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Quest Means Business

Spain Meets Netherlands This Sunday, Therefore The Economic World Cup Comes To A Climax, Too

Aired July 09, 2010 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: It's all to play for, Spain meets Netherlands, and our Economic World Cup comes to a climax.

Google and China make up ending their stand off over censorship.

And austerity versus stimulus, Niall Ferguson tells this program where he stands on the great economic debate.

I'm Richard Quest. It may be the end of the week, but we have a lot to bring you, because I mean business.

Good evening.

Football fans have taken sides. And as you've heard even Paul the Octopus has voted with his tentacles. He's backing Spain to come out on top on Sunday. When it comes to the economy, the question is who deserves to win. The Spanish taking radical steps to restore stability and emerge from an employment nightmare, or the Dutch who are still wrestling with their financial bailout.

Now, in a moment, we'll be live in Amsterdam and in Madrid. But first they maybe the two best football teams in the world, but as we have (AUDIO GAP) out the World Cup, we are more concerned with the economic World Cup, and here, of course, the story is somewhat different.

These are the two countries, Spain and the Netherlands. Now, in Spain you have a jobless rate of nearly 20 percent; a country in recession. You have a jobless rate, though, in the Netherlands 4.3 percent. The Netherlands deficit/GDP, deficit-the annual deficit is 6.6 percent, compared to Spain's 9.3 percent. So not surprisingly, Spain is undergoing an austerity drive. And crucially, it is having to have $18.5 billion in cuts in government services, civil servants, 5 percent pay cut, there is big reforming in the public sector. And the country is still in recession with GDP down just 0.5 percent. The GDP in the Netherlands, up 1.3 percent this year.

So, if we just take a straightforward economic number, as they stand at the moment, on the Economic World Cup, then clearly the Netherlands wins hands down. That, if it is the economy.

Joining me now, from Amsterdam it is Diana Magnay. Joining me fro Madrid, it is Al Goodman.

And we start with you Diana. Diana, if it is the economy alone then you win hands down. Your economy is stronger, it is more resilient, you are out of recession.

DIANA MAGNAY, CNN INT'L. CORRESPONDENT: Absolutely. The Netherlands have done fairly well, through the Euro Zone crisis. They have weathered the storm if you will. As you said, unemployment, 4.3 percent, that is pretty low. Their budget deficit, 6.6 percent of GDP. I know that is high, but not as high as many other countries in Europe. So, yes, they are doing much better than, for example, Spain. But invariably if the Dutch do win the World Cup, then consumer spending will be boosted and that is good for a country which is suffering from weak consumer spending and which depends heavily on exports. And its exports at the moment are obviously not being bought up by certainly the rest of the Euro Zone, if not the rest of the world.

So, people would be buying more. They would be buying a lot more beer, which would help companies like Heineken. You know, there are all sorts of short-term factors which would help the Dutch economy if Holland were to win the World Cup. But I think people are much more excited about winning the World Cup simply because they haven't ever won it. And they've been in the finals twice before. And if they don't win it a third time around, they would be the unluckiest team never to make it, to have the World Cup trophy, having got into the finals three times around, and never clinched it.

QUEST: Diana, it is fascinating, because that confidence and feel good factor does have an economic benefit eventually. Even though that might take some time to translate.

How would you, in a word-or two, I'll allow you three on a good day- how would you sum up the mood in Amsterdam in the Netherlands, tonight?

MAGNAY: Full of anticipation. I know that is three. It is already too many. People are very, very excited. They are pretty nervous. The all watched that game, on Wednesday, that Spain played against Germany. The had all expected Germany to win. And they saw he kind of perfection with which the Spanish held the field. So they are pretty worried about their own team's chances. That his what I'd say, Richard.

QUEST: All right. Diana Goodman-sorry, Diana Magnay-who is in Amsterdam. Al Goodman, we will rejoin in a moment or three, in the- actually, you know, he's in Madrid. She's in Amsterdam. And we will be back with them both, in a moment.

Victory on the foreign field could bring big benefits back at home. Believe it or not, economists say you can see a link between winning the World Cup and improving rates of economic growth. And some reckon you might get up to half a percent more growth than you would have done for scoring more goals than the other team.

Now, let's see what happens. Argentina won in 1986, beating West Germany, 3 goals to 2. The year after they won, or they year they won, the economy grew 7.1 percent. Now you compare that with a contraction of 7 percent in the year before. So, Argentina gets a strong thumbs up, for the net effect of winning the World Cup.

In Germany's case, four years later, Germany beat Argentina, 1-nil. And while Argentina's economy shrank 1 percent that year, Germany's grew 5.7 percent. And it added another 5 percent points. Connection or what? Winning the World Cup seems to have done the trick.

Let's go to Brazil, which of course, in '94 and '02. In '94 it was a standout year the GDP grew 5.4 percent. Less so, in 2002, where it grew nearly 2 percent, 1.9 percent. But, but, the theory does seem to hold good, whether it is in Argentina, or in Germany, or in Brazil, if you win the World Cup your economy does actually grow faster, and stronger.

Gideon Rachman is the chief foreign affairs columnist at the "Financial Times". He knows his football very well. He was in South Africa for many of the World Cup games, two of the quarter finals, in fact. He wrote a fascinating article about the relationship between football, the World Cup, and economies. He joined me to discuss, is there a connection?

(BEGIN VIDEOTAPE)

GIDEON RACHMAN, CHIEF FOREIGN AFFAIRS COLUMNIST, FINANCIAL TIMES: Well, that is certainly possible. I mean, it is very hard, to go to South Africa, as I did, and look at these magnificent stadiums, such as the ones in Cape Town and Durbin that have been built specially for this tournament, and think, gosh, was it really worth spending you know, almost $2 billion on these stadiums when 20 million South Africans live on less than $2 a day.

Now, you know, it is possible they will just see these as massive white elephants. I think it is also possible however, that there will be a more positive spin. Because you have to remember that South Africa had a pretty troubled image in the run up to this World Cup. A lot of the headlines were about crime, about electricity shortages, about mass unemployment, and I think that this whole month is served as a pretty positive advertisement for South Africa.

I mean, I know, from talking to people who are out there. A lot of people who went there, they were slightly scared about the whole crime situation.

QUEST: Right.

RACHMAN: Overwhelmingly, they had very positive experiences and I think that will spill over, not just into tourism, but possibly also into foreign investors taking a second look at the place. And if that works, then it might be worth it.

QUEST: If we, as we look to the final, and draw economic and business strands together. Who did win? I mean, Nike seemed to have managed to choose anybody and everybody who was never going to get very far, and arguably the curse of Nike might have given a bit of extra publicity.

Secondly, FIFA obviously, made off like daylight robbers and headed off into the sun. South Africa, the players, who has won?

RACHMAN: Well, I think FIFA are the ones that you have got to identify. I mean, they do an incredible business job, because all the costs are loaded onto South Africa, you know, the costs of the stadiums, the cost of infrastructure. FIFA keeps all the money from television, ticketing, marketing, and they are absolutely ferocious in fending off anybody who attempts to kind of get in on the marketing kick. They have made by some estimates, 1.7 billion pounds from this World Cup. Now they will say, well, this is our one shot. We have got to make all our money now, and that is probably true. But one has to say they are not the most popular organization in South Africa or anywhere else.

I think the sponsors probably feel that they've got quite a good deal out of it, although, as you say Nike seems to have backed some of the less successful players. And I think individual players will have done very well out of it. People like Asamoah Gyan of Ghana, even though his tournament ended in floods of tears when he missed that penalty. He's now a global super star. So, you'll see new people appearing on billboards and getting big contracts at the clubs around the world.

QUEST: You can plead the Fifth on this one, as the last question, Gideon. Are you going to give me a prediction for the final result?

RACHMAN: Well, I-my predictions are worth pretty well nothing. I've got a whole pile of betting slips, which are now useless, based on my hunches about this World Cup. I think Spain will win in quite a close game, 1-nil. They have won their last four games, 1-nil. So, if you want to sort of place me in the role of the octopus, I'll say Spain, 1-nil.

QUEST: Gideon Rachman, of the "FT", the octopus.

You've heard from Diana Magnay, who was in the Netherlands, in Amsterdam. Al Goodman, now, is in Madrid.

Al, you have Paul the Octopus on your side, you have people generally suggesting that Spain is going to win. Spain's economy is a basket case, but you might do it anyway.

AL GOODMAN, CNN INT'L. CORRESPONDENT: Indeed, and a victory just getting into the finals for the first time, Richard. They've been in the World Cup 13 times. They've never finished higher fourths. So they've already achieved something new, got into the finals. And what you are seeing, for instance, at this restaurant behind me, this Spanish flag. You are seeing that all over the country. Flag sales up five-fold, because of this team. Restaurants and bars seriously up.

And you know, Spain is really good at doing organized fiestas. Look, you are seeing that in Pamplona this week. The running of the bulls, it is happening for just a few minutes in the morning, they are running the bulls. But what is really happening in Pamplona, the whole week, is millions of euros being spent on all sorts of things at the fiesta. And that in a broader sense is what is happening now that Spain has moved right along into the World Cup. So people who were not spending are going to the bars and restaurants, watching the games with their friends. And there is an uptick. At this restaurant, they are telling me that behind me, and all the restaurants this is the kind of uptick you are seeing. Some economists say it might be worth a quarter of a point that might help boost Spain, and right now anything is needed, Richard.

QUEST: See, that's the point. We had Diana Magnay, a short moment ago. I'm sorry to tell you Al, you know, we have been looking at the Economic World Cup. If economics alone ruled this matter, you should loose.

GOODMAN: Well, I will tell you that I think most Spaniards would accept, they understand they are in a deep recession. There is a lot of labor unrest. And this is one thing that gives them a chance to forget. And believe me, the socialist government is thrilled that the team is doing so well. Because they are hoping everybody will forget about this bad economy. And they would be willing to loose on the economy and win the World Cup and see if they can figure out the economy later, Richard.

QUEST: Al Goodman, joining me from Madrid. Of course, needless to say, we take no sides here. I mean, we allow our correspondent, let's face it, if Al didn't want Madrid to win, or Spain to win, and Diane didn't want the Netherlands to win, there would be something seriously wrong, as they are stuck in the middle of all of that.

On Monday, let me tell you, we will be talking to the ambassadors of Spain and the Netherlands. I'll be having breakfast with them. And we'll be talking over the economy and the World Cup.

(DESK BELL CHIMES)

In a moment, it looked like it was all over for Google in China. Now Beijing says it can stick around, $400 million reasons why Google is glad to be staying.

(COMMERCIAL BREAK)

QUEST: Welcome back.

They have a license to stay now. After a six month stand off between Google and China was diffused on Friday. Beijing has renewed the U.S. company's license to offer Web services. Last week, in an effort to appease the authorities, Google stopped automatically redirecting users in China to an uncensored Hong Kong search site, it is now using a landing page. In January a dispute over the censorship required by the Chinese boiled over to the point where Google threatened to pull out of the country. And, of course, China threatened not to renew the license.

Come and join me over in the library and we can talk more about it. Particularly, why is Google so keen to stay? And this is the reason. After the United States, the number one Internet market, and certainly, the one market that has perhaps more web users than even in the United States. China is a vast market. Perhaps, also, not fully untapped at the moment, but with 400 million potential users, anybody who has anything to do with Worldwide Webbery, it would be lunacy not to be involved there.

Google's revenues in China thought to be about $400 million. Very small there at the moment, but of course, it is the growth in the future. On the other side, it is not all smiles and smooth sailing. There is the question, particularly for a company like Google, that made such a business about doing no harm, and doing good in the world, censorship. The censorship it undertook in China did tremendous harm to the company's reputation. And when it pulled out, or announced I was pulling out, then there was a reverse in that.

Google shares, as you look in the market, at the moment. A nice little pop up there, the best part of 2 percent. So, we need to know why and actually, who gave-and if anybody did give-what was the upshot? Let's go to San Francisco now. Michael Copeland is a senior writer at "Fortune". Michael is with me.

Was this appeasement, was it detente, or was there a straightforward winner on either side?

MICHAEL COPELAND, SR. WRITER, "FORTUNE": Well, it is interesting. It is a little bit unclear exactly how this has played out. But you know, you mentioned that a couple of months ago, Google automatically redirected Chinese users on Google's China Web site, to a Web site in Hong Kong that was uncensored. And now that has happened, is Google has said, look, we are going to put a little link there, so if you are in China and you want to go to those uncensored results. You will have to click on that link.

So, in some ways I think Google can maintain its stance that we won't censor our results in China, but they are pushing the burden of going through those uncensored results in Hong Kong, on the user. So, Google can say it is not censoring, and now the user themselves in China will have to decide whether they are going to go to that Hong Kong site or not.

QUEST: The fact that they renewed the license, from the Chinese side, I suppose, bearing in mind outside of China, Google is the big player. Did the Chinese authorities-do you think-ever really consider not renewing Google's license?

COPELAND: It seems unlikely. I mean, Google is not the largest player by any stretch. Baidu, a local Chinese company, is the largest search company in China. And Google's share is somewhere in the 30 percent range. So, if you compare that to their 60 percent, plus, in North America and Europe. They are sort of a small player in China.

But this is all about the future. And so, Google from a pragmatic point of view needs to be in China. Because, let's face it, the mobile Internet is going to be massive, and Google wants to be there. Now, I think the Chinese government wants Google there, too. Because there has been some outcry on the part of Chinese to keep Google in the wake of what happened in January and in March. So, I think the Chinese government finally understood that, yes, the people of China would like to see Google there, play alongside Baidu. And so, they have both compromised in allowing Google to stay.

QUEST: When we look at the-if we just extracted Google from this equation for a moment. Is there an inevitability, that this will happen again. Be it with a Google, or a Microsoft, or any company, or maybe not even in the Internet sector. Maybe with some other company, but the tussles that Jeffery Immelt spoke about with GE, in last week, about GE and companies doing business in China. Are we destined for these to happen more often?

COPELAND: I would think so. I mean, China, obviously, is flexing its muscle all around the world. And if you are going to play and do business in China, you need to abide by those rules to the letter. And one thing that I think Google probably learned from this is that you don't-you don't face China head on, and you don't allow them to loose face. So, you know, Google learned its lesson. Maybe we don't see this again with Google, but I do think, you know, as other companies move in, are used to doing things a certain way in other parts of the world, when they come to China, they need to play by China's rules, otherwise these things will happen again.

QUEST: Michael, many thanks, indeed. Have a pleasant weekend in San Francisco. Hopefully the weather is a big cooler than it has been elsewhere. Many thanks, indeed. Michael joining us.

Now, Germany is out, but one German company is set to do pretty well in this World Cup. Whatever your team, chances are you are wearing this name. We'll hear from the chief executive of Adi-das, or Adee-das. I promise you we will not have a debate about how it is pronounced.

(DESK BELL CHIMES)

(COMMERCIAL BREAK)

QUEST: Welcome back. Germany's World Cup dream is over, one German company still has a big interest in the competition, Adidas is the maker of the official World Cup ball. It has been since 1970. It supplies the kick (ph) Spain will wear in Sunday's final. The tournament has pushed sales of football shirts and balls to record levels. Twice as many replica shirts have been sold during this World Cup than last time in '06. Alex Thomas sat down with the chief exec of Adidas, Herbert Hainer, and says he's very pleased with the sales figures coming from this year's tournament.

(BEGIN VIDEOTAPE)

HERBERT HAINER, CEO, ADIDAS GROUP: In terms of commercial success, we will achieve record sales with at least 1.5 billion euro, which is 25 percent up growth since our last World Cup in Germany. So over all, you see, a satisfied CEO.

ALEX THOMAS, CNN SPORTS CORRESPONDENT: Because for normal fans will often question why any company would pay so much money to be an official sponsor. But you point to those record sales, I guess, and say it is worthwhile.

HAINER: I guess for us it is quite obvious. We are a sports company, football is the heart and soul of our company and Adidas started with football, the famous (UNINTELLIGIBLE) stats as you know, therefore I think it is obvious that we are here. But also it is, as we just said, for commercial reasons. And of course, we want to get the return from the investment, and for the money we pay, getting a return, and we get it.

THOMAS: How long will Adidas remain a World Cup sponsor, do you think?

HAINER: Oh, we are since, I think, more than 30 years in close cooperation with FIFA and we will stay for the future in close cooperation with FIFA. So we definitely will be the sponsor for 2014, for the next World Cup as you will see. And then there is a future ahead of that.

THOMAS: Does it make a difference to you where the World Cup is held?

HAINER: Not really. I mean, obviously, in the past, we always said that big markets should be the host for the World Cup. But this time we saw for the first time that even a smaller market, like South Africa, we have the tools to export the World Cup back into our home countries, into the home countries of the participating teams. And you have seen, there are more and more people who are going out for public viewing, be it in Brazil, be it in Germany, England or where so ever, therefore yes, we are happy if the World Cup goes to Brazil, because this is one of the greatest football nations. But we also have learned how to deal with it if it is in a smaller country.

THOMAS: Did you have any doubts that South Africa would be a good World Cup host?

HAINER: I never had. And it is easy to say now, because the World Cup is more or less over, and it went very well. But you can read in all the interviews, I gave, that I said, after I have been here a year ago, for the Confederations Cup, and I personally could see who well it was organized, how excited and joyful the people were, here in South Africa. I said from this moment on, this will be a great World Cup, and it was.

THOMAS: It is not just Spain against Holland in the final. It is Adidas against Nike, isn't it?

HAINER: It is. It is. There is always a two horse race.

(END VIDEOTAPE)

QUEST: A nice bit of humor.

Now, at QUEST MEANS BUSINESS we always like to hear from you and you have been sending us some magnificent photos from your world at work and how you have been enjoying the World Cup wherever you have been experiencing it.

So, tonight, how about this? This is a picture form Patina Crookhambo (ph) from Neckelslume (ph) in Germany. I'm sure I've got that wrong. Now, her family have been hosting Brian (ph) who is an American GAP student. I'm not sure which is Brian. Oh, we'll work that one out later.

Anyway he watched his first soccer game on Sunday, and Patina says that he thinks Germans are crazy about football. And it is Patina's husband's 49th birthday on the same day. Happy birthday for them.

To Ghana, and Nabagana Najemo Anevis (ph) has been sending us this picture. Enjoying the World Cup, again another German theme to it. Ghana and Germany, there we area. Enjoying that from the World Cup. If you got a picture of you enjoying your world at work, when it comes to the World Cup. Last chance will be on Monday.

We'll show some pictures of you watching the final, maybe. Quest@cnn.com, is the address, and Tweet@RichardQuest.

We promise you we will wrap it al up. And for those of you who can't stand the World Cup. There will not be another word, after money.

Coming up, the man responsible for steepest spending cuts in Britain , since the Second World War. The chancellor George Osborn, puts the case for austerity.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN, where the news always comes first on this network.

Now, it looks exactly the way you'd think that a spy swap should look, right down to the chartered planes from the U.S. and Russia, both of which landed in Vienna. The passengers were switched, the planes took off again. Fourteen people were exchanged. Ten Russian nationals charged in the U.S. are now back in Moscow. Four men accused of spying for the U.S. are making their way to the United States via the U.K.

A suicide car bombing in Pakistan has killed at least 56 people and wounded more than 100 others. It happened in the tribal region along the Afghanistan border. The authorities say the target was a local government office. But the bomb actually went off in a nearby market. They believe more victims may be trapped under the rubble of damaged buildings.

Spanish football fans are rejoicing. Paul the Octopus said their team is heading for World Cup glory. Spain's players hope they have enough in the tank to beat the Netherlands in Sunday's final. The eight-legged oracle inside a tank has predicted a Spanish victory.

Now, of course, Paul has been predicting the correct winner in every one of Germany's World Cup matches. This is one them.

All this week on QUEST MEANS BUSINESS, we've been talking about the great economic debate. And it really comes down to this -- austerity versus growth -- to cut or to spend.

Europe's embracing the new age of austerity and Britain is in the vanguard, the poster child, if you like, for austerity cuts. The new government budget has imposed the deepest spending cuts in more than 60 years and there's the prospect of even more before the year is out.

CNN's Fareed Zakaria spoke to the chancellor of the exchequer, George Osborne, and asked him why he was cutting so harshly and so soon.

(BEGIN VIDEOTAPE)

GEORGE OSBORNE, U.K. FINANCE MINISTER: We needed to produce a budget that dealt decisively with the deficit issue. That's the first point I'd make.

The second point I'd make is once you've committed yourself to doing that, you then have to set out credible measures. And I think if you look at the budget that we produced, it is not a budget for one year, it is a budget for four or five years. Not all of the measures we announced take effect within days or weeks or even within a year. They are staggered over a four year period. And I think people need to understand the budget in that context, that we are seeking to set out a credible plan with specific measures that take effect over a period of time.

And I think by doing that, you can see the real results. The guilt yields for the United Kingdom, the long-term interest rates that the -- the British businesses can borrow off, have come down since the election. Now, partly that has been a flight to safety brought about by concerns about sovereign debt elsewhere in the world. But the fact that we are considered the right place to go in a flight to safety is itself, I think, a vindication of what we've done. And it's interesting to note that since the election in this country, Britain has moved more a tune -- more akin with countries where there aren't big questions about sovereign debt issues and moved away from the trend that has been followed by certain countries where there are concerns about sovereign debt.

FAREED ZAKARIA, HOST, "FAREED ZAKARIA GPS": So you moved -- you've moved closer to Germany, as it were, and further away from Greece?

OSBORNE: Yes, well, broadly speaking and other European economies where people have concerns. So it's not the case that in the last two months, every economy has found it easier to borrow or the -- to have market rates have come down. Some countries have seen their market rates go up. And I'm pretty clear that if Britain had not set out a global plan, given we had the largest budget deficit, we probably would have seen our market rates rise.

ZAKARIA: What did you think of President Obama's letter to the leaders of the G20 urging them not to stop stimulus measures?

So it -- what you're doing is really a direct contradiction of what Obama urged you to do.

OSBORNE: Well, I don't think that's the case. And it's been my privilege in this job to meet the president and it's clear from the private conversations and the public communiques that, you know, he is not trying to lecture individual countries about what they should do. He is, as a president -- as a leader, trying to create an international framework in which surplus countries, countries that can do more to stimulate demand because they don't face deficit issues, should do that. And, for example, we welcome the decision that China has taken with its currency. Whereas those countries with serious deficit problems need to get on and address them.

(BEGIN VIDEO CLIP)

QUEST: The U.K. chancellor or finance minister, George Osborne.

And you can hear what else he had to say on this weekend on "FAREED ZAKARIA GPS" Sunday. It's 20:00 in the U.K., 22:00 in Central Europe right here. It is on CNN.

Now, Japan stands on the austerity side, too. The prime minister has made fiscal reform a top priority. Japan's ratio of public debt to GDP is 200 percent -- the highest in the industrialized world. The P.M. is in favor of doubling the sales tax from 5 to 10 percent, possibly over the next couple of years. Japan goes to the polls. They will have upper house elections on Sunday and this idea isn't going to go down well with various.

Prime Minister Kan says the tax plan is good for the country.

(BEGIN VIDEO CLIP)

PRIME MINISTER NAOTO KAN, JAPAN (through translator): In order to avoid Japan's bankruptcy and the breakdown of the Social Security system, I am asking you to start a discussion about the tax system reform, including consumption tax toward 2020. I believe that you all understand the necessity for the debate.

Am I right?

(END VIDEO CLIP)

QUEST: The Japanese prime minister.

Now, all this week, we've heard a range of opinions on the austerity debate. It's casting economists into two camps very firmly.

One of the strongest voices on the post-stimulus (INAUDIBLE) is the Nobel Prize winning economist, Paul Krugman.

Tonight, we plug for austerity. We have his opposite number.

I spoke to the British economist and the historian, Niall Ferguson, who told me the debate actually presents a false dichotomy.

(BEGIN VIDEOTAPE)

NIALL FERGUSON, PROFESSOR OF HISTORY, HARVARD UNIVERSITY: On the one side, you've got the claim that we can borrow almost without limit in pursuit of Keynesian stimulus. And since it didn't work the last time in the U.S., let's try another trillion. And the other side is saying put on a hair shirt and tighten your belt.

I don't think that's actually the real choice.

First of all, I don't think many countries have the Keynesian option. I'm not even sure the United States has the option to go on borrowing a trillion dollars a year for the rest of time.

And secondly, there are two kinds of austerity. The -- the sort that Keynes used, which I think is what they're doing in Greece, and there's the sort of that can galvanize you back into economic life, which I hope is what we're trying in the United Kingdom.

QUEST: But do you believe there are too many countries heading for the exit all at once at the moment?

FERGUSON: There is a risk there. There's no question. The growth economy is slowing down. The big engine in the United States is not quite stalling, but it's certainly not ticking over in a healthy way. And remember, at the same time, China has been applying the monetary brakes.

So everybody simultaneously tightening their belt is almost certainly a recipe for a -- a slowdown in growth. And that -- that's a worry. No country, in a sense, can act completely independently in a globalized world. A lot depends, from the vantage point of George Osborne, on what the Germans do. And the Germans don't need austerity. The fact that they're inflicting austerity on themselves is, I think, really surplus to requirements.

QUEST: So I'm asking you to come off the fence here on the -- forget the one hand and on the other hand, which hand are you on?

FERGUSON: I've been arguing that for over a year, that you cannot run trillion dollar deficits year after year, as the United States is doing. There has to be a credible path to fiscal stability over a five or so year time frame. The thing is, don't tighten it in 2010. You have to phase it in. But if you have an incredible financial policy over a five year time frame, then the bond vigilantes will get you.

So I think that's the critical point that many people misunderstand. What is totally absent, Richard, in Washington, at the moment, is any plan ever to balance the budget again. Now, that's not credible. And it's setting the U.S. up for a fall.

QUEST: We always knew this was going to happen, didn't we?

Putting the fire out 18 months ago was the easy bit. Rebuilding the house and deciding where the West Wing and the North Toilet was going to go was going to be the tricky bit.

FERGUSON: Oh, we've just come through a near depression experience and we've learned from history, thank goodness. We tried out the lessons of John Maynard Keynes, big fiscal stimulus. And, of course, we tried out the lessons from Milton Friedman -- massive monetary easing.

One thing that's been forgotten in this debate, as we've focused more and more on fiscal policy, is that the monetary side of the thing is changing and changing in a negative way. There's monetary contraction in the United States at the moment. The broad money measures are contracting at 6 percent a year.

It's almost like the Fed took its eye off the ball while everybody was arguing about Krugman versus Ferguson, tightening versus stimulus, the monetary policy could be going wrong. And that's increasingly my concern.

(END VIDEO TAPE)

QUEST: Bringing to an end our great economic debate. You've heard the best and the biggest names in the business talking about it this week.

QUEST MEANS BUSINESS in just a moment, the weather, because it's going to be hot in Europe. That much I can tell you without any help.

But just how hot?

We need some experience (INAUDIBLE).

(COMMERCIAL BREAK)

QUEST: You're not going to get a word of complaint from me about the deliciously toasty weather that we've got in London at the moment -- in fact, over most of Europe it is beautiful.

Pedram Javaheri is at the World Weather Center -- and it is going to last and if not, well, what happens afterward?

PEDRAM JAVAHERI, CNN METEOROLOGIST: Yes, I -- I like the selection of words -- beautiful. It's pretty toasty outside, but we'll take it.

Yes, we'll take it. Pretty warm temperatures across portions of London, where Richard is talking about. The current temperature at about 7:40 or so in the afternoon there, the current temperature is in the upper 20s. The average for today's date on July 9th is at 23 degrees. So again, it shows you, in the evening, still fairly warm around Paris. Those temperatures should be in the mid-20s, as well. And the warmth stretching all the way east.

And we think the high pressure ridge is going to slowly expand east, so the warmer temperatures are going to shift that way. And also, with that southerly flow, the southern tip, say around Spain and also the French Riviera, are getting pretty muggy conditions, too. And the actual high temperatures, again, put it in perspective. Dusseldorf in Germany, 35 degrees; Rotterdam, also, temperatures in the mid-30s; 33 in Paris. And, again, this has been going on for a few days. And we think the core of the energy going to shift east. So, yes, it will stay warm in the western portions of Europe, but we think some of the warmth now going to expand out toward, say, within Austria and also getting some -- some more warmer temperatures coming in just north of that region, into Poland. Some of the temps going to stretch here with that southerly flow.

Again, record challenging temperatures -- a good eight to 12 degrees above the average. And Madrid it shows you, the temps have been warm. A gradual cooling trend as the warmth begins to shift east. And the average temperature for this time of year is 32 degrees. And, also, Paris, notice some relief in sight. A weak disturbance could bring in some showers, Richard. So we're looking at temperatures to cool back down to 26. But still, a few degrees above where it should be for this time of year.

QUEST: I can live with that.

Many thanks.

Have a good weekend.

And this is QUEST MEANS BUSINESS for this week.

I'm Richard Quest.

As always, with the World Cup on the horizon, whatever you're up to in the hours ahead, I hope it's profitable.

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END