European Markets Up; Growth in China Slows; Spanish Government Sets up $22 Billion Aid Fund for Regions; Civil Servants Protest in Madrid
QUEST: The Chinese economy is growing at its slowest pace since the depths of the global recession in 2009.</s>QUEST: Growth fell to 7.6 percent in the second quarter of the year, compared to a year earlier. Now, by any other standard, that would be a rip-roaring success. It sounds good compared to Europe and the US. And the slip was to be expected. However, the biggest exporter in the world is suffering from the slump in its key markets in Europe and in the United States. From Addis in Ethiopia, I'm joined now b y Jeffrey Sachs of Columbia University. Always good to have you with us, Jeffrey. We knew the slowdown was coming and was happening, but do you think this 7.6 reflects the real number, or do you think it's been massaged?</s>JEFFREY SACHS, COLUMBIA UNIVERSITY (via telephone): Well, we just don't know. We do know that local governments report to target and can easily over report. We know that China is certainly in the most delicate moment that it has been in in years. And there was a bit of relief that it wasn't worse today. That's why markets --</s>QUEST: Right.</s>SACHS: -- actually soared around the world. But I think there still is a huge question mark over whether the investments that were made in the last couple of years are going to justify themselves with tenants in new buildings, with commercial structures being filled, with infrastructure being used, or whether China will --</s>QUEST: Right.</s>SACHS: -- will turn out to have made its own bubble.</s>QUEST: And with this regard, we do expect, don't we, that as the year moves on that the authorities will add liquidity either into the banking system through reserves or directly or through some form of fiscal stimulus? Because with a change of administration, the last thing they want is -- no, it's not going to be a recession, but a miserable slowdown.</s>SACHS: Well, that's exactly right. And in fact, they had already tightened last year, so we're seeing some of the results of last year's tightening show up in the first and second quarters this year. They've obviously signaled very strongly at all levels, and especially from the top and --</s>QUEST: Right.</s>SACHS: -- at the central bank, as well as leadership of the government, that they're turning on the stimulus again right now. How this plays out, though, is hard to see. This is again a situation which the whole world is simultaneously slowing down, and the uncertainty is enormous. The mood swings day to day --</s>QUEST: Right, but -- well --</s>SACHS: -- and I think we're just going to have a lot of uncertainty for many weeks to come.</s>QUEST: Well, with that uncertainty in mind -- forgive me for pressing in, there -- but should we -- should we be relieved at this 7.6, or should we be concerned?</s>SACHS: I don't -- I don't think that it added a lot of news, unfortunately. This is more or less what might have been expected, but it doesn't really answer the question of what's going to happen in China in the second half of the year. With Europe, obviously, still in a very deep crisis, with the US economy really growing only marginally, with China's exports clearly hurting very, very badly, for the second quarter, they've gotten through, but it doesn't really tell us a lot about where they're heading in the second half of the year. Just not enough information today.</s>QUEST: Jeffrey Sachs on the line from Addis. Have a good weekend, Jeffrey. Good to talk to you, as always, on the program.</s>SACHS: You, too, good to talk to you.</s>QUEST: Now, Spain stands ready with a $22 billion aid fund for its struggling regions. In return for the help, the regions will have to adopt strict measures to reduce their deficit. The announcement came as civil servants were the latest to take to the streets of Madrid. They are all protesting about the austerity. You've followed us, of course, during the course of the week we had the miners, we had the riots, we had the bank capitalizations, and we had the increase in VAT. Our correspondent in Madrid is Al Goodman.</s>AL GOODMAN, CNN MADRID BUREAU CHIEF (voice-over): Spain has more than 3 million civil servants, and this group of them shows no sign of quietly swallowing a new round of austerity cuts.</s>GOODMAN (on camera): This is the Puerta del Sol, the central plaza in Madrid and an historic place for demonstrations in the capital. Since the economic crisis began, there have been numerous protests here, almost daily. This day, it's the civil servants out here because, under the government's latest austerity measures, their pay is about to be cut again.</s>GOODMAN (voice-over): This Labor Ministry worker says the problem is much bigger than just losing the extra paycheck at Christmas.</s>ANA NIETO, LABOR MINISTER EMPLOYEE (through translator): I feel -- I feel humiliated as a worker and humiliated as a citizen. I am ready to do whatever it takes.</s>GOODMAN: After 24 years as a government worker, she earns only about $1400 a month.</s>NIETO (through translator): I'm not just losing as a worker. I'm losing as a citizen. Government services are getting worse. I'm worried about my daughters. I'm paying for their education.</s>GOODMAN: There's no time to waste. This demonstration is suddenly on the move, arriving in time to welcome more civil servants from the Treasury Ministry, a symbol of the nation's financial squeeze. Across town, King Juan Carlos hosted the prime minister and his cabinet at a rare special session. The king urged a spirit of sacrifice for all to solve the crisis. Then, the cabinet approved $80 billion in additional austerity cuts aiming to reduce the deficit.</s>CRISTOBAL MONTORO, TREASURY MINISTER (through translator): If we don't reduce the public deficit at the pace which we have agreed to, this economic crisis and the recession will just go on longer.</s>GOODMAN: Back on the street, the protesters stayed on the move, trying to swell their ranks.</s>GOODMAN (on camera): This is now the third location of this same demonstration. They've joined their colleagues outside the Education Ministry, and there are other demonstrations at this hour across the capital.</s>GOODMAN (voice-over): Protests also sweeping across the country. But the conservative government with a big majority in parliament, won't budge on the economic policy.</s>CARMEN GARCIA, REGIONAL GOVERNMENT WORKER (through translator): It's impossible for us to lose hope, because then we just might have to die. If we let them take away our money and we can't even try to do anything about it, we might as well move to Germany.</s>GOODMAN: Some here blame powerful Germany for setting the austerity tone across debt-ridden Europe. But many others fault their own government here at home for making what they say are the wrong choices to solve the crisis. Al Goodman, CNN, Madrid.</s>QUEST: Now, for tonight's Currency Conundrum. Take a look at this. What is it? Well, I'm going to tell you. It's an English pound. And now for the Conundrum. Tell me, why does the English call the pound a quid? It's called a quid, I have two quid. Was it because of the Latin "quid pro quo" or after "Chuid," the Gaelic word for money, or after the English village of Quidhampton in Wiltshire? We'll bring you the answer later on the program. Whether it's quids, yen, or euros, the euro stopped its slide against the dollar despite an Italian downgrade and poor relatively GDP out of China. It's off its two years and back above $1.22. The pound at 1.55, the yen 79. Those are the rates --</s>QUEST: -- this is the break.