Spanish Stocks Rally Amid Catalonia Confusion
QUEST: The Spanish Prime Minister's path to direct rule over Catalonia appears to be open now. After Catalonia's president called off a plan for snap regional elections. Promised watchers had hoped a new election could stall the independence crisis. Carles Puigdemont said he couldn't get a guarantee that elections would have stopped the federal government from suspending his regions autonomy. He made his announcement later in the day amid rumors there would be an election. And Spanish stocks rose nearly 2 percent, 1.9 for the IBEX. In Madrid, the deputy prime minister has now accused the Catalan government of damaging the economy through its independence moves. Tourist numbers are down, and more than 1,300 companies have announced plans to move their legal headquarters out of Catalonia. Earlier this week, the economy secretary told me it is not an economic crisis.</s>PERE ARAGONES, CATALAN ECONOMIC SECRETARY: A economic crisis and different companies and they are taking some positions among at municipal headquarters. But finally, central offices, facilities, data centers continuing in Catalonia. That's only that now, now that's only really an initiative position. Thirdly, if this situation continues over the time, over next months, then there will be affections on the Catalan economy.</s>QUEST: If this drags on, Catalonia's economy will suffer. You can agree with that.</s>ARAGONES: If this situation continues, it's obvious that there will be a problem in the Catalan economy. But also in the Spanish economy. Because there's two economies are interlinked. So, it clearly shows that there is an incentive for negotiation and solving this problem, because it's a political problem, so it needs a political solution.</s>QUEST: Economy minister of Catalan in Madrid and Barcelona lawmakers are planning their next move. CNN's Erin McLaughlin has been following it all from Barcelona.</s>ERIN MCLAUGHLIN, CNN CORRESPONDENT: Many moderate voices here in Catalonia had hoped that Catalan President Carles Puigdemont would call for snap elections on Thursday. The thinking was that would provide enough political room for Spanish Prime Minister Mariano Rajoy to soften his stance on article 155 and provide some sort of off-ramp to this crisis. But that didn't happen. Puigdemont explained his reasoning for ruling it out. Take a listen.</s>CARLES PUIGDEMONT, CATALAN PRESIDENT (through translator): You know that I wanted to call for this election if we had certain guarantees that would allow their celebration and period of normality. There are no guarantees to justify today the calling for elections in the Parliament. My obligation was to try, to try honestly and loyally to avoid an impact on our institutions of the application of article 155, like the council of ministers and likely to be approved in the Senate.</s>MCLAUGHLIN: Puigdemont also said that Catalonia's response to article 155 will be made by Parliament. On Thursday, there was a parliamentary session and debate. It's expected to continue on Friday. At the end of Friday's session, it is possible that they could vote to formally declare independence. But we're going to have to wait and see. Meanwhile, what seems certain is that the Spanish Senate in Madrid will move forward and formally vote for article 155 on Friday. If they do that, then that means that essentially come Saturday, Puigdemont and his entire government will be sacked, and emergency rule will pervade in Catalonia. Erin McLaughlin, CNN, Barcelona.</s>QUEST: And so, to the European markets. The euro bosses and they all made gains. The CAC was up 1.5 percent. As indeed the Dax was up 1.3. The European Central Bank announced a slimming down of its massive stimulus program. It will half its bond-buying program to $35 billion from next year. But it extended -- it agreed to extend the length of time that it would be making those purchases for. Janet Yellen's chance of being asked to stay at the chair of the Fed seems to be fading according to two reports. Both "Politico" and "The Washington Post" both say the choice is now between two candidates, Jerome Powell and John Taylor. The two men you see here. You can always expect the unexpected with this president. He called Yellen very impressive in a recent FOXBusiness interview. Randall Kroszner is a former governor of the Fed and joins me live from Chicago. Let's just be blunt in this one. What's your understanding of the situation now?</s>RANDALL KROSZNER, FORMER GOVERNOR, FEDERAL RESERVE: Well I think it's still fluid. I don' t think the president has made the decision. The president has said that he's very happy with all the candidates that he has gone -- has met with. And, you know, as you had said, the president often likes to surprise. So, I don't think we really know. There are a lot of reports that are coming out, but I don't think the president has made his decision.</s>QUEST: OK, let's assume for the purposes of this next question that it's not Janet Yellen. As between Jerome Powell and John Taylor, who do you prefer and why?</s>KROSZNER: Well, they certainly have different set of characteristics. Jay has been at the Fed recently, Jay Powell, Jerome Powell, has been there and would likely extend the kind of monetary policy is that Janet Yellen has been pursuing, very, very gradual interest rate increases. John Taylor, on the other hand, has been very critical of the slow pace of increases in interest rates. Has been critical of the balance sheet, not moving it down more quickly. And so, he would certainly tighten faster than Powell would.</s>QUEST: And of course, John Taylor from the Taylor rule, or the Taylor principle, once you understand the Taylor principle about its relationship between inflation and interest rates, you can sort of see where he' s coming from at the slow pace which is the Fed has tightened, can't you? I mean, if you were dealt the Taylor principle or the Taylor rule, it should have been further and faster.</s>KROSZNER: Yes, but we still haven't seeing that much inflation pressure. And so, the question is, do we want to follow up that rule? And actually, there are a lot of different versions of the rule. John has published a couple of different papers with different versions of it. And if you look around, central banks around the world, they publish different versions of it and talk about it differently. So, you could get one that moves the rates up faster or moves rates up a little bit more slowly. So, there's still some flexibility. It's not completely mechanical.</s>QUEST: On a more basic question. Both men are qualified to run the Fed, aren't they? I mean, Jay Powell, obviously, because he' s already there. John Taylor, an eminent economist, whether one agrees with economics or not, but both men are qualified. Would you agree?</s>KROSZNER: Oh, for sure.</s>QUEST: So, in that sense, what we really are is in extremely fortunate position, if it is one of the three, Yellen, Powell or Taylor that the president is unlikely to sort of impose somebody on a political whim, as a political -- I mean, I'm thinking of Gary Cohn here, who's not out of the running. But Gary Cohn, president of Goldman Sachs, certainly knows his way around markets and business. But one might argue when it comes to monetary policy, he's not of the PhD ilk to run the Fed.</s>KROSZNER: Well, certainly, he doesn't have a PhD but neither does Jay Powell. But I wouldn't want to say that disqualifies jay because he doesn't have a PhD. I have a PhD, so of course, I'm kind of biased and in favor of PhD's, generally. But I also understand the incredible value of having practical experience. And so, if you have some PhD's around and some people with practical experience, as long as you have a good mix of that I think it works. And so, you can have a very effective chair who does have a PhD or one that doesn't have a PhD. I think with Jay's experience, that helps to mitigate concerns that people might have that he doesn't have a PhD. Mario Draghi going to slow the tapering, sort of. It's not quite a tapering, but it's a buying at a reduced level. But extending by nine months or extending out into the future beyond into September of next year. And most people expect the ECB to continue the asset purchase program longer after that at lower levels.</s>KROSZNER: And Mario Draghi made a very strong point of saying, this is not a taper, because taper suggest that is going down to zero. He said it's a downscaling, a downsizing. So, a sort of step down of the purchases. But he really wanted to say, this doesn't -- you know, don't expect to it to come to an end in September 2018. You know, it might. He left open that possibility, but he really wanted to draw that distinction, that unlike the Fed when they started the taper that that meant they were going to stop the asset purchases. He wanted to leave that possibility open. And that I think surprised the markets a bit and one of the reasons why the euro fell.</s>QUEST: The euro fell, however, but the equity markets were up, which of course, just merely shows the confusion in the markets at the moment. Randall -- Dr. Kroszner, I must get it absolutely right. Doctor, good to see you, sir.</s>KROSZNER: Yes.</s>QUEST: We shall not leave those --</s>KROSZNER: It was great to see you.</s>QUEST: Thank you. PhD in honor intact. Now, as we continue tonight on QUEST MEANS BUSINESS, there's new sexual harassment allegations and it involves the veteran journalist Mark Halperin. And in this environment, we feed to consider what employers need to do to eradicate, educate, and protect in the workplace. And I think, also, it's important employees. If the rules have changed and there's a load of dinosaurs still around who believe it's the'70s and the'80s, what do you do about it?