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QUEST MEANS BUSINESS
Interview with Bob Parker; Bond Market Pressure; Greece and Risk; Youth Unemployment; Cuts and Bruises; Interview with Giuseppe Ragusa; interview with Derek Scott; "Occupy" Protesters Return; Fake Kiss Advert; Interview with Alessandro Benetton; Business in Cuba
Aired November 16, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN INTERNATIONAL HOST: Caught between a rock and a hard place -- the role of the ECB is called into question.
Young, free and out of work -- a million Britons begin their working lives unable to find a job.
And a kiss of controversy -- we'll ask Benetton's CEO if its latest campaign goes too far.
I'm Max Foster.
This is QUEST MEANS BUSINESS.
Hello to you.
The U.S. wants a farewell, Ireland the ultimate backstop and Germany says it wants no such thing. The European Central Bank has steadfastly refused to buy sovereign debt directly from governments, saying it would lose credibility and independence. Now, there are calls for the ECB to finance states directly.
The head of the Bank of England says the ECB has his sympathy.
(BEGIN VIDEO CLIP)
MERVYN KING, GOVERNOR, BANK OF ENGLAND: This phrase, lender of last resort, has been bandied around by people who, it seems to me, have no idea what lender of last resort actually means.
(END VIDEO CLIP)
FOSTER: Well, it might be the only show left in town, but even if the European Central Bank can save the day, Europe can't decide if it should. Britain's top central banker is weighing in from outside the Eurozone. But the economic situation in his part of world don't look too rosy, either.
Let's take you through these latest numbers first.
The Bank of England has cut its growth forecast for the UK. It's now only expecting 1 percent growth this year and doesn't expect the economy to start picking up again until the midul -- the middle of next year. It's a grim economic picture. And the BOE seems to be pointing more stimulus in the works, specifically, another round of quantitative easing.
Well, unemployment is also weighing down in the UK. The jobless total has gone up to 8.3 percent, the highest rate since 1996. We'll have more on that later in the show.
And the Bank of England governor, Mervyn King, seal -- still found the talen -- time to give his opinion on the Eurozone's crisis, specifically, the role of the ECB. We've heard analysts and politicians tell us this week how it's the only institution that can rescue Europe now.
But Mr. King said Europe shouldn't assume its central bank can just bailout the entire continent.
(BEGIN VIDEO CLIP)
KING: That is not the job of a central bank, to do something which a government could perfectly well do itself, but doesn't particularly want to admit to doing. And I think it's very important to recognize that there are circumstances when governments will try and put pressure on central banks to do things that they would like central banks to do in order to avoid their having to own up to the actions that they actually would like someone else to carry out.
So I have every sympathy with the European Central Bank in this predicament.
(END VIDEO CLIP)
FOSTER: Well, there seems to be a consensus amongst central bankers, but Europe's governments are still arguing about what part the ECB should play in this crisis. France seems to be more open to it taking a bigger role. A government -- a government spokeswoman said today the ECB has to take the necessary measures to ensure financial stability in Europe. Germany will fight against that tooth and nail. Chancellor Angela Merkel reiterated her stance on the matter today. She said the ECB doesn't have the possibility of solving these kinds of problems. She's been meeting with the Irish prime minister, Enda Kenny, who wants to see the bank take a bigger role.
(BEGIN VIDEO CLIP)
ENDA KENNY, IRISH PRIME MINISTER: I have suggested in our own parliament and it would be Ireland's view that the ECB is the ultimate -- is the ultimate backstop here, period. There are -- there are very divergent views about this. And I know that Germany, in particular, has its own view on it.
But this is an issue that needs to be dealt with and needs to be dealt with politically.
(END VIDEO CLIP)
FOSTER: Well, leaders outside Europe are getting tired of listening to all these squabbles.
Today, U.S. President Barack Obama said Europe needed an economic firewall as a statement of intent. He said the issue right now isn't a technical problem, but a lack of political will.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: But at this point, the larger European community has to stand behind the European project. And for those American readers or listeners and those Australian readers or listeners, I think we all understand at this point, we've got an integrated world economy. And what happens in Europe will have an impact on us. So we are going to continue to advise European leaders on what options we think would meet the threshold where markets would settle down. It is going to require some tough decisions on their part.
They have made some progress on some fronts, like their efforts to recapitalize the banks. But ultimately, what they're going to need is a firewall that sends a clear signal, we stand behind the European project and we stand behind the euro.
(END VIDEO CLIP)
FOSTER: Well, earlier, I spoke to Bob Parker, a senior adviser at Credit Suisse. He says the lack of clarity on the situation has effectively sent investors on strike.
I asked him what he made of all the arguments about Europe's central bank.
(BEGIN VIDEO TAPE)
BOB PARKER, SENIOR ADVISER, CREDIT SUISSE: The question of the ECB being a lender of last resort is actually somewhat confused, because what's going on at the moment?
First of all, the ECB is lending money to European commercial banks, where those commercial banks are struggling to borrow money at economic terms in the money markets. So to that extent, it's a lender of last resort already.
Secondly, the ECB owns a significant volume of Greek government debt. It has been buying modest amounts of Italian government debt. So there, it also has been a lender of last resort because it has been active in the markets buying government debt when the yields on that government debt jumps up because of investor distress on -- that investors do not want to buy that government debt.
I think the debate is now to what extent should the ECB do the sort of quantitative easing that the Fed has done in the States. And, obviously, so far, the amount of intervention by the ECB in purchasing government bonds and lending to European banks actually has been fairly limited. And, arguably, that's one of the reasons why actually the euro, on the foreign exchange markets, has actually held up during this period of severe stress in the European capital markets.
FOSTER: And things look to be going from bad to worse.
So they've got that potential, haven't they?
Is it right to say that the markets do want that formalized role as a lender of last resort in order to reassure them?
PARKER: I think the markets want clarity on a whole range of issues. The most important issues are obviously the implementation of economic restructuring plans, notable in Italy, and, to a lesser extent, with the new government in Spain.
FOSTER: But that's a longer-term (INAUDIBLE).
PARKER: Very much longer-term. But they want the markets -- investors want to see progress.
I think the second issue, which I regard as absolutely critical, is, theoretically, we have this European Stability Fund, the EFSF. But if you actually look at the money the EFSF has available, it's obviously grossly inadequate if -- if somebody, for example, did have to go for a bailout.
So investors want clarity on the role of that European bailout fund.
And then, obviously, a third question is the one you've raised, which is, to what extent will the ECB extend quantitative easing?
Will it come in and buy significant volumes, you know, hundreds of billions of euro -- of Italian and other government debt?
And the message there so far, from the German government, from the Bundesbank -- and you've had this statement from Mervyn King -- is they're not going to do it yet.
FOSTER: I'm just wondering if there's a big shock to the system, Italy, certainly, if something happens there and blows up...
FOSTER: Do you not want to know that the ECB or there is some sort of system in place to step in?
And if there isn't that system in place, there's potential panic, isn't there?
PARKER: Well, let's define the word panic. Now, when, Portugal, Ireland and Greece went to bailout fund, their bond yields all went significantly into double digits.
FOSTER: But they don't matter nearly as much economically speaking, do they...
PARKER: No, of course not.
FOSTER: They can let them wait.
PARKER: No, absolutely. No, there -- Italy's debt is 1.9 trillion euros. You know, Greek debt is 340 billion.
So the order of magnitude for Italy is significantly greater than any of the other countries which have gone to the bailout fund.
And I think, you know, you have a very clear position from global investors at the moment, which is they don't have any detail on the firepower of the EFSF. They don't have any detail on what the ECB would do. Therefore, the logical investor reaction is you just don't buy the bonds, because if there is a major problem with Italy -- and at the moment, the markets are holding in, just. But it is a major problem, then investors don't know what will happen. But you can guarantee, almost, that the yields on Italian debt will go to very high levels and there will be significant investor losses.
Therefore, you have this investor strike.
(END VIDEO TAPE)
FOSTER: Well, the bond market pressure cooker isn't losing any heat, as you've been hearing. Yields on Italian 10-Year notes fell slightly today, but they're still above the unlucky 7 percent mark.
Borrowing costs are going up in the -- in the meantime, for Spain and for France, as well. And as the yields rise, so does the threat of contagion.
Nina dos Santos takes a look.
NINA DOS SANTOS, CNN CORRESPONDENT: As the U.S. and sovereign debt crisis rumbles on and completes its second year in passing, one of the things that's most obvious about this crisis is its ability to move from some countries within the Eurozone that are perceived as being more financially weak to even stronger nations within the monetary bloc.
Now, if we take, for instance, Italy, we know that the cost of borrowing over the next 10 years to come, so the yields on its 10-Year bonds have surpassed 7 percent, that crucial danger point, at least twice over the course of the last two weeks.
But the same trend is being felt on other countries, like, for instance, the Netherlands, albeit its bond yields are much, much lower. But they have been surpassing the highest level we've seen in about a month, reaching about 2.44 percent.
Another country that has suffered the same fate of late is Austria. Its bond yields admittedly round about half of the cost of Italy's borrowing, but you can see, it's still at 3.65 percent and rising.
And as we know, other countries across the Eurozone, like, for instance, France and Spain, with much larger debt paths, are also seeing their bond yields soar, as well.
If we move along and talk about why this is the case, well, two or three things become obvious. On the one hand, it is the perceived creditworthiness of these countries and also fears, not just of contagion, but also of a recession, as well.
Take, for instance, the AAA rated countries across the European Union. There's nine of them across the region, as you can see, the ones denominated in red. But about six of them are within the Eurozone itself.
What's really striking here is the difference that some of these countries have to pay to borrow money. For instance, while countries like Italy are suffering record borrowing costs, countries like France and Germany are actually enjoying the lowest borrowing costs that they've had in many, many years.
If you factor in the difference between 1.8 percent and take a look at Italy's borrowing costs of 7 percent plus of late, well, that really gives you an idea of the cost of contagion across the Eurozone.
FOSTER: In Greece, the new prime minister has won a vote of confidence in parliament, paving the way for more budget cuts. The governing coalition led by Lucas Papademos received overwhelming support. Two hundred and fifty-five lawmakers voted in favor, with 38 against. The government must now approve a new bailout package and commit to austerity measures to secure the next injection of cash it needs to avoid bankruptcy.
Mr. Papademos has already told parliament that staying in the Eurozone is Greece's only option.
Greek banks are also being put to the test. Some German companies are questioning the reliability of their Greek partners, as Frederik Pleitgen now reports.
(BEGIN VIDEO TAPE)
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Operators react to an alarm in seconds at this security company in Hamburg. The firm has clients not only in Germany, but also in Greece. And what's alarming the boss right now is that some of his Greek clients, especially government institutions, are not paying their bills on time.
CARSTEN KLAUER, CEO, POWER SECURITY: In the past, they've paid, sometimes, two or three months too late. And today, it's half a year.
PLEITGEN: Power security also provides guards for many firms in Hamburg's massive port, the gateway to the world for the German exporting juggernaut.
German companies have created millions of jobs all over the globe. But business with Greece has been sluggish, to say the least.
(on-camera): German export and industrial associations say they want to do more business with Greece and help the country back on its feet. But they say first, the Greeks must change their business culture and become more reliable partners for investors.
(voice-over): With the Greek debt crisis and the social turmoil that came with the austerity programs initiated by the government in Athens, German firms doing business in Greece say credit lines are drying up and some feel the situation is so risky, that they will only deal with the country if they see cash up front.
VOLKER TREIER, DIHK: We have German firms whose trading partners of the Greek state hospitals, for instance. And they are getting paid right now not by money, and they are getting paid by governmental bonds. And then the German trading partners have to resell these bonds over the markets.
PLEITGEN: And selling Greek debt bonds is no easy task these days. But experts agree Greece needs massive foreign investment from countries like Germany to overcome the crisis.
Lawyer Stavros Konas has been advising German firms doing business in Greece for decades. He says while the risks might be higher, the rewards could be, as well. But he acknowledges, first, Greece needs reforms.
STAVROS KONAS, GERMAN-GREEK LAWYER'S ASSOCIATION: What Greece has to do is to have these companies, meaning very short positions, various -- to get the conditions and the cooperation must be better, stronger and faster.
PLEITGEN: Power Security alone employs about 300 people in Greece, according to the company, and it has no intention of giving that business up. After all, the CEO says, they still have many Greek clients who do pay on the time. And with the current uncertainty and concerns about more protests, one industry that should continue to do well is security.
Fred Pleitgen, CNN, Hamburg, Germany.
(END VIDEO TAPE)
FOSTER: Now, it is the competition to break up the Eurozone. We know you're all hard at work on your entrees to the Wolfson Prize. If you're looking for clues, perhaps listening to -- to one of the judges will help. We'll hear from the Wolfson Prize chairman after the break.
FOSTER: Well, unemployment lines are growing longer here in the UK. And if you're under 24, the queue for jobs is more than a million strong. The UK's jobless rate now stands at .3 percent, the highest rate in 15 years, more than two-and-a-half million people are out of work. We need to check that percentage. More than one million of those are aged between 16 and 24.
Britain is following in the footsteps of other European countries, including Spain. Its youth unemployment rate is now at almost 50 percent.
Now, for the growing number of young people looking for work, competition is tough and it's not going to get any easier. One big fear is there will -- they will one day be added to the long lists of long-term unemployed before they've even got out of the starting gate, as Jim Boulden now reports.
(BEGIN VIDEO TAPE)
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): A scarred generation -- that's the term being used in Britain and elsewhere when it comes to rising youth unemployment. Nineteen-year-old Tyrone Cunningham has finished school and is now trying to get his first job.
TYRONE CUNNINGHAM, 19 YEARS OLD: The whole process has been tiring, because it's like you're applying for like 15 and you only hear back from one. The thing is that -- that the (INAUDIBLE) current I'm just waiting. And on the side I'm applying for like part-time jobs and maybe full-time to, you know, get my foot in the door.
BOULDEN: Of course, people have varying views on how to get young people into work.
UNIDENTIFIED FEMALE: The number isn't the issue. It's the fact the jobs are not there and a lot of people are not actually motivated to get jobs.
UNIDENTIFIED MALE: Our generation doesn't really have the opportunities that the generation before had. So it's really difficult being a student and trying to think what am I going to do once I graduate?
UNIDENTIFIED MALE: I think youth really need to get out and maybe do a little bit more than shout sometimes. I think there's this perception now that it's -- it's just too easy just to take the money, just to take Social Security and benefits. It's too easy for kids these days.
BOULDEN: The International Labour Organization estimates around 40 percent of the world's unemployed in 2009 were between the ages of 15 to 24. The ILO projects nearly 13 percent of the world's youth won't have a meaningful job this year. In the U.K., that number is now close to 22 percent. In Ireland, it's closer to 30 percent. In Spain, more than 40 percent of the youth can't find a job.
Rajeeb Dey has been credited with matching young people with entrepreneurs and startup firms.
RAJEEB DEY, FOUNDER, ENTERNSHIPS.COM: As you've seen today with the yet figures hitting over a million, it's a time where if people have had an inclination to set up a business, it would be a good time to be thinking about starting your own business and really making a job rather than taking a job.
BOULDEN: Here in Britain, there are growing calls for skittish companies to take on more youth. But firms want the government to loosen the purse strings and to help pay to hire youth out of work more than six months.
KATJA HALL, CONFEDERATION OF BRITISH INDUSTRY: We need to see some targeted measures to help boost growth, for example, young people. And that will cost a bit of money, but it's money well worth spending.
BOULDEN: One bright spot is the 2012 Summer Olympics. Thousands of young people have been in training to give them the confidence and skills to apply for work around the Games.
But with tough austerity measures imposed by the current coalition government, it means fewer government jobs in the future, to go along with fewer private sector ones. So, those looking to get their first step on the jobs ladder are finding ever more barriers to getting a decent job.
Jim Boulden, CNN, London.
(END VIDEO TAPE)
FOSTER: Now, Spanish health care workers say austerity is costing lives. They've been holding a second day of protests against hospital closures and wage cuts. It's part of a program of cuts designed to bring down Spanish debt. Hundreds of people took to the streets in Barcelona earlier.
Dan Rivers was there.
(BEGIN VIDEO TAPE)
DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): They've had enough -- 16,500 doctors on a two day strike in Catalonia, furious at government funding cuts. Spain's battle to control its deficit is being played out in places like this.
Dr. Elvira Busbe says she's taken a 20 percent pay cut and won't stand for another one.
ELVIRA BUSBE, ANESTHESIOLOGIST: They closed the theaters. They closed, also, wards, no. So the -- the reduction of the duties, the reduction of our salaries, they are talking about to cut again in the social services, more or less, with 5 percent. So this is terrible. It's impossible.
RIVERS (on-camera): Cutting any public service in Spain is controversial. But when it involves hospitals, it really provokes passions and anger, particularly when some people claim it means the difference between life and death.
(voice-over): Natalia Fuertes hit the headlines this week for launching a private criminal prosecution against one hospital after her mother died because she was denied life-saving treatment for a stroke. The family was told operating theaters weren't available.
(on camera): Do you think your mother died because of the cutbacks in services?
NATALIA FUERTES, DAUGHTER OF STROKE VICTIM (through translator): She did not have the basic right of every citizen, to fight her condition, because she didn't have a surgery room available to her. I don't know whether she would have survived with that. She didn't have the chance to find out.
RIVERS (voice-over): The hospital denies it's to blame, saying Natalia's mother was treated with the appropriate resources.
But the union which has organized this strike says the austerity drive is having a direct impact on the patients' health.
This union leader says that urgent cases are being prioritized, but patients with chronic diseases will suffer from substandard care because of government cuts.
ALBERT TOMA, HEALTH WORKERS UNION LEADER (through translator): Cuts to health services are a key election battleground in this weekend's vote. The Socialist looks set to lose, but the center right People's Party is proposing even more austere measures on Spain's health care systems, both parties vying to show they can breathe life into Spain's sick economy. But many ordinary Spaniards are wondering whether the medicine is worse than the disease.
Dan Rivers, CNN, Barcelona.
(END VIDEO TAPE)
FOSTER: I'll be back in just a moment with the headlines for you.
FOSTER: Welcome back.
I'm Max Foster.
More QUEST MEANS BUSINESS in a moment.
First, the headlines.
The pressure is building on Syria. Arab League ministers have been meeting in Morocco to finalize Syria's suspension. A new video from inside Syria purportedly showing a tank burning in the streets of Daraa.
Separately, army defectors attacked a military intelligence complex with grenades and machine guns.
Mario Monti has been sworn in as prime minister of Italy. He's also made himself finance minister, at least for now. Mr. Monti is tasked with ended the debt crisis that forced his predecessor, Silvio Berlusconi, out of office. He says he will present plans to lawmakers on Thursday.
In Greece, the new prime minister has won a vote of confidence in parliament by a wide margin. Lucas Papademos took over from George Papandreou last week after much political wrangling. He told lawmakers earlier he was optimistic that the Eurozone can overcome its current difficulties.
And the head of FIFA backtracks after telling CNN that he believes there's no racism in football. Earlier, Sepp Blatter said that players who think they've been abused should shake hands with their opponent after the final whistle and move on. But a short while ago, Blatter released a statement saying his comments were misunderstood, that he knows racism exists in football and he never denies it and that he is committed to the fight against racism in football and society.
Italy has brought in a new government, but will the techno trap -- technocrats be able to do what the politicians couldn't?
The streamlined 16 member government faces a Herculean task, to pull Italy back from the brink of economic turmoil.
Let's take a look at the major players here. Well, the new prime minister, Mario Monti, has given himself the economy portfolio, he'll need all the expertise he's gleaned from his time as a European Commissioner and as a respected economics professor.
The infrastructure and industry portfolio has been handed to Corrado- Passera. He is the boss of Italy's biggest retail bank, Intesa Sanpaolo. And the new foreign minister is Italy's ambassador to the United States, Giulio Maria Terzi di Sant'Agata. Mario Monti described the formation of a new government as an extraordinary moment, which he says is being welcomed internationally.
(BEGIN VIDEO CLIP)
MARIO MONTI, ITALIAN PRIME MINISTER: (through translator) we have also obtained a great deal of signals of encouragement from our European partners and also from all over the world, everything, I trust, will translate, although we are going to have a difficult phase in terms of the markets. But -- but that side of the difficulty, dealing with the markets, also concerns our country.
(END VIDEO CLIP)
FOSTER: Well, joining me now for more on this is Giuseppe Ragusa.
He's an economics professor from Rome's LUISS Guideo Carli University.
Thank you so much for joining us, Professor.
First of all, I mean what we've got here is an unelected bureaucratic cabinet. There's no politicians in it whatsoever.
But is that a surprise?
GIUSEPPE RAGUSA, ECONOMICS PROFESSOR: No, it's not a surprise. It was -- it was already clear a few days ago that no politician was going to be serving on Mario Monti's cabinet. And the reason is that the parties felt that the politicians' inclusion was going to be, in some way, a negative thing to the ability of this government to act.
But you have to remember that this is a great government. This is as close as you can get to a dream team government. All the personalities involved in this government are accomplished academics, are accomplished businessmen or are public servants of extreme talent and extreme experience.
FOSTER: And will it be the solution to immediate problems facing Mario Monti, number one, reassuring the markets?
And, number two, getting political support?
RAGUSA: Well, getting political support is going to be key. Of course, he -- I think he's warning today -- he's warning today already to send a signal to the market.
But until this thing now can be heard clearly by the international community and by the markets, he has to be able to gather support around his cabinet. And he's going to be able to -- so he's going to be able to implement some of the reforms that we all believe Italy needs.
FOSTER: But he's only going to have political support, isn't he, whilst it lasts?
Even Berlusconi is suggesting that he could pull the plug on this if he doesn't like what he sees.
RAGUSA: I think -- I think it's going to be key for this government to act quickly. And this -- this is a moment where Mario Monti is in a honeymoon stage. Everybody is loving him in Italy. He has great support, great trust in him has been -- has been put.
So he has to act quick -- quickly. In 25, 30 days, he has to have a clear plan of reforms and he has to act in a very comprehensive way. He cannot only trying to address one of the many shortcomings of the Italian economic system. He has to act in a very comprehensive way, trying to bring -- present reform that is very wide and is going to attach many of the open issues in the Italian economy.
FOSTER: How long is he going to have this public support?
We've suggested it already. It's an unelected cabinet. Italians, at some point, may have an issue with that in terms of democracy. But also, he's going to perform brilliantly in order to get the economic reforms through and maybe the public will question, at some point, this is a -- this is a -- a government that's been imposed on us by Europe and it's not fair. It's not the best thing for Italy, it's the best thing for Europe.
RAGUSA: Well, this is a -- this is a risk and why he has to act quickly. Probably all this trust, all this confidence that Mario Monti right now is commanding is going to erode pretty quickly. That's why he has to act very quickly.
I don't think it has to do with the fact that this is a technical government. I think it has to do with the fact that Italy needs profound reforms. And any of this reform is going to entail some loss of -- a loss for many people.
So that's why the confidence eventually is going to be eroded, not because it's not -- it's not elected -- he's not an elected official.
FOSTER: Professor Ragusa, thank you for joining -- very much, indeed, for joining us from Italy.
Well, it is the $4,000 question, how to break up the Eurozone. The British businessman, Lord Wolfson, is offering that bounty for whoever comes up with a feasible escape route from the single currency and the deadline for entries is coming up at the end of January.
Derek Scott is the chairman, newly announced, of the Wolfson Prize and one of the judges who will sit on the panel.
I asked him about what kind of entrees he was expecting.
DEREK SCOTT, CHAIRMAN, WOLFSON ECONOMICS PRIZE: Well, I think the important thing is that because even those in favor of the euro are now recognizing that the present configuration may not last, it's a very, you know, appetent (ph) -- appetent time to -- to have the competition.
FOSTER: And have you any idea what to expect, what sort of plans are likely to come in?
Or is your mind completely a blank?
SCOTT: No, I mean, we've said that we'll expect certain things to be covered, you know, what is the most appropriate reconfiguration of currencies, clearly issues of the denomination of debt, both private and -- and sovereign debt, all problems of contracts.
So there's a myriad of things, both political and economic, that need to be did -- dealt with. But we haven't provided a -- an exhaustive list. That's really in the hands of whoever sends their applications in.
FOSTER: You say the deadline, but actually, it may be too late, mightn't it?
You know, you never know...
FOSTER: -- what might happen to you now in March...
SCOTT: Well, no, it's possible...
FOSTER: -- when they're announced.
SCOTT: -- it's possible. But even if one of these countries left, I mean the competition would still be going ahead and I think the conclusions would be -- would be -- would be valid. But I mean the way this crisis has gone, you've -- you get to over a cliff edge and then things pause a little bit. I think ultimately, the present configuration is doomed. But it may or may not survive until March.
FOSTER: What do you think the most likely configuration, at least, will be?
SCOTT: I suppose the most likely, at the end of the day, frankly, although I think the best would actually be for the Germans to leave, but that strikes me as really pretty improbable. I think the peripheral countries, as they're termed, will ultimately have to leave. I think both Greece, Portugal, Spain and Italy, possibly Ireland, but it's a bit different, already sit. And I suspect the most likely is that you end up with some more German-based Deutschemark-euro bloc in the north.
But there is a big problem there, because the French are increasingly uncompetitive with Germany. So it's not impossible that we ended up with 17 countries with their own currencies.
But I think it's most likely that some form of euro based on Germany will end up as one of the features, anyway.
FOSTER: An immediate situation is this -- this talk that the markets a sort of riddle with, at the moment, the role of the ECB and turning it into a lender of last resort, which the Germans obviously object to, at the moment...
SCOTT: Yes, I think the...
FOSTER: But that could be an immediate solution, couldn't it?
SCOTT: Well, no, it couldn't, really. I mean the lenders of last resorts are supposed to deal with liquidity problems. This is a solvency problem of nation states. And the only way in which the ECB purchasing bonds, if they wanted to get the Spanish or Italian bonds down to a level that might make it appear sustainable, they'd probably end up having to buy two or three trillion of -- of bonds.
FOSTER: That's a possibility, isn't it?
SCOTT: Well, but it would only work -- it would only work if the euro depicted sufficiently to help some of these countries, particularly Italy, and, frankly, it's impossible to see the euro getting to a level that would help Spain and the others. But that, of course, would set inflation rising in Germany. So I don't think it's a real runner. And it's one of these things like the Eurobonds that people really haven't sort themselves -- sort themselves through.
The real problem about this is it's not about debts and deficits, although they're dire. It's what happens when countries lose competitiveness in a monetary union on the scale that one of these countries have. And in those circumstances, they are being forced to do two thirds of an IMF package -- cut spending, raise your taxes, but they can't depreciate. And that just makes things worse.
(END VIDEO TAPE)
FOSTER: Coming up next, they were all out, but now they're back in -- can the Occupy Wall Street protesters still make a stand?
FOSTER: Well, over in the U.S., the number of protesters still occupying Wall Street has dwindled to around 75 people. A New York court sided with the city, saying demonstrators can return, but aren't allowed to camp.
Police cleared the area overnight on Tuesday.
Maggie Lake is in New York -- and, Maggie, they've taken away the tents, but they can't take away the protesters.
MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: That's -- that's right, Max. They are still here, although the rain, you can see the terrible weather here in New York keeping some away, as well as the fact that their -- their movements within the park very restricted -- barriers all around. They can't bring in instruments, which has been a part of this all along. Even some of the big signs are being stopped by security.
Now, some of the people who have been down here for the last two months are still meeting in their working groups, they're just doing it elsewhere. Some of them are holding vigils outside of the jail where some of those that have been arrested, including one man this morning, are still making their way through the legal process.
One person who is out of jail, though, is New York City Councilman Ydanis Rodriguez.
And we saw them just a short time ago, along with a New York State senator, about the economic issues underpinning this protest.
Have a listen.
YDANIS RODRIGUEZ, NEW YORK CITY COUNCILMAN: This movement is about jobs. It's about education. It's about housing. It's about the frustration of the working class and the middle class community, especially the ones that we represent, that feel that we have been left out on -- on lack of investment to create jobs for the working class community, for the middle community. And we believe that this movement is bringing a voice, calling on closing the gap between the wealthy and the working class community.
LAKE: Are politicians doing enough?
Are they paying enough attention to these issues that are being voiced here?
ADRIAN ESPAILLAT, NEW YORK STATE SENATE: Much more needs to be done. You know, Wall Street has been bailed out. Detroit was bailed out. Everybody but Main Street and the communities that have -- many communities that have been double digit unemployment levels for decades, you know, in a permanent recession, now see that they're really being left behind.
We must do more. There -- there's a jobs bill in Congress that's got to be passed. They are -- there's a millionaires tax in New York State that must be renewed.
These are the kinds of issues that will bring some relief to Main Street, a community to have been in a permanent recession.
(END VIDEO TAPE)
LAKE: Now, Max, we understand there's going to be a press conference taking place a little later this afternoon, early evening, by religious leaders in the area who we believe are -- are suggesting that they'll open their doors and allow people to either meet and perhaps stay in their facilities. And, of course, a lot of the protesters organizing for what is expected tomorrow, a national day of action -- Max.
FOSTER: Yes, tell us what we can expect from that Maggie, because things are being organized, right?
LAKE: That's right. And that's what a lot of people are doing. They say the numbers are going to be much greater.
The thing to pay attention to, we are told, 7:00 in the morning they plan a march on Wall Street. They want to take the message of economic frustration right to the bankers' doorsteps.
3:00 p.m. Demonstrations around subway stops all around the city, with people talking about their economic woes. And then a march at 5:00 over the Brooklyn Bridge.
We believe there's a permit for that. I think it's being organized by a union in conjunction or sympathy with the Occupy movement.
Max, important to point out, the Wall Street area and the Brooklyn Bridge area have been two sort of igniting points. There were -- that has been a no-go zone down by that stock exchange. They know that. And the Brooklyn Bridge, of course, the area where there were large scale arrests sort of in the beginning of the movement.
So they're being a bit confrontational. They say they want to keep it peaceful, but there's sort of a new relationship with police. And it's a tense one. We'll see how they make out.
FOSTER: OK, Maggie.
Back with you tomorrow.
And now a long stretch of calm weather expected for most of Europe.
But a meteor shower, no less, to -- to peak later in the week.
And Pedram has details of that -- hi, Pedram.
PEDRAM JAVAHERI, CNN METEOROLOGIST: Hi, Max.
Yes, very cold conditions across Western Europe the past couple of days. And as you said here, with a look at clear skies. That's really the optimum setup up here to allow for some radiational cooling with the clear skies. So any little warming you've got on this Wednesday going to escape into the upper atmosphere here, as the sun has now set.
But just a few storms around portions of, say, Dublin, on into the northern edge of the U.K., there are some storms. And around Puerto, into Portugal there, some storms.
But besides that, generally clear skies across Central Europe. We do have some activity across areas of Turkey. But travel plans really going to be a -- a problem around Dublin again.
Gusty conditions with this feature coming in, up to 90 minutes of delay possible on into Thursday. Glasgow, a similar story, with the winds going to be a problem out there.
But with this high pressure in place -- and, again, what about areas of high pressure really causing the air to stabilize, the air to calm a little bit, but also deflecting the storm track. It's a blocking pattern.
Some storms around portions of Western Europe again. Some storms around the Europe-Asia border on into Eurasia there, some activity.
But besides that, enjoy it. A long stretch around portions of London. We're seeing partly cloudy to mostly sunny skies. Temperatures going to be around seasonal, perhaps a degree or so below average. But still looking at enjoyable conditions out there. And again, work your way around Istanbul on into Moscow. That's where you're going to see some wind- related concerns with gusty conditions causing you up to an hour-and-a-half of delay on Thursday.
All right, we promised you a meteor shower forecast. Well, with the clear skies, if you have the opportunity, the Leonid Meteor Showers, annually picking -- peaking in the month of November. And it gets its name because it seems to radiate from the Leo constellation. So if you're looking out toward the eastern sky early Friday morning, GMT there, up to 20 meteors possible at that hour. But we do have a near quarter phase of a moon on the eastern sky. And you might even notice mars right next to the moon there on the eastern horizon.
But with that said, try to look out there and you'll have a possibility of seeing a few meteor streaks across the sky on Friday morning.
Lastly, take a look at this. The Democratic Republic of the Congo, the U.N. has said it's one of the least developed nations in the world. Some video here, if we have it, to share with you out of this area, coming out of this area. This is one of the most active volcanoes in the world spewing some lava up to 300 meters high at points. And folks in the national tourism board out there are saying if you come out here, we'll take you up to the volcano with a truck for only $300, about 220 euros, you can get out there and get a perspective. And on a night trek at all times there, you get a better perspective in the dark.
But Hawaii's Kilauea, Max, spews lava up to about 20 meters high and this goes up several hundred meters high. So it really puts it in perspective that if you get a -- a chance to make it out there to the Republic of the Congo there, a good possibility you'll see that.
FOSTER: Yes, spectacular. Great to hear tourists are going there.
Thank you very much, Pedram.
Using celebrities to sell clothes is nothing new.
But we talk about an advertising campaign showing presidents and even the pope in shocking embraces?
That's the tactic of one fashion label. And we'll let you be the judge, next.
FOSTER: Now, the Italian fashion label, Benetton, is reportedly pulling a controversial advert featuring a faked image of the -- the pope kissing an imam. It is one of several shocking images of world leaders like we've never seen them before, let's say.
Benetton launched its new series of adverts today. It's named the campaign Unhate and says it promotes love, but stirring up controversy seems to be the more likely outcome.
The images, if you hadn't realized, are fake. One ad shows U.S. President Barack Obama kissing his Chinese counterpart, Hu Jintao.
Another, North Korea's Kim Jong-Il locks lips with the president of South Korea.
The images were used and doctored without the subjects' permission.
They are certainly provocative ads, but will they actually help the labe -- the label sell more clothes?
Well, earlier, the deputy chairman, Alessandro Benetton, spoke to CNN's Juliet Mann about the controversial campaign.
ALESSANDRO BENETTON, EXECUTIVE DEPUTY CHAIRMAN, BENETTON GROUP: After a year of emergencies in the financial world, let's think just about Wall Street, the economies in Europe in general, problems like the north of Africa, think about Tunisia, Libya, Egypt, then after a year of a lot of hate atmosphere, let's try divert this energy into a positive energy. And we have invented this world which is Unhate.
JULIET MANN, CNN CORRESPONDENT: But what do photos of Obama kissing his adversaries really have to do with -- with selling more sweaters?
MANN: None of them are wearing Benetton in the campaign.
BENETTON: One of the important social elements in the next few years is going to be this dialogue between the two very important economies in the world, which is China and the United States, where, culturally, the Americans are saying that everybody is invited and welcome to be American. And the Chinese, on the other side, are saying that they would like everybody to understand the Chinese are different and they want to be respected for that.
These are two very difficult points of view, which should find common ground.
Today, with this campaign, we want to create a new energy toward tolerance, respecting the others and finding the elements in common rather than the elements that separate you from the others.
MANN: You're talking about tolerance, but looking at your campaign, you -- you've got people on the streets, you've got riots.
Are you saying that you anticipate there is to be more civil unrest around Europe and the world?
BENETTON: No. I -- I don't think that we are definitely -- we are encouraging the opposite of that. I think the campaign will just be images where we have an iconic element. So we have people that run countries. And, of course, you know, these artificial campaigns, they come back from the famous case of Brezhnev (ph), with the president of the Democratic Republic of Germany.
And so this is the iconic element there, which is a kiss, which in all cultures, for everybody, means they bring the barriers down.
(END VIDEO TAPE)
FOSTER: Well, being an Italian businessman, Alessandro Benetton has been watching every twist and turn of the economic roller coaster his country is in -- on, even. He says the new government should bring some stability.
You can see the full interview with Alessandro Benetton on "MARKETPLACE EUROPE." That is on every Thursday at 7:30 p.m. London time.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: I think that there is a technical government, there is some sort of shipping us from where we are to a safe zone, if you like, where we will be able to address the issue.
I think that in reality, it's not just the previous government that was not able to do this structural reform of the income statement and was just working off the balance sheet of the country. I think this technical government can take us to the other side of the shore. And after that, I'm hoping very strongly for a European agenda in order to force Italy to do the structural reforms that we have been waiting for too much of a long time.
(END VIDEO CLIP)
FOSTER: Well, coming up on QUEST MEANS BUSINESS, a look at the markets.
FOSTER: Businesses have been popping up across Havana over the past 12 months, as some Cubans try their hand as small business owners. This comes thanks to free market reforms put in place by President Raoul Castro.
Shasta Darlington gives us a look.
SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT (voice-over): It's the chaotic sound of commerce.
DARLINGTON: "We have herbs, roots, branches," this man shouts. "Remember, ours is the same, but cheaper," something not heard in Cuba for decades.
Here at Havana's Cuatro Caminos Market, shoppers can find everything they need for a spiritual cleansing or to ward off an evil eye.
"I can use this in the bath to protect me against the shadows," says a client buying bunches of salvadera and basil.
Dozens of shops catering to the afro-Caribbean Santeria religion have opened here since last November. That's when President Raoul Castro announced reforms to allow more private enterprise. There are plenty of rules and restrictions, but more than 300,000 Cubans have now bought licenses to operate small businesses, most of them, micro-entrepreneurs, often selling sandwiches or snacks.
(on camera): These businesses are actually changing the urban landscape. Cubans are using their living rooms, their driveways, even front stoops. Right here, in fact, we have one man fixing watches and right next door, people are selling arts and crafts, everything from little wooden cars and dolls to statues.
(voice-over): Castro has slowly adapted a number of free market reforms, handing idle land to private farmers and, most recently, allowing Cubans to buy and sell their homes.
The measures have injected a bit of capitalism in the heavily state- run economy.
The newly self-employed pay taxes. They also provide jobs at a time when the government has begun massive layoffs.
"This has been a big opportunity for a lot of Cubans who didn't have work," says the owner of a snack stand. The Mango Milkshake gets a thumbs- up. Clients like the variety and the prices. But it's not at all clear how much prosperity these limited reforms can bring for Cubans and the economy as a whole. And no figures are available on the number of businesses that have flopped in the last year.
Shasta Darlington, CNN, Havana.
(END VIDEO TAPE)
FOSTER: And as that report was playing, we had some news in from the AP news agency, suggesting that the International Monetary Fund's Europe chief, Antonio Borges, is to -- to quit. We have no more information apart from that, but not a great time for more unsettling news in the Eurozone.
That is QUEST MEANS BUSINESS.
I'm Max Foster in London.
The news continues here on CNN.