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Philipp Hildebrand Quits as Head of Swiss National Bank; Sarkozy and Merkel Support Transaction Tax; Euro Rescue Plan; Bentley CEO Says US Still Key Market for Automobiles; Rolls-Royce's Turbo-Charged Growth; Future Cities: Doha's Growth Plan; Nigeria Strikes; Interview with Christine Lagarde; Interview with Reed Hastings; The Art of Investors; Interview with Alan Lo

Aired January 9, 2012 - 14:00:00   ET


MAX FOSTER, HOST: Calling it quits. A scandal forces Switzerland Central Bank chief to resign.

A driving force for growth. The chief executive of Bentley and Rolls- Royce on the importance of the US market.

And widening the net. Netflix launches in the UK and Ireland. I'll be speaking to its CEO.

I'm Max Foster. This is QUEST MEANS BUSINESS.

A powerful banker, a glamorous wife, a suspicious trade. And now, a shocking resignation. Philipp Hildebrand has quit as head of the Swiss National Bank. Never before have the affairs of the SNB seemed so much like a soap opera.

Diana Magnay is following the story for us from Berlin. Just bring us up to date, because it's been a fascinating tale, Diana.

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: It has, Max. I would say that the behavior of Philipp Hildebrand today wasn't really like that in a soap opera. He decided in a second conference -- press conference in the space of two weeks to change his position.

On Thursday last, he said that he was going to stay as governor of the Swiss National Bank. Today, he said he was going to resign. Let's just look at what this was all about.

In August last year, his wife, Kashya, who was a currency trader herself in former times, had put through a -- had bought $500,000-worth at a time when the Central Bank was massively intervening in the currency markets, three weeks before her husband actually imposed a cap on the franc against the euro. And as a result of her transaction, she netted some $60,000 US.

Now, there's been a huge amount of speculation in the press over the last three weeks as to whether or not Philipp Hildebrand had known about that transaction, had effectively authorized it. Last week, he said he hadn't.

Today, he maintained that he hadn't, that they way he had behaved was in accordance with the rules of the SNB. But he said, "I stand before you, and my integrity is called into question. I cannot prove to you beyond doubt that I do what I said I did. My word is my bond, and that is all that I can give you. And therefore, it is untenable for me to stay on as Central Bank governor."

Let's just take a listen to what he said.


PHILIPP HILDEBRAND, FORMER PRESIDENT, SWISS NATIONAL BANK: As a result of this regrettable matter, I have concluded that I might not for some time be in a position to make the kinds of tough decisions and to implement them with the same rigor and success as in the past and as will certainly be required in the future.

Conscious as I am of the challenges currently facing our country, and given my responsibility for my office and for the SNB as an institution, I have therefore decided to relinquish my post with immediate effect.


MAGNAY: Now, Max, as far as the impact goes, the bank has said that it regrets his decision but respects it, but that it will continue the National Banks' policy of currency peg of the franc against the euro, so nothing will change in that regard.

And as far as his successor, it's going to be the vice chairman, Thomas Jordan, at least for a temporary period of time. Max?

FOSTER: OK, Diana, from Berlin. Thank you very much, indeed.

Well, the power couple at the heart of Europe's rescue plan may have been making progress, meanwhile. Angela Merkel and Nicolas Sarkozy said a deal on fiscal restraint could be signed within days. The French and German leaders have been meeting in Berlin.

One of the ideas on the table is a possible tax on financial transactions, though as Jim Boulden reports, "Merkozy" might not get their own way.


JIM BOULDEN, CNN INTERNATIONAL CORRESONDENT (voice-over): It's been easy to blame the financial sector for the recent economic crisis, so when all this kind of financial action takes place, why not tax it?

JONATHAN ROSENTHAL, "THE ECONOMIST": What if we just took a tiny slice of all of these flows of money. Kind of crumb off the cake each time that that cake gets passed. It would add up to a huge sum of money.

BOULDEN: Sounds good, right? Well, France thinks so. President Nicolas Sarkozy vowed in his New Year's message to pass a financial transaction tax, possibly by the end of this year. He said the financial sector, quote, "must be made to participate in the repair of the damage it caused."

Together with German chancellor Angela Merkel, Mr. Sarkozy plans to present this tax idea to all European Union leaders at their fiscal compact summit at the end of January.

The European Commission has proposed an EU-wide transaction tax starting in 2014. The accounting firm, Ernst and Young, estimates a transaction tax would, in fact, cost Europe $150 billion in net loss revenue.

Britain's government is dead set against it, and so is "The Economist" magazine. It says it's time to stand up for Britain's financial sector.

ROSENTHAL: Financial services is actually something that Britain is good at, and to sort of try to deliberately shrink that and perhaps growing the other bit seems shortsighted.

BOULDEN: Having said all of that, it's likely Britain will go alone again and sit this one out. It's likely to veto the transaction tax proposal for the 27 EU countries.

So, then maybe a transaction tax is coming for the 17 countries that use the euro. Critics say that will drive business from Frankfurt to London or New York or Hong Kong or Dubai. So, next on the agenda would then be a global transaction tax. What are the odds of that?

Jim Boulden, CNN, London.


FOSTER: Plenty to think about for "Merkozy," there, and Fred Pleitgen is in Berlin for us tonight. And Fred, the point is that transaction tax is playing large here in the UK, but it's just one of the factors that "Merkozy" are considering, right?

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Yes, it certainly is, although it was quite an important factor, today, at the meeting between Angela Merkel and Nicolas Sarkozy.

And again, Sarkozy said he felt that the transaction tax was something that is very important, where France is willing to go forward unilaterally, and he said once again that he felt that the financial markets were so big a part of the problem in making the financial crisis happen that they need to be a bigger part of the solution.

Angela Merkel, for her part, said she also believes that a financial transaction tax is of importance, that it's time to action on it, but she wants to do it within the framework of the eurozone or the EU.

Now, the other big things, of course, were saving the euro, which was the main point of the agenda between the two leaders. And there, the main thing that they were trying to show was that they were making progress, and that in itself, of course, is a big thing in Europe, where progress is pretty hard to come by on a lot of political reforms that people have been trying to implement.

But they said one of the main points where big progress was being made was trying to put together a fiscal compact for the eurozone countries, which would give the EU more powers to penalize countries that consistently bust their budget and that rake up large deficits.

Let's listen in to how Angela Merkel talked about the progress that was being made.


ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): First of all, it is heartening that the negotiations on the fiscal pact are progressing well. There is a good chance that we will already be able to sign the debt breaks and everything that goes with them as soon as now, in January. March at the latest.


PLEITGEN: So, again, the two leaders were saying we don't have any results yet, but we have seen the sign of the times, and we know where we need to go.

One of the other big things on the agenda is a permanent bailout fund for the eurozone. France and Germany, they're saying they're putting ways together to try and get more cash to the ESM faster than originally planned.

But again, Angela Merkel and Nicolas Sarkozy saying all of this really won't help very much if there is not more sustained growth in the EU and the eurozone as well, of course, so they said at a big summit that is going to take place her in Europe on January 30th, they are going to make suggestions to try and foster economic growth, Max.

FOSTER: Fred, thank you very much, indeed.

Now, next, a double dose of ultra-luxury. The CEOs of Bentley and Rolls-Royce talk to us about the growing appetite for expensive cars, even in austere times.


FOSTER: The North American International Motor Show is underway in Detroit. Even with explosive growth in the Asia Pacific market, the US is still a key automotive battleground.

It is the top market for luxury car maker Bentley, for example, which launched a new model of its Continental at the show today. Bentley's CEO, Wolfgang Durheimer, is there. He joins me now, live. Thank you so much for joining us.

So many people talking about Asia Pacific being the market to get into, particularly with luxury goods, actually, but you're still very heavily committed to the US. So, what are you seeing about the US economy this year?

WOLFGANG DURHEIMER, CEO, BENTLEY: Well, we are here at the Detroit Motor Show. Thank you very much for these questions. We had in Bentley Motors a tremendous year in 2011. We cranked up our sales 37 percent worldwide, and we were able to sell 7,003 of our beautiful Bentley cars.

The leading single market is still the US market that sold more than 2,000 cars, but close behind it is China. In China, we made more than 1800 Bentleys last year, and this is an increasing volume by 95 percent, so the Chinese market is really catching up, and we are expecting the Chinese to overtake the leadership of the North American market in 2012.

FOSTER: OK, so that's going to happen next year. Quite a landmark moment for the industry. But I also want to ask you, I know that you're interested in moving to SUVs, aren't you? The much larger, expensive SUV cars. You haven't got clearance, yet, I don't think, from the VW board on that, but that's the way you want to go. What's the thinking behind that?

DURHEIMER: Well, as a matter of fact, our success story relates very strong on the product. We have a complete new lineup of Continentals, and our latest Mulsanne is only one year old, so our lineup is really very actual.

And when it comes to portfolio expansion, we are investigating at present to have an SUV on top of our two model lines, the Continental and the Mulsanne. This project is under investigation.

We work hard in crew in terms of R and D. Our designers are very busy to create this new project, and I am proposing the business case to the board in VW Group most probably in the first half of 2012.

FOSTER: OK, thank you very much for talking to us Mr. Durheimer, appreciate your time from Detroit.

Now, Rolls-Royce is also cashing in on China. It sold more than 3,500 cars last year, smashing an annual sales record which stood for more than 30 years. Sales grew nearly 50 percent in the Asia Pacific region. CNN's Jim Boulden went for a spin with Rolls-Royce's CEO to find out what's turbo-charging the company's growth.


TORSTEN MULLER-OTVOS, CEO, ROLLS-ROYCE MOTOR CARS: On the one third, we have introduced a marvelous model two years ago, that is the Ghost, and the model we are sitting currently in. That is still very successful in all markets worldwide, and that has also contributed a lot to our growth story over the last years.

But I would also put it down to a lot of efforts on the sales and marketing side, so we have extended our dealer network, we have entered new markets in the world.

And also, when you look into the forecast and the development of the so-called ultra high net worth individuals, people who can afford cars or luxurious goods, then the forecast is very good. They are forecast to grow every year by 10 percent.

BOULDEN: I remember asking you during the height of the economic crisis, you did see a slowdown in sales. It wasn't because maybe those individuals couldn't afford it, but it was about not necessarily showing off or showing the ostentatious wealth. So, we're past that period for Rolls-Royce?

MULLER-OTVOS: I would say it is not that our customers are immune against anything in, let's say, economic crises. And as you say, they are never, let's say, short with money. It is, then, maybe that the mood or the sentiment is not the right now.

But I must say, even if you might think everything is doom and gloom with industries and so, that is not the case. Many of our customers are self-entrepreneurs running their own businesses and they are doing very, very, fortunate and very, very successful. So, they are rewarding themselves for certain achievements.

BOULDEN: Fastest growth, do doubt, emerging markets. But pinpoint some of the markets and tell me why you think those are doing well for you.

MULLER-OTVOS: Major developing markets for us are the Asian markets in general, all of them. I would also say that the Middle East markets have recovered nicely and are not yet on track back as they had been a couple of years before, but really developed nicely last year.

And also the North America is back, I must say, especially when I look into last weeks and last two months, we had outstanding performances seen here in the US market. And when you look into all those economic data, like unemployment rate, and everything --

BOULDEN: Falling unemployment rate, yes. Housing starts picking up.

MULLER-OTVOS: It's great. Exactly.

BOULDEN: So, you're a barometer of what maybe to come?

MULLER-OTVOS: So -- also in Europe, I think, of course, you need to be realistic. There are a couple of markets around in Europe who are really suffering within the euro crisis.


MULLER-OTVOS: But you also see a couple of markets doing well. And we have seen even here for us in our home market, the UK, an increase of 30 percent.

BOULDEN: So, I must ask you, a UK-based car company owned by BMW, a German company, the euro crisis means what to you? Is it the one thing that worries you the most?

MULLER-OTVOS: We are watching that carefully, of course, and on my wish list, the top of my wish list is that politicians are clearly getting that in order over the next couple of months and that we find a solution to bring the euro back to stability.

I'm convinced that the euro will stay in the system. We definitely want to see that sorted because that is puzzling our customers, and when our customers are puzzled, our business is also not optimal.


FOSTER: Jim looking comfortable in that car, has to be said. Up next, a rags-to-riches story in Future Cities.


HER EXCELLENCY SHEIKHA MAYASSA, CHAIRPERSON, QATAR MUSEUMS AUTHORITY: Fifteen years ago, Qatar was in complete debt. We were in a very bad financial situation. And today, we're one of the richest nations.


FOSTER: Qatar has transformed into a powerhouse economy with Doha at its sparkling center. We'll find out how it got there and how it's going to stay there.


FOSTER: A new year and a new destination for Future Cities. Throughout January, we're going to be in Doha, the capital of Qatar. It's grown thanks to the region's rich hydrocarbons -- in other words, oil and gas. It's quickly turned desert into decadence, with standards of living going up and the economy diversifying.

In a country that's only been independent for 40 years, Doha's challenge is making that progress sustainable. Richard went to look at how Doha is going to grow and grow.


RICHARD QUEST, CNN INTERNATIONAL (voice-over): In Qatar's capital, old traditions must find their place against a backdrop of rapid modernization.

QUEST (on camera): The fountain at the harbor in Doha, remembering a time when pearl fishing was what this place was all about.

Then, Qatar discovered oil and gas, and pearls in the water gave way to architectural pearls, reaching into the sky.

QUEST (voice-over): A beacon of glass and steel, the rise of Doha's West Bay is this district. It says everything about the ambition of this tiny desert peninsula.

Qatar is the world's largest supplier of liquified natural gas, LNG, and is now the wealthiest nation per capita on earth.

Amidst a global economic crisis, this remains a land of multibillion- dollar construction projects. And army of workers, imported from the east, dwarf the local population five to one.

And if many people struggled to pinpoint Dohar on the map, that all changed when FIFA awarded Qatar the 2022 World Cup.



QUEST: The emir, Sheikh Hamid Bin Khalifa al-Thani, and his wife, Sheikha Mozah, grasped another milestone in their country's evolution.

Inside the city's landmark museum of Islamic art, I met the emir's daughter, Her Excellency Sheikha Mayassa. Spearheading cultural investment is very much at the heart of her father's 2030 development vision.

MAYASSA: Fifteen years ago, Qatar was in complete debt. We were in a very bad financial situation. And today, we're one of the richest nations.

So, in order to channel these resources efficiently and effectively, the government has drawn out a 20-year plan in order to manage the growth and ensure that the future generations have what they need.

I would say we're an emerging nation. We will have lots to offer when the World Cup comes in 2022.

QUEST: When the fans arrive in Doha for the World Cup, they will do so through a new international airport, set to be completed this year.

The World Cup final will take place in Lusail City, an extension of Doha City to the north, the future home of 200,000 people. And the core of the historic city center will be rebuilt.

In the next five years alone, $125 billion will fund nearly 200 projects. One of the best ways to see Doha's growth and to appreciate the size and scale is from the sea, preferably on a luxury yacht.

QUEST (on camera): When do you expect all construction to be completed?

KHALIL SHOLY, PRESIDENT AND MD, UNITED DEVELOPMENT COMPANY: Our anticipation, by the end of 2015 should be substantial.

QUEST (voice-over): Khalil Sholy is talking about the Pearl Islands. He's the managing director of the company building this Riviera-style development on a vast manmade island.

QUEST (on camera): So, to somebody who says, "Well, Dubai's got the Palm and the World's being built, and now -- and there's the Pearl, what's the difference between here and the others?" Or are you all playing a sort of an "I've got my islands, too"?

SHOLY: I don't -- in Qatar, they don't play this way. I think -- I believe that the Pearl Island is complementary to the development that we see in Dubai, very much complementary because both attract traffic and attract foreign investment.

But if you want to strike a comparison, I would compare between Cannes and Monte Carlo, and of course, Qatar being Monte Carlo. That's my comparison.

QUEST (voice-over): Of course, the emir's 2030 vision goes much deeper than artificial islands. The idea is for a broad social blueprint, including universities, science and technology. It's sowing the seeds for the knowledge-based economy.

QUEST (on camera): How much of it is driven by this idea that hydrocarbons and carbons won't last forever, but they are your gift to be able to build for the next century and beyond?

MAYASSA: Well, it definitely is our gift, because if it wasn't for the natural resources that we have, we wouldn't be able to do what we're doing today.

But that doesn't mean to sit and say, "OK, we've achieved it all." No. We have to think 20, 30 years from now, what happens when there's no carbon and no natural resources, what do we do? So, this is why we're investing in research and science and education.

QUEST (voice-over): Qatar is spending big to pave the desert with an unshakable faith in its destiny, building for a population that doesn't yet exist in one of the most arid regions on Earth. The aim is for sustainable growth, and yet, you might wonder, if they keep building, will they come?


FOSTER: In a moment, Nigerians walk out of work and onto the streets as tension over soaring fuel costs reaches boiling point. We'll have a live report for you from Lagos. That's next.


FOSTER: Welcome back, I'm Max Foster with an update of the news headlines for you.

Venezuelan president Hugo Chavez has promised to keep working with Mahmoud Ahmadinejad against the United States. The Iranian president is on an official visit to Venezuela. He was greeted by a guard of honor in Caracas. Mr. Chavez said the two presidents must work together against the, quote, "Imperial insanity" of the United States.

A former US marine has been given the death sentence in Iran after being convicted of spying for the CIA. Amir Mirza Hekmati was arrested in August. His family says he was in Iran visiting relatives. The US State Department says the spying allegations against him are untrue.

And in Baghdad, car bombs have exploded in two mainly Shiite neighborhoods. At least five people were killed, 130 others wounded. Shia pilgrims have been coming under attack recently in the run-up to the Arbaeen, one of the holiest days in the calendar.

Tens of thousands of Syrians poured onto the streets of Damascus on Monday for funerals and anti-government demonstrations. Crowd chanted, "Overthrow Assad, overthrow the regime." Opposition activists say 18 people were killed on Monday in the crackdown, which has now been going on for roughly ten months.

Barack Obama's chief of staff has just announced he is stepping down. Bill Daley is one of the most senior members of the US president's administration. He'll be replaced by the president's budget chief, Jack Lew. Mr. Obama will deliver a statement on the change in around half an hour's time. We'll bring that to you.

And in the last half hour, Lionel Messi -- Lionel Messi has completed a hat trick, as FIFA World Player of the Year Awards. It is the third time in a row that the Argentinian has won football's Balloon d'Or. The Barcelona striker scored more than 50 goals in all competitions in 2011.

Now in Nigeria, at least 13 people were hurt when police reportedly fired on protesters. They were taking part in demonstrations against a government decision which more than doubled fuel prices. Nigerian police said they were forced to use tear gas on what they called miscreants who had been taking advantage of a nationwide strike to go looting. Trade unions say the strikes will continue until the government restores the fuel subsidy which it withdrew last week.

CNN's Vladimir Duthiers is in Lagos, the nation's capital, where business has ground to a halt -- Vladimir, just describe the scene there.

VLADIMIR DUTHIERS, CNN CORRESPONDENT: Max, this afternoon, this morning, a nationwide strike in Nigeria, as you mentioned. People here are angry. They've decided to take that anger to the streets. What they're protesting is the removal of fuel subsidies by President Goodluck Jonathan's government, which ended on January 1st of this year.

Nigeria had kept fuel prices for its citizens artificially low over the last five years. They've been paying about 40 cents a liter for -- for some petrol.

Since the ending, the removal of those fuel subsidies, the price of a liter of petrol has gone up to 86 cents, effectively doubling.

Most Nigerians live on less than $2 a day, so you can see that people here would be very, very fired up, very angry about that. And they're protesting and they were protesting today to let Goodluck Jonathan know that what they disagree with is not only the timing, but the fact that they are an oil-producing nation and they should benefit from the fact that they produce so much oil. But, in fact, now, he's removed those subsidies and so they're angry and they're taking that to the streets -- Max.

FOSTER: On that note, Vladimir, is there any suggestion that exports of oil will be affected, because Nigeria a big oil producer and crucial for Africa, the continent?

DUTHIERS: That's right. Ninety percent of the revenues in Nigeria come from oil. It's, you know, it hovers, usually, between the third and the fourth. As far as the United States is concerned, they import 9 percent of Nigeria's oil. And so it's a very, very big deal.

I don't think that the export business here has been affected all that much by just today. But I know that just talking to people in the street, they're not even concerned about that. What they're concerned about are their livelihoods. The oil that is -- and the fuel subsidies that they were getting prior to January are used essentially so that they can buy petrol for their generators, for their cars. Everything is being -- everybody is feeling the pressure right now, because just getting to work is going to be much more expensive. Food prices are going to go up.

So -- so what -- and we talked to some people who said, you know, we understand the government's rationale. The government's rationale is that they've removed these fuel subsidies so that they -- the money that they normally would spend on the fuel subsidies will go -- will pump back into Nigeria's economy to help rebuild the economy, to revitalize the economy.

But many people say that the timing is wrong. Not only are people not able to afford petrol right now, but the government is also dealing with this crisis in the northeastern part of the country with the Islamists with Boko Haram. They have attacked churches throughout the country ever since December 25, when we saw those bombings in churches in Northeastern Nigeria, there's been some kind of killing almost every single day.

So the government is dealing with these two major crises. And a lot of people are saying this isn't just the right time for that -- Max.

FOSTER: Vladimir Duthiers, thank you very much, indeed, for joining us from Lagos.

Well, Nigeria is the largest oil producer in Africa and the world's eighth largest oil exporter. Despite this seemingly vast sourced of income, Nigerians say they simply haven't seen the economic benefits. Let's take a look the numbers.

Nigeria produces more than two million barrels of crude oil a day. So far, the strike hasn't affected production, as Vlad was saying, and oil accounts for 80 percent of government revenue. Nigeria is a member of OPEC.

Now, despite this, 70 percent of gasoline is imported from other countries, because Nigeria's refineries are in despair due to corruption and mismanagement.

Costs of fuel shot up to 86 cents a liter after the decision, which affected food, transport and construction costs. Most Nigerians live on just $2 a day.

Supporters of the scheme say the subsidy was a drain on public finances. They also say the government will save around $6 billion this year.

The government plans to spend the money on infrastructure and public amenities.

Now, the IMF head, Christine Lagarde, is due to meet the German chancellor, Angela Merkel, on Tuesday. Mrs. Merkel's office says it will be an informal exchange of views.

This all comes at the start of a tour of South Africa on Friday. And Lagarde said the Eurozone, which she can't seem to get away from, would survive the current crisis.

In the South African capital of Pretoria, she spoke to CNN's Robyn Curnow about the problems facing Europe.


ROBYN CURNOW, HOST: You start off the new year and it seems that all of those problems from the Eurozone are -- are back to bear.

CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: We -- we need -- we need to be very attentive to what is being done and effectively delivered in Europe. If you look at what has taken place in the last 12 months, significant progress has been made in terms of bailout mechanisms, in terms of acceleration of stability funds such as the European stability mechanism, in terms of collective determination to have common fiscal policies and sanctions and disciplines when -- when it is not happening.

So a lot is happening. And there is a slight tendency to sort of downplay and downgrade anything that is being done at the European level because it happens more slowly than what markets would expect.

CURNOW: Do you agree with most people in the financial markets that really, it's only the ECB, the European Central Bank, that has the real firepower to deal with this crisis?

LAGARDE: When -- when it does engage, when it targets properly the instruments and the facilities, it has an immediate effect on the markets. And the -- the -- the financial partners, the financial players, the bankers, know that and know how to seize the opportunity.

So the ECB is a critical partner in addressing the crisis. There's no doubt about it.

CURNOW: And the Eurozone?

Do you see it surviving?

LAGARDE: The Eurozone is a construction that defeats the sort of common understanding, because it happens gradually, as Europe did. And that was predicted by the founders, the founding fathers of Europe, Jean Monnet and -- and -- and the rest of them. They did say so, in the first place, 60 years ago. They said Europe will progress through crisis.

This is what's happening at the moment. And the Eurozone is progressing. It's changing. Its -- its characteristics are going to be different from what it was two or three years ago. It is evolving throughout the crisis.

But I have no doubt in my mind that the euro partners are determined to keep it alive and to keep it solid, with a different architecture than two or three years ago, but with a more solid one. It's just taking a bit -- a bit of time to emerge.

CURNOW: But it's fundamentally changing?

LAGARDE: It is changing, no doubt. No doubt. From -- from a pure monetary and currency union, it's morphing into an economic union, a fiscal union with rules, with disciplines, with sanctions, with a bailout mechanism, with a European stability mechanism and -- and with a -- a collective determination to -- to stay together. That -- that's what we are seeing. That wasn't we are hearing. It needs to be implemented.

CURNOW: Exactly. And let's talk about the euro.

Should Greece pull out of the the euro?

Do you think -- do you see -- do you see Greece still being part of the euro at the end of the year?

LAGARDE: I listen to what the European partners say. And we -- we have heard repeatedly the Euro partners say that they want the zone to stay together, to include the same number of partners, if not more. And there are, you know, new partners, I believe, knocking at their door.

So if -- if implementation takes place, if programs are implemented, that's what should happen.


FOSTER: Christine Lagarde there speaking to Robyn.

Now, next, Nets -- Netflix's global ambitions -- the company's CEO tells us why he's putting expansion above profit.


FOSTER: Now, Netflix is treading on Amazon's toes. Today, Netflix launched its video streaming service here in the U.K., letting its customers watch famous over the Internet without having to wait for downloads.

It goes head-to-head with Amazon's Lovefilm, which already has two million U.K. subscribers.

Netflix CEO, Reed Hastings, told me that his service offers something different, though.


REED HASTINGS, CEO, NETFLIX: Netflix is unlimited streaming of TV shows and movies direct to a PS3 or an Xbox or a Wii. And Lovefilm is a DVD by post service. It's done well as a DVD by post service...

FOSTER: Lovefilm is streaming, as well, right?

HASTINGS: It's just starting streaming. And, in fact, just is launching the streaming only for the first time now.

FOSTER: A wide concern with Lovefilm has been that you don't have a great selection online, certainly not the sort of selection you get with Netflix in the U.S., for example. But you're going to have the same problem here, because, as I understand it, you haven't got a huge library in the UK.

HASTINGS: Really, Netflix is a competitor for Sky Atlantic and Sky Movies. Think of it as a channel of entertainment. And we offer a free trial for anyone to try Netflix for free for a month and see if it's got the content they love.

We've got great Hindi content. We've got children's content. We've got great movies. We've got Breaking Bad, Prison Break, all those amazing TV shows.

FOSTER: But apparently, if you put in Martin Scorsese, you only get three results and they're not the most recent films. And that's pretty frustrating for a film buff. You're targeting, really.

HASTINGS: No, it's not really a film buff service. We're a majority of television programs, actually. So it's much closer to Sky Atlantic in that way. And you're right that if you search for a given movie, we're not that likely to have it. It's not a reference service in the way that iTunes is.

But what we are is incredibly inexpensive, unlimited viewing for $5.99 a month. And so when people try Netflix, they tend to watch an incredible amount of content, because you've got so much. And then they'll tend to subscribe.

FOSTER: In terms of investors, how are you convincing them?

Because, obviously, there's a -- there's a problem with profits right now. I say it's a problem. You'll probably say something else. But this is going to make costs even more expensive for you and it's going to put off the profits for even longer, right?

HASTINGS: That's right. It's a big investment for us, expanding in international. We started in Canada a year-and-a-half ago. Now we're entering the UK. And so there's a big investment.

But we're not seeking short-term profits. We're here to build a great member base that's really excited about Netflix, passionate about Netflix. And then, over time, of course, that will lead to profits. But it will be a couple of years and that's OK.

FOSTER: Investors want to know when.

So you're saying in two years' time it...

HASTINGS: It will be...


HASTINGS: It will be two years plus. I mean it's hard to tell right from today. But fundamentally, we believe that the market for broadcast is evolving for movies and TV shows to be Internet TV. And with Netflix, you get to click and watch. It's high definition streaming. It's an amazing picture. And we're socially integrated on top of Facebook. So just like social news or social music, you can start with your friends are watching, get ideas, trade -- trade concepts.

FOSTER: It's about $10 a month for the U.K., right, five pounds 99?

In the U.S., you did upset a lot of customers when there was this very sharp increase of 60 percent in the price.

Are you going to do that again?

HASTINGS: What we did is we changed the price of DVD in the States and that did upset a number of people.

But streaming has always been $7.99 in the States and is $7.99 U.S. today.

FOSTER: So that won't be a shock in Europe in the way there was in the U.S.?

HASTINGS: Not at all. We've had very steady streaming pricing.

FOSTER: OK. And in terms of a later expansion, are you going to continue going country to country to country and having a zero profit or are you going to wait for the profit to go up and then continue expansion?

HASTINGS: Well, we'll be expanding quite aggressively over the next seven years. What we hope to do is be able to build a global business, to be able to be in every nation on earth and to be able to go to suppliers like BBC Worldwide or the Anime Studios or the Hollywood studios and get a global license, because we really believe in the vision of the world's best content available for the world's citizens.

FOSTER: They don't exist, though, do they?

It's very hard for a global service in your business, isn't it, because people and the companies want to sell country by country, don't they, their content?

And you want a global deal.

HASTINGS: In many cases, that's true. But if you think about the Internet, it's such a global medium, whether -- look at YouTube and how global that is. And I think we can do that if we can pay enough money and invest enough for the content.

FOSTER: It's going to be expensive, though, isn't it, to have a global license on anything, and a big investment?

HASTINGS: It's a big investment, but what it does is it stimulates the content ecosystem and it creates a great service today for citizens in the U.K. to try, because, again, we make it so easy to try Netflix for free.


FOSTER: Reed Hastings speaking to me a little earlier on.

Now, the snow will be coming down quite hard in some parts of Europe, we're told. We're told by Jennifer Delgado, who's at the Weather Center, in fact.


FOSTER: Tell us more -- Jennifer.

DELGADO: Yes. Absolutely. And today, and actually the weather is actually improving for Western Europe. But the problem is temperatures really cold over toward the east.

As I -- I'll show you on our satellite right here. Western Europe really just seeing a lot of clearing across this region. However, over toward the east, this is where all the action is. You have a low sitting in the Mediterranean Sea. This is going to be producing a good amount of snowfall for areas, including Turkey as well as Georgia. And this is going to last through midweek. Anywhere you're seeing in pink, this is where we're going to see our heaviest snowfall. We're talking some of these locations actually picking up about 15 to 25 centimeters of snowfall. And, of course, over toward the south and east, we're going to be dealing with some periods of heavy rainfall.

Temperatures we're expecting for your Tuesday, a high of two degrees in Warsaw, minus one in Moscow. This is where all the cold air is going to be. And that includes parts of Scandinavia, as well.

However, over toward Great Britain, high temperature nine degrees in Glasgow, 12 in London and 10 degrees in Paris, in addition to, really, clear skies out there.

And we do have some delays to talk about for Tuesday. If you're going to be flying out of London Heathrow, Paris, you can still see some fog around in the morning as well as into the evening hours. But really, those delays aren't so bad. They're in yellow. Red is when you really want to start to make sure you have some type of way to entertain yourself at the airport.

And then for Munich, we're also talking about some snow there, as well as strong winds for Vienna as we head into the morning and afternoon.

We're watching a low right off the coast of Western Australia. That system right there actually has about a medium chance to become a tropical cyclone, fueling some rain through the western region. And we'll continue to watch that, because it looks like that system might get its act together.

And you can see in this model, as we go about 48 hours out, we'll start to see maybe just a bit of rotation. And then for areas including Queensland as well as New South Wales, we'll see a low departing across that region.

And really, travel delays are looking pretty nice in parts of Asia -- Max, we're going to send it right back over to you.

FOSTER: Jennifer, appreciate it.

Thank you very much, indeed.

Now, art is said to be the signature -- the signature of civilizations. It's also an investment that you can bank on, according to the latest research, at least.

Coming up, we'll interview one art collector cashing in on a flourishing market.


FOSTER: The art market proved to be a strong and steady performer for investors last year, a rare thing, outstripping equities, in fact, in 2011.

Now, the latest research by Mei Moses says the art market beat the S&P 500 by 9 percentage points in terms of total returns.

Now, this chart shows how both those markets performed from December 2010 to the end of last year. And it's been the second year in a row that art has actually outperformed equities, stocks.

It's partly due to strong sales of Chinese paintings, in fact. The art work by the Chinese artist, Qi Baishi was one of the most expensive paintings sold at auction in 2011. It went under the hammer for $57 million.

Pauline Chiou interviews one Chinese artist who's driving the global art boom.


ALAN LO, ART COLLECTOR: That was a really cute piece. Well, it's here.

It's a work by Liu Bolin. This is a sculpture by Jiang Goni (ph), probably one of contemporary China's foremost artists.

PAULINE CHIOU, CNN CORRESPONDENT: And when you first saw this, did you fall in love with it immediately?

LO: You sort of need to look at it and then you sort of ask yourself the next day, are you still thinking about it, are you still -- do you -- are you still sort of thinking oh, you know, wouldn't it be nice to -- to own this?

And then, because you see so many things and -- and more and more these days with consultants, with art dealers and interesting things going on. And you just sort of have to be quite selective and -- and -- and sort of pick and choose things that you really love and you really enjoy.

CHIOU: And now because of the economy in -- and the the global economy with the U.S. and Europe really struggling now, a lot of galleries and auction houses are looking to Asia.

LO: For Hong Kong and for this part of the world, it's obviously healthy to see this gradual sort of increase in the level of interest to invest in these types of hardware. I'm talking about these gallery spaces. Major galleries in the Western world shifting their focus to -- to Hong Kong and China. I certainly hope that the -- it's sort of collectively part of everyone's sort of long-term view that there is potential in this part of the world to develop the city into, you know, something more sophisticated, more savvy in terms of appreciating art.


FOSTER: The story of art. An incredible story, really.

Now, Qantas staff are being praised for keeping calm after extreme turbulence on a flight from London to Singapore left seven people injured, four of them seriously.

Ashley Brown has been speaking with the passengers for us.

ASHLEA BROWN, NETWORK TEN CORRESPONDENT (voice-over): Loved ones were on the edge waiting for QS32 to finally touch down. Passengers couldn't be more relieved to be on solid ground.

Parents and their children shared the moment the A380 hit violent storms about three hours out of Singapore.

UNIDENTIFIED MALE: a lot of turbulence (INAUDIBLE).

UNIDENTIFIED MALE: what did it feel like?

UNIDENTIFIED MALE: I leapt two -- I leapt two foot off the ground.

UNIDENTIFIED MALE: it was pretty scary. It was pretty big, too. I didn't know what was going to happen.

BROWN: The flight was given only seconds to proper. The seat belt sign was activated, but some were caught out of their seats. Seven passengers were hurt.

UNIDENTIFIED MALE: well, when ew know there's an 80 -year-old woman who had a broken nose.

UNIDENTIFIED MALE: I believe someone's head went through an overhead locker.

BROWN: Four of the injured were rushed to hospitals. Three others were treated at a medical center in Singapore.

UNIDENTIFIED FEMALE: I think the captain put it well. He said it's like going in a speed boat and hitting a wave very fast and you kind of go flying over the wave. It felt a bit like that. Everything went flying high in the air.

BROWN: All injured passengers have now been released from hospital.

(on camera): This incident has put Qantas in the headlines again. But perhaps passengers have prevented any damage to the brand, offering nothing but praise for the captain and crew.

UNIDENTIFIED MALE: the captain came out, went through the cabin, saw the keys, told them what happened and why it happened and (INAUDIBLE) scared.

UNIDENTIFIED FEMALE: the crew were really fantastic. But yet the delay was long and exhausting and I'm happy to be home.

BROWN: Ashlea Brown, TEN News.


FOSTER: Now, New Zealand is bracing for another environmental disaster, as authorities try to contain a spreading oil spill from a cargo ship that ran aground three months ago. We told you about that at the time. Now a three kilometer oil slick now surrounds the Rena. It broke in two in bad weather over the weekend. One hundred and fifty shipping containers and other debris also feel into the sea and have begun washing up on beaches.

The Rena ran aground on a reef during what should have been a routine entry to the north island port of Tauranga. Back then, 350 tons of oil leaked into the sea. It quickly became New Zealand's worst ever environmental disaster. The Rena's Filipino captain and first officer were arrested a week later. They face charges, including operating a ship in a manner causing unnecessary danger or risk.

And there's been more drama at the high seas off the coast of Western Australia. Around 25 kilometers offshore, three activists boarded a Japanese whaling vessel, the Shonan Maru 2, and were taken captive. The men boarded the ship under the cover of darkness and were detained. The activists from Forest Rescue boarded the ship in support of the Sea Shepherd Conservation Society, which patrols the southern ocean trying to prevent Japan's whaling fleet from operating.

We'll have a quick look at the markets for you after this break.


FOSTER: Now, a poor showing from banking stocks helped drive European markets into the red today. All the major indices were down between 1 and 2/3 of a percent.

Bank stocks did worse in Italy. New data showed banks were borrowed - - banks there borrowed more than 200 billion euros from the ECB last month. UniCredit was down heavily once again today, almost 13 percent. Other Italian banks also saw dramatic losses.

Meanwhile, Europe's banks were still parking money with the ECB. Today, the central bank showed that for the third time this year, Europe's banks had deposited record amounts of money overnight, $588 billion worth, in fact.

The U.S. markets currently up, but only very slightly, up .25 of 1 percent at the moment. And we're going to give you a story from India, as well, because the Indian prime minister, Manmohan Singh, announced a cut in the country's growth forecast to -- to 7 percent, down from 8.5 percent last year. It is (INAUDIBLE) one of the drivers of growth this year.

That's also lower than the 7.5 percent the government forecast last month.

Mr. Singh admitted India is going through difficult times. It marks sharp slowdowns in previous years and follows interest rate rises to tackle inflation.


Thank you so much for watching.

I'm Max Foster in London.

The news continues, though, here on CNN.