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Will Ireland Take EU's Money?; Interview With Anders Borg

Aired November 22, 2010 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: First the bailout, now the mutiny. Ireland's government teeters over taking EU money.

Who's next? It's time to plan for Portugal, one European minister tells this program tonight.

And euro or no euro, Britain and Sweden help a friend in need.

I'm Richard Quest. We have an hour together and I mean business.

Good evening.

Crisis upon crisis in Ireland, as financial emergency now gives way to political turmoil. Tonight, as the terms of a multi-billion dollar bailout are drawn up, the frail coalition that has sustained Ireland's government is on the brink of break down. We are expecting the Irish Taoiseach, the prime minister, to address the Irish people anytime now. Mr. Cowen is expected to make a statement in the Dail, the Irish parliament, and as soon as he does start speaking we will bring that to you.

Now, some lawmakers are threatening not to back the crucial budget. Others say they'll abandon the government after the veto. Many are calling for a general election and that includes some people in Ireland out in the streets. They are showing their anger at the handling of this crisis and the price that they will have to pay. The bailout could cost Ireland dearly in terms of credibility in the markets. Moody's, the credit ratings agency, is warning it may hit Ireland with a multi-notch downgrade. The Finance Minister Brian Lenihan says the bailout is the only way to solve the banking problem.


BRIAN LENIHAN, IRISH FINANCE MINISTER: Of course I regret the fact that we have to go to a lender of money of last resort, if you like. But we have to do this. We have to preserve economic continuity in this country. We have to make sure pass (ph) machines functions, that people are paid their salaries, the people are paid their wages, that the pensions payments are made, that the welfare payments are made. And we have, in the last two years, made tremendous progress with our fiscal plans. Again, they have been very widely welcomed around the world. We have done the right thing, taken the right force of action, and I have no doubt with this external assistance Ireland will emerge from this stronger, better, and leaner.


QUEST: Now, there are $10s of billions, possibly just short of $90 billion that will arrive on the Irish coast in weeks ahead, or at least will be made available. We don't know the final figure. But more importantly for the Irish, the conditions that are attached. CNN's Jim Boulden is in the Irish capital, Dublin, tonight. He joins me.

We are waiting Jim, as you and I talk, for Brian Cowen to speak. A completely unfair question, do you have any idea what he may be saying? Is it likely to be political? An election-or is it just rampant speculation?

JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Well, we know there was an emergency cabinet meeting. I think that is fair to say. We have seen that from several reports. And what it seems to be is that he needs to make a political statement, Richard. He needs to say what is going to happen. Because the Green Party, which is a member of the coalition government, with Brian Cowen's party, has asked for an election in January, the second after (ph) January. Several of the opposition parties have said that the government needs to dissolve now and there has to be elections.

I've asked a lot of people about this today, because we have this budget coming up, in early December. And it would be very disruptive, of course, if you have a government before a budget. But there are some say they don't want this government to do the budget. They want another government to do the budget. So, we just have to wait and see.

But it very, very interesting that just a day after they announce that they would be taking the IMF money, that he'll be making this political statement. And I think a lot of people are really angry because of the last week, not because the IMF is here, not necessarily because they are taking the IMF money, but because we heard for so long that the government thought they didn't need the money. And now, of course, on Sunday they said they do want the money, Richard.

QUEST: If they-if this goes according to plan, is it still the feeling in Ireland that part of the money goes for the budget deficit, or for budgetary purposes, part goes-a large part goes to the banks, but that actually it is not all drawn down?

BOULDEN: Yes, a lot of people are saying, maybe they don't need to draw it down. They can just have this money on the books, or have this money promised to the Irish government and to the banks. And the banks could use that as collateral to go out and start acting normally.

No, I just interviewed the chairman of Anglo-Irish bank, Alan Dukes. And I asked him about this. Let's hear some of that interview, Richard.


BOULDEN (on camera): First of all, you had said today, you thought there would be fewer banks. How will the landscape change in Irish banking now that the government has said, OK, we'll take the money?

ALAN DUKES, CHAIRMAN, ANGLO IRISH BANK: Well, it is clear that three of the largest banks, they will become smaller. They have to deleverage to a very substantial extent. At the same time, we need a platform here to attract inward capital into our banking system, because there is a funding deficit in the economy. When the Irish economy is growing it needs more funds than domestic savings will account for. So, we need a banking institution that is capable of doing that. Whether as one of the two big banks or not, it is difficult to say.

Despite the fact that the economy is quite small, we need at least two banks to provide a reasonable level of competition, more than that, probably. We have an opportunity now with a substantial package of funding to do something pretty well dramatic and decisive. And I would think that if we do something that looks definitive and conclusive, early on, the effect on market sentiment would be much better than doing the same kind of thing over an extended period.

BOULDEN: Does that mean mergers within Ireland? You mean takeovers, banks from Germany, or the U.K., or the U.S., would come and take over. Or do you think closing banks and selling off the assets.

DUKES: Well, it is difficult to say before we have a detailed examination, what form it would take. I don't really have a preference about who the final owners of the banks are. The intention, clearly, should be, in my view, that banks that are currently nationalized, or almost nationalized that is, Anglo Irish Bank, and AIB (ph), should be floated back into the private sector as soon as possible. I don't think it is a good idea for governments to own banks.


DUKES: There are some foreign banks operating here that are reducing the level of their operations. I think that banking activity would still be a legitimate part of the economy. Where it is carried out and by which bank is something that we need to discuss.

BOULDEN: Why, from a banker's point of view, was it important for the government go and get help from the IMF, and the European Union?

DUKES: Because, frankly, we don't have the resources here to provide the kind of backstop that is necessary to deal with the black hole that we have in the economy following the property bubble burst.

BOULDEN: And you say it is a back off, so it would be a backstop, in the sense that maybe the government won't need all the money. Maybe the banks won't need all the money, but it is there, and it will help you go back out into the market and raise funds.

DUKES: That kind of discussion is one of my concerns. I would think, as I've said, that if we do something that big, that looks definitive pretty quickly, using up a big chunk of the money, it will have a bigger effect on market sentiment than doing the same kind of thing gradually. So I'm a big worried about the idea of having a big chunk of contingency waiting out there. I think it is-it would be a better use of the resources to do something decisive with it.


BOULDEN: So I think that answers your question, Richard, at least from that banker's point of view. He wants a lot of the money and he wants it soon, Richard.

QUEST: And, Jim, the Irish people, an enormous amount has been written and spoken o the question of sovereignty. That is hurting hard, in Ireland tonight.

BOULDEN: Yes, some of the headlines were about humiliation. Some of the headlines were about Ireland being broke. I think the fact that the British government has said that it could be lending up to 7 billion pounds, a bilateral loan, outside of this other loan, has really stung as well, because of course the historical tensions, of course, between Ireland and Great Britain. So, a lot of people having to swallow this bitter pill. But so many people say to me, OK, we're here so let's take this money. Let's get on with it. Let's get recovery. Just not sure that it will be this government that will be doing that, Richard.

QUEST: Jim Boulden, who is in Ireland tonight.

And now let's go to the Dail, in Dublin, and hear from RTE, who provides this from the prime minister.


BRIAN COWEN, PRIME MINISTER OF IRELAND: There are occasions when the imperative (ph) of serving the national interest transcends other concerns, including party, political, and personal concerns, and this is one such occasion.

The vital national interests of this country require that financial stability be achieved, by publishing a four-year plan, which sets out how the next (ph), 15 billion euro adjustment will be implemented by 2014. By adopting a budget, which affects a 6 billion adjustment in 2011, by taking the necessary legislative and other measures, that effect the terms of the budget. And by concluding negotiations on the program for support, from the European Union, the ECB, and the IMF.

These negotiations, in turn, are taking place in the context of the budgetary arrangements coming into affect. It is a matter, then, of the highest importance the Dail Erin (ph), then, should continue to consider and enact the relevant measures. And that the government should continue to discharge its obligations to bring forward the necessary proposals.

There will be a time for political accountability to the electorate. The interests of the electorate, of all our people, will not be served by delaying, or worst still, casting into doubt the steps which are necessary to secure our economy and financial stability.

The government will publish its four-year plan next Wednesday. It will continue negotiations with the European Union, the ECB and with the IMF. And it will present the budget to the Dail on the 7th of December. And it will introduce the necessary resolutions and legislation to give definitive effect to those measures. We believe that there is a clear duty on all members or Dail Erin (ph) to facilitate the passage of these measures in the uniquely serious circumstances in which we find ourselves. The political and financial stability of the state requires no less.

It is my intention at the conclusion of this budgetary process, with the enactment of the necessary legislation, in the new year, to then seek a dissolution of Dail Erin (ph) and to enable the people to determine who should undertake the responsibilities of government in the challenging period ahead, thereafter.

Thank you, that is the statement of my government colleagues and I.



COWEN: No, all of my colleagues have provided full support because of the national importance of proceeding with the job that we have undertaken and must complete. And I have said to all of my colleagues, that we are a democratic party and there are democratic processes for dealing with any issue that arises in relation to our party. I was asked to take on this responsibility as leader and Taoiseach, and I have enjoyed the full responsibility of that office. And at this time, for our country, we believe as a government, and the ministers who are from my party, share this with me. That the greatest statement of confidence that must be given in this country today is passing the budget on the 7th of December. That is the most important thing for this country. And all of us in Dail Erin (ph) have a responsibility to meet that challenge.


COWEN: There is no confusion in what the government's position is. We have set out clearly, what the imperatives of the situation require at the present time. And as I've said, and I reiterate, the passing of the budget on the 7th of December is hugely important for this country. We have entered into discussions with European partners, on the basis that we are going to implement a budget that will have a 6 billion euro adjustment to it. And that we would provide a four-year plan this week. This is the context in which negotiations have been taken-have now started to take place. So, we must proceed with that. And it is a matter for everyone in Dail Erin (ph) to take on that responsibility now because we intend putting that to the house for that purpose.



QUEST: That is Brian Cowen, the Taoiseach, the Irish prime minister, talking to the press. In it he talks about the unique serious circumstances facing the Irish people, the Irish economy. But if anyone had been expecting a general election immediately he said there would not be one. The government's priority was the budget, which will be presented on the 7th of December, which is expected to have cuts of up 6 billion euros in '11. And he said, concluding the negotiations with IMF, the ECB, and the European partners.

But, Jim Boulden, joins me again in Dublin.

Right at the end of the Taoiseach's formal statement, Jim, the-Brian Cowen said that in the new year, when these other matters were concluded there would be a dissolution of parliament, of the Dail. Therefore no election, immediately, but one in the offering. Pretty much as the Greens, basically, wanted.

BOULDEN: Yes, you know, I think what we heard there, Richard, was the defiant Brian Cowan, didn't we? He did not sit up there and eat humble pie. He did not sit up there and give up, did he? He said that it is so important that this government stay together, to get through the four-year austerity measure to be announced soon. And then to get the budget passed. Now remember he has to get this budget passed on December 7. And that is a tricky thing, of course, because you have a number of the minor parties saying they may not support it.

And of course, then he's talking about how it is so serious that the other parties must support him on this matter because they must get this budget through, of course, because the IMF and the ECB and the EU will be looking very carefully to make sure these austerity measures get pushed through.

But as you say, the Greens have called for an election in late January, so maybe if that does take place at the time, at that time it is not a snap election. But certainly I would say that that was a quite defiant Brian Cowen, Richard.

QUEST: And Jim Boulden is in Dublin tonight. Jim, many thanks for that.

Now we have a lot more coverage on the Irish situation in QUEST MEANS BUSINESS tonight. We are going to hear from the Swedish finance minister Andes Borg. We are also going to hear from the Bulgarian finance minister who believes that preparations now need to begin for Portugal's potential bailout.

But when we come back after the break it is a luscious future in the City of Curitiba, a future city, on QMB.


QUEST (On camera): On "Future Cities" from Brazil, the green spaces of Curitiba. And how this city says we want more, after the break.


QUEST: Welcome back. So far all throughout November we have been in Curitiba, the city in Brazil, the feature and focus of our "Future Cities". Now, we'll take a look at the green, open spaces of this particular city, Curitiba.

As the original way this city is making sure it continues to flourish, well, into the future. It is all about making sure there is enough green to go around. The first two parks in the city were built in 1972. That number has kept going up. There are now more than 30 big green open spaces where people can revel and enjoy. Roughly 50 square meters per citizen.

It is not just a push to create, but also preserve. In Curitiba that could even mean tax breaks on your trees.


QUEST (voice over): Towering above Curitiba, fanned out like green umbrellas the Adacaria (ph), or Brazilian pine tree has become a symbol of the city that committed to protecting it.

UNIDENTIFIED MALE: Wild parts of Curitiba is part of our history and our heritage.

QUEST: Pretty and also practical. Curitiba started building parks to ease the affects of being located on a flood plain.

UNIDENTIFIED MALE: We didn't have the money to do major construction work. And what we are going to do is create a lake around this occupied area and this lake is going to hold the water when the rain comes. It is going to make it go slower. So, when it comes back normal it can flow with no problem to anybody.

QUEST: So, in 1972 two of the first parks were built, equipped with lakes to act as buffers between flood waters and the city. A plan that was five times cheaper than building canals or levees.

Today Curitiba has 33 public parks, and countless city squares making this city literally green. Many of the parks are repurposed spaces. Like the University of the Environment, which used to be a rock quarry. There are parks to celebrate the immigrant heritage of the city. And even parks where sheep are used to help cut the grass.

In all, it totals more than 50 square meters of green space per citizen. Even the mayor's office is in a park. It looks more like a tree house rather than an office.

(through translator): Brazil is internationally known for its preservation efforts throughout the country. Curitiba stands out from other places in Brazil because it was the first city to be directly with the environment. The recent focus on the environment and the concepts of sustainability have been practiced for quite a while in Curitiba. And I think this is what makes the difference. And it makes Curitiba a model for other cities in Brazil.

QUEST (On camera): A walk through the John Paul II Park, and we are hard pushed to realize we are only five minutes from Downtown Curitiba. This is a magnificent example of natural forest. The authorities here, though, have gone further. They not only which to preserve what they have got, they want to extend the reach of the green areas, introducing new forests and green spaces.

UNIDENTIFIED FEMALE (through translator): Well, to me preservation is part of my life philosophy.

QUEST: Tarazina Varishina's (ph) house sits on 36,000 square meters of mostly forested land. This land could have been long gone by now if it weren't for the government sponsored program Conbuyo (ph).

We are visiting the 1,000 properties, to value them, and to convince them to preserve and take very good care of it. A person can create an area on their property to conserve the forest, and in return, receive benefits.

QUEST: Residents like Tarazina get anywhere from 10, all the way up to 100 percent, property tax breaks if she preserves her land.

VARISHINA (ph) (through translator): The last few years I used to feel a lone, as if I were on an island and that island was being invaded. I was being invaded by building developments. This was an invasion by building contractors starting to build houses. There have been many offers over $500,000, but I think it is priceless. Preservation does not have a price.

QUEST: Contractors have frequently targeted Tarazina's properties. But since she has made the decision to preserve it. Convao (ph) helps her make money a different way. She can't sell her land but she can sell what is called, building potential. This means Curitiba will find another piece of land for the contractor, where they can build and forests won't be destroyed.

UNIDENTIFIED MALE: As a city that is garnering increased attention, Curitiba will attract many new projects. We have managed to take good care of this. Merging advances of the city, while taking care of the environment, and most importantly, being very aware to take care of our people so we can maintain positive development for the city.

UNIDENTIFIED FEMALE (through translator): With the huge family united in the same site, and we all need the help, sponsors, organizations, domestic and international, to help us keep these projects alive.

QUEST (on camera): The needs of developers will always be in demand in our future cities, but here in Curitiba they have balanced green with growth; whether by maintaining the downtown forests or recreating the gardens of the European past.

Richard Quest, CNN, Curitiba, Brazil.


QUEST: "Future Cities" in Brazil. Now there is still much more that we need to talk about on the question of Ireland, the bailout, and who might be next. There is help from outside the Euro Zone. Sweden's finance minister joins me in a moment on why his country is hoping to lend a helping hand.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN and on this network, the news always comes first.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN. And on this network, the news always comes first.

A festival in Cambodia has turned deadly. The Cambodian prime minister said on state television at least 180 people have been killed in a stampede. These are the first pictures that we've received at CNN. The people were crossing a bridge in Phnom Penh during the Water Festival there. More than four million people are attending the festival.

The top U.N. official in Haiti says the country needs medical personnel -- and lots of them -- to stop the spread of cholera. Tony Banbury tells CNN Haitians need access to immediate treatment at the first sign of symptoms. And that means setting up thousands of treatment centers. Haiti's cholera outbreak has now killed more than 1,300 people. More than 70 -- 57,000 are ill.

Official in -- officials in New Zealand say they are still hopeful 29 missing miners will be found alive, but they're preparing for the possibility that lives will be lost. No one has heard from the miners since Friday's explosion. Rescuers can't go down to search yet because of toxic gases. They're hoping to send a robot into the mine to survey the damage.

It's a rare happy ending after a mining accident in China. Chinese state television is reporting 29 miners were rescued after spending more than 30 hours trapped in a flooded mine. The rescue took less than an hour and was broadcast live from Szechwan Province. China's mining industry is infamous for deadly accidents, which is often blamed on widespread flouting of safety regulations.

RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Now, the Irish prime minister, a short while ago, said that his priority was negotiations with the European authorities and the International Monetary Fund and getting a budget through the Irish parliament. Only then, said Brian Cowen, would he consider dissolving the Irish parliament and holding a general election.


BRIAN COWEN, IRISH PRIME MINISTER: I am formally making the point this evening in my statement that I will seek a dissolution of dail after all the necessary legislative arrangements have been put in place to give effect to a very important budget which it is imperative for this country to pass.


QUEST: Those pictures coming to us from RTE, the Irish television network.

Ireland does not need to return to fund markets for three years. If it did, it would find prices painfully high, even allowing for the bailout. Borrowing costs remain above 8 percent. That's the yield on the Irish 10- Year government bond. It's fallen very slightly. But the premium over the bund, as the yield on the bund has fallen even further. Things a little better than yesterday for the Irish.

Reaction was muted on the stock market. Banks saw heavy losses in Dublin, tearing a chunk off the ISEQ. Financial stocks were obviously under severe pressure throughout Europe. Investors are worried this isn't the least bailout and banks may end up taking part of the haircut and the cost of doing the bailout, too.

Nations outside the Eurozone are now offering to help out Ireland with additional bailout funds. Sweden's finance minister -- Sweden not being part of the Eurozone -- but Sweden's finance minister says his country is aiming to lend around $1.5 billion to further economic stability in Europe.

The U.K. says it will lend around $11 billion. The British finance minister, George Osborne, says it's in Britain's best interests to help out its neighbor.


GEORGE OSBORNE, BRITISH PRIME MINISTER: I have been one of the fiercest critics of Britain joining the euro. I didn't want Britain to join the euro. We pointed out some of the challenges that was going to face members of the euro.

But I told you so is not much of an economic policy. You know, we have got to deal with the situation as we find it. And Ireland is a very close neighbor of the U.K. We are deeply interconnected. And it's in our interests -- our national interests -- that Britain is part of the efforts to help the Irish because they are a friend in need.


QUEST: Now, Sweden's finance minister, Anders Borg, joins me live from Stockholm.

Minister, to confirm and so there's no doubt, you have now basically agreed that you will join in the bailout effort?

ANDERS BORG, SWEDISH FINANCE MINISTER: Well, we've said the same as the U.K., that we are considering -- we are stand -- ready to consider a bilateral loan to Ireland, if that would be required.

QUEST: Since you're not in the euro, I'm wondering, why do you -- what is the imperative?

Yes, you have trading relations and it helps, of course, exports and imports.

But why do you feel the need to join in this bailout?

BORG: Well, I mean for us, we are a small, open economy that is -- is quite well integrated to the -- to the European financial market. So if we do not safeguard our financial stability in Europe, we don't believe that this recovery will be safe and sound. So for us, it's in our national interests. But -- but, obviously, we will also safeguard our taxpayers' money.

So it's very, very important that the Irish government put forward a long-term sustainable fiscal policy and also a credible restructuring of its banking sector, because we want to be helpful, but it's also very, very important that we keep out -- keep the wash out for -- for our own taxpayers.

QUEST: Do you believe that this crisis ends with Ireland's bailout or do you also fear that another country will be next?

BORG: Well, clearly, the ambition from -- from all of the European countries is to stabilize the situation. And if we can induce enough credibility in this problem, it is more likely that -- that we could safeguard the stability.

But -- but, obviously, there are -- there are risks remaining. And I think we should be very cautious going forward here.

QUEST: What does that mean in reality?

Should you be preparing, do you think you and fellow ministers should be discussing now the firepower and the firewall that you would bring to bear if, say, for example, Portugal comes under attack?

BORG: Well, I think the first and the strongest line of defense is a -- a credible fiscal policy from -- from the government of Portugal and of Spain and Greece, obviously. I mean they have to restore their own credibility. And it lies a heavy responsibility on them of -- of doing what is necessary to safeguard our public finances but also to -- to restore the credibility of the banking system.

So if we can now limit the effects from -- from Ireland, that would be a first step to -- to getting out of the crisis. But I think we should be very realistic. This is a -- a difficult situation for Europe.

QUEST: And is it -- is it a situation, as some have suggested, that the European institutions, until possibly now, have been ill-prepared and rather slow to react to?

BORG: Well, I mean obviously, the problem goes back a few years. I mean there's been an over heated economy. House prices have been booming. A current accounts deficit has been building up in several of these countries.

So, obviously, the main responsibility lies with the national government.

But given that we've now seen a -- a tsunami of -- of financial uncertainty going through the world, it's quite obvious that a lot of countries is drawn into it. So I -- I think it's obvious that we have not built enough and -- and enough strong institutions in Europe to deal with these kind of problems.

QUEST: Finally, Minister, when you talk to your electorate and you justify giving your taxpayers money to bail out Ireland and possibly Portugal next -- although that would be a much bigger pill to swallow -- what would be your justification?

BORG: Well, we -- we are making the assessment on a case by case basis. What we have said is that -- that Ireland is systematically important for -- for us, for us, for our export, for our financial system, for our economic recovery. And it's in our own interests to be part of this -- this package.


QUEST: Anders Borg joining me live from Stockholm.

Many thanks, Minister.

We appreciate you joining us on QUEST MEANS BUSINESS.

As we were just talking there with the minister from Stockholm, investors are looking beyond Ireland for the next shoe to drop. Bulgaria's finance minister agrees and he says it's time to start planning for the next bailout.

Bulgaria is not as yet a member of the Eurozone and yet the country, notwithstanding the debacles of Greece, Ireland and other calamitous events, still wants to join the euro.

I asked Dr. Simeon Djankov if another European bailout is really inevitable.


SIMEON DJANKOV, BULGARIAN FINANCE MINISTER: Everybody is watching Portugal now that that's why it was so important for Ireland to be resolved fairly quickly. And I think we succeeded in that, we, the foreign ministers.

But, of course, the worry is now about Portugal and then Portugal, Spain. So...

QUEST: What Mini -- would the -- would the Union be better off now heading it off, putting in place a plan, even before the markets start attacking Portugal?

DJANKOV: I think, in some sense, what the Irish -- the quick Irish plan showed is that it can be done in a week to 10 -- to 10 days. But some sort of -- of a pre-planning is probably a very good idea, yes, so that the markets are calmer, especially having in mind that the holidays are coming in a month. And usually during the holidays, either Christmas or summer holidays, some of the biggest crisis have come during that period. So it's good to have something in advance.

QUEST: So you would be in favor of, even before things get going, looking at places like Portugal and working out what would -- what would have to be done?

DJANKOV: I think some sort of planning is -- is obviously welcome so that we don't get into periods of -- of not knowing what's -- what's next. And clearly, the market thinks that there are some -- some things still to come.

QUEST: When we talk about all of this, there are now serious questions -- the euro will undoubtedly survive the -- this crisis. But the euro is perceived to be damaged goods, isn't it?

DJANKOV: It's -- I think, yes, it's somewhat considered like that, I think, and justifiably so. All the major currencies have gone through crisis, the dollar, the yen, and have survived well. The euro will survive, for sure.

I think the current crisis and the resolution of the crisis shows not so much that the euro is in trouble, but that the European institutions were not ready to deal with this -- with this crisis.

So I think the focus is on the Commission, on the European Central Bank and how they can be improved, not the currency itself.

QUEST: Why do you still believe, for Bulgaria, the euro is a good idea?

And surely it's an albatross around the neck of some countries who have joined. And, Minister, frankly, if you run a good fiscal position, you don't have to worry about the euro.

DJANKOV: It's true. However, the Bulgarian currency, the lev, has been tied to the euro from the very beginning, from 1999. So in a way, we are already in a situation where it's as if we have the euro.

I frankly think that now the Eurozone needs countries like Bulgaria, with tight fiscal policy, more than these countries need it. The entry of Estonia from next January into the Eurozone is going to bring one more fiscally responsible member.

And there aren't that many fiscally responsible members right now. So any additional one may help the Eurozone itself.

QUEST: As we look tonight at the sorry state, not just of Ireland's economy, but the European dream, it's just about holding together, but it's fraying badly at the ends.

DJANKOV: I think the -- the main lesson from Ireland is precisely that. When Greece had trouble, everybody sort of said that, yes, we know that the Southern European economies have troubles. Ireland, however, was considered the economic dream of -- of all of Europe and something that we advertised around the world.

So now that that's gone, not only fiscally, but in terms of economic development, that puts a question mark on the economic future of Europe and how Europe can compete not only with the United States but with the Asian countries.

And there, that question mark is unanswered for now.


QUEST: Bulgaria's finance minister, who, incidentally, happens to be a former senior economist at the World Bank and has a PhD in economics.

Now, when we come back, Ireland's government has pledged it will not touch the corporation tax that could lure companies to invest in Ireland during this crucial period. After the break, the director general of the Business and Employers Confederation joins me live from Dublin.


QUEST: If you do business in Ireland or with Ireland, the terms of the bailout could be the difference between profit and loss. The Irish government is desperately trying to hold onto its attractive corporate tax rate. A great deal of uncertainty now about whether it will succeed.

What does it mean for business?

Joining me now, Danny McCoy.

He is the director general of the Irish Business and Employer's Confederation.

He joins me from Dublin.

Mr. McCoy, as we look at the -- the rules on this, firstly, do you welcome the fact the Irish prime minister is not calling an election immediately or should he go to the polls?

DANNY MCCOY, IRISH BUSINESS & EMPLOYERS CONFEDERATION: I think it's important to have certainty around the budget before we go to an election. At least then the parties can fight on the basis of a budget that is required for international market purposes.

I think the presence of the IMF, the E.U. and the ECB here in Dublin are chaperoning our government now and will be for some time. So I think it's important that we get a four year plan out on Wednesday and then the budget on December 7th and then go to the country to see who will govern.

QUEST: As you look at the position, how -- how damaging is -- obviously, the economic position, but also the fact that Ireland has had to take a bailout on the reputation and on the business environment?

MCCOY: Well, Ireland has been struggling for the last two years with the banking crisis and it also has a public finance problem. But, in fact, it's a long way toward solving this.

On -- on the public finances, we're already halfway through a 30 billion euro austerity program. And Irish businesses have actually gone on and made themselves more competitive. We've seen the capturing of market share very significantly. And we're going to have a record here for exports.

So the business sector has gone on about its business and is actually doing very well.

Public finance is still a problem and the great unknown is the scale of the banking losses.

QUEST: Would you -- if -- if push comes to shove, Mr. McCoy, and the 20 -- the 12.5 percent corporate tax rate is under threat, is that very damaging for you to lose that for Ireland's competitiveness?

MCCOY: Yes, the -- the low corporation tax rate, at 12.5 percent, has been a ctrl plank of Irish economic policy for a very long period. Certainty about the Irish corporation tax, but also about doing business in Ireland has been Ireland's hallmark. And I don't believe, actually, this is going to be under threat.

I think people are talking about it, but I just don't see it forming part of the conditions, because Ireland is a gateway for American FBI into Europe, but it's also the hub for a lot of Irish multinationals. They're here because it's a good place to do business. It's not solely about the corporation tax, but it's crucially important. It would make no sense to tamper with that.

What we need now is certainty, certainty that Ireland will recover because it is in the vanguard of this attack on the euro.

QUEST: Right. But we do know, of course, as of tonight, it's highly likely that there won't be as -- well, the banks in Ireland will be smaller and there won't be that many of them.

Does Ireland become basically an outpost for European conglomerates HSBC, Santander, Deutsche Bank and the like?

MCCOY: That may well be what will happen. But that's no different to any other sector in which Ireland trades in. It's a small -- it's a small nation, 4.5 million people. But its reach and the scale of the business that operates out of here is really huge. It's European level.

So who owns the banks is not as big an issue for Irish business as making sure that small and medium enterprises have access to credit at affordable rates.

That's what we need to see to underpin this economy. I think Irish business, as I said, is doing very well. We just need to have clarity and certainty around our banking system, regardless of who owns it.

QUEST: And -- and finally, we've talked so much over the last few days about Ireland. And many of our viewers really do need to understand and get a feel for just how devastating the events have been for the Irish people, the Irish business and the Irish economy.

MCCOY: Well, the Irish people have spent 20 years being hailed as the Celtic Tiger. So psychologically, it is a bit of a knock back to have to call in IMF support.

However, if you look at the fundamentals of the Irish economy, it still remains very strong. I think that in the last couple of weeks, what we've really seen is a play against the euro. And Ireland was weakened by its banking system and so was exposed.

I think Ireland could have traded on. I think the government was well capitalized and business was starting to grow again. So Ireland has entered into this facility as probably the best of all worlds. It didn't have its head in the sand and it was trying to do the right thing. And I think that reputation will carry it through with our international colleagues and the people we trade with.

Ireland is very good for business. It's open for business.

QUEST: Mr. McCoy, many thanks on this interesting and difficult day.

MCCOY: Thank you.

QUEST: Joining us live tonight from Dublin.

Now, when we return in just a moment, if you're going to the United States, it's Thanksgiving, of course. You'll want to know the weather forecast for that. It's the US' biggest travel day.

Elsewhere in Europe, you'll want to know what's happening.

The weather forecast.


Good evening to you.


QUEST: All right, a delightful day it was here in Abu Dhabi, where the program comes to you from tonight. And nice weather. And I even got an hour or two by the pool.

Jenny Harrison is at the World Weather Center.

I was merely getting there first before you commented on the slightly rosy looks.

JENNY HARRISON, CNN METEOROLOGIST: Yes, you've been looking very well lately, I have noticed.

Yes, well, you're in the right place. You know, sometimes you don't want to be. And, in fact, we're going to start out with the weather conditions in the Philippines, but not the mostly the conditions, a bit of the actual volcano, the status here with Mount Bulusan volcano. This is in Central Luzon. You can see it there. It's about 370 kilometers southeast of Manila.

And this erupted on Sunday, giving rise to a level one alert. And there's a -- a full kilometer radius around the base of the volcano which is considered a permanent danger zone. And, obviously, the warnings have been put out.

But about 500 farmers were evacuated on Sunday. And this began erupting back on the 6th of November. And, in fact, there's been a lot of volcanic activity, lots of quakes in the last 24 hours. And there's a lot of ash on the northwest and southwest of the crater.

When the volcano erupted, it actually ruptured a mixture of steam and ash and it went two kilometers up into the air. The threat to Lahar (ph), this is being monitored. There is rain in the forecast as we go forward, but also, there have been, in the last 24 hours, nothing particularly heavy. But you can see here by the satellite that we're dealing with the usual rains this time of year, and that is to say, it's scattered showers and thunderstorms.

If you're traveling in and around the region, there's no warnings out just yet for aviation. But, of course, you need to monitor the progress of activity of the volcano.

But across much of the northeast, again, through Japan, there's a front to clear out of the picture there. And some strong winds in Brisbane, too. There's been heavy rain, as well, in Queensland over the last few days.

As for the southeast, look at Melbourne. Temperatures well above average. So if you're heading here, then you need to be prepared for temperatures, as I say, in the low 30s Celsius, very warm, indeed, before the thunderstorms by Thursday.

The opposite sort of story, of course, in the Northwest and the West of the United States, in particular, the Sierra Nevada range of mountains. A huge amount of snow over the weekend. There's more coming in over the next few days. It is, indeed, the busiest travel week, Wednesday, the day before Thanksgiving, said to be the busiest travel day.

But also some tornadoes to consider, as well. There's a line of thunderstorms working their way across the Midwest and the South in the next 48 hours. And we could be seeing another two meters of snow out toward the west. There, all the warnings in place.

Will the snow stick around?

Well, my goodness, it doesn't like it, because temperatures are well below average out in the West. And it will also -- there are all sorts of delays at the airports because of the snow. And, again, those thunderstorms in the Midwest.

As for Europe, we've got this one major area of low pressure giving a lot of problems in the southeast, working its way through the Mediterranean. Heavy rain there. And, of course, as that moves northwards, on the back side of that, some very, very cold air is feeding in. There's going to be snow across much of Central Europe, Scandinavia, even some snow across northern sections of the U.K. And as usual, that does mean you prepare for some travel delays. Windy conditions, as well, across the north and west of Europe -- so, Richard, you have picked a good spot to be.

QUEST: Many thanks, Jenny Harrison.

Pure luck rather than good management.

When we come back in just a second, a Profitable Moment that wraps up the events in Ireland of the day.


QUEST: Tonight's Profitable Moment.

First it was Greece, now it was Ireland.

Will European leaders play the same game of chicken with the next potential candidate, possibly Portugal?

The Bulgarian finance minister says on this program, the E.U. should be preparing now. Other ministers would be wise to listen. Dr. Djankov has a PhD in economics and was a senior economist at the World Bank.

He believes pre-preparation for what might happen next is the only way to avoid a debacle. The Eurozone has already bungled two of the bailouts - - two of the bailouts. It would be a shame if they did it a third time around.

And that, as they say, is QUEST MEANS BUSINESS for the government.

I'm Richard Quest in Abu Dhabi.

Whatever you're up to in the hours ahead, I do hope it's profitable.

"WORLD ONE" starts now.