05/10/2011 World Business Report


05/10/2011

Similar Content

Browse content similar to 05/10/2011. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

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.

Download Subtitles

SRT

ASS