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Euro Zone Unemployment Climbs to 10 Percent; Politics and the Pound; Obama Lifts Restrictions on Offshore Drilling

Aired March 31, 2010 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: The Euro Zone goes double- digit unemployment climbs to 10 percent.

Britain stares into the unknown, the dangers of political vacuum worrying markets.

And drill, baby, drill. Obama lifts restrictions on offshore oil.

I'm Richard Quest. We have 45 minutes together, because I mean business.

Good evening.

It is an unwanted milestone for unemployment and no one expects this to be the end of the journey. One in 10 people are now out of work in the Europe. And economist tells this program, don't look for a turn around before the end of 2011.

Also, on this show, two exclusive guests for your Lakshmi Mittal, the chairman of Arcelor Mittal, he is one of the world's richest men. He tells us what might happen to steel prices and investments in new plants. Also, we have Sepp Blatter, tonight, the president of the world football governing body, FIFA. He tells us the English premier league needs to review club ownership.

Now, the lines of unemployed people in Europe are growing. Economic recovery may be gathering pace. If you are looking for a job, things haven't felt this bad for more than a decade. Opening the dossier and you see the numbers. Unemployment in the Euro Zone hit 10 percent in February. Now, that is 15.7 million people, now out of work. The highest its been since the single currency was launched in 1999.

Across the EU as a whole the jobless rate stands at 9.6 percent. There are 23 million people seeking work, or at least claiming out of work. Of all EU countries Latvia, which of course has been the economy that saw the largest drop in GDP, it is at the highest unemployment, 22 percent. And things aren't much better in Spain, 19 percent of the workforce are out of work there.

The under 25 are twice as likely to be unemployed as the rest of us. These are staggering numbers, when you put them into the full context. And the youth unemployment rate, the youth unemployment, 20 percent in the Euro Zone. It is 40 percent in Latvia and Spain.

Now, at the same time, prices are getting steeper for shoppers in the Euro Zone. Slowly measured as inflation as the CPI, consumer price index. It is up 1.5 percent. In February it was less than that. Economists are putting the increase down to higher oil and food costs. Traders in Europe seem to have shrugged off the news.

You have seen the economic numbers but what did the markets make of it. Well, the European Markets mostly ended the day higher. The main impact for markets was a disappointing U.S. jobs report, which at some point we'll talk to Stephanie Elam in New York, in a second.

Some banks, mining, energy stocks, look the way it goes, as the London FTSE virtually unchanged. BNP Paribas in the bank-in the Parisian market was down 2.5 percent.

Interesting-here's an interesting one for you, BSkyB shares up 3.4 percent, as analysts say the Ofcom review, this is the one that has talked about BSkyB's ability to charge wholesale prices, at which Ofcom says they should be regulated. That says, of course, that it is not too damaging for them.

Now, that is the markets today. Look at it over the quarter. We're staring to see, at least in Zurich and in London, a rather pleasant little rally that has taken place in the first quarter of 2010.

And what it also tells us, of course, we know that this time last year was the low point, March 2009 was the low point in the market. But now we are starting to see some really strong and perhaps broad-based recovery within that. Not a barn burner, by any stretch of the imaginations, but not a route either.

Move over to the euro. Now this, of course, has been as Greece's problems, we-euro over the course of the quarter lost 5.6 percent. It hit its low point, oh, just a couple of weeks ago, at 1.33, their U.S. dollar. But since then we're starting to see something of a small rebound. Now, whether that is going to be sustainable will of course be the question. If you factor in the difference between what we saw with equities, and with currencies, you are getting an overview of a quarter that actually showed some very interesting forms and differences.

Economists often disagree and describe employment as a lagging indicator, meaning it takes a while for growth to actually result in extra jobs. Even though, markets are returning to positive areas. I spoke to Paul Donovan, always makes sense; he is the deputy head of global economics at UBS. Now, I asked Paul, the outcome (ph), has to come along for jobs soon.

PAUL DONOVAN, DEPUTY HEAD OF GLOBAL ECONOMICS, UBS: Yes, I think in Europe's case, though, that could be some while off. I mean, bare in mind, of course, that European governments have been frantically coming up with all these fantastic schemes to disguise the unemployment numbers over the last year or two years. Those schemes are starting to wear off now and so the reality of the unemployment that we should have been saying over the last couple of years has still yet to hit with full force. So, I'm thinking unemployment has further to go up in Europe.

QUEST: You see, a lot of people watching tonight will find it somewhat difficult to square that circle in the sense that growth has returned, and it is pretty-and markets are up at 18 month highs, company's earnings are back, not to double digit growth, but we're seeing good strong earnings growth. When do you think you start to see jobless recovery-or jobs recovery?

DONOVAN: I think jobs recovery is going to be, at best, 2011, and probably late 2011. Yes, we have got growth, but the key point is we haven't got above trend growth. Now, economists get very excited about this sort of thing. It is an important distinction. Above trend growth, is what we reduces unemployment. Below trend growth, does not reduce unemployment, in fact, it can accompany rising unemployment. So we need to get back to a position of above trend growth, and we're not there yet. Not in Europe, not by a long way.

QUEST: If we look at Greece, well, the agreement came, and the agreement went. There was a minor recovery in Greek debt, which has since reversed. Why should that have happened. Surely, Greece has been handed exactly what it said it needed.

DONOVAN: Well, it has and it hasn't. It has been handed a rather botched job by the European Union, or at least by the Euro area. You know this was a Euro area problem. They are supposed to be able to solve their own problems. They are not supposed to go running to the Uni in the form of the IMF every time something goes wrong. You know the Marshall Plan was 60 years ago, for crying out loud, and here we are resurrecting it once again. And indeed, once again, to bail out Greece.

Now, I think that the issue here is that markets are getting a little bit concerned about the fact that the IMF and the Euro Zone may not actually agree on the conditions that are going to be required to assist Greece when the time comes.

Frankly, I feel that Greece will get the assistance when the time comes. Perhaps markets are being a little bit nervous, but after what they have been through in the last six months you can perhaps understand that nervousness.

QUEST: But, oh, yes-no, I don't understand necessarily, because the totality of it, because President Van Rompuy said quite clearly, and indeed, we know that they are not going to let Greece default. So, in that scenario, Paul, surely bonds yields for Greece should just drift back down again.

DONOVAN: Well, indeed, they should, if anybody in the market knew who the president of the European Union was, or indeed, whether he had any power. The fact is nobody knows who he is; he doesn't have any power at all. And if the Germans don't want to help, they won't help, which is, critically, the problem at the moment. So, the issue here is it is all very well, the EU commission president-I'm sorry, the EU president, saying that is it, Greece isn't going to be able to default. Well, fine, unless you have $25 billion in his personal bank account, he's not going to be able to guarantee that, personally.


QUEST: Ah, I always enjoy hearing the robust views of Paul Donovan, from UBS. He is always welcome to add a breath of fresh air on our program.

Now, on Wall Street traders are reacting to the fresh reading on the employment this session. Stephanie Elam is in New York and at the New York Stock Exchange. Stephanie joins me now.

So we had this jobs number, from ADP, which I'm going to steal your thunder, by saying, you know, it was worse than expected. But Stephanie, the market, the reaction within the market, that is what is interesting.

STEPHANIE ELAM, CNN FINANCIAL CORRESPONDENT: Well, right, Richard. You take a look at the fact that we lost 23,000 jobs in March, in the private sector, when overall we were looking for a gain of about 40,000. This is still the smallest decline in two years, but still because there was that expectation the markets were down. But now we have mixed situation, where Nasdaq and S&P are trading ever so slightly above the flat line, while the Dow is still on the negative side here.

But there are a few things you have to take a look at here, Richard. The service sector, for one, it added nearly 30,000 jobs, but the problem was that was offset by big losses in manufacturing and construction. Now despite the slip ADP does say that corporate America is on the cusp of recovery, but this report shows that they are hesitant to increase their payrolls, so the pace of improvement definitely slowing down from month-to- month. We lost 23,000 jobs in March, and we lost 24,000 in February. So it is a very tiny improvement.

Remember last year we would see these huge improvements month-to- month. Last year from March to April, for example, we saw job losses go from 750,000 to 550,000 in a month. So, things are changing.

QUEST: Yes, but I'm confused and you have got to help me here, because, please-we have the ADP report, we have the jobless claims report, we have the unemployment numbers, we have weekly claims, we have this-and the-we need to get an overview here of what the situation is. Not the minutia of one week to the next, but what is the overview?

ELAM: Well, that's true. And that is the reason why this is also noteworthy, too. Because this ADP report, normally it tracks closer in line with the government's big monthly jobs report, that we are going to get on Friday, for March. And these two are not the same, but part of the reason why is because ADP takes a look at private sector. And if you take a look at the government report, it includes government workers as well. So that number is going to be skewed a bit, because, it is census time here in the United States. So the 2010 Census is going on, so the government did a lot of hiring.


ELAM: Those jobs are going to disappear in the summer. So that is one thing you have got to factor in, that this ADP report does not. And the ADP report obviously coming in with a loss of 23,000 compared to what the government, the expected consensus out there is that the government will have added-not the government, but the economy will have added 190,000 jobs, or so, in March. But keep in mind, a lot of that is Census.

Also, we had a ton of snow hit us, in the United States, in February. So there are some people who might have wanted to do some hiring, they couldn't do that until March. So, the numbers may be inflated for that reason. One analyst that we talked to, one economist, was saying if you take out both of those factors, then the economy probably added about 25,000, not 190,000.

Still a move in the right direction, it would still be the second positive number that we have gotten from the government for these monthly jobs reports since the recession began. But obviously, it is still not that 190,000 number, but a move in the right direction.

So, the overview I can give you is March may be a blip, when we take a look at these numbers. April, it is possible we could see a slide back in the other direction.

QUEST: A blip in March. All right. Many thanks.

So, there we are. That is what happens when you get a blip in March. Stephanie Elam, did we pay the bill or not?

Right, the news headlines now. We need to turn our attention to see what is happening in the world. And for that we join Fionnuala Sweeney, who is at the CNN News Desk.


QUEST: Now it is often said financial markets hate uncertainty. With elections eminent, here in Britain, the one thing most investors are hoping to see is a clear winner. In a minute, we'll be asking, what if we don't get it. What happens to the pound?


QUEST: Britain's power brokers are bracing for the possibility there will be no clear winner in the next general election, widely expected to be on May the 6th. A recent run of polls suggests the U.K. maybe heading for the first hung parliament in some 36 years. The last thing that the markets want is a period of uncertainty about who is running the country. The markets remain vulnerable. They hate uncertainty.

Now, with a budget deficit equal to 12 percent of GDP, is that going to be negative for sterling? And will the new government have to lay out plans quite quickly, of course, if there is a power vacuum? The markets could take it out on the currency. The credit rating agencies are saying if action on the deficit doesn't move swiftly, then Britain's credit ratings could be cut. Just imagine, loosing their-the famous triple A rating, the much vaunted and protected triple A. Perhaps not likely, but is it possible? In the corridors of power a post-election contingency plan is taking place, it would give the politicians up to three weeks to form a government, leaving the Prime Minister Gordon Brown in charge throughout the transition, the Plan B.

In the currency markets sterling is gyrating as fast as the poll numbers. The pound actually rose against the dollar, this session, as traders reigned in some of their more pessimistic bets against the pound. Now it will buy you little less than $1.52.

Politics and pound, Stephen Gallo is head of market analysis at Schneider Foreign Exchange. Stephen joins me now.


QUEST: Now, well. How worried is the market, do you think, off a hung parliament?

GALLO: I say the market is very worried. It is a big speculative bet to take at the moment. And there could potentially be a lot of money in it, if we were to get uncertainty around that fiscal deficit. But we made the gutsy call early in March, and basically said that we think the risk awareness of a sterling crisis is so high in 2010, that no matter what the outcome of the general election at least minor adjustments will be made to satisfy the ratings agencies this year, 2011 is the year that we worry about.

QUEST: Let's not worry about 2011 just yet. Let's just stick with- are you seeing large speculative bets on sterling by hedge funds, by investors at the moment? It is very clear that they have been in there and they are, to a degree still in there and we also are seeing, with something-

QUEST: They are shorting?

GALLO: Yes, absolutely. It is something we're not seeing with the euro, but we are seeing with sterling, as well, is that there is a significant degree of sovereign interest in the euro, but not so much in sterling. And that is relatively worrying. Absolutely. Everyone is panicking about the outcome of the general election. We happen to think though, based on that view that I just gave you, that sterling might actually finish the year on a positive note. 2011, and the reason I worry about 2011 is because if we have a relapse in financial conditions, if we have a relapse in macro-economic conditions, the political will won't be there to put through a second round of austerity measures. Then the triple A ratings downgrade will come.

QUEST: But if there is no-the-in what circumstances?

GALLO: Well, in the circumstances that there are more strains in the British banking sector, there is more economic weakness. And that second round of austerity measures, that everyone is betting on at the moment, won't be there.

QUEST: Why are you so concerned 2011? I mean, we have got to get through May and June?

GALLO: Absolutely, absolutely. And as I say, it is a gutsy call.

QUEST: So what have you done? Have you longed or shorted?


GALLO: We don't speculate in the markets. Schneider don't speculate.

QUEST: Right.


QUEST: But you'll are making a call as to where you think it will go?


QUEST: Where do you think pound/dollar is by, sort of, autumn time?

GALLO: We think it will finish the year at $1.65, but our call for next year-


GALLO: -is for it to drift potentially below $1.40, against the dollar. Sterling crisis, 2011.

QUEST: 2011 for sterling crisis. And euro? Euro, perhaps there is no catchy name for that? GALLO: Euro selling $0.85, $0.87 for euro sterling by the end of year. But we think that will come under further pressure. You see, what will happen probably with the Euro Zone is that a number of these countries will be attacked this year, but they'll get through a reasonable amount of austerity measures before the end of the year, so the Euro Zone won't be as big of a concern for the markets next year. It will be those that have lagged on the austerity front that the markets starts to get worried about. And also, the U.S. dollar is in that boat as well, too. Except there is a lot more-

QUEST: Hang on, this boat is getting very crowded. There will be plenty of time to add something more.


QUEST: And it is leaking at the moment. Let's just stick with sterling. If we take-does the market care, at the moment, whether the Conservative opposition take control, or Labour gets in for a full term?

GALLO: Yes, because of age-old-we know that more liberal parties tend to favor bigger public sectors, bigger public sector spending. So, if the Labour government were to stay in power, obviously, there would be less cuts in government spending, which obviously, is a big concern, for the markets.

QUEST: You've got to promise me, during the election, we promise we won't ask who you think is going to win-

GALLO: The gutsy call, the gutsy call.


QUEST: But you'll come back and talk more about sterling as the election moves on and help us understand.

GALLO: I hope so.

QUEST: Many thanks, indeed.

GALLO: Thanks for having me.

QUEST: I thank you.

Now, this is a program, I tell you, we are going to get to grips with these issues, without fear or favor.

A man known for his steel billions, now Lakshmi Mittal is turning his hand to art. Ahead a chance encounter that sparked this latest venture. QUEST MEANS BUSINESS, it is midweek, and we're (INAUDIBLE).


QUEST: A fortune built on steel and reinforced by a blockbuster take over, the chief executive of Arcelor Mittal, Lakshmi Mittal has been named the wealthiest Asian living in the U.K., in 2010.

Now, so far, so good. We are going to show you something of the range of Mr. Mittal. For example, No. 8 on "Forbes" rich list in 2009. He is 58 years old. In "Forbes" top 10 every year, since 2005. And set a trend of tycoons from developing world edging out Europeans. In the 2010 list, "Forbes" ranking has him as No. 5. So, going up the list.

If you look at the range of industries and businesses, then you start to see perhaps just why this is a powerhouse lister (ph). 2006 merger with Arcelor; he brought Arcelor and Mittal together, they took the $27 billion deal. It was a hostile takeover and in doing so Arcelor Mittal became the world's largest steelmaker. It was audacious, but crucially of course, it was successful.

If you want to know how much Mr. Mittal is worth, "Forbes" estimates it at $28.7 billion. A dramatic increase on 2009, from $19 to $28, largely of course, as you will realize on the back of the share prices of Arcelor Mittal, which rose sharply. The share cap of the company itself, is $67 billion. Gives you an idea of why we are so interested in Mr. Mittal this evening.

The latest project bridges the worlds of industry and art. It is the result of a change and chance meeting in Davos with Boris Johnson, the mayor of London, who of course, has been on this program several times. The story goes, he needed just 45 seconds to persuade Mr. Mittal to fund this steel sculpture; 45 seconds, it is going to be at the center of London's Olympic park in 2012.

Speaking exclusively to CNN, Jim Boulden asked Lakshmi Mittal why he took on the project.


LAKSHMI MITTAL, CEO, ARCELOR MITTAL: It will require a lot of steel and the good thing is that most of the steel will come from various plants of Arcelor Mittal, and we have been involved from the beginning when the sketches were drawn, and the specifications were discussed. The good thing about the whole Arcelor Mittal (UNINTELLIGIBLE) is that it clearly shows that how steel can be used in the most innovative way, requiring a very high degree of engineering skill.

JIM BOULDEN, CNN INT'L. CORRESPONDENT: Now, talking about steel, of course, we have been reading lately that steel prices are on the way up and going to rise quite significantly. How is that going to change your outlook for 2010 and what you will do as a company?

MITTAL: Unfortunately, Euro metal prices have been going up very high. We know that for the second quarter the prices of iron ore have gone up more than 100 percent, comparing with last year. Even the core ingot (ph) have gone up by more than 70 percent. The prices of raw materials are going up. This is an unfortunate part of this and that means cost of producing steel is also going up.

BOULDEN: You have done a lot of cost-cutting in the last year or so, after 2008, 2009, problems. Are you beginning to now invest more? I mean, is this going to be a dramatic increase in investment for Arcelor Mittal?

MITTAL: A couple of things. One, that we did reduce a lot of cost. We reduced more than $10 billion of fixed cost during this crisis. Now some of the costs are coming back because we have started to increase volume. And I believe that we have emerged as a much leaner and stronger company out of this crisis.

BOULDEN: How would you see 2010 as far as the economy? The increase in raw materials, some people see as bullish. In other words, it means there is more demand that means the economies are picking up. How would you describe?

MITTAL: I would describe that different economies have a different growth pattern. Developing economies are coming back to normal prior to crisis. Europe and America will not come to the same volume-like pre- crisis `til 2012 or 2013, which means that we are not producing at full capacities in our European plants and our American plants, in developing economies we have started to produce closer to the capacity.

BOULDEN: Being here in the U.K., I must ask you, we are getting a few weeks away from an election. How would you describe the economy here? How would you describe the lead up? And are you worried about a hung parliament, as a businessman?

MITTAL: First of all, I am very impressed the way Gordon Brown has handled the crisis. Britain, clearly, has come out of the crisis and we can see a lot of economic numbers, which are showing positive signs. And I hope that this pattern continues and England can come out of this crisis as strong.

BOULDEN: You don't see any way that London is losing its, sort of, center of investment. There are all these issues of taxes and things?

MITTAL: Clearly, coming out of this crisis you need to look at the existing economic model for the country. We need to look at more on the innovation, more on the research and development, more on the engineering projects, and should take actions, or should take steps to attract more tourists. Clearly, Arcelor Mittal is one of these actions.

BOULDEN: Exactly. And finally, does a hung parliament worry you as a businessman?

MITTAL: I do not want to comment on politics, but clearly if there is no clear ruler ship in any country, for any corporate (ph), it worries.


QUEST: Lakshmi Mittal talking exclusively to CNN, to our Jim Boulden.

It is worth bearing in mind, Mittal is a major financial donor to Britain's Labour Party, the party of course that is in government.

America is making a bid for independence, that is energy independence. The key to autonomy lies all around the U.S. and we'll tell you why after many years President Obama wants to drill.


QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN.

The price of oil is bubbling to its highest level in 17 months. A barrel of light sweet crude is currently at up more than $1, at $83.50. The last time it was this high was October in 2008, before the full impact of the financial crisis had been felt. And, of course, prices fell backward because of the recession.

Traders saying demand is on the up in India, China, the Middle East and as well as in the U.S. from stockpiling. There's also the matter of the drop in the dollar, which makes oil cheaper for traders holding other currencies.

Earlier in the session, prices got a bit of a knock. President Obama said he wants to open new areas of the seas around the U.S. to exploration, even though he remains committed to alternative sources of energy. Mr. Obama says we still need fossil fuels.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The bottom line is this, given our energy needs, in order to sustain economic growth and produce jobs and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable, homegrown energy.


QUEST: The president's plan includes opening new areas of the Atlantic Coast and the Gulf of Mexico to drilling. You can see that here in yellow. The green bit of the map are areas where drilling is already allowed. And north to Alaska, where Mr. Obama will veto drilling in Bristol Bay, highlighted in red, but has given a green light to exploration in the Beaufort and Chukchi Sound Seas in the north.

We need some interpretation and analysis on this.

Luckily for us, Bill Murray joins us, the political correspondent of "Energy Intelligence."

He joins us now from CNN Washington.

Bill, first of all, in the areas that they're drilling -- I -- I realize no one drills completely speculatively. You don't just go and drill thinking you might find something. So they've obviously got good grounds for believing there are sizeable deposits in those places.

BILL MURRAY, POLITICAL CORRESPONDENT, ENERGY INTELLIGENCE: Well, you have two things. One is, a lot of these areas, there was a moratorium for almost three decades. Technology has increased and improved the ability to -- to get natural gas and oil out of the ground. So while these areas may have been kind of marginal commercially 30 years ago, they may actually have real commercial value now.

So that's -- that is actually...

QUEST: Right.

MURRAY: -- a reason to look to the area.

But a second point would be that the Obama administration is looking seriously at using natural gas as a bridge fuel to a low carbon economy. And it's thought that a lot of this area off the Atlantic Coast is actually natural gas prone.

QUEST: Because it's interesting, this is -- this is kind of a dichotomy in -- between natural gas discoveries and the oil discoveries, where the trend seems -- we know we need oil to run vehicles at the moment. But if you're talking about major gas fire -- major gas fired power stations and industrial sized stuff, than gas is a -- very much the option of the future.

MURRAY: Gas is an option of the future and there is some competition now between coal and natural gas. And when the Obama administration is talking about getting independence off of foreign imported oil, but also climate change, those are actually two separate issues...

QUEST: Take...

MURRAY: -- actually, two different issues. Natural gas and coal, coal is actually the real -- the -- the biggest polluter and the biggest...

QUEST: Right.

MURRAY: -- creator of climate change in the country.

QUEST: Let's talk politics for a second.

Is it at all embarrassing for the president to have had to announce -- to have announced this, whatever he may have said the bottom line is, the drill, baby, drill of the last election was the -- a defining moment.

MURRAY: This -- this is clearly -- this is a good negotiating tactic on the part of the Obama administration. He is trying to find extra votes along the southeastern coast of senators that could possibly push the climate change legislation and energy bill that is now being debated in Congress all -- through all the way to signature.

The most important thing for the administration is this is all part of a long-term plan, a plan that will have to include, somehow, a price on carbon. He's been told probably several times...


MURRAY: -- by Senate negotiators and Republicans in the Senate that he can't get the votes unless there's an offshore component. He's willing to take that risk and he's willing to combine the two together, if he can get a price on carbon that would make his environmental core constituents happy.

QUEST: Bill, many thanks for making sense of this difficult area -- making good sense of this.

We thank you for joining us.

In a moment, he's been in charge of the body that governs world football. He's at that job for a decade. Another exclusive interview tonight on this program. Sepp Blatter tells us what he thinks is right and wrong with the game, from millionaire footballers to billionaire owners, in a moment.


QUEST: European football clubs pay their players far too much money - - that's one of Seth Blatter's opinions. The FIFA president has many more. In an exclusive interview with CNN, the most powerful man in football spoke to Pedro Pinto.


SEPP BLATTER, PRESIDENT OF FIFA: I think something is wrong in here, I would also say with the Premier League, than to let out of their clubs go to -- to administration. This is not good. This is not good. They have two clubs in the Premier League. They are not in debt.

And why?

Because they have two sponsors that have taken away the debt. This is Chelsea and Manchester City. And all the others, even the big Manchester - - Manchester, they have -- I think they are just able to -- to pay the -- the -- the interest of their debt. But there are clubs, they are not even able to pay the interest of their debt. And this is not correct. This is not good. And these clubs and why they -- they are in debt?

Because they pay too high salaries to their players. They spend more money than they have. In any family in the world, you cannot do that. In any company, you cannot do that.

And why it is in football it's possible?

Football has not different laws. But this is not a question where FIFA can intervene, because this is economy. This is the responsibility of the national association, the members of FIFA, to make sure that their clubs are in good order.

In France, it is governmentally decreed that they -- they have there. In -- in Germany, 51 percent of the ownership of the club must be German. In Spain, most of the clubs belong to the -- to the fans.

PEDRO PINTO, CNN SPORTS CORRESPONDENT: But could FIFA help the national associations worldwide create some kind of salary cap?

BLATTER: I think salary caps would not be accepted by any economic system, especially not in the European Union, where the (INAUDIBLE) the economy of both -- the economy at a certain time. But salary caps would automatically come in if you agreed to this principle that you cannot spend more money that -- than your income is there. And these would -- these would out balance it, definitely. Definitely.

You have the -- these clubs, they have not 15 or 16 players. They are up to 25 players, 30 players.

And -- and what kind of players they have?

They want to have two teams, practically, if there is some -- some injuries or -- or a suspension, then they have the same quality of players. They pay them a lot of money. But if they don't have the money, then they are in debt.


QUEST: Sepp Blatter. And you can hear what else he had to say exclusively to CNN on "WORLD SPORTS," Thursday at 7:30 in London. That's 8:30 in Central Europe, right here, of course, on CNN.

Now, I promised you that I was going to discuss with Guillermo the interesting question of April showers. It is the beginning of, of course, the new month tomorrow -- Guillermo, why -- why do we have showers in April?

Surely spring has sprung, so what's this all about, April showers?


You know the jet stream?

Those the high winds that go there. They're very strong. They actually carry storms. And in the winter -- and this is a setup for the winter. We have cold air in place here and the jet is blocking that. So we have the storms in the south.

Now, this jet is going to move up, allowing the warm air for the summer to stay here, over Britain and over Europe and dry. But in the meantime, in April, as it's moving northward, this highway becomes like the perfect conduit for storms to go by. And those bring the rain showers, because it is warm enough now not to have so much snow.

Now, in the northern sections, still under the influence of that cold air area, we do have the snow, like we saw it in Scotland.

Satisfied with the answer, Richard?

QUEST: Hmmm?

ARDUINO: Satisfied with the answer?

QUEST: It does, indeed.

Thank you for that. April showers has been put into its proper perspective.

We thank you for that, Guillermo, at the World Weather Center.

ARDUINO: Thank you.

QUEST: Now, tonight's Profitable Moment.

The possibility of a hung parliament in Britain is a fascinating prospect. We have to go back to 1974 for the last time the U.K. Faced this situation. Yes, I do remember it -- not well. I was only 12 at the time, but I do remember people wondering what would happen.

How would the situation resolve itself?

What role, if any, would the constitutional monarch, Queen Elizabeth II, have to play?

In that year, of course, the U.K. Had two general elections.

Now, the civil service is preparing for this eventuality, aware that the uncertainty could create havoc for the British economy and the pound sterling. As Britain comes out of recession, albeit slowly, probably this is no time to have a politically inspired currency crisis. You heard on this program, of course, the effects that that could have. Whether or not sterling rises or falls against a pound -- against the dollar or the euro, those are going to be the questions that perhaps will get lost in the wealth of accusations, threats and, of course, who will run the U.K. In the future.

And that is our program, QUEST MEANS BUSINESS, for tonight.

I'm Richard Quest in London.

The midweek version of the program -- it's all downhill now to the weekend.

Because whatever you're up to in the hours ahead, I hope it's profitable.


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