:00:02. > :00:06.latest headlines from BBC World News. Let's bring you the latest
:00:06. > :00:16.numbers and used on the new man in charge of Italy with Sally and
:00:16. > :00:17.
:00:17. > :00:22.A warm welcome, you're with World Business Report. These are the
:00:22. > :00:26.headlines: He's an elected and highly respected. Will Mario Monti
:00:26. > :00:31.be able to bring Italy back from the precipice of financial ruin?
:00:31. > :00:38.The head of Germany's powerful Bundesbank rejects calls to use the
:00:38. > :00:48.European Central Bank as the lender of last resort. Japan bounces back
:00:48. > :00:55.
:00:55. > :01:03.from its post earthquakes slump but Mario Monti has been handed the
:01:03. > :01:05.task of forging a new government in Italy. They will hope he can
:01:05. > :01:10.restore the country's credibility and pushed through a tough
:01:10. > :01:15.austerity measures. Between 1994 and 2004 he was a European
:01:15. > :01:20.commissioner in Brussels where he developed a reputation as being a
:01:20. > :01:23.tough negotiator and he has always been a staunch defender of the euro.
:01:23. > :01:30.All eyes will be on how European markets will respond to his
:01:30. > :01:35.appointment in a few hours. I am joined by a professor of economics
:01:35. > :01:39.at the University of Sussex and also at the Open University. Are
:01:39. > :01:49.you pleased Monti got the job? It seems to be the one the markets
:01:49. > :01:49.
:01:49. > :01:52.were looking for. He was of very respectable economists. He has
:01:52. > :02:01.connections with very smart economists that he can bring into
:02:01. > :02:05.his cabinet. That will calm financial markets because he is
:02:05. > :02:09.very credible in terms of how he understands international economy
:02:09. > :02:13.and Italy's place within Europe and hopefully he can make it to the
:02:14. > :02:19.Crow. As long as the growth rate remains below the interest rates
:02:19. > :02:25.that they pay on their debt, the debt-GDP ratio will keep growing.
:02:25. > :02:29.Does he have a growth plan? So far we have had two big austerity
:02:29. > :02:33.packages pushed through Parliament in a very speedy fashion last week
:02:33. > :02:37.was the latest on. Mario Monti has got to implement that. You say he
:02:37. > :02:42.has got to bring growth. Everyone agrees that in the long-term Italy
:02:42. > :02:47.needs to have a growth plan but what about those austerity measures,
:02:47. > :02:51.will they lead to growth in Italy? It's interesting because they are
:02:51. > :02:56.actually quite similar to the kind of package that the UK government
:02:56. > :03:02.has just put through. Which is mainly about taxation. So the VAT
:03:02. > :03:06.will go up to 21% in Italy. There will be pension reform, they want
:03:06. > :03:11.Italian women to actually wait an extra five years before they get a
:03:11. > :03:15.pension. There's increases in the expenses that people make within
:03:15. > :03:20.hospitals. Little things like that. They are bringing in more money
:03:20. > :03:23.that way? There will also be a freeze on public sector wages. But
:03:24. > :03:29.if you think about what these measures will do, partly the
:03:29. > :03:36.problem is they will decrease demand, they cost the VAT rising...
:03:36. > :03:41.and this has happened in this country -- because the VAT rising.
:03:41. > :03:45.Nothing we have seen will increase productivity. For the last ten
:03:45. > :03:48.years it has had stagnant productivity. This is very
:03:48. > :03:53.different to other European countries. It is not true it is a
:03:53. > :04:00.European problem, it is an Italian problem because of under-investment
:04:00. > :04:05.in certain areas where Germany has been a lot smarter. There's nothing
:04:05. > :04:11.in this plan to do anything useful. Unless we increased Italian
:04:11. > :04:14.productivity the gross rate will not rise. These measures we see are
:04:14. > :04:19.all about decreasing the immediate debt but it is not about long-term
:04:19. > :04:22.growth. We have got to leave it there, thanks very much. I am sure
:04:22. > :04:26.we will talk again on this programme about the outlook for
:04:26. > :04:29.Italy and we will discuss it further in the look at the
:04:29. > :04:34.international press. But we have to move on because Italy may be
:04:34. > :04:39.stepping back from the brink but its government bond fields, its
:04:39. > :04:42.return and investor receives are still in the danger zone and the
:04:42. > :04:46.European Central Bank is being urged to stem the crisis by
:04:46. > :04:50.underwriting the Italian bond market. Germany are highly
:04:50. > :04:54.sceptical of this. On Thursday the President of the German Bundesbank
:04:54. > :04:58.said the ECB should not be used as a lender of last resort to European
:04:58. > :05:04.governments. The European Central Bank may have
:05:04. > :05:08.a new boss, who happens to be an Italian. But whoever's in charge
:05:08. > :05:12.the ECB can't be a lender of last resort to using its unlimited
:05:12. > :05:17.firepower to directly by the debt of governments like Italy. All you
:05:17. > :05:24.can do is go to the open market and buy bonds from distress countries,
:05:25. > :05:33.which it has done. Wholesale buying could stabilise Italy and Greece.
:05:33. > :05:36.Four protesters in Rome, it is a simple issue. TRANSLATION: The
:05:36. > :05:41.European Central Bank is the only central bank in the history of
:05:41. > :05:46.humanity that lends money to private banks at a rate of 1.5% and
:05:46. > :05:52.does not lend money to the state. We demand that the European Central
:05:52. > :05:57.Bank by his state bonds directly because this was stop the
:05:57. > :06:02.speculation. What is stopping the opening of the EU floodgates is the
:06:02. > :06:06.zone's largest paymaster, Germany. It aims it will risk unleashing
:06:06. > :06:11.chronic inflation of the kind experienced in the 1920s. But the
:06:11. > :06:17.senior figure advising this Bank thinks it will soon end to world
:06:17. > :06:22.opinion. Germany of course is in pole position here to swing the
:06:22. > :06:28.decisions and it really has a choice, if it sticks by its
:06:29. > :06:32.orthodox disciplined approach I fear there's going to be a serious
:06:32. > :06:37.escalation in the financial markets that will be beyond repair. Or it
:06:37. > :06:41.has to compromise and say, there may be certain concessions we will
:06:41. > :06:48.have to make in terms of what the European Central Bank is allowed to
:06:48. > :06:54.do so that we may leave them by some time to sort the problems out.
:06:54. > :07:01.That is what will happen I think. With the ECB on the sidelines it is
:07:01. > :07:04.still just Italy verses the markets. Japan is out of recession after its
:07:04. > :07:08.economy rebounded in the third quarter growing for the first time
:07:08. > :07:11.since the devastating earthquake in March. A rise in exports and
:07:11. > :07:18.consumer spending helped boost the economy after nine months of
:07:18. > :07:24.negative growth. Roland Berger is in Tokyo, some welcome news, tell
:07:24. > :07:33.us more about how they did this. is about companies recovering much
:07:33. > :07:38.more quickly than the common knowledge had expected. That helped
:07:38. > :07:42.to restore the supply chains. In the last quarter, July to September,
:07:42. > :07:49.the story was about companies catching up on lost production.
:07:49. > :07:54.Japan's economy expanded by 1.5% quarter on quarter, 6% as an annual
:07:54. > :07:57.rate. The fastest of any major economy. Consumers also did their
:07:57. > :08:01.bit because of concerns about electricity shortages in the wake
:08:01. > :08:05.of the Fukushima nuclear crisis, there was a bit of a Brunt on
:08:06. > :08:13.people buying energy-efficient appliances, trying to do their bit
:08:13. > :08:20.to save electricity -- a run. But can that momentum be my maintained?
:08:20. > :08:26.Presumably not. I presume the strong yen is playing a part and
:08:26. > :08:31.also the events in Europe. Those things are inextricably linked. The
:08:31. > :08:39.turmoil in Europe means investors look for a safe haven, somewhere
:08:39. > :08:45.where there is no risk of inflation so they turn to Japan. That
:08:45. > :08:49.prompted the government to intervene. The other big issue is
:08:49. > :08:53.the flooding in Thailand. Just as those supply chains were recovering
:08:53. > :08:57.from the earthquake they got hit by the flooding in Thailand. Many
:08:57. > :09:00.Japanese companies looking to escape the high yen have opened up
:09:00. > :09:05.factories there in recent years and they were in the way when the
:09:05. > :09:10.flooding happened. Thank you for joining us. Some Other stories and
:09:10. > :09:14.President Obama has announced the broad outline for plans to create a
:09:14. > :09:19.trans-Pacific free-trade zone at an annual regional summit in Hawaii.
:09:19. > :09:24.Nine APEC nations are involved but China has not expressed interest in
:09:24. > :09:33.joining the talks. APEC countries account for about 44% of global
:09:33. > :09:39.trade. Dubai baste Emirates Airlines has ordered $18 billion
:09:39. > :09:45.worth of airlines. It is the single largest aircraft order for Boeing