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Greek Government Hours Away From Crucial No-Confidence Vote; Will Papandreou Survive? G20 Summit Update from IMF Director Christine Lagarde

Aired November 4, 2011 - 15:00   ET


MAX FOSTER, CNN ANCHOR: It's live or die for the Greek government. We are just hours away from a crucial no-confidence vote.

BECKY ANDERSON, CNN ANCHOR: And kicking the can, the G20 fails to reassure the markets.

I'm Becky Anderson in Cannes, in France.

FOSTER: I'm Max Foster in London. This is QUEST MEANS BUSINESS.

ANDERSON: Good evening from the south of France. G20 leaders start leaving Cannes tonight with a crisis in the Eurozone barely contained and potential flashpoints in Italy and in Greece poised to explode. No film festival could produce such drama, such suspense, and occasional downright horror as this summit has.

FOSTER: Yes, Becky, the streets of Athens were full of the sound of protest today. The Greek government faces a life or death vote in hours. Outside parliament the people have been trying to have their say. They will not now get to vote in the referendum, though.

The idea of a referendum sparked uproar in the markets and consternation of the G20 summit. Now the extraordinary events of this week have put the political and economic future of this country, whether in or out of the euro, in doubt.

Let's to straight to Greece where Jim Boulden is standing by.

Jim, things changed from hour to hour. Where does Papandreou and the government stand going into this debate?

JIM BOULDEN, CNN BUSINESS CORRESPONDENT: Well, at least we know the referendum is dead. The finance minister said that many hours ago, today, that the referendum will not take place. So then the focus, of course, goes right behind me again to the parliament building, where in about three hours time, if things go according to plan, they will be voting for Mr. Papandreou's future. He has a razor-thin majority. He could fail. He could fall. He could win and still resign. There could be a national unity government. We just don't know.

But here to try to sort some of this out is Dimitrios Tsomocos.

You are an economic advisor to the opposition, also professor at Oxford University.

Can you tell the viewers what you think could happen in the next three hours? What could be the outcome when the voting actually takes place?


I believe that after the statesman like behavior and proposal of the leader of the opposition party, Mr. Samaras, I think the right way forward will be to organize the different transitory government, new elections, expeditiously and moreover ratify the new loan agreement between the troika, the European Union, IMF, ECB, and Greece.

BOULDEN: Let's make that clear to the views. The opposition has said they will support the bailout plan agreed to last week. They just won't support it if Mr. Papandreou stays in power. Is that accurate?

TSOMOCOS: Well, the main point of the opposition is that they have always-they have never rejected the loan agreement between Greece and the troika. However, they has suggested and they propose a different policy mix, a policy mix which is more compatible with the policies that were followed, both in the U.S. and the U.K. during, for example, the crisis of 2008 and beyond.

BOULDEN: So that means parties from sides getting together and pushing these things through parliament here is likely?

TSOMOCOS: The loan agreement?

BOULDEN: Uh-huh.

TSOMOCOS: Of course with a transitory government with the explicit mandate to organize new elections as expeditiously as possible.

BOULDEN: I think some people were surprised, though, that yesterday the opposition leader, Mr. Samaras, said, no, no, no, we will not agree with Mr. Papandreou if he stays in power. He offered an olive branch and that was rejected. And that really did upset some people in the markets.

TSOMOCOS: Well, in fact, after the irresponsible act of Mr. Papandreou, our prime minister, with respect to the referendum, that caused havoc, both in the international market and enhanced the possibility of further social unrest and social distress in the country, wrongly so, it was the blame transferred to Mr. Samaras.

Mr. Samaras, the opposition leader, on the contrary, has always been very productive and very conducive to understanding agreement consensus to push forward the right policy mix and structural reforms that will inevitably lead to the recovery of the Greek economy, because that is where the problem is. It is growth and recovery of the Greek economy.

BOULDEN: The opposition has said they will do things differently if they come to power. Does that mean not agreeing to everything that is in the bailout program?

TSOMOCOS: The opposition, basically, as many other opposition parties in Greece, disagrees with the policy mix. In other words, we disagree with the recessionary and contractionary policies that enhance the recession and they push the Greek economy further into a vicious cycle.

Instead, they support and the promote structural reforms, budget cuts, fiscal consolidation, get through growth and recovery economic policy.

BOULDEN: OK, thank you very much.

That Dimitrios Tsomocos, and economic advisor to the opposition, also, a professor at Oxford.

I think what is most interesting here, Max, from an outside point of view, is you have both main parties agreeing that the bailout needs to be agreed to; that the tough economic measures have to taken. But the two sides have not been able to come together and push that through parliament and that is why we are here tonight, with the possibility of Mr. Papandreou loosing his job in about three hours' time. Who knows? We don't know. We will have to wait and see, Max.

FOSTER: OK, Jim, thank you very much. We have got a camera, of course, in the parliament building behind Jim, there, waiting for the prime minister, Papandreou, to speak. As soon as he does, we'll go back to it.

But right now it is over to Becky, in Cannes.

ANDERSON: Thanks, Max. Yes, the protestors here in Cannes haven't been able to get quite as close as those in Athens. But Europe's leaders are still under pressure. Few more so, when Silvio Berlusconi, Italy's prime minister.

He is inviting the IMF in to look at the books, to check on the country's austerity plan. He refused financial help, though, from the IMF. The move failing to calm the markets. Now Italy's benchmark borrowing costs are the highest that they have been since it joined the euro. This week also saw the Eurozone's last taboo broken, as leaders openly discussed whether Greece should leave.

Well, Nicolas Sarkozy indicated that he wants Greece to stay, but only if the people agree.


NICOLAS SARKOZY, PRIME MINISTER, FRANCE (through translator): The other question is whether Greece should belong to the euro. And I think that this message was very clearly expressed. It is a message of friendship towards the Greek people. It is a message that we wanted to address, to the majority, and to the opposition, in Greece. And then it is up to the Greek people to choose their own leaders.


ANDERSON: Well, the G20 leaders left world financial markets pretty dissatisfied on the question of funding the IMF. They agree in broad terms that they are ready to boost its firepower. But put off stumping up any extra cash. Now President Obama explained that it is one of many pressing tasks.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Creating additional tools for the IMF is an important component of providing markets, overall, confidence in global growth, and stability. But that is a supplement to the work that is being done here in Europe.


ANDERSON: Well, earlier I spoke to Christine Lagarde, who is now the managing director of the IMF. And I put it to her, that the IMF needs more firepower, but I have seen no extra commitments. And surely, that is a worry to her. This is what she said.


CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: I am not worried, because I have a huge commitment. I have a blanket commitment from the members of the IMF that were present today, those G20 members, to actually do whatever it takes, increase the resources, without limitation, without caps, without floor, without anything, so that the IMF can continue to play its-what is called, its systemic role.

Now it is a bit magical but what it means really is if there is a crisis, if there is a country in disarray, the IMF must be able to come in and support.

ANDERSON: When the U.S. president talks about G20 countries creating new tools, additional tools, for the IMF what does he mean by that?

LAGARDE: We have conducted a project consisting of creating financial instruments that correspond to the needs of our membership. Over the last three years, what we call precautionary instruments have been created. They are used as a prevention, not as fixing a situation that has deteriorated. We have worked on a facility that we call the precautionary liquidity line.

That is for a short period of time, six months, for a country that is in good shape, but suffering from an external shock. In other words, the crisis is somewhere in the world and that country is suffering as a result of it. It could be significant reduction of trade. It could be a huge variation in exchange currencies. It could be, you know, something of that nature. In that situation this precautionary liquidity line can be asked, can then be drawn, and used by that country.

ANDERSON: How is the IMF safeguarding its balance sheets given the heavy lending to Greece during this crisis?

LAGARDE: You have to know that we are always extremely careful with the resources. The resources belong to our members. They put money in the IMF. They expect the IMF to lend on very reasonable cautious terms and we do. They expect to get a return and they do. And we always get our money back. The IMF is a secured creditor. So, it comes before anybody else when the refunding is about.

ANDERSON: What are the details of Italy's anti-crisis measures? And are you satisfied that they are enough?

LAGARDE: Italy is one of the soundest Eurozone countries, except for one component, its debt. It has a heavy debt burden, with a debt that is very largely born by the Italians themselves. But in terms of deficit, in terms of primary surplus, it is one of the best countries in the zone. And it does relatively well.

So, it has undertaken to continue to decrease its deficit. Continued to re-establish a debt trajectory that is healthier. And the Italian prime minister is actually committed to go to the Italian population to say, come on, buy Italian bonds, because non-Italians are worried about our economy. And we should demonstrate our faith in our economy. His request, to me, for the IMF to come and verify on a quarterly basis, that they are doing the right things, is exactly in the same veins. He wants to convince the rest of the world that Italy is doing the right thing.


ANDERSON: Yes, words there of Christine Lagarde, the head of the IMF speaking to me here in Cannes, just about an hour ago.

Max, back to you for the time being.

FOSTER: Busy times, Becky.

Confidence ebbed away in Europe as the G20 summit wound down without any stellar achievements. The major markets gave up some of Thursday's gains. The damage was especially severe in Italy. Frankfurt and Paris also registered sharp losses. Financial stocks were predictably some of the worst hit. Shares in Alcatel-Lucent also lost more than 17 percent, though, in Paris after the company cut its profit forecasts.

When we come back the latest U.S. jobs numbers and what they mean, the largest economy in the world is creating jobs, but are there enough of them?


ANDERSON: Welcome back to QUEST MEANS BUSINESS. We are live in London and in Cannes, in the south of France, tonight, as we continue to get reaction from the final day of the G20 summit.

FOSTER: If any hopes that U.S. markets could finish the week after being snuffed out this session. Here is how the Dow is doing right now. As you can see, you are down below the 12,000 point mark again. Down nearly 1 percent, 100 points, just over 100 points.

It has been losses of more than 1 percent for most of the session actually. So it looks like we are going to snap that two-day winning streak and finish down on the week. Although, never speak too soon. The jobs market has been a thorn in the side for investors this year. But the latest numbers for October gave investors some cause for optimism, actually; 80,000 non-farm jobs were added on October. That is enough to bring the ultimate-well, the unemployment rate down very slightly to 9 percent. But it is still not enough to keep up with population growth. And the rate of job creation is now slowing, too.

Now, admittedly part of the reason is that it is slower because the numbers for August and September were revised upwards; 262,000 jobs were actually added in those two months. The initial reading was just 160,000. That does give us a sign the situation actually is improving a bit.

Now, the U.S. president can take some heart from those numbers as he heads back home from the G20. Let's get some context, though, on the U.S. job situation and the rest of the day's events at the G20. We are joined by Mohamed El-Erian. He is the CEO of PIMCO.

And you have been very critical of some of the comments that have been coming out of Cannes. And Becky will talk to you about that in just a moment. But I just want to ask you about these jobs numbers, because they do seem positive. But the context is terrible, actually, for the jobs market in the U.S. and that is crucial for their economic recovery, right?

MOHAMED EL-ERIAN, CEO, PIMCO: You are absolutely right, Max. The positive thing is that the U.S. created some jobs and the backward revisions were pretty good. The negative is it is still at stall speed. It is still not fast enough, in terms of the job creation, to get us out of the unemployment crisis that we are in right now. So we need to see growth rates in the 200,000 range, not the 100,000 range, in order to make significant progress.

ANDERSON: Mohamed, it is Becky, here, at G20. You and I spoke, actually, at earlier on today. And you told me that you were underwhelmed by the communique that was released at the end of this G20 meeting. Why?

EL-ERIAN: Because while the narrative was right. There was discussion about youth unemployment. There was discussion about how Europe has to get its act together. There were not details. There was no time line. There was nothing as a follow through. And remember the G20 goes from summit to summit. So summits are really important. And the markets, and everybody else, looks for concrete results. And unfortunately what we got is a wonderful narrative, but not enough specifics to give people confidence that we are turning the situation around.

ANDERSON: Mohamed, you heard my interview, there, with Christine Lagarde. It was a little more extensive than that. That is as much as we are able to bring of you here on QUEST MEANS BUSINESS. And we'll get more on "CONNECT THE WORLD", in an hour or so's time.

But I was talking to her about the fact that so many people watching this meeting were waiting to hear whether the likes of the U.S. and others, including China, were ready to pony up more money, for example, for the IMF, and, indeed, for this European bailout fund? Angela Merkel really quite disappointed. She has seen no extra financing from the U.S. and China, for the European bailout fund, but she was absolutely determined, when she spoke to me, that she doesn't need more from the U.S., and for example, China, for the IMF. Is she right when she says that? Because theoretically, I believe, she is, isn't she?

EL-ERIAN: Well, she is half right. And I think net, you see the outcome, in particular what happened to the Italian bond market, and you mentioned that earlier. We are at record highs in terms of Italian yields. So why? It is a half full/half empty story. The half full, is what the managing director correctly said, which is as a commitment to enabling the IMF to play a large role.

But the reality is that you have to translate that into specifics. And we haven't gotten there yet. That is why Mrs. Merkel expressed disappointment. Also, in the case of Italy, it is correct, as she said, that the deficit is not a big issue. However, there is also a debt issue and there is a growth issue.

So, Europe is one of these issues where there is, on the one hand, and on the other, and the critical issue is to combine these two things.

ANDERSON: Would you be, then, surprised if I tell you I listened long and hard to what President Obama said today. And when he was asked whether he was convinced that the Europeans can get themselves out of this mess; he never said yes. He said that he thought they had the building blocks in place. And that countries like the U.S. were there rooting for them and waiting to assist them, but he never said, as far as I could hear, that he was convinced that this crisis has a line drawn under it.

EL-ERIAN: And I suspect he is not. And I suspect that others aren't either. And, you know, actions speak much louder than words. And on actions, the non-Europeans did not commit very much. They held back. And basically they are telling Europe, get your act together first, and then we are going to come in. You heard that from the U.S., you have certainly heard it from China, from the other BRIC economies. And everybody is waiting for the Europeans to get their act together first.

ANDERSON: Mohamed El-Erian, as ever, always a pleasure to have you on the show. We thank you very much, indeed, for joining us this evening.


FOSTER: Well in other business news, Becky, it is not the planes, it is not the people, so why does BA's owner want to buy its U.K. rival. Europe's busiest airport has something to do with it. We hear from the man trying to get the deal off the ground.


FOSTER: Indonesia, Korea, Vietnam, booming Asian-Pacific destinations that aren't part of the International Airlines Group portfolio yet. IAG owns British Airways, and Spanish airline, Iberia. It is now also trying to buy BA's U.K. rival, BMI, from its owner Lufthansa. Heathrow Airport, Europe's busiest, is at the heart of this deal.

BA and Iberia operate from Terminals 3 and 5. They have around 45 percent of all take off and landing slots at the airport. BMI, which calls Terminal 1 home, has around 9 percent. And the sale would give IAG those slots, and perhaps a further foothold in Asia.

Willie Walsh is the chief executive of IAG. He has been telling me about his plans for BMI and also explains a 31 percent fall in third quarter operating profits for IAG.


WILLIE WALSH, CEO, INT'L. AIRLINES GROUP: I think our results really indicate two things. The first is there was a significant currency impact. Although we reported revenue up 2.2 percent, a constant currency, our revenue would have been up over 8 percent, in fact. And the second thing is fuel. Our fuel bill went up by almost 24 percent, 263 million euros in the quarter. And that is a real challenge. It is a challenge for the industry. It is going to be an even bigger challenge in 2012.

FOSTER: Presumably, the euro crisis, the state of the world economy it just translates into less passengers, too, right?

WALSH: Not-yes, I think that is in the background. I think it is definitely impacting on consumer confidence. And more importantly impacting on business confidence. A lot of the business people I speak to privately will tell me that their business is performing well. But they have no confidence in investing. You know, spending money, employing more people, because of the uncertainty, and particularly the concern about the Eurozone.

FOSTER: So, tell us about BMI. You have reached an agreement to buy it, right? But you haven't set a price? It is early stages?

WALSH: Well, there is still a lot of work to do. We have agreements in principle, with Lufthansa, we have made very good progress. We need to complete additional due diligence, and it will require regulatory approval.

FOSTER: But because you are announcing it, it is highly likely to happen, right?

WALSH: We are confident that it will proceed. And we are keen to progress this as quickly as possible. I think it is certainly in the interest of everybody that the uncertainty that exists around BMI at the moment is removed. And that is one of the reasons why both Lufthansa and IAG were keen to make the announcement today.

FOSTER: And presumably it is all about the landing slots here at Heathrow. Crucial business hub, getting into the profitable business sector more deeply, right?

WALSH: It is not all about it. But it is primarily, I've made no secret of the fact that I have been interested in acquiring BMI for a number of years now; if Lufthansa was interested in selling it. So we are keen to utilize the slots that BMI have at Heathrow, in a much more efficient way. And particularly to expand long-haul out of Heathrow; to connect London and Heathrow to the emerging markets, in Asia, in particular.

FOSTER: One last question, the state of the global airline industry, you know, it is a tough, tough business isn't it?


FOSTER: Just tell us what it is all about.

WALSH: You know there is always something going on. Fuel prices continue to be a major challenge to the industry. But, you know, we are determined. We see opportunities there, and there is still growth. I think it is important to remember that the growth is not going to be like we witnessed in the boom times, but there is still some growth there.

I am an optimist. I think things are better this year than they were last year. I think if we can get some certainty around the Eurozone, and we do really need political leadership, and political unity. And, you know, that will make a big difference. But even if that doesn't happen, we are going to continue to look at how we can fill the vacuum that the politicians are leaving and provide consumers with good reason to travel. And we believe that while tough there is still a very attractive business there.


FOSTER: Willie Walsh talking to me a little earlier at Heathrow. And next week, keeping up with corporate and economic news will get a lot easier for you. We have a brand new business show launching here on CNN. "GLOBAL EXCHANGE" hosted by John Defterios will showcase the impact and influence of emerging markets, which Willie was talking about there, in fact. And on Monday, we'll be looking at who goes home a winner from the G20.

John will also have some of the biggest names in emerging markets joining him next week. Including the father of the BRICS concept, Jim O'Neill. That is "GLOBAL EXCHANGE" starting Monday at 4:00 p.m., in London, 5:00 p.m. in Berlin.

QUEST MEANS BUSINESS will be back in a moment.


FOSTER: Welcome back. I'm Max Foster.


And here are the latest news headlines for you.

In Greece, crushing debt and growing suspense. We've been waiting for the Greek prime minister to address parliament once again, as he struggles to keep the ruling Socialist Party in charge. George Papandreou's government faces a confidence vote in less than three hour's time.

Meanwhile, a huge crowd has been rallying in Athens's main square. The far left party voicing its frustration.

No signs of any end to the violence in Syria despite pleadings from the Damascus government two days ago. Activists say as many as 20 people have been killed during anti-regime protests on Friday and they reportedly say dozens of people have been arrested, including four children.

A Los Angeles jury is deliberating the fate of Michael Jackson's physician today. Dr. Conrad Murray is charged with involuntary manslaughter in Jackson's death. Murray faces up to four years in prison if he's convicted.


And CNN's coverage of the tre -- G20 in Europe's ongoing crisis continues from London and here in Cannes.

FOSTER: But we're also keeping an eye on Athens. This is the scene in the Greek prime minister right now. Lawmakers are currently debating a confidence measure in Prime Minister George Papandreou.

We are expecting a vote in just a few hours. Mr. Papandreou's majority in parliament has all but disappeared, so this vote really is on an eye pitch (ph). We often say it, but it's not a cliche this time.

It holds so much significance, not just from his political career, but potentially for the fate of his whole country.

ANDERSON: Well, Italy is also in the spotlight. It will open its books to the IMF to prove that it can get its finances in order. We'll have reaction from Rome in a moment.

But first, though, we're going to hear from the European Commission president, Jose Manuel Barroso.

I asked him a little earlier today if Italy's assurances that it will meet its obligations are credible.


JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: We have heard those assurances and, in fact, we are working with the Italian government. But now, the key is implementation.

I believe Italy will be able to overcome the current difficulties.

ANDERSON: The problem is, Mr. Barroso, that nobody has seen the details of what they call this anti-crisis deal.

Have you seen those details and can he get this implemented?

BARROSO: In fact, we are going now on a mission there, I mean our team. They have made very concrete commitments, yes. But now we have to look at the implementation in even more concrete ways.

So this is the question. But I'm -- I trust Italy will be able to overcome these difficulties.

ANDERSON: Will you concede here that the Eurozone is not set up to deal with a collapse of Italy?

BARROSO: Look, not -- neither the Eurozone nor nobody, because Italy is one of the biggest j I think it is the seventh economy in the world. So we hope that they will be able -- of course, we know it's important with monitoring and our commitment, also, they will be able to overcome this current pessimism.

Let me tell you very frankly, also, that if you look at the fundamentals of Euro -- of Italy, except the stock of the debt, they are not doing badly.

There is also some problem here of psychology, of the perceptions, global perceptions. They -- sometimes they are unfair.


FOSTER: And that matters to the markets, unfortunately.

Let's remind ourselves why so much of the focus is on Italy. The cost of servicing its loans is well above the 6 percent mark right now. Italy's 10-year bond yield is hovering around 6.37 percent. The government can't afford it because the country is so deep in the debt -- $2.6 trillion, equal to around 120 percent of its gross national output, in fact.

And then there's the number of people out of work there. The unemployment rate is high, 8.3 percent.

Now, with more party allies deflecting, Silvio Berlusconi has never looked more isolated. He will face another confidence vote in parliament on the latest reforms, but his record there is pretty amazing. He's survived more than 50 confidence votes as prime minister. Has he, though, run out of luck now, though?

Let's go to Matthew Chance in CNN Rome -- well, Matthew is, you know, try and answer it.

It's a tough one.

MATTHEW CHANCE, CNN CORRESPONDENT: Well, I mean it -- the clever money, I suppose, would be on Silvio Berlusconi surviving the confidence vote which come -- could come as early as next week. After all, as you mentioned, he's -- he's survived 51 confidence votes since he -- he came to power.

He -- he's got a pretty fragile coalition, a sort of center right coalition. But it's got this strong sense of self-preservation and they've always managed the kind of close ranks and come together when it comes to a confidence vote, although once they're elected back into power, once they're -- they're confirmed in power, they're -- they're fractured, too weak to actually pass any meaningful legislation.

So that's been one of the big problems affecting the country. And it's really one of the problems that the market is focused on now, not so much the economic fundamentals, although they're pretty bad, but as Jose Manuel Barroso was saying a few moments ago, actually, Italy is a -- is a pretty strong economy, one of the biggest economies in the world, the seventh biggest in the world, the second biggest in -- industrial power in -- in Europe.

And so it has these economic fundamentals which are not that bad, but it's got this lack of credibility politically. And that's why there's so much pressure now on the country for a change in its government, both from outside and from with inside. A lot of pressure on Silvio Berlusconi when he comes back from the G20 meetings tomorrow, he will be confronted with a no confidence vote, as we mentioned, and a population that is increasingly, it seems, against him being the man to lead this country through these very difficult economic times -- Max.

FOSTER: OK, Matthew, thank you very much, indeed, watching that confidence vote, as well as the one in Athens.

Busy politics here in Europe, as you can see.

Now, it was a -- a debut day for Groupon on the NASDAQ. And traders seemed to think it was a good deal, actually.

So why are some customers still not on board?

We'll take a closer look at the company after the break.


ANDERSON: In two-and-a-half hours from now, this is where we will see the staging of a vote of confidence in the Greek government. It is an important vote.

Will we see the end of Papandreou, the prime minister who caused such a shock at the G20 meeting here in Cannes earlier this week when he talked about putting the European bailout deal to a referendum.

Well, that seems to be off the table now, but certainly the vote of confidence will be at midnight Greek time. This, ongoing, is a debate on that very subject.

We're live from Cannes and London tonight, on the final day of the G20 summit.


I'm Becky Anderson.

FOSTER: And I'm Max Foster.

And we're talking, as well, this hour, about a launching on the -- the stock market during such a volatile week, not always being ideal. But Groupon something to pass its first day of trading with flying colors. With just a quarter of an hour to go, shares in the company that offers money saving coupons on the Internet are up almost 40 percent, would you believe?

Investors have been looking out for this IPO for months now. Just look at that pop at the start of trade. It was priced at $20 a share. Within an hour, it rose as high as $31. Prospects for the company's future success, though, are a lot more complicated, as Maggie's been finding out.


MAGGIE LAKE, CNN BUSINESS CORRESPONDENT (voice-over): Franco Agrusa and his friend May Frudo ph are dining at the Verde Restaurant in downtown Brooklyn after signing up for a Groupon dinner deal on the Internet. They pore over Groupon's site constantly and say the deals can't be beat.

FRANCO AGRUSA, GROUPON USER: You buy a coupon for $10 and you get a $30 value. And we usually go to restaurants. So that's -- that's a big savings.

LAKE: Fans like these have fueled Groupon's growth over the past year, with the number of people buying a Groupon deal rising well over 200 percent.


ANDREW MASON, CEO, GROUPON: It could be a restaurant, theater tickets, a spa.

LAKE: In an interview with CNN last year, Groupon founder Andrew Mason called his business model a win-win for everyone.

MASON: There's never been such an effective way to get customers in the door. In one day, we're often able to bring in thousands of new customers for a small business. Historical alternatives, like newspaper or radio advertising, might only get them a couple dozen.

LAKE: But Verde Restaurant owner Cono Morena has reservations.

CONO MORENA, OWNER, VERDE RESTAURANT: There is no profit with Groupon. The only thing that I'm using it for is as a marketing tool to fill up my place.

LAKE (on camera): And -- and that's the discount that the customer is getting, 59 percent?

MORENA: They do.

LAKE: Wow! And it says over 390 people bought that.

MORENA: If you get a good customer, yes, you'd make a profit. If you get a customer that's just relying on the coupon...

LAKE: Right.

MORENA: -- it's going to be zero profit.

LAKE (voice-over): Groupon watchers call this a flaw in the business plan of a company that needs enthusiastic merchants on board to expand.

ADAM HANFT, PRESIDENT, HANFT UNITED: Merchants see that, wait a minute, I'm giving half my marketing to these guys, these guys are taking their money off the table. They're getting rich. It's sort of like Occupy Groupon, you know?

It's not going to build a long-term positive ecosystem between them.

LAKE: Analysts point to other flaws in the Groupon story. Only 20 percent of its more than 140 million subscribers have bought a Groupon deal. Groupon customers are rarely repeat patrons for merchants. And waiting in the wings, a dizzying number of competing sites, like Living Social, which many believe do a better job of targeting deals to customers.

HANFT: There could be somebody who comes into the market in six months that will make Groupon the MySpace of discounting.

LAKE: Cono Morena says he's already begun looking at the upstarts.

MORENA: A different offer, a different discount, something that I could make a profit on it. Yes, I would do it.

LAKE: The food in the kitchen of the Verde Restaurant may be piping hot, but some fear Groupon is losing some of its fizzle.

Maggie Lake, CNN, New York.


FOSTER: Well, as for Groupon's movement in the marketplace, which is the talking point today, it's been a strong day for the company, to say the least.

Alison is at the New York Stock Exchange with more -- it's like the -- it's like the good old days, isn't it?

ALISON KOSIK, CNN CORRESPONDENT: It kind of is, although Groupon's shares throughout the day, they've lost a little bit of steam here right now. Shares are trading just under $27 apiece. That's after, as you said, they priced it at $20 a share for their -- their debut.

You look at -- at how much money has been raised, the IPO has raised $700 million. Sure, it's the second biggest tech IPO ever, behind Google back in 2004.

But other recent tech IPOs were great, as well. They were great on day one and then fizzled out. Remember LinkedIn?

Remember Pandora?

But with Groupon, there are a lot of questions about these new tech companies, especially with Groupon. It's going public at a time when they're not profitable.

So, Max, you're -- you're seeing lots of questions about Groupon's business model, especially -- Max.

FOSTER: OK. Alison, thank you very much, indeed, for that.

That is QUEST MEANS BUSINESS at the end of the roller coaster week for the markets and global economics.

I'm Max Foster in London.

ANDERSON: That's right.

And I'm Becky Anderson in Cannes, at the end of the G20 Summit, CONNECT THE WORLD now, also, from now,

"MARKETPLACE AFRICA," though is next.

I'm going to leave you with some of the highlights from a uncharctalit -- uncharacteristically dramatic G20. Have a very good evening.


OBAMA: There's no excuse for inaction. That's true globally. It's certainly true back home, as well, and I'm going to keep on pushing it regardless of what the politics are.


(BEGIN VIDEO CLIP) SARKOZY: The euro is the beating heart of Europe. And Europe is at the heart of French policy. We cannot allow the euro to break up. That would be the break-up of Europe. This is how the problem must be addressed and no other way.



BARROSO: I've said several times, this is not a sprint, this is a marathon. By the way, a marathon is not a Greek word. This is a marathon.




I'm Robyn Curnow here in Johannesburg.

Well, it's official, the world's population has reached seven billion. And a lot of that growth is happening here, in Sub-Saharan Africa.

And our guest on FaceTime this week believes that is a good thing.

William Mzimba is the CEO of the consulting firm Accenture and he believes Africa's people are her most valuable commodity.


CURNOW: You've done this report on -- on African consumers, particularly the power of the African consumer


CURNOW: You've broken the African spender into five different categories.


CURNOW: Just briefly tell me about them, because it is quite fascinating.

MZIMBA: Yes, in fact, often, what about just three main categories, you know, those that are below, that are emerging and that are already, you know, well -- well off and well-to-do.

But there's two main categories in -- in the -- in the middle, which talks about people that are moving out of, you know, poverty, out of subsistence that are still, in the meantime, trying to get out of the poverty line. And they are doing some subsistence type business. We call them the striving consumer.

And then obviously, you've got those that are already kind of like moving out of the thriving consumer, in terms of those that are already working and we could say just about to become the middle class.

So if you put them in those five different buckets, you actually start to see a very interesting pattern in terms of the drive for consumerization that we are seeing in the next couple of years. It's going to be a significant trend in this -- in this continent, specifically that which the retailers or fast-moving consumer goods companies, the telecos and the bank -- the banks, are going to be interested in.

CURNOW: Well, they're already interested in them. I mean I think there's a sense, particularly in East Africa -- I mean I know we've covered it on "MARKETPLACE AFRICA" -- that even the poorest of the poor, I think you call them basic survivors...


CURNOW: -- still have that little bit of disposable income. And that is attractive to cus -- to companies like Unilever, for example.

MZIMBA: Absolutely, especially because, you know, the -- the very important thing about access to infrastructure is a key to unlocking this power of the consumer that we are talking about. And that's what we have found out of the study that we have done.

Whereas, in the past, it's been very difficult, when you have a dollar, to spend a dollar, because the market wasn't available to you. Today, the market comes to the consumer because the retailers, first consumer groups companies, have recognized that cumulatively, those dollars make the bottom line that they are looking for. And, in fact, some of those markets are more profitable than elsewhere.

So you're starting to see a lot more investment. You're going to see a lot more investment in technology in how to enable those consumers, for example, to access the markets.

CURNOW: So by 2050, it's estimated that 20 billion Africans will live on the continent. Sixty percent of those will be youth.

Isn't that a problem rather than something that is positive?

MZIMBA: If you assume that governments will not be transforming, that governments will not be receiving more taxes, will not be collecting more revenues, which means they will still have the same kind of GDP percentages we're seeing today in terms of growth, then you could start to think about it as a problem.

But I've just said to you that you have to look at it from a perspective that system there is foreign direct investment coming here, there is roads that are being built, there's infrastructure that is being enabled. And there's multinational companies that are making significant investment.

All of those contribute hugely to the tax base of those countries. So the countries and the government should have sufficient funds to start building, you know, the water, the sewage plants, the electricity and all of those things. And, of course, they should also be exploiting equally the agriculture that is required for -- for the continent to provide the food that is needed to be consumed by those people by 2015.

So I don't, from where we are sitting, we don't see this as a problem, we see this as a huge opportunity.


CURNOW: Let's take a closer look at Africa's consumer market.

Now, last year, African consumers spent $600 billion US. By 2020, they're expected to spend up to $1 trillion.

Now, rapid urbanization is helping to drive this increase in spending. Accenture believes that by 2050, 60 percent of all Africans will live in cities.

From a concentration on consumers to a focus on green growth, up next, how some African business leaders hope to create more eco-friendly economies.


CURNOW: How do you balance green ideas with money-making business strategies?

That's the question ahead of the U.N. Climate Change Conference that will be held in Durbin, here in South Africa within the month.

Well, we now take a look at a group of business leaders who aim to find solutions.


UNIDENTIFIED MALE: The (INAUDIBLE) beat for our generation.

CURNOW (voice-over): In mid-September, business leaders, investors and experts from around the world met in London for the Africa Green Investment Gateway Conference.

We sat down with a few of the participants and got their views on how businesses in Africa can adapt and help reduce the impact of climate change.

KEN IFE, NEPAD BUSINESS GROUP, CHAIRMAN OF AGIG: We know the problem is global, yes. But we know that the private sector -- the public sector has been leading in these discussions for quite some time. And we all are -- we're all too aware of the dangers that we face if we do nothing. I think doing nothing is not an option.

The issues about the climate change are here. We are witnessing them. The impact on agribusiness and agricultural and food security is -- is very, very robust because the climate change predicts that by 2030 down to 30 percent fewer food.

It's not all about -- about the green investment. You know, the idea was raised that there's a strong business case, in many cases, why people should invest in renewable energy.

First of all, we produce a lot of fossil fuel in Nigeria and -- and some of the other countries. And we know that is a finite quantity. Then it will disappear. Within a few years, 100 years at the most. And so we need to start planning for a potential replacement.

And it makes sense for you to look in the direction of agriculture, because if agriculture is currently employing 60 to 70 percent of the population, although they are the bottom of the pile, in terms of income, they're very, very low paid and very -- then we'll begin to move, if we can move the productive capacity in that direction and -- and create an energy -- sustainable energy rule (ph), especially rooted (ph) energy solutions in -- in that direction, then we have -- we are making a very strong case for sustainability.

ADESINA ILLUYMEI, NEPAD COUNCIL: I believe that the international discussion that is ongoing on climate change should focus on how technology can be transferred in an effective way to African countries, but most importantly, as I always said, domestically, government needs to kind of create an environment to foster domestic innovation and entrepreneurship within. It's a -- it could be a good source to create employment for the youth and also to unmask the creating and creative energy of the youth in Africa if they come into the right framework and the right investment is -- is put into it, as well.

JURGEN RIGTERINK, FMO: It's a very positive step. It's a very positive sign.

However, as you possibly also -- probably also know, there are many conferences. I mean we can fill our time by attending a con -- one conference a day. I think the most important thing is what's -- what's next and will there be actual action points after this conference?

I think the political will is certainly there, but there it's -- I mean from very far away, we talk about -- and my presentation also mentioned that sub-Saharan Africa. But there are so many countries with so many different microeconomic circumstances. And it's not fair to say that the political will is there in all of these countries.

I think today, we saw a lot of people from Nigeria, from the banking system there, from the -- from the renewable energy side. I think that Nigeria is one of these countries where, yes, where these kind of conferences could mean that the next stop can be taken quite quickly.

JOACHIM GE, NEXIM: One has to understand that it's not climate change that's selling green energy. It's just economics. And once we get the economics right, once it becomes profitable and businesses see how profitable, in the medium- to long-term, this green energy is for them, you'll find that it will take up so much more than just climate change -- the argument for climate change.


CURNOW: Do head over to our Facebook page and join the discussion on green growth strategies here in Africa.

But for now, let's go and check on what's trending in business news.



Diamond Decision

The United States, Canada and European Union have agreed to allow Zimbabwe to export diamonds from its Marange fields, after verification by the international diamond regulator, Kimberly Process.

Zimbabwe had been under sanctions since 2009, following accusations of human rights abuses, which the country has denied.

Prospecting Plans

South African petrochemicals group Sasol has signed a joint venture agreement with Australia's Origin Energy to explore for coal bed methane in Botswana.

Botswana's large volumes of coal bed methane could be used to generate power throughout Southern Africa.

CURNOW: Well, that's all from us here in South Africa.

Remember, you can always find us online at

But for me, Robyn Curnow, until next week, good-bye.