03/11/2011 World Business Report

Those are the latest headlines. It is now time for the latest from

the G20 in Cannes. A warm welcome to World Business

Report. Eurozone leaders have cut off a

pavement to Greece until the country decides on the future of

its membership of the single currency.

It is Mario Draghi's first meeting at the helm of the European Central

Bank. He hits the ground running as the eurozone rescue plan threatens

to unravel. Asian stocks, currencies and

commodities retreat as the Greek bail out package has been put on

hold. It is a pivotal moment for Europe,

a summit that was supposed to present to the world a solution to

the eurozone crisis is now thrown into disarray as leaders are forced

to admit the possibility that Greece may have to leave the single

currency. Everything hangs on a referendum in Greece early next

month. We are going live to Cannes. We are there with the very latest.

Angela Merkel and Nicolas Sarkozy are talking tough last night.

They were dealt a very difficult hand, this referendum, which as we

understand it, they did not anticipate as taking place. It

becomes impossible for the Greek Prime Minister to retract that

promise. They imposed three stings on him. They said that he had to do

it quickly, right at the beginning of December, we are going to

withhold any payments until we have a result of that referendum, and in

addition to that, this is a question that you will ask, you

would not be talking about the bail out package, you will be asking the

Greek people if they want to or not remain in the eurozone. The

prospect of more' and depending on the answer before and after the

referendum is very large. And the prospect of contagion is becoming

more real. Berlusconi arrives today in Cannes. He himself had a crisis

meeting with his Cabinet last night. Yes indeed. Italy is a very good

example of exactly how Greece could affect the rest of the eurozone. We

have seen the value of Italian bonds plummet. A great deal of

speculation about Italy's future. It also has budgetary problems. The

problem is the amount of debt that is out there. French banks are

exposed to 40 billion euros. When it comes to Italian debt, it is

about 200 bn. We have come on the yields on those bombs, -- on those

bonds, it is very high at the moment. It exacerbates the problem

for Italy. Berlusconi is arriving today, and I imagine he will be the

target of some pretty tough talking as well. President Hu Jintao of

China is there as well. He was seen as perhaps the saviour of the

eurozone, but they are holding back and watching what was it -- what is

going to happen. Absolutely. It is impossible for China to make a

decision how and if it would come to the aid of the eurozone, for

example, by buying eurobonds, because the uncertainty is too

great. If Greece were to exit the eurozone, how would it do that.

Will it then default on its debt? It would be a fairly this orderly

process. But the ramifications on other countries, which are seen as

being weak, and within the eurozone, especially those which have already

received a bail out, of which Italy is not one, will also come under

pressure. The risk is too great, says China, to step in. It is not

impressed. We will see through the morning

throughout the BBC. She will keep us up to date with what is

happening at the G20. How are the markets digest in all

of this? I would imagine that investors are on edge. And they are

very much on edge. Not a good day for Asian investors. Stocks,

currencies, commodities are all in negative territory. It is because

the Greek bail out package has been put on hold by France and Germany.

All the stock markets are retreating for a fourth straight

day. No reaction from the Japanese market as they are closed for a

national holiday. Most sectors are declining across the board,

financials, technology, commodity stocks. Emerging currencies are

also at the declining. Oil prices are declining a wet -- as well.

They are tracking the downbeat settlement in risky assets. --

sentiment. Does the eurozone had a back-up plan if the Greeks turn

their back on it? It will be what they have. Rather than continuing

to support Greece with funds, they will probably have some support

from the IMF, assuming what end a situation in shoes, the Greeks can

put together an agreement with the IMF, not necessarily with the

Europeans. The only thing that will come from that that is different to

what we have now, the major one, is that they will go back to having a

drachma. Instead of dying by 1,000 cuts, you can suddenly lower your

costs, because you will be in drachma. But there will be massive

defaults. Let's have a look at other news. As

well as events in Cannes, Global investors will be looking to

Frankfurt as the European Central Bank holds its first meeting under

the leadership of President Mario Draghi. The ECB has been

instrumental in keeping borrowing costs under control for highly

indebted nations such as Spain. Markets will be looking for any

clues as to whether it will wrap up this policy. With a new man in

charge, they may need to learn a whole new language.

It is essential that the recent rise in inflation... when the

former boss made a pronouncement, economists stood by to decide up

its own -- his special code words. Strong vigilance was an even

clearer signal. Strong vigilance is warranted with a view to containing

outside risks... accordingly, strong vigilance is... they are

very alert to this particular kind of language. This will be in

immediate reaction that they were going to put up rates next month.

What will be the code words employed by the new man in

Fringford, Italy's Mario Draghi? Mario Draghi will be thinking about

rate cuts. For example, the phrase, downside risk, might mean a cut in

December, whereas the phrase, if confirmed, would mean a cut in

January. You have to listen very carefully to what he is saying,

especially because he is new. Things might mean different things

personally to him. He may use words differently. When Alan Greenspan

was passed at the Federal Reserve, it said a heavy briefcase were

shadow a rate change. It is important for markets not to be

given surprises, so for central banks to give out a big hints

without commitment. This is how the American markets

did yesterday. They had a better session than the previous day. It

is a roller-coaster ride. We saw some gains yesterday. Ben Bernanke

indicated that more budgetary stimulus will be needed for the US