17/06/2011 World Business Report

to be a serious condition. Those are the latest headlines. It is

time for the latest financial news. Welcome to World Business Report.

The headlines: The euro falls further and Greek bond yields soar

ever higher as investors see no clarity on a rescue plan for Athens.

In Singapore, Asian stock markets are lacklustre as investors remain

worried about Greece's debt problems.

Prada scales back its Hong Kong flotation as risk goes out of

fashion. It is a crucial day in what is

threatening to become a new financial crisis for Europe. In

just over an hour's time, the Greek Prime Minister reshuffles his

cabinet in a bid to push through new austerity measures that are a

condition of the EU and IMF bail- out. Without it, next month, Greece

will become the first eurozone them back to default on its debts. In

Berlin, Germany's Chancellor will meet the French Prime Minister to

discuss a longer term plan for managing Greece mac's 750 billion

euros debt. This is the dilemma for Europe. German taxpayers are

unwilling to write more checks to Greece. Germany wants investors to

share the pain. Either by excepted they will not be repaid in full, in

other words, taking a cut, or as quickly, by extending the

maturities on bonds. But the European Central Bank, backed by

France, is against the restructuring of existing debt, it

is worried about the precedent that will set for Ireland, Portugal, and

even Spain. The central bank is also worried about its own finances,

because it has been buying Greek bonds and accepting them as

collateral. It has $180 billion of exposure. France's banking sector

is the second-biggest lender. Worries about exposure to Greece

hit bank shares very hard on Thursday so the big question, what

his next? In the studio, we had David from BCP partners.

The former Federal Reserve chief, Alan Greenspan, said that default

is inevitable because Greece does not have the ability to deliver on

its austerity measures. Do you go along with that? Icesave Greece was

any other country, if it was outside the eurozone, even in Asia,

Greece would have to faltered long ago. The only trouble we have is

that Greece is inside the eurozone, if Greece defaults, it sets a

precedent for other countries. After a Greek default, it will not

happen again, before island off for Spain. You do not want to have

Greece default because it was set a precedent. That is an important

point. There is an argument that Greece does not want to default,

but the EU and the IMF are pushing it was that position, because they

are not working hard enough to do with the problem. It might happen

because there is too much pressure. This is an EU problem. Greece may

have managed itself very badly, but the ramifications are for the

European Union not taking a strong hand in this, they are dire. There

is a danger of throwing money down a black Kohl. No matter how much

money you put in, it is not hitting the root of the problem. We cannot

afford to shrug our shoulders and say that is how it is. We cannot

afford to do that. The European Central Bank has 180 billion euros

of bonds. It is a huge amount of money. I think the central bank is

capitalised at 180 billion euros, it is already under an enormous

amount of pressure, the European Union's political leaders have to

get a grip, for the central reason, markets cannot cope with

uncertainty. The fact they have refused to make decisions is just

exacerbating the problem. It seems as if it is largely Europe's fault,

because they are not being proactive enough, they are sitting

too far on the sidelines, they are making the situation worse. That is

a fair point. Europe has dragged its feet all along. Something was

decided a couple of weeks ago, Europe or was very reluctant to

come across with money or measures. The point you have reached, both

parties in the IMF and Europe, and Greece, they are playing a big men

should game and this is a very dangerous situation. -- a bridge

midship game. Are we in that situation? It Europe allows this to

get out of hand, it will have its own Lehman Brothers, with even

worse ramifications. The contagion effects, the banks on the bank --

the effects on the banking sector, it Europe as a whole, the survival

of the euro, it will be at stake. We will press on to see how this is

playing out in the Asian markets. What has been the response?

last is not very deep in late Asian trade. Currently, they are

lacklustre, they are in positive territory. But they are very

uncertain about the future due to this deepening crisis. It is a

potential contagion effect on other eurozone economies. One analyst

that I spoke to earlier, said that if if serious financial

problems, this will have a major effect on Asian markets. You have

technology, auto makers, property and construction issues, they are

falling before the weekend. There are also concerns about higher

rates in China. The weak US growth is also keeping investors on the

sidelines. The euro continues to slip. In oil markets, prices are

falling at four-month lows as investors continued to worry about

the pre-crisis. -- the Greek crisis. Prada is having to scale back its

ambitions ahead of its flotation on the Hong Kong Stock Exchange. It is

lined up for next week. It is being forced to pitch its shares at the

bottom end of the price range that it announced, because of poor

market conditions. Samsonite made a lacklustre market debut in Hong

Kong after scaling back its own IPO. Shares fell sharply on the first

day of trade. With typical Italian flair, Prada

has been showing off not just its latest collection, but a new

financial trend as well. Instead of using the stock market in Milan, it

has opted to float 20% of its shares in Hong Kong, the first big

Italian company to do so. Prada is loved by Asian companies, Asian

investors may be equally as King. Just as the price tag on its

accessories can be a strong that -- can be too high, shares are just

too expensive. Rivals such as Louis Vuitton looked like better value.

quibble how Prada is just that much more special than other fashion

houses. It is a significant premium. That is what I really question.

others see more of an opportunity, with Prada planning 70 new stores

in Asia, readers of a fashion magazine are being asked to buy its

shares as well as its outfits. is at the peak of its fashion

credibility. I think it looks set to continue. But markets are not in

a positive mood. Yesterday, Hong Kong was the venue for the

flotation of Samsonite, the world's biggest luggage maker, its shares

closed down 8%. A big show for Prada and a big test for Hong Kong,