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Quest Means Business
Greece Prepares to Face the Markets; Dow Jones Trades Above 11,000
Aired April 12, 2010 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ADRIAN FINIGHAN, GUEST HOST, QUEST MEANS BUSINESS: Well, here's the safety net, now prove you can walk a tightrope. Greece prepares to face the markets with back up from the EU.
Great expectations: The Dow Jones trades above 11,000 as a new earnings season dawns.
And Economics 101, George Soros gives us a lesson on how the world has changed.
Hello, I'm Adrian Finighan, in for Richard Quest, this is QUEST MEANS BUSINESS.
Good evening.
Tonight, Greece is getting ready to go back to the markets to borrow fresh funds. It goes safe in the knowledge that it has serious back up. Euro Zone finance ministers are finally putting their money where their mouths are, and naming a figure for the safety net they've spread out for Greece.
The Euro Zone and the IMF stand ready with $61 billion worth of loans. Euro Zone nations are prepared to lend more than $40 billion, and there is another $20 billion on tap from the IMF. Interest rates would be set at about 5 percent on three-year loans. That is less than Greece is paying in the open market, but well above what a low-risk borrower, such as Germany, would pay.
Well, the euro rallied on the news earlier, but it shed a little of that gain later on in the day. So, on Tuesday the Greek government will be selling bonds, looking to raise more than $1.6 billion. Now it is crucial that Greece gets that money as cheaply as possible. Is it going to get it? Well, the man who might have an inkling, Jim Boulden, is monitoring the markets. He joins us now in the studio.
JIM BOULDEN, CNN INT'L. CORRESPONDENT: Great, Adrian, thank you very much.
Yes. Tuesday's bond sale will be a definitive test of how this rescue deal is going down with investors. The less it costs Greece to borrow that money on the markets, the less it is to need the emergency financial support from the euro land countries. It is all about credibility.
Now, traders already seem to be giving the fall back plan the thumbs up. Greek bond yields fell, whether you are talking about the three-year, or the benchmark 10-year, spreads narrowed between the Greek bonds and the German bunds. And of course, that is crucial. Also, Greek stocks jumped, banks did well, EFG, EuroBank up, 11 percent. You also saw banks like the National Bank of Greece and alpha bank, up more than 5 percent.
Now, the euro currently trades just under $1.36. That is down about a half a percent, but that follows a sharp rally. Earlier it touched close to a $1.37.
And Adrian, we haven't seen that in a long time.
FINIGHAN: And the markets must be pretty pleased, Jim, that at least now they have a clear response to Greece's problems, from European leaders, and not just vague promises, like they've had in the past.
BOULDEN: And that is exactly what it is. It was too vague for the markets and they told Europe, time and time again, "We don't believe you. We don't trust you." And so what they really wanted was a number. And as many commentators were saying today, that is exactly what they got.
(BEGIN VIDEO CLIP)
VANGELIS AGAPITOS, ECONOMIST: I'm glad to see a very specific solution, because the markets were under the impression that in March there really wasn't a agreement, it was just an understanding. Now we have an actual agreement which is very specific and which provides the necessary liquidity for the government to actually carry on it its measures. Because the Greek government does need time.
(END VIDEO CLIP)
FINIGHAN: But, Jim, all of this isn't just about solving Greece's immediate cash-flow problems. The ultimate goal is to stop the country from going under, let's face it. Is it going to work?
BOULDEN: Yes, well, this is what we have to see. First we have to see whether the markets trust this enough that they will now see the interest rate on Greek bonds come down. Greece has got to sell and repay a lot of bonds next April and May, very crucial time. If it can't do that if it fails, then it goes to Euro land, then it says to the IMF, also, we need this money.
And this is where it becomes a much more fundamental issue because it is not just about Greece, it is Portugal and others, it is also about how does Europe get its act in order, and some of the economists we were talking today also had something very interesting to say, about this and about how the IMF is playing into all of this.
(BEGIN VIDEO CLIP)
KEN WATTRET, CHIEF EURO ZONE ECONOMIST, BNP PARIBAS: The issue here is putting the Greek public finances on a sustainable medium to longer term basis and the IMF's involvement should help with that. That adds some credibility to the process. But in terms of the Euro area's response, then I think there is a issue here about whether there is a support mechanism in place, a clear crisis mechanism, within the Euro area, which doesn't need IMF involvement. So, from the credibility of the euro area authority's ability to deal with this problem in the first place, the fact that the IMF is involved just asking questions abut whether we have the kind of structure the kind of procedure in place in the Euro Zone to avoid these kind of problems in the future.
(END VIDEO CLIP)
BOULDEN: Avoiding the problems in the future is the issue here, because it seems that they have stepped up to the plate when it comes to Greece but we don't know what they would do if another country would come to them.
FINIGHAN: Let's talk about this interest rate that Greece would have to pay if it went for the Euro Zone and the a package of aid. It is quite- it's punitive, I mean, some would say.
BOULDEN: Yeah.
FINIGHAN: It's high isn't it? Much more than the IMF would want in return for lending the money that it's going to lend.
BOULDEN: Yeah.
FINIGHAN: What's the point of it?
BOULDEN: Well, the idea was it must be seen as a penalty if Greece cannot do it itself if the markets don't believe it is going to bring it's budget, to have a sit down. If it can't make the cuts, the painful cuts, let's be honest. The people in Greece are going to suffer. What it needs to do, of course, it needs to take down it's budget deficit from close to 13 percent projected. Down to something around 8.7 percent and we're still a long way away from 3 percent. So, it needs to show credibility getting itself down to 3 percent. And if can't do that, then it is going to pay even more for it's debt. Then it's going to be even more expensive and more painful to bring it down.
FINIGHAN: There is this theory, as well, that the ECB is learning lessons here and that up until now on Greece it has been playing catch up with the markets. It has sort of appeared to be one step behind and then this morning we had this amount, which we knew this was coming, this announcement about the aid package. But it was far higher than the markets were expecting. So at least it is beginning to try to stick one step ahead of the markets, isn't it?
BOULDEN: Yes, it definitely was more money than we thought, but then as one analyst said, my goodness if it is that much money, if it is $40 billion, and then some IMF money, does that mean that Greece is even in worse shape than we think. So some people looking at that number, not as positively as we've seen. The majority of people are looking at that-
(CROSS TALK)
FINIGHAN: And one more question about this, about the interest rate, I mean to what extent do you think that this punitive scale of the interest rate that Greece would have to pay if it went for the Euro bailout. Has that been put into place by Germany, do you think?
BOULDEN: Oh, yes.
FINIGHAN: Yes?
BOULDEN: Yes, I mean, there is no doubt that Germany did not want to have a free ride, when all the indications were that it would have been about, you know, it could have been 3 to 4 percent if it had been left up to everyone else. Closer to what IMF is, which is about 3, 3.5 percent. But Germany, definitely, the government couldn't go to the citizens of Germany and say we're going to give them this bailout at this lower rate. They needed to be seen as a painful step if Greece comes to the Euro land countries.
FINIGHAN: All right. Jim, many thanks, indeed. You have been blogging about this today on the web site and asking whether a bailout will help the country. We've got some responses coming in already.
Ruth Hurt says how are the economies, who would themselves dare to help bailout, otherwise each country is ready for the worst themselves or is this leading to the dawn of a one world centralized economy. Is this fool talk? Correct me, but please be sensible," says Ruth.
And we've got Shevanka Mukaji saying, "Sorry, but it seems that what Ruth says has a lot of value in it. The countries who bared their taxpayers chest to bail out privately owned large corporations are daring to teach fiscal discipline to Greece.
Get in on the debate yourself by going our web site, make your voice heard, it is at CNN.com/QMB That is where you'd find Jim's blog and we'd love to hear what you have to say about Greece's current position.
European stocks ended Monday little changed after the early rally here, petered out, financial stocks did pretty well around the region, over general relief over the outlook for Greece. We saw gains today for Lloyd's Banking Group, here in London, Societe Generale in Paris, among others. In Frankfurt today shares in Infinium Technologies slumped by almost 3.5 percent.
Now, a report into the causes of Iceland's banking crisis, accuses a former prime minister and other ex-government ministers of gross negligence. The report by a parliamentary commission said that Gerhardt and others failed to spot warning signs leading to the collapse of three of the nation's largest banks. Iceland's crisis had a ripple effect, of course, around Europe. Britain and the Netherlands together forked out more than $5 billion to compensate their own residents, who had lost savings as Icelandic banks folded.
Now, tomorrow on QUEST MEANS BUSINESS we are going to hear from Paul Renson, the man who headed the special investigation commission. So, make sure you tune in at this time tomorrow night, for that interview. We are turning now, though, to Wall Street where the Dow has been able to remain above the 11,000 mark for a majority of the session today. Stephanie Elam is standing by in New York with more on the day's action.
And that is a pretty decent start to the week, Stephanie.
STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: Yes, indeed, Adrian, hopefully we can stay this way for another, oh, let's just say almost two hours when the markets close. But the blue chips have managed to say on the upside for most of the trading day.
The Dow broke back through the 11,000 mark late Friday, and then it dipped down and closed just before it. And we're hoping that positive momentum can continue today. Particularly after we start receiving some those corporate earnings reports that we'll be getting soon, this week. Many investors are holding off on making any big bets until the start of earnings season and that officially kicks off after trading today. Now, ALCOA is usually the first big company to report and that is usually starts off earnings season, so we will be getting their report in just a few hours.
In the meantime, we'll be keeping our eyes on shares of PALM. Right now they are up over 18 percent, actually, almost 19 percent right now, on reports that the smart phone maker will put itself up for sale this week. Bloomberg is reporting that the company has hired Goldman Sachs and catalyst partners to help it find a buyer. It has been no secret how much PALM has struggled over the last few years, especially with increased competition from Research in Motion's BlackBerry. And of course, you can't leave out the iPhone from Apple. Now, last month two analysts cut their price targets on PALM to zero dollars, after its bigger-than-expected quarterly loss. That had to hurt, Adrian.
FINIGHAN: Front man, U2 front man, Bono, is a major shareholder in PALM. I mean, if the sale goes through that is going to make him-I was going to say a wealthy man, an even wealthier man than he already is.
ELAM: Uber wealthy.
FINIGHAN: Yes. Despite what's going on with parliament, if you look at economic indicators in the overall market. You could be forgiven for thinking that the recession is well and truly over, but there is only one group qualified to make that call. Is that right?
ELAM: Yes, you could be right. The recession could be over. But the thing it is not over until the National Bureau of Economic Research, or the NBER, calls it. And in a rare move that group put out a new statement today, despite the Dow passing 11,000, the fact that we have seen the stock market starting to improve, they say it is too soon to call whether the recession is over.
The NBER says, quote, and I'm going to read it to you, "Although most indicators have turned up the committee decided that the determination of the trough date on the basis of current data would be premature. Many indicators are quite preliminary at this time, and will be revised in the coming months," end quote there.
So, to call of an end to a recession the NBER needs to figure when the economy hit rock bottom, because when there is no where to go but up, then we're officially in recovery mode. But the problem is that even thought the recent economic reports have been upbeat, most of them will be revised in the coming months and that revising could go downward as well. It may not just be to the upside. And as what we will be hearing from Wall Street on that one, most say this recession likely ended last summer, if that is the case it would be the longest downturn since the Great Depression, so long, no how you put it, Adrian.
FINIGHAN: Absolutely. Many thanks, indeed, Stephanie Elam, live in New York.
Right, let's get you up to date with what else is making news around the world right now. Becky Anderson joins us live in the London News Room.
(NEWSBREAK)
FINIGHAN: Back to one of the stories Becky was talking about. Red Shirts on the streets, red digits on the trading screens. Investor in Bangkok recoil after a weekend of violence, in a moment, what about the longer term impact on Thailand's economy. We'll be right back.
(COMMERCIAL BREAK)
FINIGHAN: The anti-government protests in Thailand are expected to take a direct toll on the country's economy. After 21 people died in clashes, between protestors and police on Saturday nervousness had a firm grip on the stock market when it opened on Monday market. Bangkok's SET index fell 3.6 percent today. The index has lost 6 percent of its value in the last week. Thai airways today fell 13.5 percent.
What's behind all of that, apart from the violence? Well, the government cut its economic growth forecast to 4 percent, from 4.5 percent as a direct response to the violence. Remember only last week the World Bank raised its growth forecast for Thailand to 6.2 percent this year, citing the strength of the recovery.
So, why has the government said the economy is going to suffer this year? It is all down to tourism. The government has predicted that visitor numbers could slump by 20 percent this year. That is the main factor, as I said, to cutting its growth forecast today. Tourism accounts for 6.5 percent of Thai GDP. Many foreign countries are warning their citizens to be cautious when traveling in Thailand, or indeed, to the nation. Now, in Bangkok, CNN's Senior International Correspondent John Vause takes a closer look at the affect of the political turmoil for us, and why it shows no sign of dying down.
(BEGIN VIDEOTAPE)
JOHN VAUSE, CNN SR. INT'L. CORRESPONDENT (On camera): Thailand's main stock index was down by more than 5 percent today, at one point, a sign that investors are concerned about the toll these now violent protests will take on this country's economy, in particular, the tourism sector.
Thai Airways, for example, closed down by more than 13 percent. Crew operators are now talking, anecdotally about full planes leaving the country, empty planes arriving. That would mean empty hotels, empty shops, empty restaurants, and empty resorts. And that would be a blow to the tourism industry. One of the biggest employers here had already been struggling with the global downturn.
There are reports that the prime minister might now be considering early elections, possibly within the next six months. But that is unlikely to appease the anti-government demonstrators. They want him to step down immediately. And after the failure of the government to clear demonstrators from the heart of the city over the weekend, it seems that Prime Minister Abhisit's options are now, in fact, very limited. Even if he does call those early elections it is unlikely his party will win. And that will spark another round of protests. This time by his supporters.
This political turmoil has been going on for years, here in Thailand, but because it is been peaceful, it has been mostly ignored by tourists and foreign investors, but now, after the bloodshed over the weekend, there are concerns of much more instability to come. John Vause, CNN, Bangkok.
(END VIDEOTAPE)
FINIGHAN: Well, as we said, dozens of countries are warning their citizens to take extra care when visiting Thailand. And the Thai media is reporting that Japan has raised its warning level to the highest level. Here is what other governments are saying right now. The U.S. says that travel to Thailand remains generally safe. However, U.S. citizens are reminded to exercise caution and vigilance at all times. The U.K. warns British nationals should exercise extreme caution throughout the country and avoid demonstrations and large gatherings. And Australia says there is a strong possibility of further violence and civil unrest in Thailand, particularly in Bangkok, while there has not been violence in areas outside Bangkok, to date, this could change quickly and without warning.
Now, from useless to useful, London is looking at garbage in a whole new way. In our "Future Cities" series, it isn't waste if it turns into watts.
(COMMERCIAL BREAK)
FINIGHAN: Now here at QUEST MEANS BUSINESS we are bringing you "Future Cities" the series that looks at the business of sustainable urban living. Engineers, architects, planners and scientists, all contributing their views on what cities could and should look like. Well, tonight, we are getting down and dirty looking at how London is cleaning up its act to turn its waste into energy.
(BEGIN VIDEOTAPE)
ARTURO CASTILLO-CASTILLO, IMPERIAL COLLEGE, LONDON: At the moment, in cities like London, and in many other cities around the world, we have so much waste. There is a lot of hope in the concept of waste to energy, or waste to new materials. Because we have solutions that will allow us to derive a lot of energy from what we consider today as waste. And all the parts of society stand to win in the future from this kind of solution.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS (voice over): There is an old English saying, where there is muck there is brass. But there is energy in muck, too.
CASTILLO-CASTILLO: All matter contains energy, that what enables us to take energy out of what we consider as waste.
QUEST: We all know about the stuff we recycle, but what about the rubbish that can't be. The stuff we shove in bags for the garbage men to take away. A large part of London's non-reusable waste ends up here, squashed into containers on the banks of the River Thames. The containers are loaded onto barges, that take a trip down the river. Three of these old barges can drag nearly a 1,000 of waste through the city. It is the equivalent of 90 heavy truckloads. It has been happening like this for hundreds of years, but at the moment all this rubbish is heading for landfill sites. And that's not sustainable option for the future.
CASTILLO-CASTILLO: When waste goes to landfill, all (UNINTELLIGIBLE) material stands rotting and that produces methane, which is a very power greenhouse gas. So, we want to stop that happening.
QUEST: Something else must be done with all this unrecyclable rubbish.
CASTILLO-CASTILLO: By extracting energy from waste you are minimizing the waste and at the same time you will be generating some energy, so we can tackle two challenges with one initiative.
QUEST: The pursuit of energy from waste is driven by government. The U.K.'s capital produces 22 million tons of rubbish each year. So the business and science worlds are actively exploring different ways of extracting usable energy from this. One of them is a special form of incineration.
CASTILLO-CASTILLO: The concept is very simple. When you burn the waste you could use a lot of heat, and then with that heat, you heat water, produce steam and with that steam you produce electricity. From that you can start supplying home with electricity.
QUEST: By 2011 the barges will end their journey along the River Themes, here, at a brand new state of the art incineration plant. Here the containers of rubbish will be burned to produce 66 megawatts of electricity. That is enough to power 60,000 homes in London. With concerns about pollution this incinerator was only given the final go ahead after years of public inquiry and consultation.
PETER GERSTROM, CORY ENVIRONMENTAL: We have to do something about the waste. These plants have clean up systems that take out any potential contaminants and gasses that we don't want to put into the environment. And what goes up the chimney is a very, very clean gas.
QUEST: When the plant become operational, next year, it will be burning more than 600,000 tons of waste a year. Extracting energy from the stuff in those little black binliners.
GERSTROM: It is the thing that all the cities need to do. And the advantage of this particular plant is that it will do it efficiently.
QUEST: However high tech this may be, the policy of incineration remains controversial for some. It is not a one-stop solution for dealing with all of London's non-recyclable waste.
CASTILLO-CASTILLO: The plant being built by Cory is going to be a very good plant. But there are other things you could do with waste. There are other technologies that you could use. There are other kinds of thermal treatments that you could use. So, yes, it is a good technology, but it is not the only good technology that we could be using.
QUEST: Forgive the pun, energy from waste incineration remains burning issue. For now, plants like London's Belvedere, will play its part with the best technology available. Burning rubbish to make energy is not new, but it is an evolving science. And that spells good news for all of us looking for a cleaner more efficient future city.
(END VIDEOTAPE)
FINIGHAN: Well, in the next installment of "Future Cities" we will be looking at electric cars. What's their role in lower carbon emissions and keeping economies on the move?
Now, the fraud that shook Wall Street and bankrupted dozens, may have been spotted earlier. We'll meet the man who knew what Bernard Madoff was hiding and could have stopped him if anyone in authority had listened. We'll be right back.
(COMMERCIAL BREAK)
FINIGHAN: Welcome back. Live from London, this is QUEST MEANS BUSINESS on CNN. I'm Adrian Finighan.
Now, it is more than a year since Bernard Madoff was sent to jail in the biggest Ponzi scheme in history was laid bare. The saga began to unfold on December 11, 2008, when the Wall Street financier and former chairman of the Nasdaq exchange was arrested and charged with securities fraud. Trustees were appointed to liquidate his firm, Bernard L. Madoff Investments Securities.
Now, December 17the he was under house arrest at this $7 million New York apartment. Bail was set at $10 million. He was jailed on March 12, 2009, after pleading guilty to 11 counts of fraud. In June he was sentenced to a 150 years in jail, the maximum possible sentence. Well, it took hardly anytime for Madoff's financial pyramid to crumble, but his crimes were years in the making. And one man was onto him, well, before the law caught up with Madoff. Boston-based fund manager Harry Markopolos spent nine years trying to convince U.S. authorities to investigate Madoff. He's now written a book called "No One Would Listen."
I asked him earlier what first alerted him that something was wrong.
(BEGIN VIDEOTAPE)
HARRY MARKOPOLOS, AUTHOR, "NO ONE WOULD LISTEN": In late 1999, Frank Casey one of my investigative team members, came back from New York with a one page marketing brochure. And in five minutes, I spotted three things that were wrong and it clearly pointed that Madoff was a fraud.
The first thing was Madoff's strategy would have him taking stocks that only went up or stayed the same but never went down. Well, that's never happened before in human recorded history.
The second thing was his return line went up at a 45 degree angle. Well, that doesn't exist in finance, either. That only exists in a high school geometry class.
And the third and most compelling thing was over 96 percent of his months were positive. That would be equivalent to the English national soccer team going 96 wins and four losses in World Cup play.
FINIGHAN: I heard somewhere that your -- your boss wanted you to try to replicate what Madoff was doing, which, obviously, you decided couldn't be done without -- without breaking the law.
Was it -- was it possible to explain that to your boss?
I mean what did he say at the time when you said well, look, this -- this guy is a fraud?
MARKOPOLOS: I tried. I was a derivatives portfolio manager. I was managing billions in dollars in these strategies. I knew what was achievable and what was not. I told my boss. As he said well, your math can't be as good as Madoff's, he's the king opinion on Wall Street. He has advantages. You just aren't smart enough to figure it out.
So my pride was wounded and I wanted to prove him wrong.
FINIGHAN: All right, so the -- the book tells the story of how you tried umpteen times to bring this to the attention of the authorities, who -- who effectively ignored you.
I mean how did that feel?
MARKOPOLOS: I felt like I was our doormat for eight-and-a-half years. When I finally got to testify before the U.S. House of Representatives in February of 2009, I felt it was payback time and I wanted the public and the victims to know the truth. So I had no mercy when I was testifying.
FINIGHAN: But it was a long time coming. And there -- there were times when -- when you feared for your safety, when -- when you felt the need to -- to blow the whistle, to say this isn't right. But it -- but you also felt personally threatened.
MARKOPOLOS: Well, the first two years had started out innocently enough and then it quickly became the twilight zone of all cases. It became dangerous in June of 2002, when I was in London, then going to Paris and then Zurich and Geneva. And I realized the offshore nature of these feeder funds and there were organized crime elements that were being victimized by Madoff.
FINIGHAN: Right.
MARKOPOLOS: He had a lot to fear.
FINIGHAN: So it wasn't Madoff himself, because when you -- when you see news pictures of him, he doesn't exactly seem prone to gangster-like tendencies. A fraud, sure. Maybe -- maybe he's a fraud, but -- but not a gangster. It was the feeder funds that -- that worried you?
MARKOPOLOS: Yes. If you're stealing from organized crime, then you're either criminally insane or you're an organized crime boss yourself. We still don't have enough information to determine which is, in fact, true. We'll find this out later on, as the years progress.
FINIGHAN: And if the Ponzi scheme failed, of course, then they would suffer, so they wanted to keep you quiet and that's what made you worried?
MARKOPOLOS: Oh, if they knew that Madoff was stealing their money, they would have put him away immediately. So if he had a choice -- him or me. I think I know how he would decide. This is a man that destroyed thousands of families. One more family destroyed wasn't going to matter to this monster.
FINIGHAN: You're -- you're no friend of the S.E. -- the SEC, are you?
And for the SAA, for -- for that matter, on -- on this side of the Atlantic.
Have -- have -- have things improved, do you think, with the SEC?
Could it spot another -- another Ponzi scheme like Madoff's?
MARKOPOLOS: I think the regulators are very good at spotting Ponzi schemes. Before, they were matters of low priority that they didn't know how to solve. Now, they're matters of high priority that they know how to attack aggressively.
FINIGHAN: Right. OK. Yes.
MARKOPOLOS: They've evolved. They've re-disorganized themselves. But the same people are in the same positions. No one has been held accountable. These are the same people that missed the coming collapse of our financial system.
So how can you have any confidence in them?
(END VIDEO TAPE)
FINIGHAN: Harry Markopolos, the Madoff whistleblower.
Now, resilience in the face of national tragedy, as Poland mourns the loss of its president. The prime minister's top economic adviser joins us live from Warsaw. That's next on QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
FINIGHAN: As you've been hearing in the main news, Poland has begun a week of mourning, just two days after its president and several other top officials were killed in a plane crash. The Polish capital of Warsaw was awash with tributes on Monday.
Behind the scenes, preparations got underway for a transfer of power.
Joining us now live from Warsaw is Jan Krzysztof Bielecki, the head of the Polish prime minister's Economic Council.
Mr. Bielecki, thank you, sir, for being with us.
Our condolences.
The -- the acting president says that there's no rush to -- to rush the appointment of -- of a new central bank governor. But one of the prime minister's own economic advisers said today that choosing a new governor quickly is vital to ensuring policy continuity in Poland.
Who's right?
JAN KRZYSZTOF BIELECKI, HEAD OF PRIME MINISTER'S ECONOMIC COUNCIL: Well, I think that the -- the institutions are very strong in Poland. And the tragedy, of course, is -- is very dramatic and brought a trauma to Poles. But the institutions work well and the -- the succession of the -- the office of the president is -- is handed over very quickly.
So I think that we are not in that rush to -- to make some additional decisions in the next couple of days or -- or hours.
FINIGHAN: And that opinion is borne out by what happened on -- on the markets today, when they opened.
If we take a look now at -- at what happened.
I mean you -- you could hardly describe them as being panicked.
The -- the next scheduled rate meeting in Poland is -- is later this month, the 27th and 28th of April. Now, the central bank intervened in the currency market just last week to curb the zloty's gains. It also signaled that it's deciding at the moment what to do with interest rates, whether to start raising them again from the record lows -- 3.5 percent they're at, at the moment.
Are these decisions that -- that can be made without the deciding vote of a central governor?
BIELECKI: Yes, I -- I think that we are not in a hurry to -- to make any decisions also regarding monetary policy at the moment. There was a small fear that the -- maybe the appreciation of the zloty goes too quickly. And I understand that the independent decision made by the central bank to -- to intervention and also to show the markets that the situation could be a little bit managed, was the successful one and -- and a good one.
And as -- as -- as I said before, we have strong institutions. It has been already 20 years since the transition and big reform has been introduced to my country. So there's plenty of good people and competent people to run the country and to -- to -- to handle this situation.
FINIGHAN: Mr. Bielecki, your name has been touted as -- as a possible candidate for the post of central bank governor.
What do you see as -- as the main priorities now for the Polish economy?
BIELECKI: Well, I -- I've been very satisfied with my present position as the head of the Independent Council of Advisers to the prime minister. Due to certain circumstances, I have been, let's call it, unemployed and also under the anti-competition clause, for the next year or so. So I can contribute to my country and to do something probably pro bono. And that's my priority, not to consider any further positions.
FINIGHAN: OK. But -- but if -- if you were in charge, then, presumably, you would continue this -- this policy of -- of steady as -- as she goes. You wouldn't be looking to take Poland into -- to any different economic sphere or down any -- any different economic path?
BIELECKI: Poland is doing very well. And what we have to, I think, uphold for the next years to come is to maintain that good balance between austerity measures that are necessary to -- to keep the public finances under control and the -- to be very conservative regarding the budget and fiscal deficit. At the same time, to continue the momentum of a quick development of the country's investment into infrastructure, because the modernization program has been up to the rate of -- thanks to the funds coming from the E.U. Cohesion funds, mainly, and structural funds.
FINIGHAN: Mr. Bielecki, you -- you talked about austerity measures. The late president was cited -- often cited by the government as an obstacle to -- to implementing economic reforms. That places significant emphasis, doesn't it, on the -- on the forthcoming presidential elections - - the elections that will follow this tragedy?
BIELECKI: Well, I -- I think that at -- it's difficult now to discuss about the first coming election and -- but with the timing of the -- the next election, because we are now witnessing an unprecedented situation in our history, and I think, also, in the history of Europe, that so many public figures, including the -- the president died in a plane crash. So the other issues are not that top priority for us for the time being.
FINIGHAN: We understand that.
Mr. -- Mr. Bielecki, we appreciate you -- you finding the time to join us on -- on QUEST MEANS BUSINESS.
Once again, sir, our -- our condolences.
Thank you for being with us.
BIELECKI: Thank you very much.
FINIGHAN: Jan Krzysztof Bielecki.
Now, the way we think about the world's economy has changed. The financial crisis has made the best minds re-examine old assumptions.
The investor George Soros, for instance, says what happened in 2008 proves that we need to look again at something called the efficient market hypothesis, essentially, the belief that markets know best.
Soros has just founded a think tank to pioneer such studies. The Institute of New Economic Thinking, it's called.
And Richard Quest caught up with him recently at a conference in Cambridge to launch the new body.
(BEGIN VIDEOTAPE)
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We're here in Cambridge.
What was the -- what's the purpose of this whole conference and the -- and the idea of NET?
GEORGE SOROS, INTERNATIONAL FINANCIER: Well, you know, being at -- in the home of -- of Keynes is very appropriate because he really was the economist who had the greatest insight.
But basically this whole efficient market type focus is -- has failed. And every recognized that it has failed. And, therefore, the economists need to find a new understanding of financial markets and (INAUDIBLE).
QUEST: Do you find any difficulty saying that it's failed?
These are fundamental theories and you're right in the heart of -- of where it was -- much was written.
SOROS: Yes. Well, it -- it -- this is what science is. It's trial and error. And there's been an error and it's recognized. Unfortunately, we don't have a properly developed alternative. And that's what we are looking for.
QUEST: It begs the question, will you know when you've found it?
SOROS: Well, we will see, because you have actually some of the cream of the economics profession here, a number of -- practically every panel has a Nobel Prize living economist on it. So the -- there has to be a rethinking and a -- and a reworking of the curriculum of the teaching of economics. And it has to be quite profound.
Now, I myself am a proponent of one of the alternatives. So it -- and it's not just my alternative that is being considered, but all the other ones, too.
QUEST: Do you find it at all difficult saying that the efficient market hypothesis has failed, but you have been a huge beneficiary?
SOROS: Look, I've been a huge beneficiary of having recognized that it's not applicable to the real world earlier than most other people. I wrote a book about it published in 1987 and, you know, actually, I made my money by betting against the efficient market hypothesis.
(END VIDEO TAPE)
FINIGHAN: Fascinating.
George Soros speaking there with Richard in Cambridge.
Right. Time to get a weather forecast.
Guillermo Arduino is at the CNN International Weather Center.
And since you and I last spoke, what was it, about -- hmmm, was it two weeks ago now we spoke?
GUILLERMO ARDUINO, CNN METEOROLOGIST: A week-and-a-half, yes.
FINIGHAN: Spring...
ARDUINO: Yes.
FINIGHAN: Spring has sprung on -- on this side of the Atlantic. We've got some nice settled spring weather.
ARDUINO: I know. And you know where we're expecting some snow now?
In Spain, of all places. Well, let's call it a chance of -- I'm retarded (ph) -- but here, you see, Castellan and Teruel. It's Castellan de la Plana and Teruel. It's a little bit north of Valencia. So a good chance of snow.
Some more snow here in the Alpine Region. I'll give you details. But let me focus on Britain, because it is very nice. Tonight, as you see, you may see here into London and all the eastern sections, maybe cooler weather, because we have the winds coming from the North Sea. And we are not going to see brilliant weather into Northern Ireland.
But Scotland had a very nice day, into the teens after so much cold weather. So we're happy to report that it's going to continue.
And for people in London, it's going to be nice. Like the next three or four days are going to be extremely nice. We're very happy about that.
In Sweden, we have some rain showers. Then some clouds here that come and go, that's about it.
In Spain, I told you about that.
And then Italy, the Balkan Peninsula here, Dubrovnik is going to see intense rains. We have some alerts posted.
Here in -- in Austria, especially here toward the east in Niederosterreich, in Wein and in Burgenland. This is the extremely -- the extreme eastern portion of the country. We have cities like Vienna, Wiener Neustadt, Eisenstadt. There is where we have the chance of 20 to 60 millimeters of rain. It's because of this low that is bringing the rain around. We have the mountains, too.
But Dubrovnik in Croatia is where we see the chance of some more intense rains.
The winds in Amsterdam; in Paris some, but not bad; Brussels also with some rain showers, not badly at all. Then Norway looking fine. Dee (ph), one of our faithful viewers from there, saying the weather is great, into the teens. We're happy to see that, especially this big change. We're very glad to see that, Dee.
Rome may see some rain showers. The same thing -- part of the same. And also, no problems at airports elsewhere, but in Portugal is where we have some thunder in the forecast, as well. In Viseo (ph), Guarda, Coimbra, all the way down into Avora (ph). So that's more or less what we're going to expect.
Temperatures are not a problem, even though Stockholm at eight, the high; and also seven in parts of Germany. They have, Adrian, some concern about cold conditions. Elsewhere, it appears to be very, very nice -- back to you.
FINIGHAN: All right, Guillermo.
Great to talk to you again.
ARDUINO: Good to see you.
FINIGHAN: Good to see you.
Many thanks.
ARDUINO: Thanks.
FINIGHAN: Today, the U.K.'s Labor Party officially laid out its vision for Britain.
Where does business fit into it?
We'll take a look at some of the party's aims and we'll get the thoughts of someone who's actually in business, next here on QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
FINIGHAN: Now, Britain's prime minister, Gordon Brown, has launched the manifesto on which his Labor Party will fight for reelection. There were no big spending commitments. Instead, it was very much about keeping economic recovery on track.
The way to do it, according to Gordon Brown, is like this. His government is pledged to halve the U.K.'s budget deficit over the next four years. They want to see financial change in the system. The Labor Party will work with other governments to agree on a new global levy on banks. And it will oblige them to keep more capital in reserve as a cushion against possible losses.
And it doesn't stop there. Brown's party is also looking at business takeovers. Labor says that the threshold for a corporate take over should be raised to a two thirds majority of shareholders instead of the current 50 percent plus one share.
Well, the Labor Party says there will be "no return to business as usual."
CNN's Jim Boulden spoke with Digby Jones, a senior adviser of the bank HSBC.
He's also a former minister of state for U.K. trade and investment, though he didn't join the government party at the time.
Jim asked him what the real differences are between the U.K.'s political parties in terms of the economy.
(BEGIN VIDEOTAPE)
DIGBY JONES, FORMER HEAD, CONFEDERATION OF BRITISH INDUSTRY: The problem is, of course, that turkeys don't vote for Christmas. So vote for me and I'll put your tax up, I'll cut all your public spending doesn't tend to get you elected.
So I would be rude and wrong if I was saying they are lying. I don't think they are. But all of them are not acknowledging how bad it is and they're not putting up the things they're going to have to do. And one of the things I think the markets understand is whoever is the prime minister on the seventh of May is going to have to do roughly the same sort of thing as the -- the other -- the other one would have done if he got in.
There might be an argument about the state of what they're doing.
BOULDEN: Right.
JONES: There might be an argument about a few billion here and there...
BOULDEN: Right.
JONES: -- and about where the priority is. But by and large, whoever wins this election has got to do basically the same thing.
BOULDEN: Does that mean there's not a radical difference between these chaps when it comes to the businesspeople in this country and what they're looking for?
JONES: Politicians don't really understand wealth creation. They're great at talking about spending it. They're wonderful at talking about how they'll cut spending it.
BOULDEN: Yes.
JONES: They're talking about how they delay cutting spending it. But talk about making it, creating it, getting along aside business, you don't hear politicians on that page at all. If you did, you wouldn't have had the Tories saying we'll cut national insurance contributions and -- and we'll pay for it with this efficiency saving. You wouldn't have had the government saying we'll raise national insurance contributions, both of which, of course, is a tax not on the profits of a business, but a tax on employing people.
BOULDEN: And that's why the government -- the count -- that's why these businesses say that they're not going to be able to employ as many people...
JONES: Well, sure.
BOULDEN: -- if these taxes continue to rise.
JONES: For sure. You know, at the end of the day, the only way we're going to get ourselves out of this mess, we're going to trade our way out. Business is going to pull the economy out of this mess by employing more people, creating wealth, generating taxation.
You only do three things in business, if you make money. You either reward your shareholders and they pay tax on it. You keep it in the business and you pay tax on it. Or you employ people and they pay tax on it.
And that tax goes, in part, to pay for the public sector, who pay tax on it.
But it all starts with business making money and employing people.
Now, on that basis, why on Earth tax creating the job?
Why don't they say -- and have the courage to say -- I'm not going to have national insurance for employers, what I'm going to do instead is, when you've made the money, I'll put more tax on your profits?
Business would have a difficulty trying to say no to that, because business has got to be seen to play its part. Business has got to win a few more laurels, back at -- especially in certain...
BOULDEN: Yes. Yes.
JONES: -- sectors.
BOULDEN: Yes, yes.
JONES: And -- and at the end of the day, that will be an easier thing to understand.
But for politicians on one side to put it up and the other side to say I'll cut it, as opposed to saying I won't have it at all, shows either -- I believe, politicians don't understand the -- what -- what business is about...
BOULDEN: Yes.
JONES: They see it as a great milk cow that creates this wealth that, for some reason, is always good to be there. Well, in a globalized economy, where business has choice and people who work in business has -- have choices about where they do it in the world, India wants your lunch, China wants your dinner.
You're seeing America suddenly growing more quickly than anybody expected. You're seeing the Mittelstand of Germany coming back.
Britain has got to compete in the world. And I want to see politicians of all parties -- I want them getting on the page and saying how are we going to create wealth, not, oh, how are we going to spend it?
(END VIDEO TAPE)
FINIGHAN: The forthright Digby Jones.
I like someone who can express an opinion. And politicians don't know anything about business, he was saying. They don't know what business is about.
You'll be hearing again from Digby Jones as the U.K. election campaign takes shape. He's going to be one of our business leaders sharing his thoughts right here on QUEST MEANS BUSINESS.
Just ahead on the show, we'll take a look at the market numbers in the U.S., Europe, and, in particular, Greece.
We'll be back in just a moment.
(COMMERCIAL BREAK)
FINIGHAN: I'd like to remind you that shares in Greece enjoyed something of a rebound today. The stock market bounced back sharply for the second straight session. Traders clearly relieved that the Eurozone has finally put a figure on its aid plan for Greece.
Banks did pretty well. EFG Eurobank gaining 11.3 percent. Bank of Piraeus adding 9.3 percent. The National Bank of Greece and Alpha Bank both gained more than 5 percent today.
The Composite Index adding 7 percent over the past two trading days.
Well, banks also gained plenty of ground elsewhere in Europe. But it wasn't enough to -- to lift the major markets. Most of them ended the day fairly flat, as early gains and euphoria over Greece evaporated.
Let's take a look at what's happening on Wall Street right now. On the Dow Jones, for much of the session it's been trading above 11000, boosted by E.U. leaders finally coming up with that figure for Greece. And earnings season, of course, kicks off today with Alcoa and Intel -- Intel reporting right after the bell.
That's it for QUEST MEANS BUSINESS.
In London, I'm Adrian Finighan.
As Richard would say, whatever you're up to in the hours ahead, I do hope it's profitable.
"AMANPOUR" coming up next on CNN, right after the news headlines with Errol Barnett.
END
