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QUEST MEANS BUSINESS

Default Part of Brussels Deal for Greece?; Interview With Bulgaria's Finance Minister

Aired July 21, 2011 - 14:00:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Finally, default may be part of a Brussels deal for Greece.

Bulgaria's finance minister tells me he wouldn't join the Eurozone in its current state.

(BEGIN VIDEO CLIP)

SIMEON DJANKOV, FINANCE MINISTER, BULGARIA: There are lessons that we know, that the Western countries have forgotten. Bulgaria can teach the Eurozone countries some lessons that they have forgotten.

(END VIDEO CLIP)

And debt deal or no debt deal? There is rampant confusion in Washington.

I'm Richard Quest. I mean business.

Good evening.

Uniquely grave, the Greek situation needs exceptional solutions. Those are the words, according to a draft from the Eurozone's emergency summit that was leaked earlier. The draft lays out a string of measures that would rescue Europe's economy once again.

This is what they are suggesting and proposing. According to the documents, interest rates will be lowered for Greece, Portugal and Ireland, the countries that are affected and under program at the moment. Those countries will now have at least 15 years to pay, twice as much as the original agreement put forward. And the ESFS, the stability fund, that would be-the rules would be changed. It would prevent countries in trouble from blowing up in the future. In other words, stability would now include prevention.

Most controversially, the private sector would be asked to voluntarily rollover or take haircuts on Greek debt. Now the killer question is whether the rating agencies will call that a selective default. This is the rescue plan as put out by the leaked draft.

Jim Boulden is in Brussels for us tonight.

Jim, how accurate do we believe that leaked document to be?

JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: It looks like this is the document that would have come out of the meeting in Berlin yesterday, between the president of France, Mr. Sarkozy and of course, Chancellor Merkel. They had to come up with some kind of with some kind of plan there, but bring it to Brussels, here, today. And to do that, there had to be what everyone said was a huge decision. Something very important decision to make in order to have the markets calm down.

And we saw today the euro jump. We saw bank shares jump. So, if the leak is accurate, and if these people behind me can make a decision-we still haven't heard-then it looks like they might have come up with the grand plan.

QUEST: All right. But of all those things I've just mentioned. We guess that interest rates were going to be tinkered with, and maturities. But really it is this question of the voluntary inverted commas, rollover by private debt. How are they going to handle what will almost certainly be selective default, following on?

BOULDEN: Well, what we are looking for, of course, is what does the European Central Bank say. How will they look at this? We know that Jean- Claude Trichet was there in Berlin yesterday, at least in observing. And we know he's here today. So we're going to want to hear what he has to say.

Now, what we have been hearing for the last couple of weeks is one or two rating agencies says that is selective default, well, then it is not all of them. So there is going to be a political decision, I think, made on that. But part of the ESFS is going to be being able to recapitalize the banks; have new powers within that huge loan facility. And in that they might be able to give money to governments who can loan it to their banks, to help recapitalize. And that means that if they do take a haircut, banks, insurance companies, any financial institution, that they could have that money come to them in another way. Could that still mean it is a selective default? It could. But it may be enough. That is what they are hoping here in Brussels.

QUEST: Quickly and briefly, Jim, is there a feeling in Brussels that now really is the time. This can has been kicked to the point of destruction.

BOULDEN: Absolutely. We were here in March, we were here again earlier in July. They have been going on and on with this one. But because what happened in Italy when we saw the interest rate spread really go out. It really scared people. Until Italy said, yes, we'll have a new austerity plan and they passed it very quickly. Until that happened it was very political and a lot of people weren't able to make that decision.

But I tell you we have been here seven hours listening, waiting for the announcement. It is going a long time. And I think they are really trying to hash this out, Richard.

QUEST: Jim Boulden, who has got many more hours of duty to do. You are not coming home until this thing is-the Is the dotted and the Ts are crossed. Jim Boulden who is in Brussels for us tonight.

Those bank shares soared, as Jim outlined, as European markets took heart from the negotiations. The two main Eurozone markets in Paris and Frankfurt, both up by more than 1 percent. The banking stocks lead the charge. Barclay's, Lloyd's, Santander, all seeing gains of at least 4.5 percent, 5 percent in some cases; as for the periphery, Spanish, Greek, Italian share indices up 2.5 percent or more. The euro gained ground 0.75 of 1 percent against the U.S. dollar, 1.43, 1.44.

Now since this crisis began Eurozone ministers have time and again been holding meetings. And years later here we are trying to dodge the same problem. They are still arguing over the same sticking points. The phrase that critics use in this situation, as you heard me talk about to Jim, it seems to be as true now as ever before. Europe has been kicking the can down the road.

(BEGIN VIDEOTAPE)

QUEST (On camera): The real crisis began when Greece could no longer pay its bills. And rather than realize this was a solvency question, they choose to treat as a liquidity issue. And so, they bailed out Greece. And then began the process of kicking the can down the road.

(KICKS THE CAN)

When Bailout 1 did work properly, the answer was simple, impose more austerity on the Greeks. And, yes, pass new laws in the Greek parliament. Forget the debt for the moment, just-(KICKS THE CAN)-kick the can down the road.

So far this year there have been four European summits designed to solve this problem. But all that has happened is-(KICKS THE CAN)-the can gets kicked further down the road.

As the can gets further down the road, it gets closer to the brick walls of contagion, default, or euro collapse. Battered, bruised, the options are now running out. They really have kicked the can, so far- (KICKS THE CAN)-down the road.

(END VIDEOTAPE)

QUEST: It looks like the theme in Europe tonight is making your mind up, can, or no can.

Now, there is another can that is being kicked down the road. In the U.S., it is not dancing on the ceiling it is dancing around it. With the clock ticking we'll next look at the fast-approaching debt deadline, and what is being done to sort it out. QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Now there is no deal in sight to raise the U.S. debt ceiling. Tonight, with less than two weeks to go until a default deadline, well, the White House is denying reports that lawmakers are close to an agreement.

(BEGIN VIDEO CLIP)

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: No deal, we are not close to a deal. We are-obviously, the president is in discussions with all the leaders of Congress, as well as other members. And exploring the possibility of getting the biggest deal possible, which is a position he has held for a long time now, as you know.

(END VIDEO CLIP)

QUEST: Now the Republican lead Cut, Cap and Balance plan has passed the U.S. House, but frankly, of course, withstands virtually no chance of getting through the Senate, Democratically controlled. And even if it does, by some miracle, end up on Obama's desk, it won't be signed into law. He has already vowed to veto it. It is a total waste of time.

The House Speaker John Boehner, a Republican, says the plan can work though for both parties.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, SPEAKER OF THE U.S. HOUSE OF REPRESENTATIVES: The House passed our Cut, Cap and Balance legislation, that represents exactly the kind of balanced legislation the president has talked about. It provides him with a debt limit increase that he has requested. But it gives families and small businesses the real spending cuts and reforms that they are demanding without any job crushing tax hikes. What this legislation also shows is it is not only important to avoid default.

(END VIDEO CLIP)

QUEST: John Boehner talking there. That is the man on the right.

Enthusiasm is growing for the bipartisan plan, from the group of senators known as the "Gang of Six". And here is what House Minority Leader Nancy Pelosi said about that, to CNN.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, MINORITY LEADER OF THE U.S. HOUSE OF REPRESENTATIVES: I said it contained some good principles.

QUESTION: What principles?

PELOSI: Well, we-it is about deficit reduction. It is about making sure that we do not hurt the most vulnerable in our society.

(END VIDEO CLIP)

QUEST: When we want to make sense of this we need someone like Laura Tyson to help us, professor at the Haas School of Business at the University of California, in Berkeley. And former chair of the Council of Economic Advisors, during the Clinton administration.

Laura, where do we stand? We know we have got this two-week deadline ahead of us. And how likely do you think that a plan will come to fruition now?

LAURA TYSON, HAAS SCHOOL OF BUSINESS, UNIV.-CALIFORNIA-BERKELEY: I think it is still very likely that there will be a last minute deal to avoid the catastrophic consequences of failure to raise the debt limit. I think it is unrealistic to think that with two weeks to go that is going to be attached to a major deficit reduction plan. Even the Gang of Six people have said, you know, we don't even have a legislative proposal. It hasn't been scored by the Congressional Budget Office. So, I really believe in the next two weeks we are going to have to find a way to deal with the debt limit. And it is not going to come with a full multi-year package on deficit reduction.

QUEST: Right.

TYSON: The good news is, you know, the American people now, the polls are showing have really gotten worried about the debt limit. And really are putting pressure on their representatives. And by the way, the Republicans are looking worse in this regard as being more intransigent in the polls. And I think that will help drive toward the deal.

QUEST: OK, obviously, perhaps you are coming to this maybe from a more Democratic point of view in that regard.

TYSON: Sure.

QUEST: Let's talk about the president and what some would say is his failure to get a deal and allow this position to get to the stage that we've got to.

TYSON: Well, first of all I think you need to start with the fact that there are 60 Republicans who basically, in the House of Representatives, who have said they will not vote for a debt limit increase under any circumstances. So, let's start with that. I think that the real problem here is the debt limit never should have been attached to a multi- year deficit reduction program when it became clear that there wasn't agreement on a multi-year deficit reduction program.

QUEST: Oh.

TYSON: The debt limit is about decisions we have already made. It is about debts we have already undertaken that we have to honor.

QUEST: OK, so in this scenario, when you have already had a bipartisan commission on deficit reduction, which came out with a very worthy and respected conclusion, which promptly got kicked somewhere, who knows where, and basically ignored. There is no seem-everybody seemingly says, something must be done, but, uh, would you mind doing it, not me.

TYSON: Well, I think, again, I want to make a distinction here between something must be done to raise the debt limit. That is actually a major-that is a distinction, it has been raised time and time, and time again.

QUEST: Right.

TYSON: By the same people who that had nothing to do with coming to a multi-year deficit reduction package. We need to do both.

QUEST: Right. But let's stick with deficit reduction. Let's put that ceiling to one side for just second.

TYSON: OK.

QUEST: But when you have the U.K. with austerity, Greece almost going down the toilet with austerity. Italy, an austerity plan within 24 hours. When is the U.S. going to come up with its own austerity plan?

TYSON: Well, I want to point out that unless the U.S. convinces the rest of the world that it will breech its debt limit, right now the rest of the world, including a lot of U.S. savers, are willing to continue to lend to the United States at a long-term interest rate of 3 percent or less. The view is that the U.S. problem right now is actually a jobs and investment problem, and a long-run deficit reduction problem. It is not a problem of the next year. It is not a problem, the next year is the jobs problem and an investment problem.

QUEST: All right.

TYSON: You can a multi-year deficit reduction package that handles deficits out in 2020, 2025. That is what we need.

QUEST: All right.

TYSON: That is what we need to do.

QUEST: This is the most unfair question I have asked somebody so far tonight. Which is more serious, the Greece, Eurozone crisis, or the U.S. debt ceiling crisis.

TYSON: They are both extremely serious for the global financial system.

(LAUGHTER)

Both things need to be resolved. I am heartened by what I am hearing out of the European decision, or the European proposal today. And I continue to believe that in the next two weeks the U.S. will come up with a plan to raise the debt limit. We cannot, neither Europe, nor the U.S. should allow the global financial markets to fall into chaos because of a failure to take politically difficult decisions.

QUEST: Wonderful to see you as always, Laura Tyson, many thanks for giving us time and joining us on QUEST MEANS BUSINESS, as always.

TYSON: Thank you.

QUEST: The markets, and a quick look, as you can see, up 147 on the super screen, the Big Board, on the super screen. Prices have been surging as word of the possible agreement over the debt crisis. The averages are sharply higher, up 1.17 percent.

Alison Kosik is in New York, joins me now.

Now Alison, look, why are the markets up 1 percent, when seemingly, seemingly the morass on debt continues?

ALISON KOSIK, CNN FINANCIAL CORRESPONDENT: Well, they are not focusing on the U.S. debt issues. They are focusing on what is happening with Greece. You know, investors, Richard, they have been really unsettled about these debt problems, about whether or not they would spread through Europe. And one trader even said that even though the market had been fairly bullish, recently, investors, you know, they are still looking for a driver to point the way. And that really could come from these EU talks. You know, we saw the actions in European bank shares, closing higher across the board. And that is really helping to drive the financials here. We have also got really strong earnings reports.

QUEST: Right.

KOSIK: Talk about Morgan Stanley. It posted a loss in the second quarter, it still beat forecasts, though. The focused today is on Greece, it is on strong earnings. And we are seeing a rally because of that.

QUEST: We will, of course, have-talk about that in the Q25 in a moment. I need to ask you about Chrysler. The U.S. government has now sold its equity stake in Chrysler. It is out of the company. It took a loss of over $1 billion. Quick question: Why not just hold the stake longer and hope that it turns into profit? Why monetize the loss?

KOSIK: Because this is more than just a profit for the government, Richard. You know the government wants Chrysler to be a healthy company. And the way for that to happen is to let Fiat get a controlling stake as soon as possible. And sure, the loss is big. It is $1.3 billion. It is a lot of money. But, you know, we can wind up calling this more of a bailout than an investment at this point. And when you think about it, it is really not as bad as critics had predicted.

QUEST: Oh!

KOSIK: And, you know, the bottom line with this, Richard, is that the government, it doesn't have any interest in being in the auto business. Don't you think?

QUEST: I'm not commenting on that side of it. But to say a billion is not as bad is an interesting concept, which you and I could talk about in the future.

Alison, many thanks, indeed. Alison Kosik joins us from New York.

Buckingham Palace has just confirmed, to CNN, that the Duke of York, that is Prince Andrew, is to step down as the U.K.'s special representative on international trade, the trade envoy.

In a moment, time for "Q&A". Ali and I battle it out over the value of these things. They are the tabloids. Are they worth the paper they are printed on?

(COMMERCIAL BREAK)

ALI VELSHI, CNN ANCHOR, CNN NEWSROOM: QUEST MEANS BUSINESS, and so do I. We're here together in the CNN NEWSROOM around the world.

Hello, Richard.

QUEST: Hello, Ali.

We are coming to talk business, travel innovation and since it's "Q&A" nothing is off limits, really of limits. Today, we're talking about the tabloids, the good, the bad and, Ali, the ugly.

VELSHI: Well, there it is, the rags, the scandal sheets, whatever you want to call them. We've been talking a lot about them with the "News Of The World" scandal unfolding on your side of the pond. But really what is the value of tabloids, Richard? I'll let you go first. You've got 60 seconds.

QUEST: 60 seconds on the value of the tabloids. It is easy to say that the scandal sheets and the tabloids are worthless. After all, we can all agree that a free press is essential to the nature of any country, but how can these sort of stories actually make for a viable democracy?

Well, the truth is, of course, that this is the backbone of our democracy. And the scandal sheets and their broadsheet small versions are essential for what is going to happen in the way we live our lives. The little tabloids do more than just show us bare-breasted ladies and scream obscenities about randy Vickers. They often run campaigns, for example, name and shame pedophiles, they run campaigns for consumers. They are in many ways the form that we look forward to when we want to know the way society is going.

(BUZZER SOUND)

Because it is these papers that have the circulations that we need to make it so important.

(DESK BELL CHIMES)

VELSHI: Richard, Richard, Richard. I risk your ire and the ire of our British viewers when I say that I honestly don't see that the tabloids bring us much news value on either side of the Atlantic. And you're right, they can be entertaining. They even break the occasional story. Over on our side the "National Enquirer" did with the John Edwards affair.

Here's the downside to all of this muckraking, Richard. For instance, it's hard enough to attract people into politics, good people into politics. The fact that there's a culture of so-called journalism that's out to dig up every piece of lack of judgment you've ever had, contributes to the dearth of talent available for public office.

Hey, Richard, it's entirely possible that the best person for a given job, or political office, is someone who might not have conducted themselves perfectly in every aspect of their lives. Tabloid journalism, what you're doing there, it discourages that sort from stepping into the public life because, Richard, it's not worth it. The trade-off in privacy is not worth it. Those tabloids, they hunt for dirt. The News Corp. example shows what happens when the search for sleaze and gossip goes to far, Richard.

(BUZZER SOUNDS)

QUEST: Swat this fly, please.

VELSHI: I think it's time to separate the men from the boys on this one. You probably know more about this than I do but time to bring The Voice in to quiz us on what we know about these things.

Good day, Voice.

UNIDENTIFIED MALE: Good day, gentlemen.

I've never seen you two so excited so let's dive right in.

Millions of people read the tabloids every day. According to "The Economist," which single tabloid has the highest circulation? Is it A., "Bild Zeitung", out of Germany, B., "The Sun", from the U.K., C., "Tokyo Sports," from Japan-

(DESK BELL CHIMES)

UNIDENTIFIED MALE: Richard, go ahead.

QUEST: It's "Bild" from Germany.

(BELL CHIMES)

UNIDENTIFIED MALE: That is correct. Germany's top tabloid reaches 2.9 million readers, just ahead of "The Sun,".

On to question number two. In which question was the first tabloid published? Is it A., the United States, B., Britain, C., Germany, or, D., Italy?

(BELL CHIMES)

UNIDENTIFIED MALE: Ali?

VELSHI: Britain.

(BUZZER SOUNDS)

UNIDENTIFIED MALE: Incorrect. Richard?

QUEST: It's a choice between Germany or Italy. Let's go with Germany.

VELSHI: Wait, make the choice.

(BUZZER SOUNDS)

UNIDENTIFIED MALE: You are both incorrect. The correct answer is the United States. It was a submission on New Year's Day of "The New York World" newspaper, published by James Pulitzer, but the issue was designed by a British journalist, who at the time ran "The Daily Mail" in London.

On to question number three --

VELSHI: Who knew? We started this problem, Richard.

UNIDENTIFIED MALE: Which of these is the oldest newspaper still in print? Is it A., "The Times of London," B., "The New York Times," C., "Le Figaro" out of France or, D., "The Montreal Gazette"?

VELSHI: it has got to be a trick question, Richard.

QUEST: It is absolutely a trick question.

VELSHI: OK.

UNIDENTIFIED MALE: Go ahead, Ali?

VELSHI: I'm going to go all out for "Le Figaro."

UNIDENTIFIED MALE: Incorrect.

VELSHI: I didn't really believe either but I figured were you were trying to trick us.

UNIDENTIFIED MALE: You're try, Richard.

QUEST: Is it "The Times of London" or "New York Times."

(DESK BELL CHIMES)

QUEST: I'm just going to go for it, "The London Times."

(BUZZER SOUNDS)

UNIDENTIFIED MALE: Incorrect. You both failed.

VELSHI: It can't-

UNIDENTIFIED MALE: "The Montreal Gazette."

QUEST: Ah!

UNIDENTIFIED MALE: It was started in 1778. Ten years ahead of "The Times of London."

QUEST: And you are a Canadian!

UNIDENTIFIED MALE: You should have known.

VELSHI: I'm never going to live this one down.

UNIDENTIFIED MALE: Richard, you won this time.

VELSHI: Yeah, whatever.

QUEST: That will do it for this week. Remember, we're here each week, Thursdays on QUEST MEANS BUSINESS, 18:00, and in the CNN NEWSROOM, Ali, we're also with you.

VELSHI: That's right. 2:00 p.m. Eastern on Thursdays. Keep the topics coming on our blogs at cnn.com/QMB, and CNN.com/Ali. Tell us each week what you want to talk about.

See you next week, Richard.

QUEST: See you next week. Have a good one.

We live to fight another day.

One of the most unfashionable clubs on Earth, so why on Earth would anyone want to get into the Eurozone. We'll ask Bulgaria's finance minister, why his country wants to join, next

(COMMERCIAL BREAK)

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

And on this network, the news always comes first.

One last picture perfect landing, even if it was at nighttime.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Apparently now downplaying the drag shoot. Ferguson rotating the nose gear down to the deck.

(END VIDEO CLIP)

QUEST: Atlantis, back to Earth after a mission to the International Space Station. Atlantis stays on the ground along with the rest of the shuttle fleet. NASA has now ended the 30 year program.

The conditions are very harsh -- perhaps an understatement -- but they are the words from the president of Somalia, as he issues an urgent appeal for famine aid. Half of Somalia's population is in dire need, the country stricken by drought. The World Food Programme says it will start flying aid into the capital of Mogadishu within days.

The investigation into illegal activities by British journalists appears to be widening beyond the "News of the World." It's understood police are looking into a private investigator who sold information to 31 publications. The focus is on blagging, or illegally obtained information by impersonating someone.

European leaders may be closer to a new deal to rescue Greece, as a draft agreement at the summit in Brussels, which offers new bailout loans to the country, reduced interest rates to others and would also extend rpm deadlines. Some of the terms will be offered to Portugal and Ireland.

When Bulgarians look over the garden fence toward their Greek numbers, they must feel like they've dodged a bullet.

So why does Bulgaria plan one day to join the Eurozone, which some say is near collapse?

I spoke to Bulgaria's finance minister and deputy prime minister, Simeon Djankov, who had strong views, opinions and advice about what's going on in the Eurozone.

I asked him, did he really believe European leaders have what it takes to get a grip on this crisis?

(BEGIN VIDEOTAPE)

SIMEON DJANKOV, BULGARIAN FINANCE MINISTER: We got major lessons from last years. Apparently, it we are partial and, because of that, failed. But this time it needs to be a comprehensive package. And we have one more shot. We don't have any more shots. I think everybody understands this, finance ministers, prime ministers. So this time, we will get it right.

QUEST: The annoying part is, though, every commentator said it -- we said it on this program, "The Economist" said it, "The Financial Times" said it, the analysts said it.

So when finance ministers meet and you're in the room, maybe not in the Eurozone, but of your -- of E.C....

DJANKOV: ECOFIN?

QUEST: Yes, ECOFIN.

When you meet, are you delusional or are you just dishonest?

DJANKOV: Everybody knows, among the finance ministers, as well -- we knew it last year. We had lower meetings. Ultimately it got to the political level. A couple of countries meet, France and Germany. And you come up with a different answer from what all the finance ministers thought was the right answer. That was last year.

Hopefully, it will be different this year.

QUEST: Your country is on the list to join the euro. You don't have a date yet and you're not in the RM2.

But why do you still want to join?

It's a club that's failing?

DJANKOV: Well, it needs some fiscally responsible countries, like Estonia just joined, Bulgaria is one of these countries, so we will strengthen this first. We trade with all these countries of the Eurozone...

QUEST: Do you still want to join?

DJANKOV: We'll want to join. Yes. We believe it's in the long-term interests of Bulgaria.

QUEST: But you don't want to join while it's in the mess and crisis it's in?

DJANKOV: Not yet, because we now don't exactly know what we are joining. On the monetary side, we know. But on the fiscal side, on the tax side, you know, there are a number of suggestions of tax harmonization, for example. We are not happy with that. Actually, the U.K. is not happy with that either.

We want to be part of the decisions, and that's why we want to join soon. But yet we want to change some of the arguments that are now being presented by the countries of the Eurozone itself.

QUEST: If I had a piece of paper that said, Minister, just sign on the bottom line and tomorrow you're a member of the Eurozone, would you sign?

DJANKOV: Not in this page. A couple of years ago, yes, when I became minister, in late 2009, I made a hard push to -- to join in. Then Greece happened, so everybody focused elsewhere. Now, we will look more cautious, because we want to know what we are joining, not just on the monetary side, but the fiscal rules, what fiscal rules are going to come up and what, if any, tax -- tax rules are going to come up.

Where we are not happy with the tax rules, we don't want tax harmonization.

QUEST: They've faced down the worst crisis of the Eurozone to the point where the thing is nearly collapsing. They're at each other's throats. And yet, Minister, you sit here and tell me that you think that they can improve things.

DJANKOV: Precisely because of last year's failure, essentially. Now everybody knows, the politicians, as well, that you cannot have a partial solution. You have to resolve it all. It didn't -- didn't used to be clear to everybody, not just the finance ministers and the politicians, the analysts, as well.

QUEST: I come back to the -- you know, the old Groucho Marx statement -- you may have heard it. I wouldn't want to be a member of a club that would have me as a member.

Why do you want to join the sinking ship of the Eurozone?

DJANKOV: Because with countries like Bulgaria, like Estonia, like Slovakia, that have joined more recently, the Eurozone can become a much more fiscally conservative club, which actually helps everybody. And since we trade with each other, geographically, we are very close. We just need to pool it together. And this needs to be joined.

And here, Western Europe, including, of course, the southern part, has a lot to learn from the East European countries, because we went for a major restructuring, a banking restructuring, economic restructuring, once we pulled out of socialism. And now there are lessons that we know that the western half has forgotten.

Bulgaria can teach the Eurozone countries some lessons that they have forgotten.

QUEST: All right, would you have the nerve, the gall, to look the French finance minister -- the new French finance minister or the German economic -- economics minister -- in the eye and say, I know what I'm doing and you don't?

DJANKOV: I have, I do and I actually have, on occasion, like on some of the years that have come -- they have come up with something that just does not work. This doesn't help you and it doesn't help long-term Europe. This is -- it -- it's good to be part of a club like this, because no matter how small a country Bulgaria is, it actually has equal value to a country like Germany or France and we use it.

(END VIDEO TAPE)

QUEST: Bulgaria's finance minister.

It's not often you hear such honest, forward -- straightforward views put so bluntly.

When we come back, a record quarter for Intel's sales.

The question is, when we put it against our criteria, what happens with the Q25?

(COMMERCIAL BREAK)

QUEST: So we are heading into the home stretch of the Q25. It's our exclusive quarterly index that helps you to make sense of the earnings season.

We give green chips to those companies that meet or beat our challenging criteria, and, of course, the red ones go to those that don't.

These are the criteria that we've given -- sales growth of 12 percent, revenue growth of 5 percent year-on-year, Q-on-Q earnings growth, beat earnings estimates by $0.05 a share and positive about the future. That's the outlook -- all important outlook.

If you get -- if you basically get most or all of them or one with only a section of one, then you get the -- the color. Otherwise, there is a debate.

We have dispensed 14. It's seven and seven.

Maggie Lake is in New York and joins me now -- Maggie, let's begin with AT&T. AT&T only got two out of the five. It -- so it's up for debate.

A green or a red?

MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: It -- yes, it is. And you would think, with only two out of five, we might be leaning toward red. But I like this one, Richard. I think it should get a green and here's why. They're struggling a bit with some of the legacy, older parts of the business. But 50 percent of their contracts are now Smartphones and 23 percent growth in wireless data revenues. The data for the tablets and the Smartphones.

QUEST: But how...

LAKE: That's where the future is and they're doing well there. That's what matters.

QUEST: The only two good bits, though, was positive about the future and Q-on-Q growth.

So how do, I mean...

LAKE: Again...

QUEST: Yes, but -- but, Maggie, are you wanting to give it a green on the basis of that?

LAKE: Yes. Yes, because this is where the future is. And -- and that other business, they're moving away from it. They've been doing it.

QUEST: Yes.

LAKE: And we thought AT&T was going to be dead in the water when Verizon got their hands on that...

QUEST: That...

LAKE: -- iPhone. And they weren't.

QUEST: I'm...

LAKE: They're holding steady with the iPhone business. They're adding Android and they're doing well in that segment. And that is where growth is for telecoms -- Richard.

QUEST: And that, of all of what you said, Ms. Lake, that it the reason why tonight we give them a green, the ability to handle the Verizon arrival of the iPhone. It gets you a green.

American Express -- five out of five it made. I'm not even going to invite discussion on AMEX. The company simply performs incredibly through the recession. It's cutting its costs. It's lowering its write-offs for bad debt.

Listen, you know, far be it from me to promote AMEX, but the way they've performed gets them a green.

Intel, two out of five. Let's go into it with you. It had revenue growth that was up and it beat earnings.

But what else was good?

What have you done for me lately?

LAKE: Yes, I know here -- and here, again, two out of five, where you would think maybe that's a problem. We're going to go -- I'm going for a green on this one, too. They -- the soft laptop business hurt them in the U.S. and Europe, that's for sure. But they're doing really well in the other areas, again, that are growth -- their data centers, their cloud application, cloud revenue up 50 percent. That's where the future is, again, a big deal. Intel has been moving in the right direction, concentrating on the growth areas.

I think it gets them a green.

QUEST: You're killing me here, Maggie.

You're killing me here, because we did a -- look, I have to say, it's not just Maggie and myself. David Brand (ph) joins in. Claire (ph) also joins and we have a vote on this when it is a thing. And I'm afraid I lost. I'd have gone red, but the others, who are far too rose-colored spectacles, they went for what we call (INAUDIBLE)...

LAKE: They upped their guidance, too, Richard.

QUEST: Ah...

LAKE: They upped their guidance, too.

QUEST: Ah, guidance, schmidence.

PepsiCo, three out of five. I mean I -- I would have given PepsiCo a green.

LAKE: It gets a green, doesn't it?

QUEST: It does.

LAKE: I think it gets a green. I was the one moaning about this. I wasn't so -- I wasn't so happy with PepsiCo because if you listen, they're all in a difficult situation. They -- they're dealing with rising commodity prices. They're going to raise their prices. It's a really tough consumer market...

QUEST: All right.

LAKE: You know, is that going to hurt business?

I'm not so sure. It's -- it's a risky move. And also, they're bringing their guidance down a bit and Coke didn't. That's their big rival.

So I wasn't thrilled about that. But they did get three out of five, so I was overruled.

QUEST: Let's go for Whirlpool. Whirlpool got none out of five. If you get none of any particular color, whether it's green or red, we can dispense with Whirlpool, a consumer company that's in trouble.

Morgan Stanley, oh, boy, Morgan Stanley. Morgan Stanley managed to get two out of five. If we look at the two that it got, trading revenues were up and it beat earnings. But its guidance was poor, its year-on-year and -- I mean its revenue growth was the (INAUDIBLE)...

LAKE: I love this story, though.

QUEST: Why?

LAKE: It gets a red, Richard. But this is a great story. Because Morgan Stanley did what no one else in the space did and their trading was great this quarter. Their trading revenue was up. Goldman Sachs' trading revenue down over 40 percent. In fact, an analyst here, Didd Govea (ph), is out saying is Morgan Stanley the new Goldman Sachs?

So even though Morgan lost money and they get a red, you've got to think that has the people at Morgan Stanley in the hallways, the employees over there, cheering.

QUEST: All right, but hang on. You're being contrarian and contradictory tonight, Ms. Lake.

LAKE: Well, listen, I -- I know that -- when you do good in a segment and it's where the future is -- they also do well in wealth management. I know that I've got -- the other two are green. But with Morgan Stanley, the bottom line is they're losing money. They're still losing money. Very hard to see how you can give them a green when they're losing money.

So they have got work to do, but it was a really impressive performance. Investors liked it a lot.

QUEST: Finally, Ericsson. This is not the Sony Ericsson. This is the Ericsson that makes bits for telcos so that we get more broadband. Interesting. Its revenues were up dramatically. Its margins were slightly weaker. I know this is someone that I follow perhaps a little bit more than you.

So I -- I think, perhaps, we have to give them a green for the way they performed, even though, perhaps -- even though -- here, this is my contradictory announcement -- the stock was down nearly 10 percent today.

LAKE: Maybe the good news was priced in. Listen, one thing about Ericsson -- and this is a trend we've seen, Richard, as you and I have discussed, globally, right. They've got -- they're doing well in places like Brazil, China, Russia. That has been a consistent theme no matter what area you're in, if you have that international emerging markets exposure, it's boding well for your prospects.

QUEST: Maggie, we'll pick it up tomorrow.

Many thanks.

Maggie Lake, who is in New York.

Clearly, the sun -- the hot weather of the state of New York at the moment is clearly getting to her.

We now have nine on that, 12 on the greens. The greens are just edging out.

Let's stay with that green that we gave Ericsson.

I was joined earlier by the chief executive of Ericsson.

And I asked Hans Vestberg what I was, whether their costs were clearly under control.

(BEGIN VIDEO TAPE)

HANS VESTBERG, CEO, ERICSSON: The small difference, if you take from the first quarter to the second quarter is mainly or only explained by high restructuring shortages, which we include in all the figures we report. We have a little bit higher restructuring charges in the second quarter because we have done a redundancy program in -- in Sweden that was concluded in their midst on June. So that -- that is the main explanation.

QUEST: All right...

VESTBERG: We're not an online (INAUDIBLE) as such is -- is -- is fairly -- fairly stable on the Ericsson core business.

Then, on the joint ventures, yes, Sony Ericsson and Este Ericsson will have the lower result.

QUEST: What's the trend that you're seeing in terms of where you need to look to -- to get that -- to get the growth?

Because every CEO I ask on QUEST MEANS BUSINESS happily tells me that, you know, it's emerging markets, it's Brazil, it's India, it's Russia, it's China.

But what trend are you seeing in that sense?

VESTBERG: We have been growing a lot in North America the last year. And we -- we, of course, has been down in Europe for quite a while. This quarter, we are flat with the currency adjusted growing in the UE -- in Europe.

So we see what's on the markets. Of course, Russia, China and...

QUEST: All right...

VESTBERG: -- and Brazil was very strong for us in this quarter. But they were not equally strong last year.

So as well in infrastructure and services, we, of course, have different regions coming up. And I think what we see right now, that regions are really down for us. It's still Sub-Saharan Africa and then parts of the Middle East due to the turbulence that we have seen there and then parts of Southeast Asia. And those are the regions that are really down for us. And the other regions are either on flat dish (ph) or the others are on real growth.

QUEST: If we look at the growth and we've seen the growth in Facebook and Google+ and if we look at the Smartphones and we see the -- the -- the tablets.

By all things right and proper, you have boom years to come.

VESTBERG: I usually say that the last 20 years has been fantastic to be in telecommunications. We have gone from one million to one billion subscribers to 5.7 billion mobile subscriptions in the last quarter.

But it's even more interesting to see what's going to happen in the next 10 years, because then everything is going to be connected. It's going to be a huge impact on person's lives, society, enterprises, by using broadband and connectivity. And that's why we see so many companies being interested in this sector.

So I think in the next two years, it's going to be even more interesting to be in the telecommunications industry. And there I think Ericsson is extremely well positioned. We are the number one on mobile broadband. We're number one on global services, doing service work in telecommunications. And we're working on output applications to support operators.

(END VIDEO TAPE)

QUEST: The chief exec of Ericsson.

Now, a moment ago, I was joking with Maggie about the heat. It isn't actually a laughing matter. The heat, for large parts of the United States, and some temperatures, you're not going to believe they are dangerously high. The temperatures -- and we'll tell you about them after the break.

(COMMERCIAL BREAK)

QUEST: The hottest air of the season is blanketing much of the United States.

Pedram is at the World Weather Center tracking the latest.

Look, you know, some might be tempted to say it is July slash August. It's going to be hot in the US.

So just how hot and bad?

PEDRAM JAVAHERI, CNN METEOROLOGIST: It's remarkable. You know, these temperatures getting close to 50 degrees Celsius, over 122 degrees Fahrenheit, what it feels like outside. And you take a look at what's encompassed here as far as the United States. Some one third of the Continental United States, or over two million square kilometers underneath heat advisories or heat warning. Again, a large chunk of it all the way out toward portions of the Northeast, where the highest populations reside and even to the south, the heat extends.

The warnings are now in place but the temperatures are just as hot. And take a look at a live perspective. This, right now, at Centennial Olympic Park. This is in downtown Atlanta, Georgia, site of the 1996 Olympics that took place in the city of Atlanta. And those folks trying to cool off. Temperatures as hot as 40 Celsius. When you factor in the humidity, causing a lot of concerns.

So of course, getting around water is going to help a little bit.

But take a look at this. The high temperature heat indices from Wednesday, again, factoring in the humidity, 51 Celsius. That's comparable to some of the readings we see across portions of the Middle East. But this, again, feels hotter because a lot more moisture in the atmosphere, even across portions of Minneapolis, where in the winter season, temperatures could be as cold as minus 40, 43 degrees Celsius was what it felt like on Wednesday, when you factor in the humidity.

So why is all this happening?

Well, high pressure in place, dominant ridge of high pressure, or what we call a dome of high pressure. What it does, it deflects the jet stream, the storm tracks that are taking all the moisture, all the cooler air with them well to the north.

And as the high pressure sits in place, the air likes to sink right beneath it. And as this happens, the clouds begin parting, the air sinks. And when you compress air and you sink it, it tends to warm up. And I often talk about perhaps pumping your bicycle tire as a child and seeing the -- the pump itself begin to warm up and the tire begin to warm up. It's that sort of a mechanism that's taking place right now over the United States, the eastern half, at least, and the central region, where the humidity has become stagnant , left in place, and the temperatures are remaining pretty warm.

And in New York City, Maggie Lake, she's feeling temperatures some six to eight degrees above the averages, up to 28, the average for this time of the year. And you can see Friday at 36 degrees...

QUEST: Pedram...

JAVAHERI: Oh, yes, Richard. I can hear you.

QUEST: Hang on. I'm -- I'm just interrupting you, which is most unusual.

That dome of high pressure...

JAVAHERI: Yes?

QUEST: -- that sends things around the thingamajig of the -- well, round about it, what causes that dome of high pressure?

Or is it just a phenomenon that happens?

JAVAHERI: It's a weather pattern that basically takes place around different parts of the world. We have areas that are consistently sunny and warm because there are semi-permanent areas of high pressure. And basically, if you have an area of low pressure somewhere on Earth, somewhere else, that pressure has to be balanced with an area of high pressure. And right now, that's displaced over the United States -- Richard.

QUEST: Right. Forgive me interrupting you. Do carry on.

JAVAHERI: Yes, you know what, we were talking about extreme heat, bias want to show you something very quickly on the opposite end of everything across South America. You're -- in Chile, Central Chile, this is Wednesday where two meters of snow accumulated in portions of some of the isolated communities, but some 6,500 people have actually been blocked off from help because of how much snow has accumulated there.

And, again, it shows you, we are in the heart of the winter season across the Southern Hemisphere. So the folks, even the Chilean Interior Ministry actually calling this a white earthquake because of what a shock it's brought to the communities out there and, of course, the cattle cannot get their food and the concern is going to grow there as another storm system closes in.

So there are some cooler places to head to, Richard, if you're too hot.

QUEST: All right, we thank you for that, Pedram.

And thank you for taking my interrupting question.

We appreciate it.

JAVAHERI: It's my pleasure.

QUEST: Now, we are waiting for any form of press statement that might be coming from Europe. We will be getting some pictures on that shortly and we'll show you when -- when it arrives, the statement.

Otherwise, the U.S. markets are up 160, a very strong session. It's largely on the back of what might be happening in Euroland. And with Greece getting a second bailout.

One other piece of news, just to remind you briefly, Buckingham Palace has confirmed that the Duke of York, Prince Andrew, will step down as the UK's special representative on trade. He comments that in his annual review, he said as his evolution of the role continues, he has decided that it's the label he gave himself had served its purpose.

We'll have a Profitable Moment after the break.

(COMMERCIAL BREAK)

QUEST: So, tonight's Profitable Moment.

Time is up -- European leaders are making decisions tonight that they should have made months ago, if not years ago. And still, there is no certainty that the plan to cut interest rates for countries, reform the bailout plans and extend bond dates will work. Greek default, which they said would never be allowed, is now the talk du jour.

Eurozone and ECOFIN ministers have much to answer for in the way that they have handled this crisis. It seems they've known what needs to be done, but they've failed to do it.

Now, look, far be it for me to stand here and pontificate, but the clearest sign of the chaotic mess is that Bulgaria's finance minister told us tonight he doesn't want to join the Eurozone as it currently is. And Western Europe can learn from the Eastern Bloc's fiscal discipline.

So, there is just time in Brussels, but that is really a question of just.

We will keep in touch with what's happening in Brussels and keep you informed in the hours ahead.

Because that is QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

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

"PIERS MORGAN TONIGHT" is ahead.

That's after your check of the news headlines on the world news leader.

END