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QUEST MEANS BUSINESS
OECD Ruffles Some Feathers With Its Round Robin Report Cards On The Success Of Austerity Plans, Solving Sovereign Debt In Europe
Aired September 28, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: It is a warning to Portugal. The OECD says more deficit cuts are essential.
It's a second golden era for TV, tonight, the chief exec of Time Warner tells me why it is coming.
And its called the playbook. But RIM wants the business audience. On tonight's show we have a secretary general, a peer of the realm, the chairman of the board.
And yes, I'm Richard Quest. I mean business.
Across the European Continent gloomy words, market tremors, deep concerns, over what's happening in some key economies. The OECD secretary general tells me tonight Portugal is playing with fire.
Angel Gurria is urging the country to get its finances sorted out and parliament should pass next year's budget or face problems. It was just one of the issues raised across the continent where national economies, this Tuesday, were in question.
European Commission says emergency funding is not being considered for Ireland. The decision comes as two credit rating agencies warn the country's debt is at risk of further downgrade. It sent borrowing costs soaring.
In the U.K. a Bank of England policymaker has called for a return of quantitative easing, QE2, Adam Posen, a member of the MPC, Monetary Policy Committee, says now is the time to pump more cash into the economy to secure a recovery.
And in Portugal the country's president began talks to broker next year's budget deal. The OPO (ph) says it won't support a new tax, which the government says may be needed to put the books in order.
As Portugal battles to avoid a political crisis, I asked Angel Gurria, the OECD secretary-general, what he fears might be the consequences.
(BEGIN VIDEO CLIP)
ANGEL GURRIA, SECRETARY GENERAL, OECD: The question there is a political play. They have a good enough program. They have a budget that is going to be presented to parliament in the next few days. But they do not yet have the votes. They do not have the political consensus.
Now, they have to understand that they are playing with fire. The markets are tough enough on Portugal. They have been penalizing the Portuguese debt and the access (ph) of Portugal. And if there is a perception, not with a substance of their adjustment program but the governance and the fact that they can't get it through parliament, there will be a problem.
QUEST: So, effectively, your intervention and the OECD's intervention is a warning?
GURRIA: Well, what we are saying is, listen, the market out there is looking not only at the substance of the program, which we believe is good, but it is also looking at whether, number one, you can get it approved, and second whether you can execute.
That is going to be just as important as the substance. The political aspects and the governance of the issue, is something that the market, the rating agencies, etc cetera, everybody is focusing on.
QUEST: Is it helpful for the OECD, and yourself, with respect, to enmesh yourself into this when it is a very narrow political issue within Portugal at the moment?
GURRIA: Richard, we went to Portugal to deliver this report just like I had delivered the report for the United States a week before that and I delivered the report in Ankara, two weeks before that, because it was scheduled. If we were to see that there is an election in a particular country we would never be able to deliver any reports of any kind.
This was scheduled. This was meant to be. And we deliver our recommendations as we see them. It is part of our role here regardless of the politics and it is a way in which we help our members more.
QUEST: The British government, the U.K. government, is in the final stages of putting together its own spending review. Its plans have been endorsed by the IMF. Do you also endorse the spending cuts that the U.K. has made and is planning to make?
GURRIA: We did this since about two months ago when Mr. Osborne announced the program. We looked at it very carefully. We thought it was a very, very important, very impressive, demonstration of political will. It is a tough program and it cleared the market. The markets bought it. And now the question is execution. So, we did this a lot earlier, but at the same time we have been looking at these adjustment projects.
We also looked at the Spanish one. I'm going to be in Spain on the 4th and 5th of October, to speak with the authorities there. So this is the way in which we help or members by having these dialogues about substantive polices with them.
QUEST: There is a discrepancy, though, between organizations, like the OECD, which is signing on and endorsing these austerity plans. And organizations like the ILO, unions, and others, who basically say too much austerity, too soon.
GURRIA: Richard, we don't sign off on programs or approve them. We only do that if the programs are good enough. Now, employment is our greatest concern. Education is our greatest concern. Delivering health service is our greatest concern. The only problem is that countries will no longer be able to deliver these services to the population if they continue to have fiscal problems. The fiscal problems today are unsustainable, the 10 percent, the 11 percent, deficits are unsustainable. So we have to accompany these countries so they bring down the deficits to a sustainable level. And then they can continue to deliver the services to the population.
QUEST: The secretary-general of the OECD, Angel Gurria.
Now in the United States we had economic numbers that showed consumer confidence in the economy remains grim. Consumer confidence has slumped to its lowest level in seven months. I was joined by the senior advisor to Credit Suisse, Bob Parker, a simple question, bearing in mind economies and confidence are the wheels coming off the recovery wagon.
(BEGIN VIDEO CLIP)
BOB PARKER, SENIOR ADVISER, CREDIT SUISSE: I think if you look at the detail it is very clear that in America the consumer confidence number is consistent with a sustained period of mediocre growth. And I define that as this year, the rest of this year, American growth struggling to get above 2 percent.
If we look at the U.K. clearly the economy, I think, needs further stimulus. Particularly when over the balance of this year, and later in October, we are going to get announced major public spending cuts. So the policy of the U.K. is going to be a tight fiscal policy, therefore you have got to have an easy monetary policy, therefore, you have got to have further quantitative easing.
QUEST: So, are you pretty much saying, more QE, QE2 in the U.S. and the U.K.?
PARKER: And Japan.
QUEST: And Japan?
QUEST: And the Euro Zone?
PARKER: In the Euro Zone I think it is going be very difficult. Now the QE in the Euro Zone is different because what the European Central Bank is doing is buying European bonds at what is the most significant activity by the European Central Bank is it is lending to those banks, notably in Portugal, Greece, Ireland, to some extent Spain, which can't borrow from the wholesale money markets. So it is mainly providing support-
QUEST: Unlimited funds?
PARKER: -to the banking system.
QUEST: The markets, in all of this, Bob, we have had the best September for 100 years on the S&P 500.
PARKER: When September is seasonally very weak.
QUEST: Therefore, what is the market-I mean, is the market playing its traditional role of forecasting better times ahead? Its being a barometer?
PARKER: I think a number of factors. The first point to make is that equity markets have seen extreme divergence this year. For example, the Japanese market, year to date, is down about 10 percent. In Europe, the German market is up substantially. Other markets in Europe are down substantially. America, we are now in small positive territory, year to date. So it is not a question of saying, are all equity markets up or down? You see big divergence.
QUEST: Is the bond play over?
PARKER: I think so. The bond play partly reflects-
QUEST: But it safe! Its safe!
PARKER: But it is going to earn you exceptionally low returns. You only want to buy government bonds today if you believe we are in for a period of Japanese style deflation.
QUEST: But if equity-if we are heading for austerity, with the slowdown or the sclerotic growth that comes with it, equity markets cannot continue to rise in the way they have.
PARKER: I think that next year you will have positive equity markets, but you are probably going to have positive but modest returns, because one theme throughout the whole of this is actually the strength of the corporate sector. You talk about austerity, where is that austerity? It is in public sector cut backs, notably in Europe. It is not in the corporate sector which has got a very strong balance sheet.
QUEST: Finally, the dollar?
QUEST: Down? Are you sure about that?
QUEST: You don't want to think twice about it.
PARKER: No, not at all. I think we are going to see a trend U.S. dollar weakness against most currencies and the possible two exceptions are the ones which are looking very stretched at the moment, which are the yen and the Swiss franc.
QUEST: Bob Parker of Credit Suisse joining me earlier.
The dollar, he says, is down. We'll watch that closely.
The Golden Age of TV lives on. What do all these have in common? They are all part of Time Warner. Coming up next I interview my top boss. Why the chair and chief exec of TW is so confident.
QUEST: TV isn't dead: which is a relief to those of us that work in the industry. But that is a view from my top boss, Time Warner Chairman and Chief Executive Jeff Bewkes, who was in London giving a speech to the World Television Society. My interview with Jeff in just a moment.
First, though, a reminder of just how much media conglomerate Time Warner actually is, especially since of course it divested itself of AOL and various other bits of publishing, and focused instead getting rid of cable and focusing on content. Obviously, the journalism side, the CNN part, and Time Inc, with its magazines, the largest U.S. magazine publisher. Each month one in two Americans read a publication from Time Inc. Also, of course, MTV, HBO, the Cartoon Network, Turner Broadcasting, "The Sopranos," "Sex and the City", the programs that people watch.
And finally, in the movie side, the focusing of the company Warner Brothers Pictures, New Line Cinema, making movies like "Inception", "Harry Potter" and "Lord of the Rings". With so many media assets the question has been whether the content focused policy at Time Warner is working. And if so, why did Jeff Bewkes think we were now moving into this second Golden Age of Television.
JEFF BEWKES, CHAIRMAN & CEO, TIME WARNER: I think the programming is more vibrant than ever before. Many different networks trying all kinds of new things. Very distinctive programming, very networks that stand for something. I would think of HBO as one of them. E4, here in Britain, would be another. BBC very distinctive.
QUEST: But within that area there is now, of course great concern about the Google TVs, the Apple TVs. Everybody encroaching into fundamentally our area.
BEWKES: No, they're trying to help us.
BEWKES: Yes, they are trying to-
QUEST: You don't believe that.
BEWKES: Yes, I do they actually, what you have is you have all these new advances where Google will help you search to find the show that you want. But provided that every network and all of your favorite shows are on demand, on your TV set and on your Internet device, so if you are used to watching-
QUEST: So you don't see them as a threat?
BEWKES: No, I think they should be harnessed as a support device. So, your favorite device, your favorite interface should take you to your favorite network provided that your network is there for you.
QUEST: This is what you call TV everywhere?
QUEST: How realistic is TV everywhere?
BEWKES: Well, I think it is very realistic. It is already happened in the states on a channel called HBO, if you have heard of that? So, most HBO viewers in the States are used to watching whatever show they like whenever they want on their television set.
QUEST: When you took over as head of Time Warner one of the major policies was to shift the company towards a content rich company. Are you satisfied that you have gone far enough in that regard?
BEWKES: Well, we like to do what we know how to do. And I think whether it is CNN providing the best news in the world and the largest online news service in the world, CNN, HBO, Warner Brothers making films, Time, making magazines, we basically are now focused on excellent content inside a brand that means something to people. So that you know when you pick up a magazine what you are going to find. You know when you go to that network what kind of programming you are looking for.
QUEST: But you and I are old enough to remember that that is a wheel that turns. Suddenly somebody comes along and say, oh, no what you need is conglomerates. You need to be diversified-
QUEST: -so one bit is doing well, then the other bit doesn't do so.
BEWKES: No, we don't need that. We need to stay doing what we know how to do. And every company now-not just in media-focuses on what it is excellent at, and I think that is where Time Warner is today.
QUEST: You have also said that your priority for acquisitions, to Time Warner, will be Eastern Europe, it will be Latin America, it will be emerging markets. What are you looking at particularly?
BEWKES: Well, people keep asking that. It wasn't that we were-that I was looking at anything particularly. We see when you are running TV networks around the world you basically try to offer them where they are needed. And essentially there is a lot of growth in the TV infrastructure in Eastern Europe and India, and South America. And so if you bring the networks, that we are familiar with, including CNN, there is actually a use for them there. They don't really need a lot of new networks here in the U.K.
QUEST: You mentioned, CNN, obviously, our network, and our sister network in the United States. You even referred in your speech that Pierce Morgan is joining CNN. How worried have you been by our sister network, CNN USA's decline in ratings?
BEWKES: Well, I think worried is a bit of a-I try not to worry. We know that the ratings, which essentially have been overblown, by the way. CNN reached a ratings peak in the U.S. in the election of 2008. And so the decline is off of that peak. But nevertheless we are never satisfied with weak ratings and we have had essentially ratings that are not as strong as you want in prime time.
So what we have done is we have added some new shows and new talent. And we are very optimistic about those. But it is not just the shows and the talent, it is also the focus of CNN. There is a real desire out there, there is a hole to be filled, in in-depth, even-handed comprehensive news analysis. Not from one part of the political spectrum, but across the spectrum. Not just in the middle, but covering the whole spectrum.
QUEST: Finally, you talk about the tipping point, in terms of the digital phenomenon, and where we are in terms of the television, the pay model. So you clearly believe that now is a moment of great vision and decision that has to be made.
BEWKES: Things are on the upswing. What you have is you have viewership, earnings, programming budgets all increasing, across the television dial. And now you have this fantastic new thing. Which is you can watch your network and your show, on demand, on your television, on every device you have. And all of them should work the same way. When you go to look for your network you should find it on every device.
QUEST: The chairman and chief executive of Time Warner, and my boss, Jeff Bewkes.
The newest rival to the iPad is out. It might be called the Playbook. It is no game. RIM, BlackBerry, the makers are deadly serious. They believe this will take on Apple.
QUEST: There is a new tablet in town and it is aiming to give a headache-quite the opposite of what tablets normally do-to the iPad. Research In Motion, makers of the BlackBerry unveiled their version of the pocket-sized portal to the Web. It is called the Playbook. It does one or two things the iPad won't. Initially you'll need a BlackBerry to get the full benefit. The Playbook is designed to be more of a business, rather than if you like, a fun tool.
Marc Saltzman is the technology analyst. He joins me now from Toronto, in Canada.
Is it a mistake not to have a 3G, 4G version, but to go through this idea of connecting via BlackBerry to start with, do you think?
MARC SALTZMAN, SYNDICATED TECHNOLOGY WRITER: Yes, I think it is a mistake. Because if you look at the competition, of course, Apple iPad owns this space. And very soon a bunch of android devices powered by Google's mobile operating system, they also offer wireless connectivity via cell phone, so 3G, 4G and the like. So by BlackBerry not offering one until late in 2011, the earliest they say, I think it is a mistake because it is an extra barrier of entry. Not only do you need a cell phone nearby to get on line. But it needs to be a BlackBerry no less, so you are limiting your audience.
QUEST: The functionality and the features, I was trying to read a lot about it today and I looked online and I saw the very glamorous video. There is one contributor said, if you can't get your PR video right, you won't do very well. Were you impressed by the Playbook?
SALTZMAN: Saw the video, absolutely, I was impressed. And I'm also impressed with most of its specs. We started off our chat with one of its shortcomings, the lack of 3G connectivity, but it does offer-the Playbook does offer a number of advantages, over the iPad when it comes out in six months.
So first and foremost, two high definition Web cameras, one facing out, one facing you for real-time video chats. It has HDMI (ph) connectivity, so you can connect this to a device such as a TV or a monitor.
SALTZMAN: Or even a projector, because let's face it RIM's heritage is in business. So you are going to want that. There is a USB for expandable memory and peripherals. And finally support for Flash, something the iPad doesn't offer, which means the device can visit Web sites that the iPad can't.
QUEST: Isn't it fundamental failing though, and I don't want to sound too carping, isn't a fundamental failing that anything to do with BlackBerry, for many of us, is perceived and considered to be part of work. And a lot of us like to escape the work environment and the thought of a tablet that is more work.
SALTZMAN: Well, if you looked at the video on line, I believe you said you did, it is very entertainment focused. Sure you see them checking their e-mail and surfing the Web. But a lot of it was very media rich. Somebody was reading an e-book. They were watching videos on it, listening to music and podcasts, you know? And RIM said in their announcement yesterday, from San Francisco, that it also going to be great for games because of the fast processor. That will have to be seen to be believed. Because if the BlackBerry app world is any indications today, it lacks in games compared to the iPhone and the Android.
QUEST: Marc, many thanks indeed. As each of these new gadgets and tablets come along you'll hopefully help us understand which ones. Marc Saltzman, joining us from Toronto.
The Playbook, as you will be aware, and you'll know better than I do, is one of several computer tablets that have been unveiled in recent days. If you are wondering which one to go for, what is the difference? What is better? Ayesha Durgahee explains.
AYESHA DURGAHEE, CNN INT'L. CORRESPONDENT (On camera): When I'm out and about I've got everything that I need. I've got my music and I can always be contacted either by phone or by e-mail. I can use the Internet using my BlackBerry, but sometimes it is a bit slow and the screen is too small. So usually I just wait until I get into the office.
I must admit, though, I do have a bit of tech envy when it comes to the latest gadget that brings all of these together. So, in order for me to trade in this lot to get with the times, I need to go back to school.
CHRIS FINNAMORE, WIRED MAGAZINE, U.K.: Welcome to tablet master class. The first tablet is the iPad. The iPad is the first color tablet. It's $499 for the wi-fi version. It is a 9.7 inch screen, high resolution. It also has a very long battery life. So you can get up to 10 hours continuous use.
DURGAHEE: Why do people like the iPad?
FINNAMORE: The big reason is that the size of the screen. The fact that it is very easy to use and very fast.
DURGAHEE: So, that is the Apple iPad, $499, 9.7-inch screen, no phone, no camera.
FINNAMORE: Our second tablet is the Dell Streak. Some people think this isn't actually a tablet at all. That it is actually just a big phone. And because it actually does make phone calls, unlike the iPad. The screen is half the size, it's 5 inches. It has a 5 megapixel camera, with a flash. This is $549.
DURGAHEE: More expensive than an iPad?
FINNAMORE: It is more expensive than an iPad.
DURGAHEE: A 5-inch screen is a little bit too small for me. And it is $549. Still it does have a phone, and a camera.
FINNAMORE: Our final tablet is the Samsung Galaxy Tab. It has the advantage that first of all it supports Flash playback. So you can actually, they talk abut having the whole of the Web. Obviously the iPad contacts sites that are written entirely in Adobe's Flash technology. So the Samsung Galaxy will theoretically be able to display any Web page at all.
This is a 7-inch tablet. The 7-inch market looks like it may become quite popular. Because BlackBerry, who has just released, or has just launched the Playbook, which is also 7 inches, and Apple has plans to launch a smaller version of the iPad, possibly next year, which will also be 7 inches.
DURGAHEE: The most successful tablets will be around 7 inches?
FINNAMORE: Potentially. I mean, this is speculation, but I think the important thing is that the screen is big enough for you to get a good web browsing experience.
DURGAHEE: Are there any downsides to that one? I mean, it looks quite nice.
FINNAMORE: Well, there is a lot going for the Galaxy Tab. At the moment it has a built in SIM card, so you can access the Internet away from any kind of wireless network. It runs the latest version of Google's Android Operating System, which is Android 2.2. So that means you should be able to access all of the applications on the Android market.
DURGAHEE (voice over): So that is the Samsung Galaxy Tab, 7 inch screen, phone, check, camera, check. Even with the master class I still can't decide which tablet I would choose.
(On camera): As more and more products enter the market I think it is just going to get harder to choose which one is the right one for me. Ayesha Durgahee, CNN, London.
QUEST: And every time a new one comes onto the market and we can get our hands on it, you will see it here on QUEST MEANS BUSINESS.
(DESK BELL CHIMES)
While competition may be cut throat, things turn really ugly when you try to throw the game altogether. In a moment world war over what's in your wallet. And what you need to win the week (ph).
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
We're getting reports that the Eiffel Tower has been evacuated in Paris.
Jim Bittermann is on the line -- Jim, what -- what's going on?
JIM BITTERMANN, CNN CORRESPONDENT: Richard, the second time in two weeks here that the Eiffel Tower has been evacuated. And very similar to the first one a couple of weeks ago. Basically, a phone call came in. In this case, it was to a fire station in the nearby 7th Arrondissements. And the -- the caller, calling from a public telephone cabin, said, basically, that there was a suspicious package, a bomb in -- in the Eiffel Tower. The authorities took their time, I think, to take -- before making a decision to evacuate the tower. It was a half hour after that call came -- came in that they decided to evacuate the tower. And they have now done so, taking about 2,000 people out of the towers and surrounding areas as they search around, to see if there's anything to this telephone report.
I should say that there is a very high level of alert here. The authorities have been saying for several months now that France is being targeted -- could be targeted by some kind of terrorist action, although there's no -- no real clue as to what kind of action it might be. And so when these phone calls come in, they -- they are on the side of caution. And I think that's what we're seeing tonight -- Richard.
QUEST: And, Jim, the moment this story develops one way or the other, please come back and bring us up to date.
Jim Bittermann, who is in Paris for us tonight.
Other news headlines to bring to your attention.
In Mexico, a major rescue effort underway tonight. It's believed as many as 1,000 people are buried in rubble after a landslide in the southern state of Oaxaca. A hill about 200 meters wide collapsed -- tons of mud covering up to 300 houses. The region has recently been plagued by heavy rainfall, the remnants of Tropical Storm Matthew.
The former U.S. president, Jimmy Carter, is in hospital in the U.S. state of Ohio. A statement from the Carter Center says he developed an upset stomach on a flight to the city of Cleveland. The paramedics left the plane and took him to hospital. Apparently, he's resting comfortably. He's expected to resume his book tour this week. President Carter celebrated his 86th birthday on Friday.
The Russian president has flexed his political muscles and has rid himself of a problem with the long time mayor of Moscow. Dmitry Medvedev has dismissed the mayor during a state visit to China, telling reporters the two could no longer work together. The mayor had increasingly been at odds with Mr. Medvedev and was seen as undermining his authority. The president had previously removed other regional leaders.
A silent conflict is breaking out all over the world, turning trading partners against one another. It centers on the money in the pocket. Brazil's finance minister said a bitter currency war has begun, as nations drive down the value of their currencies to make their exports more competitive.
A currency war between each other is one of the most serious and damaging that can happen between trading nations. Japan, for instance, the biggest exporting country in the world, recently intervened to curb the strength of the yen and said it would continue to do so. China has been criticized for not allowing greater appreciation of the yuan. It's despite international agreements not to do anything that could jeopardize free trade.
The world's leading nations will get the chance to talk it over when G20 leaders meet in November in South Korea. It's known as a beggar thy neighbor policy because trade, in many ways, is a zero sum game. If I export to you, you buy from me and maybe you don't sell back to me.
Jim Boulden is with us.
This -- this currency race to the bottom is quite serious.
JIM BOULDEN, CNN CORRESPONDENT: It's quite serious if it's actually happening. You know, you said it's an international currency war. But other than the Japanese yen, there aren't a lot of examples of it over time. I mean certainly we saw the Swiss doing it last year. We've seen the Korean yuan. They've been trying to -- to weaken the currency, as well. China is an ongoing story.
But when this first came out, I think there was a lot of talk about wow, what -- what is he really talking about. And now it seems like it may be more political than it is reality. It's a -- you know, when we talk about these competitive evaluations, there's the variable action and there's the actual action. And I think right now he's worried a bit more about some of the variable action, especially with the U.S. dollar continuing to decline against the major -- so many major currencies.
QUEST: Yes, but hold on a second. On this program, at the very beginning, Bob Parker...
QUEST: -- said quite clearly, the dollar is headed down.
BOULDEN: Yes. That's...
QUEST: So if the dollar is headed down on fundamentals...
BOULDEN: Yes, correct.
QUEST: -- that won't exactly disappoint U.S. exporters, because it makes their exports better values.
BOULDEN: Exactly. Bt you don't hear the U.S. talking down the dollar, you see it happening...
QUEST: But, oh...
BOULDEN: -- this is an experience...
QUEST: Come on.
BOULDEN: -- (INAUDIBLE) the intervention...
BOULDEN: -- in the Swiss franc and it's going higher. You see intervention in the -- in the yen. Where -- where was the intervention -- I'd love to see a graphic on the yen, because it was about 83 when they intervened.
BOULDEN: It went to 85 and now I think it's back to 83. So it didn't make a difference.
QUEST: But that's, Jim, I'm going to push you on this.
QUEST: But that's merely saying it's not working. What you and I are talking about is, to some extent, the policy of actually trying it in the first place.
BOULDEN: And very few countries do. I mean Japan waited six years to do this. They hadn't done it for -- for six years. The Swiss did it last year. I heard somebody earlier today say, actually, there was more intervention last year than there is this year, when you look at all the countries that did it. With China, of course, the exception to the rule, because they're constantly trying to manipulate their currency. Let's be honest. They're trying to keep it at a certain level.
I think what's the most interesting about all of this is that we have the G20 meeting coming up.
What position is Brazil trying to set itself for with this happening?
Because Brazil, some people say, is the world's most over valued currency. Which then means you have a speculation going on in this. You have property speculations. And there could be a real heavy fall for Brazil.
So why is he saying this now?
That's what a lot of people want to know.
QUEST: Jim, many thanks, indeed.
Jim Boulden with the currency speculation.
The Organization for Economic Cooperation and Development, the OECD, says trade barriers are bad for growth. We've been talking to the secretary-general, Angel Gurria today.
If there are countries that are clearly, perhaps, involved -- notice that clearly and perhaps -- hedging my bets -- involved in manipulation or, indeed, competitive devaluation, is the sec-general worried?
(BEGIN VIDEO CLIP)
ANGEL GURRIA, OECD SECRETARY-GENERAL: We are worried and we reject protectionism, either trade protectionism or investment protectionism or this kind of, in a way, foreign exchange protectionism, which is a way to do a beggar thy neighbor. We think that exchange rates should float freely according to supply and demand and to the fundamentals of the economy and that all the big players should let this happen.
We do not agree with manipulation. We agree with continue -- with central banks coming into the markets to avoid extreme volatility in the margins. But the basic trends should be allowed to happen.
QUEST: But you would agree, this is a -- that it is now not happening. What is happening is competitiveness devaluations, manipulation of currencies, massaging of -- of trade.
GURRIA: In some cases there is. And it is not to be accepted because this creates distortions and this...
GURRIA: -- eliminates the proverbial level playing field.
QUEST: Name and shame -- who's the worst offender?
GURRIA: I think there are cases recently which have been very noteworthy and that is because they were eliminating the extreme volatility. But that's -- that's not bad in and of itself. What is a problem is when you're trying to change the fundamentals and when you're trying to change the basic trends that should be happening, where a country, you know, has a currency that should be appreciating and you're keeping it very cheap in order to get advantages...
GURRIA: -- on trade. That is -- would not be happening for any country.
GURRIA: Well, that -- there's a very public, a very visible discussion about that particular currency, the yuan, and about China. I do have to tell you the details. It's in every newspaper every day. But that is one of the cases. But in -- in -- in -- to the opposite of that, the -- the intervention that the Japanese did recently, for example, was obviously to eliminate some of the extreme volatilities, as has been the case in some of the currencies.
(END VIDEO TAPE)
QUEST: The secretary-general of the OECD.
In a moment, a P.R. disaster -- a leading think tank says the scandal- hit Indian Commonwealth Games could cost the economy $90 billion over the next three years.
Is it at all salvageable?
And I don't mean the games -- I'm talking about India's reputation.
QUEST: Members of the Australia and the New Zealand, the South African teams have now arrived in New Delhi over the past 24 hours. They are some of the 8,000 athletes and officials who will take part in the Commonwealth Games. They were meant to signal India's emergence as an economic powerhouse.
As Mallika Kapur now tells us, the country's reputation has been tarnished by shoddy workmanship, dirty accommodations and that last minute rush to be ready on time.
MALLIKA KAPUR, CNN INTERNATIONAL CORRESPONDENT: (voice-over): They come to New Delhi for its culture and color -- Hans Kapur, who runs a bed and breakfast, was hoping tourists would flock to the city for The Commonwealth Games, too. He's disappointed.
HANS KAPUR, KAPUR GUEST HOUSE: This is a (INAUDIBLE), because we were expecting, you know, right about the 15th of September to the end of October to people -- you know, that we were going to -- people just coming in and going out, which is not happening.
KAPUR: They blame images like these of dirty facilities and stray dogs inside the athletes' village.
(on camera): The bridge you see behind me leads spectators into the main stadium. It collapsed last week, exposing one of India's biggest problems -- weak infrastructure.
(voice-over): It's a P.R. disaster for India, which Moody's Analytics says could put tourists off and discourage investors. Now, a New Delhi based think tank says the mess could cost the Indian economy up to $90 billion over the next three years.
ROBINDER SACHDEV, PRESIDENT, IMAGINDIA INSTITUTE: A buyer or somebody who is procuring from India would look at and see that, OK, your project management capabilities are not up to the mark. This is reinforcing all such less than negative stereotypes about India. So it could be investments coming into India, it could be exports going out of India as such and large projects are accumulated -- our ability to handle large projects has been called into question severely.
KAPUR: There are lessons to be learned from this mess. Experts say India will step up its investment in infrastructure.
ARVIND MATHUR, PRIVATE EQUITY PRO PARTNERS: People will become more conscious about the quality of infrastructure. So if -- if I'm an infrastructure entrepreneur, if I'm an Indian infrastructure entrepreneur, maybe I want to have a joint venture with a Spanish infrastructure company. Maybe I want to have a joint venture with a Japanese company. So that, you know, you learn the quality and how to make -- build quality infrastructure.
KAPUR: Others say the Commonwealth Games won't have a lasting impact on anything in India excerpt its image.
AMITABH KUNDU, JAWAHARLAL NEHRU UNIVERSITY: The long-term growth potential and the investment returns which the foreign investors are looking at, which comes because of the, you know, basically Indian law, labor costs and also stable social and political situation. I have a feeling that it would not have a major impact.
KAPUR: Kundu says the problems the games exposed -- poor infrastructure, corruption and bureaucracy -- are nothing new. Those who invest in India do so despite these issues. They put their money in a market growing at around 9 percent a year and where the stock market is booming.
Mallika Kapur, CNN, New Delhi.
(END VIDEO TAPE)
QUEST: The damage is already done.
The question is, how much can repair actually take place?
I spoke to Lord Karan Bilimoria.
He's the founder and chairman of Cobra Beer.
I asked his Lordship how damaging he believed it was to India.
KARAN BILIMORIA, FOUNDER & CHAIRMAN, COBRA BEER: It is a shame. And the whole of India is ashamed. A recent poll taken by a leading Indian newspaper, 97 percent of Indians are ashamed. And the fingers are pointing to the organizing committee, and in particular, the chair of the organizing committee, where three quarters of people in India think that they're to blame for this.
However, that said, India is a global emerging economic superpower. India will and has been predicted to, by 2050, to be one of the two largest economies in the world.
QUEST: Except that superpower, to some extent, has been revealed -- to some extent -- with smoke and mirrors. It couldn't even organize a major sporting event.
BILIMORIA: There are no smoke and mirrors here. India is a country of extremes. India is a giant country of 1.2 billion people. On the one extreme, you have abject poverty. The stereotypical image of India, which is real. It -- it's -- it is -- it is sadly true that 300 million people are living on less than a dollar a day.
On the other end, you've got a country with a space program, a nuclear power, some of the wealthiest people in the world and a 300 million sized middle class, the size of the United States of America and millions of people are being alleviated and lifted out of poverty every year.
QUEST: So we come back to, though the fiasco that they are facing with the Commonwealth Games. I mean it wasn't just one thing. This country was warned that they were behind and they continued to be behind and they failed.
BILIMORIA: We have been monitoring this for a while. India got the same amount of notice, seven years...
BILIMORIA: -- for the Commonwealth Games as we got over here for the Olympic Games, seven years. We -- as far as I can make out -- are well ahead of things. China is hosting the Asian Games. They've already handed over the keys to all the building two months in advance of the games starting.
India should have been in that position. There's no question about it. I was with David Cameron, the delegation in India just now, two months ago. We were worried about being ready on time.
But in India, things come together in the end. And -- and they will come together in the end. But the monsoons haven't held. You know, we've had the worst rains...
QUEST: Now, but, no, no, no...
BILIMORIA: -- in 40 years.
QUEST: But if you are doing business and you are looking for a partner, are you today going to be more concerned about India's ability to deliver as a result of what you've seen?
BILIMORIA: I think what you're seeing, as well, is a combination of public sector driven project. Now, we are concerned about public sector efficiency and delivery over here in the West. So I think, you know, you've got organization issues. Things that have been outsourced, things that have been left to the private sector, you go to India now -- you go to Hyderabad Airport, outsourced to a private sector company, it's one of the -- it's as good as anything in the world.
The New Delhi Airport, as good as anything in the world. All done by the private sector.
So this is an organizational issue, where there have been organizational issues that have been mismanaged. And they should have been done better in advance.
But India's capability, the private sector in particular, just look at the way Indian business is roaring ahead in every sector you can imagine.
(END VIDEO TAPE)
QUEST: Lord Bilimoria, who is the president of the UK-India Business Council.
Now, the -- we are -- in the headlines, I alluded to, I mentioned Mexico landslide. Three hundred houses buried under mud.
Guillermo Adruino is at the CNN World Weather Center.
While we await word on the fate of those underneath, what happened?
GUILLERMO ARDUINO, CNN METEOROLOGIST: You know what, Richard?
The information that is coming from there is very sketchy, not much. Actually, one of the media outlets is talking about seven dead. But I'm pretty sure that that number, as soon as they reach the area, is going to go up like crazy because of -- we -- we actually alerted our viewers about this and we are alerting our viewers about the same situation, the same likelihood in other countries in Central America because of this abundance of measures.
And when I say Central American, it's in addition to what happened in Southern Mexico.
First, I'm going to locate the town. And then I'm going to show you what's going on -- what kind of terrain we have.
Santa Maria Tlahuitoltepec in Oaxaca. And, also, I'm going to zoom in so you see that we have mountains in here. And you see, the town is perched there. Now, I'm going to take another router. Taylor, we're just manipulating the computer from there. So we're going to show you pictures from 2009. So Taylor is going to zoom in and we're going to show you pictures of those rows that would eventually lead authorities and those people who want to go and help them out into those areas.
The problem is that once you see any of these pictures -- let's take some, Taylor, as soon as you can. We're going to zoom into here and. You're going to see the road. And this is from 2009. And you already see there is evidence of a previous landslide. So imagine, with the amount of rain that we have in here, again, this is 2009, right?
Let's come out and show another one, Taylor, because this is the town -- the -- the road that actually would lead us into the -- this town of Santa Maria, where the problems happened. So it is totally saturated. We're seeing more rain in the forecast. We have talked about half a meter or so of rain and we're going to see some more.
Another picture, so you see. This is the kind of road that authorities are trying to use. And with this kind of steep terrain -- now we're talking about 200 meters of -- of road that actually, of -- of a hill that actually slid. Imagine -- of course they are all covered. So they have to reach to these people by air, obviously. They're trying to do that.
So the story is going to develop as time goes by. But we do not have much information -- Richard.
More rain in the forecast.
QUEST: Yes, well, the moment, there's more on this serious story, we need to know about it. So, Guillermo, please come back.
ARDUINO: Thank you.
QUEST: And, of course, if there's any weather that needs to affect just that area as the search goes on, we will report that immediately.
In a moment, you and I will return. We're going to talk about a day of action -- tomorrow's planned strike and protest there in Spain and elsewhere in Europe.
But what are they protesting about?
QUEST: Unions in Spain have called a general strike for tomorrow. It will be the first that socialist prime minister, Jose Luis Rodriguez Zapatero has faced in his six years in office. Mr. Zapatero's austerity measures, coming during a deep recession, have angered the unions, even as parliament has voted or is about to vote for more austerity.
Al Goodman now reporting from Madrid.
AL GOODMAN, CNN CORRESPONDENT (voice-over): Rafael Garcia is a machinist who makes plastic plumbing tubes. He's also the union shop steward and he supports the general strike.
RAFAEL GARCIA, UNION MERCHANT (through translator): Historically, we have advancing workers' rights. Now, we're going backward. I have more labor rights than my father, who was an auto worker. And I remember his strikes, too, the strikes.
GOODMAN: Spain's unions typically support socialist prime minister, Jose Luis Rodriguez Zapatero. But his austerity plan -- freezing positions and cutting government workers' salaries to ease Spain's deficit and recession, upset unions. What enraged them and led to the strike call was his labor reform package, which makes it easier for companies to lay off workers, especially higher paid ones, like Rafael Garcia. Eighteen years at the factory, and if laid off, he could expect 45 day severance pay for every year worked. But under the new rules, that could drop by half, to 20 days severance per year.
GARCIA: The new system makes it easy to lay off people, but it doesn't create steady jobs.
GOODMAN: He thinks it will lead to more temporary, low paying jobs instead of the competitive economy the government promises.
(on camera): You see some signs calling for the strike, or la huelga, but the big question is how successful this general strike is going to be.
(voice-over): One major newspaper surveyed showed just 9 percent of workers would strike. Spain already has 20 percent unemployment -- highest among the countries using the euro currency. Many see the reforms as inevitable and necessary. And several people told us they would work despite the strike, to avoid losing a day's wage.
That includes some actors and technicians working on a new movie being filmed in Madrid.
UNIDENTIFIED MALE: I will go to work. If not, I'll have to make it up another day.
UNIDENTIFIED MALE: If I am called to work on strike day, I wouldn't mind. It's like any other day.
GOODMAN: Some analysts say if unions disrupt commuter trains and metros used by millions of Spaniards, the strike could have a huge impact. Unions and officials have discussed minimum services for rail transport, but massive traffic jams are expected as people try to get to work.
At this industrial park where he works, Garcia hopes this strike will be at least as successful as the last one eight years ago against a conservative government.
GARCIA: Very few people came to work here during the last strike. No one was on the street, except us demonstrating. And there was little traffic.
GOODMAN: Now, he wonders how many will join him on the streets this time.
Al Goodman, CNN, Madrid.
(END VIDEO TAPE)
QUEST: Now, while those strikes in Madrid and demonstrations take place, Brussels, the heart of Europe, is bracing itself for large protests -- the largest in a decade -- up to 100,000 people from 30 countries could be taking to the streets, angry with government's austerity plans.
I'll be back in just a moment, when, of course, a Profitable Moment comes your way.
QUEST: A Profitable Moment.
Across the continent of Europe, there are more signs of tensions. Economic crisis is grinding inexorably on. Portugal has been warned they're playing with fire if it doesn't pass austerity measures. The U.K. needs quantitative easing. And Ireland battling perception it's the next Greece.
The markets are demanding austerity, austerity. And in the next 24 hours, there will be huge demonstrations against across the continent. The grumbling is just about everywhere.
Let me remind you, on Thursday, our weekly segment, Q&A, resumes. You send us a topic. Ali Velshi and I take them on. On this week, we're focusing on the consolidation in the aviation industry. Watch Ali and me battle it out. There's even a little quiz at CNN.com/qmb.
And that's QUEST MEANS BUSINESS tonight.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I hope it's profitable,
"WORLD ONE" is now.