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Greece On The Brink; Europe Finally Closing In On A Debt Deal; Russian Reform; Playing Politics; Greek Debt Crisis; In Focus: Currency in Zimbabwe; Banking on Zimbabwe

Aired June 17, 2011 - 14:00:00   ET


RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: The headlines tonight. It is a new odyssey for Greece as Europe closes in on a debt deal.

Not so fast. Two economists tonight tell us that Greece could still be in serious trouble.


KENNETH ROGOFF, FMR. CHIEF ECONOMIST, IMF: If they haven't had a Greek default, four or five years from now, I will be shocked.

UNIDENTIFIED MALE: Greece is bankrupt and the sooner we recognize that and do something about it the better.


And a revolution in Russia; what this could possibly mean for the Russian president and an election.

I'm Richard Quest. I mean business.

Good evening.

Europe's leaders are talking Greece back from the brink. And tonight the potential for an agreement in Berlin where a new finance chief is in Athens; and in the coming days rolling emergency talks in Luxemburg and Brussels. What is at stake here is not only Greece, but the Eurozone and potentially more damage for the global economy if it goes wrong.

Join me over in the library and you'll see what I mean. We start with the agreement between Merkel and Sarkozy in Berlin. They have agreed to have a private, voluntary creditors agreement; substantially ensuring that private banks are part of any agreement. In other words, no compulsory or non voluntary default, no disorderly default. That, at least, is what they're trying to do. And they want it all to be done when what is called the "Spirit of Vienna" agreement. This goes back to 2009 with the Austrian banks. You are going to hear this phrase, "Spirit of Vienna" quite a lot. What it basically means is that the banks voluntarily roll over the debt.


NICOLAS SARKOZY, PRESIDENT OF FRANCE (through translator): We have found a solution to involve the private sector on a voluntary basis.

ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): The faster the better. I don't think it makes sense to settle on a date, but the most important thing is that we have principles.


QUEST: So, those are the two leaders that are generally thought to be at the opposite ends of the spectrum in reaching the Eurozone part of the deal. Now, in Greece itself, Evangelos Venizelos is sworn in as the new Greek finance minister. He was the Greek defense minister. He has already said tonight that the proposals will be put to parliament for a confidence motion. He says tonight he will also be going to the Euro group meeting on Sunday to present the program and to talk about what changes there might be. And as for whether or not, or why he took the job, he said he gave it a great deal of thought before he did.


EVANGELOS VENIZELOS, FINANCE MINISTER, GREECE (through translator): Today I handle this challenge, looking forward to cooperation, unity, in a careful way, in a sober way. They are open to ideas, to dialogue, to succeed this mobilization of powers.


QUEST: And that is the new finance minister of Greece. As for the prime minister, George Papandreou will be facing a confidence vote, which he has called as early as Sunday. He knows the austerity measures have to go thorough parliament. And his finance minister will be taking them to a Euro group finance minister meeting which takes place, Sunday, Monday, in Luxemburg. And then all the leaders, there is a council of leaders, meeting in Brussels. That takes place next week. It is a very busy, important week. As Jose Manuel Barroso, the president of the Commission, clearly made clear.


JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: I look to Sunday's Euro group to resolve remaining differences and come to a responsible agreement on the financial assistance to Greece as outlined by Commissioner Hanz (ph) yesterday. Greece must do its part. And the European Union must do its part to preserve financial stability and economic recovery in Greece and in Europe.


QUEST: Diana Magnay is in Athens for us tonight.

Good evening, Di. Is there a feeling in Athens that a resolution, albeit a painful one, with more austerity, is neigh?

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: I don't that the political events of the past few days here have had much repercussion with the public. If you talk to people about what they think about this cabinet reshuffle, they think it is more of the same, but just with different faces. But the real sort of motivation behind this new finance minister, who is a very populist figure, is perhaps that he can bring unity to the ruling Pasok Party.

And the Greek Prime Minister George Papandreou was really facing a very strong rebellion within its own party. He was facing a fight on two front lines within his own party and within the parliament. And this reshuffle, even if it is people from within his party, rather than outside it, which some people have been hoping for. It may bring unity that he needs to push that austerity package through the parliament, Richard.

QUEST: That austerity package is a precursor and a necessity for further borrowings or further lendings by the Eurozone. It must be dreaded by the people that you are with in Athens?

MAGNAY: It is predicated because they have already suffered a year's worth of extremely Draconian austerity measures. And if you look at the impact of wage cuts, tax hikes, and job cuts, you now have unemployment at 16 percent. It has risen 40 percent year on year. You have the economy in deep recession. And you have no real prospects for growth. So, people are asking if you are going to make further cuts, how can we ever get out of this vicious circle? Where we are still only going to be dependent on foreign loans, that we could grow ourselves?

QUEST: Diana Magnay in Athens and we'll be watching-Diana, you'll be watching over the weekend, the events taking place in there.

Just about everybody in the markets says that a default or some form of rescheduling of Greek debt is inevitable. Earlier I was joined by Professor Ken Rogoff of Harvard. A former chief economist at the IMF and he told me that Greece can't keep rolling over the debt, because eventually something will break.


KENNETH ROGOFF, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: Unfortunately, Europe does not seem to have any plan B. Besides just continuing spending and bailing out these countries. But the problem, and you are seeing it in Greece, is the people are just not going to put up with these austerity programs forever without some hope. And the level of debt it is not just Greece. And Ireland and Portugal are such that to pay it back would just be breaking every record that we have seen in the past. They could be in recession for years, and why? I mean, I understand that Europe doesn't want to have a Lehman, they don't want to have a panic. But they do have to deal with this problem. I think it is manageable. But they don't seem to have any constitutional mechanism for making decisions.

QUEST: We talk about the Lehman's scenario, but the truth is the Lehman's scenario was a shock. It came at a weekend and it came out of the blue. We have been talking about Greek default for weeks. If and when it happens, as you say, surely, reasonable people can manage the affects.

ROGOFF: Richard, if they haven't had a Greek default four or five years from now, I will be shocked. That will be a shock. And it will absolutely bust all records. I don't see how they are going to do it unless you get extraordinary growth in Europe, in Greece, in Portugal and Ireland. They are just praying that things get better. But the trouble is they could get worse. I think it is a manageable problem. If you let it fester then it could really spread to Spain and Italy.

So, sure it is going to be a jolt when they finally have to do it. But I have seen this again and again and contagion often does not happen. And I think it will hit Portugal and Ireland. I do think they'll be able to contain it. But boy, do they have trouble making decisions in Europe. You seen to need unanimity for everything. That is what they have to overcome.

QUEST: Should the United States be worried by what is happening. The volatility, I mean, not direct contagion, but there is clearly ripple effects into the New York markets, and into the U.S. debt markets. And I am just wondering whether or not that is justified. What is the connection there?

ROGOFF: Well, it is very hard to predict the psychological affects as Europe moves to restructure. I could be for the better. It could be that after a few weeks it is clear that disaster didn't happen. The worse scenario is receding (ph). It ripples through but it is not the end of the world. So, certainly it is very hard to predict. It could take uncertainty off the table. On the other hand there is a lot of debt out there in the United States; having its own slow growth. United States' states are in a lot of trouble. So, over the longer term it could ripple back on them. I think if it spread to Spain, then the United States would be hit. The United States has a lot in Spain, the U.S. banks. But I think if it is contained to Portugal, Ireland and Greece, and it is managed decently, it will actually improve prospects not make them worse.

QUEST: And finally, Ken, you touched on, quite vociferously, the decision-making process. The Europeans always say, that is the way we do things in Europe. It takes a crisis, it takes getting to the precipice.


But all of a sudden it has got rather serious, hasn't it?

ROGOFF: See it is worse than that. I think every country has to get to the precipice in order to make tough decisions. So, that is not what is unique. What is a problem is they seem to need to have buy-in from everybody in order to cut a deal. And if you are painted in that corner, that it has to be win-win-win-win-win-win for everybody, that is very hard to do.

I mean, if you are going to be a great nation you have to go on and make decisions that are sometimes bad for somebody, but good for the whole. And it moves on and you grow and you do better. And in the long run that is good for everybody. And they seem to have a great deal of difficulty reaching these tough decisions. I mean, think, if Portugal, Greece and Ireland are forced to restructure and Spain is bailed out. They are going to scream bloody murder in Ireland, Greece and Portugal. And that is the kind of challenge that they have to face that they simply don't seem to have a mechanism for.


QUEST: That is Professor Kenneth Rogoff of Harvard, with some comments on the Greek situation.

Now, the situation is getting riskier by the day. The fall out could spread well beyond Europe's borders.

Coming up, why the IMF says the shock to Greek finance will hit all corners of the globe.


QUEST: Three separate risks in three separate economies are threatening the global recovery, according to the IMF's latest reports. In Europe, the IMF says serious market events in Greece could shock countries beyond the Eurozone. So that is Greece.

In the United States the risk is that a political gridlock over raising the debt ceiling. The country's Triple A credit rating in doubt after S&P's negative outlook last month. And then in the emerging markets the imbalance of risk, interest rates so low in developed economies, the IMF says investors are looking for profits in riskier assets. The so- called carry-trade, and that is setting up dangerous imbalances, not even- and also currency wars and protectionism, it is all at risk. Those are the three major scenarios.

Jose Vinals is the director of monetary and capital markets department at the IMF. Hosni joins me now, live, from San Paulo.

I mean, of those three risks, one of them is certainly long term and requires a structural rebalancing of global growth. But the other two are very immediate and they are fires that have to be put out now.

JOSE VINALS, DIRECTOR, MONETARY & CAPITAL MARKETS DEPT. IMF: Yes, I think this is very true. I think that we have entered into a new phase of the crisis. I would call this the political phase, where very important and tough policy decisions, and political decisions, have to be made, and where time is of the essence.

And this applies not only for Europe, that needs to get its act together in coming to a decision on how to deal with the Greek issue, but also to the United States, where-which has to find the solution to the debt ceiling, and moreover put in place a serious plan for fiscal consolidation over the medium term.

QUEST: If there is a default, or a rescheduling of debt in Greece, do you and the fund fear there could be contagion to Spain, to Portugal, to Ireland? And then ultimately affects in mature markets like the United States?

VINALS: Well, Greece is-there is an irony, Greece is very small, in economic terms. But given the financial inter linkages that exist, if something, you know if an accident were to happen then there could be consequence which would not be all important for Europe, potentially, but also for other countries in the global economy. This is why the stakes are very high.

And this is why we certainly hope that they reach a solution that includes various elements; first, a continued endorsement by the new government and the Greek authorities in general, also endorsed by the parliament, of the program that we have already agreed with the Greek authorities. Then that they are financing assurances so that the program can be fully financed, in the appropriate degree of private sector involvement, which still needs to be discussed by the European partners.

QUEST: The question of austerity, though, which is a precursor and a Sine qua non of any more money being handed. Can the Greek economy, and the people, continue to suffer that level? It sounds as if-it sounds like hard-hearted bankers and governments forcing more hardship on the Greek people whatever the rights and wrongs may be.

VINALS: Well, I think that one should not forget that in the program that needs to be implemented by Greece, there are not only measures to continue reducing the budget deficits and so on, but also measures of structural reforms, which are there precisely to enhance the growth capacity of Greece. And this is something that we think is fundamental in order to contain the cost of the program and to give a better future for the country.

I think that the alternative to that is certainly more chores (ph) for Greece and the Greek people. And that is why we are betting on the program being implemented fully.

QUEST: Jose Vinals, from the IMF in San Paulo this evening, for us tonight.

We thank you, Sir, for joining us. We wish you well tonight. Have a good weekend.

It is just about time for the Wimbledon championships.


And that has us thinking about the business of tennis, as well. Winners will score a seven figure pay check. What is really earning players the big bucks? The head of the Women's Tennis Association in a moment.


QUEST: When the world's top tennis players take to the court at Wimbledon, in London next week, it is not just the game that will be scrutinized closely. The outfits that they will be wearing will be watched closely. Far from frivolous fashion is the big business of the world, especially in women's tennis, as CNN's Isha Durgahee reports.


ISHA DURGAHEE, CNN INTERNATIONAL CORRESPONDENT (voice over): The guts and the glory.


The glitz and glamour, the sweat and tears, and styles of tennis. The women's game has drawn in the crowds and the couture more than every before. To commemorate the 125th anniversary of Wimbledon the WTA has teamed up with the British Fashion Council. Pairing off players with top British designers. French Open champion Lena arrived wearing Giles Deacon. Ana Ivanovich in Matthew Williamson's creation. And Maria Sharapova wore Alexander McQueen.

CAROLINE RUSH, CEO, BRITISH FASHION COUNCIL: I think it is one of those, then, collaborations that naturally have come together. And you have seen sort of the fashion world and the tennis world starting to develop more and more synergies over the past few years. The tennis players are starting to become icons as well.

But from our perspective it is great to see these designs on really strong, athletic women. And they look fantastic in them.

DURGAHEE: But only for one night. The dresses that have been created especially for each player will be auctioned off during Wimbledon, for charity. Still getting dressed up for the annual WTA pre-Wimbledon party is a chance to forget about the daily grind on court.

ANA IVANOVICH, 2008 FRENCH OPEN CHAMPION: It is really good. Because we don't get a chance to get dressed up that much. So, have an opportunity to get your hair and makeup done. And you know, wear high heels and do all the girl stuff, it is a lot of fun.

DURGAHEE: Association with brands and bid names after winning championships titles is big business. Former World No. 1, Maria Sharapova, is the highest paid female athlete in the world. After signing an eight- year deal with Nike, for an estimated $70 million. She is part of the design process for her outfits. And up and coming players wear Team Sharapova Nike sportswear.

MARIA SHARAPOVA, FMR. WORLD NO. 1: I always had this idea in my, kind of my head, that I wanted to express individuality. I wanted you know the product that maybe one day I would create. I wanted to be different. Because I think, you know, I could really relate to a woman that loves to be active but also wants to be glamorous and, you know, know the trends and be part of the fun times. I think I have both worlds of that. And I can really design from everyone's perspective.

DURGAHEE: And it is the endorsement deals that bridge the gap between these two worlds, where women on tour work hard, and play even harder. Isha Durgahee, CNN, London.


QUEST: A chief executive of the Women's Tennis Association is Stacy Alison. She is credited with netting $75 million worth of endorsements for Women's tennis over the past couple of years. Stacy is with me now.

What that report shows and what I know from the work you have been doing, is that, Ka-ching! Ka-ching.

STACY ALLASTER, CEO, WOMAN'S TENNIS ASSOCIATION: Ka-ching. Ka- ching. The girls are making it happen. You know they are really performing on court. They understand the business they are in. They are entertainers. And sponsors are really loving the product. You know, six major deals signed in the last 15 months. I have been able to say the global recession has hit everyone, Women's Tennis has actually been able to go forward.

QUEST: What are you selling? Are you selling the female sex, in the sense of it is more glamorous than the male game. Are you selling the tennis? What is they are buying into? Because I can't necessarily imagine that we would do a report that is just about what the men were wearing at the party last night.

ALLASTER: Well, you know, it is going to be a big moment when Federer walks out on the center court at Wimbledon. What is he wearing? Fashion in tennis is big business, men or women. But really what we are selling are the world's best female athletes. You heard Maria, she is an athlete, first and foremost. And then we have this duality of a personality and entertainment, loving the red carpet. And if brands want to align with sports and get massive eyeballs. Go do football. But if you want to have aspirational, inspirational ambassadors to align with your brand, that is the package that WTA sells.

QUEST: As-all right. You choose football, but as they have discovered scandal after scandal, and even to a certain extent cricket has had a few of its own. You are playing with fire. You are bringing in a lot of business.

ALLASTER: uh, huh?

QUEST: For a group of people who are fundamentally sports men and women. It can backfire.

ALLASTER: Well, that is the beauty of my job. I've got great athletes. They are world class. You don't read about them in the headlines, about doing things that young people shouldn't do. And-


ALLASTER: Look, overall, history will show that these are great ambassadors for women's tennis and for youth.

QUEST: There is no obvious contest for the women this year, in the same sense as the-

ALLASTER: Completely wide open.

QUEST: Now, is it a contest that is completely wide open. Is that good or bad, because obviously you have the delight of a potential surprise, but it means that you haven't got the tension that makes for a good tournament.

ALLASTER: Well, I think the tension we have is who is going to do it? You know, Venus and Serena are back. Maria is playing great ball. But will Caroline Wozniacki, our world No. 1, will she finally break though and take that slam title. So, it is wide open. And the mix of the rising stars challenging the veteran stars has made a great story for the WTA over the past 12 months.

QUEST: And next year you will come back here, hopefully, on the Friday before and talk more about the money you have been raising.

ALLASTER: Very positive. Thank you.

QUEST: We'll see you. Have a good Wimbledon.

ALLASTER: Thanks very much.

QUEST: Now reform in Russia is no easy task and that is not going to stop Dmitry Medvedev. The Russian president set out his stall in St. Petersburg. We'll have the Economic Forum in a moment.


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

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

Human rights activists say at least five people were killed in Syria today during demonstrations which took place after Friday prayers. The rallies reportedly erupted in several towns and cities. This video posted online claims to show a protest near the city of Kifar Nabil (ph). The state-run TV reports that security personnel were wounded by what they are calling militants near Damascus.

Several explosions have been reported in Tripoli on Friday, as NATO aircraft flew overhead. The attacks come as a new message from the Libyan leader, Moammar Gadhafi, claims the alliance will be defeated. The audiotape was played to pro-Gadhafi crowds in Tripoli's Green Square

Saudi Arabian women took to the wheel on Friday in a literal drive for equal rights. This action was called by the group, Women to Drive, which is campaigning against a ban on female drivers in the kingdom. Now, the ban isn't a matter of law, but is based on an interpretation of religious edicts.

President Medvedev set out his vision for Russia's economic future today. The Russian president has touted his reformist credentials at the St. Petersburg Economic Forum.

CNN's John Defterios is in St. Petersburg for us tonight -- good evening, John.


A show of force, if you will, in this new world order. The Russian president, Dmitry Medvedev, welcoming his Chinese counterpart, Wen Jiabao. Mr. Medvedev used the global spotlight here today, Richard, to mark his territory for the 2012 presidential elections, if they take place, if he's given the blessing to run. He wants to be seen as the reformer or the agent of change.


DMITRY MEDVEDEV, RUSSIAN PRESIDENT (through translator): We should not delay saying good-bye to many a bad habit. It is important for us to target only relaxed and evenly paced growth. This is a mistake. Behind the infamous stability, another stagnation may be hiding.


DEFTERIOS: It's quite interesting that he took that tone. That was seen here, on the ground in St. Petersburg, as a direct dig at Vladimir Putin, who has been less forthcoming in his move to globalization.

But does it play well with the Russian people, is a huge question?

After the fall of communism, of course, and then the globalization efforts, there was a lot of chaos in transition here to capitalism. And many Russians actually embraced the slow movement in opening up the economy.

I think, also, Mr. Medvedev was speaking to the business audience here, Richard, in St. Petersburg. But we'll see how that plays out in 2012.

QUEST: If we take a look at the relationship with China, which is a difficult relationship, at best, and yet the two faster growing countries are never backward at wanting to do a deal.

DEFTERIOS: Yes, in fact, they've gone from this friendship treaty that they signed 10 years ago to an actual business transaction. But we were looking for a major gas deal to take place, Richard. It's my understanding they're kind of bickering over pricing. And that' not too surprising.

But you cannot get the gas deal, but they want to see fourfold increase in trade from $55 billion today to $200 billion.

I had a chance to speak to one of the major oligarchs in the country this afternoon, Oleg Deripaska of UC Rusal, the largest aluminum producer in the world.

And I asked him, is this really a setback as a result of not signing that deal today.


OLEG DERIPASKA, CEO, UC RUSAL: It wasn't happened over -- overnight. You have to, you know -- you know, see how Russia, you know, prepared. We had not easy relations in the '80s and '70s. Then, you know, in our warmer relations in the '90s, we saw from the border, you know, these goods and signed. And we have the longest border in the -- on the planet between Russia and China. And then, you know, we built the first part line. There was a lot of preparation. You know, pricing is not an easy mechanism. And now in Asia, you know, negotiations, it's -- it's a culture. It's not just bargaining, it's a culture how do.

So I think saying, you know, we just need to be patient.

DEFTERIOS: You're expecting overall growth of 4 to 4.5 percent. With this different strategic thinking in specific sectors, can you see pre- crisis growth going back above 8 percent?

DERIPASKA: Very realistic. But we need to solve, you know, financial -- you know, market issues. We need to finish restructuring the financial markets. It's a lot of sitting down, because a major issue in the Russian crisis was that (INAUDIBLE) Russian in the banking system assets was foreign-based. Now, I think it's well covered. And at last now, we need to develop, you know, financial centers in Moscow, to bring a constitution to make further progress in rule of law in -- in the court system. And this will actually create opportunities for the capital markets.

DEFTERIOS: Well, you raise an interesting point. President Medvedev today was -- was targeting Prime Minister Putin, saying we can't stagnant, we have to push forward. We continue to be dependent on one man. It seems like the election campaign has begun.

DERIPASKA: Competition is always good.


QUEST: Competition is always good.

And Bob Dudley, the chief exec of BP, is -- is in favor of competition, in fact, so much competition that his deal with Rosneft blew up in his face. He's in Russia at the moment.

DEFTERIOS: Yes. Yes, in fact, Richard, it was fascinating, because we had a chance to attend this energy panel this afternoon with 25 leaders from around the world in terms of CEOs of the energy giants and -- and the like. And Bob Dudley was asked a question about his partnership in this effort to reach out to Rosneft.

He categorically said, in a very soft tone, the Rosneft deal is a thing of the past. He now is embracing TNK and says the joint venture has been very successful. He said this in front of the president of Russia, which added a little political highlight to the tone of the debate here.

Let's take a listen to what he said in front of an audience of his peers.


BOB DUDLEY, CEO, BP: We were not successful in reaching a set of commercial conditions that were acceptable to all of the companies involved. I think the concept, though, of a strategic partnership like this was good for Russia, good for the energy markets.

We remain solidly committed to investments in Russia. We remain committed to this important joint venture of TNK-BP, which I think will have a very bright future.


DEFTERIOS: So a bright future with TNK. You heard that from Bob Dudley today.

Earlier this week, from our coverage in St. Petersburg, we have a chance to talk to Victor Vekselberg of the Renova Group, the major shareholder of TNK. He said that he and Bob Dudley now see eye to eye. Dudley said we're friends. Our strained relations were all over business. We need to put that behind us. And perhaps -- perhaps we'll do international transactions with Rosneft outside of Russia.


DEFTERIOS: So it's very clear where they're going in the future.

QUEST: All right. John...

DEFTERIOS: That's politics.

QUEST: Absolutely -- John, we're obviously on the same page tonight. We clearly both got the memo that today is purple tie day. I only think the difference...

DEFTERIOS: Oh, you're kidding me?

QUEST: Yes. I just think that yours probably costs more.

DEFTERIOS: I don't have -- I don't have the -- I don't have the monitor here, but I'm glad to hear it.

QUEST: Well...

DEFTERIOS: We do that...

QUEST: Say...

DEFTERIOS: -- every once in a while, but only on Fridays, we do that.

QUEST: Take it from me, I think yours cost a great deal more than mine.

John Defterios, who is in Russia for us tonight.

Greece's debt worries reach all the way to the U.S., a country that's no stranger to dealing with its own deficit. The legendary American investor, Jim Rogers, after the break on what the countries need to do to get back on track.


QUEST: We have a little more than an hour left of trading on Wall Street and the Dow Jones looks like it's going to end the week at least higher.

What a week it has been. We're now over 12000 on the Dow. But when you think that we had a fall of 180 points, a gain of 120 or so, and now a gain of 66. So at least we have clawed back and the -- the limits on the Dow Jones, now up 66 points.

Falling oil prices and all the various other things.

Now, moving along now, Research in Motion has fallen more than 20 percent. Awful first quarter sales figures. There was a 30 percent drop in this year's profits. And delayed expectations has also caused some serious problems. And that was another of the impacts and the effects that we saw in the market today.

Those U.S. investors are keeping a close watch on the situation in Europe.

One noted investor describes the handling of Greece's debt as kicking the can down the road.

Jim Rogers told Poppy Harlow there will be unavoidable losses, but the crisis provides a chance to rebuild.


JIM ROGERS, INVESTOR: Greece is bankrupt and the sooner we recognize that and do something about it, the better. Some of the politicians in -- in Europe are just trying to push it down the road. Eventually, we're going to have to bite the bullet and some banks are going to have to leave -- and bondholders are going to have to lose a lot of money. It's not the end of the world. It's losses, but it's not the end of the world.

POPPY HARLOW, CNN BUSINESS CORRESPONDENT: Should Europe be -- be preparing for what I've seen some headlines saying, their own Lehman moment when it comes to Greece?

Should they be preparing for this?

ROGERS: Absolutely. I mean there's no way Greece can pay off those debts. If you just look at even with all their austerity plans, Poppy, the debts still continue to rise. They rise at a slower rate, but the debt goes up. This is not going to work, pushing the can down the road. Somebody is going to have to take some losses.

But, Poppy, that's good. You take the losses, you reorganize and you start over from a sound base. Then people make a lot of money.

HARLOW: The question is how quickly does that happen and -- and if we are, indeed, kicking the can down the road when it comes to Greece, action needs to happen soon. We're seeing the impact here. We saw oil fall 4 percent Wednesday alone, largely on those concerns about Greece.

The market is headed for seven straight weeks of declines here in the United States. We are facing -- and in the midst of our own debt crisis.

ROGERS: Yes, Poppy. I'm glad you understand that. I'm glad -- I wish everybody in America understood that. America is the largest debtor nation in the history of the world. We've got to do something. Sitting around denying reality in America and in Greece and in Europe is not going to solve the problem. The only way you solve the problem is you recognize it, you deal with it, you reorganize and you start over.

Yes, it's pain. It's serious pain for a while. But we've had 30 or 40 years of ignoring reality.

HARLOW: well, how do you invest, then, in a market like this?

Looking at equities, do you think they're fairly valued now?

Is this short-term concern, is this long-term concern?

And also, looking at oil, just around $94, $95 a barrel.

ROGERS: Well, people are dumping stocks right now. And usually, if it really gets panicky, you should probably step in and buy for a while. There will be a rally whenever you have a lot of panic.

But over the next couple of years or so, Poppy, I'm concerned about equities. I mean every four to six years in American history, we've had a -- an economic slowdown. That means we're overdue for one in 2 -- late 2011 or 2012 or 2013.

I would urge people to start worrying about when the next slowdown is coming, because, Poppy, it's going to come, whether we like it or not. And we're getting overdue.


QUEST: That's Jim Rogers talking to Poppy Harlow.

We are just hearing that Portugal has a new finance minister tonight. Vitor Gaspar has taken on the job, part of a new coalition cabinet that has formally been appointed today.

And that is QUEST MEANS BUSINESS for this week.

Thank you for taking the time to join us.

I'm Richard Quest in London.

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



ROBYN CURNOW, HOST: I'm Robyn Curnow.

This week, we're in Harare in Zimbabwe.

Just a few years ago, the inflation rate here was a staggering 230 million percent. A note like this -- $50 billion -- was all but worthless. It wouldn't have bought you a loaf of bread.

Things have stabilized. The economy has stabilized since the government adopted the U.S. dollar.

But there is one problem with this note.

Can I buy a newspaper, sir?

Thank you.

So the issue in Zimbabwe is that there are no coins. The smallest denomination is a one U.S. dollar note. So a newspaper vendor, instead of giving me change, will give me a voucher. Some people give out credit notes.

Now, just getting any dollars, though, for many people, they have to rely on the money that is sent home from those family members who live overseas.


CURNOW (voice-over): A father, a son -- living on separate continents, families apart but linked by a few hundred dollars sent every few months from Ebsalom Matapo in Bradford, England, to Freddie Matapo in Mashanaland Waste (ph), Zimbabwe.

FREDDIE MATAPO, FATHER: Even if he can send $100, we survive.

CURNOW: Last year, according to the World Bank, African migrants like Ebsalom and his wife sent home $40 billion of remittances. The real figure might as as high as $70 billion because much of the money is sent through unofficial channels.

EBSALOM MATAPO, SON: Sending money is just part of our -- our life, basically. And, actually, I'll tell you once did it today, he has sent pounds (INAUDIBLE) because we are always doing that.

CURNOW: His story is familiar to many an families. Not only do breadwinners like Ebsalom sustain and educate family left behind in Africa, they work and study and support their own children. But the money from Africans living abroad provides the continent with one of its largest sources of foreign capital, says the World Bank. And in places like Freddie Matapo's Zimbabwe, battered by political and economic crises, at times, remittances have propped up the economy and have been a vital source of income in a country that has seen unemployment reach around 90 percent in recent years.

F. MATAPO: (INAUDIBLE) chairs. Every day we're sitting there -- sitting under that tree. I never go anywhere.

CURNOW: The only time he says he leaves his rural home is to go to Harare to collect Ebsalom's money from an international money transfer outlet. Wiring money to African countries is expensive. Some brokers charge fees as high as 25 percent, putting an added burden on migrants and the recipients back home.

E. MATAPO: As much as we feel the strain, but we are actually helping. We are giving them a chance to -- to survive.

CURNOW: The family makes do with a bull haul and some crops. But when the money is wired from Ebsalom, they treat themselves.

F. MATAPO: We buy sugar, meat, flour. The sugar is far away, so we buy flour and the wife makes bread.

CURNOW: But he says his son warned him not to waste the money on beer. For the time being, that's OK, but for the future, Freddie has other ideas.

F. MATAPO: I'd like to go to Scotland, where -- to see where they brew whiskey. That's all.

CURNOW: Dreams of a nip of whiskey as remote as visiting his beloved grandchildren, who now have English accents.

(on camera): And you're proud of him, eh?

F. MATAPO: I'm very proud of him. I'm very proud of him.

CURNOW: And you miss the grandchildren?

F. MATAPO: I miss the...

CURNOW: You said that you miss the child.

F. MATAPO: I miss -- I miss especially him.

CURNOW (voice-over): In England, they, too, have pictures of the old man and his young grandson in a faraway Africa.

E. MATAPO: Everything about home is so (INAUDIBLE). I miss it. I don't like the weather. It's -- Zimbabwe has got the best weather in the world.

CURNOW: A home, a country, a continent largely sustained by the dedicated generosity of young migrants.

F. MATAPO: I am just praying to God that if God keeps him a very long time. I'm very grateful for what he does to me and to all of us, me and my wife. We're doing good.


CURNOW: Coming up on MARKETPLACE AFRICA, banking on Zimbabwe -- our next guest talks about dollars and cents, after the break.


CURNOW: These Zimbabweans are standing outside a bank, waiting for their money. Now, operating a bank in Zimbabwe has been a matter of survival, says our next guest on FaceTime.

Douglas Munatsi is the CEO of BancABC, a Zimbabwean banking group with operations throughout Southern Africa.

Even though he says tonight operating environment has been tough, they did post profits last year.

We started off our conversation talking about currency.


DOUGLAS MUNATSI, CEO, BANCABC: I would say that for the last 12 years, first of all, during the (INAUDIBLE) dollar era, it was a -- it was a huge challenge to not only run a business which, you know, in any business, you really need predictability, stability and all those things. And all that wasn't present. And so it was a really challenging time. And, obviously, people initially thought well, this is going to go, you know, get on right in a year, in two years, until people then realized that they really had to manage their businesses for the long-term.

And during that period, most companies which really sought to deal with the strategic challenges either bought a currency or they bought property or they they bought anything that would preserve value.

Now put the -- the crisis from -- from 2009 -- February 2009, when you're not dealing with dollarization, the challenges are that, you know, some businesses have not migrated from the singular mindset to a -- to a hard currency mind set, which is -- it's with totally different, you know, implications.

And you also see that in the labor market.

CURNOW: So what exactly do you mean there?

MUNATSI: Well, what I mean is that, you know, when you are adjusting salaries in a U.S. dollar environment, where inflation is less than 3 percent, you cannot award salaries above 6, 7, 10 percent, for example. Now, you get, for example, the banking sector. It isn't, you know, awarded to, you know, to the -- to the banking union, awarded 3 percent.

Now, that is unthinkable in a U.S. dollar environment, because that is, you know, a company's turnover.

You know, how can you deal with costs of that nature?

So dollarization had been costs, on the one hand. In some cases, your revenue is not -- does not respond in U.S. dollars in a similar fashion. So you have got these -- these -- these challenges.

CURNOW: As a businessman, you've done very well.

How have you managed to negotiate the rather turbulent waters of Zimbabwean politics in the last few years?

MUNATSI: Well, Zimbabwe is -- is really where we started, you know, 15, 16 years ago. So it is a market that we understand. And I think, also, we -- we have tended to look at ourselves and manage our business for the long-term. We are creating, hopefully, a permanent institution. We -- we are so -- you know, we -- we are not motivated by a transaction today, but no institution tomorrow. So that is really where we have focused on. And, you know, going back five or 10 years ago, when we started, you know, our regional expansion, we got a lot of criticism and, you know, you have not done it before, how are you going to be able to do it?

But we've been able to manage ourselves that way. And because of that, you know, we think that our future is -- is -- is bright.

CURNOW: But surely you've had to play the politics -- the politicians, perhaps?

MUNATSI: No. No. We -- we've stayed out of politics...

CURNOW: How...

MUNATSI: -- that'/s not our calling. CURNOW: -- do you do that, though?

MUNATSI: That does not...

CURNOW: I know. But surely on some level, it's been so murky just to survive, you've been -- there's got to be some -- you've got to be -- there's got to be some strategic way of managing the uncertainty.

MUNATSI: Well, I think it's a strategic way of engagement. We -- we -- we have engaged government at all levels. We have given them our views when they were -- when they were both requested and when we volunteered some of our own advice. And with the conviction that -- that we think is right, we will stand the test of time.

And so because of that, we have managed our business in a -- in a way that is obviously where we have stuck to -- you know, the traditional role of the bank is to -- to be a custodian for customer money and, obviously, to channel the resources where they are most required. I mean if you look at us 10 years ago, within the last 10 years, we've barely put in much -- we've barely put money into -- into lending, because there was really no lending to -- to do.

CURNOW: It's a matter of just surviving, isn't it?

MUNATSI: Well, it was survival, absolutely. It was not just really to say you -- you -- because if you didn't do that, you never made it. So we had to manage ourselves to survive, because, also, there -- your future was not certain. We didn't know how it was going to end. We end up in a - - in a -- in a dollarized environment, in the environment that we had never really operated in.

And how do you, you know, play to the new rules?

So, you know, yes.


CURNOW: Douglas Munatsi there, the CEO of BancABC.

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



Africa's Big Trade Deal

African leaders have agreed to finalize plans for the continent's biggest fair trade bloc within three years.

The proposed "Grand Free Trade Area" will create a $875 billion market, integrating three existing blocs and encompassing 26 countries.

Zambia Copper Boom

Several international mining companies are planning to expand their copper operations in Zambia, after prices for the metal nearly doubled over the past two years.

Zambia says the copper boom is helping to build infrastructure and diversify its economy.

CURNOW: That's it for this week's show.

From Harare in Zimbabwe, I am Robyn Curnow.

Thanks so much for watching.

Please do go to our Web site. All of our interviews and stories are online. While you're there, do come to our Facebook page, where you can join a discussion about this week's show.

But until next week, good-bye.