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QUEST MEANS BUSINESS
Ireland's PM Fights to Push Through Financial Aid; Portugal's Debt Swells as Fears Grow of Another Rescue
Aired November 23, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, GUEST HOST, QUEST MEANS BUSINESS: No budget, no bailout. Ireland's prime minister fights to push through financial aid.
Portugal's debt swells as fears grow of a third rescue.
And a growth spurt in the U.S., but the markets have their eyes on North Korea.
I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello to you.
The Irish Prime Minister Brian Cowen is fighting to keep the bailout show on the road. Ireland's cabinet is putting the final touches on a plan to slash the budget by $20 billion over four years. Without the cuts there can be no bailout. And Ireland will be on the danger list. But Mr. Cowen's critics are turning up the pressure and they threatened to trigger a snap election, which could knock the plan off course.
With protests in the streets, one opposition party is pushing a vote of no confidence in the government. There is more discontent within the coalition and even rebellion within Cowen's own party.
Cowen says he will call a general election but only when the budget is agreed and Ireland is safely in receipt of bailout funds. The Irish prime minister has to hold things together for two more weeks until budget day on December the 7th, when lawmakers get their chance to vote on the first $8 billion of cuts, for 2011.
Jim Boulden is in Dublin and he joins me from there now-Jim.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Max, yes, really we're going to focus on tomorrow here in Dublin, because this is when the four- year austerity plan will be announced by the government. What does this mean? This is because Ireland has already gone through some austerity measures but it hasn't been enough. So a few months ago the government promised that they would announce even more cuts to try to stabilize the markets, to try to help the bond markets. And of course, it has come to late for the IMF and everyone else who is now, of course, in Ireland has accepted IMF help and IMF money will be coming soon enough. But we are still going to get this austerity measure announced tomorrow. Then we have the budget on December 7.
And the prime minister is doing all of this while trying to cling onto power and as you say all these other parties are trying to bring him down, effectively. Earlier today I spoke to a former finance minister. He's from the Labour Party, he is Ruairi Quinn. And he was the finance minister during the `90s, during the Celtic Tiger. And we talked a lot about what happened, last night, where there was thought that he would-the prime minister would resign. And also Mr. Quinn tells me, he'd like his job back.
(BEGIN VIDEO CLIP)
RUAIRI QUINN, FMR. FINANCE MINISTER, IRELAND: Well, they're unprecedented. We expected the Mr. Cowen would go to the Phoenix Park, where the president is, to seek a dissolution of the Dail Erin (ph), the national parliament. And he didn't do so. He rang the party leader of the Labour Party in Gilmore (ph) and also the party leader of Finaveil (ph) the Christian Democratic Party, and informed them that as far as he was concerned the international authorities, including the European institutions, require us to pass the budget; and to enact the necessary subsequent financial legislation as a condition of the financial support which they are giving to us.
Now, that is what he said to us. We're not entirely sure whether that is exactly the case.
QUINN: Right this, morning now, in so far as you can predict anything, there is a serious chance that the budget will not pass on the 7th of December.
QUINN: Yes, under our constitution the failure to pass the financial resolution of the magnitude would automatically trigger a general election. He would have to go to the Park to request the president dissolve the parliament.
QUINN: Well, of course it is. And this seems to have been the intention of the Green Party, as well. But by announcing yesterday, Monday, that they were looking for general election in the middle of late January, of next year, they set in train a process which, frankly unraveled. I mean, why would some back benchers-this is the argument, why would government back benchers vote for an austerity budget on the 6th of December, or the 7th of December, and then face an electorate five weeks later. It-I don't think the Green Party, quite frankly, thought through the consequences of that announcement. They should had they been more cute and more politically wise, gone along with the budgetary process and announced after it had been faithfully passed and the four-year revealed. Then they could say, look, we are seeking an early election. But they didn't do that and we are now where we are today.
(END VIDEO CLIP)
BOULDEN: I think we're having some technical problems there, Max. But I think you get the gist of it. The former finance minister saying that it is very important that they decide how this budget is going to be put together. The question is, can the prime minister get enough votes for this budget. If he can't and he's not able to get the budget through parliament, then he would have to resign. There would have to be snap elections. And as I said earlier, Mr. Quinn says, he certainly would like to have the finance ministry, again, under a Labour coalition government, Max.
FOSTER: Jim, in Dublin, thank you very much, indeed.
Now, even if Ireland can get itself onto a firmer financial footing several other nations in Europe remain dangerously close to the edge. And pressure from the markets is threatening to push them over, it seems. The euro markets have fallen quite significantly as you can see. There is fear that this contagion, as some people are calling it, could spread. Plus, worries about South Korea and North Korea, of course, as well and possible tensions there.
The banks were hit very hard, indeed. The Bank of Ireland is down nearly 23 percent. And Allied Irish down 19 percent. The head of Ireland's central bank says Irish banks are all up for sale.
Now the euro, over the last three days, well it gained on Sunday when the bailout was announced, as you can see. And it peaked earlier on Monday, then sunk. And it continued to fall on Tuesday. Now, down nearly 3 percent since that peak on Sunday. So a lot of positive feeling in the currency market seems to have gone away.
Let's have a look at the borrowing costs. They are still rising. If we take a look at 10-year bonds, in Ireland, the yield, thus the rate, it has risen to about 8.7 percent. In Spain, the wider spread in the euro area, with German bundes more than 2.3 percent more costly now. Now, Portugal is close to 7 percent and we are going to have more on Portugal later in the program. A lot of concern about Portugal, of course.
Now, if confidence doesn't improve soon, we could start to see a run on Ireland's banks. That is the view, at least, of Mohamed El-Erian, he is the CEO of what is often called the world's biggest bond house, and that is PIMCO. And he joins me now.
Thank you so much for joining us. First of all, just, this concern about a run on Irish banks. Things are bad enough already how would that happen?
MOHAMED EL-ERIAN, CEO PIMCO: That would complicate things tremendously. The numbers that have been issued by various banks in Ireland suggest that about 5 to 10 percent of the deposit base has already fled up to this period. With the uncertainty, there is a risk, that you may see an acceleration of the outflow of deposits. Basically people taking the money out and putting them in banks headquarters, elsewhere in Europe; and if that occurs it will complicate an already very fragile situation.
FOSTER: But it seems it is already happening, if you look at those deposit figures that you just pointed out.
EL-ERIAN: They have. But so far it has been controllable. But you don't want this situation to get worse.
FOSTER: And in terms of your investment strategy, what are you concerned about Ireland doing then? What happens with this budget? What happens with the prime minister? What do you want to see done there?
EL-ERIAN: I think you need four things to come together. And that speaks to how important this period is for Ireland. First you need the Irish government to be able to deliver on a set of measures. And we just heard about the complicating political situation around that. Secondly, you need the EU to be able to get money into Ireland quickly. And the EU will be using a brand new facility that has not been tested as yet. Thirdly, you need the IMF to also support this process. And the IMF has just arrived in town a couple of days ago, so it needs to go through its own procedures. And finally, you need the depositors and the creditors not to exit en masse. So you need to see these four things happen and happened quickly in order to stabilize the Ireland situation and in order to stop contagion to other countries in Europe.
FOSTER: But you are the type of person that actually defines whether or not a country like Ireland has got enough money to survive. But you are not going to be putting money into Ireland right now, are you?
EL-ERIAN: No, we've been worriers. We have been worried about the situation in peripheral Europe for a long time. And therefore, we have not been investing in Ireland. We would like to see improvements on a couple of things for us to be willing to go back in and invest in Ireland. First, Ireland dealing with its debt overhang, which means dealing with its banking system. And secondly, Ireland having the conditions in place to grow and to grow at a fast rate. Otherwise, this will be a lost decade for Ireland.
FOSTER: And I've got ask you about Portuguese bonds. Are you interested in them right now? And which way are they going to go?
EL-ERIAN: No, we have exited Portugal a long time ago. Again, on the basis of worries that as we look over the next two to three years, Portugal also faces a debt overhang problem. So, our concern has been that it starts in Greece, it is not solved in Greece and the next thing you know, Ireland gets contaminated, then Portugal gets contaminated. And it is critical for the European Union to be able to stop this serial contamination of balance sheets.
FOSTER: Mohamed El-Erian, thank you very much indeed for joining us with your perspective, a very powerful figure in those bond markets.
Let's check on the Dow, because everyone is watching the Dow right now. Largely because of concerns about the Koreas, but also about Ireland as well.
As you can see, it is down 1.4 percent. It is not a particularly positive trading day. More on that a little later on.
Now, the conflict is in the Koreas and the effects are global. Next we'll look at how the artillery attack in that island is playing out on stock markets across the globe.
FOSTER: Events on the Korean Peninsula are sending shock waves across the world. South Korea's president has called for military action, not talk-uh, not talk-not to punish North Korea for deadly artillery attacks. South Korea says two Marines were killed when the North opened fire on Yeonpyeong Island, in the Yellow Sea. And North Korea says the South engaged in reckless military provocation by firing shells inside its waters.
The shellings came as Asian markets were closing for the day. Earlier, whilst Europe's markets were still trading, I spoke to Andrew Stevens in Hong Kong about how we can gauge the reaction in Asia.
ANDREW STEVENS, CNN INTERNATIONAL CORRESPONDENT: Yes, the yuan was trading, Max, and we saw that coming down quite quickly, and quite rapidly against the U.S. dollar in the aftermath of the reports coming out. Down by about 3 percent against the U.S. dollar. But probably the best indicator of what we can expect in the markets, particularly in the South Korean markets, comes in the form of some of the very big South Korean companies which are traded in London, and also in New York. These are sort of proxy shares, if you like. They are called GDRs in London and ADRS in the U.S. And some of the big companies there, like Hyundai in London, down 8 percent. If you look at Posco, the big steelmaker, in the U.S. it is trading down 5 percent at the moment, while these markets are still open. So, if you extrapolate that to the opening of the South Korean markets tomorrow, expect a fairly big sell off.
FOSTER: And can the authorities use any tools to try to dampen the effects of that?
STEVENS: Well, they can intervene in the markets. They can put some of their own sort of sovereign money to work, if you like, in the markets to try and support some share prices. Unlikely to do that, I think, in South Korea they are more likely to see how this goes over the first day. And then if there is a route and it continues in the ensuing days, they may take firmer action, Max. But they-what they are worried about is sort of is panic selling and sort of uncontrolled selling if you like.
So, that the central bank had the emergency session today. They said in a statement afterwards, they would take market stabilizing measures. They haven't said what they are. But these measures are to do just that. To stabilize a trend, rather than to try and reverse a trend, so they are trying to smooth out any big volatility if they can. Just to try and make it a little bit more orderly.
FOSTER: Well, incident in Yeonpyeong has shaken investors across the globe. In the U.S., the Dow is currently down around 150 points, despite some encouraging economic news. The GDP, in the third quarter, grew more than previously reported. A second reading shows 2.5 percent growth. Much better than the initial reading of 2 percent. Now the government says stronger exports and spending helped with the rise. And economists warned that recovery, at that pace, still isn't enough to create new jobs.
Julia Coronado is chief U.S. economist at BNP Paribas. She joins us now from New York.
Thank you so much for joining us. We saw how the Dow is pretty negative today. What are the main drivers there would you say today?
JULIA CORONADO, CHIEF U.S. ECONOMIST, BNP PARIBAS: I think clearly the global events of the day are dominating the markets with the North Korean situation, as well as the ongoing troubles in the European peripheral countries. Really causing a lot of flight from risk, and flight to quality, and leading to the sell off in the stock markets and a rally in Treasury markets.
FOSTER: And the U.S. recovery isn't strong enough to withstand some of these shocks, is it? That's the truth of the matter?
CORONADO: Well, that is always been the background concern here and the improvement that we saw in the numbers today really doesn't undo that concern; 2.5 percent is better than 2, but really isn't sort of the standards we have been used to in recoveries. And it is barely enough to keep the unemployment rate stable. So, the good news in the GDP report is that the upward revisions came in things like business investment and consumer spending, showing some firmer real underlying demand.
But still more than half of that number is coming from inventories. So the question remains, what is going to happen to top-line GDP when the inventory cycle fades?
FOSTER: Consumer spending, though, on the uptick is pretty positive, isn't it? Because it shows confidence and that is really what you are trying to get, isn't it, from the economy right now?
CORONADO: Yes, and we've seen some of indications of a better sort of self-reinforcing dynamic, with consumer spending a little bit more, and the service sector hiring a little bit more. And if we continue on that trajectory, which we expect, we will continue on the road to improvement with a gradually better and better numbers in non-farm payrolls, and a gradual pick up in GDP. But we don't expect this to be a rapid transition to above-trend growth, given all the headwinds the economy is still dealing with.
FOSTER: Can I just ask you, in terms of geopolitical events, at what point do you get more concerned about the Koreas, for example, and Europe?
CORONADO: Well, Europe is an ongoing concern, and you know, it is going to be a bumpy road. We do think that there is a lot of issues to be worked through. It is going to cause a lot of uncertainty as we work through these issues. So there is no quick fix, in the near-term, for the fiscal concerns and the interaction with the economic concerns.
The European-excuse me-the Korean situation has obviously come out of left field a little bit, and it is hard to say at this point, to what extent this is, you know, a sort of a one-off issue versus and ongoing conflict that might escalate and really derail confidence in the global stability.
FOSTER: OK, Julia Coronado, thank you very much for joining us from BNP Paribas.
Next we take a look at what it is like to in charge. Come with us behind the scenes as we catch up with out CEOs, in "The Boss".
FOSTER: Time for "The Boss", where we go behind the scenes with the people at the top of their game.
It's a big week for Richard Braddock, in New York, as he branches out into New Jersey. Here in London, Sarah Curran has a new addition to the team. Let's take a look.
UNIDENTIFIED MALE: Last week on "The Boss", Sarah hit the runway in London in search of exciting designers and new trends.
SARAH CURRAN, CEO, MY-WARDROBE.COM: We've really got to keep ahead, and that's why, again, trends are very, very important.
UNIDENTIFIED MALE: And in New York, Richard and his team revamped the packaging of the Four-Minute Meal.
RICHARD BRADDOCK, CEO, FRESH DIRECT: I think this is going to be a great launch (ph).
UNIDENTIFIED FEMALE: Good morning, Rick, we're going to New Jersey.
BRADDOCK: Right after I get some coffee.
UNIDENTIFIED MALE: It is 7:00 a.m. in New York. And it is a big day for Fresh Direct and its chief executive, Richard Braddock.
BRADDOCK: How you doing today?
UNIDENTIFIED MALE: Good morning, Sir.
UNIDENTIFIED MALE: Richard is heading to New Jersey.
BRADDOCK: You know anything about New Jersey?
UNIDENTIFIED MALE: Where Fresh Direct is about to dramatically expand its business, tripling its presence in the state.
BRADDOCK: You can't change without taking risks. You can' grow without taking risks, because you are dealing with some degree of uncertainty. And getting your people to believe, that where that uncertainty exists, opportunity can be created.
UNIDENTIFIED MALE: Richard is, of course, the public face of the expansion.
BRADDOCK: How do I look?
UNIDENTIFIED MALE: Good.
BRADDOCK: Ready to work for the day?
UNIDENTIFIED MALE: Yeah.
BRADDOCK: Well, it is fun to be running a business that is expanding and growing, and this is another indication of our success. So we feel good about the-about today and about our future in New Jersey and elsewhere.
UNIDENTIFIED MALE: As he promotes his product, getting the message out, means the boss has to press the flesh. First, it is mayor of the Township of Monte Clare (ph).
BRADDOCK: Hi, there.
UNIDENTIFIED MALE: Jerry Green (ph).
BRADDOCK: Rick Braddock. How are you?
UNIDENTIFIED MALE: Oh, good to meet you.
UNIDENTIFIED MALE: Nice to be here with you. I put my hat on for you and everything.
BRADDOCK: I can see that.
UNIDENTIFIED MALE: Here you are going to put this food to good use.
UNIDENTIFIED MALE: Richard offers the mayor of Fresh Direct produce and other products.
BRADDOCK: And we have some, I don't know, cheeses. They have very good cheeses, and soups. They did pretty well for you here.
UNIDENTIFIED MALE: These are the staples of Fresh Direct, whose business model is simple. The company buys directly from local farms and fisheries, and then delivers them directly to customer's homes.
Back in Mont Clare (ph), Richard is totally on message when he talks to the press.
BRADDOCK: We buy from the local farm direct, we buy from the slaughterhouse direct.
I don't look like I'm holding anything, but-
UNIDENTIFIED MALE: The message never wavers over five hours and three mayors.
BRADDOCK: This is really, in our mind, a rolling expansion.
UNIDENTIFIED MALE: After all, for Richard this expansion crucial to his plans for the company.
UNIDENTIFIED MALE: I'm going to have to take a bite out of whatever is in here.
UNIDENTIFIED MALE: He's pleased with the way this launch has gone.
BRADDOCK: We got, I think, a great reception. And we have to a-I think we helped a couple of mayors in their re-election campaign, and I think we did great out here.
UNIDENTIFIED MALE: It is a reception of a different kind in London. My-Wardrobe.com management is meeting.
CURRAN: It's really important as a trend-led site, that we understand what the media are calling in what ever one is talking about.
UNIDENTIFIED MALE: Before the meeting gets going, Sarah has a new recruit to welcome.
CURRAN: OK, morning every one. Firstly, if I could introduce you to Fiona who joins today as our creative director.
UNIDENTIFIED MALE: For Sarah there is no greater responsibility than hiring the right people.
CURRAN: The last (UNINTELLIGIBLE).
UNIDENTIFIED MALE: Her business relies on this investment.
CURRAN: I think that as we are undergoing this sort big process of repositioning of the brand, it is really important to surround yourself with experts. And I've never been shy of that. I've always made sure that within the buying team, within PR, I brought on the best person that I think, you know, can do that job.
UNIDENTIFIED MALE: My-Wardrobe launched in 2006. Today it is one of the leading online retailers of everyday luxury wear. As a trend-led site the My-Wardrobe team needs to make decisions fast.
CURRAN: We should hold off until everybody goes big with their features.
UNIDENTIFIED MALE: This meeting will help them to decide where they are going wrong.
UNIDENTIFIED FEMALE: We have these items coming in this week. This is what everyone needs to be shouting about.
UNIDENTIFIED MALE: What they're missing out on.
UNIDENTIFIED FEMALE: They are totally what you would never expect anyone to go out with and it looks unbelievable.
UNIDENTIFIED FEMALE: We got these-
UNIDENTIFIED MALE: And what products deserve more attention.
UNIDENTIFIED FEMALE: We've got the dress, we've got coats, we've got-
UNIDENTIFIED MALE: It is this immediacy they hope will bring customers to their web site.
UNIDENTIFIED FEMALE: Everybody knowing their style-
UNIDENTIFIED MALE: Lauren is My-Wardrobe's head of PR. And she's in charge of keeping a close eye on what the industry has been talking about.
UNIDENTIFIED FEMALE: There is a cape. The cape is now everywhere. I went through and made sure that segment was tied (ph) to the cape. That kind of thing, the last time, in the creative had been saying that sometimes the terms were a little bit different. So it could have the shoe was tan, but it could have been named camel.
CURRAN: Lee Ann, could you speak to the product writers, then, and make sure that the terms are consistent?
UNIDENTIFIED FEMALE: Yes.
UNIDENTIFIED MALE: Sarah says that her priority is to inspire an to empower her team. She believes this is the key to winning.
CURRAN: As we are growing we are getting to that next level in turn over, that next level of in terms of even awareness out there. It is really important that the team is totally motivated.
UNIDENTIFIED MALE: Next week, on "The Boss":
Sarah tells us why it wise to know your business inside out.
And in Hong Kong Michael Wu motivates his staff with a little reward.
FOSTER: There you are, there is "The Boss".
And Prime Minister George Papandreou in Greece is turning things around in his country. And it is good news if you are in Ireland, at the moment. We'll explain, next.
FOSTER: Welcome back, I'm Max Foster. You are watching QUEST MEANS BUSINESS. Let's take a look at the headlines this hour.
FOSTER: Welcome back.
I'm Max Foster.
You are watching QUEST MEANS BUSINESS.
Let's take a look at the headlines this hour.
South Korea's president is calling for enormous retaliation after his country's troops were attacked by the North along their disputed sea border. Diplomats are condemning the violence and urging restraint. Two South Korean marines were killed in the fighting. There were no reports of North Korean casualties.
The North accuses the South of provoking the violence by launching maritime military drills.
Bleak and gray, that's how one official describes the situation at a New Zealand coal mine, where 29 miners have been missing since an explosion on Friday. A video shows a powerful blast and officials say there's a real risk of a second one. They say it's still too dangerous for rescuers to go underground. One robot sent into the mine has broken down, but another one is on the scene.
Britain's royal family has announced when and where Prince William will marry Kate Middleton. Their wedding is set for April the 29th at Westminster Abby. That's also where Britain crowns its kings and queens. Prime Minister David Cameron says it will be a national holiday.
Let's return now to our top story, the debt crisis in Europe that just won't go away. It seems that even billions of dollars aren't enough to stop the bleeding. As soon as one country is safe, investors look to weak points everywhere else.
Now that Greece and Ireland have accepted help, attention is turning to Spain, Portugal and Italy, the so-called peripheral countries in red there. Now, things are looking up for Greece, which is still the only country who has actually received any money. Officials from the IMF, the European Central Bank and the E.U. are checking up on things in Athens. They say Greece is making progress, particularly at getting the deficit down, and it's even on track to start growing again as soon as next year.
Poul Thomsen is the head of the IMF mission to Greece.
(BEGIN VIDEO CLIP)
POUL THOMSEN, IMF MISSION CHIEF FOR GREECE: We could start providing the rest of -- of the financing on -- on the facilities and allow a longer repayment period. We have that option. We -- we -- there is -- there is the possibility of doing that. So providing the rest of -- of the financing with a longer repayment plan.
Another option is, of course, to have -- to give a -- follow-up loans that when this falls through, you will just give a -- another loan. There -- there are a number of options. At this stage, we are -- we -- we are confident that Greece will be able to return to the market.
(END VIDEO CLIP)
FOSTER: Well, the focus now is shifting to Portugal. A general strike is due to take place there on Wednesday.
Our Al Goodman is in Lisbon and he joins us now -- Al, are people feeling vulnerable there?
AL GOODMAN, CNN CORRESPONDENT: Hi, Max.
Well, we've just arrived here in Central Lisbon. And on the drive in from Spain, we talked to many people at various places we stopped. Everyone -- to a person -- very concerned about the situation in Portugal, not to mention Ireland.
Now, in recent hours, we've heard from the Portuguese prime minister from the E.C. Commission and from the OECD, insisting, these leaders, that Portugal is not like Ireland and is in a better situation.
But yet, as you mentioned, there is a general strike here to protest against the government's austerity measures, that includes a -- a freeze on many pensions, a freeze on many government workers' salaries, a cut in public investment, a rise in the VAT tax. And yet all of these measures have not saved Portugal. At this time, its budget deficit is going up, unlike in Spain, where it is going down. And so as the markets focus in on Portugal, there's a lot of concern, will the unions and will this -- the general strike force this government, already fighting with its opposition, to step back and cause the situation to get, perhaps, even worse -- Max.
FOSTER: is there a sense of depression there, because you would have thought that, actually, Ireland being bailed out was a positive sign for Portugal and should instill some confidence in the economy there.
GOODMAN: Indeed. But, for instance, as we stopped, we saw the headlines of two major Portuguese newspapers that say that bailout of Ireland is going to cost every Portuguese citizen, per capita, about 140 euros, upwards of $200 U.S. So that is hitting home.
And because of the instability here, the difference between Portugal - - you see in Ireland, it was the banks that had the huge debt. In Portugal, it's the government. The public deficit was the huge debt. And they can't seem to rein in spending. That's according to the latest figures.
So whereas in Spain, where the markets are also looking at the much bigger economy of Spain, Spain larger than Ireland, Greece and Portugal put together in terms of its economy, at least they have been getting the budget deficit down. In Portugal, it's going up slightly.
So you saw that in the -- in the close of the markets this day, Portugal down, Spain down. A lot of nervousness here on the Iberian Peninsula -- Max.
FOSTER: Al, thank you very much, indeed, for that.
Well, beleaguered by bailouts, political strain and financial instability, the single European currency is struggling, let's face it, to keep it together. German Chancellor Angela Merkel is now saying the euro is in an exceptionally serious situation and unflattering ends for the euro are being outlined in the media across the continent.
For more, let's speak to Vicky Pryce.
She's senior managing director at FTI Consulting.
This is a very big test for the euro, isn't it?
VICKY PRYCE, SENIOR MANAGING DIRECTOR, FTI CONSULTING: Well, I'm afraid it is. And what the crisis has shown is that, in fact, bringing all these countries together which have very different economies and which have been hit disproportionately by the crisis. So it's a very, very different sort of reaction to what's been going on in terms of the recession and the reaction to it and has shown, under the euro, which has been trying to unify those countries, it's simply not able to do that.
FOSTER: So it's failed already?
PRYCE: Well, you could argue that it has. But, of course, what has been going on is that there's been a huge attempt now to have a greater unification across Europe. And in reality, what is going on in terms of the fiscal consolidation that's taking place and the rescues that are actually happening, is that the center -- which I think we could call Germany being the center -- is exercising a lot control on what is happening on the fiscal side in the smaller countries.
FOSTER: It's basically saying do it the German way and it's not appropriate for those countries.
PRYCE: Well, absolutely. I mean you could argue that you could never have had sort of the euro being a success unless you have fiscal unity, as well, not just monetary union, but also fiscal union. And, actually, we are slowly moving in that direction.
The real question is whether the countries that are suffering most because they have to change their economies very substantially and have to become more competitive, that the pain in the process of getting there is so great, that politics are going to intervene and they're simply not going to be able to do this.
And so if the pain is so large that there is a real revolt against sort of that control from the center, then I think the euro will be doomed.
FOSTER: And if Ireland needs to be bailed out and then we start looking toward Spain and possibly even Italy, at what point along that line does the euro fail because the system can't afford it?
PRYCE: Well, the system can, perhaps, afford it. I think when we get to Spain...
FOSTER: (INAUDIBLE) Spain...
PRYCE: -- when we get to Spain, it's a bit of a problem. But, of course, the problems in Spain are slightly different. I mean Spain has had this huge property and...
PRYCE: -- like Ireland.
FOSTER: -- Portugal...
PRYCE: -- but compared to the others, it will be fine.
FOSTER: If it bails out Portugal, then we look to Spain, after that Spain, then it's over.
PRYCE: Well, I think -- I think we're getting into really bad territory at that stage.
FOSTER: OK, Vicky Pryce, thank you very much, indeed.
Now, the clampdown on insider trading widens in the U.S. We'll have an update on that, as well, for you, after this break.
FOSTER: Now the U.S. financial community is on edge. The fear is that federal officials will raid more firms in what appears to be a large scale insider trading investigation.
Felicia Taylor has the story for us.
FELICIA TAYLOR, CNN CORRESPONDENT: Well, the big question, of course, is, you know, what actually constitutes insider trading?
Did anybody violate Reg FD, which is full disclosure. That's what's the uncertainty and the problem here in this -- in this investigation. No one knows how many firms are involved; ultimately, how many are going to be targeted in the investigation. Word on the Street right now, though, is that it's pretty far-reaching and pretty far damning.
No charges have been filed as of yet. But take note of the way that investigators are going about this. It's in a very public manner.
They could have issued subpoenas and gone about this a little bit more quietly, but over the last couple of days, instead, they're going into various offices, carrying out files. That's a clear signal being sent that authorities are out there. They have raided three U.S. hedge funds, so far, on Monday, to gather evidence for the investigation.
Documents were openly seized and officials have told "The New York Times" that arrests could be made over the next few weeks, certainly before the end of the year.
Many would say that federal authorities think insider trading is, you know, is a growing problem. We talk about this all the time. And it's kind of openly acknowledged that, you know, there probably is some violation going on, but yet it's kind of the normal course of business.
And, again, that question is, what is the interpretation of insider trading?
That's what's not clear here. The fear is that the federal officials might seek to criminalize or certainly clamp down on what are now common industry practices. For example, in recent years, investment firms have hired industry experts and subscribed to their products that will sort of help them piece together information about other industries, such as sales trends or whether firms might be ripe for takeovers, things like that.
No one disputes that doing detective work is permissible. This is allowable under the law.
But have some experts working for Wall Street gone a little too far?
Has Wall Street profited from information that's not public knowledge?
That's the key.
(BEGIN VIDEO CLIP)
JACOB FRENKEL, FORMER SEC ATTORNEY: It is entirely appropriate for hedge funds, for market professionals, to use those senior professionals and those experts who have unique knowledge of the industries, unique knowledge, even, of the corporations to assist them in making their investment decisions.
The question really is going to be have the hedge funds or the information providers crossed the line because somebody asked us material, non-public information of these issuers.
(END VIDEO CLIP)
TAYLOR: So one interesting development in this probe is a case, sort of a -- like a six degrees of separation. Two of the hedge funds targeted in Monday's raid, Level Global Investors and Diamondback Capital, both run executives who used to work at the same hedge firm, that's SAC Capital Advisors, run by Steve Cohen.
"The New York Times" says a defendant in a previous insider trading case -- that was with Gallant Group Hedge Fund -- also had ties to SAC. He was -- that's, like I said, run by billionaire Steve Cohen and he's already given information about that.
Experts say it's still uncertain whether this has any bearing on the case as of yet. But, again, you know, a very interesting coincidence that you've got ties back to SAC Capital. But what they do say is that the government is mostly certainly probing the connections and the communications between the firms, whether improper information was leaked through any kind of this investment network.
This case could certainly get interesting over the next few weeks until the end of the year and probably through into 2001 -- Max.
FOSTER: OK, well, let's see how that insider trading probe, among several other factors around the world, is shaking the markets today.
Carter Evans is at the New York Stock Exchange.
A lot for you to take in today -- Carter.
CARTER EVANS, CNN CORRESPONDENT: Yes, well, Max, you know, I mean add that insider trading probe just right onto the pile. The clash in Korea really caused this sell-off today, but we've got the nagging concerns of Ireland. We've got concerns about Portugal, concerns about Spain, concerns about Europe in general, the debt crisis. And even more concerns about where it may spread next. Investors are also concerned about the insider trading probe, but we also got a reading on existing home sales today in October. And it's OK. It's certainly not helping the market. And sales dipped a little more than 2 percent.
But we had huge growth the month before. So that was expected. But it's basically the weak economy and flaws in the foreclosure process. It's scaring buyers away. I mean, basically, it's just kind of a trifecta of scary news. We did get that good news about GDP today. But that's not moving the market. I mean it's going to take a whole lot more than just some decent new about gross domestic product to pull us out of this hole that we're in today.
We just got the minutes from the Fed's most recent meeting, as well. And central bankers say they expect our gross domestic product in 2011 to grow to around 3.3 percent. That is also down from its previous estimate of about 3.9 percent.
There's just nothing really good coming out today Max, that's giving investors a "buy" signal.
FOSTER: OK, Carter, thank you very much, indeed.
Hope it's better tomorrow.
Now just in from Boston, where a cargo building at Logan International Airport had been evacuated. Now an all clear has been announced, so you know. And word from Delta Airlines that this incident began as a TSA exercise.
There's some good news on that front.
Let's find out what's going on in terms of the rest of the travel this week. And a very big, big weekend, of course, in the U.S., where Thanksgiving is nearly upon us -- Jenny.
JENNY HARRISON, CNN METEOROLOGIST: Nearly upon us, Max, yes.
Wednesday, the biggest travel day across the U.S. And my goodness, the weather is always -- knows exactly when to really kick it up a notch.
We've been looking at the snow piling in to the west over the last few days and at the same time, a line of thunderstorms working through the Midwest. So this trend will continue into Wednesday, the busiest day. Some very heavy snow. Some strong winds in the forecast, as well. So developing into blizzard conditions across the northern Four Corners region.
And just in case you're wondering, there don't have to be some actual specifics in place for a blizzard. Basically, the wind, of course, critical, over 66 -- 56 kilometers an hour or stronger than that. And, obviously, with that blowing with falling snow, winds like that, it reduces the visibility really drastically. So that is what we mean by blizzard conditions.
But it's pretty good news if you're a skier. I think the skiers are all quite excited. A long weekend coming up and some pretty good snow out there. Canada is not celebrating Thanksgiving, of course. But even so, the west coast of Canada has seen some pretty good snowfall so far. Conditions on the slopes there excellent. And then also Vail in Colorado. Some more snow heading in that way on Monday.
And, as I say, very excellent conditions on at the ski slopes, as well. And I would press on to the next graphic, if I could. So I'm going to step out of the shot for a moment and I'm going to see if it will work this way.
So there, as I say, is -- but, no, nothing is going to work, Max.
So, unfortunately, I can't move on to all my graphics to tell you about what's going on in the U.S. and Europe.
But maybe we could take a break or something and I don't know if I can come back. But I can't do it with just this graphic -- Max.
FOSTER: Well, at least we know what...
FOSTER: (INAUDIBLE) for those holiday makers going that way.
Jenny, good to have you on the program.
Thank you very much, indeed.
Now, a giant returns to the skies. Qantas says some of its A380s will take to the air on Saturday. We'll give you an update on the airline's plan.
FOSTER: Well, they've undergone inspection and been subject to scrutiny. Now Qantas is bringing some of its A380s back into action.
(BEGIN VIDEO CLIP)
ALAN JOYCE, CEO, QANTAS: After those extensive checks with Airbus and Rolls-Royce, we're completely comfortable now with the operation of the aircraft. The aircraft have been grounded now for 19 days and we believe it's appropriate that we start the services this week.
(END VIDEO CLIP)
FOSTER: And if you were to fly with the CEO, he will be back on board the first flight this Saturday, trying to lend his confidence in the safety of the aircraft, all the way from Sydney to London, but A380s are still grounded on U.S. West Coast routes. So they're not all up and running yet. The European Aviation Safety Agency has changed some of the tests that engines need to undergo before flight, dropping blade checks and honing in on oil tubes now.
These are all interim measures as a final report from the Australian Transport Safety Bureau is still expected. And that's going to be a big thing that we're waiting for.
Now, Rolls-Royce, the maker of the engine, may have to pay a large settlement to Qantas. The company's CEO says he would talk over a range of issues with Rolls-Royce, but only after a key concern -- getting the planes off the tarmac -- was fully addressed.
So that's the story about Qantas right now.
And sticking with airline safety, Ayesha Durgahee, one of this show's regular reporters -- you know her well -- recently won an award for her investigative piece on Aerotoxic Syndrome, a silent threat to cabin crews.
This is her report.
AYESHA DURGAHEE, CNN CORRESPONDENT (voice-over): For 30 years, Captain John Hoyte had a dream career as an airline pilot. Then, in 2004, he refused to fly.
JOHN HOYTE, FORMER PILOT: I thought I had Alzheimer's. I started to lose my speech. I couldn't relate to other people. I had all sorts of other issues -- brain fog, word floundering, memory. And I thought what is going on, if I fly today, I'm going to kill myself, kill my passengers. This is not good. I've got to stop. And that was in 2004. I actually walked off an aircraft.
DURGAHEE: Soon, Hoyte's flying career was over. He was grounded. Diagnosis -- chronic stress.
Then he was contacted by another grounded pilot, Tristan Lorene (ph), who asked Hoyte to volunteer for a blood test.
The results for Hoyte and 25 other grounded pilots showed the presence of tricresyl phosphate, or TCP. TCP is used on aircraft as an oil additive to prevent engine wear. It's chemically similar to a pesticide.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: So please now fasten your seatbelt and enjoy your flight today with Toxic Airlines.
(END VIDEO CLIP)
DURGAHEE: Lorene (ph) and Susan Michaelis, also a grounded pilot, set out to publicize a film of what they saw as the link between sick flight crews and cabin air. Their belief -- air contaminated by an engine made them sick.
Every aircraft gets fresh air into the cabin the same way -- it's drawn in through the engine and fed through the plane's air conditioning system. Lorene (ph) and Michaelis say the air can be contaminated by leaking oil to form a fine, sometimes toxic mist. Michaelis says she has documented dozens of incidents and the effects on flight crews.
SUSAN MICHAELIS AUTHOR, "AVIATION CONTAMINATED AIR REFERENCE MANUAL": The information and the evidence is there. The admissions from the airline industry that oil leaks and that it causes at least short-term symptoms is all there. What they don't accept is the long-term symptoms.
DURGAHEE: Peter Julu is the doctor who diagnosed John Hoyte with acute traumatic brain injury. He says repeated exposure may be the problem.
DR. PETER JULU, NEUROPHYSIOLOGIST, BREAKSPEAR HOSPITAL: All the pilots that I've seen are very senior pilots. They are all captains and they've been flying for over 10 years. So that is one -- one thing that would tell you straightaway that this is very concentrated and repetitive, a long-term effect.
DURGAHEE: But how often does cabin air get contaminated?
Britain's Civil Aviation Authority declined an interview, saying it counted just 52 aircraft fume events in the first seven months of 2009. The CAA said investigations have concluded that there was no evidence that cabin air in general, or following fume events, causes ill health in air crews.
The U.K. Department of Transport, in 2006, commissioned an independent study by Cranford University to monitor and analyze cabin air aboard BAe 146s, Boeing 757s and Airbus A319s. In all, 100 flights will be monitored. Study results won't be known until next summer. Five European airlines are allowing in flight monitoring, but no U.S. carriers are participating.
Dr. Mackenzie-Ross, a neuropsychologist who's been testing pilots, fears that the study is just too small.
DR. SARAH MACKENZIE-ROSS, UNIVERSITY COLLEGE, LONDON: One of the difficulties we've got is a contaminated air event is, by differentiation, one that shouldn't happen. So basically, you're waiting for a plane to have some sort of problem. So it's a very difficult thing to really look into. And there's a chance that you will -- however much money you spend on that and however many planes you survey, miss a contaminated air event.
DURGAHEE: What's been easier to document is the presence of TCP in the blood of active pilots.
Professor Clement Furlong at the University of Washington in Seattle developed the blood test. He says sometimes you can't see a fume event, but you can often smell it.
CLEMENT FURLONG, PROFESSOR, UNIVERSITY OF WASHINGTON: A vomit smell, a wet dog smell. And then the symptoms they might experience would be headache, nausea, dizziness, shaking, tingling.
DURGAHEE: The U.S. Federal Aviation Administration told CNN that the concerns raised by crew members about fume events are reasonable and are being investigated. The FAA believes that the cabin environment in the vast majority of commercial flights is safe.
(on camera): For its part, the International Air Transport Association, a trade group with more than 230 airlines, told CNN that they are aware of some very isolated cases where bleed air has been questioned.
(voice-over): Airbus says it has very stringent cabin air purity requirements and aircraft are designed to avoid air contamination in normal operating conditions. And in an e-mail, Boeing said that contaminant levels are generally low and that health and safety standards are met.
But Boeing is redesigning air handling in the company's new Dreamliner 787 to eliminate any engine bleed air.
Ayesha Durgahee, CNN, London.
(END VIDEO TAPE)
FOSTER: Well, Cranford University is still conducting its research on airline cabin air quality. And the results still haven't been published. But when they are, Ayesha will no doubt update us.
Ayesha there winning the Business Travel News Journalist of the Year for the 2010 Business Travel Journalism Award.
Congratulations to Ayesha, of course.
We're going to go to the U.S. now and see how those major markets are doing. And they are lower. Mounting tensions on the Korean Peninsula a big concern there; also debt fears in Europe -- what's going to go on in Ireland?
Will they get the budget through?
What's going to happen with the leadership there?
And will there be an impact on Portugal, Spain, even Italy?
All concerns in Wall Street right now. The Dow is down more than 1 percent, as you can see. And with most of the components trading lower, PC maker, Hewlett Packard, did manage to stay ahead after the new CEO raised expectations for 2011. So a rare bright spot on Wall Street today.
Just a reminder of how the euro markets ended the day, it was a pretty bleak picture, too. Fears that the crisis could spread from Ireland, plus worries about North Korea, as well. Banks hit very hard. The Bank of Ireland down 23 percent. Allied Irish down 19 percent.
A reminder, you can contact the show or Richard. You can go via Facebook or e-mail, CNN.com/quest or Twitter @richardquest, of course. Do let us know your thoughts on the program.
Now it's pretty useless as a computer, but it's fetched a massive price...
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: At 60,000 pounds, 60,000, 65,000, 70,000, 75,000, 80,000, 85,000...
(END VIDEO CLIP)
FOSTER: It's an auction success for one of Apple's earliest creations, but much bigger.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: One hundred thousand pounds (INAUDIBLE), 100,000.
(END VIDEO CLIP)
FOSTER: Well, it's the most expensive Apple computer to date and it's not even powerful enough, would you believe, to play Pac-Man?
It's Apple 1 sold at Christie's Auction House in London today, for a whopping $212,000. It was bought by a private Italian collector. Only 200 of the machines were ever made. And they were knocked up in a garage in the 1970s by Apple founders Steve Jobs and Steve Wozniak. It was still pretty pricey 34 years ago, selling at $666. That's the equivalent of nearly $3,000 in today's money and you had to build your own case and keyboard for the thing, as well.
Look at that.
That is QUEST MEANS BUSINESS.
I'm Max Foster in London.
Thank you very much, indeed, for watching.
"WORLD ONE" starts right now.