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QUEST MEANS BUSINESS
Travel Warning for Europe; Greek Austerity Plans
Aired October 4, 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, HOST, QUEST MEANS BUSINESS: On high alert. Travelers warned of a terror threat in Europe.
No let up on austerity. Greece is vowing to beat its own deficit target.
And "Future Cities", we're in Los Angeles, the birthplace of urban sprawl.
I'm Richard Quest. We have a week together. It's Monday and I mean business.
Travelers have been warned that Europe is not as safe as it might seem. Those with plans to visit have been told to take every precaution due to the elevated threat which could be aimed at popular tourist spots as well major transportation hubs.
Now Japan has become the latest country to issue a travel alert for Europe. Japan is urging citizens to take every precaution against a possible terror attack. Japan followed the U.S. which highlighted the risk of public transport at popular tourists sites. Britain has also upgraded its own travel advisory for British people going to France and Germany.
Now, despite all these warnings, which in some cases sounded quite alarming, American tourists in London are taking things in their stride.
(BEGIN VIDEO CLIP)
RUTH PAYNE, TRAVELING TO MUNICH: I made the arrangements six months ago. It would probably take an incident of some sort where there was real danger.
TOM MELCHIORRE, TRAVELING TO ITALY: Because you only live once. I mean, what are you going to do? I can't let those people terrorize me.
(END VIDEO CLIP)
QUEST: The airlines are reporting that there have been few, if any, cancellations as a result of these terror warnings. Passengers, it seems, are determined to stick their original plans. CNN's Phil Black is, tonight, at the O2 Arena in London, where two top American basketball teams are due to play. Anyway I asked him why the travel warnings seem to be necessary. After all, few people are heeding them.
PHIL BLACK, CNN CORRESPONDENT (On camera): If you listen to the British government they will tell you this is simply about reiterating the importance of being vigilant. Because on the surface, and in their language, these warnings don't really issue any new specific information about any sort of eminent or specific threat. They are quite general in the language that they use. Having said that, when you visit tourist sites across London, in the wake of these warnings, the people have certainly taken them onboard. There is certainly a degree of concern.
And in line with those warnings people say they are just simply a lot more alert, a lot more vigilant, some were certainly visibly nervous about being in large crowds. Some say they deliberately were avoiding public transportation.
QUEST: Where does this break down between the American warning for the Europe wide, and the U.K.'s warning about Germany and France?
BLACK: Yes, there is perhaps in some ways a discrepancy. Although, essentially the themes of both are the same. They both are all of the same sort of level which would say the authorities in all of these countries believe that there are people or organizations looking, hoping, planning to strike somewhere within a major European target. And given that a lot of these countries have been at a very high level of threat alert for sometime.
As I say there is no new alarming information in any of this. Britain remains at a severe alert as it has done for some time. The travel advice that it has given to people going to France and Germany is that those countries still believe that the threat is high as they have done for sometime now Richard.
QUEST: Finally, Phil, taking the need to continue with business I see airlines are saying that there has been no noticeable impact on bookings. The tourists you spoke to aren't going home. I wonder, what's the point of it?
BLACK: Well, indeed, there has been a lot of speculation about that, perhaps, I guess, the fact that they haven't identified a specific eminent threat, you would presume that perhaps there isn't one. But clearly given the number of countries that are now issuing these warnings, that adds weight to the belief that there must be something behind this. Although, at this moment it is not specific and the advice to people is to not cancel their holidays, to not cancel their holidays, to not change their plans, to continue living their lives, but to just be a little bit more alert while they're doing it.
QUEST: The definition of terror is to strike fear into a wider group of people in the sense, for a political gain. There is also in these terror warnings, of course, the psychological effect, Jim.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Exactly. I mean, what is interesting here is because it is an alert, it hasn't told anybody to do anything except be more vigilant. I think a lot of people are wondering, what should I do? What does this mean for me? Do I cancel my trip? Well, we haven't found anybody who said they would cancel their trip.
But earlier a spoke to a psychotherapist, Lucy Beresford, and she said this vague wording could actually make people even more anxious than maybe they should be. It is interesting. Listen to this.
(BEGIN VIDEO CLIP)
LUCY BERESFORD, PSYCHOTHERAPIST: It promotes the fear of the unknown, really. We don't know what it is that we ought to be preparing ourselves for, or taking strenuous exercises against. It is something that makes us afraid because we don't know it, we can't control it.
And quite a lot of people who travel, quite a lot of people who travel for business, they take risks. And so in fact, this may be, for some people, just one more risk that they are prepared to take. But for the very risk averse, and quite a lot of travelers are risk averse and they would prefer to be in control. This really will set them off.
BOULDEN: Does this make us more alert? After all, that is what the authorities seem to want from this?
BERESFORD: The authorities want us to be more alert. And I think intriguing thing is that because the countries that have been chosen are very unusual. We're used to a different group of countries as being the ones that we might expect have an alert about. But France, Germany, Japan, these aren't countries that we're expecting. So our ears prick up, we are more alert. And the authorities may be very pleased by that.
BOULDEN: Do these things build over time, or does it strip away-or are we much more battle hardened since, say, 9/11?
BERESFORD: My sense is that it depends on the personality of the individual. There are some people who will become quite blase about the terror threats that they hear globally. And the more they hear the less interest they are inclined to take. Other people who perhaps have more anxious disposition, or perhaps for whom this particular news isn't necessarily something they have been listening out for. But now they happen to be going on a trip, it seems to be much more personal for them. They may become more anxious. They may become slightly more obsessed about their travel arrangements, their own security.
BOULDEN: If the alert was more specific would that actually make people feel less anxious, in other words, at least they know what they're dealing with?
BERESFORD: If you had an alert that was more specific you would find that there would be people who would treat that as a known, therefore they wouldn't be so anxious. They might, though, actually begin to think, that actually doesn't relate to me, because I'm not going to that one particular place. I'm not going to be traveling on that mode of transport. And there defense will be down. And what you really want, and you are an authority, and you are trying to preserve the sort of well-being of the people in your country, what you want is for people to be more alert, or more vigilant.
BOULDEN: Yes, so ironically being too specific might actually put more people in danger.
BERESFORD: Counter-intuitively, it might actually put more people in danger, because they might actually think this doesn't really relate to me.
BOULDEN: So it really depends on the person, themselves. Of course, travelers, I think, are seasoned now. I think we've learned a lot, even things like the ash cloud. We have learned a lot about having to make alternative arrangements and plans. But in this case it is an alert.
QUEST: All right. I just want to read you one thing that CNN reports tonight. The State Department spokesman says, We have credible information that justified the alert. But it is not specific at this point.
QUEST: I mean-what does that mean?
I thought I was the only one. I mean, it is not as helpful as a headache.
BOULDEN: Well, this is what she's saying. This is what Lucy is saying. It makes people more anxious. But if you become too specific then you and I might say, oh, it's over there. So we're not going to worry about it. And then if it isn't over there-
QUEST: Well, what are you supposed to do? Assuming the tubes were running anyway.
QUEST: Which they're not-or the buses, or whatever. But what are you supposed to do?
BOULDEN: Aren't we always supposed to be vigilant in a place like London anyway? We've had terror here for years and years and years, long before 9/11. So, I think it is just to remind people, oh, yeah, that part of the world isn't over yet, and we have to keep vigilant.
QUEST: Jim, many thanks, indeed.
QUEST: Good stuff. Thank you.
Now, here comes the pain. Greece is bracing for a squeeze, as it tries to add to its debtors demands. It is sending the signal that its gaping budget deficit is under control.
And we'll be talking Basel III. Oh, yes! That's back.
QUEST: Cleaner, meaner, tougher and stronger. The Greek government is squeezing the economy even tighter. It is trimming its spending plans to the bone. And it's raising taxes.
It set an ambitious new target to cut the budget debt to a super lean 7 percent of GDP by the end of next year. That is even smaller than the 7.6 percent that the IMF-there you are, the 7.6, there is your 7 percent that they are aiming to by the IMF and EU.
The idea is to show that Greece is serious about taking responsibility for its financial future. The journalist Elinda Labropoulou is in Athens and joins me now.
Elinda, as we look at this number, I mean, bearing in mind that in the summer, they only just about made their numbers. And there were certain over expenditure by local councils and pensions. Is this realistic?
ELINDA LABROPOULOU, JOURNALIST: Well, they are saying that they can do it and they're saying they can do it by continuing the same program that we have had since the summer, or since the spring, if you like. But we have seen results, so there is strong belief that the government may be in a position to do it. But as you very well said, the main point that the government is trying to get across at this point in time is that it can be taken seriously. So by announcing that it can go even further than the EU and the IMF want it to, the government is sending a message that it can be trusted again and that it can regain credibility from the markets.
QUEST: Well, yes, but you see Greece is lucky isn't it? Greece is fully funded by the Greece bailout fund for the next 18 months or so. So it doesn't have to go back into the market if it doesn't want to.
LABROPOULOU: Well, but it wants to. This is the whole point so far. Yes, it has to show that it is making progress, if it wants to continue getting the money from the bailout plan then it needs to show that it is actually very serious about making changes.
LABROPOULOU: And this is what its doing.
QUEST: But, but, but! There is one factor that hasn't been necessarily fully factored into the Greek thing (ph). The people in Greece haven't yet seen the full whack of any-of austerity that will come in the winter months.
LABROPOULOU: Well, there is certainly reason for concern there. We have seen a lot of large demonstrations and mobilizations across Greece with the first batch of austerity measures and everything that has followed. There is no reason to believe that this won't continue. Certainly, people here are likely to suffer the consequences of this plan.
We are looking at an economy that is likely to shrink by 2.6 percent in the next year. And unemployment is expected to rise by 3 percent points, for the next year, then a further 0.5 percent in 2012, before the country can start making some kind of recovery. So the people are obviously going to bear the worst of this.
QUEST: Elinda, many thanks indeed. Keep on this story. Keep coming to us from Athens. Elinda joining us from Athens.
Now, the age of austerity, obviously, is rapidly moving across Europe. In the U.K., the British finance minister, the chancellor, is set to make sweeping changes to the welfare system. The payment child benefit, basically a payment to help the cost of bringing up a child, will no longer be universal. Instead the chancellor says it will be phased out for families who earn more than $70,000 a year.
In Portugal, government austerity plans got a much needed thumbs up from a credit rating agency. S&P says it expects tough budget cuts will win approval in parliament even though the opposition is known to be against tax rises.
The other big question of course is financial reform. On both sides of the Atlantic regulators have now put in place varying degrees of severity to restructure the financial markets. Basel III as it is known. Jose Vinals is the financial counselor and the director of monetary and capital markets at the IMF. Jose joins me now from Washington.
It is devilish complicated. We know that much, but do you believe, let's take Basel III, do you believe the U.S. and everybody else is going to sign up to this? And will sign onto it at the G20?
JOSE VINALS, FINANCIAL COUNSELOR, IMF: Yes, I think there is already an agreement which is basically made by the central bank governors and the banking supervisors of the G20 countries. To go forward with a package, that would substantially enhance the quantity and quality of capital and the liquidity of the banking sector. So, I have no doubt that this is something which has-is going to go forward because it has been already agreed.
QUEST: The difference, though, and the warnings that the IMF is concerned about with Basel, you have some pretty strong thoughts about what could go wrong. I mean, if you end up with a rush and a difference of regulatory regimes, if you would end up with a flight to capital, to those countries that have lesser regimes, don't you?
VINALS: Yes, we think that it is very important that we now continue to work together, even beyond Basel III. Basel III is something which is affecting only banks. But one must move beyond banks in order to make the entire financial system safer. And it is very urgent that we do that in order to avoid planting the seed for a new crisis. And I think that countries in different-
QUEST: Let me just interrupt you there. Let me jump in.
If you had-I mean, you know it has taken months to get Basel III. The U.S. has done its financial reform package. The EU has put forward its own financial reform package. It has been tortured and painful. What is the one thing you want them all still to do?
VINALS: Well, they have to continue putting in place sound regulatory policies. And what we need is that there is an international agreement to have similar regulations in place so that we can have a global financial system, which is safer. It would not be good to have just a few countries that move ahead without the rest going forward, too.
QUEST: Not going to happen.
QUEST: It's not going to happen.
VINALS: I think it is going-
QUEST: No. You know as well as I do that the argument of a race of different regimes there will always be some hold out countries that will not want to take part, because they see it as a commercial, opportunistic advantage.
VINALS: Well, I think that one advantage of the G20 process is that it includes the main emerging market economies, together with advanced countries, so the expectation would be that there is an agreement that will make all of these countries move forward, maybe at different times, but within a reasonable period of time. And that will avoid the problem that you are talking about. At least in the most extreme circumstances.
QUEST: Jose Vinals at the IMF, very good to have you on the program talking about this. You and I will talk more about it in the future. Jose joining me there from Washington.
The City of Angels is looking for a development miracle. The object and the aim to bring Los Angeles and have it enjoy a city center, and bring it back into fashion. Why building deep into the suburbs is no longer a greener alternative on (INAUDIBLE).
QUEST: On this program, QUEST MEANS BUSINESS, we've been looking at how the urban environment has adapted and is adapting and must adapt to the future, the "Future Cities". It is a large part of the problem is classically space. Now last week, as you'll remember, we were in Cairo. We've been in Hamburg, Istanbul. We were in Cairo looking at how satellite cities were getting people out of the city all together. Today we go to Los Angeles, on the West Coast of the United States, where a city is facing the opposite challenge. How to build and develop, but in Los Angeles' case they have to do it from the inside, out.
QUEST (voice over): Mid-day and mid-week, in Los Angeles. And the smog hangs over the horizon of this vast and seemingly endless cityscape.
Four thousand square miles of twisting freeways and gridded boulevards; 88 sub cities, 10 million people, 7 million vehicles. The County of Los Angeles may sell the Californian dream, but it is the epitome of car driven sprawl.
DANA CUFF, DIRECTOR, CITYLAB UCLA: Now that the sprawl has hit the wall, as some people would say, we need to backfill. And those are much trickier problems than clearing farmland and planting a series of suburban houses.
QUEST: After their summer break students return to CityLab, a think tank at the University of California, in Los Angeles.
CUFF: Architects could really be at the lead edge of what is possible in this next era.
QUEST: The creation of City Lab and its focus on urban design is perhaps evidence of a city reinventing itself.
CUFF: Sprawl is at its end. There is no further out that we can go without people having three-hour commutes. It becomes unlivable. And so really for the first time in our history we have a chance and a necessity to build back into the city. And to grow the city from the inside out, instead of always from the outskirts.
QUEST (on camera): Reshaping this city's future means monumental reform. Nothing less than rewriting the city's DNA code.
(Voice over): Creating a more livable, more walk able, more sustainable Los Angeles.
KATHERINE PEREZ, EXEC. DIR., URBAN LAND INST.: We've been kind of moving away from the suburban style of living simply because its days are gone. We would rather live in our city, where it is close to the amenities and the challenge for Los Angels is to meet that demand.
QUEST: To meet this demand, the city must retrofit the existing fabric.
(On camera): As Los Angeles grapples with urban sprawl, it seems the time has come for the city to grow up, not out.
(Voice over): In this town that doesn't necessarily mean building to the sky.
MICHAEL MALTZAN, PRINCIPAL, MICHAEL MALTZAN, ARCHITECTURE: It would be a mistake for Los Angeles to merely change a horizontal sprawl for a series of-of more vertical developments in the city. I think the bigger challenge is how you think of densification in Los Angeles.
PEREZ: Today it is all about infill. It is about going back into the city and filling in parking lots and other empty unused land. In proving the use of the land, so that we can actually begin to marry our housing needs, our job needs, combined with transportation.
QUEST (voice over): To see this new ethos in practice, go to downtown L.A. Historically, this financial and business district was a place where people commuted to, rather than live deep (ph). But now a new generation of urbanites are calling downtown, home.
This is a place that has transitioned. We have housing, we have a park, we have neighborhood retail. We have a grocery store. We have all the pieces that someone would need if they wanted to choose to live in downtown L.A. People are activating the streets.
QUEST (voice over): The population of Downtown L.A. has doubled in the past decade. In a sea of uniform, low-rise density, it has given a new lease of life to a district that is as close as LA gets to a conventional city center.
Every large metropolitan city needs a center that people feel is iconic, is belongs to all of us together. And it remains a center point. And so we have been lacking that for some time.
QUEST: The downtown retrofit is typical of the way L.A. must evolve. Empowering people to live where they work. With little land left for developers it is the architects alike Michael Maltzan, who may drive this new era.
This is the new Carver Apartments, which is 89 units. For formerly homeless individuals in the downtown district of Los Angeles. It is really a kind of syph (ph) that is-that will be critical for how L. A. continue to develop itself. It is a site that, for the most part, was marked by its proximity to the highway, very loud, fast moving, fast paced part of the city that nobody lived in, that nobody dwelled here. But the opportunity is in all of the space underneath it, on top of it, and around it.
I think that what you are seeing here is not only a new type of thinking in the city about infill, a new type of site.
QUEST: For more than five decades, Angelinos choose to move out of the city, to the suburbs. And there is a feeling that the tide is now turning the other way. Even if Los Angeles will never quite confirm, so the city we have come to expect.
MALTZAN: I think if people hope Los Angeles will somehow look like the traditional cities that we often think of, New York, London, Paris, they are going to be deeply disappointed.
QUEST: Los Angeles has been described as a collection of suburbs in search of a city. Politicians and planners are trying to arrange its citizens in a more conventional pattern and change their behavior.
In doing so, many years from now they might just find the city they're looking for.
QUEST: And all this month, the month of October, we are in Los Angeles, with "Future Cities".
Now, in a moment some recoveries are more equal than others. From the austerity of Europe to the new strength of the developing world, why the head of the World Bank says the uneven recovery means economic models no longer have the answers. If that's true, what are we left with?
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
So let me tell you, Pakistani officials say eight suspected German militants were killed in an apparent drone strike in Northwestern Pakistan. It happened in North Waziristan, near the Afghanistan border. The officials say the eight are believed to have been members of the group Jihad al-Islami. The strike came a day after the U.S. issued a general travel alert for Americans in Europe. It's unclear whether the stri -- the warning and the strikes are linked.
And today, Japan became the latest country to urge its citizens to exercise caution in Europe, for fear of possible terror attacks. Canada cautioned its citizens there to take appropriate steps to ensure personal security. And Britain has a high travel advisory for people going to Germany and France.
The Taliban claimed responsibility for an attack on NATO trucks in Northwestern Pakistan on Monday, along with a similar one last week. And they're vowing to carry out more. Three people were killed in Monday's attack. Several trucks went up in flames. The militants say they're responding to U.S. drone attacks in Pakistan, trying to keep NATO from moving supplies into the country.
This year's Nobel Prize for medicine is going to the so-called father of the test tube baby. The British biologist Robert G. Edwards, who helped develop in vitro fertilization treatment, has led to the first test tube infant in 1978. Since then, at least four million couples with infertility have had children.
Europe's top golfers bested the Americans as the weather finally cleared. And it was a late finish at the Ryder Cup. Europe won 14-and-a- half points to 13-and-a-half and reclaimed the honor. The Europeans claimed victory when American, Hunter Mahan, missed a long put. (INAUDIBLE) his team needed to stay alive. Heavy rain forced play into Monday. It's the first time that's happened in the Ryder Cup history.
The president of the World Bank says there won't be an all our currency war. But Robert Zoellick is warning there may be more tensions to come as governments step in to protect exports and spur growth.
President Robert Zoellick joins me now live from Washington.
It's one of the big fears, isn't it, the ultimate beggar thy neighbor policy?
And we are already seeing evidence of it.
ROBERT ZOELLICK, PRESIDENT, WORLD BANK: Well, this is still a very fragile economic recovery. So whether it's trade, currency or other issues, we have to be careful in managing the risks so we can continue the path of growth -- Richard.
QUEST: If we look at this path of growth, are we -- certainly in the developed nations of the G20 -- are we destined for this sclerotic, slow sludge for the foreseeable future, do you believe?
ZOELLICK: Well, I hope it's not that bad, but it's likely to be a slow recovery. And that means unemployment is likely to remain high. And the developing countries are increasingly the source of global growth, about half of it at present.
QUEST: That growth, that unbalanced, uneven growth that we are seeing, is creating its own tensions in the world at the moment.
ZOELLICK: Yes. But it's also creating an opportunity, because now, as opposed to the developing world just being a source of a location for foreign aid, it creates new opportunity for jobs, for exports. So the question is how to get developed and developing countries to cooperate effectively together.
QUEST: Yes, well answer that question for me if you would, what is the -- the best way?
Because, frankly, the G20 -- the G20 process doesn't necessarily seem to be the most efficient post-crisis.
ZOELLICK: Well, first off, there's a changing role for institutions like the World Bank. So far in this crisis, we've provided about $138 billion of support for the poorest and for the private sector. And that's been important in creating demand, in safety nets in some of the developing countries. And then that growth helps some of the developed countries.
But the G20 is, of course, a fairer group, more representative than the old G7 or G8. And some of the issues that you were referring to, for example, currency issues, were around when I was working with the G7 at the time of the '80s with the Plaza and the Louvre Accord.
So these aren't new issues. But what's new is the players involved.
QUEST: Let's talk about austerity, if we may.
Where do you stand on this question?
Are countries taking too much of an austere men -- too many austerity measures at the moment?
ZOELLICK: Well, it -- it depends on the country, Richard. And -- and I prefer to focus on laying the foundation for growth and just austerity. But austerity comes up in the context of countries that often have to get their budgets under control, get their spending under control, big expansion of -- of government policy, dealing with the crisis, with banking and stimulus programs. And, of course, they have to get those -- those back under control, because otherwise, we're going to have a problem in terms of high taxation, and, frankly, crowding out the private sector over time.
ZOELLICK: The challenge now is getting that transition right.
QUEST: Is it time for the U.S. to engage or to in -- to introduce another bout of quantitative easing?
ZOELLICK: Well, that's what the Federal Reserve is debating right now. And I think what is going to be most important will be how the United States gets its budget deficit under control. And I think that's going to be the primary issue you see over the next couple of years.
The private sector in the United States, the corporations, are sitting on about $2 trillion of cash. That money can be invested. But right now, there's high degrees of uncertainty. I think one of the best things the government could do would show its long-term fiscal posture.
QUEST: Finally, the -- the relationship -- the complicated relationship between the U.S. and China, particularly on -- on currency, on the question of the yuan, do you worry that post-November's mid-term elections, eventually, the U.S. is going to introduce some form of sanctions, some form of action?
ZOELLICK: Well, the pressure is building, as you saw in the vote in the House of Representatives. On the other hand, you've seen China moving on some of the currency issues, as I believe it should do.
But the fundamental issue for China goes beyond currency. There's not going to be a silver bullet. It goes to this issue of increasing consumption as opposed to savings, where the United States has to do the reverse.
And on that, the encouraging news is when I was in China about three weeks ago, the Chinese realized, for their own interests, they want to move in that direction.
The question is keeping people working together while both countries rebalance and the international system rebalances.
(END VIDEO TAPE)
QUEST: President Zoellick joining me from the World Bank in Washington.
Have a good meeting. It's the annual meeting. I hope they have a good meeting.
Many thanks for joining us.
Now, we stay with China because Europe's most debt-ridden country has a new supporter. And it's a nation with a deep pocket. China says it is and stands ready to offer Greece a cash injection by snapping up bonds when they're next on the market. We talked about that earlier.
China's premier, Wen Jiabao, was in Athens at the weekend, where he expressed confidence that Greece, in his words, is emerging from the shadow of its debt crisis. And he says China has every confidence in Greece's future.
Wen Jiabao continues his international trip. He's in Brussels at the summit meeting of leaders of Europe and Asia, where they're obviously talking about the economy.
Ahead of the summit, Wen Jiabao gave a rare interview to our Fareed Zakaria.
Now, bear in mind as you listen to this interview, Wen Jiabao hasn't spoken to a Western television reporter in two years, until now.
PREMIER WEN JIABAO, CHINA (through translator): In face of the financial crisis, any person who has a sense of responsibility toward the country and toward the entire human race should learn lessons from the financial crisis. As far as I am concerned, the biggest lesson that I have drawn from the financial crisis is that in managing the affairs of a country, it's important to pay close attention to addressing the structural problems in the economy.
China has achieved enormous progress in its development, winning acclaim around the world. Yet I was one of the first ones to argue that our economic development still lacks balance, coordination and sustainability. This financial crisis has reinforced my view on this point.
On the one hand, we must tackle the financial crisis; on the other, we must continue to address our own problems. And we must do these two tasks well at the same time and this is a very difficult one.
China has a vast domestic market and there is great potential in China's domestic demand. China is at a stage of accelerated organization and industrialization. We can rely on stimulating domestic demand to stabilize and further grow the Chinese economy. This requires us that we must seize the opportunities, speed up our development and stabilize the Chinese economy. And on that basis, we must take a long-term perspective to address all these structural challenges in our economy.
As far as the U.S. Economy is concerned, I always believe that the U.S. Economy is solidly based, not only in a material sense, but more importantly, the United States has the strength of scientific and technological talent and the managerial expertise. It has accumulated a wealth of exper -- experience in its economic development over the past more than 200 years. In spite of the twists and turns, the United States, I believe, will tide over the crisis and difficulties and we must have confidence in the prospects of the U.S. Economy.
The recovery and further growth of the largest economy in the world, that is, the U.S. Economy, is in the interests of the recovery and stability of the world economy.
(END VIDEO CLIP)
QUEST: Wen Jiabao talking to Fareed Zakaria.
Now, in a moment, when it comes to drumming up tourism, image is everything. Kenya needed work. Next, I speak to the tourism minister on which things are now looking up, in a moment.
QUEST: We're seeing ash clouds, strikes and now terror warnings -- they all threaten to cripple tourism industries around the world. One thing, though, we know, is that this is a sector which is resilient.
Two years ago, when Kenya descended into rioting and chaos after disputed elections, the tourism industry came close to collapse -- and for good reason. Now the country has a new constitution, a safer image, and, following what we've just said, the resilience of tourism seems to be bouncing back. Earnings more than doubled in the first five months of the year.
The Kenyan tourism minister, Najib Balala, joined me.
And I needed to know how he planned to keep that momentum going.
NAJIB BALALA, KENYAN TOURISM MINISTER: We have done the assurance missions. We have done aggressive marketing and advertising in the global media, but partnering with tour operators. We have also built institutions that guarantee security and the police reform that we have done in our country assures that security will be addressed.
QUEST: How far was the peaceful constitutional referendum reinforcing of that, to some extent, because even though the con -- the referendum was peaceful and has been implemented, the new constitution, the fact is it all creates the era of -- of -- of change and of uncertainty.
BALALA: It's a new dawn for Kenya. Institutions are being built. Governance is checked, as well as the evolution of the system to the rest of the country so that we can develop the country together. But also institutions where justice and policing is taken seriously, because we have three arms of government. We have the executive, the legislative and the judiciary. So the best -- the first thing we are doing right away as a government, we are doing the reforms in the judiciary and the police so that we can be able to guarantee Kenya as a vehicle for investment and also to attract tourists to the country.
QUEST: How important, in the new Kenyan business environment, where agriculture, where coffee, where all these other parts of the economy are relevant, how important is tourism?
BALALA: Well, it is number two. It is 12 percent of the GDP.
BALALA: Behind agriculture...
BALALA: Yes. So it is important. It is one of the six pillars where we have the revo -- the changes of Vision 2030.
QUEST: And are you able to go to the prime minister and able to go to cabinet and say I need more money, industry to spend on infrastructure, I need to improve the roads, I need to improve the airports, I need to improve whatever?
BALALA: Well, government now appreciates tourism. They know the value and they know the power of tourism and its revenue. And that's why a lot of money now is being forecast on infrastructure development. Nairobi is going to transformed in the next couple of years on major infrastructure. Almost $250 million are spent on infrastructure. So, yes, it's there.
In terms of marketing, we are trying our best to market as much as we can. We have diversified our markets from Europe, Central Europe, Russia, the Middle East, China, Japan. I've just come back from Shanghai to market Kenya.
QUEST: See, that's the fascinating part, isn't it, you -- people like yourself, your traditional markets of North American and Northern Europe, basically, you're having to rethink the map now, aren't you?
BALALA: Well, with the -- with -- with the economic crisis that happened a year ago...
BALALA: -- I think we need to diversify our source markets and be able to say, yes, they are markets and traditional markets, but not kill the traditional market, support it. That's why I'm in London today.
QUEST: You say not kill but support, but the truth is a...
QUEST: -- there is a shift.
BALALA: Diversification, you know...
QUEST: Oh, I -- I -- my shift is your diversification.
BALALA: No, but it's important for us to appreciate that the was a dip in the -- in the markets here. We can't just sit and fold our hands. We have to open new markets. And we did that exactly.
So we are benefiting. Where a year ago, when we opened China, we had a 49 percent increase, from 15,000 to now plus 25,000. So we see that numbers going up for this year.
(END VIDEO TAPE)
QUEST: That's the Kenyan tourism minister joining me earlier.
Now, just -- I don't even know where to begin -- Guillermo.
I mean every time I put my head outside the front door this week or last weekend, it...
QUEST: Well, you were on holiday. So let's not have any of your chortling. And now it's Austria and Italy that has this rain.
What's going on?
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, Italy, especially the Liguria region.
You know where Genoa is?
That's where we have alerts, actually, of severe rain -- a lot of rain, winds and severe storms. And you see it, as -- as we look at the satellite picture, also the southern parts here of France. Nice and Lyon are reporting intense rain, especially more Lyon than anything.
And then Austria, you see that it's picking up a lot of observations, saying that it's raining and they are going to get this system going there.
But Britain doesn't look that bad. I think that London looks bad for what is -- what day is today?
Then Tuesday it's going to rain. Wednesday it's going to rain in London. Thursday and Friday are going to be better. So we have something to look forward to. So there you go. England is not in bad shape right now, in the next 48 hours, as you see, because we will see some rain. But that's about it. Inverness is reporting now rain. You see it here on the radar. While London is on the -- in the clear, for the time being.
This is transitional weather. I mean it -- it is going to happen. As the temperature also looks a little bit better, because it's cooler, blah, blah, blah, blah, blah. Well, this is what happens with transitional weather.
The east, man, if you're in the Aegean Sea or the Mediterranean Sea, Cyprus, Crete -- wonderful. But this is the problem here. Liguria -- this is the Liguria region -- all the way down -- well, up here into Piemonte, Lombardia, Venitafullia (ph), Venezia, Julia here in the east and Toscana, Marque, Abruzzo -- all those areas are going to see rain. Not bad at the airports, though.
Dublin with some winds then London with the rain, Paris with rain here and there, Copenhagen with windy conditions. Very windy in Norway, especially in the coastal parts there.
Rome with rain. Let's see the temps. Not bad at all -- 17 in London, 18 in Berlin. Look at Vienna, 12. You see, I told you. And we're going to see a lot of rain. Twenty-three in Madrid, gorgeous.
But I'm going to end with a positive note, of course. So I stay here in the East Med, in Cyprus and, of course, all the way to the Middle East here in the coastal parts, it's gorgeous -- back to you.
QUEST: He enjoyed all that rain.
We'll find out tomorrow where Guillermo was on holiday. We will ask and we will know.
In a moment, after the break, the 33-year-old rogue trader who nearly brought Societe Generale to its knees. Jerome Kerviel has always protested his innocence. A court in France will decide if he deserves to serve time.
QUEST: Now, this time tomorrow, Jerome Kerviel, the market trader from Societe Generale, will find out his fate from a court in Paris. The 33-year-old ex-trader will face, possibly, four years in prison after almost bringing S.G. Societe Generale, to the brink of collapse in '08.
What's the verdict?
We'll find out and know tomorrow.
But our senior international correspondent, Jim Bittermann, looks ahead to the decision.
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): For Daniel Bouton, it was a bad day at the bank. The exclusive chairman of one of the oldest financial institutions in France, Societe Generale, had scheduled a news conference in January, 2008, to talk up the bank's quarterly earnings. But instead, Bouton was obliged to acknowledge that one of his employees had been placing bets on success that were worth more than the value of the bank itself and that in the process of liquidating them, the bank was taking 4.9 billion euros, $6.5 billion, in losses.
From the beginning, the bank insisted the employee, Jerome Kerviel, acted alone, that he had violated trading rules, fraudulently manipulated computer codes and forged documents. The young trader was put under investigation and in custody.
But he told prosecutors and CNN in this exclusive interview last spring an entirely different story, that everything he did was sanctioned and even encouraged by the bank, that his superiors were well aware of what he was doing and that he was not about to made a scapegoat.
JEROME KERVIEL, EX-SECURITIES TRADER: What Societe Generale claims is untrue. It's impossible for such a thing to take place in a trading room. It's impossible my superiors didn't see anything.
BITTERMANN: The bank denied the claims and after two years of investigations, prosecutors brought charges only against Kerviel. But at his trial in June, he pleaded not guilty. While Kerviel is the only person to face jail time, many of his superiors, including the Societe Generale chairman, have been punished in a different way -- by losing their jobs at the bank. Bouton stepped down under pressure.
All of which begs the question, whether anything has been learned from the Kerviel case the executive director of one of France's leading business schools and a former securities trader himself, thinks yes and no.
BENOIT ARNAUD, EDHEC SCHOOL OF BUSINESS: When you see these young kids that can run away with a lot of money and not understand very well what they have done, I think there is much more to be done at a political level. And that should be done at a global level, not only at the French level or the American level.
BITTERMANN (on camera): What still surprises many here, both inside and outside the financial community, is how close a single mid-level trader came to bringing down one of France's largest banks. And yet, more than two-and-a-half years on, there are experts here who say it could happen again.
Jim Bittermann, CNN, Paris.
(END VIDEO TAPE)
QUEST: And we'll have a Profitable Moment after the break.
QUEST: Tonight's Profitable Moment.
The terror alerts that have been issued remind travelers that we are all the targets of the battle of terrorism. So far, airlines are reporting bookings haven't changed. Travelers are not heading home. But it is too early to say that either fatigue about these warnings or resilience in the face of them is the reason why.
The truth is it's difficult to know what you actually do in these situations. The advice of staying alert and being aware, well, it sounds a bit evil. And, frankly, it's so obvious, in the face of an attack. But if we are to carry on business as usual, much as we have been, then we have no choice other than to follow these rather basic principles.
If you're on holiday in Europe or you're here doing business, well, that's QUEST MEANS BUSINESS.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I hope it's profitable.
"WORLD ONE" is now.