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QUEST MEANS BUSINESS

China Powers Ahead; China's Economic Might; Google Tops $1,000; US Markets; European Markets; EU-Canada Trade Deal; Buying Stock in an Athlete; Rebelo Returns

Aired October 18, 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: Well, they don't look terribly happy, and perhaps they should be cheering a little bit louder. It's the end of a week that was fraught with risk for the US economy and beyond. Yes, it is Friday, it is October -- that's the 18th.

And slowly we grow. This is the case of China, economic numbers, steadying the nerves for the time being.

Also, good for Google. The shares hit $1,000.

And where's the beef? EU's trade commissioner tells me it's all about a landmark trade deal with Canada.

The end of the week, it's Friday, I'm Richard Quest, but I still mean business.

Good evening. Tonight, stocks across the world are hitting record highs, and it's been sparked by growth in one of the world's most important and fastest-growing market.

(RINGS BELL)

QUEST: China's economy is powering ahead and putting optimism into the markets worldwide. Fast-growing markets, and you join me at the super screen. The economy in China grew 7.8 percent in the third quarter. Now, just look at how that fasts -- and paced in. It's -- so we go to the end of last year, but if you take Q -- 2013, it's the fastest pace so far this year, as again, 7.5 and 7.7.

And if you want to know what it all means and the takeaway from it all, overall, the significance is Beijing, China, will hit its 7.5 percent growth target for the year unless, of course, the end of the year is a complete and utter disaster, which it doesn't seem to be so far.

At the IMF and World Bank meetings last week, the deputy governor of the central bank of China told me this year's growth numbers may not live up to past glories, but will still be impressive.

(BEGIN VIDEO CLIP)

YI GANG, DEPUTY GOVERNOR, PEOPLE'S BANK OF CHINA: It is true that if people think China will always grow at double-digits, like that last decade, and now we changed from a very high speed of growth to a medium-to- high speed of growth, which is maybe around 7 percent. But I think by world standards, it is still a very rapid growth rate.

(END VIDEO CLIP)

QUEST: I don't think anybody could disagree with that by world standards. A closer look at China and its role in the global economy. Nariman Behravesh is the chief economist at IHS, joins me now from Lexington, Massachusetts. Oh for 7.5 percent anywhere else in the world, sir.

NARIMAN BEHRAVESH, CHIEF ECONOMIST, IHS: That's right. It's all relative. China was growing over 10 percent, so 7.5 doesn't seem so great for China. But you're right, compared with everybody else, it's great.

QUEST: So, put it into the global perspective. A China at 7.5 percent. Now, we know China can not be the engine of growth like, say, for example, the US is. It's large, but it hasn't got the oomph in its economy. What does 7.5 percent mean for everybody else?

BEHRAVESH: Well, I think what it does mean is that there is not a danger, as you were saying earlier, of a hard landing in China. I think those fears have dissipated. And that could have had major ramifications, especially for the commodity exporting countries and for commodity prices more generally.

That was the big fear. I think these numbers reduce that fear, if you will, that -- I think the likelihood now --

QUEST: Right.

BEHRAVESH: -- of a hard landing is pretty low.

QUEST: No, but at 7.5 percent, does it allow China to play a role in keeping everybody else's engines going? For example, the sucking in of commodities from Southeast Asia and from Australia, the continuing of exports into the EU and the US. Is 7.5 percent good enough for that?

BEHRAVESH: It is, but it obviously isn't as good as it was before. But you're absolutely right that China is a bit of an engine of growth for the rest of Asia and for the commodity exporting countries. It isn't for the US, it isn't, really, for Europe or you could argue even for Japan.

But for other Asian economies and, very importantly, commodity exporting countries, it's still an engine. And 7.5, 7.8 will do the trick.

QUEST: Internally within China, the necessity of a high rate of growth for urbanization and for the growing middle class. Again, I'm asking the same question in many different forms, but for domestic policy in China, is 7.5 percent satisfactory?

BEHRAVESH: I think the answer again is yes. Our view right now is China has to grow at least about 6, 6.5, maybe as high as 7 to absorb all that surplus labor. The workers coming from the rural areas into the city. If they grow below that, then they're in trouble. But they're growing, as you say, above that, so I think 7.5 is enough for domestic reasons as well.

QUEST: So, a soft landing, good for the US or good for commodities and good for the domestic. I have to ask you, Nariman, as we come to the end, in a sentence, please reflect on the week that we've been through, and give me and instant thought.

BEHRAVESH: It was an utter waste of time in the sense that nothing was accomplished and it did damage to the US economy, less to the global economy. But an utter waste of time.

QUEST: Well, putting it succinctly. Thank you very much for joining us. Have a lovely weekend. Next week, we do it all over again -- or maybe not -- in some shape or form. Good to see you.

Now, the Chinese companies that we've just been talking about are showing their economic might across the world. I want to show you over here. If you take, for example, real estate, they've got all these billions -- in some cases, trillions -- of excess surplus dollars that they have to -- and renminbi that they have to wash through the financial system.

They've already got a gazillion -- $1.2 trillion, if you want to be precise -- US treasuries. So now, they're on a spending spree, and look where they're spending.

They are -- that is taking us into, number one, Chase Manhattan Plaza, a New York City landmark, which you can see just over there, and it now belongs to Fosun International, a Shanghai-based conglomerate. So, they have that in their portfolio.

They've also got, of course, if you're moving on, you can see nuclear power stations. Next, they have been purchasing UK reactors in -- they've been purchasing reactors in the UK, the government there has allowed Chinese companies to invest in the future of nuclear power in that country.

And a deal signed and sealed looking for this week, Lenovo looking to buy BlackBerry in the SmartPhone technology area. Lenovo is one of China's most established brands. In 2005, of course, it bought IBM's PC business for $1.25 billion.

The big talking point in the markets, it was Google. Now, we could actually say, of course, put a couple more zeros in there. Google has punched above the $1,000 for the first time. Investors warmed the company for strong third quarter earnings report. Google's analysts rushed to raise their price targets for the stocks. One of the most bullish, Deutsche Bank, sees Google hitting $1220 before too long.

And if you take a look at just how Google has performed, just look at this and see the Google share price. It's up 13.84 percent, $1,011.82. Google is not the first S&P 500 stock to break the $1,000 mark. Priceline, the online travel site, did it last month. Google began trading to 2004 at $85 a share. Google at $1,000. Paul La Monica joins me. Paul, Google at $1,000. Worth it?

PAUL LA MONICA, CNN MONEY ASSISTANT MANAGING EDITOR: It's amazingly enough, probably still worth it. It's trading at about 20 times 2014 earnings estimates, which isn't dirt cheap, but earnings are growing rapidly. Profits were up more than 35 percent in the third quarter, so this is a company that's living up to the considerable hype.

QUEST: But it's making its money from display ads online, it's having some difficulties getting the same formula for revenue and margins with mobile ad clicks.

LA MONICA: That's correct, and that's an industry-wide problem, not a Google-specific problem. It's something that Facebook is still struggling with to a certain extent, Yahoo! definitely. We're waiting to see what Twitter, when it goes public, how much success it has with mobile. I think simply put, it's such a new business right now that much of the same way --

QUEST: Wait --

LA MONICA: -- that online ads didn't get the same heft that TV and print did, we're now seeing that with mobile.

QUEST: Where does -- what else does Google make its money at? Because I know one of the questions that viewers always often want to know and I always want to know is, do they really just make most of their money by those ads and those click-throughs that we see on the Google home page?

LA MONICA: That is the for the most part what they make money for. Google is really a pretty boring company that has a lot of side projects that are --

QUEST: Right. But all these other things like mobile and Google Calendar --

LA MONICA: Yes.

QUEST: -- all the other bits of Google that they've sort of -- they do to keep you in their walled garden, do they make money too?

LA MONICA: Some of them do. But what I think is really important is that Google has been pretty savvy with its acquisitions. Motorola, the jury's still out --

QUEST: Yes.

LA MONICA: -- on that one, because they're losing money, but it did get them a bigger presence --

QUEST: Patents.

LA MONICA: -- in both patents and hardware. But when you look at Double Click, the big online ad exchange they bought, very big success. And YouTube has been very, very successful for them. It has been --

QUEST: Profitable?

LA MONICA: -- profitable and clearly they're getting more revenue on the mobile side as well as desktop with the video advertising.

QUEST: And interesting, when you get a stock like Google at $1,000 a stock, they don't split it.

LA MONICA: They have -- yes.

QUEST: They don't split the stock. And I know the argument, Paul, and you and I have talked maybe before about this, but a 10 percent gain at $1,000 is the same as a 10 percent gain at $100. It's still a 10 percent gain. But you don't get the small investors when you're stock's at $1,000.

LA MONICA: It's true. It's harder to justify buying one share at $1,000 when you could buy, say, 10 at $100. But Google famously, when they filed to go public, they cites Warren Buffett pretty frequently in terms of who they idolized and Berkshire Hathaway, the A shares have never split. The B shares finally did because of the Burlington Northern deal. But Warren Buffett's Berkshire Hathaway, that you have to be a billionaire to own that stock.

QUEST: Unless you go into a fund that has fractionized them up --

LA MONICA: Exactly.

QUEST: -- and did all that sort of thing. Good to see you. $1,000. I would be tempted to ask you if you -- this time next year where you think it will be, but that will be inviting you to give investment advice.

LA MONICA: Yes, we'll steer clear of that, but I do think it's safe to say that Google is not a company I would necessarily bet against.

(LAUGHTER)

QUEST: There's more than one way to skin that cat.

LA MONICA: Thank you.

QUEST: Good to see you. Alison's at the New York Stock Exchange. Only $1,000 a share, Alison.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Only.

QUEST: I assume you got -- you went out and got a couple before lunch.

KOSIK: Oh, don't you know, I bought 500 shares at $90 way back when - -

QUEST: Oh!

KOSIK: I'm sitting pretty today!

QUEST: Oh!

(LAUGHTER)

KOSIK: I'm kidding! I wish!

QUEST: Don't you wish!

KOSIK: I really do wish. So, you know what we can do? We can live vicariously through the S&P 500, which hit another record high, second time in a row. It's already been a really amazing year for the S&P 500. The debt deal is done, investors are focusing finally on third quarter earnings. Some solid ones came out today.

Google gave some inspiration to the market, but we're still seeing a little hesitation, Richard, because there's the reality, the reality that Washington has only kind of kicked the proverbial can down the road. We're going to be right back where we were this week --

(QUEST RINGS BELL)

KOSIK: -- in a few months. So, that uncertainty in the markets --

QUEST: Just a minute!

KOSIK: -- still kind of underneath the surface --

QUEST: Just a minute!

(RINGS BELL)

QUEST: That "kicking can" comment has cost you one of your Google shares.

(LAUGHTER)

KOSIK: Oh, come on, didn't you actually kick a can on TV or something like that?

QUEST: Yes, well --

KOSIK: I missed that.

QUEST: -- all right. Have a good weekend. Thank you very much.

KOSIK: OK.

QUEST: Alison Kosik. I promise you that, if she'd bought those Google shares at $90 each and they were sitting pretty at $1,000, she wouldn't be sitting there talking to us this evening. She'd be down on the Riviera somewhere.

European stocks rose on Friday on news of accelerating growth in China. It didn't hurt the US debt debacle is now over and rearview mirror stuff. This was the seventh straight day of growth. The DAX climbed 0.6, the CAC jumped 1 percent, close to the highest of the year, and LBMH was up 2 percent as luxury goods makers benefited from the news from China.

When we come back, a trade deal was done, but not only was the Canada and European Union deal worth billions for the countries involved, it's a dress rehearsal for the Big Show with the US. You'll hear from Europe's trade commissioner, Karel de Gucht, after the break.

(COMMERCIAL BREAK)

QUEST: Canada and the European Union struck a landmark free trade deal. It's a multibillion-dollar agreement that will remove 99 percent of the tariffs between the two economies.

It's expected to boost two-way business between Canada and the EU by more than 20 percent, and it opens the way to the bigger deal between EU and the United States. The Canadian prime minister, Stephen Harper, talked about what it meant for his country.

(BEGIN VIDEO CLIP)

STEPHEN HARPER, PRIME MINISTER OF CANADA: This is a big deal. Indeed, it is the biggest deal our country has ever made. This is an historic win for Canada. It means access for Canadian businesses to half a billion affluent customers, and thus to thousands of jobs for Canadians.

(END VIDEO CLIP)

QUEST: Now, from the EU's point of view, it was their first major trade pact with a fellow G8 country. But it nearly got scuppered. I want to show you who gains and who loses in all of this and the sort of machinations, which will give you a really good idea about why it's difficult for the next stage with the United States.

From Canada to the EU, its agricultural products, its maple syrup of course, its wheat, its pork, and its beef. And it was the beef that caused great issues because the Europeans, the French particularly, said they did not want vast quantities of imported Canadian beef.

Going in the opposite direction, you had from the EU to Canada, you have cheese, and there it was the Canadian dairy farmers that were so upset, the Canadian government gave them temporary assistance. Cars also go from Europe across the Atlantic, and it became easier for EU carmakers to export.

But the crucial part of this deal is it was seen as being a precursor of the big trans-Atlantic trade partnership, the EU and the United States. The EU trade commissioner said the deal with the US could be finished by the end of the year. Karel de Gucht explained how it's now become a template.

(BEGIN VIDEOTAPE)

KAREL DE GUCHT, TRADE COMMISSIONER, EUROPEAN UNION: For example, we have negotiated protection for geographical indicators. That's something that will come back with the United States, obviously. You have the opening of the market for public procurement at the federal, at the state level. Again, that's something that we should discuss with the United States.

Jones Act, one of the oldest non-tariff barriers still in existence, we have opened the market for maritime transport including dredging with Canada. So, there are a number of precedents that we have been creating, and these will certainly serve us as kind of stepping stones for the negotiations with the United States, yes?

QUEST: This agreement with Canada is significant, isn't it? Because it is the EU's first full-fledged trade agreement with a fellow G8 country.

DE GUCHT: Yes, right. It is the first time every that we have such an agreement. Because you may think that having an agreement with two economies that have more or less the same development, same degree of development and maturity would be easier.

It's the contrary, because what is still on the table is, of course, the most difficult issues, and it will be exactly the same with the United States, and it was also with Canada, and that's why, for example, negotiations on the intellectual property on pharmaceuticals has been very difficult. So yes, it's a real challenge to make that kind of agreement with a mature economy.

QUEST: How far in these negotiations and in these agreements are you going to be able to carry your own member countries?

DE GUCHT: Well, at the time that the agreement was presented to the press here in Brussels, I was in Luxembourg because I had the meeting of the Council of Ministers of Trade that was on the agenda already for some time. And I have to say that everybody was very positive. Maybe a little bad mouth from France on beef, but for the rest of everybody, it was very, very pleased with the outcome.

So the idea that European Union cannot make trade deals anymore, that there is a lot of resistance and all that kind of things, it's not true. Generally, there is a belief in Europe and also at the highest political level that we should continue with these trade deals because they are good for growth and jobs in Europe.

QUEST: Final question, sir: when will a deal with the United States be concluded do you believe? I'm asking -- I keep asking this question because -- for a hard date, when are you looking to finish the deal?

DE GUCHT: A year and a half ago, we had almost finished with Canada, and then all of a sudden, we got a problem on the equation between beef and cheese. And that can always happen to negotiations. Yes, it is possible to finish the negotiation with the US by the end of the next year. It is possible. But of course, we can also encounter stumbling stones that is costing is much more time.

So yes, we are ready to do that, and I hope that also the Americans are thinking along that lines, and I hope that we have no more shutdowns because if there had not been a shutdown last week, we would have had a negotiation round in Brussels. They couldn't come because they couldn't buy tickets.

But it is possible. You need a lot of political steer to do that, but my idea is that if you really need a lot of political impetus, it's probably easier to -- how would I say it? -- to make it surface on a shorter period of time than to keep it, let's say, for a very long time.

(END VIDEOTAPE)

QUEST: That's the EU trade commissioner. And you've got to admit, that puts it into perspective, what we've been through this week, when EU- US trade talks don't take place because the Americans can't buy tickets.

(RINGS BELL)

QUEST: A World Cup wobble. Brazil's sports minister has a change of heart about his position, but what was his position in the first place and why has he changed his mind?

(COMMERCIAL BREAK)

QUEST: In this program, we've told you about how the Chinese own large buildings, nuclear power stations. Well now you can own a piece of your favorite sports star. Well, maybe not actually physically. You can at least get a share of what he or she earns. It could be very lucrative. It could also be very risky if there's an injury or if they simply fail to perform. CNN's Christine Romans reports.

(BEGIN VIDEOTAPE)

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Call it buying stock in a jock. A brand-building company, Fantex Holdings, just filed with regulators to offer a new tracking stock, Arian Foster convertible. That's a person. Arian Foster is the pro-bowl running back who plays for the Houston Texans. And he's the first athlete to sign up.

But wait a minute. Stock in an athlete, how in the world would that work? Well, simply put, the math looks like this: Foster gets a lump-sum payment of $10 million. The investor gets 20 percent of future income derived from lead contracts, endorsements, and appearance fees.

Now, the stock price is tied to the player's brand, and it'll be up to Fantex to help build that brand. But it's so far off to a good start, at least the brand is of Foster. He's led all running backs in rushing touchdowns in two of the past three seasons.

Now, the idea of buying into a star isn't new. In the late 1990s, Bowie bonds were created. They paid interest on revenue from a collection of 25 albums by the rock legend David Bowie.

But football is a contact sport, right? And injuries could derail a player's potential. That could certainly block a lucrative future in brand-building. So there is, of course, risk. And assuming the risk is part of the game for investors interested in buying into an athlete. For the player, it can be viewed as a way to diversify and get some big money up front.

Now, Fantex is hoping to develop the business by signing additional players in football, even other sports. It's even got its sights on pop singers and Hollywood actors down the road.

Christine Romans, CNN, New York.

(END VIDEOTAPE)

QUEST: Which of course raises the question, what happens if the star, actor, or football sportsman decides, well, he's got the money, and that's really about all he cares about?

Talking with sports, Brazil's sports minister can't seem to make up his mind. With just months to go until the country hosts the FIFA World Cup, Aldo Rebelo announced his resignation yesterday, but he's back today. Shasta Darlington is in Sao Paulo.

All right, now you see him, now you don't. Firstly, why did he resign? And secondly, why is he back?

SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: Well Richard, basically, he wanted to run in regional elections. He wanted to be the next governor of Sao Paulo.

But he got an order straight from the top. He was ordered into the office of President Dilma Rousseff yesterday afternoon, and when he came out, he announced he would be staying at the job a little longer. He says he's going to remain the sports minister through the World Cup.

And really, that is very good news. Because even though he'd initially said that he wouldn't resign until after all 12 of the stadiums were finished and handed over at the end of December, there's still a lot of work left to do beyond that. There's the logistics, there's security. Brazil has been working with all of these international groups to make this a safe place --

QUEST: But Shasta --

DARLINGTON: -- and they'd just gotten a new threat -- yes? Go ahead.

QUEST: Sorry. We'll come to the new threat in a second. He must have realized that you can't just resign a year before the event when it's the biggest thing that's going to happen in your portfolio. Didn't he ever -- didn't some advisor say, "This isn't a very good idea, Minister"?

DARLINGTON: Well, Richard, he sort of floated the idea before, and really being the governor of Sao Paulo is a huge -- a huge deal here. Sao Paulo has the economy of many countries. So it certainly -- you can't blame him for wanting the job, and he had talked about it.

Obviously, somebody just hadn't given him the message that it wasn't an option at this point. So, President Dilma Rousseff did do that. Maybe she should have sent that message a little sooner, Richard.

QUEST: Now, back to that new threat that you say, because everybody is concerned. Yes, there may be great parties and there may be a great fiesta and carnival atmosphere in Brazil for the World Cup, but will it be a well-organized, well-run event?

DARLINGTON: I think that would be pushing it, Richard. It will be a party, and there -- some parts of it I'm sure will be well-organized. The stadiums, may of them are looking pretty good. They're in good shape. They were finished -- six of them were finished in advance for the Confederations Cup.

But the logistics at this point, I would say, are going to be a nightmare. These -- many of these cities are very far, one from the other. You're going to have to fly. Prices are skyrocketing. The price of a flight between Rio and Sao Paulo, we're talking a 45-minute flight, is already over $1,000.

The government has said it's going to create a task force to try and keep prices down, but as far as we can see, that task force doesn't really have any muscle. It can't put a cap prices. It can name and shame, but this is going to be a long, tough road ahead, Richard.

QUEST: $1,000 for the short flight between Rio and Sao Paulo. We'll talk more about that in the months ahead. Shasta, have a good weekend. Good to see you, many thanks.

Now, coming up, he knows what it's like to be on the front lines of an economic crisis. The former Greek prime minister, George Papandreou, joins me after the break. QUEST MEANS BUSINESS.

(RINGS BELL)

QUEST: It's Friday.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There is more "Quest Means Business" in just a moment. This is CNN, and no this network the news always comes first.

The Taliban is claiming responsibility for a suicide bombing in Kabul today. The blast went off outside a residential compound where many foreign workers in the Afghan capital are based. Officials say two people were killed. Saudi Arabia has rejected a seat on the United Nations Security Council. A statement released by the Saudi Foreign Ministry says the body has failed the Middle East and is riddled with quote "double standards."

Norwegian intelligence agents are in Kenya investigating a possible suspect in the deadly Nairobi Mall terror attack last month. He's described as a Norwegian citizen of Somali descent. They're also looking into his ties with an Al-Shabha commander named Ikarima who spent time in Norway. Fire crews are struggling to control nearly 100 bush fires in southeastern Australia. Hundreds of homes have burned down. And one man died while defending his house. High winds and high temperatures have been stoking the flames. We'll talk more about this in just a moment with Jenny Harrison in the World Weather Forecast.

Transport across Italy was disrupted after thousands (inaudible) went on strike to protest against austerity measures in the government's new business. Dozens of flights were canceled, busses and trains were delayed. Firefighters, steel workers and civil servants were among those who joined the 24-hour strike.

Greece has fallen out with its international lenders over next year's budget. Greece says it is on track for a surplus next year. The Troika says the numbers don't add up. Officials for the E.U., ECB and IMF say Greece needs to find another $2.7 billion to fill the perceived hole and they're demanding -- well I suppose austerity might be putting it too harsh -- whatever sort of cutbacks they're looking at wouldn't go down well with these protesters delivering food to the Office of the Greek Finance Minister. The demonstrators who came armed with tomatoes, olive oil, chicken were angry about recent comments he made, suggesting his family was suffering like others in the country.

George Papandreou is the former Greek prime minister joins me from Los Angeles. Good to see you, Mr. Papandreou, as always, good to see you. And -

UNIDENTIFIED MALE: Good to see you, Richard.

QUEST: Your understanding of the situation, I mean, is it likely that the Greek economy -- whether we call it a bailout, whether we call it further financial support, whatever -- however we want to dress it up, is it likely Greece is going to need further assistance?

GEORGE PAPANDREOU, FORMER PRIME MINISTER OF GREECE: Well first of all, Greece has made huge strides. We've cut our budget more than anyone else has done within the European Union over the past few years. We're number five -- we're in the five first of the fiscally responsible now and amongst all European members. So, I think that this is a -- even if there is a gap which the government says there is not, I think we don't need new austerity measures. What we need now is a real bargain which will say if you even need to ease a bit on the austerity which I think should be done, we need to help and push on the implementation of the reforms.

Under my watch, we made major reforms --

QUEST: Right.

PAPANDREOU: -- tax collection issues, transparency, opening up professions. These need to be implemented because they are what actually are the root of the cause of the cause of the deficit.

QUEST: Right, but does this mean -- I'm trying to keep away from the 'b' -- bailout pejorative word -- but so keeping it neutral as possible. Does it mean, do you think, that Greece will need further external financing?

PAPANDREOU: Well, when we were talking about $2.7 billion, let's assume that there might be that case -- $2.7 billion if you talk about the $200 billion we already have gotten in loans. This is not a bailout, these are loans. This is a very, very small amount, so I don't think we should make too much -- 10 percent a teacup here. But it could be the straw that break the back, and that's why I think it has to be the Troika really has to think very clearly and I would say our partners in the European Union. We need to reprioritize, put emphasis on reforms and that would be -- that would bring -- trust to the people of Greece.

QUEST: I need to talk to you because I need your perspective, sir. I mean you went to the edge and back and over and backwards and forwards and you know what it's like being in this sort of default situation, but let me ask you this -- how do you view what happened in the United States over the past week?

PAPANDREOU: Well I think there's -- there are some similarities between what we went through. First of all, Greece began as a small problem and the markets were believed that this would be solved by the European Union very simply, and as a matter of fact the European Union had they come down very hard, strong statements in favor of our first programs, there would have -- the markets would have -- been very calm and we would've gone on our business in a more normal manner.

However, when they saw that the European Union was making mistakes, was having difficulties -- was --

QUEST: Right.

PAPANDREOU: -- not didn't have the political will to develop -- to deal with -- this issue, then the markets got very worried and the crisis became a contagion. That's what's happened in the United States. The markets did not believe that we could get to the brink of a default so they were not factoring it in as a problem. Now that they see -

QUEST: OK.

PAPANDREOU: -- that you're really on the brink and that there is a political impasse, they will factor that in, and what that means is that if this is not solved soon, we will see -- we will see borrowing costs go up and it will be a huge impact both on the American economy and likely on the world economy. And I think where we need to --

QUEST: What would your advice -- what would your advice be -- we need to finish up, but what would your advice be to U.S. lawmakers who've now got three months to sort this out, having been where you were?

PAPANDREOU: I think first all we need to see that let's not make the deficit problem which is fact is a problem which is with growth it's happening in the United States, it is a becoming a secondary problem. Let's not make -- create -- a new problem which doesn't exist -

QUEST: Right.

PAPANDREOU: -- which would be the political impasse, and that would - - we would be paying all around the world for a new problem because of the political impasse. Secondly, I believe that the real deficits that we are facing whether in Europe or in the United States as developed countries are deficits in infrastructure, deficits in education, deficits in green growth -- let's invest. Let's invest -

QUEST: Thank you.

PAPANDREOU: -- let's get our citizens employed again and that in fact will bring growth and that will deal with the -- both the debt and the deficit issue. And one more -- one more -- point. There are areas one can reform -- certainly the welfare system, the benefits are on the one hand take an issue to be reformed, but on the other hand, we need to see issues like tax havens, being with higher taxes for the rich and some reform in governance here. I'm in California now -

QUEST: Right, sir.

PAPANDREOU: I know Governor Brown has turned things around because of reforms in the Democratic system if you like. The Berggruen Institute has been doing a lot on California. Let's see hour or democracies can be we can innovate in a way to bring back the trust and empower our citizens so that they feel that they are owning the solutions. I tried --

QUEST: We need to leave it there -- I need to jump in there, sir, and say thank you, apologies, but I do need to jump in because -- thank you, good to talk to you, sir.

PAPANDREOU: Thank you, Richard. Nice talking to you.

QUEST: Former Greek prime minister joining us there. Now, the weather forecast. Jenny Harrison is with us. I was talking in the news summary just there about the events in Australia and what is happening. Now, we've had very nasty bush fires before but these are particularly dangerous and worrisome.

JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: They are. They're very, very early in the season, Richard as well and over a 100 of them now and they are spreading so rapidly. The winds believe it or not have actually been lighter in the last couple of days so that has been helping the firefighters but they're still managing to spread. This shows you really it's sort of a big, big view, but the number of fires -- over a 100 as we know -- and of course where they are. So very close to Sydney out there in the Blue Mountains. Now, there's a number of reasons why these fires have been spreading so quickly and why it is so early in the season. It's been a record warm winter across much of Australia. Springwood where the fires really began, just 34 millimeters of rain since August. The average is just over 104 millimeters, and as I've been saying of course, this could be the worst bush fire season in over a decade, particularly because it has started so very early in the season.

Now, one of the things they're talking about is spot fires. The winds carry these embers a very, very long way and they can start the fires of course a long way from the front. The firefighters are really fighting, and of course I was saying again yesterday these fires -- the winds have been up to at times 90 kilometers an hour. And that's why the embers can spread six kilometers. So this is what happens -- it literally jumps the line a hugely long way, and this is the problem.

As well as spot fires, they have what are called escape fires. So they think they've put these fires out, but in fact, literally a day or more later, they find these fires are starting again because the heat is so intense way down there under the ground. Even though there's no evidence on the surface that the fire is still going.

Right now it is coming up towards 8 o'clock in the morning in Sydney. The winds are still light, the temperatures still not bad at 15 degrees Celsius. The front that passed through -- this is why we've got these calmer winds. We had them for the last couple of days, but there is a bottom I'm afraid. There's another front on the way. This is going to kick the winds up again. This will be throughout the weekend.

The only upside to that is we'll see some increase in the humidity, there's some rain in the forecast. Not getting this far but it will bring some relief there. But you can see the winds are still very calm right now across the entire region. This is the sort of more hourly wind forecast as you can see. The high is sort of 26 kilometers an hour through Saturday, some high gusts and of course do remember these fires actually have their own sort of weather systems in terms of course the heat but also the winds that go with them.

And you can see this is a front coming through. This is the moisture that could with it and of course by day the temperatures once again becoming really pretty warm. But, Richard, the weekend not looking good for these firefighters. They really have got such a huge battle on their hands.

QUEST: Jenny Harrison at the World Weather Center. Jenny, thank you for that and we'll obviously be following that very closely. And I could have a profitable moment for you tonight. But what a week it has been. I don't think we need one more word about debt, default, despair and the budget crisis in Washington. Let's just have a weekend. Because that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you on Monday.

(END QUEST SHOW)

(BEGIN CNN MARKETPLACE AFRICA SHOW)

NIMA ELBAGIR, LONDON-BASED INTERNATIONAL CORRESPONDENT FOR CNN, CAPE TOWN, SOUTH AFRICA: Three South African business leaders.

DAN EVANS, CEO, BOSS BRANDS: Proving yourself out here in South Africa or in Africa is good enough to really back yourself and to put that model out in other regions and other parts of the world.

ELBAGIR: Ready to capitalize on the continent's growth.

PRECIOUS MOLOI-MOTSEPE, FOUNDER, AFRICAN FASHION INTERNATIONAL: We are very cognizant of the fact that it is Africa's time. We have a very special window of opportunity.

ELBAGIR: The fifth and final member of the BRICs nations is starting to live up to its promise as the gateway to Africa.

BEN KRUGER, JOINT CEO, STANDARD BANK: If we not better than China operating in Africa or Brazil operating in Angola, we have no chance or reason to be there.

ELBAGIR: South Africa's trade with the continent is growing faster than all other member nations, up 15 percent last year.

EVANS: For us in South Africa to be successful, we could never be arrogant and we can learn so much from every single country in Africa.

ELBAGIR: South African companies looking beyond the country's borders. From Cape Town, a "Face Time" edition of "Marketplace Africa."

Jim O'Neill famously said South Africa will justify its BRIC status when it properly capitalizes on cross-borders trade and cross-border connections with the rest of Africa. Do you think that's happening?

KRUGER: I think it is indeed. I mean a big part of the BRICS theory was premised on population and obviously on consumer growth and so forth. And I think that's what people see in South Africa with the connective-ness towards Africa. If you compare the blocks that we have in Africa, in West Africa, you will soon have a very high growth population. Nigeria is projected to grow to 200 million people by 2020 and then to 400 million people by 2050. That's bigger than the U.S. in terms of population. So if you add the whole west block, you then bring together the East Africa block, Africa will have a population by 2050 of 1 and a 1/2 billion people or closer to 2 -- bigger than China. And I think people are seeing that and that's the real drive. So, for South Africa to be successful as a BRIC, it really would have to connect properly with Africa. And I think a lot of companies are starting to do that and people are investing here and from abroad in South Africa as well as in Africa to see that growth.

ELBAGIR: Do you not worry about Kenya? Do you not feel Kenya kind of slightly breathing on South Africa's neck?

KRUGER: I don't think there's going to be a real competition between Kenya and South Africa. The real powerhouse in due course clearly will be Nigeria, and as to how we harness all of this together, that'll be the challenge for Africa. And I think it is very good for us to have competition from different parts on the continent and to try and raise the level of work capacity on the continent. If the continent does well, if you have good neighbors you're going to do much better so trade can increase.

If you look at what happened to trade over the last 10 years, there was very little trade into Africa, a very, very small amount. And there was very little trade with the developing world. So if we tried -- if Africa tried 10 years ago it would have been less than 10 percent, now it's more than 50 percent. So that's an unbelievable development in a short space of time. And I'm quite sure that you'll see that continue in the next decade.

ELBAGIR: Do feel that it's -- do you feel that African consumers want to invest in African products? You know this sense of the pride in being African?

KRUGER: Yes.

ELBAGIR: You know whether it's banking with an African bank or buying a South African brand or a South African (inaudible), is that also -- is that giving you that extra push whereas before they would want to be seen with a French or European or an American brand. Now they want to be seen to be buying African.

EVANS: Well from my perspective, I think people are actually, they're looking to support brands that they're proud of. You know whether that's African or not. They're actually not making a sort of patriotic choice.

ELBAGIR: But their identity is tied up in the choice they're making.

EVANS: Absolutely. If it's something that's just aspirational then they'll identify with it and they'll choose that brand over others.

ELBAGIR: Do you see that, Dr. Precious?

PRECIOUS MOLOI-MOTSEPE, FOUNDER, AFRICAN FASHION INTERNATIONAL: Our unique selling point as Africans is our rich cultural heritage. It is just the diversity of our continent. I mean, if you look at South Africa for instance, we've got 55 million people and we have 11 different languages. And when you sell, package that properly, price it properly and make sure that it is good quality, when you sell it to the global market then it has a real appeal.

ELBAGIR: I mean I know you both think that there isn't -- there isn't that kind of African patriotism coming out, but I know I definitely feel, when I go to pick up something Europe or America and it is something that I can -- you know it's recognizably African to me, but it's by an American designer or European designer. There's a part of me that thinks 'Why would I do that? Why wouldn't I just go home?'

MOLOI-MOTSEPE: If you look at international brands like Burberry, your Louis Vuitton's, there's so much of copying off of -- we inspire them. Africa is seen as very inspirational and very different, so they always try and produce goods that they know will sell because they are of African origin. But I think for Africans themselves to do that and sell it globally, it means so much more. It's made by Africans, it's from African. It tells a beautiful story because I find that people also buy into stories. Where is this made?

ELBAGIR: (Inaudible) authenticity.

MOLOI-MOTSEPE: Absolutely. It's the story, the authenticity and you know combined with all the other things that you have to satisfy as a premium brand.

ELBAGIR: Well I think definitely with consumers, Rooibos so huge that you know when you're looking at Rooibos -- I do find myself looking over the box and wanting to know well is it from South Africa?

EVANS: Yes.

ELBAGIR: And that is something that, I mean, do you think that is something that's also helping in terms of -- because you are pushing into Europe at the moment?

EVANS: Yes, absolutely. And I think it's what, you know, that backstory -- that brand backstory is incredibly important that it has to -- people are really looking for products, brands with a certain integrity to their story and to their message. And that's something which really resonates with people. If your brand backstory has that authenticity, people respond well to it.

ELBAGIR: Do you see a point where the African consumer will be wielding that same kind of power?

MOLOI-MOTSEPE: Oh, absolutely. You know with such spending power you actually dictate how brands should speak to you.

(COMMERCIAL BREAK)

ELBAGIR: Do you feel in terms of the African consumer, when you see the approach from non-African companies -

EVANS: Yes.

ELBAGIR: -- to the African consumer, do you sometimes think 'I wouldn't have played it that way'? You know, sometimes a lack of nuance, a lack of subtlety, because everybody's talking about the African consumer.

EVANS: Yes.

ELBAGIR: And sometimes as an African consumer you feel just like hit over the head. What would you -- what would your advice be to non-African companies coming into this market?

EVANS: A lot of times brands look at a market and they think -- they take the easy road. They say, well, we can just do traditional TV media. We'll just run a TV campaign. We'll use some footage or some advertising we used to do in our market we'll just pace into their market and then -- and so we don't have to get our hands too dirty you know. So and actually what you have to do is you have to find ways of helping consumers to engage with your brands. You have to figure out like how can you activate, how can you physically get into people's hands. You have to really plug into what's happening at a local level. As our brand, we do a lot of work in the music and design and outdoor healthy living, so you know we really look for you know what are the specific events on the ground. What are the specific music events and sampling opportunities that we can engage with. I think you have to put people on the ground to do that and you have to figure that out I mean and kind of really engage in the consumer's at that level and you can't just run a TV campaign and not do -- and your work's done.

ELBAGIR: Well, don't run a TV campaign that kind of shows all the African stereotypes kind of crammed into a few minutes' space -- a marketplace, a woman in brightly-colored clothing and some music and think that that's going to appeal.

EVANS: Yes.

ELBAGIR: Dr. Precious, do you feel like the African consumer is often underestimated?

MOLOI-MOTSEPE: Underestimated and under -- not properly understood. So, how we do it at AFI is we find strategic partners. We started here in Cape Town, you know, we got ourselves to understand what we're trying to do as a brand, perfected our skills, made sure that we worked with local Cape Townians, and we spread into Johannesburg, gradually spread onto the continent. So when we, in Tanzania for instance, we work with local people who will understand exactly what the local consumer would want.

ELBAGIR: What's interesting to me is the way that the purchasing power of the Asian consumer has definitely changed the landscape of advertising in fashion. And you know we have these debates every fashion week -- a lot of activists do a count of the ethnic spread of the models. And increasingly we're seeing Asian models being used in advertising. Do you see a point where the African consumer will be wielding that same kind of power where it won't be a debate about racism or you must to do this because it's right? It will be a debate about you must do this because otherwise we who have the money will not buy your product.

MOLOI-MOTSEPE: Oh absolutely. You know with such spending power you actually dictate how brands should treat you. We have at the end of our fashion week an award ceremony where we celebrate designers from the continent, and we celebrate for instance you talked about models from the continent as well. So, we put them on a pedestal and make consumers see themselves in these people because they support their businesses and they need to identify with them.

ELBAGIR: And do you think we're underestimated?

KRUGER: I would agree with the point made because if you look at the changing demographics, more than half the population in Africa in -- by -- 2020 will be middle class, and that's a significant change in terms of the distribution of consumer spending on the continent. And then I think the thing that we mustn't underestimate is the impact of information -- TV, radio, social media, Internet. People now know a lot more of what's happening all over the world and what's available and they can draw comparisons and conclusions. And I think people in Africa can manufacture and produce and design (inaudible) as well, and it's more of a global feel to it. And I definitely think for us when we think about products, we never ever think of Africa as secondary products, in most places, it has to be absolutely world-class products and services, and you need to do that. If you don't do that, I think you will not be a participant in five to 10 years.

END