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QUEST MEANS BUSINESS

European Commission President Says He Is Very Pleased That All 27 Member States Have Agreed To Fund A Permanent Stability Program; Global Business Risks; China's Pakistan Proposals; The Brain Drain; Banking in Africa

Aired December 17, 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, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: A deal is done. Europe plans to rewrite the rules to save the euro.

Finally some good news for Madoff's victims. As a $7-billion promise makes U.S. corporate history.

And walking the business tightrope. We'll tell you what to watch out for in 2011.

I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.

Hello to you.

Europe's leaders are hailing their new permanent crisis fund saying it will safeguard the euro. But even as the ink dries on the agreement we are seeing fresh signs of distress in the marketplace with Ireland taking another knock from the credit ratings agencies. A long term solution, this maybe, but in the short-term the question is whether Europe is doing enough to stem the crisis.

The new permanent crisis mechanism means struggling nations will be able to get help after 2013. That date was when the original temporary trillion-dollar bailout fund was due to expire. Europe's leaders have agreed to tweak the Lisbon treaty. That is no easy feat, requiring the agreement of all 27 members. Leaders did not add any more money to the pot for now. The financial safety net for Europe is still worth around a trillion dollars. And some heads of government want to make sure the EU itself is extra careful with its money. The leaders of France, Germany and the U.K. want to put future EU spending plans on ice. They are pushing for a virtual freeze of the EU budget until 2020.

Earlier I spoke to Jose Manuel Barroso, he is president of the European Commission and I asked him whether he was pleased about the new crisis mechanism.

(BEGIN VIDEOTAPE)

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: It was a very important decision. For the first time now there is a possibility for a permanent mechanism for the stability of the euro area. And not only we have agreed on the main features of this permanent mechanism for financial stability, we also have agreed on the necessary limited revision of the treaty to allow for that mechanism.

FOSTER: As I understand it, the wording that will go into the treaty includes this sentence: "The granting of any required financial assistance under the mechanism will be made subject to strict conditionality." What does that conditionality refer to?

BARROSO: It means that a country may receive some support, financial support, in the form of loans or guarantees, but for that it has to respect some very clear commitments in terms of budgetary policy or some kind of reforms. Of course, this has to be decided on a case by case basis.

FOSTER: And the treaty is being adjusted. That means that national governments will have to approve it still, won't it? So we are some way off this becoming law?

BARROSO: All the governments have already approved it, now it is important to have the ratification through the parliaments, according to the national procedures. But the 27 governments have accepted this kind of very limited, surgical reform of the treaty to make it possible to have this kind of permanent mechanism for the stability, financial stability in the euro area.

FOSTER: Separately leaders have also agreed to a budget freeze, haven't they?

BARROSO: To a budget freeze? No, there is no decision at all about that. That was just speculation and some rumors. But in fact the decision regarding the future budget is a decision inviting the commission to present its proposals. And we are going to come with our proposals in June of 2011. So we are preparing proposals and at the end of those proposals there will be afterward a discussion.

FOSTER: You know the leaders of France, Britain, and Germany have agreed between themselves to have effectively a real term freeze, though, between 2014 and 2020. And they'll decide this, won't they?

BARROSO: I don't know what our decision is, in fact, the decisions of the European Union are taken by the 27 countries based on the proposals of the commission. So, we cannot yet say there is a decision before the proposal is made. They may have some ideas. Of course, it is important that each country has its own idea. But in fact, negotiations have not yet started (ph), because we need the proposal to start negotiations.

FOSTER: OK, so what would you make of a freeze? Because there are certain countries like Poland that wouldn't approve of it at all, would they?

BARROSO: You know, it think it is not wise to start discussing the budget in terms of freeze or increase, or decrease. It is not wise. But we have to see in a realistic and rational and reasonable manner is where the European funding brings added value. When we can be increasing our competitiveness, making our economy more fit for this globalization age, and what is the contribution a European budget can make to it. So this is the matters where we are now focusing our attention. Afterwards we have to discuss what is the profit level of expenditure or investment. Having of course, to take in consideration the current financial constraints and the economic circumstances.

FOSTER: Is it helpful that the three most powerful leaders in the area are making decisions on their own?

BARROSO: Of course, it is not helpful if this was the case. I don't know exactly what is the-these decisions that you are referring to. But if this is the case it is decisions that only bind the countries that are responsible for that. We are 27 countries in the European Union. All have the same dignity. All have the same (UNINTELLIGIBLE) system, this is very important. And I'm sure that some have different views. But as it happened always in the past, there will be a negotiation. I have been in several negotiations as prime minister of my country and a foreign minister, and also already as president of the commission. So, I can tell from experience that the out come is never exactly what some people anticipate. It is a very complex process and we have to take in mind that what we are seeing now is what I sometimes call the ritual dances of the different tribes, before the real party begins.

(END VIDEOTAPE)

FOSTER: The president of the European Commission today. Well, European leaders are on their way home from Brussels now, fully agreed on at least a financial safety net, in principle. Our Fred Pleitgen is in snowy Brussels tonight. I asked him if what we have seen over the past 24 hours really is European unity at its best.

(BEGIN VIDEO CLIP)

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, it is probably not a true picture. I think in the whole scheme of things, if you look at this EU summit, there is really one country that go most of what it wanted to get and that was Germany, which, of course, right now is also in the strongest position within the European Union.

The Germans said from the beginning they wanted several things from this, what they call permanent crisis mechanism. They said they wanted it to be a matter of last resort. That this would only be tapped into if in fact the whole of the Euro Zone stability were called into question or was in danger. That is certainly something that they got. They said they wanted massive strings attached to any bailout money that would flow to any of the member states. That is another thing that the Germans got. The Germans were the first ones to float the idea of changing the Lisbon treaty to do all that. They got what they wanted in that respect as well.

So certainly this does reflect, in many ways, the strength of the German economy within the Euro Zone and also, of course, the strength of Germany's financial discipline that it has been having in the past couple of years. So certainly you can say that while there was some descent that Germany probably did win out on most of the things that it wanted to do, Max.

FOSTER: And Germany needed that role or that sort of PR for its own political reasons, didn't it? So Merkel could go back to the Germans and say, actually, you know, it is not so bad. We got what we wanted so we can stay in the euro and it is a good thing to be there.

PLEITGEN: Yes, you know, she was in a very difficult role. Because on the one hand there are a lot of Germans right now who are becoming more and more euro skeptical I would say. There are a lot of Germans that believe their country is paying way too much into the European Union and is not getting enough out of the European Union.

On the other hand, of course, you do also have the opposition here in Germany, which has said that Angela Merkel is, quote, "un-European". That she is not doing enough to prop up Europe. The Germans have for a very long time and have always really seen the European Union as much as a political entity as they have an economic entity. So certainly this is something that they also take very seriously from a political standpoint, and of course, from the standpoint of keeping the peace in Europe. So she has been taking a lot of shots from either side. And she reflected that throughout the day in her press conference, when she said that, yes, on the one hand there is no way that we are going to let the euro slide. But on the other hand we are going to make it as tough as possible to actually tap into that bailout money to make sure that nations that are in trouble implement their own austerity measures before they try and get money from this European bailout fund.

(BEGIN VIDEO CLIP)

ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): The size of the fund has to be large enough to make it credible. And the same criteria will apply to the permanent crisis mechanism as with all other measures. We will do whatever it takes to ensure the stability of the euro. It is very hard to say today how large the crisis fund will have to be, but it must be sufficient.

(END VIDEO CLIP)

FOSTER: And in terms of the mechanism and how it works, not complete clarity there, yet. But do you think this is enough to convince investors that actually the European Union is there to bailout countries if there are problems, even if there isn't a bailout fund, as we have got right now?

PLEITGEN: You know the interesting thing about what was said after the summit, and was said by all of these leaders, is that they never put a number on how big they actually want this fund to be, when it comes into effect. Of course, we know that right now the temporary fund for bailing out countries is about 750 billion euros, or $1.1 trillion, which in part is EU money. On the other part, of course, is IMF money. The Germans have always been very reluctant to put any money on top of that. So far no one has been willing to come out and say this is how big this fund is going to be. All they keep saying is we want this fund to be big enough to actually be credible.

However, we do also have to say that it is still two years before this is going to get implemented. This is not going to start until the year 2013, so we'll see how things evolve until then. But yes, you are absolutely right, so far they have still bee quite vague on how they want this mechanism to actually look like. And therefore it is doubtful whether or not this is going to calm down the skeptics that, of course, are out there, Max.

(END VIDEOTAPE)

FOSTER: Fred, who was in Berlin, in fact, not Brussels.

Now it will be a long time before Irish eyes are smile again. The IMF and Moody's cast further doubt on Ireland's debt stricken economy and they question its ability to pay that last month's massive bailout; more on that after the break.

(COMMERCIAL BREAK)

FOSTER: Now against a drip, drip, drip of bad news Ireland's financial future has been thrown into further doubt today, would you believe? Moody's, the credit rating agency, has slashed Ireland's credit rating by five notches. It is has been cut from AA2 to BAA1. Moody's also gives Ireland a negative outlook citing uncertainties over the economy and public finances. It is warning of further downgrades as well.

Now to counter this, the European Central Bank and the Bank of England announced a temporary swap agreement today. Described as precautionary, the Bank of England will provide the ECB with up to $15.5 billion. The measure will allow the ECB to provide sterling liquidity to a third party, which is most likely Ireland, of course.

This was the reaction from the prime minister in Ireland. Brian Cowen calls Moody's downgrade "disappointing" and a bit "excessive". He is especially unhappy with the negative outlook. In the meantime the IMF says that Ireland faces significant risks that could affect its ability to pay $113 billion in rescue bailout package. And the IMF says Ireland won't be able to cut its budget deficit to 3 percent of GDP, by 2015. CNN's Jim Boulden has been following this all along, from Dublin, as well.

JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Yes.

FOSTER: You are in the U.K. now, but what do you make looking back at Dublin today. It is looking grim, isn't it? We didn't think it was going to get any worse?

BOULDEN: No, I mean we-Moody's had already said this was going to come. But the downgrade itself, but it seemed to be a bit excessive to some people, using Mr. Cowen's term for some. You know it was excessive, or more than people had expected. But it is not a surprise that they are being downgraded. But you add that on top of what the IMF-I mean, in one hand they are giving money to Ireland. On the other hand they are saying Ireland can't pay it back, it is extraordinary. And if this had been leaked in late November, when apparently it might have been written, I mean this would have caused mayhem in the markets.

So, it is interesting that it is coming just before Christmas and it there hasn't been any reaction, really, from the markets. So it-a lot of analysts have been saying in the past couple of weeks, we are going to have a lull period here. You know, Portugal didn't blow up. So we had this lull period. And then what happens after Christmas and the New Year's? Everything could start again. So now we should take this lull period as being, well, every thing is over. But to say that Ireland won't be able to pay it back. Some of the things people are saying today, you know they are going cut their deficit by 20 percent over this four year plan.

And that may not be enough. I mean (INAUDIBLE). Could you imagine trying to do any more than that. You're going to have people in the streets. And that is what is amazing. If you say Ireland has to do more than already doing-what more can this government do? Well, the other problem is it will be a new government in, mostly likely after the election. And they are going to possibly-possibly have to give back some things for the people, because-who vote them in. Some treats. They do that and it makes the deficit worse. So, how can they do both these things and not be able to pay back the IMF at the same time?

FOSTER: OK, and in terms of the bond markets. You said there wasn't a huge amount of reaction on the markets. But in terms of bonds it is getting more and more desperate for Ireland, isn't it?

BOULDEN: Well, they don't have to pay these yields, of course, because they've got the debt. They have the loan from the IMF and from EU. So you can say, yes, it is getting worse and worse and worse. But it won't matter until they have to go back to the market sometime next year. In fact, if they have to.

So that is, yes, if you see that number, you think, wow. But it is not like Portugal or Spain have to pay. And they are continuing to have to, as we saw earlier this week with Spain having to pay an enormous amount for their 15 year bond.

FOSTER: So, briefly, when we were talking about it before we were saying this is the bottom of it. The bailout marks the beginning of an upturn. Actually, it could get worse for Ireland?

BOULDEN: Oh, it is hard to say. It really will depend I think on the election and what the new government does.

FOSTER: Jim, thank you very much indeed.

Well, those worries fail to spook the Irish stock market meanwhile. It closed 7.9 percent lower. Or just 0.21 of 1 percent-sorry 7.9 points lower, or just 0.2 of 1 percent. The biggest losers were the banks. The financials, Allied Irish, was down 3.3 percent. Irish Life and Permanent lost, 8.75 percent, and Bank of Ireland lost almost 14 percent. They certainly lost out.

The banks are taking a huge hit here, too, as investors worry about possible exposure to Ireland. Lloyd's banking group shed 3.5 percent, RBS lost 5.7 percent. Credit Agrico lost 2.5 percent. In Paris none of the gloom in Europe seems to be worrying Germans executives, though. Business confidence hit a record in December, according to a survey by Munich's IFO Institute. It seems exporters are benefiting from a weak euro. In which case there is more good news this session, because we see the euro sliding, because of the knock Ireland's credit rating. Right now it is trailing at around $1.31 to the euro.

Now, debating is done, the lobbying can be left behind. Now, all that is needed to finalize the biggest stimulus plan of all time, is Barack Obama's signature. We'll be live in Washington after the break.

(COMMERCIAL BREAK)

FOSTER: U.S. President Barack Obama is about to sign an $858 billion compromise tax bill. This is a story we have been tracking all week, as the bill has been debated around Congress. But in the next two hours it is going to be signed and the building you are watching live right now. We are expecting Mr. Obama to make a statement from the White House after he signs the bill. CNN will bring you the latest developments as they happen.

It has been quite a journey to get this far. Congressional action was necessary because Bush-era tax cuts were set to expire on January 1. Now, Republicans wanted those cuts to be extended for all Americans, including the rich. And they got their wish. Democrats had wanted to maintain tax cuts for the middle class and let rates for wealthy Americans go up. Instead they compromised in return for giving the rich a tax break they included an additional tax break and extensions for unemployment benefits in the bill, which many Republicans would traditionally oppose.

Now the total price tag of the bill? Well, it is $858 billion and it is being called the biggest economic stimulus measure in history. Compare that to the $700 billion TARP program, the $787 billion economic stimulus plan. And China is at $586 billion stimulus plan. It is huge.

Let's go to Washington now. Our Senior Congressional Correspondent Dana Bash is there for us.

Dana, it seems as though no one is actually entirely happy with this bill, so how on earth did it get through the legal process so quickly?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: You are absolutely right, nobody is entirely happy, including President Obama, who was the one who brokered this, including Republicans who-the Republican leader in the Senate, in particular, who helped broker this. I guess the answer to that question is because this was, like it or not, good old fashion compromise. And that is how it got through. Because everybody is not happy with some of it, maybe it means that it is OK, so to speak.

But let me actually play for you a sound bite from the incoming speaker, the Republican Speaker to be, John Boehner, who was actually keeping a pretty low profile on this. But he was asked about this earlier today, about why he, in particular decided to vote for it. Take a listen.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER,(R) INCOMING SPEAKER OF THE HOUSE: Our first goal was to stop the big tax hike that was coming on January 1. I made it clear going back over the summer, that stopping all of the tax hikes was one of our main priorities for this lame-duck session. And while there was an agreement, considering that Democrats control the House, the Senate-and the White House, I thought on balance it was worthy of my vote. And I voted for it.

(END VIDEO CLIP)

BASH: And you know in the Senate the final vote was just huge in terms of its bi-partisan vote; 81 senators voted for it, which we have not seen, at all, since President Obama has been here, on any piece of legislation, much less something major like this tax cut legislation.

And last night in the Senate, it was-it was actually quite remarkable how evenly split it was among the parties; 139 Democrats, 138 Republicans voted for it.

FOSTER: And this is being paid for, effectively, by debt, because there is no cash for it. So how are they justifying the cost of this huge program?

BASH: Really, really interesting. The answers to those questions fall on party and philosophical lines. Meaning Republicans answer that question by saying, well, they are not happy about the fact that the unemployment benefits, for example are not paid for. And they recognize from their perspective that does add to the debt and deficit.

But on the tax cut issue, which of course costs the most in this package, Republicans argue that it is sort of pay it forward. They argue that their economic philosophy means that tax cuts will help the economy. On the Democratic side, they don't believe that. But it is interesting to hear Democrats, now, yell and scream about the deficit, many of them who did not vote for this, saying that it is just appalling that you are adding this much money to the deficit. Again, these are the Democrats who voted for many of the large packages that you listed earlier, in the last couple of years, without worrying too much about the deficit.

So basically nobody is answering that question directly. But the reality is that it is a huge, huge, hole that is being put into the debt and deficit. There is no question about it, bigger than ever before.

And we're going to see how, at least Republicans who are going to have the House of Representatives in January. And many more seats in the Senate, how they are going to try to start to deal with that down the road.

FOSTER: Dana, thank you very much indeed for joining us from Washington.

Now, it is nothing less than a major development in the Bernard Madoff case. Within the past few hours the U.S. has announced a major settlement that promises to return billions to those who placed their trust with the disgraced financier. Maggie Lake joins us with this story from New York.

Maggie, this is a real turning up for the victims, isn't it?

MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: It is. After nearly two years, rather two years after this Madoff scandal came to light, the trustee Irving Pickard, and government authorities have secured a major settlement and they also-well, let's go to the numbers, $7.2 billion. That is from the estate of Jeffry Picower, you mentioned his name. Not only is it the biggest claw back, in this case, it is also the largest forfeiture in U.S. history.

The New York attorney general says it is a major victory for Madoff victims.

(BEGIN VIDEO CLIP)

PREET BHARARA, U.S. ATTORNEY GENERAL, NEW YORK: This settlement is the most substantial step to date in the ongoing effort to make the Madoff victims, whole. Combined with the approximately 2.6 billion, Irving Pickard has, through Herculean efforts already recovered to date, along with the funds my office has gathered through criminal and civil forfeiture proceedings, today's settlement marks a major milestone. With the close to $10 billion now recovered, we have together collected close to 50 percent of the principle that victims lost to Madoff's Ponzi scheme.

(END VIDEO CLIP)

LAKE: Halfway there. That is a major milestone. When this first broke, many doubted that Irving Pickard, the trustee who is responsible for liquidating Madoff's firm, many doubted that he would be able to recoup any money for Madoff victims. Remember Madoff has never cooperated with the government. He has not helped sort of untangle the web and say where the money went. So it is a significant milestone. But Irving Pickard is not done yet. There are others that he is suing and it is quite a list, including Bank Medicci (ph) and founder Sanjah Cohen (ph), Bank Austria, UniCredit, UBS, just to name a few, Max.

FOSTER: Pickard is a bit of a dark horse, isn't he? He suddenly came through with a flurry of court cases. He is in court all the time now. Why? Why is it all happening right now?

LAKE: Yes, there is a very good reason for that. I mentioned the two year anniversary. On that two year anniversary, the deadline for making claims for this case, expires. So that is why in this last period, and the name has been in the headlines again. Pickard has been very much in the headline. That is why you have all of these announcements of suing and they are big suits. I mean he is really going for it in some of these cases. So when the settlement talks stalled or he sees and opportunity, he has got to get that all on the docket so to speak. So that is why you are seeing this big push. And in some ways it seems that the negotiations, at least from this particular case, like with the settlement. I'm sure they are hoping that this is the first of more to come.

FOSTER: OK, Maggie, thank you very much indeed. We are going to stay in New York as we take a look at the markets and see how they are doing right now. Fairly sedate session so far as you can see, down, but only marginally the Dow hovering around two-year highs from Thursday, in fact.

The pharmaceutical company, Merck, is the poorest performer. That is the standout today.

Now, it is too late to sit back and relax, Ernst & Young has already identified the biggest business risks in the year ahead. We'll tell you what they are and how to prepare for them after this break.

(COMMERCIAL BREAK)

FOSTER: Welcome back to QUEST MEANS BUSINESS.

I'm Max Foster and these are the headlines.

More calls from the international community for Ivory Coast President Lauren Gbagbo to -- to recognize election results and step down. U.N. Secretary Ban Ki-moon is now urging Gbagbo to let Alassane Ouattara assume office. The election commission says Ouattara won the November run-off but the country's constitutional council declared Gbagbo the winner. And much more on this story in 30 minutes on "WORLD ONE".

WikiLeaks founder Julian Assange is calling Sweden's sex crimes investigation a smear campaign meant to discredit him and his Web site. He also says he's worried the U.S. might be planning to extradite him on espionage charges.

WikiLeaks has been posting thousands of classified U.S. government documents. But Assange says he's never heard of the U.S. Army private charged with stealing them until seeing press reports.

Just weeks after an attack on a South Korean island, North Korea is warning of an even deadlier response if Seoul goes ahead with plans to conduct military exercises there. South Korea says the live fire artillery drills in Yeonpyeong Island take place this week as planned.

FIFA President Sepp Blatter is apologizing for his joking remarks about gay fans attending the 2022 World Cup in Qatar. Blatter has been heavily criticized for saying gays should avoid engaging in sexual activity in Qatar since homosexuality is a crime in the Emirate. Blatter offered his apology at a news conference in Abu Dhabi on Friday and went on to say he is against all forms of discrimination.

Global businesses will continue to walk a tightrope next year. And here's what threatens to tip the balance, according to Ernst & Young.

Regulation and compliance remains the biggest concern for companies. The expansion of government roles is all linked in with this. And this risk was also in the top spot in 2009. So that's not a major change. But cost cutting, competition to increase as companies fight for market share, that's what we're expecting. That's what the Ernst & Young report says.

And that comes against a backdrop of slow growth in developed economies.

Now, this has moved up from sixth place since 2009, so a big jump in that concern.

Now, the prospect of a slow recovery and fears of a double dip recession, that stays in the same spot as in 2009.

Now, Andrew Embury is the advisory leader for Europe, the Middle East, India and Africa of Ernst & Young.

Let's get his thoughts on the risks and concerns.

Obviously the -- thank you for joining us.

The top position hasn't changed.

But what's interesting about second for you?

ANDREW EMBURY, ERNST & YOUNG: Yes, I think we -- we see, you know, exactly that. What's interesting is -- is the -- the points of movement. And I think what we observe is intensified competition in both mature markets, slow growth mature markets and also in emerging markets, which came out. We also had the top 10 business opportunities for next year. The top slot came as emerging markets growth opportunities.

So -- so I think the combination of intense competition, pricing pressure in mature markets, slow growth, negative growth in Europe and other places, and organizations -- global organizations looking for a land grab in emerging markets. And what was interesting is that intensity of competition is -- is also there in higher growth emerging markets, like India. The telecoms industry would be a great example.

FOSTER: And if everyone is piling into those countries, then, obviously, the competition goes up.

EMBURY: Yes, the comp -- the competition goes up. Everybody's scrambling for their share of -- the (INAUDIBLE) -- what...

FOSTER: A growing cake, as it were.

EMBURY: A growing -- a growing cake in the emerging markets, but a limited -- limited offerings in mature markets.

FOSTER: And they're forced to go into those markets because of what you're describing in the mature markets.

EMBURY: Yes, but I -- I think in the mature markets, we also see global organizations focused on -- much more focused on finding those profitable segments, those high growth segments in what otherwise would be limited markets.

FOSTER: Yes. I was interested to see access to credit as a concern. It actually fell five bases, to seventh.

Does that suggest to you that there's plenty of money around, because we don't feel it?

EMBURY: Well, it's still there. It's still in the top 10. And I think what we see there is that issue has subsided somewhat after very heightened concerns last year.

FOSTER: Yes.

EMBURY: But it's still on the agenda. So -- so the initial challenges -- the way we read it, the initial challenges have been overcome, but it's still there as a concern for major corporates.

FOSTER: OK. And as far as market risks are concerned, in the top 10 for the first time.

What do market risks mean?

What are people concerned about?

EMBURY: Well, I think a number of things there. We see commodity prices rising, the prices of raw materials. We see Eurozone on the agenda again today, potential instability in a number of markets. And, also, to some extent, the role of government coming in, the increasing role of government as banker of last resort to the banking industry.

FOSTER: And to regulate...

EMBURY: Regulation.

FOSTER: Yes.

EMBURY: Yes.

FOSTER: OK. Brilliant.

Thank you very much, indeed, Andrew, for coming in on that.

Andrew Embury from Ernst & Young.

Appreciate it.

Now, China and Pakistan say they are all weather friends. As the Chinese prime minister meets his Pakistani counterpart, we'll tell you why there are 20 billion reasons this pair have plenty to talk about.

(COMMERCIAL BREAK)

FOSTER: It's a terrible thing, but whenever we anchors talk about the weather, we always talk about ourselves. And it's been snowing very heavily in London.

And Guillermo has been warning us it would happen -- and Guillermo, your words are coming true, not that I'm pleased about it.

GUILLERMO ARDUINO, CNN METEOROLOGIST: No. And especially, you know, you say we talk about us, but at the same time, there are many travelers that are going through Gatwick, for instance, so many airports in Britain that have been affected by this. And, actually, Gatwick is alerting people to check on the status of their flights before venturing into the airport this weekend.

Gatwick is not the only one.

Look at Hamburg, Germany. And I tell you one thing, they are de-icing the plane even when there is a very thin layer of ice, they need to do this. And you may be standing there waiting for your turn to go to your jet way and you are delayed by one hour, let's say. It happened to me a couple of days ago.

Well, we are going to see more bad weather and this is coming up this weekend.

Look at Wuppertal in Germany.

You see this?

It's an accident there. And the line continues, because there were more problems before.

Britain with more snow. We're going to see the snow Saturday. Temperatures are going to go down on Sunday. It's going to be way

Below average. Now it's bitterly cold and it's going to embrace the whole continent. This is not over. By no means. We will continue to see this area of bad weather. This is through Friday.

You see, this is what we already got. And now, temperatures, are going to go down after this. And we have a secondary system that is coming behind that is going to spread all the way into France, in the Alpine Region. And we will see more and more and more snow, five to 10 centimeters -- 20 to 25 centimeters we have seen already, snow in Wales. And we are going to see these airports with problems -- Amsterdam, a big, huge airport, a very efficient airport, but with snow. And the snow is not mainly the issue, because it can be

Snowing and it's not that cold. Plan -- planes land and take off with no problem at all. But then if the temperature drops and it becomes icy, that's a big problem. If visibility is bad, that's a big problem. If winds are bad, that's a big problem, as well.

If you're in any European country right now, you should check ahead. Log onto your airline and confirm that things are running OK. It is going to be two degrees in London only on Saturday; minus seven in Berlin.

So, you know, when we talk about this, then people in Germany and Poland and the Alps and Austria must be laughing at us.

And what about Bucharest, minus two?

What about Stockholm, minus three.

And we're talking about only the high -- the high temperature of the day. So very, very low temperature.

And we have snow in the Carpathian Mountains, more rain in Turkey. We have special coverage of I-List Turkey, so we're going to continue to talk about Turkey's weather, because we have snow there, believe it or not, as well -- Max.

FOSTER: Snow, of course.

You had to end on that, didn't you?

Thank you, Guillermo.

Appreciate it.

Thank you very much, indeed.

ARDUINO: Thank you.

FOSTER: And now, Wen Jiabao's charm offensive across South Asia is continuing tonight in Pakistan. The Chinese premier arrives in Chaklala Air Base on Friday to a 21-gun salute. The two countries call themselves all weather friends.

Now, in an alliance of two very different economies, deals worth up to around $20 billion are on the table during this day.

But while we all know China's economic strength, Pakistan's economy has struggled to attract foreign investment in the past.

Mr. Wen's visit follows a similar trip to India earlier this week. The two countries pledged to increase their trade to $100 billion by 2015.

Now, the visit to India was sometimes overshadowed by differences over Kashmir.

So what's on the agenda for the Pakistani visit?

Well, Chris Lawrence is in Islamabad for us tonight.

And I guess Islamabad wants reassurance that China is still close to Islamabad?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, exactly, Max. I think what -- what this showed was not only a rea -- reaffirming of the relationship between China and Pakistan, but also, you know, further some of those economic ties.

We're told some of that money is going to go toward reconstruction projects in some of the areas damaged by the floods. One official said there's even been talk, down the road, of establishing certain China towns in -- in major cities in -- in Is -- in Pakistan. And what these would be, would be basically giving over land to the Chinese government, who would then come in and build industry, which would then allow Pakistan to be sort of a -- a major explorer of Chinese goods and profit in that way.

But, really, I think the -- one of the big things that's coming out of these meetings is going to be the -- the banking situation in that China is going to open a branch of its largest private bank. This is a bank that's flush with money and a lot of the -- the Pakistani officials that I've spoken with here say it could be a real key toward financing a lot of Pakistani development and especially projects that -- that the two countries share -- Max.

FOSTER: And that is, as expected, because they are two countries very close together.

What was interesting about India, I guess, is the massive trade deals being done and the politics being brushed aside a bit in -- in order to -- to boost trade for two giants of the world economy.

LAWRENCE: That's right. You know, when -- when Prime Minister Wen, before he came here, he was -- he spent a few days in India. And they signed about $16 billion in trade agreements there, sort of deepening the economic relationship between the two countries.

And -- and basically the -- the Chinese -- the Chinese premier called India a cooperative partner, not a rival. You know, for some here in Pakistan, that would raise some alarms in terms of a -- a growing closeness between China and India. But I spoke with the former deputy ambassador to China. He says it's not a concern because of the longstanding history between China and Pakistan -- Max.

FOSTER: OK.

Chris Lawrence, thank you very much, indeed.

That is QUEST MEANS BUSINESS.

That's it for this week.

I'm Max Foster.

Thank you very much for watching.

Richard is back next week.

But "MARKETPLACE AFRICA" is next.

Have a good weekend.

(COMMERCIAL BREAK)

ROBYN CURNOW, HOST, MARKETPLACE AFRICA: Hello and welcome to MARKETPLACE AFRICA.

I'm Robyn Curnow here in Central Johannesburg.

Now, it's called the brain drain -- when talented people leave their countries looking for opportunities

Elsewhere.

It's a big problem here in Africa, where the brightest and the best are often found living in the U.S. or Europe.

So we're going to begin this week's show with an In Focus look at the founder of one company who finds African enterprises in the United States and helps them to bring their business ideas back home.

(BEGIN VIDEOTAPE)

GARANG AKAU, FOUNDER, NEW SCHOLARS: We ate only once a day. And sometimes we went for three days without food or water.

CURNOW (voice-over): When Garang Akau shares the story of how he got to America...

AKAU: I walked for more than 300 miles to safety.

CURNOW: -- people listen.

AKAU: Hey, Eric (ph), I'm going to have to go.

CURNOW: Akau has cheated fate more than once in his lifetime. While millions of his countrymen perished during Sudan's last civil war in the early '80s, he managed to escape.

AKAU: I was one of the thousands of young people called the lost voice of Sudan that were driven away by the Sudanese government because they were thinking that these young people would grow up to become the -- the future soldiers.

Hi, (INAUDIBLE). CURNOW: But Akau grew up to become something very different. With help from aid groups, he relocated to the U.S., where, without friends or family, he started a new life.

AKAU: When I first came here, I had to -- I had to -- to find a job within the first month to be able to support myself and support my people back home. So what I did was I trained for security. I worked security night -- at nights and also worked at grocery stores, just a lot of manual jobs. And -- and then went to school.

CURNOW: Akau could have joined other graduates who set out to seek fame and fortune, but he had other ideas.

DARIUS GOLKAR, FOUNDER, NEW SCHOLARS: And then, also, Garang and I were talking about...

CURNOW: He approached his friend and seasoned entrepreneur, Darius Golkar, and together they launched New Scholars, a venture to help young Africans around the world start up businesses back home.

AKAU: Fortunately, these people in the diaspora are -- they have been able to gain some education. They have looked around and have gained valuable insights from just living outside of the country. And so empowering these people to come back to the country, bring back their education, bring back their skill sets and the opportunities that they have seen is really very important.

CURNOW: With few resources, the staff of two rely on fundraising to survive. They work mostly from their kitchen in Cupertino, California, where they field calls and talk by Skype with potential enterprises.

AKAU: I -- I know you -- you came back from Sudan.

CURNOW: To become part of New Scholars, candidates must speak English and have a solid business idea that will provide jobs for Africans.

GOLKAR: So is it fair to say what you need most are role models?

UNIDENTIFIED MALE: I need role models. I need any available resources, any money I can get. I need expertise I can get. I need it all.

CURNOW: To answer such needs, New Scholars sets up business boot camps in the Sudan and Kenya, where budding entrepreneurs work with mentors to flesh out their ideas.

UNIDENTIFIED FEMALE: But this exercise must say, OK, concretely, how would you implement something?

CURNOW: But boot camp is only the first step. The most promising projects are developed further in New Scholars' incubator. The best of these are given between $10,000 and $30,000 in startup cash. And while many of the ideas developed with this money may see rudimentary by Western standards...

GOLKAR: In Southern Sudan, transportation is very difficult. And this individual wants to bring year round transportation channels between villages and Juba. And he'll do that by employing a fleet of four by four vehicles. We have another person who's interested in starting an IT business to replicate a business he's already started in Kenya because in Southern Sudan right now, you have to fly out your computer or fly in an expert, because, really, there's -- there's not much there.

CURNOW: Creating something out of nothing is only part of New Scholars' challenge. They hope to incubate at least 50 businesses over the next five years. But they say the real measure of their success is how many Africans return home and develop Africa's future just as Akau planned and as they continue to grow.

(END VIDEO TAPE)

CURNOW: Small and medium sized businesses are vital here in Africa. In fact, across the continent, they make up about 90 percent of all businesses. And in some countries, they employ about three quarters of the workforce. But they only contribute, in many countries, about 20 percent to the GDP because of harsh financing constraints.

(voice-over): What do banks need to survive and thrive in Africa?

We'll ask the CEO of one of the biggest banking groups on the continent, next in Face Time.

(BEGIN VIDEOTAPE)

MAGGIE LAKE, CNN CORRESPONDENT: What -- what is one of your worries or one of -- one of the challenges that -- that keeps you up at night?

(END VIDEO TAPE)

(COMMERCIAL BREAK)

CURNOW: Ecobank is one of the largest banks in Africa. It operates in 29 countries. And the man in charge of it is Arnold Ekpe.

Now, in 2008, he was voted African Business Leader of the Year.

Recently, he sat down with Maggie Lake in New York to talk about the challenges and successes of banking in Africa.

(BEGIN VIDEOTAPE)

LAKE: In terms of growth opportunities, what are the trends that are going to dominate in banking and how do they differ than what we see elsewhere, say, in Europe or -- or in a more developed region?

ARNOLD EKPE, CEO, ECOBANK: I -- I think the differences are very, very important and -- and they're quite fundamental. I think in Europe and the more developed markets, the key challenge is keeping costs down, whereas in Africa, the key challenge for us is -- is growing. Africa is under banked, for example. The banking penetration in most of our markets is less than 10 percent.

If you look at the demographics, I think 50 percent of the population is 20 years or younger. OK, the economies of one of the fastest growing -- some of the fastest growing economies in the world, according to the World Bank statistics.

So all the stories in Africa is about growth and taking advantage of that growth. And that's what we're trying to do.

LAKE: And how do you do that?

How do you capture this -- this generation, many of whom may not have any bank account at all?

I mean are -- are you -- do you take the traditional measures or, in some ways, do you hop forward to spaces that -- that some of the traditional Western banks are just getting around to?

And I'm thinking of mobile banking, for example, which is often talked about as a -- as a real frontier in Africa?

EKPE: We do both. I mean we -- we have a 70 -- 750 branch network, because you've got to reach out to people on the ground.

LAKE: Of course.

EKPE: But we also have a mobile banking platform. We work with Impessa (ph). We work with MTM. We work with Zane. And we also have Internet banking.

So our view is make the channels available, apply all the channels and provide competent banking to the consumer.

So we see that the younger people are much more comfortable with it, you know, the mobile banking channels, the Internet banking with ATMs and cards.

LAKE: But what about the challenges of expanding and tapping into that growth potential?

What's the biggest challenge, as far as you're concerned?

EKPE: I think there are several challenges. One, of course, is that the infrastructure in Africa is still growing. It's not quite there. The issue about power -- getting enough electricity into the branches. Many of our branches run on generators, for example. But that's a challenge. It doesn't stop us from providing banking services.

And when you look at the telecommunications, for example, the fiber optics and all of that, we don't have that in Africa. We have to use prisart (ph). We have to use other means of -- of connecting up branches. But we do that in a way.

And what it does, it does -- it increases the costs of providing the service in the short-term. But we think we have to make an investment up front and over time the costs should come down.

So you have to take a long-term view to the -- to banking in Africa.

LAKE: What are you seeing in terms of impact of Chinese investment coming into the continent and -- and how are you working along that avenue?

EKPE: We have a very agnostic view. Africa needs capital. Africa needs to grow at an accelerated base. Whether that capital comes from the East, the West or the center, quite frankly, if it's good capital and it helps the growth of Africa, then it is something good for Africa.

China has certainly shown a very strong interest, OK, driven, perhaps, by it's own self-interest, in Africa. And that has to be good for Africa.

What we're here today trying to do is to get more North American and more United States interest in also supporting the growth of Africa.

LAKE: We talked a lot about the opportunities in Africa.

What -- what is one of your worries or what are one of the challenges that -- that keeps you up at night?

EKPE: I -- I think the major challenge we have in Africa is to understand the need to move a little bit faster, that Africa needs to catch up a little bit more, that the rest of the world will not wait for Africa and the rest of the world does not owe Africa a favor and that Africa really has to make that extra effort.

So on -- on a philosophical level, I think that that, to us, is -- is a major challenge we have in Africa. We can go through the minor problems -- infrastructure, all of that -- but those can be fixed once the bigger problem is solved.

(END VIDEO TAPE)

CURNOW: Ending on a philosophical note there.

Now, here's what's trending this week.

(BEGIN VIDEOTAPE)

CURNOW (voice-over): A new agreement between one of Africa's biggest oil producers and one of its leading oil consumers. Angola and South Africa have signed a deal that could see South Africa investing billions more in Angola's energy industry. South Africa is seeking new sources of oil to fuel its growth and oil rich Angola says it's been looking for new investors.

Nigeria's largest cement maker, Dangote, has signed a $400 million agreement to build a new plant in Zambia. The company says the investment will help complement Zambia's efforts to improve its infrastructure and diversify its economy.

(END VIDEO TAPE)

CURNOW: Well, that's it for this week's program.

I'm Robyn Curnow here in Johannesburg.

Remember, you can view all of our stories online at CNN.com/marketplaceafrica. All of our contact details are on that Web site, as well.

But until next week, good-bye.

END