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QUEST MEANS BUSINESS
Algeria Gad Field Attack; Obama Unveils Gun Control Plans; NRA Ad Slammed; Gun Stocks Surge; Economic Impact of Gun Industry in US; US Gun Control; Fed Beige Book; Germany Slashes 2013 Growth Forecast; European Stocks Mixed; Swedish Finance Minister Forecasting Bleak Year; Pound at Seven-Week Low; Dreamliner Drama; Safety Scares; Horse Meat Found in UK, Irish Burgers
Aired January 16, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, HOST: Workers held hostage as militants attack a BP gas field in Algeria.
Twenty-three steps and no time to lose. US president Barack Obama takes on the mighty gun industry.
And profits up, but bonuses down. JPMorgan and Goldman Sachs post bumper earnings.
Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.
Good evening. Tonight, we start with a developing story in Algeria. Armed militants are currently holding a number of people hostage at a gas field. Algerian media are reporting that two people have been killed and six have been injured.
A number of foreign nationals are said to be among the hostages there. The site is partially owned and run by BP, and in a statement, BP had this to say: quote, "We understand that armed individuals are still occupying the Amenas operations site." It added that contact with this site at present is extremely difficult.
CNN's Nima Elbagir joins us now, live from the capital of Mali, Bamako. So, Nima, what do we know so far, and how is it linked to what's going on in Mali?
NIMA ELBAGIR, CNN INTERNATIONAL CORRESPONDENT (via telephone): Well, we're still waiting to get a definitive on the number of foreign nationals that are currently being held hostage, Nina. Only the French and the British -- sorry, I should say on the US and the United Kingdom have confirmed that their nationals are being held hostage.
We also have had some reports from Ireland, but the French Interior Ministry has no -- so far not confirmed that there are French nationals being held.
The Mauritnian news agency, which has had very good relationships so far in the past with Islamists, has been the source of much of the local media reporting on this, and they say that they have received a direct claim of responsibility from al Qaeda in Islamic Maghreb, and that this is a splinter group being led by one of the al Qaeda's senior commanders.
All of this, of course, will come as a massive sense of audacity being felt in the international community. Alger was very quick to secure its borders with Mali and to be very clear that for those foreign companies that were invested in Algeria's oil fields that they had nothing to fear.
This also, of course, draws into question much of the security in neighboring Libya. It raises concerns about Niger. And this is -- I don't think it's an exaggeration to say that this is sending shockwaves across much of Northern Africa, Nina.
DOS SANTOS: What does it also say for the French campaign currently underway in Mali. It doesn't have huge backing back at home in France, either.
ELBAGIR: Well, they were very, very quick to come out and say that this is directly in retaliation for Algeria opening up its air space to France to use in its air support of -- of its operations here on the ground in Mali.
Today, the French have said that they are embarking on use of ground troops, and we've seen the French rhetoric slowly change. Initially they said that they wouldn't be here for very long, that their position was purely to come and stabilize the country, and then it would allow ECOWAS, the member state group of the West African nations, to come in and support their neighbors.
Now, the French are saying that they're in it for the long haul, and as you rightly said, this doesn't have much support back home in France. And what little support there is will surely dwindle.
The audacity of this attack, Nina. We're hearing reports -- we're talking, like, 14 pickup trucks of armed men crossing that kind of space to the southeast of Algeria to get to what should be a heavily-secured, very high-profile facility, and to be able to take that and keep dozens of foreign nationals hostage. This is incredibly, incredibly brazen, Nina.
DOS SANTOS: OK, Nima Elbagir, there, in Bamako, Mali. Thanks very much for bringing us the latest on that.
Barack Obama has called for a ban on assault weapons and universal background checks on all US gun sales going forward. The president also signed 23 of his own measures into law designed to toughen up gun controls in the United States. Mr. Obama says that it's now up to Congress, though, to go even further.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: They need to bring these proposals up for a vote, and the American people need to make sure that they do. Get them on record.
Ask your member of Congress if they support universal background checks to keep guns out of the wrong hands. Ask them if they support renewing a ban on military-style assault weapons and high-capacity magazines.
And if they say no, ask them why not. Ask them what's more important, doing whatever it takes to get an A grade from the gun lobby that funds their campaigns, or giving parents some piece of mind when they drop their child off for first grade.
(END VIDEO CLIP)
DOS SANTOS: Well, Dana Bash is live in Washington for us at the moment to bring us the latest. Dana, is there any appetite, really, though, for Congress to put these kind of measures into action and take the action that some might say will be needed.
DANA BASH, CNN SENIOR US CONGRESSIONAL CORRESPONDENT: It is going to be an uphill climb. And the thing to keep in mind, though, is that so much of what we've been reporting on here in Congress has been about things being stuck because of a partisan divide.
That's not the case when it comes to the issue of guns. The president's biggest challenge is going to be convincing many of his fellow Democrats, Democrats in the Senate in particular, to go along with the measures that he is pushing.
You have six to eight Democrats, maybe even more, who are from what we call red states, conservative states, where gun rights and gun owning are a way of life, and they will get potentially hammered politically if they support anything that has to do with controlling or backpedaling on those gun rights. So, that is the delicate issue politically that the president is dealing with, and he knows that very well.
The main reason, Nina, that we have not seen a big push from this president in the first term or from congressional Democrats is because they decided about a decade ago that it is simply bad politics to push for gun control, and they were losing in the South, losing in rural states, because they talked about that issue too much.
So, that is why it's going to be incredibly difficult. Not so much because of Republicans who run the house, because of fellow Democrats in the Senate, where this whole thing is going to start, if it goes anywhere legislatively.
DOS SANTOS: Live in Washington, Dana Bash, thanks so much for bringing us that. Well, the White House has also attacked the latest TV advert from the National Rifle Association, calling it "repugnant" and also "cowardly." And this is why.
(BEGIN VIDEO CLIP - NRA TV AD)
UNIDENTIFIED MALE: Are the president's kids more important than yours? Then why is he skeptical about putting armed security in our schools when his kids are protected by armed guards at their school?
(END VIDEO CLIP)
DOS SANTOS: Well, Mr. Obama's press secretary says that most Americans agree that a president's children should not be used as pawns in a political fight. They might hear other people outside the United States agreeing with that kind of statement as well.
Now, shares in American gun companies have surged since details of Mr. Obama's plan actually came out on Tuesday, and as you can see behind me, we're just taking a look at two gun makers' stocks. Smith & Wesson, as you can see there, up around nearly 4 percent in the trading session today. We also see Sturm, Ruger, & Co. That one is up by a similar margin as well.
Now, the state of New York recently announced that its own state pension fund would not add to its investments in Sturm, Ruger, & Co. going forward. It also got rid of its holdings in Smith & Wesson after the Newtown shootings in Connecticut.
However, gun sales have since been soaring since then, and that's perhaps, some say, in anticipation of these kind of tighter gun controls that are being put on the table by the Obama administration.
Mind you, though, firearms do have a significant impact on the US economy, and this is something that lobby groups are very, very keen to point out. According to the National Shooting Sports Foundation, or NSSF, which is based in Newtown, the gun industry, as you can see here, generates more than 200,000 jobs in America, either directly or indirectly.
And also, it adds to the government's coffers as well, putting on around about $4.5 billion worth of business taxes, another half a billion in excise taxes, so adding to the state and government purse. Never more so has that been important at a time when, of course, America is debating issues such as the fiscal cliff and also the debt ceiling.
So, in total, the NSSF says that the firearms industry and also the ammunition industry accounted for, as you can see here, more than $30 billion worth of economic activity just in the last year alone. Those are staggeringly big figures.
It's a very divisive issue Stateside, and in fact, on the eve of all of this, Las Vegas is hosting one of the largest gun industry trade shows in the United States. From Las Vegas joins us Miguel Marquez. He's live at a gun range in Las Vegas.
Miguel, this is very, very bad timing, some might say, to be holding a trade show after, of course, what's happened in Newton, Connecticut, and just as the Obama administration wants to try and right the wrongs, if you like.
MIGUEL MARQUEZ, CNN CORRESPONDENT: Yes, even more strangely for the NSSF, the National Sports Shooting Foundation, they sponsor the Shot Show, which is the largest show -- gun show in the world, 60,000 attendees, all in the trade, though. No public can get in there, but it's all just trade members. And the NSSF is also based in Newtown, Connecticut, coincidentally enough.
We are at the largest gun range -- it's a gun shop and gun range -- in Nevada. And I want to show you one thing, here, Nina, if I could. These are some of the guns that the president is really targeting today, for lack of a better word.
This is an actual M16 rifle, the sort that the military would use. This is a locally-produced gun by a company called M2. What makes this different from an AR15, those military-style assault weapons, as the president called them today, is this little area in here.
When it's pointed at zero, that means that you can't pull this. That is the safety is on. When it's in the number one position, that means that it is a single shot per pull. Every time you pull that trigger, it fires a shot. That is a semi-automatic mode.
When you flip it to this number three position here, you pull the trigger, and that's automatic mode. That means until you stop pulling that trigger, the bullets won't stop coming out of this gun. They can have them here at the range 702 in Las Vegas because they have a federal license and they can fire them in this range. They cannot sell them here.
The AR platforms, guns very similar to this without that one feature, without the automatic feature, they've been selling by the hundreds, and they've doubled in price. $1200, $1500, now going for about $3,000, and they've sold about 100 -- more than 100 in the last month out of this one store alone.
The ammunition, that 223 ammunition as well, this is what a case of that looks like, 1,000 rounds of 223 ammunition in here. It's gone up in price from $450 to about $650, and this store now has to limit the number of cases that individuals can buy.
There is a real rush on across the gun industry to buy all of these different platforms, all of the different ammunition for this. At the moment, this particular store is out of the AR15 type weapons here, so that is where the fight will be.
That -- all that said, the folks of this store believe that no matter what comes down they pike, they don't think it will affect their core business. They will continue to sell guns, they will continue to use their range here, and they'll continue to exist.
But it's the gun manufacturers that will certainly be in the fight for their lives over all of this and a big fight for their core business over all of that, and that's probably where we're going to see a lot of that fight happen. Nina?
DOS SANTOS: Thanks so much, Miguel Marquez, there, live at a gun range in Las Vegas, Nevada, where of course, that big industry event is going on as we speak.
Let's turn attention back towards the economy, particularly the US economy, the largest one in the world, because the Fed's beige book is out. This is a look at the regional economic conditions facing this, as I was saying before, the world's largest economy.
And what we've learned from what the Fed has to say in its beige book is that economic activity has expanded since the last time it made this kind of report. It's reported modest or moderate growth in all districts, but of course, there are plenty of clouds there on the horizon.
Not only do we have the issue of raising the fiscal cliff (sic) very, very soon, we've also got some spending cuts that are part of the deal -- temporary deal -- on the fiscal cliff that still have to be hammered out in Washington.
And in light of that kind of uncertainty, as you can see, despite the fact that we've had some pretty big banks on Wall Street coming out with their earnings, bumper earnings, I might add, as you can see, we've got the Dow Jones Industrial average suffering from what's being said her, down around about 0.2 of 1 percent.
Now, speaking of the world's largest economy, let's move to Europe's largest economy, because it's official, Germany has finally succumbed to its neighbors' inertia. The government forecasts for 2013 will be on this very show after the break. Stay tuned.
DOS SANTOS: The German government has cut its growth forecast for this year by more than half. Europe's biggest economy is now expected to grow just 0.4 percent in 2013.
Well, Germany's Xetra DAX made a bit of a slight gain despite that, finishing up around about a fifth of one percent on the day. The main markets in Paris and Zurich also made it into the black today. However, those global growth concerns did limit some of the gains on the upside.
I spoke to Sweden's finance minister about the latest eurozone figures just a short time ago. Anders Borg told me that he's concerned about the year ahead.
ANDERS BORG, SWEDISH FINANCE MINISTER: We think 2013 will be a bleak and meager year. We are expecting weak growth in North Europe and also in Sweden. So, that's one of the reasons that we're trying to push our managing to our own economy with fiscal measures.
And I don't think we should declare the crisis over yet. There might be political uncertainties coming back, so I think 2013 will be a difficult year.
DOS SANTOS: Well, the other thing we've noticed right throughout the course of this eurozone debacle over the last two or three years is that Germany has played an enormous role in trying to help solve it, but obviously, with a weak German economy, elections just around the corner, there, for its own government, could we be seeing a change of power play, if you like, and what kind of role will Sweden play in that?
BORG: Well, I do think that countries like Germany and also Sweden can do a little bit to counter the crisis with more fundamental long-term reforms to strengthen growth, including tax cuts, but maybe also expenditures on infrastructure and research and development. So, I think that should be really seriously considered if we would see even weaker growth coming out of the eurozone.
DOS SANTOS: If we take a look at the trading pattern and the trading partners to Sweden, are we seeing the prospect of this famous two-speed, two-tier Europe eventually emerging with other places in the world that don't use the euro as their common currency being more important as trading partners for countries like Sweden?
BORG: For us, what is really working is the kind of German production zone, with Poland, Slovakia, the Czechs, the Swedes, the Finns, in a kind of an industrial cluster, with its center in Germany, that is actually very competitive, that is selling a lot of cars and trucks, computers and telecommunication systems to Asia.
So, we are becoming more Northern European and more Asian than we have been and less dependent on the continental Europe and the rest of the continent of Europe.
DOS SANTOS: Obviously, some of these BRIC economies -- Brazil, Russia, India, China -- they're becoming more and more important for countries like Sweden that are outside the eurozone but still have the benefits of being inside the EU.
BORG: Well, for us, this is an opportunity. This is a demand shock rather than a supply shock. There is a lot of all the cracks and errors on telecommunications systems sold in China and the rest of Asia.
So -- but that means that we have to improve our game. We have to do more to become also competitive in the future. You cannot relax and think that you can be ahead of the game.
DOS SANTOS: That is Anders Borg, the Swedish finance minister, speaking to me a bit earlier on. And as you heard, he said the problems for the eurozone, by his account, aren't completely over yet.
Well, speaking of the eurozone, it's time for a Currency Conundrum for you now, and this time, we look outside the current bloc. The Polish currency, the zloty, literally means "golden" in English. So, here's my question today: how much gold is there actually contained within one zloty? Is it 1.5 grams, is it half a gram, or none at all? We'll have the answer for you a little later on in the show.
Speaking of currencies, the British pound is now trading near a seven- week low at the moment against the US dollar. And as you can see, it's trading at a price about $1.5999. The euro is basically flat against the dollar. We've got the yen gaining just a little bit, reversing its recent trend.
DOS SANTOS: United Airlines says that it'll keep on flying Boeing's flagship Dreamliner planes while half of the 787s currently out there in service still remain grounded. United says that it has now inspected all of its six Dreamliner jets and that they will continue to operate as scheduled.
Well, early on Wednesday, All Nippon Airways and Japan Airlines grounded their Dreamliners. We're talking about 24 jets, here, in total. All of this came after this All Nippon 787 was forced to make an emergency landing.
Domestic NAA flight 692 was on its way to Tokyo when a battery alert went off in the cockpit and passengers smelt burning in the cabin. It's the most safety incident yet for Dreamliner, and it has sent Boeing shares more than 3.5 percent lower in New York trading.
The grounding of Japan Dreamliners fleet comes just a week after almost daily safety scares. Richard Quest has been looking at what could be behind some of these problems that the Dreamliner is facing.
RICHARD QUEST, CNN INTERNATIONAL: The core question comes down to why does this new aircraft have so many problems seemingly so frequently? Is it because, as Boeing says, there are these teething issues, these glitches in a highly-sophisticated new technologically advanced aircraft, or are there problems?
For example, supply chain issues on quality, or assembly and manufacturing problems by Boeing themselves. After all, we know that the Dreamliner has used new technology, carbon fiber. It has brought suppliers from different parts of the world together to assemble the aircraft in the United States.
Whatever the final determination, the raw fact is that two of the airlines, the launch customer ANA and JAL of Japan have both grounded their fleet. Other airlines like United, Qatar, and even LOT, the Polish airline, which is due to make its first trans-Atlantic flight with the Dreamliner, are continuing with the aircraft in service.
And so we have this, perhaps, confusion for the traveling public -- two airlines saying that they're out of service for the time being, and the rest remaining and continuing to fly. One thing is certain, for Boeing itself, the manufacturer needs to get to grips with what could rapidly become a reputational crisis.
DOS SANTOS: Well, Boeing isn't the only company to have struggled with safety issues of late. Let me just remind you that its rival, Airbus, also had some teething problems of its own with its flagship plane.
Just last year, cracks were discovered in the wings of its A380 jets, and Airbus identified the problem as a design fault. Subsequently, it says, it spent that -- $266 million on repairs. That was just for the first months -- first nine months of 2012 alone. It could incur some more costs there.
And it's not just in the plane-making industry, as well. This week, Toyota managed to reclaim the title of the world's top-selling carmaker, beating General Motors after an expected 400,000 vehicles were sold.
But Toyota has still, let's point out, managed to bounce back from a serious safety scare that led to the recall of a million of its cars, all of that happening last year.
And in the UK and Ireland, what we saw was a number of supermarket chains coming into the spotlight after horse meat -- that's right, horse meat -- was found in frozen beef burgers. The products have now been taken off sale, but as Jim Boulden reports, these kind of stories -- these kind of stores want to speak to their suppliers to get them to explain exactly how all this happened.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): So, how does horse and pig DNA end up in frozen beef burgers? That's what the world's third-largest retailer, Tesco, is asking after authorities said some patties from Tesco and four other supermarket chains in Ireland and the UK, contain traces of horse and pig.
TIM SMITH, TECHINCAL DIRECTOR, TESCO: Our investigation of the supplier will cover in great detail exactly what happened, who was responsible for it, and just exactly how long this has been going on.
UNIDENTIFIED FEMALE: Thank you, Mr. Speaker.
BOULDEN: The prime minister put the responsibility squarely on the supermarkets.
DAVID CAMERON, PRIME MINISTER OF BRITAIN: But it is worth making the point that ultimately retailers have to be responsible for what they sell and where it has come from.
BOULDEN: Ireland's food safety authority conducted the tests two months ago and generally found trace elements of pork or horse meat in many of the samples. But in one of the beef patties supplied to Tesco, 29 percent of the meat content was, in fact, horse DNA.
Irish food standard officials said, of 27 burger patties tested, 10 had horse DNA, and that 20 had pig DNA. A worry for those with religious food restrictions.
UNIDENTIFIED FEMALE: And if you are from the Jewish or Muslim faith, that must be an absolutely horrific revelation.
BOULDEN: Tesco said there can only be two answers.
SMITH: One of them involves illegality by suppliers or suppliers to those individual suppliers, or gross negligence.
BOULDEN: One of the suppliers identified by Irish authorities is Liffey Meats. In a statement, Liffey said, "The horse DNA likely came from an approved EU raw meat plant who was supposed to only supply beef" and stressed "the products concerned represent no risk to human health."
The other Irish supplier, Silvercrest, said it's launched a full-scale investigation into two continental European third-party suppliers.
The investigation centers on if pig and horse DNA got into the burgers when non-meant ingredients, like what holds the meat together, was mixed in, and it stirs up the age-old question, what goes into our food?
Jim Boulden, CNN, London.
DOS SANTOS: Two major US banks have beaten the Street with their earnings reports. We're heading to New York to the Stock Exchange next for the numbers on JPMorgan and Goldman Sachs.
NINA DOS SANTOS, CNN HOST: Hello and welcome back. I'm Nina dos Santos. These are the main headlines this half hour.
(BEGIN VIDEO CLIP)
DOS SANTOS (voice-over): Armed militants are holding a number of people hostage at a gas field in Algeria. Algerian media reporting at the moment that two people have been killed and six injured. A number of foreign nationals including Americans are also among some of the hostages. U.S. Defense Secretary Leon Panetta called the attack, quote, "a terrorist act."
French troops are reportedly battling Islamist militants in north of Mali's capital. It's the first ground combat in the French intervention that began in earnest with airstrikes on Friday. France has 800 troops on the ground in Mali with plans to send 1,600 more to the region.
The U.S. president, Barack Obama, has just outlined his new proposals for fighting gun violence in America. He's calling for a ban on assault weapons and high-capacity magazines like the ones that were used in the mass shootings in Connecticut and also in Colorado. Mr. Obama also wants background checks on gun sales.
All right. Let me bring this statement that the NRA of America, the National Rifle Association, has just released in response to that statement that Barack Obama will be pushing through 22 new laws into Congress.
It says, quote, "Throughout its history, the National Rifle Association has led efforts to promote safety and responsible gun ownership. Keeping our children and society safe remains our top priority.
"The NRA," it goes on to say, "will continue to focus on keeping our children safe and securing our schools, fixing our broken mental health system and prosecuting violent criminals to the fullest extent of the law.
"We look forward," it says, "to working with Congress on a bipartisan basis to find real solutions to protecting America's most valuable asset -- our children"
It finally says, "Attacking firearms and ignoring children is not a solution to the crisis we face as a nation. Only honest, law-abiding gun owners will be affected and our children will remain vulnerable to the inevitability of more tragedy."
In other news, a helicopter crash in central London has killed the pilot and a person on the ground. The chopper hit a crane on top of an unfinished luxury residential building in Vauxhall south of the Thames in London. Thirteen people were wounded in that accident.
And finally, Josep Guardiola is returning to football as a manager of Bayern Munich. The German club has announced that Guardiola has signed a three-year deal starting this very July. Guardiola won three Spanish League titles and two Champions League trophies as manager of Barcelona. His Barca team is renowned as being one of the best of all time.
(END VIDEO CLIP)
DOS SANTOS: (Inaudible) investment banks Goldman Sachs and JPMorgan have reported a sharp rise in their profits. JPMorgan, let's start with that one, beat forecasts with 4th quarter earnings coming in at $5.7 billion.
The chief executive, Jamie Dimon, will be taking home a $10 million bonus. If you think that's a lot, I might point out that it's actually half of what he would have had without the bank's so-called London Whale trading incident last year. Goldman Sachs, for its part, saw 4th quarter profits nearly triple the year before.
Goldman's staff got nearly a 10 percent increase in their total compensation or take-home pay and that one averages out at around about $400,000 per member of staff -- huge amount of money, isn't it?
The bank is setting aside $13 billion for salaries and bonuses, also perks for its 32,500 employees, which, as I said, works out at around about 400,000K -- 400K, if you like, or $400,000. Let's have a look at how the stocks are responding to those kind of reports. Alison Kosik joins us now live from the New York Stock Exchange.
And if we start with JPMorgan Chase, Alison, that one was quite interesting because we had this report internally being circulated supposedly about the London Whale incident, and it did affect Jamie Dimon's bonus.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: It did. Yes, that is sort of the talk of these earnings, showing that he is taking a huge pay cut. But if it -- let's first talk about those earnings, though, for the company. We certainly saw a boost from new mortgages and consumer and investment banking.
You know, shares of JPMorgan are actually doing well overall for the year, when you look at it. JPMorgan's shares have outperformed the KBW bank index of all of 2012. Shares gained 32 percent for the year and the KBW index was tracked 24 banks rose 30 percent. So shares are doing well. But his pay was cut anyway because of the London Whale of business.
You know, of course, that was a huge controversy with a $6 billion trading mishap. This was a U.K.-based trader who made these big bets on complex derivatives which went terribly wrong, leading to all those billions of dollars of losses for the bank.
Now consider, though, although that is a big pay cut for Jamie Dimon, still is a lot of money, $11.5 million for 2012.
Goldman Sachs, yes, having a strong finish as well, booking a profit of almost $3 billion. And like JPMorgan, Goldman benefited from the housing recovery and improving credit conditions.
Now what's interesting with this earnings report, as you look and you see that there's a shift in Goldman from making money on trading and investment management to getting most of its growth from lending money. And that's partly because new regulations have clamped down on some the bank's more profitable businesses, Nina.
DOS SANTOS: OK. Alison Kosik there in New York, wrapping up those big Wall Street earnings, thanks so much for bringing us that.
Now the World Bank has cut its global growth forecast. (Inaudible) report its global economic prospects is published today, and it says that the world economy will probably grow just 2.4 percent this year. That's quite a bit lower than the 3 percent forecast that this very institution had all the way back in June, who developed high income nations, this is exactly what the World Bank expects.
It expects growth to be virtually unchanged from last year, still coming in at a slugging 1.3 percent. In developing economies, however, the bank is forecasting something a little bit more robust, as you can see there, 5.5 percent for the period.
Andrew Burns is the World Bank's manager of global macroeconomics. He's also the lead author of this hefty report. Earlier he told me that a downgrade on global growth had actually been on the cards (inaudible) for some time.
ANDREW BURNS, GLOBAL MACROECONOMICS MANAGER, WORLD BANK: What we're really doing here is reflecting in the forecast events that have already occurred. We had a very weak second quarter last year.
Third and fourth quarter have been disappointing, in part because of uncertainties surrounding the fiscal cliff, dragging growth in the U.S., but also the very weak numbers that we saw in Europe during the fourth quarter, industrial production in Germany.
So that's all weighed down on growth. It's had an impact for developing countries as well going forward. Continued weakness in the high-income world, some acceleration in the developing world from 5.1 percent last year up to about 5.5 percent next year.
DOS SANTOS: Let's home in on Germany, because obviously that's the big story of the week, with its latest GDP figures, exports disappointing we found out last week. How concerned are you about Germany at the West Bank?
BURNS: Well, again, I think this is more of a story of what's already happened as opposed to what is going to happen. If we look at global exports, they're starting to accelerate. That's a good story. We see strong import demand coming out of the developing world now. That's going to be a plus for Germany, big exporter of capital goods.
So insofar as that turnaround is -- starts to appear to be the case, it's actually sort of an upside risk for the global economy. And that's one of the big differences when we look at the world today, that there is an upside risk; whereas if we were looking at it a year ago, it was all really about the downside risk.
DOS SANTOS: And one thing that could go either way is this ongoing issue about the debt ceiling in the United States and also the spending cuts that could be part of a deal to solve the fiscal cliff that haven't yet been hammered out.
The United States seems to be holding the world economy hostage, some might say.
BURNS: Well, this certainly is a lot of concern about the clarity or the lack of clarity in terms of fiscal policy in the United States. That was a big part, as I said, of the weakness in the second half. And going forward, it's going to be an important determinant of how strong or how weak the global economy is going forward.
DOS SANTOS: And what about China here, because a lot of people have been saying that China should be starting to get used to a pace of growth. It's not 8 percent, which was their previous target, which they reluctantly came down to, but maybe even 7 percent, 71/2 percent. Where does the World Bank stand on China's growth?
BURNS: Well, for next year (inaudible) this year, rather, 2013, we're expecting growth of about 8.4 percent. We expect it to slow gradually towards about 7.9 percent in 2015. So we do see a restructuring of growth away from exports and investment in China towards consumer demands, towards the service sector. And that will cause a slowing in the economy.
But there's an awful lot of momentum there, and there's an awful lot that's going right and it's going to take a long time for that slower growth to materialize.
DOS SANTOS: Where's the bright spot, though?
BURNS: Well, one of the bright spots has certainly been developments in Africa. If you take South Africa out of the equation, the subcontinent grew about 5.8 percent last year, excellent growth. A third of the country's growing more than 6 percent. That's a really positive development for a part of the world that historically in the 1970s and '80s was really struggling to get in strong numbers.
(END VIDEO CLIP)
DOS SANTOS: Now Etihad CEO doesn't want to join anyone else. He says that he's starting his own alliance. After the break, James Hogan on his (inaudible).
DOS SANTOS: Berlin's Brandenburg Airport has fired its chief executive after its opening was delayed yet again. The airport was first scheduled to be open in late 2011. But it's been postponed four times since then and run billions of dollars over budget. Planners and builders are said to be struggling with technical problems as well as an elaborate fire safety system.
Well, we've been taking an in-depth look at the Gulf carriers on "Business Traveller" of late. Emirates, Etihad and also Qatar turned the airline industry on its head over the last year with rapid growth in new partnerships. Well, tonight, we hear from James Hogan, the chief executive of Etihad, says it's all about expansion but instead this time he wants to do it alone.
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RICHARD QUEST, CNN HOST (voice-over): Etihad was created just eight years ago. Today's chief executive, James Hogan, came on board in 2006 and brought with him a clear different strategy for building the network.
QUEST: We could get a couple more airlines in here. Who else is joining?
QUEST (voice-over): Etihad now owns 29 percent of Air Berlin, 40 percent of Air Seychelles and just under 3 percent of the Irish carrier, Aer Lingus. It signed its 40th coach air deal, a wide-ranging partnership with Air France KLM. It's also in talks with the Indian carrier, Jet Airways.
JAMES HOGAN, CEO, ETIHAD: We fly to 86 cities of the world. With 41 coaches, that takes about over 400 cities that we can service.
QUEST: So why did you decide not to join an alliance, assuming an alliance wanted you?
HOGAN: Well, you're right, Richard. In the early days, the alliances, quite frankly, didn't want us. So over the past five years, we've built a network. My strategy is to (inaudible). And to be able to work with Air France, KLM, Air Berlin and Aer Lingus coming down over Abu Dhabi, means we have got a strong network proposition.
QUEST (voice-over): Etihad is not joining an alliance. So as the list of partners grows, so does the potential for conflicts of interest.
QUEST: You've owned part of Air Berlin and yet Air Berlin is a member of One World. And One World has just taken in Qatar. So I ask, who is Air Berlin supposed to send its passengers to? You? Or Akbar at Qatar?
HOGAN: And whilst you're asking that question, one can also consider what's happened with Qantas and Emirates. I guess what I'm saying is aviation is changing. A CEO who's responsible for the bottom line is (inaudible) first achieve the network flows that benefits his business.
QUEST: But you've just also got into bed with Air France KLM, which is SkyTeam.
HOGAN: There's a win-win here. These carriers in the case of Air France KLM wouldn't enter into this arrangement if they felt the network benefits weren't there for their airlines and for their customers.
QUEST: But do you want Air Berlin out of One World?
HOGAN: What we're joining is an Etihad alliance. I think that sounds better. We're an independent airline. We're taking advantage of and our position of being not aligned to work with all the alliances. And I say that for us that's a smart move.
QUEST: For some, you are all creating a revolution. To others, you're a bunch of bloody menaces who are disrupting the cozy world of aviation.
HOGAN: Well, I think the cozy world of aviation was already rocky. And I think what we're doing is focusing on the most important person, the customer.
QUEST (voice-over): As the airline continues to share passengers with others, it's important that service standards match.
UNIDENTIFIED MALE: I need a backup! I need a backup!
UNIDENTIFIED FEMALE: Everyone's (inaudible).
QUEST (voice-over): Etihad has established Abu Dhabi as a global training center for its affiliates.
UNIDENTIFIED MALE: (Inaudible).
UNIDENTIFIED FEMALE: Want to try the Revlon (ph)?
Excuse me. Mine's greater than yours.
QUEST (voice-over): Another important aspect of the food on board.
HOGAN: So Richard, this is our chef's training room.
QUEST: There's only so much you can do on a plane kitchen, though, isn't it, (inaudible)? So what are you doing?
UNIDENTIFIED MALE: We're having a plating session.
QUEST: It would be rude not to.
HOGAN: Oh, Richard, please, you're our guest.
QUEST: Mmm! This is rather good.
(END VIDEO CLIP)
DOS SANTOS: Now for you business travelers out there, let's take a quick check on how the weather forecast is looking. Jenny Harrison is at the CNN International Weather Center.
What have you got for us, Jenny?
JENNY HARRISON, CNN METEOROLOGIST: You know, not good weather for traveling. That is for certain, Nina, my goodness, some bitterly cold air out there, temperatures well below freezing. It has been like this for the last two days. It's going to stay like this.
And look at the satellite, widespread areas of unsettled weather, a lot of rain across the south, but really a lot of that cloud bringing with it quite a bit of snow. These are the current temperatures. It's with the wind factored in, so it feels like -18 in Oslo, just a couple of degrees below freezing in London, colder in Paris at -7, feels like -9 in Stuttgart. And you can see in Helsinki -12.
Now again, the last few hours, more snow working its way really from the northwest of Europe, all the way to the southeast. So you can see Scotland but also now coming across into Wales, so rain mixed into sleet turning to snow, similar story across into France and also Germany. You'll notice some very heavy snow has been coming in in the last few hours into southern France.
This is the pictures coming out of the Pyrenees because that snow came through so fast and furiously over a meter of snow to some areas that the French authorities actually put the highest warning alert out for the dangers of avalanches. So that was Wednesday. As the day went on, they did actually bring that warning down.
But you can just see the snow there, just some of the locals literally trying to go about their daily lives. So it has caused all sorts of huge problems. And of course with such a huge amount of snow in a short space of time, there's always a very high risk of avalanches. Let me show you the snow, of course, that came down.
Remember this? I was talking about it yesterday, 68 centimeters to Croatia, a record amount of snow certainly for January. And now we've got some pictures to show you what that actually looks like. It looks lovely, of course, as usual, when you've got nowhere to go. But you'll just see there's some cars in the background.
Well, guess what? I doubt you're going very far in your car. Look at it, just so much snow, 68 centimeters. There's more snow that's been coming down. There's more in the forecast. So if you're traveling to the southeast of Europe in the next couple of days or trying to get out of there, well, do be prepared for this.
Expect some very long delays, very dangerous conditions on the roads. Another 19 centimeters into Zagreb. And generally we've got some very widespread snow, 25 centimeters or more are widespread across the region. It's going to stay cold as one system comes through another one works its way out of the picture, just literally to have it being replaced by another system.
That's coming into the northwest. There's that bitterly cold air plunging all the way down even into the central Mediterranean and temperatures well below the average for the next few days, London, Paris, Berlin, the same in every case, Berlin about 9 degrees below average by day.
And there's that next system of snow coming in, so as I say, a very, very unsettled picture. Expect lots of delays, widespread snow. So just check ahead and allow plenty of time for any journey that you're making, Nina.
DOS SANTOS: OK. Jenny Harrison at the CNN Weather Center, thanks very much for that update there.
Well, speaking of Germany, as Jenny was just mentioning, it has some of the world's largest gold reserves. Just one problem, though. Hardly any of this gold is actually on German soil. We'll explain how it (inaudible) just go back into the country in just a moment's time (ph).
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DOS SANTOS (voice-over): Time now for the answer to today's "Currency Conundrum," earlier in the show we asked you how much gold is there actually inside one Polish zloty? The answer is, well, none at all, I'm afraid to say.
Even though the word zloty literally translates to gold in English, the zloty is actually a silver coin and as such doesn't contain any gold at all. Nor is there any gold in any of the other denominations of the currency.
(END VIDEO CLIP)
DOS SANTOS: Now speaking of gold, Germany's central bank says that it wants to return almost $35 billion worth of gold to German soil. Take a look at this map.
As you can see, if you imagine that each gold bar is roughly around about 10 percent of Germany's gold reserves, you can quickly guess that there's quite a bit more of it held in other places around the world, like New York and Paris and London than there is actually on German soil. And that's because Germany stored much of its gold overseas for safekeeping during the Cold War.
But now German regulators want closer control over these kind of gold reserves. And as such, the Bundesbank says that it's bringing some of the gold back to, quote, "build trust in the German financial system."
So first of all, London will get to keep its 13 percent of total German gold reserves. But what we're seeing is that Germany will be bringing back around about 9 percent of its gold back from New York.
As for Paris, well, every single last gold bar will be going back to Frankfurt. And that'll mean in all around about half of all of Germany's gold reserves will be back onto German soil by the year 2020. Frederic Pleitgen is live for us in Berlin to tell us why the Germans are embarking on this kind of strategy.
There is a hideous irony in all of this, Frederic, is that these kind of moves are being announced on the same week (inaudible) of course the German economy isn't in quite as well as some people might have thought.
FREDERIK PLEITGEN, CNN CORRESPONDENT: Yes, absolutely. And it's interesting because this debate, Nina, actually came up last year when people were talking all about how everybody was investing in gold and how gold was really important.
And then I remembered some publications here in Germany started asking the question, well, where's all the German gold? Because, I mean, the country has the second largest gold reserves in the world. And then people found out that much of it was actually in other countries, a lot of it in the U.S., as you said, a lot of it in England as well. And now they're bringing it back.
And they say that that's simply a shift in strategy, because they say the gold strategy for Germany basically has two main pillars. One of them is you want part of your gold in your own country to keep trust in your own economy.
But you also want part of the gold in other countries so in case there's a currency crisis in your country, you can buy foreign currency, for instance dollars, for instance pounds as well. And one of the interesting things that you said, Nina, was that all the gold that Germany is keeping in France is going to return to Germany.
That's because it made sense to keep it there when France still had the franc. It does not make sense when France has the same currency as Germany, Nina.
DOS SANTOS: Yes, the other irony is that the word gelt in German for money literally means gold as well, doesn't it? Fred Pleitgen joining us live in Berlin with more on that, thanks ever so much for braving the cold.
QUEST MEANS BUSINESS will be back with a final check on the markets after this.
DOS SANTOS: New York's major stock indices ended Wednesday's session on a bit of a mixed note. The London FTSE 100 closing in the red as falling mining shares helped to abate some of the gains on that market.
(Inaudible) Anglo American lost by more than 3 percent each one those moderate gains for the rest of you, as you can see though, particularly in the Eurozone countries and Paris ever so in the EADS continue to rise on the back of the setbacks to Boeing. It rose 9/10 of 1 percent on the session.
Well, on Wall Street, the Dow Jones industrial average is in the red as we speak, snapping a 5-session winning streak for this market. Little bit of lack of confidence here, not least because of the issues surrounding Boeing. That stock was actually the worst performer on this index, down by nearly 4 percent on the news of another setback for its 787 Dreamliner plane.
Let me remind you that the Fed's Beige Book is out this hour as well, and it is a major look at the regional economic conditions facing the United States, the world's largest economy. What we found out from the Beige Book when it was released is that economic activity has actually expanded for the U.S. since its last report.
That is positive, obviously, what we're seeing here in moderate or modest growth in all districts, but of course there are some significant clouds on the horizon, not least the issue over the debt ceiling debate and also the issues surrounding what has yet to be resolved in March on the fiscal cliff.
And on that note, it's time to say goodbye. Thanks for joining me, that's it for QUEST MEANS BUSINESS. I'm Nina dos Santos. "AMANPOUR" follows a quick check of the headlines (inaudible).
DOS SANTOS: This is CNN. These are the main news headlines this hour.
The National Rifle Association says that new tougher gun controls in the United States will only affect law-abiding gun owners. The NRA has criticized plans outlined by Barack Obama earlier on Wednesday to tackle gun violence in the U.S. The U.S. president calls for universal background checks on gun sales as well as a ban on assault weapons.
Armed militants are holding a number of people hostage at a gas field in Algeria. Algerian media reported that two people have been killed and six injured. A number of foreign nationals including Americans are said to be among the hostages. U.S. Defense Secretary Leon Panetta called the attack, quote, "a terrorist act."
French troops are reportedly battling Islamist militants north of Mali's capital. It's the first ground combat in the French intervention which began with airstrikes on Friday. France has 800 troops on the ground in Mali and plans to send (inaudible) 1,600 more.
A helicopter crash in central London has killed the pilot and one person on the ground. The chopper hit a crane on top of an unfinished luxury residential building in south London in Vauxhall. Thirteen people were wounded in the accident.
That's a main look at the stories that we're following for you on CNN. "AMANPOUR" is next.