Browse content similar to 05/10/2011. Check below for episodes and series from the same categories and more!
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Those are the latest headlines. It is time for the latest financial | :00:04. | :00:14. | |
:00:14. | :00:19. | ||
This is World Business Report. The headlines: More twists in the | :00:19. | :00:25. | |
eurozone crisis as Italy get a downgrade from Moody's. A stricken | :00:25. | :00:31. | |
bank, Dexia Bank faces a break-up as France and -- France and Belgium | :00:31. | :00:36. | |
will launch a rescue plan. It's China is the recipe for | :00:36. | :00:43. | |
success. An American fast food chain which sells pizza, and fried | :00:43. | :00:52. | |
chicken. A bitterly's credit-rating has been slashed by Moody's the | :00:52. | :00:58. | |
ratings agency. It cut it by three notches to give | :00:58. | :01:01. | |
it a A2 rating. This means it is more expensive for Italy to borrow | :01:01. | :01:05. | |
money and it could exacerbate the banking crisis. It is the first | :01:05. | :01:10. | |
time in nearly 20 years Moody's has downgraded Italy's debt and it | :01:10. | :01:16. | |
follows a similar move last month. Italy has approved an austerity | :01:16. | :01:20. | |
plan which initially brought down its borrowing costs. They are now | :01:20. | :01:25. | |
back near record highs. Silvio Berlusconi said the move was | :01:25. | :01:35. | |
:01:35. | :01:37. | ||
expected. The move was expected but still not good for Italy. No. The | :01:37. | :01:44. | |
market reaction was due because we had the downgrade a couple of weeks | :01:44. | :01:51. | |
ago. But it is another wake-up call to the politicians to sort out | :01:51. | :01:54. | |
confidence in the common currency area. Italy is a country which has | :01:55. | :02:00. | |
had high debt levels far over 20 years. Its current debt levels and | :02:00. | :02:07. | |
is lower. Until very recently they were running a surplus on their | :02:07. | :02:10. | |
budget, excluding interest charges. They were clearly on top of it. | :02:11. | :02:15. | |
Over the last six months... That is why for the first half of the year | :02:15. | :02:20. | |
they were bypassed by the gloom. But over the last three months a | :02:21. | :02:28. | |
culmination of a some backsliding and the spreading crisis over the | :02:28. | :02:32. | |
hall eurozone has meant that Italy's cost of financing has gone | :02:32. | :02:38. | |
up. What might be sustainable at 4.5% is not sustainable at 6.5%. | :02:38. | :02:42. | |
They are halfway between those two at the moment. From the point of | :02:42. | :02:52. | |
:02:52. | :02:53. | ||
view of Italy, as you say, the debt has been clear. But having said | :02:53. | :02:58. | |
that its debt-GDP ratio is second biggest after Greece. This is the | :02:58. | :03:02. | |
issue, financing that debt and paying the interest on it. It is | :03:02. | :03:07. | |
climbing. That becomes incredibly difficult. Yes, and the interest | :03:07. | :03:13. | |
rate matters. Japan's ratio is even higher up but they can finance it. | :03:13. | :03:17. | |
In August there was a row between the prime minister and the budget | :03:17. | :03:22. | |
minister which made it look like Italy was backsliding on its fizz | :03:22. | :03:25. | |
to put -- on its fiscal austerity programme. The markets savaged | :03:25. | :03:31. | |
their bonds and interest rates went up. The other aspect... If you like, | :03:31. | :03:34. | |
they have been caught up in the general deterioration in confidence. | :03:35. | :03:39. | |
But the other aspect is that Europe must find a way of encouraging | :03:39. | :03:45. | |
countries to sort out their long- term budget problems without | :03:45. | :03:48. | |
prolonging or finding economies back into recession. Otherwise you | :03:48. | :03:58. | |
:03:58. | :04:00. | ||
are chasing a moving target. Let's have a look at the other | :04:00. | :04:04. | |
twist. Belgium and France have pledged to save Dexia Bank. There | :04:04. | :04:08. | |
has been worries it could be threatened by exposure to the debt | :04:08. | :04:12. | |
crisis. That sent its shares plunging and forced the French and | :04:12. | :04:18. | |
Belgian governments to launch a rescue plan. As the debt crisis | :04:18. | :04:23. | |
spreads from Greece, Ireland and Portugal, the main fear is that | :04:23. | :04:26. | |
rising losses could move through the European financial system yet | :04:26. | :04:30. | |
again. It could lead to the possibility of a new and more | :04:30. | :04:34. | |
devastating credit crunch. Uncertainty created by the debt | :04:34. | :04:39. | |
crisis has increased banks' reluctance to lend. One back starts | :04:39. | :04:44. | |
to go down and it threatens to pull down others. That makes banks | :04:44. | :04:51. | |
terrified of lending to each other. Remember that interest rates are | :04:51. | :04:58. | |
close to zero and there are very few deposits. They rely on deposits | :04:58. | :05:03. | |
via the into banking markets. When that starts to dry up banks around | :05:03. | :05:09. | |
the world feel pressure. Adding to the pressure, reports that the | :05:09. | :05:13. | |
Federal Reserve Bank of New York is seeking reassurances from European | :05:13. | :05:17. | |
banks over their liquidity. The US is becoming nervous about the | :05:18. | :05:22. | |
situation in Europe and is seeking to limit risks and any exposure to | :05:22. | :05:29. | |
future lending. Markets are now counting on the European financial | :05:29. | :05:33. | |
stabilisation Fund and the ECB to provide enough support for the | :05:33. | :05:37. | |
banking sector to maintain confidence and prevent another rush | :05:37. | :05:44. | |
on the banks. The company behind KFC, Yum Brands, | :05:44. | :05:48. | |
has failed to impress investors with its latest profit news, | :05:48. | :05:55. | |
despite strong growth in China. Let's be to Rico Hizon in Singapore. | :05:55. | :06:04. | |
Why is this happening? First of all, the sluggish performance in the US | :06:04. | :06:06. | |
market has basically been disappointing because the American | :06:06. | :06:14. | |
market has long been saturated. Now China's appetite for fast food is | :06:14. | :06:18. | |
growing. Over 1 billion strong population and the potential there | :06:18. | :06:23. | |
is enormous. It is showing in the strong sales numbers of the Yum | :06:23. | :06:29. | |
Brands, the owner of Pizza Hut, and KFC. They have opened 4,000 | :06:29. | :06:33. | |
locations on the mainland, generating just over 40% of the | :06:33. | :06:39. | |
company's total operating profit. They also open 138 new restaurants | :06:39. | :06:44. | |
in China during the last quarter. That was during July it-August, | :06:44. | :06:49. | |
which boosted profitability. They are on track to open 600 more | :06:49. | :06:55. | |
restaurants this year. Apart from China, they also opened more than | :06:55. | :06:59. | |
190 new restaurants during the quarter and expects to open 900 | :06:59. | :07:05. | |
more for the year. The growth in the US is now outside of the US but | :07:05. | :07:09. | |
they say that the company's continued success in the mainland | :07:09. | :07:14. | |
is not guaranteed. There are challenges ranging -- ranging from | :07:14. | :07:21. | |
food and inflation. Increased tens of thousands are | :07:21. | :07:25. | |
state workers are staging a 24-hour strike. Such protests have become | :07:25. | :07:29. | |
an almost daily event as workers fight austerity measures and | :07:29. | :07:34. | |
sweeping privatisation. But international partners are not | :07:34. | :07:41. | |
satisfied with the case of the state's sell-offs. This is one of | :07:41. | :07:45. | |
the 5,000 state lottery shops due to be privatised. But you can place | :07:45. | :07:53. | |
a bet on this. The whole raft of great assets for sale will not | :07:53. | :07:59. | |
raise the money by 2015. That includes the railways. 49% would be | :07:59. | :08:04. | |
welcome but they may not be any takers until the network is pruned | :08:04. | :08:10. | |
to reduce losses. Another privatisation lined up for next | :08:10. | :08:16. | |
year but mired in delays is the Athens water company, which employs | :08:16. | :08:21. | |
2,800 workers. Few job losses are expected but its chief admits staff | :08:21. | :08:28. | |
had valid worries about their wages, pensions and conditions. Greece is | :08:28. | :08:34. | |
the last Soviet bastion in Europe. Nothing has happened since last | :08:34. | :08:41. | |
summer. There is a lot of opposition in the process. The | :08:41. | :08:46. | |
market is distressed. The capitalisation of these companies | :08:47. | :08:51. | |
is low. Take gas privatisation. It is being opposed every step of the | :08:51. | :08:55. | |
way by the unions. They simply would not get the same pay and | :08:55. | :08:59. | |
conditions under a commercial management. The government had | :08:59. | :09:03. | |
promised 1.7 billion euros worth of sales by this month. All they have | :09:03. | :09:09. | |
sold recently is 10% of a mobile phone company. We have over | :09:09. | :09:13. | |
regulations, under regulations, conflicting regulations. There are | :09:13. | :09:18. | |
too many people making a decision about one specific asset. That | :09:18. | :09:23. | |
problem takes more than 16 months to resolve. It took privatisation | :09:23. | :09:28. | |
pioneer in Britain a decade to sell off its utilities. Greece has just | :09:28. | :09:31. | |
months and so far it has been hard to convince workers that the | :09:31. | :09:38. | |
process will bring anything except pay cuts and higher bills. | :09:38. | :09:43. | |
Asian markets are having a tough session in reaction in a large part | :09:43. | :09:46. | |
of that downgrade by Moody's. This happen well after the European | :09:46. | :09:49. |