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Quest Means Business
Tsipras New Greek Prime Minister; Tsipras Faces Immediate Challenges; Greek Stocks Fall; European Stocks Rise; S&P Cuts Russian Debt to Junk Status; Exclusive Interview With Indonesian President; AirAsia CEO on Aviation Infrastructure in Asia; Crippling Storms Slam Northeast US; S&P Downgrades Russia
Aired January 26, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
MAGGIE LAKE, HOST: Markets fall slightly on Wall Street, but that's the least of their worries at the New York Stock Exchange as a giant
blizzard descends on New York City. It's Monday, the 26th of January.
Tonight, Greece's new prime minister vows no more austerity, and it's likely, its next finance minister tells us, we are not leaving the euro.
(BEGIN VIDEO CLIP)
YANIS VAROUFAKIS, MEMBER OF GREEK PARLIAMENT, SYRIZA: Greece is absolutely, irreversibly committed to be staying in the eurozone.
(END VIDEO CLIP)
LAKE: A hunk of junk. Russia gets a decisive downgrade from S&P.
And baby, it's cold outside. It's travel chaos here in New York as a super-sized snowstorm approaches.
I'm Maggie Lake, this is QUEST MEANS BUSINESS.
Good evening. Tonight, Greece has a new prime minister who is dedicated to undoing austerity. Voters have handed power to a left-wing
party, Syriza, led by 40-year-old Alexis Tsipras. His election promise: no more bailouts, no more submission, no more blackmailing.
Mr. Tsipras was sworn in as prime minister after he formed a coalition with the Independent Greeks, who also oppose austerity. The new prime
minister's message, it's an historic turning point, and not just for Greece.
(BEGIN VIDEO CLIP)
ALEXIS TSIPRAS, PRIME MINISTER OF GREECE (through translator): Our victory is also a victory for all the people of Europe who are fighting
against austerity that is destroying our common European future.
(END VIDEO CLIP)
LAKE: Isa Soares has more from Athens now. And Isa, they've got a new government, but they have -- they're facing the same staggering
economic challenges. What's the mood in Greece today among the people?
ISA SOARES, CNN INTERNATIONAL CORRESPONDENT: Hi, Maggie. Well, I think from the party yesterday, many celebrating, the millions of people
who voted for him. People waking up saying there is a lot of work to be done, but they really believe that he is the man to do it.
Worth reminding people that there have been so many of the old guard in charge here, the same parties that had been in charge for 40 years,
Maggie. So, millions of people are giving -- gambling, in fact -- on Syriza, believing that he can turn this economy around and that he can
renegotiate growth. Obviously, it's a hard task and job, and the hard work is only just beginning.
(BEGIN VIDEOTAPE)
SOARES (voice-over): Change has come to Greece in the form of Alexis Tsipras, the country's first-ever elected left-wing prime minister.
TSIPRAS (through translator): If someone has won today, that's the Greece who fights.
SOARES: Standing victorious in front of the millions who voted for him, the leader of the Syriza party reaffirmed his pledge to end austerity
in Greece.
TSIPRAS (through translator): Greece is turning a page. Greece is leaving behind a catastrophic austerity. It is leaving behind fear and
autocracy. It is leaving behind five years of humiliation and pain.
SOARES: Words that have inspired many hoping he can deliver economic growth.
UNIDENTIFIED FEMALE (through translator): I think it inspires hope, it inspires change. I'm not at all certain that they have what it takes to
achieve what they say they will, but let them try. Give a chance to young people so that they can do something better. That's how I feel. I really
feel hopeful.
SOARES: With the fate of Greece now in his hands, Alexis Tsipras moved quickly to seal a coalition, picking the right-wing Independent
Greeks to stand alongside him. An alliance that has raised eyebrows here in Greece.
PANOS POLYZOIDIS, JOURNALIST, SKAI TV: River Party would have been more of a moderating force in a coalition government, whereas the
Independent Greeks could force him or could put pressure on him to move in rather radical positions and views.
SOARES: This young prime minister is now looking to forge ahead in a country with high unemployment, falling wages, and frozen pensions.
TSIPRAS (through translator): Mr. President, I would like to assure you that I will be the upholder of the constitution and the law.
SOARES: The promises have been made.
TSIPRAS (through translator): Greece leaves behind the austerity that ruined it. Leaves behind the fear. Leaves behind five years of
humiliation. And Greece moves forward with optimism and hope and dignity.
SOARES: Now, the hard work begins and the world watches to see whether this once derided political force can deliver on his promises.
(END VIDEOTAPE)
SOARES: And Maggie, many critics will say that Alex Tsipras's comments, his promise, his pledges, are just empty promises that he won't
be able to deliver. Perhaps he will do what former Prime Minster Samaras did. He said he wanted an end to austerity, and then when he got into
power, he actually just couldn't deliver on that.
He actually had to sign up to austerity, the straight jacket that left this country in recession for five years. So, many people are hoping that
he can actually stick to what he's promising. But many others saying that he will probably have to water down many of his pledges or make a complete
U-turn, Maggie.
LAKE: Isa Soares for us, live from Athens tonight. Thank you so much, Isa.
Now, Alexis Tsipras came to power by pledging to force Greece's creditors to renegotiate the terms of its international bailout. He faces
a number of immediate challenges. February 28th is the deadline for an extension of Greece's 240 billion euro bailout. Some economists warn the
government will run out of money without additional funds.
Next, restructuring of debt. Greece's lenders, the IMF, ECB, and European Commission are likely to resist any changes to previous
agreements. Tsipras says he wants Greece to keep the euro, but one possible outcome of all of this is Greece leaving the eurozone. Experts
are not ruling it out, though it is not an immediate risk.
Well, the man tipped to be Greece's next finance minister told me private creditors will not suffer additional losses. Yanis Varoufakis, a
member of parliament for Syriza, says the Greek people have given a vote of confidence to hope.
Taking inspiration from a Dylan Thomas poem, he wrote, "Greek democracy resolves to rage against the dying of the light." I asked him
what the government's economic plan would look like in order to satisfy all sides.
(BEGIN VIDEOTAPE)
VAROUFAKIS: What we are about to propose is not a kind of zero-sum game where we are asking for something that they will have to forfeit. The
problem with the way that Europe has been dealing with this crisis since 2010 is that everybody is a loser, when we could have a much more rational
way of dealing with the Greek crisis, where the average European citizen pays less for this unfolding, never-ending debacle.
To be very brief with you -- on this matter, on the debt, we want to tie up the rate of repayments to the rate of nominal GDP growth, just like
any good banker would do with a company that is in distress and would offer a debt restructuring whereby repayments to the bank by the stressed company
are linked to the profit rate of the company. This is precisely what we're going to be proposing.
At the very same time, what we need to impress our German, French, Italian partners with is a program of reforms that will ensure that this
country, even if we manage to do away with the debt problem and the debt crisis, is not going to find itself in the state in which it found itself
in 2008, 2009.
LAKE: There's been a lot of rhetoric throughout the campaign. Is Greece committed to staying in the eurozone?
VAROUFAKIS: Greece is absolutely, irreversibly committed to be staying in the eurozone. You see, the problem is, that once you're in,
just like you will recall the Eagles song "Hotel California," "You can check out anytime you like, but you can never leave."
Dismantling a monetary union like ours is going to have detrimental effects throughout Europe and, indeed, in the global economy. It is not
just a case of severing a peg, like Argentina did or Mexico did with the US dollar. We don't have a currency to devalue. We don't have a currency
that is pegged to some hard currency like the Deutsche mark. We have the euro.
And exiting the euro is going to start a domino effect which will never, ever lead to anything good for either the Greeks or the Europeans
or, indeed, for the rest of the global economy, which is struggling to achieve escape velocity for the crisis that began in 2008.
LAKE: You're talking about the need to restructure some of the debt - - the outstanding debt for your country. When you're talking about doing that with private creditors, it's proven incredibly difficult in the past.
Are you confident that you can also persuade them that this is the way forward to Greece? Because you're going to need to access the capital
markets. You need to be able to borrow.
VAROUFAKIS: Maggie, I'm deeply appreciative for your question, because I want to make this loud and clear, that private creditors will not
be haircut. Let me remind you that in 2012, we had a massive PSI, we call it. This is a euphemism. We had a massive haircut on private creditors.
They lost in net present value terms 90 percent overall throughout 2012 in two goes.
This government is not interested in another haircut of privately- owned big bills or bonds. Our task is to persuade the official sector to stop holding out and to participate in a debt restructure so that Greece an
maintain to the full its commitment to repaying to the last penny our private creditors.
(END VIDEOTAPE)
LAKE: Now, shares in Athens fell sharply Monday, the banking stocks among the hardest hit as investors worry about a possible renegotiation of
Greece's bailout terms. The general index is down 30 percent from a year ago.
Elsewhere, the mood was pretty upbeat. Europe's main stock markets closed higher. The feel-good factor continues from the European Central
Bank's decision to launch QE.
Still to come, Russia's debt is downgraded to junk status, and the rating agency that did it warns there may be more pain to come.
(COMMERCIAL BREAK)
LAKE: It's yet another blow to the Russian economy. Ratings agency S&P has cut the country's debt rating to junk status, and it warns further
downgrades are possible. It is the first time in a decade Russian debt has been rated below investment grade.
S&P says economic weakness is limiting the Russian Central Bank's options when it comes to monetary policy. The move may force investors to
sell holdings and will raise the country's borrowing cost.
Mohamed El-Erian is the chief economic advisor at Allianz, and he joins us now from Washington, where it is also snowing. Mohamed, it's
lovely to see you. I think a lot of people might have been expecting this or worried that this might happen. What are the implications for Russia?
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: So, the immediate implication, Maggie, is first it raises the borrowing cost of Russia. Not
just the sovereign, but also the corporates and the banks.
And second, it has contributed already to an 8 percent weakening in the currency. All this fuels the economic and financial implosion that's
being powered by lower oil prices, Western sanctions, and of course, economic mismanagement. So, it makes bad things even worse.
LAKE: Mohamed, a lot of people have been saying over and over again, this is not 1980 -- 1998, rather -- this is not a repeat of that episode
where Russia really sparked a global financial crisis. Are we being too complacent about the risk presented by Russia?
(SILENCE)
LAKE: Mohamed, can you hear me? I think we're having some audio problems with Mohamed. Let's see if we can fix that. We're going to take
a short break and we'll be right back. Stay with us.
(COMMERCIAL BREAK)
LAKE: Welcome back to QUEST MEANS BUSINESS. Speaking exclusively to CNN, Indonesia's president says his country needs to fix the way it runs
its airlines. Joko Widodo spoke to CNN's Christiane Amanpour in Jakarta. She asked him what needs to happen to make sure an incident like the
AirAsia crash doesn't happen again.
(BEGIN VIDEO CLIP)
JOKO WIDODO, PRESIDENT OF INDONESIA (through translator): What we want to fix is the administration system. We are going to fix this. This
is a momentum to fix the administrations related to airline industry. This is to deal with the system. But the amendment of system and administration
is not related to the airline accidents.
CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: So, you don't think that regulation is related?
WIDODO (through translator): No, there is no relation because accidents can be because of the weather, can be also because of human
error. It can be like that. But until now, we don't know yet. We haven't concluded anything yet.
(END VIDEO CLIP)
LAKE: Viewers in Europe can see the full interview with Indonesia's president on "Amanpour" in around 20 minutes from now.
AirAsia's CEO Tony Fernandes says airports in Asia are lagging behind travel demand in the region. He spoke to Richard Quest in Davos last week.
Richard asked if the infrastructure in Asia is keeping up with growth in aviation.
(BEGIN VIDEO CLIP)
TONY FERNANDES, CEO, AIRASIA: I would say not an issue. If you look around, there are evolving processes which would happen anyway. This
process of the flight plan is really a very minor point, because there are many other checks and balances. You can't fly to another country without
the right balances.
I would say, though, that air traffic control is fairly well managed. I've always asked for a regional air traffic control, like in Europe. But
I don't think having ten countries makes a massive difference. I think infrastructure has gone in.
The only thing where I say that we're a bit tight is airports. Airports haven't been able to keep up with the rapid growth. There are
lots of slot constraints, and that means things are tight. But I don't see there's a safety issue.
RICHARD QUEST, CNN INTERNATIONAL: Right. So, you don't see there's anything systemically wrong with the fast pace of growth in aviation in
Asia?
FERNANDES: No, I think if you see -- what are the causes of -- there's infrastructure, whether the regulators have enough people to check
and regulate.
And I don't see a shortcoming there, because we've probably been one of the fastest growing in Malaysia, Thailand, and Indonesia. They've all
had enough safety checkers, et cetera, to check the processes. Airports are tight around the region, and that, I think, is an issue, but that's not
a safety issue.
(END VIDEO CLIP)
LAKE: Crippling and potentially historic, that's how the National Weather Service describes the winter storm hitting the northeastern United
States. The blizzard could bring nearly a meter of snow, heavy winds, and widespread power outages. Almost 60 million people are in the storm's
path.
Governors of Massachusetts, New York, and New Jersey have declared states of emergency. The storm is expected to intensify Monday night into
Tuesday. The blizzard should not stop trading on Wall Street. The New York Stock Exchange and the city's other trading floors are planning to
stay open Tuesday.
United Technologies pushed the release of its earnings up to Monday from Tuesday. The United Nations closed early Monday. It will not be open
at all on Tuesday.
The storm is also wreaking havoc, as you can imagine, on travelers. About 2,700 flights have been canceled. Rene Marsh is at LaGuardia Airport
for us tonight. And Rene, this is really just the beginning of the problems, although I guess on the bright side, the airlines are getting
ahead of it by doing all these cancellations.
RENE MARSH, CNN AVIATION CORRESPONDENT: Right. You could say that from prior storms, airlines have really learned their lesson in that they
are making a call and putting in these cancellations before the storm actually hits. We saw that with this storm.
But even as this day goes on, we do see additional cancellations piling up. And really, this is -- when you look at these boards here at
this hour, it's really a sad sight. All red and orange, which are not the colors you want to see. Those are cancellations and delays. The majority
of them that I'm seeing here, cancellations.
Our latest numbers show that between today and tomorrow, we will have seen, the latest tally, more than 6500 cancellations. That's a lot. So,
if you're trying to get somewhere by plane, it really is a tough go. You either A have to be patient or B find another way to that destination.
At LaGuardia, where I am, they're really seeing a lot of cancellations, over 700. Some of the county's busiest airports really
getting hit: Philadelphia, JFK, Newark. And here at LaGuardia, we just -- got information a short time ago that there's a ground stop in effect until
at least 4:30. So that simply means if you are on a flight bound for LaGuardia, it's not taking off anytime soon.
The issue here is visibility. The wind has picked up. The snow is coming down at a pretty good pace. So, for safety issues, visibility isn't
at its best, they're halting those flights until things clear up.
LAKE: I'm glad you mentioned that, because this is a storm -- the reason it's being categorized as a blizzard, it's the worst-case scenario
for airlines, isn't it? Because very, very high winds are expected to accompany this storm.
You mention a ground stop in terms of getting out. International flights are often the last ones they try to cancel. Do we know how late
planes are going to be able to come in and land? Do they think they're at least going to be able to get those inbound flights on the ground, or are
we looking at international cancellations as well?
MARSH: So -- and I should clarify, the ground stop is, again, for flights coming into LaGuardia, not so much for flights coming out. But
then again, when you look at the boards, there's not much activity on the going out end anyway.
As far as the impact on international travelers, we're definitely going to see that. Newark International Airport, we heard from United,
they're stopping their operations there. That's a pretty big international airport. LaGuardia has international flights as well.
So, this is not just an issue that's going to affect people traveling domestically. You hear oftentimes we talk about that ripple effect. Well,
it's going to affect international travelers as well.
When you have these major hubs along the Northeast, many of them in which these international flights go in and out of, you're going to have a
wide-reaching impact, and that's exactly what we're seeing here.
And here's the bad news: it doesn't stop today. We expect that it's going to be quite a mess again tomorrow, Maggie.
LAKE: A lot of people to re-book. Hopefully the airlines by making this call early have started that process. All right, Rene, thank you so
much.
Well, Ivan Cabrera is live from the World Weather Center, just the person we need to talk to. So, Ivan, we always hear people say, oh, I
don't believe the hype. How bad is this going to be?
IVAN CABRERA, AMS METEOROLOGIST: Well, it's bad enough you can see it from space, and it is just impressive here. And as far as the airports,
Thursday and Friday, those are probably going to be the days that we're going to finally get things back to normal. And here in the United States
right now, it's still Monday.
And the storm has yet to reach its peak. Look behind me. This is from NOAA and NASA here, an incredible image coming out. You can barely
see the United States here. This is the storm, and it is just getting going now.
We'll show you the radar perspective so you'll be able to see the bands we've been checking in with our Chad Myers out there, and Jennifer
Gray reporting already upwards of -- my goodness -- several centimeters on the ground already, and that's just the beginning of it. You see some of
these bands here.
Look behind me, the lightning. Do you see the lightning there? That is an indication that the storm is now beginning to really get going here.
And so by the time we get into this evening and into tonight, the snow rates are going to become more significant, more heavy.
And the wind is going to be an issue as well, 80-kilometer-per-hour winds certainly not out of the question. In fact, I think at times we'll
have sustained winds of tropical storm force and hurricane force. Wind gusts, that's going to be a big deal.
So, there are your cancellations, as we've been talking about, into the thousands at this point here for LaGuardia, Newark, JFK. Logan is
going to be a mess as well, although again for Boston, because you're further north and east, that will be more of an event as we head through
the day on Tuesday where nothing is going to be getting in or out.
Likewise on the roads here, as we've been talking about and reporting with the press conferences from the mayors and the governors, with states
of emergency. And again, basically, after tonight, you're not going to get around, whether by car, by train, by air. You've got to stay where you are
right now.
So pick a good spot. If it's home, that's great. If not, you'd better get there and soon, because things are going to start getting
dangerous rather quickly here.
So, here we are. We're talking about the blizzard warning that now extends from New York all the way into Portland, including Boston. So, if
you're trying to get into the United States, it's going to be a hard time for you.
Because we're accumulating snow at these rates: 30 to 60 centimeters for New York City and over 60 centimeters, Maggie, here for a good chunk of
New England, including Connecticut, Rhodes Island, and into Massachusetts, where Boston will likely get one of the -- probably this is going to be one
of the hardest-hit areas here, with an impressive snowstorm here as we continue into Wednesday.
And then, by then, we'll begin to wind things down. But there's going to be a lot of snow to get off the roads.
LAKE: There certainly is going to be. And anytime you've got those coastal storms, I know we worry about flooding. And sometimes they stick
around. They're a little unpredictable, so we'll be sure to check in with you again. Ivan, thank you so much.
Well, the stage is set for a showdown between Greece's new government and its creditors. We'll explain what happens when the curtain rises,
next.
(COMMERCIAL BREAK)
LAKE: Welcome back, I'm Maggie Lake. In the next half hour, the ECB's top economist tells us why there's no plan B for Greece and its
debts.
And Microsoft earnings are hot off the presses, and the company's latest strategy is to give its products away.
Before all that, this is CNN, and on this network, the news always comes first.
The new prime minister of Greece is promising a way out of austerity. Alex Tsipras heads the victorious far-left Syriza Party. They have vowed
to roll back austerity and renegotiate the country's massive debt.
The man tipped to become Greece's finance minister says Greece has been subjected to fiscal water-boarding but remains committed to the euro.
(BEGIN VIDEO CLIP)
VAROUFAKIS: Greece is absolutely, irreversibly committed to be staying in the eurozone.
(END VIDEO CLIP)
LAKE: Ten people have died after an F-16 fighter jet crashed in southeastern Spain. A Spanish official says the Greek jet crashed on
takeoff and struck other planes on the ground. The incident took place during a NATO training exercise.
The northeastern United States is bracing for a huge snowstorm. Thousands of flights have been canceled, and schools will be closed in New
York and Boston on Tuesday as forecasters warn of a storm of historic proportions.
The United States has resumed drone attacks against al Qaeda targets in Yemen, carrying out a strike there for the first time since the
government collapsed. Houthi rebels control the streets of Sanaa, but it's unclear who's running the country.
As we were telling you earlier, the rating agency S&P has cut the country's -- Russia's debt status to junk and it warns of further
downgrades. It's the first time in a decade Russian debt has been rated below investment grade.
Let's go back to Mohamed El-Erian, chief economic advisor at Allianz. He joins us from Washington and was kind enough to stick around while
worked out our audio problems. Mohamed, before the break, we were talking about whether investors are too complacent about the risk posed by Russian
in terms of the world economy, the contagion risk. What's your assessment?
EL-ERIAN: So the big risk, Maggie, is that the implosion of the Russian economy leads President Putin to be more aggressive in the
adventures that he's undertaken in Ukraine which causes sanctions from the West, counter sanctions from Russia and the next thing you know the supply
of energy is disrupted to Europe. And that would put Europe into recession. So that's a major risk. It's not a financial risk as much as
it's an economic risk because of the politics of the situation, and particularly what's happening in Ukraine.
LAKE: Which is why many people have being pointing to geopolitical risk as maybe the biggest concern for them. I want to ask you - I heard
someone say something interesting which is pushed up against the wall - by default - Putin's already cut off -- Russia's already cut off in effect
from the West right now - by defaulting he puts the burden on creditors as opposed to the Russian economy and the Russian people. Is there a chance
that he would pursue default as a way to sort of, you know, further raise the stakes with Europe, with the West? Does that sound plausible to you?
EL-ERIAN: So not the sovereign - the Russian sovereign has hardly any debt calling due and they've still got about $380 billion of reserves. So
the issue is not the sovereign. The Russian companies and banks are going to have a lot of challenges and you may see some defaults there, but I
don't think the sovereign defaults.
LAKE: Mohamed, when we look at the situation with Europe, you mentioned, you know, the risk of energy for Europe. We're in such a
precarious situation with the European economy. We've seen the ECB take these measures of stimulus which many say were needed. Will they be
enough?
EL-ERIAN: So will they be enough in buying time for the politicians to step up to the plate? Yes. They buy time for Europe. Do they solve
the fundamental problem which is not enough reforms to generate growth, unbalanced demand, and pockets of excessive debt including in Greece? No,
they don't answer those questions. So the best that the ECB can do is buy time, but it comes with collateral damage and unintended consequences.
LAKE: Yes, as does all stimulus - QE stimulus that we've talked about many times with the Fed. I want to finish up on Russia. What can Putin
do? Do officials there have the ability to try to help the economy? To try to offset this downward spiral they seem to be in. What are the tools
in his arsenal or the Central Bank's arsenal that they can release or they can use?
EL-ERIAN: So first it's hard. They're getting hit with a reduction by 50 percent of the export revenue, and they are very dependent on that
revenue. Secondly, there's Western sanctions which means that investors aren't willing to put more money in. He's got to go back and he's got to
cut the budget like crazy and he's got to step up on the structural reforms. Now that is really unlikely and that's why the alternative for
him is to try to divert attention by pursuing geopolitical adventures rather than addressing the economic issues at home. And we should point
out his popularity remains high as we discuss this, even with the economic problems. We'll see if that continues. Mohamed, always great to catch up
with you. Thank you so much.
EL-ERIAN: Thank you.
LAKE: Mohamed El-Erian for us. Now, the new Greek government is on a collision course with European leaders. As we've been discussing all show,
Prime Minister Alexis Tsipras says he will stick to his anti-austerity campaign promises, defying his country's creditors. The Greek debt burden
stands at 175 percent of GDP. That is by the far the highest in the E.U. European leaders say there is no support for write-downs the prime
minister's party wants, and they worry other countries may following Tsipras' example and demand new deals as well.
Michael Jacobides is the professor of entrepreneurship at the London Business School and he joins me now. And, Michael, I want to ask you about
that point. I think this is what the markets are most concerned about - that what we see sort of taking root in Europe is going to encourage others
where there is also austerity fatigue. What's your feeling? Is this the beginning of a sea (ph) change in sentiment in Europe?
MICHAEL JACOBIDES, ENTREPRENEURSHIP PROFESSOR, LONDON BUSINESS SCHOOL: Well, there's a couple of different things. The first thing is that the
Greek problem isn't just a problem of the level of debt. And I think that everyone recognizes that the Greek debt is too large to be serviceable.
And there is a hope that some kind of arrangements will happen - probably by changing the maturities as opposed to changing the nominal amount in
order to ensure that you don't start an avalanche as you pointed out of these changes. But the real problem right now and I think the real concern
is the liquidity concern. It's a concern that the state will not be able to cover its obligations and it's also a concern that the Greek banks are
going to be squeezed very hard. And although they've been given access to the ELA, to the emergency liquidity window, that may be pushing the limit
of what is doable. So, medium-term problem - the debt, short-term problem - liquidity, and of course as Mohamed was saying, for Russia the real
reforms that are required for GDP to actually grow.
LAKE: Which we've seen no matter where you look - whether in Europe or Japan - so difficult to do when you're talking about changing some of
these long-held practices. Greece desperately needs -- in this liquidity crisis they desperately need to grow their economy. What should the
government focus on first? What is the most immediate thing they need to do in order to try to get some sort of economic growth - some sort of
business investment in Greece?
JACOBIDES: Well, this is what the paradox is. Syriza just now got to the government has been anti-investment in terms of most of the foreign
investment that has been proposed. So you have a body that has opposed many of these, thinking that Greece is going to be sold off to foreign
creditors and so on (ph) support, and we are in need of investment. Now, the state cannot invest simply because there is no liquidity. Their
suggestion is that there should be a substantial increase in terms of the spending in order to be able to create the stimulus. But the practical
question is where will we find the money? In the very short term, there is hardly enough money to support the normal functioning of the economy. And
any negotiation that relates to the Greek debt will take time.
The second part is the structural reform. All the efforts of structural reform that happened, and I should note that the Samaras
government was rather limited in its ability and certainly in its appetite to be real reform-minded, have been met by great resistance from Syriza.
So it was really interesting to hear Mr. Varoufakis speak about reform. Nobody has an idea of what exactly reforms they have in mind that could
potentially help grow the economy in Greece.
LAKE: I think they're not being specific right now intentionally obviously. I want to ask you about the Greece - Greek - people. They have
pointed out rightly so that there is in effect a humanitarian crisis taking place in Greece --
JACOBIDES: Absolutely.
LAKE: What these people have been subjected to. But there's also a riff in trying to address that. Greece cannot afford to become a massive
welfare state. How do you reengage the population - these people who have been out of work who have lost their homes who are not functioning in the
economy? How do you reengage them? It sounds like they need some sort of new deal, but, again with no money, how do you do that?
JACOBIDES: So there's two things. The first thing is that the Greek society, the Greek polity did not collapse. And many people thought that
the - with the - massive reduction that we saw in Greek income and with the unemployment for young people being over 50 percent, you would have severe
problems. Greece is a much more peaceful country now than it was even four or five years ago when people woke up to the bad economic news. So that's
the good news, and I think that what you see is that the social fabric and especially families have created an extraordinary support for people to
help go through the crisis.
Now, the only way in which you can reengage them is to get them in the labor force. Now, the challenge is that the Syriza program says, `Well,
we're going to do that by creating jobs in the public sector.' But it is very difficult when you cannot even sustain the current public sector
employees to do so. What most economists - I would almost say all economists - understand that what we need to do is to create the conditions
for greater investment.
LAKE: Right.
JACOBIDES: The political uncertainty and the rhetoric against investment acts exactly in the opposite direction, and that's where we are
right now.
LAKE: And it's been pointed out many times, there are many Greeks abroad - sitting (ph) abroad - that may be able to participate in that
business investment if the conditions were right for that. Michael, thank you so much for bringing up the point about the social fabric. It is
incredibly important as we talk about pride - the creditors and haircuts (ph) in debt -- that we don't forget about the people in Greece and what
they've been going through. Michael Jacobides for us tonight. Thanks so much.
JACOBIDES: Thank you.
LAKE: Well when you take a look at what Greek voters have endured over the past few years as we were just discussing, it's easy to understand
why they are kicking against austerity. I want to take it a step further and try to imagine what it would be like if another country - say Germany -
had experienced this same economic cataclysm. Now, the Greek unemployment rate is more than 25 percent. If that applied to Germany, there would be
around 11 million people out of work. The real number is just over 2 million. If Germany had Greece's level of debt, it would owe around $6 and
a 1/2 trillion. That is nearly twice the size of its economy. And if the German economy had shrunk at the same rate as the Greek economy did over
the past few years, it would be almost 1/3rd smaller than it is today.
Well Peter Praet is chief economist at the European Central Bank. He told CNN's Jim Boulden the ECB is not considering the possibility Greece
will leave the Euro.
(BEGIN VIDEOCLIP)
PETER PRAET, CHIEF ECONOMIST, EUROPEAN CENTRAL BANK: We don't have a plan B as we say, I mean, and I think also it reflects very much, you know,
the public opinion in Greece is to say we want to stay in Europe and I think we just state the information as it is. I mean, we are a central
banker, we conduct monetary policy for the Euro area as a whole and so there is no plan B.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Obviously the ECB took a momentous step last week with quantitative easing. What do you say to
the critics who say you waited too long? You might have - (inaudible) -
PRAET: It's always the same - it's too long, it's too late, I mean.
BOULDEN: But it took a long time for the ECB to get there (ph).
PRAET: No, I wouldn't say that because you know we are basically a bank intermediator to financial environment. We deal with the banks, the
difficulties with the banks of course is during the adjustment process as you know. So when we want to inject liquidity in the market, we give
conditions which are attractive conditions for the banks. If they don't come to us, we don't have the liquidity creation that we expected to do.
And for that you need some time to assess that, and before you enter the next - the next - let's say - steps, you know, in terms of toolbox which is
buying government bonds, we waited to be sure that the time was right.
BOULDEN: But every time you - the ECB - does something, you always - Mr. Draghi always says we need more structural reform, we need the
politicians to do their part now --
PRAET: We do.
BOULDEN: -- but every time you time you take another step into the unknown. Have you taken the final step into the unknown with QE? I mean,
you can do a little bit toward -
PRAET: I wouldn't say it's a final step because we always have our toolbox as we say and the toolbox we can use it. I mean the toolbox now in
asset purchases we said yes. Our intention is to buy until you know September 2016, but we say in any case, you know, we want to see results
before deciding on the rest. But the markets have called it, you know, sort of hybrid sort of communication on QE which has an open-ended
character (ph) but conditional -- but conditional on our objective. So I think it's not correct to say that we have used all the last tool. I think
it's not correct at all for Europe really to recover. If you needed what we call a comprehensive policy response, it's not only a central bank that
will solve the problem.
We have a big responsibility in terms of bringing the inflation on the path, you know, which is consistent with our objective and our mandate or
mandate in the ECB. Now it belongs to the other authorities to do their part and we know that, you know, that has been in recent weeks very -
recent years - quite weak actually. But I would not, you know, underestimate the efforts which have been done in a number of countries in
structural reforms, so this is coming. We also have on fiscal policy this year a fiscal policy which would be more neutral this year. So we think
with oil prices, you know, financial conditions which are very good and - or - quantitative measures that we took last week - a more neutral fiscal
policy - I think there is a good, you know, case, you know, to bring the economy back to the nominal growth path which I think which be the only
pass for sustainability.
(END VIDEOCLIP)
LAKE: Microsoft, one of Silicon Valley's old boys, is trying to become more like the new kids in town. We'll have the company's financial
report card next.
(COMMERCIAL BREAK)
LAKE: We have new numbers coming in to CNN this hour. Microsoft's earnings and revenue for the most recent quarter have hit investor
expectations. The company's in the midst of a major shift in strategy. Samuel Burke is here with the breakdown. So they met expectations - I
don't know if that's going to be good enough for Wall Street.
SAMUEL BURKE, BUSINESS CORRESPONDENT: It doesn't look like it's good enough. The stock is down about 3 percent, Maggie, even though earnings
per share is 79 cents, which is exactly what the Street had expected. Revenue actually $26.4 billion as opposed to expectations of $26.3 billion,
but I think the stock is down about 3 percent because of Windows' news. Windows is down about 13 percent, and that's some really bad news because -
think about it - they actually give Windows away for free starting soon. They said that Windows 10 is going to be free. So if on the one hand, it's
already not doing well and you're telling investors that you're going to start giving it away for free in the upcoming year, that's some worrying
news.
On the other hand, they've started to give Word away for free and they've also started giving Excel away for free. So on the other hand,
though, it's actually doing pretty well they say. It's actually freemium is actually the word we should use. They're giving these two products away
for free on the iPhone and the iPad, and actually say the subscriptions for this - once people start paying for it - is actually up 114 percent. So on
the one hand, free may not work so well with Windows, but with these Office products like Word and Excel, that actually seems to be working well.
LAKE: Is that - this is the beginning. So to be fair, and I'm sure they're going to hammer him with this on the conference call that they're
probably going to get underway soon -
BURKE: Starting to.
LAKE: -- this is the beginning of this massive shift in strategy for this company. Is it because these programs work better on mobile devices?
That's been the big issue, right? The reason they're doing the freemium thing is because everything was tied to revenues related to PCs and they
were kind of behind on mobile.
BURKE: Well, they're doing freemium because this is the way of this market now. It's really driven by companies like Google - Google Docs, for
example, that's what I use to do my type of Word usage, or Excel I go to those places and they do freemium, so they're following in their footsteps.
But the Windows - the Windows drop is really hard to explain, Maggie, --
LAKE: Yes.
BURKE: -- because we're actually in an environment where PC sales are actually strong. So the fact that it went down 13 percent - we're really
going to be listening closely to that phone call to see what they say because that's pretty hard to understand. On the other hand, their Surface
did really well. Their table has done excellent. You also had Xbox sales that were pretty good. And then we have this age-old problem with the
Windows phone -
LAKE: I know, I was going to ask about that.
BURKE: You know it's less than 3 percent - their operating system is less than 3 percent of market share in the world, and although they did
well -- they went over 10 million unit sales, -- what was interesting to me here is that the average Windows phone sells for about $230 as compared to
an iPhone which sells for about $600. So, yes, they're going after that affordable market, but it really doesn't show that it's doing much for
them. They really aren't competing all that well with the iPhone. So a good amount of sales, but it was just -
LAKE: Yes.
BURKE: -- the revenue's really not there.
LAKE: The phone thing I think Wall Street has the phone issue - Wall Street has their head around - investors have their head around - I think
what they're really going to want to know is about that shift in the services. Are they building up the areas of the company where they -
BURKE: Cloud did incredibly well for them this quarter.
LAKE: And now we'll be able to see if investors ease up on the selling a little bit. All right, Samuel, thank you so much. And of course
Samuel will have more on that when markets open tomorrow as well. Well, U.S. markets today closed flat this Monday, you could see. And we are
talking flat - not much activity at all. The Dow only gained about six points. NASDAQ rose only slightly as well. First person (ph) said the
NYSE will be open Tuesday despite that massive winter storm.
Now at the Economic World Forum in Davos, Richard asked the Barclays CEO how the bank was impacted when the Swiss National Bank dropped its
currency peg to the euro.
(BEGIN VIDEOCLIP)
ANTONY JENKINS, CEO, BARCLAYS: We didn't lose very much on the franc, and the important thing about this is we live in an uncertain world, and I
haven't got to have a crystal ball, so I can't predict what the next certainty is going to be. What I have to do is build resilience into
Barclays so that we can cope with those things, and where possible, take advantage of big uncertainties like the impact of technology.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR AND REPORTER HOST OF "QUEST MEANS BUSINESS" SHOW: With this volatility, I just wanted to stay with
this because whatever - you know - I look, let's say, when I'm doing "Quest Means Business" and we see at the end of the day the Dow move to a 400-
point range of the day. You think at the S and -- the Swiss Bank -- go about 30 percent in a day - exceptional I know - it makes it very difficult
for ordinary people to comprehend these changes that are taking place.
JENKINS: Yes, I think you are seeing more volatility - again, driven by the sort of uncertainties that I was referring to. I think we look back
at the period now - the 20 or 30 years before 2008 - has an unusual period in some ways of stability in the global economy.
QUEST: What's driving this uncertainty now though? Because yes it's there, --
JENKINS: Yes.
QUEST: -- And the IMF talked about adverse circumstances in its latest WIR (ph) report when it down graded. But what's driving -- ?
JENKINS: Three things. Geopolitical uncertainty, structurally lower macro-economic growth. If you look at global GDP growth forecast this
year, it's around 3 percent/3 and 1/2 percent. Historically it had been close to 5/5 and 1/2 percent and we all know why that is - too long to go
into that now. And the third is technology. And technology, again, is transforming huge areas of our lives much quicker than we can see it. And
when you put all those thing together, you live in a world of uncertainty and you live in a world where the average person feels more uncertain about
the future.
QUEST: As we look now at technology and what is happening, it's blisteringly fast, it's almost incomprehensible to get onboard, and then
you end up with something like Sony - -a hacking scandal of the highest order. As a chief exec, when you head about Sony, did a little shiver go
through you and think, `God, could this have been us?'
JENKINS: Well of course. We all have to worry about hacking and cybercrime. If you asked most CEOs in a bank or any other organization,
that's probably at the top of the risk list. But technology is much more a positive than a negative for the average person and indeed for business.
QUEST: Right, but if you're not the average person at the moment, you're running the bank, and in that sense, are you now saying, `Look,
whatever it takes, just make sure we are OK.' Have you elevated it? Is it something that reports to you now?
JENKINS: It's something we've had elevated for years, so I mean this is not a new event. You know, we had a series of situations where
organizations have been hacked - governmental organizations, banks, businesses - so this is not new. This is something that we've been putting
as a top priority for a long time. Now of course with all of these things, there's no perfect defense against hacking. It's like anything in life.
So you have to be better than the other people who might be targets.
(END VIDEOCLIP)
LAKE: We'll be back with more "Quest Means Business" in just a moment.
(COMMERCIAL BREAK)
LAKE: A new study shows that Chinese travelers are increasingly seeking out more exotic locations to visit. Andrew Stevens reports on how
social media has played a part in the changing attitudes of Chinese tourists.
(BEGIN VIDEOCLIP)
ANDREW STEVENS, ANCHOR AND CORRESPONDENT BASED AT CNN'S ASIA PACIFIC HEADQUARTERS IN HONG KONG: It's a familiar sight in Hong Kong - the
world's top destination for Mainland Chinese tourists. But thanks in part to the power of social media, that's about to change, from this - to this -
-according to a new report by Hong Kong research firm CLSA.
(BEGIN VIDEOCLIP)
AARON FISCHER, REGIONAL HEAD OF CONSUMER AND GAMING RESEARCH, CLSA: They want to go the next place, the next exotic place. They want to be -
they don't want to be the guy or girl that's been to Hong Kong to repeat (ph) with the Star Ferry or ICC or IFC. They want to go somewhere new.
Even for some of those people, going to the Eiffel Tower is not good enough anymore. So the same people travel to these more exotic locations. So if
they're going to Europe, instead of going to Paris or Milan there, they might be looking at places like Greece or Croatia. So it's really trying
to find that next destination.
STEVENS: As of last year, nearly half of China's 100 million outbound tourists went to Hong Kong. But that number says CLSA is likely to fall to
26 percent by 2020. So, where do they want to go?
Female, VIA INTERPRETER: Next year I'm going to graduate. I want to go to Italy.
Male: I want to go to Seoul, and ideally I want to go to Europe. That would be best.
STEVENS: And this is where they get their inspiration. CLSA says that some three quarters of all Chinese travelers now use social media to
get an idea for their next get away. Browsing photos and sharing their on- message app WeChat. Tourism boards around the world have taken notice. The city of Los Angeles is just one destination that's created an account
on Chinese microblogging site Weibo aimed at potential travelers. And with up to 200 million Chinese taking a trip every year by 2020, there's big
money at stake.
FISCHER: The world is - it needs to be prepared for this onslaught of more Chinese tourists, and I think for a lot of industries they should be
very excited about that.
Group: Shouting.
STEVENS: They're saying, "Hong Kong, we have arrived." But the social media that will decide where they go next. Andrew Stevens, CNN Hong
Kong.
(END VIDEOCLIP)
LAKE: Next we'll see what kind of a welcome Greece's new prime minister got elsewhere in Europe.
(COMMERCIAL BREAK)
LAKE: Volatile weather is not just hitting the United States, we saw what you might call rather appropriate conditions in Athens today.
(RAIN SHOWERS)
LAKE: Thunder and lightning greeted Alexis Tsipras as he left the prime minister's office for the first time. Tsipras may need to prepare
for political storm clouds as well. He's vowed to confront European leaders and challenge the status quo. And that's "Quest Means Business."
I'm Maggie Lake. Thanks for watching. Amanpour is next.
END
