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QUEST MEANS BUSINESS
After the Debt Deal; Mixed Markets in US; Earnings Season; European Markets; Aviation Roundup; Norwegian Air Expansion; Air and Space Museum Reopens; Make, Create, Innovate: Nanoparticles Deliver Cancer Drugs; London Tech City; US Government Back to Business
Aired October 17, 2013 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Think of this as a tale of two markets: the Dow may have hit a flat note, but today, the S&P has hit a record high at the closing bell. It is Thursday, October the 17th.
The message is clear: fed up with Washington. The US president promises real change as the federal government goes back to work.
The message from Norwegian: if you can't compete, go home. The airline takes a bold step into the trans-Atlantic market.
And think of this as a day of reckoning for Germany's Bishop of Bling. He's fighting to keep his job.
I'm Richard Quest. I mean business.
Good evening. It is back to business in the United States of the federal government. At least for nearly half a million federal employees, it was back to work for the first time in 16 days. And in the nation's capital, Washington, it meant there'll be money to pay the bills.
As for the rest of the world, US political paralysis will not wreck the global recovery -- well at least not this week. President Obama today addressed the lingering consequences of the debt crisis.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We know that just the threat of default, of America not paying all the bills that we owe on time, increased our borrowing costs, which adds to our deficit. And of course, we know that the American people's frustration with what goes on in this town has never been higher. That's not a surprise, that the American people are completely fed up with Washington.
(END VIDEO CLIP)
QUEST: Now, the Italian prime minister, Enrico Letta, was with the president this morning, and the Italian prime minister said America's debt deal is crucial for Italy's economy and the global recovery.
(BEGIN VIDEO CLIP)
ENRICO LETTA, PRIME MINISTER OF ITALY: I congratulated President Obama for yesterday's success. It's his success, but it's also our success, because yesterday's decision was very important for the stability in the markets in the world, in Europe, and in Italy first of all.
(END VIDEO CLIP)
QUEST: Mark Zandi is the chief economist at Moody's Analytics, a subsidiary of Moody's corporation, which provides economic research. He joins me now. Well, it is very difficult, isn't it, to know what to make of it all the morning after?
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Well, yes, a lot of confusion, but at least they got it done at the last minute. That's what we expected, and they came through, I guess.
QUEST: Let me ask you about that, because by doing it at the last moment and reinforcing the market's view that these deals are always done at the last moment, to some extent, they've done a disservice for the future, haven't they? Because that's what you're going to expect every time.
ZANDI: That's kind of a mind-numbing thought, isn't it? Yes. I do think that investors are becoming -- they know -- they've seen the movie, they know how it ends, and this is what they'll expect going down the road if we go down this path again.
But I will say this: I'm not so sure consumers and business people feel like they understand what's going on, and my sense is that consumer business confidence has weakened and thus spending and investment and hiring, all the things that really make our economy tick.
So, investors, maybe they've got this figured out, but consumers and businesses, I think they're pretty nervous about all of this.
QUEST: What's your best guess, because we need to push forward, what's your best guess, as a result of what we had over the last week, does it mean for, for instance, economic growth in Q4?
ZANDI: Well, I do forecasting. It's part of what I do for my day job, and I've lowered my expectation for growth for GDP, that's the value of all the things that we produce, the rate of growth is going to be a half a percentage point lower as a result of all of this.
So, it's -- it means that the economy is going to continue to grow, the recovery will remain intact, but it will remain very, very lackluster.
And I'll also say this: given that all policymakers really did here is to kick the can into next year, and the uncertainty with regard to what they're doing --
ZANDI: -- will remain quite intense, and intensify as we get through the Christmas season, that this is going to remain a weight on economic growth going into next year.
QUEST: That half point, that's gone. It's not -- there's not going to be a bounce back in Q1 or a corresponding bounce back in the rest of the quarter that can make up that. It's gone. Finished. Toast.
ZANDI: Well, yes, that's my -- what I -- I've accounted for some of the bounce back in Q4, so that's in my number.
Now, if lawmakers can figure out a way to raise the debt limit and fund the government next year, early next year, without going down this very dark road, they do it in a reasonably graceful way -- and there's a possibility that could happen -- then I think we're in pretty good shape. I think the private economy, if you look at businesses and banks and households --
QUEST: Here's the --
ZANDI: -- they've done a lot of hard work and they've got themselves in pretty good --
ZANDI: -- financial shape, and I think the economy will take off if the lawmakers can get it together.
QUEST: Factor in for me: we've got an S&P and we get a record high. The Dow is little changed. It is bizarre, isn't it, the market's capacity to hit these highs at the same time as such fundamental uncertainty about US government debt, deficit, ceilings, and the like?
ZANDI: Yes, but you've got to take a step back and look at the stock market over a long period of time. Yes, we're at a record high, but we really haven't gone anywhere in ten years. The stock market today is about where it was back in the early 1990s.
So, we go up and we go big down and we're back up again, but effectively, we've not really gone anywhere, really, in 15 -- almost 15 years now.
QUEST: Good to talk to you, sir. Thank you very much, Mark Zandi, chief economist at Moody's Analytics, joining me to put that into perspective. Let me remind you, the S&P ends in a record high, investors are reacting to debt and budget deal. The NASDAQ was up half a percent, Dow was little changed.
Alison, I'm not trying to do your job for you by updating us on the markets, but it is an important day, and it has to be put in perspective. Tell me more.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, first you're seeing the first reaction to what Wall Street thinks about this temporary debt deal. And to be honest with you, Wall Street's not really thrilled about it, because we're going to be right back where we were a few days ago in a few months.
Still, for some interesting reason, as you said, the S&P 500 reaching a record high today. Did you know the S&P 500 is up 20 percent so far this year? The usual is 8 percent.
But if you look at the market as a whole, even though the Dow's ending flat, the market's been really on a tear since -- what? -- last Wednesday because of the debt deal. The Dow's gained almost 600 points. We're not seeing a lot of conviction today, though, because not a lot of love behind this temporary debt deal, Richard.
QUEST: Stay where you are, Alison. Alison Kosik is at the Exchange. Google has just reported, always reports after the bell. The headline: earnings per share is $10.74, that's taking out any extra items, of course. The market had been looking for $10.35. So, at that level, it is higher than expected. Stock is up 4 percent in after hours -- it's just 10 minutes after hours.
Goldman Sachs reported at the beginning of the session. Disappointing Q3, revenue down 20 percent. And that weighted on the Dow for most of the session. One of the big drivers down was the Goldman Sachs number, and it was bond trading that was weak at the start. As you can see, that's the earnings number.
And Verizon, the big, giant comms company, 77 percent -- 77 cents a share better than expected. Subscribers apparently spent more on data services.
Alison, the day spent most of its session worrying about IBM before the bell, Goldman Sachs before the bell. Now we have Google after the bell, so we're getting a really interesting set of numbers here.
KOSIK: Yes, a lot of these numbers aren't great. Let's just take IBM and Goldman Sachs. Goldman Sachs, its first foray, obviously, into the Dow, its first report since being into the Dow, so between IBM and Goldman Sachs, that's really what weighed on the Dow.
You look at Goldman Sachs really being hit hard. Its business was with revenue from bond currency, commodity trading down 44 percent from last year. We're seeing a --
QUEST: Why, though? Why? Why was it down?
KOSIK: Because -- because Goldman Sachs, like many of these other banks, are dealing with slower business. They had slower business over the summer especially because interest rates were going up, the expectation that the Fed would taper. So, you saw Goldman shares hit hard today, down more than 2 percent.
IBM shares, a whole different ballgame there. A revenue miss for the company. It's having hardware issues --
KOSIK: -- to say the least.
QUEST: In the middle of the reporting season, and the numbers are coming out. Alison Kosik at the stock exchange. Just let me remind you, S&P at a record high, Dow Jones was flat.
Earnings were the focus in Europe. BSkyB reported stronger than expected sales. The stock jumped 7 percent in London, and that helped the FTSE close just marginally higher. On the downside, KPM dropped nearly 8 percent in Amsterdam after American Mobile abandoned a plan to boost its stake in KPM.
When we come back after the break, Norwegian is going trans-Atlantic, and the chief executive, Bjorn Kjos tells me he can make flying from Gatwick to New York a success where others have tried and failed, and if he can't, well he should be out of business. QUEST MEANS BUSINESS.
QUEST: Aviation always high on our agenda, and AMR, that's the parent company of American Airlines, says it's just had its most profitable quarter in its history. In fact, the world of aviation has been extremely busy today. A new venture taking off and an old proposal came back from the clouds. Join me, if you will, in the cabin.
First of all, those AMR results. Profits at $530 million. It was a record quarterly for revenues. All the more interesting for AMR, which managed to cut labor costs. But the big battle for American Airlines is its merger with US Airways and the DOJ attempt to stop it. That trial starts next month.
Also, the European Union, an old friend is back, or an old nemesis. It's revived its carbon tax on global airlines. IATA says it's concerned and surprised, and the airlines say that this decision threatens the agreement in Montreal at ICAO.
One big difference though: now the EU says it won't tax for carbon the whole of a flight from, say, New York to London or Los Angeles to Paris, just that part that is in European air space. Even so, airlines don't like it.
Norwegian Air is going to expand its trans-Atlantic market. Budget flights from London Gatwick to New York and elsewhere in the US at a price of $240 one way. It'll use the Dreamliner 787 planes. Norwegian's had problems. One of its 787s had to go back to Boeing to be fixed.
Now, the message from Norwegian, which is one of Europe's largest low- cast carriers, is if you can't compete, go home. The chief exec, Bjorn Kjos, told me about his expansion plans, his Dreamliners, and his determination to expand.
BJORN KJOS, CEO, NOREWEGIAN AIR SHUTTLE: Our first aircraft have worked wonderfully, actually. We haven't had one single incident. It was the second one that we received in August that had a lot of minor things, so we told Boeing we are putting it on ground. You have to fix it. Flew in 15 technicians and they worked it from those dates. I know it's out working again, and it seems to be working really fine now.
QUEST: What do you think went wrong? Just one of those things? Did you just get one of those planes that was built on a Friday?
KJOS: I think, actually, I think so. I think we were lucky with that one, because the first one, however, it worked fantastic.
QUEST: Did they ever say to you, Bjorn, sorry?
KJOS: No, they -- they told us that obviously we'll do whatever we can do to fix it.
QUEST: Right. Let's talk about your new expansion plans. New routes from Gatwick to the United States next year. This has been tried before, famously with Sky Train, the late Sir Freddie Laker. Why do you think you can make Gatwick to the US a success where others have tried and failed?
KJOS: I think you have to have a profitable shuttle network. We fly 400 routes throughout Europe with 80 airplanes and have been for several years profitable. That's the first condition.
Second, only two aircraft -- types of aircraft we can actually do it with because you need low-cost, low fuel burn, and low maintenance cost. The only two airplanes that could do it was the Airbus 350 and the Dreamliner.
QUEST: There are many airlines that have long-haul strategies. Your entire long-haul strategy is based on these new lower-operating-cost aircraft, isn't it?
KJOS: That's totally right. We couldn't do it with other types of aircraft. To do it for a 747, no way. You have to have a profitable short-haul network, and then you have to have the newest aircraft, the Dreamliner or the 350.
QUEST: You really are stepping up another notch with these new routes from London to the US.
KJOS: Well --
QUEST: It is the most competitive -- fiercely competitive -- environment across the Atlantic. Is it wise?
KJOS: Well, you have to be able to compete with everybody, and then we have that edge that no one is flying at all from Gatwick to, for instance, New York, so -- or to Los Angeles or Miami, but yes.
But then again, you have to be able to compete with everybody. And if you can't compete globally with whatever airline there is, stay away. Go home.
QUEST: You've got to admit, that is a masterful piece of advice from business: if you can't compete, go home.
Coming up next, more masterful. This time, master class in medical research. We'll meet a professor who's pioneering work gives new hope to cancer patients.
QUEST: In Washington, the doors of the Smithsonian National Air and Space Museum opened, and these people lined up to get in on Thursday morning. Thousands of government scientists have also been getting back into the lab following the government shutdown.
While across the Atlantic in Paris, researchers are trying to make cancer drugs work better by getting diseased cells to open up and let them in. As Nick Glass explains, it's all done using tiny work horses known as nanoparticles.
NICK GLASS, CNN INTERNATIONAL CORRESPONDENT: Most if not all of us know someone who's had cancer. Here at a university south of Paris is one of the largest research projects of its kind anywhere in Europe. They've been looking at new and better ways of delivering cancer drugs by nanotechnology.
What is the problem with drugs for cancer patients at present?
PATRICK COUVREUR, PROFESSOR, PARIS-SUD UNIVERSITY: The major problem is the toxicity. You know that when you are injecting the anti-cancer drug intravenously, it will distribute everywhere into the body, including into the healthy tissues and not only into the cancer cells.
GLASS (voice-over): Traditional ways of treating cancer include chemotherapy and radiotherapy, painful, draining, and often unsuccessful. Patrick Couvreur has been working on a solution since 1974.
COUVREUR: By using nanotechnologies, you can target in a highly specific manner the drug only at the level of the tumor.
GLASS: A nanoparticle is a miniscule carrier into which drugs can be injected and sent through the bloodstream. It'll only enter a cell it's designed to enter.
STEPHEN BOYD AS GRANT, "FANTASTIC VOYAGE": Arterial wall to the left.
GLASS: The stuff of science fiction. In the 1966 movie "Fantastic Voyage," a submarine is miniaturized so that it can enter the bloodstream. Its mission: to remove a blood clot on the brain.
UNIDENTIFIED MALE, "FANTASTIC VOYAGE": At speed.
UNIDENTIFIED MALE, "FANTASTIC VOYAGE": She won't respond. We're in some sort of current.
GLASS: Couvreur's nanoparticles work in the same way, but instead of a submarine filled with scientists, it's a tiny bubble filled with anti- cancer drugs.
GLASS (on camera): How do you actually make nanoparticles?
COUVREUR: The first step is to make the synthesis of the carrier material. And to do that, you need to do chemistry. You will dissolve the carrier material into an organic solvent together with the drug. And as soon as the solvent is evaporated, the carrier material will precipitate together with the drug and you will get nice nanoparticles.
GLASS: So, what do they look like?
COUVREUR: Come and see. The size is between one-tenth and a few hundredths of nanometers.
GLASS: Tiny, tiny.
COUVREUR: Yes. A blood cell is 70 times bigger than a nanotechnology for drug delivery.
GLASS: This is obviously pioneering cancer research. Fundamentally, it's about taking out the enemy, hitting that cancerous tumor with missile precision and without collateral damage.
GLASS (voice-over): Thanks to research in this field, there are already a handful of nano drugs on the market, but nano medicine is not set to replace current therapies.
COUVREUR: My opinion is that the nano medicine will be very helpful to cure or to treat cancer which are resistant to all the currently- available treatments.
GLASS: And the future signals nanoparticle therapy in other diseases.
COUVREUR: We have a lot of different technologies which allow to target the drug for the infectious disease, including HIV and also some brain diseases.
GLASS (on camera): What keeps you going? What motivates you now?
COUVREUR: The research, the discovery of new concepts, to be in the front of the science, but also to be able to translate that for the persons who have very, very severe disease.
QUEST: And let's continue looking at the world of new inventions and the forefront. London is hoping to reinvent itself as a challenger to Silicon Valley. Today, the British government named 25 companies to get support from its Tech City start-up project in East London.
It included Halo, the cab company, Skyscanner, and Mind Candy. Jim Boulden asked the Tech City CEO, Joanna Shields, if the British capital could really become start-up capital.
JOANNA SHIELDS, CEO, TECH CITY UK: We are an urban cluster here in London, and just last week, Mayor Bloomberg made a comment that he is looking at London as his competition to be the champion city for tech versus Silicon Valley, which might surprise people.
But it means that London is truly on the map in terms of start-ups, in terms of the policies to support their growth, and that's really what we're hear to talk about today is that next stage of taking all this energy around start-ups and positive success stories and moving these companies through to high growth to an eventual listing or potential other liquidity event, like an acquisition.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: One of the things people always say is great about Silicon Valley is the VCs, the venture capitalists. There's always people there with money who want to invest in these companies even if they don't work out in the end.
It's always been the difference in Europe, where it's been hard for these small firms to find that money. Are you changing that platform, really, here in London?
SHIELDS: Well, we've had -- we have a very robust angel community, and in first investment type community in the UK, but what we're doing with this program, the Future 50 program, is really highlighting to investors all around the world the investment opportunity in mid-stage and high- growth companies.
And we've had hundreds of companies apply for this program because of the services that we provide, the ability to contact someone in 93 offices or consulates around the world or the British government to find suppliers, partners, distributors. Whatever you need to fulfill your business.
If you need visas, we'll facilitate that connection with the home office to get the visas for the high-value employees that you need to build you business.
QUEST: When we come back, it's just incredible how US lawmakers, journalists, and everybody else, myself included, manage to squeeze the entire US debt crisis into the cliche-du-jour. I'll explain when we come back.
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.
Barack Obama says there were no winners in the standoff over the US government budget battle. Congress broke the deadlock on Wednesday and reopened the government and raised the US debt limit. In response, the S&P 500 has closed at a record all-time high.
At least 94 people are dead and dozens more injured after a series of explosions across Baghdad today. Police say most of the blasts targeted amusement parks where families usually go to celebrate the Eid holiday.
Nearly 100 bush fires are burning across southeastern Australia. The string of fires is being called the worst to hit New South Wales in more than a decade. It follows Australia's warmest 12 months to date. It's not yet clear how many homes have been destroyed. Some estimates put the number in the hundreds.
The investigation into the plane crash in Laos is focusing on the weather. All 44 passengers and 5 crew members onboard the plane were killed when it crashed near the Mekong River on Wednesday. Five bodies have been recovered, the rest are still missing. Witnesses say the plane was buffeted by strong winds.
Thousands of students have taken to the streets in Paris to protest against the deportation of foreign students. The protests were triggered after a 15-year-old girl and her family were deported to Kosovo earlier this month.
Thanks to the deal last night in Washington, the US government is back in business. That much we told you so far. The country is not about to default its debt and the global economy seemingly, at least, won't tumble into the unknown abyss. At least not for a few months.
Join me at the super screen and you'll see that we have reset the dates. So, we have a government shutdown that is now for -- under a temporary budget fix and the shutdown date is now February the 7th into next year.
And we have a debt ceiling of January the 15th. That's the way it seems to have been done. And if you -- you will forgive me, but I think those dates might actually be the other way around. I think we might have flipped them by accident there, the debt ceiling and the government shutdown.
Be that as it may, whether it's government shutdown or debt ceiling, it remains the same, that lawmakers reminded us of the famous cliche-du- jour.
CRUZ: This deal kicks the can down the road.
UNIDENTIFIED MALE: We are kicking the can but better to kick the can than to stomp on the can.
UNIDENTIFIED MALE: At the same time we keep kickin' the can down the road.
UNIDENTIFIED MALE: Instead of kicking the can down the road -
UNIDENTIFIED MALE: Kick the can down the road.
UNIDENTIFIED MALE: Kick the can down the road.
UNIDENTIFIED MALE: The problem is we continue kick it down the road.
UNIDENTIFIED MALE: It's hard not be cynical when we've seen the can kicked down the road so many times.
UNIDENTIFIED MALE: We will continue to kick this thing down the road, and with real harmful effect for the American populous.
QUEST: Ah, that famous can which is being kicked down the road so often, it's battered and bruised. This old can that once again is about to be kicked - but, let us remember how many times the can has actually been kicked.
QUEST: This latest series of can kicking began in the summer of 2011 -- when Congress raised the debt ceiling, the U.S. lost its triple A and a Supercommittee was formed to sort out the budget problems. The can was kicked. In November of that year, the Supercommittee failed to reach an agreement, threw the decision back to Congress, who, not surprisingly, kicked the can. Fast forward and the fiscal cliff crisis is upon us, Congress still couldn't agree, sequestration came in, and as for the deficit and debt ceiling - down the road.
And so we come to the budget crisis of the past few days where the U.S. came as close to default as it ever wants to. The debt ceiling was finally raised, the U.S. government was reopened but of course it was only done by kicking the can into next year. So now there's another four months to try and reach a long-lasting budget agreement. All involved would do well to remember an important economic fact - there comes a time when there's no longer any road to kick the can down.
QUEST: So, the can has been kicked down the road, but the U.S. government has now lifted the shutters from the various parts as you can see here. First of all, federal employees are going back to work. That's roughly 70,000 that filed for unemployment benefits. Congress has said it will pay them retroactively and of course the states will ask for the unemployment benefits back. The shutter goes up a little bit more - landmarks reopen, some states tapped into their own funds to keep them going. The federal government repays them with interest - The Statue of Liberty, the Grand Canyon, Mount Rushmore in South Dakota. The panda cam for example at the National Zoo looked like this for the first time in 16 days, and now it goes back to normal.
There will be delayed economic data. Now, the jobs report - that crucial piece of information will now be brought out next Tuesday. It's crucially significant for the future direction of the U.S. economy, and when (inaudible) start tapering, we now know that piece will come next Tuesday. As for the damaged reputation of the United States government, it will take a bit longer than next Tuesday for that to be repaired because of course Fitch has the U.S. government on a negative ratings watch. And bearing in mind the kicking of the can - there's always the very real, distinct possibility that the shutters go back down again.
The U.S. government is open, federal workers are back on the job. That's not the case for Americans who private businesses suffered during the weeks-long shutdown. In Speaker Boehner's home state of Ohio, Century Cycles sent two of its eight employees home. The bicycle shop rents for tourists picking up the trails of Cuyahoga Valley National Park. When the park was roped off, business ran dry. The owner of Century Cycles, Scott Cowan, joins me now via Skype from Westlake, Ohio. The government's open, why aren't you back open again?
SCOTT COWAN, OWNER, CENTURY CYCLES FROM VIDEOCLIP: We are finally open back up after a 15-day hiatus.
QUEST: Fifteen - well why do you have - is it because you're so close to this park, if the park's closed, nobody's going to ride the bike and therefore you have to close down?
COWAN: Actually the trails were cordoned off by the rangers and they were given direction to ticket people that were in the national park in any capacity.
QUEST: You lost, well, how many thousand dollars?
COWAN: Uh, a small business - at least $10,000 in actual bike rentals, and then all the auxiliary sales of people not coming to the Village of Peninsula - so lots.
QUEST: That money has gone and it's not coming back. I'm not wishing to dwell on your misery here, I'm just trying to make the point very clear to our viewers - it's gone, it's not coming back - you can't make it up -
COWAN: Absolutely. We're not getting it back again. We had 15 days of spectacular Cleveland weather and it's raining and 50 degrees now, and so bike renting is going to be challenging going forward.
QUEST: Final question - how furious are you?
COWAN: I'm pretty pissed about the concept that the federal government can close down Mother Nature and it directly affect my business and my employees and then also the small Village of Peninsula and all the other businesses that were affected by this shutdown.
QUEST: Many thanks indeed for joining us, sir. I hope you and I do not have to speak - I'm not being rude - but I hope you and I do not have to speak again in January or February, but if we do, we will. Thank you very much, sir for joining us.
QUEST: Let's hope it doesn't happen. Now it's a day of reckoning for one big spending bishop. Pope Francis held a crisis meeting on Thursday to decide the fate - we talked about him last week. He's the Bishop of Lindberg in Germany, under pressure to resign after it emerged he spent over $40 million renovating his new residence. As Diana Magnay now reports, his behavior is in stark contrast to the frugal Pope.
DIANA MAGNAY, BERLIN-BASED CORRESPONDENT FOR CNN: Here you have if you will the two faces of today's Catholic Church - the old and the new. Pope Francis with his message of humility and change, declaring from his modest quarters in the Santa Marta guest house that priests should not live like princes. And German Bishop Franz-Peter Tebartz-van Elst, theologically conservative and also it seems a believer in the finer things in life, having just renovated his Episcopal residence in the German town of Lindberg to the tune of $42 million. Though it's no eyesore, Lindberg residents aren't pleased with the project that's run drastically over budget.
RAINMUND CHAMPERT VIA TRANSLATOR: As a Catholic, it is something that completely doesn't fit with the times today. Such a prestige project that the Church pushes through.
PATRICK DEHM, FORMER LEADER, FRANKFURT CATHOLIC COMMUNTIY CENTER VIA TRANSLATOR: He built his office on lies. This must come to an end. The Diocese does not deserve (this).
MAGNAY: Many within and beyond Lindberg are calling on the Bishop to resign. But Tebartz-van Elst insists the cost overruns were legitimate and came from the renovation of protected features such as the old city wall. He says his fate lies in the hands of the Holy Father. Archbishop Robert Zollitsch who heads Germany's Catholic Church, met with Pope Francis on Thursday. He says a commission set up to investigate the Bishop's spending will start its work immediately and that he's "confident after his meeting that all sides are interested in a good and speedy resolution." Perhaps an indication that Pope Francis is prepared to wait on the commission's results before he responds to a scandal whose momentum is overshadowing his reform efforts. The German press has come down hard on Bishop Tebartz-van Elst, "Der Spiegel" especially, criticizing him for a first-class flight he took to India to visit social services for the poor. He says that he was upgraded and that he doesn't like champagne and caviar in any case. But it seems that he is now going for a cheaper option, according to media reports, flying to Rome on a budget airline where he awaits word on his future. Diana Magnay, CNN Berlin.
QUEST: The weather forecast and decidedly autumnal left, right and center -- Jenny Harrison is at the World Weather Center.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Hey, Richard, apart from Australia of course we're going now into the spring and eventually into the summer months, and it's all about these bush fires because, my goodness, there's nearly 100 bush fires burning right now. They are very, very close to Sydney. This is why Sydney looks like this, because there smoke and there's haze. Right the way across the bridge you can see it has been blowing in on winds which at times have been gushing to over 90 kilometers an hour. When you've got winds gusting to 90 kilometers an hour, the embers can travel as far as six kilometers, and this is what has been going on.
We've had these strong, strong winds, all ahead of a cold front which has been coming in and has been forcing these winds to really get these fires going, and so much so that there've been so many of them - 35 by the way are completely just uncontained. So the firefighters of which there are nearly 600 of them are fighting these blazes. They've got a huge firefighting (inaudible) on their hands, but you can see in Springwood and Winmalee in particular. We've got some pictures actually to show you but they are really as I say fighting these blazes that are proving extremely difficult to actually fight. We've had home lost at both of these particular places. But as we go into Friday, conditions should actually start to improve. I can show you here that we've actually got much calmer winds as we go through Friday because that front has come through and so conditions have really improved. But as we head to the weekend, the winds again likely to pick up ahead of this next (burn OR one) that comes through. It's not expected to bring any rain with it, but as you can see, the current temperatures also of course playing a part as well as the winds.
Right now it's 2 Celsius in Canberra, it's 14 in Sydney since the early part of the morning. The winds have (certainly OR suddenly) changed direction but they're also a lot lighter than they were. This is the wind forecast as we go through Friday on into Saturday - 23 kilometers an hour at most. There's no real rain in the forecast into Sydney, but it's certainly going to be increasing humidity and the temperatures by day, Richard, are probably about 21 Celsius, so, not bad on Friday but the weekend began not looking too good for those firefighters.
QUEST: Jenny Harrison at the World Weather Center. Keeping an eye on that, Jenny, many thanks. And that's "Quest Means Business." I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.
(END QUEST SHOW)
QUEST: From the IMF in Washington, D.C., this is "Marketplace Europe." I'm Richard Quest. The American Capitol has seen some extraordinary events the past week, the like of which many of us have never witnessed before. A U.S. government shutdown and the prospect of a government default sent repercussions around the world, and in Europe, created great concern about what was going to come next and how it could endanger the fragile recovery underway. In this program coming up.
Can't pay the bills - Jim Boulden on the countries that have defaulted on their debts in the past. And I talked to Christine Lagarde, the managing director of the IMF. Reminds everyone Europe's crisis isn't over.
CHRISTINE LAGARDE, MANAGING DIRECTOR OF THE INTERNATIONAL MONETARY FUND: What we want to see is continued progress, none of that fatigue that is often referred to. They have to continue.
QUEST: There was a collective sigh of relief from Europe's finance ministers. For once, Europe, the Eurozone and the future of the euro was not making the headlines. Structural reform, austerity, shoring up the banks - all the European efforts seemed to be bearing fruit, and ministers weren't backward at letting you know.
FABRIZIO SACCOMANNI, FINANCE MINISTER, ITALY: You see, we have so far achieved you know to end one of the most longest recession in the history of Italy. We see now clear signs of recovery in the third quarter and in the fourth quarter, and we hope that this will materialize and strengthen next year.
PIERRE MOSCOVICI, FINANCE MINISTER, FRANCE: -- (Inaudible) (deficits), and if I look one year backwards, what I see is that the question here in Washington, it was 'will you survive'? Will we stay in? Will you make the necessary efforts? And what about your growth and structural reform? We made it.
QUEST: They've made it this far. Enda Kenny, Ireland's Prime Minister or Taoiseach, hopes to exit the bailout program by the end of the year. He still said, "There's a long way to go. But at last the era of bailout will be no more. The economic emergency will be over." If Europe's finance ministers can enjoy a little respite from the economic headwinds, they still need to plow on ahead with their efforts.
GEORGE OSBORNE, FINANCE MINSTER, U.K.: I am well aware this is still the early stages of recovery around the world. We've got to sustain our recovery, so this is not a moment to declare victory - far from it - it is a moment to redouble our efforts to make the recovery a lasting one in the U.K., and make sure we're the most competitive place to do business.
QUEST: Global challenges and global solutions. The IMF knows a thing or two about helping nations that can't pay their bills. After all, that's why the fund was set up. In the case of the United States, it's more an issue of won't pay, not can't pay. As Jim Boulden now explains, for some countries the kitty is empty.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: In a perfect world, governments would pay all their bills using taxes and investments. Few can. To fill the gap, they sell bonds with a promise to pay back the value of the bonds with interest. There are plenty of examples when countries would not or could not fulfill those promises, and that usually means default.
ANN PETTIFOR, PRIME ECONOMICS: In economic terms, it means (inaudible) the money we would have been paying in debt payments, but it loses credibility literally with the international capital market.
BOULDEN: In the most recent examples, Argentina defaulted in late 2001. Inflation soared. In 1998, Russia defaulted on treasury bonds and suspended payments on international debts. North Korea stopped paying back some loans in 1987. Even Great Britain had to take a $4 billion IMF loan in 1976. In part, that staved off fear of a default. That is reminiscent of the recent Eurozone economic crisis. Technically, there was no outright default. No country refused to pay back debt. But in order to meet obligations and of course in return for painful budget cuts, Ireland, then Portugal and then Spain got bailout loans from the IMF, E.U. and the European Central Bank. Greece of course is another matter. After its painful descent into economic and political crisis and two bailouts, Greece's bondholders were encouraged to take haircuts or partial losses on the bonds they hold. A default by some definitions. Years on and few can see the Greek economy rebounding soon.
PETTIFOR: Greece is really tragic. It' s a really tragic example of us not being - not having within the international financial system a proper insolvency framework.
BOULDEN: Ironically, after extreme and sharp pain for their citizens, the economies of Russia and Argentina started to grow again within two years.
PETTIFOR: Sometimes a default can enable a country to recover and therefore repay its debts.
BOULDEN: Repay, perhaps, but not repair reputations. Defaulting countries are treated with some suspicion on international markets for years afterwards.
QUEST: Jim Boulden on the countries that couldn't pay their bills and the effects on everyone else. When we come back after the break, the managing director of the IMF, Christine Lagarde. Europe may be growing again but what does the continent need to do?
QUEST: Welcome back to "Marketplace Europe" with the IMF in Washington, D.C. When the Fund published its latest world economic outlook, there was encouraging news for the Eurozone and Europeans. Economic growth was raised albeit by just a smidgen which is good news after so many quarters of recession. Now according to the Fund, the question is what comes next?
LAGARDE: What we want to see is continued progress, none of that fatigue that is often referred to. They have to continue. They have to continue making sure that the banks are solid, they need to assess that clearly with third parties involved to give clarity to the process. They need to move on with the European Banking Union, and for many of them, they need to do structural reforms or continue structural reforms so that their economies can actually operate a niche growth and create jobs.
QUEST: The worry of course is that once growth returns, they become complacent.
LAGARDE: That's what I meant about fatigue. You cannot be fatigued. You have to just get on with it and continue the work that they have started.
QUEST: Do you sense from your discussions with European ministers that they are going to keep the pressure on? Or, and you know this from your time in the French Finance Ministry, will factional arguments break out within the European Union family?
LAGARDE: You know, over the last two and a half years, they've been under the spotlight of the markets. I don't think there's been any single G20 IMF meetings without the Eurozone in particular being at the center of the debates. They don't want that to happen again. They've been celebrating the fact that they're not right in the middle of the agenda today. Well, if they want that to last, they have to continue doing the work that they have started, and continue on the progress that they've made.
QUEST: We must talk about the jobless. We must talk about the youth unemployment. It is just obscene, Managing Director, isn't it?
LAGARDE: Two hundred million people unemployed around the planet, and that has to be the highest priority on all agenda of all policymakers. And what we're doing - we at the Fund - is really focus on growth and jobs, and what macroeconomic policies, what specific tools, what best practices there are in order to bring people back to the market or to bring them into the market. And that's particularly the case for young people. But it's going to take time, it's going to take effort, it's going to take money and it's going to be a matter for all of the policymakers to really focus on.
QUEST: There isn't the money and the time is limited because eventually rioting on the streets or (disaffection) or a lost generation will take over.
LAGARDE: You know, first of all, it's a long-term investment. And for that long-term investment, all money that is available should be harnessed, and all the goodwill policymakers should be harnessed as well. We're seeing it in the Middle East for instance - in those Arab countries in transition. They have high youth unemployment. They want to address that. It's a partnership issue. There are donors. The countries have to do their job, the IMF will help in the process as well. So we have to partner the goodwill, the money available and the political determination to focus on the right issues.
QUEST: It's been a surreal experience this time, hasn't it? Being in the American Capitol with all these finance ministers and central bankers trying to put pressure up the road on the federal government being closed. It's been weird.
LAGARDE: The timing was not ideal for sure.
QUEST: Thank you very much.
QUEST: Christine Lagarde, indeed not an ideal time to be meeting while Washington is partly closed and the IMF's finance ministers are in town. And that's "Marketplace Europe" for this week. I'm Richard Quest in Washington, D.C. Whatever markets you're in, hope it's profitable.