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Europe's Grand Plan For Greece Wins Applause From Global Stock Markets; Interview with Pavlos; Interview with Bill Gates; Interview with Carolyn McCall; Interview with Siim Kallas

Aired October 27, 2011 - 14:00:00   ET


MAX FOSTER, CNN ANCHOR, QUEST MEANS BUSINESS: Europe's grand plan wins applause from the stock markets, but is it grand enough? Or princely enough? The crown prince of Greece tells me there is hard work ahead.


CROWN PRINCE PAVLOS, GREECE: We are in serious trouble. That we get rid of this fat and try to put us back on land. It could be incredible what happens in the future.


FOSTER: And a man with a plan. Bill Gates tells us what G20 leaders must do to get Europe back on track.

I'm Max Foster. This is QUEST MEANS BUSINESS.


We have the deal now we need the detail. After more than 600 days and 14 summits, and a marathon 11-hour meeting which saw Europe's leaders talking through the night. They have reached a landmark agreement.

Tonight, on QUEST MEANS BUSINESS we'll be breaking down the deal, testing it and asking what's missing. We'll also hear from Bill Gates. This all coming up this hour.

Now traders seem grateful for what they've got so far. Stock markets in Europe ended the day with their highest points in several weeks; with stunning gains for the main markets around the region. Bank shares did the best of all. In Frankfurt, Commerz Bank added 60 percent. Deutsche Bank gained 15 percent. In Paris, Credit Agricole led the board with a 22.5 percent gain. Financial stocks also did well in Milan and in Athens.

The euro is trading close to a 7-week high against the U.S. dollar. Right now 1 euro is worth around $1.42, up more than 2 percent on the open.

We are also seeing a vote of confidence for the deal from bond traders, crucial here. Bond yields, or the cost of borrowing is falling for nations with the most debt. Europe's leaders will count that as a success since the whole point of this deal is to ease the burden on the world's most indebted nations.

Now Greece saw the biggest gains today.

Let's bring that up.

Greece saw the biggest gains today. Take a look at these figures. The loss, almost 2 percentage points off its sovereign debt costs. It's benchmark 10-year borrowing cost, still frightening high, though; above 20 percent.

This is the story down in Italy; yields down slightly for the moment. The effect is bigger in Spain, though.

If we go up there. Oh, sorry. Germany, of course.

Spain. Spain with in fact, a 0.15 percentage point, shaved off borrowing costs. With those countries paying above 5 percent to borrow, but crucially below 6 percent.

Back to Germany and the bond yields there, rising because there is now less demand for so-called safe haven assets. It is all looking like a big thumbs up, though, for the debt plan.

Earlier I spoke to Sarah Hewin, senior economist at Standard Chartered Bank. I asked her to explain how the markets have reacted today.

SARAH HEWIN, SENIOR ECONOMIST, STANDARD CHARTERED BANK: Yes, I think that although the deal last night was broadly in line with what had been expected, up until we got the deal there were still the fears that it might all fall apart. So we certainly seen something of a relief rally across all risk assets today.

FOSTER: I think that the truth is probably that the markets didn't really believe the politicians could sort it out, right?

HEWIN: Well, that seems to be what has bee reflected in the markets today. And, of course, it was very much 11th hour stuff. We didn't get the deal on the debt restructuring until the early hours in London. So, I think right up until the last minute there was a sense that there wouldn't be a comprehensive plan. And it might all fall apart at the last hurdle.

FOSTER: How comprehensive was it? The Greek haircut was pretty clear on its detail. But other parts of the plan weren't quite as clear, were they? Are you thinking the markets will expect more detail to come through?

HEWIN: Yes, we very much had the headlines delivered to us overnight. The real details will need to be flushed out over the next few days and weeks. Our concern that is that as those negotiations start to occur then there will be some hurdles. And the markets might take that badly. So we could, for example, see the participation in the Greek debt restructuring perhaps not as high as the Greek authorities would want.

We don't really know the details yet of the leverage proposal for the EU bailout facility. I think on debt recapitalization that is pretty straight forward. We have most of the details there. But we don't know at what point the EFSF is supposed to step in if governments aren't able to help their banks.

FOSTER: How long have the politicians actually got until the markets loose faith in them again, would you say?

HEWIN: Well, I think we had a real lesson over the summer. The July 21 agreement was also treated with a great fanfare, markets took that summit, the results of that summit very well. And, of course, the politicians went on holiday and we didn't have parliaments meeting to ratify the EU bailout facility until September/October. And in that time the nervousness over the outlook for the Euro area debt crisis escalated. And that is why we had to have this second round of summit meetings.

So the short answer is markets will probably give the politicians the benefit of the doubt over the next few days, and a few weeks, but there will have to be some progress. Some very visible progress being made.

FOSTER: But in summary, you like the plan, they just have to make sure they see it through?

HEWIN: Absolutely. Yes, implementation is everything.


FOSTER: That is the view of the markets in general. Let's get the view of the market trading right now. Let's go to New York where Alison Kosik is standing by.

Hi, Alison.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi, Max. Yes, we have been watching a rally all day. I'm here with Teddy Weisberg. He is with Seaport Securities. This is all about Europe.

And this is what Wall Street has been waiting for hasn't it?

TED WEISBERG, SEAPORT SECURITIES: Well, I think so. Listen, we have-the markets have been hostage to the politicians, both here in the U.S. and in Europe for many months, going on probably almost two years. But there is no question that what has happened in the Eurozone, over the last year and a half, has had a biggest impact on our markets. When the news has been good, we have seen a better tone. Bad we have seen big sell offs. Clearly the market likes what it sees and it is reflected by the fact we are up 350 points.

KOSIK: With this deal have we really dodged a bullet?

WEISBERG: Well, no I think there are a lot of bullets out there. But I think for the moment-I mean, just knowing what we read in the paper and what we have heard, it seems that there are a lot of structure in this deal. And perhaps this will keep the wolves at bay, at least for a long enough time for them to get their respective financial houses in order.

Let's not forget we are dealing with 16 or 17 different countries. Sort of like trying to herd cats. And there are a lot of moving parts here. So I would say, at least on the surface, it is obviously a positive and that has been reflected in the very positive tone here today and in Europe coming into today's market.

KOSIK: What is Wall Street looking forward to happen next now? Now that this is out of the way?

WEISBERG: Well, first of all, I'm not sure that this is out of the way, but you know, we are just days away from this debt committee in the U.S., which is probably going to be come the renewed focus. I think that we can only hope that we don't get this terrible display that we had, the last time we had these negotiations over the debt ceiling here, which was sort of pathetic. And sent a very negative message, not only to the U.S. markets, to the markets around the world.

Perhaps on the strength of the fact that the Eurozone with 16 or 17 countries could, at least for the moment, resolve their issues, maybe we can get our debt issues resolved here. I think a lot of people are going to be watching this committee very closely. Let's hope we get some positive results.

KOSIK: All right. Teddy Weisberg with Seaport Securities, thanks very much for joining us.

We'll be hopping from one debt situation to the next. That is the bottom line, Max.

FOSTER: Alison, thank you very much indeed.

Now, the markets don't tell the whole story. The deal raises just as many questions as answers. We'll take a closer look next.


FOSTER: Europe needed a comprehensive deal, now Jose Manuel Barroso says, it has got one. The European Commission president says the grand plan must solve the debt problem once and for all. And while the deal got done the hard work doesn't stop here.


JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: The package we agreed tonight, this comprehensive package confirms that Europe will do what it takes to safeguard financial stability. I have said it before and I'll say it again. This is a marathon, not a sprint. The technical work needed to finalize certain aspects of this package will be completed by the relevant authorities in the coming weeks. And the commission will make further proposals for a community way out of this crisis.

As you know these are exceptional measures for exceptional times. Europe must never again find itself in this situation. This is why we must further improve our economic governance, namely in the Euro area.


FOSTER: Well, it has been touch and go, really, hasn't it? With tempers flaring and negotiations going long into the night. Herman Van Rompuy said leaders were now fully committed to putting the deal into practice. The European Council president said they were under no illusions as to how serious the consequences would be.


HERMAN VAN ROMPUY, PRESIDENT, EUROPEAN COUNCIL: Compared to eight or 10 years ago the pressure which leader puts on each other, has become much more effective, as the events of the last days show. Today no government can afford to underestimate the possible impact of, for instance, public debts, or housing bubbles, in other Eurozone countries, on its own economy. They would be punished by the voters and by the markets.


FOSTER: Well, Greece knows how it feels to be punished by the markets. We are expecting the Greek Prime Minister George Papandreou to deliver an address to the nation, any moment now. We will bring word on that statement as we get it.

The devil is, of course, in the detail, as they say. And there is a lot of it here. Felicia has been wading through the small print.

And there is concern, Felicia, isn't there, that the detail isn't there? But you have been at what is.

FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT: There is no question about that. And like you said, the devil is in the details. And we wonder exactly how those details are going to play out.

Like any deal of this size, reading between the lines is just as important as looking at the headline figures. We have been hearing all week about the three main hurdles that leaders needed to clear. Perhaps what is to come as the biggest relief to the markets is that we did get some degree of resolution to each one.

So let's start with the banks. The headline here is that they will have to increase their capital requirements to 9 percent. In other words, more cash saved for basically a rainy day.

Now the interesting detail here is how much they are going to need to reach that target by deadline next June? It is estimated at about $140 billion. The banks were worried that they were going to have to raise a lot-a lot-more. In fact, the IMF had said they might need up to three times that amount.

Then, of course, there is the bailout fund. That is getting ramped up to $1.4 trillion. Now that money has got to come from somewhere. And what the EU has essentially done is open the door to the private sector. Or even possibly emerging market nations to get involved through some sort of special investment vehicles, they are called SPIVs. One of the countries that they are thinking about getting involved is China. And that is possibility has already got investors excited that the fund really is going to have the firepower that it might need, if say, Italy, or Spain, needs help.

Now, finally, the haircuts that we have been talking about. In other words, what percentage of Greek debt won't end up getting repaid? French and German diplomats have been tearing each other's hair out over this one, literally.

And it looks like the Germans came out on top; 50 percent is the final figure. And that, basically, knocks $140 billion off of Greece's debt over night. About a third of which is going to come from the public sector. And that has managed to convince private sector investors, who hold that debt, to accept the deal voluntarily.

Now that is a major victory for the EU. That means we won't see any credit events. We won't see banks having to pay out on credit default swaps. That doesn't mean though, it is going to be pretty for anyone holding Greek debt instruments. But it will make things just a little bit more orderly.

FOSTER: Everyone was pleasantly surprised by what was achieved, weren't they, at these meetings? But have you managed to find any glaring omissions, as you have been pouring through the details?

TAYLOR: The markets were elated about this. Because finally, you know, the European leaders came together. But the thing that people are worried about now is there is no plan for actual growth. And that is a real significant problem. We don't know how some of these Eurozone nations are going to grow moving forward. How are they going to be able to boost exports?

The other thing that is not there is now these austerity measures are going to be put into place. Will they also be able to stem the contagion around countries like Italy, Spain, Portugal, etc cetera?

And that is also a problem. Because we just don't know how long this good news is going to last. It may be only for a few months. And that is what the critics are worried about. That we are going to find ourselves in the same position in just a few months from now.

FOSTER: Felicia, thank you very much indeed.

Now, EU leaders fought tooth and nail to keep their own countries' interests on the table over night. Now that a deal is being done, there is a European power shift on the cards. Earlier I spoke to Kirsty Hughes from the Center for International Studies, at Oxford University.

And I asked her if she saw this deal as a major political achievement?


KIRSTY HUGHES, CENTER FOR INT'L. STUDIES, OXFORD UNIV.: I think it was a political achievement to get to those three main, economic agreements. And I think they also went beyond that. They, basically, in the summit conclusion set out a whole list of things in writing, of how they are going to coordinate better as a group, the 17 in the Eurozone. How the commission was going to have a role. They are going to have new presidents at the Euro summit, group of leaders of the Euro group, the finance ministers and even the officials working below that.

So, when you read it, it is very striking. It is almost like you are having a parallel club to the EU of 27.

FOSTER: Who is in the two clubs?

HUGHES: Well, the clubs at the moment are the 17 in the euro, and the 10 on the outside, which includes the U.K., Sweden, Poland. But I think the outside group are going to have trouble. Because they can't just caucus as a group of 10. They are a very varied group. Some of them want to join the euro eventually, as it carries on existing. Some like the U.K. and want to opt out of existing EU laws. So, it is quite messy for the outs to maintain influence.

FOSTER: And does Sarkozy make clear to Cameron, you know, keep your nose out of the euro debate, basically? Even though Britain is affected?

HUGHES: Sarkozy said that to Cameron and when you look at what the Euro group are not going to focus on, they are going to look at issues around competitiveness, not just around budgets and fiscal monitoring. And although the single market is what was meant to unite the 27, if you have the 17 meeting separately, regularly, they are going to have their own views on how that needs to develop.

FOSTER: They are going to be much more powerful, because the two major countries, France and Germany, are in that, in the heart of that?

HUGHES: They are not only going to be more powerful, because they are in the heart of it, but if you look at the way EU politics happens over time, the leaders and ministers, they do deals all the time. Unrelated, they say, we'll back you on this law, if you back him on that deal. And the 17 are going to meet a lot. They are going to be agreeing on a lot more things. Britain is just not going to be in the room, nor is Sweden, nor is Poland.

FOSTER: So, in conclusion, would you say that the integration of Europe, bringing fiscal policy into monetary policy has started to happen now. It is not just a monetary union?

HUGHES: I think it is not just a monetary union. I think they have taken steps to strengthen the existing stability and growth pact; to strengthen the roll of the Commission. They have also already got something called the euro plus pact, which encourages in a voluntary way that to happen. That actually covers 23 member states. It is almost like a three-tier EU.

To do that in treaty change, which they are talking about, will take a couple of years. And we are certainly not suddenly going to see a federal states of Europe, like the United States. But we are heading in that direction.


FOSTER: Wow, it is an end of an era.

Meanwhile, for Ericsson, as Sony buys up its share of their joint phone venture. Ericsson's CEO will tell us why (UNINTELLIGIBLE) networks is a logical step.


FOSTER: Taking you live to Athens where the prime minister is addressing the nation.


GEORGE PAPANDREOU, PRIME MINISTER OF GREECE, (through translator): They want cancel this by changing this decision, these results. Our collective efforts have given us the most important weapons for our negotiations. Not just for out debt and for also for our future. Yesterday's decision gives us time. It removes some insecurity from us. Gives us the opportunity to map out our own road.

This decision in no way will create any problem for the banking system, or for the pensions. On the opposite, it creates new opportunities for the development, for liquidity, and to support social security and the banking system.

It gives us the carriage to proceed forward with better prerequisites. We negotiate and have managed to write off an important part of our debt. Billions of euros went from the head to the shoulders. So the banks will pay this cost, not the citizens. It is a more fair distribution of the debt. We managed to cover our low, low needs; our credit and on a better more favorable terms.

The result of yesterday's negotiation is of significance for our country. It has taken this big burden of the past, they want the next year to be the first year when new debts are not added to our shoulders. And we will manage to do that.

Yesterday's decisions, they are a sign of something more important. It means that when we work together, when we are persistent, and when we are dedicated, when we make difficult steps finally we reach our goals. And the part which we don't fight, we loose this fight, it is also a sign of something else.

That our allies in the European Union, they recognize these efforts. They want our success, and not just the failure of Greece. They also support now as we ensure the viability of our debt, for many years, we can dedicate ourselves to what we have more need. And in the future they will have real benefits for our lives and the lives of our children. And we will have to work together in this route, so that we are all together in this way we will create Greece, and nobody else will do it for us.

We shouldn't wait for magicians, or some gods to do the work for us. Those who are concerned or worried, I want to put calm them down. In this agreement there is nothing sacrifices our opportunity, our opportunity to take our own decisions.

On the opposite, it opens up the road to leave-to get out of these dependencies. Our future is in our plans. We map out the road which we will follow and we are responsible for this to have the know how, support, and the advice of the experts, is can only be of good to us. We'll know that our country has huge opportunities for all of us.

But they should be utilized, these opportunities; they shouldn't be buried under the burden of the state which sinks to operate, which was oppressing any productive force which we have available.

And we should-the state, we didn't know how to collect money, how to spend money, how to invest for the joint interests of the people, and not just for their own some interests.

There was a state we didn't know, what (UNINTELLIGIBLE) they have, how many, and it was wasting (UNINTELLIGIBLE). From us, started the problem, the power, and we are today, who are making this new, big steps, but we need the participation of all people. So, everybody makes this own revolution for more fair, a more different Greece.

Whether the tie will create a country, and effective country, and fair, and the country will release the development and we won't suppress the development, the progress. A country which knows its role and a state which knows its roles, and who serves the people. We have a way to go until this point. The work should be continued intensively.

We should change something. Nothing will change overnight and it makes no sense to go over the same criticism. Whatever is unfair we have to change and it would be best to do something which makes our country different, distinct. And it is best to do this. The crisis gives us an opportunity and this agreement gives us time to choose to select what is of value for us Greeks. What we want to keep and what is something that we want to change.

We can't have the burden of the debt, which will suppress our ancestors, us, and-we should all together make this big change, which we all want, is make changes in this political system and the economy in the development, for more green development. Much of it has become practice as in the insurance field, in education, in the release of different professions, so that to make our country more, you know, effective. So that every citizen can risk his own potential. And so use our own comparative advantages and benefits.

So we continue, we have much work to do. As we won this fight, I cannot be but optimistic and believe that we will manage to achieve the next goal of creating a new productive state of (UNINTELLIGIBLE). We have the opportunity to create a better state and within a reasonable time, to created a completely different Greece. Now we have work and responsibility to make practice the yesterday decision. To turn up the practice, we have work to do. Now we should change towards a more creative Greece.


FOSTER: There you are, the Greek prime minister talking after that major deal on the Greek haircut, as it is called, by the European Union.

What he was really trying to do is say we should see this as an opportunity for Greece to rebuild and to make changes and not be burden by all of the debts that they have. And they are losing, effectively some of their debts are written off.

Our allies in the EU recognize our efforts and want our success, not just our failure. He is trying to be really positive, really. Give a positive message from what is a dreadful economic situation.

He said, we will create a Greece-we will create Greece, as in Greece will be responsible. Nobody else will do it for us. We should not wait for magicians.

And it was interesting that he talked about the advice of experts can only be good for us. And that is because a part of this deal, the European Union will send a team into Athens to oversee this program be put into place for Greece. And Greece is seeing that as a loss of sovereignty; Europe taking control of their country, but he is trying to turn that around and give, actually, the advice should be valued.

So, there you are, the Greek prime minister speaking to the Greek people.

Next, a royal viewpoint on Greece's debt crisis. The country's crown prince shares his thoughts on how we got there and how we can get out.


FOSTER: Welcome back. I'm Max Foster.

More QUEST MEANS BUSINESS in a moment.

But first, your news headlines.

Investors seem pleased by the new European debt deal for -- for now, at least. As we've been reporting, U.S. stocks rallied early on word of the EU agreement to write-down Greek debt, expand the Eurozone rescue fund and recapitalize European banks. It came after a marathon negotiating session in Brussels.

And three months into Thailand's flood crisis, water is seeping slowly but surely into the central area of Bangkok. The Thai prime minister says most of the capital will end up underwater and is urging people to evacuate. The government has public holidays for the rest of the month so the residents can get to the countryside.

Exciting moments in Eastern Turkey as rescue crews find another survivor. The 18 -year-old university student was pulled from the rubble of an apartment building almost 100 hours after the powerful earthquake hit. According to Turkish state news, he's dehydrated but has no other traumas.

Egypt has released an Israeli-American man to Israel in exchange for 25 Egyptian prisoners. Ilan Grapel touched down at an airport in Tel Aviv on Thursday, shortly after the release of the Egyptian detainees to the Sinai. He was arrested in June on suspicion of spying. Charges against the Egyptian prisoners ranged from drugs to weapons violations.

Our top story and dealing with the euro crisis and in particular, the Greek crisis, that big haircut that was instilled there.

As the co-founder of several investment funds, Crown Prince Pavlos of Greece is familiar with the debt crisis on a personal and a business level.

Earlier he told me he's pleased that action is finally being taken to address it.


PAVLOS, CROWN PRINCE OF GREECE: It's a huge -- a huge relief for the country. And I think the government has worked very hard to get to this point.

FOSTER: How did Greece get into this situation, do you think?

PAVLOS: The backbone of our country is -- and in most countries -- is the -- is the -- the public sector. We have a very good one, but we have too many, you know. And over time, the governments have basically employed more and more people into the public sector. So that a job that could be done by one or two people very efficiently is now being handled by three, four, five people. I would say about 25 percent of our working force is in the public sector.

Our -- we have created a middle class which is somewhat a forced middle class. They -- they've been able to live under wonderful standards...

FOSTER: Because that middle class largely works in the public sector.


FOSTER: And they're losing their jobs now.

PAVLOS: And they're losing their jobs. All are being brought down dramatically in the -- in the level of income they're going to be making.

FOSTER: So what -- just describe the atmosphere in Greece right now.

PAVLOS: The whole country ids not as aggressive as what you're seeing in the Constitution Square. There's a lot of people who are very, very good people who want to work hard and -- and to those people is who we have to direct our attention to. We're about 11 million Greeks in Greece and now the equivalent may be 10 to 11 outside. And the ones outside, everybody will know very well, have worked very hard and done entrepreneurial jobs from -- from owning their own restaurants to -- to being, you know, millionaires and billionaires in -- in Australia, in England, America, around the world.

And we still have a lot of that kind of personality in Greece. But it -- some of it has been sucked away from us just because they were offered jobs that -- that helped reelect different governments, both socialists and the conservative governments. And that is what we have to change. We have to reintroduce the private sector.

FOSTER: Could this be a fresh start, then, for Greece, do you think?

PAVLOS: The real issue is that of a confidence factor in our politicians, whether it is this current government, previous governments or future governments. There's a very high lack of confidence in -- in these people.

FOSTER: What about the future of the euro?

Do you think it's going to continue to exist in the form it's in right now?

PAVLOS: Being in the euro has not necessarily been very useful to us. It's been very expensive to live -- the cost of living in Greece has gone up and our, you know, the minimum wage is around 600 euros. That will drop now to 300 euros.

So it's very expensive to live.

How can you survive under those conditions?

So the answer is, I think it's going to be a very rough road for the euro and it may change what it looks like today, over the next few years.

FOSTER: But would bringing the drachma back be all that bad, do you think?

PAVLOS: Bringing the drachma back today would be very painful and would cause a lot of problems. I mean you reduce the net worth of anybody from, you know, down 50 percent right there. But the only good thing that would come out of that is that you -- you'd be at a completely rock bottom and you can start from the bottom and work your way back up.

Maybe we weren't quite as honest with ourselves as to how good everybody's books were and -- and how much reading we did into -- into what we were receiving.

FOSTER: I get a sense of some Greek pride right now, a great nation with a fantastic history and currently all the headlines are about Greece being a drain on Europe.

PAVLOS: Greeks have always been very confident, very strong people. That is -- that is our real, I guess, benefit, is that we are independent thinkers. We will always get up on our feet. We -- we sometimes act the best when we are downtrodden.

So I'm really confident that the future is -- is actually going to be very good.

We are in serious trouble. But if we get rid of this fact and try to put ourselves back on -- online again, it can be incredible what happens in the future -- you know, more hotels, more tourism, but at a higher level than we have been doing to date.

So it -- it's a -- it's a beginning we are looking at. I think it's a long road ahead. But I am very confident that we can get there. And we just have to put in, you know, one step in front of the other and -- and really look to -- to help each other in -- in the right way.


FOSTER: And there's been huge changes in Europe, haven't there, over the recent years?

And just as that interview was playing, President Sarkozy of France has been making a speech or delivering a speech. And he said a very powerful thing. He said it was an error to admit Greece to the euro in 2001. So a profound comment on a profound date for the European Union and Greece.

As European debt seals the global spotlight, Bill Gates is urging world leaders not to forget the poor. We'll hear from him next.


FOSTER: Well, it's bye-bye Brussels, hello Cannes. The G20 in the next big summit on the calendar and it's taking place next week in the rather glamorous resort in the south of France.

For Bill Gates, it's a chance to make a difference in fighting global poverty. The Microsoft -- the Microsoft co-founder is -- is taking his humanitarian campaign to Cannes.

And he told Elise Labott what he hopes world leaders can do.


BILL GATES, MICROSOFT CO-FOUNDER: Well, they have to balance the short-term requirements for the stability of the financial markets along with the requirement that you invest in helping the poorest. You know, the track record worldwide of getting people out of poverty, reducing childhood death, improving nutrition has a pretty amazing track record.

And with the number of innovators in the world being larger today than ever, with countries like China and Brazil able to contribute rather than be recipients, you have to say that you ought to be able to deal with the short-term and continue this trajectory of -- of improving living conditions. And it's taking innovation. It's -- it's driving that forward. It's thinking of the needs of the poorest.

So I -- I'm pretty upbeat. You know, it's easy to think that these short-term issues will overwhelm us. I think there are good solutions to those and we'll -- we'll get back on track of the -- the incredible rate of improvement we've seen in the past.

ELISE LABOTT, CNN CORRESPONDENT: Now you've started this foundation from a place of philanthropy, but it's clear you're very involved in the science of it all and very interested in the development of these technologies. And I'm just seeing the parallels between what you did at Microsoft and what you're doing now.

And you see parallels in terms of developing some kind of technology versus developing seeds and developing new agriculture systems?

I mean does your mind work the same way?

GATES: Sure. I think my Microsoft work prepared me well. I've heard to learn a lot of new things. The delivery challenges in poor countries are quite different. The science is a -- a little different.

But the idea of backing great scientists, figuring out what the needs are, matching those two things up, being patient, you know, sometimes for more than a decade, that's what, you know, made Microsoft work so well. And now here with seeds and vaccines and many other tools, we're trying to make breakthroughs. This time, it's the poor who will get the most benefit.


FOSTER: Bill Gates, of course.

FOSTER: Now severe weather has devastated parts of Italy, from the Northern Alps down to the Mediterranean.

Pedram has got more on this for us from the Weather Center -- Pedram.


We're following a few storm systems across portions of the Mediterranean. And as you said, Italians there are dealing with nearly a half a meter of rainfall in the past 24 hours, with severe storms that rolled through and now another line of storms pushing in over portions of Barcelona, eventually going to work its way out toward, say, Nice in Southern France. Getting very heavy rainfall in the next 24 hours with these isolated thunderstorms. And, again, you take a look at some of these observations. Anywhere from Portugal out toward Spain up through Croatia now reporting the heaviest rains associated with this front. And we're going to expect another, say, five to 10 centimeters or so in the next few hours. So keep that in mind if you have travel plans to Southern Europe.

But out toward the east there, around, say, the eastern areas of -- the western areas and the eastern areas of Turkey and Iran there, on the border, heavy rainfall again, right toward that quake zone. And that's what we're watching very closely because if you get up to the higher elevations, of course, you're talking about snow accumulating. And still finding folks that are alive underneath some of the earthquake damage there in portions of Turkey.

But they picked up some 40 millimeters. And Tehran have actually picked up heavy rainfall for their standards. The highest amount they've seen in all of 2011 and then out toward, say, Bandar Anzali, they've picked up about 200 millimeters of rainfall -- the storm, Max, it's not going anywhere. So we're going to be following this for the next couple of days.

FOSTER: OK. Thank you very much for that, Pedram.


I'm Max Foster in London.

Thank you for watching.




I'm Richard Quest.

This week, we're focusing on transport and the growing need for infrastructure that could help or hinder economies and businesses become more profitable.

We hear from the EU transport commissioner, who says he wants a network, not a patchwork.

We visit Siemens, makers of high speed trains. Making them as fast as they can. and the chief executive of easyJet tells us she's giving high speed rail a run for its money.


QUEST: Let's talk about Europe just and -- because you're a European, you're a pan-European carrier.


QUEST: You compete against other airlines. You compete against high speed rail now (INAUDIBLE)...

MCCALL: Yes, we do.

QUEST: Do you consider high speed rail to be a competitor?

MCCALL: Absolutely. Yes. It's much more expensive than we do, but we absolutely compete with them. We run ad campaigns against them.

QUEST: In Europe, do you see more consolidation coming along?

And if so, are you going to be part of it?

MCCALL: And when you think about the cost headwinds for this industry, you know, we've had unprecedented high fuel for a very sustainable period of time. That's going to cost us 220 pounds more, year over year. Emissions trading schemes for the first time ever. That's going to cost us money. So we've got some really severe headwinds.

In addition to that, we have a Eurozone in crisis. So I think consolidation is going to be inevitable in some way over the next three to five years. EasyJet's entire strategy is based on its organic growth, not on M&A.


QUEST: St Pancras Station in London -- it cost more than a billion euros to upgrade this station, the high speed rail and the Eurostar.

The EU transport commissioner, Siim Kallas, now wants to have a trans- European core transport network that would involve more than 80 ports, 15,000 more kilometers of high speed rail and, supposedly, would help European business become more profitable.


JULIET MANN, CNN CORRESPONDENT: Let's talk about the plans that you've got. You -- you've got a huge new project for infrastructure all around Europe to -- to change the road -- road map.

What -- what's the -- the -- the main new thing we're going to learn there?

SIIM KALLAS, EU COMMISSIONER FOR TRANSPORT: We -- we have designed a regulation which then -- then gives birth to a probably better functioning European transport network.

MANN: You said better functioning.

Where are we going to see improvement?

Are you talking about...


MANN: -- the network getting bigger?

Are you talking about particular stretches of -- of track becoming faster?

KALLAS: We have a patchwork of -- of national projects. We want to create more network. The missing links are the east-west connections, interoperability and less fragmented investments. These are the most important things.

MANN: As you said yourself, there's a lot of talking to be done. And that all takes time. You know, if -- if a government itself wants to do something like this, they get on with it. Look at the French. They want to expand their high speed rail network. They found the funding. They make it happen.

KALLAS: Um-hmm.

MANN: They aren't -- with you getting involved like this, aren't you slowing down the process?

Aren't you already creating more stumbling blocks?

KALLAS: No, I don't think so, because that's a big -- meant big problems. If one member state develops this network, the high speed train, inside this country, it cannot run to another country. Now, this particular example is one of the biggest success stories. You have Brussels-Paris. You have Brussels and Paris- London. You have Brussels- London. A well functioning network. And it is, of course, intergovernmental. It is -- it is a pan-European project.

So we try to facilitate these types of projects.

MANN: So how...


MANN: -- how do you know if your expectations, to -- to be realistic, bearing in mind the -- the economic situation in Europe at the moment?

KALLAS: That's -- that's interesting. You see, the member states mostly, the governments, they have not got so much investment projects, because everybody understands that the investments into transport infrastructure and other infrastructure greatly facilitates growth.

MANN: Talk me through some of the other key pillars, if you like, and -- of the future of transport plans.

KALLAS: We have, in my view, two main -- main problems. One problem is this congestion, which is a very serious problem in Europe. On roads, but though not only roads, also airlines or -- or air space. And second, the dependence of oil.

So if we want to reduce the dependence of oil and reduce the congestion, we must learn some structural changes.

One better alternative is to create a better functioning railway network.

MANN: Are you saying railway is good, roads and air bad?

KALLAS: No, we are not saying so. We -- we simply say, see that if we rely only on aviation and roads, we will be in troubles, because these will be so squeezed and we don't -- don't have enough space to -- to airplanes and -- and cars and trucks.


QUEST: Passengers getting ready to board one of the 27 Eurostar high speed trains that run every day between London, Paris and Brussels. These trains have been in service for some years. And when we come back after the break, a sneak preview of the new Eurostar engines.


QUEST: Welcome back to MARKETPLACE EUROPE. these awesome trains have been the backbone of the Eurostar service. Since 1994, when it began, they've carried more than 100 million passengers under the water.

Now, it's time for new trains. And after a hard-fought contest, Siemens of Germany won the battle.

Juliet Mann has been to the factory to see the new high speed trains.


Come back!

Come back!


MANN (voice-over): Recession, what recession?

They make the hot transport of the future. Siemens Rail Systems, near Dusseldorf, has hit engineering gold -- high speed trains.

DR. ANSGAR BROCKMEYER, CEO, SIEMENS HIGH SPEED & COMMUTER RAIL: The impact of the financial crisis was nearly nil. And there were huge stimulus programs and that helped us through the crisis. It helped us that we didn't have to lay off any personnel here. So we had huge contracts to work on. We still have huge contracts to work on. So the effect of the financial crisis was nearly nil to us.

MANN (on camera): So the big question is what -- what next, when those orders run out?

BROCKMEYER: Yes, what next.

MANN: Will you have a gap on your order book?

BROCKMEYER: Because now the stability money is spent and the governments don't have any more money to spend. So for us, I think we are in a quite good position because we were able to secure huge contracts, long-term contracts. So we have a long-term work load in this factory.

MANN (voice-over): Including this -- and we're the first to see it, soon to be the brand new Eurostar train.

(on camera): Ten years ago, the order books were bare. Then two things happened. The rail operators were privatized and rail systems decided to change, making its very own product all in one place.

In this factory, they're working on rolling stock from the highlands - - Belgium, the Netherlands and Germany. And that's just this week. (voice-over): A standard 200 meter high speed train costs about 35 million euros to build. The bigger layout is the infrastructure -- tracks, bridges, tunnels, costs with the potential to run away like a runaway train.

BROCKMEYER: Every country has its own signal business system. Every country has its own electrification system. And they're not compatible. So up to now, the train has to swallow all these different infrastructure issues. So our high speed train that we see here in the back can run in eight different signal systems and under four different voltage systems.

So that's a huge cost factor in -- in the relevant (INAUDIBLE).

MANN: But that huge cost is not slowing down the Siemens engine.

BROCKMEYER: We don't see that, that we have financing problems in the -- in the rail industry so far. We still see that -- that the banks and the financials regard this as a very secure market. I think the -- the business model for rail is still very, very stable.

MANN: The big assumption is, of course, that we, the prospective passengers, are all on board. The Automobile Association in the U.K. found that cost, not speed, was the most important factor for motorists deciding between making a journey on the roads or high speed rail.

(on camera): A recent study by European rail body, Uniphase (ph), shows that high speed rail is having a bit of a moment. And it's not just here in Germany. France, Spain and Italy have been consistently expanding their high speed rail networks over the last few years.

(voice-over): An industry that for decades seemed doomed for signal failure is showing no signs now of being stopped in its tracks.


QUEST: Well, we've had planes, trains, so it must be time for automobiles, in this case, Europe by Numbers -- the price of petrol.

So, the cheapest petrol, that's in Poland. The most expensive is in Norway.

(on camera): Road, rail and air -- doing business across the continent.

And do keep me in touch with what you're doing. The e-mail address is

As always, Whatever your market in Europe, I hope it's profitable.

I'll see you next week.