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QUEST MEANS BUSINESS
Eurostar Winterizes Trains; Romania After Communism
Aired December 21, 2009 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Back on the rails, Eurostar is shamed into action by a French presidential rebuke. .
A slice of village life, how small businesses in Britain are handling the recession.
And also, on tonight's program, the U.S. Transportation secretary will tell me why three hours on the runway is more than enough.
A bit chesty with cold, but nonetheless, I'm Richard Quest, and tonight, I mean business.
Good evening. Apologies if I am slightly croaky this evening, the bad weather in London appears to have finally got to grips. Anyway, in last hour we have learned that Eurostar the train from London to France and Belgium, will be back on track tomorrow with a limited service. The only people who will get seats on Tuesday will be those who had tickets to travel at the weekend. If you had tickets dated Monday or Tuesday there is no seat available for you, until Wednesday at least.
The knockout affects still leaves tens of thousands of passengers in limbo. It has been a day of chaos at a time, when time is running short, ahead of the Christmas holiday. Now, rail buses have been talking and giving excuses. They have been talking to none other than the French President Nicholas Sarkozy about the collapse of five trains on Friday and the failure to get to grips with what caused the trains to breakdown in the tunnel, and then managing to put in place a proper rescue operation in the days afterwards.
Nicholas Sarkozy has said it is, "unacceptable". He told the chairman of Eurostar the delay ending the disruption was a matter of urgency. If you bear in mind, tens of thousands of people have been affected. In fact, 40,000 because Eurostar now has more than 85 percent of the traffic between London and Paris, London and Brussels, and there are many other places like Disneyland Paris, where it is also a major travel venue. Eurostar has captured the market. So, when Eurostar when wrong, or has gone wrong, then the affects are very widely felt.
If you are unlucky enough to have been caught in this chaos and confusion, Eurostar, at one level having maybe messed it up initially are now saying that those people who have been affected can either get a full refund, or they can change their ticket. Now, that is so far so good. But as Paula Newton now explains, from Paddington, that - I beg your pardon, from St. Pancras, the Eurostar terminal in London -that is cold comfort for those people who need to cross the channel, get to a destination before Christmas.
PAULA NEWTON, CNN INT'L. CORRESPONDENT (on camera): What a few days here for European passengers trying to use the Eurostar. Literally thousands of people stranded, first, on trains and then at terminals, for hours on end. Some good news today from the people who operate Eurostar, saying that protectively (ph), they hope to get those trains back on the rails. Let's hear now from Richard Brown, from Eurostar.
RICHARD BROWN, CEO, EUROSTAR: The measures the engineers have identified to fix the problem are working. We are therefore planning to operate, to reopen services tomorrow, subject to the tests that we will run this afternoon. If those all go well, we will operate the service tomorrow.
Inevitably, it will be a somewhat limited service, because we have to modify the trains to make sure that they are reliable in service. And we will not be able to do all 27 of our trains sets.
NEWTON: Now that limited service means they are trying to clear the backlog, it will take several days. This is still going to be a headache for people wanting to make sure that their plans aren't spoiled. And you know, the snow and the deep freeze throughout Europe continues and that means that any kind of alternate travel, whether it is a plane, or a train, automobile, trying to get onto ferries that cross the channel, any of that will be disrupted. Many people trying their patience throughout this holiday season.
But there still is a few days `til Christmas, so some people are hopeful that at least the family plans for the holiday may not be ruined. We are going to hold our breathe tomorrow to see if that modification - the fact that those trains will be re-winterized, to make sure that they work. The test trains have worked so hopefully tomorrow they will begin to get through and really service all those frustrated passengers that have been holding out here at the stations for days. Paula Newton, CNN, London.
QUEST: As Paula was saying, the various people who have been stranded on both sides of the chunnel, not surprisingly are pretty angry that they won't be able to complete their journeys in a timely fashion.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: It is, I don't know, a bit pathetic, really. The way they have acted, isn't it? You know, they have had cold weather in the past. Like I came two years ago on the Eurostar, and it was just as cold as it was now. So, why is it all of a sudden become such an issue that they can't run the trains. Other trains are still working. Electric trains and that's all they are.
UNIDENTIFIED FEMALE: They just told us that even tomorrow they can't guarantee us we have a train to London, you know? And whether they can confirm the ferry from Callie (ph), they need our agent to book it directly. But we are waiting for the coach to bring us out of the, you know, the train station, at least to have a lunch. And then we are going to coach to Callie (ph) to get a ferry, because tomorrow we can continue our flight.
(END VIDEO CLIP)
QUEST: Now if only travel in other venues and other modes was that simple. But Europe's winter is affecting many of the airports in Britain. London Gatwick, to the south of the capital, in Luttenton (ph), are currently closed due to the severe weather. Which means, of course, flying from Paris is not possible. The runway Gatwick is shut for deicing work. Passengers are being urged to check the airports web sites for the most up to date information.
And one other post script to the London-Paris misery, Ryan Air says that it will offer extra flights on the 23rd of December, from Paris Bouvier (ph) to London Stanford, at the price of 99 euros, or 99 pounds, one way.
General Motors is considering a new bid tonight from the company what wants to save Saab from the scrap heap. Spyker, a Dutch firm, that hand builds around 40 electric cars a year, tabled a revised offer for Saab at the weekend. Gave GM until 5 p.m. Detroit time to respond. They have by my reckoning, that is three hours, or two or three hours from now.
GM has announced on Friday it decided to close the loss-making business. You heard from the Swedish minister on this program. But GM said it didn't see any chance of closing a deal in a reasonable time frame. Spyker says its new proposal, unlike the earlier one, does not depend on the European investment bank lending it several $100 million. It believes it can hit GM's December 31st deadline to do the deal. Spyker's offer isn't the only one on the table. Several proposals came in over the weekend after it announced Saab would be shut.
Spyker says its bid has the full backing of Saab management. The Dutch company's chief executive says, "Our efforts are based on our passion for saving an iconic brand that we would be honored to shepherd. And the jobs and livelihood of thousands of loyal Saab employees, suppliers, and dealers around the world."
Saab sales in the U.S. this year, have fallen by more than 50 percent. Analysts say there is nothing more that can be done with the brand.
(BEGIN VIDEO CLIP)
GEORGE MAGLIANO, GLOBAL INSIGHT GROUP: At the end of the day, for the last 10 years, or so, or even more, it has just been hanging on. It has been a money pit for General Motors. It is a brand that has no stature anymore. And being, you know, GM over the course of the last 10 or 15 years has been pumping in different products in there, models, try to vitalize the brand. And it has never worked.
(END VIDEO CLIP)
QUEST: Here in Europe, stock markets kicked off the week on a positive note. There was thin trade, as investors got set for the holiday season. If you take a look at the markets, the European stock markets were up by more than 2 percent in Paris, up by 1 percent in the Xetra DAX in Frankfurt, and the Zurich SMI was up by half of a percent.
Now, Cairn Energy, here is an interesting stop, it was up 4.4 percent on London's FTSE. The oil explorer will start drilling off the coast of Iceland. I'm sorry, beg your pardon, Greenland, I do beg your pardon.
Energy shares also were up on higher crude prices. We saw an interesting reaction in the carbon market, which I will tell you about a little later.
Another one, one of the big losers on the day, Actelion down nearly 4 percent in Zurich. Europe's biggest bio-tech company said experimental drugs for insomnia ran into safety problems in the last stages of the trail.
So, I would say the markets are strong. I would have to say quite an impressive performance for the markets. Time now for the news headlines. Becky Anderson is at the CNN News Desk.
QUEST: When we come back in just a moment we'll have a bit of Old English charm on QUEST MEAN BUSINESS.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Splendid, splendid, that is service
UNIDENTIFIED MALE: With a smile.
UNIDENTIFIED MALE: With a smile.
(END VIDEO CLIP)
QUEST: Meet the owners of a family run shop that puts people ahead of profits in just a moment.
QUEST: Now a bit like investors that have had a bad year, we'll manfully carry on for the next 50 odd minutes.
Stock markets from New York to London are ending the year in better shape than most of us could have foreseen 12 months ago. The financial world came close to the brink, but rebounded fairly smartly.
I was looking at some numbers, investors who kept their faith in shares, are indeed, reaping the rewards. All the leading indices are showing healthy double-digit gains for the year. In some cases, since their low points, they are still up by more than 20 percent. Take for example Wall Street. We have seen a similar rally in Europe and in some markets, like Shanghai they have done a great deal better than that.
In 2010 we'll see whether this is a bull market that has legs, or is it just a correction from an over selling that took place in the early part of the year. I asked Max King, strategist at Investec Asset Management.
(BEGIN VIDEO CLIP)
MAX KING, INVESTEC ASSET MANAGEMENT: There are two possible outcomes. The big issue for next year is how governments in the Western world finance their fiscal deficits against banks which have stopped cuts of easing. It is really the irresistible force of government spending versus the immovable object of central banks not financing the spending anymore. The big question is how will that be resolved. If it continues to be a problem equity markets will probably struggle next year. They won't go down, but they will be flat lining all year, becoming progressively cheaper and cheaper. However, if the clouds do lift and equity markets do go up quite a long way, so you know, heads, they are flat, tails they go up 15, 20 percent. They are not going to do anything in between.
QUEST: If we look at so far the plans that governments have come out with, in terms of how they are going to deal with that fiscal deficit, perhaps only Greece and Ireland have made any impressive measures to actually tell us what they are going to do.
KING: Well, Ireland has no plan, Greece has no plan, U.S has no plan, U.K. has absolutely no plan and no intention of coming up with a plan either.
QUEST: So, in that environment, you are -to extrapolate your answer, we are talking flat, if that is the case?
KING: Well, it depends. Currently governments are assuming that they can borrow indefinitely. It is like a consumer being a -having a credit card limit, having been right up to the credit card limits and just assuming that the credit card company will go on increasing the limit. That is what the governments are doing. The people, they assume that somehow or other people will lend them infinite numbers of amounts of money at lower and lower interest rates. And yet, we are not -we are a big investment house, we're not buying any government bonds, at all at the moment. And there are many others are not only like us, but they are actually going short the government bond market.
QUEST: For individual investors, who have been worried about the stock markets downturn, there was the shift into government bonds, because at least they offered security against losses.
QUEST: Now is that likely to happen again next year?
KING: No, the big message for private investors is avoid government bonds in the Western world. Now, corporate bonds are sort of OK, but a lot of money has gone into there so they'll be decent. Now the big potential is in equities and high-yield bonds. Now either of those will perform very well, or they will be flat but they won't go down. So, heads you win, tails you break even. It is not a bad bet for a private investor.
QUEST: It is not a bad bet, if you are wanting a bit of more security?
KING: Well, security will not be provided by government bonds, because there is no intentions of any of these governments to ever repay their debt. So you must get away from the idea that government bonds are low risk and provide security.
QUEST: Let's just quickly talk about gold.
QUEST: I mean, at $1,200 an ounce, where is the risk in the next 12 months?
KING: It is getting more difficult because gold prices have gone up a long way in the last 10 years. Our view is actually it has got further to go. It will probably blow out next year and reach a peak. Now, what I would envisage, for example, is gold price going up perhaps significantly higher. We don't know where to, but we'll know when we see it. We will know a peak when we see it. When that happens then there will be a sense of crisis around -perhaps the bond market will no longer be -it will be tanking and money will be in trouble. When that happens, perhaps central governments will then start to see, to get the picture, and they'll sort things out. And if they do, that will be very, very positive for the markets.
QUEST: Max, the traffic lights.
QUEST: Now, if we are talking about global economic growth?
QUEST: And I know that is just about impossible if you think from Asia, across Europe and the U.S., but are you optimistic, pessimistic, or pretty neutral for the 12 months ahead?
KING: Well, globally, we're pretty neutral. Emerging markets in Asia, is green. And the quality countries such as Germany, France, America, Japan, probably on amber. And near the -I wouldn't say Ireland, certainly not Ireland -- Greece, the U.K. are on red.
QUEST: Oh, mostly on amber then?
KING: Amber would be a good average.
QUEST: Thank you very much indeed.
QUEST: So, there we are an amber light, throughout, of course, 2009 and into next year, our traffic lights will help us understand where we are going.
After a difficult year retailers are hoping holiday sales will give a boost to the bottom line. In the first of a series of reports, from his home village, CNN's Charles Hodson visits a shop that like every other business keeps its eye on the finances, but also has its own set of values at heart.
CHARLES HODSON, CNN INT'L. CORRESPONDENT (voice over): Welcome to my other world. This is Tagumba (ph) in Rural West Somerset, where I spend my time when I'm not at CNN London.
The Southwest of England here is known for its damp, mild climate, for its attractive villages and picturesque scenery. Nevertheless, the recession and the credit crunch have both been felt here. To find out how things are looking now, I'm going to start in the village shop.
(On camera): Good morning, good morning, Anne, in behind your screen I can see you, and Roger.
ROGER HOWE, SHOPKEEPER: Good morning, Charles.
HODSON: Roger, thinking about the impact of the recession, how strongly have you felt it here?
R. HOWE: Not too bad. Obviously, the local community as everywhere else has had difficulty. But from our point of view, provided we keep the prices competitive, then the local community will support us.
UNIDENTIFIED MALE: Good morning. How are you today?
UNIDENTIFIED FEMALE: Fine thank you. (INAUDIBLE)
UNIDENTIFIED MALE: Oh, thank you.
HODSON (voice over): And they do. About 600 people live hereabouts and this is their hub. The Howes bought the shop and the house above it three years ago after poor health forced them to quite their jobs.
UNIDENTIFIED MALE: Thank you very much now.
ANNE HOWE, SHOPKEEPER: Roger is really an element (ph) with customers.
UNIDENTIFIED MALE: Splendid, splendid, that is service.
R. HOWE: With a smile.
A. HOWE: I'm quite into organizing and paperwork. So we thought it would be an opportunity to do something together, because traditionally we are not really, in the strictest sense, employable. We have always put people first. We put our family first and we are just extending it to the community.
HODSON: Which means buying locally, carrying for the environment, and valuing everyone's contribution; the youngest Howe, 10-year-old Ben, even goes to the toy wholesaler to advise on what will sell.
(On camera): Do you make decisions as a family, about how the shop should be run and so on?
BEN HOWE, SON OF SHOPKEEPER: Yes, we make decisions as a family around the table, normally.
HODSON: So, it is a special way of living, really, isn't it?
B. HOWE: I love it.
HODSON (voice over): Fifteen-year-old Tom does the web site. But living above the family shop is not every teenagers' idea of cool.
TOM HOWE, SON OF SHOPKEEPER: Well, it is quite interesting getting to meet lots of people and being a central part of the community. Otherwise, it is quite boring, really. Because it is quite repetitive.
HODSON: The Post Office counter produces extra revenue and foot fall. The Howe's can't compete on price or range with supermarkets, they offer convenience, service and friendliness.
R. HOWE: I never have been the winner of a star prize.
A. HOWE: I think the faith of some people have been lost in large companies. I think they put their profits first. And they may have forgotten the assets that they actually have within the building, which is the people who actually perform the work.
HODSON: But the Howes aren't just dreamers. There has to be a bottom line.
(On camera): If you completely failed to make a profit here, would you close the doors.
R. HOWE: Oh, we've got to make a profit to live.
HODSON: Roger probably puts in twice as many hours a week as most people but the Howes like working together to serve a community. They may not be getting rich, but they have jobs satisfaction and a job, and that worth a lot. Charles Hodson, CNN, West Somerset, England.
QUEST: Look at these three interesting facts, and we will try and put some context into them. Twenty years ago on Christmas Day, the Romanian Stalinist dictator, Nikolai Ceausescu, was executed. And the country's emergence from Communist rule was completed in one respect, but it is an emergence into capitalism and a Western democratic model that is continuing until today.
So, for example, if you look at the Latin roots of the name, Romania comes from Romanus, meaning citizen of the Roman Empire. That, in itself, gives you some idea of the history of this country. But there are some dark sides to it as well. Bram Stoker, whose Dracula, inspired by the blood-thirsty 15th century ruler Vlad Tepes, he was known as Vlad the Impaler for his habit of impaling and executing his enemies on wooden stakes. Now that is the historical side of it.
This, unfortunately, is the more up to date bit. Jobless at 7 percent, that is the official number, but many people believe that number is actually much larger than that. If you include, for example, the informal economy.
As part of our "Autumn of Change" series, we are focusing tonight and this week on Romania, as it continues the challenges that it faces. Tonight, CNN's Diana Magnay reports on the industry of the car industry and the issues and challenges that that provides for the people.
(BEGIN VIDEO CLIP)
DIANA MAGNAY, CNN INT'L. CORRESPONDENT (voice over): In today's Romania, the poor live just as they did centuries ago. Modern industry offers little opportunity to those at the bottom of the food chain.
And Romania's industry itself is struggling to cope as export markets shrink, the economy contracting nearly 8 percent this year. Despite all this economic gloom and a difficult start to the year, carmaker Dacia is now doing surprisingly well. Sales are up more than 25 percent year on year, after a 50 percent drop last year. The increase largely a result of demand for cheap cars in Western Europe, where consumers took advantage of government backed car scrapping programs.
Elena Nita has worked for Dacia since Ceausescu's rule and she remembers well how hard times were. Ceausescu was paying off the country's international debts by exporting everything it produced. Anita says times are very different now and she is proud of the company's success. Most of all, though, she is glad she has a job.
"I don't even want to think about what it would be like if I didn't have this," she says, "It would be so difficult. I mean, can't you see what is happening in the country with the unemployment?"
MAGNAY (On camera): You won't see many of these at Dacia, most of the work here is done by hand. It is much more labor intensive, especially for a mass produced car. But Dacia says it is a lot cheaper.
(Voice over): Production costs are low because wages here at Dacia are only around a fifth of those of Western European car makers. Business model works for now, though, the figures don't yet reflect what will happen once the cash for clunkers incentive falls away.
For other businesses across Romania, it has been a case of, adapt or die.
CEZAR ANDREI BABU, CONFLUX: This is Ceausescu's pajamas.
MAGNAY: Back in Ceausescu's time clothes maker, Conflux, used to embroider the dictator's bed linen. Now it makes clothes for fashion houses in Western Europe.
When orders reduced by half, earlier in the year, Conflux had to drastically readjust its business model.
BABU: That mean, OK, we don't have any more orders for 500 or 1,000 piece, for a garment, for a style, we can work orders for one piece per style. So we had to become more and more flexible and try to -don't loose any order possible.
MAGNAY: Conflux workers are lucky. The company hasn't had to cut staff. But unemployment almost doubled this year, to just over 7 percent. The International Monetary Fund's $30 billion aid package is on hold until the government comes up with a solid budget plan. So far, it hasn't.
And the sorry state of the country's finances is all too clear. Investments in infrastructure are on hold. Downtown Bucharest is crumbling for lack of funds. For the average Romanian there is little to smile about, as one of the poorest countries in Europe limps its way through the global financial crisis. Diana Magnay, CNN, Bucharest, Romania.
QUEST: CNN is in Romania all this week. Fionnuala Sweeney live from Bucharest as she presents a special edition of "WORLD ONE" from the capital. That is 20:30 in London, 21:30 Central Europe. Right here on CNN.
When I come back, in just a moment, we'll be talking to the U.S. Transportation secretary about why he thinks three hours on the runway is quite enough time for anyone.
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
New rules from the U.S. Government on the amount of time that passengers can be stranded on planes sitting on the runway. The U.S. Department of Transportation is tired of stories of planes stuck for hours, leaving passengers in discomfort and now says it's imposing a time limit of three hours. After that, passengers can demand to leave a delayed plane.
The new rules also say that food and water and proper sanitation needs to be made available before passengers in discomfort.
Six hundred and thirteen planes between January and June of this year sat on the runway for more than three hours.
Joining me now, the Transportation secretary, Ray LaHood, of the United States, to discuss this.
Mr. Secretary, firstly, many thanks, indeed.
But the fact that you had to introduce these rules, is that a realization that the industry was incapable or unwilling to do it themselves?
RAY LAHOOD, U.S. TRANSPORTATION SECRETARY: Oh, I think so, Richard. I think that if the industry wanted to develop their own rules where they would send a plane back to the terminal so people wouldn't have to sit seven, eight, nine 10 hours, without any food or -- or drink, they could have done that. But for some reason, they didn't want to do it.
So we felt this rule, which is a great Christmas present to travelers all over America today, the idea that they're not going to have to sit on a plane more than three hours and that they are going to be provided food and drink up to two hours before, is great news for the flying public.
QUEST: So when the -- when the industry says in reta -- in retaliation, ah, that's fine, Mr. Secretary, but now this will lead to more cancellations and possibly higher costs, are they just scare-mongering?
LAHOOD: Well, it means they'll lose more business. People do not want to sit on planes more than three hours. They want -- they want to know why their plane is delayed and they want to know why they can't go back to the terminal. And we've set out some very good rules today that allow that kind of information to be provided or they can go back and make decisions about reboarding or about going home or about taking another flight later on.
These are decisions they can make based on good information. The airline industry should...
LAHOOD: ...get with it. If they really want to help passengers, they should say this is a good idea.
QUEST: Some of the cases last year were -- were egregious and horrific, when one actually wondered -- I mean people being kept on planes for nine, 10, 11 hours when common sense should have dictated just take the plane and get the passengers off.
LAHOOD: Well, you've -- you made my case. People are sick and tired of sitting for long, long hours with children who don't understand why they have to sit there, with adults who try to use the facilities and they're broken or clogged up and then no food and no water and no excuses...
LAHOOD: ...and no good information.
QUEST: Mr. Secretary, before we leave you, I have to ask you a sort of more general issue of aviation. The airline industry globally lost $11 billion, according to ARTA.
Are you concerned next year about the strength of the U.S. aviation industry?
LAHOOD: Well, Richard, I think as the economy improves, business travel will pick up. We know the airline industry is hurting, both here in this country and internationally, because business travel is way, way down. But we believe that as the economy gets better, both in America and internationally, business travel will go up. And that will be a big boost to the airline industry. And -- and we think it will -- it will come back next year.
QUEST: Well, Mr. Secretary, if you get tired of looking at the U.S. side, there's a Eurostar train or two that was delayed for 14 hours over the weekend. You might look at that, as well.
Many thanks, indeed for joining us.
The U.S. Transportation secretary, Ray LaHood.
Now, as with take a look at the markets and how they've been doing business, the Dow Jones Industrials are having a strong session.
Susan Lisovicz -- Susan, forgive me tonight, I'm a bit croaky, but hopefully your markets are looking a little more cheerful.
SUSAN LISOVICZ, CNN CORRESPONDENT: No question about it. You know, we got a big snowstorm over the weekend, perfect for a jolly fat man wearing a red suit. Actually, Santa Claus, as everybody knows, came to Wall Street in March, because we've had such a tremendous rally that has just taken us to the -- pretty much the end of the year, it seems.
But we have some fundamentals at work, too, today. We have a few deals in health care, one in mining. We have an upgrade on two important stocks, both Alcoa in -- the big aluminum maker. Its shares are up nearly 9 percent. Intel, the big chip maker, its shares are up 2.5 percent on those upgrades.
We have some quarterly earnings that were soothing. There's a sense that retailers on the Northeast part of the United States will make up for the shopping that they might have missed out over the weekend.
So all is good. Unfortunately, this rally is coming in paper thin volume, but it is a nice rally. The three major averages are up 1 percent with 90 minutes to go in the session -- Richard.
QUEST: OK. So I was just doing some numbers. By my reckoning for the year, the low point being March, we're up about, what, 30 to 40 percent from the very lowest point, but still down 20 to 30 percent from the all time high.
LISOVICZ: You know, I was just doing a report on this earlier today, Richard. Yes, I mean the three major averages have -- have recouped at least 50 percent from their bear market lows.
But if you look long-term -- and, you know, we always say -- we always advise, you know, invest for the long-term. You look at these averages, as we approach the end of the decade and the Dow, the NASDAQ and the S&P 500 are all well off where they stood December 31st, 1999. I mean it's really just shocking.
But then this decade has been shocking, with two recessions and a number of bubbles. And, unfortunately, it seems like it's back to the future.
QUEST: You see I'm not sure -- I have a -- it's a fine argument, and I've heard a few people advance it. And you and I, later in the week, we'll get into it a bit more, I hope. But I -- I think people are generally wealthier now than they were, maybe, in 1999. But and I will discuss that hopefully as the week moves on.
LISOVICZ: I look forward to it.
QUEST: Susan Lisovicz at the New York Stock Exchange.
First transport and weather chaos, now gloomy economic data -- can there be much to be cheerful about if you're living in the U.K.?
The man who has got some sobering numbers.
We'll be talking in just a moment.
QUEST: Britain's recession could be ending as I speak. The Confederation of British Industries says the economy, which has shrunk for the past six quarters, is probably growing again. And numbers released by the U.K. government will confirm that later in the week.
Stop cheering, though, because the bounce back could be decidedly limp. The CBI estimates the economy will grow by 1.2 percent next year. It won't get to 2.5 percent until 2011. That's below government forecasts and certainly below trend growth. U.K. unemployment is expected to continue rising. Public finances will remain in poor health. And despite all of this, the Bank of England expected to start raising interest rates early next year.
So, not too much to be cheerful about.
Lai Wah Co is the CBI's head of economics.
LAI WAH CO, HEAD OF ECONOMICS, CBI: We've been through a very severe recession, the worst for many, many years. But that's hardly any surprise. And, obviously, there are going to be lingering efforts from the financial system which has -- which has scarred the U.K. economy. You know, we're essentially predicting that a cover -- a recovery will start late this year and that growth momentum will be maintained, but that it will feel very slow and economic conditions will be challenging.
QUEST: That recovery, and, in fact, we're going to get numbers this week, I believe, on fir...
QUEST: ...on the -- the last quarter. But that recovery is purely predicated on policy actions -- basically, government spending. There's not a lot of self-sustaining recovery action out there.
CO: Well, in actual fact, government spending is starting to be cut back by 2011. And so that's part of the reason why there isn't much moment.
QUEST: But what I'm saying is the growth that we're seeing at the moment...
QUEST: ...is really government-led.
CO: Yes. I mean at the moment, we're predicting that consumers are being -- going to go out and buy things in order to avoid the VAT rise at the start of the year. But then momentum will fade as a result.
But I think looking beyond the next couple of years, it's -- it's there when there's a real challenge with regards to U.K. public finances. And -- and the government will need to take a grip in terms of addressing the -- the terrible situation that we're in.
QUEST: Are you worried that -- or is the CBI worried that we're going into 2010 with very little idea of how the U.K. government is going to address the fiscal imbalance, we know there's some tax rises, but that substantial measures have not been outlined yet?
CO: That's right. They haven't been outlined yet. And, obviously,, there is some degree of uncertainty. But we won't know until after the general election in -- when there most likely will be an emergency budget. And then we'll know better then. But until then, there is this -- you know, undesirable uncertainty that's out there.
QUEST: So we're looking at less than 1.5 percent growth next year.
CO: That's right.
QUEST: And we don't get to trend growth until 11 or 12?
CO: I mean even trend growth -- and, I mean, we're forecasting 2.5 percent by 2011. That might sound reasonable by normal standards. But if you think about it, we've fallen off a cliff. We're along the bottom. We're clambering our way back up again. And we still don't see, by the end of 2011, that we will have returned to pre-recession levels of spending and output here in the UK.
QUEST: All right. You're at -- you're new to this particular part, our traffic light in the studio. Red, amber and green -- that much is quite clear.
For the U.K. in 20 -- 2010, are -- red obviously being stop and not very good and the obvious in green -- which one would you like for U.K. 2010?
CO: Amber, I think.
QUEST: Oh. Well, let me flash it for you, as well.
QUEST: And that's a warning light.
CO: Oh, right.
QUEST: Many thanks, indeed for coming in and joining us.
CO: Thank you.
QUEST: And there you have the amber light, which, of course, shows the way things are going.
Something tells me we're going to have quite a few embers (ph) in the early part of next year. But what we're waiting for, of course, is when we finally start to see some green lights.
Now, other news. The Dubai World Group has not yet worked out with its creditors how to reorganize some $22 billion in loans. Dubai's flagship holding company met with about 90 creditors on Monday to try to reach a standstill agreement. It has made clear -- it is making clear that it is not imposing a standstill, it is still seeking it. (INAUDIBLE) agreed to take no further action on an unpaid loan for a certain period of time.
Dubai sent shockwaves through the financial markets in late November when it said it needed its lenders to relax repayment terms for billions of dollars of debt, much of it incurred by its property development arms.
Now, much of this program has been taken up talking about the weather and whether you're in the U.K. or in parts of France, which have seen some horrifically cold temperatures -- elsewhere in Europe, as well -- Guillermo, you must be doing double duty.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, I am.
QUEST: Can you bring you up to date?
ARDUINO: Yes. Well, I think that the long-term forecast and the general idea is better for most of Europe in the next two or three days and onwards. In Britain, as in Scandinavia, Northern Germany and Northern France and the Lower Countries, we'll still be dealing with the snow, rain showers. Everything is going to be better, though.
We still have a little bit more snow, especially tonight. There are you know, all of the warnings you can imagine -- the ice problems and also the snow. Drivers, careful tonight if you're watching from Great Britain right now. The same can be applied for France.
Now, in the forecast -- and I'm taking you into tomorrow now -- we see an improvement -- another round of rain showers possibly. But it's more rain showers, sun, snow showers for some people in Britain.
France, I think, is going to be even better. We will see, especially in the north, an improvement and then another round of precipitation. But things are not going to be as bad as they were before, the reason being is that humongous change that we are seeing over here.
Remember that trench that I was talking about, the jet stream being down there into the Mediterranean Sea, keeping the cold air in place?
Well, that trench now is going to move. And this is the pattern. You're going to see how is squeezes out. And the cold air is going to be only relegated to the north. That includes, unfortunately, areas from where you're watching right now.
But for the most part, this section -- Ukraine, Romania, Bulgaria, parts of Greece, the Balkan Peninsula, Italy are going to be in good shape.
Right. You're telling me, of course, I'm watching from Milano and now it's snowing like crazy or Charles de Gaulle and I don't like this any more. Well, through midweek. So we have to wait a little bit. The general pattern is bringing good news, I think, especially for areas that were severely hit.
The Alpine Region, the high elevations, Northern Spain, are going to see some more snow. Temperature-wise, the problem was that we were below freezing or on freezing margins and Gatwick closed down because they needed to de-ice the runway and planes.
Well, the temperatures are going to stay pretty much the same.
Now, the east gets no relief in terms of the cold. So it's going to be bitterly cold. And we're going to leave you with these forecasts -- more snow, probably tomorrow morning, for London; Germany, Copenhagen, Zurich, more snow and the winds in the south.
OK. See you tomorrow.
Now, after the break, more QUEST MEANS BUSINESS.
QUEST: Welcome back.
Our 12 Days of Festive Christmas or festive 12 Days of Christmas continues. And we are at 10 lords a leaping. Now, when we had to think about 10 lords a leaping, well, that was fairly obvious. We would simply go to the House of Lords at Westminster.
Well, that was easy enough. But we needed to make it more interesting, more complicated and perhaps give it a bit of a twist.
I was recently given a privileged tour of one of the most indelible institutions in the UK.
But instead of lords a leaping, what about a lady a leaping, in this case, Baroness D'Souza. Member of the House of Lords, the upper house, Lady D'Souza explained to me what it means in practice to be part of that institution of lords and ladies a leaping.
BARONESS D'SOUZA: And it's amazing how few people actually know what the House of Lords does.
QUEST: Ah, this is...
BARONESS D'SOUZA: Look at it.
Isn't it splendid?
You know, I remember that I actually walked through this hall Sunday and there was absolutely no one here. It was completely silent. And the weight of history was incredible.
This is nearly 1,000 years old. I mean you can't help get the feeling that parliament and actually what it implies, which is democracy, goes back an awful long way in this country.
QUEST: Baroness D'Souza sits as a crossbencher, or independent, with no party affiliation. As the main crossbencher, she's responsible for helping others decide which way to vote. The crossbenchers make up a third of the House of Lords and they're a crucial part of the House's democracy.
BARONESS D'SOUZA: What surprised me enormously when I came here was how vital the two functions of the House of Lords are. One is to scrutinize legislation line by line, sentence by sentence, comma by comma. And the second thing, of course, is to hold the government to account. It is up to the lords to say hang on a minute, that is not appropriate. That is going to result in bad law.
Sometimes I wonder whether it was built to intimidate people.
QUEST: It is a -- it's both awe-inspiring and intimidating.
BARONESS D'SOUZA: And oppressive -- somewhat oppressive, I think.
QUEST: As a -- a lord and a lady, what's the trick of the trade?
BARONESS D'SOUZA: To network across parties. And you have to build up alliances. I think those who are unprepared to spend time in tea rooms and in the Peers Lobby, you are less likely to have influence in this house.
So here we are in the famous Peers Lobby. And, as you can see, it's not that big. It's quite high and it's apparently got very special architecture. This is the place where I try and catch people. So I'm forever darting up and down saying will you do this, can you do this, are you free?
QUEST: Lords and ladies a leaping.
BARONESS D'SOUZA: Lords and ladies a leaping, holding their skirts, yes. I'm not going to do that for you today. It would be -- it would be - - it would not be decorous.
BARONESS D'SOUZA: No. It would not be decorous in this Peers Lobby, let alone in the -- the chamber which you see there to your -- to my left down there. And if you just glimpse the gold of the throne where the queen sits when she attends parliament.
This is Central Lobby. Here we are. Yes. And this, which is actually quite a generous space, is the area where the public, if they've got appointments of any kind with politicians, meet. So it's full, when the public is here, of people and politicians.
It is a jolly big privilege and it's not often in life that one can say that you can make a difference for an awful lot of people. I think we have done that. I think we have upheld certain civil liberties, certain freedoms which are essential in a democracy. And as we all know, the price of democracy is eternal vigilance. And though there are oftentimes, you know, organizations outside parliament that lobby, what we can do is -- is change legislation for the good, in the interests of the individual and individual liberty. Therefore, I think it's something that everyone has to believe is a good thing to do.
(END VIDEO TAPE)
QUEST: A lady a leaping in the furtherance of civil rights, baroness D'Souza.
And we continue our festive 12 Days of Christmas tomorrow, when, of course, we're at number 11. And it's 11 pipers piping.
I'll have a Profitable Moment after the break.
QUEST: Finally tonight's Profitable Moment.
The misery facing those people on Eurostar stranded by the train's weekend failure, is grim, indeed. And while I have some sympathy for Eurostar's position that they've been running the trains for 15 years without this happening before, it's the way they've handled the crisis that leaves one breathless.
Firstly, let's have a reality check. It is inevitable that any public transport interruption is going to be messy -- thousands of people, limited options. It's not a happy question.
But the questions being asked today -- why wasn't it possible to get food and water to those stranded?
And why couldn't they do more?
I don't believe calling for the resignation of Richard Brown, the chief executive, is helpful. Ultimately, then, when the facts are known, someone will have to carry the can -- not for the failure of trains. That was a technological blip. But for the way this crisis has been handled.
And that's QUEST MEANS BUSINESS for tonight.
I'm a jesty Richard Quest in London.
Whatever you're up to in the hours ahead, I do hope it's profitable.
Christiane is next, after the headlines from the I Desk.