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QUEST MEANS BUSINESS
U.K. to Implement Austerity Measures; BA Strike
Aired May 24, 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 is for austerity. European governments are swinging the axe. B is for British Airways, the strike is underway. And C is for cities, casinos, and recycling. We find the future of conservation in Las Vegas.
I'm Richard Quest. We start a new week together and I mean business.
European governments are starting wield the knife on their public deficits. And in the months ahead, deeper cuts will be needed. Tonight, on QUEST MEANS BUSINESS, austerity has arrived. It began today with Britain's new finance minister taking a tentative ax to public spending plans. The aim is to get the U.K. budget deficit back under control. The chancellor of the exchequer, the finance minister, George Osborne says he wants to show the world that the U.K is serious about living within its means. And he's determined to keep hold of the prized triple A rating for U.K. gilts.
Come and join me over in the library as we look. The U.K. now pretty much has the largest deficit within-or at least structural deficit-within the European Union, at 11.1 percent. Certainly even more so, bearing in mind, the measures being taken by countries like Greece, which if come to fruition, would put their deficits on a much faster trajectory down. The budget deficit in the U.K. is expected to be $224, or so, billion. Now, it is less-we got numbers last week that showed that number was slightly less than originally expected. But it is still a record since the Second World War. And it is the highest, incidentally, of any G7 country.
So, the U.K. will slash savings by about 9-sorry, slash spending, by about $9 billion, give or take; 6 billion pounds, 6.2 billion. It is going to be done by a variety of methods in all departments, except frontline services. The detail is mind numbing on (ph) one level, but the chancellor believes it shows a commitment to what is necessary, going forward.
And George Osborne said there would be tough times ahead the worst is yet to come. The chancellor warned more difficult decisions lie ahead. Now put into perspective today's cut is only about 4 percent of the deficit. It is a relatively small amount. But it is symbolic in that as the U.K. economy is moving forward, so they are taking the first steps.
Now the German government is cracking down on its deficit also, according to reports. Officials told the paper, they are looking to curb spending by about $13 billion a year, $13 billion a year until 2016. There is austerity all over the Iberian Peninsula. Portugal and Spain are trying to prove they are fiscally responsible. Portugal is aiming to get over its deficit down by 4.6 percent, by 2010. Spain has outlined $19 billion in spending cuts.
And of course, Greece, the first debt choked nation in Europe to feel pressure. The Greek government has been forced to implement sweeping cuts and to accept rescue funds from its neighbors and the IMF.
Let's put this into context. Joining me now from the U.S. our old friend-well, less of the old and more of friend-David Blanchflower, former member of the U.K. monetary policy committee.
DAVID BLANCHFLOWER, PROF. OF ECONOMICS, DARTMOUTH COLLEGE: Hello.
QUEST: Best known to you and me, of course, because he helps us to understand, in his own way, the way forward.
David, we've now go tonight, you've got Germany, you've got the U.K. with is relatively small amount. So, what does it all mean?
BLANCHFLOWER: Well, it means that governments around the world are start-as you say-starting to move to austerity. But some of them really need to. That's Greece and Spain and Portugal. The U.K.'s move is really ahead of the game. Didn't really need to; its bond rating isn't in question. The deficit is relatively large, but we're able to borrow at reasonable figures. So, the U.K. is started today on a rather divisive strategy that I believe will make matters worse and it is a bad day for the British people.
QUEST: Right, we'll come to, if you like, the party-or the economic pre-part of that. Let's just stick with the symbolism, because exit strategy is all about telegraphing your are serious at some point. And to that extent that has now begun.
BLANCHFLOWER: Well, you have to say that you are serious, but it has to be dependent upon growth. On the one hand you are serious, you say you have a strategy to lead, but the danger is that you cause growth to decline because of what you've done. And the evidence here, two things, we've had very anemic growth so far and now the evidence from the European area is that growth is lower there. It is our biggest export market. We were hoping to export our way out of trouble.
So, policy needs to be dependent upon events. You can't just declare what you are going to do and do it irrelevant to what happens around you. And that is the worry, that growth won't come through in the way that they predict. And then if it doesn't it then you need more cuts and lower growth and then more cuts and lower growth, and that is the death spiral that I have said on this program that I worry about.
QUEST: Yes, you are always a cheerful chap, but you are particularly concerned on this happiness question. And I don't mean joke telling. There is a worry isn't there?
QUEST: There is a worry, isn't there, David, that as these cuts bite and there are plenty more to come in all Euro Zone countries that we feel worse off?
BLANCHFLOWER: Right. Well, I certainly think that way. I mean, in the past what we actually saw was that central bankers assumed that really changes in inflation was all that matters. Inflation is what hurt us. But research now consistent with what you are seeing is that increased unemployment really hurts people.
BLANCHFLOWER: Turns out the literature seems to suggest as well, it is particularly bad in South European countries. That, you know, Spain and Greece and Italy and Portugal, unemployment really hurts there. So what we are going to see is this austerity message, increased unemployment, we collectively are hurt by. I don't like the fact that somebody else is unemployed, but those people themselves are less happy. So we are really going to see, if you like, a hunkering down here, but people are not going to like it. How they react? We don't know yet.
QUEST: OK, let's throw the elephant into the living room, if you like. The United States has not even begun to talk about-I mean, to make any serious inroads into their 9.2 percent budget deficit.
QUEST: Now, if they join the austerity party, what happens?
BLANCHFLOWER: I think that is not quite right in the sense that the federal government hasn't gone into austerity, but in a sense the federal package was to deal with austerity packages at the state level. So, in my state there are spending cuts going on. So some of it started there, but at the federal level, that is no big sets of spending cuts. And the Fed hasn't even talked or thought about, but if they were start the danger would be you start too soon, America starts to tighten, and that impacts the rest of the world. And the moral of the tale through all of this is we're all in this together. But I think the view certainly at the Fed, and I share, you don't start cutting until you really see growth. And that's the problem that Osborne has. No growth, they start cutting, the danger is we get double-dip.
BLANCHFLOWER: And I think that really looks-an increased chance in Britain today, Osborne has increased the possibility the U.K. goes into double-dip by this unnecessary and divisive action today.
BLANCHFLOWER: Never have a view on things?
QUEST: No, I was about to say. Thank you for that, the austerity party is now well and truly underway.
David Blanchflower joining us from the United States.
Now, the Euro markets have been open and an interesting session. Well, actually lackluster, perhaps, some would say. London's FTSE, the Paris CAC currant, they spent much of the session looking for direction. I say interesting because after last week when we were having so many worries about what was going on, if you look at these sort of numbers you might be concerned. After all, if you look in one particular market, first gains in three sessions for the Paris market. The CAC flat, the DAX ended the day in the red.
Now, it was glorious weather in the United Kingdom today. Some would say lovely weather for a strike. This might look like fun. There is a real bitter dispute going on behind the picket lines. We'll have the story on that in a moment.
QUEST: Absolutely revolutionized the way we kept in touch. For many of us, they were the first way we got onto the Internet, and discovered how to use that thing called e-mail. You've got mail. AOL the search engine is 25 years old. Just even hearing that makes some of us feel a little older than perhaps we'd like to be. AOL's Chief Exec Tim Armstrong and the Co-Founder Steve Case join me now, from New York.
Good morning-good evening to you, I should say, gentlemen.
Tim Armstrong, we'll start with you to begin with. The way in which you now have to take the company, AOL, that was part of Time Warner and give it relevance, for the next 25 years is your biggest challenge isn't it?
TIM ARMSTRONG, CEO, AOL: Yes, I think, first of all, Steve and I are actually in Steve's original office in Dulles, Virginia, in the headquarters. And we have a giant-we have about 3,000 people here today for the 25th anniversary party.
And look I think the relevance of AOL going forward is really a lot of the relevance from the past, which is producing really great products and services that simplify the experience for people online. We have pivoted the company to focus on local and global content because we believe the future of the Internet needs better high-quality content, at scale. But we are starting this mission with a global brand, which only a handful of people on the planet have. We also have a set of assets and other properties around AOL. We have about 250 million global users. So, we have a lot of work to do, but we are starting off from a good spot.
QUEST: Steve I sat on the stage in that New York auditorium, I covered the merger with Time Warner all those years ago, and I even spoke to you then. That is all water under the bridge and what happened and all those things is water under the bridge. But you can't be overly pleased at the way in which the company that you founded, nearly foundered.
STEVE CASE, CO-FOUNDER, AOL: Well, obviously, there have been some disappointments, but today I'm really here to celebrate the work of the pioneers 25 years ago that really put AOL on he map and it really helped put the Internet on the map. When we got started nobody really knew what these services were all about. And nobody had computer, or very few people had computers. And now the Internet is really part of everyday life. It is really pretty ubiquitous and people use it, not just on computers but mobile devices and so forth. So it has really become an essential part of everyday life.
And that was our goal 25 years ago. So that is the main thing. In terms of the evolution, that first phase, the first seven or eight years, really were about being pioneers; trying to put the basic foundation in place for this new medium. T the second phase, or the mid to late `90s, was when we really saw the hyper growth of AOL. Everybody became interested in the Internet and AOL was the way many people choose to learn about it and become part of the Internet.
And then we moved into a third phase, which was a disappointing phase, kind of a little bit of stagnation, in part, because of the merger. I think now we're opening a new chapter under Tim's leadership. How do you take this forward for the next 25 years in a more focused entrepreneurial way. So I'm pleased to be here to thank the people in the past and also to cheer on the people headed into the future.
QUEST: Tim, Tim, as we come to the end. I'm one of the people that you need to get back. I paid-when I was living in the States, I paid my $14 a month, or whatever, for my AOL subscription. And then, of course, like others did, that became irrelevant. So, I'm just wondering now, as you look to take your company forward-
QUEST: That question of is there a killer app that you can actually go forward with, do you think?
ARMSTRONG: First and foremost, I'll speak for Steve, we'd both love to have you come back to the company.
CASE: Yeah, what's your credit card number?
ARMSTRONG: We'll start there. We can take that off line with you.
And then two ways, I would just say, you know, the killer app for us actually is a combination of two things. One, it is giving you content experiences. People have forgotten the fact that we own MoviePhone and MapQuest, and Gadget, and other things that are global properties that people use. And I think a lot of our properties get used everyday. So, hopefully you are still using one of them, to begin with.
And the second thing is we are going to pioneer and innovate some specific areas. One of them is around local, so where you live, so hopefully whatever community you live in we will come to your community and put in your information and have journalists online.
And then, two, I would just say we are going innovate across all the products and services. LifeStream, which is a new product for us, is the only fully integrated social networking product that can update all your social networking activities on one application. I think that is fairly groundbreaking for us.
QUEST: Tim and Steve, forgive me I don't seem to have my wallet on me in the studio. Many thanks-
QUEST: Also you may be familiar with that phrase, "The check's in the mail."
(DESK BELL CHIMES)
Many thanks, gentlemen.
QUEST: Now, British Airways, that is the other major story we are following today. The cabin crew are nearly 20 hours into a five day strike over pay and working conditions. Thousands of customers, passengers, who intended to fly with BA today won't be able to. The second time this year BA's been hit by strikes. There are more strikes to come if the two sides don't reach agreement. Ayesha Durgahee is with me now.
Ayesha, first off, how many planes did they manage to fly, or what was the situation today?
AYESHA DURGAHEE, CNN INT'L. CORRESPONDENT: Well, BA has said that they have managed to fly 85 percent of all of their long-haul flights and 100 percent of their short-haul flights. So, BA is sounding very confident at the moment. They've done better than they had originally projected. And to show this confidence they've actually put on 12 of their aircraft, the phrase, "Keeping the Flag Flying". I think we've got it, can show you. "Keep the Flag Flying".
DURGAHEE: On 12 of their aircraft at Heathrow, you'll see 10 Triple 7s and at Gatwick you'll see two aircraft with that slogan.
QUEST: OK, so no talks took place today?
DURGAHEE: No talks.
QUEST: And we had the aborted talks on Saturday when the protestors got in. And then we had Twittergate, or Twitterplane, whatever you want to call it. How far apart are the two sides here?
DURGAHEE: Well, it is very clear where they are stuck at an impasse and aren't budging from either position.
QUEST: But this idea-this idea that it is all about the perks that Willie Walsh won't give back, or the grievances. Is that true or is there something else lurking underneath do you think?
DURGAHEE: That's the springboard into the second round of talks and what is being discussed. No, there are deep issues involved in terms of the union, Unite union accusing British Airways of bullying tactics, and how cabin crew were suspended the second time around. But I went down to the Unite camp at Bedford Football Club.
DURGAHEE: And spoke to some cabin crew.
QUEST: But hang on-but, but, we don't have time for that.
DURGAHEE: Oh, you won't?
QUEST: Let's talk about Twitter instead.
QUEST: This Twitter business, tell me about the Twitter business.
DURGAHEE: Tweeting, giving a running commentary while-during delicate negotiations between Unite and BA, so Tony-Derek Simpson was Tweeting.
QUEST: Hang on, let's get this right. They were sitting in the meeting.
DURGAHEE: Yep, closed door.
QUEST: Yes? And one of them is Tweeting to the other? Is that correct?
DURGAHEE: No, no, no. Derek-
QUEST: So, one of them is Tweeting what is happening in that meeting?
DURGAHEE: Yes. Giving a running commentary, going-let me read a few for you. Arguments over the eight sacked workers, when employees on both sides of the dispute hide their faces when interviewing-dot, dot, dot, then something is badly wrong, down at BA.
DURGAHEE: And the third one here, "intruders from left political group has infiltrated police corps, much noise and stamping."
QUEST: But none of it is terribly awful, what they said, isn't it? I mean, what is wrong with this. Because Willie Walsh was absolutely steaming about this.
DURGAHEE: Yes, they released a statement saying that they were absolutely astonished that Derek Simpson would be Tweeting while negotiations were taking place. And when it-it's basically inappropriate when this is a serious issue between both the Unite union and British Airways, when they have been at this dispute for-
QUEST: I'm just being rude. I'm just being rude. You are finishing what you are saying, I'm actually-
DURGAHEE: You may not be able to read all the-
QUEST: I'm logging onto my Twitter. Ayesha, many thanks, indeed.
Twitter certainly seems to have put the Unite union in a tailspin. When is it right to Tweet, and when is it wrong? When is it getting it right and a social faux pas to be Tweeting about it. To guide us through the dos and don'ts I'm joined live from Florida, by the international etiquette expert, Jacqueline Whitmore, the author of "Business Class Etiquette Essentials for Success At Work."
Jacqueline, many thanks for joining us. You know the story, of course. Tweeting in negotiations, what's wrong with that?
JACQUELINE WHITMORE, INT'L. ETIQUETTE EXPERT: It's extremely inappropriate. I have a rule, you never Tweet, when you meet. When you are in a meeting, especially one of that nature, that that is so serious, what they are negotiating, and confidential. You don't sit there in front of your counterpart and look down and Tweet what is happening to the worldwide web. It's inappropriate and its rude.
QUEST: Come on, are we not just being old fashioned here, Jacqueline, we're from a different generation. The youngsters do that sort of thing.
WHITMORE: I don't think he was a youngster, do you?
QUEST: Good point. I was trying to be-I was trying to give him the benefit of the doubt. All right. When else shouldn't you Tweet?
WHITEMORE: Well, you should never Tweet when you are angry, and obviously this Tweeting took place when, uh, emotions were running high. You don't-you really need time to cool down. You shouldn't Tweet in front of another person if you are going to Tweet, you step outside, or you do it in private. You know, what's rude on Twitter is also rude in real life. When you are mean, when you are grossly offensive, it can reflect very poorly on your perception, your perception or also how others perceive you.
QUEST: It interesting, isn't it? Because I mean I was slightly joking when I pointed out the age thing, but there is a prevalent view that rules of courtesy, decorum, and business etiquette do not apply in social media. And those of us who think we do, think we're all a bit fuddy-duddy.
WHITEMORE: Oh, no. Social media has forms of etiquette. They are developing as time goes on, but social media, like Facebook, and Twitter, and Linked-In, they all have their own set of rules and protocols.
WOLF: So what about, I'm just looking at my computer screen here. I'm not being rude to you, but I asked people today, on my own Twitter page, when is it not permissible-I would not Tweet when? One person says, "Tweeting and texting is commonplace in board meetings, it is OK `til it distracts others in the room."
"I would never Tweet when driving or on a plane."
"I would never Tweet while driving."
"I would never Tweet when meeting my girlfriend's parents," says one person.
You'd agree, I suspect?
WHITEMORE: Well, and don't drink and Tweet. You know, sending at Tweet while you are tipsy or intoxicated can also work against your favor. And also, don't Tweet in heat. And what I mean by that nothing can be gained, and much can be lost, when you Tweet in the heat of the moment.
QUEST: All right. Many thanks, indeed, Jacqui. We'll talk again about the rights and wrongs. We'll need you put us right. Many thanks indeed.
When we come back in just a moment, there may be no such thing as a sure bet, Las Vegas goes gambling on recycling food and waste paper, it all seems to be paying off. In a moment.
QUEST: Las Vegas is the home of glitz and glamour, casinos and piles of cash. There is a side to Sin City that is more green than the dollar bills in the casino and on the tables. Some of the hotels have instigated a huge waste recycling program, with a little help from the humble pig farmer.
QUEST: The lifeblood of Vegas, The Strip at night, this is the side of the city that draws 40 million visitors each year. This, on the other hand, is a side of Vegas that few, if any, tourists will ever see.
Underneath the sprawling Venetian and Palazzo Hotel & Casinos, the access from above, in full view below; 70 tons of waste, brought down daily. Sorted, smashed, carted away. At one time most of it would have ended up in the local landfill, but in just a few short years the complex has converted itself into one of the valley's largest recyclers. And all with the help of one unlikely ally.
ROBERT COMBS, PIG FARMER: OK, we're headed over to look at the cooker. Here we go.
QUEST: Bob Combs, in a city where big usually means better, a simple solution from small pig farmer. It has transformed sustainability on The Strip.
COMBS: That's what the RC stands for, Resource Conservation, not Robert Combs.
QUEST: Tons and tons of food waste from many of the major casinos. It all ends up here, on Combs 150-acre farm.
COMBS: Yeah, we can go ahead and pour it now, right?
QUEST: With his newly built boiler, in just two hours Combs can turn 10 tons of buffet leftovers into nutrient rich pig feed. And just like that bright lights city to the south, this is a 24/7 operation.
COMBS: I work everyday, yeah. Pigs can outrun me now. Most of them can.
QUEST: For Combs sustainability has been a part of his life.
COMBS: That's our tire shop right there.came from across the street. I moved it over, too nice of a building to tear it down.
QUEST: His farm is a shrine to conservation. Even the pens themselves are made from recycled World War II landing mats.
COMBS: It's tough, they don't wear it out and their snout doesn't get hung up in it very often either. It does the job.
QUEST: He has witnessed first hand the transformation of Vegas, from that sleepy Southwest outpost, to a global tourist destination. The subdivisions from last decade housing boom, now surround him.
COMBS: You don't build a pig farm right downtown, do you? We built it out in the wide open spaces. In fact we were the only lights out here. That's how open it was.
QUEST: And while he says he's received plenty of offers from developers to sell his land, up to $140 million at one point, Combs says he is committed to his city, and it's future.
COMBS: We feel like we are doing a service. We have a purpose-filled life.
QUEST: In building the future Las Vegas Sands Chief Operating Officer Mike Levin says Combs message of sustainability makes sense, especially, in the current economic climate.
MICHAEL LEVIN, CHIEF OPERATING OFFICER, LAS VEGAS SANDS CORP.: Well, there's no question there's a bottom line to it. Bottom line means we're getting at least four to five times the return on our investment over a 10 year period and it keeps going year after year.
QUEST: Levin points out the recycling of food waste is just a small part of the Venetian and Palaxos' (ph) sustainability plans.
LEVIN: Massive buildings mean massive opportunities. And although one person can do his own or her own good for what's going on with sustainability, big properties like this can save an awful lot -- up to 100 millions of gallons of water a year. That's a billion gallons in 10 years -- light savings, energy savings that amount to four or five times our investment.
QUEST: The key, says Levin, is to conserve while keeping the comforts visitors have come to expect.
LEVIN: I'm not sure the average visitor really thinks about it unless you tell them. The culture of Vegas is to people to have a good time, to have fun.
QUEST: Which mean efforts by Bob Coombs' recycling pig farm stay out of view. The sustainable side of Las Vegas' future -- out of sight but not out of mind in the City of Sin.
(END VIDEO TAPE)
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN, where the news always comes first.
South Korea says Pyongyang will pay a price for its aggression. Seoul is suspending trade with North Korea, sealing off shipping routes and adopting a tougher military posture after international investigators blamed North Korea for sinking a South Korean warship in March, killing 46 people on board.
Seoul also wants the U.N. Security Council to approve tougher sanctions. Pyongyang has denied attacking the ship.
"These are not the actions of a friend." And with those words, Australia announced it is expelling an Israeli diplomat. Australia's investigators have confirmed that Israeli agents forged Australian passports used in the killing of a Hamas operative in Dubai. Israel says it regrets the expulsion, saying it's not in line with the quality and importance of its relations with Australia.
A crisis in Jamaica is spreading despite a state of emergency. Gang members have blockaded a major road and bridge outside the capital. Police officers have come under fire as they tried to clear blockades in Kingston. The gangs are defending an alleged drug dealer that U.S. wants to extradite. On Sunday, two police officers were killed.
Iran, Turkey and Brazil have submitted a letter detailing their grievance on enriched uranium to the UN's nuclear watchdog agency. It calls for Tehran to ship low enriched uranium to Turkey and later receive fuel rods suitable for medical research. Brazil and Turkey are non- permanent members of the U.N. Security Council. They oppose a U.S. push for fresh sanctions against Iran.
Central bankers and governments are pulling out all the stops to got on top of Europe's sovereign debt crisis, as we've been reporting tonight. It's all about austerity (INAUDIBLE). And these days, austerity is the party that Europe is enjoying.
QUEST: Earlier, I spoke to the governor of the central bank of Lebanon, who won plaudits for the way he dealt with his own country's finances during various crises, including war.
I put it to Riad Salame that it is a tough time to be head of a central bank.
RIAD SALAME, GOVERNOR, CENTRAL BANK OF LEBANON: It is a crisis of confidence on the sovereign issue that has spread across the world, because the credit default swaps have been increasing in value worldwide. The -- this crisis, after the banking crisis, puts, again, the people at risk because the austerity measures means that there will be a delay in reducing unemployment. There is risk, also, on the persons in power due to the fact that the currencies are being devalued and the...
But if we look at your country, for example, 153 percent debt to GDP, an economy that is still growing. But at some point, you are -- you are also going to have to address, from the finance minister's side, the problem of deficits.
SALAME: We -- we have created confidence in our model. The central bank -- never has it paid to intervene, whether to shore up the currency or to prevent any failure in banks. Our model has been exposed to very stressful situations -- worse than what you have in Europe there, because they touched on wars and political instability.
And I believe that if the central bank has the determination and has the mandate to intervene and not let the markets deteriorate -- intervene by anticipation, that things -- things will remain stable.
QUEST: You have dealt with, as you've rightly said in this interview, some of the worst conditions to have to deal with or to -- to manage a monetary system.
What would be your single piece of advice to the central bankers in Europe today?
SALAME: I think they should not have hesitation to do whatever is needed, even if it is not in the orthodox way of working in central banks in order to bring back confidence. And they also have to listen to the markets, not only to the economists.
QUEST: And when the markets say we have no confidence in your debt, for example, with Greek bonds or credit default swaps, then you've really got to listen.
SALAME: You've got to listen and you don't have to wait so long to intervene and put order, because once the confidence is broken, it is much more costly to bring it back.
(END VIDEO TAPE)
QUEST: That, of course, was the central bank governor of Lebanon.
Many think -- many people think Spain could be the next victim of Europe's debt crisis. In a moment, we'll consider the options available to Spain as they choose which way to go forward, in a moment.
QUEST: The debt problems in Europe continue to keep the U.S. market in a state of heightened volatility. But a busy week of data could shift focus to the health of the U.S. Economy.
Felicia Taylor is at the New York Stock Exchange.
After last week and a 4 percent fall in the Dow, I think most investors would just be happy to get out with the shirt on their back.
FELICIA TAYLOR, CNN CORRESPONDENT: Some of them may have. However, some of them didn't. We started the week with the Dow sinking 100 points. Stocks did turn around, though, after we got some good news on existing home sales. Those sales surged 7.6 percent last month. And that is the biggest gain we've seen in five months.
Take note, though -- April was the last month Americans could take advantage of the homebuyer tax credit. So we could see a slowdown in the coming months.
However, we've also got mortgage rates that are below 5 percent, thanks, in part, to a run to U.S. Treasuries in the wake of European debt problems. That's one of the few, if any, positive effects of the European crisis.
The market, however, does remain under pressure. There is a lot of data this week. We've got new home sales, durable goods and consumer confidence. Thursday, though, we get the broadest measure of U.S. economic growth. That's the second quarter -- first quarter, rather -- GDP.
And the U.S. economy, by the way, grew more than 3 percent in the first three months of the year.
QUEST: We've been talking on our program tonight, Felicia, about austerity and the UK's measures announced today. Germany has announced measures.
QUEST: But the United States still has basically no measure in place, other than talking about it, for when it's time to start cutting the difficult, have they?
TAYLOR: Well, not in particular. I mean, you're right. I mean you're -- you're actively looking at some serious problems throughout Europe and taking a look at austerity measures there. We've had a different kind of a situation here. Naturally, it's a global economy and what happens in one corner of the world obviously has serious impact elsewhere.
That's why, when you take a look at what's happening especially in Spain right now over the weekend, with their financial institutions, whether or not that's going to have any impact on the larger American banks, in particular today, you can see reflected in financial shares here, such as JPMorgan Chase or Bank of America.
Hundreds of millions of dollars worth of exposure in Europe. But even -- we've got smaller regional lenders who may not have direct ties. Though -- they could have corporate clients that do have exposure.
So it all remains to play out. And as to whether or not we're going to see other, smaller European institutions need to be propped up -- Richard.
QUEST: Felicia, many thanks, indeed.
We're going to stay talking about that issue with Spanish banks.
The Spanish government has approved a $19 billion austerity plan to rein in the country's budget deficit. We told you about that earlier. Spain's cost cutting plans are already starting to bite. Lawmakers have slashed economic forecasts for the next by half a percentage point.
Al Goodman sat down with the former Spanish prime minister, Jose Maria Aznar and asked him what he thought about the government's plan.
JOSE MARIA AZNAR, FORMER SPANISH PRIME MINISTER: Well, it is possible (INAUDIBLE) to avoid another crisis in the -- in the Eurozone. And the responsibilities is trying that the situation in some countries -- Greece, Portugal, even Spain -- was not producing a contamination in other countries.
But the problem is that some countries, especially some governments in the countries, do not respect the real (INAUDIBLE). And that provokes a situation of indiscipline, no control of -- of -- of budgets and provoke a -- an enormous increasing of the -- of the debt in the -- in the countries.
AL GOODMAN, CNN CORRESPONDENT: How do you think this will all end?
Will the euro be saved or will there have to be new monetary structures with sharper, tougher fiscal teeth?
ASNAR: Maybe both. It's necessary to -- to -- to -- to have in mind -- to be reminded that, really, the country of the north of Europe was taking this (INAUDIBLE) the south of Europe that we live in -- under incubation (ph). And this vision exists.
Another is in the vision -- this vision exists in the Eurozone. I prefer to concentrate my efforts and efforts in the country and to -- to recover the situation. If five years ago, six years ago, we created more jobs than the United Kingdom, the German, the French and Italy together, today we create more jobless than the United Kingdom, French, Germany and Italy together.
Five, six years ago, I were that (ph) are more credibility -- have more credibility.
GOODMAN: So you're talking about a two tracked Europe, the north and the southern countries -- Greece, Italy, Spain and Portugal -- that are taking instructions from the north?
AZNAR: If it is, is one of the consequences of this -- of this situation. If you read in the newspaper, you hear TV station, the European Union explained that the -- the decision that must be taken for the Spanish government or the Greece government. This has had very tough consequences -- political consequences.
And I -- I wish for my country another situation -- another situation (INAUDIBLE) organize another political response of -- of this crisis.
(END VIDEO TAPE)
QUEST: The former Spanish prime minister, Aznar, talking to Al Goodman.
The weather forecast demands our attention. I promise you, Guillermo, at the World Weather Center, if you do anything to destroy this glorious weather we are enjoying in London, you and I are going to have a serious falling out.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Well, I think we will.
London especially will see some clouds and some rain showers here and there. It's not going to be a repeat of what we saw today. We have record heat today, 28; Paris, the same thing. We'll see the rain in Paris. I think that if we compare Paris and Britain, you know, Paris is going to be more impacted.
Also, cooler conditions are moving on. But come on, it's Monday. And toward Tuesday. So you have four days to recover and enjoy the weekend that's coming up.
Also -- and I have good news again -- Richard, no volcano activity despite the fact that we forecast that the winds were going to come down -- and they are -- into Scotland and in Northern Europe, as we said, because we can forecast the winds. We didn't know that the volcano was going to stop acting and it did.
So it is great news. So all of you who are planning right now to see how the winds were going to behave and impact your travel arrangements, you have some time to relax. The weekend was good. It seems that this week is going to be good, as well.
We'll keep you updated.
Well, OK, also, Poland with more rain. Unfortunately the floods here in this part of the world; Slovakia, the Czech Republic also with bad weather in here. Germany getting better, though we must -- we are going to see some thunder and some windy conditions.
Copenhagen will see winds, as well. But this is the summary, if you're watching from, let's say, Vienna, you may see some bad weather there. The winds are going to be impacting the area, but it's around this orange circle -- so Poland, parts of the Czech Republic and Germany where we will see the worst weather or the potential for bad weather.
The winds, then, in the north, so Copenhagen may be impacted one way or another. Spain, you know, some clouds there. Britain looking fine. London looking fine. We'll see some clouds.
You see here?
In the next two days, probably tomorrow will be day -- will be good. And then on Wednesday, we'll see some problems.
Copenhagen, you see. And I'm going to go in a second. Munich with some rain showers. Everybody else OK and happy -- back to you.
QUEST: We can live with that, at least for today. And we'll be back with you tomorrow.
QUEST: Guillermo at the World Weather Center.
We know we are deep in debt and we need to find a way out of the woods.
In a moment, as part of the austerity party, we'll need an exit strategy -- a jargon buster, ahead.
QUEST: So, all in this program, we are talking about the exit strategies and the rush to austerity. Governments are battling to escape their debts, which were allowed to flourish when economies needed support in the bad times.
Now, as they try and pull back and find a way to cut their deficits, Jim Boulden takes a look at the global search for an exit strategy.
JIM BOULDEN, CNN CORRESPONDENT (voice-over): It sounds simple enough. After all, we all know what the exit is -- it's the way out, the way we leave. It's the way we get away -- sometimes from danger. In this current economic crisis, it means pretty much the same thing. It's about seeing the woods through the trees, picking the best path out when you've lost your way.
But in the aftermath of the recession, picking up all the debris caused by the rescue operation...
(on camera): -- is causing some very difficult problems.
(voice-over): Governments and central bankers have spent the past several months trying to light a fire under the global economy. By cutting interest rates and borrowing billions, they have done the economic equivalent of pouring petrol on the dying embers of the economy -- trying to spark it back to life.
They have even used the dynamite of effectively printing millions, so- called quantitative easing, to really stoke things up. It is work that is starting to pay off. There are signs that the economy is responding.
There is fear that with so much fuel fanning the flames, eventually, things could get out of hand and all that money in the system will eventually bring back the black smoke of inflation.
(on camera): And that's something investors definitely don't want to see.
(voice-over): By the time the flames even look like they're getting out of control, it will be too late.
(on camera): So, central bankers have been busy preparing their plans to control all of this combustible material without either killing the fire or letting it get out of control.
(voice-over): It tells investors we know what we're doing, we have a plan, this is the way we are going to dispose of the excess money in the system. The exit strategy -- it's a safe way to ensure that we prevent an inflationary disaster while dealing with the present recessionary one.
(on camera): Hello!
Is anybody there?
I need an exit strategy.
(voice-over): Jim Boulden, CNN, somewhere in the south of England.
(END VIDEO TAPE)
QUEST: The lawyers and my bosses require me to tell you, of course, that they were not real dollar bills that we were burning. As if you thought that for a moment.
Now, @richardquest was where we asked you to say, "finish this sentence," following on from the BA.
Finish this sentence -- I would never Tweet when.
All right, I would never Tweet when...
This is what we got @richardquest.
Alex Ochs (ph): "I would never Tweet when taking a shower."
Betina Hoberth (ph): "I would never Tweet when I need or want to be fully present with another person."
"I would never Tweet" -- well, that's an obvious one.
"I would never Tweet when driving."
"I would never Tweet when on a plane," says Hamji Henji (ph).
Laura Expat: "I'm trying to think of all kinds of responses."
But this one, of course, from Khalid al-Kalifa (ph). "I can't Tweet during cabinet meets or I'll be in trouble."
Foreign minister, you will, indeed, be in trouble if you're Tweeting at that particular moment.
@richardquest is where you can join our debate on this.
I'll have a Profitable Moment after the break.
QUEST: Tonight's Profitable Moment.
The word is austerity and its definition leaves little to the imagination -- harshness, strictness, severe and rigid. It's rapidly becoming the economic policy du jour. Greece, Spain and Portugal introduced austerity budgets. Britain and Germany have joined the club and have tipped their toes into the fiscal waters. These countries will be joined by others before long. We always knew it was coming and now it is underway.
And the next big question is, when will the United States and Japan feel the need to start their own fiscal tightening, as surely they must?
And then the chill of the spending cuts will be felt on economies that are already fragile. David Branchflower thinks it will be a disaster. The hope is that governments get the timing right. The fear is they don't. And without any self-sustaining growth, each of us will be in our own bit of austerity, with all the harshness that involves.
And it's only Monday.
But it is QUEST MEANS BUSINESS and we do have a week together.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I do hope it's profitable.
WORLD ONE starts now.