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QUEST MEANS BUSINESS
Venizelos Hopeful He Can Persuade Democratic Left Party to Join His Coalition; Spain Government Assisting One of its Biggest Banks; Emirates Airline Net Profits Drops Due to High Fuel Costs; World Economic Forum in Ethiopia; Ferrari Incident in China
Aired May 10, 2012 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN ANCHOR: Going for Growth. The IMF's Christine Lagarde tells CNN that austerity can lead to expansion.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: It's a bit more complicated than to say, "We want growth. Now, we want austerity."
(END VIDEO CLIP)
FOSTER: High fuel costs cost Emirates Airlines. Its President Tim Clark tells us about the squeeze. And the Ferrari stunt drives China up the wall. I'm Max Foster. This is QUEST MEANS BUSINESS.
Hello to you. Two countries, two crises. And, right now, no sure solutions as Spain's government just stepped in to rescue its failing banks while Greece is still struggling to form a government at all.
I will start though in Athens. The leader of PASOK, Evangelos Venizelos, says there's a good omen in the air after a meeting with Democratic Left party. He believes he can persuade them to join his coalition even though PASOK only finished third in Sunday's elections.
They suddently have a chance to form a government of both the new democracy and series of parties have already failed to do so. Venizelos says his government will keep Greece in the Europe. The former finance minister said that pro-Europe sons was what the people of Greece demanded.
(BEGIN VIDEO CLIP)
EVANGELOS VENIZELOS, PASOK LEADER, ATHENS, GREECE (through translator): I will make an effort to respond to the people's mandate for a government as they wish, a cooperation government -- European and within the Europe. We owe this to them.
(END VIDEO CLIP)
FOSTER: Meanwhile, Spain is propping up its banking center. The government is part nationalizing Bankia, one of the country's biggest banks by converting a $5.8 billion-loan into shares. Bankia has been struggling with billions of dollars in exposure to bad property loans.
The move was good news for Spanish stocks. The Ibex was up almost three and a half percent. And Greek stocks also rebounded. The Athens Composite finished up four percent.
Now, as Greece and Spain struggle on with austerity, the head of the IMF says growth is still possible even when countries are focused on paying down debts. Christine Lagarde tells CNN, the so-called choice between austerity and growth might be a false one.
(BEGIN VIDEO CLIP)
LAGARDE: It is not as simplistic as either growth or austerity. And my view is that the two are not mutually exclusive and they can be reconciled so that they can feed each other. It's a bit more complicated than to say, "We want growth. Now, we want austerity."
Actually, there has to be sufficient, solid, credible, well-anchored fiscal consolidation for growth to take roots because, if that fiscal consolidation does not happen, then investors will always be reluctant to invest in either the sovereign or the corporate because there's often an association between the two.
But, equally, it cannot be without a compost from which economic activity is going to prosper. So, any policy, going forward, should actually try to reconcile the two by having enough well-anchored fiscal consolidation. But, in the short-term, letting revenue fall and spending rise if it's only as a result of the macro-economic situation.
At the same time, the economies have to do the structural reforms that will actually accommodate growth. Because if you reform your product market, if you reform your labor market in a good dialogue with all the stakeholders, then you encourage investors.
And there are plenty of investors at the moments. There are lots of companies that would like to invest that are sitting on piles of cash. But they simply don't know because they don't really trust what is happening at the moment.
So, it's short-term -- the fiscal accommodation that is at -- at a sensible pace, country-specific -- and in the medium to long-term, the structural reforms that need to restore confidence and enable people to actually invest.
(END VIDEO CLIP)
FOSTER: Christine Lagarde speaking to CNN. Well, Jim is with us tonight. Our focus is still very much on Greece because we don't know whether or not we're going to get a new government. Therefore, a new election. What are your thoughts.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Well, I think, all along, the idea of the new election will have to take place in June was always going to be a very strong possibility. And it's interesting now, Mr. Venizelos now -- whose party was decimated in the election, has this sort of window and opportunity to try to put together a government of national unity.
I think, a lot of Greek people would be quite surprised that he is even trying, given the fact that they basically chuck most of the MPs out of Parliament. So, you'll have another day. Probably, by tomorrow, we'll find out that there is, unlikely, that he can form a government.
So, he wants a government national unity. So, what's next. Well, then, an interim government and then another election, possibly, June 10th, June 17th.
FOSTER: In the meantime, we've got some important Euro meetings and - - can they really progress when you have got a situations to resolve in Greece because you don't want to, sort of, keep considering Greece. We don't know how it's going to end up.
BOULDEN: No. And I think what's interesting is that some people were getting worried that they would, you know -- next week, for instance, the troika of the IMF, the EU and ECB aren't going back to Greece to talk to the government because there's no government to talk to.
So, the timeline starts to get squeezed again just like what we talked about in the first quarter of this year. No Greek government but they have a lot of decisions to make in mid-June in order to get the money.
So, at the finance minister's meeting in Brussels on Monday and on Tuesday, are we going to hear of any -- I don't want to use the word "threat", but are we going to hear any very strong language toward the Greeks and the Greek voters about what scenarios are out there if they don't stick to austerity.
Also, maybe, we'll hear about some legal room. Maybe, we'll hear some words of confidence given to the Greeks and the Greek people from the finance minister that might help soften the edges. They can't change the austerity program that's in place unless they renegotiate everything which would be -- take a long time.
But could they give some words of comforts to the Greek people. Would the Greek people vote differently in June. That's the fascinating question.
FOSTER: And will it be interesting to, sort of, get the first sense of the Franco-German relationship now, as well.
BOULDEN: Well, when the EU leaders meet in May 23rd as well and then formal dinner is being called by Mr. Van Rompuy in Brussels -- that would be very interesting because, without the Franco-German strong combination, then you're talking about fractures around all of Europe.
And that really worries some people. We're not there yet but, you know, will France and Germany -- as we just heard Miss Lagarde talk about long-term structural reform, that's not what we're hearing from the new leader of France, is it. Mr. Hollande talking about -- not talking about as much privatization or cutting of jobs as you would have heard from -- from Mr. Sarkozy.
So, what kind of language is it will we hear from France and Germany that would give the markets confidence, that things can move forward and not go back to where we were last year.
FOSTER: Jim, thank you very much indeed. Now, they may operate in an oil-rich country but Emirates is still feeling the fuels squeeze. We'll hear from the airline's President, Tim Clark. Next.
FOSTER: Heavy oil prices are taking a heavy toll on Emirates' profits. They fell like 72 percent in 2011 because the airline spends an extra $1.6 billion on fuel as oil prices stayed above a hundred dollars a barrel. John Defterios asked Emirates President Tim Clark how he could tackle those kinds of costs.
TIM CLARK, PRESIDENT, EMIRATES AIRLINE: Yes, I think, the fact of the matter is that we've had a 44 percent gross in our fuel prices. We know where the fuel prices are and the effect they've had in the bottomline. $1.6 billion straight out of the bottomline just because of that.
But in terms of our unit costs, gross income and all income strings that come behind it -- the seat factors, the production -- it's all a good story and quite a robust story. If it had not been for the fuel, we would be well ahead of the game.
JOHN DEFTERIOS, CNN CORRESPONDENT: It's quite interesting. If you look at the level of the fuel cost to your bottomline. Delta has taken a very different position once they get involved in the trading business and the refining business. This is not something , even though you're based in the Gulf, Emirates would consider.
CLARK: I have spoken to my boss over a number of occasions about what we can do to mitigate the risk. And, short of a refinery, I thought about all sorts of way where we could store fuel if necessary for the airline to get involved in the refinery as Delta has done.
Suggest that all else has failed. But they cannot break themselves away from the vice-like grip of the entities that control the fuel price so they got to bail out and try and do their own things to mitigate. Is that something that other carriers would do.
We'd look at anything but, you know, to become an oil -- a refiner, that is something pretty special. It's pretty unique and pretty bright. Good luck to them.
DEFTERIOS: We've seen 10 to 15 percent correction depending on the product that you're looking at in terms of prices in their peak in 2012. Is this the beginning of a downward trend because of the recession that we are seeing in Europe and the reduction of the security risk in Iran.
CLARK: Well, you're starting to see movements but, hopefully, it will continue going South. It needed to go there. I mean, it was artificially- inflated. And yes, the geo-politics of the region were they are used as - - my view was masking the real issues here -- as what and how is this -- are these prices being set. How they are actually coming because the global economy could not support a hundred and thirty dollars in a sustained manner.
It was impossible to do that. At a time when every country on the planet is feeling the pinch, some to greater extent -- look at the Euro's own today. Look at how nine governments have been removed in the last two years. Look at the fragility of the U.S. economy and the fragility of the global economy in general.
And yet, the price of oil has been remained the highest for the longest in our history.
DEFTERIOS: If you look at the UAE in totality, you have Etihad buying stakes and carriers and Emirates has a very different strategy. You're very happy not to go into deep partnership or take equity stakes in other carriers to boost your growth.
CLARK: That's right. Look, I don't want to comment on what Etihad do -- does. If it has a strategy that sees some minor MNA program into carriers that, you know, around the region, that's up to them. I'm sure, they'll succeed if that's the way they want to go.
For us, we wouldn't do that because we have 232 aircrafts on order. We have to manage the -- what is almost the largest carrier in the world - - our production. That fleet is growing everyday. Twenty-two aircrafts came in last year. We've got another 24 coming in this year. Many of those are 380s. They are all wide bodies. We are growing our network.
For us to get involved with MNA activity whether it be in India or Europe or whatever -- however tempting it may look on paper, it's too much for us to do and give them what we have out there at the moment.
FOSTER: Air India, meanwhile, was forced to cancel more flights on Thursday because of a pilot strike now on its third day. In fact, some long-hold bookings are being suspended until the 15th of May. The pilots continued their walkout despite ruling from Delhi's High Court that said it was illegal.
Thousands are being fired and the union is angry that other pilots set to join Air India from a recent merger will be allowed to fly some of the sought-after routes.
For the south (ph) strikes -- at Heathrow in London caused far less disruption. The main protests were in Central London. Union say around 400,000 active workers were expected to participate across the U.K. as protest against plans and pension reforms. This is the second major strike over the issue in six months.
Power Bowl comes. There are some U.K. bowler stars staging a one-day strike over pensions. Airport-operated BAA says any disruption will be minimal but it's pining pressure on borders at a crucial time in the countdown to the London olympics. And there's Ayesha Durgahee in our reports. The U.K. is failing to keep up with technology that could reduce immigration lines.
AISHE DURGAHEE, CNN CORRESPONDENT (voice-over): It's custom the last thing you want after sitting in closed-quarters to then going to a halt on the home straight, and stand shoulder-to-shoulder with other passengers at immigration.
MIKE CARRIVICK, CEO, BOARD OF AIRLINE REPRESENTATIVES, U.K.: The U.K. Border Post is getting a lot of information and sends way in advance to the actual flight taking off. They know who is booked. They know who is actually checked in. Why, then, do they come up against these physical barriers on arrival.
DURGAHEE: Airports and governments are mixing manpower with biometric technology to make immigration quick and easy to residents. Like the e-Channel at HongKong International that use ID cards and finger print scanners. The airport has also opened up its Frequent Visitor cards to international passengers.
RAYMOND LOK, HONGKONG IMMIGRATION DEPARTMENT WORKER: Time is the money. They want to have a quick, more efficient, immigrants and clearance at our airport -- the self-service immigrants and clearance. It only takes about 30 seconds to complete the whole process.
DURGAHEE: Over in UAE, Dubai International has a total of 208 immigration counters and a hundred e-gates that can be used by anyone with a readable passport.
In the U.K., continued longer lines at London Heathrow has sparked crises talks between the government and airlines. For the Chief of the International Airlines Group which owns British Airways, it comes down to poor allocation of resources.
WILLIE WALSH, CEO, INTERNATIONAL AIRLINES GROUP: To process an EU/UK passport holder through the border in 25 minutes is unacceptable. I will not pay for the completely inadequate, unacceptable standards that are in place today.
We've got to expose the reality here. Because if the government won't accept the scale of the problem. I'd have no confidence that they will address the problem.
DURGAHEE: A recent government report found that the $14.5 million spent on the iris scanners could have been used to employ at least 60 passport officers. The U.K. Border Agency decilned an interview with CNN and said in a statement, "Planning for an alternative to IRIS began over two years ago and IRIS has since been phased out as the technology becamse outdated. This government plans to replace IRIS with other types gates that non-EU passengers will be able to use."
There could be a way to avoid falling into a technology trap that could be up to 20 percent cheaper. Amsterdam's Schiphol airport hired their e-gates first before buying them.
UNIDENTIFIED MALE: What Schiphol are doing which is really interesting is a different model -- it's a lease model. You know, extensions were permitted to a provider as a service and, I think, that's a model for the future, in a fast-moving environment.
DURGAHEE: Airports are the gateways to the countries they represent. With global awards like Skytrax as stamp of approval, customer satisfaction is not just their sake but national pride and reputation. Aishe Durgahee, CNN LONDON.
FOSTER: Now, the Bank of England today kept interest rates on hold at half of percentage points. And, also, go to the King ...they're extending his quantitative evening program. On concerns, the high inflation outweigh the risk of renewed dangers from the Euros and prices.
And that brings us to today's "Currency Conundrum". The Bank of England has always been totally sure -- a banknote in England dwells --now tell me this, in what year were the last private banknotes issued, 1709 -- 1921 -- or was it 1945.
Well, the Bank of England's decision to keep those rates on hold, based in the pounds, to just below a three and a half year high against the Euros. The Euros is up against the Dollar. For the first time in nine sessions the Spanish debt stress eased slightly and Greece secures funds to repay bond holders. (COMMERCIAL BREAK)
FOSTER: A quick look at U.S. markets. "Europe, the On-going Story" - - unsure because I don't know much U.S. news. Alison, what have you got.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Exactly, how about U.S. news. At this point, it looks like investors are focusing on scooping up some bargain stocks that have been beaten down after a six-session losing streak but it looks like stocks couldn't (ph) -- in the positive column today, we still have a few hours to go before they're closing Dell.
That's the spike -- first-hand claims for unemployment benefits falling only 1,000 to 367,000. We're seeing those jobless claims number kind of churn at that level . But, you know, after that drumbeat of negative headlines that have come out of the Euros all this week, investors are really trying to grab on to anything positive.
And, at this point, bargain prices for a stock are the positives of the day. One big loser that is keeping a lid on some of the gains today, at least, for the Dell -- shares of Cisco Systems, right now, plunging 10 percent that, once again, is keeping Dell -- the Dell's gains at a minimum. Same with the Nasdaq as well.
Cisco is, of course, the networking giant, it released a disappointing sales outlook. CEO John Chambers is very conscious about global IT spending. He says customers are buying cheaper products. They are holding off on making any upgrades. And for Cisco, Europe has really become an issue and, as he puts it, "When you're uncertain, you also don't spend."
We are also keeping our eye on shares of Avon. They are falling more than three percent. The privately-held perfume company Coty isn't giving up on its bid for the cosmetics giant. Coty is back with a sweetened offer because of $15-million-richer than the $10 billion bid that Avon rejected last month.
Avon shares, "Had jumped 10 percent on Wednesday, anticipating the sweetened bid, but they are losing ground today."
Despite the fact, guess who jumps on-board back. Warren Buffett's Berkshire Hathaway. Now an investor in Coty's bid but, once again, we are seeing shares lower today.
FOSTER: Always interesting to see what he is interested in. Alison, thank you very much indeed for that.
Now, believe it or not, there are some goodness of hope in the U.S. economy even as Wall Street struggles to gain momentum. Business across the East River in Brooklyn is picking up. Felicia Taylor went over there to take a look.
UNIDENTIFIED MALE: Those are ponds (ph) in there.
FELICIA TAYLOR, CNN BUSINESS CORRESPONDENT (voice-over): From fresh fruit popsicle --
UNIDENTIFIED MALE: You'd get lost in the moment.
TAYLOR: -- to tastier cheese-milk ice creams --
UNIDENTIFIED MALE: There's some strawberry ricotta (ph), cedar ricotta (ph) swirl in there.
TAYLOR: Deeply yummy. And refreshing fermented cheese.
UNIDENTIFIED MALE: So, this is Kombucha on Tap.
TAYLOR: It's one taste treat after another. It's good stuff. Inside this massive factory space that once housed the headquarters of drugmaker Pfizer.
(On camera): This may be where it all began for Pfizer for than a hundred and fifty years ago. But this manufacturing facility is now sponsoring a new generation of entrepeneurs. Look at these vast spaces. I mean, it's amazing.
(Voice-over): Jeff Rosenblum whose investment company bought the site from Pfizer gives me the grand tour.
JEFF ROSENBLUM, CO-MANAGING MEMBER, ACUMEN CAPITAL PARTNERS: Well, when we came in to the building a couple of years ago -- when we were first negotiating with Pfizer, they had -- they were producing Lipitor and Viagra -- their whole product line was produced here.
TAYLOR: And the first thing I see is Viagra. Oh, Zithromax, Zoloft. So, this is literally powder mixing for prescription --
ROSENBLUM: Powder mixing in the simplest form.
TAYLOR: What did you think when you first walked in here.
ROSENBLUM: We thought that it's going to be quite a challenge to fill it.
TAYLOR: Pfizer began moving out in 2009 and company has started moving in a few months ago. Only a small fraction of the space has been leased so far. But this is wild -- giving free run to workers on skateboards and their frisky pet.
It could feel a bit like "The Twilight Zone". I think it's really eerie. But tell me this is not like "The Shining" for you.
ROSENBLUM: It totally is.
TAYLOR: But the 15 businesses in here now say the move has been worth it. I understand, it's sort of $12 to $15 a square foot. Is that about right.
DAVID CARRELL, OWNER, PEOPLE'S POPS: Yes.
TAYLOR: Which is a lot cheaper than what you might find in Manhattan.
CARRELL: Yes, I don't have neighbors to the left and to the right just yet, so I can really grow. You know, the sky is the limit.
TAYLOR: Pfizer provided key financing so Rosenblum's group could buy the building. Without that help, the site would have been torn down. It's a big relief for city officials worried about the loss of hundreds of Pfizer jobs.
CARLO SCISSURA, SENIOR ADVISER, BROOKLYN BOROUGH PRESIDENT: When we talk about manufacturing jobs in the U.S., the people that are working in this building are showing us what the future of manufacturing looks like. It's creative. It's young . It's different.
TAYLOR: Almost two hours into my visit, the whirlwind taste test continues. It's a good pickle. From ice cream to pickles. I'm not pregnant.
JOE SALVATORE, MARKETING DIRECTOR, MADECASSE: Did you get her reaction on tape.
TAYLOR: This is the best day I've ever had.
Everyone here hopes the best days of this venerable building are still ahead. Felicia Taylor, CNN New York.
FOSTER: Well, next, the World Economic Forum kicks off in Ethiopia. Turner takes a look at one of Africa's fastest growing economies and opportunities for foreign investments.
FOSTER: Hello. Welcome back. I'm Max Foster. These are the news headlines at this hour. The insider committee for the Red Cross is suspending operations in Pakistan pending a review. The move follows the kidnapping and murder of a British health program manager in Qatar.
The ICRC has nearly a thousand employees in Pakistan -- one of it's largest operations in the world.
A Syrian opposition group is calling duel (ph) blasts in Damascus the deadliest attacks since the start of the uprising and crackdown nearly 14 months ago. The government says quote, "Suicidal terrorists killed 55 civilians and troops with a thousand kilograms of explosives."
But two opposition movements say the regime orchestrated the attacks.
The former "News of the World" editor, Andy Coulson, says he was unaware of any phone hacking whilst he was with the tabloid. Coulson testified today in Britain's inquiry into media ethics. He also denies his ties to "News International" played a role when he was hired as Prime Minister David Cameron's Communications Director.
Ahead, Greece's Center Left Pasok party is trying to couple together a ruling coalition. If these two rival party leaders weren't able to accomplish -- Sunday's election left no clear majority -- If no deal is struck by May the 17th, new elections will be called during the bailout deal into town (ph).
And Rafael Nadal has been knocked out of the third round of the Madrid Open by Spanish compatriot -- by a Spanish compatriot. This is the first time the world number two has lost on clay in 23 matches.
FOSTER: Now the World Economic Forum has just kicked off in Ethiopia. This year is focusing on Africa and the continent's potential to become a top destination for foreign investments. A new survey from Ernst & Young shows investment is picking up for the so-called lion economies. But plenty of challenges remain. Robyn Curnow has more.
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ROBYN CURNOW, CNN HOST: This is one of the fastest growing economies in Africa. We're in Addis Ababa, Ethiopia. Now the World Economic Forum is taking place here as people from across the continent are trying to rebrand, tell a different story for Africa, tell people that this is the place to invest your money.
At the same time, Ernst & Young has come out with a so-called attractiveness report. How attractive is it to do business here in Africa? Well, this is what they have to say.
ZEM NEGATU, ERNST & YOUNG: I look at things from a global perspective. One of the major global trends that we see is the gradual shift of economic power from west to east, places like China. The Chinese have made huge investments in Africa. Why is that? They're growing. They're starting to uplift hundreds of millions of Chinese from abject poverty into the middle class, and pretty soon to the upper class.
These people now are becoming affluent. They now -- China today is the largest automobile market in the world. That means the raw material to produce those cars, the raw material to fuel those cars, has to come from somewhere. And that somewhere is Africa.
CURNOW: So the optimists continue to talk about opportunity. But the challenges still remain. Africa's economies have to diversify. Governments have to create more jobs for Africans to really take advantage of the growth rate that we're seeing -- Robyn Curnow, CNN, Addis Ababa, Ethiopia.
(END VIDEO CLIP)
FOSTER: Well, as foreign companies look into Africa for investments, its largest bank by assets is looking out. While Standard Bank says its main focus is still in its home continent, it's exploring expansion in emerging markets elsewhere. Jacko Maree is the chief executive of Standard Bank, and he joins me now live.
Thank you for joining us. You've made a great success of operating in Africa. But other companies not operating there are concerned. They're concerned the legal system isn't there to protect their intellectual property. For example, they're concerned about corruption. Have you got `round those challenges? Because they are there, aren't they?
JACKO MAREE, CEO, STANDARD BANK: Of course, but we find that having operated in many emerging markets like Russia and places of that sort, you know, you find this in many fast-growing developing countries.
And of course, many African markets are essentially frontier markets. But we've been in Africa for 150 years. And I think, you know, it always comes down to having people that you know and trust to work with. And of course, having your own principles.
FOSTER: And in terms of a particular way of working in Africa, if I can generalize across the continent, are there particular ways of working there (inaudible) Africa not apparent in other markets?
MAREE: Well, I think the thing that you have to realize is any big corporation, when you are operating in a country with a lot of poor people, is I think you have to demonstrate that you are doing more than making money. You have to be contributing to the agenda of the country and help with the upliftment (ph) of people and so forth, not through your CSI programs, but through what you do day to day.
I think that's absolutely fundamental. You have to be in tune with what the issues of the government are and what the issues of the communities are in which you operate.
FOSTER: And you famously did a very big deal with a large Chinese bank (inaudible) very big stake in your business. That was a couple of years ago, wasn't it, 2008?
FOSTER: How's that partnership worked, because obviously people are attracted by these huge amounts of cash these Chinese businesses can offer. But how involved have they been and how -- have there been any interruptions as a result of that?
MAREE: ICBC, which is actually the biggest bank in the world by most measures today, bought 20 percent of Standard Bank for $5.5 billion. So there's a massive investment because of China's interest in Africa.
So if we could help them as their clients wanted to expand and put a presence on the ground in many African countries. And it's worked really well there. Two members on our board, we cooperate. We have 50 people in Beijing, looking for opportunities with a big Chinese stake on the enterprises as they expand on the continent. And it really, I think, will define Standard Bank over the next 50 years.
FOSTER: And now you're going their way, heading towards the Asian developing markets. So does the partnership work both ways?
MAREE: Well, we tend to piggyback off what they're doing. I mean, we have had small presences. We are very strong because our heritage and commodities and mining and infrastructure. So we look for ways in which we can assist the Chinese market for commodities in partnership with ICBC.
FOSTER: Jacko Maree, thank you very much for joining us.
Now a publicity stunt by Ferrari in China is certainly getting a lot of attention, but (inaudible) look at the carmaker's PR faux pas in one of its largest markets.
FOSTER: Earlier we told you that the Bank of England has not always been a sole issuer of banknotes in England and Wales, and asked our "Currency Conundrum", where -- when were the latest or the last private banknotes issued? The answer there is B, 1921, by the Somerset Bank (inaudible) Fowler and Code (ph). Now you know.
A publicity stunt is turning into a PR nightmare for Ferrari. The luxury carmaker is marking its 20th anniversary in China. But the real mark that it's left is on an ancient wall that dates back hundreds of years. Ramy Inocencio has more.
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RAMY INOCENCIO, CNN CORRESPONDENT: The wheels of the luxury Ferrari spin as the driver shows off, leaving dark tire marks on Nanjing's historic gate, visible impact for a gate tower that dates back 600 years to the Ming dynasty. The incident has provoked a backlash in China, where high-end cars are often seen as symbols of rich elite who live by a different set of rules.
China state media reported the event was intended to celebrate Ferrari's 20th anniversary in China with the special edition Ferrari 458 Italia, valued at 954,000 U.S. dollars.
Now much of the online ire has centered around government officials, who allowed the event to take place. One person said this, "Ferrari put out the cash; Nanjing put out the city walls."
But another commentator was a little bit more forceful. They said, "I think that without government authorization, how would this damn store dare to take the Ferrari onto the city walls?"
A representative of the local tourism bureau says Ferrari had not received the proper authorization. According to the regulations, the Ferrari should be pushed up to the gate tower rather than being driven up there, he says. We've seriously criticized the officials of Junghwa Gate Tower regarding this matter.
Ferrari China quickly issued an apology, blaming its local dealership and the inappropriate act of a single employee. Ferrari expresses deep regret, the Chinese statement read, in part, "Ferrari is very concerned about and will closely watch the development of the case to make sure the dealership solves the problems properly."
This is not the first time a Western brand has gotten caught in a political firestorm in China. Starbucks faced serious opposition after it opened a store in China's landmark Forbidden City. It eventually closed that location.
Italian fashion brand Dolce & Gabbana was forced to apologize last year after security guards stopped Hong Kong residents from taking photos of the store in what many said was a violation of their rights. For a brand like Ferrari, it's important to tread carefully. In 2011, Greater China grew to be the company's second largest market -- Ramy Inocencio, CNN, Hong Kong.
(END VIDEO CLIP)
FOSTER: A lesson learned for Ferrari there.
We're going to cross to the weather now. We're going to cross to the Weather Center. I think we've got Jenny Harrison there, coming, Jenny?
JENNY HARRISON, CNN METEOROLOGIST: Yes, hey, Max, I'm here. You say that as if you're going to say --
FOSTER: Nothing quite worked. We had a plan in place, so it didn't work, Jenny Harrison, because we actually found a replacement for you. Let me show you who that replacement is.
HARRISON: (Inaudible). Oh, who is -- ooh. Oh.
(BEGIN VIDEO CLIP)
CHARLES, PRINCE OF WALES: In the west, rain will be lighter in patches. There will be maybe a few drier in Toulouse there but don't freeze high in Asia. Aha. There will be snow to the higher ground in the Highlands and Aberdeenshire. The potential for a few flurries over Balmoral -- who the hell wrote this script?
CHARLES: As the afternoon goes on.
(END VIDEO CLIP)
HARRISON: Max -- oh, you've disappeared. So what was that all about, and what -- well, you have to explain. What was that all about?
FOSTER: Well, there he was, Prince Charles, wandering around the TV studio. He was asked impromptu, I'm told, if he wanted to have a go at the weather.
FOSTER: And I think he was quite good. I think he's a closet wannabe. He wants to be you, Jenny.
HARRISON: Well, I'm not sure he wants to be me, but I'm fairly certain I bet you he's always wanted to have a go at doing that, don't you think? He's always --
FOSTER: Yes, you get that sense.
HARRISON: You do, you do. And he wasn't bad, was he? But yes, he did have it scripted, you know, in fairness. We don't.
FOSTER: Yes, and he wasn't very impressed by the script.
HARRISON: He wasn't, was it? No, well. Hm. I'm not going to comment, because I'm about to start talking now without a script. So you know, you might say all sorts of things about what I have to say.
HARRISON: -- (inaudible) your weather. I'm going to talk about your weather, of course.
And also the other thing I need to talk about, I'll talk about it when I talk back to you, Max, and to who's going to come and do the weather with me.
But look at this, one system after another, heading across in particular northern Europe. And we've seen some very heavy amounts of rain. You can see there in the last few hours, the low countries in particular, have seen some pretty strong thunderstorms.
But look how it's been adding up again, just in the last 24 hours (inaudible) up in northern England, 43 millimeters and then Brest across in France, 40 millimeters of rain, all on top of what we've seen, of course. Over the last several weeks.
Winds are picking up right now, sustained winds of 35 kilometers an hour in Amsterdam, just below that in Plymouth. That means the gusts will be a lot stronger than that as well. This is a system working its way through the Baltic Sea, as you can see, and that is where we're going to see the strongest winds over the next sort of 48 hours.
But that system coming through, not just bringing the rain, but also some much, much cooler air. Now still pretty summerlike across more southern and eastern areas. But at the same time, more threat as we head in Friday of those severe thunderstorms, and in fact, quite possible as well we could even have some tornadoes spawned from these severe thunderstorms.
This is what's going on. So the temperatures are going to drop well below average because this front is just ushering all the cold air from the north. When it comes to what it will actually do to temperatures, have a look at this, this Thursday particularly warm in Paris, 28 by Friday, below the average at 17, by Saturday down to 15.
And you can see how that's the general trend, Berlin and Warsaw. Vienna, you are going to get cooler but probably not until about Sunday. So that is the effect of that front swinging through. And I'll tell you (inaudible) bringing with it the rain -- there is the rain with those thunderstorms. And snow of course into the north.
But where it is warm and dry is the southwest, Spain, we've got some of the images to show you there, oh, where you're really enjoying the sunshine, taken from all over Spain, but of course in the south in particular, where you've got the nice beaches and as you can see, have just having a fine old time, really, fairly typical that we'll see this sort of weather in Spain continuing now through the next few months, taking us into the summer, but at the same time, we will expect to see delays at the airports to the north, nothing really affecting Spain.
We can see even in London (inaudible) some foggy conditions, but generally it is that wind which is causing delays at the airports. There's that 14 in London. It's going to cool off there as well of course, 32 in Madrid, and as I say, some of the better weather in the southwest. But, Max, I was just thinking, you know, if Prince Charles goes and does the weather in the U.K., then we need someone who can do the world weather to a world audience. And I think --
FOSTER: Five second.
HARRISON: Well, it's got to be Prince Harry, isn't it? (Inaudible).
FOSTER: Prince Harry.
HARRISON: Prince Harry (inaudible).
FOSTER: Odds on him.
FOSTER: (Inaudible) indeed. Jenny Harrison, thank you very much, you're much better than Prince Charles. That's QUEST MEANS BUSINESS. I'm Max Foster, she's Jenny Harrison. "MARKETPLACE EUROPE" is next.
JULIET MANN, CNN HOST: Welcome to MARKETPLACE EUROPE. I'm Juliet Mann here in Paris, as France gets down to business under its first socialist president since 1995.
MANN: Let's go.
The public backlash against austerity came to a head last weekend as voters here in France and in Greece ousted their government. Francois Hollande faces a rough ride ahead with his European counterparts, as he attempts to steer the French economy out of trouble. Will this be the road to ruin or a recipe for recovery?
MANN (voice-over): Coming up, I get the view from the top from the boss of the French building materials group, Lafarge, and hard times call for drastic measures. Business is brisk down at the Paris pawnbrokers'.
MANN: Francois Hollande has declared that austerity can no longer be the only option. His plans to tax and spend include increasing the minimum wage, hiring 60,000 more teachers, reducing the age of retirement, raising taxes and renegotiating the E.U. fiscal pact championed by his predecessor and German chancellor, Angela Merkel.
So what will the new regime mean for companies trying to build a foundation for the future prosperity of France?
MANN (voice-over): The French building materials supplier, Lafarge, is the world's second largest cement manufacturer. The company started in the 1830s as a limestone mining company and supplied materials for the construction of the Suez Canal. Today the company employs over 75,000 people across 64 countries, producing concrete, aggregate, cement and plasterboard for the construction industry.
BRUNO LAFONT, CEO & CHAIRMAN, LAFARGE: Well, it's a challenge time, because as you know, the economic situation in developed countries is not so beautiful, especially in our sector, which is the construction business. Everywhere in the developed world, the construction has come down with the financial crisis at the same time.
So we developed a lot in the emerging markets. So we are quite resilient. But clearly it is a challenging time for the company and we need to transform a lot of things, which we are doing.
MANN: When you consider that the construction industry has been so hard-hit in the downturn, how do your results suggest that maybe we've hit the bottom and that there are signs now of economic recovery?
LAFONT: So what we see is that the recovery in developed countries will be slow, that emerging markets will continue to be -- to be growing and to be growing well. At the same time, we see some uncertainties continuing. So we had to rely on our own ways to implement actions and to get along with our targets.
Sixty percent of our sales are in emerging countries. And operationally, we are just adjusting our costs. So we are reducing our costs and trying to improve our margins in a difficult situation.
MANN: With your focus on emerging markets, are you giving up on Europe?
LAFONT: No, there are -- you know, for us really there are two directions. The first one is emerging countries, because growth, demography, organization will happen there. But it's also to focus on innovation, because (inaudible) construction, because you know, the developed countries will continue, you know, to lead and to build.
(Inaudible) we have to build more efficient buildings and we have to improve also the esthetics and all the aspects of construction. So and here there is also a growth potential. So we are working on both, but clearly both are necessary at the same time.
MANN: The property boom and bust, particularly in Spain, is rather a symbol of the economic downturn. I know when you've been asked this before, you've said, well, we spread our risks, we're in so many countries. But looking to the future, what's your outlook?
LAFONT: So Spain is a very specific situation. There are not many places where there was an overbuilt situation, you know. Clearly there are some parts of the U.S., clearly Spain, but for example France and the U.K. never overbid. There is still a lot of housing in France and U.K. So the day the economy will restart, housing will restart and we'll restart faster.
MANN: Here in France, there's a new president. He's promised to raise the minimum wage and to increase taxes, notably on big corporations and on big earners like you. How does that make you feel?
LAFONT: I think the new president has a very challenging task because of the economic situation, because of the present challenges. I think what's very important for me is the level of confidence which will -- which he will be able to create in the next 100 or 200 days. And that will have a strong impact on the economy, and that will be important for companies and also for the people in France.
So when Lafarge invested in France, each time it's invested in a new plant, it's for 50 years. So we are not, you know, forecasting which president will be there in five, 10, 15, 25 years. So we have to adapt ourselves to each type of situation.
So we have to look at the potential of the environment. France has a strong potential as a country. And over time, we believe we'll be able to adapt ourselves and to remain very strong and to have a strong business in France.
MANN: Francois Hollande has said that austerity can no longer be the only option. And the rhetoric has shifted. The buzzword is now growth. What can business do to promote growth?
LAFONT: I think business has a very critical task, which is to remain competitive at all time. And competitiveness is -- has to do with cost. We have to manage our cost situation as well as we can to reduce costs everywhere we can. And at the same time to innovate, to beg, to propose the best solutions, the best products and the best future to our customers. So if we work on both, we will be successful anywhere.
MANN: Do you think that Europe can sort out this debt crisis and at the same time maintain the stability of the single currency?
LAFONT: Well, I'm (inaudible) in Europe. I think the euro is one of the clear strengths of Europe.
And if the euro is indicating something very strong is that Europe should become even more Europe (ph), you know, having the same rules, the same policies, the same -- and I think if we do all that, and if we go the directions we are taking, with the golden rules and so on, the euro will not only survive but make Europe even stronger.
We have started to take measures. And need to know the first failure (inaudible) you have taken measures are the most faithful. So we have to go through them.
It is the same in the companies. And I think we have to be patient and we have to really stay for them, because they are better than anything else. Maybe Europe challenges will take us to new opportunities.
(END VIDEO CLIP)
MANN: Bruno Lafont, CEO of Lafarge.
Coming up after the break, I find out how cash-strapped Parisians are keep one lucrative enterprise in the driving seat.
MANN: Welcome back to MARKETPLACE EUROPE in Paris. Here in the French capital, people are turning to this conventional way of improving their cash flow. While many companies are suffering as people rein in their spending, the public pawnbroker is reporting healthy growth.
MANN (voice-over): 9:00 am, and they're lining up to pawn their wares. It's the same story every morning at one of the French capital's most famous institutions, Credit Municipal. Behind these doors, are storage vaults crammed with more than a million objects. Nicole Roche (ph) is hoping to offload her treasures for cash to boost her dwindling retirement fund.
NICOLE ROCHE (PH), PENSIONER (through translator): We're going through a difficult time. My husband and I retired, so there are periods which are sometimes hard, and we need to pay the rent.
MANN (voice-over): Parisians have been coming here for centuries to take out low-cost loans against their possessions to make ends meet. They bring anything from a minimum value of 30 euros as security against a 12- month loan equal to half their object's value.
Tough economic times have seen around a 40 percent more people turning up here in the last five years. Seven hundred people come each day, compared to 550 a year ago.
BERNARD CANDIARD, DIRECTOR-GENERAL, CREDIT MUNICIPAL (through translator): We are quite a good barometer of the economy, and we are slightly ahead of it, because our 30 percent increase in trade between 2007 and 2008 was before the crisis. So the crisis began with us, four months before it happened to the markets.
MANN (voice-over): Credit Municipal was set up in the 17th century as an alternative to moneylenders demanding interest rates of between 100 and 300 percent. Today, clients pay between 4 and 9 percent interest and can extend the loan as long as they wish. The average loan is 1,000 euros.
MATHILDE BELCOUR, VALUATION TELLER (through translator): Unfortunately, the object is not in bronze. So even though it's pleasant and from the `30s, it's worth a lot less, between 100 and 150 euros.
MANN: Nine out of 10 people do redeem the objects they've pawned, although during the downturn, it's taking them twice as long to come up with the money, around about two years. If they can't pay back the interest on their loans, their objects are sold at auction through there (ph).
MANN (voice-over): If anything goes for a profit, the original owner pockets the takings after submission and administrative costs.
Nicole's (ph) fur was rejected, but she has cashed in on the clock.
"It's not what I was hoping," she's saying, "but it's something." And some things at the oldest financial institution in town can do to help down-on-their-luck Parisians through these tough economic times.
(END VIDEO CLIP)
MANN: That's it for MARKETPLACE EUROPE in Paris. Do join us next week. Goodbye.