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Quest Means Business

Lagarde Says She Doesn't Want U.S. Tax Reform to Fail; Schauble Says I Will Defend Minorities; Spanish Minister Speaks on Protests Turn Violent. Aired 4-5p ET

Aired October 12, 2017 - 16:00   ET

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

[16:00:00] RICHARD QUEST, CNN HOST: The closing bell ringing on Wall Street. Down today for the Dow. So, no records there. But as the market

does come to a close, lots of news, business and economics on the course of the day. A strong -- oh, look at that. That last gavel. Trading is over.

It is Thursday, the 12th of October.

Tonight, in Washington, at the IMF, Christine Lagarde denies she wants Donald Trump's tax reform to fail.

Germany's finance minister Wolfgang Schauble bows out and says he's going to defend the rights of minorities. We have an exclusive interview with

Wolfgang Schauble.

And the Catalan protests turn violent. We'll be joined by Spain's economy minister live on this program.

I'm Richard Quest. Tonight, live from the IMF in Washington, D.C., where, of course, I mean business.

The atrium at headquarters to HQ2 is what this building is known as. It's at the IMF here in Washington. Good evening to you. Tonight, Christine

Lagarde has rejected White House claims that she wants Donald Trump's U.S. tax reform to fail. Mr. Trump's budget director accused the fund of being

invested in the idea that the tax cuts won't boost the U.S. economy. However, speaking to me here, at the CNN debate at the annual meeting, the

managing director says her message is clear. The United States needs good tax reform.

Joining Christine Lagarde at this year's CNN debate. The Harvard professor and advisor to New York Fed, Gita Gopinath. Sri Mulyani Indrawati,

Indonesia's finance minister, the French minister for the economy and finance, Bruno Le Maire. And Canada's finance minister, Bill Morneau. It

was a full, frank and honest discussion. And they all have a stake in the global tax debate. Christine Lagarde began with an unequivocal denial of

the White House claim that she wants President Trump's tax reform to fail.

(BEGIN VIDEOTAPE)

CHRISTINE LAGARDE, MANAGING DIR., INTERNATIONAL MONETARY FUND: There'll be no ambiguity. We want a good reform of the tax system, particularly the

corporate tax.

QUEST: Now I heard you earlier that the plan on the table is -- will not look like the final plan when it is passed. But as a general principle of

tax cuts leading to greater deficits, will the IMF support such a plan?

LAGARDE: Ideally, there should be a plan that makes the tax system simpler, lowers the rate, eliminates the loopholes, eliminate the

deductions. Has a larger base. Focuses on labor. Reinforces the middle- class. Is pro-growth. And does not increase the deficit, but on the contrary, generates revenues, because the United States in a few years'

time will be facing serious entitlement programs for which it will have to pay for. And it should not want to increase its debt.

QUEST: Bill Morneau, raising taxes on the rich is something you've been in favor of.

WILLIAM MORNEAU, CANADIAN FINANCE MINISTER: That's not exactly the way we characterize it though, Richard. Just saying. No, what we've said from

day one, as government in Canada, was that we saw a real level of anxiety among middle-class Canadians. The concern that their likelihood of success

for the next generation was getting increasingly difficult. And that dealing with that issue by lowering middle classes taxes was important.

And the financing mechanism was to look at the 1 percent in our country and say that they've done very well. So, we lowered middle-class taxes, we

raised on the 1 percent. And right now, we're in the midst, of trying to continue to make sure our tax system is working.

QUEST: Of all of our panelists today, Minister Le Maire from France, possibly now your economic policies and the structural reforms making are

amongst the most ambitious of any of the -- I mean, the minister may disagree -- but the reality is, you are trying to undo decades of economic

policies in a short period of time. Can you do it without having vast industrial unrest?

BRUNO LE MAIRE, FRENCH MINISTER FOR ECONOMY AND FINANCE: It will be a surprise for everybody, but yes.

QUEST: I think the surprise would have been if you said no.

LE MAIRE: So, we are trying with Emmanuel Macron, to introduce I would say the most important program of reforms for decades. And we have been so far

so good. We have been successful. We have introduced a major reform on the labor market. Of course, there has been reactions and opposition,

because we are in France. And France, without oppositions, and without strikes, would not be France any more. But -- but we're doing a good job.

We are introducing now the most important tax reform for the last decades. We are trying to have a corporate tax of 30 percent, a flat tax on all

capital revenues. We are trying to diminish the level of the corporate tax from 33.3 percent to 25 percent. And still --

QUEST: You haven't Donald Trump's 20 percent.

LE MAIRE: Twenty percent. But all tax will be effective. And we are trying to get rid of the so-called wealth tax, the tax on wealth. Which is

something quite hard. But we will exceed. And we are fully determined to change the things in France. Because people are waiting for that and by

electing Emmanuel Macron they have voted four a huge in profound change for France.

QUEST: And Sri Mulyani, you listen to these ministers with great respect. Are you worried that developing nations for emerging markets -- you stand -

- I mean, you're doing extremely well? You have your own policy mix and shifts. But what you stand to bear the brunt of much of what they're

doing. Are you worried?

SRI MULYANI INDRAWATI, INDONESIAN FINANCE MINISTER: Well, definitely. I think definitely worried in terms of whether they are going to be

successful and bring their reform. Because part of the global growth, which is actually very important, is how the developed country can recover

their economy. And that will then bring a global demand for many of the commodities as well as manufacturing products, for many emerging and

developing countries.

And we know that the recovery of the global economy has been slack. It's because of this global demand does not pick up as strong and as fast. And

most of the problem is actually in many advanced countries, they have to do the reform. My second worry is not only about that, Richard. The second

worry is that many of this fiscal policy tax reform in the G20, we try to avoid that lowering the tax rate for the sake of just you are going to be

more attractive. Then our minister of finance is going to then race to the bottom. We just add things. This is something that is worrying for many

countries. Indonesian's income tax rate for the corporate is 25 percent. And we are on to see that everybody is going to 25.

But if you look at Indonesia, they will then compare with Singapore, where there is only 17 percent. So, this is going to be something that we all

need to know, what it is exactly we want from the fiscal policy, revenue side and spending side. It seems like revenue side, we want to expand tax

base. We actually really want on an international corporation to avoid that tax avoidance and tax evasion. So that we are going to be able to tax

this 1 percent, because they can easily go all over the world, avoiding the tax. So, effective tax rate is important.

QUEST: Gita, help keep us honest here. How much of these tax proposals make sense, and crucially, this concept that the U.S. is putting forward at

the moment, lowering taxes, the Reaganomics trickle-down growth. Does it hold water?

GITA GOPINATH, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: There is no doubt that having a simplified rational tax system is important for growth and

there's no doubt that growth has been fantastic for reducing poverty, especially in the developing world. So, let's just remember that growth

may not always reduce inequality, but has been fantastic in reducing poverty. So, we have to keep that in mind.

But I think what we also have to realize is that especially in the advanced economies, with the decline and progressivity in the tax system, there has

been no improvement in inequality. We have not succeed in measures of inequality.

QUEST: Why don't you go ahead?

[16:10:00] LAGARDE: Two things, Richard, that I'd like to add. I totally agree with Gita that tax has to be paid. I think the other thing is --

three things actually. When you sort of race to the bottom, the problem with that is that everybody ends up at the bottom. And yet you need to

generate the revenues, number one. Number two, it's all very well talking about the rates. You have to talk about the base. And that's the whole

difference between cheddar cheese and swiss cheese. Cheddar has got no holes. Swiss cheese got full of holes. You own the cheddar.

And to the point of -- I just on the giants and taxation. I think it's great that France could be any other country -- but I think it's great that

France is taking the lead. What certainly we would encourage is that all countries align their position, because if there is one area where there

has to cooperation, it is on that kind of area. How do you define the intangible goods? How do you determine who is a giant, who is not a giant?

How do you define the base? So, it's great to have that initiative. But cooperation is going to be key in order to have something that is actually

sensible, that is acceptable to all countries, where you identify where the value is. And my humble suggestion would be to actually include the giants

in the discussions. Because otherwise it's going to be like, you know, thieves and cops. They will be running away. We will be will be trying to

catch -- or other will be trying them and to locate the revenues. So, they had better be part of that discussion, as well.

(END VIDEOTAPE)

QUEST: Christine Lagarde and we'll have more o the CNN Global Economic Debate later in the program. Kaitlian Collins is at the White House, just

across the way from where I am at the fund. Kaitlian, people have been enlivened and energized at the thought that the fund wants -- or that

denied that they want Donald Trump's tax policies to fail. But the IMF, these international bodies, they are not well-liked at the White House, are

they?

KAITIAN COLLINS, CNN WHITE HOUSE REPORTER: Well, we heard from Mick Mulvaney on that yesterday. But the White House is going right ahead with

this. The President continues to tout his play, and he did so just last night. So, the White House doesn't seem to be taking those concerns or at

least they're not taking them -- or saying they're concerned about them publicly -- Richard.

QUEST: And as the White House moves forward on this tax reform, how far are they along? What's the feeling about just how difficult it's going to

be?

COLLINS: Well, is certainly going to be very difficult. They have a lot on their agenda right now. But the White House really is attempting to

make this work. They're getting behind it much more than you saw them do with those efforts to repeal and replace the Obamacare. The president has

already traveled two several states. He was in Pennsylvania just last night, speaking to truckers about this plan. So, we're really seeing them

make much more of move optically here -- Richard.

QUEST: Kaitian thank you, over at the White House. I am over at the IMF. We're both in Washington. On Wall Street the U.S. markets closed in the

red after all-time highs on Wednesday. Third quarter earnings season is under way. We had results. And the banking stocks fell. Some of them

quite dramatically. Citibank was off the best part of 2 percent. And as you can see, the Dow was off just around at the low point of the session so

far.

When we come back, European and Brexit talks. According to the EU, negotiate a deadlock over the divorce bill. Round five has finished in

Belgium. Pierre Moscovici is with me, the European Commissioner for Economic and Financial Affairs. That's after the break QUEST MEANS

BUSINESS We are at the IMF in Washington, the annual meeting.

[16:15:00] (COMMERCIAL BREAK)

QUEST: Welcome back to QUEST MEANS BUSINESS live in Washington in the CNN Global Debate. France's finance minister told me today that Brexit is a

historic mistake, in his words. While the round five of the Brexit talks took place, and according to the European Union, there's deadlock over the

question of the divorce bill. The money and the talks has been described as disturbing that they have fallen into deadlock. The pound fell 1

percent versus the dollar, is slightly recovered. And according to Michel Barnier, who is the EU's principal negotiator. He says there is an impasse

over Britain's financial settlement.

(BEGIN VIDEO CLIP)

Michel Barnier (through translator): I'm not thankful. In the current circumstances to propose to next week's European Council that we should

start discussions on the future relationship.

(END VIDEO CLIP)

QUEST: Pierre Moscovici, is European commissioner for economic and financial affairs and former finance minister of France, a well. So, good

to see you, sir. The idea -- I mean, that these negotiations are deadlocked -- to use the phrase of today -- how serious do you think it is?

Or are we just in the midst of a negotiation? And by a very nature, they look messy?

PIERRE MOSCOVICI, EUROPEAN COMMISSIONER, ECONOMIC AND FINANCIAL AFFAIRS: Well, we have a quite clear and firm position an united position, the 27.

That first we need to solve the issues primary to a divorce, and then we will discuss about the future of our relationship. And this has to be

solved, financial sentiments, citizens' rights. Well, it needs to be two to tango. And so, clarity is on our side. While we are waiting for

clarity from the other side.

I think that today we had to say, that here was not enough progress, sufficient progress. But we expect that this can change during the two

months to come. So, let's keep our calm. We still want these negotiations to succeed, and we believe that in two months to come, it can really

progress.

QUEST: If we look at the Prime Minister Mays speech in Florence, this idea of a deep and special partnership, no EEA, no Swiss solution, but a unique

relationship for the United Kingdom. Do you believe that is possible?

MOSCOVICI: By definition we are not talking of a future relationship before solving the present issue. But one thing is clear, the U.K., they

chose that. We have to respect that, even, if we regret it. They chose to be out of the EU by the 29th of March. OK. Then it will happen. After

that, the U.K. will still be, a European country, even if not in the EU. And we need to have a very close relationship, a very close, partnership.

But first things first. We need to conclude on those financial settlements. We need to know precisely where we are as far as citizens'

rights are concerned. We need to see how we going to solve the issues leading to Ireland. And, you know, in the meantime, the energy of the EU,

is dedicated to strengthening its economy, to strengthening the eurozone, to have a better tax system. We are working on our future.

QUEST: Is it -- just one more on Brexit and I will move on. Is the EU preparing for a no deal in the same way that we now heard in the U.K. the

British government -- although it doesn't want that -- is preparing for a no deal?

[16:20:04] MOSCOVICI We are working, and we dedicate all our energy to succeed in these negotiations. We have again, a very clear and united view

with an agenda, with principles. We're prepared. And so, let's not talk about -- I don't know what kind of Armageddon. Let's prepare for serious

talks that will lead to a proper exit.

QUEST: Only Question. European growth is now one of the bright spots. People are talking about it here at the IMF. I suppose the issue becomes

now making it sustainable. And that means ensuring that the entire continent or the entire EU 27 enjoy it.

MOSCOVICI It's the case. We have now solid growth around 2 percent maybe a bit above 2 percent., it is broad-based, because all the EU countries and

eurozone countries are now moving in the same direction. I think our member states have made a lot of progress as far as fiscal consolidation,

has concerns for structural reforms. Of course, we still need to work towards problems, such as the high level of MPLs. But it's time for us to

do more in integrating the eurozone.

QUEST: Right.

MOSCOVICI: And I believe if we do so, yes, we will have a long-lasting, solid growth. And today I'm glad to say that I these meetings, it was not

the case in previous years, Europe is not part of the problem. It's part of the solution.

QUEST: This goes to what the managing director of the fund, Christine Lagarde, has said, when the sun shines, you repair the roof. Now, you've

got to repair the roof for when ECB monetary accommodation is withdrawn.

MOSCOVICI: I cannot comment on that. But one thing I can see is that we still need to have a policy support as well fiscally and monetarily. And

so, I expect that Mr. Draghi will do whatever it takes. That's always the case. I expect that we will have for quite a while, a quality of monetary

policy, which is adapted. But I'm very confident in Mr. Draghi's leadership. And for the time being, we need -- and the states need to act

to have a euro area of fiscal stance, which is globally neutral. Which must not compromise the recovery. We still need to sport our recovery with

policies that are adapted and pro-growth.

QUEST: The former finance minister, almost, of Germany, Wolfgang Schauble, has warned of imbalances. He's warned of the necessity of not being

complacent within the eurozone. That there needs to be further integration and more countries within it. Do you agree with him?

MOSCOVICI: I think first that we need to mitigate risk reduction, and there I fully agree with him. But also, a kind of risk-sharing, a part of

solidarity to have a convergence inside the eurozone. I also believe that we need to succeed in completing the banking union. It's high time that we

do that. And that we must also progress on as well the tools and governance of the eurozone. So, we must be very serious as ever, but also

very ambitious now, because the idea that I have is that the eurozone must be really an area of strength, with more democracy and more efficiency.

QUEST: Sir, good to see you, as always.

MOSCOVICI: Thank you.

QUEST: Thank you very much indeed. Much appreciate it, as always.

As we continue tonight, European markets were mostly higher, despite Brexit uncertainty. Investors weighing up the U.S. Fed minutes. Some

policymakers are concerned about inflation and the persistent low inflation within the United States.

And so, to the panel that we had here the CNN Global Debate, where we shifted our attention from tax to trade. I asked the Indonesian finance

minister whether the whole trade issue is stifled by politics.

(BEGIN VIDEOTAPE)

INDRAWATI: Trade is the most difficult political issue in any countries. There is really one evidence saying that trade is helping a lot of

countries to have this prosperity, but then disconnect with those losing from this competition within your own country. Each company when you start

opening and being competitive, there is also a loser. Whether this is an industry or a certain group of people and it seems like a country is not

addressing those issues properly, so that the support -- political support for openness and trade is becoming -- eroding. And this is the area in

which we are all need to now focus on, what kind of what we call, inclusiveness that you are skeptical of. But we actually have the ambition

to address this issue effectively so that we are going to have a political support.

LE MAIRE: I fully share her point of view, because I think that trade must ensure that trade agreements are already based on a level playing field.

QUEST: Right. If you accept that -- I'm going to interrupt you. If you accept that level playing field, then Theresa May is right, when she say

that post Brexit, the U.K. and the EU are on a level playing field, because they have the same standards from EU membership, and therefore a single

market or at least a relevant single market access, free-trade agreement should be easy to get. Do you agree with her?

[16:25:00] LAGARDE: But, you know -- level playing field means that all factors being equal. And the level playing field that exists at the moment

within the European Union is also again consideration. You pay your due. You open your borders. You let people come in. In those circumstances,

then it's level playing field and trade should be had. Whereas what I understand, but Bruno knows better, is currently on the table is no

contribution to the to the club. No movement of people in the way it is currently done. And on and on. So, I withdraw and I want the benefits --

that's not a level playing field.

LE MAIRE: You can't pretend to have e same advantageous of the member states without being a member state. We deeply regret the decision that

has been taken by the British people. I think that it is a historic mistake. And that the consequences of the Brexit will be very bad

consequences for the British people. And that's why I deeply regret the decision that has been taken. But now the British people and the British

government have to assume the consequences of that decision. They can no longer pretend to have the benefits of the membership within the European

Union without being a membership of the European Union any more.

MORNEAU: So, for me, I mean, what's the lesson here? That we -- as was mentioned, we can't divorce our domestic policies from our goal to have a

more open global trading system. We can't think about these things without understanding they go together. If people believe that trade doesn't

necessarily advantage them, be then why are they going to buy into it. So, our agenda has been very clearly to try a show benefits to Canadians from

our grow. And then to help people understand that trade has been huge advantage for us from a growth standpoint over time.

QUEST: So --

LAGARDE: Can I chip in on that one?

QUEST: Of course.

LAGARDE: Because both Sri Mulyani and Bill are saying the same thing. Trade over the course of time has lifted millions of people out of poverty,

has increased the income of people around the world. Not just in the low- income countries, but also in the advanced economies. And is hugely beneficial to those that are the poorest in each and every of those

advanced economies of society. It's W2 demonstrated, IMF demonstrated joint work, and all of us are saying the same thing. Which is why Canada

is celebrating the entering into effect more or less, of its trade agreement with Europe. Which is why Europe is moving out to Japan to say,

let's have a deal and a trade agreement. So, this movement will continue. And I think that it will go beyond the trepidations that we see.

QUEST: Gita.

GOPINATH: I just want a couple of points to make here, which is that for those in the advanced world thinking about trade and growth, just to remind

yourself that there is no empirical evidence that protectionism has been good for growth in high-income countries. Let' just be clear about that.

Raising tariffs -- you compare countries with high tariffs and low tariffs in high income countries, if anything, the evidence says that it's bad for

growth on a long run basis. Let's keep that first in mind. The second thing is that trade gets a lot of bashing for inequality. But the main

driver of inequality and increasing inequality has been technology and not trade. And so, you know, by blowing up -- by blowing holes through the

roof instead of repairing it, you know, you aren't fixing either of these problems.

(END VIDEOTAPE)

QUEST: An honest assessment from Gita on the CNN Global Debate. After the break, an exclusive interview. The man who has a grip on the purse strings

of Europe for the past eight years. Wolfgang Schauble is going to steer the political debate in Germany's Bundestag. The finance minister and

speaker-to-be, joined me earlier. You'll hear him next. QUEST MEANS BUSINESS live in atrium of the IMF. HQ2 with this building.

[16:30:00] (COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. When you're going to hear an exclusive interview with

Germany's finance minister, Wolfgang Schauble, who says look out for the underlying risks in the global economy. And I'll be joined by Spain's

economy minister, as Madrid's deadline for Catalonia draws closer. As we continue tonight, this is CNN, and on this network, the news always comes

first.

President Donald Trump says the federal government's emergency responders can't stay in Puerto Rico, in his words, forever. It was a tweet that

comes nearly three weeks after the island was hit by hurricane Maria and as it still struggles to recover. Most of Puerto Rico still has no

electricity and the number of people died from the hurricane has been rising.

A U.S. woman, her Canadian husband and their three children are still in Pakistan after being freed by a Taliban-linked group. The U.S. officials

says Joshua Boyle, wild not board a plane home fearing legal issues. Boyle and Caitlan Coleman were abducted in 2012 while traveling in Afghanistan.

Coleman was pregnant. They had two children while in captivity.

Facebook's executive, Sheryl Sandberg, says the company will work with Congress to reveal how Russia targeted U.S. voters on its platform. She

admitted Facebook should have done more to prevent foreign interference in last year's election. The House Intelligence Committee now says it will

release copies of Russia-linked content.

the IMF's managing director says, countries must cooperate on tax policy. Speaking to me at the CNN Global Debate, Christine Lagarde warned, the race

to lower tax rates will result in all countries ending up at the bottom. And she said governments must focus their tax bases, ensuring everyone pays

their fair share.

Germany's finance minister, Wolfgang Schauble, has a warning for all the ministers here for all the ministers here in Washington, guard against

complacency.

Minister Schauble says the global economy is in good shape. However, there are serious and growing underlying risks, which could derail everything.

It's an exclusive interview you're going to hear now. Minister Schauble leaves the finance ministry after eight years where he expects to be

appointed speaker to the German parliament.

He has this advice for finance ministers.

(BEGIN VIDEO CLIP)

WOLFGANG SCHAUBLE, FINANCE MINISTER, GERMANY: I think number one is we are actually in a relative good shape of the global economy, especially the

European economy is doing much better than it used to do in the last annual meeting of the IMF.

[16:35:00] And my advice would be, don't be too compliant to think that it can be -- complacent. It can change very soon. We are in good shape. We

have to continue. We have to work.

And if we will continue, then we have a good chance. We can get it.

QUEST: Have to work at what? What are the things that need to be continued?

SCHAUBLE: We still have a lot of underlying risk in increasing volatility in financial markets. The level of indebtedness is terribly high,

historically high. And of course, even the level of liquidity is high, therefore I think the Federal Reserve is going the right way, I think the

European Central Bank is thinking about how and when they can follow. Because in reducing volatility and risk, we ensure resilience and

sustainability.

QUEST: In that sense, you believe that growth is sustainable with low inflation, or at least target inflation, and therefore it's appropriate to

tighten.

SCHAUBLE: Yes, of course. I think so. I could show the experience of the last eight years, we have eight-year sustainable growth since the last

financial crisis eight years ago, and l think we achieved it in working for increasing investors' confidence, consumers' confidence, and that means

also to have -- and a sustainable fiscal policy, as well.

But of course, that is not all. We have to have in mind and I'm very happy that in the last couple years that I mentioned, of inclusiveness, much more

to be taken serious especially by the IMF. It is not really new for Germany because that used to be lionized by British friends and so on until

the financial crisis.

I think it worked continuously for the right balance between growth, market economy, competitiveness, and social inclusion is a right way to make

growth sustainable.

QUEST: Do you fear in a quiet moment that when you are not there in the finance ministers meeting or in European meetings, that the tree may start

to run away?

SCHAUBLE: No.

QUEST: The austerity or the policies of firm, sound money may be swept aside?

SCHAUBLE: No, I don't think -- that' not -- it's not one person. And it doesn't depend from person. I don't think -- no one is irreplaceable. And

I have served eight years and eight years is enough.

(END VIDEO CLIP)

QUEST: Wolfgang Schauble talking to me here at the IMF, no one is irreplaceable. He certainly going to be missed by the other finance

ministers.

This is "QUEST MEANS BUSINESS," live for you tonight at the IMF in Washington, D.C.

[16:40:00] (COMMERCIAL BREAK)

QUEST: Welcome back to the IMF, Columbia's finance minister says the political crisis in Venezuela has become a humanitarian one.

Mauricio Cardenas says the situation has become difficult for the entire region, at a time when the global economy overall is picking up. He told

me there is generally a brighter mood though here at the IMF.

(BEGIN VIDEO CLIP)

MAURICIO CARDENAS, FINANCE MINISTER, COLUMBIA: There is a better environment.

QUEST: For some.

CARDENAS: Yes, people have been more optimistic it does seem that things are improving. They are moving in the right direction. Last two or three

years was a bit of a negative attitude. Now I feel, you know, things are moving right.

QUEST: Let's just look at Venezuela, which continues to be a thorn in the global economy, or at least particularly for yourselves.

CARDENAS: Big issue for Latin America. First of all, the concern about the humanitarian situation in Venezuela. For the Venezuelans, they have

lost on average 8 kg per person, that means there is no food, restrictions are really affecting people. People are crossing the border to Columbia.

We have 300,000 Venezuela is now in Columbia. We provide them with health, with location, with food, but the situation is very difficult. And then

about a Venezuelan default which would have consequences.

QUEST: So, in that very tricky environment, what is the solution since clearly, Maduro is not going to go, Andy seems to be digging again as long

as he has got the military. And you have a burgeoning refugee, for want of a better word, crisis on your doorstep.

CARDENAS: There has to be a solution. There have to be elections. Election so that there is the option for people to change the government.

And of course, change the economy model, at the end of the day this is not about the left or the right, this is about wrong economic policies.

(END VIDEO CLIP)

QUEST: The Colombian finance minister. Leaders in Catalonia want to make regional independence an international issue. We'll be talking to the

finance minister from Spain, who joins me here live at the IMF after the break. QUEST MEANS BUSINESS in Washington.

[16:45:00] (COMMERCIAL BREAK)

QUEST: Rallies on Spain's national day turned violent in Barcelona. The supporters and opponents of Catalan independence threw punches and chairs

and a nasty fracas. The Spanish Prime Minister has set a deadline of Monday for Catalan's presidents to clarify where the region has indeed

declared independence. Catalan leaders say it's the Spanish governments years long refusal to discuss more autonomy that caused that led to calls

for separation and the violence.

The economy minister of Spain has ruled out mediated talks, and insist that independence will not happen. The economy minister who joins me now, Luis

de Guindos, good to see you, sir.

LUIS DE GUINDOS, ECONOMY MINISTER, SPAIN: Good to see you.

QUEST: Where it is the middle ground here, bearing in mind there is this declaration of independence, which has been suspended and now the prime

minister has thrown down the gauntlet giving time for them to state their intentions.

DE GUINDOS: I think there is no middle ground. I think there is only one framework, it is the framework of legality, is the framework of the Spanish

Constitution. It's the framework of economic policy rationality. We have seen an exodus of large and medium Catalonian corporations over the last

days.

[16:50:00] QUEST: We wound the elastic band and paid the electricity bill, we are back with the finance minister. You are talking about the issue,

and I am asking you, is there any evidence yet that the Catalonia crisis is having an effect on the wider national economy? During my Catalonia's 20

percent of your economy.

DE GUINDOS: Not so far, the third quarter of this year has been quite positive in terms of growth, in terms of employment creation, terms of

capital expenditure. Even if you look at capital markets the Catalan crisis has not had any sort of impact so far. I think the only other

indicators, leading indicators that we have available show that perhaps in the case Catalonia, we have started to see a decline of the flows of

tourists moving towards Catalonia. That is the only early indication that we have.

QUEST: The nuclear option of article 155 of the Constitution which would allow pretty much centralized rule, full rule from Madrid. How close are

we to that?

DE GUINDOS: It depends on Mr. Puigdemont. If he steps back and backtracks and comes back to legality, I am totally sure article 155 will not be

triggered. So, it's up to him. If he is back to the legality, if he realizes that his policies are driving Catalonia into a big crisis, and he

is dispelling a lot of large corporations and medium corporations out of Catalonia, I am totally sure in the framework of legality the Spanish

government is open.

QUEST: But does that mean, I am not trying to get you negotiate on television but as I have watched this from afar, it's difficult to see

where the common ground is. If one side says independence, we've had a referendum, what you say is illegal. And let's not get into that. But is

difficult to see where the room for mediation is.

DE GUINDOS: This is not a question of mediation of any sort of arbitration, this a question of applying and enforcement of the law. The

rule of law is key. Not only in Spain but all over Europe, all over the world, all over the developed world. In Mr. Puigdemont is breaching a law.

He is not respecting the Spanish Constitution. That was voted by a majority of Catalan's in '78.

This is the legality that he derives his power from, from the legality of the Spanish Constitution, the regional law, that creates the regional

parliament, in creates all the powers Mr. Puigdemont.

QUEST: Already we are starting to hear other European finance ministers and prime ministers say they would not recognize an independent Catalonia,

that it would not be part of European Union. The moment that you start going down that road there is a sort of legitimacy of process that says

people are taking seriously the idea that that Catalonia could be independent

DE GUINDOS: I think that is not an avenue to independence, independence is out of the question, but we are doing this to warn and advise the Catalan

population about the consequences of the rational policies implemented by the regional government of Catalonia. And we have started to see the

outcome of these policies. We have started see the Exodus a lot of corporations.

QUEST: Let's talk about that. But you change the rules, you change the law that made it easier for the banks and those corporations to move out of

Catalonia. I can see why you did it, but you did it.

DE GUINDOS: It was at the request of the Catalan companies.

QUEST: Because they want out?

DE GUINDOS: Yes, and I saw the decision that they were going to be taking for themselves. The government has nothing to say and that kind of

decision.

QUEST: Except, if the Catalonian companies, if the central government is saying, look, there can be no independence. Then the Catalonian companies

should not have necessarily feared because there could be no independence.

DE GUINDOS: This is not a question of independence or lack of independence, I think the main problem is the radical policies of the

government of Catalonia. It is not a question of independence. Independence is out of the question.

QUEST: Except to them, they say it is.

DE GUINDOS: No, no, no. Only one third of the population supports independence, they know that. The question is that the radical policies

that they are implementing are the policies that are pushing outside Catalonia, the large and medium corporations of Catalonia.

[16:55:00] QUEST: Final question, completely different, Wolfgang Schauble, the hard man of Eco Fin it's going, are you going to take over that role of

being the hard man.

DE GUINDOS: No, no, no, I don't think so. Wolfgang Schauble is a unique personality he has made a lot of good things for Europe, for the euro zone.

I think everybody despite the fact that sometimes there are some differences acknowledges that he has made a very good job.

QUEST: Made a very good job, good to see you, minister. Let's continue talking about Wolfgang Schauble. He was described today at the IMF as a

pillar and a giant, he is a true grandee of German politics. He is moving onto the next phase of his political career on the tour he's been on for 45

years.

Partially paralyzed in an assassination attempt in 1990, finance minister since 2009, and once led Angela Merkel's party. A fiscal disciplinarian,

he created tensions over euro zone debt, he was hated in Greece for insisting on cuts. Now he wants to be the next speaker of the German

parliament.

In the second part of our exclusive interview, the outgoing German finance minister spoke about his new job the speaker of the parliament with a

strong right-wing presence he noted he has his work cut out for him.

(BEGIN VIDEO CLIP)

SCHAUBLE: I think we have to start with a fundamental respect of free Democratic elections. And that means any member of Parliament has the same

rights and has to be respected. Of course, they all have the same rights in the same duties. They are defined by a Constitution. And the more that

we take everyone serious, the more difficult it will be for everyone to try to get political results with provocation and so on. But we will see.

QUEST: The role that you will take, you and I have talked before on the panel here. We talked about that post second world war period of democracy

in Germany which was very influential in your upbringing and in your philosophy. You would agree.

SCHAUBLE: Of course.

QUEST: Now, with Germany having taken a turn to the right, that is a warning not just for Germany, but for elsewhere in Europe. Do you agree?

SCHAUBLE: I would not take it too seriously. To have a result in the general election with 12 points for a right-wing party is not so dramatic.

Because most of them are serious democratic people. Therefore, it's a normality and in some regards, we are moving in this way. But we have a

broad consensus not to fall back into nationalism, to stay pro-European. And to protect the rights and the values of a democratic society.

QUEST: Finally, sir, your reputation precedes you, certainly during the Greek negotiations, certainly during the austerity post financial crisis,

did you ever go home at night read what people said or thought or were saying about this hard man from Germany, and think that is not me.

SCHAUBLE: Yes, I did, but I did understand that it was especially for let's say public opinion in Greece it was difficult to suffer. It is quite

understandable. But is always difficult to accept reforms that are needed. Reforms mean changes. And I would not have been forced to implement the

same reforms in Germany. It is difficult to do it politically. Therefore, I was -- I could understand, but I was convinced in the best interest

especially, even in Greece, it was to force them to agree on reforms. And to implement reforms.

QUEST: Even if that meant people had a bad idea of you?

SCHAUBLE: That is not the most important thing. It is more important the voters in my constituency are voting for me. Was I popular in Greece are

not, it is not so important for me.

QUEST: I wish you congratulations when it happens, and good luck.

SCHAUBLE: Thank you so much.

QUEST: Thank you very much. Very nice to see you.

(END VIDEO CLIP)

QUEST: Tonight's Profitable Moment on Wolfgang Schauble.

For many years, he has been a fixture at Eco Fin, the European finance ministers here at the IMF World Economic Forum. And he's always had one

point of view. And that is that the policies he's putting forward are not designed to harm or cause trouble, but in his view, there the right

policies for good sustainable long-term growth.

They don't agree with that in Greece. They don't agree with that in large parts of Spain or Italy or indeed many parts of Europe where strict

austerity has taken its toll. Wolfgang Schauble has never deviated from those fears.

And that is why he is probably the perfect man after 45 years of Parliament, in the 70s, become the speaker of the German Bundestag. Quite

simply and with a far-right wing they have come up against and met their match. Wolfgang Schauble will give no quarter with dealing with unruly

unrest

And that is QUEST MEANS BUSINESS for tonight. I am Richard Quest at the IMF in Washington. Whatever you are up to in the hours ahead, I hope it's

profitable. I will see you tomorrow.

END