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Quest Means Business
IMF Looks for Exit Strategy; E.U. Pilots Fight New Flight Laws; Forbes Fears Weak Dollar
Aired October 05, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Looking for the exit, the IMF gets set to coordinate the way out.
Under the radar, E.U. pilots say new flight laws could put passengers at risk.
And betting on broadband, England's football fans get set.
It's a brand new viewing experience. It may be Monday, the start of a week, I'm Richard Quest, and together, we mean business.
Good evening. Coordination, cooperation, and a safe way out. Right now the International Monetary Fund is deep in its annual meetings in Istanbul with world finance ministers. And at issue, one of the most complex exit strategies in the financial world since World War II.
Dominique Strauss-Kahn, the head of the IMF, told us on this program last week, it was all like a burning house, you had thrown so much water at it to put out the fire, the cleanup can be just as taxing.
The IMF has basically now been given the task of coordinating the exit strategy. This is the document from the weekend meeting, the communique from the International Monetary and Finance Committee.
Youssef Boutros Ghali is the man who heads this committee. He has got his hands on the IMF steering wheel, the chairman of the IMFC, this is the body that drives political direction and policy priorities at the IMF.
Minister became Egypt's finance minister in 2004. He has more than a decade of experience in government. In that communique issued late on Sunday, the IMFC said that they were calling on the IMF to set out the principles for an orderly, cooperative exit, taking into account specific circumstances.
I spoke to Youssef Boutros Ghali and asked him, what was all of this about, coordinating exit strategies?
(BEGIN VIDEOTAPE)
YOUSSEF BOUTROS GHALI, EGYPTIAN FINANCE MINISTER: Coordination is an easy word. The implementation of coordinating policy is very complex. You have to start with having a common measure for different policies in different countries with different legislation and different problems. You need to agree on a common metric so that you can compare these various policies together.
Second, you need a forum where policy-makers will sit around the table and decide who is going to do policy A, who is going to do policy B, how A and B are going to be coherent so that they don't harm policy C. The IMF is eminently equipped for this kind of exercise. It has a common metric for all countries that are members in it. And it is used to coordinating among countries.
All we need to do is to put this into action.
QUEST: That is, as you rightly point out, easier said than done. But what sort of principles for orderly and cooperative exit strategies are you looking for? Are you hoping that each country is going to submit to the IMF, this, if you like, road map for a strategy? Or are you going to do it ad hoc as each country comes along?
GHALI: Well, there is a set of core countries where their policies affect the rest of the system. These core countries, we may differ on who is core and who isn't, but these core countries need to keep talking to each other, and need to keep exchanging information.
QUEST: Right. And which -- which -- which.
GHALI: . through the clearinghouse that is the IMF.
QUEST: And which are these core countries that you're thinking of?
GHALI: Well, the ones that have been on the front of the scene, the large European countries, the United States, China, these countries are going to be instrumental in guiding the world economy, like they have been instrumental in the problems that we have faced in the last 18 months.
And therefore, these countries need to keep talking and need to keep in sync with each other so that eventually the policies that are implemented in any one of them does not harm the other, and does not cause negative repercussions on the rest of the world.
QUEST: Right. The communique published by the -- by your committee says that you support a shift, if you like, from over-represented countries within the fund to under-represented countries.
Now we can think of plenty of under-represented, but this power shift will come at the cost of other countries. So the U.K. is not going to give up its power, France won't give up its power. I can think of lots of -- who is going to give power in the fund?
GHALI: You shouldn't look at it as somebody giving up power. It is true that the quota shift is essentially a zero-sum game. The wins -- the winnings of one are the losses of the other. However, the quota shift is just one element of a much broader restructuring of the institution.
And that restructuring is a positive sum game. We all gain. Those who have given up quota shares and those who will get quota shares, everybody wins.
QUEST: When do you see durable recovery? And I think that's a key word, isn't it, recovery not dependent upon stimulus and policy response, durable recovery.
GHALI: Yes. Look, every since the beginning of this crisis in September of last year, we have been in uncharted territory. We have used unconventional methods, unconventional instruments. We have found problems that we didn't suspect existed. And therefore, we cannot anticipate all of the signals that are being sent by the world economy -- are new to us.
The variables are new. The behavior is new. And in a period of structural shift, you cannot rely on the old measurements and the old accepted diagnostic instruments to be able to tell. Nobody can tell you when we will be able to stand on our own two feet without fiscal stimuli.
What we can tell you is that we are on the right track. And things -- the world economy is responding. Now when will it be able to stand on its own two feet is anybody's guess.
(END VIDEOTAPE)
QUEST: And that's Dr. Youssef Boutros Ghali, the finance minister of Egypt, who is also the head of the Monetary and Finance Committee at the IMF.
If you are still a little confused about what we mean when we talk about exit strategies, we sent Jim Boulden deep into the economic thicket, wandering around in the policy undergrowth, trying to find a way out.
(BEGIN VIDEO CLIP)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): In this current economic crisis, it means pretty much the same thing: It's about seeing the woods through the trees, picking the best path out when you've lost your way.
But in the aftermath of the recession, picking up all of the debris caused by the rescue operation.
(on camera): . is causing some very difficult problems.
(END VIDEO CLIP)
QUEST: Jim Boulden, and you'll hear more from him later. Also within the next hour, Steve Forbes will be talking to us about how we exit this recession and the strengths and weaknesses within the economies.
Now I'll update you in the markets in a while, first up, the news headlines. Fionnuala Sweeney at the CNN news desk.
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Richard, first to Pakistan and this surveillance camera caught a deadly moment at a United Nations office in Islamabad. A suicide bomber dressed in black entered a storage site for the World Food Programme, seconds later a powerful explosion destroyed part of the building. Five employees were killed in the attack.
Election workers in Afghanistan have begun recounting some ballots from the disputed presidential election. A partial recount of some 10 percent of the country's polling stations was ordered by a U.N.-backed commission after allegations of widespread fraud in the August vote. An announcement regarding whether President Hamid Karzai will have to face a runoff election is expected next week.
The death toll from flooding in southern Indian has topped 270. Torrential rains have forced 1 million people to flee their homes. The states of Andhra Pradesh and Karnataka have been hardest hit. The military is helping with relief and rescue operations.
Authorities in Indonesia say they've given up the search for missing people in the rubble of last week's earthquake and ordered to care for the survivors. More than 600 people were killed in Wednesday's quake, hundreds more are confirmed missing.
And those are the headlines. Join me for more at 8:30 p.m. London time. And that's "WORLD ONE" in about an hour and 20 minutes from now. In the meantime, back to you, Richard, in the studio.
QUEST: Fionnuala Sweeney, we will be with you at that appointed hour, many thanks.
Now France Telecom's deputy chief exec has resigned after mounting criticism of the handling of a spate of employee suicides. A worker's union now says the company's restructuring could have been to blame.
CNN's senior international correspondent, Jim Bittermann follows the story from Paris.
(BEGIN VIDEOTAPE)
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Louis Wenes is being taken out of the number two job at France Telecom, being replaced by Stephane Richard, who is -- was designated to take over the company in a few months anyway as a replacement for Didier Lombard, the CEO.
Basically this move coming about after a number of work-related suicides, 24 suicides in 20 months at France Telecom, sounds like a lot, it's actually below the national average for suicides. Nonetheless, it has been tremendously embarrassing for the company and for the government because the government owns between 27 and 28 percent of France Telecom.
And as a consequence, there has been great pressure brought to bear by the unions about these work-related deaths. Not all of the suicides were work-related, but in a number of cases, those who committed suicide wrote notes and left word that it was company stress that was contributing to them taking their lives.
So as a consequence, the company has decided to make this management change at the top. The man coming in, Stephane Richard, said to be very close to President Sarkozy, and up until very recently, was chef du cabinet for Christine Lagarde, the finance minister.
He has had a track record of dealing with some pretty tricky labor situations, including some restructuring in the past and also some transformation of public companies to private ones. So he may be the person who can tackle this. We'll just have to see how this works out in terms of the manager.
Jim Bittermann, CNN, Paris.
(END VIDEOTAPE)
QUEST: When it is a matter of economic survival, people will try just about anything out of desperation, even if there is danger in getting burned. Policy-makers have been playing with fire as they stop the world economy from freezing over. How many more metaphors can we mix between now and when we explain the true meaning of exit strategy.
(RINGS BELL)
(COMMERCIAL BREAK)
QUEST: In Istanbul, as you've been hearing on this program, the world's top money men desperately searching for the way out. Uncharted economic territory, everyone seems to agree, they need to find a way home from here. The woods are dark and deep. And we've miles to go if we are to effect an exit strategy.
What does this cute little phrase mean? Jim Boulden explains.
(BEGIN VIDEOTAPE)
BOULDEN (voice-over): It sounds simple enough, after all, we all know what the exit is, it's the way out, the way we leave.
(on camera): It's the way we get away...
(voice-over): ... sometimes from danger.
In this current economic crisis, it means pretty much the same thing. It's about seeing the woods through the trees, picking the best path out when you've lost your way. But in the aftermath of the recession, picking up all of the debris caused by the rescue operation.
(on camera): . is causing some very difficult problems.
(voice-over): Governments and central bankers have spent the past several months trying to light a fire under the global economy. By cutting interest rates and borrowing billions, they have done the economic equivalent of pouring petrol on the dying embers of the economy.
(on camera): . trying to spark it back to life.
(voice-over): They have even used the dynamite of effectively printing millions -- so-called "quantitative easing" -- to really stoke things up. It is work that is starting to pay off. There are signs that the economy is responding.
(on camera): There is fear that with so much fuel fanning the flames, eventually, things could get out of hand and all of that money in the system will eventually bring back the black smoke of inflation.
And that's something investors definitely don't want to see.
(voice-over): By the time the flames even look like they're getting out of control, it will be too late.
(on camera): So, central bankers have been busy preparing their plans to control all of this combustible material without either killing the fire or letting it get out of control.
(voice-over): It tells investors we know what we're doing, we have a plan, this is the way we are going to dispose of the excess money in the system. The exit strategy, it's a safe way to ensure that we prevent an inflationary disaster while dealing with the present recessionary one.
(on camera): Hello?
Is anybody there?
I need an exit strategy.
(voice-over): Jim Boulden, CNN, somewhere in the south of England.
(END VIDEOTAPE)
QUEST: And fret ye not, Jim Boulden is far too mean to use real dollar bills. Those weren't real currency he was burning there.
Steve Forbes is the chairman of Forbes and editor-in-chief of Forbes magazine. And he has just returned from the annual Forbes Global CEO Conference. Its overall theme, game-change for the global economy. Steve joins me now from New York.
Many thanks, always lovely to have you to discuss these matters. I know you are especially concerned about the mounting and huge U.S. budget deficit. But surely, Steve, you would agree, now is not the time to be cutting spending.
STEVE FORBES, CEO & EDITOR-IN-CHIEF, FORBES: Well, it depends on what kind of spending you're talking about. Building airports, as we do in this country, that no one uses, I'm not sure that's a good use of capital. But in terms of the -- getting the economy moving, I think two essential things have to be done.
One is making the dollar strong and stable. Now that is a very, very real dampener, the weak dollar, as the pound is going to be for your economy in Britain. And reducing tax rates -- or at least not increasing tax rates, these one-time rebates that George Bush did twice, and Barack Obama did earlier this year, they're just that, one-shots, and they don't work.
So this is not going to be sustainable. And especially for small businesses, Richard, they're not going to get the credit they need to create new jobs.
QUEST: The problem is, you can't do both, Steve. You can't maintain deficit spending and, of course, have social programs, and have lower taxes. So surely do you favor cutting spending, and if you do, where -- because, let's face it, all G-7 economies are going to have to cut spending sooner, rather, or later. Where does that spending cut take place?
FORBES: Well, there -- you take this stimulus package that we passed earlier this year, $787 billion, there are a lot of programs in there, including some wasteful infrastructure that you could cut back on.
The key thing is, though, you've got to get the economy moving. Stimulus spending doesn't do it long-term. Japan has shown that about 12 times in the last 15 years. So giving people more incentive to start new businesses and to create new jobs, we know that works. But people don't seem to learn that.
QUEST: The dollar, of course, I mean, isn't any -- isn't any economic policy predicated on a currency movement destined and doomed to fail. I mean, I know you want a strong dollar and I know you want the Treasury -- and I can see you shaking your head as I say this, but the reality, Steve, is the market will find the best level for the currency rather than artificially manipulating it.
FORBES: Well, governments do control the amount of the currency they create, especially the Federal Reserve and the Bank of England and other central banks. And you pick a target, whether it's a basket of commodities, gold, or something else, and then you tell the markets and you stick to it.
Right now the policy of the U.S. government, and has been under George Bush, which I think was his biggest domestic mistake, is a weak dollar. They don't want it to get weak too quickly, but they do want the dollar to weaken. That is poison for recovery, poison for attracting investment.
QUEST: And yet, of course, that strong dollar sucks in imports, deteriorates the trade imbalance, and weakens the overall trading position. I mean, you -- how are you squaring.
FORBES: No.
QUEST: How are you squaring this circle, for one thing, a strong dollar at the moment?
FORBES: Well, if a central bank doesn't print a lot of money, you don't get -- you get a strong dollar. And a strong dollar, if people have faith in it, then you get true lower interest rates and not just a refuge in a time of crisis, and you also get real investment again.
Foreign capital is not coming to this country. In fact, capital is fleeing this country, going to more promising areas like we were in Asia. And so that's going to be bad for the U.S. economy. Weak currencies don't lead to prosperity. Britain should have learned that in the '50s and '60s.
We should have learned that in the 1970s and the early -- in the later part of this last decade when George Bush's weak dollar helped to create the housing bubble. Weak currencies are poison.
QUEST: So.
FORBES: Again, it's not good.
QUEST: So would you have reappointed Ben Bernanke? It's academic. He is going to be reappointed. He is going to be the chairman of the Fed. He was there earlier. But I suspect you have some fundamental philosophical differences with him on this.
FORBES: Yes, I do. He does not care a hoot about the value of the dollar. And so that, I think, is the worst thing we've had. Well, Greenspan was no good in his last years. And a guy named Paul Miller -- or G. William Miller, you may remember him from the late '70s under Jimmy Carter, who didn't care about the dollar, and we paid a severe price for it.
QUEST: OK. Now, I have a set of traffic lights in my studio. You can't see them. It's an ordinary set of traffic lights. Red, amber, and green. If you took the U.S. economy as you see it, Steve, at the moment, which light would you like me to flash for you, red, amber, or green?
FORBES: Amber tending towards red, because small businesses in this country still can't get credit. I know Ben Bernanke is busy congratulating himself on his perception that he saved civilization. But unless you get small businesses back on their feet, jobs aren't going to be created, and you will see major economic policy changes next year, just for political reasons.
QUEST: Steve, many thanks indeed. Look forward to talking to you again. No doubt we'll talk about these things in.
FORBES: Thank you, Richard.
(CROSSTALK)
QUEST: Delighted to have you on the program. Steve Forbes, always a pleasure to hear the views -- particularly strong views when it comes to matters of currency and the like.
In just a moment, more strong views. You are hearing some pretty strong CEOs tonight, Michael O'Leary on why his airline will outwit, outplay, and outlast the competition.
(BEGIN VIDEO CLIP)
MICHAEL O'LEARY, CEO, RYANAIR: People love Ryanair because we're the only honest airline out there. We're breaking up all of those hidden charges and we're letting each passenger choose.
(END VIDEO CLIP)
QUEST: We'll have more from the chief exec of Ryanair in a moment, and how it's hedging its fuel for years to come.
(COMMERCIAL BREAK)
QUEST: European pilots are demonstrating in Brussels over long flying hours, which they are claiming puts lives at risk. They want the E.U. to amend current flight time regulations and act on recommendations of a study commissioned by the European Union itself.
For instance, pilots should work no more than 13 hours instead of 14 hours. No more than 13 hours a day. Flying at night should be limited to 10 hours, instead of almost 12. The pilots involved are members of the European Cockpit Association, 10,000 of which also belong to BALPA, the British Pilots' Association.
Here is BALPA's general secretary, Jim McAuslan.
(BEGIN VIDEO CLIP)
JIM MCAUSLAN, GENERAL SECRETARY, BRITISH AIR LINE PILOTS' ASSOCIATION: In the aftermath of the Buffalo tragedy, the FAA, the U.S. administration, plus the U.S. Pilots Association, have got together. The government in the U.S. has said, three months, sort it out.
Here in the E.U., the E.U. legislators have had for nine months the scientific evidence and have ignored it. I wish we could emulate the way in which the U.S. government has knocked heads together and got something moving.
(END VIDEO CLIP)
QUEST: Ayesha Durgahee joins me now to talk about this more.
You've been following it today, Ayesha, he talks about the Colgan tragedy, that's the Buffalo air crash. What was the problem there?
AYESHA DURGAHEE, CNN INTERNATIONAL CORRESPONDENT: Well, the investigation showed that the pilots were, in a word, shattered when they did not recognize the ice that had built up on the windscreen of the air cockpit.
QUEST: So basically, in that case, they were too tired to fly, and they made mistakes when things went wrong.
DURGAHEE: Correct.
QUEST: If that's the case, what -- or how safe is this? I mean, Europeans saying that they want action, but what action do they want?
DURGAHEE: Well, under E.U. regulation, pilots can fly up to 180 hours over a three-week period, 21 days. And from this scientific study, from these aviation fatigue experts, they have recommended that pilots should be flying no more than 100 hours in a period of 14 days.
QUEST: Wow. Fair enough. That's all fair and good, but these are not normal times for the airlines. Can the airlines afford them? Are the airlines going to oppose this? Everybody says they want safety, it comes at what price, though?
DURGAHEE: Well, exactly. And no matter how much cost-cutting takes place, the airlines cannot afford to compromise the safety of the pilots and the passengers.
All right. Ayesha, many thanks. Keep watching this.
DURGAHEE: Will do.
QUEST: Whenever this action is due to take place, which I think is quite soon, come back and talk more about it.
DURGAHEE: Fine.
QUEST: Ayesha, thank you.
Now Ryanair's drastic cost-cuts all seem to be paying off. The budget airline's passenger numbers in September were almost 20 percent from last year. Ryanair is hoping that the dip in oil prices will once again translate into significant savings for the company. The customers, of course, could stand to benefit.
On Friday, I asked the chief executive, Michael O'Leary, how he views Ryanair's reputation, because after all, he was the man, he was the man that wanted to charge you to use the toilet. He charges for just about everything else.
(BEGIN VIDEOTAPE)
O'LEARY: Look, the reputation we have is, we're driving down airfares. We're the only airline that is committed to lowering airfares every year, and in fact, this year, our airfares will fall by another 20 percent.
People love Ryanair because we're the only honest airline out there. We're breaking up of those hidden charges and we're letting each passenger choose. You could guarantee to get the lowest fare on Ryanair, if you want to bring a checked-in bag, you decide what you pay.
If you want a snack on board, you decide what you pay. It's your choice.
QUEST: Paint for me the picture of your ideal passenger.
O'LEARY: Our ideal passenger is someone who has a credit card and pays. Other than that, we welcome all passengers. As long as you've paid for the ticket, there isn't an ideal passenger, because we carry, remember, 66 million passengers this year.
They break (ph) from people who are going on one or two short days' stay who just carry a carry-on bag, and they -- to families with four or five people with a couple of checked-in bags who paid the extra charges. But the savings they make over four or five people in a group compared to the high fares being charged by our competitors, pay for all of the extra charges.
QUEST: You announced today you're hedged for the first half of next year at 60.
O'LEARY: Well, we're hedged for the remainder of this year, which finishes in March, 2010, at $62 a barrel. And we're hedged for the first quarter of next -- of 2011, that's the quarter ended June, at about $66 a barrel. Fifty percent of the hedging now in place.
QUEST: So you're pretty much hedged where the market is into the price at the moment?
O'LEARY: Yes.
QUEST: So you're pretty much -- you're pretty much banking on the fact that prices are going to rise?
O'LEARY: I mean, our concern would be that fuel prices have been very stable. You know, there seems to be a floor of about $65 a barrel. I think if you -- we see more green shoots of recovery, I think any risk is going to be on the upside that oil prices will rise. And I think we want to secure our oil price out into next year so that we know with certainty what our costs will be, and we can keep lowering airfare.
QUEST: If we look at the aviation industry in Europe, we've got BA trying to merge with Iberia, we've got Lufthansa eating up every airline.
(CROSSTALK)
O'LEARY: Everybody that's left.
QUEST: Every airline that might go bankrupt. And we've got Air France and KLM, Aer Lingus in trouble, BMI. So what do you see as the next -- as the major trend in the next 18 months-two years?
(CROSSTALK)
O'LEARY: I think in the next two years we complete the process of European consolidation. You're going to see three large high-fare airline groups in Europe: BA, Lufthansa, Air France, and one very large low-fares airlines with a guarantee of no fuel surcharges, which will be Ryanair.
(END VIDEOTAPE)
(LAUGHTER)
QUEST: Ah, I have to say, it is always a treat to have a chat with Michael O'Leary about Ryanair. We'll have more from him, obviously, in the months ahead.
Now the world's top finance ministers, they have vowed to crack down on tax havens. What exactly are they? We'll answer the questions. The "Biz Clinic," the pros and cons, and why Hong Kong is hell-bent on not being called one. Tax havens in a moment, QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
On Wall Street, investors ignoring new words of warning from the economist known as "Dr. Doom."
What are they ignoring and should they?
Susan Lisovicz is at the New York Stock Exchange.
And what ending -- first of all, what's "Dr. Doom" been saying and what reaction has it had within the market?
What's Nouriel Roubini been up to?
SUSAN LISOVICZ, CNN CORRESPONDENT: Well, Nouriel Roubini is saying something that a lot of people are saying, that is, that the stock market got ahead of itself and that it's due for a downturn. That's -- that's hardly a novelty on Wall Street. There's always a tug of war between the bulls and bears. And when you have a great recession, it's even more vigorous of a push/pull.
But, no, the market is ignoring that. We have a nice rally today and I think perhaps the catalyst for the rally today, Richard, is the Goldman Sachs note, which is bullish on big banks. And so you're seeing the Dow, for instance, really led by J.P. Morgan, Bank of America, American Express and so on -- a nice rally in financials.
QUEST: One thing I -- I'm sort of seeing in the market, particularly in the U.S. market, which is up the best part of 1 percent at the moment, it -- there is a lack, if you like, of substantive news. There's a lot of bits and barbs -- a brokerage note here, the ISM report there. But there's no firm direction of where we're going.
LISOVICZ: Well, I -- I think that, you know, one of the realities about any recovery is that it's not going to be even. And when you have the kind of hemorrhaging that we've seen here, that should not be a surprise.
Nonetheless, it sort of set the market back in the last two weeks. And that's where we registered two consecutive weeks of setbacks to the stock market after a spectacular rally since March.
It shouldn't be a surprise, but I think there's just a lot of worry -- could we be going back?
Could it be the shape of a W?
Could -- you know, it be a double dip recession?
And, you know, there's all this -- there are all these questions.
Last week was econorama -- full of economic reports. This week is a mirror -- a mirror image. We have nothing. We start to get a tiny trickle of corporate reports for the third quarter, of course, starting with Alcoa. Next week we'll get a much heavier stream of reports.
And so it's -- it's quiet and that's reflected in the volume, Richard. It's just abysmal today in volume -- about 600 million shares traded, with less than...
QUEST: (INAUDIBLE)...
LISOVICZ: -- 90 minutes to go in the session. There's just -- it's just -- it's apathetic. We're waiting. We're waiting on (INAUDIBLE) at this point.
QUEST: We're waiting. I was going to say waiting for Godot, but waiting for markets.
And we've got the Q25 in a couple of weeks. You're going to help us choose the -- the shares, the companies that go into this. From what we're seeing in terms of the last couple of weeks, I haven't noticed any dramatic pre-earnings releases or warnings, which suggests -- convoluted question number 496 -- it suggests that companies will meet or match.
LISOVICZ: Well, and that's what we've seen. We -- we've seen a real surprise to the up side for corporate America. But the bar was set very low and the reason why corporate America was to exceed the low expectations was because of massive cost cutting.
The bar is set higher and there's going to be a real emphasis on revenue, to see if there's any sales growth, to see if it's really just, you know, price cuts, head -- head count reductions, that kind of thing. It can only go on so long.
QUEST: Susan Lisovicz in New York. We thank you.
Talk to you again tomorrow.
Many thanks.
Now, we will, of course, be talking ahead with Poppy Harlow tomorrow, who will be interviewing "Dr. Do" -- "Dr. Doom." I was going to say "Dr. Dare" -- Nouriel Roubini -- "Dr. Doom."
Is he still as doomish, if there is such a word?
And I promise my questions will be shorter tomorrow.
European stocks -- they edged higher for the first time in a week on Monday. It was a positive reading for eurozone's private sector output. A solid report on the U.K. sector services. It all helped to ease the fears that have been gripping investors.
Don't get too far ahead of yourself. The markets, London's mines and banks offered some support on the 100. The RBS led the gains in the financial sector. In Frankfurt, Volkswagen, the best performance on the Dax. Paris, Michelin helped the 40 (ph), the Swiss insurance companies added points on the SMI. All in all, not a bad sort of Monday -- long as long (ph).
Shares in the MAN Group gained more than 2 percent. Hakan Samuelsson is the chairman of MAN A.G. As the chief exec, it's a big trucks, buses and diesel engine company. And he says business is starting to improve. As he explained to me, the recession wiped out something like half the company's order book.
(BEGIN VIDEOTAPE)
HAKAN SAMUELSSON, CHAIRMAN, MAN GROUP: And it started, when was it, six months ago. Of course, we saw it in the truck business. Order intake fell rather rapidly and now we have seen, also, the output volumes falling. So maybe we are now at about half or even less than half where we were in the peak situation -- peak time.
So it's a very severe downturn. And -- but we are seeing a leveling out on this low level. So I think that's at least the first thing you have to expect before things is getting better.
QUEST: Now, you're telling me that the reduction in orders and output was of a magnitude of 50 percent.
SAMUELSSON: Yes. Yes.
QUEST: That's extraordinary.
SAMUELSSON: That's extraordinary. I've never seen it before in -- in this business and can very few businesses -- other people have seen it either. So this is a new situation and you have to do as much as you can cutting costs to -- to live with this. And I think we have been quite successful.
We have also another positive factor, is that we are not only doing trucks and buses, but our diesel and total machinery has continued on a very good level. That has helped the company, also.
QUEST: You fell off a cliff, basically.
Are you pulling back yet or are you still bouncing along the bottom?
SAMUELSSON: Still no real signs of improvement, but we say the last six months or so, we have a rather stable level on -- on this level, a very low level. And also, of course, we went into this flat period with rather high inventories. And right now, we can also say that inventory levels have normalized. I think that's also something necessary to -- to really see before you can see a real improvement.
QUEST: The impatience of that, of course, will be that there will be an inventory buildup again in most industries, most companies, once the recession ends. But that's -- you're not going to build inventories up again, I wouldn't imagine.
SAMUELSSON: No, no, no.
QUEST: You're going to let them...
SAMUELSSON: (INAUDIBLE).
QUEST: ...continue to just -- to just slide down.
SAMUELSSON: So basically we build to order. But, of course, when you come from a very high level, double the one we have today, of course, it takes some time before the inventories have normalized. And that is now what we're seeing right now. That's -- that's a positive thing.
QUEST: Look at our traffic light. So, red is -- well, obvious. Well, you're in the -- you're in the transport industry. You certainly know what red stands for -- amber and green.
For your industry and for one, for your company and for what it's telling you, which light would you like today?
SAMUELSSON: Well, red we have seen enough of. So I would say put it on yellow because I have difficult to see that it could get worse.
QUEST: Do you think it's -- it couldn't get much worse. So, really...
SAMUELSSON: Should we also have to weigh it. But we haven't (INAUDIBLE) no real signs of any improvement. But I -- I would not believe it will get worse. I think yellow is the right color for me.
(END VIDEO TAPE)
QUEST: There you are, a yellow for an interview.
We spoke to him last week, the head of MAN Group -- trucks, trains and diesels.
A lot of yellows these days, which, of course, tells us that we're in that transition phase of the crisis, The Great Recession.
When we come back in a moment, paying the price of being a loyal football fan. It may mean you don't actually see the game. England's World Cup qualifier heads in a new direction.
Forget shooting into the big box. Think about looking at the small screen, in a moment.
(COMMERCIAL BREAK)
QUEST: Welcome back.
The Biz Clinic is now open and doing business. American tax authorities are bringing in new rules to try and catch tax cheats. We know that much so far. It's causing confusion for ordinary people working and living abroad.
So, in this week's Biz Clinic, Eunice Yoon takes a look at what American expats everywhere need to know.
(BEGIN VIDEOTAPE)
EUNICE YOON, CNN CORRESPONDENT (voice-over): Death and taxes -- they're two of the surest things in the world. With the economic crisis in focus, governments worldwide want to make sure they're getting their share of tax dollars.
One of their solutions -- cracking down on tax havens.
But what's a tax haven?
EVAN BLANCO, PARTNER, DELOITTE: You think of a tax haven as something like an island in -- in the Caribbean somewhere where people are putting their money and just hiding it from government.
YOON: In some cases, that's true. But with pressure growing for governments to go after tax dodgers, nations and cities are getting named and shamed on white, gray or black lists.
BLANCO: White is for jurisdictions that are generally in everybody's good graces. Gray is for jurisdictions that have a little bit of work to do to get to white. And black is for jurisdictions that either don't want to or really don't have the hope of getting ever to the white or the gray list.
YOON: In other words, full blown tax havens.
BLANCO: A tax haven is a tax haven because of one of two things -- either because they have bank secrecy or because they refuse to exchange information or maybe have laws that don't allow them to easily exchange information.
YOON: If a place is declared a tax haven, life starts to get tough for the financial institutions there. Business dealings with customers in other parts of the world become nearly impossible. And with leaders of the top 20 economies vowing to root out tax havens, all places are coming under pressure -- not only notorious havens like Liechtenstein, but low cost cities like Hong Kong. Hong Kong charges little or no tax on certain investments and its financial institutions are not required by law to disclose information on all transactions.
Many who live here find the scrutiny unfair.
UNIDENTIFIED MALE: Other islands and Singapore, I think they are more likely tax havens than in Hong Kong.
YOON: Even so, the Hong Kong government is looking to change the laws.
BLANCO: If you're Hong Kong and you want to be considered to be an Asian hub, you want to be a finance center, you want to be a headquarters center, you absolutely need to avoid being considered being a tax haven.
YOON: If your home city isn't declared a tax haven and you filed your taxes, you shouldn't have to worry, unless you're a U.S. taxpayer.
UNIDENTIFIED MALE: Is it confusing?
UNIDENTIFIED FEMALE: Absolutely. And I wouldn't begin to do it unless I had someone to consult with.
YOON: The U.S. Internal Revenue Service is tightening its rules for offshore accounts. All Americans and green card holders living outside of the United States plus foreigners residing in the U.S. must declare the highest balance in all their foreign accounts to the dollar if the amount combined is above $10,000. That includes bank, brokerage, derivatives, mutual funds, prepaid credit cards, even business accounts not in your name where you write the checks. The paperwork needs to be filed even for years gone by.
BLANCO: Go back over the past six years and look at any accounts that they had anything to do with.
YOON: Or risk a massive fine and possibly jail time. The deadline for filing is October 15th but the global crackdown on tax havens is only beginning.
Eunice Yoon, CNN, Hong Kong.
(END VIDEO TAPE)
QUEST: There is one thing you will have realized -- expert advice in uncertain times -- The Biz Clinic every Monday here on QUEST MEANS BUSINESS.
And one other thing to note, of course, that you should have gathered from Eunice's report, that when it comes to your taxation, complicated stuff -- seek advice, if necessary.
Stormy weather in Asia. That's putting it mildly. The rain increases in the U.K. And I -- you know, there's been such truly horrendous weather elsewhere, one hesitates to -- to actually make much of the little downpour that we've had here -- but, Guillermo, what on Earth happened?
I looked online this morning, it said it would be OK in London. And it just poof.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Well, farther south is where we are going to see more rain, but London is going to get its fair share. The temps, though -- and I challenge you on this -- I think that temperature wise, we we're not doing that badly. We have this morning but not now and tomorrow is going to be better in London. But the rain is there to stay.
Now, when it comes to Asia, this is really, really bad and also complicated right now. We have a super typhoon, Melor, here, and Parma. So you would say, well, you know, Parma is weakening.
Huh?
Parma is somewhere there still and now stationary, going down a little bit. So Luzon is going to get more rain. And there are some numeric models -- and I'm going to go way into the future right now -- that suggest that Melor and Parma may do what is called the Fujiwhara effect, which is they run -- they roll or turn around each other. And that would complicate things for the Philippines.
That's a long-term forecast. You know, it may be wrong because it's numeric. But let's see what we have here. More rain into parts of Luzon where we don't need. It's stationary right now. We'll have to see what happens. You need to stay with CNN. We'll let you know.
In the meantime, you see that Tokyo is getting rain. I'll tell you why. Taipei wins because of that cyclone that we had -- we have here, in the vicinity of the Philippines.
You see how close it is to it?
But this is a super typhoon that is promising to go into Japan.
But there's one system -- it's a frontal system that is going to help out and push this system away, but we are going to get a lot of rain associated with it. So it's not a win-win situation in this case.
Look at the winds -- 250 per hour, gusting at 306. It's pretty scary. It's menacing. But as it moves to the north, it's going to weaken and start to move very rapidly. You see 26 per hour. So that means it's going to move away.
Well, let's see, time to talk about Britain. I think we're going to see rain all over. It started with Scotland. It's now generating rain from the south in England. We're going to see more overnight. You're going to see a miserable Tuesday -- a lot of rain. But look at the temps - - 20, not bad. The low, 16 -- not bad at all. If you go up to the north is where the cold air is. So Wednesday, also, it's going to be rainy. I think we're up for a lot of rain in here.
Coming from the north, from the south, remnants of a tropical system. So we have a lot of rain in Britain. We have a lot of winds in other sections, like here in the northern parts of Europe into Germany. Also, in Southern Germany, we're going to see winds. We're going to see winds here into Galicia. We'll see winds in Portugal. So expect delays at airports, naturally, with this, anywhere from Dublin to Brussels into Britain, London particularly. So we're going to see bad weather.
Twenty-three in Paris, not bad; 24 in Bucharest; 20 in London.
And you know what?
In Israel here, especially in Haifa, Zefat, Kadrin (ph), Nazareth, we'll see rain. You see this system here moving into that area also at 11. And we'll see some rain in coastal parts of Syria. It's not a good idea to swim in the Mediterranean Sea in those areas. It's going to be choppy, windy and rainy.
We'll see you on the other side of the break.
This is QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: When football fans can't make the game, most gather at a nearby pub, find a friend -- usually the one with the biggest TV screen, preferably something like that, if you can.
For those who are keen on watching England's next World Cup qualifier on Saturday, you'll have to do something completely different. Forget that -- think more something like this.
Why?
Jim Boulden explains.
(BEGIN VIDEOTAPE)
JIM BOULDEN, CNN CORRESPONDENT (voice-over): Turning adversity into opportunity -- when none of Britain's conventional broadcasters was willing to pay a multi-million dollar fee to air England's national football World Cup qualifier this coming Saturday, the games' rights holders, Swiss company, Kantaro, came up with another idea.
PHILIPP GROTHE, CEO, KANTARO: Ultimately, we decided then to put this game onto the Internet, because I think this is a fantastic and very innovative solution to broadcast this match.
UNIDENTIFIED MALE: England will play live on the Internet for the first time.
BOULDEN: Fans can pay anywhere from $8 to $20 to watch live via their computer or a bit more to watch in select cinemas. But England has already qualified for next year's World Cup and bloggers have been flooding Web sites with the URLs of sites where people can watch the game illegally.
So, will fans pay to watch legally online?
UNIDENTIFIED MALE: They're charging to watch it, but there's so many sites out there that you can watch it for free. So if someone's going to have to watch the game on the Internet, they're not going to pay for it at all.
BOULDEN: The company streaming the game, known as Perform, provides sports content for dozens of Web sites and has streamed other minor matches which were not on television. But nothing like an exclusive, live, national World Cup qualifier.
ANDREW CROKER, CHAIRMAN, PERFORM: Certainly all the rights holders are looking at this with great interest. And I know that people look at practically Major League baseball and basketball, where you have a huge volume of games -- obviously, in the NFL, you've got less games. But those, you know, (INAUDIBLE) streaming there. America is a much more mature broadband environment. But this is -- it's fairly pioneering still doing -- they're doing a football match.
BOULDEN: Some of Britain's national newspapers have signed up to show the game live on their Web sites under a revenue sharing deal -- a new way, perhaps, for papers to survive. And while there is a great deal of buzz and criticism around an England match not to be screened on TV in England, some say more of this is coming.
PETER SILVERSTONE, MD, KANTARO U.K.: I don't expect this type of discussion to be commonplace, this media frenzy, because in six months time, this will be a moot point. We will all be watching content -- live content (INAUDIBLE).
BOULDEN: Up until now, watching highlights, minor events and illegal material is the norm for sports online. But rights holders will have a taster this Saturday of how many people are willing to pay to sit in front of a computer screen instead of a TV screen.
Jim Boulden, CNN, London.
(END VIDEO TAPE)
QUEST: And I'll have the Profitable Moment in just a moment.
(COMMERCIAL BREAK)
QUEST: Tonight's Profitable Moment -- G7 finance ministers have decided they will no longer regularly meet and issue their bland and detailed communiques. Instead, they prefer the larger G20 grouping that's now been endorsed by the Pittsburgh summit.
Critics say about time, too, G7 outdated, unrepresentative, a waste of time.
Well, I'm a little more worried than, perhaps, most. G7 are still amongst the most powerful economies in the world. They have the highest trade flows between them, currency transactions and growth. As long as it was meeting publicly at the IMF and at summits, we knew what they were up to.
Let's not kid ourselves the G7 is no longer relevant. There are issues like currencies, interest rates, all of which are best decided within the G7. Any group that brings together the U.S., the E.U. and Japan is still amongst the most powerful grouping in the world.
Look, I never liked the G7 very much, but at least I knew what they were up to. I now fear that some finance ministers will meet quietly -- a private summit. Oops, it's not a time for the G7 to quietly drift away.
And that's QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I do hope it's profitable.
"AMANPOUR" with Christiane starts right now.
END
