Return to Transcripts main page


Sell-Off on Wall Street; Putin's Letter to the West; G7 Talks on Russia; Greece Returns to Bond Market; Athens Blast; Europe's Economic Recovery; Tackling Inequality; Former Canadian Finance Minister Jim Flaherty Dies; Make, Create, Innovate: Artificial Leaf Converts Sunlight to Fuel

Aired April 10, 2014 - 16:00   ET



RICHARD QUEST, HOST: OK, they are the coaches of the men and women winners of the national championships, college basketball, so I'm told. There's only two or three of them up there. I'm not sure why there's not more. Well, if there's only one winner in each. And -- nearly broke the gavel. Well, I suppose if you're that sport, then you know what you're doing. It is Thursday, it is April the 10th.

Tonight, stocks endure a stomach-churning fall. Wall Street suffers one of its worst days of the year. The fourth-worst day so far.

The IMF and the World Bank fire a warning shot on Ukraine as Vladimir Putin threatens to turn off the gas taps. We'll be live in Kiev and Washington.

And the heads of the IMF, OECD, and ILO give us their thoughts on inequality. You'll hear from all three on tonight's program.

I'm Richard Quest. I mean business.

Good evening. It's a red and rough day on Wall Street, with all three major indices sharply down. The NASDAQ was hit by a triplet-digit drop, as investors dumped biotech stocks. The Dow, the S&P also, fell very sharply. Look at the damage. If you join me at the super screens, you'll see exactly what sort of a day it was.

This is how the day progressed for the Dow Jones. It's down 1.6 percent, the S&P down 2 percent. The NASDAQ was down 3.1 percent.

And if you look at the actual trading day as it progressed, you see without -- with a single sort of exception towards the late afternoon, where I wouldn't describe it even as a rally, I would describe it as a dying gasp, the market was down and never really recovered. We'll compare the five-day numbers in just a moment.

Look and see, again, how it progressed. That was the lowest point of the day. That's the sort of the day -- gasp of the afternoon. But overall, it went down and it never looked back, 267.

Alison's at the New York Stock Exchange, and Alison, we know why it was up the other day, but why was it down today?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know what investors did today after we saw the market go up yesterday? Today, investors went back to thinking, you know what? Stocks may have gotten ahead of themselves yet again, so that disconnect where stocks were yesterday and where the economy is and the worry of how companies are doing in the first quarter.

Investors assessed all that, and you know what they did? They ran for the exits. And that's despite two days of gains, one of them, as I said, in the triple digits thanks to the Fed minutes that came out yesterday.

We saw investors dumping growth stocks, like Google, Amazon, and Priceline. And what they did was they moved their money elsewhere, some into cheaper stocks. One analyst putting it this way: there's a love/hate relationship --

QUEST: Right.

KOSIK: -- with momentum stocks right now. That seems to change on a day-to-day basis. It almost seems schizophrenic, doesn't it, Richard?

QUEST: It does. Alison, it's very serious the way these markets have been falling inconsistently all this week. Alison Kosik, who's given us the up sum. Look at the Dow's spectacular fall from grace over the last five days.

It's apparent when you look at a trading map of the last five days, because it was down on Friday, down on Monday, Tuesday had a bit of a gain, Wednesday -- Thursday -- Wednesday was up, but we know why Wednesday was up. It was the Fed and the Fed minutes.

If you extract just that, essentially what you have -- and you say Wednesday was an aberration because of the Fed minutes, essentially what you have is down Monday, pretty much down Tuesday, down Thursday.

Let's put it into a perspective. There's plenty of volatility in the markets. Jim Awad is from Zephyr Management, joins me now. You see the graph, you see the market. Why is the -- why is both the narrow and the broader market consistently falling?

JIM AWAD, CHAIRMAN, PLIMSOLL MARK CAPITAL: Well, because it's a risk- on, risk-off trade. When it goes up, everything goes up. When it goes down, everything goes down. So, the markets now are not cheap. Everybody knows they're up a lot. So, what you need from here for stocks to make further gains is for earnings to grow. For earnings to grow --

QUEST: I -- I'm not talking about why we want further gains.


QUEST: I'm talking about why we're falling.

AWAD: Because the whole thesis of the economy re-accelerating and having profit growth is threatened whenever you get news to the contrary. And overnight last night, we had news from China that both their exports and imports declined, so there is worry about economic activity in China.

Also, a major soy importer in China defaulted on the import, and there's worry about the credit system and the bad debt and the bad loans in China.

And then, there were movements -- intelligence reports that there were movements of Russian troops on the border of Ukraine. And then the momentum stocks broke. So, that pulled the rest of the market down. So, if anything happens in Ukraine, anything happens in China, it makes investors worried --

QUEST: Right.

AWAD: -- about the economy, which takes stock prices down.

QUEST: And when you talk about momentum stocks, which ones in particular?

AWAD: Well,we're talking primarily biotechnology, the biotech stocks and the social media stocks are the biggest.

QUEST: The ones -- those in vogue where you can play on a daily basis and you can follow the market trend.

AWAD: It's the stock market on steroids, those stocks. And hot money managers buy them when the market goes up, they sell them when the market goes down.

QUEST: We're still some weeks away from Q1's numbers in the United States, the first quarter numbers. It's not going to be a good number, but it's not going to be a dreadful number either, say people, 2 percent seems to be the number. At that sort of economic growth, does the market hold its own?

AWAD: For the market -- the market can hold its own on 2 -- 2 percent growth. But it needs 3 percent growth to accelerate further from here. It needs an acceleration of earnings, and that takes 3 percent growth.

QUEST: Right. There's a difference between your position and my position.

AWAD: Right.

QUEST: You're looking for more growth. I'm maybe wanting to make sure we don't go down further.

AWAD: Well, it's interesting. The ten-year treasury yield is frighteningly strong, meaning that the treasury is strong and the yield is going down, so the bond market is telling you that it doesn't believe that world growth is going to accelerate and, in fact, that it could go the other way.

QUEST: If that's right --

AWAD: The bond market is worried.

QUEST: Right. If the bond market is worried, and bonds -- or the bond price is back in vogue -- look, I'm a traditionalist.

AWAD: Yes.

QUEST: That would suggest equities are in trouble.

AWAD: If bonds keep going up and yields going down, it means economic activity is going the wrong way, and stocks will go down.

QUEST: So good to have your analysis, sir.

AWAD: Always my pleasure.

QUEST: Thank you very much.


QUEST: Now, we talked about it. Russia says it's ready to turn off the gas taps supplying Ukraine. President Vladimir Putin says Russia cannot go on offering discounts and forgiving debts. He says that over the past four years, Russia's been subsidizing Ukraine to the tune of $35 billion and it has to stop. And you'll see exactly what he said at the super screen.

In his letter to European leaders, President Putin, this is what he has said. President Putin has warned Gazprom will be asking Ukraine to pay the bills. If conditions were breached, Gazprom would now completely or partially cease gas deliveries. In other words, if you don't pay the bills, this is what you could expect, completely or partially cease gas deliveries.

It could raise the risk that Ukraine might start siphoning off gas intended for Europe. That would disrupt supplies. Remember, there were allegations that that had happened before.

Putin also warns that Ukraine's heading towards default. Ukraine the country, heading towards default, and Russia cannot and should not bear the burden of supporting its economy.

You might remember, of course, that President Putin was quite happy to bear the burden of Ukraine's economy and supporting it when it was his $15 billion that was going to Ukraine. However, now that Ukraine is -- or that part of Ukraine, to the west, is back in the European camp, suddenly he's not quite so keen. These are the pipelines, by the way, through which they could be siphoned.

Nina Dos Santos is in Washington, where G7 finance ministers are meeting. First to Kellie Morgan in Kiev. Kellie, you've been talking to the Ukrainian energy minister. Will the minister be concerned by this warning from President Putin?

KELLIE MORGAN, CNN INTERNATIONAL CORRESPONDENT: Yes, good evening, Richard. Well actually, the minister, Yuriy Prodan, actually predicted that this is a move that -- or something that Russia would do, that it would accuse Ukraine of siphoning off the gas, and then it would have an excuse to shut down those pipes.

So, yes, he expected that. And he accused today, when we were speaking to him, he accused Russia of using an economic weapon with these gas prices, which he described as completely unjustified. They've gone up 81 percent since the ousting of President Viktor Yanukovych earlier this year.

So Kiev is -- they're not happy. They're refusing to pay that price. They want to go back to the subsidized deal they were paying in January. And he just said that we don't want to pay a political price for this gas, we'll pay the market price, but not the political price. And this is what he said to me a little bit earlier about trying to secure Ukraine's gas supply.


YURIY PRODAN, UKRAINIAN ENERGY MINISTER (through translator): We will do everything we can to maintain our energy security and the normal functioning of our gas transport system in order to minimize the impact on people of less gas being supplied to Ukraine. And we hope for help from the EU, both in terms of financial and technical help in reversing supplies.

Because it is not only about the energy security of Ukraine, but also the energy security of all Europe. And we should work in cooperation with the European Commission. Ukraine is ready to pay a market price for gas, not a political price, and we will explain exactly this to our citizens.


QUEST: The minister talking to you, Kellie. Kellie in Kiev tonight. To Washington, now, where Nina Dos Santos is at the IMF and World Bank meetings. How concerned are they there about what's happening in Ukraine, Nina?

NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: Richard, there's a real sense here, if you listen to people at the IMF, that something needs to be done and fast. The IMF managing director, Madame Christine Lagarde, was asked about this in the first press conference that she gave here in Washington at the start of today, and she reiterated that we're talking about a $14 billion to $18 billion aid package, nothing new in that.

She also cautioned that it hasn't yet been signed off and it would come with stringent conditions, like the ones we've seen imposed upon countries like Greece, which by the way, ironically, re-entered the international bond markets today.

This is Madame Lagarde had to say in response to perhaps suggestions that this aid package for Ukraine might not work, because remember, Richard, it's had a checkered past with this country. This is what she had to say when asked if the plan would fail.


CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: We generally do not enter into negotiations with the idea that he program is going to fail. And when we do negotiate on the ground, when we do work with the authorities with support from the entire membership of the IMF, we do not forecast failure.


DOS SANTOS: As we all know, Richard, there's more than just money on the table here. It is also the future and security of Europe on the eastern flank, too. But whatever the IMF puts on the table, as I was saying before that, stringent conditions imposed, harsh austerity measures.

And also demands to try and cut the luxurious energy subsidies to try and prevent the kind of energy situation that we're seeing today, where Ukraine is so keenly skewed towards the Russian energy markets. But of course, as we know, that has severe implications for Europe as well.

QUEST: And when we talk about Russia and when we look at the situation, Nina, the questions for the World Bank and the IMF now become very difficult, because those institutions are members -- Russia is a member.

DOS SANTOS: Absolutely, you're right, Richard. It's a member, it's a very important and vocal member, too, isn't it? But we should also point out that the IMF and the World Bank have let the numbers do the talking on this one.

Both of them have decided to downgrade their economic forecast to Russia on the back of its incursion into Crimea and said, look, if you continue upon this path, it will hurt your economy. It will prevent people from investing in Russia. It could also, if you turn off the gas taps to Ukraine --

QUEST: Right.

DOS SANTOS: -- and therefore, withhold gas to Europe. It could also affect Europe's nascent recovery, and that's not good for Russia, either.

QUEST: Nina Dos Santos, who's at the IMF for us this evening. We thank you, and we'll be back with you, of course, over the next few days. Thanks a lot, Nina.

Now, when we come back, Greece has gone back to the markets after four years of pain, with scenes like this, a reminder of anger, which many Greeks still feel about austerity. We'll be talking to Angel Gurria of the OECD in just a moment. This is QUEST MEANS BUSINESS live from New York.



QUEST: This is most definitely worth a ding of the bell.


QUEST: Greece's return to the bond market was a roaring success. Athens raised more than $4 billion in a deal. It's the first time since the bailout in 2010. The Greek government sold five-year bonds, the yield was 4.95 percent. Demand covered it -- no, cover was seven times greater than supply, and it racked up nearly $28 billion in orders.

Now, the other side to this coin is there was serious unrest in the lead-up to the sale. A car bomb exploded near a central bank building in the capital. No one was, fortunately, hurt. Officials say it didn't overshadow the bond sale and insist the government is on the right track.


YANNIS STOURNARAS, GREEK FINANCE MINISTER: They said to wait for all those who have suffered and to find some compensation in terms of rising incomes, disposable incomes, is the road that we have designed. It seems that the whole community now, trust base, wants more. We had a very big success today. And this, I'm afraid, the only solution. This is the only way forward. And it seems that they are paying off some.


QUEST: So, a bond deal for Greece. The Organization for Economic Cooperation and Development says Europe's reforms are now starting to pay off. It warns more work need to be done. The secretary general is Angel Gurria. Always good to see you, sir, joining me from the IMF meetings in Washington.

All right, so, the pain is finally giving some gain. The risk, sir, is one of complacency and the job doesn't get done.

ANGEL GURRIA, SECRETARY-GENERAL, OECD: Oh, we can't be complacent, Richard. This would really be extremely dangerous. After all, we -- in the whole of the euro area, we're only coming out of negative growth. We're having mildly positive growth for the first time, 2 to 3 percent, in the case of the United States, moving away from deflation, the case of Japan.

It's still a very fragile situation, very asymmetric, slowdown in the large emerging economies, which had been the drivers of growth in the last few years. So, no, we're not out of the woods yet. The legacies of the crisis are still heavy on us, slow growth, very high unemployment, growing inequalities, and a very great destruction of trust. We have to deal with that.

QUEST: That -- you've put your finger on it. That destruction of trust. How do you put that right? Because frankly, people are starting to say a plague on all your houses.

GURRIA: Well, basically you get growth back, you get jobs back. But you also fight against corruption. You get individuals to pay their taxes, you get multinationals to pay their taxes. And you get good government. And these are the things that are going to get the trust back, and they're not going to happen overnight. But the sooner we start, the better.

QUEST: Into this -- all right, I was going to say "benign environment," but it's not, because there's still risk out there. But the big worries are some things like you get a battle with Russia over gas, you get a China that's slowing down, you get a banking crisis in China or a failed recapitalization in Europe. So, Mr. Secretary-General, what's your biggest worry here?

GURRIA: Well, I think all of the above. But at the same time, all are being addressed. That is very important. The bank capitalization, the banking union is being organized, and there are stress tests that are going to be made throughout the year, asset qualities review are going to be made in the European banks, very much needed.

In the case of Russia, of course, it's a geopolitical, geostrategic, geomilitary type of issue, not quite an economic one. But it comes at the wrong time also, because just as we were building the trust.

QUEST: Right.

GURRIA: And in the case of China, I was recently there, and I think they're dealing with the question of their banking system and their financial system. And it's better for China to be moving along at 7.5 than at 11 percent. Breakneck speed is not good for anybody.

QUEST: The old Goldilocks scenario, not too hot and not too cold, just about right. Finally, in the event -- inequality. Mr. Gurria, when are leaders going to deal with inequality and stop talking about it and start doing something about it?

GURRIA: Inequality will be dealt with not only by growth, but we have to -- it's very related to jobs. Jobs, jobs, jobs. Also, better-paying jobs. And for that, you've got to work on the skills, you've got to work on the education. The only way in which we can improve the pay, the remuneration, is with better skills and better education.

QUEST: Good to see you, sir. Thank you very much, as always. Enjoy the IMF. I appreciate your time tonight, sir. Thank you.

GURRIA: Thank you.

QUEST: Sad news tonight to bring you, we'll be talking about. The man who steered Canada's economy through the financial crisis has passed away. Jim Flaherty, who resigned as Canada's finance minister on March the 18th.

Although he was an outspoken critic of deficits, Mr. Flaherty pushed for massive government stimulus during the financial crisis. It was a move that helped Canada's economy recover quickly. He was a firm friend of this program. It was always good to have Jim Flaherty on QUEST MEANS BUSINESS, and once he resigned and retired, and now he's passed away. We'll have more in a moment.



QUEST: Now, arguable, it's the biggest Make, Create, Innovate that you're ever likely to see. The Lord said, "Let there be light," and there was, indeed, light. And indeed, today, that light is bringing flight to this: the Solar Impulse 2.

The Swiss team that created this plane says it can fly around the world without using a drop of fuel. Now, in this particular plane, 17,000 solar cells power the plane and charge the batteries and allow it fly at night.

Its wings are larger than those of a jumbo 747, and it weighs as much as a large family car. The inventors plan to fly it around the world next year.

Down on the ground, high cost and inconsistent availability have held solar power back until now. An American chemist says he's improved on nature's solar cell leaves, and he now believes he's got the right answer for Make, Create, Innovate.


NICK GLASS, CNN INTERNATIONAL CORRESPONDENT (voice-over): A natural powerhouse, each and every leaf on planet Earth creates fuel for itself, simply from sunlight, water, and air, in a process we know as photosynthesis.

Can science mimic nature? Can humans make and store energy just as plants do?

DANIEL NOCERA, PROFESSOR OF ENERGY, HARVARD UNIVERSITY: My vision of the world is if you see some sun, you would be in control of your own energy supply.

GLASS: Daniel Nocera has been working on alternative energy for 30 years. His breakthrough in 2008, the artificial leaf, takes sunlight plus water and makes hydrogen and oxygen.

In the lab, the artificial leaf doesn't look much or particularly leaf-like, just a small, thumb-sized wafer of silicon. It's the special coatings that are vital. On one side, a catalyst that splits oxygen from water. On the other, an alloy that releases the remaining hydrogen.

NOCERA: When sunlight shines on this, and it's in contact with water, poof! One side will make oxygen, and the other side will make hydrogen. So, you're using the sunlight to split water to make two fuels. You can see the bubbles forming on --

GLASS (on camera): You can, too.

GLASS (voice-over): Crucially, light activates this reaction.

NOCERA: If I turn the light off, it'll stop because there's no driving force. When I turn the light on, it will start up again.

GLASS: The resulting oxygen and hydrogen are stored separately and then recombined later to produce energy.

UNIDENTIFIED MALE: -- activated, T minus 10 --

NOCERA: Hydrogen is a very combustible form of energy. If I put it with oxygen, it's actually explosive. Hydrogen is what they use to make the Shuttle go into space as a fuel.

GLASS (on camera): Have you improved on nature?

NOCERA: Yes. The best stuff that grows, say, in a field, a plant, it only fixes one percent of the light. We're already at 7 percent.

GLASS (voice-over): Professor Nocera believes his discovery is best applied in the developing world, and that's what drives him on.

NOCERA: The energy I'm worried about is for the poor. And federal money isn't set up to worry about poor people in other parts of the world.

GLASS: The problem, as with many alternative energy sources, is cost.

NOCERA: When you're trying to make a new energy infrastructure, you'd better understand, this isn't going to happen overnight, because there's nothing any scientist is going to invent in their lab to displace hundreds of trillions of dollars of investment in an energy infrastructure. It's got to be a mindset we all have to want.

GLASS: Undeterred, Professor Nocera is a powerhouse himself, knowing that one day, energy crisis will force us all to seek out ever more alternative solutions.

NOCERA: I know you will be in control of your own energy someday. It's a question of how fast are you going to go there.


QUEST: When we come back, tackling unemployment and income inequality. We speak to the head of the IMF and the International Labor Organization. Government's role and what more they should be doing now.


QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in a moment. This is CNN, and on this network the news always comes first. President Putin has warned that Europe may face disruption to its gas supplies if Ukraine is unable to settle its debt to Russia. He called for urgent talks with European finance ministers to resolve the situation. Ukraine's energy ministers tell CNN Russia's gas price rises are unacceptable and politically motivated.

NATO has released satellite images that it says show a significant buildup of Russian troops and military hardware near Ukraine's border. The images were filmed in late March and early April. NATO calls the Russian forces 'ready for combat.' Russia's denies any troop buildup.

Oscar Pistorius faces a second day of aggressive cross-examination in his murder trial. The chief prosecutor tried to portray the Olympics sprinter as quick-tempered and reckless with guns. Pistorius denied that Reeva Steenkamp, the girlfriend he's accused of intentionally killing, was afraid of him.

Pope Francis has described human trafficking as an open wound on the body of contemporary society. Speaking at an anti-slavery conference in the Vatican, he denounced it as a crime against humanity. Earlier he met survivors of forced prostitution. He called for the international community to do more to tackle the crime.

And the U.S. Markets -- the numbers tell their own stories. They were down sharply. The Dow lost more than 260 points and NASDAQ was off more than 3 percent.

The IMF has found itself on the receiving end of a furious blast from Argentina. After the Fund predicted the Argentinian economy would only grow by half a percent this year. Argentina replied and accused the IMF of, in their words, "harboring ideological bias."' The Country said its recommendations had led to the worst social crisis in its history. The IMF's managing director Christine Lagarde was having none of it, and says that's plainly rubbish.


CHRISTINE LAGARDE, MANAGING DIRECTOR OF THE INTERNATIONAL MONETARY FUND: You know, first of all I would say that we have re-initiating work in cooperation with the Argentinian authorities. Last year, at their request, we did a financial sector assessment and currently we are reviewing the reforms and the changes that they are making to their CPI and to the methodology that they apply to this CPI. So, we will continue to have that productive dialog and we have to comply with the rules. We have standards that apply that have been agreed to by the entire membership, and it is not driven by ideology. It is driven by the determination to compare carrots and carrots, apples and apples. When there is a change in methodology - and it happens. You know there is now and again a resetting of numbers by various authorities. It happened in this country - in the United States. It happened just recently in Nigeria. And I know that the Argentinian authorities are resetting numbers for the calculation of AGDP. But, you know, this is fine. We just need to look at how it is done, we need to assess the numbers, and we cannot just jump to conclusion in a matter of a week. We do fundamental work and research, and we don't do things likely, we don't say things likely, so we will look obviously at whatever new numbers are being produced.

GABRIELA FRIAS, CNN ESP. CORRESPONDENT: Venezuela is an important case. I'm sure you are aware of the protests of entrepreneurs asking to review the model - the economic model the IMF saying months ago that it was not sustainable. My question to you - do you see any room for technical assistance? We know there's a Venezuelan representative within the IMF. Is it time for a review for offering - formally offering? Has there been any approach?

LAGARDE: It's overdue. So it is very much time for an Article IV review. We're celebrating the tenth anniversary of no review in Venezuela, and we would very much welcome an invitation to do an Article IV review in the country. And I hope that the indication of a willingness to negotiate, to have a dialog which, you know, we have heard about, would apply in the economic sphere and would extend also to the IMF. Venezuela is a member of this institution and we very much hope that we can go back to a normal relationship.

FRIAS: It takes trust.

LAGARDE: It's a both-way street. Trust is a both-way street.

FRIAS: Let's go to Brazil, because when we think about Brazil, we think about the very loud intention of Brazil to be better represented within the IMF, and you've talked so much about the reform being stalled for so long because of what's happening in the U.S. Congress. What do you tell the government that want louder voice, better quotas? Do we need to wait for the midterm elections to be done in the - in America? Do we need President Obama to speak louder about it?

LAGARDE: You know, all under-represented countries need to be better represented. I don't think that Brazil is an ounce lower (ph) in terms of under-representation, OK? So it's not just a Brazilian issue, it's an appropriate representation for the entire membership. Some are over- represented, others are under-represented. And as I said, Brazil is not in a worst-case situation, let's face it. China for instance is far more under-represented than Brazil.

My sincere hope is that we can exhaust all the avenues of the 2010 Governance and Quota Reform in the not-too-distant future. And I will - I hope the membership, I hope all authorities at the highest level bring to bear all the necessary conviction, persuasion power that they have to signal how important it is for the - not just for this institution. You know it's not about just us. It's about, you know, the role that we have to play, the mission that we were given to provide more stability, to support everyone, and to that effect, to be, number one, representative, number two, to have the resources that are needed.


QUEST: That's Christine Lagarde talking to us earlier. Now, inequality is one of the key themes at the IMF spring meetings in Washington. Guy Ryder is the director general of the ILO. He joins me now from Washington. Guy, we've talked so many times on this program to you about inequality, and I often wonder how you managed to sort of keep optimistic when the numbers don't necessarily go in the right direction. And, again, inequality as the global growth picks up still remains an issue but on the backburner.

GUY RYDER, DIRECTOR GENERAL, ILO: Well, I hope it's moving to the front burner now because what we're seeing as we gather for the meetings with the bank and the Fund here, is that there is increasing realization that inequality, it's not just a problem - a social problem for our societies, something we may deplore but not do much about. But is in fact also being recognized as a growth problem that, you know, the labels of inequality that we have right now in society is a drag on growth, and I hope that here in Washington now we're going to start to draw some conclusions from that realization.

QUEST: I know one size doesn't fit all, but if you were given the choice of one or two core policies that you would like to see adopted by IMF-member countries, which ones would they be? Would it be equal pay? Would it be minimum wage? Would it be poverty safety net?

RYDER: Yes. I mean, what's quite clear is one size does not fit all, but all of the things you've mentioned have been shown in different circumstances to work in reducing inequality. We've seen countries like Brazil make a whole on admittedly very high levels of inequality by minimum wage policies, but also by very comprehensive social protection. And let's not forget either that, you know, one of the best ways in the world to work that you share out growth in the fairest possible way is through collective bargaining, by workers and employers sitting down together and sharing the cake in a way which is both fair and promotion of growth. So all of these things I think need to come very much onto the - as you put it - the front burner now.

QUEST: Why do you think issues of inequality simply never really get the juices flowing at events like this? Everybody pays great lip service to it, but it never quite gets there. Why do you think that is? And, I mean, you might deny that it's true, but I think you'd agree it doesn't get the emphasis it deserves.

RYDER: I think for two reasons. One is we've developed quite high tolerance levels for levels of inequality which perhaps previous generations would have found surprising. But more importantly than that, I think we got ourselves into the mindsets that even if we don't like it very much, inequality is a price that we pay to make the global economy turn around as quickly as we want it to do. And I think now the contrary argument is coming home to roost, if you like.

But look, when economies get as unequal as they are in many cases today, you know, you'll run into trouble. Because the demand is not there, companies are not going to invest and they're not investing because they don't know who's going to buy their goods. So I think the big change now, and I hope it is a C (ph) change, is a realization that inequality is not the price we have to pay for economic success. It's actually an obstacle in the way of economic success.

QUEST: Good to see you, sir, as always. Thank you. Guy Ryder joining me from the IMF in Washington. We'll be back in just a moment, good evening.


QUEST: Sad news tonight. As we mentioned a while ago, the man who steered Canada's economy through the financial crisis has passed away. It was Jim Flaherty who has died at the age of 64. He was only just resigned as Canada's finance minister last month. He was an outspoken critic of deficits, he pushed for massive government stimulus during the financial crisis. And of all the economies of the G7 Canada's recovered most quickly. In a statement the foreign affairs minister John Baird said he will be remembered by all Canadians as a man that steered our nation through some of its most difficult days. I had the privilege of interviewing Minister Flaherty many times over the years, particularly on the issue of inequality which we heard tonight from Guy Ryder and Angel Gurria. These were his thoughts at Davos last year.


QUEST: Are you now concerned not just a world of haves and have nots, but an inequality in society when we take the Occupy movement that is now getting a head of steam that the elites have not listened.

JIM FLAHERTY, CANADA'S FORMER FINANCE MINISTER: I think there's evidence in some of our financial institutions that they have not learned very much from the crisis of a few years ago. Some of the compensation issues are back again with a very -

QUEST: What bit don't they understand? This is what I can't understand. Because (inaudible) done with the bankers. Don't you see them -


QUEST: -- which bit of greed do you not understand?

FLAHERTY: Well, unbridled greed is a dangerous thing as we learned a few years ago. So they need to get that under control. They really have to rely on their boards to do that. The boards thinking about the, you know, the corporation, they go to the corporation and then they go to the shareholders.


QUEST: Paula Newton is here with us this evening. Paula, you've obviously worked and covered this occasion you've covered Jim Flaherty. He was a gentleman. He was always courteous even at G7s and G8s where he'd be running from one place to the next. I had multiple interviews to do. He would also be courteous and he always no courteously.

PAULA NEWTON, INTERNATIONAL CORRESPONDENT FOR CNN BASED IN CANADA: (LAUGHTER). He was good at that I can you tell he liked you, Richard. And he liked when he interviewed (ph), he was a man who appreciated candor, and you saw that in all that he did. I can tell you in Canada at this moment, we've had a lot of acrimony politically - they're all coming together today in condolences. From the prime minister - or Prime Minister Stephen Harper saying that "It is with the heaviest of hearts that I offer my family's condolences and I know the condolences of the entire Parliament and the government of Canada." Richard, you can't underscore too much - you know you and I covered those crisis meetings - those G20 crisis meetings - in London. When we were going through those terrible financial times, with Jim Flaherty, with Mark Carney now at the head of the Bank of England, previously with the Bank of Canada. These are men who kind of brought to the fore what some of the principles were to try and keep a steady hand in the economy. And I can tell you, Mr. Flaherty - if he didn't like what they were doing with mortgages on the banks, he'd call up the major banks. If he didn't like some of the policies that the provinces were going on about - whether it was too much taxation or whatever, he'd call them up and say, 'Why not consider this?' He was a man who many Canadians saw as a strong, steady hand, and many people around the world came to see as a steady hand on the economy.

QUEST: And that's the interesting part, because of all the G7 or G8 - we're back to G7 I think now Russia's gone, of all the G7 countries, Canada, because of Jim Flaherty, Canada punched above its weight. Canada had a voice people respected. Canada didn't have a banking crisis like everybody else did.

NEWTON: And that had a lot to do with some other regulations that were put in place years previous about banks, and that was a lot of the different things that Jim Flaherty - yes, we have to say his predecessor Paul Martin - you know for many years was at the helm there. It is something that's appreciated in Canada and something that is - it's pocketful of politics, this is not about high finance. This is about really going down to the consumer level and talking about taxes and debt and what a government should be doing for its people. I want to say that when he resigned, NASDAQ actually gave him a fond farewell just a few weeks ago. They understood certainly the importance of him in the global economy, and there you have it. Very sad for his family. He was going to take some time off, Richard. He was not feeling well. His family convinced him to finally resign after eight years, and our condolences go to them.

QUEST: Paula, thank you. Thank you for coming in. Good to have your insight. Sad news indeed. Now, the weather forecast and Jenny Harrison is with us this evening. Good evening.

JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Hello, Richard. Yes, I'm afraid I'm going to start out with some fairly bad news as well. This is particularly for the residents Queensland in Australia because we have one of the most powerful cyclones aiming towards the shores there for you that we've had for many years - since 1899 there've only been and handful of storms this strong. It is just a shade of category 5 (it was on the Saffir-Simpson scale. If this was - it is already on a cat. 5 - it's already a cat. 5 on the Australian scale, and if this was in the Northwest Pacific, it would be a super typhoon.

Look at these - these winds are sustained at 250 kilometers an hour. It's moving to the southwest, it has actually slowed down just a little bit. It's moving at about 11 kilometers an hour and you have to figure that this has just come in. So, what you can see here because we've got boxes of it, boxes. But it's actually expected to make landfall in the next sort of 12 to 18 hours. So, already of course, we're coming up to 7 a.m. in the morning in Cairns. This is expected to make landfall this Friday evening or Friday night, just to the north of Cairns. And then it's going to work its way down the coast. You can see there down towards Townsville.

The winds will be extremely strong, but really once the storm does come on shore, then the winds will actually begin to ease. But there are certainly plenty of gale warnings and watches in place. They're about 200,000 people actually under these gale warnings because it's on a hugely- populated area of Australia. But even so, this is the rain coming with it. And again it's dropping off at the end there, but I can tell you that the rain of course - it'll move fairly swiftly along that east coast, but even so, some of these accumulations - it's gone again - but some of these accumulations - if they would come back - would show you about 250 millimeters of rain, it could well accumulate in the next 48 hours. So, the warnings are in place and so that's all expected to happen Friday evening/night local time.

In the U.S., of course we've some torrential storms to start out the week, but we've had very clear conditions in the Southeast for the last 24 hours. This is what it looks like out there at Augusta. This is Stewart Cink. It was his second shot on the second hole. Glorious sunshine, the skies have been very good and clear. Not a lot there in the way of flowering shrubbery this year because it's been so cold. These are the current temperatures/conditions. You can see a light wind from the south, 24 Celsius, good visibility, and for the next few days, a little bit more cloud maybe middle of the weekend. But even so, temperatures actually on the rise into the mid to high 20s, and that is actually a little bit above the average.

Then we head across towards Europe. Still quite chilly across Eastern Europe. Scattered showers in the southeast, mild across the central areas, more scattered showers in the northwest. The southwest, with Spain in particular, maybe some isolated thunderstorms, and this has given rise to some warnings in that particular region - mostly for heavy rain and some large hail. So, if all of this just doesn't sound very good, well listen, I think I've got the tonic just for you because you can this weekend head to Athens. Some glorious conditions, good temperatures, mid to high teens. Remember these temperatures are in the shade. Overnight temperatures not too bad. If that's not warm enough for you, how about this? Seville in Spain, temperatures in the high 20s, under again some pretty good, sunny skies and quite mild in the overnight hours. Richard.

QUEST: And you can take some of those bonds that you've bought at that cheaper price or cheaper yield I should say and spend them while you're there - well, at least in the Athens part. Jenny, thank you very much indeed.

HARRISON: Right. Bye-bye for now. (LAUGHTER).

QUEST: Right, now when we come back, Carl Icahn, he went into battle with eBay over PayPal. It's ended but who won? And not everybody's smiling. (RINGS BELL).


QUEST: It was a - it was a heady mix when Carl Icahn came head-to- head with eBay. The sparks flew and the accusations rolled out. And now the feud with eBay is over for the moment. The activist has dropped his demand that eBay split off its PayPal unit. He's withdrawn two nominees for the eBay board. And in a concession to Mr. Icahn, eBay will add David Dorman to the board as an independent director. eBay's chief exec John Donahoe calls the deal a win for all shareholders. Paula Newton asked him how this deal came together.


DON DONAHOE, CEO, EBAY: Carl I have had dialog throughout this process, private dialog on a periodic basis. And about a week ago, Jimmy Lee who is the vice chairman of JPMorgan Chase had been meeting with Carl on another topic, saw that there was opportunity, so he called - he called me - and he said. You know, you and Carl ought to spend more time talking directly with one another about the business. And that's exactly what we've done. We spent a lot of time over the weekend talking. We talked about PayPal and its enormous potential in online payments, talked about eBay. And as we did, I think Carl saw the real value in keeping our company together, and the real opportunity and potential. So Carl in essence is becoming a long-term shareholder, and it allows me and all of our management team to stay focused on doing what's right for all shareholders.

NEWTON: Can you talk about how Mr. Icahn though has moved forward that issue of shareholder values, specifically when it comes to that PayPal unit, because that was definitely a sore point between you?

DONAHOE: Well, what I - you know - when I said that Carl, and I've said repeatedly through this process, is that our board and I look all the times at all the strategic alternatives and options in front of us and we're committed to pursuing a path that drives the greatest growth in the market which in turn drives the greatest shareholder turn - return - over time. And now we believe that that involves eBay/PayPal together because there's strong synergies between the two businesses. eBay helps PayPal grow more quickly and successfully and vice-a-versa. And so, we'll continue to pursue that path. That's the best way to drive shareholder value. And if and when that changes, we'll act rationally as we have in the past. So, I think Carl now understands that, he appreciates it and we'll continue to pursue that path with him now as one of our long-term shareholders.

NEWTON: And what's the one thing that you can say to investors, shareholders, people watching your stock right now, that this acrimony hasn't really done permanent and lasting damage to eBay? I mean, I know you're playing it as a big plus and that you've learned certainly from the issues that Mr. Icahn brought up, but how can you say that there wasn't any damage here? I'm sure you would have rather not going through this very public battle.

DONAHOE: Yes, there were a little bit of distraction in the media over the last several weeks, but our team stayed focused and I tried to keep us focused on doing what is the only thing we can in a situation like this - delivering for our customers, innovating and executing. That's what drives growth and that's what drive shareholder value over time.


QUEST: "Profitable Moment" is next.


QUEST: Tonight's "Profitable Moment." The whole question of inequality which we've talked about at some length in tonight's program isn't unique to the developing world or to third-world countries or to those societies which have massive differences in equality. Even in the most developed economies here in the United States, for example, questions of inequality go to the very core of society. Whether it's gay rights in the workplace or whether it's equal pay, whether it's time off for home. Whatever the issue is, it might be something like the minimum wage or extending unemployment benefit. You see the problem and the point is when it comes to inequality and the issues of un-equality, nobody comes to the table with clean hands. What you get and where you sit depends on the society where you live. And that's why inequality remains on the agenda. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you tomorrow.