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Swiss Central Bank Takes Steps to Halt Over-Valuation of Its Currency; Italy's Parliament to Vote on New Austerity Package; End of the Euro?

Aired September 6, 2011 - 14:00   ET


RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: It's a franc exchange, Switzerland says we won't tolerate the over valuation of the currency.

Berlusconi, once again, questions over what it means for Italy's growth and the future of the economy.

And tonight, the tragic question of the euro. A former prime minister of Spain worries about the future of the common currency.

I'm Richard Quest. And yes, I mean business.

Good evening.

Today Switzerland said its entire economy is under threat. In an effort to slash the value of its currency, the Swiss franc, the central bank made and extraordinary move; made a statement that set out a minimum exchange rate of 1.20 against the euro. The franc was quite remarkable. The chairman, Philipp Hildebrand, said this morning. He said that Switzerland is a small, very open economy where every second franc is earned abroad. A massive over valuation carries risk of recession and deflationary developments.

So, the Swiss National Bank was undertaking a substantial and sustained weakening of the Swiss franc, with immediate effect. They said they would no longer tolerate a euro/franc exchange rate below 120. And the SNB, and this was the nub, enforce the minimum rate with the utmost determination. He is prepared to purchase unlimited quantities of money.

What did all that mean in the markets? Have a look over here at the super screen. And you see, now, as you look at what happens, bear in mind currencies don't tend to move 7 to 8 percent, in one day, in the modern era. The Swiss National Bank achieved just that.

So that is the way you see what has been happening. You see this remarkable appreciation in the value of the currency. And then, the action that comes right into the market. They move in harshly, they move in with vigor, and they put in. And this is key, we get rid of this, and we bring in this one, a flaw. And remember, the flaw is 120 against the euro. So roughly 120 is just about somewhere round about there.

Ignore my line, not exactly as neat as it could be. The SNB certainly would be horrified by it!

But at 120, you can see how much further. All this time you can see how much time they have had to keep pushing to keep the currency above. And what they will have to do, in the future, if they are going to maintain the 120 limit. It is going to be a Herculean task for the SNB providing of course the markets let them get on with it.

Joining me now, Steven Sawyer, head of European Forex Strategy at PNP Paribas.

Steven, what did you make of today?

STEVEN SAYWELL, HEAD OF EUROPEAN FOREX STRATEGY, BNP PARIBAS: Well, it was certainly very surprising for us in the markets. I think the first point I would make is that is was surprising that the SNB actually intervened at all. They have been complaining about the strength of the Swiss franc for some time. But up until now they have continued to ease monetary policy rather than actually intervene.

QUEST: But you don't see those sort of moves very frequently, do you? I mean, their statement and their activity of intervention had the effect they wanted to, didn't they?

SAYWELL: Well, yes. And I think the second surprising component was the fact that they actually gave the market a target, this level of one 120 that you spoke about, as a floor in the euro/Swiss.


SAYWELL: This is very unusual. And their intervention, actually took euro/Swiss straight to that level. So, as far as today is concerned they were very successful in achieving that level.

QUEST: We'll come to the question in just a moment, will they be successful long term, or will they end up just throwing a lot of money down the drain. Stay where you are, because we want to get some background on this as to why this is so important for Switzerland, in particular-Jim, Jim Boulden.

JIM BOULDEN, CNN BUSINESS CORRESPONDENT: Well, it is very interesting why Switzerland did this. Let's remind people what has happened. We know that markets have had a very bad summer, but the Swiss stock market, particularly, was performing extremely poorly throughout the summer. Even worse than we saw in some places like Germany. One of the reasons, of course, is because the strong franc made many Swiss companies very uncompetitive. So people were moving out of Swiss stocks in a very rapid way.

Now, what are some of the reasons the currency impact would have besides companies? Well, you would have prices. Some people say that prices for consumers were half when they went to Germany or France, instead of buying things in Switzerland. So there is talk of a lot of Swiss people getting in their cars driving across the border, because it was just so much cheaper.

In fact, tourism was falling. It was predicted 5 percent drop in tourism this year. So the Swiss tourism board actually increased its budget to try to remind people to come to Switzerland despite the strong franc.

And exports, we always talk about exports. Something like 50 percent of the economy relies on exports. You think of companies, you think of Swiss watches. You think of Swatch. Swatch is one of the companies that has been so angry at what they said was speculators driving up the Swiss franc. So, Swatch said it was bad for their business and they said that-in July they said that the first half year they so a drop in gross sales of 12.8 just because of the currency. Not because of anything different in their business. And I should tell you that Swatch shares were up 3 percent today, Richard.

QUEST: All right, Jim.

Now the question becomes will this make any difference? Will it actually do the trick, Steven, long term?

SAYWELL: First of all, I would say, as of today they have been successful. They have achieved what they wanted. But long term the reasons that the Swiss franc is so strong has nothing to do with the Swiss economy. It is the fact that the Swiss franc, like the yen, is seen as a safe haven against fear and concern in the global market.

QUEST: Right.

SAYWELL: And given the fear that we have had recently it makes sense that Swiss franc and the yen have been so strong.

QUEST: Right. If I take your logic and apply it to the sovereign debt crisis in Europe and the U.S. budget deficit crisis. Then Switzerland and Japan remain safe havens.

SAYWELL: Yes, that is exactly the case. I think in a world of global concerns, currency investors are looking for safe currencies to park their funds. And the Swiss franc and the yen are at the top of the tree on this.

QUEST: So, to maintain that 120 minimum level against the euro, the SNB is going to-and they say in that statement-use unlimited resources to do so. They are going to have to pay on this.

SAYWELL: Well, this is exactly what they are going to have to do. To achieve that target, that 120, they are committing themselves to unlimited purchases of the euros and selling of the Swiss franc to achieve that.

QUEST: You are in the market. Is it your gut feeling the market will test the credibility of that undertaking.

SAYWELL: I think that is highly likely. And I think particularly in the next month. We have a lot of concern over the U.S. economy. What type of policy response we'll get from the Federal Reserve. And still some concerns in Europe. Particularly the Italian bond market.

QUEST: But why would you test the virility of the SNB? It is not like the ERM in the U.K., where you can crash out of it. Switzerland will just keep printing or they would loose credibility and face.

SAYWELL: Yes, I think that is exactly the case. But I wouldn't probably use the word, "test". I would veer away from that word. Really what investors are doing, having a very strong demand for Swiss francs. And I think that demand will continue.

QUEST: Do you see a speculative opportunity in what the SNB did today, to arbitrage, now we've seen that they are determined to maintain a 120 level.

SAYWELL: Well, we wouldn't stand in front of the SNB. We have seen the success that they have had today. I think the point I would make is the demand for Swiss francs, it is coming from people who really want a safe haven. They are not speculating, they want their money to be safe.

QUEST: OK. All right. They may be the end of line purchasers. But we have seen in Japan, similar actions, as you were telling me as the G10, Japan and Switzerland-well, all right, Switzerland is not a G10 country, but you know what I mean.

SAYWELL: Uh-huh.

QUEST: Japan has tried to buck the market and failed. Isn't Switzerland destined to have the same experience?

SAYWELL: Well, I think that the risk is very high. And you mentioned Japan, I think there is a very strong chance that we'll actually now see intervention from the Bank of Japan as well, in an attempt to curb the strength of the yen.

QUEST: Beggar they neighbor. You and I are old enough to know that phrase from the currency markets. Steven, many thanks, indeed, coming in from BNP Paribas.

SAYWELL: Thank you.

QUEST: Now that Swiss intervention helped the Zurich SMI buck the trend, never mind what Margaret Thatcher said all those years ago, on the market. Shares across the sectors rallied. Every stock finishing in the green. The SMI gains of more than 4 percent. Paris and Frankfurt trailing. French banks had another poor day. Soc Gen, Agrico, BNP Paribas, one of the biggest losers on the CAC currant.

To the U.S. markets!


Bear in mind the U.S. didn't trade yesterday, with it being the Labor Day holiday. That is not the lows of the session. We have been under 11,000, but we are off 143, at the moment. We were off nearly 300 at one particular point. So that is almost a (UNINTELLIGIBLE) by comparison.

Coming up in just a moment, they are fighting back against the cuts. Italian parliament plans new sweeping austerity measures, but Italians are protesting. It is a big question, in a moment.


QUEST: In Italy striking workers offered and unsettling backdrop to the austerity debate that was taking place in parliament. Public transport went into a near standstill across the country. Italy's biggest union called the strike to protest against the government's $64 billion austerity plan. The Senate began debating the package in Rome, a few hours ago. There are new measures including a rise in VAT from 20 to 21 percent, along with a wealth tax for those earning more than $500,000. Joining me now from the capitol is Senator Mario Baldassarri, the chairman of the Senate Finance Committee.

Senator, what a mess? The inability of the administration, the Berlusconi administration, to get a credible austerity package that parliament can agree upon?

SEN. MARIO BALDASSARRI, CHAIRMAN, ITALIAN SENATE FINANCE CMTE.: Well, let's start by asking what about the European Commission, the European authorities and the market (UNINTELLIGIBLE) asked Italy to do. And they asked it to get a zero deficit target in 2013, and do structural reforms to support growth. So what we have to face now is the proposal, the new budget law made by the government, that has been changed over the last 10, seven, eight days, everyday. But it seems that tonight will be the final version.

And the final version will be an increase in taxes, considering last statistical data of 2010, the increase in taxes will be around $100 billion euro. And these higher taxes will be devoted to get the deficit from 71 billion deficit in 2010 to zero. And the other one to finance due current account expenditure. So the point is, there are not yet structural reform to give support to growth.

QUEST: Right. Now-

BALDASSARRI: That is why the government has been-

QUEST: The problem is, Sir, the problem is that all these measures will, as you rightly point out, plug gaps, slow down the economy, do what is necessary. Are you concerned-end I think you are, from what you say- that actually longer term it is business as usual. Where is the structural change?

BALDASSARRI: Yes, this is the problem. If you don't have structural reform, you are like a dog chasing his tail. Because if you get a zero deficit target by increasing taxes and cutting investments then you have some kind of negative effect on growth. And then the same target of getting the deficit to zero will be fragile.

QUEST: Right.

BALDASSARRI: This is what I have been saying in the parliament since two months ago. So we need to have a zero deficit, in the budget of the Italian government, but the point is how you reach that kind of target. And my position is you have to reach the zero deficit by cutting government account expenditure, the current account government expenditure. By spending cuts, not by raising taxes.

QUEST: Oh, but-hang on! Hang on! Hang on! We have Christine Lagarde at the IMF basically saying that now is not the time, there needs to be growth intensive measures. Surely, you would accept that it can't all be done by austerity, or you'll end up with a situation like the United Kingdom.

BALDASSARRI: Yes, right. But Christine Lagarde, I mean, the IMF, gave last week, the forecast for the Italian growth an extra year. And the forecast that the IMF gave is one half, with respect to the forecast gave by the Italian government. So if you take into consideration the real recent forecast of the IMF by this kind of proposal made by the government we will never reach zero deficit in 2013.

QUEST: One final quick question: Is it time for the prime minister, Mr. Berlusconi, is time for him to go?

BALDASSARRI: Well, the point is, what kind of government in Italy will be able to implement the needed structural reforms that we need, not just for the crisis, we need maybe since five, 10 years ago. But within the reform there are much more needed and much more urgent to be implemented.

QUEST: Senior Baldassarri, thank you very much.

BALDASSARRI: Thank you to you.

QUEST: I know you have much happening in parliament and we are grateful you have come to talk to us this evening. I appreciate your time. Thank you, Sir.

Joining us from Rome, the chairman of the Senate Finance Committee. And they are voting there, actually, pretty much any time now, on that increase in VAT and the wealth tax, in an effort to cut the deficit back.

QUEST MEANS BUSINESS is the program.

And more moderate unions refuse to join today's strike. The union that organized the walk out says that more than half of the country's workers walked off the job. In Rome the protestors echoed complaints heard all around Europe and beyond, that working men and women are picking up more than their fair share of the tab.



UNIDENTIFIED MALE: They are stating the package is wrong because it is very unfair to low income people. And it does not have anything to support growth. And we want the government (UNINTELLIGIBLE).



UNIDENTIFIED MALE: (UNINTELLIGIBLE) Government needs money and people who pay taxes, will pay more taxes. And people who doesn't pay taxes will not pay more taxes. This is very bad (ph).

UNIDENTIFIED FEMALE: I'm here in Rome to protest against Berlusconi.


UNIDENTIFIED FEMALE: I believe the measures which are going to pass (UNINTELLIGIBLE) financial measures won't work because they are only attacking the weak part of the society.

UNIDENTIFIED MALE: And the main problem of Italy is growth. We want to change the package. And we are here today to push for a change.


QUEST: Some views on the streets of Italy today. In just a moment, after the break, not every boss keeps promises. Steven Hindy believes, most certainly, you do. And you won't believe what his staff are getting out of it. It is your appointment in the C suite, with "The Boss".


QUEST: Three bosses, three different companies, and all different kinds of challenges. Each week we show you what life is really like for people, for those men and women who are truly "The Boss." Let me remind you who our candidates are at the moment.

We have Francis Lui, who only a month ago opened his new casino in Macao. He is already looking for new bigger ways to beat the competition. There is Steve Hindy, in New York, behind the Brooklyn Brewery. After years of planning his investments are just starting to take his company to new and higher levels. And, of course, there is Sarah Curran, who is running the show at, who we will be with next week.

Tonight, we are with Steven and Francis. In Macao Francis Lui is adding another dimension to his gambling Galaxy, while over in New York Steve Hindy is going to make good on a personal promise to staff, to fly staff out on holiday. These gentlemen, they are, "The Boss".


UNIDENTIFIED MALE: Previously on "The Boss": Pride and satisfaction for Steve Hindy, as Brooklyn Brewery's expansion begins to take shape.

STEVE HINDY, FOUNDER, CEO, BROOKLYN BREWERY: This is a total thrill. This is a total turn on to be expanding your brewery.

UNIDENTIFIED MALE: And in Macao, Francis Lui tells his executive team there is room for improvement.

FRANCIS LUI, VICE CHAIRMAN, GALAXY ENTERTAINMENT GROUP: Even though we are achieving great results right now, I still think that we can be better, much better.

UNIDENTIFIED MALE: As the team continues to iron out those details, making the product the best it can be, Francis Lui has thrown himself into his next big project, making his casino resort even more attractive to his customers.

Today he's taking a hard-hat tour of construction for Galaxy Square, an area within the Galaxy Casino resort, which will comprise nine 3-D cinema screens and a karaoke complex.

LUI: Burgundy and red looks quite similar. The purple, the red, on a grid, they are very distinct.

That is our entertainment center. It is going to be one of the biggest in Hong Kong and Macao. And, all together, we can seat about 1,000 people inside.

UNIDENTIFIED MALE: The Galaxy Square, which is due to open in the fall, is all part of Francis' non-gaming strategy. He knows that his casino will continue to draw loyal gaming fans. But to attract a bigger audience, he needs to broaden its appeal.

LUI: Gaming, entertainment, is a very important part of the whole property. When we opened up the Galaxy Macao, we know that we are a little bit short of non-gaming entertainment for the children, for the kids, for the family. And this is why this is so important for us.

UNIDENTIFIED MALE: As he tours the space that will become the Galaxy Square, 16,000 square meters to be exact, Francis is across every aspect of the construction.

LUI: If I have my choice, use drywall, so that this will be thinner, and then the width here will be-wider.

This is fine.

UNIDENTIFIED MALE: A boss with an eye for detail, who leaves nothing to chance.

LUI: This is fine. I always keep saying that I'm just here to give directions and recommendations and suggestions. At the end of the day it is the manager who is going to take charge and make all those tough decisions for us.

UNIDENTIFIED MALE: In New York, Brooklyn Brewery President Steve Hindy is enjoying a light-hearted moment with three of his employees.

UNIDENTIFIED MALE: Tom is driving through these mountain roads.

HINDY: You don't look too good there.

UNIDENTIFIED MALE: Were you drunk?

UNIDENTIFIED MALE: No, I was car sick.

UNIDENTIFIED MALE: Brian Dockly (ph), Allie Deeper (ph) and Sherman Chang have just come back from trips to Italy and Sweden. Vacations paid for completely by their boss, Steve Hindy.

HINDY: Is that in Capri?


UNIDENTIFIED MALE: Steve's way of rewarding his employees may seem extravagant to some. But for Steve this is more than just an incentive. It is a case of promises kept. A bold pledge he made to workers six years ago.

HINDY: At that time we were about, I think, about 50,000 barrels, or something like that, of production. We said when we get to 100,000 barrels, we'll take everybody on a trip to Europe.

UNIDENTIFIED MALE: So, to Europe they went; 20 were sent to Italy, and 28 to Sweden, at a cost to the company of around $100,000.

HINDY: You know, I told a lot of people about this since we did it. And other people in other businesses are like, whoa, that is amazing. I can't imagine doing that. And actually you probably couldn't do that if you were a public company. You know, I mean, how many times you read about a public company. But a private company, it can do it.


HINDY: Hi, Eric.

UNIDENTIFIED MALE: For Steve this is about recognizing and rewarding his staff.

HINDY: It's really a personal choice. But, you know, from the beginning of the company it seemed to me to be real important to have people committed to our objectives and our mission, our vision. You know, in the beginning, we didn't pay too well. We didn't pay ourselves too well, and we didn't pay our people too well.

UNIDENTIFIED MALE: We got in a boat. And I was sitting in the back of the boat.

UNIDENTIFIED MALE: For some of Brooklyn Brewery's employees, this was an opportunity to travel outside the United States for the first time. And opportunity to get to know the key markets they serve and get to know each other.

UNIDENTIFIED FEMALE: I think it was great to go on the trip together and just spend time together as a company. It definitely brought us closer.

UNIDENTIFIED MALE: But this holiday may not be their last. Steve Hindy could soon throw down the gauntlet with higher targets and again offer a new set of rewards to his team.

HINDY: Maybe the goal is going to be at 300,000 now, for the next trip. But, you know, I think it was-it a great impact on moral and on enthusiasm for the company and belief in the company. And a belief that, you know, it is not just the owners who are benefiting from the growth. It is everybody.

UNIDENTIFIED MALE: Next week on "The Boss":

LUI: The gaming industry, it is not for everyone. And this is why we take it upon ourselves that we need to connect with the community.

UNIDENTIFIED MALE: Francis Lui proves you can combine public service with profitability. That is next week on "The Boss".


QUEST: What insight, giving all those employees vacation and designing a new part of your empire, "The Boss" only on QUEST MEANS BUSINESS, on CNN.

After the break, an interview with the former prime minister of Spain, Jose Marihafna (ph), pay attention to what he says about the future of the euro.


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

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

Libya's Transitional Council says negotiations over the pro-Gadhafi stronghold of Bani Walid are over. The Council says elders who were negotiating them were fired upon by pro-Gadhafi elements when they tried to return to the town and that they no longer believe the situation can be resolved peacefully.

New fallout from Israel's deadly raid last year on the Gaza-bound flotilla. Turkey has now frozen defense ties with Israel. And Israeli official says his country does not want its relationship with Turkey to deteriorate further, but refuses to apologize for the raid. Eight Turks and one Turkish-American were killed when Israeli commandos stormed the ship.

Members of Italy's largest union have been on strike today in several cities. They are protesting against the unpopular austerity measures moving through parliament. The work stoppage has caused transportation problems across the country.

More pressure on the media tycoon, James Murdoch, as British lawmakers have heard testimony about the ongoing phone hacking scandal. On Tuesday, a former lawyer for "The News of the World" tabloid said James Murdoch knew illegal phone hacking went beyond a single journalist.

Mr. Murdoch continues to insist he never misled lawmakers about what he knew and when he knew it.

He calls it a tragic question -- could the Eurozone be about to disappear altogether?

Jose Maria Aznar is now one of the leaders no longer talking in terms of crisis management, but in terms of survival. The former Spanish prime minister says he fears for the single currency's future and told me both the Eurozone and the EU itself faced stark choices.


JOSE MARIA AZNAR, FORMER SPANISH PRIME MINISTER: The question now is dramatic. And the question is more or less the -- this -- if the euro can disappear, if that don't exist at serious political decisions, especially from part of Germans, to -- to resolve, politically, this -- this situation, not only in the peripheral countries, the situation of the lack of trust in the future of the eurozone.

This is a question. This is -- now, this is -- tragically, this is the question.

QUEST: Do you believe the euro will survive?

AZNAR: I think -- I -- I wish the euro survives, because a crisis in the euro will be a crisis in the European Union. And maybe it will be, it will means that -- that the European Union will disappear. And this is, for me, a serious concern.

QUEST: But the fact that you're not saying definitively that you think it will survive raises the very doubt that there is a real risk that it might not survive.

AZNAR: Political is very -- it's especially important that the euro survive.

QUEST: Economically?

AZNAR: And politically, because the -- for the euro is the most important political expression of the European Union and the Eurozone. And the political consequences of the -- and the criticism in the euro of the separation of the euro that there -- that will be very complicated to manage in Europe.

QUEST: Do you believe that your country, Spain, will avoid or will need a bailout?

AZNAR: Since the moment that the European Central Bank, this summer, buying Spanish bonds, we living under some kind of intervention, Spain and Italy, a different intervention that creates political island (ph). But this decision of the European Central Bank means a kind of intervention in the Spanish economy.

Spain has the capacity to -- to improve the situation, absolutely. The country has the capacity. But with a new political formula, a new political government, take Australia's decision and living in -- in a -- in a landscape that makes possible that the decision of the new government...

QUEST: Right.

AZNAR: -- means that the possibility to -- for -- for growth.


QUEST: that is the former Spanish prime minister, Jose Maria Aznar, on the question of the euro.

Now, on trial in Iceland, the former prime minister is going to be talking to us next.

QUEST MEANS BUSINESS, after the break.


QUEST: It was one of the most spectacular crashes of the 2008 financial crisis -- the 2008 financial crisis. Iceland's economy, which had been steaming ahead, sunk to unthinkable depths. Its three main banks, who had become colossuses in Europe, went down heavily.

The man at the helm during that period was the prime minister, Geir Haarde, who is now appearing in a Reykjavik court on Monday, accused of failures of ministerial responsibility.

Mr. Haarde joins me now from Reykjavik.

Geir Haarde, you are the only political leader who has been charged in connection with the crisis of 2008.

What did you do that was so dreadful?

GEIR HAARDE, FORMER ICELANDIC PRIME MINISTER: Well, that is a very good question, Mr. Quest.

You know, what we have here is a criminal trial, formally speaking, but in reality, it's a political trial which has been initiated and instigated by some of my old political enemies who see the opportunity to settle some old...

QUEST: But...

HAARDE: -- political scores...

QUEST: Right. But...

HAARDE: -- using the justice system to do it.

QUEST: Right. But they say -- and we may as well just very briefly, because they -- obviously, it's phenomenally complicated, with truth reports and the like. But they basically say that you knew the crisis was coming, you didn't act swiftly or appropriately in dealing with it. That - - that's basically the nub of their accusation.

HAARDE: Well, you know, this was an international financial crisis. It started in the US. The U.S. Federal Reserve is on record saying that they did not see it coming. They have a very good hurricane watch in the U.S., but they don't see -- didn't see the financial hurricane coming in the fall of 2008.

Neither did the European governments. And all the public data we had, throughout the year 2008, up until September, about the bank, including their audited reports, reports from...

QUEST: Right...

HAARDE: -- the financial supervisory authority and, among others, the IMF suggested that even though there was headwinds, they were basically sound.

QUEST: But -- but...

HAARDE: And this is -- this is what the situation, as we deemed it at the time.

QUEST: Obviously, somebody has to carry the can, because, let's face it, we know from our coverage of Iceland and the debts that Iceland will be paying to Denmark and the U.K. for years to come.

You're the scapegoat, aren't you?

You're the person who's carrying the can?

HAARDE: Well, you're -- you can put it that way. That's probably -- probably true. But, you know, you have to also think back. I was finance minister for -- for longer than almost anybody else in Iceland's history. We paid back the treasuries debt so that it was almost debt-free when the crisis hit. We were in, for that reason, in a much better position to -- to take on new responsibilities as a result of the crisis. And we, as a country, will work our way...

QUEST: Right.

HAARDE: -- through them. I negotiated with my colleagues the agreement with the IMF in the fall of 2008, which gave us, you know, ground to -- to work on, for the recovery to resume.

And don't forget, the measures that we took in the fall of 2008 to save the domestic banking system here, not make the mistakes that some other countries did...


HAARDE: -- in terms of guaran -- guaranteeing the external debt of the banking system. That's -- all that worked.

QUEST: Right.

HAARDE: So in -- in a way, we were in -- we are not in a much better position...

QUEST: But do...

HAARDE: -- than some others.

QUEST: -- do you accept, though -- admit talking about criminal liability here, because obviously that will be decided by a court of your peers.

But do you accept that as the finance minister for so many years and the prime minister, that you do bear -- your governments bear and the cabinets you were part of bear some of the responsibility, because you did deregulate and allow those banks to get into areas that, frankly, they should never have been near?

HAARDE: Well, they did that on the basis of a Pan-European regulatory system and a framework which was set by the European Union. We can blame ourselves now, clearly, in retrospect, that we allowed them to go as far as they did within that particular framework.

It's also turning out that it looks like there was some activity, allegedly illegal, going on in the banks...

QUEST: Right.

HAARDE: -- which we, of course, didn't know about, market manipulation and stuff like that. But it's sad to have to say that. And - - and, of course, if people have done something like that, they will be -- be punished.

QUEST: Right.

HAARDE: But, of course, in the -- the banking collapse in this country or elsewhere is not the fault of one single person, not one single political leader.


HAARDE: But many people have to share the blame. I take my full political responsibility for what happened here on my watch. But I'm not...

QUEST: Finally...

HAARDE: -- I have not committed any crimes, Mr. Quest. I know that you mean business, but you have to give me time to -- to answer.

QUEST: Sure.

HAARDE: I have not committed any crimes and so haven't my governments. None of my governments I sat in have committed any criminal acts.

QUEST: I -- I -- I appreciate that and apologize for interrupting. It is, of course, just the pressure of time.

But finally, sir, I -- I am interested, what does it say about democracy in your country, in Iceland, that, frankly, somebody can be hauled -- for political decisions, be hauled about before the courts, the criminal court, in such a fashion?

HAARDE: It says nothing about democracy. It says, I am afraid, a lot about the political ruling majority in this country at this time. And I must say, I am a little ashamed of my parliament, in which I sat for over 20 years, for having disgraced itself in this manner. The grandmother parliament, as many people call it.

QUEST: Thank you very much, sir, for joining us. And good to...

HAARDE: My pleasure.

QUEST: -- good to have you on the program.

Thank you very much.

HAARDE: Thank you.

QUEST: The former prime minister of Iceland joining us from Reykjavik tonight.

Even in today's modern world, there are an estimated 10 to 30 million people living in slavery. Next, as part of our Freedom Project, we'll look at how, with the help of your Smartphone, you can make a stand against it.


QUEST: This week, QUEST MEANS BUSINESS, we are looking at the role of technology in fighting human trafficking. It's part of our Freedom Project. We shine the light on the horrors of modern-day slavery without fear or favor.

Now, today, we're going to look at how the Smartphone can help you take a stand.

Join me at the super screen and you'll see what I mean.

All right, forget just Tweeting about where you are or Facebooking about your friends or any of that nonsense. A call and response that compliments the anti-slavery film of the same name, "Call, Response." It allows you to read stories by freed slaves and share your own experiences with others. Now, Trafficking Persons Awareness, this will give you -- Trafficking Persons Awareness will give you an aware -- a crash course in spotting and helping to prevent human trafficking.

There's plenty more. The RD app (ph) helps users coordinate flash mobs, concerts and protests on Redemption Day, the 11th of November. That's pegged to be the global day to make a shout-out against slavery. You can guarantee that we will have extensive coverage there.

And Free2Work -- we talked about this last night -- lets you look at major brands as you shop to check what they're doing to tackle the problem. These are real live apps and real live technologies that we can use everyday, which, of course, you'll find on our Web site, to actually make a stand, to make a difference.

Now, Free2Work was created by the Not For Sale Campaign. Its goal is to use technology to mobilize activists and fight slavery.

David Batstone is the campaign's co-founder and president.

He joins me from San Francisco.

We now, over the -- the months that we've had the Freedom Project, we've got a very good idea of the issues. We know the awfulness.

But, David, it's doing something about it that I need you to talk to me about, not telling me how dreadful it is.

DAVID BATSTONE, PRESIDENT, NOT FOR SALE: Yes, that's exactly our -- our mission, Richard, is to mobilize smart activists. There's a lot of dumb activism out there, frankly.

And what can I really do that makes an impact?

What can I do that makes a change?

And so we use technology and business to bring about solutions.

QUEST: OK. When you talk about that, the technology, give me an idea of the range, short of telling me what, you know, a product or something that might work or might not, what can technology really do?

BATSTONE: Well, it can do a lot of things. One is when your listeners shop, whether it's in a large department store or whether they are out at the grocery store, that they're able to take their Smartphone, through Free2Work, our app, and they're able to look at the products.

And what's the story behind those products?

Right, how are they made?

Where were they made?

How were people treated?

Were they actually free to work?

You see, none of us want to wear people's tragedy. We don't want to consume their suffering where we have coffee with sugar poured in it. We want to make sure that people's lives are enhanced.

And this tool enables you to buy in such a way that you know you're enhancing the lives of the people who made those products.

QUEST: OK. This assumes -- there's -- there's two problems, aren't there, in all of this?

Firstly, you've got to ensure that people care enough to want to do anything about it, which is a, I suppose, the sine quo non of the whole thing to begin with.

But even then, you've got to raise your app and your technology above the clutter, haven't you?

BATSTONE: No, you really do. I'd say, first off, that, really, you know, we need one out of five people who are watching this show to download the app. You know, the other four can be losers, Richard. Really. We just need one out of five to say I care about the way that the products that I use are made. So one is to mobilize that very active minority. And that makes a difference to a company. We don't need to get five out of five people.

QUEST: Right.

BATSTONE: But still, we have to raise it above the clutter. That's why we make partnerships with major global brands, who start to care about the way their own products were made and they show the way forward and how you can actually make a difference in production and change the way that people work.

QUEST: On the wider point of preventing and -- and ridding slavery, is there not a fact that, frankly, you, you and me, we all have to accept we may have to pay more to ensure a product that is secure, safe and has -- and does not transgress?

BATSTONE: Well, to the extent to which we have to make sure that everyone's lives really are protected in the making of that, it would be more than actually using a product or buying a product where people are forced to work.

But, really, we're talking about a very small margin, Richard. And this is what I've tried to tell companies, that we're not -- you know, sometimes people say, gee, it's going to cost $200 to buy a hamburger if we actually pay people what they deserve.

But, you know, really, it's about 10 to 20 to 30 cents on a product. And I think all of us are willing to pay that just so that we can live in a world of dignity. I think that's not enough for us to try to ignore the fact that we are linked to people around the world through consumer products.

QUEST: All right, David, thank you.

You just want one out of five to download Free2Work.

All right...

BATSTONE: I just want one out of five.

QUEST: One out of five. All right.

BATSTONE: And then you get a company, Richard, like...

QUEST: All right...

BATSTONE: Yes, but I -- you know, then you get a company like All Saints in London, a global company. In two weeks, the Fashion Week, they're creating their own Not For Sale line of apparel where you know when you buy a shirt that that was made where people had dignity, you're going to look stylish...

QUEST: All right...

BATSTONE: And it helps our cause to fight slavery. So those kinds of things are great.

QUEST: David, thank you for joining us from San Francisco.

We'll talk more about this later in -- one out of five. One out of five, Free2Work. I'm going to Tweet the details of when you can download it immediately after the program. If you're not following me already, it is @richardquest. And we'll put it on the Facebook page, questmeansbusiness.

Very strong wind and heavy rain -- Jenny Harrison is at the World Weather Center.

It is vile in large parts of Europe.

Y HARRISON, CNN METEOROLOGIST: Yes, absolutely, Richard.

It began to come in last night. The winds are beginning to pick up across much of the northwest, first of all. The U.K. actually seeing some of the strongest winds and, in particular, funneling through the Channel. And you can see this massive cloud, guess what, to the north of that -- see that curly cloud?

That is the area of low pressure. That is why it is so very unsettled.

Now, much of the rain in the last 12 hours has been across the U.K., worked its way across the Channel into the northern sections of mainland Europe. And the U.K., as I say, has certainly been seeing the brunt of the very heavy amounts of rain.

But look at the winds. These are current wind speeds. So getting on to 50 kilometers an hour in Dublin, the same in Plymouth.

Now, those are the same winds. So that means easily gusts in excess of 60, 65 kilometers an hour. And have a look at some of the winds that have been reported already on this Tuesday. Now, the highest wind actually was out in one of the ocean buoys there, as I say, in the Channel. As you can see 190 kilometers an hour.

And then in Southern Wales, Mumbles, 111 kilometers an hour. And one of the (INAUDIBLE) places that generally is, in the UK. Again, in North Wales and Snowdonia is a couple periods of 79 millimeters in the last 24 hours. And, as I say, there is more of this to come.

The winds are also going to remain fairly strong across the northwest. They're funneling through the Baltic Sea, as you can see there. But eventually, they're going to actually ease off a little bit. As I say, the brunt of the wind is really being felt across the far northwest.

It's because of this area of low pressure. Also, quite a bit cooler in the wake of this system as well as the fact that we're going to see some rather heavy rains at times. And some of these rains really will be heavy. Again, with these strong winds inside. And also, we could have some tornadoes actually forming through those severe thunderstorms.

You can see that cooler air filtering across the northern and eastern areas of Europe. Still very nice across the south. But definitely feeling more autumnal generally with this sort of weather pattern in place for the next few days.

As I say, clearer skies across the south and the southwest. So 33 in Madrid and then 18 apiece for London and Paris.

Now, way out in the Atlantic we are watching this major hurricane. It is a Category 3. This is Katia. Winds 185 kilometers an hour. There is Bermuda. There is now a tropical storm warning in place for Bermuda. These are all the computer models with the forecast track for where they think this hurricane is going to head. So, hopefully it will bypass Bermuda, to the west of there and stay well offshore of the U.S., particularly the Northeast, which was so severely hit with Hurricane Irene, and in particularly by heavy rains.

The last 12 hours, more warnings in place across the Carolinas, pushing up into Virginia. So severe thunderstorms. Very heavy rain accumulating for the next couple of days. The Northeast, as I say, is the area that we could really see some high totals.

So again, there are plenty of flood warnings in place there -- Richard.

QUEST: I think is the time for me to get out the winter mac, Miss. Harrison.

HARRISON: Yes, that infamous mac. Although I think you might have, you know, bought a new one from time to time, just to stay in style.


HARRISON: Although I don't know...


HARRISON: No, what am I thinking?

QUEST: Recession, don't you know?

HARRISON: What am I doing?

QUEST: Recession.

HARRISON: What am I thinking?


QUEST: There's at least another 10 years in that mac.

All right, Jenny, many thanks, indeed.

Jenny Harrison at the World Weather Center. a very quick look at the markets. That's what's happening, 165 down on the Dow. 11000 looking dodgy.

A Profitable Moment in a moment.



QUEST: Tonight's Profitable Moment.

Sometimes, and often, it's not what you say that's important, it's what you don't say. In the past few months, we've heard leader after European leader insist the Eurozone can survive this crisis, the euro must be protected at all costs.

Now, that is starting to change.

Jose Maria Aznar refused to put on that brave face we've come to expect from his colleagues and contemporaries. When asked this morning, quite bluntly, can the euro survive, he openly entertained the idea that the euro and the Eurozone will have to have major radical change and might not make it through this crisis intact.

Aznar has the luxury of no longer having an election to win or a cabinet to maintain. But today, we saw Switzerland batten down the hatches and take unforeseen measures to protect itself from this crisis.

Switzerland already knows what everyone else is realizing quickly, Europe is not going to be able to dodge these cloud -- gathering clouds. It's a case of be prepared when the storm hits.

The Eurozone, whether it survives, what happens with Switzerland -- these are all questions, difficult questions (INAUDIBLE).

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest in London.

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

"PIERS MORGAN TONIGHT" is after the headlines.