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QUEST MEANS BUSINESS

Europe Agrees on Banking Union; S&P Cuts UK Outlook; European Markets Mostly Down; Berlusconi Backs Monti; Return of Berlusconi; US Libor Penalty; Dow Falls; Fiscal Cliff Countdown; Royal Inspection; Euro Flat, Yen, Pound Lower; Greece Funds Released; Greece: The Human Cost When Economic Turmoil Creates Political, Ethnic Tensions

Aired December 13, 2012 - 14:00   ET

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


NINA DOS SANTOS, HOST: Tonight, done deal. European finance ministers sign off on a Greek debt package and also a banking union.

Backing for fracking. The UK gives the controversial gas extraction technique the go-ahead.

And Google's map app finds its way back to Apple.

Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.

Good evening. Well, tonight in Brussels, a deal on banking supervision is currently in the hands of Europe's leaders. The plan opens the way for the European Central Bank now to bail out troubled lenders going forward, and it also breaks the poisonous link between indebted banks and sovereign states.

So, let's have a look at the details of this plan. The plan is being drawn up by finance ministers. What it does is essentially it gives the European Central Bank the right to watch over the eurozone's largest banks.

Starting in March 2014,the ECB will be able to force these kind of banks to raise more capital if they need it. It can also force them to distribute money straight from Europe's own bailout fund, that is the so- called ESM.

The next stage would be to try and create a body with the power to try and close banks if they are in financial trouble. Ultimately, the aim here is to prevent another financial crisis from happening.

Well, European Council president Herman van Rompuy said it was, indeed, an historic moment.

(BEGIN VIDEO CLIP)

HERMAN VAN ROMPUY, PRESIDENT, EUROPEAN COUNCIL: This agreement is a real milestone in the strengthening of our economic and monetary union. It will contribute to more stability, which in itself is a major contribution in our fight for growth and jobs.

Our objective for today is to map out our next step toward a genuine economic and monetary union. We must implement our agenda on competitiveness and on growth.

(END VIDEO CLIP)

DOS SANTOS: Well, this deal only applies to, remember, to the 17 countries inside the eurozone and the banks that are listed there. Non- euro countries can opt in, but we already know that some countries like, for instance, the United Kingdom, has decided it won't be doing so.

Remember that also Sweden and the Czech Republic are also unhappy with the details of this deal. In Britain's case, it's all about wanting safeguards for its crucial financial sector. The prime minister, David Cameron, said he had no intention of joining up.

(BEGIN VIDEO CLIP)

DAVID CAMERON, PRIME MINSTER OF BRITAIN: The European Union, the eurozone, needs a banking union, but Britain won't be part of this banking union, and we properly protected our interests in the single market.

That's what today's discussions are going to be about, the broader discussions, really, about how Europe is changing. And a lot of that change is being driven because of the euro, because the countries in the euro need to integrate more, need to integrate their institutions more. Britain's not in the euro. We're not going to join the euro. So, we won't be part of that integration.

(END VIDEO CLIP)

DOS SANTOS: That's David Cameron, the prime minister of the UK, speaking earlier today from Brussels.

Well, speaking of the UK, Standard & Poor's has put Britain's Triple-A rating on negative watch. It says that it could lower its rating for the UK if the recovery takes longer than expected. Remember, that's particularly interesting given the fact that what we've seen is the Bank of England and also the chancellor of the exchequer in the UK cutting their growth outlooks for this year and next.

Well, that news came out after European markets had closed, but still, as you can see, the FTSE 100 did manage to spend much of the session in the red, closing the day down by around about a third of one percent. That meant that it snapped and eight-day winning streak for this market.

There were some gains in other markets, peripheral European markets, however. Notably, as you can see there, the Milan FTSE MIB index over in Italy had a bit of a good day, ending the day up around about two thirds of one percent after a successful bond sale, with borrowing costs falling compared to the last time it had a bond auction.

Speaking of Italy, its political soap opera took another unexpected turn today as Silvio Berlusconi backs the current prime minister, the technocrat Mario Monti, to run for office again. To many people's surprise, Berlusconi suggested that Monti could lead a center-right coalition.

Not everybody is so sure that he's quite being serious on this issue. Monti had said that he'd resign, you remember, last weekend, as prime minister once Italy's budget for next year was approved by parliament. As Ben Wedeman now reports, Berlusconi is enjoying every minute of his political return.

(BEGIN VIDEOTAPE)

(APPLAUSE)

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): He's back. Once and perhaps future Italian prime minister Silvio Berlusconi says he'll run for the premiership for the sixth time in 20 years.

A year after he resigned as prime minister, he's coming back more emphatically than ever, telling an appreciative audience in Rome that --

(SILVIO BERLUSCONI SPEAKING ITALIAN)

WEDEMAN: -- he'll denounce the policies of his successor, technocrat Mario Monti, and his management of the current economic crisis.

(APPLAUSE)

WEDEMAN: After decades in the bruising arena of Italian politics, the 76-year-old businessman appears rested and ready for a fight. Tanned, fit, not a gray hair on his head.

Berlusconi is not, however, without troubles of his own. He's appealing a conviction for tax evasion and is still on trial for allegedly having sex with a minor, a now of-age exotic Moroccan dancer known as Ruby Rubacuori, or Ruby the Heartbreaker.

Berlusconi is in and Prime Minister Mario Monti will soon be out, announcing he'll step down as soon as parliament passes Italy's 2013 budget. But stepping down doesn't mean he's stepping out. Many here speculate he's simply preparing to take off his technocratic mantle and don that of a politician and run himself for the premiership in elections early next year.

Monti's policies of tax increases and spending cuts have sparked widespread protests, but many other Italians think such tough measures were unavoidable, says Professor Franco Pavoncello.

FRANCO PAVONCELLO, PROFESSOR, JOHN CABOT UNIVERSITY: While there is concern, while there is resentment, while there is worry about the future, I think there is a rather widespread agreement that what Monti did was absolutely necessary to avoid disaster in the finances of the country.

WEDEMAN: Monti's medicine has been bitter, says bank worker Simone Escolasti (ph), but it had to be swallowed. "Let's say Monti put in place very hard measures with taxes and whatnot, but something is coming out of it," he says. "With Berlusconi, the situation was the lowest it could get. So the return of Berlusconi, I honestly see as very bad."

Berlusconi won the premiership three out of the five times he ran. Some Italians love him, some hate him, but few underestimate him.

Ben Wedeman, CNN, Rome.

(END VIDEOTAPE)

DOS SANTOS: They don't call him "il Cavaliere" for nothing, Berlusconi. Well, Francesco Giavazzi says that the political upheaval currently underway in Italy is a good thing if it kills off Silvio Berlusconi's career in politics once and for all.

Now, Giavazzi is the professor in economics at Milan's Bocconi University. He's also an advisor to Mario Monti, the current PM. And speaking to me earlier in the week from Paris, he told me that Mr. Monti's resignation would not necessarily cause disaster.

(BEGIN VIDEOTAPE)

FRANCESCO GIAVAZZI, ECONOMICS PROFESSOR, BOCCONI UNIVERSITY: I think this is actually very good news for two reasons. One, that it has triggered a snap election. We were supposed to have elections in late April, so a long and divisive campaign, and now we are going to vote in September (sic), so everything is going to be over soon.

Second, and more importantly, I think this will sanction the end of the political life of Mr. Berlusconi, because he will do very badly in the election, and then he will be out of Italian politics. So, I think that for both reasons, this is a good thing.

DOS SANTOS: Economically speaking, do you think that even if we do see the center-left party managing to win a new election and take on a lot of the plans that Mario Monti has put forward, will they be able to implement them?

GIAVAZZI: Italy all depends on whether we're going to see growth resuming or not. Without growth, there is no way this country can make it. If there is some sign of growth after the minus two and a half we do this year, then that would be good.

So, the issue is, will the new center-left government that would be elected in February be able to implement measures that would help growth? And I think they have all the incentives, and they have the preparatory work done by Mario Monti, so the transition would be able to do it.

DOS SANTOS: Now, having said that, you know Mario Monti very well, you -- and still are one of his economic advisors on the spending review, and yet, you've often cautioned that not enough is being done to cut spending and that too much is being relied on in terms of tax increases to try and pay down the debt. Your thoughts on where that's going to go in this new reality without Mario Monti?

GIAVAZZI: Yes. The big limitation of Mario Monti of the past year has been the relying almost entirely on tax increases, which is one of the reasons why the economy is not doing well and not being able to do enough, actually very little on spending.

My own view is this is not due to his not willing to do it. It's not even due to parliament. But it's due to a very heavy bureaucracy that leaves out of government spending and has resisted strongly to any cuts. And changing a bureaucracy is not something that you can do in a few months. But that's the main reason why it hasn't happened.

DOS SANTOS: Do you think Mario Monti will return as a politician and try and run for this next election?

GIAVAZZI: It's certainly up to Mario to decide what he will do. I think, however -- this is my personal view -- that having someone who remains outside of politics and is ready, as was the case a year ago -- to step in and quote-unquote "save the country" as needed, is a big insurance.

And then -- and for this reasons, I think for Italy, it would be better if he just stayed out of the election, ready to step in.

(END VIDEOTAPE)

DOS SANTOS: The US Fed is now tying the unemployment rate to interest rates. Up next, the chief economist at Wells Fargo explains to me why Ben Bernanke's new policy regime may not run as smoothly as he may expect.

(COMMERCIAL BREAK)

DOS SANTOS: UBS could face a charge of up to a billion dollars over claims that it was fixing libor, according to media reports. Well that, if true, would be the biggest penalty yet in the London lending rate scandal so far. Alison Kosik joins us now, live from the New York Stock Exchange to explain all and how it's affecting the markets. Tell us more, Alison.

ALISON KOSIK, CNN CORRESPONDENT: Nina, this $1 billion settlement will reportedly be announced next week sometime. The effect on the stock, we're saying shares of UBS down 1.5 percent. "The Wall Street Journal" says the discussions are still happening and that UBS and regulators have been close to deals in the past, only to see them unravel.

Now, for UBS, this would bring to an end a saga that's been unfolding since last spring. US, European, and Swiss authorities have all been looking into the alleged rate-fixing. If the $1 billion fine comes to be, it would be more than double the $450 million fine that Barclay's agreed to pay back in June.

As far as UBS goes, UBS has really been front and center in this investigation, being only the second bank to settle. And experts say more fines are likely to come in this. There are more than a dozen other banks still under investigation. At least one, Royal Bank of Scotland, says it hopes to settle in a couple of months.

And when you look at the size of these fines, they're not very surprising. You can't forget the enormous implications the rate-setting process has for global markets, about $10 trillion -- with a T -- $10 trillion in loans worldwide. It affects everything from credit card rates to mortgages. All of that are tied to libor.

DOS SANTOS: Alison, obviously we've had a whole week of banks supposedly behaving badly, with HSBC, Standard Chartered at the start of the week. It seems as though a lot of international banks are really seeing -- feeling the brunt of regulators stateside and elsewhere. That must undermine investor confidence in the financial sector.

KOSIK: It does, but it's not very surprising. You even think about the financial crisis, there is -- here in the US, a lot of complaints had been that there have been no criminal charges against any of these banks.

So, this libor scandal is one way that these authorities are able to at least hold these banks accountable with these big fines. And the big fines really aren't a huge surprise considering what a huge impact libor rates have globally, Nina.

DOS SANTOS: OK, Alison Kosik there from the New York Stock Exchange. Thanks ever so much for bringing us the latest there.

Let's have a quick look at how things stand on Wall Street at the moment. Some analysts are indeed saying that the markets at the moment are essentially in something if a holding pattern at the moment, while we count down towards the festive season, but also, more crucially, we've got Congress trying to sort out the fiscal cliff issue before New Years Eve strikes.

And, well, the feel-good factor from yesterday's Fed statement seems to have worn off, as you can see. We've got the Dow Jones Industrial Average down about 0.7 percent, or 90-odd points, trading at 13,155 as we speak, with a couple of hours left to go in the trading day.

One piece of positive economic news coming out stateside was news that initial jobless claims actually fell more than expected for last week.

Well, speaking of the US, one top US economist says that it's unlikely that Congress will manage to fix the country's fiscal problems by the time we do see that clock striking midnight on New Year's Eve.

Let me just remind you that there are just 19 -- that's right, 19 -- days now to go for President Obama to reach a deal with Republicans in Congress. But John Silvia from Wells Fargo expects the main issues to be pushed back until at least February or even March.

With the Fed announcing new stimulus measures just on measure, I asked him earlier in an exclusive interview if tying those interest rates in the United States to the unemployment rate would actually help the US economy.

(BEGIN VIDEOTAPE)

JOHN SILVIA, CHIEF ECONOMIST, WELLS FARGO: I think it's a very tricky story to put a particular number on, let's say, the unemployment rate, for two different reasons. First, historically, it's not been a strong relationship between monetary policy and unemployment rate per se.

And then second, that unemployment can be composed of both structural and cyclical factors, and once again, structural factors are probably not amenable to monetary policy.

DOS SANTOS: Well, and then the other thing that, of course, as you said, is the backdrop to all of this is the fiscal cliff. And that again could change a lot of those structural factors as well, couldn't it? Talk to me about what you're expecting if --

SILVIA: Oh, yes.

DOS SANTOS: -- we do go over the fiscal cliff. Do you think we will?

SILVIA: My sense is that we're probably not going to resolve the fiscal issues right now. So, I think a continuing resolution of some sort, perhaps postponing the real debates until February or March with a new Congress next year seems to me the most likely outcome.

I think they can do enough to get past what we might consider the fiscal cliff, but still not resolve the fundamental issues. I think that's the path they will take.

DOS SANTOS: Now, you're talking about moderate economic growth here. Can you quantify that for the United States? Because obviously what the US is seeing in terms of growth forecast for next year would, frankly, be enviable for places like Europe, that are contending with recessions.

(LAUGHTER)

SILVIA: Yes, the United States is in an interesting position because our long-term growth potential seems a little bit stronger than Europe. So, when we're talking about 1 to 2 percent economic growth in the next year, that's still pretty modest compared to what Americans have traditionally assumed would be good economic growth of 3, 3.5 percent.

So, this presents an interesting challenge because it seems as if we're -- at 1 to 2 percent, it's going to be quite a challenge for us to generate the revenues, for example, to pay the bills that government is looking at.

It's also a challenge in terms of 1 to 2 percent. It's not going to generate a lot of job growth. I think that's going to be an interesting challenge for households in general. So, 1 to 2 percent, moderate but disappointing compared to US history.

DOS SANTOS: Give me your three big predictions for 2013, then.

SILVIA: My three big predictions is one, the US will start to address its long-term fiscal problems. Two, We will view ourselves in the United Sates as much more of an export-driven economy than can simply domestic demand, and we will take advantage, I think, of Asian economic development.

And third, I think we will come to the realization that interest rates in the United States will stay low for a longer period of time.

(END VIDEOTAPE)

DOS SANTOS: John Silvia there. The chief economist at Wells Fargo speaking to me earlier.

Well, Britain's central bank got a right royal grilling on today's session. The queen toured the Bank of England. She inspected the gold vaults and finally got an answer to a question that she first asked all the way back in 2008, namely, why did no one see the financial crisis coming?

Well, a member of the Bank of England's financial services committee was on hand to tell her that the markets were stable at the time, which in turn had led to complacency. Her husband, Prince Philip, had one choice comment: "Don't do it again."

A related Currency Conundrum for you out there now. On their first visit to the Bank of England, the Queen and the Duke of Edinburgh signed a bank note to record their visit. So, our question is, what was its face value? Was it A, 100 pounds? B, 1,000 pounds? Or C, 1 million pounds? We'll have the answer for you later on in the program.

Speaking of currencies, the euro is fairly flat following the EU's announcement on a banking pact. The single currency still remains well above the US dollar, as you can see there, and the yen is down against the dollar, though, for a third straight day. The British pound is weaker against the greenback as well, trading at $1.6104.

(COMMERCIAL BREAK)

DOS SANTOS: "Grexit is dead." Those are the words of the Greek prime minister after the country's much-needed and long-delayed loan payment was finally approved by the IMF and the eurozone finance ministers overnight.

The $65 billion wedge of funds should start to flow to Athens within days. Antonis Samaras says that it will ensure Greece stays in the eurozone and gets back on its own two feet.

All this week, we're looking at the human cost of the Greek financial crisis. The increasing hardship for many Greeks is giving rise to ever- more extreme views. Some people are blaming immigrants for the country's problems. And, as Diana Magnay now reports, one party in particular is keen to push that version of events.

(BEGIN VIDEOTAPE)

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT (voice-over): Greece's long coastline means almost a tenth of the population are immigrants, many of them here illegally. The far right blames them for rapes and murders and for stealing Greek jobs. It's vocal and it's growing.

Golden Dawn is now Greece's third most popular political party. It has 18 seats in the parliament, as much as 14 percent public support.

NIKOLAOS MICHALOLIAKOS, LEADER, GOLDEN DAWN (through translator): We may do the Hitler salute, but at least our hands are clean.

(APPLAUSE)

MAGNAY: The party campaigns beneath the slogan "Clear the Filth." "The filth" is code for African and Asian migrants. We're not allowed to film here. We're told to take the state broadcaster's pool feed, and attendees are warned of our presence.

(CROWD CHANTING IN GREEK)

MAGNAY: But we make contact: 21-year-old "Manos" agrees to meet us the next day.

"MANOS", GOLDEN DAWN SUPPORTER (through translator): I don't like foreigners because they cause a lot of trouble. They scare people. They rape women, they kill for no reason. Many people blame Golden Dawn for being racist, but we're not racist. We're nationalist.

MAGNAY: We meet the head of the Tanzanian Community Center in Athens, Francis Williams. In September, a mob of Golden Dawn supporters attacked his center and several shops on the same street. A terrified neighbor shot this video.

FRANCIS WILLIAMS, PRESIDENT, TANZANIAN COMMUNITY CENTER, ATHENS: We expect maybe the police could have at least confront these people, at least arrest some people.

MAGNAY (on camera): But nothing.

WILLIAMS: But nothing.

MAGNAY (voice-over): Police spokesman Christos Manouras said he would investigate any video which suggested officers had turned a blind eye that night. He wrote: "Unlawful behaviors, wherever they come from within the Greek police force, are not and will not be tolerated."

A new police unit tasked with dealing with racist violence is being set up. But Golden Dawn is now policing whole neighborhoods itself.

(END VIDEOTAPE)

DOS SANTOS: That's Diana Magnay reporting, there, from Greece. Well, you can check out more of her stories from Greece in our special program, "Greece: The Human Cost." Watch it tomorrow at 4:30 PM in London here on CNN.

A turning point of the UK's energy future, or a serious environmental concern? We're going to be putting fracking under the spotlight next.

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back. I'm Nina dos Santos. These are the main news headlines this half-hour.

(BEGIN VIDEO CLIP)

DOS SANTOS (voice-over): NATO secretary general says it's only a matter of time until Bashar al-Assad's regime falls to the rebellion. That stark assessment came from Anders Fogh Rasmussen at a news conference in Brussels, Belgium. He was announcing the deployment of two Patriot air defense batteries to Turkey's border with Syria.

Rasmussen also called the alleged use of Scud missiles by the Syrian army, quote, "reckless." NATO earlier said that it had detected unguided Scud-type missiles fired inside Syria this week. Syria's government is vehemently denying those allegations.

Japan says a Chinese plane flew into the airspace between these disputed islands, prompting Japan to scramble fighter jets. The Japanese Coast Guard vessel reported the plane near the islands of the East China Sea. Tensions are currently high in the area. Both Japan and China claim sovereignty over (inaudible).

South Korea says that it's picking up the pieces from North Korea's successful satellite launch. The South Korean navy says that this large object is part of the first stage booster from the rocket that carried the satellite into orbit. Many countries believe Wednesday's launch was really a ballistic missile test.

(MUSIC PLAYING)

(END VIDEO CLIP)

DOS SANTOS: Now the U.K.'s decided to lift its ban on fracking. As such, companies will be able to use the controversial gas instruction technique as long as they carry out risk assessments and monitor (inaudible) activity. All of this was put on hold in the U.K. just last year after two small earthquakes were detected near the U.K.'s only current site for fracking.

So hydraulic fracturing, or fracking, as it's often been called, is a way of extracting gas from areas that traditional drilling basically can't reach. And what it involves here is pumping, as you can see here, millions of liters of water and chemicals underground into shale rock formations, as you can see, as the fluid and pressure builds up, well, then we have fractures forming in the rock.

And that released trapped pockets of natural gas. Now the U.K. isn't the only country to be doing this. Just last year, as you can see, we had 87 percent of the world's fracking being carried out in the United States, a huge hub for fracking.

It's experienced a real boom these days because of that. Australia and also South Africa over there also have some important commercial projects in this space. There currently also is seeing test flights being run over here in China for the moment, too.

However, not all countries are pro-fracking. In fact, these countries have actually banned fracking so far. France and Bulgaria have banned the practice altogether because of safety concerns, particularly when it comes to seismic activity.

So the seismic events due to (inaudible) resources U.K. fracking site that led to the temporary ban. Cuadrilla CEO says that today's news is, in fact, a turning point for the country's energy future. Before the ban was lifted, he spoke with our very own Jim Boulden about the concerns that some environmental groups have about this controversial process.

(BEGIN VIDEO CLIP)

FRANCIS EGAN, CEO, CUADRILLA RESOURCES: I understand people get concerned. There were two seismic events; I think one was a 1.5 event and the other was a 2.3 event. So they're not major events.

And then if I can just put them in context, I think if you -- if you - - if you look at the British Geological Survey here in the U.K. and look at their website, you'll see that in the last two months alone there were nine such events in the U.K. between 1.0 and 2.7 not reported on (inaudible). So they're not life-threatening events or damage-inducing events, but they do cause concern.

So as a consequence, the fracking was suspended. And we've done a lot of work. There's been -- there's been various academic studies into the (inaudible) city. And before we can start up again, there will be very extensive seismic monitoring arrays installed around the world. It's to monitor and check progress.

JIM BOULDEN, CNN CORRESPONDENT: Have we moved on from that? Is that the old story, the worries about water supply and worries about where the liquids go? Or are we going to go through all of that here in the U.K. as well?

EGAN: Those concerns are expressed in the U.K. And I think we take great pains to explain what it is we're doing here. So for chemicals, for example, in the fracturing fluid in Lancashire, we use one single chemical. It's a friction reducer. It's polyacrylamide. It's used in very small dosages. It has to be approved by the environment agency. It's nonhazardous and there are no other chemicals used.

So we do hear stories of cocktails of chemicals and other things, such is not the case over here.

The U.K. is a highly regulated environment, has been offshore since the -- since the dreadful Piper Alsa (ph) tragedy in the mid-'80s. And we've had a strong regulatory environment in the U.K. I think that will stand in good stead as we move onshore. I think companies like Cuadrilla are capable and prepared to meet all those regulatory requirements.

So as long as it can be done safely and sensibly, which it can, and I think the taste may be a little slower than the U.S., but it can and will be done. I do believe that.

(END VIDEO CLIP)

DOS SANTOS: Well, Friends of the Earth has some concerns over the safety of fracking. Helen Rimmer is a campaigner for the organization and she told me that she'd rather see the U.K. focus instead on cleaner energy sources altogether.

(BEGIN VIDEO CLIP)

HELEN RIMMER, FOTE CAMPAIGNER: I think this is the wrong direction for the U.K.'s energy policy; we need to be moving away from our reliance on fossil fuels. This is going to deepen our dependency on fossil fuels, we should be investing in clean, renewable technology, clean, renewable energy in order to not only put climate emission but also to create thousands of new jobs.

(CROSSTALK)

DOS SANTOS: (Inaudible) slightly issue to having an issue with fracking in itself. There's been a lot of concerns about whether or not it's safe, detrimental to the environment. What would you say?

RIMMER: I'd say that's another major concern. The European Commission, for example, has said that there's high risks of air pollution, water contamination, so clearly locally that's going to have a big environmental impact. But we simply don't need to be taking that risk with the environment. We don't need to cut into that gas. We should be developing cleaner, greener energy sources.

DOS SANTOS: The flip of all this, some might argue, is that the U.K. needs energy security. If you take a look at what the United States is doing, it's experiencing a veritable economic boom, thanks to fracking.

So what we're seeing is our North Sea oil and gas fields being depleted. Why not use the resource that we have under our very feet?

RIMMER: Well, the situation in the U.K. is very (inaudible) U.S. It would be much more difficult and costly to extract the shale gas that we have here. Also we have more than enough gas in the world. We have 100 years' worth of gas resource. The committee on climate change has been very clear. We need to reduce our reliance on gas. We need to have a virtually carbon-free power system by 2030.

DOS SANTOS: But does it make sense, moving gas from one place in the world to another place in the world, say from, I don't know, Africa to the U.K. at great cost of the environment, because that also has a carbon footprint issue? When we could extract the gas under our own feet?

RIMMER: Well, the issues with fossil fuels, we don't need more fossil fuels. We need to develop cleaner energy. But on that particular question, (inaudible) looked at the climate change impact comparatively to say that it is any better in terms of climate change to have the shale gas resource here compared to (inaudible) in from Norway, for example.

So the jury's completely out on the climate change comparison of shale gas with conventional gas with coal. And some experts' evidence shows that it could be as bad as coal in terms of climate change.

(END VIDEO CLIP)

DOS SANTOS: Up next, a big relief for lost (inaudible) as Google Maps is back. We'll see how it compares to Apple's much maligned alternative.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

(BEGIN VIDEO CLIP)

DOS SANTOS (voice-over): Let's get the answer to today's "Currency Conundrum" for you out there. When the Queen introduced (inaudible) Bank of England today, they signed a bank note. My question to you earlier was what was its face value. And the answer is C, it was worth 1 million pounds.

This is a tradition that dates all the way back to the early part of the 19th century. The note is placed in the bank's distinguished visitors' book with a very distinguished signature.

(END VIDEO CLIP)

DOS SANTOS: Now iPhone users are currently scrambling to get Google Maps launched late on Wednesday. Google's own mapping software has literally leapt to the top of Apple's app download charts. And this is it, as you can see.

It's actually Google's first homemade app for Apple phones. Up until September, Apple just used to download the data and use the data from Google in its own program and then what it did was it launched its new Apple Maps service, describing it as, quote, "amazing." Well, iPhone users basically didn't agree. They found themselves confronted with weird images like this, as you can see, strange 3D glitches.

Here as you can see making the Manhattan Bridge rather wobbly over there. No step-by-step directions were offered and landmarks were often listed miles away from where they actually were in real life.

Well, this is now how the new Google Maps app looks on one street compared to Apple's own version -- no comparison, really, is there?

And this shows Google's traffic and public transport information particularly to the city of Hong Kong over there on the other side of the planet, side by side with Apple's, as you can see, Apple's is missing an awful lot of information. It doesn't even have the subway and train system on it.

Now Jenny Harrison is at the CNN International Weather Center and we're going to be staying with that part of the planet, aren't we, Jenny, because you're going to be telling us about the cyclone currently underway in Samoa.

JENNY HARRISON, CNN METEOROLOGIST: Yes, this is not a good one at all, Nina. This, of course, is Tropical Storm Evan, a very, very powerful storm and just continuing to hammer Samoa and also American Samoa. It's barely been moving in the last few hours.

When you think of the size of the storm and the size of the Pacific Ocean and the size of the land that it's actually impacting, it's just all those things that come together. And we've got winds right now 170 kph. And for the next 24 really to 48 hours, it is barely going to be moving. And then at the moment, the forecast track when it does move as heading on towards Fiji, as you can see.

Now there has already been some substantial wind damage reported across Samoa; at least two deaths have also been attributed to this storm. Storm surge was reported to be between 31/2-41/2 meters, which, by the way, is the same height as storm surge that we actually saw up in the northeast of the U.S. during the height of superstorm Sandy when it came onshore.

So that is a huge amount of storm surge, about 7-10 storms a year across this part of the world, but already we've had 94 millimeters of rain in Pago Pago and across there on Samoa 103. There's more to come and of course because the storm's been moving so slowly, it really is going to continue to add up. So we could easily see another half meter of rain.

And then meanwhile, in across Europe, just to tell you that the main theme is changing. The cold air retreating eastwards. These are current temperatures, much milder from the west. But as usual, Nina, the mild comes with a bit of a downside; it will be wet and it will be windy. But at least milder.

DOS SANTOS: Jenny Harrison, thanks so much for that.

And on that note, it's time to say goodbye. Thanks for watching QUEST MEANS BUSINESS.

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RICHARD QUEST, CNN HOST: From Reykjavik in Iceland, this is MARKETPLACE EUROPE. I'm Richard Quest. And this is the Sun Voyager statue at the heart of the city. Four years ago, Iceland went bust. The banks were bankrupt. Inflation went through the roof. The country needed a bailout.

The economy was like the landscape, spectacular and unforgiving. Four years on, how things have changed. Iceland is certainly growing faster than the moribund European Union. And it's also growing faster than the United States.

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QUEST (voice-over): Coming up, fishing for future prosperity: how Iceland is banking on the humble mackerel to keep its finances afloat.

And to join or not to join, President Grimsson stands firm on the issue of E.U. membership.

OLAFUR RAGNAR GRIMSSON, PRESIDENT OF ICELAND: I believe (inaudible) to benefit from the future of the Arctic by maintaining our present position rather than to let the European Union speak on our behalf.

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QUEST: As the economy here slowly recovers from the big bank bust-up, the government is shifting the focus to traditional industries, like tourism and, of course, fishing, long one of the mainstays of Iceland's economy. Even here, though, there are problems as Rosie Tompkins now reports, a row with the European Union threatens this most traditional of industries.

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ROSIE TOMKINS, CNN CORRESPONDENT (voice-over): It's a new dawn for this remote island in the North Atlantic Ocean.

The fishing industry has helped lift Iceland's economy out of recession. When the economic crash took the country's currency down with it, the devalued kroner made Icelandic products cheaper overseas, boosting exports. The fishing industry now accounts for almost 25 percent of the country's GDP.

TOMKINS: This vessel has just returned from four days at sea. It's carrying 100 tons of fish. That is worth a quarter of a million dollars worth of export to this company alone. Scale that up nationwide, and you start to understand why fishing is so important to Iceland.

TOMKINS (voice-over): H.P. Grandy (ph) is one of the country's largest fisheries.

UNIDENTIFIED MALE: (Inaudible) from the pollock. This is the most expensive part of the fish. But it is sold to the European market. (Inaudible). So --

TOMKINS: This market is where?

UNIDENTIFIED MALE: Probably in France.

TOMKINS (voice-over): This company catches 160,000 fish annually, worth a quarter of a million dollars in exports. But like all fisheries in Iceland, their catch is limited by government quotas, which are there to keep the industry sustainable.

TOMKINS: When quotas are controlled, it's all about maximizing profits and that means using every single part of a fish. These pollocks are being processed in the Nigerian market, where dried fish bones and dried fishheads are a popular dish.

TOMKINS (voice-over): In addition to pollock, one of the ground fish species, the company is also heavily reliant on pelagic fish, such as cod and mackerel.

UNIDENTIFIED MALE: The mackerel is very, very important for us. And if I am going to name one item who has saved (inaudible) or have (inaudible) from the crisis, that is mackerel. It came into our waters in a big, huge amount. And of course, we start to utilize it.

TOMKINS (voice-over): The problem, however is that Iceland and the E.U. nations are at loggerheads over how to share this migrating stock. The E.U. and Norway have allotted themselves 90 percent of the total allowable catch, leaving the Faroe Islands, Russia and Iceland with 10 percent between (sic) them. However, Iceland assigns itself a 16 percent portion.

The numbers don't add up and with fishing accounting for 40 percent of the nation's exports it's not prepared to take this cut without a compromise.

STEINGRIMUR SIGFUSSON, MINISTER OF FISHERIES AND AGRICULTURE: The mackerel has been coming in huge numbers into Icelandic waters spending months and months here and eating a lot, taking a lot out of the biosystem. So obviously we are a coastal state, must stand firmly on our rights to have a share in this migrating species. So obviously, Iceland is entitled to some share.

TOMKINS (voice-over): Until an agreement is reached ,the E.U. could impose restrictions on Iceland for nonsustainable fishing. And that, in turn, may put the country's E.U. application on ice.

SIGFUSSON: These negotiations have been delayed maybe because of (inaudible) like the mackerel. It's becoming increasingly difficult to continue as nothing has happened. And needless to say, sanctions or things like that would be very detrimental to the atmosphere.

TOMKINS (voice-over): And detrimental to the fishing industry, a lifesaver of Iceland's economy.

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QUEST: Rosie Tomkins catches and prepares the fish, I get to enjoy it. This is sauted blue ling.

When we come back on MARKETPLACE EUROPE, the president of Iceland.

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QUEST: Welcome back to MARKETPLACE EUROPE in Reykjavik, Iceland.

When the economy collapsed in 2008, everyone was affected. With a population of just 320,000, this country found itself the epicenter of the global financial crisis. There was a real risk that society would fracture. The man responsible for trying to hold everything together is the president, Olafur Ragnar Grimsson.

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GRIMSSON: If you have one, you're (inaudible) this long and have to be having to decide whether to (inaudible) or not with every government in Europe against me, with almost every expert saying I would create a financial disaster for Iceland if I did it, then to take the decision on my own shoulders and say I would go with the democratic will of the Icelandic people, against the pressure of European governments and the financial sector in Europe, was the most difficult decision I ever had to take.

QUEST: Do you believe the ability to be maverick in that was unique to Iceland and could not have been repeated in a place like Greece or Ireland?

GRIMSSON: Well, certainly, they were part of the Euro system. So they couldn't have devalued the currency. But they could also have adopted our policy with respect to -- with respect to the banks. I have often asked the question, why are banks holier in the economic system than many other important, more productive corporations?

And also when we face the choice between the interest of the European financial markets that were pressurizing us to follow certain policies, and the democratic will of the Icelandic people, we decided to let the democratic will of the Icelandic people be paramount.

QUEST: But if we take your argument to its logical conclusion, then many more banks in Europe would have been allowed to go bust.

GRIMSSON: It is clear that one of the fundamental reasons why Iceland is now on a -- in a strong -- in a strong recovery with respect to, relatively speaking, to other European countries, is that we allow the banks to fail. They were private banks and the private market was allowed to take its course.

QUEST: And to the critics who say you can do that with 320,000 people; you can't do it with 32 million people, what would you say?

GRIMSSON: I don't accept that argument, because if anybody had described four years ago how Iceland would be in 2012, following the policies that we have followed, most established policymakers, economists and political leaders in Europe would have said it can't be done.

But we are now here four years later, and we have proved it can be done.

QUEST: So I'm going to take you deep into the political waters, Mr. President. You would not be in favor of Iceland joining the Euro if and when the country becomes a member of the European Union?

GRIMSSON: We are here in the middle of the North Atlantic. Our neighbor to the east, Norway, is outside the European Union. Our neighbor to the west, Greenland, decided to leave the European Union.

And if then we look to the future of the Arctic, which is gradually becoming one of the most important playing grounds in the -- in the 21st century world economy, I believe Iceland is better placed to benefit from the future of the Arctic by maintaining our present position rather than to let the European Union speak on our behalf.

QUEST: If it came to a decision on E.U. membership, would you insist that it goes to a referendum?

GRIMSSON: Oh, absolutely. Absolutely. That's what I said in the presidential election early this year. And I was voted back into office for the fifth term on the basis of this promise, that I would --

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QUEST: So you'd wield the (inaudible).

GRIMSSON: Oh, absolutely. Absolutely.

QUEST: Finally, do you see the people of Iceland, do you see society here being at ease with itself now?

GRIMSSON: There are still wounds. There are still scars. There are still frustrations and there is still anger. But on the whole, the democratic will of the people of Iceland have enabled us to recover and move towards the future reasonably confident that we can build a better society.

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QUEST: President Grimsson of Iceland. And that's MARKETPLACE EUROPE for this week. I'm Richard Quest in Reykjavik, the Icelandic capital. Whatever market you're in, I hope it's profitable. And I'll see you next week.

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