Breathing Room for Portugal, Ireland; Cyprus's Ballooning Bailout; Europe's Bailouts
NINA DOS SANTOS, HOST: Reworking the rescue plan. Eurozone finance ministers tweak the bailouts to Ireland and Portugal. A family affair. David Cameron takes the wife and kids to meet Angela Merkel. And Psy and the Wizard of Oz. Both are headed for chart success for some very, very different reasons. We'll tell you why. Hello, I'm Nina Dos Santos in for Richard Quest, and this is QUEST MEANS BUSINESS. Good evening. Europe's finance ministers are taking the pressure off of Portugal and Ireland. At a meeting in Dublin, the ministers agreed to give the countries an extra seven years to pay back their bailout loans. Even IMF officials have been ruling out contributing more money to Cyprus's bailout, though. On Thursday, Cyprus said that it would need $30 billion instead of a previously-stated $22 billion. European Commission president -- vice-president Olli Rehn says that the numbers haven't really changed.</s>OLLI REHN, VICE PRESIDENT, EUROPEAN COMMISSION: The confusion is coming from the fact that two entirely different sets of figures are being compared. One net, and one gross. One based on a set of assumptions from several months ago and the other taking into account the most recent decisions. In other words, people have been comparing apples with pears and coming up with oranges.</s>DOS SANTOS: Very colorful analogy there from Olli Rehn. The eurogroup president, Jeroen Dijsselbloem, says that Ireland is a living example that adjustment programs do actually work. Let's remind you that Ireland successfully returned to the bond markets this year, managing to wean itself off of the bailout funds, which will run out in the coming months. Portugal, though, is another country that still has some problems years on. Just last week, its constitutional court rejected some of the spending cuts attached to its own bailout. The government as such will now present new austerity measures, and those should be tabled next week. Let's go back to Cyprus, because its bailout plan still needs to be approved by several eurozone states. Cyprus has agreed to sell the bulk of its gold reserves to contribute to the rescue package so far. That in turn will raise more than $520 million. For some, though, it's not a surprise that countries like Cyprus will see their bailout bills swelling. Speaking on this program last month, the former Bundesbank president Axel Weber said that he -- shared his views why he thought Cyprus would be back for more cash after this.</s>AXEL WEBER, FORMER PRESIDENT, BUNDESBANK: Like every rescue we've seen in the past, I'm pretty sure this is just a first round of dealing with the issue. They'll see what will happen, and what will happen is three things. There will be a knee-jerk recession in Cyprus as a result of this. Banks will delever at brute force, and you will see a rippling effect throughout the economy. Whether that will increase the bill, and some ministers like Mr. Schauble have already raised the question at the negotiations whether actually the cost of this bailout are increasing, and my expectation is, looking at previous bailouts, it won't be the last discussion we have.</s>DOS SANTOS: Axel Weber, there, former Bundesbank head. Julia Coronado is the chief North American economist at BNP Paribas. Earlier today, she told me that it's clear that the bailout concerns stretch far beyond islands like Cyprus.</s>JULIA CORONADO, CHIEF ECONOMIST FOR NORTH AMERICA, BNP PARIBAS: Well, again, Cyprus in and of itself is not a worry, the numbers we're talking about are not that large, but it's the reminder of the ongoing issues that are yet to be resolved and how complicated these issues are. And we know there's a lot of other issues, not just Cyprus. There's many other countries that were facing difficult negotiations around bailout packages, so the road stretches long before us, and that's a worry.</s>DOS SANTOS: And it seems as though countries, even if they are small, like Cyprus, are basically getting the message you're almost on your own, even if you are inside the eurozone club. You've got to stump up the extra cash yourselves. Where are they going to find it from?</s>CORONADO: Well, and that's part of the worry, that's part of the ripple effect from Cyprus is that there's going to be as much bail-in, or there's going to be some bail-in that comes with a bailout and how that pain is spread in each country is going to be different. And so that makes people nervous in some of the larger countries.</s>DOS SANTOS: But in the meantime, Italy and Spain haven't had a bailout. There's two other countries called Portugal and Ireland that have had bailouts, and people are now expecting, in light of what's going on, that they could need a second bailout. Do you think that that realistically could be on the cards?</s>CORONADO: For Portugal and Ireland, there is a certain amount of willingness to work with them as long as they are moving forward and some of the structural reforms.</s>DOS SANTOS: Do you think, though, that there is a risk that we could see haircuts imposed upon creditors going forward for countries like Portugal or, indeed, raiding of savings accounts in Spain?</s>CORONADO: Well, I don't think those are realistic, front-burner options for either case, but they are a risk that people do worry about. I think that it's well understood what a haircut on deposits in Spain would do. And in fact the structure of Cyprus is very, very, very different from the -- from what's going on in Spain. So, if there was bail-in, it wouldn't take the form, most likely, of a haircut on deposits.</s>DOS SANTOS: The "Wall Street Journal" has called this eurozone bailout club, if you like, "Hotel California." You can check in, but you can never actually leave. Would you say that that's a fair assessment, and where are we headed with that?</s>CORONADO: It's very poetic and probably pretty fair. Clearly, the problems are not solved, and a lot of the reforms that have been promised, the oversight of the banking sector in Europe, perhaps more fiscal unity, more -- in a more formalized way, all of these things lie well ahead of us. So, I don't know if we'll never leave the Hotel Europe, but it's going to be a long stay.</s>DOS SANTOS: Well, you know what you get after a long stay? A pretty big bill as well, don't you? Let's have a look at how the stock markets have been reacting to all this news on the final trading session of the week. Cyprus's main stock index is actually one of the worst performers of the day in Europe this Friday, surprise, surprise. As you can see on the chart behind me, it fell around about two and a quarter of one percent. But elsewhere across the rest of the eurozone, we saw some pretty steep falls as well, eclipsing some of the euphoria that we'd seen earlier on in the week. We had the Xetra DAX down by one and two thirds of one percent. One of the big sectors that fell in light of all of these concerns is the banking sector. We saw a number of the big banking groups, like Deutsche Bank, listed over there on the Xetra DAX, down around about 3.6 percent. Societe Generale, the French bank listed in Paris, that went down just shy of 3 percent. And I should point out, though, that despite the kind of loss on a Friday closed basis for these markets, a number of these indices -- in fact, all of them -- are actually up over the course of the week as a whole, which is something of a good note. Straight ahead here on QUEST MEANS BUSINESS, fun for all the family. David Cameron meets Angela Merkel, and he brings along his wife and kids. Plus, uncovered. The viral video controversy. Why Psy could soon be stripped of his title of being the most talked-about man online.