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Quest Means Business
French PM Uses Decree to Pass Reforms; Hungary and Russia Strike Energy Deal; U.S. Wants Ports to End Dispute; U.S. Air Carriers Feud with Gulf Rivals
Aired February 17, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST: It was a trading session of two halves, down in the morning, up in the afternoon, but with only a small gain of 18 points
also when trading came to an end. Lady hits the gavel. Good sport. Scared the bejeebies out of me and everybody else on Tuesday, the 17th of
February.
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QUEST (voice-over): Tonight the French government (INAUDIBLE) confidence vote after putting major reforms through the back door. Ship after ship of
wasted goods. The dock dispute is costing the United States billions in lost trade. And last night you saw Delta throw down the gauntlet. Tonight
the group CEO of Qatar Airways answers back to claims of unfair competition.
I'm Richard Quest and I mean business.
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QUEST: Good evening. We begin tonight in France, where the government there faces the threat of a no-confidence vote after some legislative
jiggery pokery maneuverings indeed which have lawmakers up in arms.
The French prime minister rammed through a bill on economic reforms without putting it to a parliamentary vote. It's a rare section of the French law
which allows him to do it. But it's a move that could bring down the French government. There are fears of a revolt in parliament, which forced
President Hollande to approve a rarely used power.
Now by using this power to get his budget through means the bill does not have to pass by a vote. It literally goes through by edict. The
opposition party immediately called for a vote of no confidence -- that's the party led by the former president, Nicolas Sarkozy. The reforms are
modest by some standards, but they are aimed at cutting red tape for businesses and extending trading hours for shops.
Here's what the parliamentary leader for the Socialist Party said about the reforms.
(BEGIN VIDEO CLIP)
BRUNO LE ROUX, SOCIALIST PARTY (through translator): The prime minister has engaged the responsibility of the government. He will use the 49-3
constitutional decrease to pass the bill. It was not possible to take the flight as risk with the law for which we may have had an insufficient
majority. This bill is too important for the French, for France. And we wanted it to be voted so that it can continue its parliamentary route.
(END VIDEO CLIP)
QUEST: 49-3: this is the provision in the French law that allows the government to literally ram a new law into effect without passing
parliament. But it's been done very sparely in the past -- I think nine years ago President Mitterrand was the last example of when it was used.
International diplomatic consultant Christian Malard is with us this evening in Paris.
So, 49-3, this --
CHRISTIAN MALARD, INTERNATIONAL DIPLOMATIC CONSULTANT: Good afternoon, Richard.
QUEST: -- good afternoon, sir -- this rare legislative action -- but they must have known that they were going to cause a furor, a ruckus when they
did it.
MALARD: Let's put it this way. This shows the use of the 49-3 article of the French constitution shows that there was a real lack of confidence by
most of the Socialists inside the parliament concerning Prime Minister Valls with his social liberal reforms and they are qualified by most of the
Socialist parliamentarians.
So this is a big fight inside the majority and to use this as a forceps to have this law adopted prove that definitely the government is in trouble.
QUEST: Right. But you see he has a huge majority, but he couldn't get the law through. But he will win the vote of confidence.
Now is that because basically --
MALARD: Oh, yes.
QUEST: -- his own party's going to stick by him; turkeys don't vote for Christmas.
MALARD: Yes.
Yes, right. Definitely on the vote of confidence which should take place Thursday afternoon New York time, your time, I'm sure. If I had to make a
bet that the government won't fall down, no way.
All these people of the left wing of the Socialist Party and the extreme left wing which are against these socioeconomic reforms, liberal reforms by
Prime Minister Valls and Mr. Macron, the secretary of the economy, definitely all these people will stick to the government. We lack one
person, one man around the government. They are so much afraid to lose their job because we're only two years and a half away from the next
presidential election. So I don't worry about that. I don't think we'll have to spend next Thursday afternoon.
But still, there is this kind of revolt broiling inside the Socialist government and with all these different tendencies inside the party which
might put into trouble for the future Prime Minister Valls and some of his economic advisers who are too much judged as being a little bit too much on
the Right.
QUEST: The actual reforms, I mean, they may be draconian by French Socialist standards, but they're quite modest -- I mean, a bit of changing
of the trading hours on Sunday, a few other minor changes, they're not exactly the sort of root and branch reform of the economy that people say
is needed.
MALARD: You're totally right, Richard. You put the finger on it. And let's put it this way. Mr. Macron, the secretary of the economy, are
willing to make many concessions when look at the law the way it was looking like at the very beginning.
And because definitely there is a Socialist orthodoxy, all these people who are sticking to old habits, who don't want to have any reforms, they are so
much scared that we are going to break the 35 hours' work week and have these people work on Sunday, even if they get more money. They are tied to
that.
So France is very conservative country and doesn't want to move the modern way. This is a problem we are facing in this country.
QUEST: Careful, Christian. If you're not careful, you might have to work 36 hours next week. Thank you for joining us tonight from Paris.
MALARD: Thanks, Richard.
QUEST: A 35-hour week.
Now European stocks finished the session, they were mostly higher. Well, you saw what happened in New York, the Dow was down and then it was up.
But in Europe, then you see they were in the red when the debt talks between Athens and its Eurozone creditors fell apart. Investors are
worrying that Greece's future in the single currency book is seriously in doubt. We'll obviously be talking a great deal about that more.
But as you can see the markets, three were up, one was down.
Right now, any hope that the E.U. had of showing a united front against Russia is perhaps in tatters after Hungary welcomed Vladimir Putin to
Budapest. The Hungarian prime minister Viktor Orban got what he wanted, which was the renewal and the extension of the gas deal with Russia, which
the gas will now continue to flow to Hungary. The prime minister told a joint news conference with the Russian president an agreement had been
reached in principle.
(BEGIN VIDEO CLIP)
VIKTOR ORBAN, HUNGARIAN PM (through translator): It is important that everybody should strive for peace in Europe and it is not only about
stopping war but also about constructing future. And I am convinced that European unity can be created in parallel with cooperation with Russia.
(END VIDEO CLIP)
QUEST: European unity can be created. The Hungarian government spokesman, Zoltan Kovacs, joins me now live via Skype from Budapest.
And sir, we're grateful to you for joining us this evening and helping us understand this.
Whichever way it has been spun in Budapest, if I read the wires and I read the news stories about this, it seemed to be, at the very least, unhelpful
to a unified E.U. position on Russia.
ZOLTAN KOVACS, SPOKESPERSON, HUNGARIAN GOVERNMENT: Good evening, Richard. I think the press conference and the two statements by President Putin and
Prime Minister Orban basically testified about something different. And I think that there is the possibility and that's the only way that there is a
common European policy towards the crisis in the Ukraine.
So that should be a common solution which also includes Russia's perspectives and Russia as a partner.
QUEST: The view is, of course, and you're well familiar with this, that Viktor Orban, your prime minister, is playing both sides of the blanket, as
my grandmother used to say. Obviously being one-half actually in the European Union, but at the same time wanting to keep this bridge hold open
to Russia.
KOVACS: Well, we have announced a couple of times during the past couple of weeks we cannot really think with the heads of many other states and
many other statements. Rather we would like to think with our own heads, and that is pursuing the Hungarian (INAUDIBLE). And that's very clear and
very simple. Energy dependency on Russia is a fact. Energy security is an issue that is an everyday problem and everyday issue that needs a solution.
And I think today's talks and deals basically clarify that situation.
QUEST: At a time when relations -- when the Ukraine -- I mean, I listen to what President Putin said about the current-day -- the cease-fire and he
said it will take time and it's a lot better than it was.
But at a time when clearly unity amongst the E.U. is so important in its strategy -- and we know that the prime minister doesn't support the
sanctions in principle even though he may be in practice, the call -- I mean, Angela Merkel arrives in the next 48 hours. And some suggest she's
going to tell the prime minister what she thinks of him.
KOVACS: Yes. But also keep in mind that following Ms. Merkel's visit, the prime minister have visited Mr. Poroshenko UTL (ph) today there were very
fruitful discussions with President Putin and Mr. Orban is going to visit Warsaw in two days.
I believe that these meetings, these discussions really help to approach the kind of unity you are talking about and basically are essential to
reach what everybody desires in this conflict and in this geopolitical situation and that's peace.
QUEST: Sir, thank you for joining us tonight from Budapest. Good to see you as always, thank you.
Now putting into perspective the three days of a cease-fire between Ukrainian forces and the pro-Russian separatists, well, three days after it
was begin -- meant to begin, the violence in Eastern Ukraine does continue.
Ukraine says five members of its armed services were killed in the past 24 hours. And video shows the aftermath when a gas pipeline was hit by
shelling.
The economy minister says economic output is contracting fast even if the violence stops entirely. In the last quarter of 2014, the government
estimates GDP fell 15 percent year-on-year, 4 percent just on a quarterly basis. And the IMF bailout is promising emergency fund and hoping that the
company returns to growth.
Speaking to me on QUEST MEANS BUSINESS last week, Ukraine's finance minister said more austerity because of this was inevitable.
(BEGIN VIDEO CLIP)
NATALIE JARESKO, UKRAINE'S FINANCE MINISTER: I think the Ukrainian people not only are demanding (INAUDIBLE) reforms, they understand that a small
amount of additional pain, a small amount of additional patience will be required for us to turn this around.
(END VIDEO CLIP)
QUEST: That's the Ukrainian finance minister.
Labor disputes ranging on America's West Coast and it's paralyzing trade and it's turning the ocean into a literal parking lot. Look at all those
ships that are parked, waiting to load and unload. With President Obama's top labor official on the scene, we'll be in Los Angeles after the break.
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QUEST: A nasty dispute in the ports of the West Coast of the United States -- look at all the ships waiting to either unload cargoes or get more,
President Obama's now sending his labor secretary to the West to try to end this (INAUDIBLE) dispute that's crippling U.S. trade. Now there are 29
ports from Southern California to Seattle and the flow of goods in and out has almost ground to a halt.
Employers and dock workers or unions are wrestling over pay and conditions. It's turned the waters of California into a waiting room for ships that
can't dock -- just look at the sheer number of them.
The Secretary of Labor, Tom Perez, has been on this program many times, has been dispatched; his goal: to give the negotiations a push and try and
find a resolution.
Around $1 trillion of cargo passes through these ports every year. Now bearing in mind, this is the route from the west. It's 70 percent of
exports from Asia, which come across into the West Coast ports and of course in return the U.S. sends to the -- outwards to Asia, California farm
produce heading for China, Korea, Japan, Malaysia, Indonesia and Australia.
And there's one other point to remember: by coming into the Northern California ports, they also join the land bridge, which takes of course
goods and services -- goods across the United States to places like Wichita, Kansas, and out towards the east.
The slows up and down of the West Coast have had massive international repercussions and backlogs. Here we go at the superscreen. First of all,
the auto parts: they're being held up, simply can't get in. Remember just in time production, you need them now. Honda says it's actually slowing
plants at its factories because it can't get goods which have come across, of course, from China into the United States.
And then you've got as well, also coming through, on the thing McDonald's in Japan. Now McDonald's in Japan is rationing French fries. Emergency
supplies of frozen fries have had to be sent by air. Look at the distances, again, that we are talking about, the Pacific, the largest ocean
and of course McDonald's now shipping potatoes backwards and forwards to the Japanese can have a French fry with their Big Mac.
As for what else is happening in the delays, you have fruit and veg. It's rotting on the ships. California oranges, lemons, waiting to be sent to
the Pacific, just simply sitting on the docks.
Sara Sidner has been following this for some time.
Good evening, Sara. Good evening.
SARA SIDNER, CNN CORRESPONDENT: How are you, Richard?
QUEST: I'm well. What a mess.
SIDNER: This is a real problem. Yes, it is. I actually went out on a boat a day ago just to see what it looks like when you get out there on the
water. And it really is a parking lot in the sea, which is really, really odd to see. You already have plenty of traffic in Los Angeles and Long
Beach.
But when you see those ships stacked up with what from afar looks like Legos, but actually close up they're those massive containers filled with
everything from bluejeans to potatoes to car parts, I mean, whatever you have on your back, a lot of the clothes that we buy, a lot of the items
that we buy in stores, they're in those containers and they literally have been stuck for three days. There was no movement at all. Now the movement
is starting again, but it is very, very slow. And that has a lot of people worried.
(BEGIN VIDEOTAPE)
SIDNER (voice-over): An economic disaster in slow motion: ships filled with the goods mostly from Asia that helped fuel America's economy anchored
offshore, waiting and waiting and waiting to unload. The pace of work at 29 West Coast ports has ground to a halt.
STEVE GETZUG, PACIFIC MARITIME ASSOCIATION: We're getting to a point, a breaking point, where the system is really sort of collapsing under its own
weight. We're experiencing significant delays and backlogs.
SIDNER (voice-over): That's Steve Getzug of the PMA, Pacific Maritime Association, which represents 72 companies.
UNIDENTIFIED MALE: The drivers united.
SIDNER (voice-over): It blames workers in a labor union for purposely slowing down their work and expecting to be paid full wages as a tactic to
get a better deal on their contract which expired in July.
The labor union blames the PMA, which has halted operations altogether for the holiday weekend so it doesn't have to pay overtime.
ARMANDO PORRAS, UNION REP: It's their decision not to bring them in. They bring those ships in, we will work them.
SIDNER: They're saying this is disingenuous, that it is the workers who have created this slowdown.
UNIDENTIFIED MALE: That's a slap in the face to us. We don't do that. We believe that if we work hard to bring these ships in, they keep coming back
to our ports.
SIDNER (voice-over): Both sides talked to us before the media blackout. Whoever is at fault, a crisis is building. Container ships stacked with
everything from salt to sheet metal lingering out at sea.
On shore, perishable goods like California's famous oranges, rotting, while waiting to be loaded and sent to consumers in Asia.
SIDNER: How would you describe that scene? I mean, are we talking a parking lot out there?
UNIDENTIFIED FEMALE: You could describe it as a parking lot. When you have that many ships, you increase the risks of collisions, elisions,
grounding, environment cases and maybe even some security problems.
SIDNER (voice-over): But for now, the biggest problem is the potential economic impact. The National Retail Association estimates a complete
shutdown of the West Coast ports could cost the U.S. economy $1.9 billion per day.
SIDNER: To give you some idea of the goods that go through these ports here on the West Coast, and spread out to the rest of America, the L.A. and
Long Beach ports combined handle about 40 percent of the nation's cargo.
SIDNER (voice-over): And that is just two of the 29 West Coast ports experiencing delays.
In the waters off West Coast ports, we spotted nature moving at its normal pace while the human-made giants are left behind.
(END VIDEOTAPE)
QUEST: Sara's with me in Los Angeles.
So Perez is being sent out there, talk to the labor secretary. What's the best hope that he can do?
SIDNER: You know, I think at this point everyone wants to see these ports at full steam ahead -- no pun intended. I mean, trying to get all of these
ships and get them in fast and get them unloaded fast and having the staff to do that, that is the ultimate goal because as mentioned, this could cost
more than $1 billion per day.
The United States and no other economy can deal with losing that kind of money. And I was just on the phone with Congresswoman Janice Hahn (ph),
who is the ports are in her purview, both the Los Angeles and the Long Beach ports. She says, look, I can see these ships out my windows just
sitting there. It's heartbreaking. The longshoremen, they want to work. And for sure these tanks, these tankers and these containers need to get
where they're going so that the consumers have what they need.
QUEST: Sara Sidner, who is with the intractable dispute on the West Coast, Sara, thank you. Come back when there's more to report.
Now U.S. stocks ended today, they were higher. The S&P closed at a new record. But if you look at the Dow, interesting the way that -- we had
this morning session which was down largely on the back of what was happening with Greece and the worries about that.
And then you have a jump session during the day much more positive. A little blip towards the end. It all shows the nature of the beast.
When we come back, last night you heard from Delta and the accusations against the Gulf 3 carriers. In a moment, Akbar Al Baker is the group
chief executive from Qatar Airways who'll be responding to the accusations -- QUEST MEANS BUSINESS.
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QUEST (voice-over): A dispute between the three biggest U.S. carriers and their Middle East rivals is certainly heating up.
Delta, American and United say they're facing unfair competition because Emirates, Etihad and Qatar Airways, the so-called Gulf 3, receive or have
received what the U.S. carriers believe is up to $40 billion in state aid. And the structure of their airlines is such, they say, that it's going to
get worse.
Last night on this program, the Delta Airlines chief executive, Richard Anderson, landed the first blow in this battle, when he said the United
Arab Emirates -- by which he means Etihad and Emirates Airlines -- and Qatar Airways -- they are not airlines; they are governments.
And he denied that his airline has also received benefit from different forms of state aid, such as Chapter 11. Quite clear battle between the
two.
Joining me now on the line from Doha is the chief executive of Qatar Airways, the group's CEO. It's Akbar Al Baker.
Good evening to you, sir.
Good evening.
QUEST: The -- the case -- we'll come to the wider issues. But in the case of Qatar, the U.S. report says that you've received at least more than $10
billion worth of subsidies in the last -- since the airline has set up, in one way or another.
Do you admit or deny that you've received these subsidies?
Quite frankly I think that Mr. Richard Anderson needs to go and study the new (INAUDIBLE) to find out what is the difference between equity and
subsidy. We don't receive any subsidy. What the government has given us is equity into an airline which they own.
QUEST: They also say -- they also claim that the U.S. that many of the charges, for example, for example, that you pay at your new airport are
unrealistically low. They don't reflect the capital cost of a $17 billion airline -- airport and the structures say, for example, in Qatar, are
designed to promote your airline, not an industry.
What do you say?
BAKER: I don't think that is true, either. The airport is a part of the government infrastructure and the fees that are charged to Qatar Airways is
also charged to all the foreign carriers that operate from the airport.
So there is no subsidy or assistance given to Qatar Airways.
QUEST: Right. But you'll agree that there's a big difference between the sort of low fees that you might pay at your hub and for example, your new
investment British Airways, where you bought 10 percent IAG, that they're paying at Heathrow. It has a disproportionate effect to the airline.
BAKER: Yes, of course. It is -- Heathrow is owned by a company and the Doha airport is owned by the state. And it's up to the owners what fees
they want to charge.
QUEST: This battle, one particular point that the report does talk about with your airline, sir, if I can put it to you bluntly, is this question of
the contracts that your flight attendants, particularly, well, obviously the female flight attendants sign where they have to ask permission to get
married and to get pregnant.
First of all, let's scotch this once and for all.
Is that true?
BAKER: That is not true. That is a load of bullshit. This is people creating issues because yes, we don't have unions and this is what they
don't like. They see that our work practices are very progressive. People have all the rights that they require. And what the rumors are being
circulated is absolutely untrue. And we have already the ILO inspectors in my country that are looking into this and have already found that all these
rumors are unsubstantiated and just created to paint a bad picture on the Gulf carriers.
But let me go back to the issue of custody. I think Mr. Anderson has forgotten that in 2001, the government of the United States contributed
nearly $5 billion in aid to the airlines and additional $10 billion in loan guarantees that was given to them.
What is this called? It is called a donation? Or it is called subsidy? Or is it called government help to them?
(CROSSTALK)
QUEST: All right. You're referring there to the -- to what he said last night about the post-9/11 incident.
So, Mr. Al Baker, just bear with me. We're going to play -- since you've raised it, we're going to play what Mr. Anderson said and then let you come
back to respond to that.
(BEGIN VIDEO CLIP)
QUEST: And to the allegation that, well, you restructured under Chapter 11. You -- the U.S. fleet certainly gains benefits from the civil defense
fleet. American has just restructured. The argument is that you in your own ways have had your hand in the bailout trough.
RICHARD ANDERSON, CEO, DELTA AIR LINES: That is categorically false. And it's a great irony to have the United Arab Emirates from the Arabian
Peninsula talk about that, given the fact that our industry was really shocked by the terrorism of 9/11, which came from terrorists from the
Arabian Peninsula, that caused us to go through a massive restructuring.
And in the United States, our restructuring process is transparent and there is no government subsidy. And in fact, there were billions of
dollars of equity and unsecured debt that were wiped out through that process.
(END VIDEO CLIP)
QUEST: So there you have his views, Mr. Al Baker. What do you say?
BAKER: Well, I think he should be ashamed to bring the issue of terrorism to try to cover his inefficiency in running an airline. I think that he
should not be talking about this. He should very frankly state that he used this Chapter 11 to fix the problems he has in his carrier. Quite
frankly, I think that Mr. Anderson should be doing his job, improving and competing with us instead of just crying wolf for his shortcomings in the
way the airline is run.
And blaming us as Gulf carriers whilst not saying anything to other countries, which have similar organizations like we have in our countries.
For example, state-owned airlines in India, in China, in Russia and many parts of the world. He does not talk about that. He only is targeting
Gulf carriers. I don't know why. What is the reason he is doing this? Is he afraid to talk about them because he has huge investments and flights to
those countries?
QUEST: We will leave it there. We will talk more about it. We hope to have tomorrow night Sir Tim Clark from Emirates on the program. We're
being absolutely evenhanded.
Thank you very much, Akbar Al Baker for joining us with that.
When we come back , too many restrictions, no time to think. Some European finance ministers say they're getting more and more worried about Greece's
dispute with the Eurozone. We'll hear from one of those ministers when we come back.
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QUEST (voice-over): Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment.
When the former president of the European Commission, Jose Manuel Barroso, he'll join me live as Greece edges closer to calamity. What does he say
needs to be done?
And the chief executive of the world's biggest hotel group IHG tells me how he juggles the various brands from IHG.
Before all of that, this is CNN and on this network the news always comes first.
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(BEGIN VIDEO CLIP)
QUEST (voice-over): Fierce fighting's been reported around the town of Debaltseve in Eastern Ukraine. The cease-fire was meant to take effect
three days ago. A huge fireball erupted outside the town when a mortar shell hit the gas pipeline. Separatists now say they control 80 percent of
Debaltseve.
The French government's facing a threat of a no-confidence vote because the prime minister pushed a bill on economic reforms through without asking for
parliamentary approval using a little known technique. The government says it's a business-friendly package designed to cut red tape.
Still in France, a prosecutor has called the charges of aggravated pimping against Dominique Strauss-Kahn to be dropped. The prosecutor says the
investigation into the former head of the IMF has failed to produce evidence of wrongdoing. Strauss-Kahn is accused of organizing sex parties
with prostitutes. He denies the charges.
Emergencies have been declared in four U.S. states because of the severe winter weather -- in Kentucky, Tennessee, North Carolina and Virginia snow
and ice are causing widespread power failures and deeply dangerous driving conditions.
(END VIDEO CLIP)
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QUEST: Talks over Greece's bailout are not only running out of time, they're getting perhaps deeply personal. The Greek prime minister says
Germany's finance minister is losing his cool, in his words, by insulting the Greek people.
Now talks broke down when Greece refused to continue into the existing terms of the bailout program.
Wolfgang Schaeuble says only Athens knows if Greece wants to stay in the Eurozone. In the Greek parliament today, Alexis Tsipras struck a defiant
tone.
(BEGIN VIDEO CLIP)
ALEXIS TSIPRAS, GREEK PRIME MINISTER (through translator): The German finance minister, Mr. Schaeuble, yesterday lost his cool, not because he
spoke against the Greek government -- that is his right -- but because he expressed himself in a derogatory manner about the Greek people.
WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER (through translator): We all want the Eurogroup to stay together. We have worked on it for years. I am
the only one who has been here the longest of all the finance ministers. But everybody has to do its part and the decision is now only in Athens.
(END VIDEO CLIP)
QUEST: He then went on to say Athens and its irresponsible government -- or at least that's the way the reports were.
Greece is expected to ask for some kind of loan extension on Wednesday. The problem, of course, is they're not prepared to also sign up to the
troika terms or indeed the full bailout.
Malta's finance minister was at the talks today and the Eurogroup meeting on Monday. He's been pessimistic about the situation. I asked him why
he's now concerned that there's a potential for disaster.
(BEGIN VIDEOTAPE)
EDWARD SCICLUNA, MALTESE FINANCE MINISTER: Well, this is because there are too many restrictions. The election has been just the recent past. There
isn't time to think and discuss. The deadline is at the end of the month. We -- all the ministers have to meet in Brussels. So there are many
restrictions. And too many institutions and ministers. So yes, too many things against this agreement. But that was in answer to another question.
So it will be a disaster if there is no agreement.
QUEST: But do you -- are you confident or do you believe that there will be an agreement?
SCICLUNA: From this morning, at least the statements made by both the Greek finance minister and the chairman of the Eurogroup in the council --
so the morrow of the Eurogroup meeting -- both of them said that they are not contemplating any Plan B. They don't even want to contemplate. So
they are keen to get an agreement.
Now at least that's the intention.
QUEST: Do you think it is fundamentally inconsistent to have the position as the Greek government, the position as the Eurozone government, which --
or the Eurozone group, which basically is that they have to accept the extension before you can even discuss potential reforms to the program?
SCICLUNA: Well, this package, this memorandum of understanding took many months, if not years, to bring up. There are so many rules, regulations
and treaty and so on. So it's not easy for the Eurogroup to change tack overnight. It needs time. It needs about six months.
Now it would have been solved if such a thing as a bridge loan could have been created. But the European Central Bank just threw it out, just said
it's not within our system. It's not according to the rules.
So the extension of the program is a means of using that as a bridge or lever until deeper negotiations are made. Now that is very difficult for
the Greek side, because they were elected on the premise that they will -- they consider that as a Gordian knot. And rather than solving it, they
want to do away with it. And now they are faced with -- they have to accept it as a means for obtaining flexibility, a bridge loan, so to speak.
And then hopefully negotiations for the future, but that's a political problem for them to explain to the Greek people.
QUEST: Where do you stand? Where does Malta stand?
SCICLUNA: We made it very clear that Malta had to borrow in order to lend towards Greece. We -- it's a small sum of 180 million. But for Malta,
it's a lot of money. It's about 2.4 percent of our GDP. So we want our money back, at least they have to honor it. And we're very concerned when
there were statements to the contrary.
So now that we said, look, if you want concessions and we are for flexibility, however, you must honor the debt first, which they did, which
they did more than once in the group and even publicly now.
So we are now -- we want debt flexibility, which is enough for us to guard our money, to guarantee it for the future. So their concerns and ours are
the same. We want a program. We want the medicine to work and we want to see growth. We want to see a successful Greece and not this humanitarian
issue and problems they have.
(END VIDEOTAPE)
QUEST: Finance minister of Malta. Now the former president of the European Commission is all about the Greek debt turmoil. Jose Manuel
Barroso, who you see here with the previous Greek element, various ones of them, was a major player in the negotiations during all sections of the
international crisis.
Today he's a visiting professor at the Princeton University and he joins me now.
Mr. Barroso, thank you, sir, for joining us this evening. It is good to see you better than pretty much anybody knows how intractable this is.
But you also know that a deal can be done.
So are you optimistic?
JOSE MANUEL BARROSO, FMR. PRESIDENT, EUROPEAN COMMISSION: So first of all, thank you, Richard, for the invitation to speak with you again.
Indeed, I think that if things will go the normal way the European Union and we had many of these crises as you remember, at the end, we shall have
a deal. That's the way we do things in European Union. Sometimes there are extreme positions but we know that at the end a compromise has to be
found.
This time, to be very frank with you, I'm not so sure because there is a new player, the new government in Greece, that was elected with a quite
radical program and I don't know if they really understood the rules of the game. And the rules of the game in European Union are quite clear.
Decisions have been taken and they have been taken unanimously. So we can change them, yes, but it has to be also by consensus. One country has not
the right to impose its view on all the others.
So I'm in favor of flexibility. I think we should accommodate some of the Greek concerns. But the Greek government should start saying that they
really want to respect the agreements taken, not -- they maybe put themselves in a corner.
QUEST: Well, they're already in that corner in that respect.
But here's the problem, Mr. Barroso. Everybody says there needs to be some flexibility as a precursor to then say, but you've got to then also agree
to stick by your current conditions.
How much flexibility can there be to the Greek government which has previously signed up to certain things?
BARROSO: I think there can be some flexibility. There have been different signals mainly from commission, from the commissioner responsible, that
some -- even also from the president of the Eurogroup, Mr. --
(CROSSTALK)
BARROSO: -- that in case the Greeks accept that the program is not to be extended, in fact that program, some accommodation can be done. So I
really believe it's possible to do it so that the --
QUEST: Except that's --
BARROSO: -- that is doing something.
QUEST: -- except that's the one thing, that's the one thing they went to the country on and said they will not sign up to the program.
So you're right to be pessimistic tonight, aren't you?
BARROSO: Look, I've been saying that for some days or for some weeks already, that this time, paradoxically, the possibility of a default is
much bigger than before. You remember, Richard, because you were following this very closely yourself and we spoke very often during the most acute
moments of the financial crisis and I was always confident that we are going to find a solution at that time.
Why?
Because a possible Grexit at that moment would have a major systemic impact. This time this is not the case. We see that the spreads with --
of Ireland, Portugal, of Spain, they remain stable. And so this time the Greek authorities cannot play with the threat that if there is a problem
with Greece, it'll become a problem for all euro area. Of course, it's something that nobody wants in euro area. We don't want a Greek default.
We don't want a Grexit.
But this time it'll be more manageable. By the way, the quantitative easing program of the ECB in itself, it's a very powerful firewall.
So I really believe that the Greeks should understand that we are no longer in 2012 or 2013 and they should try to find accommodation because I also
believe on the other side compromise is possible.
QUEST: All right. So finally, because this is a fascinating discussion and we're grateful to have on the program, finally, sir, there is a harder
line now, isn't there?
I listened to what Mr. Dijsselbloem said when he said there's no support really or there's a lot of support for maintaining the position. I spoke
yesterday to the finance minister of Belgium. You just heard the finance minister of Malta.
Other countries are basically saying to Greece, no.
BARROSO: You have to understand why because what is at -- in question is that the way European Union takes decisions, those decisions were not taken
by the so-called troika. And that's one of the mistakes of Mr. Tsipras and of the Greek government. It was not the European Commission, European
Central Bank, the IMF that were imposing some decisions on Greece. Those decisions were taken unanimously by the member states of the euro area.
And so it's OK; now we have a new government in Greece. You have to listen to the arguments. But that argument also -- that government also has to
respect the arguments of the 18 other members of the Eurozone. Now what happens is that it is not only -- it is not only a problem between Greece
and Germany as sometimes they put it. No, there are countries, countries that are poorer than Greece, for instance, Slovakia, which is poor, on the
GDP per capita basis, than Greece. And they simply say they don't want to be paying for Greece.
So I think the government of Greece has the right to make its innovations but has to respect the commitments taken by the country towards the other
democracies of Europe as well.
QUEST: Mr. Barroso, thank you for joining us and we'll talk more about this, that much I know for sure, in the days and weeks ahead. Thank you,
sir, for joining us.
2014 was a strong, good year for the world's largest hotel group. The chief executive of IHG now has the knotty problem of taking all these
brands and making them sing like a bird.
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QUEST: Rising demand in the United States boosted earnings for InterContinental Hotels Group, IHG. It's the largest hotel group in the
world. It says revenue for available rooms -- so-called revpar -- jumped more than 6 percent. Look at the brands. The IHG name may be rather
boring, but you certainly know the brands of Holiday Inn, Holiday Inn Express, Grand Plaza, InterContinental Hotels and so on.
I spoke to IHG's chief exec, Richard Solomons and I asked him where was he taking the world's largest hotel group.
(BEGIN VIDEOTAPE)
RICHARD SOLOMONS, CEO, IHG: We saw in the results this year, as you say, they were a pretty strong set of results of growth actually all around the
world. Is we've had a very consistent strategy from day one, since we became independent in 2003 and it really is about trying to make the brands
better, make them genuinely preferred, drive returns for owners, generate cash. And that's what the business does. So we see opportunity in a
number of areas. We see improving our existing brands. We've innovated extensively around Holiday Inn with new open lobby, new restaurant concept.
We've taken the existing brands into new markets, so Holiday Inn, the last three years, we've moved into 13 new markets, including Singapore, Thailand
with Express, Oman, Nicaragua and so on. We've launched new brands, even hotels in the U.S., first to open Hualuxe Hotels in China just announced
the location of the first one in Yangjiang (ph) last week and we've got another one opening in a few weeks and then as you mentioned with Kimpton
Hotels that we acquired earlier this year, we've added a new brand. So I think we have a range of growth opportunities to continue taking the
business forward.
QUEST: How do you knit them together, if, indeed, one does knit them together, so that they don't just become a disparate individual range of
different brands, but they are a cohesive portfolio?
SOLOMONS: It's a good question I think in two ways. One actually we do keep them separate. I think in today's world of what consumers are looking
for, hotels and elsewhere, you want brands that are really targeted, that really mean something for consumers. So we don't name our hotels all the
same brand as many of our competitors do. We have targeted brands. And when you want to pull through and create demand that's really important.
But we knit them together primarily through IHG Rewards Club, which is our loyalty scheme, as you know. And encouraging consumers to go across the
brands as each brand is targeted to a different need, a different occasion, a different price point, is very powerful. And that's one of the things
that's been driving a lot of our growth recently.
(END VIDEOTAPE)
QUEST: That's Richard Solomons of IHG.
There are many ways to get ahead in life. Now vandalizing washing machines is not usually one of them. And there's some very strange accusations
going around and around and around -- in a moment.
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QUEST: There are battles and there are corporate disputes and then there's Samsung and LG Electronics, which are having a tiff in a court over a
washing machine. The South Korean court has indicted several LG executives for vandalizing Samsung washing machines on display in Germany. CNN's
Paula Hancocks reports.
(BEGIN VIDEOTAPE)
PAULA HANCOCKS, CNN CORRESPONDENT: Last week we had nut rage. This week it is washing machine fury. South Korea's latest bizarre legal battle is
between LG and Samsung.
Now the head of LG's home appliances department has been indicted for allegedly deliberately damaging four Samsung washing machines in two shops
in Germany last September. Two other executives are also facing charges.
LG says the executive didn't intentionally damage them, but he was just testing them out and he paid for the machines. But they couldn't resist a
dig, saying in a statement the damage was probably more to do with weak hinges than anything else.
Now LG posted this CCTV footage on YouTube saying there were Samsung employees nearby. And they'd have noticed if property was being damaged.
But Samsung is saying that it is selective editing on LG's part and that the video conveniently doesn't show that no employees were watching at the
time of the alleged vandalizing.
Now Samsung says it has the unedited version, but releasing it would be, quote, "inappropriate."
LG's video also shows a child swinging on the washing machine door, others using the machine roughly and even laboratory experiments trying to support
their argument that they didn't damage the machine.
It's not the first public spat between these two companies. Back in 2012, they argued about whose refrigerator was bigger and that argument was
fought on YouTube. Both of the companies posting video showing that they could fit more goods into their refrigerator.
Now that one was settled out of court. But at this point, it looks like the South Korean courts will have to decide in the washing machine case who
is right -- Paula Hancocks, CNN, Seoul.
(END VIDEOTAPE)
QUEST: Interesting now deciding who's white rather than white or right. We'll have a "Profitable Moment" after the break.
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QUEST: Tonight's "Profitable Moment": the interview with Jose Manuel Barroso was particularly telling for one simple reason: here was a man
who, three or four months ago, would have been telling us everything is smooth and rosy in the garden. But a deal will be done and that we should
all just relax.
Tonight he said nothing of the kind -- far from it. He actually suggested that a Grexit, whilst undesirable, would not be the disaster it once was.
And he went further. He said that the way the Greek government has painted itself into a corner might mean that it's exactly that option that is going
to finally come to fruition.
Put it all together and Greece is looking a lot more unstable in the Eurozone tonight.
And that is QUEST MEANS BUSINESS. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you
tomorrow.
END
