:00:04. > :00:14.Those are the latest headlines. It is time for the latest financial
:00:14. > :00:19.
:00:19. > :00:25.This is World Business Report. The headlines: More twists in the
:00:25. > :00:31.eurozone crisis as Italy get a downgrade from Moody's. A stricken
:00:31. > :00:36.bank, Dexia Bank faces a break-up as France and -- France and Belgium
:00:36. > :00:43.will launch a rescue plan. It's China is the recipe for
:00:43. > :00:52.success. An American fast food chain which sells pizza, and fried
:00:52. > :00:58.chicken. A bitterly's credit-rating has been slashed by Moody's the
:00:58. > :01:01.ratings agency. It cut it by three notches to give
:01:01. > :01:05.it a A2 rating. This means it is more expensive for Italy to borrow
:01:05. > :01:10.money and it could exacerbate the banking crisis. It is the first
:01:10. > :01:16.time in nearly 20 years Moody's has downgraded Italy's debt and it
:01:16. > :01:20.follows a similar move last month. Italy has approved an austerity
:01:20. > :01:25.plan which initially brought down its borrowing costs. They are now
:01:25. > :01:35.back near record highs. Silvio Berlusconi said the move was
:01:35. > :01:37.
:01:37. > :01:44.expected. The move was expected but still not good for Italy. No. The
:01:44. > :01:51.market reaction was due because we had the downgrade a couple of weeks
:01:51. > :01:54.ago. But it is another wake-up call to the politicians to sort out
:01:55. > :02:00.confidence in the common currency area. Italy is a country which has
:02:00. > :02:07.had high debt levels far over 20 years. Its current debt levels and
:02:07. > :02:10.is lower. Until very recently they were running a surplus on their
:02:11. > :02:15.budget, excluding interest charges. They were clearly on top of it.
:02:15. > :02:20.Over the last six months... That is why for the first half of the year
:02:21. > :02:28.they were bypassed by the gloom. But over the last three months a
:02:28. > :02:32.culmination of a some backsliding and the spreading crisis over the
:02:32. > :02:38.hall eurozone has meant that Italy's cost of financing has gone
:02:38. > :02:42.up. What might be sustainable at 4.5% is not sustainable at 6.5%.
:02:42. > :02:52.They are halfway between those two at the moment. From the point of
:02:52. > :02:53.
:02:53. > :02:58.view of Italy, as you say, the debt has been clear. But having said
:02:58. > :03:02.that its debt-GDP ratio is second biggest after Greece. This is the
:03:02. > :03:07.issue, financing that debt and paying the interest on it. It is
:03:07. > :03:13.climbing. That becomes incredibly difficult. Yes, and the interest
:03:13. > :03:17.rate matters. Japan's ratio is even higher up but they can finance it.
:03:17. > :03:22.In August there was a row between the prime minister and the budget
:03:22. > :03:25.minister which made it look like Italy was backsliding on its fizz
:03:25. > :03:31.to put -- on its fiscal austerity programme. The markets savaged
:03:31. > :03:34.their bonds and interest rates went up. The other aspect... If you like,
:03:35. > :03:39.they have been caught up in the general deterioration in confidence.
:03:39. > :03:45.But the other aspect is that Europe must find a way of encouraging
:03:45. > :03:48.countries to sort out their long- term budget problems without
:03:48. > :03:58.prolonging or finding economies back into recession. Otherwise you
:03:58. > :04:00.
:04:00. > :04:04.are chasing a moving target. Let's have a look at the other
:04:04. > :04:08.twist. Belgium and France have pledged to save Dexia Bank. There
:04:08. > :04:12.has been worries it could be threatened by exposure to the debt
:04:12. > :04:18.crisis. That sent its shares plunging and forced the French and
:04:18. > :04:23.Belgian governments to launch a rescue plan. As the debt crisis
:04:23. > :04:26.spreads from Greece, Ireland and Portugal, the main fear is that
:04:26. > :04:30.rising losses could move through the European financial system yet
:04:30. > :04:34.again. It could lead to the possibility of a new and more
:04:34. > :04:39.devastating credit crunch. Uncertainty created by the debt
:04:39. > :04:44.crisis has increased banks' reluctance to lend. One back starts
:04:44. > :04:51.to go down and it threatens to pull down others. That makes banks
:04:51. > :04:58.terrified of lending to each other. Remember that interest rates are
:04:58. > :05:03.close to zero and there are very few deposits. They rely on deposits
:05:03. > :05:09.via the into banking markets. When that starts to dry up banks around
:05:09. > :05:13.the world feel pressure. Adding to the pressure, reports that the
:05:13. > :05:17.Federal Reserve Bank of New York is seeking reassurances from European
:05:18. > :05:22.banks over their liquidity. The US is becoming nervous about the
:05:22. > :05:29.situation in Europe and is seeking to limit risks and any exposure to
:05:29. > :05:33.future lending. Markets are now counting on the European financial
:05:33. > :05:37.stabilisation Fund and the ECB to provide enough support for the
:05:37. > :05:44.banking sector to maintain confidence and prevent another rush
:05:44. > :05:48.on the banks. The company behind KFC, Yum Brands,
:05:48. > :05:55.has failed to impress investors with its latest profit news,
:05:55. > :06:04.despite strong growth in China. Let's be to Rico Hizon in Singapore.
:06:04. > :06:06.Why is this happening? First of all, the sluggish performance in the US
:06:06. > :06:14.market has basically been disappointing because the American
:06:14. > :06:18.market has long been saturated. Now China's appetite for fast food is
:06:18. > :06:23.growing. Over 1 billion strong population and the potential there
:06:23. > :06:29.is enormous. It is showing in the strong sales numbers of the Yum
:06:29. > :06:33.Brands, the owner of Pizza Hut, and KFC. They have opened 4,000
:06:33. > :06:39.locations on the mainland, generating just over 40% of the
:06:39. > :06:44.company's total operating profit. They also open 138 new restaurants
:06:44. > :06:49.in China during the last quarter. That was during July it-August,
:06:49. > :06:55.which boosted profitability. They are on track to open 600 more
:06:55. > :06:59.restaurants this year. Apart from China, they also opened more than
:06:59. > :07:05.190 new restaurants during the quarter and expects to open 900
:07:05. > :07:09.more for the year. The growth in the US is now outside of the US but
:07:09. > :07:14.they say that the company's continued success in the mainland
:07:14. > :07:21.is not guaranteed. There are challenges ranging -- ranging from
:07:21. > :07:25.food and inflation. Increased tens of thousands are
:07:25. > :07:29.state workers are staging a 24-hour strike. Such protests have become
:07:29. > :07:34.an almost daily event as workers fight austerity measures and
:07:34. > :07:41.sweeping privatisation. But international partners are not
:07:41. > :07:45.satisfied with the case of the state's sell-offs. This is one of
:07:45. > :07:53.the 5,000 state lottery shops due to be privatised. But you can place
:07:53. > :07:59.a bet on this. The whole raft of great assets for sale will not
:07:59. > :08:04.raise the money by 2015. That includes the railways. 49% would be
:08:04. > :08:10.welcome but they may not be any takers until the network is pruned
:08:10. > :08:16.to reduce losses. Another privatisation lined up for next
:08:16. > :08:21.year but mired in delays is the Athens water company, which employs
:08:21. > :08:28.2,800 workers. Few job losses are expected but its chief admits staff
:08:28. > :08:34.had valid worries about their wages, pensions and conditions. Greece is
:08:34. > :08:41.the last Soviet bastion in Europe. Nothing has happened since last
:08:41. > :08:46.summer. There is a lot of opposition in the process. The
:08:47. > :08:51.market is distressed. The capitalisation of these companies
:08:51. > :08:55.is low. Take gas privatisation. It is being opposed every step of the
:08:55. > :08:59.way by the unions. They simply would not get the same pay and
:08:59. > :09:03.conditions under a commercial management. The government had
:09:03. > :09:09.promised 1.7 billion euros worth of sales by this month. All they have
:09:09. > :09:13.sold recently is 10% of a mobile phone company. We have over
:09:13. > :09:18.regulations, under regulations, conflicting regulations. There are
:09:18. > :09:23.too many people making a decision about one specific asset. That
:09:23. > :09:28.problem takes more than 16 months to resolve. It took privatisation
:09:28. > :09:31.pioneer in Britain a decade to sell off its utilities. Greece has just
:09:31. > :09:38.months and so far it has been hard to convince workers that the
:09:38. > :09:43.process will bring anything except pay cuts and higher bills.
:09:43. > :09:46.Asian markets are having a tough session in reaction in a large part
:09:46. > :09:49.of that downgrade by Moody's. This happen well after the European