Return to Transcripts main page

Quest Means Business

Reports From Euro Summit in Brussels; A Look At Patent Policies in Europe

Aired December 08, 2011 - 14:00   ET

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

HALA GORANI, CNN INTERNATIONAL ANCHOR: I'm Hala Gorani at the CNN Center. Here are your headlines this hour.

Iran has publicly displayed what it says it is a U.S. military drone that it says it downed last week. The aircraft appears to have a stealth design and a smooth body. The U.S. acknowledges that it did lose a drone over western Afghanistan, but says all Iran might have captured would be, quote, a pile of rubble.

The U.S. Secretary of State Hillary Clinton says she stands by her suggestion that Russia's recent legislative election was manipulated. Her latest comments came after Russian Prime Minister Vladimir Putin accused America of stoking anti-government protests in Russia that had followed the vote.

(BEGIN VIDEO CLIP)

VLADIMIR PUTIN, RUSSIAN PRIME MINISTER: The first thing that the U.S. Secretary of State said about the Russian elections was that they were neither fair nor free even before receiving reports from international observers. By saying that, she set the tone for some public figures in our country, gave them the signal. They heard that signal. And with the support of the U.S. State Department started their active work.

(END VIDEO CLIP)

GORANI: John Corzine, the former CEO of bankrupt brokerage firm MF Global was sworn in before testifying on Capitol Hill that he simply does not know the whereabouts of more than a $1 billion missing from customer accounts. Corzine is a former U.S. Senator, and former CEO of Goldman Sachs.

Monstrous waves are hammering Scotland today. They are part of a severe storm system in parts of -- across parts of the UK. Thousands of people have lost power. Heavy winds have also forced cancellations at schools and airports. Police are urging drivers to stay off the road.

That's a look at your headlines. QUEST MEANS BUSINESS, live from Brussels tonight, starts now.

RICHARD QUEST, CNN INTERNATIONAL HOST: It's the last chance summit. Angela Merkel says the euro has lost credibility. In a moment I'll be speaking to Sweden's prime minister.

Bond buying is not the answer. The ECB today disappointed the market.

And the missing billion: the former head of MF Global says he has no idea where the money is.

Live from Brussels at the Euro summit. I'm Richard Quest. I mean business.

Good evening. There will be no second chances. Tonight, we're at the heart of Europe's government. And the biggest names in EuroZone government are all here to discuss trying to make sure the zone doesn't collapse. EU leaders have been arriving over the last hour. They are here for the start of the summit which will begin with an informal dinner trying to put together a protocol into formula that they can all agree upon.

Though as the project seems to be collapsing at the seems, never mind an informal dinner is looking like the last supper.

Here are the main developments so far on Euro Summit number seven -- or maybe it's eight, it could even be nine.

Angela Merkel says the euro has lost its credibility and that it needs to be regained. She wants to see a tighter fiscal union. The IMF also says it wants to play a bigger role in Europe.

The EuroZone is close to agreeing to lend the fund $200 billion. In other words, they will lend the IMF the money so the IMF can bailout countries in Europe in trouble. The IMF managing director Christine Lagarde said it's all part of the IMF playing its part.

Earlier, some of the leaders were in Marseilles for a meeting of European conservative leaders. Among them, the French president Nicolas Sarkozy who said this really was Europe's last chance.

(BEGIN VIDEO CLIP)

NICOLAS SARKOZY, PRESIDENT OF FRANCE (through translator): The more we wait to come up with a solution, the more costly and the less relevant it will be. Of course each of us has his or her own convictions, his or her own views, his or her own requests. We all have our problems. And there is no country where the political situation is easy.

But you can all understand that if we don't find an agreement by tomorrow there will be no second chance.

(END VIDEO CLIP)

QUEST: Now coincidentally while the EuroZone summit the conservatives were talking and preparing for this, the ECB governing council in Frankfurt were meeting to discuss the future direction of monetary policy. And the ECB moved to help prop up the banks.

As expected, it cut its interest rate by -- to 1 percent, lopping a quarter of a percentage point. It's the second cut by the ECB.

But also, perhaps not so suspected, the introduction of more non- standard measure announced by the president Mario Draghi. These non- standard measures are designed to ease the pressures on the banks.

It's rebooting its plan to offer unlimited funds. Now long-term funds will be available for three years. And here's the kicker, no interest until the loan matures.

The central bank will accept lower quality investments as collateral. In other words, more junk, or at least not as good quality if you want to borrow money.

Oh, and finally you don't need to have as much money in the bank yourself. Banking reserve ratios are being reduced to 1 percent to encourage the banks to lend out.

President Draghi says there are still big dangers lurking.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, EUROPEAN CENTRAL BANK PRESIDENT: Substantial downside risks to the economic outlook for the euro area exists in an environment of high uncertainty. Downside risks notably relate to a further intensification of the tensions in euro area financial markets and their potential spillover to the euro area real economy.

Downside risks also relate to the global economy which may be weaker than expected as well as to the protections pressures and the possibility of a disorderly correction of global imbalances.

(END VIDEO CLIP)

QUEST: President Draghi has made it clear that he is prepared to do more to help, but only when the fiscal compact of EuroZone countries has been agreed upon and that is what they will be discussing at this EU council summit.

On the one hand, how far they are prepared to go to strengthen the bailout fund. On the other hand, the very tricky question of the future direction -- will there be treaty changes? Or can they manage to make the changes through minor administrative matters?

Sweden's prime minister believes the summit has got its priorities wrong. Fredrik Reinfeldt says treaty change is not what his government or what the market wants. He believes they need to concentrate on the crisis at hand.

(BEGIN VIDEOTAPE)

FREDRIK REINFELDT, PRIME MINISTER OF SWEDEN: Well, first of all I think millions of Europeans are now looking for leadership. And what they want to see is solving the economic problems. So more reforms into both indebted countries. We are seeing this. Also now in Italy, but we need it also in Spain and many of the others. Then we need an increased firepower in the firewall, that's the capacity to lend resources to troubled countries. And then we need to enhance growth. Those are the three solutions we need. And that's where we need to start.

QUEST: But even to get to those solutions and the longer-term solution is going to require a treaty change. Or are you in favor of the protocol change of the president?

REINFELDT: I have a support for my parliament for the protocol change that President (inaudible) has presented. I have no support for a treaty change. Treaty change will not -- I still believe that that is not really inter the heart of the problem which is more related to economic problems and need reforming in the countries and need increased firepower in the firewall.

QUEST: We'll come to that aspect of the immediate crisis, but just to conclude on this treaty question, that could blow this summit apart, because there are some like the German chancellor and the French president who are very much in favor of the treaty change route. So are you prepared to, as they say, go to the mat on that one?

REINHOLDT: Well, again, I have as of now no support from my parliament. I have a parliamentary committee that I could talk to tomorrow. I want to be clear on that, treaty change means different things, because it could be a smaller more technical one. We did one in starting up one of these crisis mechanisms inside the EuroZone, or it could be a bigger.

Then of course I ask myself, if it's a bigger one than it could be followed by referendums, then it could take a long time. Who could that -- how could that be the short-term solution to the economic problems we are having?

QUEST: Let's turn to those economic solutions. Everybody agrees more firepower needed. You're in favor of the IMF being basically lend the money so they can lend it back again.

REINHOLDT: Yeah, absolutely. I think the IMF means that it's done thorough. They have huge confidence in the financial markets. And we are also then able from Sweden to be part of that solution, because it needs to come in side by side with the EuroZone mechanisms in the reserve and the (inaudible).

QUEST: The continual drip, drip, drip of semi-solutions, partial responses and failure of result. Why should we be any more hopeful from this meeting than we have from the seven previous?

REINHOLDT: Well, I just want to be clear that coming from Sweden I will say exactly this, we have had too many meetings talking too much about how often we should meet and more structural questions which is on the side of the problems. Go to the core of the problems which is the firewall, which is the reforms in the most indebted countries.

QUEST: So I need to ask you a blunt question then, why has the process failed continuously over the last 18 months?

REINHOLDT: Well, the problem is that the increased firepower means that a lot of countries need to put up more resources that stand at the risk of being in default on different (inaudible). I would argue that's the experience in Sweden, that it's market based lending with actually no problems and it creates the confidence we need.

QUEST: Do you share the view of President Sarkozy and others that this is drinking at the chance saloon? If this doesn't work this weekend we're in deep trouble?

REINHOLDT: We're already under pressure. I don't think you ever should use wordings like that, because there is always a possibility to have a new meeting. But I mean, we are taking this very seriously. We are trying to bring the leadership and the solutions together tonight.

QUEST: And if you fail? Well, you smile, but prime minister if I said the track record is not that good. If you fail, should the EU leaders be ashamed of themselves?

REINHOLDT: Well, we're hear to try to solve this problem. But I want to be clear that we need to then to discuss the deep rooted economic problems, that's where we have the problems. It's about the firewall, it's about the reform process in Italy, in Spain, that's where we have the core of the solution.

(END VIDEOTAPE)

QUEST: That's the Swedish prime minister talking to me a short while ago. And the issue is very simple.

But the help cannot come quickly enough for Europe's banks. A couple of hours ago the stress test confirmed that they need a sizable amount of money, $150 billion needs to be capitalized-- to be recapitalized by June. Banks need to raise this money to meet new European rules on cash reserves. And these are the countries most in need: Germany needs more than $17 billion -- or German banks. It's more than double the EVA estimate in October. There's media speculation that Comet Bank (ph) will require help from the government.

Still, those worries help pull down European markets, particularly the two big Eurozone indices. (inaudible) was off almost 10 percent. Markets were also disappointed by the statement from the president of the ECB. Traders have been hoping for bond buying on a much bigger scale. President Draghi had nothing to offer on that one.

Joining me now is Peter Spiegel from the Financial Times. Good evening to you, Peter.

There are so many issues on the table here. Which for you is the single most important one that they have to deal with?

PETER SPIEGEL, "FINANCIAL TIMES": Well, I must say I think I agree with your interview with the Swedish prime minister. I think a lot of this focus on treaty change is a bit misguided, particularly when you look at what the financial markets are looking for. (inaudible) is a bond trader sitting alone in Manhattan really care about qualified majority voting in budget rules in Brussels. No. What they're looking for is Draghi -- is Draghi going to come in with (inaudible).

QUEST: But now you just squared your circle, because Draghi is not going to come in until the treaty changes have been at least agreed, or the mechanisms agreed. It's a chicken and an egg.

SPIEGEL: For an audience of one, absolutely. What they're doing here is for an audience of one. But Draghi indicated today that perhaps he didn't know why everyone was being so optimistic about his bond buying. There is that issue.

The other issue which I think has gotten less attention that I am watching very closely is the issue of what they call firewalls. It is increasing the size of the bailout funds. You mention the issue of sending 150 billion euros to the IMF. That's sort of another little bit of a bazooka they keep talking about. That to me is what the markets are looking for.

QUEST: Right. So the markets want the bazooka. And they have got the money it's just a question of how they get -- are they prepared to spend it and the mechanism for doing so?

SPIEGEL: Yes.

QUEST: Do you think they realize the importance of that?

SPIEGEL: Well, I think most European leaders realize that, but again the stumbling block has been time and again it appears it's going to be at the summit Angela Merkel. Even on the IMF plan she doesn't want to send the money to Washington.

QUEST: So, Angela Merkel wants treaty change that you and the Swedish president don't think is relevant. Angela Merkel is against euro bond purchases and against further ECB intervention which you and a few other people here is the core question. And Angela Merkel is not in favor of the IMF being involved, which some people say is the best way to puddle the money.

So if you got to guess (inaudible) or is she actually the one who is right and wants to get it done properly?

SPIEGEL: What the assumptions are is that it's a quid pro quo, that if Merkel gets her way on treaty change, on rules, on all this stuff we're talking about here at this summit there will be acquiescence on euro bond, on the ECB...

QUEST: Can we wait this long?

SPIEGEL: Well, that is the risk. And that's what as you talk to people on the sidelines here, whatever one is very nervous about. Have we waited too long? Is this now a foregone conclusion that finally will get the Germans on board with a lot of this stuff, but we should have done it three months ago, we should have done it six months ago and now it's too late. And that's a big question the markets are looking for, I think.

QUEST: (inaudible) Thursday and Friday Peter joining me here.

Now, the Europe debt trouble have very quickly transmitted themselves to the U.S. once again. The Dow Jones Industrials is down around 150 points. Some of the worst performers are the banks. JP Morgan down 4 percent. Bank of America down similar amount.

Across the globe all eyes are on the debt crisis. And that means all eyes are here. Next, we will get an American view. Maybe think of it more as an international (inaudible). My friend Steve Forbes joining on QUEST MEANS BUSINESS live from Brussels.

(COMMERCIAL BREAK)

QUEST: Good evening from Brussels where the leaders at the Euro summit are now enjoying an informal dinner as they try and deal with the multitude and myriad of problems, hoping to put an end to the EuroZone crisis once and for all.

The United States is keeping a very close eye on the crisis. Tim Geithner, the U.S. Treasury Secretary, spent time in Europe this week. He's still here talking to leaders and giving his support. He says he trusts them to sort out the mess.

Steve Forbes is the chief executive of Forbes Publishing, a good friend of this program. Steve Forbes joins me now from New York.

Mr. Forbes, do you -- like Tim Geithner do you trust the Europeans to sort out this mess, or are you worried?

STEVE FORBES, CEO, FORBES PUBLISHING: I'm worried that they're letting this thing drag out as long as it has and that Chancellor Merkel is using this crisis to try to achieve a closer fiscal union. The banks, as you know, are on the verge of cardiac arrest so the ECB is going to have to take emergency measures on a major scale fairly soon. It's like a cardiac arrest you to the defibrillators and whatever you have to do to keep the patient alive, then you worry about lifestyle changes.

So this dragging it out -- I think they should just -- Germans should let the ECB just say we're going to buy what we have to shore up Spain and Italy and reforms are going to be following in its wake. You have new governments in Italy and Spain. They're wanting to make some major reforms.

QUEST: We have seen better than expected economic performance in the United States. The numbers do seem to be showing an improvement. Sure your fear must be that as the U.S. is just picking up steam, Europe could pour the cold water on the U.S. economy as well.

FORBES: Yes it could. If you get a major banking crisis such as we had in 2008 that would be very damaging to the U.S. economy. 25 of our -- 25 percent of our exports do go to Europe. Our banking systems are interlinked. We're going to have a good fourth quarter, probably real growth at 3.5, 4 percent. I think that'll taper off next year. But still, we're getting a little bit of speed here. And we are watching this European crisis closely, because as we saw in 2008 a major system gets in trouble we're all in trouble.

QUEST: Do you think that Europeans just don't get it, or Steve, do you think it's just simply too difficult for them to actually do something about it? Because the way things are deteriorating one has to wonder.

FORBES: Well, I don't understand why again we have a banking system in Europe that is contracting. And if something is not done soon they're going to be calling in loans. They're going to have to sell assets. So the European Central Bank has to act decisively and make it clear they're willing to commit hundreds of billions of euros to shore up Spain and Italy. And the sooner they do it the better.

QUEST: And are you in favor of the U.S. fed joining in if necessary, because if the boat is sinking you're on board too?

FORBES: We are on board. And I think the fed has made it clear several days ago that its willing to do its part. But the key thing is for the Germans to get off their duffs and say to the ECB you have our permission, whether they do it wink and a nod, or behind the scenes and say hundreds of billions of euros will be committed to make sure that Italy and Spain don't fall into the abyss. Because otherwise you are going to get a contraction, or a cardiac arrest like three years ago.

QUEST: Steve, one quick question on the U.S. presidential situation. Is budget deficit cuts off the table now do you think until now until the election, nothing meaningful can happen?

FORBES: Nothing meaningful will happen. That super committee that we had couldn't perform because the White House made it clear to the Democrats they weren't willing to cut a bipartisan deal. And so yes it's going to be after our elections before major reforms take place.

QUEST: Oh, fine, many thanks. Steve Forbes for joining me. Quick question, are you going to be Davos this year? Will we have the chance -- will we catch up with you in Davos? I'm not sure whether you are going next year?

FORBES: I hope to be there. It'll be cold, but not as cold as the economies of Europe if they don't get off their duffs and do something decisive now.

QUEST: All right. We look forward to talking more about this with you at Davos. Steve Forbes joining me from New York. We will, of course, be live in Davos come January.

When we come back in a moment, it's a billion dollar question: how do you lose a billion dollars? A former governor, U.S. Senator, and chief executive of the bank says I don't know where the money is.

(COMMERCIAL BREAK)

QUEST: The former chief of the failed brokerage MF Global says he doesn't know where the money is. It's a billion dollars. And Jon Corzine has said -- is spending Thursday being grilled on Capitol Hill by U.S. lawmakers. MF Global collapsed after (inaudible) exposure to the sovereign debt crisis undermined investor confidence. The FBI, U.S. regulators, everybody is investigating, but so far there was a massive whole in the accounts.

Maggie Lake joins me from New York. Maggie, Jon Corzine is the former governor of New Jersey, the former head of the bank. And he doesn't know where the money is.

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: That's right. This is a man who is at the center of power in both Washington and Wall Street. And Richard this is significant, it's been 100 years since congress has subpoenaed a senator to testify in this manner.

We thought Corzine was going to refuse to speak, take the fifth amendment, because this is a criminal investigation. But he did speak and take questions today. And lawmakers grilling him, went right to the point about what happened to customer money in those last hectic days of MF Global in the bankruptcy. Have a listen to the exchange.

(BEGIN VIDEO CLIP)

JON CORZINE, CEO, MF GLOBAL: Well there are, Mr. Chairman, many transactions that occurred in those last chaotic days. And I am not aware of all those, nor do I have the information to be able to look at those transactions, and as a consequence it would be very hard for me to speculate why or where that shortfall took place.

REP. FRANK LUCAS, (R) OKLAHOMA: Let me ask you in a very precise fashion, in your role at MF Global, did you authorize a transfer of customer funds from these segregated accounts?

CORZINE: I never intended to break any rules whether it dealt with the segregation rules or any of the other rules that are applicable.

(END VIDEO CLIP)

LAKE: A very careful answer there, Richard, I never intended to break any rules. You can bet when this resumes they're going to go back to that issue again. If Corzine wasn't responsible, who was? What exactly happened? Was there a regulatory breakdown failure in this case which clearly there seems to have been. And what about the culture at this firm? How is it that they were so levered up and were operating in this fashion and the accounting was, as the trustee tole me, in absolute shambles when they got there -- Richard.

QUEST: So, Maggie, this is all sort of murky and whether it's incompetence or dishonesty we will discover in the fullness of time. But what does it reflect on a Wall Street that has been through everything -- 10 years the day since Enron, Worldcom and have seen a collapse in 2008 of Lehman Brothers and the like?

LAKE: Well, this is -- I think (inaudible) it's going to feed in the perception that the people at the very top in the corner offices of both corporate America, but in particular Wall Street think they're smarter then everyone else in the room, don't have to pay attention to the same rules, and do for profit -- or act for profit at expense of the consequences for everyone else. That's the perception of the public. It's leading to a massive loss of confidence. And the fact that you're seeing this, this big kind of casino-like lever bet in order to ramp up those profits, even if the best themselves in the end didn't sink Global, the fact that they're behaving like that so close after what we've seen happen with Lehman Brothers is very troubling to people watching this both on the lawmakers -- some of the lawmakers sitting on the panel, but most importantly to the investing public.

QUEST: Maggie Lake who is in New York for us tonight on the MF Global story. Maggie, many thanks indeed.

When we come back in just a moment, more from Brussels. You want to know how this thing really operates? Look over there right in the corner. The sort of huddles and briefings and gossip and rumor, that's what you call spin Euro style. We're back after the break. Quest Means Business live in Brussels.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. More Quest Means Business live from the Euro summit in Brussels in just a moment. First, though, this is CNN and on this network the news always comes first. And that means Becky Anderson at CNN London. Good evening.

BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: That's right, Richard. Thank you for that. There's been a fatal shooting on the campus of Virginia Tech in the U.S. Now two people are confirmed dead, one a police officer who was trying to make a traffic stop when the gunman opened fire, the other found in a parking lot: identify unknown at this time. The suspect is still at large. And the students are being told to stay inside. You'll remember four years ago another gunman opened fire on the same campus killing 32 people before killing himself.

Well, Iran is publicly displayed what it says is a U.S. military drone that it says it downed last week. The aircraft appears to have been a stealth design with a smooth body. The U.S. acknowledges it lost a drone over western Afghanistan, but an official told CNN that all Iran might have captured would be a, quote, "pile of rubble."

Russian Prime Minister Vladimir Putin is blaming the U.S. for anti- government demonstrations that rocked Russia earlier this week after Sunday's legislative election. He says Secretary of State Hillary Clinton's suggestion that the vote was manipulated sent a, quote, "signal to the opposition." Clinton says she stands by her comments.

And biting winds, an extremely large waves have been lashing Scotland. They say the storm system has knocked out power to thousands of people, many schools are closed and the airports in Glasgow and in Edinburgh have been forced to delay or cancel a number of flights. Those are the headlines from CNN Center here. Back to Richard in Brussels for more Quest Means Business -- Richard.

QUEST: Good evening from Brussels where an informal dinner is now underway between the 27 member countries of the EuroZone, the government leaders. They are trying to decide the way forward with the thorny issue of a firepower bazooka and of course whether or not there needs to be treaty changes to the union.

Europe's top political (inaudible) one of the key questions how to funnel money to the IMF, the International Monetary Fund, basically so the IMF can increase the firepower of the bailout fund and lend it back again. The IMF chief Christine Lagarde, the managing director says she's all for helping out the EuroZone crisis.

(BEGIN VIDEOTAPE)

CHRISTINE LAGARDE, IMF MANAGING DIRECTOR: There is a lot of work to do. It must be coordinated, decisive, and the International Monetary Fund will be part of these efforts.

(END VIDEO CLIP)

QUEST: Not surprisingly with so much uncertainty as the summit is underway the single currency is slipping against the dollar. After -- particularly after the ECB president Mario Draghi dashed hopes that they would step up their bond buying efforts. Standards & Poors has put the European Union on notice for a possible wholesale downgrade. Now it's a highly technical downgrade they're talking about, but it does follow the warning for 15 members of the EuroZone on Monday.

Yields on 10-year notes in Italy and Spain crept higher, but those of Germany, they actually fell back.

France is the country that is seen as most likely to suffer an immediate or near-term downgrade, losing its privileged AAA bond rating.

CNN senior international correspondent Jim Bittermann in Paris now reports that if the French economy that's in the firing line. He sat down with Norbert Gaillard, the economist and former World Bank consultant. He asked him why in the case of France it was so important to maintain its AAA.

(BEGIN VIDEO CLIP)

JIM BITTERMANN, CNN INTERNATIONAL CORRESPONDENT: Norbert Gaillard, you've spent more than 10 years studying ratings agencies. So why is it so important that countries in Europe are worried about losing their AAA rating?

NORBERT GAILLARD, ECONOMIST: I think it's a big problem, because it showed that there is a lack of confidence in the EuroZone and more probably in the euro as a whole. So it's a big problem. I think it's much more (inaudible) problem than an economy problem.

BITTERMANN: What kind of impact is it going to have on people on the street if a country loses its AAA rating?

GAILLARD: We could expect that France, Germany and all other EuroZone countries will have to increase taxes and to get expenditures as (inaudible) and as anticipating the U.S. (inaudible)

BITTERMANN: Exactly who are these people who are making these decisions?

GAILLARD: They are having three main (inaudible) in the rating business, Fitch, Moodys, S&P. And they get around 90, 95 percent of marketshares in the world.

BITTERMANN: So they're serious people.

GAILLARD: Yes, they are serious people. They are experienced people.

BITTERMANN: Yeah, the critics say they've gotten it wrong in the case of Greece, in the case of Lehman Brothers. So how can we have any confidence in them?

GAILLARD: Yes, that's a big issue. It is related to the fact that current ratings tend to be overly optimistic. And during economic rules and too pessimistic in times of (inaudible).

BITTERMANN: The speculators see the ratings come out and then they can speculate against the currency.

GAILLARD: That is a problem, because if the rate of all EuroZone countries it will be perceived as global lack of confidence in the EuroZone and in the euro too. So we could expect a drop in the euro. And that will be a very, very bad signal, very negative signal for investors.

BITTERMANN: It's almost a self-fulfilling prophesy. The ratings come out and then the speculators go against the currency. And (inaudible).

GAILLARD: You're right. It is partly a self-fulling prophesy. The reason why, we think that any downgrade of (inaudible) is a big issue for all (inaudible) for all corporate bonds, local governments and so on.

BITTERMANN: Anybody that borrows is going to be -- going to have a problem.

GAILLARD: Yes, yes, yes. And we may expect other problems in the EuroZone (inaudible) wave of (inaudible).

BITTERMANN: It sounds like you're saying that credit rating agencies have become too powerful.

GAILLARD: Fitch, Moodys, and S&P are quite small, but they have -- they are very powerful.

(END VIDEOTAPE)

QUEST: Jim Bittermann in Paris there.

Now you will be well aware that we have been counting down the 10 days to the save the euro, because it was nine days ago Europe's commissioner for economic affairs warned there were just 10 days left to save the currency.

(COMMERCIAL BREAK)

QUEST: Nine days ago the European economic commissioners Ollie Rehn warned there were just 10 days to save the euro.

(BEGIN VIDEO CLIP)

OLLIE REHN, EUROPEAN ECONOMIC AFFAIRS COMMISSIONER: We are now entering the critical period of 10 days to complete and conclude the crisis which concerns all the European Union.

(END VIDEO CLIP)

QUEST: Now, every day over the last -- we've opened our very own CNN advent calendar. There's the piece of chocolate. Jim Bolden who is with me, you hold the Advent calendar. While you're trying to pry it out, it's a bit like getting euro money out, let me remind you of how the festivities have proceeded so far.

On November 3 -- and Jim, join in with a comment on anything you think.

JIM BOLDEN, CNN INTERNATIONAL CORRESPONDENT: Let's get the chocolate.

QUEST: OK. November 3 here, central banks liquidity boosted. And they decided they were going to do what they could. That was the gift to the euro.

December 1, fiscal union talks began.

BOLDEN: And that's -- but we heard from Mrs. Merkel, that was very important when she said we must have fiscal union.

QUEST: December 2, best week of market gains since 2008.

BOLDEN: Market -- it was the best we've seen in the Dow forever. The markets loved it.

QUEST: Except in Italy, December 5, Monday, Italian austerity. But that austerity package was a gift to the euro.

On December 6, S&P downgraded parts of the EuroZone, warned it would, and the Germans liked it.

BOLDEN: Well, they're pouring cold water on everything else. Some people think the markets got ahead of themselves. And the S&P helped there.

QUEST: Tim Geithner said on December 7, U.S. Treasury Secretary said I trust them. It is going to work.

BOLDEN: Well, we're find out tomorrow night won't we?

QUEST: And on Thursday Mario Draghi gave a gift to the banks, unlimited three year cash, interest to be paid after maturity.

Jim Bolden is with me.

BOLDEN: He helped -- he helped the markets. I mean, he helped the banks. It didn't help the markets. He didn't help the leaders here. He still put it on them. Mario Draghi made it very clear, he is not going to be the one to save them.

QUEST: So what is the purpose of this? What's going to be the defining point of this Euro summit?

BOLDEN: Well, first we're going find out whether there's going to be a deal between the 17 of the 27. If that's important, will it just be the EuroZone countries or will it be the 27. And can they come with an agreement that has got a short-term fix that the markets will like come Monday morning, a medium-term fix would be something that could help the ECB, and then the long-term fix would be the treaty changes. It sounds boring, but the treaty changes are important.

QUEST: Right, but guest after guest after guest on this program has said treaty changes aren't what is significant now. They have to do the ESFS. And time and again this year they've tried to deal with the bailout fund and they've not succeeded.

BOLDEN: That's where we're going to get the loans to t he IMF. The IMF can loan the money back to Europe.

QUEST: Have you ever heard anything as ludicrous as lend the money to the IMF so the IMF can lend it back?

BOLDEN: Mr. Draghi said today we must respect the treaty, the spirit of the treaty he kept saying as well. Not just the letter, we must respect the treaty. To do that, you cannot have the...

QUEST: We have entered Alice in Wonderland when we are shuffling money without dealing with the problem.

BOLDEN: Does that make Mrs. Lagarde Alice, I wonder?

QUEST: We will leave it there. Jim Bolden.

You really want that chocolate, don't you? He finally got a freebie out of Europe.

OK, Jim Bolden, many thanks indeed. Jim is a student and scholar of the summit. And probably has been here more often than is honest or decent.

The next 24 hours will be crucial as we find out on day 10 whether or not they have come up with a plan that will save the euro.

The markets will give their verdict overnight in Asian. European markets will open on Friday.

And that, as they say, is Quest Means Business live tonight from the Euro summit in Brussels. I'm Richard Quest. As always, and as we look at the hours ahead you'll need nerves of steel because what ever you're up to in the hours ahead I hope it's profitable. I'll be back here tomorrow.

(COMMERCIAL BREAK)

QUEST: Hello, and welcome to Marketplace Europe. I'm Richard Quest. This week at the design museum in London.

If there is one thing that chief executives tell us again and again, in difficult economic times it is crucial to keep spending money and have as your priority innovation.

(BEGIN VIDEOTAPE)

QUEST: This week, Juliet Mann speaks to Sir James Dyson who calls for the present patent system to be radically changed. And we meet a business owner in Spain. Red tape, he says, is making it impossible to compete against emerging markets.

Patent protection of cleaning the floors started with the carpet sweeper in the 1920s. Hoover came along with the vacuum cleaner after the Second World War, like this. And then at the end of the last century, Sir James Dyson invented his bagless cleaner The Dyson.

Sir James believes that in Europe today the system is crazy. There needs to be a better regime of patent protection.

JULIET MANN, CNN INTERNATIONAL CORRESPONDENT: Sir James Dyson, here we are in your office which is crammed with your inventions. It's quite a slog, though, being an inventor. It's not just about having a big idea. There are lots of hurdles aren't there?

JAMES DYSON, INVENTOR: Well, no, being an inventor is about having failures every day. You're go downstairs to the workshop and to the laboratory and you try out -- try things out. And of course most of the time they fail. It's pretty rare that they succeed. And they only succeed after a lot of hard work.

And then, of course, you have to go an patent them, which is extremely expensive. And so on and so on.

MANN: That's true. You said yourself that any inventor has always opened himself up to the risk of being copied. How has that affected you in your business?

DYSON: Well, yeah, the problem with inventing is that you file a patent. The moment you file a patent everybody sees what you're doing and they can also see how to get around it. So it's affected me enormously over 30 or 40 years of my career with people copying what I've done, the huge expense of filing patents and maintaining patents -- you know, paying renewal fees in every country for every patent you have every year.

MANN: Would a European-wide patent system help you in that? Or does it go beyond...

DYSON: No, European patent is a must. I mean, what we have at the moment is absolutely crazy where you have 16 to 20 different countries where you have to file in each country, you have to translate for each country. You have to sue in each country. You have pay renewal fees in each country. It's complete madness. Very, very expensive. And its' very unhelpful for small inventors and small businesses. It's just too expensive.

We should have a European-wide patent and a European court in which to sue.

MANN: So with a little nudge from you, the UK government is moving in the right direction, investors too. What do you see going on in the rest of Europe? Is enough being done?

DYSON: Yes. I thought there were similar tax credits on research and development. Very good ones in France, for example. Not quite as good ones in Germany. But, no, I think these sort of measures are spreading across Europe. I'm not familiar with the tax system, the range of the tax system in other European countries, but similar tax incentives exist.

MANN: It's a huge process to be having -- get yourself out of it.

DYSON: Well, actually, there's slightly less so in France and Germany. I mean, the European mainland courts are much more efficient than British and American courts. So for far less money and far more quickly you can bring a case in France and Germany than you can in Britain.

MANN: So if someone were to copy one of Dyson's latest in the UK or in America, because in France they'll come unstuck.

DYSON: They'll come unstuck. But you may get a much bigger fine in the United States and in Britain. So watch out.

(LAUGHTER)

QUEST: The issue of patent protection in the European Union is both practical and philosophical. And joining me is Illia Cardi (ph), the intellectual property lawyer at Matters and Squire (ph) in the UK.

When you are advising your client, what is the core of where they should file their patent application in Europe?

UNIDENTIFIED MALE: It depends on their market, depends on their business plan, but there's major markets in Europe, obviously France, Germany, and the UK are the leading markets.

QUEST: If you then have to enforce -- let's assume that worse comes to worse, and you have to enforce your patent. Do you jurisdiction hop?

UNIDENTIFIED MALE: Yes. You can choose what's favorable. So different courts have different reputations for speed, whether they're more or less favorably disposed towards the patentee or the defendant. And for example, the UK courts, are reasonable thorough, reasonably fast. The German courts have a reputation for being more sympathetic to patentees. The Dutch court is reasonably efficient. And other countries' courts are less favored.

QUEST: Would you say that in Europe the patent system is working?

UNIDENTIFIED MALE: Largely in as much as any system is working. Nothing is perfect. We don't live in a perfect world. A lot of it works. A lot of it could be better. You could be -- it's very easy to say it would be nice if things were smooth, quick, and cheap, but nothing in life ever is. You have to go through hurdles.

Other parties would object if the patent system is too smooth for pantentees. They want to see a bit of push back from the system. If someone could walk into a court and walk out with an injunction without it being properly heard the recipient of the injunction would object. So you have to find a balance.

And it works largely. It could definitely be better. But I -- we, unfortunately deal with humans. And it's very hard to get human systems to work perfectly in the real world.

QUEST: Thank you very much.

The pain of patents. After the break, we're in Spain to see how expensive bureaucracy is nearly killing one music maker. Put the kettle on.

(COMMERCIAL BREAK)

QUEST: Welcome back to Marketplace Europe.

The late Steve Jobs of Apple famously said innovation is what distinguishes a leader from a follower. The makers of this mobile factory would undoubtedly agree. It takes wood and turns it into wood chips from which you can then make hard furniture like this.

You probably couldn't make a delicate guitar in this fashion. Our correspondent Al Goodman in Madrid now reports on one such company that despite innovation is having to go outside Europe to be successful.

AL GOODMAN, CNN INTERNATIONAL CORRESPONDENT: It's a century old family firm that makes Spanish classical guitars.

MANUEL RODRIGUEZ JR., GUITARRAS MANUEL RODRIGUEZ AND SONS: Each guitar has our name and that's very important. That name is the guitar we make has to speak, has to sound very beautiful, and in terms because these players are very high demanding they want the perfect sound.

GOODMAN: Manuel Rodriquez Jr. is the third generation. He knows that in Spain's deep economic crisis several competitors have closed. And he blames Spain's rigid labor laws and high business taxes for hurting his chances for survival.

RODRIGUEZ: If I have -- hire a person, it's like a big bag in my back, rock, that so many years I have to hang with him. We need more freedom. It's too tight. I mean, I'm used to the U.S. system, or South America, or -- we must be more competitive.

GOODMAN: Since taking over the company he's expanded a joint venture in China. It has 100 workers. And his guitar sales are up 10 percent this year globally, mainly thanks to lower priced models. But in Spain, where they still make the premium guitars, the staff of 60 a few years ago is down to just 25 now.

As you look around the factory you see an aging workforce. The company hasn't hired a new full-time worker in 6 years.

He hopes Spain's newly elected conservative government will deliver on his business friendly promises.

RODRIGUEZ: If this new government comes in with power and aggression to change things and drops takes like Social Security 50 percent I can get back that 60 workers making in Spain. But we need very drastic changes in Europe.

How can you compete with people in China working 60 hours a week and we are working 37 hours?

GOODMAN: Regulations requiring high severance costs for full-time Spanish workers don't just need to be fine-tuned, he says, they need to be cut drastically.

Rodriguez aggressively promotes his guitars, even inviting former U.S. President Jimmy Carter to visit the workshop four years ago.

Exports go to 120 countries. These shipments, bound for Prague, Istanbul, and the United States. All of that helps, Rodriguez says, but won't be enough.

RODRIGUEZ: So I need to grow more the company so I need a partner to grow. Because there's no credit. Banks are not giving any cents, because there's no money in the system.

GOODMAN: An uncertain future for this family business and its part in Spanish culture.

QUEST: In Europe it seems red tape, expensive bureaucracy, outdated legislation, these are the enemies of innovation.

As European business becomes ever more integrated, the hope must be that these barriers are blown up.

And that's "Marketplace Europe" for this week. I'm Richard Quest at the Design Museum in London.

Whatever markets your in, I hope its profitable. I'll see you next week.

END