Return to Transcripts main page
QUEST MEANS BUSINESS
Spanish Unemployment Rises; European Job Crisis; European Markets Rise; European Focus Shifts to Jobs; Britain's EU Future; Future of Europe; Apple Shares Plunge; US Markets Update; Nokia Returns to Profit
Aired January 24, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: The worst on record. Spain's job crisis calls prompt for action at Davos. The debate is now.
David Cameron defends his referendum.
And we're all too optimistic. So says the second in command at the IMF.
I'm Richard Quest. Come with me, because I mean business.
Good evening. Uncertainty and unemployment. Two key themes at the World Economic Forum in Davos on the day Spain reported a record high rate of unemployment. Tonight, we speak to the director-general of the ILO and the chief executive of Publicis.
Also on this program, the EU economic affairs commissioner, Olli Rehn, tells me the UK's threat to leave the EU is not helpful. Sweden's prime minister bemoans Europe's lack of competitiveness, and the head of the WTO, the World Trade Organization, Pascal Lamy, will answer the call from leaders in Davos to clamp down on trade protectionism.
Tonight, though, unemployment is at a new record high in the country and the epicenter of Europe's job crisis, it is Spain. The jobless rate there has crept above 26 percent for the first time, second only to Greece in Europe. It's a sharp reminder of Europe's most pressing issue.
As we know, eurozone unemployment is pushing 12 percent, far worse than the United States, and the youth unemployment gap is even wider. Here in Davos, the German chancellor, Angela Merkel, said it was time for a fresh approach.
(BEGIN VIDEO CLIP)
ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): When you have a youth unemployment of 60 percent, particularly among young people in Portugal, in Spain, we have to see to it that we open up new perspectives, and perhaps also introduce certain bridging measures that will then allow those reform processes to take place without unduly disturbing domestic peace.
(END VIDEO CLIP)
QUEST: Earlier, I spoke to the Danish prime minister Helle Thorning- Schmidt, and I suggested to her that the gap between Europe's governments their citizens had got so wide, trust had disappeared.
HELLE THORNING-SCHMIDT, PRIME MINISTER OF DENMARK: It's all about jobs. If we can start getting jobs back in Europe, growth again in Europe, I think the trust for the European leaders in our member states and in Europe will --
QUEST: OK, hold on --
THORNING-SCHMIDT: -- will be better.
QUEST: Why do European leaders not find it more offensive that there's 11 percent unemployed in the EU at the moment, 11.8 percent?
THORNING-SCHMIDT: We find it hugely offensive, and secondly, when you look at youth employment, there's nothing that concerns me or other European more than the youth employment. This is something that is bad for the young people individually, but it's bad for our society.
So, I think we find it very offensive, and that's why we're working every day to remedy this and create more growth and jobs in Europe.
QUEST: That's the view of the Danish prime minister. The ILO, the International Labor Organization says unemployed, the number, will be more than 200 million worldwide by the end of this year. Its director-general is Guy Ryder, he joins me now. Maurice Levy is the chief executive of Publicis and is also with me this evening.
Maurice, we start with you. The number of unemployed, the private sector can only do so much to take up that slack, because they're still losing jobs in Europe at the moment.
MAURICE LEVY, CEO, PUBLICIS: Yes, and we can expect that this number will increase by the end of the year because the economy is not growing, and we know that we can create jobs only if there is growth.
QUEST: Guy, when we look at the number, 26 percent, 50-odd percent youth unemployment, and yet, as Maurice says, obviously growth is still the issue.
GUY RYDER, DIRECTOR-GENERAL, INTERNATIONAL LABOR ORGANIZATION: Growth is the issue, and I think the fact of the matter is, we've got to realize that in Spain, at least, we haven't missed the Great Recession, we've hit the Great Recession. That calls for action now --
QUEST: What do you want, sir? What do you want?
RYDER: Well, firstly, I think Spain has got to understand --
QUEST: Not just Spain, I'm talking about pan-European.
RYDER: Europe -- that the austerity measures have been applied have been overdone. The IMF realizes now that the potency of the austerity measures was more than they expected. If you're taking medicine and it's stronger than you thought, you down the dose.
LEVY: I think we need to do at least three things. The first thing is to have a kind of new agreement on labor laws and make things more flexible as we see in Germany --
LEVY: Dereg -- I wouldn't call it "deregulation," I would call it "soft regulation," if I may. Not deregulation, because I think that we need regulation, and we need to find solutions, because in may countries, and particularly the south of Europe, we have still labor laws which are privileging the positions which are there instead of privileging new jobs.
QUEST: Can you live with -- with those changes in labor laws?
RYDER: Well, Spain been there, done that. Had two rounds of deregulation of labor markets. In conditions of recession and shrinkage, it isn't going to work.
LEVY: Yes, that's true because the recession in Spain is very tough. And as long as we have no growth in Spain, even if you have well-educated people, you will not have job generation.
QUEST: He's got a point, though, hasn't he? Because if you look at the United States, which has got more flexible labor markets, unemployment has come down to 7 -- excuse me -- 7.8 percent.
RYDER: I don't think the fall -- it's come down in the last few months in the US is accountable to flexibilized labor markets. They've done the right thing with monetary policy, they're trying to do the right thing on the fiscal cliff. If the financial crisis is now easing up, there's more space, use it.
QUEST: Do you believe that both in business and in government, they - - the realization of the awfulness, the obscenity of this unemployment crisis is realized?
LEVY: I'm sure that everyone is perfectly conscious of this miserable situation. This is very tough. I don't know if it is obscenity. I think it's worse than obscenity. And the responsibility is in -- lies in many, many constituencies.
First, I think that a lot of past governments have not taken the right actions regarding education, innovation, and job creation. Second, I think also that the consequences of globalization had not been drawn correctly, and decisions linked to globalization have not been made.
RYDER: I think that people know. I think that business knows. I listened to Maurice this afternoon. He knows, and I think you accept that business has responsibility. Politicians have no excuse for not knowing the problem is of a paralysis of policy.
QUEST: What about this idea that was raised here, get young people to work for two years free for experience and so they get to know about the workforce.
RYDER: Would you do it? I don't think so. I don't think this is the right answer.
LEVY: I don't know which channel has broadcasted such news, but I believe that it is insane. We can't --
LEVY: Insane. We can't ask people to work for free. We can have a program of education --
LEVY: That's different. But asking people to work for free, this is insane.
QUEST: The riskometer. I shall put your crosses on. Start with you, because there's two of you. Maurice, start with you. Which is the biggest risk to global growth in 2013? Is it the US, the EU? I'm going to move? Tell me when you -- where would you like to go?
MAURICE: Move, move, move, move -- stop.
QUEST: Guy, the biggest -- is it the US budget deficit or -- which one?
RYDER: EU, EU, EU, EU.
QUEST: Are you sure?
RYDER: I'm sure, sir.
QUEST: All right.
RYDER: Keep going. Yes.
LEVY: There we are. You see, we are in perfect agreement on everything.
QUEST: Which is a deeply worrying position to be in.
LEVY: Yes, sorry.
QUEST: At this -- good to see you.
LEVY: Thank you.
QUEST: Thank you very much for joining us.
LEVY: Thank you.
QUEST: Many thanks, indeed. Good to see you.
RYDER: Thank you.
QUEST: The unemployment situation continues, and we will follow it. That's our commitment on this QUEST MEANS BUSINESS. And it all happens, this unemployment rate, at a time when stock markets continue to rise inexorably. The FTSE, the Zurich SMI are at their highest levels since the summer of 2008.
And there were more job cuts in the corporate sector. Commerzbank announced 6,000 layoffs, whilst ArcelorMittal is closing production lines in Belgium.
The European Commission's vice president, Olli Rehn, says this year's focus has now shifted from fixing the crisis to tackling the jobs issue.
OLLI REHN, VICE PRESIDENT, EUROPEAN COMMISSION: But the worst is over as it costs the tail risk of the potential breakup of the euro. That has all but disappeared. It has virtually disappeared thanks to the actions taken by the member states and not least by the European Central Bank.
However, of course, in the real economy, we have a very difficult situation. In many countries, high unemployment, low growth, and we have to use now the better sentiment in the markets and the restoration of confidence to boost confidence and growth and job creation in the European economy. That's the focus of 2013.
QUEST: Is it a risk that countries slow down their process of reform. Even the Union itself and the institutions slow down. Complacency comes in, the fire is out, the crisis is over, business is normal.
REHN: I don't think we can afford to have business as usual in this situation. We have serious problems in the real economy, and that's why there is no room for complacency. We cannot lower our guard, and the best recipe to avoid this complacency is to stay the reform course and do the things that will help Europe to grow and create jobs.
QUEST: QUEST MEANS BUSINESS, we are in Davos tonight. We're looking at the question of the jobs crisis, and we're back in a moment.
QUEST: A day after raising the prospect of that all-out referendum in or out, the British prime minister David Cameron arrived in Davos to defend his stance on Europe. Mr. Cameron said there was no getting away from the debate about Britain's future and the EU.
(BEGIN VIDEO CLIP)
DAVID CAMERON, PRIME MINISTER OF BRITAIN: The club we belong to is changing. We can't ignore this. Change is underway. And the debate about what this means, it is live. It is happening right now.
(END VIDEO CLIP)
QUEST: Now, speaking to Christiane Amanpour, David Cameron said his plan was in both British and European interests. Christiane asked him if he would go down in history as the man who took Britain out of the EU.
(BEGIN VIDEO CLIP)
CAMERON: I hope I'll be remembered as someone who did everything they could to get the British economy back on track, to strengthen Britain's society and Britain's place in the world, and to secure Britain's place in a reformed European Union. I think that is what I want to achieve.
There are obviously huge amount of work in the years ahead, but I feel very confident and positive that having set out a plan, having explained to the world, to our European partners, to the British people, to British business, everyone can see there is a plan to change Europe for the better and to secure Britain's place in it.
And to those who disagree, I would just say, you can't attack a plan if you've got nothing to attack it with. This is the right way forward for Britain, it's in our national interest. It's also in Europe's interest, too.
(END VIDEO CLIP)
QUEST: The full interview with David Cameron you can see in less than an hour. "Amanpour" is live from New York. It's 9:00 PM in Central Europe and 8:00 in London.
Olli Rehn says Britain does not need to threaten to leave the Union in order to prompt the debate about its future and admits that the question could lead to instability.
REHN: As regards to the UK, you are right, this debate may lead to certain -- to a certain degree of uncertainty. Of course, it's a democratic debate in the United Kingdom, and it's up to the UK to run this debate in the UK. I can only say that it is to my mind to the mutual benefit of Britain and Europe that Britain stays as a member of the European Union.
QUEST: But there will come a point when the UK is saying to the Commission and to the institutions and to the other nations, we want to renegotiate, we want to adapt the terms. What would your answer be?
REHN: I would not like to jump the gun. It's up to the UK to define, first of all, its policy objectives. We work for that. We work for the common growth of Europe. But you don't have to make threats of leaving the Union to have a debate on those.
QUEST: There was no getting away from it, the cat is out of the bag. And even though that referendum may be some years away, the question is now on everyone's minds in the Union.
Sweden's prime minister says the UK's membership is of vital interest to his country. I spoke to Frederik Reinfeldt here in Davos, and I asked the prime minister whether he's open to negotiation on Britain's membership and the terms.
FREDERIK REINFELDT, PRIME MINISTER OF SWEDEN: I would definitely allow David Cameron to push forward his concerns, and I think we should listen. I'm not sure that we will agree.
But I've seen this before, European leaders making different ideas on how this cooperation can change or be different. So, why shouldn't he be able to do that? I see it as an initiative to keep Britain inside the European Union. That's a vital interest of Sweden.
QUEST: But the practicalities are -- and as the French minister -- German minister says, you can't cherry-pick. But that's what he wants to do. He wants to say we like this, we don't like that.
REINFELDT: But that's already the cooperation we have. We have a kind of multi-speed Europe. Sweden, UK, and eight other countries do not have the euro as their currency, and with that follows a lot of changes. So we are not on the same stand, the 27 of us, and I think that, therefore, we need to discuss the differences between the nation states.
QUEST: You are in favor of a form of discussion that does look at the relationship between countries?
REINFELDT: Yes, I think there should be some space for that, but I'm a little bit worried that we have talked too much about the structures. Where should we take the decision, in what cities? I think the major problem in Europe, and that was also David Cameron's point, is the lack of competitiveness.
The growing world economy is not growing that much in Europe. That is what we need to attend and actually push through the reforms to change.
QUEST: Banking union, for example, and the issues where you are not at one with the Commission and with the proposals, where are you going with that?
REINFELDT: My parliament has said that we have requirements that need to be met for Sweden to join. It's about influence, it's about capture requirements on our banking sector in Sweden, and it's definitely about not covering losses for the failure in other countries' banking systems.
QUEST: Olli Rehn said to me just a short while ago, the vice president, that although the worst may be over for the euro per se in terms of the collapses of the currency, he would remind people to -- reforms have to continue.
REINFELDT: I totally agree. The reforms are still needed to be -- come through. We have taken steps, we have seen better reforms in Italy and Spain, but needs -- more needs to be done.
QUEST: Prime Minister -- the riskometer.
REINFELDT: The risk-o-meter.
QUEST: Oh, the risk-o-meter, that's better.
REINFELDT: Yes, exactly.
QUEST: All right. Well, you know what it is. If we take 2013 and global growth, where is the biggest risk at the moment? Is it coming from the US with its budget issues, or is it still in the EU and its eurozone issues? Where would you like your -- and you can go off the line, so you can put it -- make a nice big cross.
REINFELDT: I would say somewhere like that. It's a little bit more Europe, but more US than I think they like to discuss. And that concern comes both to their sore public finances and the risk linked to the political system in the United States, I would say. Europe is catching up.
QUEST: That's the prime minister of Sweden. And just to let you know, of course, there are many guests that we will see next week as well. They are on the risk-o-meter, which is why there are so many more than perhaps you're wondering. But at the moment, Europe is clearly the riskier part of the meter.
Coming up next, after 18 months in the red, Nokia back in the black. The chief exec, Stephen Elop, tells us about the turnaround. It's QUEST MEANS BUSINESS, we're live, we're in Davos, good evening.
QUEST: Ah, the snow is looking deliciously snowy.
QUEST: It wasn't supposed to snow today. We'll find out maybe later as to why it wasn't supposed to snow.
Investors are reacting to Apple's record earnings with cold, bitter disappointment. Shares are currently down more than 10 percent in New York, dragging the entire NASDAQ into the red. Apple's $13.1 billion net profit may be a record, it's a rise of just $14 million from the same period last year. Apple shares have now lost a third -- whoa -- a third of their value since hitting $700 in September last year.
All this -- look at this! Apple's weighing on the NASDAQ, but the Dow is trading at a fresh five-year high. Netflix is the best performer. The shares are up 38 percent on earnings. Microsoft, AT&T, Starbucks report after the bell. And you're just about 180-odd points, 190 points from 14,000 on the Dow.
As Nokia's profits get back in the black, its shares are in the red. Nokia's shares close 5.5 percent lower in Helsinki. As the phone maker said it's -- announced it's scrapping a 2012 dividend even though it's returned to profit.
The chief executive, Stephen Elop, spoke to Nina Dos Santos earlier and said the dividend decision, well that is a defensive move.
STEPHEN ELOP, CEO, NOKIA: The signal we're sending here is one of ensuring that we maintain strategic flexibility as we move forward.
But if you take the recommendation we're making about thee dividend combined with the cash generation that you saw in Q4, it clearly establishes us in a very strong cash and liquidity situation. So, we believe we're nicely configuring for competition and all of the hard work we have ahead.
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: What's your personal take on returning Nokia to its fortunes? Because only three or four months ago, some technology people had been saying that your company was almost, if you like -- forgive me saying it -- but in terminal decline. Presumably, a lot of this has to do with the launch of the new Windows 8 phone, Lumia?
ELOP: Yes, actually if you look at the work that we've been doing at Nokia overall, it's a number of different things that all come together to create the results that we've been talking about over the last couple of weeks.
For example, amongst our lower-priced devices, the Asha Full Touch SmartPhones, you saw them grow in volumes from just over 6 million to over 9 million units quarter on quarter. As you mentioned, the flagship Lumia products clearly improved from 2.9 million units to 4.4 million units.
DOS SANTOS: Are you worried about the launch of the BlackBerry 10?
ELOP: To give customers what they want today, it's not just about another piece of hardware or another operating system, but you need all of the applications. You need developers, you need Cloud-based services, like games and music and entertainment and unified communications and Word and PowerPoint. You need all of these things.
And there are very few combinations of companies that can bring that to the marketplace today. We think we're doing that very successfully with Microsoft, and I think any challenger in this space is going to have to figure out if they have the capacity to do that themselves or not.
DOS SANTOS: Well, if you take a look at those figures coming out of Apple, it seems as thought he bubble could be bursting there. That could be a gap in the market for companies like Nokia.
ELOP: Clearly, at the high end SmartPhone area, products like the Lumia 920 clearly have an opportunity to compete very effectively there. We've seen a number of people moving to our platform from Android, from Apple, and we're going to continue to encourage that.
QUEST: That is Stephen Elop of Nokia. It wouldn't be Davos if we didn't have the director-general of the WTO with us. Pascal Lamy is here, and with a splendid new hat. It's a Davos tradition, after the break.
RICHARD QUEST, CNN HOST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The British and German governments are warning their citizens to leave the Libyan city of Benghazi in response to what they say is a specific threat. The Dutch and U.S. governments are also advising citizens not to travel to the area.
The U.S. Secretary of State Hillary Clinton spent most of the day on Wednesday in congressional hearings answering questions about last September's attacks on the U.S. consulate in Benghazi.
A Chicago man has been sentenced to 35 years in jail for his role in the deadly siege at Mumbai in 2008. David Headley admitted to scouting attack locations for a Pakistani terrorist group. The attack on the Taj Mahal Hotel killed more than 160 people and that included six U.S. citizens.
The U.S. Defense chief says he is concerned about North Korea's, in his words, "continuing provocative behavior." Leon Panetta said there were no outward indications if an imminent nuclear test despite threats from Pyongyang. He says the United States is a sworn enemy of the Korean people. The E.U. and U.S. issued fresh sanctions against North Korea on Tuesday.
We're keeping our eye on two live events in the United States. The National Transportation Safety Board in the U.S. is holding briefings on its investigation into the Boeing Dreamliner batteries, testing those on board the 787 Japan Air Lines flight that led to an entire fleet of planes being grounded.
U.S. president is announcing his pick, the former government prosecutor Mary Jo White of New York -- of course, U.S. attorney in New York -- as his nominee to lead the Securities and Exchange Commission. Barack Obama will also renominate Richard Cordray as the director of the Consumer Financial Protection Bureau. He's currently heading the agency on a recess appointment.
(END VIDEO CLIP)
QUEST: One thing leaders agree on is the principle of free trade. And here at the World Economic Forum in Davos, both David Cameron and Angela Merkel called for a free trade deal between the U.S. and Europe. Mr. Cameron said tradeoffs need to address the damage done during the financial crisis.
(BEGIN VIDEO CLIP)
DAVID CAMERON, PRIME MINISTER, GREAT BRITAIN: In late 2008, we saw the steepest fall in global trade ever, and the deepest since the Great Depression. And more than four years on, trade has still not fully recovered. And this should be the foremost forefront of the mind of every leader, every diplomat, during those long negotiations on trade.
ANGELA MERKEL, CHANCELLOR OF Germany (through translator): We need to do everything we can in order to contain these -- our protectionist tendencies, the Doha round, the World Trade Organization unfortunately has not (inaudible) positive direction as we wished.
So in the future, too, unfortunately, we need to pin our hopes on bilateral trade agreements. And Germany, I can promise you, will be very proactive as regards the conclusion of such free trade agreements.
(END VIDEO CLIP)
QUEST: Pascal Lamy is the director-general of the WTO. He joins me now.
Director-General, all right. You must be pretty horrified at the idea of an E.U.-U.S. bilateral trade treaty when what you want is multilateral talks.
PASCAL LAMY, WTO DIRECTOR-GENERAL: Well, it all depends on what is in this prospective big bilateral deal.
QUEST: But you'd rather they were doing a multilateral deal under the auspices of the WTO, let's say, Doha or Doha Lite?
LAMY: That's for sure. And this, obviously, is the best option. But it's for countries to decide. Now it all depends on what will be in there. Some of these (inaudible) are conducing to leveling the playing field and fine with that. Others are conducive to scattering the playing field. And this is where the WTO would have a problem.
QUEST: We've been talking a lot tonight about jobs. Do you think governments fully appreciate the benefit to jobs of free trade? Or are they still too many protectionists for jobs?
LAMY: I think it's pretty obvious in small countries. It's less obvious in big countries, which is why we now have to number world trade, not the way you used it in the past, but in value addition to show how much of an economy benefits from the international trade in job creation. That's the real purpose of what we're trying to do.
QUEST: In your time at the WTO, you've tried the Doha round. You've tried very hard to get the Doha round through. And frankly, you've not been able to succeed. Do you consider that a failure?
LAMY: Well, I'm disappointed that the Doha round as a big bundle deal of 20 topics, did not conclude. But we are now working on a sort of more piecemeal approach with bits of that, which may be concluded even this year. So the Doha round is not dead. (Inaudible) are still alive and they can move forward.
QUEST: This is your last term at the WTO. Who do you want, there are nine candidates. The selection process is underway. Who do you want to succeed you?
LAMY: My own position doesn't matter and shouldn't matter. That's for the members to decide.
The good news is that we have nine candidates and not many international (inaudible) who recruit their leader with an open competition of nine people. I cannot have a preference. I should not have a preference. This is for the (inaudible) what I can say is that I'll do my best to help my successor into this position.
QUEST: Come and join me at the risk-ometer.
QUEST: Global growth in 2012, where is the biggest risk? Is it from the U.S. side, with its budget problems? Or still with the E.U.?
LAMY: I would put it here, which on the E.U. side. But remember, last year, I was there. So the good news that the E.U. has gone from there to there, the U.S., I think, is a bit of a problem. But I would put the U.S. here.
QUEST: Typical WTO, gets two bites of the cherry. Director-General, always lovely to see you and I wish you -- I won't say a good retirement, because I know you'll be back to do something else, and we'll certainly have you with your hat.
LAMY: Thank you.
We're all far too optimistic. That's the view of Min Zhu, the deputy managing director of the IMF. As the IMF downgrades its forecasts for the Eurozone, Min Zhu told me the world needs structural reform and it needs it now.
(BEGIN VIDEO CLIP)
MIN ZHU, DEPUTY MANAGING DIRECTOR, IMF: It's much more challenging to do the structural reform but the quantitative easing that low interest rates is only paved the way for the structures (inaudible). I think we'll have to understand that.
QUEST: Who needs to do most structural reforms?
MIN: Everyone. For U.S. to Europe to China to Brazil.
QUEST: Unemployment at 202 million, according to the ILO, 11.8 percent in the E.U., structural reform will, in the short term, create even greater social unrest.
MIN: Structural reform will create a job. I think --
MIN: Not only for the -- eventually (inaudible), but also in the short term, because the (inaudible) market reform makes the labor market more flexible. Open service sector, less service sector competing with the whole world increasing productivity will create a lot of jobs. But the whole thing is we have to move.
QUEST: You have to move. And what we're not seeing is movement fast enough.
MIN: For structural reform, yes. We agree with you. We're not seeing them move fast enough.
QUEST: Why not?
MIN: It's not easy, as you said, but this year is actually going back to (inaudible) working very interesting moments because 12 months ago, we met here, right? We're concerned about euro collapse (inaudible) U.S. fiscal cliff. We're concerned China (inaudible). Now they're all down. So with a little bit of stabilizing (inaudible). So it's time to do structure reform.
QUEST: Do you think we are storing up huge problems for the future because we have now got Japan with full throttle QE, the U.S. full throttle QE, we had the E.U. ready with OMT. These are ticking time bombs.
MIN: There is a risk, so we need to very carefully monitor the process. Actually, the -- for the short term, it's a necessity. But in the medium and the long term, we have to be very careful looking (inaudible) low interest rates (inaudible).
QUEST: Join me at the risk-ometer.
What is the biggest risk to the global economy in 2013? Does it come from the U.S. with its budgetary problems and its negotiations, or from the E.U. with its ongoing -- or maybe somewhere else? You're more concerned (inaudible). It's up to you. (Inaudible).
MIN: Just so you know, there are always (inaudible) picture.
MIN: A little bit, the risk for the whole world today is over- optimism, because people feel we left the process behind. So and since it become a little easier. But between the U.S. and the Europe, I would say that more risk is around here, yes. Yes.
QUEST: And because you think it's over-optimism, we'll let you have another one down here.
MIN: Yes. I think over-optimism.
QUEST: Yes, (inaudible), too. Thank you very much.
MIN: Thank you very much.
(END VIDEO CLIP)
QUEST: Min Zhu and the risk-ometer. QUEST MEETS DAVOS live from Davos in a moment. It's still snowing. Soon, Jeff (ph), the snowman, will actually grow a little bit bigger (inaudible) growth here.
QUEST: The first stopgap U.S. debt ceiling fix is one of the main talking points here at Davos. Earlier, I had a chat with Howard Lutnick -- more than a chat. We went head-to-head. He's the chairman and CEO of Cantor Fitzgerald. He told me that with all the political bickering, the U.S. is getting closer and closer to the edge.
HOWARD LUTNICK, CHM AND CEO, CANTOR FITZGERALD: I thought that media missed it. They thought the fiscal cliff was December 31st. I think the fiscal cliff is coming.
The Republican Party, who was elected to control the Congress the same time as Obama was elected, are going to cross their arms and they are not going to raise the debt ceiling ultimately unless they get severe spending cuts and the Obama administration is not going to give it to them. And you're going to watch the U.S. do crazy, crazy things this year.
QUEST: If you are right on those crazy, crazy things, then the rest of us are in for a dreadful, dreadful time.
LUTNICK: Dreadful. I mean, it's going to be so strange for the richest country on Earth to cross their arms and say, I'm not paying. Imagine crossing their arms and saying I'm not paying. But you're going to see it this year.
QUEST: Do you think regulation is too much, banking is too complicated and there needs to be a readdressment of this?
LUTNICK: Well, banking has become so big -- and that's the issue. It's become very barbell-like. You know, they're all so gigantic, so they matter. So that's a huge risk to us.
But the -- but the fact is that the regulators tend to do the political thing, like saying transparency or the way -- you know, some of the things that they talk about are just not the things that caused the credit crisis, because the credit crisis was just dumb lending. When you lend money to people who can't pay you back --
LUTNICK: Well, greed is, I guess, fine. I'll go with that. They tried to make money -- by lending money to people who can't pay you back, that's how you go broke.
(END VIDEO CLIP)
QUEST: And Howard Lutnick was the first and leader to want to go onto the U.S. side of the risk-ometer. You can keep up to date with the comings and goings at Davos. It's all on Twitter @RichardQuest. Facebook as well, /CNNQuest. And you can also use the #Quest. If you can't work out where it is, well, you'll never find us. And that's QUEST MEANS BUSINESS. I'm Richard Quest in Davos. Whatever you're up to in the hours ahead, I hope it's profitable. I'll be back with MARKETPLACE EUROPE.
QUEST: From Davos in Switzerland, this is MARKETPLACE EUROPE, I'm Richard Quest. We are now going to take a much more focused look at the business world in Davos as it relates to the marketplace in Europe. A year ago, delegates here, the business elite, they faced that crisis. The future, the very existence of the euro was under threat.
Twelve months on, the weather may be just as chilly and the snow may be falling, but the economic landscape shows signs of warming up. The crisis, of course, isn't over. The threat to the euro is now.
The British prime minister wants to renegotiate the U.K.'s relationship with the E.U., an in-or-out referendum by 2017. I met the mayor of London, Boris Johnson. And before we embarked on a quick stroll through Davos' promenade, I asked Mr. Mayor what he thought about David Cameron and Europe.
(BEGIN VIDEO CLIP)
QUEST: So the prime minister makes his statement his speech. And here there's an element of people talking about it. But they're really saying it's a q of uncertainty.
BORIS JOHNSON, MAYOR OF LONDON: Well, I don't buy that at all. I think if you ask most international business leaders and bankers whether they wanted to abolish elections in order to remove any element of uncertainty from the commercial world, well, of course they'd love to do that.
You've got to consult with people from time to time, the British people haven't been consulted since 1975. The French have, the Danes have, the Dutch have, the Irish have. Now is the moment. And I think --
QUEST: Ah. (Inaudible) now is the moment, not in five years' time, five years potentially of uncertainty has now been built in.
JOHNSON: No. I don't believe that we'll make a bean of difference to any trade or investment flows, because I think what most people can see is that the overwhelming likelihood isn't.
In fact, I think the certainty is that Britain, one way or another, will remain part of the free trade zone. The issue is what exactly this negotiation, when it eventually takes place, (inaudible) and what exactly are the competencies that will be adjusted.
And there, I think, actually -- I think the press would be -- there will be a lot of support around Europe for some of the stuff that the U.K. delegation is saying. I -- coming into Davos last night, met a minister from another European country, which I won't mention by name -- (inaudible) one cannot (inaudible) checking into her hotel.
QUEST: Ah. (Inaudible), bit by bit.
JOHNSON: Not much, no, no, no. This place is absolutely riddled with ministers. And I said, what do you think? And she said it was absolutely fine. People want a debate. And I think the thing that's really cheesed off people in Britain is we haven't had a chance to discuss it properly in a grownup way.
QUEST: So the other issue that's happened, of course, for London is now the European countries have decided it's time; they are going ahead with their transaction tax. Do you see that as a benefit or a hindrance to London, bearing in mind the U.K. will not be part of it.
JOHNSON: No. And I think that -- listen. If other European countries want to do things that, you know, affect their own economies and obviously that's their right. We simply don't think it's wise to do things that will drive business, not just away from London, but away from the E.U. I mean, I don't believe -- you see whatever they try to do, they won't -- they won't (inaudible).
These banks, were they to up sticks and leave, they wouldn't go to Frankfurt or Paris. They would go -- and they're not going to, by the way, but they would go to Switzerland --
JOHNSON: -- where we are now, to Singapore, to other jurisdictions outside the E.U. But I don't think that is -- that is likely to happen.
QUEST: What about the commission and their various proposals to restrict London? The ECB's proposals on euro trading, all the things that (inaudible) come and go.
JOHNSON: And they -- of course. It will -- always has been and always will be a historic aim of the French in particular, and but other countries, certainly, to try to chip away at the financial dominance of the city of London. That's always going to be their objective. And you must forgive them for that. That's what, you know, they (inaudible) use what bureaucratic tools they can to achieve those ends.
They haven't succeeded in the past. I don't believe they will succeed -- and I think the key reason why they won't is that actually, in the end, most sensible people in other European capitals know that it is in their interests, in the interests of the E.U. to have a massive global powerhouse in London, rather --
QUEST: A singleton (ph)?
JOHNSON: -- rather, rather than in Singapore or New York. So that's the -- that's the winning card we've got to play.
QUEST: Finally, (inaudible), you're in Davos.
JOHNSON: I am.
QUEST: What do you make of it all here? I mean --
JOHNSON: (Inaudible) it's all a bit intoxicating. It is -- it is this great sort of cyclotron of egos. Everybody's sort of bumping into each other and having enormous, ghastly, nauseating feelings of mutual self-regard, mutual regard. But I, you know, it's -- it is important. I never come away from here without having met some people who can put a lot of money into London. And that's generally what we achieve.
Nice to see you. Thank you.
(END VIDEO CLIP)
QUEST: That's the mayor of London, Boris Johnson, with always his forthright views on issues. When we return, the chief executive of Europe's largest aerospace group. It is Airbus. Well, you knew that. But it's Fabrice Bregier who's with me after the break.
QUEST: Welcome back to MARKETPLACE EUROPE. We're at the World Economic Forum in Davos. An event that for the past three years has been dominated by the Eurozone sovereign debt crisis. For business leaders, it's the first big event to go into the dowry each year, an opportunity to share views, concerns in the business climate.
Earlier, I caught up with the chief executive of Airbus, Fabrice Bregier. He took over the helm of Europe's largest aerospace group. He's took over last June.
(BEGIN VIDEO CLIP)
QUEST: We need to start with the Dreamliner. Obviously, it is a competitor's new aircraft and I know absolutely that you take no schadenfreude or pleasure in any way at what is happening there. I completely understand that.
But the issues that are raised by the Dreamliner's problems are the sort of issues you saw in 380 initially and with wing cracks subsequent and that you are at risk of seeing with 350 because it's a major infrastructure project.
FABRICE BREGIER, CEO, AIRBUS: Well, you are right. They are very similar because we are dealing with extraordinary developments. We are talking about $10 billion to $15 billion upfront investment in R&D to develop a 380 or a 787 and one lesson drawn from the 380 is that we need full transparency from our teams, so the first thing.
And then we need also to control some functions. You know, sometimes we went too far away on outsourcing work. We need to make sure that we control the architecture of the aircraft so as to have the safest and the best aircraft.
QUEST: With Airbus, now you are at the helm. Your growth is so tied to global growth. We have uncertainty in the West. Planes are still being ordered to refurbish and renew fleets. You have new fleets in the East. How are you adapting the company accordingly?
BREGIER: We are in a growing market and if I could deliver aircraft faster, I would have more customers. Why? Because our growth now comes largely from the Asia Pacific, from China, from India, from Latin America, from Middle East. You are right. There is a recession in Europe and Europe now is only 14 percent of my backlog. It was 50 percent 15 years ago.
So this is why we grow and we grow at a speed which is about twice the speed of the GDP. So we need worldwide growth but we are not limited to one area in the world.
QUEST: Finally, the distractions of the ownership, the whole EADS, BAE --
BREGIER: It's behind us.
QUEST: You say it's behind you. You say it's behind you. The German government, the French government, I know that that's one level above. It's at the corporate level. It's at the group level. But have you managed to keep that away from the minutiae of building planes?
BREGIER: Totally, totally. I think we've (inaudible) for the last five years. We integrated total (inaudible) management. There is no longer French management, German management --
QUEST: Oh, oh, when will the replacements -- they still have this question --
QUEST: -- Frenchman or a German.
BREGIER: I replace the German.
QUEST: Yes, but which German got a job because you replaced a German?
BREGIER: Well, but you know, (inaudible) was the best for EDS and we felt humility I was the best for Airbus. No, being serious. We have integrated so much. But we are faster that our national governments, which were used to national entities, this was the point. And now with EDS, in two months we'll get (inaudible).
QUEST: Final question: when will you fly the 350?
BREGIER: Mid-this year.
QUEST: So if it's late this year, you're buying me lunch?
BREGIER: Two lunch.
(END VIDEO CLIP)
QUEST: And I intend to take him up on that offer.
And that's MARKETPLACE EUROPE for this week. The program is in Denmark next week. I'm Richard Quest at the World Economic Forum in Davos, Switzerland. Whatever market you're in, I hope it's profitable. We'll see you next week.