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Big On Promises, Short On Detail, EU Leaders Meet In Brussels Tonight; European Crisis Summit; Interview with Romano Prodi; Dreamliner's Debut

Aired October 26, 2011 - 14:00:00   ET


RICHARD QUEST, CNN ANCHOR: An evening big on promises, short on detail. EU leaders are meeting tonight in Brussels.

It's a smart move for Nokia. The chief executive tells me why he's betting his new phones with Windows.

And it is reality for the Dreamliner. We are onboard that maiden flight.

I'm Richard Quest. And hour together and I mean business.

Good evening.

Tonight a plan is in the making for Europe as leaders are concocting what they believe could be the cure for the region's debt crisis. A beefed up rescue fund, a soothing flood of cash for the banking sector, and a corrective haircut for Greek bondholders.

They have been meeting for several hours in Brussels. The president, or the current president of the council, the Polish prime minister, is currently briefing on exactly what they have decided so far before the head off for dinner. Let's listen in.


DONALD TUSK, PRIME MINISTER, POLAND, (through translator): After a short, heated debate we also adopted the main principle that annexed to our position, our statement. Thanks to that the recapitalization of banks will be possible, according to us.

This element of the agreement-


QUEST: Now obviously, dipping in, in such a fashion it is hard to gauge what they have come up with, whether it is a recapitalization of the banks, or any of the other decisions they had to take. But so far it seems one crucial ingredient has been missing, the numbers. It is all starting to look a little half-baked.

EU heads of government in Brussels to add those final touches to the plan. Germany's Chancellor Angela Merkel arrived with the support of German lawmakers behind her. They voted to back changes to Europe's bailout fund, the EFSF. She told them earlier the world is watching Europe.

Now the trouble is each of the main sticking points depends to some extent on the other. If you'll join me over here, you will see exactly what I mean, at the super screen.

The problem is this: You can't solve one part of the European problem without necessarily dealing with the others. And where each one is concerned you end up in a circular motion. So, for instance, we need numbers to know how much the banks need to be recapitalized. Because we need to know what the haircut for Greece is going to be. And only when you get those numbers can you work out what the EFSF is going to need; which put another way, it means that depends on that, which depends on that, which depends on that, and so far nobody it seems is prepared to put any numbers on anything.

Which is why this continues to go in one large circle. Let's talk about this with Nina Dos Santos, who is joining me from Brussels.

So, they are having a short break from the first part. Any idea if they have solved any of these problems yet?

NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: At this point, Richard, we are none the wiser either.

What I can tell you is that that session has just finally finished. And they have wrapped up pretty much slightly ahead of what we were expecting. OK, half an hour maybe, 45 minutes after time. But there is a growing weariness here in the atrium (ph) of the European Council, where as you can see behind me 100s, literally 100s of foreign journalist from all 27 nations within the European Union, are basically hunkered down for the evening. Because we know that these negotiations, when they go back into a working dinner and more sessions, are likely to run late into the night. That is what we have been told.

As you said there is very little meat on the bone at this stage. But there are two or three contentious issues out of those three, in particular, namely the haircut, that could be imposed on investors in Greek bonds. Indeed, whether it will be voluntary or mandatory. That is another sticking point, Richard.

And, of course, the big question how do you boost your financial firepower for such an extremely important economic region in the world, if its biggest members aren't willing to put their hands in their pockets. As ever, the devil is in the detail. And I did manage to talk to one senior aide about exactly how fraught these negotiations were.


RICHARD CORBETT, ADVISOR TO EC PRESIDENT HERMAN VON ROMPUY: Of course there will be details as soon as there is agreements and you need to recognize this is part of a process. This is the latest step in the process. A lot has been done over the last few months, by the way. But also, now, the meeting Sunday, and the meeting today, was always in visage of a two step process. The configuration, the outline of an agreement on Sunday, allowing leaders then to go to their national parliaments in the countries where that was necessary, yesterday and today. And then having secured that approval, come back to clench the deal today.


DOS SANTOS: So, that gentleman, Richard Corbett, is an advisor to the president of the European Council, which itself is steering these negotiations, Richard. And if you can't get detail off people like that well, that pretty much sums up the question doesn't it?

QUEST: Right. The British Prime Minister David Cameron has just said that the meetings are going well, and that they haven't watered down the recap for the banks.

Nina, as I look at this chart of banks, Greece, and EFSF, which do you think, at the moment, is proving to be the biggest stumbling block as they try and deal with the issues?

DOS SANTOS: Yes, we are tucking and jiving every single half an hour here, on this particular issue. Monetarily, supposedly, I would assume it would be the EFSF. Because that has an actual lending capacity of about $444 billion at the moment, Richard. You and I know that that is absolutely no where near enough to address all of these ills. They are going to have to, at least, quadruple this. Maybe even boost it fivefold. Finding the money for that will be difficult.

Then, again, negotiating with banks is also hairy stuff, on those haircuts.

QUEST: Nina Dos Santos, who is in Brussels tonight. Summit has rolled into summit, over the last 18 months we have seen more extreme actions, but no real movement. There have been three summits at Euro Council level; 29 people around the table. That is 27, plus Von Rumpuy and the president of the commission.

In the same period there have also been 23 ECONFIN meetings. Along with one more summit to go, of course, the G20, which takes place in Cannes. So for the leaders, this is what the calendar has looked like for Messrs. Sarkozy, Merkel and the rest.

In October 2008, the Euro group successfully headed off the financial meltdown. They had the first-ever Euro area summit, that agreed that governments will buy into banks, if required to boost finances. By the time you get to May 2010 that is a picture of Von Rumpuy on the day, the EU decided to create the euro-500-billion package for measures to prevent and protect the stability, what subsequently became the EFSF.

Move forward to July of this year and you have a massive new lending pattern put in place, with the Greek prime minister receiving his second bailout, an assistance program for his country.

And then you move to today. The 23rd summit, it is meant to finalize and compartmentalize the strategy ahead of the Cannes summit, the G20, which comes along later, of course, next month.

Stephen Pope is with me.

Put it all into perspective for us. How bad is it tonight?

STEPHEN POPE, FOUNDER, SPOTLIGHT IDEAS: Extremely bad. We are almost in last chance saloon now. How many times have we been told that this is the final deal, the total solution? We certainly told that in July. But here we are again. We were promised that at the beginning of October, when Sarkozy and Merkel stood there in Berlin, saying we agree on everything. Clearly they didn't.

So, they promised us that in three weeks' time that they would bring the package.

QUEST: We knew then-Stephen, we knew then that when Sarkozy said that we agree, everything, that we'll have a deal by the 23, it was just about impossible. So, where they disingenuous or dishonest to make the promise?

POPE: To an extent I think it was slightly disingenuous. I would never say a politician is deliberately being dishonest with us.

QUEST: But they knew it couldn't be done?

POPE: I think they probably knew the total agreement deal couldn't be done, but they would find a compromise that they could perhaps pacify the markets with. But I'll tell you this, if they don't deliver something today, markets should crucify this market-this euro, tomorrow.

QUEST: Right. But we saw at the G20 fin mins, just 10 days ago-or five days ago, or whatever it was-the leaders were warned to do the deal. They were told by other G20 finance ministers. And yet they still can't. What is the sticking point? Help us understand tonight. What is the real problem?

POPE: I think the real sticking point is the banks. And we have to go to the French banks. Now, they have accepted the 21 percent haircut. They are screaming because they don't want to take more. And yet all summer long they have been telling us that they are in good financial shape. Well, I would turn around and say all the banks must make an open declaration of what they are exposed to, what they are prepared to write down, and if they don't pony up and take the full disclosure and haircut, then they don't get the full amount of recapitalization.

QUEST: The truth is, as we saw in the diagram earlier, this is so frighteningly complicated. Even if we look at the two mechanisms for re- leveraging up the EFSF. One variant (ph) in insurance, one variant (ph) in SBV. It is mind-bogglingly difficult. With huge potential to go wrong.

POPE: Absolutely. If you take the insurance scenario, first of all, they say that the EFSF who will guarantee a proportion of new issueds, from government other than those distressed nations who already had a bailout. Well, what proportion?

And then if there is a default, they will guarantee and pay that proportion of money back to the investors. Well, what is the definition of a default? Because if you take the Greek case, for the last two years, we certainly have no clue what a default is meant to mean. And then you start moving on special purpose vehicles and we are in very murky territory.

QUEST: I want you to stay exactly where you are for two seconds more, if you please.

While I just point out the European stock market picture, with uncertainty tonight. This is how the major indices ended the day; slightly better than you might have expected. With just the FTSE up a 0.50 a percent. The DAX, the CAC, the SMI, all off relatively minor amounts at the moment. Looking to the New York market at the moment.


And we have the Dow Jones up 133 points. Again of just over 1 percent; 11,000-12,000 is not out of the realms of possibility at the moment.

So, I come back to you, Stephen Pope, and I ask you: How can the Dow be up 133, and the European markets be so tame, if it is all so bad?

POPE: Certainly the European markets were never against trying to make a grand statement by being long or short, until they had actually seen whatever detail we may get tonight. They can react tomorrow. The American markets, yes, they're watching Europe, of course. But they have their own information to digest and they are thinking about what is happening in the U.S. economy, as well as what is happening over here in Eurozone land.

QUEST: So what you are politely telling me is don't necessarily read too much into what we are seeing in the market. It could all go in exactly the opposite direction.

We are just going to pause for a moment and go back to Donald Tusk, the prime minister of Poland. To listen about bank recapitalization.


TUSK (through translator): The only thing that remains are important but only technical issues. We need to be patient. I don't think we should speculate now. We will know the outcome of this meeting in a couple of hours.

For its part, the presidency has done its utmost and that was clearly demonstrated by the meeting tonight. That we did our utmost, and we did it right; everything that we proposed was approved by the 27 member states.

UNIDENTIFIED MALE: First of all the recapitalization agreement is necessary for PSI to be able to proceed safely, because the recapitalization agreement provides a-a safety net for-for the PSI for Greece. In short-


QUEST: Well and truly in the weeds, in the heavy weeds there of the PSI and private sector involvement. We need to be patient.

Stephen Pope, we need to be patient, says Donald Tusk.

POPE: Oh, I think we have run out of patience. I think we have been tracing this patience story, wait and see, for about 18 months.

QUEST: Many thanks, indeed.

POPE: Thank you.

QUEST: We'll have more if and when they speak, we'll bring it to you.

After the break SAP is brushing off the global slowdown. One of the company's chief execs, the co-chief exec tells us why.




QUEST: Even in an economic downturn SAP says businesses are still investing in IT. The software maker reported record revenue growth in Q3 and a doubling of profits to $1.7 billion. The company's co-chief exec, Bill McDermott, joins me now from New York.

Good to see you, as always, Bill.

We'll get to your individual results in just one second. I do need to ask you: You join us tonight on a very busy night. Obviously, when there is the Eurozone in crisis. We have all these other issues. As the chief exec, who has to trade in these difficult times, how difficult is it for you to make decisions?

BILL MCDERMOTT, CO-CEO, SAP: Well, the first thing you have to do is stick to your strategy. We believe, very much, in a customer-driven innovation strategy. And whether the times are certain, or uncertain, or they are robust, CEOs have to innovate their business. They have to grow their business and they have to get their business to execute in these choppy waters. So, our business software helps them do that.

And I keep our company, along with my co-CEO Jim Hagemann Snabe, and our board, we all keep the customer first and foremost in our mind. And that is why we are doing so well.

QUEST: The results are impressive when you consider the uncertainty that is in the wider global economic situation. And it begs the question: This willingness to spend on IT and invest when there is uncertainty. Why do you think that is the case? Because they could be laying off and facing double-dip before long?

MCDERMOTT: There are basically three mega trends, I believe, from a CEO perspective, as to why companies are investing. First, you have to be operationally excellent with your business model to compete against your peer group. So if you are not operationally excellent and not on par, at least with your toughest competitor, you are going to loose.

Secondly, you have got to have a real-time enterprise, where you sort through the complexity of data and you can make insights about your customer about your suppliers, obviously, about your business model. So you can in fact innovate and grow.

And finally, you have got to mobilize your workforce. People today have no interest in being tethered to a desktop. They are on the move and they need business applications on their hip so they can participate in the work flow and the decisions and the execution.

QUEST: Right.

MCDERMOTT: We do all these things better than any company in the world. And I think that is what is making such a difference. CEOs will invest in this because it helps them innovate, helps them compete, and helps them grow.

QUEST: All right. But what could cloud that picture? As we see tonight, for example, in Europe, with leaders, what could be the very falling and stumbling block in this recovery?

MCDERMOTT: The big thing is innovation. In fact, if you have innovation-and we see this in technology, the innovative companies, the Apples, the Googles, the SAPs, they are growing very fast. The ones that aren't innovating aren't growing near as fast or they are not growing at all.

What could change things, obviously, is if companies like us didn't innovate. The other thing that could change is if companies didn't have liquidity and strong balance sheets.

The fact of the matter is in spite of the debt crisis in Europe companies have good liquidity, very solid balance sheets.

QUEST: Right.

MCDERMOTT: And they do need to invest so they can compete, innovate, and of course, grow. And the fact is, if CEOs don't make the decision to invest into uncertainty, they never come out of the uncertainty in good shape. Their competitors do.


MCDERMOTT: And they have learned this.

QUEST: Bill, good to see you as always, in New York. Forgive me cutting you, slightly shorter than normal, but it is-as I'm sure you understand, it is one of those days where this all seems to be hitting us from every side.

Bill McDermott joining me from New York. We'll be back with more after the break. QUEST MEANS BUSINESS, good evening.


QUEST: Now we have just received a draft copy of the statement from the EU heads of state and government, which basically is the latest details. It says the heads of government discussed the situation and underline their common resolve to do their utmost to overcome the crisis. Well, that is soothing words, indeed. Do their utmost to resolve the crisis and to help face, in a spirit of solidarity, the challenges confronting the European Union and the euro area.

This is the statement so far. There is broad agreement on the question of debt relief. A significantly higher capital ratio of 9 percent, that is relating to the bank recapitalization. When you put it all together you get a chance to see the totality of agreement. And so far we are lacking details; specific details on what they intend to do.

While we get this, of course, get away from the generalities and get to the specifics, we will turn to other matters.

Nokia, the smart phone transformation is complete. Nokia unveiled in London today one of its newest phones. It is the Windows Phone-powered Lumiere handset. It is designed to go head to head with Apple and Android.

As Nokia's smart phone market share continues to plunge, the Chief Executive Stephen Elop is hoping his decision to ditch Nokia's own software for Microsoft will turn the company's fortunes around, as I heard earlier today.


STEPHEN ELOP, CEO, NOKIA: What we announced on February 11 as a strategy, we are now showing as real products. And that is an amazing accomplishment. And yet, on the other hand, we know that we are going through a transition period. And we know that we have to take this one steady step at a time. So today was also just one step in a journey, as we do everything necessary to insure that Nokia is successful going forward.

QUEST: Which is the impossible question, then, was this the most important step? Because obviously these are the first devices using the new operating system that is going to become the backbone of Nokia.

ELOP: There are millions of more important steps still ahead. Every time a consumer walks into a retail store, experiences the Nokia experience for the first time and purchases that product. Those are the moments where you say, we've hit it. We've nailed it.

QUEST: To the people who say, well, fair enough, he has brought out his Lumiere phone. And it is a Microsoft Windows phone, device. Where is the Nokia in all of this?


QUEST: I mean, I heard you put the boot in to the competition, when you said this is the first Windows phone, but why not just present this as a Windows phone rather than a Nokia phone?

ELOP: Well, a couple of points here. First of all, the differentiation around our product is substantial. For example, the quality industrial design; how it feels in your hand; the photography capabilities; but we also have only on Nokia devices, turn by turn navigation, we have incredible music experiences, unrivaled in the industry. All sorts of new sports experience.

So, collectively, the experience is differentiated from any other platform out there. And it is differentiated well relative to other Windows Phone devices.

QUEST: Can you turn this ship around? Is that-that is-you know, you and I can dance for hours around it, in any way. But that is the core question people are asking.

ELOP: And the answer to the question is absolutely, yes. When you see the quality of the work; the way we have compressed the time horizon, changed the way we operate, being able to show a picture from our factory in Salo, Finland, of the first Nokia Windows Phone based devices rolling off the line. No one predicted that we would be able to deliver that in such a short period of time. And as they will soon see with such a high degree of quality.

We have changed at Nokia. We continue to change as we go forward.

QUEST: And if you did have to look at market share numbers that you are looking forward to achieving. Because let's face it, the speed and the ferocity with which Android has moved into the market is really quite extraordinary.

ELOP: What we have seen, and India is a great example of this, just in the last month or so. We introduced a new range of dual SIM products, which are important in the India market. And in the markets in which we are competing with those we went from 0 percent share to almost 30 percent share in a matter of months, because the brand, the execution of a team and great products can quickly turn things around as well.

And so, Nokia, here in the United Kingdom, and in many places around the world, has a particular promise. And if that is matched up with great products then I predict success ahead.

QUEST: It was also very notable today that you are focusing so much of Nokia's fire power on emerging markets, developing economies. That is a clear, definable strategy.

ELOP: Absolutely. If you look at the economics of Nokia roughly half of the company, half of the business, half of how we think about the business is focused on those emerging markets and on those lower-priced devices. But, of course, people who are aspirational and buying those lower-priced devices today are looking at smart phones tomorrow, and so forth. So there is a very deliberate strategy there. But with that strategy we have tremendous market strength in those markets that we can leverage across other products.

QUEST: So how do you then go to the next stage? And it really is a classic case of-"so what have you done for me lately?" How do you go to that next stage? So that after trying the Nokia experience they don't aspirationally want to go say, for an iPhone or for another phone?

ELOP: By making sure that the Nokia experience is absolutely the best experience. As people take advantage of what we show today, bit it on a mobile phone or on a smart phone, it is something that becomes very addictive. They make the investment in configuring that and on they go. They continue to use those devices.

QUEST: And your forecast for market share, when you and I talk next year, Nokia 2012?

ELOP: So, we are not providing particular forecasts for market share, but I promise you that we'll be having a very different conversation as even more excitement is ahead in our transformation.


QUEST: That is the CEO of Nokia Stephen Elop. And for those of you who want to see, this is actually what the new phone looks like. It is the Lumiere 800, running on the Windows Phone system. Smooth as butter, they say. But, of course, I'm not quite sure exactly what I am doing so probably it is best if it is left to the professionals to show exactly how these things work, in the future.

Now, when we come back, a double act or a double trouble? Monsieur Sarkozy and Mrs. Merkel, scrambling to save the euro; we're live in France and Germany after the break.



QUEST: Hello, I'm Richard Quest.

More QUEST MEANS BUSINESS in a moment.

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

And in Brussels, a draft statement has emerged from the Eurozone debt crisis talks. It's short on details, but stresses the urgent need to support Europe's banks. The leaders are still yet to agree to a deal on expanding the bailout fund and how to arrange a possible write-down on Greek debt.

The International Criminal Court is shrugging off media reports that Moammar Gadhafi's son, Saif al-Islam, is ready to surrender.


QUEST: Excuse me.

A spokesman says the court has no confirmation or information on that.

Earlier, a member of Libya's National Transitional Council told Reuters that the former dictator's son and intelligence chief wanted to turn themselves in.

CNN has been unable to confirm that.

Freezing temperatures in Eastern Turkey will make it harder to find more earthquake survivors. Forecasters say the area will get hit with snow overnight. Around the clock searches are still underway and two more people were rescued earlier today. It's now been more than three days since the 7.2 earthquake struck.

Bangkok is expected to face its highest floodwaters yet in the next few days. Thailand's prime minister is warning the capital could be under as much as 1.5 meters of water. The government has declared a five day break, a holiday, if you like. It's having trouble convincing people to leave their homes.

The two countries have fought battles since the Middle Ages, and now the latest conflict would threaten the entire European project. The French president, Nikolas Sarkozy, and the German chancellor, Angela Merkel, are entering the final hours of negotiations in Brussels. For Europe and the European project, there is no more important relationship that that which exists between France and Germany.

And we have reporters on both sides of the Rhine tonight.

Jim Bittermann is in Paris.

And Fred Pleitgen is in Berlin -- Fred, start with you.

When Mrs. Merkel went to Brussels, she went with a thumping big majority on the refinancing of the bailout fund. So she has political capital.

So what's her problem?

FREDERIK PLEITGEN, CNN CORRESPONDENT: Well, one of her main problems is obviously getting all the things that the Germans want to do through those negotiations in Brussels. One of the interesting things she said today in a fundamental speech in front of the German parliament, is she alluded to exactly what you were just saying, that special important relationship to France, the special things that the European Union also means to Germany.

She called this, quote, "The most significant crisis that the European Union faces since World War II." She also said that peace in Europe is not something that can be taken for -- for granted.

I want you to listen in to a little bit of what she had to say.


ANGELA MERKEL, GERMAN CHANCELLOR (through translator): We have a historical responsibility to the union of Europe that our ancestors, after hundreds of years, made it possible. Our union, with all our possibilities and instruments, to fight for the union and the consequences if that doesn't happen, we don't know.


PLEITGEN: Now, one of the things that, of course, German taxpayers are worried -- very worried about and one of the things that she needs to be very worried about at this summit is they're very worried about losing German taxpayer money. And she said, with the things that the European summit is trying to push through, yes, there is increased risk to German taxpayer dollars. But she says she feels that risk is acceptable -- Richard.

QUEST: Jim in Paris, what's the problem for President Sarkozy?

What's his stumbling block tonight?

JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, I don't think he has much of a stumbling block. He just has to find some kind of a solution to the disagreements that he has with Germany. Basically, they're both on the same wavelength. What they really want to do is they want to leverage this EFSF to a point where it's meaningful for the markets.

And the question is, how do you do that?

And the French came up with a proposal on Sunday. The Germans rejected it. And I think the French have just abandoned that position, the idea of -- of having the central bank come to the table with the EFSF in order to reinforce the stability fund.

So we're back to another -- these other kinds of solutions, like, for instance, some kind of an insurance backup for countries that have sovereign debt that goes too high and they can't meet their debt payments. That -- that kind of thing is the kind of thing that they're thrashing out right now. And I -- you know, I don't think that it -- it's that big of a disagreement in the sense that the two don't see eye-to-eye on the overall strategy. It's just a question of the details.

How do you get from here to there?

And Madam Merkel has made it quite clear that she does not want to put any more money in this fund. So there's got to be some other way to make it more -- make it stronger...

QUEST: All right...

BITTERMANN: -- make it stronger, somehow to make it -- reinforce it somehow -- Richard.

QUEST: Fred -- Fred, how aware do you think they are in Berlin that the rest of the world is basically -- has basically run out of time and patience with the way this is being handled?

PLEITGEN: Oh, I think they're very much aware of that. I certainly think that the German chancellor is aware of that. And she said that today when she was speaking in the German parliament.

She said, "The world is looking at Europe right now." And it certainly would be a catastrophe if all of this failed.

At the same time, of course, Angela Merkel has a commitment to German taxpayer money. It was really interesting, because essentially what she said in front of the German parliament today was that these measures are absolutely necessary -- the the debt write-down, making the EFSF more powerful, all of these things were necessary.

But in the long run, she said, essentially, that the other European countries in the EU have to become more like Germany and that she would push them to implement further reforms, to make Europe more financially stable. Those were the words that she kept saying -- fiscal responsibility, financial stability, more of Germany for the EU to make things more stable -- Richard.

QUEST: We'll -- we'll leave it there, gentlemen, Fred in Berlin, Jim is in Paris, while we turn to get more details on this draft coming out from Brussels tonight.

Nina dos Santos is in Brussels still.

The statement of EU heads of government confronting the European Union in the spirit of solidarity, it's a very complicated document about the capitalization of the banks.

Boil it down for me, please -- Nina.

NINA DOS SANTOS, CNN CORRESPONDENT: Yes, particularly consom -- complicated when you're having to read it on one of these, I've got to tell you, Richard.

But I seem to have isolated some of the salient paragraphs. And you're absolutely right. Everything seems rather foggy except when you come to the paragraphs that are relevant to the banks.

Now, what they've decided to do is they're going to be boosting the capital of these banks and particularly the ratio of capital to money that they essentially have in their coffers versus their outstanding obligations and loans.

And they're going to be boosting their higher quality, or tier one capital, the core capital here of the banks, to a level of 9 percent.

And they're going to have to do that as of the 30th. So they're going to have to do that pretty soon. This is according to lets -- this is according to proposals that were really put forward on the 30th of September. I think they've got until the 30th of June, 2012, to actually put this in place now.

And the vehicle for assuring that these banks are essentially recapitalized so their -- their capital ratios are higher and they get more money into balance against the loans will be the European banking authority, so the EBA.

All of this is stuff that we were expecting. The other interesting notes that we also were expecting after Sunday's summit, because Angela Merkel did give us a bit of a hint about this, is that the banks would have to try and raise this money themselves in the private sector first. And then, if they didn't manage to do so, well, the governments could potentially help them out. The last resort will, and, according to this document, be the EFSF.

QUEST: I -- I was just about to say, I was looking at it as you were -- you were talking there. I mean the core point seems to be here. It says: "A simple repetition of 2008 with full national digression of liquidity schemes may not provide a satisfactory solution."

You know, whichever way you read this document, it is almost a blank check to recapitalize the banks, it -- using state funds...

DOS SANTOS: And it...

QUEST: -- if necessary.

DOS SANTOS: And it feels very much like Lehman Brothers', Northern Rock, RBS, again, doesn't fit. I spotted that paragraph myself, Richard. And that was exactly the kind of sentiment I got.

But we should also stress that they're going back into other negotiations and particularly with the 17 out of those 27 nations in the EU that actually use the euro as their common currency, those are the ones we're most worried about. Perhaps they're going to add more flesh and more meat on the bones here, because the fundamental questions remain unanswered, how much to boost the Eurozone bailout fund, the EFSF, by, and, also, crucially, that talk of negotiations with private investors about the haircut that could be applied to Greek bonds. Those are the other kind of things that are going to have to move the markets. We've known about the capital ratios to banks for some time. And we've also known that this could have been on the cards this Sunday, which is their last self-imposed deadline -- Richard.

QUEST: Nina, you have a long night ahead of you in Brussels to watch over. For every little nook and cranny, twist and turn of this story.

Nina dos Santos in Brussels tonight.

If Sarkozy and Merkel are trying to be adults, Silvio Berlusconi has been treated like Europe's problem child. We'll hear from his predecessor, the former Italian prime minister, Romano Prodi, next on the program.


QUEST: The waters are raising around the Italian prime minister, Silvio Berlusconi. First EU leaders turned on Italy at this week's talks. Now, it's the turn of the bond market. Italy did manage to sell $14.5 billion of debt. The cost in doing so was eye-whopping yields on 10-year bonds are pushing 6 percent again. And rates on short-term debt are at their highest for three years, up .5 percentage point on last month's refinancing.

It adds more fuel to an austerity debate that has well and truly boiled over in Italy's parliament. Proceedings were suspended today when two deputies from the Northern League and the FLI Parties grabbed each other by the throat, according to Reuters.

While Prime Minister Berlusconi tries to ride out the mess, the rest of Europe is getting impatient. Mr. Berlusconi got a dressing down from Chancellor Merkel and President Sarkozy earlier this week.

I spoke to his predecessor, Romano Prodi, and I asked if he thought Italy was getting unfair treatment.


ROMANO PRODI, FORMER ITALIAN PRIME MINISTER: From an objective point of view, I say that they are unfair, the fact that they -- Italy's public debt situation is no different from the ELU, which Italy earned into the euro. The deficit is certainly better under control than in other European countries. But -- but there is some reason, because, for the future, Italy is not changing the economic structure or changing the behavior that are made in order to make Italy growing as it is necessary to have a better future.

So there is unfairness from outside, but truth from the other side.

QUEST: OK, but let -- let's...

PRODI: But what...

QUEST: If I can...

PRODI: -- why this is the reason?

Because the Italian government, during this summer, has demonstrated to be divided, to be uncertain of other decisions to take. And so this is the reason why there is this sense of...

QUEST: All right...

PRODI: -- uneasiness.

QUEST: So if we put this into the -- into the melting pot of what is happening in Europe at the moment,

How worried are you that Italy becomes the next victim?

PRODI: Oh, no, I am not to worry. You just said that if Italy is a victim, the euro is over, you know. Italy is -- is not a small country. It is such a big country that you -- you can speak about Italy in difficulties if you also include the euro difficulties.

How can you -- how can you have Italy in trouble without having France in trouble?


QUEST: Do you regret now the way in which the euro was set up, that so many things were left undone, so many loose ends that should have been tightened up and that now, we are visiting the mistakes of the past?

PRODI: Look, mistake, very well. Unfinished jobs I do remember in my interviews telling, look, we need a common financial policy. We need the harmonization of our economic policy. We need at least , I've repeated so many times, some surveillance, a control by Eurostar of the initial accounts. The answer, also by the most European leaders, starting from Kohl, we shall do it now. We have done the first step. The full steps will follow. The problem is that the following steps did not follow.


QUEST: That's the former Italian prime minister on the former steps now following, Romano Prodi.

QUEST: A series of storms impacting parts of Europe this week.

Pedram is at the World Weather Center.

And I -- I hear reports that some of these storms can be absolutely brutal.

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, they have been, at least in the past several hours across portions of Italy there. You were speaking of Italy, they're getting some very strong reports. And we'll break that down momentarily.

But really scattered about the areas, some areas, like portions of the U.K., in England, this is out of the Royal Horticultural Society Garden in Wisley, UK. And take a look -- a picturesque afternoon. We had sun breaks. We had some showers on the horizon. The -- the autumn foliage across portions of Europe really gorgeous. But you take a look elsewhere, a couple of storms have -- there it is. The U.K. and portions of Ireland remaining dry, as storms scattered about the region.

But strong storms across portions of the south, say around Portugal, on into Spain and then eventually a very defined front lined up from Italy all the way northward toward the eastern areas of Germany and Western Poland.

And look at these rainfall totals. Out of Italy, nearly a half a meter of rainfall in the past 24 hours, from Tuesday on into Wednesday. Some of these other areas getting up to 120 millimeters of rainfall in 24 hours.

And just some video from areas around Italy showing you the amount of water coming down. We know nine lives have been lost, six of them in Borgetovada (ph), this village known for its grapes, its wines, the chestnut. And, again, one of those beautiful spots across portions of Italy.

But the heavy rain interacting with the mountains of Italy has really squeezed out copious amounts of water out of these clouds and that's led to some problems across that part of the world.

Take a look. What's on tap for the next 24 hours?

Well, from Italy, the central areas toward the south, some severe weather possible. Again, heavy rainfall, strong winds and also areas to the area around, say, Portugal and Spain getting very heavy rainfall in the next day or so. From Madrid, expect some moderate delays in the morning hours and besides that, really, Central Europe and Southern Europe right now looks to be dealing with the -- the severest extent of the weather there -- Richard.

QUEST: Many thanks, Pedram.

We appreciate that.

In a moment, we'll take you inside the aircraft on its first commercial flight and look at what makes it stand out from the competition.


QUEST: Three years behind schedule, Boeing's 787 Dreamliner has completed its first commercial flight. VIPs, media. Well, it was ANA Flight 7871. It touched down in Hong Kong earlier today. There were a couple of regular passengers. Most got their tickets from a charity lottery. All Nippon says one passenger paid more than $30,000 to be on the flight through the auction.

Boeing announced soaring third quarter earnings. Its Q3 jumped by a third, to $1.1 billion. Boeing said it's due to stronger military and commercial sales. Not, of course, that that wasn't harmed by what happened with the Dreamliner. The full cost of the delays have still to be written off over many years to come.

As for today's maiden flight, CNN's Andrew Stevens was on the maiden flight.


ANDREW STEVENS, CNN CORRESPONDENT (voice-over): Ceremonial drinks to launch a new era in commercial aviation. The Boeing 787 Dreamliner has its first commercial flight today, October the 26th, from here, Tokyo, to Hong Kong.

We've had the press conferences. We've had the opening speeches. Now it's time to fly.

(on camera): Now, the Dreamliner, the Boeing 787, has been called revolutionary. It's been called a game-changer. And that is why this material is actually a high tech plastic. It's called a composite. It's been reinforced with carbon fibers, which makes it very strong and very light. This plane is probably 15 percent lighter than a plane of the same size made out of aluminum.

And what this allows Boeing to do is to create what they say are new passenger experiences inside the cabin.

Let's go and see what they're talking about.

Good morning.

Good morning.

(voice-over): I have to say, the first thing you notice are the ceilings. They're much, much higher. And that the lighting is a lot more soothing. And because plastic doesn't rust, there's higher humidity and higher cabin pressure, closer to normal, on the ground conditions.

Personally, I didn't notice that.

Once in the air, my fellow passengers, though, were very positive.

UNIDENTIFIED MALE: I have to tell you, next to the day I was married and my two sons were born, this is the -- the biggest day of my life. So I'm just thrilled to be here.

UNIDENTIFIED MALE: I mean the ceiling height is dramatic. The lighting is dramatic.

UNIDENTIFIED MALE (through translator): Because of the wider seats, higher ceilings and more headroom, I can be relaxed.

STEVENS: My own personal favorite has to be the window. This is 30 percent bigger, this window, but most of it is coming at the top.

So you get the sense of a much more panoramic view outside. You can really see much more what's going on instead of hunching over. And the other great thing about this window is that it actually self-tints. So there's no slides anymore. Press that button and it gradually darkens to a point where the sun's rays are shut out. But you can still see what's going on outside.

UNIDENTIFIED FEMALE: The window, to me, there's -- there's something about being in an aircraft for an extended period time. But when you have a little bit of the outside brought in and you don't have to shut the curtains, then you're -- you're perfect.

STEVENS (on camera): One of the more unexpected highlights on this plane has turned out to be the toilet here in the middle of the plane.


Well, because it's the loo with a view.

(voice-over): Nearly four hours later, our ANA flight is on the tarmac in Hong Kong. This hasn't been the party flight that the launch of the A380 Super Jumbo was, says those in the know. But for most people on board, it's been the trip of a lifetime.

(on camera): So a successful maiden flight for the Dreamliner. The 787 is now officially in service across the world -- 821 orders Boeing now has to fill. They hope this is, indeed, a game-changer, something different for the aviation industry.

Talking to people on board, they certainly agree with that sentiment.

Andrew Stevens, CNN, Hong Kong.


QUEST: And I'll have a Profitable Moment after the break.


QUEST: Tonight's Profitable Moment.

I have with me two of Europe's favorite foods. They are, of course, waffle and fudge. And both have been served up in huge quantities over the past 18 months as ministers have grappled with the financial mess.

It doesn't matter which one you choose for your own delectation and delight, the result has been an ever worsening crisis.

The waffling is obvious. Every meeting finishes with the leaders saying they will do everything necessary to save the euro and create stability. As for the fudge, that's been the agreements that fail in precision -- deals done so no one sees the true state of disagreement.

Now, there is no more room for such indigestion. Europe is already heading for its own lost years of high unemployment and stagnant growth. Waffle and fudge -- they make a very tasty morsel for a treat and perhaps for afternoon tea. But as they're discovering at the moment in Brussels, if you eat too much of this stuff, then eventually all that happens is misery, mayhem and mess.

In Euroland, these are the fats that we can do without.

And 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.

The news continues on CNN.