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QUEST MEANS BUSINESS
Papandreou Must Explain Referendum To Merkel, Sarkozy; Bond Swap Hold-Up Due To Greek Uncertainty; Emergency Meeting on European Debt Crisis; Interview with Yiannos Papantoniou; Interview with Tim Armstrong; BRICS Bailout?; On the Road in Europe
Aired November 2, 2011 - 15:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, CNN ANCHOR: A cloud over Cannes. Crisis in Europe overshadows the G20 summit.
BECKY ANDERSON, CNN INTERNATIONAL CORRESPONDENT: I'm Becky Anderson in Cannes. This hour, the Greek prime minister is called to account by European leaders.
JIM BOULDEN, CNN BUSINESS CORRESPONDENT: And I'm Jim Boulden in Athens, where debate has begun behind me on a vote of no confidence on Mr. Papandreou.
I'm Nina Dos Santos, in London, in for Richard Quest. This is QUEST MEANS BUSINESS.
Tonight the Greek butterfly has flapped its wings and the world's top 20 economies must deal with the fallout. It is the eve of what is shaping up to be a critical G20. We'll have all the angles of that story covered, as fear of contagion spreads to Italy. And the world's emerging economies may be called in to mop up all of the mess.
Also, tonight the Fed holds rates steady, but warns that risks remain. And the CEO of AOL tells us that content is key.
But first let's go to the top story of this evening. It is over to Becky Anderson in Cannes.
ANDERSON: That's right. Thank you for that. Famously a Mecca for movie moguls tonight morphed into a monetary policymakers' hell. On the eve of what could have been a triumphant G20 summit the only talking point here in Cannes is a country that is not even part of the G20 club.
German Chancellor Angela Merkel and French President Nicolas Sarkozy will be meeting with the Greek prime minister a few minutes from now. And he'll need to come up with some answers. Europe's leaders are furious that his planned referendum could derail their carefully constructed rescue plan.
Now to all intents and purposes, this summit is now already underway a day early. Mr. Sarkozy, as the host, has spent the day meeting with other leaders, such as the IMF chief Christine Lagarde. He also met with European Commission President Jose Manuel Barroso. Having spent so long putting this deal together he's been left dumbstruck. The potential consequences are unforeseeable, he says. And the people most at risk are Greece's most vulnerable. Earlier today he said the time for unity had come.
(BEGIN VIDEO CLIP)
JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: I want to make a very urgent, heartfelt appeal for national and political unity in Greece. The European Union, we have agreed on far-reaching measures to support Greece. But for those measures to be implemented it is critically important to have stability in the country.
Without the agreement of Greece to the programs supported by the European Union, and IMF, the conditions for Greek citizens will become much more painful, particularly, for the most vulnerable.
The consequences will be impossible to foresee. That is why I call on the Greek government and all political leaders of Greece to show that they are ready to work for national unity, national political unity, and for achieving the broad support needed for the implementation of the European Union/IMF program.
(END VIDEO CLIP)
ANDERSON: Well, the Greek foreign minister says that he is convinced that the people will approve the deal. I spoke to him earlier today and asked him specifically what question would his government be putting to the nation. This is what he said.
(BEGIN VIDEO CLIP)
STAVROS LAMBRINIDIS, FOREIGN MINISTER, GREECE: The Greek people will be asked to approve the new program and the new loan agreement. As I mentioned, this is a very positive program for Greece. The debate in Greece has been very difficult as you know, and as you see in pictures for the past year or so. This will be an opportunity for everyone to focus on the important things for Greece. Greeks are fanatic supporters of Europe, and the European perspective of Greece. They are fanatic supporters of the stability of their savings, of their salaries, these are issues that this loan agreement guarantees.
At the same time, as I said, there has been all this doubt, all this lack of reporting of the pain and suffering of the Greek people. I think it is about time that we put all this to rest. We safeguard Europe, safeguard Greece, and move on with the application of all these very tough measures.
(END VIDEO CLIP)
ANDERSON: All right. And that we understand. When will this referendum be? And do you expect that the Greeks will vote yes, or no?
LAMBRINIDIS: I expect, and I believe, that the Greeks will-for the reasons I told you before, will vote yes. I think everyone is getting a little tired of doubting the wisdom of the Greek people, or their commitment to Europe. And the referendum will take place the moment the details of the loan agreement are finalized. I hope very, very soon to be honest.
ANDERSON: When is that? January? December? Next week-when?
LAMBRINIDIS: It is up to us. There are discussions right now on a number of elements of the details of the loan agreement and they can happen very soon if everyone moves fast and with determination.
ANDERSON: OK. Last question to you, sir. Does Greece have a plan B, if indeed, the Greeks vote no? And for example are you printing drachmas now, anywhere in the world, if indeed you were to pull out of the euro, for example?
LAMBRINIDIS: I can give you only one answer, and this is very sincere. The Greeks, in my view, will not vote no. I do not speculate around anything else. And our commitment has been proven up `til now, to apply tough measures, to take the pain, the change the country, and this is a commitment that I think will be demonstrated as well, in this referendum.
ANDERSON: So what do you say to those watching this show now, who will be thinking that this decision is jeopardizing the entire future if the Eurozone. For those who think this is a reckless gamble on the part of the Greek authorities, what do you say?
LAMBRINIDIS: I say we have been discussing, in Europe, for the past year and a half the future of the Eurozone. And entirely respective of the referendum that was just announced, that future has been placed in doubt, by markets or some in the markets, for a long while. In fact, although Greece is the center of the storm, it is well known that Greece is not the center of the problem of the debt crisis in Europe today. We are changing everything that we must and we have the obligation to our partners to do.
But everyone realizes that there are attacks on other European countries, and on their debts; that there is a questioning of the capacity of Europe to defend itself. We have watched this move (ph), as I said at the beginning, many times. And Europe and Greece are dedicated to safeguarding a very strong currency and a very strong union.
(END VIDEO CLIP)
ANDERSON: The Greek foreign minister speaking to me just some hours ago. Two questions remain unanswered tonight, Nina. When that vote will be and what the question will be that is put to the Greeks. Will it be a referendum on the European debt, or would it be a referendum on staying in the euro. Two unanswered questions this evening. We know that the Greek prime minister, George Papandreou, is as we speak making his way towards the conference center, some miles behind me here in Cannes, where he will be grilled by those who are amassing this evening to ask him some, very, very, very important questions, Nina.
DOS SANTOS: Becky Anderson, as always, staying there. Keeping us up to date with what is going on.
Let's tell our viewers exactly about this referendum, though. Because however confident the Greek government is that this referendum is a risk-however confident it is that this referendum will to though, it is a risk it seems that no one is happy to take. In fact, it is already slowing up Europe's efforts to try and clean up the entire debt crisis. Take for instance, German banks. Not they are, at the moment, holding off when it comes to a bond swap. This deal was supposed to ease the debt burden that Greece has; writing down about 50 percent its debt.
But the head of the German Banking Association says at the moment, given the kind of uncertainties we have seen, with regards to that referendum, it, quote, "makes no sense to go ahead at the moment." The German banks still saying that they are standing by the deal; a certain degree of a lack of clarity on that for the moment.
Changing situation as we speak, but the likelihood is we will have no progress until the result of that referendum is known, as Becky was just saying. Indeed, what the exact question that they will be putting to the Greek people is, and when they will be doing so.
Let's move on and talk about the Dutch parliament because it is not so confident in this particular deal. The opposition Labour Party says that the referendum is actually, quote, "a deal breaker" here. Now, the Dutch parliament is still planning to vote on the Greek deal. The Dutch government needs the Labour Party's support to actually pass that deal.
And markets also showing their signs of disapproval, saying the EU bailout fund is damaged as a result of all of this. It would have been-it was actually going to be issuing another sale of bonds to beef up the EFSF; about $4 billion worth of bonds, particularly as you can see, for Ireland. One bank has been telling CNN, quote, "why bother issuing bonds right now when the markets are so volatile." And that just gives you an idea of how it really is the dog wagging its own tail.
Now, the Greek news has investors weeping to their terminals yesterday. Things are, of course, looking a little bit better today. Let's have a look at how the Big Board is faring over on Wall Street. The Dow Jones industrial average, as you can see, heading quite a bit higher this session, back towards that crucial 12,000 point barrier.
Now a couple of encouraging sets of jobs numbers are helping this particular market to bounce back from a sell off on Tuesday. Also, to bring it back from the kind of concerns here in the Eurozone that have been affecting it of late. The rally has faded a little bit, since the Fed actually came out its initial statement and we'll have a little bit more on that later on, but they effectively downgraded their growth forecast and that has put a little bit of a damper on the market. But as you can see 11,843, and rising, for the Dow Jones industrials.
Well, here in Europe we have had a late charge, meaning that it was quite a strong finish for the big three at the end of the day. But it really has been a volatile few days for all of these markets. In particular, the DAX seeing gains of about 2.25 percent, Paris CAC currant, and also the FTSE 100 all finishing up the day to the tune of 1 percent. But we must stress these are markets that just hours before finishing, were also flirting with negative territory. And this really just goes to show the volatility, as of course, Greece is the word, and it hangs in the balance, Becky.
ANDERSON: Yes, and these markets hate uncertainty. You and I both know that. And they have got a hell of a lot of uncertainty at the moment. And as a referendum threatens to overturn that Greek rescue plan, agreed only last week, German Chancellor Angela Merkel is pushing for answers. She is here in Cannes. She says European leaders will seek clarity tonight, when they meet with the prime minister of Greece ahead of the main G20 summit, which kicks off here in Cannes on Thursday.
Frederik Pleitgen now joins us from Berlin.
And what are you hearing from Merkel's people, Fred?
FREDRICK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: I'm hearing basically the same thing that you just said and that word "clarity", that is one that is being used very often here in Berlin these days, and of course, in these hours. Some of it you hear both from the government as well as the opposition parties, here in Berlin, is that they want clarity from the Greeks as fast as possible.
And one of the things that many people in the political sphere here are talking about is they want this referendum-which no one believes is actually not going to go forward anymore. They want this referendum to happen as fast as possible to get that clarity, to know whether or not this deal is actually going to get through. But one of the things that it has already done, Becky, and this is something that is not very good for Chancellor Angela Merkel, it has made the political situation here a lot more messy than it was before.
You will recall that before the deal was struck, at that summit in Brussels, last week, there were a lot of dissenters, within the governing ranks here in Berlin. There were a lot of dissenters within Angela Merkel's Christian Democratic Union, as well as even more dissenters in the Liberal Democratic Party, which governing together with Angela Merkel.
And all those people who were quieted down last week after those agreements were reached in Brussels, are now starting to speak up again. You have people in some parties who are saying the deal should be off the table, immediately. You have some who are saying that all this has to go through very quickly at this point in time. There are a lot of people who are calling the things that have been decided on into question, once again, after the idea of this referendum was put forward. And that is one of the reasons why the German government is so forceful in saying they fully expect all of the things that were decided there, the debt write-offs, the recapitalization of the banks, the restructuring of the EFSF, to go through as planned. And they want to put in place a time table as fast as possible, Becky.
ANDERSON: All right, Fred, thank you for that.
There is an $8 billion question outstanding tonight. And that is this: Will the Europeans withhold this next traunch of money; $8 billion to the Greeks? They need it to pay their bills. Will they withhold that money until this crisis here is sorted out? That remains to be seen. We'll try and get that question answered for you as we cover the Cannes G20 summit here in France.
We are going to take a very, very short break, for you. Back after this.
DOS SANTOS: From London and the G20 in Cannes, welcome back to QUEST MEANS BUSINESS.
The EFSF was meant to be a life ring to prevent more European states from slipping into the debt crisis engulfing the region. And with that now in jeopardy, well it seems Italy is getting forced closer and closer into that particular whirlpool. Tonight, amid spiking Italian bond yields, and urgent calls from the country's president to speed up fiscal reforms, Silvio Berlusconi is holding crisis talks with his cabinet, yet again. As confidence nosedives, Italy is edging closer to being priced out of the world's bond market. Right now the yield on the Italian 10-year government note is trading at about 6.1 percent. That is down slightly from yesterday, but it is still considered too high to be sustainable in the long term.
CNN's Matthew Chance joins us now on the line from Rome.
Matthew, this is a story you have been covering quite a bit lately, and especially in a lot of depth today. Now, Berlusconi was effectively backed into a corner by Merkel and Sarkozy at the EU summit, repeatedly. He has even been backed into a corner by his own president.
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, there have been some extraordinary statements over the course of the day. One in particular from the country's president, Giorgio Napolitano, saying that he is speaking to members of the opposition, in the country, to try and assess what their appetites might be to impose the kind of austerity cuts that Italy needs, to salvage its economy.
If a new government has to be formed that comes amid, you know, further calls by the opposition that call for Silvio Berlusconi to step down, it is seen in the eyes of many people, in the country as having lost his credibility when it comes to fixing the country's economy. There has also been a statement issued by the country's main business and banking federation, calling on Prime Minister Berlusconi to act now, to push through the austerity measures that are needed for the economy, or to step aside and make way for somebody who will do that. So, Silvio Berlusconi, particularly after this Greek issue, which is have obviously sent the (UNINTELLIGIBLE) markets into turmoil, facing a lot of pressure, indeed, Nina.
DOS SANTOS: OK, CNN's Matthew Chance, there, joining us there, on the line, from Rome. Many thanks.
ANDERSON: Well, not even the Greeks saw this one coming. And it is not making them feel much better, either. Jim Boulden is in Athens for us tonight-Jim.
JIM BOULDEN, CNN BUSINESS CORRESPONDENT: Yes, Becky, I think there is as much shock here as there is in Cannes. This decision by Mr. Papandreou to hold a referendum, maybe December, maybe January, we talked to a number of people today and I want you to hear some of these voices. First, from Milena Apostolaki, she is the member of parliament who pulled her support from Mr. Papandreou, after this announcement, which gives him a razor-thin majority in the parliament behind me. And she, earlier today, gave us her reasons for saying why this referendum is such a bad idea. Have a listen.
(BEGIN VIDEO CLIP)
MILENA APOSTOLAKI, GREEK LAWMAKER: The call for a referendum is an erroneous political decision. It jeopardizes the efforts and painful sacrifices that are made by the Greek people. It puts a high risk on the European perspective of the country and also divides the nation. That is why I believe in this, that in these extremely difficult days we only have to contain the crisis, and to make all the sacrifices of the Greek people worthwhile.
(END VIDEO CLIP)
BOULDEN: Now it wasn't just lawmakers who had this position. It was hard to find anyone on the streets of Athens today who not only supported the referendum, but supported this whole idea, of Mr. Papandreou, of asking the people what they think about the bailout. Here is a sampling about what some people told us.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Confused. Totally confused. We try to gather, to discuss, to talk about what happened with Papandreou, we cannot answer you. We cannot answer.
UNIDENTIFIED MALE: I think it is a new way to commit suicide, for my country, for the European citizens, and for Europe as a whole.
UNIDENTIFIED FEMALE: I think we don't have a choice, and we have to follow what Europe says.
(END VIDEO CLIP)
BOULDEN: Later in the show we'll have my interview with Yannis Papantoniou He is a former finance minister here. And he'll tell us why he thinks that Greece has been embarrassed by this referendum call, Becky.
ANDERSON: All right, Jim. Thank you for that.
I'm Becky Anderson here, in Cannes. Jim, of course, is in Athens. As he says, he'll be speaking to the former Greek finance minister. Is this referendum an embarrassment to Greece, as a nation?
I'll be back later in the show with more as G20 preparations get underway.
DOS SANTOS: We certainly look forward to it, Becky.
Coming up next in the show, the crisis in Europe is looming larger and it would be nice if the Federal Reserve responds with its view on the economy. Stay tuned.
DOS SANTOS: The situation is improving, but the job market remains weak. And that is the assessment given by the U.S. Federal Reserve on the American economy, the world's largest economy.
The central bank wrapped up its policy meeting on Wednesday with no surprises. As expected the stimulus program remains unchanged, with interest rates on hold through the year 2013. Maggie Lake is in New York and she joins us now, live, with all of the details on this.
Maggie, it wasn't really fireworks, was it? But then, again, what more can they say?
MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: That's right. There is not much more they can say. In particular, Nina, you have the sense that they are being very careful about what they wanted to say, today.
You know, at first blush, this looked like a little bit more of an upbeat statement coming out of the Fed. They pointed to the fact-what we have seen in the data-that economic activity seemed to be doing a big better from the last meeting. Economic growth strengthened somewhat, household spending increased, and longer-term inflation remained stable. Those were also slightly more positive-but, and this is a big but-they lowered their formal targets for growth, raised the formal targets for unemployment, and made it clear in their language that they are very worried. Have a listen.
(BEGIN VIDEO CLIP)
BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE BANK: In short, while we still expect that economic activity and labor market conditions will improve gradually over time, the pace of progress is likely to be frustratingly slow. Moreover, there are significant downside risks to the economic outlook. Most notably, concerns about European fiscal and banking issues have contributed to strains in global financial markets, which have likely had adverse affects on confidence and growth. European leaders have recently announced a number of steps to address those issues. We will continue to monitor European developments closely.
(END VIDEO CLIP)
LAKE: And the fact that the Fed is watching and stands ready seems to be enough; the market rally on track. But no dissent this time against people who are against stimulus, only one dissenting. He thought they needed more stimulus. That gives you and indication that the Fed is worried, Nina.
DOS SANTOS: Yes, that is an interesting footnote to that. Maggie Lake, as always, many thanks from New York.
Well, U.S. stocks reacted well with the S&P 500 rising more than 1 percent immediately after that statement was made. For more on the market reaction to this decision I'm joined now by financial analyst, Todd Benjamin. He is a long-time friend to CNN.
TODD BENJAMIN, FINANCIAL ANALYST: Good to see you, Nina.
DOS SANTOS: Good to see you, too. And thanks for coming in. Now, as we were just saying, with Maggie, the Fed is between a rock and a hard place. And it's tool box is increasingly depleted. Let's start out by talking about this grave forecast. It is not particularly positive, is it, about the cut?
BENJAMIN: Not at all. In fact, in mid-June they were saying that the economy grew by 3.5 percent next year. Now they are saying it could be as low as 2.5 percent. And private forecasters are even lower than, all right?
In terms of unemployment, again, in June they were thinking that by the end of next year, unemployment would be 8.4 percent. Of course, currently, it is above 9 percent. Now they are saying it could be as high as 8.7 percent.
So, as Bernanke, we heard him say in that statement, you know, he thinks things are getting better, but it is going to be painfully slow. I think the Fed is just acknowledging reality.
DOS SANTOS: And, as he speaks, the situation in the Eurozone, one of the world's biggest economic partners for the United States is getting worse by the day. To a certain extent are these predictions already obsolete?
BENJAMIN: No, I don't think the predictions are obsolete. I just think it underscores, again, the reality that we are in right now. And I think there is tremendous uncertainty in terms of what is going to happen in Europe. Because not only the situation in Greece but Italy and some of the other peripheries.
And secondly, at the same time, it is-you know, because they want banks to have more capital aside. That means there is less lending. So I think the Fed is in a very difficult position, because even though they want to get the economy moving, you know, they've held rates practically at zero for an extended period of time. They are going to continue to do so, we know that. But the problem isn't the level of rates. The problem is access to credit.
And if you can't get credit to buy a house, if you can't get credit to buy other things, then that is not going to help the economy. So what the Fed is saying, and Bernanke has said is, please, we need help from the fiscal side. Mr. Obama, he's made some proposals, and he is also telling Congress, come on, give us some help. Unless you get it on the fiscal side-and I mean a heavy fiscal dose, nothing is going to matter. The Fed's hands, in a sense, are tied.
DOS SANTOS: As he just said, Todd, you know, if it is consumer who can't get credit, companies can't get credit, Greece can't even get credit. So that really underscores the issue.
DOS SANTOS: Todd Benjamin, as always many thanks for bringing us up to date. And also giving us analysis on what the Fed has been saying in the last hour or so.
Now, is rare that Ben Bernanke plays second fiddle to the world's business news, but all eyes are focused on Cannes this evening. And that is where we are going to be going next, after this break. George Papandreou is about to face the music from the rest of Europe's leaders. We'll be live in the South of France in just a moment's time.
NINA DOS SANTOS, CNN CORRESPONDENT: Hello and welcome back.
We'll have more QUEST MEANS BUSINESS in just a moment's time.
But first, these are your new headlines.
An emergency meeting between European leaders and the Greek prime minister is scheduled to start right now in Cannes. This marks the unofficial launch of the G20 summit. The talks were triggered by George Papandreou's shocked decision to hold a public vote on Europe's massive bailout. The French and German leaders are urging Greece to get over itself and to accept the deal.
Also this hour, a meeting between Silvio Berlusconi and his ministers. The focus -- how to keep Italy from slipping into its own full blown financial crisis. Opposition lawmakers are urging the Italian prime minister to step aside and to make way for a national unity government. As of mid-October, Italy was more than $2.5 trillion in debt.
The Russian known as "The Merchant of Death" has been convicted of conspiring to kill Americans and three other counts. Now, Viktor Bout could face life in prison. Jurors in New York told -- took just two days to reach the guilty verdict. Bout's lawyers said that he will be appealing.
The controversial founder of WikiLeaks, Julian Assange, is deciding his next move after a British court refused to block his extradition to Sweden. Authorities there want to question him about allegations of sexual misconduct, which he steadfastly denies.
Our coverage of the G20 continues on QUEST MEANS BUSINESS.
I'm Nina dos Santos at CNN London.
BECKY ANDERSON, HOST: And I'm Becky Anderson in Cannes in France.
And before the summit officially begins. What may be the most important meeting of the whole week is already underway. Greek Prime Minister George Papandreou has been hauled in front of Angela Merkel, Nicolas Sarkozy and other European leaders as they try to sift through the effects of his decision to call a referendum on Europe's debt deal.
Ali Velshi joins me now at summit headquarters, where that meeting is taking place -- Ali, what do we know at this point?
ALI VELSHI, CNN ANCHOR: Moments ago, one of my colleagues saw French President Sarkozy in the area. He was posing for photographs. He was shaking some hands.
He is going into that meeting and he seemed to look quite pleasant at the time. But we think that there are going to be some harsh words in that meeting, with German Chancellor Angela Merkel and French President Sarkozy, really hitting hard on -- on Papandreou, wondering what is going on, what's the reasoning for this?
Is this a political ploy?
Is this a reasonable view that he wants the Greek people to chime in on the hardships that they may have to face under this European deal?
But there are some real serious problems. The IMF has suggested that if this referendum goes forward, the next installment of money that's supposed to go to Greece will not go until the referendum is done. This could unwind the entire deal.
So right now in Athens, there are struggles about whether or not this is the right thing to do or whether it actually imperils this deal.
There's also no understanding, Becky, that if this referendum were to go forward, which side would win. There legitimate concerns that Greece has faced too much austerity and it's actually pushing their economy backward at this point.
So this is a major, major problem. If this referendum delays things by a month or six weeks, this could wreak havoc on international markets. So a lot of pressure right now, as we speak, in this meeting with Angela Merkel and -- and Sarkozy.
You know that Papandreou is getting an earful right now.
ANDERSON: Yes. And the questions, one assumes, they will be asking is -- are these.
When is this referendum?
When are you planning to have it?
What are you planning to ask the Greek people?
ANDERSON: And the real outstanding question, which is an $8 billion question at this point, is whether Sarkozy, Merkel and the rest of those in the room are prepared to pony up with the money, the $8 billion, which would be the next tranche of money...
ANDERSON: -- that the Greeks need now, today, in order to pay their bills. We don't know the answer to any of those questions yet, do we?
VELSHI: there are a couple -- we -- we don't. And what's happened is, because of the frustration around what Papandreou did, there's been a lot of tough talk. We've heard it from various quarters, not officially, but we've heard stuff, like the deal is off the table, the Greeks can go it alone, the Greeks might find themselves outside the EU.
One thing that we have again heard, and not confirmed, is that the question that will be put to the Greek people is not whether they want to remain part of the European Union or the Eurozone, but specifically a vote on this bailout packages and the things that the Greeks have to do to satisfy its -- its conditions.
The question -- the larger question is that if the Greeks reject this, do they then get faced with the frustration of their -- their colleagues in the Eurozone who say, you know what, maybe you shouldn't be part of this organization, maybe the Greeks have to give up the euro and go back to the drachma.
What impact will that have?
How will that impact lending in -- in Europe?
And the third issue -- and this is probably the most serious one for our viewers right now -- is what impact will a likely default, which is what's going to happen to Greece if they -- if they reject a deal -- what impact will that have on lending globally?
Is this a Lehman Brothers writ large?
Will international global lending start to freeze up and have an effect everywhere in the world, as people try and get mortgages or car loans or small business loans?
To the impact of this is going to be felt around the world. You can imagine, Becky, you and I were both here to cover the G20. The stuff that was on the G20 agenda is almost becoming a sideshow to everything that's going on right now with Greece.
ANDERSON: Yes, a disorderly default is the worst of everybody's options at this point, but it is a possibility...
ANDERSON: -- as we await to get the results of...
VELSHI: A possibility.
ANDERSON: -- this meeting.
Ali is at the conference center. As soon as we get a result from that meeting, we, of course, will bring it to you, viewers.
ANDERSON: Ali Velshi, thank you, for the time being -- Nina, back to you.
DOS SANTOS: Becky, as always, and Ali, many thanks.
It's a place in Europe that has never looked more precarious. And, indeed, it's own place on the world stage hasn't looked more precarious, either, until recently.
Now analysts are already thinking up scenarios whereby Greece could actually leave the euro altogether, and, as Ali and Becky were just discussing, go back to the drachma.
Let's return to Jim Boulden.
He's at the epicenter of the crisis in Athens -- Jim, you've had your ear to the ground for much of today.
What have people been saying?
JIM BOULDEN, CNN CORRESPONDENT: Well, earlier today, I spoke to the former finance minister of Greece, Yiannos Papantoniou. He's the man who actually took Greece into the euro and took away the drachma.
Now, what he said to me was, you can never say never about Greece finding a way, or the European Union finding a way, if that comes to the point of getting Greece out.
But we're a long way from that. We have the confidence vote that will happen behind me in a few days on the prime minister. Then we have this idea of the referendum and all that Becky and Ali were talking about, what will be in the referendum?
But I put it the former finance minister, what -- first of all, what he thought about the fact that Mr. Papandreou had been summoned to the G20 summit.
YIANNOS PAPANTONIOU, FORMER GREEK FINANCE MINISTER: Exactly. And Mrs. Merkel and Mr. Sarkozy are not very happy about it, particularly Mr. Sarkozy, who is now heading the G20 and who wants to make a big show at Cannes...
PAPANTONIOU: -- vis-a-vis Mr. Obama and the Chinese. He wants a resolve in the euro debt crisis.
PAPANTONIOU: But now, he has to apologize to them for having all these things in the air, because the agreement of October 26th is in the air until the Greek people give an answer as to whether the Greek chapter of the agreement proceeds.
So they have -- we have put our partners and friends in an extremely embarrassing situation to no purpose, because if the government feels that it cannot -- it cannot govern, then it would call early elections, as Mr. Juan Zapatero has done.
BOULDEN: You said no purpose, but then why did Mr. Papandreou call for a referendum?
PAPANTONIOU: Because he didn't -- doesn't want to leave office and through -- through early elections, because PASOK is very much behind Negov (INAUDIBLE) in the polls.
PAPANTONIOU: So he prefers this kind of re-legitimization then would the -- rather than the conventional one, which is early elections.
I would have been very much in favor of early elections, because I believe that the people of Greece must have a say over their future. But not through such an unfortunate decision as a referendum is likely to prove...
BOULDEN: Is there a chance...
PAPANTONIOU: -- to be.
BOULDEN: -- that he will change his mind and there will not be a referendum?
PAPANTONIOU: He may not change his mind. I find this rather unlikely...
PAPANTONIOU: -- because he has committed himself very strongly to this idea. It's his -- his baby, so to speak. But I don't think that he will find enough votes in the parliament to proceed with this.
So I would find it as very, very unlikely that this decision is actually and effectively implemented. I do hope that it is not implemented.
But besides what I hope, this is my objective prediction and the prediction of most observers here in Athens today.
BOULDEN: As the man who was finance minister, who took Greece into the euro...
BOULDEN: -- is it even possible that Greece will have to leave the euro?
Is it even remotely possible?
PAPANTONIOU: Look, legally, it is impossible...
BOULDEN: It is?
PAPANTONIOU: -- you know, because there's no clause in the treaty allowing this. But, of course, in very dire conditions, if there is a huge financial crisis affecting Greece and perhaps the Eurozone, nobody could exclude any such thing happening. The point is not to arrive at this stage...
PAPANTONIOU: -- on the way to a -- not to arrive at this stage, it's to have, as soon as possible, a strong and effective government...
BOULDEN: If you look out on this beautiful city, the sun is setting...
BOULDEN: -- over the Acropolis.
Could you imagine that Athens and Greece would be in this situation today?
PAPANTONIOU: No, I would never imagine that. After the entry of the euro, as you know, in the year 2000, that Greece entered we had very strong growth -- 4 percent growth, very low inflation, very low interest rates. And then the mistake was made by that -- no, I would say the Greek society and also the Spanish society and the Portuguese society and all those southern economy societies, that life would be easy within the euro, although this was not actually the case.
And, unfortunately, irresponsible governments came into power after 2004, which cultivated this sense in the people and we arrived at this very dire state we find ourselves today.
So this -- the post-euro era was essentially a lost decade for Greece. And now, in the course of the next few months or one or two years, we have to recover the lost ground.
(END VIDEO TAPE)
BOULDEN: Now, Nina, the -- the vote of confidence debate has been going on for about three hours in the parliament behind me. It will continue on Thursday and on Friday. Mr. Papandreou will have to come back from Cannes to deal with that, although it is not expected on his -- the confidence on his government, until midnight on Friday. So a number of things could happen between now and then, of course.
DOS SANTOS: OK. Jim Boulden there joining us from Athens.
Thanks ever so much for that.
Next, the consummation of AOL -- the company's CEO speaks to us about how the switch from connections to content (INAUDIBLE) the stock has paid off.
DOS SANTOS: We all remember it pretty well, don't we, the shrill sound of a dialup Internet?
Now, back in the day when this was our only option of getting online, AOL was at the top of its game.
Today, it's not just the logo that's changed. AOL has actually turned its focus from Internet access to being an ad-funded media company.
It lost about $2.6 million in the third quarter of the year due to dwindling subscriptions and various restructuring charges.
All the same, the new ad-based direction, it seems, does seem it -- it does seem to be making some headway for this company.
AOL's global advertising revenues actually grew by 8 percent the three months up until September, to a total of about $320 million.
I got a chance to speak to the company's CEO and chairman, Tim Armstrong, earlier. And he told me that the latest numbers just go to show that AOL is well on its way to being profitable.
TIM ARMSTRONG, CHAIRMAN AND CEO, AOL: Well, there's two things to notice with our earnings. One is we, a year ago, had a 27 percent decrease in earnings, which is now 6 percent. So we're really making progress to gross revenue growth again at AOL, which a lot of people have not expected, but I think we will achieve.
The second thing is underneath those results, we have moderated the decline of AOL's historic business and really improved the advertising business. And the advertising business has been improved organically and also through the acquisitions we've gotten in. We're hopeful that we're going to continue the trend that you see in today's earnings.
DOS SANTOS: Now, under your stewardship, AOL has become a completely different company than the one that people like I remember about 10 years ago, essentially a dialup business.
Is advertising revenue the future for your business?
Is it also sustainable from here on?
ARMSTRONG: Yes, I think when you look at the advertising business model in the future for Internet and mobile and connected TVs, it offers a really robust business opportunity. And the reason we've repositioned the company out of dial-up access into the content space is we believe content is going to be the differentiator for the Web as Silicon Valley in the U.S. and across the globe starts to produce more platforms that get commoditized, content and content services are things that differentiate it. Advertise one of -- or advertisers want to stay with users and consumers as they are on their -- our content properties. And we see that as a very big business opportunity in the future.
DOS SANTOS: And you have been spending an awful lot of money on content, Huffington Post, TechCrunch. You've also got Patch, though there's a certain degree of skepticism about the future of Patch, if you speak to many analysts.
This is an expensive strategy.
ARMSTRONG: Well, our strategy, actually, is built on, really, where the Internet is going. And I think the expense within the strategy has to be balanced with the revenue opportunities in the strategy. And I think if you look at our results today, we said up front we were going to focus on content and focus on the consumer experience and over time continue to really focus in on the monetization opportunities and business opportunities. And you're seeing that in our results.
So I think, you know, people look at content as expensive. We look at it as an investment in a future audience, a future business opportunity and a lot of -- of potential partnerships with the world's best brands.
DOS SANTOS: OK, so how much money are you going to be investing on this investment going forward?
And have you eyed any acquisitions?
ARMSTRONG: So we've -- you know, we told Wall Street today that we're going to be consistent on our investment strategy. We've talked about it in the past, which is we've done a number of acquisitions. We don't have any big acquisitions in our future right now. So I think our current, you know, run rate for how we're running the content business is going to be remaining similar.
The second piece of it, as we look forward on the deal front, you know, we're very focused on organic areas of our business. And I think we'll do more business development deals. Again, nothing on the radar screen right now for large acquisitions. And we're in a turnaround, so we're going to continue to be opportunistic. But, really, our focus is organic.
DOS SANTOS: OK, so what about divestitures?
Could you be selling something?
Say, for instance, what is the future of that dial-up business that people like me recognize AOL for as a brand?
ARMSTRONG: So, I -- we just separated it. I think that some of the international people in your audience will recognize AOL from a dial-up business. People in the United States are really starting to recognize AOL as a media company and we will export that internationally over time.
In terms of divestitures, we don't have any major plans right now on the divestiture front. We took $500 million of cost out of the business. We divested a bunch of assets over the last two years. We're really focused on execution, execution, execution at this point, as a company.
(END VIDEO TAPE)
DOS SANTOS: Tim Armstrong there, the CEO and chairman of AOL, speaking to me earlier.
Now, Europe is in turmoil, the U.S. is in the doldrums, so will the world's emerging markets ride to the rescue in Cannes?
We'll see what the BRICS are bringing to the table, next.
DOS SANTOS: Hello.
Welcome back, live, QUEST MEANS BUSINESS, which is coming to you from London and Cannes today.
And we're also going to be bringing you some video now, because what we've heard is that the Greek prime minister, George Papandreou, was actually just recently in Cannes at the G20 summit, walked into his crunch meeting with European counterparts.
Do remember that this crucial summit, the G20, has very much, to a certain extent, been overshadowed by the Greek prime minister's decision to hold a referendum on the latest plan to try and save Greece and other Eurozone nations.
Let's go over to Becky.
She's standing by in Cannes itself -- Becky.
ANDERSON: Yes, that's right.
Last week, French President Nicolas Sarkozy, called China's president, Hu Jintao, about investing some of its vast currency reserves in the European bloc. Well, if Europe was pinning all its hopes on a bailout from the BRICS -- you remember who those are, of course, Brazil, Russia, India and China -- it better start thinking of a backup plan.
Brazil says it's Europe's responsibility to get its house in order.
Shasta Darlington joining us now for more on that from CNN Sao Paulo - - Shasta.
SHASTA DARLINGTON, CNN CORRESPONDENT: That's right, Becky.
The European leaders were very clear about the fact that they would like Brazil to pitch in, perhaps buy some European bonds.
But it was the Brazilian finance minister himself, Guido Mantega, who was just as clear, saying that Brazil did not have any plans to buy European debt and that Europe should (AUDIO GAP).
He said that Brazil could pitch in with funds via the IMF. And remember, it was just a few years ago that Brazil itself was receiving funds from the IMF.
And this is just another sign of -- of how its role on the global stage is changing. And it's something we may hear more about during the meeting, the G20 meeting. And that's because we've got Mantega there. We've got the Brazilian president, Dilma Rousseff, there. And it was just last year that Brazil overtook Italy as the world's seventh biggest economy, giving it even more clout.
Of course, that does mean that the global financial crisis hasn't hit Brazil, it has. And that will mean that Rousseff and her economic team are struggling to keep growth booming here. We're not talking about the 7.5 percent that we saw last year.
But they are hoping to keep 3, 4 percent growth without kicking up inflation, which doesn't give them a whole lot of time to deal with Europe's problems -- Becky.
ANDERSON: Yes. All right. Thank you for that, the view from Sao Paulo.
We are all over the world for you tonight, watching what is an incredibly important story. G20 leaders gathered here in Cannes in the south of France. What they were hoping to do was set about some sort of action plan for promoting sustainable growth around the world and job creation.
What they're left with is an absolute emergency. And George Papandreou, the prime minister of Greece, is being hauled into a meeting tonight with the host, Nicolas Sarkozy, and his counterpart, the German chancellor, Angela Merkel.
Will the European debt deal that was signed off on just a while ago still be in play at the end of tonight?
This is the unofficial start of the G20. More from us as we move, of course, through the week. CTW, CONNECT THE WORLD, is back with you in an hour from now.
I'm Becky Anderson in Cannes -- Nina, back to you.
DOS SANTOS: OK, Becky.
Many thanks for that.
And, of course, Becky will be keeping us up to date with what's going on in Cannes as those leaders trickle in and that unofficial start for the G20 gets underway.
Of course, one of the big topics on the agenda is how to actually stimulate growth once we finally solve this crisis and create jobs. It's, of course, a worrying time for young people right across Europe, with their growing aging population to support a shrinking employment market, the future is looking ever more bleak by the day.
CNN's Diana Magnay has been taking to the road to hear what young people have had to say. And today, she's in the heart of Italy's financial center, which is Milan -- it's good to see you, Diana.
I lived in Milan many years myself. I distinctly remember it being the one place where there are more jobs to be had for young people in Italy.
But what's the feeling like on the ground there?
DIANA MAGNAY, CNN CORRESPONDENT: Well, they're still very worried, Nina. And we gathered a bunch of people together by social media but also just by pulling people into the place where we were holding this town hall.
And, in fact, two guys I've spoke to said, we just happened to be talking about the Eurozone crisis when you pitched up. So it is obviously a huge discussion point here -- jobs the number one priority, the number one concern for young people here in Italy, where youth unemployment is at 28 percent, well above the Eurozone average of 20 percent.
People here saying that they don't expect to find jobs in Italy, that they're considering having to go and find jobs elsewhere, in other countries. A very, very bleak picture and a very stark contrast, of course, to the bunch of students I spoke to in Germany, who felt, yesterday, that given their qualifications, they would be well placed, given this aging demographic and the shrinking workforce, to get jobs. They don't feel that here in Italy. They don't feel that the government is giving money to sponsor job programs. In fact, one young person said to me, they're putting money into the banks and into their own personal pockets rather than into the youth, which is where it's needed.
Let's just take a listen to a couple of things that they had to say.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: You know, other countries, like Germany, are stronger than us. And they look at us and smile. So they feel safe about if ever -- if everyone falls and Germany survives, then he has to fall through.
FABIO GUZZI: There is no money in the -- in Italy. There is no opportunity or just a little opportunity. It's -- it's difficult.
(END VIDEO CLIP)
MAGNAY: There's obviously a big sense of blame here against the government, who they feel is -- is -- is really giving Italy a bad name internationally and not doing enough to fix the problems back home. And one girl said to me, "If you'll only acknowledge (AUDIO GAP)."
DOS SANTOS: OK. We seem to have lost Diana Magnay.
Apologies for that Internet connection issue.
But, as you could see, she was just showing us that right across the Eurozone and, indeed, the European Union, the issue of not just unemployment, but youth unemployment, remains front and center at the moment.
Let's go back over to Cannes, which is where, of course, the official start of the G20 seems to be getting underway. And I believe we can show you some live pictures of the Chinese president, Hu Jintao, there with the French president, Nicolas Sarkozy, obviously. You'll remember that Sarkozy is the host of the G20. They're that great be heading over the big baton straight after this particular summit to the next G20 host, which will be Mexico.
And plenty to talk about on the agenda. Obviously, the Eurozone financial crisis. Nicolas Sarkozy has been one of two self-appointed saviors for the Eurozone, rustling up a plan at the eleventh hour in Brussels to try and stave off a disorderly default for Greece. But that plan seems to have had a spoke put in the works just recently, after George Papandreou, the Greek prime minister, said that he's going to be asking his country for a referendum about it.
So those are the things that are on the agenda. Also, whether China could stump up cash to help Europe with its problems (INAUDIBLE).
And that's it for this edition of QUEST MEANS BUSINESS. I'm Nina dos Santos at CNN London.
But the news continues on CNN.