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QUEST MEANS BUSINESS

Spain Shut Out; Choppy Session for European Markets; G7 Conference Call; Spain's Housing Crash; US Markets Up; Qantas Shares at All-Time Low; Abu Dhabi Airline Etihad Buys Stake in Virgin Australia; Euro, Yen Down Against Dollar; The Queen's Speech

Aired June 5, 2012 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, HOST: Shut out. Spain says the door to the debt market has been slammed in its face.

A hopping big profit warning. Qantas sounds the alarm.

And the Diamond Jubilee has sparkled. Almost time now for the gold. London's mayor looks to the Olympics.

I'm Richard Quest. I mean business.

Good evening. As cries for help go, it's a dramatic one. Spain's treasury minister says his country is now being shut out of the international debt market and that, of course, has dramatic ramifications as Spain has to consider borrowing more money, not only because their country is in recession, but also if it has to pay for the bailing out of its banks.

Join me at the -- in the library, and you'll see exactly what's been happening. Cristobal Montoro says in a radio interview the risk premium that Spain doesn't have the market door open. In other words, it can't afford to borrow private money at the rates the market is demanding.

Now, you'll know that ten-year bonds is at 6.3 percent. So, what Spain is considering is some form of bailout, as long as it's not called a bailout, looking for ECB funding to pump money directly into the Spanish banks.

Interestingly, this is exactly what the market has been forecasting for at least the last six months, that would have to have central funds, either from the ECB, ECIMF to help bailout or at least fund the banks.

The G7 finance ministers have had a telephone conference call. Now, details are thin on the ground. There's certainly been no new measures announced. Everyone's basically saying they will monitor the situation ahead of the G20 in Mexico, that's in the middle of June.

We'll talk to Jim Boulden just about that in one second, may ask the question, Jim, why did they bother? What did they get out of it? Be prepared for that one.

The European stock markets, two are up, two are down. If you look at Athens, the downs beat the ups. In other words, banking shares were very severely mixed across Germany, Spain. Spanish investors acting as though they believe that help is imminent in Paris. Banking shares rose, SocGen was up four percent, Credit Agricole up three percent.

In Athens, it was very much the other way, and this is the sort of story that has been happening, and these are the factors that really did weigh very hard on the markets today.

So, that meeting that took place, we've given him long enough to think about it. I suppose the only good part about the G7 having a telephone conference call is that they didn't waste money on airline tickets.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: By meeting together somewhere --

QUEST: Right.

BOULDEN: -- like the way the European Union does every other week.

QUEST: Absolutely --

(LAUGHTER)

QUEST: They saved the money on that.

BOULDEN: Seriously, we don't know what they talked about, but they called it an emergency meeting, and all we got was the Canadians saying that they talked about progress towards financial and fiscal union in Europe, so Europe obviously being the focus.

We do know that the US and Spain -- sorry, the US and Canada have been trying to make it very clear to their European counterparts they're not pleased at all that this drags on and on and on, especially when you have the US economy not doing as well as expected and worries about the Chinese economy. So, yes --

QUEST: What was the point of it?

BOULDEN: Well, I think -- OK.

QUEST: All right. Bearing in mind -- bearing in mind, amongst the G7, the UK, Germany, France, and Italy -- so, four members are EU countries already. On that call, you've got Japan, Spain -- I'm sorry, Japan, US, and Canada.

BOULDEN: Yes.

QUEST: And then, you also have got -- I presume the EU took part --

BOULDEN: And some central bankers, as well.

QUEST: Yes.

BOULDEN: But the Japanese gave us a bit more when they said in a press conference that they expect the European side to respond speedily. So, that's the word, "speedily." But again, that's just speak, isn't it?

We had this happen toward the end of last year, and then we saw massive intervention by central banks. We saw massive liquidity put into the system by the ECB, as well. Wouldn't be surprised if they talked about something like that ahead of the G20.

We do have the European Central Bank meeting and press conference on tomorrow, Wednesday, instead of Thursday, which is a holiday. So, everyone will be watching to see what Mr. Draghi has to say about this conference call and what he has to say about Spain.

QUEST: On at least two occasions last year before major meetings, the US told the Europeans to get their act together. They were quite blunt about that. Tim Geithner was blunt about it --

BOULDEN: Yes.

QUEST: President Obama was blunt about it. More than one -- on this very program, the Canadian finance minister said it, the Australian treasurer has said it.

BOULDEN: Yes. Tim Geithner flew all the way to Poland to meet with them, so that time he did spend money to say how serious they see this. Because the US has got its own problems, but what they don't want to see is the world dragged down because of what's happening specifically in Spain.

Spain's very interesting. They're saying, "We need the money," as you said, without calling it a bailout. "We need a direct -- injection of maybe 40 billion euros into our banks to keep them afloat -- "

QUEST: Right.

BOULDEN: -- because the --

QUEST: May -- I'm going to take this.

BOULDEN: OK.

QUEST: Maybe I'm just frustrated and sort of a bit irritable because I've spent so long in the rain over the last 48 hours with the Jubilee, but we have known about this Spanish problem --

BOULDEN: Oh, yes.

QUEST: -- for months.

BOULDEN: Yes.

QUEST: We have known that there was going to need to be a bailout problem four months, Jim.

BOULDEN: Yes. And that's what's annoying me about the whole Greek issue, as you know. Too much time has been focused on Greece, very small economy, another election coming along, and everyone's sort of forgot about Spain for a very long time. This -- this has not been solved at all. At all.

QUEST: G20 is in --

BOULDEN: In Mexico.

QUEST: Mexico? G8 is -- we've actually had G8.

BOULDEN: Yes. And then we've got the European leaders at the end of the month in Brussels, where they're supposed to come together this grand idea --

QUEST: Right.

BOULDEN: -- of putting the banks -- control of the European banks into one pocket.

(QUEST RINGS BELL)

QUEST: I'm calling time on that. Thank you, Jim. Keep watching. Just don't come back until you've got something to say.

(LAUGHTER)

QUEST: The key problem for Spanish banks -- and it is a different problem to, say, the Greek situation or, indeed, the UK or any of the others -- so many of their borrowers in the past decade use the money to build or buy homes.

This is a classic case in Spain of a housing crisis. A frightening number of borrowers can't pay back the money. The global financial crisis put an end to Spain's ten-year housing boom. There is an extraordinary amount of property on the market. Even with rock-bottom prices, it's a tough sale.

Our correspondent Al Goodman, who told us last week of the deals he'd been offered, now explains competition is fierce.

(BEGIN VIDEOTAPE)

AL GOODMAN, CNN MADRID BUREAU CHIEF (voice-over): Eduardo Bustamante counts himself among the lucky real estate agents in Spain's economic crisis. He says he's got a slow but steady stream of potential buyers for these new homes, although his company won't allow us to film them.

He's been in the business 20 years, a business that took a radical turn after the decade-long real estate boom went bust, leaving hundreds of thousands of unsold new homes like this one.

EDUARDO BUSTAMANTE, REAL ESTATE AGENT (through translator): Before, selling a home was simple because clients found you. They didn't worry too much about the price, and almost everything got sold. Not now. Clients aren't willing to pay the old prices, and many have financing problems.

GOODMAN: This building opened in 2008 at the end of the boom, near one of Madrid's most exclusive neighborhoods. It has 60 homes.

GOODMAN (on camera): It took four years to sell half of the homes in this building, about 30. But now, in just a few months, this new sales force is close to selling four more.

GOODMAN (voice-over): The main reason business is up? The prices have dropped sharply. This two-story attic condominium costs half a million dollars, about half the old price.

But realtors complain that banks are giving preferential financing to new homes offered by the banks themselves. Bad real estate loans are dragging down the balance sheets of Spanish banks.

CARLOS ARENAS, SEGI REALTORS ASSOCIATION (through translator): The banks are competing with us. They are taking advantage of our clients, who decided to buy. They tried to get him to change his mind and buy a different home, but with financing.

GOODMAN: Banco Popular, one of the major banks offering steep discounts on its stock of homes, declined to comment for this story, as did Ibercaja bank. But the push to sell the glut of new homes is clearly evident.

This housing fair is in the parking lot of a major Madrid shopping center. Here, you can even get a brand new car for free if you would just buy a new home.

Al Goodman, CNN, Madrid.

(END VIDEOTAPE)

QUEST: Now, the markets in New York --

(RINGS BELL)

QUEST: -- we're watching closely. The fact it is up 23 in these difficult times we can take to being to the good because in these troubled times, any gains on the US market, which is having its own problems, is perhaps to be welcomed if you're long, a gain of a fifth of one percent.

In a moment, it is the flying kangaroo of Australia, although it seems to be in deep trouble. Qantas shares are trading at an all-time low, in a moment.

(COMMERCIAL BREAK)

QUEST: Some people call Qantas Airways the flying kangaroo. Today, it's not flying so high after a whopping -- hopping, you might say -- big profit warning. The Australian airline said profits have collapsed in the past few months, and it's blaming a rise in fuel costs, weak ticket sales, and disruption from series of strikes.

But also, we can't ignore the now ferocious competition that Qantas faces on its international routes and at home. Qantas shares fell to an all-time low in Sydney. Channel Ten's Alan Murrell looks at an airline that, frankly, has lost its bounce.

(BEGIN VIDEOTAPE)

ALAN MURRELL, AUSTRALIA CHANNEL TEN CORRESPONDENT (voice-over): Qantas shocked the market with the size of the forecast profit slumps. Exchange rates, financial tensions in Europe, and operating costs taking a big toll on the airline's bottom line.

DAVID HALLIDAY, MACQUARIE PRIVATE WEALTH: A big part of the profit downgrade we saw was from the enormous fuel bill, $450 million worth of fuel last year, that's a hell of a lot of fuel.

MURRELL: Underlying profit last year, more than half a billion, will dive by up to 91 percent to as little as 50 million.

UNIDENTIFIED MALE: Qantas is really in a perfect storm right now. When people are concerned about the economic future, they don't travel.

MURRELL (on camera): It's the airline's struggling overseas operations that are worst affected. The loss of the international business expected to more than double this year.

MURRELL (voice-over): That wiped out strong results from the core domestic operation. For passengers, the bottom line is the effect on them.

UNIDENTIFIED FEMALE: If the prices go up, well, we may be looking around for some cheaper way.

UNIDENTIFIED FEMALE: As long as it's not passed onto us, I suppose.

UNIDENTIFIED FEMALE: Yes, well, one would have to wonder where the customer service would go in that.

MURRELL: The results could add to arguments allowing overseas airline Emirates to take a stake in Qantas. Middle East carrier Etihad has bought four percent of Virgin Australia, ammunition Qantas could use for an easing of foreign ownership restrictions.

NICK XENOPHON, INDEPENENT SENATOR: This is a case of the foreign investment review board being asleep at the joystick.

MURRELL: An eventful day for Australian aviation: Singapore's new low-cost carrier, Scoot, making its maiden flight, albeit two hours late.

Alan Murrell, Ten News.

(END VIDEOTAPE)

QUEST: That report made clear, Qantas has problems of competition, particularly from airlines like Etihad. The market is growing crowded with new, deep-pocket rivals from the UAE. It's hit the international passenger traffic quite badly.

Also, now, of course, it's getting worse for Qantas as Etihad makes inroads into the domestic services, as that report made clear, with its four percent stake in Virgin Australia. It cost over $35 million. CNN's John Defterios spoke to Etihad's chief executive, James Hogan, and asked him why he chose to invest in Virgin Australia, what it gave his airline.

(BEGIN VIDEOTAPE)

JAMES HOGAN, CEO, ETIHAD AIRWAYS: Qantas decided they didn't wish to take the program that far, due to their relationship with British Airways, and that's fine, that was their business decision.

So, we decided in 2010 to embrace Virgin Australia. They have a very strong domestic network in Australia and New Zealand. They also agreed to fly to Abu Dhabi, which enabled us to improve our services between Sydney and Abu Dhabi and Abu Dhabi and Sydney, to take it from 11 to 14, and that's been hugely successful for both airlines.

JOHN DEFTERIOS, CNN INTERNATIONAL CORRESPONDENT: In hindsight, then, this was a blessing that you didn't go deeper with Qantas, and they're hitting a wall at this juncture.

HOGAN: As we're seeing, many of the legacy carriers, whether they be in Europe or Australia, are facing tough times. When we seek partners, we're looking for that same ability to move fast, integrate. And part of our ethos is all about customer service and have that can-do attitude in building propositions for our customer.

DEFTERIOS: It's interesting the stakes that you're taking recently with Air Lingus, and now with Virgin Australia. Is it a dating period that allows you to kind of grow from that sort of base, where you boost your equity over time if there's the right DNA?

HOGAN: So for our customer, we're stretching the network. We're giving greater choice. And when you look at the next generation in digital strategy, where people can build their own itineraries, those co-chair flows, those equity flows, strengthen, in our opinion, our proposition to the consumer, whether they be business or leisure.

DEFTERIOS: You don't see yourself becoming a majority holder of any of these carriers over time, a better than 50 percent stakeholder?

HOGAN: No, not at all. What we're looking at is the network, the management, cost synergies. We see these as key drivers. We don't want to go into owning the airline and managing the business's day-to-day. We won't enter into the partnership unless we consider it's a sound business.

DEFTERIOS: You're quite proud of the fact that Etihad can forge new ground and build roots that build business over the future. But we had the scare with the militias in Tripoli Airport after you've gone in. You didn't have a plane on the ground. Does it alter your thinking about Tripoli now and the security measures taken on the ground?

HOGAN: There has been an issue over the last 24 hours. We have short-term suspended our services, we're being assured by the authorities the appropriate controls will be in place in the coming 24, 48 hours. If we're satisfied, we'll reenter the market, but we'll never place our aircraft, our passengers, and our crew into a situation that we believe is unsafe. We'll do the appropriate due diligence.

DEFTERIOS: But you don't feel like it was premature to go into Tripoli, then?

HOGAN: Not at all. And -- Tripoli's been hugely successful. The county's rebuilding, has strong traffic, and there's also a strong cargo traffic.

DEFTERIOS: Let me follow up. What would prompt you to suspend it longer than 24 hours of service, and what are you hearing?

HOGAN: What we're hearing at the moment is that the government had the situation in hand, and we just want to be assured that whether it's customs, police, fire services, that the appropriate level of support, as you would expect at any airport in the world, is in place.

(COMMERCIAL BREAK)

QUEST: Chief executive of Etihad, that's James Hogan. Now, the Currency Conundrum.

(RINGS BELL)

QUEST: What year did Britain's last coin denominated in shillings cease to be legal tender? It was a two-shilling coin called a florin or two-bob bit. When was it withdrawn, 93, 82, or 1971? The answer later in the program. I think this might be a bit of a trick question.

No tricks on the markets today. The euro's falling sharply against the US dollar. It's worth under 1.245, nearly a whole cent. The yen's down, as well. Japan's finance minister said the G7 would cooperate. Those are the rates, this is the break.

(COMMERCIAL BREAK)

QUEST: The queen says she has been humbled by the public enthusiasm for the events marking the Diamond Jubilee. You will have seen that earlier. The queen wrapped up a long weekend of celebrations by giving a televised speech of thanks. She said that last three days have been an occasion that wouldn't be forgotten for a long time.

(BEGIN VIDEO CLIP)

HRM QUEEN ELIZABETH II, BRITAIN: It has touched me deeply to see so many thousands of families, neighbors, and friends celebrating together in such a happy atmosphere. I hope that memories of all this year's happy events will brighten our lives for many years to come.

I will continue to treasure and draw inspiration from the countless kindnesses shown to me in this country and throughout the commonwealth. Thank you all.

(END VIDEO CLIP)

QUEST: Today, the grand finale of the extravaganza. Some of the highlights, the glittering state procession through the center of London, that fly past by aircraft of the Royal Air Force vintage planes and new ones.

(BEGIN VIDEO CLIP)

(CROWD CHEERING)

(JET ENGINES)

(END VIDEO CLIP)

QUEST: Can't beat a bit of that. Max Foster is with me, now, outside Buckingham Palace. It's wet, the crowds have gone. I wouldn't be surprised if the queen is already on her way back, if not already at Windsor, Max.

MAX FOSTER, CNN ROYAL CORRESPONDENT: Let me turn around and look at the flag. The flag is still up, so it looks like she's still in. It was a spectacular day, wasn't it? And she went into this with approval ratings of over 80 percent, and I'm sure she's thinking to herself she's done even better, now.

It was a spectacular performance today, starting off with that thanksgiving service in St. Paul's Cathedral. She's head of the Church of England, supreme governor of the Church of England. Now, I think she got - - I think at that point, she fancied a very solemn occasion, and she's taken that very seriously.

And then going into that carriage procession, Richard, which of course you saw go past you, and the crowds up your end of the Mall were enormous, weren't they?

QUEST: OK. Yes, they were. Now, Max, let's put this into some perspective. The queen, the royal family in the UK, is not in jeopardy at all, but I want to know from you what over the past four days, as our royal correspondent, was the most significant moment?

FOSTER: The River Pageant was something that people thought wouldn't work, and it did go fantastically well, and she stood up -- and she stood up for all those hours in that wind and cold. I think people appreciated that. Some concern that it might have affected Prince Philip's hospitalization, I think that's probably untrue.

But then, going into the concert, a lot of sympathy for the queen as she goes into that concert and a lot of the headlines in the newspapers had the same one, "The show must go on." So, the focus being on her.

And then coming here, seeing those crowds in front of her --

QUEST: Ah!

FOSTER: -- I think generally the feeling over the weekend was this --

QUEST: Max!

FOSTER: -- this respect for a figure.

QUEST: Max! Max! Off the fence, off the fence, please. What for you was the high point of the Jubilee?

FOSTER: The high point is always when you have that crowd coming down the Mall, I think. And confirmation, for the queen, probably, that she's got those big crowds still coming in.

And that -- is that sort of calm walk down the Mall, that tremendous crowds coming in, coming in to see something that they know is going to happen. She's going to come out on the balcony, she's going to go back in, and there's going to be a fly past.

But I think that's always the buzz. I think always the most interesting thing about those moments is the view that they've probably got going the other way. That's the real story, really, the response of the people.

QUEST: Max Foster, who's done royal work and yeoman work for us at Buckingham Palace. We appreciate it, Max, as always. Be ready for a break and a cup of tea himself.

London's mayor, Boris Johnson, says after the letting of the past few days, he doubts if there are any Britons left who want to ditch the queen and turn the country into a republic. I spoke to Mayor Boris Johnson during the celebrations at Trafalgar Square, where we obviously also had to turn our attention to the London Olympics.

(BEGIN VIDEOTAPE)

QUEST: Mr. Mayor, thank you for this.

BORIS JOHNSON, MAYOR OF LONDON: My pleasure, but we're all really toenails next to imagining the queen. This is -- this event is a massive opportunity, I think, for the people of London to say thank you to her for 60 years of incredible service to this country. And I think it's quite remarkable how united the country has been in getting that over to her.

QUEST: What has been so interesting is the way in which the four days have all been very different and sent very different messages, right the way through to this morning at St. Paul's Cathedral.

JOHNSON: Yes, it was a great service this morning at St. Paul's. I think the concert last night was fantastic. But the real standout thing for me was that incredible flotilla, that sort of jolly version of (INAUDIBLE) that we put on. A real --

QUEST: I stood there for four hours!

JOHNSON: Essentially balmy British event. But I think it was successful, never mind the rain. I think it was a great, great success.

QUEST: And as for the queen, here she is, her home is in London, London is where it's based, all over the country and the commonwealth, and the city has come together spectacularly.

JOHNSON: Yes. Yes, if the queen is the star, London is the -- the number two player in this whole thing. London has been -- has put on, I think, a fantastic performance. Everything's worked well. The transport system performed very well, and that's a good omen for the -- not counting my chickens, but it's a good omen for me in the run-up to the Olympic Games.

QUEST: Let's talk about the Olympics briefly, because this is the runner, although important. Now, you've really --

JOHNSON: Well, some people will say this is the important one.

QUEST: All right. But now we are going full helter-skelter to the Olympics.

JOHNSON: We are.

QUEST: Are we ready?

JOHNSON: We are. And as people may know around the world, we put a huge amount of investment into London's transport networks, upgraded the Tube, built new lines. The Stratford site's going to be fantastic. The people will find a wonderful bike scheme when they get here, new buses on the streets. So --

QUEST: If they ever get out of the airport.

JOHNSON: And, as you -- as you know, there's a commitment to making sure that nobody waits more than 45 minutes getting through. There'll be an average wait of 25 minutes to get from the plane through to the other side. So, we're working very hard to make the people's arrival as comfortable as possible.

(END VIDEOTAPE)

QUEST: The mayor of London, Boris Johnson.

In a moment, a four-tier Europe. This is the report, the World Economic Forum lead economist tells us why the block needs to innovate to fill its competitiveness gap, in a moment.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.

A U.S. official says Al Qaeda's second in command has been killed in a U.S. drone strike in Pakistan. He was Abu Yahya al-Libi, a Libyan. The attack apparently took place in the region of North Waziristan near Pakistan's border with Afghan. Al-Libi was said to be Al Qaeda's most senior figure after Ayman al-Zawahiri, who took over after the death of Osama bin Laden.

A Syrian opposition group says at least 38 people have been killed on Tuesday. Video posted online appears to show shelling near the town of Hipa (ph) in the last few hours. U.N. says Syria has finally agreed to humanitarian response plan. No details of the plan were given.

This is the police mug shot of the Canadian man who's suspected of carrying out a most grisly killing. Luka Rocco Magnotta appeared in court in Berlin after police arrested him on Monday at an Internet cafe. Magnotta told the judge he won't find extradition back to Canada, where police there say he's accused of killing and dismembering a Chinese student and videotaping the entire affair.

Nigerian authorities have suspended Dana Air's license to fly after Sunday's deadly plane crash in Lagos. The Dana jet crashed into a building in a crowded part of the city, 153 people on board and at least 10 people on the ground were killed. Officials say the Nigerian airline will be grounded until further notice.

A final day of pageantry for Britain's Queen Elizabeth. The celebrations of her 60 years on the throne drew to a close. The Royal Family had four days of special events and today it was a thanksgiving service, a carriage procession and the famous balcony wave from Buckingham Palace.

(MUSIC PLAYING)

QUEST: If you read this report, it's called "Europe 2020 Competitiveness Report," for it shows that the weaker part of the European Union are holding back the rest of the block. It's the verdict of the World Economic Forum, which says Sweden and Finland have the most competitive economies in the E.U. Near the end of the scale, you have Greece, Rumania and Bulgaria.

Jennifer Blanke is the forum's lead economist, and she says we're not looking at a two-speed Europe. It's more like a four-speed one.

(BEGIN VIDEO CLIP)

JENNIFER BLANKE, LEAD ECONOMIST, WORLD ECONOMIC FORUM: If you look at Europe compared to some of the more competitive economies, there's a serious lag, particularly in the area of creating a smart Europe, so innovative Europe.

But in fact we can't just talk about Europe as one group, because what we're seeing is there are almost four different Europes that range from very competitive Europes, such as the Nordics, down to the least competitive, which obviously include countries such as Greece.

QUEST: Isn't that exactly the problem that we currently face in the Eurozone and in the European Union? You have less competitive countries trying to compete in a single market on a level playing field, when they are, if you like, to some extent, disabled by their competitiveness value?

BLANKE: Well, you can actually say that this actually makes it more difficult for them to be able to coexist together in one union. But at the same time, if you look at the United States, one cannot say that the 50 United States are exactly the same. In fact, you'd probably find even greater diversity among the economies of the United States.

So, yes, it's a difficulty, but it can also be a blessing as well, because you're seeing different areas of Europe that can contribute things in terms of innovation, in terms of wage differences and so on and so forth.

QUEST: Providing they take the necessary measures, but as you are aware, since you can't have currency devaluation to effect change, you end up having to have internal economic devaluation, which is exactly what's happening in Spain, in Italy, in Greece and in the periphery.

BLANKE: Absolutely. And I mean, this is very difficult and it's something that Europe is going to be struggling with for a number of years.

But in parallel, although clearly they have to be putting out this fire and figuring out a way to deal with this sort of wage adjustment around the region, they really need to be thinking forward in terms of innovation and those things that will actually bring up the level of those countries that are struggling to the same productivity level as the leaders so that we can have sustainable prosperity everywhere.

QUEST: The idea of thinking of innovation and the new ways of doing things at a time when, frankly, they're just trying to prevent the whole thing from collapsing, collapsing in a heap, it's a bit farfetched.

BLANKE: Well, I mean, I think that that's something that we can say in the short term. And, clearly, again, they do need to sort of deal with this issue quite quickly. But it's very dangerous to think so short- termist.

One of the points of our reporting, all the work that the World Economic Forum does on competitive is -- cut competitiveness is to think longer term and really think into the future about those things that will set countries on a sustainable level of prosperity.

And if they don't deal with the innovation issue, if they don't deal with higher levels of education, if they don't deal with R&D and things of this nature, then forget it. I mean, really, it's something that Europe needs to take seriously and think about over the longer term.

QUEST: Final question: do you think (inaudible) of this year at this time next year, this time two years' time, all the members of the Eurozone will still be there?

BLANKE: That's a very good question. I think that that's a political question more than anything. I'm hoping that, over the next couple of months, the sorts of issues are dealt with that will allow this to be the case. But regardless, these issues of competitiveness will be important. And I think we're still going to see a European Union of 27 or 28 in one year from now.

(END VIDEO CLIP)

QUEST: You're watching QUEST MEANS BUSINESS. In a moment, catching online in Africa, Google says there's a long way to go to connect a continent dealing with famine, drought and the Arab Spring. That's next.

(MUSIC PLAYING)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

QUEST (voice-over): The answer to today's "Currency Conundrum" -- earlier we asked in what year was the last shilling coined (inaudible) (inaudible) two shillings taken out of circulation. That was a trick question, because you might have gone for C, thinking we were talking about decimalization, but you'd be wrong.

The answer was A, the (inaudible) was used interchangeably with the 10-pence piece until 1993. It didn't matter you mixed them up. They were the same size, same shape and worth the same amount.

(END VIDEO CLIP)

QUEST: I can honestly tell you now that 10 pence in this country, as anybody of you knows visited here, I can't think of what you could actually buy for 10 pence anymore. Cost you three of them, 30 pence, to go and use the public convenience in a railway station. What could you buy for 10 pence? I'm sure somebody will tell me what 10 pence will buy.

Now when we talk about money, we're not exactly talking about small change for the company the size of Google. Its latest takeover, frankly, no matter how much it spent won't leave it short of money. It's buying Meebo -- I think I've pronounced that right -- a firm whose tools help websites tie their content to social networks.

It's handy for Google, which has its own Facebook wannabe called Google Plus. In a separate push for growth, the website company's expanding in Africa. Google's Ory Okollah told Robyn Curnow connectivity's growing and in some parts of the continent it is proving the very connectivity, the very act of Google has proven to be the catalyst necessary for change.

(BEGIN VIDEO CLIP)

ORY OKOLLAH, POLICY MANAGER FOR Africa, Google: It's no coincidence that the countries that had the Arab Spring -- Egypt, Tunisia in particular, those were at 30 percent connectivity. So we think that's where things start to happen as far as an ecosystem around Internet and around technology.

You're not talking just about access to the Internet, talking about citizens connecting to government. You're talking about people connecting to each other. You're talking about businesses starting to be able to grow online and build their businesses online. I think, yes, that is a tipping point.

ROBYN CURNOW, CNN HOST: But in many parts of Africa, societies are still very closed. Getting online is not as easy as many people think.

OKOLLAH: There are spots that do -- that remain closed. I think research support -- highlighted (inaudible), highlighted places like (inaudible), places like Ethiopia, places like Sudan, where there is even (inaudible) still relatively closed.

But by and large, if you look at our transparency reports, which record the number of requests that we as Google receive to take down information (inaudible) websites, Africa still has (inaudible) feature there. What are you seeing, though, is activity on the mobile side and what we are calling just-in-time blocking.

So where it's open, but if there is a crisis or if, for instance, in Mozambique, where there are riots around food and in Swaziland and (inaudible) where they've been protecting against the government, where they'll block Facebook for that particular time, and then sort of open it up once the threat of the marches are over, the political temperature's cooled down.

So relatively I'd say it's open but there is still a concern around this sort of just-in-time blocking of SMSs and websites and so on.

CURNOW: So in Nigeria, in Nairobi, in Addis, in Egypt, in Johannesburg, what do people Google?

OKOLLAH: Oh, it's what everybody else does, ironically. It's entertainment. There's usually tops sports, music, porn and then news.

CURNOW: Google Maps, very powerful tool. Where have you mapped? Or where haven't you mapped?

OKOLLAH: I think we have attempted to map pretty much everywhere. We have not had sort of in-person activities in all the countries. But as much as possible we do try and cover everywhere. The question is sort of now we're at a quality stage, where qualities in some countries, a bit better than others.

We recently (inaudible) South Sudan that the newest African country and we did that through the help of the diaspora in D.C. and what sort of government and also a local sort of university students, who chose a really sort of amazing opportunity.

And it was funny, because once they celebrated their independence, you know, having a Google Map was almost the indicator of sort of independence, and I was getting all these questions, you know, when is -- when are you going to recognize South Sudan, and it's funny how Google Maps has become sort of an indication that you are -- that you exist, you know.

(END VIDEO CLIP)

QUEST: That's Google. And coming up next, it's been a very busy few days with the Jubilee. And you will forgive us, forgive me if we do take a moment or two before we finish just to remember the very best (inaudible).

(COMMERCIAL BREAK)

QUEST: There's a very rare astronomical event happening today, as seen from here on Earth, the planet Venus will make a seven-hour transit in front of the sun. Right. Now if you were with us last night, you will know that we finally -- or maybe not -- got to the point at what time this was going to take place.

Jennifer Delgado is with us now. Did we ever find --

(CROSSTALK)

QUEST: Well, I couldn't work out -- I read -- it was my fault. It was my fault.

JENNIFER DELGADO, AMS METEOROLOGIST: No, no, no. I take 80 percent of the blame. Hey, this show's about numbers. (Inaudible) 80 percent.

QUEST: Let me beat myself up first, then I'll beat you up.

DELGADO: OK.

QUEST: This is -- OK, look, I couldn't work out whether you were talking about --

DELGADO: I know.

QUEST: -- 0300 Pacific or 1500 Pacific.

DELGADO: Yes. It's actually 2209 GMT. That is the time that the transit is going to begin. So that means sunrise for you tomorrow in Europe, but Richard, doesn't matter if you're going to be looking at your watch, because you're going to see a lot of clouds around through parts of England. I mean, we're talking about rain around there.

But let's talk a little bit more about this transit. This is Venus. Now on the graphic here, you can kind of see the little black dot? Well, that indicates actually Venus passing in front of the sun. Well, this is a very rare event. Nobody alive has seen this and nobody alive in 2117, they're not going to see that as well, because this is a once-in-a-lifetime thing as I said. It last happened back in 2004.

Well, Venus moves in front of the sun as a pair. So it was eight years ago and now we're going to see this happen again, as I said. And roughly about four hours, at 2209 GMT. Now this transit lasts seven hours, so that means a lot of people are going to be able to see this.

But don't go out there with your naked eyes. Hopefully, Richard, you have a pair of welder glasses or a telescope or something out there so you can protect your eyes. Now the best place to see this is actually going to be in the Pacific, we're talking for areas across parts of Asia. Now I'm going to step out of the way for you.

We're going to talk about this graphic from east unto west. So parts of Asia, they're going to see the entire transit, as I said, for the seven hours. Now for parts of the Middle East, as well as into Europe, you'll be able to see it from sunrise to end. Now say if you are in western Africa or if you're in eastern parts of South America, you're not going to be able to see this.

But across parts of the U.S., Pacific time, this is the time that I gave you yesterday that really confused Richard, when I said at 3:09. Well, for parts of the U.S., you'll see this from the start as well (inaudible) to sunset. But you really need to know what the weather's going to be like for parts of Europe out there.

And as I show you, a lot of clouds around for France, areas in central Europe as well as for parts of Germany, as well as into Poland. You'll be able to see that. You can see for areas including Italy. Conditions will be a lot better out there. So hopefully it made more sense today. And I didn't confuse you this time. So you need your glasses --

QUEST: Oh, yes, oh, oh, yes you did.

DELGADO: Yes, good. And you know what, those glasses aren't going to work. You need to get some proper welder's glasses --

QUEST: Yes, I was just -- I was just thinking those welder -- those welder glasses that I've got just lying around my kitchen. (Inaudible) --

DELGADO: You left them at home. You need to bring them.

QUEST: All right.

DELGADO: All right. Better informed today. I apologize.

QUEST: Well, that -- all right, (inaudible). Thank you very much.

DELGADO: You're welcome.

QUEST: The Royals have wrapped up four days of celebrations with a service of thanksgiving, a carriage processing and a wave to the crowds from the balcony palace.

From ties to teapots, one image has come to symbolize the occasion more than any other. It is the Great British Union flag, the Union Jack, actually, as it can be called. And this week, as Nina dos Santos found out, it is the darling of the retail sector.

(BEGIN VIDEO CLIP)

NINA DOS SANTOS, CNN HOST (voice-over): Never before in Britain has it seemed so fashionable and financially lucrative to fly the flag.

(MUSIC PLAYING)

DOS SANTOS: These flags flying in one of London's main shopping thoroughfares (inaudible) 500 across the West End to mark London's summer of glory. It's estimated that some 12 million people from across 200 countries will see them during the six weeks that they're up.

DOS SANTOS (voice-over): First created in 1606, the banner was designed to mark the union of Scotland with England and Wales under James I. It's best known by its seafaring name, the Union Jack. And because the flag isn't licensed, anyone can add it to their wares.

NICK GROOM, AUTHOR: It was a trademark for international -- for the British international empire in the 19th century. It has since become, if you like, a design classic and it really does saturate our culture.

DOS SANTOS (voice-over): Once seen as a status (ph) symbol of a bygone era, the Union Jack has something of a checkered past. It's been hijacked by the right wing and become a staple (inaudible). But this year's combination of the Queen's Diamond Jubilee and the London Olympics has rekindled interest in the red, white and blue. And purveyors of patriotic products have already sold out of a number of items.

Supermarket chain Tesco (ph) reckons some 2.8 (inaudible) million flags (inaudible) by the end of the weekend. (Inaudible) also doing a booming (ph) trade.

UNIDENTIFIED MALE: Probably on average about 20 percent are from business from last year.

FIRTH WAINEY, MANAGER, CREST OF LONDON: Aprons, napkins, all sorts of things. I mean, I think the Union Jack has probably outsold just about anything else in the last couple of works. It's been fantastic. It's all good for British business throughout the whole country.

(MUSIC PLAYING)

DOS SANTOS (voice-over): But you don't have to be from the United Kingdom to want a piece of the Union Jack. Britain's flag may have been flown upside down when it joined the European Union, but now its continental cousins wear it the right way up, with pride.

UNIDENTIFIED FEMALE: I like England and these are really cool colors. I love this.

UNIDENTIFIED FEMALE: (Inaudible).

DOS SANTOS (voice-over): Which means that this summer, cool Britannia (inaudible) world.

(END VIDEO CLIP)

(MUSIC PLAYING)

QUEST: Finally, a look back at the day of Queen Elizabeth's -- the last day of the Jubilee (inaudible).

(BEGIN VIDEO CLIP)

(MUSIC PLAYING)

(APPLAUSE)

(MUSIC PLAYING)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

QUEST: Finally, tonight's "Profitable Moment", a poem written by Reg Starkey and performed by Mike Grady (ph), something a bit different.

(BEGIN VIDEO CLIP)

CHARLES, PRINCE OF WALES: Three resounding cheers for Her Majesty, The Queen.

Hip, hip, hooray. Hip, hip, hooray. Hip, hip, hooray.

MIKE GRADY (PH) (voice-over): How best can we celebrate your 60 long years? Your reign is now longer than your own father's age. Surely we need more than the usual three cheers.

Was it fate at the outset, that it started in tears, like your father, King George, you were thrust on the stage. How best can we celebrate your 60 long years? (Inaudible) the monarch meant changing the tears. "Keep calm and keep going," his words were so sage. How best can we celebrate your 60 long years?

Queen Victoria and you are both without peers. Not footnotes in history, you both earned a page. So how best can we celebrate your 60 long years? Surely we need more than the usual three cheers.

(END VIDEO CLIP)

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

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QUEST: The headlines at the top of the hour: a U.S. official says Al Qaeda's second in command has been killed in a U.S. drone strike in northern Pakistan. Abu Yahya al-Libi was said to be Al Qaeda's most senior figure. He took over after the death of Osama bin Laden.

A Syrian opposition group says at least 38 people have been killed Tuesday. Video posted online appears to show shelling near the town of Hipa (ph) in the last few hours. U.N. says Syria has finally agreed to a humanitarian response plan.

This is the police mug shot of the Canadian man suspected of carrying out a grisly killing. Luka Rocco Magnotta appeared in Berlin after police arrested him. Police say they -- he is accused killing and dismembering a Chinese student.

A flight path, a wave to the crowd and the end of four days of celebrations in Britain of Queen Elizabeth's Diamond Jubilee.

You are up to date. Those are the headlines. Now, from New York, "AMANPOUR."

END