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Quest Means Business
Greece is Running Out of Time; Will a Deal Be Done In Time?; Larry Summers Advocates Trade Deal. Aired 4:40-5p ET
Aired June 15, 2015 - 16:40 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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[16:40:57:04] MAGGIE LAKE, BUSINESS ANCHOR AND CORRESPONDENT FOR CNN INTERNATIONAL FILLING IN FOR RICHARD QUEST, "QUEST MEANS BUSINESS" SHOW:
Good evening, I'm Maggie Lake. This is QUEST MEANS BUSINESS. You've been watching CNN USA Jeb Bush, the former governor of Florida has
formally announced he is running for president of the United States. Now we want to bring you today's business news. Tonight Greece is running out of time. The country has four days left to agree to new bailout
conditions or risk a crisis that could force it out of the Eurozone. Greece and its creditors are in a high-stakes game of chicken. Each side
is waiting for the other to blink. After months of talks, that hasn't happened. The IMF walked away from the table last week. A meeting Sunday night lasted just 45 minutes. The
country's major creditors are taking a tough line, saying it's up to Greece to save itself.
(BEGIN VIDEOCLIP)
MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: Such a strong and credible agreement with Greece is needed, not only in the interest of Greece, but
also of the euro area as a whole. While all actors will now need to go the extra mile, the bull lies squarely in the camp of the Greek government to take the necessary steps.
(END VIDEOCLIP)
LAKE: The unfolding crisis hurt stocks around Europe. The FTSE in London shed just over 1 percent, Frankfurt and Paris were hit harder, both closing
almost 2 percent lower. The losses were heaviest in Athens though. Greece's main index was down 4 and 3/4 percent.
Now we know a lot about this June 30th deadline when Greece $1.7 billion to the IMF. But it is this week that may make or break a default.
Now, on Wednesday, the European Central Bank's governing council will meet and Greece and will be at the top of the agenda.
The ECB has been supplying Greek banks with emergency loans to keep them afloat. The program has been criticized and there have been calls for it
to be ended. On Thursday, Greek Prime Minister Alexis Tsipras heads to Russia. He'll meet with Vladimr Putin and attend an economic forum in
Saint Petersburg over the weekend. Meanwhile, the most important event of the week begins in Luxembourg where
the Eurogroup finance ministers will meet and resume talks for a Greek reform plan. The rest of the finance ministers from around the E.U. will
join the meeting on Friday. This may be the last chance to strike a deal with enough time for Greece to secure funding, pay the IMF and avoid
default and exiting the Eurozone. Now joining me now is Gillian Tett, the U.S. managing editor of the "Financial Times." And, Gillian, I mean, we heard about that last meeting
lasting only 45 minutes. At this point, are relations so damaged that a deal is looking less likely?
GILLIAN TETT, MANAGING EDITOR, "FINANCIAL TIMES U.S.": Well never say never, but certainly the omens right now are incredibly bad. It's not just
the fact that the Greeks are stepping out the saber-rattling and basically saying that they're just not going to give any more concessions.
What's very ominous is in the last 24 hours you've had a series of Eurozone leaders saying that we need to prepare for plan B.
They've not said this before in public because they didn't want to panic the markets, but they're coming out openly now in Germany in Brussels
saying it's time to prepare for a plan B to prepare for essentially Greece defaulting.
LAKE: And that's very interesting, Gillian. I wonder what your take is on this. They have said -- even though they haven't been talking about it
publicly -- they have sort of alluded to the fact that the believe if it comes to that, it's manageable, it can be contained, and yet I see research
and I hear investors talking and they do not have that same level of confidence. Are they -- is this just a negotiating tactic do you think?
TETT: Well the political phases of the music coming from the Eurozone leaders has changed over the month. Initially -- if you go back a year or
two ago -- the message from the U.S. and leaders was there was no question of Greece or anyone else leaving or defaulting because that would be
disastrous. Then toward the beginning of this year, it changed quite significantly and the Germans were indicating that actually a departure or a default by
Greece would be manageable and that was presumed to be a negotiating tactic to show that actually the Germans would essentially agree to let Greece
leave or default if it carried on playing so hardball. [16:45:06] What they're saying now is once again that actually things are
manageable, they can move to a plan B, they won't -- need not panic anybody. But the reality as you say is that many investors in the markets
are very concerned. And they're concerned about two things. One is the fact that you won't just get financial market contagion, you'll get economic contagion and
potential political -- geopolitical contagion too. Because the meeting between the Greek leaders and the Russians is very significant.
There's growing concern that the people who will actually end up benefiting from any Greek crisis would (AUDIO GAP) actually Russia and Vladimir Putin
who will try and cozy up to the Greeks.
LAKE: Yes, and --
TETT: And of course you get economic contagion.
LAKE: -- absolutely. That's right. Gillian, that point has been brought up. It would be seen as not only an economic problem but a failure of
European leadership. Germany has made its point clear so that the Northern European members of
the group also seem to be in that camp. What about Italy and Spain? Should they be nervous and could they be the deciding factor that brokers
a compromise here. Some think that they are most at risk in that event.
TETT: Well there's certainly a risk from the issue of financial market contagion because the lesson of the Lehmer Brothers collapse. The lesson
if you go back to long-term capital management back in 1997, is that when you get a crisis, you get contagion, it spreads very fast and the
consequences are frankly unpredictable. So certainly the other periphery countries are very nervous. But right now it's all eyes on Germany because even inside the German government, there's
a lot of division about the degree to which they should or should not. We're worried about the Russian issue.
There are parts of the German government saying actually we need to basically give Greece more help to stop it falling into the sway of
Vladimir Putin. There are others saying actually we just simply need to recognize the inevitable and let Greece default because there is no other
option.
LAKE: And --
TETT: It's going to be a long, hot sticky summer is all I can say.
LAKE: -- it is, it certainly is. And Alexis Tsipras playing right into that by visiting and meeting with Putin at the end of this week. Gillian,
great to catch up with you. Thank you for being patient. We'll talk soon.
TETT: Thank you. Thank you.
LAKE: Now the pain for investors traveled across the Atlantic Monday, reeling from the news out of Greece. The Dow Jones dropped nearly 200
points right at the start of trade in New York but it did climb back slightly by midday.
Still, it was a triple digit loss and the Dow ended the session down six tenths of 1 percent.
Now the former U.S. Treasury Secretary Larry Summers says we are now in the last hour of the Greece talks and that it will be a tragedy if progress
isn't made quickly. He told me that both sides will need to make sacrifices.
(BEGIN VIDEOCLIP)
LARRY SUMMERS, FORMER U.S. TREASURY SECRETARY: The term Greek tragedy is 2,000 years old and we're going to see one of the biggest ones ever if
something is not done. The Greeks need to recognize that their path has been an unsustainable one that will need to be substantially adjusted. And
Europe needs to be prepared to take yes for an answer from Greece. Europe needs to recognize that a degree of austerity has been imposed on Greece in the name of debt repayment of a kind that is unlike almost
anything we've seen in modern times. And it is the last hour. And if at this last hour there is not an agreement reached, I think we're going to
see something that is really tragic.
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LAKE: Still to come, more from Larry Summers who warns that rejecting a trade deal could neuter the U.S. presidency for 19 months.
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[16:50:28] LAKE: Former U.S. treasury secretary Larry Summers says a rejection of the Trans-Pacific Partnership would neuter the U.S. presidency
for the next 19 months. And he says it would serve as a major blow to U.S. economic influence around the world.
The TPP is a trade deal that would include 12 countries, creating a free trade zone for nations that account for around 40 percent of the global
economy. Last week President Obama's fellow democrats overwhelmingly voted down a
measure that would have paved the way for the deal. I spoke to Larry Summers, former U.S. treasury secretary and professor at Harvard
University, and I asked why the TPP is so crucial.
(BEGIN VIDEOCLIP)
SUMMERS: This is a major presidential initiative with respect to the U.S. role in Asia right after the United States didn't participate in the Asian
infrastructure bank. We've proclaimed rebalancing is a central part of our grand strategy, and
if we don't have this deal, there'll be no non-military component to that rebalancing.
If we don't have a deal which the United States has pushed and invested in, other countries will come to doubt our ability to carry through on
commitments, they will tend to find it difficult to negotiate with presidents because they're not sure the presidents can deliver through the
Congress. So you can debate the merits of TPP. I think on balance it's a good thing though its proponents have certainly exaggerated on some dimensions. But
given where we are now, to abandon this effort would I think have grave and continuing consequences for a long time to come.
LAKE: There is a perception -- a persistent perception -- that these free trade agreements are basically just cover for companies to move jobs out of
the U.S. and abroad. How do we tackle that issue? And is it true?
SUMMERS: I think it's more wrong than right. The reality is that the United States has been a very open market for a long time. And so
companies want to produce abroad and sell into the American market. They have had that ability. They don't need this agreement to be able to (AUDIO
GAP) that (ph). What this agreement does do is create more permissive regimes for us to sell into the countries in Asia. What this does do is enable our companies
to work more cooperatively around the world which ultimately makes them more competitive.
LAKE: The environment for this discussion is that so many in the middle class feel squeezed. Do these two things -- the issues -- have to be tied
together? Does more work need to be done to address that in order to get Congress to go along with free trade or do these discussions -- is that the
price we pay for free trade and for being able to have strong U.S. corporations?
SUMMERS: Look, people are right -- people are right to be angry. They don't have the family benefits that people in other countries do, they
don't have the vacation benefits that people in other countries do, they don't have the assurances about health insurance that people in other
countries do, they don't have the minimum wage protections that people in other countries do.
They've seen a huge gap open up between growth and average productivity and growth in average wages. They've seen construction work collapse and
the public sector take advantage of that moment to further collapse construction work by crushing infrastructure spending, they've seen a
drying up of credit so that people whose credit hasn't been perfect can no longer afford to buy homes.
There's no question that people have the right to be frustrated and angry but the answer is not to lash out at other countries. The answer is to
build a more inclusive prosperity here in the United States. And I think if we are successful in building a more inclusive prosperity in the United
States that there will over time come to be more support for economic internationalism.
But if we're not successful -- if we're not successful in having people believe that the government of the United States is basically on their
side, they are going to stop and interfere with any effort to pursue American global leadership.
[16:55:16] And that I think would be very, very costly for the United States and for the world.
(END VIDEOCLIP)
LAKE: And we will have more QUEST MEANS BUSINESS in just a moment.
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LAKE: A legendary U.S. gun maker Colt Defense has run out of bullets.
(BEGIN VIDEOCLIP)
MALE ACTOR: Where's Colt repeating pistols in this territory, sheriff? Finest guns ever made. Here's law and order in six finger doses, yes sir.
Easy to load and as durable as your mother-in-law.
(END VIDEOCLIP)
LAKE: That was a clip from a western move, "Colt 45." It depicts the introduction of Colt revolvers to the Wild West in the middle of the 19th
century which started a long history of success for the gun maker. Around 70 years later, it developed the semi-automatic 45-caliber pistol which was
used by the U.S. Army for 80 years -- through both World Wars and the Conflict in Vietnam.
But now the company has filed to the U.S. authorities for bankruptcy protection. The company says its business operations will not be affected.
Instead, it's going to press ahead with trying to sell its operations in the United States and in Canada.
And some news just in to CNN this hour. Clothing retailer Gap says it is planning to close roughly one in five of its stores in the United States.
A total of 175 stores will close. A limited number of stores will also be closing in Europe.
Shares in Gap are up around 1 percent in after-hours trade. And that is QUEST MEANS BUSINESS. I'm Maggie Lake. Stay with CNN.
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