:00:03. > :00:12.landslide struck. Those are the latest headlines. For
:00:13. > :00:17.
:00:17. > :00:22.the latest financial news it is time for World Business Report.
:00:22. > :00:24.The headlines: Austerity set to bite even harder in Spain as the
:00:24. > :00:29.new government shows its determination with a new round of
:00:29. > :00:33.cuts. France faces the markets. It tries
:00:33. > :00:42.to raise up to 9 billion euros amid warnings it could be stripped of
:00:42. > :00:47.its AAA credit rating. China's airlines will not pay the
:00:47. > :00:57.fee you carbon tax on flights to and from the region, setting the
:00:57. > :00:58.
:00:58. > :01:02.stage for a global trade battle. The leaders of the eurozone's most
:01:02. > :01:06.indebted countries are talking tough in a bid to drive through
:01:06. > :01:12.painful austerity measures. On Wednesday Greece's Prime Minister
:01:12. > :01:15.raised the stakes when he told union leaders the country faced an
:01:15. > :01:24.UN controlled default on its debt as soon as much unless they except
:01:24. > :01:30.more cuts. Spain will hope to carve -- calmed the nerves in the market
:01:30. > :01:34.with tax hikes and spending cuts announced days ago. Spain's
:01:34. > :01:43.government is keen to show it is determined to act quickly to shore
:01:43. > :01:46.up its finances. It is sale season and many shoppers are making the
:01:46. > :01:50.most of the low prices. It is still officially the holiday period here,
:01:50. > :01:53.but for most Spaniards there is little to celebrate. The new
:01:53. > :01:59.government is expected to reveal a second round of austerity measures
:01:59. > :02:03.on Thursday. This is less than one week after announcing a 15 billion
:02:03. > :02:13.euros package of cuts. The government has justified the move
:02:13. > :02:13.
:02:13. > :02:18.by pointing to a deficit that Sears is around 7% GDP. On taking office
:02:18. > :02:23.just before Christmas, the Prime Minister says Spain must restore
:02:23. > :02:28.its credibility in order it to escape the debt crisis. Slashing
:02:28. > :02:32.the deficit to 4% of GDP this year is a priority. This week the
:02:32. > :02:35.country's regional accounts started showing strain with the local
:02:35. > :02:45.government of violence here confirming it had delayed a debt
:02:45. > :02:51.payment. -- Valencia. They also have the highest jobless rate in
:02:51. > :02:57.the West. Unemployment rose for the 5th straight month in December.
:02:57. > :03:06.TRANSLATION: The cuts will not help generate work. They are tightening
:03:06. > :03:09.up on us. They increase taxes so power earnings go down. In recent
:03:09. > :03:14.days the government has been busy preparing a labour market reform
:03:14. > :03:18.that it hopes will improve the situation. Thursday's measures are
:03:18. > :03:26.unlikely to be the last of the year. Spaniards are expected to face more
:03:26. > :03:31.austerity in the spring when the delayed Budget will be presented.
:03:31. > :03:35.As you can imagine all of these have had quite an impact on the
:03:35. > :03:39.markets, particularly the comments from the Prime Minister who was
:03:39. > :03:49.speaking late yesterday. This is how the euro is trading right now.
:03:49. > :03:52.It is at an 11-year low against the Japanese yen.
:03:52. > :03:58.Everybody thinks the US dollar is the best place to put their cash,
:03:58. > :04:04.as well as the Japanese young -- Japanese yen. There is a lot of
:04:04. > :04:10.concern over the European debt crisis. France is hoping to raise
:04:10. > :04:14.seven attack 8 billion euros in an auction of long-term debt now.
:04:14. > :04:18.Let's talk about that with a senior economic adviser to Ernst and Young.
:04:18. > :04:23.There is so much going on right now that it is hard to digest. Can we
:04:23. > :04:28.talk about that on sale in France. Presumably it will go OK, but there
:04:28. > :04:34.are so many sales of sovereign debt in the early part of this year, the
:04:34. > :04:37.appetite will soon run out. That is right. It has been aided recorded
:04:37. > :04:43.here for several reasons. One is that governments in the eurozone
:04:43. > :04:48.need to refine that -- refinancing a lot of debt. A lot of it was in
:04:48. > :04:51.the first few months in the year. So far we have had fairly
:04:51. > :04:58.successful sales in Italy and Germany. It is quite positive.
:04:58. > :05:02.There seems to be some demand there. As far as France is concerned, when
:05:02. > :05:06.you are buying our government ones, you are buying into the French
:05:06. > :05:13.government story. They have an election in April. It is not clear
:05:13. > :05:16.what the outcome will be. There is uncertainty. There is the political
:05:16. > :05:24.context. There is the fact that ratings agencies have put France on
:05:24. > :05:32.watch. Investors buying French bonds do not know yet what affects
:05:32. > :05:40.this will have. This is an added uncertainty. We do expect the sale
:05:40. > :05:44.to go relatively well. But as we go is through the next few months,
:05:44. > :05:48.there will probably be a lot of volatility and some of the options
:05:48. > :05:52.might not go as well as the government want them to. Do you
:05:52. > :05:56.think France will lose its AAA credit rating? Election is
:05:56. > :05:59.happening in a few months' time and the Socialist opposition party
:05:59. > :06:05.leader is putting forward quite interesting ideas in terms of what
:06:05. > :06:12.he might do. That is right. It is possible that France will lose it
:06:12. > :06:18.is AAA rating. Credit agencies are aware of the consequences not only
:06:18. > :06:25.for France, but for the eurozone. The political uncertainty adds to
:06:25. > :06:30.this. We have to distinguish between a political statement and
:06:30. > :06:36.what will be implemented in the future. There is a clear trend
:06:36. > :06:45.towards fiscal consolidation. terms of what is happening with
:06:45. > :06:49.Spain, they are pushing ahead with further austerity measures.
:06:49. > :06:53.Greece's prime minister is telling trade unions they have to accept a
:06:53. > :07:01.cut in income. All of these measures are tough to implement.
:07:01. > :07:09.And there is nothing to fuel growth. That is the key issue. It risks
:07:09. > :07:15.undermining growth and could result in fiscal outcomes that are not so
:07:15. > :07:18.good. There needs to be a growth agenda. This is something that the
:07:18. > :07:25.Spanish government has talked about in terms of labour market reforms.
:07:25. > :07:35.That is clearly going in the right direction. Governments are torn
:07:35. > :07:35.
:07:35. > :07:39.between the emergency of reducing deficits and the need for growth.
:07:39. > :07:43.Thank you for putting that in perspective. We will keep you up-
:07:43. > :07:47.to-date with all of these announcements when we get them.
:07:47. > :07:51.Chinese airlines say they will refuse to pay a charge on carbon
:07:51. > :07:58.emissions imposed by the European Union. This has sparkehas sparkerow
:07:58. > :08:03.over the so-called pap and trade scheme. Rico Hizon is in Singapore.
:08:03. > :08:08.Can you talk us through what is happening.
:08:08. > :08:14.It is a very serious issue, because Chinese airlines are not budging.
:08:14. > :08:18.They have made a final decision and they are refusing to pay it any
:08:18. > :08:23.carbon tax under the European Union's permission trading scheme.
:08:23. > :08:26.The China Travel Association said they would not co-operate with the
:08:27. > :08:32.EU because such an initiative would impact the financial position of
:08:32. > :08:38.its carriers. The industry group estimates this scheme will cost its
:08:38. > :08:43.airlines more than 120 US dollars in the first year and will more
:08:43. > :08:53.than a trickle by 2020. The transport group which represents
:08:53. > :08:53.
:08:53. > :08:57.the country's four major carriers says they are refusing to pay and
:08:57. > :09:07.are also considering retaliation measures against the European Union.
:09:07. > :09:14.To give you some background, this was launched about six years ago.
:09:14. > :09:20.The law also allows some flexibility, giving countries the
:09:20. > :09:27.option of alternative ways to offset carbon emissions.
:09:27. > :09:31.Sepoy. The head of Switzerland's central bank will give a press