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QUEST MEANS BUSINESS
S&P 500 Hits All-Time High; Global Economic Rebound; Italy in Limbo; High Rollers at New York Auto Show; Dollar Down; Make, Create, Innovate: Spiritual Home of the Post-It Note; No Sign of Spring in Europe
Aired March 28, 2013 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: The US markets are forging ahead. The S&P 500 hits an all-time high, but will it hold it until the close?
After 12 long days, Cypriot banks finally back in business.
And you know the old saying: if you want to get ahead, get a hat. The great bowler is back in fashion and a fedora is also fashionable, too.
I'm Richard Quest. I mean business.
First, the Dow claimed record territory, now it's the turn of the S&P 500, which is on course to close at a new all-time high, if the market holds its nerve for the next hour.
QUEST: The old record was 1565, which was set in October 2007. We're now up a quarter of a percent, and we're up 1566, so we're in that territory. Alison Kosik, live from the New York Stock Exchange. Before we consider will it hold to the close, let it consider why has it taken so long when the Dow Jones did it a couple of weeks ago?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, well, the Dow's been doing it. In fact, it hit another record high this week. You know, you look at the levels -- actually, think about how stocks here are traded every day. There are more incremental moves with the S&P 500 than when you see with the Dow. The Dow you see these big swings almost on a daily basis lately.
But then, you look at the level of the Dow, the Dow trading at over 14,000. The S&P is much, much lower trading at 1567, so what you're seeing is fewer stocks in the Dow making a bigger impact as opposed to the 500 stocks in the S&P making these incremental changes.
And that's part of the reason why you may be wondering why it took the S&P 500 to hit its record and obviously now breaking through it, Richard.
QUEST: But the markets overall are still showing, as you see on that screen, 11, 8, 10 percent gains for the year. We're looking at the best January for years, or the best first quarter, I should say, for years.
QUEST: And what I think it comes back to is whether the people in the market believe it's justified.
KOSIK: And the view on that is really mixed. Everybody knows that what's really fueling this rally is sheer momentum from the Fed, the good old Fed, continuing to pump billions of dollars every single month into this market, pushing down interest rates, making stocks the best game in town, Richard.
You're not going to see investors run to bonds at this point when they see stocks doing their thing here. So, that's really what's creating that wealth effect here at the New York Stock Exchange. For one is the Fed has a huge impact on what's going on.
It's less about fundamentals. Sure, the housing market here in the US is getting better, consumer spending is getting better. But the jobs market is still eh. We're still sort of muddling along. But if you compare the US economy to what's going on in Europe, things are kind of going south again in Europe, where the US economy, it is getting better ever so slightly, Richard.
QUEST: Now, I think that's a highly technical phrase that you use, Ms. Kosik, a piece of good financial --
KOSIK: Which one was that?
QUEST: The bit -- the job situation is a bit "eh." I think that's sort of a well --
KOSIK: It is a bit eh.
QUEST: It's a well-known financial --
KOSIK: Twelve million people are out of work.
QUEST: Absolutely. And that puts it better than anywhere else. Alison Kosik, who's in New York for us this evening.
Markets are on fire with a fragile Europe. And yet, the OECD's chief economist, Pier Carlo Padoan, is warning through the OECD that stock values are outpacing the recovery in real activity. Basically, the point is that fundamentals can not be judged on the basis of what's happening in the market.
Now, if you join me over at the CNN -- if you join me, first of all, we'll hear from the OECD chief. The OECD says Europe is in a better shape than it was six months ago. Listen to what he had to say.
PIER CARLO PADOAN, CHIEF ECONOMIST, OECD: We are definitely seeing an excessive risk-taking in some markets, including equities, including corporate. But this is something that is the consequence of increased resilience globally, the lowering risks, and of course a lot of liquidity around.
Having said that, we think that there's no condition to ease -- to stop having easing monetary policy, so of course we are concerned about those risk-taking operations. But this is to be watched rather than changed.
QUEST: The story of this report and these latest numbers really is once again from the European point of view, Europe is the problem.
PADOAN: I agree, but also let's not underestimate the good news coming from the US and especially from Japan. Europe is a problem halfway because Germany is growing at a sustainable pace. Of course, Italy and France in our forecast are not doing very well.
QUEST: That's a mild understatement, I venture to suggest. You've got Germany growing at over 2 percent, and yet you've got Italy that'll probably contract by a similar, potentially, sort of amount. That's not a monetary union, that is a bifurcated continent.
PADOAN: It is a monetary union that's adjusting. If you go beyond that, you see that the periphery is increasing its competitiveness. They are stabilizing. And of course, yes, growth is negative in large parts of the euro area, but we are hopeful that this will not be the case next year.
QUEST: The European situation does not look good.
PADOAN: It doesn't look good, but it looks much better than it was six months ago, before the ECB stepped in with this new OMT, the new intervention mechanism, which has greatly reduced the systemic risk, or the tail risk, as the economists call it.
So, now we are in a much better shape. It doesn't look good, I agree, but it's much better than it was.
QUEST: And if we look at the United States, we got better than first thought numbers for the United States. The country is growing, unemployment is coming down. Are you worried that the sequester is going to take a toll?
PADOAN: No, we think that its impact is largely already in the numbers. Of course, there is still the debt ceiling issue, which adds to the uncertainty rather than lowering the numbers, and further looking down the road, the US need a medium-term consolidation plan, because that as it is is not sustainable.
QUEST: That's really the core point, isn't it? The US is once again not quite yet growing sufficiently, but at least it is the engine of growth.
PADOAN: It is one of the big engines of growth, and it will be more, especially if we take into account that the adjustment process in the private sector, notably households, but also companies, is about to be completed, which is very good news. If you look at the housing market, for instance, that seems to be the case.
QUEST: That's the chief economist of the OECD, whose latest global forecast says basically the US is growing fast but the problem, of course, is in Europe. And that -- those problems in Europe, well perhaps besides Cyprus, can be summed up in one word: Italy.
The country is in political limbo after the center-left leader, Pier Luigi Bersani, has now announced he's failed to form a government. He told the country's president, Giorgio Napolitano, that he's given up on attempt to secure a coalition after six days of negotiations.
Barbie Nadeau joins me on the line from Rome. So, Bersani says he can't form a government. Where does the mandate go next? We always knew - - didn't we? -- that if they couldn't do it that Italy might be back at the polls. But does it now seem it'll be sooner rather than later?
BARBIE NADEAU, CNN INTERNATIONAL CORRESPONDENT (via telephone): No, I think it definitely will be sooner rather than later. But I suspect we're going to see tomorrow another round of last-ditch negotiations. Napolitano has said that he's going to meet with all the major parties.
Bersani, it should be noted, said that he would not accept what he terms "unacceptable constraints" with joining any of the other coalitions. That means he met with Silvio Berlusconi, obviously, and Berlusconi put on some restrictions on an alliance between those two parties.
He met with Beppe Grillo, the leader of the Five Star Movement, the sort of grass roots, very rebellious movement against -- anti- establishment, anti-austerity, anti-Europe. And again, Beppe Grillo gave him a set of guidelines that he just wasn't willing to accept.
QUEST: All right.
NADEAU: So, Bersani tomorrow will go back to Napolitano, they'll talk again, and I expect we'll see a technocratic government in place until elections, probably in the fall.
QUEST: Is it at all likely that that technocratic government would continue to be headed by Mario Monti simply on the basis that he's the man in the job and therefore you carry on with it?
NADEAU: It's a possibility, but of course, Mario Monti traded in his technocratic cap for one of a politician by entering into the elections in February, and that could change a little bit.
He says in an interview on Italian television yesterday he can't wait to get out -- get on to something else, he can't wait to stop being the prime minister of Italy. So, he's obviously frustrated as well by this stalemate and this gridlock.
It's probably more probable, let's say, that it would be someone else other than Mario Monti because of course he ran and lost in the election.
QUEST: Briefly, Barbie, is it -- it seems to be a case, and talking to anybody else in Europe, they say, well, Europe continues, the economy in Italy continues, despite what the government is or isn't doing. Is there the feeling in Italy of crisis tonight?
NADEAU: There is a feeling of crisis, there's a feeling of desperation, I think, among the Italians, who had hopes that they would have a government by now. Now, they're looking at another round of elections.
And I think there's just a lot of despair and -- a very down period, now, for Italy, who were -- they were hoping to be on their feet by now. But again, they're just facing more uncertainty.
QUEST: Barbie, we'll talk more about this in the days ahead.
In a moment after this short break on QUEST MEANS BUSINESS, I invite you to fasten your seat belt, feel the wind in the hair. Felicia Taylor is off to the New York Auto Show, and she's the sort of lady that likes -- ooh, look at that smile. A bit of a fast woman one way or another.
QUEST: Now, forget the smell of soft leather and Walnut Burl Veneer, more likely you're going to need smelling salts when you get a whiff of the price of this Rolls-Royce motorcar. Now, this car knows when bends are coming up, using GPS, and chains gear all by itself.
Its cost is north of $300,000, and it's exactly the sort of vehicle -- no, motor vehicle -- for Felicia Taylor, who's at the New York Auto Show and joins me now. I can see you, Felicia, sort of -- oh, go on, languish yourself over the hood of such a vehicle.
FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Come on, you have to admit, when it comes to ultimate luxury, this is what you think of. Obviously, this an penultimate luxurious car.
It is head -- the hood ornament, which you'll find on every single one of them, is called the Spirit of Ecstasy. Some people call her the Silver Lady, the Flying Lady. Evidently, she was modeled after the secretary of one of the most famous customers of Rolls-Royce, Lord Montague.
Nevertheless, that's not one of the finest features of this car. This is called the Wraith, and I'm going to tell you that actually the sticker price is $295,000, so you can get it for less than $300,000, but you can custom-make the roof. By the way, Richard, what sign are you?
QUEST: Pisces. It's just been my birthday.
TAYLOR: There you go, happy birthday, belatedly. So, you can custom- make this to any night constellation you want, which is really rather fascinating, if you ask me, as a feature. And for those rainy days in London --
QUEST: She didn't -- she didn't --
TAYLOR: -- which you no doubt -- you don't -- you don't -- you need one of these every single day in London, practically, as --
QUEST: She didn't take the hint. I mentioned my birthday, and she didn't take the hint that I'd actually quite like one of those vehicles. Listen, I have to tell you, Felicia --
QUEST: -- you are a newcomer to the Rolls-Royce phenomenon --
TAYLOR: Oh! Really?
QUEST: Yes, during the royal wedding two years ago, I actually tootled around large parts of royal London in a Rolls-Royce and thoroughly enjoying myself on the streets. And here's the other question. Do you know how to get into a Rolls-Royce?
TAYLOR: Didn't I just do that?
QUEST: No. What you do is -- if you were getting into a limousine version, you would step inside as if you were stepping into a sitting room.
TAYLOR: All right. We'll do it again.
QUEST: I don't think we want to see this. It'll be an --
TAYLOR: No. Be graceful I can't --
TAYLOR: To be graceful, you have to do it this way, Richard, give me a break. All right, but --
QUEST: I --
TAYLOR: We did look at some of the other cars.
QUEST: But you see -- that's the difference between you and me, you see. You drive yourself. I would prefer to have the chauffeur.
TAYLOR: Oh, well, that's true. I'd much rather be driven than have to drive the car myself, but the Wraith is really not meant to be a chauffeur-driven car. That's the whole point of this. This is for the ideal customer for Rolls-Royce. It's not meant to be chauffeur-driven.
QUEST: Felicia Taylor, who is in New York and drooling all over the beautiful leather and hoping to take the car home. The answer is no.
Now, tonight's Currency Conundrum for you. The 1943 US copper penny is a sought-after coin by collectors. So, if you want to know if your 1943 copper penny is genuine, is it -- could you tell because it's magnetic, it's not magnetic, or it floats? We'll have the answer for you later in the program.
The rates in the market: the dollar's down against the euro, the pound, and the yen, overall by around a quarter of a percent. Those are the rates --
QUEST: -- this is the break.
QUEST: It is time to sing the praises to the humble yet very versatile post-it note. The post-it note is found in stationary cupboards and desk drawers everywhere. You can do all sorts of things with it. It's indispensable when you need to remind yourself where you work, for example.
In fact, the post-it note has been used in many different ways. It's been the savior of the phone message reminding you who has called and what the message might have been. Then, of course, they have appeared as street art in windows, brightening up buildings. They have even been included in protest, as you can see here.
So, for this week's Make, Create, Innovate, Nick Glass gets attached to this handy helper, this hymn of creativity.
(CHOIR SINGING HYMN)
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: There's simply no accounting for inspiration, divine or otherwise. This story begins in this church, this Presbyterian church in the American city of St. Paul's, Minnesota, and it led to an invention that we never really realized how badly we needed.
ART FRY, CO-INVENTOR, POST-IT NOTE: The post-it note is a self- attaching note that will adhere to all sorts of surfaces, including paper, so that when it is removed, it won't damage the surface that you've applied it to.
GLASS (voice-over): The invention two employees of a giant multinational Minnesotan company 3M, post-it notes have become ubiquitous in stationary cupboards worldwide.
SPENCE SILVER, CO-INVENTOR, POST-IT NOTE: Post-it note is a unique invention that uses an adhesive I invented called microspheres to adhere to paper but also give it its removability characteristic.
GLASS: Under the microscope, they look like bubbles of stickiness. They have just the right amount of tack, not too little, not too much.
Things got going when adhesive expert Spencer Silver was approached by his colleague, Art Fry, to help him out with a problem at his choir practice.
FRY: The basic problem was that Wednesday night would be choir practice. We would sing from different sheets of music, and I would put little pieces of paper in there that would sometimes fall out before Sunday morning, and I thought, what I need is a bookmark that will stick to the paper without falling off, but not damage the sheets.
We thought, yes, what we have here isn't just a bookmark. It's a whole new way to communicate.
CHOIR (singing): Hallelujah!
GLASS: 3M says it manufactures a staggering 50 billion post-it notes every year.
SILVER: Post-it notes took off so rapidly that I think it left a lot of people in marketing and sales gasping a little bit.
FRY: Post-it notes was like a virus. It was always a self- advertising product, because a customer would get a pad, had 100 sheets on it, but 20 might go on to things that he sent to other people. They would look at it, peel it off, play with it, and then go out and buy a pad for themselves.
GLASS: And what did the co-inventors make out of it?
SILVER: I got to work for 30 years and no one said, "What are you doing now, Spence?" I think I got a lot of freedom as a result.
FRY: People think because I invented post-it notes, I must be rich. I don't get any royalty. But we're -- we were well taken care of in that we have a comfortable retirement.
GLASS: To this day, 3M won't reveal how exactly the notepads are coated with adhesive.
FRY: We never patented post-it notes, because his patent on the microspheres gave us protection, and because we didn't patent it, we didn't have to tell people how we made it, because this is a product that looks so simple but is very high-tech. And so, it's trade secret.
GLASS: 3M don't just make post-its. They have a huge product range of more than 50,000 different items, including reflective materials used in road signs and Scotch tape. Their R&D department generated over 3,000 patents last year.
GLASS (on camera): Some ideas stick, others don't. The post-it note emphatically did.
QUEST: The post-it note for Make, Create, Innovate. Now, to the weather forecast. Jenny Harrison is at the World Weather Center for us this evening, where I know, Jenny, that things are extremely unpleasant.
JENNY HARRISON, CNN METEOROLOGIST: Very unpleasant, Richard, very cold, staying cold, and of course I'm really talking about central and northern Europe. Still the days are going by and no sign yet of that much- awaited spring.
Thursday yet another day with all of these cities well below the average, London, Paris, Warsaw, Berlin, still feeling more like January than the March that, in fact, it is. Nearly in April, of course.
Temperatures still well below the average, but look at the number of days, now, that we have seen these temperatures below average. Copenhagen and London topping the table at 21 consecutive days with the temperature well below.
It's going to stay like this, I have to warn you, for about the next ten days. And certainly for the UK, March now looks to be about the coldest since 1962, coldest particularly across the northern section of the UK. The average temperature only reaching 2.5. It should've been a whopping 5.5 throughout the month of March.
And also a little bit short on sunshine, just 58 percent of the usual amount. Bit of a breather there in terms of the snow and the rain. Instead, we've seen a lot of that across Germany, the low countries in the last 12 hours.
Lovely photos coming in from Budapest from our iReporter Peter who, incidentally, works for the tourism industry. He books river cruises on the Danube. I'm not sure how many people are booking them this time of year, but it looks beautiful. The trams, of course, are still running despite the snow.
There is more on the way. It's going to work its way across into more central and eastern portions of Europe, rain across the south, where it is a little bit milder. But very widespread, this snow, over the next few days, as you can see. It does mean a few delays, particularly at Munich and Berlin, with that snow in the forecast. Temperatures still on the low side.
Somewhere we've got some very nice weather is Bishkek across in Kyrgyzstan. The reason I tell you about this is very quickly, hopefully, we can just show you the pictures. A wonderful fashion show showing off the spring fashions. They actually get quite an amazing climate in Kyrgyzstan, in the low temperatures in January about 3 degrees Celsius at best, 31 is the high in July.
So, spring fashion very important. We need to take a break now here on QUEST MEANS BUSINESS. Mr. Quest will be back with you with his own fashion style in just a moment.
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in a moment. This is CNN. On this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Nelson Mandela is said to be responding well to treatment for a recurring lung infection that forced another emergency visit to the hospital. The 94-year old hasn't been seen in public since 2010. It's the second time he's been in hospital this month.
Italy's president, Giorgio Napolitano, will hold talks with political parties on Friday to try to form a government. Tonight, the center left leader, Pier Luigi Bersani, said he had failed to assemble a coalition.
Oscar Pistorius is now free to travel abroad to compete while he awaits trial. A judge has eased the bail restrictions on the South African track star. He was accused of murdering his girlfriend, Reeva Steenkamp. Pistorius can also drink alcohol and return to his home where Steenkamp died.
Syria's government is blaming rebels for an attack at Damascus University that killed at least 10 people. The state-run news agency Sanaa says a mortar shell hit a cafeteria at the university's College of Architecture. The facility is in central Damascus; it's surrounded by government buildings.
(END VIDEO CLIP)
QUEST: Banks in Cyprus opened their doors after the 12-day shutout. The queues, as expected, were long; perhaps not as long as some had expected. But those waiting were mostly civil. Cash withdrawals limited to around $380 a day were made under heightened security. The doors of the Cyprus stock exchange remained closed. Trading won't resume there until next week.
Now Cyprus's foreign minister says the limits on movement of money could last for a month. The restrictions are actually totally at odds with the very concept of the E.U., the single market and the treaties.
Now the treaty on the functioning of the European Union states that the internal market shall comprise an area without internal frontiers under Article 26, under which there shall be the free movement of goods, persons, services and capital.
So that's been about from the north, right on into the southeast to the west. In the case of Cyprus, the European Commission has made an exception. It says the restrictions on euro trade are justified because of the stability in financial markets and the banking system, in their words. And there's an overriding public interest down in Cyprus.
Now there is a nasty side effect. What more and more people are suggesting is that the euro -- that's the 50-euro note -- the euro in Cyprus today might not be as valuable as the euro elsewhere. Let me explain how that theory works.
First of all, because those large deposits in Cyprus have had part of it taken away in a tax and a levy, they are going to be penalized. So effectively, euros there are not worth as much say for example as those that may have been put in Greece, in other countries that are in bailout conditions.
And then you have the second one. You can't move the money around. Therefore, not only have people lost their money in some cases in Cyprus, the restrictions on being able to have that free movement of money that the rest of the union enjoys perhaps gives questions as to whether or not the whole thing works.
If you take this overall, not surprisingly, Europe's main stock indices closed in the black on Thursday, making up for some of Wednesday's losses. Look at the numbers. The Athens ATHEX 30 was the best performer, rebounding from two sessions of sharp falls. We won't see more trading on these indices until next week due to public holidays.
Ivan Watson is with me now from Nicosia.
It was always going to be difficult, Ivan. But the consensus, from what I see, is things went better than expected.
IVAN WATSON, CNN CONTRIBUTOR: That's right. There was extra security. We heard about Hollywood style operation bringing in a planeload of cash from the European Central Bank yesterday in preparation for this day. But at the end, when the bank doors finally opened after more than 12 days of being shut, we didn't see panic; we didn't see a run on the banks.
We saw -- I mean, in the case of the one branch I was at, an orderly line of about nine or 10 Greek Cypriot pensioners, waiting one by one for a guard to politely let them in. It was the journalists who were a little bit more impolite than the depositors, who hadn't had access to their money.
They did have these strict restrictions; they can only pull out 300 euros per day per person. You can only carry out 1,000 euros cash off the island now. But in the end there was no massive bank run today. The Swedish foreign minister, who coincidentally happened to be touring Cyprus today, when I spoke to him, he said, so far, so good.
(BEGIN VIDEO CLIP)
CARL BILDT, SWEDISH FOREIGN MINISTER: Well, two weeks I've been to Iceland, which had a financial collapse that was worse than this one. I've been to Ireland, which had another collapse that was fairly solid. I see both of these economies having now done things in order to get their economies right and then are starting to do well.
So it could be the possibility to get things right in Cyprus as well. So I'm not particularly pessimistic about the long-term future of Cyprus. It's going to be difficult days now for some time, but not necessarily long-term.
(END VIDEO CLIP)
WATSON: But, Richard, I do have to say that Carl Bildt, that European diplomat, he had very little sympathy for the bankers in Cyprus, who had enjoyed some high-flying times of international finance or for the foreign investors, who have billions of euros, theoretically, tied up in Cypriot banks, and they really can't get access to them, Richard.
QUEST: Ivan Watson in Nicosia for us tonight.
Joining us now is Tobias Blattner, former ECB economist, now European economist at Dower (ph) International.
So things went better than expected. But you can ignore the fact, as I was just putting out there, this argument, that says a euro in Greece -- oh, sorry; in Cyprus -- is not worth as much as -- and the different rules (inaudible). (Inaudible) can't help (inaudible) monetary union.
TOBIAS BLATTNER, FORMER ECB ECONOMIST: (Inaudible). I think, in particular, the fact that you right now undermine the freedom of capital movements in the euro area. This is a big, big, big problem. But of course it's a very exceptional circumstances that we're facing right now. And they need to do it.
If you want to go ahead and push with a plan that Europe and policymakers are trying to do right now, you have to do it, because otherwise you would face massive bank runs and, of course, the liquidity would massively flow out.
QUEST: But you see, they must have known that when they introduced Article 26. And I agree, there is the exception for national security and there are some other exceptions like this. But it makes such nonsense of the whole system when you change the rules and you jigger it, pokery around.
BLATTNER: Oh, definitely. I think beyond any doubt. But the problem is that if you really want to preserve the cohesion of the single currency union right now, then this is the only way you can do it.
QUEST: You don't believe any more than anybody else that this is the end of this, do you?
BLATTNER: Well, I mean, I guess it's probably more -- it's fair to say this is the most challenging period that the euro has --
QUEST: There's another crisis going to happen.
BLATTNER: It's probably not the end yet, let's say like this, surely, because we see, you know, the experience of Greece tells us exactly what will happen in Cyprus. We will know that Cyprus will go through a very, very difficult (inaudible) --
QUEST: (Inaudible) back.
BLATTNER: And Cyprus will be back. It will -- it (inaudible) disappeared so far. So of course, the challenges remain. And maybe, you know, people already watching to Slovenia, they are already looking out for the next candidate to ask for a bailout.
So of course, this is the period that will decide of the future of the euro.
QUEST: Slovenia: you heard it here first. Many thanks indeed for joining us this evening.
QUEST: Now they keep your head warm and they help you stand out in a crowd. Making a fashion statement with a hat at the birthplace of the bowler, after the break.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The answer to tonight's "Currency Conundrum," how can you test whether the rare 1943 U.S. copper penny might be the genuine article? The answer is it's not magnetic. Most pennies at the time were made of zinc-coated steel to save copper and nickel for the war effort. So if it doesn't stick to a magnet, it might be genuine.
(END VIDEO CLIP)
QUEST: Now anybody who's a gentleman these days will have a penchant for one of these. This is one of my particular favorites. It's sort of a cross between a Trilby and a fedora. According to the shop which sold the first ever bowler hat here in London, men's hats are again on the rise. And there's a right way and a wrong way to wear one.
It's also, incidentally, officially U.K. Wear a Hat Day, which bearing all that in mind, perhaps not. Time for a master class.
(BEGIN VIDEO CLIP)
QUEST (voice-over): There are bowlers and berets, trilbies and caps, hats of all shapes and sizes are back. Just near to St. James' Palace in the heart of London, Lock & Co. is the perfect place to find out why and maybe spruce up this old thing.
Hats, hats, everywhere hats.
SUE SIMPSON, MANAGING DIRECTOR, LOCK & CO. HATTERS: It completes an outfit. It makes a gentleman look well dressed as long as he's wearing the right hat, of course, and it's fitted correctly.
SIMPSON: That's a beautiful hat. Now that's very wide. That makes a real statement. You have to have a lot of confidence to wear that hat.
This is an Italian Borsalino (ph).
QUEST: You do berets.
SIMPSON: This is a nice hat. See if you like it.
QUEST: Oh, no, no, no. I don't --
QUEST: I don't think a beret. No berets today.
SIMPSON: Always put a hat on from the front first.
QUEST: Always from the front first?
SIMPSON: Yes, because then it gets fit in the right position.
QUEST: Forgive me: the coke or the bowler, it's a bit passe now, isn't it?
SIMPSON: No, absolutely not.
QUEST: Oh, come on, it is.
SIMPSON: It is not.
SIMPSON: Let me just put this on your head correctly.
SIMPSON: (Inaudible) that big, yes.
QUEST: It's distressing you, the way I'm wearing my hat. Why?
SIMPSON: Because it's too far back on your head.
QUEST: But the people wear (inaudible).
SIMPSON: No, a gentleman should always wear his hat an inch above his eyebrows.
SIMPSON: Yes, just like that. Just a little bit on the side, give it a bit more style. There we are.
QUEST: What do you think about my hat?
SIMPSON: Well, it needs a little bit of work on it.
QUEST: Don't think of it. I've had this hat for eight years. It's been all around the world. Maybe it could do with some sprucing up.
SIMPSON: You should always steam and brush to remove any marks from a hat.
QUEST: Do you love hats?
SIMPSON: I do.
QUEST: Why? Why do you love them?
SIMPSON: Why do I love them? Because they're just great to work with. And we have some fabulous customers.
QUEST: Oh, look at that.
SIMPSON: As you can see, it's beginning to look --
SIMPSON: -- a little bit less disreputable.
QUEST: So on from the front, an inch from the eyebrows. Now I mean business.
(END VIDEO CLIP)
QUEST: Ah! Here's your hat. Where's your hurry? And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I do hope it's profitable. MARKETPLACE EUROPE continues.
QUEST: From Lapland in northern Finland, this is MARKETPLACE EUROPE. I'm Richard Quest. (Inaudible). This icy landscape has been the setting for a meeting of several European leaders. They are here to discuss the frozen European economy. On this program, we will ask the leaders what it will take to stop the dogs of recession from barking.
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QUEST (voice-over): In a moment, Finland's prime minister tells me it's time for Europe to follow the rules.
JYRKI KATAINEN, FINLAND, PRIME MINISTER: One of the reasons why we are in crisis at the moment is that everybody (inaudible). And now we pay a price.
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QUEST: The meeting's billed as an informal retreat. There are no communiques or statements, just a quiet get-together to talk over the big problems facing Europe. Of course, it couldn't have come at a better time as mostly those are now preoccupied with solving the problems of Cyprus and making sure once again the Eurozone doesn't sink into disaster.
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QUEST (voice-over): A picture postcard setting in sub-zero temperatures. Reindeer, national dress and cozy, casual clothing (inaudible) purpose. Unlike the Eurozone itself, this latest chilly blast have taken the edge of voracious and pending membership of the E.U.
ZORAN MILANOVIC, PM, CROATIA: So we'll (inaudible) but not as excited as we (inaudible).
QUEST (voice-over): With Cyprus weighing as heavily as the snow on the cabin roof, the leaders began to talk. The retreat considered the big issues of what needed to be done to make the union work better.
HELLE THORNING-SCHMIDT, PM, DENMARK: We must never let this happen again, and that requires new rules and that every country follow the rules that we have. Tough choices that needs to be taken in order to create new growth.
All member states have to do that. Those are the rules. They have to followed. And I'm convinced that once we start doing that, all of us, follow the rules, take the tough choices, confidence will come back because what people want is deliverance.
QUEST (voice-over): For those doing business the Eurozone crisis is damaging for a single market that's struggling to develop and corrosive for business confidence.
LUCINDA CREIGHTON, MINISTER FOR EUROPEAN AFFAIRS, IRELAND: I think, you know, solving the debt crisis, solving the banking crisis is key to enabling business to grow. Europe cannot look in in this crisis. We have to look out.
That means we have to get over a lot of our difficulties and a lot of our protectionism and a lot of our, you know, our traditional instincts to take advantage of the new opportunities that exist in a new world order. And that, I think, is going to be politically difficult. But I think that the will is there to do it.
QUEST (voice-over): Political will, tough choices, follow the rules. The ministers here speak with one voice, taking a new hard line.
ALEXANDER STUBB, EUROPEAN AFFAIRS AND FOREIGN TRADE, FINLAND: We need structural changes at home. Countries like Finland, AAA-rated, we do austerity policies and growth policies at the same time. But this is come to each and every member state to do. We can choose to compete or protect ourselves out of this crisis. I'd much rather compete than protect.
Two, we need a free, single market. We need a digital single market. We need people, money and goods and services to move around this area freely. That's the only way which we get growth.
And then, three, we need free trade worldwide. And one of the key elements here is a free trade agreement between the United States and Europe. I think if we get these three potions, I'm not saying they're magic, but at least they'll get us quite far.
QUEST: The organizers of the Lapland retreat deem to keep on top of business. And the reindeer, well, that said it. No matter how much you try to cover up the unpleasant mess, it still smolders beneath the surface.
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QUEST: This is almost a metaphor for the Eurozone. Hard work getting uphill and you wonder why you bother when you got there. You can do it. Come on. Come on. That's it. That's it. Coming up after the break, the Finnish prime minister tells me why the Eurozone can do it, even though it's mired in crisis.
QUEST: Welcome back to MARKETPLACE EUROPE. Deep inside the Arctic Circle, where Finland is hosting the Lapland Retreat. The topic here, the future of Europe, a good one, you might say, bearing in mind the crisis in Cyprus as business confidence ebbs away. I asked Finland's prime minister how damaging it was to have this drip, drip, drip effect of constant crisis.
QUEST: How concerned are you that there is this uncertainty, this lack of confidence, which is having a very negative effect on business in the union?
KATAINEN: Well, we have witnessed uncertainty but luckily certainty has improved. When looking at government bond yields, for instance, a year ago Portuguese 10-year government bond deal was more like 12 percent. Now it's close to 6 percent.
When looking at Irish government bond deal, a few months ago or a year ago it was too high to be sustainable. Now it's 3.7 percent. So confidence has been returning back. I'm a former finance minister and I have learned not to say that we have seen the worst. But --
QUEST: But you're talking about -- with respect, Prime Minister, you're talking about countries where the -- where those yield premia were because there was a risk of them falling out the union or the Eurozone or whatever.
I'm talking about core consumer confidence, the zeu (ph) numbers in Germany; the efo (ph) numbers, the other numbers, the consumer sales numbers. Business is not confident that European growth is returning yet.
KATAINEN: Actually, in all the (inaudible) confidence, it means that the government must do dramatic decisions (ph) in order to lower the deficit, in order to show that they are capable to bring the public debt down.
And once people start believing that this will function, it will strengthen the confidence. And at the same time, we must be ready to do measures which strengthen competitiveness. And this is exactly what many countries have already been doing.
QUEST: Yes, that's a bit like motherhood and apple pie, as the Americans would say. Everyone will agree. Everyone will sit 'round the table and nod sagely, we must improve European competitiveness. But nobody actually does it.
KATAINEN: Well, actually, quite many countries have done all up. For instance, in Spain, the competitiveness has been improving a lot. They have done (inaudible) reforms. They have done the similar things in Ireland.
But it always takes some time to function. But nevertheless many countries have done a lot. For instance in Finland, the lower corporate tax rate in order to make our country more competitive and I am sure it will function.
QUEST: The union at the moment, the Eurozone, the union, stagnant growth. The call is for growth, not more austerity. The call is for something to move things forward. Europeans are sick and tired of this mess.
KATAINEN: Well, I don't understand the discussion that we should choose either austerity or growth, because if there is not austerity, who will lend money to the countries who are in trouble? Nobody.
So in order to restore confidence, we have to do austerity. But at the same time, we have to do things which improve the growth. For instance, deepening single market, for instance, a digital single market or opening up a free trade negotiation with the United States. Those are the questions what the E.U. can do in order to improve growth opportunities.
QUEST: You talked earlier about the necessity of implementation. Let's just look at this. Lisbon treaty rejected. Maastricht treaty rejected. Euro Compact rejected by one to two countries. Constitution rejected. Every time a treaty is put forward or change is put forward, it merely proves the point that the European Union as constituted doesn't work efficiently.
KATAINEN: Yes, of course, we can always improve the efficiency and implementation of the rule base. But when looking at what we have done during this crisis, first of all, we have created riskier mechanism.
The second, we have reformed the rule base of currency unit. IT's -- the rules are much stricter and better and more sustainable than before. We are about to create the banking union. So lots of things have been -- have been doing and will be done within the next few months. So the Europe will be much better, safer and sustainable than it used to be.
One of the reasons why we are in crisis at the moment is that everybody (inaudible) follows stick to the rule base and now we pay a price. So this has been very hard lesson for many of us. And I hope that all the European countries will follow the better and stricter rule base in the future because otherwise we can never get out of the crisis.
QUEST: So you are a hardliner?
KATAINEN: I think it's I'm a fairliner.
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QUEST: The prime minister of Finland.
And that's MARKETPLACE EUROPE for this week. I'm Richard Quest in Lapland. Did you know in the summer the reindeer's antlers can grow up to 2 centimeters a day? Whatever market you're in, I hope it's profitable. I'll see you next week.