CNN CNN


 

Return to Transcripts main page

QUEST MEANS BUSINESS

Eurostar or Euro Spat?; The Cost of Hungary's Toxic Sludge Spill

Aired October 7, 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 case of Eurostar or Euro spat? France lands a deal to use German-made trains in the Channel Tunnel.

The clean up begins, who is going to pay? We're counting the cost of Hungary's toxic sludge.

And rates stay stuck in Europe. It is the currencies that are moving worryingly fast.

I'm Richard Quest. We have an hour together and, yes, I mean business.

Good evening.

Tonight, Eurostar, the cross channel train company, announced $1 billion-worth of new trains and in doing so has bought itself a headache. The company has chosen Germany's Siemens for its next generation of high- speed trains. The French government says, not so fast.

The French government had pressed for the contract to be awarded to the company, the French, Alstom, which until now has built Eurostar's trains. Paris and Alstom have raised concerns about safety standards on the Siemens trains. Siemens' new Velaro trains are expected to carry 900 passengers, 20 percent more capacity than the existing trains.

When, and if, introduced they will cut travel time between London and Paris to just over 2 hours. The French government particularly has been strong saying they were amazed at the decision of Eurostar.

So, now, let's ask why they made that decision and whether they will reconsider. Joined by Eurostar's Chief Executive Nicolas Petrovic.

Mr. Petrovic, the French government says tonight they are calling upon you to reconsider your decision. Will you?

NICOLAS PETROVIC, CEO, EUROSTAR: Well, uh, it is an investment and the decision is a very important one for Eurostar and generally for customers across Europe. What we are trying to do there is to take advantage of the opening of the market in Europe for rail. And there will be more opportunities and we want to get more people to travel by high- speed rail, hence this investment in the fleet.

How did we get to that decision? We went through a normal procurement process, with criteria, it was objective, and Siemens offered the best deal.

QUEST: Well, then, how do you-we'll come back to that first question, in just one second, if we may.

PETROVIC: Yeah, yeah, yeah.

QUEST: But look, Siemens-sorry, Alstom and the French government say they have expressed their amazement at Eurostar's lack of consideration over the security regulations about the trains in the tunnel. It is all to do-I don't quite understand it, but it is to do with the power motors and the distribution of power throughout the train. They say they are not safe. And they are not-the trains you've chosen are not within the rules.

PETROVIC: We would never choose something which is not safe. Safety is the number one priority of Eurostar and we've been operating for 16 years very safely.

It happens to be that the rules to enter the tunnel have been in the process of being updated. And it is done so by a safety authority which is Franco-British, half and half, OK?

QUEST: So you admit that the train-that you'll have to change the rules for the Siemens' trains to run through the tunnel?

PETROVIC: Hmm, it is not exactly that. In March this year, this safety authority said they change the rules in this and that way, by it was a question of doing a few procedural things. So we based our specifications on that ruling from the safety authorities. So we didn't take chances. We worked on what written to us by the safety authorities. It seems that suddenly, suddenly the same safety authorities on the French side, and only on the French side, have changed their minds.

QUEST: Are you stuck in the middle of politics and business, here? They wanted the jobs and the money to go to a French company. Is that the butt of it? I mean, come on? We're all businessmen of the world.

(LAUGHTER)

PETROVIC: Listen, I don't know about all of that. All I know is that we are a commercial business. There are rules in Europe. We cannot choose trains by nationality or these kinds of things. Things have changed. So, obviously, I think we need to talk, but we need to have-but the decision is made. So it is impossible to reverse it.

QUEST: So the you come back to my first question.

PETROVIC: Yes.

QUEST: Will you reconsider? The answer is no.

PETROVIC: No, but we have a problem on our hands. It seems that the French government has got a different view than it had a few months ago. So, we need to engage and see how we are going to resolve that.

QUEST: Let's talk about the trains and let's move to, if you like, wider issues. The chunnel, the Eurostar has been a phenomenal success; 90- odd percent of the traffic between London and Paris and Brussels, and similar-you have knocked the airlines off the route, effectively. It is the object of your exercise now to take those journeys to three, four, and five hours, isn't it? We know high-speed rail is the future.

PETROVIC: Yes, exactly. We've been very successful. Paris/London, London/Brussels, but we can go further. There are high-speed lines which have been opened to Holland, to German, in France, to Switzerland. There are markets were people are still flying.

QUEST: But a couple of months ago I wanted to go to Amsterdam, filming. And I looked at the Eurostar schedule and it was going to take me five and a half hours, with two changes of trains. What do you believe is your cut off point for what people will do on a train-in terms of how far they'll travel? Three, four, five hours?

PETROVIC: I think four or five hours, max. And with the new high- speed line to Holland it is going to go down to four and a half hours, fours hours. Frankfurt will be four hours. Geneva, five, so you see we have got choices.

QUEST: You've got choices. And you also have competition from Deutsche Bahn coming on. I know you say you've had competition for years, from various organizations. Are you worried?

(LAUGHTER)

PETROVIC: No. No, no, no, that's good. I think once again, it is a new era for high speed rail.

QUEST: All right.

PETROVIC: And the more competition, the more innovation there is on the market. The more destinations we offer the clients, the more people will choose to travel by high-speed rail instead of flying. So that is good.

QUEST: Many thanks indeed for coming in.

PETROVIC: Thank you very much.

QUEST: Many thanks to you, indeed, the chief executive of Eurostar.

We spoke to Alstom. This is where they stand on the matter, in the fullness, we need to tell you. It "underlines, as the French ministry of transport has already done, that the current security rules applying to trains traveling through the Channel Tunnel conform to the highest possible standards and consequently do not permit the use of the trains that Eurostar states it has purchased."

You heard the answer from the chief executive.

Let's talk about this and the wider issue, again. Eric Spiegel is the head of Siemens in the United States. He joins me from Tampa, in Florida, where interestingly, he's promoting the Velaro, the very type of train involved. Florida is the first state in America to build a high-speed rail corridor. Eric joins me now.

Eric, first of all, I understand you are in the U.S. I also know this is in Europe, but this is-this has raised issues, hasn't it, about your Velaro train?

ERIC SPIEGEL, CEO, SIEMENS CORP.: Well, I think, actually, we're pretty excited about what we heard today about the Eurostar selecting the Velaro. I think it validates that we have the best technology in the world. And it is going to put the fastest train in the world that goes at 220 miles per hour, between London, Paris and Brussels, and maybe beyond.

QUEST: Right. So, are-would you be-

(CROSS TALK)

SPIEGEL: I think it has just added some spark to our meeting today.

QUEST: Would you be prepared, if necessary, and maybe it won't be necessary if the rules have changed, but if you had to, would you redesign part of it for the Eurostar?

SPIEGEL: I'm not really that aware of the specific details of how the Eurostar trains are designed. But I'm sure we'll do whatever is required to satisfy the safety rules and regulations and policies that have been put in place for the Eurostar.

QUEST: Let's talk about high-speed rail in the U.S. California is looking for high-speed railing from Los Angeles to San Francisco. It is billions of dollars, $10s of billions, it is years in the future. The Northeast still needs to be properly upgraded. Florida, do you think the argument is shifting, yet. Properly bearing in mind the vast sums involved?

SPIEGEL: I think the argument is shifting. We are pretty pleased with what is happening on high-speed rail. As you know, President Obama and the government have come out and committed $8 billion to kind of seed the development of high-speed rail. We are sitting here in Tampa, where the Florida proposed line between Tampa and Orlando has received $1.25 billion. California has received $2.25 billion and about 31 other states, and the District of Columbia have also received funding.

QUEST: Right.

SPIEGEL: As you may have heard AMTRAK has also come out and proposed a 30-year vision that would require about $120 billion to upgrade the corridor to high-speed between Washington and Boston. So, we are hearing all the right things about the U.S. wanting to move forward with high-speed rail.

QUEST: So, what then, the single biggest problem, as I suspect, is going to be, not just the seed the corn, but the financing of this. As the U.S. comes out of the Great Recession, realistically, Eric, do any of these projects get off the ground and running in the near future?

SPIEGEL: Well, we feel really good about Florida. We believe it will be the first project, the first $1.25 billion is there. They have requested some additional federal funding. It is going to be a public/private partnership so it will require private money. But from what we've looked at and other people we're talking to, we think that is going to be available depending on how much additional federal money comes from this.

The state has already put in the right of way money, which is several $100 million. The total cost of this is about 2.6 billion. So it looks pretty good in terms of getting the funding that is required, which is why we think this will be the first project to go forward.

QUEST: Eric Spiegel, in Florida, with the Velaro trains and high- speed rail. Many thank for joining us on that.

Now in a moment it is Hungary's toxic sludge. The size and scale of the poisonous mudslide has reached a branch of the Danube River. The cost and the insurance costs, who will pay? After the break.

(COMMERCIAL BREAK)

QUEST: The toxic sludge that has killed four people in Hungary is now spreading further. Disaster officials are calling it a huge tragedy for the whole country. The sludge has now reached a branch of the Danube, Europe's second largest river. It leaked from an aluminum plant reservoir on Monday. Emergency workers are trying to neutralize contaminated waters and plasters and fertilizers.

To call it an environmental disaster is perhaps an understatement. The cleanup costs, no one really knows. We're talking vast numbers, in the $10s of millions. Let's see how Hungary is set to handle the potentially costly environmental crisis.

When one looks at Hungary and the implications for it, the World Bank ranks Hungary, a member of the European Union, as the world's 51st largest economy. In its most recent WEO, the IMF projects growth this year of 0.6 percent. And that is after a sharp fall of more than 6 percent in 2009. Unemployment projected at 10.8 percent for the year, arising slightly in 2011.

Eurostat projects Hungary will have a 4.1 percent budget deficit for 2010. Now, that is the economic scenario, but of course, you'll be aware that Hungary is also having an out and out spat with the IMF, who it has basically told to go and take a running jump. And the European Union, in terms of taking further measures over cutting its budget deficit. So, we'll look at who is going to foot the clean up bill, in a moment. First, though, our Senior International Correspondent Nic Robertson has been following the story from Devecser, in Hungary.

I asked him how much sludge is out there?

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN SR. INT'L. CORRESPONDENT: It is huge. It is massive. I mean, we were out driving around some of the fields before where the sludge passed through. You can see sort of a 100-yard wide area, the sludge just swept through these fields, into the town where I'm standing; now, into other villages as well, swamping houses, up above my head height, inside some of the houses.

We have seen people, everything they're taking out, trying to salvage something. The reality is they know, they can't salvage anything, it has all been contaminated and they are saying they think their houses should be pulled down as well. The gardens are swamps of this red soup. And it is seeping all of these chemicals into the ground, which is making the place uninhabitable in the near future, at least.

QUEST: So, what is-what are the chemicals involved? What is the toxicity we are talking about?

ROBERTSON: Well, I give it to you in laymen's terms first. The toxicity is such that a lot of the people that we've seen cleaning up today using bare hands, protective gloves, they are getting sores. They are getting ulcers on their hands. They've been doing this for two days. That is because this material is caustic; it has got a high pH, and it is heavily alkaline. That is what is causing those burns.

Furthermore, it contains other chemicals, what are known as heavy metals, cadmium, chromium, and poisons like arsenic. Those are some of the things that are going to kill the wildlife further downstream, as we are already seeing, Richard.

QUEST: Now, I know that it has reached the Danube. I know that some rivers are already said to be dead. But in terms of the Danube, are they just being optimistic when they say the pH levels are not likely to get to dangerous levels?

ROBERTSON: Well, it seems the initial estimates-there is an army truck just backing up here-we are just outside and army decontamination zone. But it does seem that the government has been eagerly optimistic in the first place. They said they had enough professionals to clean it up. That they could stop it from getting to the Danube, then when it got to the Danube earlier to day, they said we've added enough sort of other materials of a chemicals to lower that high pH balance. That doesn't seem to be the case. The fact is that the fish can't cope with this high pH, even though the government has done a lot to reduce it here. So it does seem that they had been early and eager to be optimistic, and that is an optimism that just hasn't been matched by the reality on the ground, so far. Even the prime minister, today, Viktor Orban, said that he didn't know how bad the situation was; how bad it would get Richard.

QUEST: In a sentence, Nic, is this crisis under control?

ROBERTSON: The answer is, no. This has got further to run. People are going to be continuing to tidy up their homes. There will be claims against the government, against the aluminum company, but this has got a ways to run in terms of where it is going ecologically. It is only just beginning.

(END VIDEOTAPE)

QUEST: There, Nic Robertson, there in Hungary tonight.

(DESK BELL CHIMES)

The cost of the disaster, we won't really know for some weeks, if not months. But it is certainly in the 10s of millions of dollars and if it is as widespread it may be a great deal more. Jim Boulden is with us.

Jim, first and foremost, the only question is, who is paying for this?

JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Right now, the Hungarian government is paying. Because it is the police and the military who are involved. So let's break that down for you.

Now, first we talk about the company. It is MAL Hungarian Aluminum. First we should note that it did have a legal permit from the site in 2006. The government says that so far the cost of this clean up could be, quote, "$10s of millions". Now the plant itself is shut for now, so we couldn't get a comment from them, about the insurance or the costs for the company itself.

But we did get a comment from the insurance company itself. Allianz Hungaria did confirm to me in an e-mail today that MAL has a 2010 insurance policy, perfectly valid for, quote, property and liability. However, Allianz will not say, and says it is not authorized by the company to say, how much that insurance policy is.

So, then we flip over to the European Commission, of course, because there are lot of mechanisms involved, in this, if Hungary were to ask for help. Now the European Commission says to us that Hungary has not asked for help, as of yet. But they should-the operator itself, quote, "should be liable." Any European company involved in this kind of disaster should be liable for the clean up costs.

Now, Hungary, at the moment, is paying for it through the police and the military, as I said. But the European Commission feels that Hungary would be able to recover its costs from the operator, MAL.

Now, let's hear from the European environmental commissioner, Janez Potocnik.

(BEGIN VIDEO CLIP)

JANEZ POTOCNIK, EU ENVIRONMENTAL COMMISSIONER: We have to establish European law in that respect; it is called liability directive. Again, we would need to study in detail, but at the first sight it looks that the company would be directly liable for the damage.

(END VIDEO CLIP)

BOULDEN: So, at the first blush, it looks like the company would definitely have to pay for this under normal European Union rules.

QUEST: Yes, is it expected, and I'm asking you the impossible question. Is it expected that the amount involved, it would be so huge. I mean, we're not obviously looking at a Chernobyl situation here, but is anyone putting any numbers on it yet?

BOULDEN: No, just the $10s of millions. That is the clean up costs. Of course, even Nic Robertson was telling me earlier, he talked to one man who paid some $45,000 to put in new windows and to clean up his house, before this happened. You think of all those individuals whose houses are going to have to be knocked down. Each one of those will have a compensation claim. So you are talking about a lot of money-not just the clean up costs, but then you have the liability issues as well.

QUEST: Jim Boulden, many thanks, indeed.

Digital days are dawning in the book world. In a moment a best- selling author who doesn't mind saying good-bye to the printed word. You'll want to hear that.

(COMMERCIAL BREAK)

QUEST: One might say the print industry is cutting off the branch on which it sits by embracing the e-books. The digital age is also offering a certain edge. Amazon's sales of digital books for the Kindle reader, superceded book sales in the U.S. earlier this year. And if you think electronic book worms are biting into the publishing market, e-books make up around 3 percent of book sales in the U.S. And e-books are also buying both the old-fashioned and the new times.

Social media is a digital power, which not only promotes printed books, it is also changing the way books are written and experienced. Reading books with hyper-links to comment from your friends, your Facebook people, and even collaborating online with best-selling authors. Paulo Coelho has sold over 100 million novels and was reportedly the first best- selling author to offer free online access to his work before printed work. He has advocated collaborations with this reader online in the experiments, such as the experimental widget (ph).

Paulo joins me now.

All right. Turkey's voting for Christmas, fewer book sales. I can think of thousand and one phrases, Paulo. But do you believe the printed book will eventually slide away?

PAULO COELHO, AUTHOR, "THE ALCHEMIST": No, the straight answer is no. Like theatre survived television, like television surviving the Internet, I think that there is a space for everything. And that said, I think e-books are going to play a more and more important role in the reading habits of the reader.

QUEST: For yourself, though, how do you decide when it is time to, if you like, promote the e-book side of the business? How do you balance that between the two sides?

COELHO: I was always in love with this new technology. I have my printer, I have my Facebook, I think that books are-I mean books are a platform to express ideas. So, two years ago I decided that I have to put everything online. And I did, and so far, so good. I think that the results are extremely good.

QUEST: I am with you on this. I use my-I actually use my e-reader and I, frankly, wouldn't travel without it. But what would you say to those people who still say they have to hear the crinkle of the page being turned?

COELHO: Well, if they have, they can go to book stores and buy books. I think book stores are not going to disappear. Printed books are not going to disappear. But we are going through a major change. Like if you go to the medieval times and you are used to seeing this copyists, these monks, copying books. And then all of a sudden we had the printed books. And that was a revolution, not only a revolution as technology, but also to make a democracy out of an idea. And to have the Bible, the first printed book, and since then the story of religion changed.

QUEST: I'm wondering, as an author, as an author, do you think that you have to write differently knowing that people are reading on e-books. And the reason I say this is, it is often said that the attention span and the ability to absorb content is less when you read it from the digital page, than from the printed page.

COELHO: You mentioned the right-the right word, "content". So, if I write a book, no I should write a book as a book. And then the platform can be a Kindle, it can be an iPad, but that is just the platform to read. Having said that, if you write for Facebook, if you write for Twitter, then you have to summarize you ideas; and today an author must be aware that he is not writing only for books. But also for social communities, which I really a pleasure to do.

QUEST: Well, you can Tweet that you and I have had a chat tonight. As, indeed, as soon as I come off-before the break is over, I will be Tweeting that you and I have been chatting about it.

Paulo, many thanks, indeed, for joining us tonight.

And perhaps proving that sometimes technology doesn't always necessarily, no matter what we do, work as we might. We apologize if it did seem as if sound and vision were going in different direction. We'll pay the bill.

Was it something I said? Jean Claude Trichet adds his voice to the currency wars. His comments have fueled a spike in the euro. What was that spike and why, after the break.

(DESK BELL CHIMES)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN. And on this network the news always comes first.

As we were telling you, crews in Hungary are tonight scrambling to keep the toxic sludge away from the Danube River in any substantial amounts and dilute what's already managed to get into the Danube. The mud, poisoned with alkaline, has smothered several communities in Southwest Hungary. The red muck was unleashed after a reservoir at a metals plant burst. Hungary has launched a criminal inquiry.

At least eight people have been killed when two explosions ripped through a Sufi shrine in Karachi in Pakistan. Sixty other people were injured. The Taliban have claimed responsibility for the attack. The authorities have closed all shrines in the city in the wake of the suicide bombings.

Chile's mining minister says a breakthrough is expected by Saturday in the effort to rescue the 33 trapped miners. Laurence Cobern says one of the drills being used is just 89 meters away from the men. Once completed in the tunnel, the miners will be brought out within days.

This year's Nobel Prize for literature is being awarded to a Peruvian author. Mario Vargas Llosa's breakthrough novel was controversial, based on his experiences in military school. He ran for president of Peru in 1990, lost to Alberto Fujimori. He's now teaching at Princeton University.

And Nobel Peace Prize laureate, Desmond Tutu, is retiring today at a celebration in Cape Town. The South African archbishop's activism has earned him international fame. He's campaigned on such rights as gay rights, HIV and justice around the world. The archbishop's retirement comes on his 79th birthday. Barack Obama congratulated Desmond Tutu, calling him a moral titan.

Europe's top banker is adding his voice to the chorus of concerns about a currency war. Jean-Claude Trichet said such moves in exchange rates could upset the recovery.

(BEGIN VIDEO CLIP, COURTESY EBS)

JEAN-CLAUDE TRICHET, PRESIDENT, EUROPEAN CENTRAL BANK: Because I never -- I think that exchange rates should reflect economic fundamentals, excess productivity and disorderly movements in exchange rates have adverse implications for economic and financial stability. And we will have an occasion to exchange views on that with, in particular, the authorities, the central bank governors and the ministers of finance of the (AUDIO GAP) floating currencies in Washington in a few days.

(END VIDEO CLIP)

QUEST: Now, Trichet was speaking at the ECB's meeting after the interest rate decision. The irony is his words helped drive the euro to an eight month high. And that's where it's been stuck for the past year-and- a-half. He spoke of down side risks, prevailing uncertainties. Traders saw no signs he's about to loosen the money supply and that's what gave the euro the boost.

Now, as we look at Europe's top bankers and as the euro rises, so does the level of concern at the ECB. If you join me over here, I'll show you exactly what's been happening with currencies at the moment and why this has actually been all so very much. A year in the life of the euro. Just look at what happened.

Now, this was the crisis point of the euro, which takes us through into the mid part of last year. There were a variety of reasons why the euro fell down in stages, not least of which there was sovereign debt, there was worries about quantitative easing, the banks' refusal to engage it in sooner and then joining in. All of these gave rise to where it got down to the bottom and then started this pendulumic sweet -- pendulumic sweet -- sweep back up again.

Now, it's at its highest level since the end of January. And some say that is a player that's still go -- going to go on.

But look at what people are expecting. Traders are now looking for more quantitative easing, QE2. They're expecting that's going to come from the U.S. Fed and probably in November, after the mid-term elections. The Bank of England may also do similar -- similarly. The dollar hit a new 15- year low against the Japanese yen, which, of course, hurts Japanese exporters. And that's one reason by Japan has been intervening to boost it up.

So, does all this lead to stunted growth amongst the European Union?

Strong euro growth, which will eventually take its toll against the current -- against the economies, particularly Germany, which, of course, is the powerhouse in terms of exports.

Let's talk more about this.

Julian Callow is with us.

Good evening to you.

JULIAN CALLOW, CHIEF EUROPEAN ECONOMIST, BARCLAYS CAPITAL: Hi.

Good evening.

QUEST: OK, no surprise that the ECB didn't move on rates.

CALLOW: Absolutely. Yes. Yes, we shouldn't be surprised by that. Yes.

QUEST: But there was some interesting wording in this statement, wasn't there?

CALLOW: I -- I think that Trichet is really quite concerned here about, as you're saying, at the euro appreciating, in particular, the ECB does have concern that the Fed is going to be embarking on a new wave of quantitative easing, buying U.S. government bonds and that that could suddenly send the dollar significantly weaker, still, from where we are now.

As you're saying, Europe does have a big interest itself in having a soft currency here. There's a lot of fiscal tightening out there to do, particularly in -- in France and in Portugal and, of course, in Ireland and also in Spain, in Italy, the U.K., as well.

QUEST: Right. But the dollar -- the euro weakens that we saw last year was sovereign debt and it was worries about the economy failing, really.

CALLOW: Yes.

QUEST: But that rebound that's taken place has been quite dramatic.

CALLOW: It's been very significant. I think it's caught a lot of people by surprise. Of course, with currency markets, often if people expecting it, then that's actually when you do get the biggest surprise.

QUEST: But the unspoken...

CALLOW: Yes?

QUEST: -- talking point of the market is everybody believes the dollar is going to devalue.

CALLOW: Yes, because people are really...

QUEST: You believe it.

CALLOW: -- everybody...

QUEST: You believe it.

CALLOW: I -- I think that seems to be what the Fed is telling us. The Fed seems to be telling people that it's going to buy a large amount of U.S. government bonds here, that that is likely to weaken the dollar. It's also likely to push up commodity prices.

QUEST: Right.

CALLOW: Have you noticed the oil price recently?

QUEST: Yes, oil price and gold.

CALLOW: Yes.

QUEST: -- a dramatic (INAUDIBLE).

CALLOW: Yes.

QUEST: But the Fed isn't buying its securities -- or do you believe the Fed is going into QET -- QE2 to -- to weaken the dollar?

They're doing it just to bring down interest rates and to keep the economy moving.

CALLOW: Well, I think...

QUEST: Or do you think they're not unhappy about the dollar falling?

CALLOW: They're not unhappy at all. I'm -- I mean I think for the Fed, the dollar is probably not a -- a high priority consideration. But what the Fed wants to do is bring down U.S. unemployment.

QUEST: Right.

CALLOW: It's finding it's being too sticky at 9.5 percent. And it wants to boost inflation. A weaker dollar is going to help significantly on both counts.

QUEST: In Europe, Trichet today said that he still expects a moderate pace of economic growth for the rest -- the second half of this year.

CALLOW: Yes.

QUEST: But it's the unevenness, isn't it, that's within Europe.

So do you see -- and do you see the -- the ECB moving anyway toward any form of non-traditional forms...

CALLOW: Or -- or new forms of non-traditional forms.

QUEST: Yes. New forms.

CALLOW: Yes. Right.

QUEST: I mean are they going to start buying more bonds, do you think?

CALLOW: It's a possibility. I mean I...

QUEST: But you wouldn't...

CALLOW: -- I wouldn't go there. I mean that taboo was crossed in May. Before May, the ECB...

QUEST: Yes.

CALLOW: -- had never really bought government bonds. But then -- then it goes out and buys them. So it doesn't have that particular inhibition. It could do so if -- if the dollar really does weaken sharply against the euro. It might -- it might be forced to. But it would do so through gritted teeth, I think.

QUEST: Fascinating subject.

If -- if the U.S...

CALLOW: Yes?

QUEST: -- starts to allow the dollar to depreciate, which many people believe...

CALLOW: Yes.

QUEST: -- is going to happen, then Brazil's finance minister's currency wars is a reality.

CALLOW: Yes. Well, well, that's right. Japan, as you say, wants to get a weaker tariff fee.

QUEST: (INAUDIBLE)?

CALLOW: Yes. And -- and China does not want its currency to -- to be appreciating here. And -- and -- and the euro, by default, tends to move higher. But -- but then the ECB may be forced into reacting. But the trouble for Europe is the ECB tends to react let. It tends to be last to react. And -- and, therefore, the euro hurts the economy.

QUEST: Many thanks, indeed.

CALLOW: Thanks.

QUEST: Thank you.

We appreciate it.

Now, there is an air of trepidation on the trading floors of Europe. Today is the eve of a big jobs report in the U.S. and we're also on the brink of the earnings season. And then the FTSE was the only major index to slide over the red line. A sudden drop in U.K. housing prices sent a shudder through the market. In Paris, the market gained -- well, it's hardly.

Shares in Renault were up more than 8 percent after it sold its stake in Volvo. Gains for Volkswagen and Daimler have just sent a big drop in Heidelberg Cement.

And Siemens lost the best part of 1 percent.

All that despite of good news in Florida and the Eurostar deal in Europe.

Procter & Gamble is the world's biggest producer of household goods. That much we know. The chief executive ix next. His global perspective on the economic recovery and, oh, yes, currency.

(COMMERCIAL BREAK)

QUEST: Now, on Wall Street, stocks are stumbling. The U.S. dollar is recouping some of its losses from earlier in the week. Everyone is a bit on edge about the health of the labor market.

To New York and Carter Evans at the New York Stock Exchange.

And the market is waiting for what?

CARTER EVANS, CNN CORRESPONDENT: You know, on this first question there, the audio dropped out.

QUEST: Well, then -- then I'm more than happy to ask it again.

The market is waiting for what to happen?

What's the next thing that it's actually concerned about?

EVANS: Well, we're concerned about a lot of things, certainly. But tomorrow is the big government jobs report. That's going to be coming out. I think we've got a pretty good idea of how that's going to turn out. You know, it's expected to be flat. We got the ADP numbers in yesterday, which were pretty disappointing. And it showed a loss of 39,000 jobs. Analysts were expecting to see a gain.

We got the weekly unemployment numbers today. They were pretty good. They were down by 11,000. They're still way too high.

What we're also looking ahead to, though, and this starts this afternoon, third quarter earnings kicks off after the closing bell with Alcoa. It's going to be interesting. You know, investors want to see more than what they've been seeing from companies for the last couple of quarters. What we've seen seeing is profit cutting -- I mean not profit cutting, cost cutting, which results in profits. That's not what investors want to see now.

Investors want to see revenue growth. They're also very interested to see how companies weathered the summer, because this summer was kind of rough.

QUEST: When we look at Q3, how much is it going to be a concern of what they warn about for Q4?

EVANS: Well, you know, that is going to be very interesting to see what companies are saying about the future and what they're thinking about the economy. You know, we want to see that we're continuing to move forward here. A lot of these economic reports just show that we're slowed down further and further. Although lately, Richard, what I've found really interesting and this will be interesting to see what goes on into Q4 -- retail sales -- we got some retail sales numbers in today. They're pretty good. Retailers are hiring a lot of people for the holidays, which they do every year. But this year, they say they're hiring more than they've been hiring in the past couple of years.

So, hopefully, we're going to see some improvement. But it's going to be very interesting to see how the leaders of the world's companies handle this as we go into third quarter reporting.

QUEST: And Procter & Gamble, I noticed, not a particularly lively stock today. P&G's is up about .5 of a percent, all things considered.

EVANS: Well, you know, I -- as far as Procter & Gamble is concerned, it's going to be interesting, I guess, to see how all of this comes out. You know, I've got to tell you, though -- and I was listening to your previous segment about currency and I wanted to touch on that for a second, because every time I go down to the floor over the last couple of days and I talked to the guys about what's going on, they say it's all about the dollar. It's all about the value of the dollar. That's why you're seeing gains, because it was falling. All of a sudden, we're seeing losses in the markets today. And wouldn't you know it, the dollar index is up.

QUEST: All right, Carter Evans at the New York Stock Exchange.

Thank you.

Now, big retailers in the U.S. say they have had a strong September. Thomson Reuters data for 28 big chain stores shows sales rose 2.8 percent last month. A rise of 2.1 was expected. Good news for retailers and producers alike.

Procter & Gamble is the world's biggest producer of household goods.

Maggie Lake looks at how they got started.

(BEGIN VIDEOTAPE)

MAGGIE LAKE, CNN CORRESPONDENT (voice-over): A dizzying array of brands under pressure from generic labels -- Procter & Gamble is the world's largest consumer goods firm. Its products are sold in some 180 countries, reaching more than four billion people, or two thirds of the world's population.

Based in Cincinnati, Ohio, the firm was founded more than 170 years ago as a manufacturer of soaps and candles.

In the 20th century, the firm expanded on the idea of a brand, pioneering market research and television advertising and branching out into other household products. As the defining consumer company, Procter & Gamble now faces the ultimate test of brand loyalty -- battling generic products a shoppers emerge from recession.

(END VIDEO TAPE)

QUEST: Now, Bob McDonald is the chief exec of P & G.

And Maggie asked him where he thinks -- whether he thinks we're in an economic recovery.

(BEGIN VIDEO CLIP)

BOB MCDONALD, CEO, PROCTER & GAMBLE: Well, we see the economy improving globally, Maggie. And one of the things we have right now, is we have one of our strongest innovation efforts ever in the world. And so we can see consumers buying premium priced products like the new Gillette Pro Glide razor and blades we understand introduced in the United States, as well as we see growth improving around the world.

There are some countries in the world, like Turkey, where I was last week, that never saw a recession; Southeast Asia, which is growing very strongly; and Western Europe and the United States, which are recovering, albeit at a slower pace than all of us would like to create jobs.

LAKE: Currencies are a big issue for investors in the global marketplace. Your company, being so global, is affected by fluctuations in exchange rates.

Are you worried about the level and direction of the dollar and the fact that you have some people saying there's a threat that countries are engaging in what some call a currency war?

MCDONALD: Well, because our business is global, we have a natural hedge against currencies. We have -- we have a natural hedge, because 60 percent of our business is -- is outside the United States. And we're involved, as you said, in over 80 -- 180 countries around the world. So there's a natural currency hedge.

At the same time, our factories have to be near the consumers they serve. We can't produce a Pampers disposable diaper in the United States and ship it to China and make money on it. So our 150 plants around the world tend to have local operations. And because of those local operations, that's also a natural currency hedge.

(END VIDEO TAPE)

QUEST: So that's the chief exec of P&G, Bob McDonald.

We need to just remind you where the Dow stands. Well, 11000 was very much a prevalent point, down 20 points. And I've never been a great believer -- well, you know this. You and I have talked about it before. I've never been a great believer in the psychologically important barrier - - hugely. But it does seem as if 11000 is absolutely -- something that the Dow just cannot break through at the moment. It was May before the flash crash. We're going to watch this like a hawk.

When I come back after a very short break, we'll talk about the bloggers at the fashion shows. They're muscling their way past the grand gowns of haute couture with borrowed photos and (INAUDIBLE) gowns. And not a moment too soon.

(COMMERCIAL BREAK)

QUEST: For more years than I care to remember, when I was in New York, I was covering New York Fashion Week. I've covered London Fashion Week. And I've done battle to get into the various shows when they take place.

Well, on this program earlier, we heard how the digital ad is fast transforming the world of sports. Now it's also making a major change to the way we cover the world of fashion.

And it's not the professionals that are getting in on the act. It seems the digital world has changed, as Jim Bittermann reports from Paris.

(BEGIN VIDEOTAPE)

JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): The view along fashion's runways has changed very little. The clothes seem just as glamorous, the fashion press just as hungry, the models just as starved. But a new actor has gained entry into this once private world -- a digital intruder that is changing the way the fashion business does its business. It's not just the light speed communications that can flash the glitz worldwide in an instant. It's a new accessibility -- an openness personified by 17-year-old Charles Guislain. He's still in high school, but when the Paris shows are on, Guislain escapes from his studies as often as he can to go hang out with the fashionistas -- something that helps him feed his photo blog.

CHARLES GUISLAIN, FN BLOGGER: Thank you.

BITTERMANN: But also gradually has turned him into a celebrity himself. And, thanks to established bloggers, something of an Internet fashion critic.

UNIDENTIFIED FEMALE: Now what are you wearing?

GUISLAIN: I'm wearing a Matudan (ph).

BITTERMANN: There are a growing number of fashion Web waifs like Guislain, including one as young as 14 whose running commentaries on the season's creations are taken seriously enough by the design houses that they're now getting some of the highly sought after seats at the shows right alongside the established authorities on fashion, who have long dictated the ins and outs of style.

(on camera): The Internet experts are new and perhaps not so controllable players on a field that has traditionally been reserved for fashion's feedback loop of designers, retailers and writers, who, up until now, have pretty much dominated fashion from one season to the next.

(voice-over): It's something that fashion houses now accept.

ANTOINE ARNAUD, LOUIS VUITTON: I think once you start being afraid of those new media or -- or kind of hiding from them, a day or another, they'll come back to you. So we embrace them. We invite them.

BITTERMANN: And Guislain believes, what he is doing will only increase his influence.

GUISLAIN: In a few years, you will see, you will have (INAUDIBLE) boys with much more (INAUDIBLE). And I think that's going to happen.

BITTERMANN: But it's not just blogging that's democratizing the industry. The Internet is taking the shows right to the customers -- without the meditation of the fashion mob. After streaming the catwalk shows onto the Web for the past few seasons, Louis Vuitton this year has upgraded to an interactive approach that allows customers to see the clothes in ways that even those who attend the shows cannot. For the fashion business, where, unlike most others, demand is created after supply, there may be tricky new challenges.

JEAN-NOEL KAPFERER, LUXURY BRANDS SPECIALIST: What's new with the Web tools is that a lot of self-appointed figures influences social opinion, leaders, etc. The system is not so controllable.

BITTERMANN: Still, those who study luxury brands point out that the Internet intrusion into this traditionally closed world also brings one big advantage -- instant satisfaction. Fashion houses which successfully create desire and can seduce those self-appointed critics can now be just a mouse click away from a sale.

Jim Bittermann, CNN, Paris.

(END VIDEO TAPE)

QUEST: One of China's most popular tourist destinations is the island of Hainan and its popularity is thanks, in large part, to an average of 300 sunny days per year. The past few days have been far from like that and far from nice.

Pedram is at the World Weather Center this evening -- how bad is it?

PEDRAM JAVAHERI, CNN METEOROLOGIST: Oh, it's been fair -- fairly wet out there, Richard. And you know, it's a storm system that was a remnant tropical depression. It was Tropical Depression 14, what it was called just a couple of days ago, producing heavy rainfall in Vietnam and also around the island of Hainan. And you've got to keep in mind now, it wasn't a tropical storm, it wasn't a typhoon. It doesn't need to be. It's still producing rainfall on the order of over 1,200 millimeters in portions of Hainan.

And take a look -- one observation point, there it goes -- 1,271 millimeters. And, again, that's just in four days, where an island that, again, could see up to 300 sunny days per year, gets an average of about 1,500 millimeters a year has picked up almost a year's worth of rain in just four days. And you can kind of see the eastern edge of the island picked up rainfall on the order of 15 to 25 centimeters in the next 24 to 48 hours. That will finally begin to weaken and move out in here.

But across Europe, nicer conditions to speak of. We do have a weak front that's beginning to move on out of here. Another one working its way in. That's going to bring in some heavy rainfall around portions of Portugal. Spain getting some showers and also, perhaps, the Northern U.K.

But overall, London looks pretty nice. Temperatures should be in the upper teens tomorrow. We're looking at mostly sunny skies by the afternoon hours, after some morning fog. And travel really going to be minimal as far as delays being concerned there, evening hours perhaps some showers around Copenhagen.

But, again, we're looking at a broad are of high pressure in place. The storm system tries to come in. The heaviest rainfall, again, will be expected around Portugal and also Spain. But pleasant weather going to continue. Paris should be at 23 degrees on Friday. So certainly, fall like conditions -- summer like conditions trying to hang in there as the showers begin coming on in here in the next few days.

But, again, light in nature as you work your way farther toward, say, the U.K. And, again, travel not going to be impacted whatsoever.

London looking at clear skies after the morning fog. Dublin, perhaps some showers. And Brussels, again, no delays as far as we can see right now.

But we're talking about what's been happening over Africa. Western Africa -- there's Nigeria. Some thunderstorms producing very heavy rainfall along what we call the Intertropical Convergence Zone. And this time of year, not uncommon to see Lagos coming in with heavy rainfall. Some photographs to show you how folks are trying to just make their way home, setting up some of those barriers there, not only to stop water, but also just to walk across to make it back home.

And we have some of the other photographs here showing you the damage that's been left in place for them. It looks like the showers are going to continue, but nothing as heavy as we've seen. And, again, you can kind of pick out the line of thunderstorms. We have the southerly winds and the northerly winds and they meet up right along this latitude, Richard. And that's why the showers are in place.

QUEST: Well, that's why we will be watching this closely.

Many thanks, indeed.

And we'll have more from you and the weekend weather tomorrow.

Many thanks.

When I come back after the break, a Profitable Moment on the railways.

(COMMERCIAL BREAK)

QUEST: Tonight's Profitable Moment.

The spats over the selection of Siemens to provide the next generation of Eurostar trains is a good old-fashioned bit of politics over business. The claim is that the Siemens' trains breach current safety rules concerning power plants and the like.

Well, as you heard on this program, it's inconceivable that Eurostar didn't consider what this meant before making its choice. They hope that the rules will actually be changed by the authorities. Eurostar says there's no problem. And on this program tonight, the chief executive of Eurostar said that he would not -- or they would not reconsider.

Well, what this is really about is where the jobs and the dollars will be spent. The French obviously believe it should be in France, not Germany. But, of course, don't forget, within just a few years, the tunnel itself will be opened up to competition. And the German train operator, Deutsche Bahn is planning to start its own services -- a fact probably not lost on the French, as they lose their -- and lick their wounds from this contract.

And that's QUEST MEANS BUSINESS tonight.

I'm Richard Quest in London.

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

"WORLD ONE" starts right now.

END