27/10/2011 World Business Report


27/10/2011

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place nearly three -- She said the attempts took place nearly three

:00:04.:00:12.

years ago. Now for the latest financial news.

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Hello and welcome to World Business Report.

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Back from the brink - EU leaders agree a larger bailout fund and

:00:23.:00:29.

banks accept a 50% write-off of Greek debt. Much of the detail

:00:29.:00:34.

still needs to be sorted. Asian stock currency and commodity

:00:34.:00:40.

markets rise after European leaders raise hopes for the eurodebt crisis

:00:40.:00:48.

will be contained. -- eurozone debt crisis will be contained. GDP is

:00:48.:00:58.
:00:58.:01:02.

expected to show growth picking up After ten hours of talks, European

:01:02.:01:06.

leaders have unveiled a plan which they hope will stabilise the

:01:06.:01:13.

eurozone. The key to the deal - a break in the deadlock between banks

:01:13.:01:20.

and governments. Banks holding Greek debt will accept a loss of

:01:20.:01:25.

50%. Leaders also agreed a mechanism for the eurozone's main

:01:25.:01:33.

bailout fund to boost its fire power to $1 trill -- 1 trillion

:01:33.:01:38.

euro. The framework should be in place in November. Banks will be

:01:38.:01:42.

forced to raise more capital to shield them from any losses. How

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will all of this work in practice? Let's talk to Andrew Walker who is

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in Brussels. Hello, Andrew. How is it going to work in practice? And

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where is the money going to come from? Part of the idea of it is to

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make more effective use of the money that's already been committed.

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The financial guarantees made by the eurozone governments themselves

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and it is politically enormously important to those countries that

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they did not end up having to commit more money to it. That's

:02:17.:02:23.

going to be used to fund the system of financial guarantees, a kind of

:02:23.:02:28.

insurance against losses on new bonds issued by some eurozone

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governments. The idea is that you, is that you underwrite more lending

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by, let's say for example, Italy, by doing it through the system of

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guarantees than you can do by directly lending from the European

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bailout agency itself. The other elwant is that they're going to

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establish some sort of, what they call a special-purpose vehicle to

:02:51.:02:56.

put money, to encourage money from outside Europe to go in to the

:02:56.:02:59.

European bailout system. So the obvious source of help there is

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going to be some of the big emerging economies. China is the

:03:04.:03:08.

most obvious target. And we do know the head of the European Bailout

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Agency is planning to go to China later in the week to see if he can

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:03:23.:03:23.

persuade them to contribute. What about this 50% write-down? Doesn't

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mean to say that the Greek debt mounten won't be reduced by 50%,

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does it? A lot of that debt is privately owned? Absolutely. I mean,

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this deal applies only to, it's a voluntary one. So I suppose many

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private holders of the debt won't take part in it. It only applies to

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the private sector. So the debt owed to the Merl Monetary Fund --

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International Monetary Fund, the eurozone countries, debt is held

:03:59.:04:03.

there. Those won't be written down by this 50% figure, which is why

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you do come to a much smaller overall figure for the amount of

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debt relief Greece will get. It's a relatively large figure. More than

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double the headline figure they agreed only in July. A figure

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that's never been implemented. So, clearly, it does make a difference.

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Again, on this one, there is still a lot of detailed negotiation to be

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done. However, the key point is that the leaders of the

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negotiations on behalf of the international banks have agreed at

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least to this headline figure. Absolutely. Thank you very much.

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How have the markets been reacting so far? Over in Asia, Rico is in

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the BBC Singapore office. What's been happening? A good reaction?

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Very popular reaction. Agents sparked, the currency and

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commodities all in positive territory after European leaders

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agreed to boost the region's rescue funds. Basically, it's giving a lot

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of investors here hope that the eurozone debts crisis will be

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contained. Most of the regional markets have been down by 15% to

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20%. The likes of Japan, South Korea, Singapore, Australia, Hong

:05:23.:05:28.

Kong all trading higher. Investors having the feeling they'd want to

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get back in to risky assets. The euro is extending its gains in

:05:34.:05:44.
:05:44.:05:48.

Asian trade. And you have Asian currencies from the -- from the

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different currencies. Oil price is going up. US crude nearing $91. As

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for the price of gold, also soaring to its highest level in more than a

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month. Now trading add $1,721. -- at $1,721. Thank you very much.

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Also weighing down the summit is deep concern about Italy which has

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:06:24.:06:26.

a public debts 1.8 trill -- public debt of 1.8 trillion. Berlusconi

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has delivered a plan of action. Hello. It's really vital, isn't it,

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that this plan of action is enacted? Silvio Berlusconi is

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pretty beleaguered? It is fundamental that these good

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intentions will be transformed in actions. And the government is

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ready to do it but the coalition is not very strong and there are

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important differences within the coalition and between the coalition

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and the opposition. So we will see. As far as the public are concerned,

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raising the retirement age, they'd be very opposed to it. But reforms

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like that are key to make it more competitive? Yeah. There is a lot

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of new approach, I would say, in the sense of opening hours for

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shops will be increased or the intention is they should be

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increased. And in many occupations, self-employed occupations, there

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will be a more liberal approach. So this is important. More

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privatisation, so the public debt will be reused. Thank you very much.

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That's all we have time for. Thank you very much for joining us from

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Rome. To reduce the debt mountain, growth in Europe is key. It's an

:07:50.:07:53.

issue the US is struggling with too. After a volatile few months,

:07:53.:07:58.

including the downgrade of America's credit rating, economists

:07:58.:08:02.

are slightly more optimistic about the US GDP. They're predicting an

:08:02.:08:07.

expansion of as much as 2.5% for the third quarter. The housing

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market remains a major blackspot. Even the beach doesn't provide an

:08:13.:08:17.

escape from the chill winds blowing through the economy. This is all

:08:17.:08:24.

that remains of plans to build a luxury apartment building here in

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New Jersey. The project stalled during the recession. A blow to the

:08:28.:08:32.

city. It would have been a major spike in the economy. More

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importantly, the fact that piece of property was developed. If the

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economy had remained the same, it would have spurred additional

:08:41.:08:48.

development down. This professor agrees. He said housing is holding

:08:48.:08:53.

back growth. In a normal economic cycle, housing and construction are

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usually post recession economic locomotives. This time around,

:08:57.:09:01.

they've held back the recovery train. We've never had a strong

:09:01.:09:06.

recovery without a housing recovery. The unfinished apartment block, a

:09:06.:09:11.

short stroll from here, is in some ways a symbol of the broader

:09:11.:09:17.

economy which itself is struggling to grow. And then in here, we have

:09:17.:09:22.

a project my husband and I did. That's making its toll on

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businesses here on the boardwalk. The worst thing for me in all of

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this is putting people out of work. We employ right now about 100

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people. In the summer, over 200. And the lay-offs have been more

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drastic this year because I've learned to be more diligent with

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the payroll, which in our industry is the biggest problem. Parts of

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the economy are starting to improve but with unfinished projects like

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this one dotted across the countries, dreams of a robust

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recovery may turn out to be built on sand.

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So just to recap - it's so far so good in terms of the reaction to

:10:05.:10:09.

the debt crisis deal on the markets. There was a bit of a lacklustre

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