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Barclays Recipient of Record Fine; Hollande & Merkel Meet ahead of Summit; Google Announces Tablet

Aired June 27, 2012 - 14:00:00   ET


MAX FOSTER, CNN INTERNATIONAL ANCHOR: Barclays pays a record fine for manipulating rates.

Battle of the Eurobonds, Merkel's defiance leaves her isolated.

And battle of the tablets, Google joins in the race.

I'm Max Foster, this is QUEST MEANS BUSINESS.

Barclays will pay $450 million for misconduct and attempted manipulation. U.S. and U.K. authorities have been looking into the British bank for some time now.

It stands accused of trying to manipulate the London Interbank Offered Rate, or LIBOR, its benchmark for $360 trillion in contracts worldwide. The U.S. Commodity Futures Trading Commission says Barclays's attempted to manipulate LIBOR submissions, sometimes on a daily basis over a four-year period starting in 2005.

The U.K. fine alone is $92.5 million, the largest ever imposed by a British regulator. Barclays will also pay a $200 million penalty levied by the CFTC, and a $160 million payment in exchange for a non-prosecution agreement with the U.S. Justice Department.

Now Barclays's chief executive, Bob Diamond, has publicly apologized. In a statement today he said he was sorry that some people acted in a manner not consistent with Barclays's culture and values.

He also said he and three other executive directors would waive any potential bonus for the year to reflect "our collective responsibility as leaders."

Barclays's share price suggested investors thought it would be worse. Shares in London closed up nearly 2 percent. Brian Caplan is the editor of Banker Magazine. He joins us now live.

We're going to go back to basics, because many in the city don't even fully understand LIBOR, even though they pretend that they do. What, in basic terms, is it?

BRIAN CAPLAN, EDITOR, BANKER MAGAZINE: This is the way that banks set the rates that they lend to each other. OK, so it's by a collection of banks offering the rate that they can borrow at. And then the British Bankers' Association averages that rate out and sets the rate for the market.

Now it might sound a bit technical, but actually it's hugely influential, because it influences all kinds of other interest rates. They're all set in relation to LIBOR. So mortgages, credit cards, corporate loans, derivatives products across the world in 15 currencies in different time zones are all set in relation to LIBOR.

FOSTER: It's essentially a ring-round (ph) effectively, isn't it? What rates are being offered where.

CAPLAN: That's right, yes. So what was happening at Barclays was they were submitting rates that they knew either to be too low or in some cases too high.

FOSTER: So Mr. LIBOR was ringing up Mr. Barclays and saying, what's your rate?

CAPLAN: That's right. And sometimes they were saying it was too low because they didn't want to injure their reputation by telling the market that they couldn't borrow at that low rate.

Sometimes they were setting it too high because one of their traders had a derivatives position that they wanted to protect. So the derivatives people, the traders, were ringing up the people who were submitting the rates to LIBOR, and telling them, you know, can you change it to this amount rather than this amount?

FOSTER: So LIBOR became a bit of a farce, but luckily we didn't know at the time, because if that had been case then all sorts of confidence would been lost in these rates.

CAPLAN: That's right. It's one more way that the market was going sour and getting manipulated in that critical period of the financial crisis when everything was going wrong.

FOSTER: It didn't actually have too much impact, though, did it? Because it didn't sort of bring down a financial system, but it could it done, because the sort of figures we're talking about.

CAPLAN: Yes, but what it does, you see, it affects the faith in the market, right? So the point about it is, I think, is that when we've had some previous blow-ups like we've had, you know, insider trading scandals at UBS and GHARIB: , and we just had this thing with JPMorgan where the proprietary traders got themselves into a mess, that's one institution.

This is the whole market, right? So, I mean, it's very damaging to Barclays to be involved in a manipulation of a market that's absolutely enormous. And quite frankly, this is only the first step. We're going to see other banks involved in this and other regulators.

FOSTER: So has confidence been lost in LIBOR or is it still OK at this point?

CAPLAN: I think the people in the market had already lost confidence, because they were looking at some of these LIBOR submissions and they were saying, well, that's funny, Barclays can't borrow in the market at that rate, this must be wrong, OK?

But they need to get the confidence because, as I said earlier, it's such a crucial measure of interest rates throughout the world.

FOSTER: OK. Well, thank you so much for joining us and explaining that in basic terms, incredible. Thank you very much, indeed.

Well, earlier, I spoke with the chairman the U.K.'s Treasury Select Committee, I began by asking Andrew Tyrie what he made of the record fine handed to Barclays today.


ANDREW TYRIE MP, CHAIRMAN, U.K. TREASURY SELECT COMMITTEE: I think we'll be cross-examining the Financial Services Authority to explain the size of the fine that they've arrived. They clearly think it's very serious. It's a record fine. Frankly, if you read the document, you can see just how shocking some of the behavior was.

I was appalled by it, and a large fine is certainly justified.

FOSTER: The very fact that this was going on does signify a major problem, doesn't it? LIBOR is a crucial element of the international financial system. If it's vulnerable, we're all in trouble, aren't we?

TYRIE: Yes, I think you're absolutely right. And it looks as if the LIBOR market was under-regulated, was not being well-monitored, and that's what made this sort of behavior possible. It also looks as if there was in parts of these banks something systemically wrong that could enable this to take place.

After all, we're talking about activities between banks in order to rig the market. And the whole culture seems to have been exemplified by some of the emails that we've had going to and fro.

Just to read you one. After one bit of rigging of the market, the external trader thanked "trader G" for Barclays's LIBOR submission, that is the rigged submission. And he says: "Dude, I owe you big time. Come over one day after work and I'm opening a bottle of Bollinger."

This is the culture we're talking about here. The trading desks seem to have been out of control. And what we now need, to be reassured of them, is that the regulators have got on top of this, that they're confident this sort of activity isn't taking place, and that Barclays's culture has been cleaned up.

Bob Diamond has given some reassurance today on this. But we'll be expecting him to repeat that and to be cross-examined on it in front of the Treasury Committee shortly.

FOSTER: Although regulation probably was there, wasn't it? Because the fact that we would come up with this fine indicates that, but perhaps the oversight wasn't good enough that it got to this point at which Barclays were rigging things, as you were saying.

So there is a problem with the system. It's also another example here, isn't it, of how the global financial system, all of these banks are in this very complicated system, which many people don't understand it, and is making everyone vulnerable.

TYRIE: This affects ordinary people in a big way. And it's crucial that this sort of activity be rooted out. But there's another good reason it needs rooting out, which is, of course, we need to restore confidence in banks, not just to help the recovery, but also because Britain as a financial center, London as a financial center needs to demonstrate that if you do business here, you're not going to be taken to the cleaners by small groups of corrupt market practitioners.

So there is a lot at stake here in demonstrating that the right things have been done. I think this looks, from what I've seen so far, to be an example of the regulator having got on top of an issue and having investigated it properly.


FOSTER: Well, that's one big corporate story today. This time tomorrow the very future of Europe could be decided in Brussels. And on the even of the E.U. Summit, it seems not everyone is fighting in Angela Merkel's corner. We'll take you to Berlin, next.


FOSTER: On the eve of the most important E.U. Summit of the year, Angela Merkel is meeting Francois Hollande in Paris for the first time. The German chancellor arrived for dinner with the French president around an hour ago. They're preparing for a crucial two-day meeting for E.U. leaders in Brussels.

According to the AFP news agency, Mr. Hollande is calling for deeper economic and monetary union in Europe. Mrs. Merkel is refusing to budge on the question Eurobonds, and other E.U. are refusing to let it go. The chancellor told German parliament that Eurobonds are counterproductive, unconstitutional, wrong. She said tighter European controls on budgets should be the way forward, and that collectively issued debt had already failed.


ANGELA MERKEL, GERMAN CHANCELLOR (through translator): The mistakes of the past cannot be allowed to happen again. To politically force single interest rates by means of Eurobonds, which already have not worked on the markets, would be repeating an old mistake, and not the lesson learned from experience.


FOSTER: Statements like that will not please Mariano Rajoy, the Spanish prime minister says this week's summit has to bring stability to the markets. Mr. Rajoy said Spain could not keep funding itself whilst its borrowing costs are so high. Yields on Spanish 10-year bonds were up again today, 6.92 percent, notching close to the 7 percent danger zone, as it's called.

Italian yields are also up, and Mario Monti says he will keep pushing for the E.U. to bring down borrowing costs. The Italian prime minister says he wants serious commitments out of the summit, and he will stay in Brussels until Sunday if he has to. Mr. Monti has already scored one victory this week. On Tuesday he won a second vote of confidence on his labor reforms in the Italian parliament.

Now the chancellor is looking somewhat isolated as she prepares to head to Brussels, whilst other E.U. leaders want her to do more, some of her colleagues at home want her to do less. Klaus-Peter Willsch is a member of her Christian Democratic Union party, he talked to CNN's Diana Magnay about why Germany shouldn't be obliged to bail out other economies.


KLAUS-PETER WILLSCH, CHRISTIAN DEMOCRATIC UNION: If there is no transfer system, which we did not want to set up, there must be some principles. One principle was no financing of government deficits by the central bank, and the other was no bailout. Each country has to take for its own budget.

And, well, you make contracts -- not only for good weather phases, but also for phases when it doesn't run as well. And we have to stick to this legal framework, because otherwise it won't help anybody. You lower the interest rates, this will nurse the need of structural change-ments (ph) of lowering the deficit. And this will end up with all the debt, all the sovereign debt ending at our tax base in Germany. And then we won't bear it anymore.

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: But this is a very bad weather phase where the Eurozone looks as though it could implode at any moment now. And the structures that we've had to date haven't helped. Mario Monti wants to see a solution on the table before markets open on Monday. What is Germany going to be able to offer him?

WILLSCH: Well, I just can support my -- Chancellor Merkel when she keeps the wallet shut, because there is no use in it. You see, if anybody wants to bring out common bonds, the U.S. or whoever, is invited to make common bonds with Greece or with Italy. I don't know how far this will carry on.

But what we really need is an approach in those countries having large deficits, having debt problems to consolidate. And we will not have them when we will put it along a timeline for one more year, two more years, three more years. Look what we did with Greece, it hasn't helped anything.

MAGNAY: But you're happy for countries like Greece to leave and you're not worried about the implications for the Eurozone?

WILLSCH: No, I don't worry about this. I think that's what we should have done from the first day, and we've -- can start it every day. If a country is not longer able to bear the interest rates, to bear the money they have to afford to -- what, to pay their people, to pay their public servants, to pay out their rent and all that, and they cannot pay back their bonds, they have to tell the creditors we cannot pay any longer, the creditors will come together at a round table and they will discuss a cut and all that.

That like IMF did it in February when hundreds of (INAUDIBLE).

MAGNAY: Right. And that will be that, a "Grexit" as they say.

WILLSCH: Right. I think they have no chance within the euro because the competitiveness of Greece is such low that with such a strong currency like the euro, it's impossible for them to perform well.


FOSTER: And the crisis rumbles on. Fitch has downgraded three banks in Cyprus. The Euro group countries and the IMF say they are ready help with its impending bailout. Cyprus is now the fifth Eurozone country to ask for help.

Matthew Chance explains why it's just the tip of the iceberg as the world waits for this week's summit.


MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): At every turn it seems the Euro crisis is getting worse, spiraling borrowing costs in Italy and Spain, calls from Greece to renegotiate its bailout, Cyprus becoming the fifth country to ask for emergency help.

But the two nations at the heart of Europe, France and Germany, appeared divided on what to do. Not good, as a crucial E.U. Summit meant to solve Europe's gets under way.

(on camera): The core of the dispute is this. President Hollande of France wants to see European solidarity, making common the debt of countries like Greece or Italy or Spain to reduce their interest rates. Only after, he says, would France consider ceding powers to Europe.

For the German chancellor, Angela Merkel knows her taxpayers would have to foot any debt bill. So she wants much closer economic integration first, control over how countries tax and spend before putting any German finances on the line.

(voice-over): Speaking ahead of the summit, Chancellor Merkel again cautioned Europe about depending too heavily on Germany.

MERKEL (through translator): Germany is the economic motor and the stability anchor in Europe. But the strength of Germany is not without limits. We should not overestimate our resources. If we take that to heart, then Germany's strength can work well for Germany and for Europe.

CHANCE: But the instinct in Brussels is for more European integration. And European officials are trying to bridge the Franco-German divide.

A report from the European Council, released ahead of the summit, calls for closer economic and political union. There should be more joint liabilities, it says, and more European-level control of national policies.

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: Standing still is not an option. A big leap forward is now needed. It may not be simple. It will require ambition, vision, and determination to enact far-reaching reforms.

CHANCE: But expectations are low. Analysts say just getting Chancellor Merkel to discuss things like sharing debt or the French to talk about surrendering sovereignty would be a big achievement. Getting them to agree on it in Brussels may be too much to ask.

Matthew Chance, CNN, London.


FOSTER: And now a currency conundrum for you. Panama has no central bank, which of this the country's de facto currency? Is it, A, the Colombian peso? U.S. dollar? The Venezuelan bolivar? We will have the answer for you later in the program.

The euro is heading lower ahead of that summit in -- the E.U. Summit. Comments from leaders today indicate they will be no new ideas for the crisis-hit region. That's the interpretation. In the meantime, traders are continuing to choose safe havens like the yen and the dollar.

The U.S. currency is trading higher against most of the majors today.


FOSTER: Last week it was Microsoft, this week it's Google coming out with its own brand tablet, the Nexus 7 has just been announced at a Google developers conference in San Francisco. It costs $199, half the price of the cheapest iPad, sold directly through Google and will start shipping next month.

The Nexus 7 isn't the first tablet to run Google's Android software, but it is the first to bear the Google brand name. It will have a seven- inch screen and come in at around half the weight of the new iPad.


HUGO BARRA, DIRECTOR OF ANDROID PRODUCT MANAGEMENT, GOOGLE: It's only 340 grams, just about the weight of an average paper book. It fits perfectly in one hand. You can put it in a purse or a bag. It doesn't tip over when you're reading or watching a movie in bed. It just feels right. That's Nexus 7.


FOSTER: Apple is still the dominant force in the tablet computing market. Today a U.S. judge granted the company's request for a ban on a Samsung tablet, which Apple says copies its iPad. Judge Lucy Koh wrote that although Samsung does have a right to compete, it does not have a right to compete unfairly by flooding the market with infringing products.

We're joined now Ilya Kazi, partner at patent lawyers Mathis and Squire. "Pay-tent" or "pah-tent," I never keep up.


FOSTER: "Pah-tent." Just explain what the case was asking, first of all, so we can.

KAZI: Well, in the Apple-Samsung, there has been -- as you're probably aware, there has been lots of battles to and fro, there has been patent in others. The reason judgment was a preliminary injunction on a design case, so that's essentially playing snap (ph) with the look of a tablet.

So Apple have a registration of the appearance of their tablet and they have said that Samsung tablet infringes that design.

FOSTER: So it's just the visual appearance of it at this point, not the fact that you can move it around.

KAZI: Yes, and there have been separate judgments on the technology. And in fact, Samsung won a recent battle in the Netherlands on the technology on a patent -- on a technical patent.

FOSTER: And how long does that patent last? Because that looks like pretty much the standard look of a tablet these days. How long will it control that?

KAZI: Well, there are various issues. Patents last 20 years, from filing designs, last 25 years, but it varies from country to country and the right is from when it was filed. There are other rights as well. But the case, in summary, Samsung was saying that this is a standard design. Apple is saying this is our design. And that's what it comes down to.

FOSTER: Well, Apple came up with it first, I guess, but because it has become generic across the industry, is that the argument that Samsung can now put.

KAZI: Well, no, you can't say it's generic after the event, but they're saying there's nothing particularly distinctive, it's just a flat piece of glass screen. And I think they quoted something from "Star Wars," that some of their (INAUDIBLE) saying, well, these black tablets have been around for a while.

FOSTER: Can Apple then use that in other countries, for example?

KAZI: There's a whole series of parallel litigation going on in different countries. What's at the heart of this is as you're aware, the tablet market is worth $30 billion-odd a year, and anything you can do to steal a little share in any country is worth quite a lot. One percent is worth $300 million.

In the context of that, a skirmish over a little feature is worth having. And that's why we're seeing all this litigation between the two.

FOSTER: And were you impressed Apple won this case? Because it did seem pretty tough, didn't it?

KAZI: This is very preliminary. So there was a preliminary injunction. They lost the first time around. It went to appeal. It came back. It may yet be overturned. It probably will be overturned. But it's just part of the continuing saga. And we won't see the end of this for some considerable time.

FOSTER: Keeps you lot busy.

KAZI: Well, it keeps us entertained.

FOSTER: Ilya Kazi, thank you very much, indeed.

Now after 40 days of silence, the companies which underwrote Facebook's IPO are now allowed to give their views on the company. And many people want to hear them.

Alison at the stock exchange, what are they saying?

ALISON KOSIK, CNN CORRESPONDENT: Yes, and analysts, Max, are publishing their research, and guess what, it's far from gushing. It is kind of surprising given that, you know, coverage from underwriters tends to be positive when the quiet periods ends.

So let's look at some of it. BMO Capital Markets rates the stock to underperform, essentially a sell rating with a $25 price target. An analyst there cites slowing user growth as a primary concern for Facebook's current valuation.

There are also a lot of neutral ratings too, from Barclays, from Citigroup, Credit Suisse, and Bank of America Merrill Lynch. Morgan Stanley, that's, of course, the lead underwriter on the Facebook IPO itself. No surprises here, is pretty bullish, it rates the stock a buy with a $38 price target. What a coincidence there, it's the same price as the IPO.

But it does say that advertising pricing is really the key risk for the company. JPMorgan and Goldman Sachs also say Facebook is a buy with price targets above $40. And right now when you look at shares, Facebook shares are down about 3 percent, trading at $32.06, still below that IPO price of $38.

But it has climbed back from the low of around $25 -- Max.

FOSTER: Yes, I remember that. Alison, thank you very much, indeed, for that.

Now, next, if you like it, you've got to put a ring on it. I knew I could pull that one off. London is getting ready for its biggest celebration ever, the Olympics are coming up fast and so are the decorations.


FOSTER: Welcome back. I'm Max Foster. This is CNN. And here are the latest headlines today from CNN.

A small gesture takes on greater meaning in Northern Ireland. Britain's Queen Elizabeth II shook the hand of a former IRA commander today, Martin McGuinness is now deputy first minister for Northern Ireland. And he has played an instrumental role in the peace process.

Syria's information minister says, quoting now, "a massacre" at a pro- government TV station near Damascus will not go unpunished. State media say terrorists planted bombs in the headquarters of the Al Ekhbariya network, killing seven people. An opposition group says 35 civilians have been killed nationwide today alone.

Iraqi authorities say bombings on the outskirts of Baghdad have claimed 11 more lives. The first blast exploded near home southeast of the city, and when neighbors rushed to help another bomb went off. Nearly 180 people have been killed in attacks this month.

Wind gusts and hot temperatures are fueling wildfires in the western United States. Fire crews are fighting seven different blazes in the state of Colorado, and thunderstorms are expected to complicate things today in Colorado Springs, where one fire doubled in size just overnight.

And Google has unveiled its brand new branded tablet. The Nexus 7 will start shipping next month for $199. That's less than half the price of the cheapest iPad. They will run a brand new version of Google's Android software called Jelly Bean.


FOSTER: The Summer Olympic Games begins in exactly one month's time right here in London. And to mark the occasion, the iconic Olympic rings have been mounted onto historic Tower Bridge, which is where we find Becky.

But someone's stolen them.

BECKY ANDERSON, CNN HOST: Oh, no, no one's stolen them. Don't worry. Your delight and delectation, we've just organized the Tower Bridge to go up, so you can see what's going on. And as the bridge goes up -- we haven't really, it's just what happens at half-past 7:00 here in London.

And as you can see, underneath the bridge, because it's going up at the moment, the rings have just been raised. But they'll be back down shortly. They are there and have been lowered from Tower Bridge today at an opening ceremony with the Lord Mayor of London -- sorry, not the Lord Mayor -- the Mayor of London, Boris Johnson, who described their symbolism, Max, this way.


BORIS JOHNSON, MAYOR OF LONDON: To some people, I think Baron Pierre de Coubertin said that they symbolized the five Olympic virtues of athleticism, competition, sportsmanship, poverty, chastity -- I can't remember what they were, really, but they're there. It was that kind of thing. But for me, what they stand for is the hoops we've had to go through to get London ready.


ANDERSON: And the way he described those hoops is simply this way: they've got five things that they had to get ready with just a month to go. He said we are nearly there, venues, security, transport, the look and feel of the city and the readiness, of course, for the athletes, 101/2 thousand of them will be competing at the Olympics, Max, 41/2 thousand at the Paralympics, athletes from 204 countries.

This cost about $9.6 billion, but London say that it's going to be worth it. They say they'll make their money back. They say at least they've sold 9 million tickets, so there a little birdie tells me there are still quite a lot available for the football at Wembley. It's interesting, this event which London hopes will be the best sporting event on the planet because there are stadia which are fixed.

And there are many, many stadia around London and its outskirts which are actually temporary stadiums, like Wembley, where you'll see the -- where you'll see the football and then horse cart parade, for example, where you will see the beach volleyball, much in demand, those tickets as you would imagine. Thirty days to go, Max. We are in the home stretch.

FOSTER: And I've got beach volleyball tickets. So I'm a winner already, Becky. I know that you've spent a lot of -- you've spent a lot of the time meeting the athletes involved, and what always comes out at the Olympics is lots of really interesting stories, not necessarily around the favorites, but the interesting stories behind the athletes going into the Olympics. And what sort of stories have really stood out to you this time `round?

ANDERSON: Yes, I mean, there's a British athlete who's competing in the archery competition for the sixth time. You know, there are some really inspiring stories, particularly in the Paralympics, for example. I was with one of the marathon athletes, who competes in a wheelchair. And she'd just done the London Marathon here. She's also hoping to compete in the 5,000- and the 10,000-meters.

The enthusiasm, as you know, is absolutely unbounded. And the athletes, the 101/2 thousand athletes who pitch up for the start (inaudible), which is of course the Olympic event, coming from, as I say, 204 countries around the world. And they'll all be coming in in the next 10 days. And they will be getting together and training at locations all around the country.

And that's been a big dispute here, the fact that these Olympics are supposed to be in the U.K., but much of what is going on is here in London. So many of the training facilities being used for these athletes are all around the country. So at least everybody can get a piece of the action, as it were. But, yes, it's an inspiring stories, 30 days to go. London says it's ready.

FOSTER: Becky, thank you very much indeed. Looking forward to your coverage over the next month or so.

Now even for a city the size of London, the scale of this event is quite simply massive, 800,000 people are going to take public transport to the Games on its busiest day. And almost a quarter of a million people will be taken by train to the Olympic Park, it's estimated, every hour. All in all, 1 million people will visit the Olympic Stadium itself. And local businesses are already planning ways to work around all of this extra traffic. Jim Boulden (inaudible).



JIM BOULDEN, CNN CORRESPONDENT (voice-over): This is not a normal end of the day for Nick Tunley. He's been asked by his employer, the consultancy firm, Deloitte, to change from suit to bike gear and pedal to and from work for one day.

With safety gear on and lights at the ready, Nick leaves Deloitte's central London headquarters for home, 20 miles away.

While Nick is an avid rider, he's taking this journey as part of Deloitte's Olympic stress test. Like many firms, it wants to make sure workers can get in, even if transport grinds to a halt during the Games, as many fear it will. Nick is also part of Deloitte's team helping to get more of its clients ready for the Games.

NICK TUNLEY, DELOITTE: I think a lot of commuters are probably not going to wake up to this until actually Games time hits. As commuters all know, you have to wait for perhaps the next tube, because you just can't get on. At another 3 million journeys per day onto the tube network in Games time, it's only going to get worse.

BOULDEN (voice-over): Companies are told to take a variety of steps to prepare. Some have set up satellite offices outside London.

Others are allowing work from home or more flexible working hours. Some officials even say employees might want to stay in the pub a few hours after each day and leave when trains will be less busy. But at data center Interxion, where many critical financial firms back up their data, employees on bikes is not the option.

BOULDEN: For some companies like this data center, they can't risk that mission-critical staff would be late even one day during the Olympics. So enter Podtime.

BOULDEN (voice-over): Workers here can sleep on the job if need be. Interxion has rented a sleeping pod.

GRAHAM CREASEY, INTERXION: I'm not sure if the worries and concerns are overblown. However, we have to prepare and so we have to make sure that essentially business as usual for our customer base. They entrust us with their data, and so therefore we're making sure that it is business as usual.

Podtime has also set up beds at the London Stock Exchange. All this Olympic interest has been an unexpected boon for the entrepreneurs behind Podtime.

JONATHAN GRAY, PODTIME: The Olympics contingency wasn't something that we thought about until Interxion phoned us up. They said we want to get some in the data center just in case the transport gets too busy that people can't get to work. So on that one or two nights during the Olympics, the guys can actually crash here and then, you know, run the operation seamlessly.

BOULDEN (voice-over): London is a busy, crowded capital city with a Victorian-era transport system. Whether it concerns their employees or just their own normal deliveries, firms here can't afford to lay (sic) down on the job -- Jim Boulden, CNN, London.


FOSTER: Amazing, those sleeping pods.

Next, a Boeing veteran ticks his boxes and prepares to bail out. We'll hear from Jim Albaugh on challenges and China.




FOSTER: After 37 years of service, Jim Albaugh is stepping down from Boeing. Ray Conner will lead the commercial jet unit from October, three years shy of Boeing's retirement age. The move has come as a surprise. But Jim Albaugh told Boeing that he's achieved all that he wanted during his three years in the top job. So that's an achievement in itself.

And he had three main jobs on his to-do list, all of which he did manage to achieve: winning the $35 billion U.S. Air Force tanker contract against tense competition from Airbus; delivering the new 787 Dreamliner and 747-8 jumbo jet, planes that endured years of delays; and securing a labor agreement with Boeing's biggest union. There have been bitter dispute over the location of a second 787 assembly line.

Now Jim Albaugh leaves the commercial airplane unit in pretty good shape but accounted for 53 percent of Boeing's 2011 sales. Richard caught up with Jim in Beijing earlier this month. They discussed strategy, the role of China and Boeing's crude awakening, the biggest threat to its business.


JIM ALBAUGH, OUTGOING CEO, BOEING COMMERCIAL AIRPLANES: Well, I think you talked about one of the biggest issues, and that is that the price of oil. And this morning at IATA, the general session, they talked about the fact the margins in this industry were half a percent. Those are pathetic.

But how do you make the margins higher than that? It's through having more fuel efficient airplanes. And that's what we offer. The 737 Max is going to be 13-14 more efficient that the airplane that it replaces.

The 787 is 20 percent more efficient than the airplane it replaces. And I think airlines that are in it for the long haul understand that they cannot afford to continue to spend 40 percent of their total revenues on fuel. That's going to drive them to buy more fuel-efficient airplanes. And I think that will bode well for us over the long haul.

RICHARD QUEST, CNN HOST: The only thing we can all say about trying and economic growth, aviation growth, is that whichever number you choose to use, the number of aircraft or (inaudible) or travelers, they are vast (ph). Does anybody really get a handle, do you think, on just how big this market is going to be?

ALBAUGH: Well, you think about how many people will live in China. You look at the airport expansion that they're doing, the lack of other infrastructure to get around. We really believe that China is going to be the second largest market for us outside the United States. We look at our forecast over the next 20 years.

We believe that there's a market for some 5,000 airplanes here. And it's a market, certainly, that we want to go after. It's an airplane that Airbus covets and certainly COMAC, which is the new Chinese manufacturer wants to go after as well. But, no, I believe in this marketplace.

QUEST: And are you content in your own company now that the 787 ramp- up is on schedule, that orders are -- more orders for the 747-8 are on the way, and I suppose, (inaudible), you can build them (inaudible). I mean, you've taken a lot of orders for the Max.

ALBAUGH: Yes. Well, you know, Richard, you just kind of went through my worry list, OK? And I wouldn't sit here and tell you that those aren't concerns, because they are. You know, on the 737 Max, this is not a very complex undertaking. We've reengined that airplane twice. Are we watching it and managing it? Absolutely.

On the ramp, we're 31/2 now going to 10. Nobody's ever done 10 composite airplanes in a month. Is that something I worry about? Absolutely. Do we have the discipline to do it? You know, I believe we do.

On the 747-8, we've got a lot of active campaigns. And I think over the next couple of months, hopefully when I'm sitting across from you in a chair at Farnborough (ph), we can talk about some of the announcements.

QUEST: Come on, give me them.

ALBAUGH: I'm not going to give them to you.

QUEST: Cockpit philosophy, I'm not inviting you to bash the competitor, but I am inviting you to tell me what Boeing's cockpit philosophy fundamentally is and how that might differ.

ALBAUGH: All the way back to 1916, our philosophy has been, you know, the pilot is in charge of the airplane. And we want the pilot to have tactile feedback in from the control surfaces. That's why we have the Yoke now.

A lot of people say the Yoke is this old technology. But you know what? When that autopilot is flying the airplane, and the pilot can see that Yoke move back and forth, they always know what the airplane is doing. That's been our philosophy, always has been, always will be.


FOSTER: Now (inaudible) France's bureau of investigative and analysis will release its final report into flight 447 next week, and we'll bring you a sensitive reporting of that when it happens. But QUEST MEANS BUSINESS will continue after this short break.



FOSTER (voice-over): Time now for the answer to today's "Currency Conundrum," which of these Panama de facto currency? The answer is B, U.S. dollars have been illegal -- or legal tender in Panama since 1904. Panama does have its own coins, the Panamanian balboa, which takes the U.S. dollar.

Now a cola war is growing between Coke and SodaStream, would you believe. This is the cage. Soda Stream is using it to show the number of cans and bottles the average family throws away each year, a number that can be saved by one of its do-it-yourself soft drinks makers, they claim.

Coca-Cola wants its cans removed from the cage, but SodaStream says they're collected from local dumps and Coke no longer has any claim over them. Now Coke is threatening legal action. We asked Coca-Cola for a response today.

They sent us a statement, saying, "Coke is committed to increasing the recovery and recycling of its packaging around the globe." The statement did not mention the legal dispute with SodaStream, other than to say Coca- Cola was aware that SodaStream's campaign.

I spoke to SodaStream's chief executive, Daniel Birnbaum earlier. He told me that Coca-Cola must take responsibility for its part in clogging up landfills.


DANIEL BIRNBAUM, CEO, SODASTREAM: We're not seeking competitors' products. We go to garbage dumps. And the case that's been disclosed recently is a garbage dump near Johannesburg, South Africa.

Although we have about 30 installations around the world, but we collect beverage packages from the garbage dump -- whatever is there -- it could be water, sparkling water, private label and a number of branded beverages.

We don't pre-select. And we fill this cage. In the case of South Africa, it's more than 5,000 bottles and cans that a family will use in three years. In the U.K., it's 1,500 a year. In the U.S., it's 2,000 bottles and cans a year --

FOSTER: And your argument is you'd only have one or two of your bottles?

BIRNBAUM: Well, depending on what you drink, it might be five. But you can eliminate -- the world can eliminate billions of bottles and cans.

FOSTER: You're very protective of your brand, I'm sure. And your competitors are, too. And Coca-Cola, in particular, is -- seems to be pretty upset with your installations and have instructed legal advice against you, saying stop using their branded products. You are using their brand to -- in a negative way, aren't you?

BIRNBAUM: You know, I find it incredulent (sic) that Coca-Cola are now reclaiming ownership of their garbage, of their trash.

FOSTER: But they own those bottles.

BIRNBAUM: In the trash?

FOSTER: They own the bottles, don't they, ultimately?

BIRNBAUM: They own them in the supermarket. But when a consumer bought that bottle with their trademark, then we claim that the trademark has exhausted. And if they own the bottle --

FOSTER: But the brand, the -- you know, the physical interpretation of the brand, they own. And you're using that in your installation.

BIRNBAUM: But we invite them to go and collect the products that they own in the garbage, in the landfills of the world.

FOSTER: What's your legal defense against Coca-Cola? Public interest? Is that the message?

BIRNBAUM: No, there's a very simple legal defense here. One is that they have two claims on us . One is that there's trademark infringement and the other is that their disparaging advertising. On disparaging advertising, we say that we are just merely telling the truth. And if the truth hurts, fix it.

And as far as the trademark infringement goes, we're saying, you know, once you sold the product, your trademark has expired. But if you so desire, and you really want to claim your trademark, go get it. Go collect it from the landfills of the world. Go clean up the great garbage dump in the Pacific Ocean, which is an island almost as big -- it's a trash island almost as big as Australia.

FOSTER: But you're not just blaming Coca-Cola for this. You're blaming all of your competitors.

BIRNBAUM: Well, we're not -- look, we're -- it's not that we're targeting Coca-Cola. We went to the garbage dump and collected garbage. So -- but Coke are the first -- for some reason, after two years that we're showing this exhibit, are the first to step up and be troubled by it. And I can understand their discomfort.

FOSTER: Now we're going to cross to the Weather Center now. Jenny Harrison, a fan of SodaStream's and --


FOSTER: Is it the `80s or the `70s? (Inaudible) answer.

HARRISON: Max, I was never a fan. I said that I thought they came and went in the 1970s.

No, we didn't have that at my house. We just have my mum's homemade ginger beer that used to explode from time to time. And that was delicious.


FOSTER: OK. Carry on.

HARRISON: Is that all you've got to say? OK.

Well, I'm going to start with weather conditions where Max is, actually. We've been watching Becky out there, of course, all day, so looking a little bit chilly, she has been. But temperatures not too bad.

In fact, it is warming up in London and elsewhere across the west and northwest of Europe in the days to come all this warm air from the southwest is streaming up. But you'll notice quite a bit of cloud and sure enough, there have been a few showers, some heavier rain just pushing into the west right now.

But as for conditions for the football, not long now till they're in fact, I should imagine, it has already kicked off. Look, there's a bit of cloud that's been heading across in the last few hours. It's kept the temperature down, so already down to 19 degree Celsius. But it should be a game with partly cloudy skies, light winds and those temperatures sort of in the high teens Celsius.

There is some more rain coming in in the next 48 hours. But, again, we should be pretty lucky and warm so on Thursday, partly cloudy and again pretty good temperatures for a game of football, some light winds. But this is the heat coming in, pushing up to the northwest, so really is warming up finally.

Still, though, that heavier rain across much of the north and of course that front will also swing through, as you can see there, across much of Germany and Poland. Now right now in London, it is 21 degrees Celsius. The wind is fairly light, from the southwest, we have seen a few showers, as I say, in the last few hours. There's more on the way. But for Wimbledon for the next few days, well, it's not been a bad start, thankfully.

There is some rain in the forecast. It's just whether or not it really impacts play. But Thursday and Friday, 40-50 percent chance, very windy for the next few days as well. But Thursday a very warm day, the high 27 degrees Celsius elsewhere across in Europe you can see those rain showers across central regions, very nice throughout the Mediterranean.

The warm air just pushing nicely across this central region, up to the northwest, and so most areas feeling pretty good, so 28 is the high in Paris on Thursday and the same across in Vienna. Now heading towards the United States, we've been focusing very much on Colorado. We've seen some rain come through in the last few hours, but also of course, some dry lightning strikes.

And this is the latest fire. You've got the Hyde Park fire to the north. Now this is the Waldo Canyon. It has increased in size dramatically in literally a matter of sort of 12 hours, 32 residents now evacuated because of this fire, it's so very close to Colorado Springs. Winds have been gusting to 100 kilometers an hour, 6.5 kilometers it started out on Sunday.

Look how it has spread and grown literally over the last few days, 62 square kilometers it has now up to as it jumped from 25 to that in just one day. And look how close it is to the town, in fact, closer than that.

Have a look at these images. This is actually Tuesday night, and there have been dozens of homes that have gone up literally in flames. This is a huge fire that is traveling so fast. In the evening hours on Tuesday, the fire just roared down the canyon and then literally reached the ridge, breached the ridge and as you can see the firefighters just weren't able to fight this.

This is the images by day. This is just a tremendous fire, about 1,000 firefighters are fighting that. Let me just show you, though, what happens with a fire, because this is how they spread so frequently when we've got these strong winds. It is very, very hot and dry. We've got these strong winds, very low humidity, so the fire is just racing along.

And of course it just races up into anything. All of this is just tinder. And then when you've got trees such as this along the treeline, the winds literally blow the trees, and that just spreads these embers a huge distance. And then you've got another line of fires. So this is hard, Max, only 5 percent contained so far.

FOSTER: OK, Jenny, thank you very much indeed. We'll watch that.

Just ahead, we'll get a check of the stock markets. You're watching QUEST MEANS BUSINESS.




FOSTER: Former Prime Minister Tony Blair has been weighing in on the Eurozone crisis ahead of Thursday's crucial summit. The former British prime minister said he could only see one solution to Europe's problems.


TONY BLAIR, FORMER PM OF ENGLAND: The only thing that works, in my view, is a kind of grand bargain involving Germany and the creditor countries on one hand and Italy, Spain and the debtor countries on the other, in which Germany commits fully to policies that support growth and the maintenance of the single currency, and on the other hand there is a commitment on the part of the other countries to the fundamental major structural reform necessary to make Europe competitive as a whole in the long term.

So this is, on any basis, it's a -- it's a huge moment for Europe. It's a moment where big decisions have got to be made. And the longer they're delayed, by the way, the bigger they get.


FOSTER: Such a big summit, we will be covering it in some depth for you over the next couple of days.

European shares got a boost today (inaudible) out of the U.S. lifted the markets as they jittered away about the outcome of that summit. All the major European indices ended the day higher with the biggest gains in Paris. We'll wait to see what the summit brings for those markets.

And that is QUEST MEANS BUSINESS. I'm Max Foster in London. Thank you for watching.


FOSTER: The headlines this hour, a small gesture takes on greater meaning in Northern Ireland. Britain's Queen Elizabeth II took the hand of a former IRA commander today. Martin McGuinness is now the deputy first minister for Northern Ireland. He's played an institutional role in the peace process.

Syria's information minister says, quote, "A massacre at a pro- government TV station near Damascus will not go unpunished." State media say terrorists (inaudible) bombs at the headquarters of the Al Ikhbariya network, killing seven people. An opposition group says 35 civilians have been killed nationwide today alone.

Iraqi authorities say bombings on the outskirts of Baghdad have claimed 11 more lives. The first blast exploded near a home southeast of the city. And when neighbors pushed or rushed to help, another bomb went off. Nearly 180 people have been killed in attacks this month.

In the first semifinal of Euro 2012 is underway in the Ukrainian city of Donetsk after 13 minutes of play the latest score is Portugal 0, Spain 0. We'll continue to keep you updated. That's a look at some of the stories we're watching for you on CNN. "AMANPOUR" is next.