TAYLOR: You've got to -- you've got to have one
FOSTER: Yes, here we go.
TAYLOR: Absolutely.
OK, McDonald's has that consistent growth.
(LAUGHTER)
TAYLOR: Don't chew with your -- I mean don't speak with your mouth full.
FOSTER: I'm keeping quiet, you'll notice.
TAYLOR: OK. It had consistent growth in a very tough economy. That's why I like them. They per -- they performed and outperformed the competition. They've had huge growth in a number of different areas. Same store sales have grown between 4 and 5 percent in both the U.S. and Europe. Also in Asia, Africa, and the Middle East, they've had over 3.5 percent growth.
So for them, they have value offerings. They have hamburgers. They have great shakes. I mean...
FOSTER: In this economic environment, people are going for cheaper food, they're saying, is that right?
TAYLOR: Well, unfortunately that's the case. But you know what, for the company, it's great. Their stock hit a 52-week high.
FOSTER: What flavor is that?
TAYLOR: Vanilla.
FOSTER: OK.
TAYLOR: I like it.
FOSTER: A green then?
TAYLOR: Yes, definitely a green. There's no doubt about that.
FOSTER: And, finally, Microsoft is a company often in the headlines.
TAYLOR: Yes.
FOSTER: How is it doing?
TAYLOR: You know, this is a company that's had a really tough time with their more nimble offerings out there. And let's face it, you know, people are moving away from the laptop and the PC. Everybody is using their mobile devices, their tablets, things like that. That's where investors are more worried about the growth going forward. They say that they're going to be able to overcome that. But -- and they do still represent 90 percent of the PC market.
But for them, I think they're going to have a really tough road, like I said, because everybody is using the smaller devices that they can carry with them. And this, frankly, is a little clumsy compared to a tablet.
FOSTER: So looking ahead, you're feeling a bit pessimistic?
TAYLOR: Hmmm, pess -- yes. I just don't think they're going to be able to overcome the competition. So for me, it's a red.
FOSTER: it's a red?
TAYLOR: Definitely. Yes.
FOSTER: And that's our last one, Felicia.
TAYLOR: Ooh.
How did we do?
FOSTER: Well, we're going to come over here. The final tally for the edition -- OK, we've got to stay here.
The final tally for the -- this edition of Q-25, we could get a rough idea. Obviously, the greens are ahead.
TAYLOR: Well...
FOSTER: The Q-25 suggests that this is hardly a blowout for the U.S. earnings season?
TAYLOR: It's not. There's no question that it's not a blowout for the earnings season. But the point is, as we said at the -- at the top of the segment, things are looking better for companies. And that's what's most important. I mean if we had seen forward-looking guidance reduced for more companies, then this would be a problem. But the -- the truth is, I mean it's kind of neck and neck, which isn't bad, considering where we've come from. So all -- all in all, it's been a pretty good earnings season...
FOSTER: (INAUDIBLE)...
TAYLOR: -- and people were expecting...
FOSTER: -- this economic gloom?
Actually, there's something positive here.
TAYLOR: Some companies are able to overcome it, like McDonald's. You've got to take a look at what they're offering, though.
FOSTER: We'll let you tuck into that.
TAYLOR: Oh, good.
FOSTER: Felicia, thank you so much.
Save me some.
TAYLOR: Maybe.
FOSTER: We're going to have a look at Wall Street now, because it's rallying. They're obviously listening to us, all that good news coming out. It's getting a boost ahead of this weekend's summit on the European debt crisis.
Corporate earnings also helping U.S. stocks, it has to be said. McDonald's, one of the top performers after what we were talking about there. The fast food chain's third quarter earnings were better than expected. The Dow up 1.7 percent current.
Now, coming up, ending slavery for good. CNN's Freedom Project is live from the Global Forum on Human Trafficking.
Oscar winner Mira Sorvino will be there. And campaigner Lyndon Lea is on his way. We've been talking to both of them about this important movement. That's next.
(COMMERCIAL BREAK)
FOSTER: CNN's Freedom Project is concentrating on helping to end human slavery and showing you how to be a modern-day abolitionist.
We're -- we've joined an important movement. You are looking at live pictures of the Global Forum on Human Trafficking. It just kicked off a short time ago in California, bringing together leaders in business and culture and education from across the world.
The mission?
To try to end slavery in our lifetime.
One idea, the Not For Sale Campaign, is already on its feet and it has supported nearly 1,000 survivors of forced labor this year.
Here in London, fashion retailer AllSaints Spitalfields says there's nothing chic about slavery. So it's getting involved with the Not For Sale group to put pressure on businesses to be more transparent about their supply chains.
Earlier, the store's owner, financier and campaigner, Lyndon Lea, told me that saying, "I didn't know" just doesn't cut it.
(BEGIN VIDEOTAPE)
LYNDON LEA, OWNER, ALLSAINTS SPITALFIELDS, FOUNDER, LION CAPITAL: There are certain necessary conditions for trafficking to occur. And one of the primary ones is -- is poverty.
So, you know, as business is pushing to get their costs down, they are tending to put production in low cost economies. Therefore, it is a responsibility of those same businesses to ensure that the goods and products that are made are not by trafficked individuals.
FOSTER: What we've found is that when we do find a product on a High Street, for example, here in the United Kingdom, which was produced with slave labor, often, the company doesn't know that -- and are quite horrified to hear that, because it's a system of contractors under their control that are responsible for this.
Can you really go right back into the supply chain and really try to resolve this?
LEA: Well, clearly, it's not easy. I mean, you know, there -- there are a lot of challenges. Again, it's all driven by an effort to be competitive.
But, you know, it is simply that, a challenge. And we have to do everything within our power. And, inevitably, you know, things will slip through the cracks. But we have to we have to start somewhere. And I think it is imperative that we have our suppliers sign up to -- to agreements that we have the ability to police not only suppliers in the factories, but their suppliers.
And I think it is important -- it's a cost that inevitably we -- we -- we're going to have to incur, you know, as -- as part of our corporate responsibility.
FOSTER: What about the idea of some sort of badging system so you can have a -- a product badged saying this is slave labor free?
LEA: Yes, well, I mean, I think, you know, Not For Sale has been involved in -- in -- in initiatives such as that. And, you know, I think it is, again, it's all about small steps. It is a big issue. It's -- it's an issue that's been around for -- for many, many years, for hundreds of years. And any of these initiatives are progress. Clearly, there's faults in everything and nothing is perfect, but, you know, will have to make these small steps and -- and be committed to -- to eradicating slavery in our lifetime.
FOSTER: It's a strange thing, isn't it, because when you talk to people about the issue, everyone is against it. And that -- but it's so prevalent. And it's prevalent in pretty much every city in the world, it seems.
LEA: Yes, it is amazing. And I think, you know, clearly what CNN and others are doing is -- is -- is -- is a huge help in terms of creating the awareness.
But then it's -- it's about going, you know, beyond the awareness. It's about taking the next step and being an informed consumer. It's about businesses being informed and coming under pressure to be transparent and for them to effectively self-police themselves and look at their supply chain.
And again, small steps, but every step is important in getting to the end result.
(END VIDEO TAPE)
FOSTER: Now, sometimes bailing out the banks isn't the answer. Not - - it's not just the protesters on Wall Street who believe that. There's one world leader who knows firsthand. The president of Iceland on how to escape an economic crisis. That's next.
(COMMERCIAL BREAK)
FOSTER: Welcome back.
I'm Max Foster.
More QUEST MEANS BUSINESS in just a moment.
But first, here are the headlines for you.
The 40,000 U.S. combat troops still in Iraq will leave by the year's end. U.S. President Barack Obama made the announcement a short time ago, saying America's war in Iraq will be over. Any chance of an extension beyond 2011 ended when the nations failed to reach a legal immunity deal for the remaining U.S. troops.
Now, Libyans lined up to see Moammar Gadhafi's body in a refrigerated locker in Misrata. Muslim rites require burial within 24 hours. But the transitional government says it's putting the funeral for the former leader on hold in case officials from the International Criminal Court want to see the body first.
Protesters camping outside St. Paul's Cathedral in London have forced the dean of the iconic church to make a rare move. He's shut the cathedral's doors because of health and fire hazards. The demonstrators are part of the Occupy Wall Street movement. They say they're staying put.
Some important news regarding Greece this hour. The Euro Group of countries has just released a statement saying it will give Greece the next installment of its bailout money. That's a total of 8 billion Euros, or around $11 billion. That money will start coming in around the first half of next month, subject to the IMF's approval. The statement just released said the Euro Group welcomed the austerity measures from Greece and says it expects it to meet its targets next year. So good news for Greece today.
Back in 2008, Iceland suffered a complete economic meltdown. Three years on and with unemployment numbers that would be the envy of most of Europe, Iceland's president says his country is an interesting example of how to escape a deep financial crisis.
President Olafur Ragnar Grimsson joins me now live from CNN New York.
Thank you so much for joining me, President.
I know you don't want...
PRES. OLAFUR RAGNAR GRIMSSON, ICELAND: Thank you.
FOSTER: -- you don't want to talk about specific meetings being held in the Casbat (ph) countries here in Europe, the Eurozone, but when you take an example of Greece, a country struggling, and they're facing the economic abyss, what hope can you offer people living there right now?
GRIMSSON: The main hope was, in our case, that we were wise enough to combine not just economic and financial measures, but also very comprehensive political, judicial and social reforms.
And I think if you approach this crisis in Greece or anywhere else simply through economic and financial measures, it is very doubtful whether you will succeed, because this is a very deep and profound democratic and social crisis in our countries.
And one of the reasons why Iceland is now successfully on the way to recovery is that we were, as I said, fortunate enough to realize that we had to deal with all the dimensions in this fundamental crisis.
FOSTER: Let's talk about the money issue, the cash issue, the debt issue. You know, these -- these debts need to be dealt with some way.
So is it better to bite the bullet and default completely or is it better to try to go into a cost cutting drive and be in this effort with the markets the whole time?
GRIMSSON: Well, first of all, everybody has to be clear that if there are private banks, they should be treated like private companies. If we enter into the area of considering private financial institutions somehow holier than other private companies, tined to our problems.
In my country, we decided that these were private banks. So we did not pump public money into those banks and we allowed them to fail.
And then, secondly, when the governments of Britain and the Netherlands, supported by all the European Union countries, wanted ordinary people in Iceland to shoulder the debt of one private bank who had operated abroad, I put that to a referendum, because I didn't think it was fair to ask farmers and fishermen and teachers and nurses and ordinary people to be responsible for the failures of a private bank.
And I think this is an issue not just in Europe, but also here in the United States, that political leaders and others have to face squarely the dilemma between the democratic right of the people and the financial interests of private financial institutions that have not been successful.
FOSTER: On that principle, there shouldn't be another bailout for Greece then, should there?
It should be allowed to default.
GRIMSSON: Well, as I have said for many months, I don't want to give direct answers to the problems of other countries. What I can describe is how we handled this situation in my country. And the end result is that three years later, we are now well on our way to recovery, with exports growing, unemployment relatively low and economic growth on the scale of 2 or 3 percent.
FOSTER: OK, President Grimsson, thank you very much, indeed, for joining us from New York.
GRIMSSON: Thank you.
FOSTER: Now, Gadhafi is gone, but billions of dollars in regime assets remain frozen around the world. Up next, we'll find out where Gadhafi's money is being held and what happens to it now.
(COMMERCIAL BREAK)
FOSTER: We are going to return to our Freedom Project now, because we want to bring you another interview that I managed to grab the other night. And it's about ending slavery in our lifetime. It's a big priority for the actor, the Oscar-winner, Mira Sorvino.
Earlier this week, I caught up with her.
She was fundraising here in London.
It's a really big part of the whole campaign, but sometimes it's a bit of a struggle raising money, as well as awareness.
She started by telling me that a -- a struggle to find backers continues, even when the cause is as urgent as this one.
(BEGIN VIDEOTAPE)
MIRA SORVINO, OSCAR-WINNING ACTRESS: Last year, the State Department had a $16 million budget to work on trafficking and it got slashed to about $9 million. And I'm not really supposed to know that, but I do. We spend more on marching band in a month than we do for a whole year's budget. Military marching bands get more in the U.S. in one month than -- than human trafficking.
FOSTER: So you're great concern is awareness going well, but actually funding it is going to be a problem. And we're going through this recession and it's not going to get any easier.
SORVINO: No. But, you know, generous people always are able to give something. And it -- I -- I want people to understand that your dollar, your pound, your pennies would actually make a significant difference in the overall scheme of it, because these grants are just $25,000 U.S. per grantee.
FOSTER: But why human trafficking?
Why not animal welfare?
Why not young children?
That's what you're competing against, other causes, as well, right now.
SORVINO: Well, every cause needs its hero. Just having met so many victims of human trafficking and understanding that, you know, I think all of us us are very complacent that we are part of the modern-day culture that put slavery out of business. But we didn't. It's still alive and well. You know, everybody thinks Lincoln was a great man, the -- the British abolitionists were great human beings. And -- and they did away with a terrible evil that has been institutionalized. Well, the institution has just gone underground.
So slavery is doing better than it ever has, but it's just illegal rather than legal. And it's harder to find because it's hidden. And its victims are the most disempowered human beings on the face of the earth, people who have no voice. They have no education. They have no money. They've got nobody looking out for them. They're -- they're people that their own parents have sold in order to try and save the rest of the family. So that's who these people are.
So who's going to help them if we don't?
(END VIDEO TAPE)
FOSTER: Mira Sorvino speaking to me earlier this week.
Now, the weekend weather is upon us.
And to get the latest weather for Europe, meteorologist ram Javaheri is at the Weather Center for us -- ram, what have you got?
PEDRAM JAVAHERI, CNN METEOROLOGIST: Oh, yes, Max.
We're going to be talking about the breakdown here for what looks like a gorgeous weekend across portions of Europe and not just Western Europe, but across portions of the east and even Central Europe getting sunny skies on tap the next couple of days. And a few clouds associated with a storm system well to the north. But that's pretty much it.
Travel plans going to see very moderate to light as far as delays are concerned, as we're seeing clearer skies. So that is a clear across the board there.
Temperatures in Paris have cooled off to seven. And, again, we had that chill earlier in the week. And we are going to warm up now, above average over the next couple of days, currently sitting at six in Berlin.
And Copenhagen locks in at 9 degrees. But again, notice the blue colors there. That's the cool temperatures. That's shifting on into Russia. We get a lot of yellows and oranges. Those are temperatures right around the seasonal averages. And we will return now with those to the forecast here and finally push above average by the time Sunday comes around.
So across London, Paris, all the way into Berlin, you're looking at temperatures a good one to three degrees above average. In some areas, by Sunday, London actually warms up to four degrees above seasonal averages. So not too often in the latter portion of October do you get a weekend forecast that resembles something like this, but we had that across the area there in portions of Northwest Europe. And, again, we're going to see a few areas of breezy conditions in Dublin. That might hamper travel issues there.
But that is it in the Weather Center there. And it looks like we're going to remain warm and dry through the beginning portion of next week, Max, before another storm comes in by the middle of next week.
FOSTER: OK, ram, thank you very much.
Appreciate that.
That is QUEST MEANS BUSINESS for you.
Thank you so much for watching.
I'm Max Foster in London.
"MARKETPLACE AFRICA" is up next for you.
(COMMERCIAL BREAK)
ROBYN CURNOW, HOST: You're watching MARKETPLACE AFRICA.
I'm Robyn Curnow.
And this week, we're at the Johannesburg Motor Show. It's one of the top ten auto shows in the world and certainly one of the largest here in Southern Africa.
Now, it's not just cars that are on display. The trucking stand is also getting a lot of interest.
So for this week's In Focus segment, we're going to take a look at how the trucking industry is expanding here in Southern Africa.
(BEGIN VIDEOTAPE)
CURNOW: This is what much of South Africa's rail network looks like - - rundown, barely functioning. Peripheral lines have been broken up and sold as scrap metal.
Now, the breakdown of South Africa's rail infrastructure is putting huge pressure on South Africa's road infrastructure, say economists. More than 85 percent of all goods are transported by the roads. And that is having a huge impact, as well, on South Africa's South Africa's competitiveness.
(BEGIN VIDEOTAPE)
CURNOW (voice-over): Even though South Africa's roads are some of the best on the continent, transporting goods is expensive.
MARK RYLANCE, BARLOWORLD LOGISTICS: If you have a look at it, logistics spend over 30 percent of GDP, some of the highest in the world.
CURNOW: For many key players, the freight transporting industry is at a crisis point.
FRANCOIS VAN RENSENBURG, BARLOWORLD LOGISTICS: All the players seem to be disorientated, disorganized.
UNIDENTIFIED MALE: A lot of the companies at the (INAUDIBLE) bypass specific driving hours. They're putting a lot of pressure in terms of payloads of specific vehicles. They're missing toll roads. They're using alternative routes, which, again, it puts pressure on our secondary roads.
So it's -- so it -- it's just a trade, you know. Companies -- customers out there are -- are looking more for -- for a frost (ph) than -- than a solution.
CURNOW: The larger companies blame new, small time truck owners like Tibahul Manamo (ph), who's at this factory looking to buy another truck for his three vehicle fleet. He says he's happy with the industry opportunities.
TIBAHUL MANAMO: At the end of the day, it's about the supplier and the customer. If the supplier says I want my tonnage, so much tonnage moved at such a rate, if the bigger boys come in, they have fleets of 100 or 200 trucks. They're going to cut your rate. It's as simple as that.
It should be an open free market system. I can come in, name my price and get what I want.
CURNOW: Pressured from all angles, larger companies like Barloworld are relying even more on their truck drivers to adhere to road rules, to deliver goods more safely than competitors.
(on camera): We're going to go for a ride now. These are called extra heavy duty trucks and they carry about 35 tons.
(voice-over): Barry Neokazi is an experienced hand in an industry full of young, newly qualified drivers, all trying to get their heavy loads to destinations as fast as possible.
(on camera): This truck is going quite fast in front of us now.
Do you feel that there's a lot of speeding?
BARRY NEOKAZI, BARLOWORLD LOGISTICS: Yes, maybe.
CURNOW: It seems like there are a lot of bad drivers on the road who really push things.
NEOKAZI: Yes. There are a lot of bad drivers on the road. But at times, it's maybe because it's an express truck. Maybe you'll find that by working more kilometers and making more loads, that's how you accumulate more money for -- for -- for your salary at the end of the week or at the end of the month.
CURNOW (voice-over): Manamo says he pays his drivers a minimum wage and an incentive bonus for speedy but safe service. And he thinks that the growing number of trucks on South Africa's roads is a positive indication of an economy on the move.
MANAMO: Business in South Africa or anywhere in the world should be governed by a need and an opportunity. Railway, yes, it was working. It still is working, but it wasn't sufficient. Our -- we started growing as an economy in South Africa. And I believe that's one of the major impacts that got trucks getting more involved. We needed things to move.
CURNOW: Moving too fast for some, too slow for others, South Africa's roads expose the strengths and the weakness of the country's economy.
(COMMERCIAL BREAK)
CURNOW: OK, let's take a look at South Africa's auto industry by the numbers.
Now, the Department of Trade and Industry says that the auto sector has set themselves a target of producing 1.2 million vehicles per year by 2020. Currently, the sector contributes around 6 percent to the country's GDP and makes up nearly 12 percent of all exports.
From ground transportation to air expansion, up next, how carriers are keeping up with Africa's soaring aviation demand.
(COMMERCIAL BREAK)
CURNOW: These cars may dazzle and delight motor enthusiasts, but driving them on the open road could be a challenge in areas with poor infrastructure. Bad roads and expensive rail networks have helped to make Africa's skies more busy.
Well, our guest on FaceTime this week is Boeing's vice president of sales for Africa, Van Rex Gallard.
And we talked about African aviation.
(BEGIN VIDEOTAPE)
VAN REX GALLARD, BOEING VICE PRESIDENT OF SALES FOR AFRICA: Right now, the African market, for the airlines, is quite small. The African airlines only have around 2 percent of the total revenues of the traffic between Africa and the rest of the world.
So to me, the potential is huge.
CURNOW: So what are the numbers we're talking about here then?
GALLARD: The numbers, if everything stays the way it is right now, status quo, without the African airlines growing faster and the way they should, it would be around 800 airplanes for the next 20 years, worth around $100 billion.
CURNOW: And, of course, Boeing wants to...
GALLARD: That will...
CURNOW: -- it wants to get a bit of that -- a bit of that pie.
GALLARD: But it's not just Boeing. I think it's for the -- for the well-being of the region. To me and to many people, aviation is a -- is a machine that will develop the region. It's an economic development machine. So if we want to take advantage of this machine, we need to grow faster.
The African airlines need to gain a higher percentage of the marketplace.
CURNOW: So the African airlines need to gain a greater percentage of the marketplace. But already, we're seeing quite an influx of particularly Middle Eastern airlines coming in, undercutting on prices. And a lot of people are saying that's the future.
GALLARD: It is an open market. And so -- so the the African airlines need to react, need to compete. And to compete, they need to grow and provide a better service than the competition and a better service not only when it comes to passenger comfort, but pricing. And to have better pricing and -- and better features, you need better economics, so you need new equipment.
CURNOW: Maintenance -- a big issue here on the continent. Huge -- I think 12 times -- the accident rate here is 12 times the global average.
GALLARD: OK.
CURNOW: How do you ensure that once Boeing has delivered their consignment of aircraft, that these planes are maintained, that there is a -- there's a skill level that can actually ensure that these fleets continue to service Africans and the rest of the world for years to come?
GALLARD: Well, we do for the air, for our customers, let's say our airline customers in Africa, we provide the training -- the required training for them to be prepared to take in and operate these airplanes, not only in the maintenance side, but also in the -- in the pilots' side.
CURNOW: But is this something that you've realized is -- is a concern?
Because what I've picked up is that particularly when it comes to pilots or to engineers and that sort of thing, there is a skills shortage on this continent. And there is not enough pilots, for example, to actually fly all of these planes and all of this capacity that is expected.
GALLARD: Yes, there is a skill shortage around the world, not only in Africa. So one of the -- one of the initiatives worldwide for the Boeing Company is to assist in the development of these skills required to maintain and grow the fleet.
CURNOW: Who's buying new airplanes on the African continent?
GALLARD: We have a lot of customers in Africa. And this is actually -- this is a very exciting period. As an example, we just announced two 747-8 passenger airplanes for Arik Air in Nigeria. And they also have 787s on order and 7 -- brand new 737s on order.
In the east coast, we have Ethiopian Airlines, who are just growing really, really fast. The airline business, to them, is a priority. They just ordered six 777 freighters. They have 787s on order. They have 737s on order.
The same with Kenya Airways. Kenya Airways have new airplanes on order. You have Rwanda Air, also growing.
Equatorial Guinea is ordering new airplanes.
So the list is actually quite long.
CURNOW: So what are the challenges, in particular, opening up the skies?
It's still, some of the roots are still quite sort of convoluted, aren't they?
It's still hard getting from east to west and west to east.
GALLARD: I'm told that some of those issues may be because of the lack of rights or open skies within the region. So once you have open skies in Africa, you may see a huge difference. You're going to be able to move from any part of the continent freely with the frequencies necessary to make your transportation efficient and cost-effective.
CURNOW: And that's a political question, it's not a business question. And I know that your probably hesitant to sort of push on that. But it's about African governments, it's about African carriers realizing that they can't protect their little bit of air space or their little bit of the market, that there is actually a whole sky out there.
GALLARD: They have to get together and realize that working together as -- as a continent, they will be able to find growth and development instead of protectionism. Protectionism doesn't help anyone.
(END VIDEO TAPE)
CURNOW: That was Van Rex Gallard from Boeing.
Now, here's what's trending in African business news this week.
(ON SCREEN)
Taking Flight
Air Namibia orders two new Airbus planes worth $90 million.
The purchases is part of a new business plan for the struggling airline, which calls for new actually, new routes and better scheduling.
Doing Business
Africa shows major progress in the IFC/World Bank's new "Doing Business 2012" report.
Five of the world's most improved economies are in Africa. Overall, 78 percent of African economies have implemented changes, making it easier to do business there.
CURNOW: That's it for this week's show.
A reminder, we are on Facebook, Facebook.com/CNNmarketplaceafrica. There are lots of behind the scenes photos as well as many of our old interviews and stories.
But for me, Robyn Curnow, here in Johannesburg, goodbye.
END
