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Quest Means Business
Cypriot Parliament Debating Bailout; Cyprus Bank Crisis; Line in the Sand; Parliament Delay; Fitch Warns of UK Downgrade; Muted Markets; Bailout Battle; Betting on a Last-Minute Deal; Pound, Euro, Yen Gaining; Italy Coalition Talks
Aired March 22, 2013 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, HOST: The deposit tax is back on the table as Cypriot lawmakers fight for the country`s economic future.
A breakthrough in Rome. Italy`s center-left leader is asked to form a government.
And 50 years since the release of their debut album, the Beatles are still memorabilia magic.
Hello, I`m Nina Dos Santos and this is QUEST MEANS BUSINESS.
Good evening. With just two days to avoid financial failure, Cypriot lawmakers are once more talking about a tax on savings. The finance minister, Michael Sarris, has confirmed parliament is indeed debating the levy on bank deposits.
Reuters reports that lawmakers are currently considering imposing a 10 percent tax on deposits that exceed 100,000 euros. Other reports suggest that it could be as much as 15 percent. Well, the hugely levy is the main reason that parliament threw out the first rescue plan that was tabled just days ago. The second was knocked back by EU officials.
Cyprus now has until Monday to come up with an acceptable way of raising the $7.5 billion that this country needs to qualify for a desperately-needed EU bailout. Without that kind of cash, the supply to the country`s struggling banks will be cut off by Monday the 25th by the ECB. The president, Nicos Anastasiades, says that there will be painful aspects to any kind of solution, but Cyprus must be saved.
In a moment, we`re going to go over to Jim Boulden, who`s standing by in Nicosia, but earlier, let`s point out, that he spoke to the acting head of Laiki Bank. This is one of the country`s main lenders. He asked the head what would have to happen for the banks to reopen as slated on Tuesday.
(BEGIN VIDEOTAPE)
TAKIS PHIDIAS, ACTING CEO, LAIKI BANK: I have no idea. Now that we are at this stage, I really have no idea what could happen. I think any decision would be a disastrous decision.
In my opinion, if we had done the haircut on deposits, we could do a haircut on deposits, it could be a much better solution because all the banks would be saved. But that would need the unconditional support of the European Central Bank, which is not there.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: So right now, everyone with 100,000 euros or below is -- will be safe. But people who have more than that in your bank most likely will have to pay a levy, will they not?
PHIDIAS: Definitely. It`s not a levy, it`s a -- they will just receive money if the resolution of that bank has any money to be paid to depositors. And that includes people who got damages from court for the death of their parents or incapability, that includes property funds, pension funds, and a lot of other humanitarian sums that could leave families in desperation.
BOULDEN: And finally --
PHIDIAS: I understand they`re trying to do something about that, but I`m not quite sure.
BOULDEN: Finally, how worried are you that your bank will collapse come Tuesday morning?
PHIDIAS: To be honest, I have no idea how we will open on Tuesday morning. I don`t really know if our people go to the branches, I`m not quite sure what they have to do and how the situation will be handled.
You realize that this is the first time we`ve come across such a scenario. I`m not quite sure if in Europe anybody else has come across this scenario with restrictions and a transfer -- a partial transfer or deposits.
BOULDEN: Who do you blame? Do you blame -- the eurozone blames the banks here in Cyprus.
PHIDIAS: Look, the banks here were OK. We had a very healthy financial system. The -- what effectively happened is that ever since we participated in the Greek PSI --
BOULDEN: To help save the Greek banks, yes.
PHIDIAS: To save the Greek banks, our banks immediately became insolvent. And because there was no provision to save the Cyprus banks from the Greek PSI, from that moment onwards, it was a total dependence on assistance from the European Central Bank with --
BOULDEN: And that assistance will dry up on Monday if there`s no deal.
PHIDIAS: And that assistance, we are being told, has dried up already, yes.
(END VIDEOTAPE)
DOS SANTOS: As promised, Jim Boulden will be joining us later on in the show, but in the meantime, let`s also point out that obviously Germany is key to whatever happens in Cyprus. And indeed the German chancellor Angela Merkel has been playing a pretty tough game here, warning that leaders are running out of patience.
On this very program last night, Cyprus`s former central bank governor said that Germany`s hardline stance could actually kill off the entire eurozone bloc for good.
(BEGIN VIDEO CLIP)
ATHANASIOS ORPHANIDES, FORMER GOVERNOR, CENTRAL BANK OF CYPRUS: The way the German government has been behaving and the way in which other governments in Europe have been trying to appease the German government, yes, this is a clear risk. Again, let me repeat: I believe we are witnessing a slow death of the European Union project.
(END VIDEO CLIP)
DOS SANTOS: Peter Bofinger is the economic advisor to Angela Merkel, and earlier today, he told me that Germany isn`t budging on its position.
(BEGIN VIDEOTAPE)
PETER BOFINGER, CHAIR OF ECONOMICS, UNIVERSITY OF WUERZBURG: Well, the German stance on Cyprus is very tough. I think the German authorities expect that at least major depositors will have to participate in financing the bailout package. And so far, I don`t see that the German government is willing to give in on this position.
DOS SANTOS: Do you think that that will remain a sticking point here? And when you say depositors, are we talking about depositors with more than 100,000 euros in the bank? Because that otherwise would fly in the face of the insurance that has been guaranteed there to people who are savers with just under 100,000 euros.
BOFINGER: No, I think in the meantime it`s quite clear that the small depositors -- that means deposits of less than 100,000 euros -- will not be affected. It`s clear that major depositors will be taxed, at least as the German position is concerned.
In Cyprus so far, the authorities have tried to avoid this, which in my view is somewhat understandable because it has a negative impact on the position of Cyprus as a financial center.
DOS SANTOS: It certainly does. It raised the prospects of people taking their money out of Spanish and Italian bank accounts because they think, hey, if we need a bailout, they might impose the same conditions.
BOFINGER: That`s exactly the signal that will be sent if a package in Cyprus includes billing of large depositors, and therefore, I think it would be worthwhile to find other solutions. I have some sympathy with the plan B of the authorities from Cyprus, which tries to collect money from pension funds, foreign exchange reserves, from the churches, to avoid an outright billing of large depositors.
DOS SANTOS: But then again, why did the EU and the IMF just staunchly say not good enough?
BOFINGER: It`s difficult for me to understand this, because the collateral damage of anything that happens to depositors in Cyprus is high. It is high for the whole euro area, and especially for countries that have problems with their bank, especially Spain, or let`s also say Ireland.
DOS SANTOS: Do you think that Cyprus will be out of the eurozone in a week`s time?
BOFINGER: There`s a risk that this might happen. What we observe right now is a kind of chicken game, a dangerous chicken game between the authorities from Cyprus and the euro area finance ministers. And there is a risk that this chicken game will end up with a crash, which could be bankruptcy of Cyprus, Cyprus exiting the euro area.
And again, this would have a huge collateral damage on the stability of the euro area, because it would mean that membership in the euro area is no longer irrevocable, and so people in Italy or Spain might also consider an exit of their country in the case of troubles as an option, and this definitively destabilizes the euro area.
(END VIDEOTAPE)
DOS SANTOS: Jim Boulden now joins us live on the telephone from Nicosia at the moment. Jim, you`ve been spending a lot of time outside parliament. Finally, those parliamentarians are going to gather in Cyprus. What are they going to put on the table?
BOUDLEN (via telephone): Well, we keep waiting for them to gather. They`re around, but they haven`t actually sat down into the chamber yet. But what it seems like -- what`s taking so long, really, frankly, is that a haircut will be inevitable, I would say, for those who have savings of over 100,000 euros in the bank accounts.
And that`s what`s taking all day, to really get the political will to do that. Will that actually be what they vote on? Let`s see. We`re hearing reports where votes may begin tomorrow. Three bills, of course, are supposed to come before them to try to help get this legislation through.
And of course, they`ve been dealing with the Troika all day, Nina. Back and forth from the president to the parliament. The Troika, of course, are the ECB, IMF, and the eurozone, and they have got to approve any deal here.
And of course, Cyprus has to come up with the money one way or the other in order for the other 10 billion euro bailout to go through. And of course the ECB says it will stop funding the banks in emergency funding come Monday.
So, we`re deep into Friday night, now. Parliament still hasn`t openly debated or voted on anything, and we thought it would happen earlier today, so obviously, it`s getting down to the nitty-gritty, and they`ve got to get a deal together that everyone can agree to by Monday.
We could go into Sunday, no doubt. I think we are running out of time, and protesters are at the gates of the parliament. But they work for one of the banks, the Laiki Bank, the Cypriot popular bank, and obviously, if you do a reorganization of the banks, split it into bad bank and good bank, there will be job losses, and that`s something also that politicians are having to come to terms with.
DOS SANTOS: And that`s further down the line, Jim, but for the moment, the practicalities of actually just trying to get cash out to spend in Cyprus must be very difficult.
BOULDEN: Well, to be honest with you, we see people lining up every day for ATMs, they do seem to be refilling the ATMs. Obviously, there are hardships for people who don`t have bank cards, and obviously, if you cannot do your normal operations.
So, it`s very difficult for restaurants and things. I can see that using taxis now -- they`re rounding up so that you pay a 5 euro or 10 euro note without change, because that`s the way the system has been running now.
We are -- the banks have been closed for five days. So you can imagine what it`ll be like for anybody who only had access to a couple hundred euros or dollars or pounds or whatever each day from an ATM and having to wait sometimes up to a half an hour in the ATM line to get that money.
So, it`s become part of daily life here. I haven`t seen pushing and shoving. I don`t see people frustrated walking away thinking they haven`t gotten money. But I can`t imagine what it`ll be like if these banks don`t reopen again on Tuesday, Nina.
DOS SANTOS: OK, Jim Boulden, setting the tone there this evening outside the parliament in Nicosia, Cyprus. Thanks for that.
Well, markets have so far largely shrugged off the crisis in Cyprus. After the break, we`ll talk about whether it`s complacency, confidence, or something else entirely different.
(COMMERCIAL BREAK)
DOS SANTOS: Welcome back. Fitch has warned it may cut the UK`s Triple A credit rating because of rising debt and dwindling growth. All of this follows last month`s downgrade by rival ratings agency Moody`s, It also comes just a couple of days after the UK chancellor announced his budget.
The news came after markets closed. The FTSE 100 finished the day on a bit of a flat note, as you can see there, and stocks mostly edged lower right around the region, if you look at the eurozone markets, particularly the CAC 40 and the Xetra DAX, not huge losses there.
And a muted reaction to the problems in Cyprus have actually led many analysts to suggest that well, it could be something of a storm in a teacup. However, the German finance minister, Wolfgang Schaeuble, has been putting the resilience in these kind of markets down to confidence -- would you believe it? -- in the eurozone.
Wall Street at the moment is posting some pretty slim gains, as you can see, on the Dow Jones Industrial Average. With less than an hour trade left for this market, as you can see, it`s currently up around about half of one percent or 78 points at the moment.
Compared to the other EU bailouts, as we were saying just before, Cyprus looks as though it`s small change. Take a look at the $13 billion that it may well get here on this chart, as you can see. And if we stack it up against some of the other bailouts, well, it`s just 6 percent of what Greek received, that $13 billion. Greece, you`ll remember, got around about $224 billion.
It wasn`t in one installment, it was still in two installments, but it`s not just quite a bit more than Cyprus, it`s twice the size of Portugal. That country received only $101 billion.
And let me remind you of Ireland, which was also one of the countries that precipitated the eurozone crisis no less than four years ago. Ireland got $87 billion. Pales in comparison, still, to the kind of $13 billion that we see there from Cyprus.
Well, Diane Swonk joins me now. She`s the chief economist for Mesirow Financial. She joins us now live from Chicago to put all of this into perspective. So, Diane, why are the markets not reacting quite so negatively to Cyprus as we saw them react to countries like Greece?
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Well, I think there`s a couple things going on. One is they`re taking the lead of Ben Bernanke, who really didn`t talk very much, even when asked directly, about what was going on Cyprus as a major risk to hedge on the Fed`s list of risks that they`re hedging today.
And so, I think that`s one of the issues is they`re taking the lead from Ben Bernanke and sort of buying with the Fed. That said, I also think that there`s been a major shift in the political headwinds in the United States that have left people to feel a little more comfortable that there can be last-minute deals done.
The sequester has now been muted by continuing resolution that pushed back to September 30th, and muting the initial effects on defense and health care spending and the job furloughs that are going to come after April 1st.
So, I think that there`s this sense that there`s a bipartisan movement in the United States that one once thought was impossible. And so, if we can do it here, perhaps Europe has been able to pull itself together in the last minute, and so everyone`s betting on a last-minute deal.
The problem, of course, is if there isn`t a last-minute success, there is no plan B for the eurozone, and the collateral damage of this and of actually Cyprus going bankrupt would be phenomenal.
So, I think there is a very moved sense in terms of what governments can do at the last minute. They`ve seen some movement in the US, which was locked in gridlock, with less desperate times. They`ve seen Europe pull a rabbit out of the hat many times, and I think that`s what they`re betting on.
DOS SANTOS: That`s very interesting, isn`t it? And in fact, it`s replicated in the movements of the markets over the last year or so. What we`re seeing is a gradual sort of decoupling, if you like, from the markets that are at four, maybe even five-year highs where you are in the States, and the economic fundamentals don`t seem to back that up.
SWONK: Well, exactly. We are seeing, of course, the stock market caught up a bit. It`s way -- seems ahead of itself at this time.
We do have some improving economic news that`s hard to tell, though -- and I think the Fed was reasonably cautious about that, much more dove-ish in their tone -- about how much is there a second shoe to drop on fiscal drag, not just the sequester in the United States.
But remember, a lot of money was pulled into December as people hedged their tax -- higher tax rates in the United States. That supported spending in January and February and helped mask the effects of the payroll tax holiday coming to an end. And so, we could see some further crimp from fiscal drag as we move into the year.
So again, markets are reading into what have been a lot of upside surprises, but there may be special factors contributing to that, not the least of which might also be Super Storm Sandy, which has created an enormous amount of rebuilding and released insurance funds and things like that that could be spend that didn`t necessarily come out of income in the United States.
DOS SANTOS: Ever so briefly, if I may, we haven`t addressed the issue of bonds. And US treasuries are enjoying something of an interesting run of late. Obviously, as people don`t want to put their money in the eurozone, they`re certainly plowing it into America.
SWONK: You know, it`s amazing how low bonds have been, but I wouldn`t fight the Fed. At the end of the day, the Fed is buying a lot of bonds on the margin. We`re also seeing inflation remains extremely low in the United States, and in terms of a safe bet, we are actually seeing our deficit being reduced now.
For as much as our political situation is extremely dysfunctional, we have managed to get about halfway through that $4-some trillion that was in the original Simpson-Bowles plan. And so, we actually over the next decade are now reducing, and our deficit is falling today.
In fact, this year, the deficit as a share of GDP in the US is going to be at its lowest level since pre-crisis and lower than the peak prior to the crisis, about 5.5 percent or so. That`s really phenomenal movement, and I think many people aren`t really giving credit to what has actually occurred on that front.
DOS SANTOS: "I wouldn`t fight the Fed." That`s my favorite quote of the day. Thanks ever so much for that. Diane Swonk, there, from Mesirow Financial, joining us in Chicago.
And now, time for tonight`s Currency Conundrum. With the banks under pressure in Cyprus, more and more people are buying up units of a virtual currency called the bitcoin. It`s a risky saving, though, because it has no real value and can only be traded with other willing buyers.
So, what I want to know this evening is, how much has the bitcoin risen in value over the past week? Is it A 5 percent, B 50 percent, or C 500 percent? We`ll have the answer for you later on in this very show.
Let`s have a look at the currency markets now. At the moment, the pound, the euro, and the yen all making some gains against the US dollar.
(COMMERCIAL BREAK)
DOS SANTOS: Italy`s president has asked the center-left leader, Pier Luigi Bersani, to form a coalition government. All of this in attempt to end the country`s ongoing political gridlock.
Bersani`s Democratic party won control of Italy`s lower house last month, but crucially, it failed to achieve a majority in the upper house or Senate. CNN`s Barbie Nadeau joins us now live from Rome on the implications of what this means.
So, the gridlock`s ended for a little bit, Barbie, but what prospect does Pier Luigi Bersani really have of forming a workable government?
BARBIE NADEAU, CNN INTERNATIONAL CORRESPONDENT: Well, I think it`s going to be a very difficult exercise for him. He`s got just a few days to pull this together before there`s a confidence vote held next week sometime.
And he`s really only got two options. He can either join his foes, which are, of course, Silvio Berlusconi and Beppe Grillo, or he can try to persuade some of those supporters to join his coalition. It`s going to be a tough battle, though, because all -- these people don`t agree on the very basic platforms that they put forward and that they won on. So, it`s a tough road ahead for Bersani, definitely.
DOS SANTOS: What happens if he can`t form a government here, though? How long can Italy last without a functioning coalition government at the helm? Another six months or so?
NADEAU: Well, I think definitely if they can`t form -- if Bersani can`t form a government, they`re going to have to put another technocratic leader in place. The whole situation, though, is complicated by the fact that Giorgio Napolitano, who`s the president of the republic, is up for -- his mandate expires at the end of the month of April.
So, they`ve got to vote in a new president in order to help this along, even in terms of calling a new election. Right now, Napolitano cannot call a new election because he has less than six months in his mandate.
So, the parliament first of all has to vote a new president, who may eventually dissolve their parliament and send them to elections. But I think the conventional wisdom is that by the fall, certainly, we`re going to see a move towards new elections, maybe a technocratic government in place until then. Who that could be leading that technocratic government is anyone`s guess, though, at this point.
DOS SANTOS: And all of this throws into disarray the kind of badly- needed austerity measures that Mario Monti, the first technocratic government, had been putting on the table. Where are we on that front? Because of course we`ve now got the specter of Cyprus leaving the eurozone, and that`ll shed the focus back onto troubled countries, like Italy.
NADEAU: Oh, of course, Nina. I think a lot of people are very nervous that are watching Italy`s economic situation, because right now, the government is not functioning. They`re not putting together reforms, they`re not following through on any of the promises of austerity that they`ve made. It`s really a gridlock, standstill situation.
It depends very much, of course, what happens. If Bersani does manage to form a government, if he`s going to have any power to pass the reforms. He really did follow along the same lines as Monti`s austerity moves in terms of his campaign promises.
But of course, he`s going to need the support of Berlusconi and Beppe Grillo, who are anti-austerity and anti-euro, in order to form this government. So, I think we`re looking at gridlock, we`re looking at very easily elections within the next year, if not sooner.
DOS SANTOS: Barbie Nadeau, thanks so much for that, joining us live from Rome to put it into perspective.
Now, sun-kissed shores, beautiful beaches, and, well, banks and businesses in turmoil. Doesn`t exactly sound relaxing, does it? Coming up next, why some tourists are turning their backs on Cyprus.
(COMMERCIAL BREAK)
DOS SANTOS: Welcome back. I`m Nina Dos Santos, these are the headlines this half hour. Lebanon`s prime minister has resigned and announced the resignation of his government. Najib Mikati made the statement on live television in Lebanon. His cabinet has been deadlocked over preparations for parliamentary election. And they also failed to extend the mandate for Lebanon`s own police chief.
In Nicosia, angry Cypriots are demonstrating outside parliament. Lawmakers are currently debating or set to debate later this hour a plan to raise around about $7.5 billion. That`s the cash that`s needed to unlock a badly-needed bailout from Europe. The country`s finance minister says that a levy on savings is still on the table for this country. The ECB will cut off funding to Cyprus`s banking system on Monday if no rescue deal is actually reached.
In Egypt, clashes have broken out between protesters and supporters of the Muslim Brotherhood. At least 40 people have reportedly been injured outside the party`s headquarters in Cairo. There are also reports of protesters setting buses on fire there.
US president Barack Obama is attending a state dinner in his honor with King Abdullah of Jordan. The two leaders spoke to the media just a short time ago, and Jordan`s king highlighted the growing Syrian refugee crisis. He says Jordan can`t turn away women and children, but pleaded for help from the international community to deal with the burden.
Israeli prime minister Benjamin Netanyahu has apologized to Turkey for an Israeli raid on a flotilla bound for Gaza in 2010. Mr. Netanyahu phoned the Turkish prime minister, Recep Erdogan, to express his regret for the deaths of nine activists killed in that raid. He made the call during an airport meeting with President Barack Obama just before the president left for Jordan.
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DOS SANTOS: Greece is giving Cyprus a helping hand. The third largest Greek bank, Piraeus, is now confirmed that it`s buying Greek branches of the banks in Cyprus we`re talking about, Bank of Cyprus and Laiki Bank, to be specific.
But the banks set to be shuttered till at least early next week are -- it`s increasingly difficult for Cypriots to make ends meet. Nick Paton Walsh has one woman`s difficult story.
(BEGIN VIDEO CLIP)
NICK PATON WALSH, CNN CORRESPONDENT (voice-over): Olga, a Russian single mother who taught herself Greek just to get work in an upscale hotel:
OLGA, HOTEL MAID: Housekeeping, ma`am.
WALSH (voice-over): -- has always lived on a budget, but never like this. She has no ATM card, so closed banks mean there`s no more money now for food. Here, how much that`s left in her purse for her family to live off.
OLGA (through translator): Not even five euros. (Inaudible) from friends to get through the weekend. But I don`t know when the banks open again. My son gets paid tomorrow with a check, but he can`t cash it anywhere. We have money, but can`t get at it, maybe even for a week.
WALSH (voice-over): Her eldest two have grown and work to pay for school, but little Elena always has questions.
OLGA (through translator): "Mom, what will we do now?" she asks. At school, even the little ones talk. She hears stuff in school, and that`s a problem. I can`t put adult problems on a baby`s shoulder. I explain; I say we can get through this. We will wait and something good, I believe, will come of this. I feel hopeless. Fear, not just for my future, but for the future of my children. What can we do?
WALSH: Across Nicosia, there is that sense of despair, streets like this that would normally be bustling now barren and empty. So many Cypriots waking up to hear that the solutions their government offered the day before have now been cast aside.
WALSH (voice-over): During Thursday, queues grew with ATMs, gas stations asked only for cash, shops stayed shuttered, panic built. Olga says her 1,000-euro savings, a two-year`s work for her, not something she can lose even 2 percent of.
OLGA (through translator): I feel like it`s a million because I worked for it, sweat for it. I saved this money. Not scared, not angry, it`s desperation that grips your soul. A desperate situation and you cannot find your way out.
WALSH (voice-over): She jokes her life is like a fairy tale: it gets scarier the longer it goes on -- Nick Paton Walsh, CNN, Nicosia.
(END VIDEO CLIP)
DOS SANTOS: (Inaudible) many Europeans thought of Cyprus as a place to go on holiday. Tourism is, of course, a critical source of cash for the Cypriot economy. And just last month, over 40,000 tourists arrived on this particular island. (Inaudible) that`s a drop of nearly a quarter of a percent on last year.
Let`s have a look at exactly how much this is worth, because between January and November last year, tourism was worth a whopping $2.4 billion, as you can see there, to the Cypriot economy, up over around about 10 percent on 2011. But as we were saying, it has, over the last period, dropped by around about a quarter.
Let`s bring in Simon Calder, who`s the senior travel editor for "The Independent" newspaper in Britain. He began his career with British Airways, working at London`s Gatwick Airport. And now he`s a well- respected travel commentator and writer.
A little earlier today, I asked him about the impact on tourism in Cyprus and also crucially what`s going on today means for travelers.
(BEGIN VIDEO CLIP)
SIMON CALDER, SENIOR TRAVEL EDITOR, "THE INDEPENDENT": If you`re simply going on a vacation, well, it`s going to be possibly a little bit stressful if you don`t go prepared with the right financial arrangements. And clearly, for the people of Cyprus, it`s a very, very tough time. But frankly, I went there this time last year; I`m looking forward to going back again.
DOS SANTOS: Would you recommend people book then? There might be some bargains out there.
CALDER: Well, I think the three crucial things to do -- and all week I`ve been taking calls and emails and tweets from people who are going to Cyprus -- the main thing is don`t cancel if you`ve already booked a vacation because at this stage, particularly if you`re going in the next few weeks over Easter, you`ll lose some or all of your money.
Next, just take euros. Don`t worry about plastic, just take euro notes. That will be exactly what you need. You could even, if you`ve got a few U.S. dollars hanging around, those would do as well. And certainly, as you imply, there are going to be some great bargains around. And so I`m waiting for one of those.
And that`s partly because actually you might find that two of the big constitual (ph) groups that go into Cyprus -- that`s the Germans may feel that they wouldn`t be particularly welcome there -- and the Russians, who also make up perhaps half a million visitors a year, may well also, for their reasons, be staying away.
DOS SANTOS: You`ve also got a Cypriot pound there.
CALDER: Ah, this brings back the old memories, doesn`t it, of Cyprus before the Eurozone. And I think there will be a number of people who will be saying that by Tuesday morning perhaps we might be looking at a new currency for Cyprus. And that, of course, from a traveler`s point of view, is very good news. We would (inaudible) --
DOS SANTOS: -- also a logistical nightmare, though, isn`t it?
CALDER: Well, you know, as long as you`ve got your euros or your dollars, it`s -- some well-recognized hard currency, you will be fine as a tourist. It`s the poor residents who will be having problems.
But if we saw Cyprus lose the euro, we would probably see either in dollar or euro or pound sterling terms prices would come down, which would do wonders to stimulus the Cypriot economy in terms of boosting tourism.
DOS SANTOS: Well, that`s certainly true, especially considering as the banking model seems to have gone bust.
We saw this in Iceland, didn`t we, in 2008 when their currency -- well, they didn`t drop out of euro, because they were never part of it in the first place. But when their currency plunged, we saw Iceland becoming quite a destination of choice. Most people didn`t think about going there. They thought it was just too expensive.
CALDER: Well, exactly. And they`re still reaping the rewards.
And in fact, of course, the way, as you`ve reported on -- in CNN, the way that Iceland has turned itself around could be a perfect example for Cyprus, both relatively small islands, or at least with small populations, both of which have, you know, great industrious people, both of which welcome tourists and have fantastic opportunities culturally and in terms of everything else scenically, to explore.
So, yes, if they follow the Icelandic model, if they become cheaper by losing the euro, that will be very painful in the short term, but in the long term it could be just the right thing to do.
(END VIDEO CLIP)
DOS SANTOS: Sounds as though Simon`s not just a travel editor, he`s turning his hat to economics as well, from what he had to say then.
Now straight ahead on QUEST MEANS BUSINESS, in terms of commercial success, it`s of course hard to beat The Beatles, 50 years after their debut album was released. There`s still big money to be made on the Fab Four.
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DOS SANTOS (voice-over): Time now for the answer to today`s "Currency Conundrum." Earlier on the show, we asked you how much of a Bitcoin`s value jumped over the course of the past week? And the answer is B, 50 percent. One unit of this virtual currency is currently worth more than 72 dollars no less. Wow.
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DOS SANTOS: In the last few hours, priced pieces of music history have been going under the hammer at a rare auction of Beatles memorabilia.
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DOS SANTOS (voice-over): Fifty years ago we saw the release of the Fab Four`s first album, which was "Please Please Me," bringing the world an instant classic, like for instance if I named them all, we`d be here forever, but let`s start out with "Love Me Do," "I Saw Her Standing There" and "Twist and Shout," of course, some classics that you may well remember out there.
Well, 250 rare lots were sold in Stockport in England, including all sorts of photographers, posters, autographs and albums from the Fab Four. Let me just give you some examples of exactly what was raised and what went on the block.
This is lot 139. It`s a stereo black and gold pressing of that iconic hit I was talking about before "Please Please Me." The estimate was between $4,500 and a cool $6,000. And this is lot 259. This looks like a bit of a scrap paper, doesn`t it? But if you take a look at it, it`s actually signatures. It`s a signed ticket from 1962, the (inaudible) price for this coveted item was $2,200 to $3,000 no less.
Pretty lucrative stuff and they`re still making money 40 years on.
Let`s go over to Jenny Harrison, who`s standing by to tell us about the climatic picture, particularly over the U.K. at the CNN International Weather Center.
So Jenny, how`s it looking?
JENNY HARRISON, CNN METEOROLOGIST: It`s not looking very good, Nina, as I`m sure you know only too well. You`ve been quite fortunate in London. It`s actually mainly been rain that`s coming your way because all this moisture`s coming in from the northwest.
And then because of the cold winds that are coming across Europe, that is coming down as snow. So this gives you an idea of the last 12 hours, some very heavy amounts of snow. In fact, let`s have a look at some of the pictures. And you can see what I`m talking about.
This is North Wales and, well, not a lot of traffic on those roads at all. Now we`ve had power outages as well and some of the major routes have really been impacted and of course dozens and dozens of schools were closed throughout the day on Friday. Some more pictures of Staffordshire as well, which is to the east of Wales, a couple of counties to the east of Wales.
And you can see a similar sort of story there, very wet, heavy snow, this is, that has come down because also bearing in mind that we`ve got all the spring greenery out right now. The trees, of course, beginning to bloom and so because of that the snow has brought down some of those trees, and that has brought down some of the power lines.
Now the amount of snow that`s come through, let me show you, because the winds also playing a major part in this. So first of all, Belfast, Northern Ireland, 27 centimeters of snow. This is a huge amount. So the 5 centimeters in Nottingham doesn`t look like a great deal compared to that. And then the wind gusts, 90 kph.
And that means, of course ,the same winds at around 70 kph. So that is another reason why we`ve seen so much damage. But just to give you an idea, this particular day, compared to the same day in 2012, at that particular point, we have temperatures well above the average. I mean, look at this, Belfast, 12 degrees Celsius back in 2012.
And then this day, 2 degrees Celsius. Similar story for Liverpool, 15 was what it was this time in 2012, 2 degrees Celsius right now. So because of this as well, people are really feeling it and really thinking something is going on. But it`s quite simple because we had high pressure in control last year this same time.
And right now the high is to the north; the low is to the northwest. And that cold air is turning all that moisture across into the snow, quite a wintry mix as well across central regions of the U.K., through Wales, as again up into Northern Ireland.
So as we go through Saturday, it`s a very, very similar picture. It should begin to ease by Sunday but again, in the meantime, just look at the amount of snow that`s going to come down about 15 centimeters in Birmingham, maybe another 35 in Belfast.
You add the winds into that, these are the sustained winds right now. We`ll be seeing winds over the weekend, sustained at around 60-65 kph. So all of that means a very unpleasant weekend ahead and a very dangerous one, too, Nina.
DOS SANTOS: Yes, should have thought that spring was already here. Jenny Harrison, have a great weekend, thanks ever so much for that, though.
Well, that`s it for this edition of QUEST MEANS BUSINESS. Thanks for joining me. I`m Nina dos Santos. MARKETPLACE AFRICA is (inaudible) on CNN.
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ROBYN CURNOW, CNN HOST: You`re watching MARKETPLACE AFRICA. I`m Robyn Curnow. Now small businesses like these are a crucial part of economic activity across the African continent. But in Zambia, small and medium enterprises or SMEs are often unregulated, operate outside the formal economy. But still economists say they`re crucial in emerging markets.
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BARNETT (voice-over): Meet Muape Mulenga (ph), the designer; Anderson Lupia (ph), the steelmaker; and Webster Kapine (ph), the carpenter. All of them are part of Zambia`s vibrant informal economy, self-employed, self- reliant and self-made.
Now this is where you see Zambia`s SMEs or small and medium enterprises hard at work, lining the busy streets of the capital, Lusaka. Now some view these types of businesses, the informal ones, as a burden because they don`t operate within the country`s formal financial system.
Yet when you look closely at the numbers, you`ll find that businesses like these employ the vast majority of Zambians, allowing people to learn a trade and earn an income.
UNIDENTIFIED MALE: The big thing about Zambia`s SMEs is that they are the largest employers in the country. Ninety-five percent of Zambians are actually employed in SME activity and only 5 percent are actually in the multinational and corporations in terms of employment.
So the value of SMEs at this stage in time is not about how much they`re contributing to the economy in terms of dollars and cents or kwachas and ngwees, it`s actually in terms of economic activity.
BARNETT (voice-over): Take, for example, Anderson Lupia (ph), the swing maker. He tells me that it`s all about learning the tricks of the trade and then teaching it.
BARNETT: You were trained by someone --
ANDERSON LUPIA (PH), SWING MAKER: Yes.
BARNETT: And then you trained your employees. And you`re saying one of your employees has gone on to start his own business.
LUPIA (PH): Yes, his own business. And he has also employed other (inaudible) people.
BARNETT: So I guess does that speak to the importance, then, of small businesses here in Zambia?
LUPIA (PH): Yes. So this employee business is under (inaudible) to improve the economy because even the job creation, if the government and invest very much in this kind of businesses, then the employment problem will be (inaudible).
BARNETT (voice-over): Muape Mulenga (ph) also wants to employ more people but it`s easier said than done. Her workshop is cramped at the back of a restaurant and she hardly breaks even each month.
MUAPE MULENGA (PH), DESIGNER: Actually, what I think is more than what is left. Yes. So it`s a little bit challenging for me.
BARNETT (voice-over): Muape`s (ph) $30 dresses are her best sellers. She makes three to four garments per day and has to compete with other designers, not to mention large clothing factories and cheap imports from China.
MULENGA (PH): There is actually competition. You know, so you really have to -- you really have to -- you`re actually -- your work really has to be -- has to be pleasing. It has to be neat for you to have customers, for people to come, you know.
BARNETT (voice-over): The quality of products is one of the main challenges these informal SMEs are faced with.
UNIDENTIFIED MALE (voice-over): The power lies in the formal corporate world. So really the SMEs have to -- they have to be able to claim their place. And part of claiming their place is upping the game by producing better quality goods.
BARNETT (voice-over): Even though Webster Kapine (ph) says that these joints are strong and that this bed will last for 10 years, he admits the quality could be better.
WEBSTER KAPINE (PH), CARPENTER: I know that I make a different quality. But you just have lack of machines. But --
BARNETT: You`re saying you have a different quality, meaning a bit less quality?
KAPINE (PH): Yes, right now, it`s a less -- just a lack of machine.
BARNETT: Because of lack of machines?
KAPINE (PH): Yes, yes.
BARNETT: And why do you have a lack of machines?
KAPINE (PH): Just because I don`t have -- right now I don`t have enough money to buy machines.
BARNETT (voice-over): He tells me it will take him about a year to save enough money for a woodwork machine. And then he`ll need to rent a bigger space. Muape (ph), too, has big plans for her small business.
MULENGA (PH): I keep trying every day and my -- and I keep hoping that this business will (inaudible) time, you know, (inaudible). So (inaudible) now, I know that it -- I may be where I am and there be -- there are a few challenges here and there. But my vision is to expand the business.
BARNETT (voice-over): Whether it`s stitching, sawing or welding, small and medium enterprises have a real impact on the lives of ordinary Zambians.
KAPINE (PH): Well, it`s a (inaudible). Then after they can learn, the people like a smaller this one. We can make a future for my friends.
BARNETT (voice-over): So that despite the trials that these small businesses face, there`s still time to enjoy the benefits of self- employment.
BARNETT: So how often do you take a break and sit on one of these swings?
LUPIA (PH): Sometimes 30 minutes or one hour.
BARNETT: You do?
LUPIA (PH): Yes, yes, I do.
BARNETT: I haven`t been on a swing in years.
BARNETT (voice-over): Errol Barnett for CNN MARKETPLACE AFRICA, Lusaka, Zambia.
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CURNOW: Errol Barnett there reporting from Zambia.
Well, for most businesses to succeed, you need electricity, which is often intermittent, expensive or nonexistent here on the African continent. Well, after the break, we`ll meet a man who offers temporary solutions for when the power goes out.
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CURNOW: Flicking on a switch and turning on the lights is still a luxury in many parts of Africa. The electricity infrastructure is still a challenge. But Rupert Soames, the CEO of Aggreko, says that he`s built a business out of offering temporary power solutions to many African countries.
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CURNOW: Africa is particularly in need of energy, isn`t it?
Well, it`s particularly in need for the very reason that Africa`s economies are growing really fast. And not only (inaudible) GDP Africa now has more mobile phone subscribers in sub-Saharan Africa than the whole of the E.U.
And all of these things require energy; there`s a lot of industrialization going on. All requires energy. But the electricity infrastructure, generally speaking, is not keeping up with the demand for new power. So that`s where we step in, to bring power in for short periods of time and in a hurry.
CURNOW: Essentially coming up with the fact that African leaders, African governments have failed to plan. And there`s (inaudible) being a failure of leadership to create this (inaudible) framework for electricity.
SOAMES: Yes, it`s easy to say, but it`s difficult to do. I mean, these are very, very major infrastructure projects. And the fact is, is that to get (inaudible) have to go and raise money, 40-year money that`s going to go and sit in a country for a period of time.
And it`s difficult to do. And the difficulties of keeping up with power supply is not unique to Africa. (Inaudible) same problems in South America and in many parts of Asia, and look what happened in India last year, where they had power (inaudible) affecting 700 million people were in darkness.
CURNOW: Nigeria?
SOAMES: Yes?
CURNOW: That`s a whole other league, isn`t it?
SOAMES: It -- Nigeria is a very special country. And with -- as I say, huge potential, burgeoning markets and, you know, look at any of the statistics. But the power sector is one which really has not kept up with (inaudible) --
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CURNOW: (Inaudible) running on small generators.
SOAMES: It`s a vast cost to the nation. And you know, if they could get their (inaudible) if they -- when they get their grid sorted out and people are not having to pay -- I mean, the cost of providing electricity from a small generator as opposed to getting it from the plug in the wall is you`re talking about a hundred times more expensive. But it does require a degree of --
CURNOW: Political will.
SOAMES: Well, not only political will, but it takes a long time to build and things are difficult to do sometimes in (inaudible).
CURNOW: And the indications are the Nigerians are going that way and many are hopeful that there will --
SOAMES: And the sincerity is very competent people doing that. I think one of the really interesting things about Africa that I have noticed -- and I`ve been doing business here for over 30 years -- is that the bright people who wanted to make money used to leave Africa in their 20s and go to get educated in the university.
The really bright -- many of the brightest Africans I know in Europe and America are now headed back to Africa because they know there is more chance to make money, to make real money in Africa than there is in Europe and America.
CURNOW: The reason I wanted to talk to you is to get the sense of outside looking in, what does the city of London, what do so-called foreign investors look into Africa and what do they see as positives and negatives?
SOAMES: There are some parts of Africa that are looking increasingly like China in terms of the growth rates that they are producing. And that`s going to be very, very exciting for them. But they do have choice.
And I think one of the things that everybody needs to realize is that these investors have -- the money has a choice of going to South America, does it go to Africa, does it go to Asia. The global capital markets have choice. And in order to be able to attract that money, good governance is absolutely essential.
CURNOW: And the risks?
SOAMES: The risks are that I think that because in many countries in Africa the institutions are quite young. They can change quite quickly. And the risk map of Africa changes quite rapidly between countries that look like absolute basket cases one day, actually three years later are fantastic investment opportunities.
And but that can also go the other way. And I think that, you know, that this reputation for stability, which actually countries like Kenya, you know, there are a lot of very well governed countries (inaudible), well, they are able to attract investment.
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CURNOW: That was Rupert Soames, who`s the CEO of Aggreko, as well as being Winston Churchill`s grandson. Now you can watch that interview as well as many more on our website, which is CNN.com/MarketplaceAfrica. I`m Robyn Curnow. Thanks for watching. Join us again next week.
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