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QUEST MEANS BUSINESS
German Chancellor Argues for Helping Greece Despite Internal Protests; Oil Spill Cleanup; Continental, United Airlines to Merge
Aired May 3, 2010 - 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: A big step forward today for Greece. Germany's chancellor agrees to pay the lion's share of the bailout.
A disaster for the environment, for local business, and BP, the Gulf of Mexico is swimming in oil.
And Continental and United Airlines, the merger is on, they become number one.
I'm Richard Quest. We have a busy hour a head, as I mean business.
At last a life line for Greece seems to be eminent however grudgingly it is being offered. The German chancellor has given her consent and stressing that it is not a blue print for other countries in hot water.
Tonight, from Berlin, the latest on Angela Merkel's political balancing act. And from Athens, and interview with the chief of the IMF mission to Greece, who puts it into perspective of exactly what the country has agreed to sign up for.
Germany, though, is now ready to pay the lion's share, at least from the Euro Zone's point, of the Greek bailout. Berlin is poised to open a credit line that will be worth $30 billion in total; $8 billion this year, $14 billion over the-euros-over the next two years, 2011, 2012. We're now waiting for the German lawmakers to signal their approval. Angela Merkel says what is good for Greece is good for Germany. Fred Pleitgen is following the story, joins me now from the German capital.
Angela Merkel always said that she would go along with it as long as the stability of the euro was in question. And once again today she dressed it up in such a fashion.
FREDERIK PLEITGEN, CNN INT'L. CORRESPONDENT: She certainly did. She said that this was very important for Germany's vital interests because there is such a big danger to the Euro Zone, Richard.
One of the things that has bee perceived in the past couple of days and weeks, really, was that Germans seem quite reluctant to help Greece with their bailout plan. Of course, some of that had to with inner German, with domestic politics here. There is a very important state election coming up in Germany and certainly the bailout measures aren't ones that are very popular. However, today, Angela Merkel said that this was absolutely vital for Germany's financial, for its domestic interests. Let's listen in to what the chancellor had to say at a press conference earlier today.
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ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): This reaction with the law does not only mean that we assist Greece but it will also help the stabilization of the euro, as a whole, and therefore help the people of Germany. Because a stable European currency is extraordinarily important.
(END VIDEO CLIP)
PLEITGEN: So that is what she believes is at stake, Richard. And let me walk you through the process that is going to happen from here on. Of course, today the German government has approved this law. Now what's going to happen is it is going to go through both houses of German parliament and barring any further difficulties, this law that would allow money to flow to Greece should be enacted by Friday May 7. And the opposition here, in Germany parliament, has signaled that it will not stand in the way of fast bailout money for Greece, Richard.
QUEST: Fred Pleitgen with the German side of the story tonight.
Germany is one of 15 nations pooling their resources to help Greece. The loans will be over a three-year period. The repayment will begin in 2013 through 2016. The terms of the loan will be on both fixed and variable rates of interest, depending on the particular country and the mechanism of the agreement. CNN's Jim Boulden is with me.
It is a long and complicated agreement. It is an enormous amount of money. So, what's the gist of who pays what?
JIM BOULDEN, CNN INT'L. CORRESPONDENT: I think before we get to numbers let's remind people that this is actually not going to be necessarily taxpayer's money, as a lot of people are saying, but these governments will go and sell their own bonds, get that money at a lower rate, give it to ECB. The ECB will then loan it to Greece at a higher rate and these countries, these governments should be able to break even, if not make a profit. I wanted to say that first, but let's look at the numbers.
Of course, Germany no surprise, somewhere in the region between $29 and $30 billion, because it has the largest share of the European Central Bank. That it is being broke down. France, $22 billion, Italy, somewhere north of $19 billion. Those are the three countries that had to come up with the most money. Of course, we're not talking about the IMF here. We're talking about the money coming from the Euro Zone, $106 billion.
Now, interestingly, the other countries that people keep talking about as maybe having trouble themselves. Spain, $13 billion, Portugal, a much smaller economy, somewhere south of $3 billion; and even Ireland, about $1.7 billion. The Irish have taken to the streets over the last few months upset at the bank bailout in their own country, now they're going to have to come up with money for Greece.
Now who is going to pay the least? Well, no surprise, really. The Islands of Cypress, a little over $200 million, the Island of Malta, under $100 million. And of course, Richard, let's not forget, Greece isn't on this list because they are going to be receiving the money, so they don't have to put money into this.
QUEST: Jim, one of the developments that I noticed during the course of the day, the ECB widened the range of Greek government debt, that it would accept as collateral. Explain, why is that significant?
BOULDEN: The moment that the S&P lowered the ratings on the Greek debt to junk status, I got an e-mail from one of the analysts who said, "Oh my, God, they can't put their bonds into the ECB." You have to have collateral in the ECB, that has to be what's in there from the governments. But it is not supposed to be able to take junk bonds. So they've had to do something in order to allow Greece to have collateral in the ECB, so it can get those loans.
QUEST: Which, of course, in turn will help Greek banks which are stuffed to the gills with $40 or $50 billion-
BOULDEN: With Greek debt.
QUEST: -worth or Greek government bonds. They could use that for-all right, Jim, stay on top of it. Many thanks, indeed. Jim Boulden joining us there.
In Athens, today, Greek workers were back on the streets. Garbage collectors, cleaners, office workers, they all marched to parliament where they protested over cuts to their pay and pensions. Greece has agreed to make savings worth $40 billion over the next two years. It's part of the condition of the international help.
The damage to these people will be severe, to their economic well being. Diana Magnay spoke to the IMF mission chief for Greece and asked him if this austerity program was too serious, and was it going to work?
POUL THOMSEN, IMF MISSION CHIEF FOR GREECE: It's going to work because it is a program that takes all the important measures up front, now, this week. It is a program that is going to work because it is socially fair. It well-balanced. It has measures to protect the valuable. It is a program that is going to work because it is going to be supported by an unprecedented amount of money from the international community. And above all, it is going to work because it is the government's program. This is what the government wants to do.
DIANA MAGNAY, CNN INT'L. CORRESPONDENT (On camera): But people on the streets don't think that this is socially fair. What happens if this kind of social unrest continues?
THOMSEN: You know, it is-this is a difficult program. It is, as the prime minister, a painful program, but from my talk with the government, and my talk with the opposition, the social partners, including labor unions. I do sense that there is a clear sense that this is the defining moment for Greece in that the political elite has to come together and support this program. And I think that that is going to happen.
MAGNAY: But what happens if it doesn't? Is there a back up plan?
THOMSEN: Well, it is, you know, programs like this will be reviewed every three months. We live in a world that is constantly changing. Things go up and things go down. And we have to constantly readjust. A program is an organic thing. Perhaps it is working too well, and we can take the pressure off in some areas. And perhaps even a little bit more in other areas. That's the way things are.
MAGNAY: But alongside these extremely harsh austerity measures is there the kind of structural reform included in this package that Greece needs to tide it through. Not just for the next three years, but beyond that?
THOMSEN: The real issue is for Greece to come to grips with the problems with lacking competitiveness. And being part of a currency union, they cannot devalue it, and so they need structural reforms to boost productivity. And there is a long range of measures in the labor market, make the labor market more flexible. In the enterprise sector, to make entry and more easy to increase competition, to reform state enterprises, the whole range of measures are there.
MAGNAY: Can the Greeks expect further austerity measures if this package doesn't work?
THOMSEN: I am convinced that it will work. I am convinced that it will produce early results.
MAGNAY: How early? When do you-I mean, by 2014, is that what you're talking-?
THOMSEN: I think that by-I think that by, no, after a couple of years into this program I think that the Greek population will be convinced that the worst is behind them. They will start seeing rising employment, rising wages, and they'll see definitely that there is light at the end of the tunnel.
QUEST: Now, the Greek situation is still a worry for investors who are guessing whether the country will be able to cut its suit according to its much reduced cloth. Stocks tumbled in Athens as more unrest hit the capital. And in Europe some of the main indices made it into the black towards the end of the session, not much. It was a bank holiday in London. So there was no trading in the U.K. The euro has slipped. It's almost off 1 percent. Those are the markets to the currencies and the euro is off $1.3191.
Greek borrowing costs did ease every so slightly. The yields on the Greek 10-year bond fell back, narrowing the gap between the bond and the bund, but it is still many percentage points adrift.
The markets in New York are open. They are concerning themselves with a variety of things. Economic news, we'll talk about that in a moment. Car sales news, and there is a bit of Greece in there as well. The Dow is up 1.3 percent. You are up to date.
Now, let's get a look at the news headlines. Becky Anderson is at the CNN News Desk.
QUEST: The full impact of the catastrophic oil spill in the Gulf of Mexico is slowly sinking in for the people as in the affected area. The attempts to stop it have been futile, a quick fix is looking unlikely. We'll be live on the Gulf Coast in a moment.
QUEST: Everyday another 5,000 barrels of oil gushes from a ruptured off shore pipe. At least that is how much they think is coming out of the pipe. They can't be sure, it may be more. Hours by hour, the slick oozes closer the southern United States. In Louisiana the state where the oil looks likely to reach first, it is where we find Reynolds Wolf, who joins us from Venice, a community on the coast south of New Orleans. I beg your pardon.
Reynolds, the clean up operation and the protection operation is going as fast as they say they can do. But is there a feeling that more could be done?
REYNOLDS WOLF, CNN METEOROLOGIST: To tell you honestly, Richard, I think to be able to do more, you have to have perfect weather. You have to have great cooperation from Mother Nature. And earlier, last week, conditions were somewhat bearable. They were quite good during the middle of last week but then we started having very rough conditions in terms of what sailors were experiencing out on the ocean; some very big waves, very choppy seas, making it very difficult for boats.
Once they were able to navigate their way into the Mississippi Delta and then plunge into parts of the Gulf of Mexico. They ran into-it was like the say, almost like the inside of a washing machine; the water just incredibly rough, so very difficult for them there. Then just over the last 12 to 24 hours we have had a strong line of storms come through, some residual storms this morning, which really did bring the progress of bringing out some of those protective barriers to a standstill. But now we do anticipate the weather is going to cooperate and I would expect they would really ramp up their efforts, especially over the next coming hours and days, Richard.
QUEST: Perhaps and impossible question at this point, but from the people you have been talking to how much are they blaming, for example, BP, the oil industry, the U.S. government, where is the locus of blame heading at the moment?
WOLF: There is a lot of anger. There is no question about it. And, yes, we have heard murmurings of people accusing BP. We have heard some people say that the government has been-you know, then we have heard people say the government response has also not been not as fast as they would like. But to be honest a lot of it is this wait and see kind of attitude. They understand that this is a very rare event. I mean, Richard, you have to think about it, in the Gulf of Mexico there are so many of these oil platforms. And we have had so many huge storms, some Category 4 and 5 hurricanes that have come through here, some of the strongest storms on the planet, and yet there has been very limited problems in terms of the oil wells. Then you have this happen, which it seems like a true anomaly. So, they are doing what they can to help support, again, BP trying to help support the government to try to curtail the advancement of this oil plume.
This is an oil plume, remember, that is about the size of Jamaica, if you happen to be tuning in from say Canada and you are more familiar with the United States, it is about the size of the state of Delaware.
And right now, they're not trying to do the blame game just yet. The biggest thing they're trying to do is just keep it away from shore and they'll sort it out later.
QUEST: Reynolds, we'll talk to you again, in the days ahead. Stay on top of this for us. Reynolds Wolf joining us from Venice.
How can the leak be stopped? Crews are working on three solutions. Now, the first is to fix a massive piece of equipment called a blow out preventer, of the BOP, as you can see here. It is designed to seal the well quickly in the event of an emergency. Now, that was already installed on the -the Horizon. But as it did when the explosion happened the BOP, the blow out preventer, didn't work, when the workers flipped the switch it simply didn't happen. So now they are using remote-operated vehicles, ROVs, to try and activate this. They are sending things down. They are literally pumping hydraulic fluid in, they are doing whatever they can to do through these ROVs, to try and get the BOP to work.
Another operation will be to put a containment chamber over the leak. You take the chamber, and bear in mind, this chamber weighs some 74 tons. You put the chamber over the well, or at least the leaks, and you pump the oil to the surface. It is like a funnel arrangement. It has never been tried as such depths. This is 5,000 feet of water. BP says it will take about four weeks before the system is ready.
The third and the most drastic option of all and the longest option is to drill a second well, a relief well, which would intercept the oil. Then the first one, the actual main leaks can then be capped and initially you pump heavy mud in and then you cap it with cement. If they have to go down this road, BP says it will take two months to drill-two to three months, to drill those relief wells. So, a variety of options, none of which are easy and certainly none of which are quick. It is an enormous stroke of luck if the oil can be kept from the shoreline, whatever happens, information will be gained from this, to bear to what happens next.
Let's get to Woods Hole Oceanic Institution in Massachusetts. Chris Reddy is there, a marine chemist and an expert on oil spills.
Chris, when we-you have just heard the synopsis of what I've just given. And how realistic are those options in the short term. Or are they the only options so they have got to work? One has to work?
CHRIS REDDY, MARINE CHEMIST, WOODS HOLE OCEANIC INSTITUTION: They are our only options at this point, and I suspect they are constantly working and trying to find more. So, they find they have to do something and it seems like BP is working as hard as they can. That is all you can do.
QUEST: Let's just focus on that, please. Because BP points out that it was the blow out preventer didn't work. And they have put-they have 2,000 people down, 2,500, hundreds of ships. Is there more that really could be done at this stage in the proceedings? Or are people just sort of railing against the sea, if you like?
REDDY: My opinion is that BP is working as hard as possible. I mean, they are in tough seas, but British Petroleum, like everybody else down there, is working singularly to reduce any additional damages, so I would say they are working as hard as possible concerning the sea state and any other opportunities that you have to do when you are in 5,000 feet of water. I mean, think about trying to tie your shoes when you are in three feet of water. And then consider the complexity of doing any operations at 5,000 feet.
QUEST: We know there are several leaks, but the largest one seems to be at the end of the pipe, doesn't it? The bit that was-I mean, forgive my ignorant way of describing it. But the bit that was headed back up to the oil rig. That seems to be where the largest and most difficult one to cap is, is that correct?
REDDY: That is what I believe as well, yes.
QUEST: Now, to do that, the sort of mechanisms that I've heard them talking about is that they are going to cut the pipe back down again and then tramp it another blow out preventer on some-or activate another one. This is going to be extremely difficult.
REDDY: Yes. No, I mea, I don't think there is any easy course to go about it and they have to try, and I wish them the best, because any extra drop that goes out is even worse, but they are trying their best, I believe.
QUEST: Chris, let's just go into the realms of-you know, worst-case- scenario.
QUEST: If they are unable to-if they are unable to get the blow out preventer to work, and they are unable, and the dome doesn't work. And they do have to use the longer-term solution of drilling an oil well, a relief well, is that a guaranteed success, a relief well? Is that tried technology that will succeed?
REDDY: I'm not quite sure. I believe we are in such unprecedented areas that almost everything will be unprecedented in terms of the success. Certainly, I think the time lines and the stress that is going be involved, I just don't know. And I don't think many people have many answers at this time. But they are certainly working hard.
QUEST: Chris, would like you to come back in the future, as this develops, to help us understand what's happening, when it's happening. We need your sort of expertise on this program. Many thanks, indeed for joining us.
And at the top of the hour, the toll the oil spill is taking on the fishing industry. The State of Louisiana produces some 30 percent of the seafood consumed in the United States. Now commercial, recreational fishing is shut down for at least 10 days. We'll hear from the owner of a charter fishing boat. That's "WORLD ONE". It is at the top of the hour.
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Coming up next on QUEST MEANS BUSINESS we're taking a look at Las Vegas. There is no sure thing as a sure bet. Gambling on green living is one wager that is paying off. We're in "Future Cities" in Vegas.
QUEST: Here on QUEST MEANS BUSINESS, "Future Cities" has been showing us the latest thinking in the business of sustainable urban living. Tonight, well sustainable may be one word for it. We're going to Sin City, Las Vegas, has reinvented itself. Now, don't worry. This is all good family fun, but here we're going to offer you a greener tinge.
QUEST (voice over): Welcome to Las Vegas. And island of excess in the middle of the Mojave Desert. It is the only place in the world where a sphinx sits beside a skyscraper. Where taking a gamble isn't the exception, here it is the rule.
DANIEL LIBESKIND, ARCHITECT: I think either they are crazy or this is the best incredible vision that we could be a part of.
QUEST: The city was built on reinventing itself. And it is again playing a new hand. This time it is architecture. For a renowned designers Cesar Pelli and Daniel Libeskind, this is their future Vegas.
City Center, a five-year, $8.5 billion project; 12 city blocks packed with hotels, condominiums, a casino, and of course, retail space.
It opened in December 2009, with all the pomp you'd expect from one of the world's entertainment capitals.
When you look at the rest of Las Vegas, and suddenly you see this new sort of momentum of a 21st century city, and you see that there is a plurality of different voices and that that is part of modern city.
CESAR PELLI, ARCHITECT: What is interesting, since City Center has been built, most of existing buildings in Las Vegas look very old and tired.
QUEST: These clean, modern lines may only get a head turn in New York, but here in Vegas, with a strip dominated by pirate ships and miniature Eiffel Towers, this is a clear departure of design.
UNIDENTIFIED MALE: They put together a group of architects that were not about sentimentality, nostalgia, and copy. It set a new paradigm that you don't impose some buildings from elsewhere but you work from within this climate, this desert climate, and we created a sustainable development, which isn't just nice buildings, but really use energy in intelligent ways.
QUEST: Hidden beneath the glossy sheen is a design that uses insulation, increased air flow, recycled materials. It all transforms this city within a city, into a complex that will save the owners MGM Grand, more than 30 percent in energy costs a year.
CINDY ORTEGA, VICE PRESIDENT, MGM MIRAGE: If you want to go to a place that screams sustainability, you need to go to a national park. The primary purpose of people coming here isn't to see how environmental we are, so for us, the signature of doing it right is that you don't walk in an the first thing you see is wow, this is an environmental building.
QUEST: Take a walk with Libeskind through his newly born retail center and the proud father is aglow over what he calls walk-able urbanism.
LIBESKIND: The city of the future, a sustainable city, is a city where people don't have to use the care. They use public transport. They can live, work, play, entertain themselves, stay in hotels, live in the center of the city. And I think that is part of impetus of this pride, City Center. Bring people to live in the center, avoid, you know, eating up more and more land and use of the car and the gasoline that waste of energy.
People sometimes have a very fixed view of a city. They think they know what the city is, but that is the past of the city. The city is changing, rapidly, and I think it is urbanizing, it is becoming metropolitan.
QUEST: But can architecture alone transform Vegas' notoriously transient culture into a conservation minded community?
RON SMITH, VICE PRESIDENT FOR RESEARCH, UNIV. OF LAS VEGAS: Here is what I buy about City Center, is it going to help our economy? Yes. Is it going to be a center attraction? Yes. Is it going to provide jobs, all those wonderful things? Of course. Are we glad its here? Praise the Lord. You know, but you know what? You don't find hospitals there, you don't find schools there. You don't find social and cultural artifacts there. You don't find what makes a community a community.
QUEST: Unemployment here hovers around 13 percent. And of course, the local economy has been hit hard by the recession. Still, Smith says, Vegas is ready for new direction.
SMITH: But what I think is fascinating about it is that there is now, in this time of crisis, such a momentum to sit back and reinvent ourselves one more time. And Las Vegas is doing that.
QUEST: The question remains is City Center's careful planning and sustainable design merely a shift in architecture on the Strip? Or will its city, within a city concept, truly take flight in this city of risk and reward?
QUEST: And all this month, in May, our "Future Cities" is going be Las Vegas, and we will be taking you there each Monday, as part of our series, "Future Cities" looking at the urban life of the future.
When you and I rejoin in just a moment we're going to be united-we're not the only ones. Continental and United Airlines have announced a multi- billion dollar merger.
Well, I thought it was witty.
What does it mean for the passengers? I suspect it still means economy seats. In a moment.
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QUEST: I'm Richard Quest, QUEST MEANS BUSINESS. This is CNN.
They are expecting few problems from the regulators as they try to put together the world's biggest airline. Continental and United have agreed to merge two years after and earlier round of talks between them broke down.
It is a seemingly Goliath, behemoth of a task to put these airlines together. They were third and fourth , or second and fourth, in size. But together they will be the largest. This is what the planes will look like. Someone has done a bit of Photoshop on that.
The planes of the new airline is going to be called United. But it will keep livery and the logo of Continental. It is a deal worth $3.2 billion. Of the old, 55 percent of the new airline will go to United. So it is the closest I've ever seen to a merger that is a takeover, or a takeover that is a merger. And there is no premium really, barely 1.5 percent premium on the price being paid, 1.05 united shares being paid for every Continental. So, it is just about even Stevens.
The new airline will be run by chief executive Jeff Smisek, who comes from Continental, the non-exec chairman will be Glenn Tilton, of United, who will retire in the fullness of time. And Smisek will then take both jobs.
The savings, by putting them together, could be up to $1.2 billion over the next three years. And the way, of course, you do that is by you cut back on back office. You only need one headquarters, there will be a certain amount of rationalizing of routes. And indeed, Jeff Smisek admitted this. That there would, in a press conference, he admitted that it wouldn't necessarily mean that there would be some limited job losses. But the route to success, of course, for this merger is there is actually very little overlap between Continental and United they are different strength and weaknesses, which means, as Smisek believes, that this actually is a deal that makes sense politically, commercially, and in the aviation industry.
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JEFF SMISEK, CEO, CONTINENTAL AIRLINES: We talked in 2008, the stars weren't aligned then, in terms of the capital markets or the liquidity position of the companies. Certainly fuel prices back in 2008 were screaming through the roof, and we were at the cusp of a great recession. Now the stars have aligned, liquidity is better, both companies are performing better. Business travel is coming back. The economy is recovering. Fuel prices have moderated. And our discussions actually proceeded very swiftly.
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QUEST: So Smisek and Tilton there, explaining why the talks two years ago failed. They say the merger makes sense for both companies. And to give you and idea of where they fly and their strengths and weaknesses in different parts of the world. This is the map that you can see on UnitedContinental merger.com. It is their map.
Now, bear with me. To some extent they all fly everywhere, but Continental is much bigger from the United States down to Central and Southern America. United bought the old Pan Am routes across the Atlantic, to Britain, and across-but mainly across the Pacific. So, United has big hubs out there in Tokyo. Continental has an extremely strong hub down in Guam. And Continental is extremely big across over into Europe. A policy of many hears flying those 757s. It is a lot regional airports across the continent. That gives you and idea of how and why it works. And if you look at their 10-or eight or ten hubs, you see that they are geographically very strongly positioned.
Maggie Lake is in New York.
Maggie, when we look at that, it makes sense, but will the regulators see it in the same way?
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: That's the really bit question, Richard. And especially so know, because there is a new sheriff in town, isn't there? This is going to be the first bit test of the Obama administration when it comes to anti-trust. And they were assumed by the business community to be less friendly to the idea of these kind of big mergers.
You are right. One of the biggest issues they are going to look at its crossover. And as you showed on that map, there isn't a howl lot of overlap. And that is the point that the executives were really quick to make today in that press conference. Have a listen.
(BEGIN VIDEO CLIP)
GLENN TILTON, CEO, UNITED AIRLINES: There is virtually no overlap. So the work that we have done independent of one another, is exactly the result you are going to see when we come together as one company.
SMISEK: That's right. And the synergies that we're projecting in this deal, none of those synergies has any air fare increases built into them.
LAKE: Ah, the price issue. The price issue, though, is going to be another issue. Whether they hike fares. And Richard, it is not just whether they, the two of them hike fares, because of this merger, but whether it causes a system wide phenomenon of fares going up, just because they are taking capacity out. That is going to be what is likely going to be a really big issue for the administration, and one that analysts are little less confident about than the cross over and the redundancy issue.
QUEST: The workforce, pilots, machinists for maintenance, flight attendants, two sets of unions, both-I mean, at the end of the day, here, labor could scuttle it, but labor has been remarkably-I mean unionized labor, not the Labour Party. But that labor has been very quiet.
LAKE: They have, which is a good sign, if you talk to people watching this deal. And traditionally, your first and foremost, worried about the unions, because they have scuttled the mergers before. And then you usually worry about the regulators. The reason that people not as concerned this time around, you are already getting friendly noises from the United union. I haven't heard that much from the Continental Unions yet.
But listen, there is a precedent in place here. And that is the big Delta/Northwest merger. That deal is considered to be a template. They negotiated a contract, one contract for the whole new union. And United and Continental certainly hoping it is going to look like that, because that one included pay increases, it included an equity, and a seat on the board. So if they can come up with something like that and the unions are hoping they can, then this should go very smoothly on that front.
But again, remains to be seen and is a potential hiccup but so far the indications are good on that front, Richard.
QUEST: Maggie Lake, in New York. Thank you.
The deal between Continental and United is expected to close later in the year. And tomorrow, on this program, I'll be talking to the chief execs of both airlines. Continental's Jeff Smisek, United's Glenn Tilton, about the deal. They will be my guest tomorrow on QUEST MEANS BUSINESS.
In a moment, from humble origins to hate figure. He is one of the few people who knows what it is like to earned $68 million for a year's work. Lloyd Blankfein of Goldman Sachs says he does understand life at the sharp end.
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QUEST: We're getting a better sense of the legal headaches facing Goldman Sachs. The banker has filed a report with the SEC showing the number of lawsuits and shareholder challenges as a result of the SEC case. Goldman has been criticized for being tight-lipped about legal problems. It seems to understand it has an image problem that needs fixing. Fareed Zakaria spoke to Goldman Sachs' Chief Exec Lloyd Blankfein in a CNN exclusive. And he asked Blankfein if he understood the human impact of the sub-prime crisis.
LLOYD BLANKFEIN, CHIEF EXECUTIVE, GOLDMAN SACHS: I didn't always live on this perch. My-I grew up in public housing. My dad, for most of my life, worked for the Post Office, which was a terrific job to get, because you couldn't lose your job. But before he got that job, he had a lost his job.
And I remember one of my earliest memories is my own dad being unemployed and the insecurity I felt. I mean the horrible thing that I think of in families is not a parents, but a kid who is picking up the vibes and the insecurity and it doesn't apply just to the people who are distressed, but the people who are worried about falling into distress. That I can really appreciate. I mean, the anxiety of where those things are coming from. I'm a little bit immunized from that personally, but I can say that I don't-that I'm not-at the core of who I am, that I don't appreciate it or understand it, or frankly remember it.
FAREED ZAKARIA, CNN ANCHOR: Do you think of it when you think of this crisis? Do you think of people like your father?
BLANKFEIN: I think about it. I think about-I think about it all the time. First of all, I look at myself in the mirror. And the older I get the more I look like my dad every day. My dad passed away about 20 years ago, but I know look like he looked, as I remember him looking. And I think about my dad who worked at the Post Office, but worked nights at the Post Office, because you got a 10 percent night deferential, for doing it. And I think about getting, you know, when we moved into the projects in Brooklyn, and getting the apartment we got and trying to get upgraded to another apartment. I think of all these-of course, I think of all these elements. I think I'm a better person-I think that has been a huge advantage to me, in my life, to have that I think it has been a huge advantage to me in my life to have come up through that kind of-through those kinds of stresses and strains.
ZAKARIA: And yet, 2007, in the midst of this terrible crisis, you made $68 million? What do you say to Americans who look at that and say- and gasp?
BLANKFEIN: Well, I would tell you it was nothing about growing up in it, or for those Americans that make-should make people necessarily apologize for doing well, if in fact you really are doing well and working honorably and being successful. I think the big gasps that were done to Wall Street, were the gasps that were done for people who did not seem to earn the money that they were getting.
QUEST: Lloyd Blankfein talking to Fareed Zakaria on the issues. And exclusive interview that you saw and heard, here on CNN.
We need look at the markets and the Dow Jones industrials, up 152, just over 1.3 percent, 11,161.
Now Wall Street is being helped to its higher levels by some good economic news from the U.S.; a pile of reports, for instance, a rise in consumer spending, and faster activity in manufacturing. We saw both of those numbers that came out in the last few hours. This follows on from the GDP number that we saw on Friday. The exceptionally good earnings numbers that we've seen over the reporting season. Brain Fabbri is the chief economist at BNP Paribas, in New York.
Brian, the ISM number, the manufacturing number, the best in six years. So, that clearly shows that there is something-that it is more than just froth. There is real improvement taking place.
BRIAN FABBRI, CHIEF U.S. ECONOMIST, BNP PARIBAS: Well, I think that is true. Obviously, the manufacturing sector is benefiting from two big contributing factors, one is, global trade has increased across the board, across the world. And obviously that is creating a big gain in export demand everywhere, Including in the United States. So after going won almost cataclysmically down, we are now seeing a very strong upward rebound, due to exports worldwide.
The second thing is, if you recall in 2009, businesses were just absolutely taking the stock off their shelves and getting rid of it. And so we had this massive destocking. Now, of course, we are going through a process, very recently, in the fourth quarter, first quarter of buildings that created manufacturing demand, some new manufacturing jobs, and that what ism is really telling us.
QUEST: But at 3.2 percent that we saw in the GDP number last week, that is not enough to create the jobs that people are seeking yet, so is it? So we are still, you know, people-when I talked about what it happening economically, people seem to say, is it good? Is it bad? What is actually happening?
FABBRI: I think if we just take a look at that 3.2 percent growth, and really look at it over the last three quarters, we have some substantial growth, we've got consistent growth. We probably had sustainable growth. All of that is great, but it is not enough to create a lot of new jobs. Now, over another couple of quarters, as business becomes much more convinced that there is no double dip ahead. That there is this sustainability, that the momentum is positive, presumably as we go through the second half of this year, businesses will start to create real jobs. As banks loosen up some of the credit conditions, we just had a report, very, very recently saying big banks are loosening up credit standards for big companies, as it happens, as it becomes implemented into new loans, then presumably in the second half we will have more jobs.
QUEST: Brian Fabbri, BNP Paribas, in New York. Many thanks, indeed.
A reminder that the Dow is up 152, up 1.39 percent.
The weather forecast now and the key question of course that people are looking at very closely is what the weather means for the oil spill in the Gulf of Mexico. A bit also of course, back on this side of the Atlantic, what we can expect for the day ahead.
Lola, good evening.
QUEST: We know Greece is in trouble, it's not alone. Find out, why it seems like this could be coming soon to a street near you, in a moment.
QUEST: Welcome back.
One million was sold in 28 days, that's the word from Apple. Less than a month after the iPad went on sale, it hit the 1 million mark in less than half the time it took for the iPhone. Apple says demand for the tablet computer is out stripping supply. That is bad news for people outside the United States.
This one was brought across the Atlantic.
Apple says it will force the company to delay the iPad's international launch until late May. Basically, the rest of the world is being put on hold so that they can satisfy demand for U.S. domestic, the 3G has just come out in the U.S. and is having one or two difficulties.
The U.K.'s budget deficit is nearly as deep as Greece's. Unlike the politicians in Athens, no one at Westminster is taking an axe to the budget deficit just yet. And there is a very good reason for that. Why the U.K. believes it doesn't need to deal with the deficit now. As Jim Boulden reports.
JIM BOULDEN, CNN INT'L. CORRESPONDENT: Greece is doing it, Ireland started doing it last year, despite protests, mainly from state employees, some governments are cutting wages, loosening pension and entitlement promises, raising taxes, all to cut the budget deficits. But not in the United Kingdom. At least not until after the election on May 6.
DIGBY JONES, ADVISOR, HSBC: The problem is, of course, that turkey's don't vote for Christmas. So, vote for me, and I'll put your tax up, I'll cut all you public spending, doesn't tend to get you elected.
BOULDEN: The two main political parties are promising billions of dollars in so-called efficiency savings, cutting waste, but not big cuts to spending or tax raises yet.
BOB PARKER, CREDIT SUISSE: Clearly addressing the cut in public expenditure, and that balance between trends in public expenditure versus increased taxation. That balance is critical for the development of the economy.
BOULDEN (On camera): When it comes to election promises the ruling Labour government has said it will not implement cuts in spending or tax increases this year, claiming the U.K. is too early into recovery and it would choke off growth. But it has pledged to get the deficit to 4 percent by 2015. Now, the Conservative Party, currently ahead in the polls has left any detailed cuts for a budget announcement after the election. While the third party, the liberal Democrats, who could have a role to play in any coalition government, has said it would cut some big ticket defense items and slash big IT projects.
(voice over): So far, the currency and bond markets and rating agencies are taking the lack of detail all in stride.
RUTH LEA, ABRUTHNOT BANKING GROUP: I think ironically the bond markets are sitting there, saying well, we'll hang on and so will the rating societies, which are crucial here, however flawed they are, they are still influential. And they've made it very clear that they will hang on until after the election and see what a new government might say about dealing with the deficit.
BOULDEN: In the league table of budget deficits, for 2009, the U.K. came in at 12.6 percent of gross domestic product. Only Greece and Iceland had worse numbers in Western Europe. In fact, Britain edges out the likes of Ireland and the United States. And has a long way to go it if is to meet Germany, which stands near the E.U. goal of debt not exceeding 3 percent of GDP. Still, some market watchers are a bit more relaxed about the coming of austerity in Britain.
DAVID BUIK, BGC PARTNERS: We don't have a bad track record. We shouldn't be compared to Greece. That's not fair. Because this is actually quite a buoyant economy in the fullness of time. It is just, the fact, that the election really has got in the way of reality.
BOULDEN: But after the election, reality will certainly bite. Jim Boulden, CNN, London.
QUEST: And we'll have the "Profitable Moment" in just a moment, after the break.
QUEST: Tonight's "Profitable Moment".
The plight facing the U.S. Gulf Coast is perilous. The prospects are grim and getting worse. And at the center of it all, BP. Everyone from the U.S. president down, which have been criticized the old company's handling of the situation. BP says it has brought in more than 2,000 people to deal with the blow out. It has hired more than 700 boats to help disperse the oil.
It is not immediately clear, what more they could do?
BP's chairman has described the capping process as being like doing open heart surgery at 5,000 feet in the dark, and using robot to control submarines. BP has acknowledged it is liable to pay for the damage, but then clouded the issue by talking of paying for legitimate and objectively verifiable damage. Such legalistic nonsense is not welcome to those facing economic destruction at the moment.
And that is QUEST MEANS BUSINESS for this night. I'm Richard Quest in London. Whatever you are up to in the hours ahead- (DESK BELL CHIMES)-I hope it is profitable. "WORLD ONE" with Jim Clancy, starts now.