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QUEST MEANS BUSINESS
Budget Battle in Washington; Interview With Jose Manuel Barroso
Aired July 25, 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, CNN ANCHOR, QUEST MEANS BUSINESS: The good ship Brinkmanship sails into Washington tonight. We speak to Congressmen from both sides of the debt divide.
A legal minefield: DSK's accuser gives evidence to the media. What is going on?
And all aboard the federal train. Europe races for closer integration.
I'm Richard Quest. We start a new week together. I mean business.
Back from the drawing board once again and Barack Obama is promising historic cuts. Rival parties are preparing their potential final hand in the debt ceiling showdown in the United States. There are eight days to go until the ceiling is hit. And Democrats are giving up on tax raises, but say Republicans, they still won't budge on long-term debt ceiling increases.
Even if a debt deal was agreed tomorrow, Republicans say that still might not leave enough time to pass Congress. The president says the very future of the country is in line.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If we don't address the debt that is already on our national credit card, it will leave us unable to invest in things like education, to protect vital programs. So, I've already said I'm willing to cut spending that we don't need by historic amounts to reduce our long-term deficit and make sure that we can invest in our children's future.
(END VIDEO CLIP)
QUEST: The deadline is upon us. If Washington can't unravel the situation by then it is a case of simple damage limitation. Now, this is when it gets really tricky. The worst case scenario is barely worth thinking about. Risk of default, whether by accident or otherwise, not to mention downgrades from U.S. triple A status. The IMF has said that will be extremely damaging, in their words, to the global economy.
And that is not the only issue at hand. If you join me over in the library, you'll see what I mean. These paint a sorry picture of what will happen if the two sides do not reach an agreement. First of all, $125 billion needs to be made up somewhere. And if it is not, then checks won't be paid, government will stop paying bills, and some people who are rely on government checks, the elderly, the sick, the war veterans, won't get their payments. Now they will get them eventually, but in the battle of robbing Peter to pay Paul, it will be the poor and the elderly that loose out, as bond holders get their payments instead.
Not surprisingly, and we'll hear the market reaction in a moment, the stock market has given a very brutal reaction. Confidence in Congress is shattered. Markets have always assumed that they would do a deal but stocks could fall even further.
And this is really the big worry, the bond turmoil. The U.S. makes up about 40 percent of the global bond market, of some trillions of dollars. Now, put that into perspective and you realize that the bond market in any shape or form for U.S. government debt would be catastrophic. Increased interest rates, there could be worries on the U.S. dollar, all sorts of problems could happen.
So, with the risk of default, let's put the two arguments together. The Democrats come later in tonight's program. First though, every Republican member of Congress is being briefed at this moment by the speaker, John Boehner. One of the sponsors of a controversial Cut, Cap, and Balance plan, Congressman Jason Chaffetz, joined me. I asked the congressman, from the right, from the Republican side, if no one increases, surely, there has to be a debt revenue raising.
(BEGIN VIDEO CLIP)
REP. JASON CHAFFETZ, (R) UTAH: I think we have more of a spending problem in Washington, D.C., than we have a revenue problem. We have said very loudly, very clearly, that we want to broaden the base, lower the rates, but a net tax increase with the economy as sour as it is right now, is not going to help grow the economy.
But we like to say here, at least, on the Republican side of the aisle, is we need more taxpayers, not more taxes. And there is a very fundamental difference. How do we get this economy revving? It is not going to be by raising taxes.
QUEST: I don't know of any country that has come out of this recession with a dramatic deficit, that has managed to balance, including my own, and I'm paying higher taxes as a result of it, without having an element, an element of tax increases.
CHAFFETZ: I think we need tax reform, but I don't think we need tax increases. Remember the House Republicans actually passed a budget over the course of the time, balances, not only balances, but pays off the debt. Now it takes a number of years to get through them, but we have actually passed that bill. And it did not have tax increases in it, but it did have tax reform.
QUEST: Congressman, one worries, looking from over afar, is that America, the United States here, could win the battle and loose the war. Because if this thing goes sour, if there is a default, and interest rates- or even as we get closer a default it will be a plague on all your houses.
CHAFFETZ: Yeah, the clock is ticking. That is the frustration. We have had a lot of rhetoric, we've had a lot of speeches, we have had a lot of press conferences, but we have yet to see from the president a plan. He has never introduced a plan. The Senate Democrats refuse to even debate- they won't even debate the plan that we passed out of the House of Representatives. So, I think there is frustration, clearly on all sides. There is not reason to default. But we have offered the only thing that is actually passed. And that is a key. It has actually passed.
QUEST: What is your gut feeling on whether there will be a deficit plan, or a plan that raises the debt ceiling, by August 2nd.
CHAFFETZ: Well, the clock is ticking, it changes hour by hour, but as I stand here I am an eternal optimist. I don't see a reason for this country to do something it doesn't have to do, but at the heart of that question, is whether or not this country, long-term, is going committed to balancing its books. That is why I am committed to a balanced budget amendment. But it is not being widely received. And I think the core question for the president, the Senate Democrats is, are they willing, are they committed to actually balancing our books. And I don't know if that is a resounding yes.
QUEST: Well, that is the Republican view. Later in the program you will hear from a Democratic congressman as to why his party is sticking to its guns in the face of such opposition.
Markets have always assumed that the debt ceiling would be raised and has left it priced in for some weeks. There is worry now. Allan Chernoff is at the New York Stock Exchange.
The worry-all right-never mind-I mean, what is the market actually saying? And what do they believe there?
ALLAN CHERNOFF, CNN SR. CORRESPONDENT: Yes, Richard, you know, the market down here has been saying, they wouldn't really do this, would they? That has pretty much been the sentiment. And that is why we haven't seen much panic. Let's find out a little more. Ken Polcari is a long-time trader here at the New York Stock Exchange.
Ken, we are talking about the full-faith and credit of the United States government, probably the most important promise.
KEN POLCARI, ICAP EQUITIES: Right.
CHERNOFF: On Wall Street, in the land, perhaps.
POLCARI: Right, and I would agree. And I think what we are seeing today is that panic that people thought was going to happen last night in Asia and in Europe, in fact, didn't happen. Yes, Asia was a little bit weak, Europe was a little bit weak, our futures this morning were off big. But you know, when the day got started there was a sense that the market took a breather and it is almost saying, look, we're never going to react anymore. We have been having these crazy days, up 200, down 100, up 100, down 100. The market feels like today it is just saying, we're going to wait and see. And we are going to see what they have to say and then have the reaction.
CHERNOFF: But, so is the feeling they wouldn't dare. They wouldn't dare default on U.S. Treasury bonds?
POLCARI: I have to believe that the feeling is that they are not going to default. I would be very hard pressed to say that the U.S. would default. So, I don't think that is the issue. I think what the issue is going to be is what is this program going to look like? Is it going to be as significant as we need? You know the market and the rating agencies are going to decide whether or not the program that they have designed, and come up with, is going to really be able to get where we need to go and save the Triple A rating. Because-
CHERNOFF: So, you are saying, it is not just about raising the debt ceiling, they have to show a convincing plan that will actually cut spending.
POLCARI: They have to show a very convincing plan, not only to investors around the world, but even to the American citizenry. They want to see it. They are tired of it. People are fed up with what is going on in Washington. The fact is, listen, Timmy Geithner wrote this letter in January, to the Congress. Listen, we have this potential issue, we should talk about this and get this out there now before it becomes a problem. The fact is they let this go until five days before August 2nd, and so people are really disgusted now. But they are going to wait and see.
CHERNOFF: Disgusted, but we haven't seen the panic just yet, so for those investors sitting at home wondering what should I do? Do you say sit tight here, or what?
POLCARI: Well, listen I tend to be much more conservative. So, I have my own view. I think the market is going lower. I think they are going to come out with this program and it is not going to be what the market is expecting. And then I think you are going to see the reaction. Do I think it is going to completely fall out of bed? No. But do I think the market is going to head lower and test the 200-day moving average? Again, I absolutely do. So therefore I am much more conservative. So, yes, I have been getting out. So therefore I am going to wait and see.
CHERNOFF: Ken Polcari, thank you very much.
Richard, so you see, no panic yet But let's see what happens. Thank you.
QUEST: Hey, when Polcari says, the great conservative, when he says he is getting out, others are heading for the door. Tell Ken good luck to him with that. Many thanks, Allan Chernoff joining us there, as we talk more about this.
Now, let's talk more about the political side of it. We have heard the Republican side. Peter Welch is the Democratic representative from Vermont and joins me now.
Congressman, the Republicans say, and we have heard their argument on this program already, that more revenue raises is a bad idea and actually the government, the U.S. government, the Cut, Cap and Balance program, should at least be voted on and given a chance. They have a point, don't they?
PETER WELCH, (D) VERMONT: Well, they do have a point. I mean, we have to deal with spending. But we have a point, we have to deal with revenue. I mean, obviously, if you want to put a big dent in the deficit, you are going to use a balance of cuts and a balance of revenues. And the dilemma that we have is that the hardest thing to do in this situation is the most obvious and helpful thing, and that is compromise. If the Republicans give us something on revenues we have a mess in the tax code where we are just squandering money. And we ought to take that money and apply it to the deficit. And we can look at some of the spending programs as the Republicans have been arguing.
QUEST: Congressman Chaffetz said to me, just moments ago, I asked him specifically, you know, should revenues be part of this? Are you in favor of raising taxes? And he said, no. So let me ask you, Congressman, are you in favor of raising taxes to balance the budget in this case?
WELCH: Yes, revenues have to be part of it. You know we give away $6 billion a year to the ethanol industry, it does no good for anybody. It wrecks our engines in many cases. We hedge fund managers get a lower tax rate than the people who work for them. Things like that are unfair, don't make sense, have no economic value. We ought to be looking for those reforms. Likewise, when the Republicans say let's look at spending, I'm in agreement. But we could have a $4 trillion deal, but what you have is a second agenda, unfortunately. The Republicans basically have a-in addition to wanting to bring down the deficit, they really want to shrivel government. So that is why you are seeing cuts in a lot of these agency budgets, for the SEC, the Commodity Future Trading Commission.
QUEST: Right. So and when they say that President Obama hasn't put a plan on the table, I mean, I don't want to get into the minutia, I suspect you are well and truly up to your ears in minutia of all of this. But they have a valid point, don't they?
WELCH: I don't really think so. I think it is a talking point. Bottom line, the president is negotiating and what he is saying is, look, we have to have a balanced approach. He is willing to put even our entitlements on the table for consideration about how to save money there. He is willing to put revenues on and he has indicated cuts. So, usually when you are dealing with something as complicated as this. It is a combination effort. You sit down, you go through it. And you come out at the end of the day with some compromise. But what I'm starting to see is the Republican caucus, unfortunately, on the debt ceiling is more interested in default than they are a debt ceiling. Seeing that is at tactic that may help them achieve a goal of a smaller government.
QUEST: Final question, same to you as to your Republican counterpart. Will there be a default?
WELCH: I'm sorry, what?
QUEST: Will there be a default?
WELCH: I would have said absolutely no, but now I'm not so sure. And I'll tell you, the problem is on the Republican side we have some folks who want to vote no and we have a lot of other folks who want to vote, hell, no. So we have backed ourselves into this corner, where the one option that would get us out of the jam, compromise, seems to be the one that nobody is willing to use. So, I don't know.
QUEST: Congressman, we thank you, as always for taking time and talking to us. We much appreciate it. Many thanks, indeed.
Congressman Welch joining us from the Capitol, in Washington.
And I'm not sure, when we look at it, we are much the wiser which way it is going to go as they get towards August 2nd. But that is politics for you in Washington.
When we come back, the maid and the media. The woman who accuses Dominique Strauss-Kahn of sex crimes goes public. We ask where this leads in the court case, in a moment.
(DESK BELL CHIMES)
QUEST: Lawyers are to file a civil lawsuit on behalf of the woman who says Dominique Strauss-Kahn tried to rape her. The word comes on the day that the woman went public with her allegations. Nafissatou Diallo, is the hotel maid and she has been giving interviews to ABC News television and "Newsweek" magazine in the United States.
Meanwhile, Dominique Strauss-Kahn, the former head of the IMF, denies all the charges against him.
Diallo says she is telling the truth and gave this account of what happened in Strauss-Kahn's hotel room.
(BEGIN VIDEO CLIP)
NAFISSATOU DIALLO, DOMINIQUE STRAUSS-KAHN ACCUSER: Stop. Stop this, stop this. But he wants me on lap and he keeps pushing me, pushing me, pushing me to the hallway, back to the hallway, keep pushing me. I was so afraid. I was so scared.
UNIDENTIFIED FEMALE: What do you want?
DIALLO: I want to see. I want to see him go to jail. I want him to know you cannot use your power, when you do something like this.
(END VIDEO CLIP)
QUEST: Now, the "Newsweek" magazine, for those who would care to know these things, goes into great detail, anatomical and otherwise, about what took place allegedly, in that hotel suite, at the Sofitel, in New York. Highly unusual in many legal systems for a victim to be allowed to go public like this in the middle of a criminal investigation, and facing prosecution. Alan Abramson is a criminal defense attorney who has worked as a prosecutor. Allan joins me now from New York.
Allan, let's-I mean, for goodness sake, is it unusual by U.S. legal standards for a victim to be allowed to write an article, or take part, and give an interview like this?
ALAN ABRAMSON, CRIMINAL DEFENSE ATTORNEY: Richard, in 25 years I have never seen a complainant in a sex crimes case give a television interview, give a press interview, anything of the sort prior to the case actually going to trial, and then having the opportunity to speak after a jury has reached its verdict. I've just never seen it. It is an extraordinary development.
QUEST: So, what is the gain behind it? Is it designed to get the word out so that the civil case, or push the prosecutor to actually proceed against DSK?
ABRAMSON: Well, I think if the purpose was to push the prosecutor and try to force his hand to bring the case, I think it was a big mistake. I think this just puts another impediment in front of the prosecutor. And it makes an already difficult case almost impossible to move forward.
There is the other side, though, because it seem pretty clear that in a few weeks there is going to be a civil suit announced and perhaps this is being done to just try to prime the public a little bit, for her, to build up a little sympathy for her. But in terms of pushing forward on the criminal case, I just don't see this as a positive development at all.
QUEST: Let's face it, all they have to say now is that whatever vestiges of unbiased juries were out there, it is almost impossible. National television, a national news magazine have had it, where would you stand on this, Alan?
ABRAMSON: Well, you have to understand something, I mean, one of the things I keep hearing is well, perhaps she should be allowed to have her day in court. But that is not a prosecutors' job. They don't provide days in court for people. They have to decide was a crime committed? Who committed the crime? And then most importantly, they have to be able to say to the public and say to themselves we have sufficient evidence, evidence beyond a reasonable doubt to prove our case. If they don't have it, you don't get your day in court.
QUEST: If we take this latest development and we factor it in. Are you-and I'm going to throw your own words back at you, if you'll forgive me. You said, last time you were on the program, you were pretty much certain that the charges would be dismissed. Are you still that certain?
ABRAMSON: You know, Richard, I very rarely take that strong a position until I-until I, uh, until I feel I know every detail. But I have to tell you, I'm sticking with that position. I do not see how this prosecution can go forward. I do not believe they can prove their case beyond a reasonable doubt. There are just too many problems with the evidence, and they just can't bring it into a court of law in the United States and get a successful-and get a conviction.
QUEST: Quick, final question, it just occurred to me, the judge in all of this? Surely, the judge must be spitting feathers at these articles and these interviews?
ABRAMSON: I think the judge is spitting feathers. I think the prosecutor must be incredibly angry. I don't think anyone involved in the criminal justice system is happy to see someone go on and do these interviews. There is now going to be issues about what other things did she say that didn't appear on the air. This is going to raise a myriad of legal problems. And it is just one more problem that I don't think can be overcome in this case.
QUEST: Alan, you making sense of it all for us, and we'll have you back to talk more about it as the case moves on. Alan Abramson, joining us from New York.
When we return, vibrant Valencia. Rivers run green, an old plan to open up this Spanish city to the sea, as a "Future City".
QUEST: A run down port area in Valencia stands in the way of an ambitious project that would link the Spanish city to the Mediterranean Sea in all its glory. Isle Grao is a blight to Valencia's thriving green heart, at least that is what some people say. In tonight's episode of "Future Cities", a plan to transform a dirty, derelict district, into a prize piece of real estate. What they are doing in Valencia.
QUEST (voice over): Since the dawn of civilization man has settled near water, the source of human life. Valencia was built on the banks of the River Turia, it was an unfortunate choice. This river is prone to flooding.
On stormy day in 1957 the river spilled onto the streets, 80 people were killed. Under four meters of water, Valencia looked more like Venice.
JOSE FERRI, TOUR GUIDE: The streets were dirty. The people couldn't live there. Even some buildings collapsed because of water. It was really the largest disaster that the city had suffered.
QUEST: After the flood the city knew something had to change. So the temperamental Turia was diverted away from the city. It left the old river bed dry.
Fast forward 50 years, Valencia's old source of pain, now its greatest gain. Delve into this empty riverbed today we find Spain's longest stretch of parkland, the colorful Turia Gardens. This dry riverbed runs through the city like a long green artery. And hosts the city's iconic buildings, the spectacular City of Arts & Sciences.
(On camera): Walking amongst Valencia's space age architecture it is easy to imagine I've been teleported to a future city many light years away.
(Voice over): Oh, if only the whole riverbed looked like this, because walk a few blocks further and we find a neighborhood stuck in the past. The port city of El Grao is a blot on Valencia's otherwise scenic riverbed route, with abandoned warehouses spoiling the view, separating the city center from the sea. Valencia's chief architect wants this to change. Tomas Llavador has developed a master plan for a so-called Delta of Green, to reconnect the river bed and the water front.
TOMAS LLAVADORE, ARCHITECT (through translator): The idea is to complete the Turia Gardens, creating a brand new space. It is an opportunity to finally fulfill the desire of Valencians to unit the city with the sea.
QUEST (on camera): To get a better understanding of this project, I've come to the top of the Aqua Tower, one of the tallest buildings in Valencia. From here, I can see the City of Arts & Sciences. The project would begin just over there. It would renovate all of that derelict land and opening up a new way to the sea.
(Voice over): This giant green space of 400,000 square meters, will host apartments and office buildings. The foundation for a healthy city and a healthy budget, because the mayor believes this delta of green could provide a breath of fresh air for Valencia's economy.
MAYOR RITA BARBERA NOLLA, VALENCIA, SPAIN (through translator): There are already important people, big industries and big global businesses looking into the possibility of having their skyscraper in the Green Delta. Because this is going to be a very beautiful place. Very modern, powerful, and full of potential.
QUEST: The city's architects, aren't green behind the ears, although the master plan has been approved, the landscaping underway, they know a project of this scale doesn't materialize from one day to the next.
LLAVADORE: I think that in 10 years' time, this project will be a reality. The image of the city from the ocean will be completely different. It will be a more dynamic image, a more modern image, a more open image.
FERRI: The last piece of the puzzle, the last part to complete the whole project, and to make sense of the old project.
QUEST: The Delta of Green will give Valencia a dynamic new space. For the people of the city it goes back to the need to be near the water. And for the city itself it is a symbolic last step on the way to forgetting the traumatic events of 1957.
(END VIDEO TAPE)
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
More than 100,000 people tonight are taking part at this moment in a vigil in the Norwegian capital, Oslo, where they're remembering the victims of Friday's bombing and the mass shooting.
CNN's correspondent, Jim Boulden, is in Oslo and joins me now -- good evening, Jim.
JIM BOULDEN, CNN CORRESPONDENT: Good evening, Richard.
As the bells of the cathedral here in Oslo ring out throughout this city, behind me you'll see parts of the tens of thousands of people who have been marching from city hall down through the center, very close to where the bomb damage can still be seen. And they're coming down toward the church -- tens of thousands of people carrying roses.
And it was quite a moving scene about two hours ago, as they raised their flowers for a minute's silence, something one of the observers told me that he's never seen done here before in Oslo. And this happened a few hours after the suspect, Anders Breivik, appeared in court.
Now, journalists were not allowed in court, but there was video of him leaving and still photos. It was the first time that many Norwegians were able to get a look at him since, of course, the atrocity took place.
The judge has ordered him to be kept in custody for a further eight weeks, until there's another hearing, four weeks of those in isolation because, the judge said, she did not want him to have any contact with any potential -- any potential people who might have helped him.
And apparently, he said in court that there were two cells of people who helped him carry out these atrocities, which he did admit to taking -- taking part in and actually doing -- Richard.
QUEST: Jim Boulden in Oslo this evening.
A London coroner says an autopsy on the body of the singer, Amy Winehouse, has now been performed. No results have been released pending further tests. The 27 -year-old singer was found dead at her London apartment on Saturday. The multiple Grammy winner has battled multiple addictions for many years.
Barack Obama says he will support historic amounts of spending cuts if it helps to raise the country's debt ceiling. There are eight days until the U.S. hits its top spending limit. The IMF has warned a U.S. credit downgrade could be disastrous for the global economy.
Republicans are currently being briefed on their party's plans by the House speaker, John Boehner.
It's looking more likely there will be a full NFL season in 2011. The players have unanimously agreed on the new collective bargaining agreement with the owners. That means an end to the labor dispute that had threatened to cancel next season's American football calendar. It is all but a formality.
Now, Moody's says a default on U.S. -- Greek debt. I was going to say U.S. debt. It just shows the state of play at the moment. But we are back in Greece for this story.
Greek debt -- a default is almost certain. And it cut Greece's sovereign debt rating from, well, I'll show you. It cut -- I beg your pardon -- it cut Greece's debt rating from CAA, which is there, to the CA, although those -- but it does stop.
Marvelous, isn't it?
It's like the Greek debt, it just keeps going round and round.
Anyway, it's now almost at the very bottom of the ratings barrel.
So, how Moody's rates financial obligations, as you can see, B, AA, A, B, C, D and so forth and onward. We all start -- major economies like the U.K., the United States, Germany and France, at AAA. That is the gold standard for all major economies.
And they work their way down right the way through all these other lower levels. There is deep distress in the markets tonight. Bank stocks are taking a battering and gold is at a new record high. Traders have plenty on their plates, from the crisis over the U.S. debt crisis to the threat of imminent default in Greece.
Well, what the difference a weekend makes.
On Friday, European leaders said they had given us the game changer -- a new plan to ease Europe's debt burden. Crucially, it included a contribution from the private sector running into the tens of billions of dollars.
The president of the European Commission, President Barroso, spoke to us exclusively. Obviously, unfortunately, we were unable to run that interview on Friday because of events in Norway.
So it's a good moment now to hear from Mr. Barroso.
And I asked him if he was satisfied the Eurozone's got a grip on its problems.
JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: I think the decisions taken now are extremely important because they are of a systemic nature. Not only there was the question of addressing the sustainability of the Greek debt, lowering the interest rates, expanding the maturities. This will be also applicable to other two countries, Ireland and Portugal.
But there are new instruments that allow us to intervene, for instance, in the secondary markets and with a precautionary nature.
So this is, in fact, a new arsenal of weapons in a systemic plan for our battle that we did not have before.
QUEST: I don't wish to sound churlish, but bearing in mind the Ireland and Portugal came so much later, there will be those who say, you should never have -- Ireland and Portugal should never have been given such a high interest rate or such maturities in the first place. And that's not just being clever with hindsight. People were saying it at the time.
BARROSO: Yes. It's true. I said it myself at the time. But at the time, there was not yet the determination that we have seen now, the understanding of the systemic nature of this and the need to do much more in terms of an integrated response.
So I think now, all the European leaders, together, the 17 members of the Euro area, accepted that we need a much stronger and integrated response and I welcome that.
QUEST: Is it going to be very difficult not to repeat -- not to -- it is going to be very difficult not to repeat the Greek unique, exceptional solution, the PSI solution, for others if required?
You've broken the precedence and, indeed, Fitch says that today in Fitch's statement, it says the potential precedence set by PSI in the Greek package.
BARROSO: The situation of Greece is really unique. It's -- if you look at the figures, it's clear. And that's why not recognizing the very exceptional and uniqueness of the Greek situation, there was a -- overall, an unanimous decision of the leaders not to have the same kind of treatment for other countries. And including the leaders of those countries, they have committed not to ask for a solution of this type. And they have done everything to give us assurances in that direction.
QUEST: Right. Let's talk about the future, because in many ways, really, the most interesting part of what was decided comes right at the back of the agreement. And it's talking about the new legally binding national fiscal framework.
That's the future, isn't it?
You're going to have to get rid of every country doing what it wants when it likes. There's going to have to be binding regulations at national levels.
BARROSO: Yes. Richard, we have been speaking about this now, I think, for some -- some time. And you remember that I have been always insisting on this point. To complement the monetary union with the economic union and a real integrated governance structure in the Euro area.
And now it seems possible. The leaders, yesterday, the 17 (INAUDIBLE) governments, accepted our proposals to increase the integration, adopting, by the way, the proposals that the commission has put forward some time ago. And so to come to an agreement with the European Parliament, what we call here the governance sector...
BARROSO: -- so that was not possible before. And also, to review the rules of the coordination and integration in our common response in case of crisis.
QUEST: So the 17 members of the Eurozone are effectively creating a federal state system whereby national economies have to be monitored much more closely?
BARROSO: I would not say exactly federal now, but something in that direction, yes, at least much more integrated than before. I think now we have a much clearer sense of direction, recognizing the interdependence and so accepting a much more integrated governance structure. That is, in some cases, we can say it is equivalent to a federal system.
(END VIDEO TAPE)
QUEST: So it seems the federal train is leaving the Euro station and the scheduled arrival, as yet, the destination unknown.
But let's look at some of the stops along the way.
Join me in the booking carriage.
First of all, the federal means will give greater control over national budgets. A fiscal union between countries to compliment the monetary union that already exists that would address the problem of those countries that are spending too much.
But national budgets means greater supervision. This is a big part of federal Europe -- the EFSF, the stability fund, to become the ESM, stability mechanism in 2013. It will act like a European monetary fund. They've admitted that much. It will be able to give loans directly to banks. It will recapitalize banks. It will intervene in the secondary market for bonds. The ESFS is part of a bigger project, as, indeed, is the Eurobond. It would reduce the borrowing costs of member states. It's favored by the periphery. The Germans oppose it.
But this may be the only way to save the rest.
So the market for this Monday, lackluster for stocks in Europe. Not surprising when you consider the uncertainty at the moment.
Banks were hard-hit. "Handlesblatt," Commerce Bank, Lloyd's, Barclay's all off more than 4 percent.
Did I just say Handlesblatt)?
It's a newspaper, not a bank.
Anyway, Deutsche Bank has more new -- than new -- has two new men at the top. It's replacing its chief exec, Josef Ackermann, with a pair of joint chief executives. Anshu Jain was the head of the investment bank and Jurgen Fitschen was the German chief.
After the break, she sold millions of songs when she was alive. Coming up, Amy Winehouse now in death. We'll report.
QUEST: The weather forecast now...
Guillermo is at the World Weather Center for us.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Hi, Richard.
I imagine that we have no complaints coming from you. It's cool, but we don't have any rain. Actually, there's a pattern very clearly defined here in Europe. Central and Western is much cooler than the East, where we have most of the warm weather that prevails in there. In fact, Moscow -- it's so warm right now, close to 30 degrees. So we're 10 degrees above average.
So no rain or no significant rain for Britain, for France. In Central Europe is where we have some rain showers. But then no delays at airports. I'm showing you the U.S. and also parts of Europe. No problems at all. So everything is stable.
Oslo, the rain is gone. We've got winds at nine kilometers per hour. You see how it fizzles out. But we got rain. And actually quite significant, around 11 millimeters on the weekend. So that was pretty significant.
And also, I want to show you what's going on with Moscow, because, as I said, it is actually quite warm. And what we have in here is the temperatures that continue to prevail at very high numbers. And it's going to continue like that. Here a comparison of heat waves in previous instances, last year, for example. We are so far 38 days into the heat, the consecutive days above the -- the usual temperatures. And it should be 20.
Can you believe that?
Tuesday and Wednesday and Thursday it's going to be far, far away from it. It should be 22. And we have the low at around 20 degrees.
Before I go, we have two tropical cyclones we are monitoring, one heading for Hong Kong. So stay tuned on CNN. When we have time to track it down, we'll let you know what happens.
Btu -- Richard.
QUEST: Indeed. You've got your work cut out for you for the next few days, then.
ARDUINO: Thank you.
QUEST: And building up.
Guillermo, many thanks.
Now, as I was mentioning a moment ago, an autopsy has been performed on the body of the singer, Amy Winehouse. We might not get the results back for some weeks.
But music fans are paying their own tribute to her by buying her records. There's been a 37-fold increase in album sales since the performer's death was announced on Saturday, as Nina dos Santos reports.
(BEGIN VIDEO TAPE)
NINA DOS SANTOS, CNN CORRESPONDENT (voice-over): Terrifically talented but tragically troubled -- the legacy of singer Amy Winehouse lives on in her music with its haunting tales of addiction to drugs and alcohol.
DOS SANTOS: She died young, at just 27 years old. But by then, Winehouse had already made a name for herself. She was the first British female artist to win five Grammy Awards for her album, "Back to Black." Winehouse's records sold millions of copies worldwide and according to the "Sunday Times," she was worth some $8.5 million.
(on camera): What about the pressures that some of these young music stars are facing?
They don't make quite as much money as, for instance, the people in the '60s and '70s.
GENNARO CASTALDO, HMV: Well, certainly not from recordings. Obviously, they're having to perform a great deal more and to try to get money from publishing and TV adverts and merchandising, as well. And, certainly, you know, Amy would be facing those pressures.
DOS SANTOS (voice-over): It may not be as much as artists who have come before her, but some music industry experts say that with piracy rising and sales falling, it's not that surprising.
MARCUS O'DAIR, MUSIC JOURNALIST: Certainly, obviously, it's well publicized these days that music isn't as lucrative as it has been in the past with CD sales falling, etc. There's still money there in -- in sync and in live and all these other things.
DOS SANTOS (on camera): The simple truth is that Amy Winehouse's music may be even more popular since her death. Already, her songs have shot up the U.K. charts and music retailers like this one have sold all of their copies of the only two albums she ever made.
(voice-over): As Winehouse's friends and family try to come to terms with her passing, some fans are hoping for the eventual release of material from a third album she was reportedly working on.
CASTALDO: I would be surprised if between now and a few year's time, there wasn't some kind of album coming out, because the demand for it would be absolutely (INAUDIBLE).
DOS SANTOS (voice-over): Which means Amy Winehouse's star will continue to shine long after her untimely death.
Nina dos Santos, CNN, London.
(END VIDEO TAPE)
QUEST: Now, our main story, of course, tonight, concerns the U.S. debt ceiling and raising the debt ceiling. In Washington at the moment, House Democrats are revealing their own budget cutting plan, which will be to cut $2.7 trillion spending cuts. Savings from domestic and defense spending ultimately would provide enough borrowing authority to meet the government needs through 2012.
This is the plan that they will be putting. That's Chuck Schumer there of New York, who is, of course, a -- one of the leading Democrats in putting forward the plan.
When we have more details in a moment, we'll bring it to you.
QUEST: On Friday, of course, because of events in Oslo, we were unable and obviously, you'll understand, we didn't finish off the Q25, which we now need to do, which is our analysis of the earnings season and those companies that we think are of merit. Maggie Lake is in New York -- Maggie, let's wrap up with Friday's companies.
We had General Electric. It was up for debate, because it only got three of the five. But we by and large felt that it was a -- it was a green, wasn't it?
MAGGIE LAKE, CNN CORRESPONDENT: Yes, it was. One -- one of the things they missed on, Richard, was revenue. But that only because they were selling MDC. And investors like the fact that they're getting rid of some of those units, entertainment, really streamlining and getting back to their industrial roots. And it's done well for them. It's helping the bottom line.
Once again, those industrials, sort of old, boring companies, are doing well in this environment.
QUEST: Microsoft got five out of five. It got its profit growth, it got its revenue growth, it's got Q on Q, it beat earnings expectations.
You and I disagree on Microsoft. I think it's got a strategy for -- with Nokia, with Skype. You're -- you're growling.
LAKE: Yes, I mean they get a -- they get a green for sure. I'm not convinced. You remember, I talked to Ballmer a few months ago. I don't know, listen, their Windows operating system sales were actually down. They're still making a lot of money off those business clients, but things are shifting.
I will say that they've got a good hookup with Skype, with Facebook. They are moving Office onto the cloud.
LAKE: I still think their competitors are ahead of them. We'll see.
QUEST: Caterpillar got four out of five. It is an automatic green on the Q25. Problems in China, problems in Japan, obviously, Japan because of the earthquake.
QUEST: The market -- the stock took a bit of a hit, but frankly, it's back to your industrials points, isn't it, those countries -- companies...
LAKE: It certainly...
QUEST: Go ahead.
LAKE: It certainly is. And once again, a lot of exposure to emerging markets. China aside, it made people nervous, but the long-term picture still looks good.
QUEST: Five out of five for Big Mac and Ronald McDonald, which -- which performer -- all right, that's the way it looks. We can now see exactly how the Q25 has fall -- fallen together. And you really do see, Maggie, the greens overwhelmingly won on this on three, six, nine, 12 and 16 versus nine. As we factor in these things, let me just go through a couple of important points, starting with the green.
We had five tech companies, particularly Apple, which was a major performer, up 125 percent. On the down side, it was the banks, particularly Goldman Sachs. The banks just did not perform, the big trading institutions, as they should have done. And overall, Maggie, earnings per share up 19 percent for S&P companies reporting so far.
What do you make of it?
LAKE: It's interesting, Richard. When you look at that board, it -- it's striking that we should feel a lot better about things than we do. And technology, the -- the leaders there really point out why. They are doing fantastic because people are using technology companies to make themselves more efficient. But that doesn't mean they're hiring. They're doing more with less. And that hiring part is like confidence and -- and the atmosphere feels negative. But clearly, the corporate balance sheets are doing well.
QUEST: All right, Maggie.
We do the Q 20 -- I'm surprised that we got as many greens this time, bearing in mind the challenging economic conditions. I am surprised. We've nearly got a clean sweep of the -- at the top there.
We'll do it again in a quarter's time, Maggie.
LAKE: Will do.
QUEST: Maggie Lake, who is in New York.
The Republicans are now putting forward their plan in -- in Congress. We've got the Democrats presenting theirs, the Republicans presenting theirs, eight days to go before the ceiling is hit. And we will obviously keep you informed how those debate -- how those two debt deficit plans are done.
I'll have a Profitable Moment after the break.
QUEST: Tonight's profitable music.
In Washington, the heat is really being turned up -- and I don't mean the weather. In the last hour, we've had plans announced from both the Democrats and the Republicans. Both are moving forward with their last moments to try and get their plan onto the table.
Now, the motives sound sincere. There are grand themes on the line for both sides. After all, from welfare to taxation, it's the cornerstones of each's principles that are at risk tonight.
Neither side says they want the U.S. to default. Some, perhaps, on extreme sides don't mind, but the sensible ones recognize the seriousness.
But something changes when they come together. Like squabbling siblings, they quickly fall back to old arguments, too proud to put aside their differences for the greater good or maybe it is because they believe they're going for the greater good.
What should have been a debate on fixing the deficit has been a competition on who can score the most political points before next November.
And that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I do hope it's profitable.
"WORLD ONE" is next.