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Quest Means Business
Truss Sacks Kwarteng, Scraps Corporate Tax Cut; Irish Finance Minister: Making Preparations For Winter; IMF: Italy's Economy Expected To Shrink 0.2 Percent In 2023; IMF Cuts Polish Economic Outlook, Blames War In Ukraine; Green Hydrogen Attracts Big Players Around The World; E.U. Trade Commissioner: Gas Stores Over 90 Percent Full. Aired 3-4p ET
Aired October 14, 2022 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: You would rightly be forgiven if you're gasping your way to the weekend, somewhat exhausted, completely
perplexed, perhaps bewildered and wondering what is likely to happen next.
Well, that's what is happening. The Dow is down very sharply on the day. It has been down pretty much since mid-morning. A thousand and one reasons why
all of which factor into a miserable sort of day.
Bank earnings, the market -- everybody isa little unhappy, and one of the catalysts of today's event is as follows: The markets and the events.
The UK Chancellor has been fired. Kwasi Kwarteng is gone. Meanwhile, Prime Minister Liz Truss fights for her political future. She has also done a U-
turn on tax reverses to calm the market. It's not working.
Europe is on the verge of a long, cold winter. The Irish Finance Minister and the Eurogroup President tells me tonight how they are preparing.
And governments in Italy and Colombia rose to power on populist agendas. So you're going to hear from policymakers, Central Bank Governors, Finance
Ministers in both of those countries.
We are alive tonight from the IMF and World Bank Annual Meetings in Washington, DC. It is Friday. It is October the 14th, just checking the
date, well, you can never be sure, things change so fast.
I'm Richard Quest and at the IMF and World Bank, I definitely mean business.
A very good day to the IMF and World Bank. It's Day Two of the meetings, but it is the continuing saga of the British fiscal fiasco that is
underway. Kwasi Kwarteng, yesterday, 24 hours ago said he wasn't going anywhere. He was wrong. He went back to London and promptly got fired by
the Prime Minister, Liz Truss.
The Prime Minister sacrificed trust to save her own political future. Basically, the Prime Minister -- Truss-economics or Trussonomics as it is
known is idea of growth, but don't tell anybody how you're going to pay for them.
(BEGIN VIDEO CLIP)
LIZ TRUSS, BRITISH PRIME MINISTER: But it is clear that parts of our mini budget went further and faster than markets were expecting. So, the way we
are delivering our mission right now has to change. We need to act now to reassure the markets of our fiscal discipline.
I have therefore decided --
(END VIDEO CLIP)
QUEST: And so, what she did, what you were about to hear her go on to say if I hadn't rudely interrupted the Prime Minister, was she was going on to
say she has put off the tax array as she has reinstated the tax rise that is going to take effect of April next year, one that she had previously
said she was not going to introduce.
It adds about 18 billion pounds or so back into government coffers, or it will next year and she has appointed Jeremy Hunt as the new Chancellor of
It has been a day of chaos, some would say financial fiasco and our correspondent Bianca Nobilo reports on what happened.
(BEGIN VIDEO CLIP)
BIANCA NOBILO, CNN INTERNATIONAL CORRESPONDENT (voice over): Marking 38 disastrous days in office for the Truss government, Kwasi Kwarteng, the
Prime Minister's trusted ally and economic kindred spirit has been sacked as Britain's Finance Minister.
Liz Truss said that she was incredibly sorry, but that her mission remains.
TRUSS: It is clear that parts of our mini budget went further and faster than markets were expecting.
KWASI KWARTENG, FORMER BRITISH CHANCELLOR OF EXCHEQUER: Now Mr. Speaker, now Mr. Speaker --
NOBILO (voice over): After delivering the mini budget just three weeks ago that sent the pound plummeting promising huge tax cuts and increased
borrowing, Kwarteng was shown the door on Friday.
Speculation over his political future had become a distraction, a senior source inside Downing Street told CNN echoing similar excuse issued last
week when the government U-turned on their announcement cutting the top rate of tax, that too had become a distraction.
UNIDENTIFIED MALE: What a day. It has been tough.
NOBILO (voice over): Now another U-turn on corporation tax. Truss said she will keep corporation tax at its current rate reversing her policy to scrap
the plan rise from 19 to 25 percent. How will this all impacts the beleaguered Prime Minister it remains to be seen.
Kwarteng was a key confidante, the Speaker who introduced her at her campaign events. He could be forgiven for feeling scapegoated by a Prime
Minister in peril. After all, it was Liz Truss who campaigned on the promises drawn up in Kwarteng's mini budget.
News agencies offered live video of his plane landing back in London from Washington, DC where he met with the IMF, one of the bodies that criticized
KRISTALINA GEORGIEVA, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: Now, in this jittery environment, there could be no reasons for more jitter.
NOBILO (voice over): Kwarteng continue to defend his plan in a letter issued Friday afternoon, following the status quo, he wrote: "It was simply
not an option."
TRUSS: I want to be honest, this is difficult.
NOBILO (voice over): Truss appear defeated at her very brief press conference on Friday. Questions centered on her credibility, whether she
continued to hold the authority to govern having thrown her friend under the bus in order to save her Premiership.
TRUSS: But we recognize because of current market issues, we have to deliver the mission in a different way.
UNIDENTIFIED MALE: Good afternoon.
UNIDENTIFIED MALE: Good afternoon, sir.
NOBILO (voice over): Jeremy Hunt will replace Kwarteng as Chancellor, a position that has changed hands four times in as many months.
Bianca Nobilo, CNN, London.
QUEST: Liz Truss has been in power just 38 days. Her Chancellor is the second the shortest in living memory. But the market turmoil has been
intense ever since September, the 23rd when it was introduced.
Martin Wolf, the Chief Financial Analyst for "The Financial Times," he wrote in a tweet, some days ago, that truss and her Chancellor, Kwasi
Kwarteng were mad, bad, and dangerous, and had to go.
So when I spoke to him today, I pointed out one of them had gone and asked was that enough?
MARTIN WOLF, CHIEF FINANCIAL ANALYST, "THE FINANCIAL TIMES": He had to go. He had completely lost the confidence of the markets and the party. You
cannot remain Chancellor in that situation.
But everybody knows Liz Truss was responsible for this. It was her plan. She hasn't even really apologized for it as far as I can see, she has to
QUEST: Delaying the corporate tax cuts, putting it on the back burner for now gives about $18 billion. Is that enough?
WOLF: No, they have to reverse the entire tax cut package in size, which is about 42 billion pounds. So, quite a lot of money, and they are basically
about a third of the way there. And I think they might have to go further to restore confidence, because it is so badly damaged.
They can't just go back to where they started, just look at what happened to interest rates.
QUEST: But as they say here at the IMF, certain parts of a package are acceptable when for example, it's targeted and hits the most vulnerable. So
the Energy Support Package side of it is probably okay.
WOLF: It's probably okay. I had big problems with it, but I think the markets didn't go crazy over it. As long as it's credibly time limited, I
think they can probably just get away with it, though. I think there are risks there too now.
QUEST: Martin Wolf. The reaction on the markets, take a look at the numbers. They tell their own story.
The FTSE, there was a rally underway which faded. There is the pound against the dollar. We'll start with that then, the damage has been done.
UK bonds have been selling off with the increasing cost of government borrowing.
The pound dropped 1.4 percent against the dollar. You can see now, it is still down one-and-a-fifth cent, and the FTSE just basically petered out
when all was said and done. There were obviously other factors concerned with that.
In terms of gilts and bond yields, the damage over the last three weeks, UK bonds have continued to sell off and that has increased the cost of
government borrowing. Mortgage rates are higher, more rate rises likely, and the U-turn hasn't filled the fiscal hole.
With me, Adam Tooze, the Director of the European Institute at Columbia University.
Adam, this is a real mess, isn't it? I mean, this is one for the history books.
ADAM TOOZE, DIRECTOR, EUROPEAN INSTITUTE AT COLUMBIA UNIVERSITY: It really is, I think, and above and beyond the issues which Martin Wolf so precisely
diagnosed, which has to do with the balance of the government budget, the balance between spending and taxing.
I think there are two other variables here. One is the dysfunction in the gilt market. There is a ticking time bomb there in the various derivative
contracts which pension funds have written on this market. And the other aspect here is the Bank of England, which has in this moment, withdrawing
its support for the gilt market.
So, this is a triple test, not just of the fiscal position of the government, but also of the stance of the Bank of England and the stability
of the key financial market for the UK, namely the gilt market.
QUEST: I'm just looking at the 10-year gilt, which actually rose again, basically 4.4 percent -- 4.39 percent. So, gilt yields are up.
That has a dramatic effect on UK government borrowing. It essentially wipes out any advantage that they make from these tax cut reforms.
TOOZE: It will do that, but I think the even more severe consequence of this is that it drives interest rates up across the board, and as we know,
the UK housing market is one of the hottest in the world, or at least was one of the hottest and it is the foundation of course of the balance sheets
and the wealth of the British middle and upper middle class.
And when that, as it were feeds its way through to increasing mortgage interest rates, and they adjust much more quickly in the UK than they do in
the US, for instance, this is going to have a hugely recessionary impact, and that, the shrinking of GDP, the shrinking of aggregate demand will do
the real damage to the government budget.
You can forget under those circumstances, the tax cuts and so on.
QUEST: When I listened to the Prime Minister today, and I heard the Business Secretary Jacob Rees-Mogg, earlier in the week, both of them still
suggesting that nothing to see here, Gov. It wasn't our fault, it wasn't our policy. It's all to do with their war and to do with those people at
the Fed raising interest rates. Do you buy that?
TOOZE: Well, it is certainly true that the Feds pushed to raise interest rates since the beginning of this year, it is putting pressure on everyone,
but you've got to ask yourself, where are the weakest links?
You know, so Sri Lanka tumbles, that's perhaps not surprising. The real question mark is how a British government managed to put Britain in harm's
way. And it isn't, as I say, not simply a matter of the British government. It is also a question of the Bank of England playing cat and mouse with the
But that is the question that has got to be asked, not why there is pressure globally, but why Britain has become one of the weak links in the
QUEST: I read in your recent article, you talk about the need for greater coordination on macroeconomic policy. In this program, we're going to have
numerous Finance Ministers saying that the issue needs to be how we coordinate our policies, and so on, and so on and so on.
But I don't think they're going to be able to, I don't even think really, they're going to collaborate on this sense. They're all going to debt for
their own individual countries.
TOOZE: And if they do, the risk is that they tighten too much, right? Because what they're not going to factor in is the spillover effects, which
could come through currency appreciation, so beggar thy neighbor currency wars, not in the sense of chasing currencies down to more competitive
levels or chasing currencies up to less inflationary levels.
And the other really worrying side effect here is that as everyone deflates, aggregate demand in the entire global economy shrinks more than
we actually need it to shrink by. And so we could really be steering or if you'd like sleepwalking towards a global contraction here that could become
extremely severe in 2023. And the worry, again, is where are the weak links? What breaks when you do that? Which bits of the financial system
prove to be non-robust, like we saw in the pension funds in the UK gilt market? And which economies are the least well prepared for the
recessionary shock ahead?
QUEST: Adam, we'll talk more in the days and weeks ahead, you're in New York. Hopefully you'll join me in the C-suite in the sky as we will talk
more about this. I'm grateful for your time, today. Thank you.
Now, all of this has to be seen not just through the lens of Westminster, or indeed the UK market, but through also the prism of Europe.
Tonight, Ireland's Finance Minister and the Bank of Italy's Governor, both next on how the dislocation and worries in markets inflation, interest
rates are affecting their economies. It is QUEST MEANS BUSINESS at the IMF.
QUEST: Europe is preparing for a difficult winter. The prospect of an energy -- well, a real energy crisis and the lights going off as a result
of the war in Ukraine, the inflation that it has all created and the higher interest rates from the ECB.
So, I was joined by Paschal Donohoe, who is the Irish Finance Minister, at least until the end of the year. He is also the Eurogroup President, to put
it all together, if you look at how Ireland is preparing for the oncoming crisis in winter.
PASCHAL DONOHOE, IRISH FINANCE MINISTER: From a fiscal position within Ireland, we are now in surplus. So, we are now not borrowing to fund any of
the measures that we need to support households and businesses and that is the key point, to avoid an inflationary risk within the Irish economy. We
are very clear that we will only fund our response to the needs of households and businesses from taxes that we collect within Ireland.
In terms of the design of the policy measures, we do as I'm sure you're going to bring up with me, we do have some broad based measures, but what
we have tried to do as the difficulties have grown is add to them with more targeted measures for pensioners, for vulnerable families, and by bringing
in business support measures that are capped.
QUEST: I'm not for a second suggesting that the issues are simple and the Ukraine war adds a complexity with energy crisis. I mean, do you think
European citizens have been properly prepared for what could be a truly dreadful winter?
DONOHOE: We are preparing them and we are talking about the need to conserve energy. Politicians and political leaders across Europe, I
believe, have been open about the tradeoffs and difficulties that we will face. It's more than just about communications about what we're doing. It's
why it's important that Europe has taken such steps to build up our gas reserves for this winter.
It's why we've tried to bring in a common approach to reduce consumption of energy across the European Union, and I believe despite the difficulty the
winter will bring, I do believe we've done all we can to be prepared for it, and we need to plan ahead now for what 2023 could bring, and for what
the winter after this one could bring.
QUEST: Does there need to be more coordination between the major economies in terms of both monetary policy, fiscal policy, and foreign exchange
DONOHOE: So within the European Union, we have high levels of coordination in place at the moment, but they need to deepen. If you look at the core of
the question, you've just raised to me about energy, we've taken a lot of steps, but we need to do more and we need to reach agreement, for example,
on how we manage the price of energy.
And then also from a budgetary policy point of view, we have made efforts to be coordinated, I believe we've made progress, but the longer this goes
on, the more difficult it becomes, the greater the need for us to coordinate even more effectively will be, which I believe we'll be able to
QUEST: And on foreign exchange?
DONOHOE: Well, foreign exchange rates are, and the value of currencies are determined by the markets and if you look at where we are with the euro, so
much of where the value of the Euro currently stands, can be explained by the impact of the war, can be explained by rate of monetary policy
normalization that's appropriate for Europe, but different to other parts of the world at the moment.
QUEST: So, that's the view as seen from Dublin.
In Rome, of course, they have different issues. With a new government, a new left the government taking place or a new government taking place, I
should say, and new policies, which could be completely at odds with monetary policy from the Central Bank.
Italy's economy is to shrink next year. The IMF is estimating a fifth of a percent. The new government has got high debt and skyrocketing energy
prices to contend with.
Now, the Central Bank Governor of Italy is of course, independent of the government. But like Andrew Bailey at the Bank of England, he has found if
the government in charge goes rogue, then he will have to respond. So the question for Italy, how to handle rising rates?
IGNACIO VISCO, GOVERNOR, BANK OF ITALY: This not only has to do with trade, it has to do with financial markets, and the clearly, there might -- it
backfires that we have to consider. So, we will monitor the situation. And so far, the European euro area is well settled in terms of financial
intermediaries and so on.
But all the non-bank financial intermediaries that have caused these problems clearly are very relevant also to us.
QUEST: Now, Italy, of course, is going to get a new government one way or the other. As I realize, the Central Bank independence, et cetera, et
cetera, but you will have to respond to any policies one way or the other.
VISCO: Well, first of all, obviously, the light motive is the same: Growth and prudence on the fiscal side. There is nothing that you can do. Draghi's
government has done well. The debt to GDP ratio has fallen from 155, where it went, 20 points higher than in 2019, to first 150 percent, and then 145
percent. It has to continue this consolidation.
QUEST: So if you're in your position, you have high inflation in the Eurozone, which will come down according to the IMF's forecast. The ECB has
pretty much said rates are going to have to go higher.
In this scenario, what more needs to be done?
VISCO: Well, first of all, the normalization of monetary policy is a must, differently than the United States, we don't have excess demand in Europe,
but we risk second round effects, as they're called that these wage price spirals to accommodate the fall in the cost of living, the rise in the cost
of living, and the fall in purchasing power, and the risk of de-anchoring of inflation's potential effects.
So, we have to continue the normalization, raising rates. The issue is not the direction, it is the speed and the levels that we are going to somehow
QUEST: As the Central Bank, do you sign on to this idea of targeted relief for the most -- for those necessary within a macroeconomic fiscal framework
versus broad based?
VISCO: I totally agree. The task will be targeted, the question of temporary -- it depends because we have to define temporary, but it has to
be targeted to the enterprises that are most affected in the households who suffer, the distribution issue is crucial.
QUEST: So finally, you know, we look at the situation today, the Managing Director warned fiscal and monetary has to be cohesive. The UK has been
punished for exactly one on the brake, one on the accelerator. Do you stand ready in Italy, in your country, to take the same sort of, you know,
whatever it takes assuming adverse fiscal policy?
VISCO: Well, first of all, I'm not going to define adverse fiscal policy. Obviously, it has to be, if there is some risk on the Italian paper, which
is due to speculation or whatever, we will act to reduce it.
And in any case, the government has to follow a policy of prudence and targeting, as you say, those who are in need. But we cannot -- we have to
rely on our recovery plan and have all the structural changes that are needed to put in place.
This is, I think, from the economic point of view what this government knows that it has to do and that I am confident that we will do. There are
side effects that we cannot judge now.
QUEST: One of the great beauties of being here at the IMF and World Bank is you really do get to speak to all economic players, policymakers in one go.
That was the Central Bank Governor of Italy.
Next, to Colombia's new Finance Minister, which is a country that has just as much of an interesting situation because of the new government that took
office just about two months ago with a very different, yes, left agenda compared to the previous one.
Already, the President of Colombia has been roundly criticizing the Central Bank, which has raised rates considerably to where the policy rate is
nearly 10 percent this year, whilst inflation remains high, 27 percent as you can see.
The Colombian Finance Minister, Jose Antonio Ocampo is with me.
Minister, it is good to see you, sir.
JOSE ANTONIO OCAMPO, COLOMBIAN FINANCE MINISTER: Very nice to be with you.
QUEST: Now, I know it is not unusual for politicians in Colombia to regret the decisions of the Central Bank, but do you think they're wrong, the
Central Bank to raise rates so high?
OCAMPO: Well, let me say to start with that, as far as I can remember, all Presidents have criticized at one point, the Central Bank. Now the Minister
of Finance, participates in the Board of the Central Bank, but it's really the decisions, and let me say that given the context of rising interest
rates worldwide, it is difficult for Colombia not to go in that direction because otherwise we'll have a capital outflow.
QUEST: Right. So, this is the spillover. This is the -- you are tied to the Fed in a sense, not in a formal peg sense, but you are tied. And if rates
are going higher, you're going to put them higher as well.
OCAMPO: Well --
QUEST: Or take the potential consequences on the currency.
OCAMPO: Well, let me say, rates started to increase earlier in all Latin American countries. And at one point, we can also stop earlier.
I mean, it depends on what the international context is. But of course, if the Fed continues rising interest too fast, is difficult to be isolated.
QUEST: Is the Central, Southern America, Latin America premier in the market? Is that still fair? They are at a premier on interest rates?
OCAMPO: Well, yes, let's say we have to pay more, yes.
QUEST: Is it fair?
OCAMPO: Well, it is difficult to say if it is fair or not. I mean, whoever gets a higher cost for a loan, will probably see some hurt. But in any
case, is it a normal characteristic of the market.
QUEST: Whenever I spoke to your predecessor and the previous President, there were in the later days concerns over the policies that the new
President was going to introduce, both on oil and gas, both on public spending and on fiscal prudence.
What we've seen in the Bank of England and the British government case, is the market will punish and punish badly. Has that message got through for
OCAMPO: Well, let me say that we are doing a significant fiscal adjustment. We're reducing the deficit from 7.1 percent of GDP to 4.3 next year. So
actually, if I can say, the previous Governor did not do the fiscal adjustment, we are doing it.
QUEST: And you are doing it in which way then? Are you doing it with higher taxes or cutting spending?
OCAMPO: Well, I can --
QUEST: Or restructuring the debt?
OCAMPO: No, we don't do that. We haven't done that for decades and we will not do that.
QUEST: Not even voluntary -- not even not even changing the maturities?
OCAMPO: Well, you can trade different maturities in the market, it is a normal practice in the markets, so we do that, yes. But let me say that in
any case, this year, spending is being reduced. Next year, it is going to be capped, and by doing also through a tax reform.
QUEST: Good to see you, Minister. Thank you so much. Nice to have you, and we'll talk again, in fact, hopefully in Colombia.
OCAMPO: Yes, please, come.
QUEST: We look forward to it. Thank you very much.
It is QUEST MEANS BUSINESS tonight at the IMF.
So, what happens next? Liz Truss sacks her Finance Minister, and there's another U-turn. We'll analyze exactly with an MP or former MP about what it
means, in a moment.
QUEST: We've looked at the economic effects. We've now looked at the political effects. The numbers -- the poll numbers for Liz Truss are truly
dreadful. Her Conservative Party on a YouGov survey last week. Look, I'll show you. The Tories have 22 percent support, labor and the secure summer
has 52 percent. 30-point difference. It's not surprising that there are rumblings about her future and whether she can survive. The Prime Minister
is not going anywhere, she says
(BEGIN VIDEO CLIP)
LIZ TRUSS, PRIME MINISTER OF BRITAIN: I have acted decisively today, because my priority is ensuring our country's economic stability. As prime
minister, I will always act in the national interest. This is always my first consideration. I want to be honest, this is difficult. But we will
get through this storm. And we will deliver the strong and sustained growth that can transform the prosperity of our country for generations to come.
(END VIDEO CLIP)
QUEST: Alistair Burt is with me. He is the former British Conservative M.P. A really simple question, Alistair. Can the Prime Minister survive this?
ALISTAIR BURT, FORMER BRITISH CONSERVATIVE M.P.: I don't think so, Richard. And her survival doesn't depend on her redoubtable determination and her
willingness to stay in office and face all the challenges. It depends on the parliamentary Conservative Party of which two-thirds did not vote for
her in the leadership contest. It depends on whether or not the markets respond well to the decisions that her chancellor will make in the next few
And whether or not the country at large recovers some degree of confidence in her so her survival is not up to her. And at the moment from all the
noises being made, it would look extremely difficult for her to survive.
QUEST: OK. So I guess the mechanism is how she removed.
BURT: The mechanism is up to her colleagues in Parliament. The conservative parliamentary party has been pleased autonomy in these things. It makes the
rules by which leaders are chosen. The current rules require a leadership contest involving the membership party, the parliamentary party could
change that rule overnight.
BURT: Almost certainly if there was to be another leader it would not be as a result of another six-week long campaign involving the membership,
members would have to accept. And I'm a member, I would have to accept it, I would not have a vote. Because what's imperative is that the government
has an opportunity to recover its authority, not for the purposes of bolstering the Conservative Party pure and simple.
They're doing the right thing for the country which is now the most important thing. So the rules can be changed very quickly and a new leader
could be installed if that is what the parliamentary the elected members of the -- of the conservative party in parliament decided to do.
QUEST: I guess what-- one more looks at the situation, you ask how did they ever make this policy in the first place? Didn't go through cabinet, didn't
go through the OBR? By all accounts they just discussed, decided, the Treasury was against it. And it does beg the question, they did it against
all advice. How?
BURT: You'll probably know a bit of the answer to this, Richard. You'll know that within the Conservative Party, there has long been a strand of
libertarian free market economics driven by those who put forward such things in the United Kingdom that covered by think tanks such as the IEA,
the state of Economic Affairs and others. And they have theories. And the theories are that in the -- in the bright and beautiful world, they wish to
see you cut taxes.
It inspires growth, everybody gets more money, and everything works well. And I think both Liz Truss and Kwasi kwarteng have been part of this
ideological drive for a long time. And they -- and the think tanks and the newspapers who supported them, until very recently, when they seem to move
their position a bit, have put them in a position to say, well, now you're in charge, you can try it.
But doing so at a time when market conditions and life was very different. And it seems to -- it seems to someone who does not share an ideological
free market takes all position that you make your economy -- you make your economics work for the country. And I don't think they listened. And they
were so determined to kick over the traces that that became the dominant theme. And we've seen what's happened which has been an extremely rough
brush with reality.
QUEST: Alistair Burt, grateful you're with us tonight. Thank you. As QUEST MEANS BUSINESS in the IMF continues, Poland's finance minister will be --
will be, she is, she is here. We will discuss the issues and how opponents is and particularly of course, there's energy, various questions of
development. There's questions of recovery funds, all of which needs to be discussed with the minister and that will be after the break. QUEST MEANS
QUEST: According to the IMF World Economic Outlook, Poland's economy is expected to slow. There's some good reasons of course, the war in Ukraine
on its doorstep is one of them. Poland, you'll be aware. We talked about it when we're QUEST MEANS BUSINESS from Warsaw, we took to -- Poland has taken
at 1-1/2 million Ukrainian refugees. But coal supplies are dwindling. Russian coal has been banned.
And some people are burning trash and garbage to keep warm. With me is Magdalena Rzeczkowska, the finance minister of Poland. Minister, I'm
grateful. Thank you.
MAGDALENA RZECZKOWSKA, MINISTER OF FINANCE OF POLAND: Thank you.
QUEST: The energy crisis, the necessity for getting more energy. Now of course, there is the new pipeline that's come on from Norway, which is
helping and going to help terminates in your country. But what more needs to be done? How worried are you?
RZECZKOWSKA: As far as the gas supplies as concerned, Poland is on the safe side. We are secured. Our storage is -- are full in 98. Even 100 percent.
At the Baltic pipe, the new pipeline, it's already in operation and eight billion cubic meters of gas will flow through the pipeline. Of course,
contractation for this year is -- for next year is 6.5, next year 7.0.
QUEST: So you don't think there'll be a shortage in Poland?
RZECZKOWSKA: I don't think there will be a shortage in Poland. As far as the gas is concerned, we are secured. We have been predicting what can
happen and that Russia is really a dangerous one. And you have to diversify to be on the safe side --
QUEST: And then same on oil? More difficult.
RZECZKOWSKA: The same on oil -- no, it's not more difficult, it's the same on oil. Our intention was to cut and stop supplying oil from Russia. So, we
are supplying from -- on the sea, from others.
QUEST: Your prime minister has basically said to the European Commission, we need the recovery funds to pay for the refugees that -- and the costs of
the spillover effects of the war. But of course the Europeans say, well, hang on a second, you haven't done the reforms. You haven't done properly,
the legal, unnecessary reforms.
RZECZKOWSKA: We need European funds, not only the recovery funds for the national recovery plan, but also substructure cohesion funds and Poland is
doing well while spending E.U. funds. We are one of the best as far as audit authority is concerned. So -- and we are doing our reforms. We have
done the judicial reform.
QUEST: Well, some people -- some people say that's a -- that's a fig leaf. There was an argument that says that's not real judicial reform.
RZECZKOWSKA: It is to be judged by -- because the law, the new law has been implemented only in July. So it is a short time for already being in life
then the new reform and then new law. Of course, it is to be -- to be judged in on -- OK or not. As far as recovery plan is concerned and the
formalities we are on the way. We are already have signed two agreements. One is negotiated and the lodgment for payments will be until the end of
QUEST: There is of course this continuing dispute over who has the final word, this constitutional battle where the polish top court has said no, we
have the final word. And everyone else is saying actually, the European -- the Court has the final one. I guess my question is more one of philosophy
than legal nicety. Poland seems to be at odds with some of the fundamental values that the E.U. says it stands for. How do you square that?
RZECZKOWSKA: I don't think that Poland is on the edge of any values. We are a democratic country. We are European country from -- in our history shows
that values which are important for today's world, democratic world are the values of Poland.
QUEST: And the democracy is strong in the sense that there are elections.
RZECZKOWSKA: Yes, democracy is strong. Democracy --
QUEST: Election is coming up.
RZECZKOWSKA: Yes. Elections are coming up and we have previous elections, also democratic elections. So we are in democracy and democratic country.
QUEST: So what will be the fighting ground in your view for the forthcoming election? What do you think is going to be the key issue?
RZECZKOWSKA: The key issue is -- we are -- the key issues now, the key issue is to survive winter. It's not only for Poland, but for the whole
Europe. Energy crisis. Those are the key issues. And we are here and now. And we will have to fight -- win this fight and win with Russia.
QUEST: I'm very glad you came to talk to us today.
RZECZKOWSKA: Thank you.
QUEST: Minister, thank you very much. Thank you very much indeed. Now, energy we're just talking about in Poland and the minister says that Poland
should be fine for this winter. But of course, everybody's looking for new options. And green hydrogen is clearly one of the major solutions. Eleni
Giokos went to the UAE and spoke to Siemens energy, as she thinks big on what's next.
ELENI GIOKOS, CNN CORRESPONDENT: CNN CORRESPONDENT (voice over): Shiny pipes, a few rumbles like panels here and there. It's hard to imagine that
a place so calm and still could potentially revolutionize the future of energy in the Middle East and beyond.
FALK WOTTAWAH, VICE PRESIDENT, CHIEF OF STAFF AND HEAD OF STRATEGY AT SIEMENS ENERGY MIDDLE EAST: This is the first industrial scale green
hydrogen production in the Middle East and North Africa.
GIOKOS: Hydrogen, a colorless gas is the most abundant elements in the universe. But on Earth, it's almost always found as part of another
compound like water. In order to produce energy, hydrogen needs to be extracted from fossil fuels, biomass or water. Today, 95 percent of
hydrogen production relies on fossil fuels. However, there are greener options, fueling the process with renewable energy sources like wind and
This is what green hydrogen means. At this plant in Dubai, solar panels provide power to split water into hydrogen and oxygen. Oxygen is released
into the air and hydrogen is stored to be used later on and converted into electricity during the night. This ability for storage is an added bonus.
WOTTAWAH: The sun doesn't always shine, the wind doesn't always blow. And this creates less reliability. Green hydrogen can be used as high intensity
long-term energy storage.
GIOKOS: GIOKOS (voice over): Open just over a year ago, the hydrogen produced here is currently being fed into Dubai's energy mix.
HESHAM ISMAIL, SENIOR MANAGER, TECHNOLOGY ADVANCEMENT, DEWA: We take the store hydrogen and we burn it and we producing about 280 kilowatt
electricity and we feed it back to the grid.
GIOKOS (voice over): That's enough to power just under 10 average American homes per day. But there are plans to scale up the project and increase the
ISMAIL: There is a big future demand for vehicle and to be used and transportation as well. We can also export it tomorrow to countries who
GIOKOS (voice over): There is still a long road ahead. More than $13 billion were invested in this pilot plant and hydrogen production itself
may be cost prohibitive.
WOTTAWAH: Currently it costs between three and $6.5 per kg. So our hope is to take that number to be less than $1.00 per kg.
GIOKOS (voice over): For now, the future of green hydrogen is still up in the air, but as quiet as it seems this technology is making some noise in
the discussion of the future of energy.
Eleni Giokos, CNN.
QUEST: Energy trade -- energy trade, these are all the big issues that they are discussing here at the IMF. Coming up next you're going to hear from
the E.U. trade commissioner, the E.U. vice president on what it takes now that of course things are looking extremely gloomy.
(BEGIN VIDEO CLIP)
VALDIS DOMBROVKIS, E.U. TRADE COMMISSIONER: On one hand, we need to support our economy, households businesses in view of high energy prices. On the
other hand, we held record-high inflation. So we need to tame inflation.
QUEST: Yes. There you have the atrium here in headquarters to HQ2. And the meetings are all in that big room behind along with or elsewhere throughout
the building. It's Friday afternoon, everyone's pretty much exhausted here. Some have left early like Kwasi Kwarteng and others too. And because the
intensity of the discussions has been remarkable. Higher interest rates, high inflation, the prospect of higher unemployment for longer periods is
really what's perplex them, which is why the E.U. vice president and trade commissioner when he spoke to me was quite clear that they are negotiating
difficult times and that means tricky policy decisions.
DOMBROVKIS: We need to find a right balance in our policy response because on one hand, we need to support our economy, households, businesses in view
of higher energy prices. On the other hand, we held record high inflation. So we need to tame inflation. So it's important that monetary policy and
fiscal policy are not working at cross purposes. That in a sense, fiscal policy is not contradicting Central Bank's work or bringing inflation down.
QUEST: The Central Bank is going to raise rates further. But I'm hearing from governments about the need to spend more on the fiscal side European
governments to compensate for the vulnerable. How do you balance that?
DOMBROVKIS: Well, it's important that support measures are targeted and temporary. So we are not now advocating for a broad based fiscal stimulus
next year. For the European Union we think that fiscal stance should be broadly neutral next year, not to contradict monetary policy efforts,
because if with fiscal policy, we continue to feel inflation is -- Central Bank how to do more monetary tightening, and that will reduce our fiscal
space even more.
QUEST: In other words, don't do what the U.K. has tried to do. Don't do -- don't do that. What do you make the U.K. situation? And I know that, you
know, it's difficult to comment on a non-E,U, member, albeit a friendly country. But at the end of the day, what -- if there is turmoil in
Britain's economy that will have a dramatic effect on those who trade.
DOMBROVKIS: Well, first of all, this policy guidance which European Commission is giving, it's very close to the one IMF is giving
internationally. So basically we know (INAUDIBLE) also discussing some policy adjustments because it was exactly the same problem in a sense.
Fiscal policy, is this large fiscal policy stimulus, contradicting monetary policy aim of bringing inflation down.
QUEST: Do you worry though? Let's take for example, Italy, which is getting a new government that could have elements within it that are looking for
fiscal expansion. Do you worry that the E.U. could have its own internal problems of this?
DOMBROVKIS: Well, as European Commission of course we are monitoring and coordinating closely the member states, fiscal response and providing
fiscal policy guidance to avoid this.
DOMBROVKIS: And especially we are advising more fiscal caution for high depth countries.
QUEST: It does feel like it's been one crisis after the other since 2008.
DOMBROVKIS: I would say it's not one crisis after another because there was a quite a long period of economic growth in between. But now, of course,
with COVID, with Russia's war in Ukraine, with correspondingly very high energy prices it's very much strong.
QUEST: Final thoughts on the question of the energy crisis. I've heard President von der Leyen talking about this on several occasions, more work
needs to be done to ensure the European energy security for this winter, which could be bad.
DOMBROVKIS: Well, indeed, and we are working full steam on this. We have largely managed to change Russia's natural gas supplies to other suppliers
like Norway, United States, Qatar, Algeria, Azerbaijan. So we managed to replace Russia supplies with alternative suppliers. We did quite a few
infrastructure fixes to adjust our gas supply infrastructure and our gas storages are more than 90 percent full now ahead of the winter season.
So, lots of work has been done there to ensure energy security. We're also looking at demand management measures and targeted interventions also in
electricity markets but it's through that energy policy keeps us busy right now.
QUEST: It's not easy as one thing we've seen from all the policymakers we've spoken to. We will have a profitable moment after the break. QUEST
MEANS BUSINESS in Washington, D.C.
QUEST: Tonight's profitable moment from the IMF, I could wax lyrical about how difficult it is and how awful and the U.K.'s fiasco, et cetera. Well, I
will leave you with this one thought. It isn't easy being a policymaker when you're dealing with a war and energy crisis, higher inflation by
whatever means. And you've got higher interest rates. And you've got of course, to target relief for those most vulnerable.
The one thing I've seen this time at the IMF is how they are grappling with this three dimensional chess to make sure things don't get much worse,
which of course is all the more remarkable when you think of what's happened in the United Kingdom. But that's for another day. It is Friday.
It is the weekend ahead and I think we could all do with a bit of a break. I'll be in Istanbul next week. I look forward to seeing you there.
Otherwise that's QUEST MEANS BUSINESS for this Friday night. I'm Richard Quest for the IMF in D.C. Whatever you're up to in the hours ahead, I hope
it's profitable. I'll see you next week.