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QUEST MEANS BUSINESS
Cyprus Capital Control; Cyprus Security; Europe in Crisis; Markets Down; Cyprus: The Verdict; Euro Down Sharply; New York Auto Show
Aired March 27, 2013 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Controls on the cash, security on the doors. Final preparations as Cyprus prepares to reopen its banks.
This is just the beginning tonight, says Axel Weber. We haven't heard the last from Cyprus. You'll hear him in just a moment.
Also, it's the scourge of the business traveler, you and I hate it: wifi costs and why IHG is cutting the cost of hotel wifi.
I'm Richard Quest, we've got an hour together. And as always, I mean business.
Good evening. In the last hour, we've been getting details of the capital controls that will be in force in Cyprus when the banks reopen tomorrow. The measures are considerable, they are wide-ranging, they come in a decree from the Finance Ministry, which has just been published.
The gist of them: they limit the movement of cash within Cyprus and overseas. So, the main restrictions.
QUEST: A daily cash withdrawal limit of 300 euros, that's about $380. Spending on credit cards abroad capped at 5,000 per month per person in each institution. That's about $6,500. There will be a ban on the cashing of checks, but you can put money into the bank.
Now, as well as capital controls, the Cypriot banks are hiring security guards to protect their branches from an expected rush. Our correspondent Ivan Watson's measuring the mood for us. Ivan, I know -- I realize that we've just got the details of these capital controls. Nothing dramatically outstanding or different, pretty standard sort of stuff. But how will they be received in Cyprus?
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: I don't know. You know this world far better than I do, Richard, but when I see these types of limits, that you can't take out more than 300 euros a day or that you're restricted by month to spending 5,000 euros on your credit card outside of the country or that you'd have to ask a committee for permission of any non-cash, basically wired transaction of more than 5,000 euros, that sounds pretty draconian to me.
But then again, the law that has just been reported on the Cypriot news agency is called Enforcement of Temporary Restrictive Measures on Transactions in Case of Emergency. It sounds very much like this is an emergency, and I think the whole island, all of the residents of the republic of Cyprus, are very well aware of this.
As you did mention, we didn't address the question of security at the bank branches, which are supposed to open on Thursday for the first time in more than 12 days. Well, the opening of the banks will be at noon local time, not at 8:00 or 9:00 in the morning, as is usually the practice.
And private security companies are being brought in to help bulk up protection along with police officers. Take a listen to what one of the heads of one of these private security companies said to us.
(BEGIN VIDEO CLIP)
JOHN ARGHYROU, MANAGING DIRECTOR, G4S SECURE SOLUTIONS CYPRUS: It's a major operation and cooperation with the police, OK? What we're going to do, it's not going to be Fort Knox, it's not going to be something that is -- we're just going to have at every branch maybe one or two people.
They're there just to give comfort and advise. But we're not there -- to stop masses of people creating problems. That's the responsibility of the police.
(END VIDEO CLIP)
WATSON: Now, Richard, the new law that's been proposed, it basically says these restrictions are so important because the lack of substantial liquidity and significant risk of deposits outflow --
QUEST: Right. I --
WATSON: -- basically could lead to the collapse of the entire banking system. Richard?
QUEST: So, Ivan, as you look at it tonight -- and you will be there tomorrow morning -- we'll be looking, obviously -- or tomorrow lunch time, 12:00, when the banks open -- we'll be looking to see the lines outside.
But I think the crucial point here is whether or not, Ivan, people believe the European promise that their bank -- that under 100,000 euros, they are safe. Do people turn up tomorrow to clean out the banks? That's the big issue now.
WATSON: That is the huge issue, and according to these new restrictions, these laws, they -- I guess they can't even if they wanted to. There's a certain limit that they can pull out, 300 euros.
WATSON: So, we'll just have to watch. When you talk to Cypriots, they insist that this is a people, a culture that has experienced crisis in the past, and everybody points to the 1974 invasion of the northern part of the island --
WATSON: -- by the Turkish military, and they cite that as an example in saying, well, we'll stay calm despite the very intense shock to the economy that has -- everybody concedes will transform way of life on Cyprus for years to come.
QUEST: Ivan Watson, who's in Nicosia and will be at the banks tomorrow when they open. Ivan, many thanks.
Now, also tonight, a serious warning from Axel Weber, the former head of Germany Central Bank, the Bundesbank. Axel Weber says that Cyprus will probably be back for more, as evidence mounts that the European crisis is not over yet. Join me in the library and you'll see exactly what I mean. And it really does come down to the devil in the detail, the detail in the data.
Let's start with Italian bonds. The ten-year bond yield has risen. It's now 4.76 percent. It's jumped -- it may only be a tad compared -- and it's a lot less than the old 7 percent we were seeing.
But the Five Star Party refuses to form an alliance with Pier Luigi Bersani's Democratic party, and according to wire reports, join the talks. They -- put it this way: They became extremely fruity and not much progress was made.
So, we're already seeing -- and I can tell you from talking to economists, this is what they're worried about: Italy. Cyprus is a sideshow at one level. Italy and the problems of the Italian economy is what they're worried about. We'll talk about this with Bronwyn Curtis in a little while.
The economic sentiment has declined across just about every sector at the moment. The recovery in November is now on hold, it's down across every sector in the eurozone: industry, consumer, retail construction, all are lower, according to the latest numbers.
And look at the euro as against the dollar. We know it's been under pressure. Come right in and you'll see. It's down now another -- the best part of three quarters of a percent today, 6.5 percent from its 2013 high. That obviously creates its own pressures of inflation and, indeed, slowdown.
Now, before becoming chairman of UBS, Axel Weber spent eight years as the head of the Bundesbank. He has been a decision-maker through every stage of Europe's protracted crisis. I spoke to Axel Weber today, and when we talked about Cyprus and the bailout, he didn't believe it was a model for the future and, more importantly, he's pretty sure Cyprus will be back for more.
AXEL WEBER, CHAIRMAN, UBS: The troubling aspect is that Cyprus needed help and it was known for quite a long time. The negotiations over two weekends didn't really work well, and I think the resolution we're seeing now puts in place a lot more solutions than we would have expected in the past.
For example, we now have a very clear distinction between deposits below 100,000 and above 100,000. However, it is unclear whether that is the birth of a European-wide deposit guarantee scheme. Because by and large, these deposits are not insured by the Cypriot taxpayers, they're insured by European taxpayers.
So, the question is, will this be something we'll see going forward? And the flip side is, above 100,000, where depositors are being bailed in, is that the new normal?
QUEST: Do you believe it's the new normal? And if it is, is it the right normal?
WEBER: I don't think it's a new normal. There a lot of Cypriot- specific effects that have led to that. For example, the balance sheet is largely funded by deposits. There are no bonds that are issued to a large extent. So, I don't think it is a characteristic balance sheet, and therefore it will not be a standard solution.
QUEST: There are so many uncertainties going forward from this one.
WEBER: There are, and like very rescue we've seen in the past, I'm pretty sure this is just a first round of dealing with the issue. They'll see what will happen, and what will happen is three things. There will be a knee-jerk recession in Cyprus as a result of this. Banks will deleverage at brute force, and you will see a rippling effect throughout the economy.
Whether that will increase the bill -- and some ministers, like Mr. Schauble, have already raised the question at the negotiations whether actually the costs of this bailout are increasing, and my expectation is, looking at previous bailouts, it won't be the last discussion we have.
QUEST: Well hang on. Get it right the first time. If you've got to put 15 billion in instead of 10 billion, just do it, but get it right. Now, tell me why I'm naive.
WEBER: They have to go to their parliaments and they need approval by parliamentary committees, including in Germany and other countries. So if you come up with a too-high bailout bill up front and you're very clear about that, there is political resistance to doing that.
QUEST: I've just got to be blunt and ask you: which country next? Spain? Italy? Which one are you go -- which one are you concerned about?
WEBER: Well, I wouldn't rule out that there is a program coming at some point where Spain asks for international help on their thing. It's not on the horizon. It's a possibility rather than a certainty. But it's, I think, a real possibility.
QUEST: And Italy? Same again?
WEBER: I think Italy is a lot more safe. Italy has no levered corporate sector. They have no leveraged private sector. They have a high debt-to-GDP ratio, but they already run primary surpluses, so I'm not skeptical on Italy at all.
QUEST: Which concerns you more? You and I talked about it in Davos. Is it still Europe or have you still got one eye on the United States and its own budgetary problems?
WEBER: I think the bigger problems for this year and into next year are going to be emanating out of the European economy. It's going to produce global repercussions for the world economy. The US looks a lot more solid. They have their debt problem, but I think they're on a better track to have a stronger economy.
QUEST: And we've got more from Axel Weber later in the program with his thoughts on the expanding role of central banks and why he's worried that banks are being given -- central banks are being given too much responsibility. That's at half past the hour, 20 minutes from now. And we'll be looking at the market reaction to Cyprus next. QUEST MEANS BUSINESS.
QUEST: European markets were in the red as Cyprus announced those capital controls. Even though we didn't have the details, we pretty much knew they were on the way. Look at the numbers. The heaviest losses, of course, come in Frankfurt, the Xetra DAX off over 1 percent. Paris the same.
Again, the markets sort of drifted down during the course of the day and never really looked back. Let's just compare it to London and the FTSE and how that sort of moved. Not as much of a big move, and even perhaps a small rise. That 2:00 in the afternoon rise, I'm guessing that's just about when Wall Street kicked in today. Look at the US numbers.
QUEST: Now down 34 on the Dow, but it was off more than that, and it's off just a quarter of one percent.
To gauge the global market reaction to the reopening of Cyprus banks, Bronwyn Curtis is with me, former head of global research at HSBC. Good to see you, Bronwyn, as always. Well. This is it, isn't it? We've not really seen one of these that you and I can remember, where a bank -- an entire banking system in Europe has shut down and had to be reopened. We don't know what is going to happen.
BRONWYN CURTIS, FORMER HEAD OF GLOBAL RESEARCH, HSBC: We don't. Actually, I think it's pictures tomorrow that really might make a difference, make people much more nervous. It's not a big economy. And as we've seen in Europe before, they muddle through. They come to a crisis, they sort it out, they muddle through.
And that's what they've done again, because who would've thought capital controls inside a monetary union? It's never really happened before. It's very strange, and --
QUEST: It's also against the European treaty, article 26. But I suspect they're going to use the exception of national security or an emergency. And you can't blame them for wanting to use these capital controls.
CURTIS: No, you can't blame -- well, in fact, you would have to use them, I think, because otherwise all the money would just leave because of the fear factor now. And particularly because the country will go into deep recession.
Unemployment, it will go up, be 30 percent, more. And I think this is really quite difficult for everybody. And so, of course you would take your money out. So, you've got to stop that. And of course, you've got the backstop of the European Central Bank.
QUEST: Bronwyn, as an economist, and you're looking now at the latest eurozone numbers, the winter forecast was depressing. There's no -- it's the lack of growth. It's the lack of opportunity. You saw earlier in the program, I showed you the sentiment numbers are down. The euro's down. This, of course, imports inflation.
CURTIS: Well, it does import inflation, but only if you've got some demand.
CURITS: But if --
QUEST: I suppose inflation's not what we need to be worried about.
CURTIS: I don't think we need to worry about inflation in the eurozone, but I think the lack of growth is a problem because as long as there isn't any growth -- and we're not forecasting any for a long, long time -- then you're going to have these stressors coming along.
And I think when you listen to Axel Weber, he talked about, and you asked, him other countries. Of course, the small countries are worrying right now, like Luxembourg and Slovenia and so on, but --
QUEST: If there is the scintilla of a run on the Spanish or Italian banks, we move into a whole new game, here, don't we? And really, we're looking -- as I said to Ivan Watson earlier, we're looking to see whether people just basically take the European Commission and the banks at their word that their savings are safe.
CURTIS: I think their savings are safe. Let's be careful here, because we could start a run on the banks. I don't think that's going to happen, but there will be crises. We're looking at Italy, but look at it. Bond yields went up, as you said, but not that much. Not as much as they could've done.
Equity markets went down. But really, if this was the crisis for Europe, they would've gone down a lot further. So, markets are expecting the EU or the eurozone and the ECB to muddle through again. But of course, you know, it's a problem.
QUEST: Muddling through. Is that the best that we can ask from our European leaders? Muddling through?
CURTIS: Yes, I think it is. I think it is. We've got a German election this year, the Germans have the money, the rest don't, and so they will have to pay, and that's really difficult in an election year. And I think that this is going to continue.
QUEST: So, as we come in here, what worries you most about this? Everyone says Cyprus is a unique situation, it's a small country, it's got Russian money, we'll just ignore what's being done to some extent, we'll ignore the rules being broken for Cyprus. And there's -- and the contagion's limited. So, what's worrying you about the current situation?
CURTIS: That there isn't any growth going forward, that we get more and more populist activism, and governments get less and less capable of making decisions, and then we'll have a real problem.
QUEST: We've -- but if you're right and we're muddling through, then it -- I hate to say it, it's not like I'm -- between the two of us, listen to us. It's not going to get better anytime soon.
CURTIS: No, and we will have another crisis, and another one after that, and I'm sure we will, and they will -- at some point, if they can't muddle through, then it falls apart.
QUEST: And on that cheerful note, thank you. Bronwyn Curtis, thank you very much. Muddling through until we fall apart.
A Currency Conundrum. Well, if you're worried about the euro, at least the coins themselves are secure. Euro coins are fitted with several security features to prevent counterfeiting, among them, edge-lettering around the two euro coin. Germany's two reads, "Unity, Justice, and Freedom."
What's written on the Cypriot euro coin? Is it "The Republic of Cyprus," "2 Euro," or "God is with us?" The answer later in the program.
The currencies, I told you earlier, the euro's sharply down against the dollar, down two thirds of a percent. The Swiss franc is down by a similar amount. The yen is gaining slightly. Those are the rates --
QUEST: -- this is the break.
QUEST: If you've lamented the state of your car at the end of a long journey with the kids, this -- I'm going to show you in a moment -- is the vehicle for you. The minivan with a built-in vacuum. It's been drawing plenty of attention at the New York Auto Show, which opened to the press today.
Maggie Lake is in New York. Maggie, are you seriously, seriously telling me that in this era of advanced technology, people are getting excited by a vacuum cleaner in a car?
MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Oh, you better believe it, Richard. But sometimes it is the simplest ideas that are genius and really change your life. And I feel like they were reading my mind. Come check this out.
Every time I give my kids a treat in the car, it immediately -- this is what happens. All over the place. But hey, it's not just for the moms, Richard. I've sat next you to you at lunch, my dear, and I see the way you wolf down your food --
LAKE: -- goldfish flying everywhere, right? Now all we have to do in this Honda Odyssey is open the door, pull out the vacuum, turn it on, and there you go --
(VACUUM POWERING UP)
LAKE: -- mess cleaned up immediately. And listen, if you are a busy mom --
(VACUUM SHUTS OFF)
LAKE: -- working mom, like I am, those minutes count. So, it is about convenience. And we were laughing before, saying are people really going to buy a car because of this? That's exactly what they said about the cup holder, so yes, these extras really matter, Richard.
QUEST: Maggie, when you finish in the car, do pop around to my place and run the back around.
QUEST: I think there's a bit of business --
LAKE: Oh, you wish!
QUEST: OK. The digital dashboard -- the digital dashboard, a little more high-tech than a vacuum cleaner, but everybody's talking about that, too.
LAKE: Absolutely. And it is really a big theme here, Richard. And I'll tell you how I know, because I'm bumping into technology writers that I usually only see at launches for phones at Samsung and Apple, and they're here today at the auto show for the first time. So, it is a really big deal. It's what consumers want.
And I just talked to Ford a little while ago. They actually launched a contest, $50,000, they opened up their platform to outside developers, $50,000 for a person who can come up with the best app in terms of fuel efficiency, gauging fuel efficiency.
They are really pushing the envelope in terms of moving and having it be a seamless experience from your SmartPhone right to when you get into the car.
LAKE: They've been polling people, they say that's what they want. Technology and fuel efficiency. That's top on the list when making decisions about buying a car. And then of course --
QUEST: But -- but --
LAKE: -- the convenient extras.
QUEST: Oh, all right. So, you've got your vacuum cleaner and you've got your digital dashboard, but I know that --
QUEST: -- because I've been told that you've been driving -- well, not literally driving a vehicle. We're not that foolish to let you have a go that far. Instead, it's the simulators.
LAKE: Oh, that's right. And I dragged Neil, who's behind the camera with me, Hallsworth, who should know a thing or two about driving. I've been in a crew car with him onto this, it simulated a race track over at Mazda to see how we fared.
Neil got right down to it, serious-faced. I looked like I was on a roller coaster ride and needed to get off. I don't think I'm meant for off-road, Richard, if you can see the expressions on my face. I look like I was stunned in the back. So, I don't think I fared so well, not for me. I'm going to stick to something a little bit more practical, I think.
QUEST: All right. Neil, if you -- if you can hear me, Neil, nod with the camera or shake it. Was she any good on the -- behind the wheel?
(CAMERA SHAKES BACK AND FORTH)
LAKE: Traitor! You traitor!
QUEST: Neil -- Neil Hallsworth and Maggie Lake. Neil, get her back to doing the vacuum cleaning. Oh, Lord, that'll cause trouble. Many thanks, indeed. Maggie Lake, who's in New York. I still can't believe -- come on. Would you -- @RichardQuest, @RichardQuest, would you buy a car on the basis that it has a vacuum cleaner shoved in the back in the trunk?
QUEST: @RichardQuest. We'll talk about that privately. Coming up next, the ever-increasing role of central banks. Axel Weber tells us the potential pitfalls of the banks taking on too much. It's QUEST MEANS BUSINESS, middle of the week.
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
As you've been hearing on the program, Cyprus has announced the strict money controls that will come introduced tomorrow as the banks brace for the reopening of the banking sector on Thursday after a 12-day shutdown. There's to be a 300 euro limit on daily cash withdrawals and a ban on cashing checks amongst the temporary measures introduced. It's the first time such capital controls have been imposed within the eurozone.
We are now hearing from the family of a Pakistani schoolteacher who was shot and killed on Wednesday. Shahnaz Nazli's husband says there was no government security around the girls' school where his wife worked. The UN is circulating a petition demanding more security for students and teachers.
Protesters on opposing sides of the same-sex marriage debate are demonstrating outside the US Supreme Court in Washington. Arguments have been heard in the case involving the federal Defense of Marriage Act, also known as DOMA, and the arguments ended earlier in the day. A majority of the nine justices seemed to question the constitutionality of the law that denies federal marriage benefits to same-sex couples.
The leaders of the so-called BRICS group of nations have agreed to create a new development bank at a summit in South Africa. It'll be the first formal institution created by the emerging economies grouping.
(END VIDEO CLIP)
QUEST: The Bank of England warned today that U.K. banks need an extra $38 billion to cushion them against future financial shocks. From next month, regulation of the banking sector will fall to the Bank of England. It's all part of a growing trend of giving central banks more and more responsibility, becoming supervisors as well as setting monetary policy.
You heard from Axel Weber earlier in the program on Cyprus. Now the former head with the Bundesbank told me central banks are becoming dangerously overstretched.
(BEGIN VIDEO CLIP)
AXEL BABER, FORMER BUNDESBANK GOVERNOR: Monetary policy has, in my view, moved too far into the gray area of fiscal policy. If you co-run fiscal policy out of a central bank, you have a lot more reporting lines to parliament and to taxpayers than you need as an independent central bank.
So I think the central banks have always stretched themselves. I think they have ventured into gray areas that, for standard monetary policy, were always off limits. And by and large, I think they are now seen by many as the only game in town. That's not the right way to look at a central bank.
QUEST: And the fascinating part about that is while central banks warn other bankers of moral hazard they have fallen foul themselves of exactly that sin.
BABER: Well, I would say that they're getting asked to do ever more things, like banking supervision, playing a key role in financial market regulation, being the provider of liquidity. There are tradeoffs to being these. There are conflicts of interesting.
Very clearly, if you make mistake as a banking supervisor, there's too high a risk that you cover it up in liquidity provision. And if it's within the same institution, there are conflicts of interest that I think are counterproductive.
QUEST: When you saw -- and you know obviously George Osborn, the British finance minister, widen the remit of the Bank of England, when they've got not quite a dual mandate from the Fed, do you think this is something that should be looked at further for, say, the ECB?
BABER: Oh, the forward guidance is one example. The ECB is always, in most of their language, had -- we never precommit. So they understand that the world changes dramatically and very often at short notice. Forward guidance, if it's viewed as a commitment advice, if it's viewed as tying your hands on an announced pass of policy, might be counterproductive.
But most of the central banks, including the Fed, don't see it like that. The -- it's a snapshot on how they see the world evolving. But the question is how useful these snapshots are if you keep revising them at every meeting.
QUEST: What do you think?
BABER: I think those that look at forward guidance as a second tool carry it too far. Forward guidance should be to be clear about your visibility of the U.A., of the economy forward, that might change with events. And so we have to be clear about it, that it is a condition of perspective that you're giving. And you have to be prepared to revise it.
QUEST: And finally, what's your forward guidance to us as to what we should expect for the rest of the year?
BABER: 2013 for me looks like a replay of 2012, with a lot of volatility and a lot of sort of on-off activity in the market.
(END VIDEO CLIP)
QUEST: Axel Baber with on-off activity and volatility in the markets, talking to me earlier.
Coming up, on QUEST MEANS BUSINESS, it pays to get connected with some hefty prices around the hotel wi-fi, we reveal who is bucking the trend. QUEST MEANS BUSINESS. Good night.
QUEST: A resignation and alliance and a fashion statement, three developments in the airline industry for this week's "Business Traveller" update.
First of all, the chief exec of Iberia, Rafael Sanchez-Lozano, has quit the job and the board of IAG. He was at the helm of the Spanish carrier for three years. You'll know these pictures. Iberia's currently undergoing massive restructuring. It's involving striking of thousands of job losses as well.
Qantas and -- Qantas of Australia, Emirates of the Gulf, have been given final approval for their groundbreaking alliance. It was the Australian regulator granted permission for five years. The carriers had wanted 10. The new joint timetable over the Gulf over Dubai, that kicks in on Sunday.
And one of the strictest dress codes in the sky has been ditched. It comes from Seoul-based Asiana Airlines, who will now allow female flight attendants to wear trousers. They did have a skirt-only dress code. It was overturned following a discrimination case in South Korea. So you can wear pants on Asiana.
You can fly Qantas and they're looking for a new CEO. Well, they're not looking for a new CEO at Iberia; they have already appointed somebody.
It's one of the most hated charges for guests in hotels, I loathe it; you loathe it, the wi-fi charge. Now owners of the Holiday Inn and other big hotels, the InterContinental Hotels Group, IHG, they're claiming to be the first hotel chain to offer guests free wi-fi in all nine brands of the chain across the world from July.
There is a catch: you have to be a member of -- an Elite member of their loyalty scheme. Other loyalty members join in next year. We rang 'round some of London's best-known hotels to find out what they charge for wi-fi in the rooms.
Let's start, of course, at the Savoy on the Strand. Now the Savoy charges 9 pounds. That's about $15.03 a day for 24-hour access. The Marriott Grosvenor House charges $22.66. But of course Elite members of their program, the top Elite members, do get free wi-fi in certain situations.
And the London Hilton on Park Lane, the most expensive of all, $30.19 a day. In a statement to us, Hilton did say that wi-fi in public areas was free, but not in the rooms; and in the rooms, it's free to Gold and Diamond members at full service and luxury brands.
So that's the way -- that's a snapshot, if you like, and it's set the tone.
A little earlier I spoke to chief exec of InterContinental Hotels Group, Richard Solomons, and I said -- I put it to him that he actually had been bounced into offering free wi-fi.
(BEGIN VIDEO CLIP)
RICHARD SOLOMONS, CEO, IHG: I wouldn't say (inaudible) been going that way. And quite a few of our hotels, we already do it as do others. And this is really about rewarding loyalty for our frequent stayers, through the loyalty program and just making sure (inaudible) got consistency around the world, because it does vary around the world.
So if you're a -- you know, one of our loyal customers, whatever you go, you're not going to get free Internet. But you're right. It is -- it is annoying. I mean, we actually did a survey. We did a (inaudible) survey.
We sort of knew the answers, but sometimes it's good to get the facts. And 43 percent of people actually say they won't use our hotel if it doesn't offer free Internet. I think it's 23 percent find it the most annoying thing in the hotel without (inaudible). So it was right to sort it out.
QUEST: And yet you're doing it just for your loyalty, your frequent stayers. If it is good enough for them, why is it not good enough for everybody? Or are you using it as a -- well, you are. You're using it as a bit of a hook. (Inaudible)?
SOLOMONS: Yes, it is a little one. I think it is -- it's partly about capacity, you know, you just want to have systems that you know can deliver. But, yes, it is a bit about rewarding loyalty. And it's something we can talk to all our guests about.
And we've just changed the name of our program, as you may be aware, from Priority Club Rewards to IHG Rewards Club. And it might seem like a small thing, but in some way it's a big thing, because IHG is well known in financial market. It's well known as an employer. It's well known in the business markets. Not a name that's well known in the consumer market or with all of our guests.
QUEST: But why do you want IHG to be well known by your guests? I mean, any more than Willie Walsh wants, you know, IAG to be known? It's meaningless. All people care about is BA or Iberia. In your case, all they care about are the brand names.
SOLOMONS: Yes and no. And there's a couple of reasons why. But the most important reason is that we've built our business on what we call rifle shot branding. So it's not -- it's not (inaudible) by Holiday Inn or Staybridge by Holiday Inn. They're stand-alone brands. We've got nine brands.
But what we do know is that travelers choose where they stay by their need, by their occasion. And they're not a Crowne Plaza customer; they may be a business traveler who wants Crowne Plaza on vacation, then they go to Holiday Inn Resorts. So we wanted to make sure that they knew very clearly that the brands were part of one family.
The other thing which is less important, but I still think relevant, is every time we talk about IHG -- I come on this program to talk to you about IHG -- we want to make sure that we're getting full advantage of talking about it and people understand it and hear about it. So that's really the reason.
QUEST: When -- back to the Internet, was it your decision?
SOLOMONS: My decision?
SOLOMONS: It was something I really encouraged. Yes, absolutely. But we --
QUEST: (Inaudible) that's a wonder chief exec (inaudible), something I really encouraged, like somebody's going to say no?
SOLOMONS: It -- I'm always happy for people to say no if they can persuade me. The real reason is it was the biggest dissatisfier from our guest surveys, the Internet issue, both quality but also price, as you said right at the beginning. So it was a very clear call. That's one of the first things we've got to deal with.
QUEST: What's next?
SOLOMONS: Well, there's a long list of other things.
I mean, interestingly, what people really want out of their hotel stay is security, safety, cleanliness. Those are the three things. So make sure you get those right all the time --
QUEST: Security, safety, cleanliness.
SOLOMONS: Those are like the -- literally the top three things. And a good night's sleep, obviously, is up there in a hotel. So you've got to get the basics right and then you can start dealing with some of the other things.
(END VIDEO CLIP)
QUEST: Interesting, security, safety, cleanliness, the basics, and a good night's sleep.
Another travel necessity that runs up the cost, besides wi-fi, on a trip, car rentals. I get infuriated with some of the extras which suddenly may take a small, cheap car into the stratosphere.
So here's my guide to saving money and never say I don't give you anything.
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QUEST (voice-over): I have a reservation. Last name's Quest. My midsized car lists itself as $19 a day.
UNIDENTIFIED FEMALE: Are you making a reservation for two days' rental --
QUEST (voice-over): Then the extra fees kick in.
QUEST: So the actual car itself is $40. And by the time we finish, it's $176. It's gone up more than 400 percent.
QUEST (voice-over): How on Earth did we get here? Let's add it up.
Luckily, except for the taxes, all these other costs can be avoided. We start with the biggest, insurance. The car hire companies offer it; yet often you're already covered.
QUEST: Don't you take the insurance?
UNIDENTIFIED FEMALE: I have no choice.
QUEST: You have no choice? Why a credit card?
You don't know, do you? You don't know whether your credit card covers you?
UNIDENTIFIED FEMALE: Very interesting. Yes. I don't.
QUEST (voice-over): That's the problem. Most of us know we're probably already covered by a credit card. But until I read the fine print, I can't rely on it.
When I got home and discovered I was covered by three.
UNIDENTIFIED FEMALE: Would you like to add a GPS?
QUEST: How much is that?
UNIDENTIFIED FEMALE: $11 per day.
QUEST (voice-over): I do, of course, have GPS on my mobile phone. But the roaming charges will be far in excess of $11 a day. Throw the GPS in there as well.
UNIDENTIFIED FEMALE: Drive 700 meters. Then --
QUEST (voice-over): If roaming charges aren't relevant, use your own smartphone or take your own GPS. Like most airports, Montreal charges a prime location fee. It's an extra 16 percent just to pick up the car at the airport. Think about hiring elsewhere and avoid this cost completely.
The last cost, when you return the car, fuel. Do you prepay by the tank, return the car full within 5 kilometers and these days they check and they'll want to see a receipt. Or do you take their usury rate of filling the car because they'll fill it for you?
Ignore the confusion. If you're paying to refill, do it yourself. If you're driving long distance, pay for the first tank and return it empty. It really is as simple as that. And don't be caught with the squabble over scratches. There's a very simple thing you can do before you drive away. Use your smartphone to take pictures. Prove that there's no scratches.
Undoubtedly, the freedom, privacy and fun of your own wheels makes it all worth it, but only at the right price. Add it all up on simple economics, cabs may be cheaper.
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QUEST: The car rentals dos and don'ts from "Business Traveller" in Montreal.
Now some breaking news to bring you.
Greek police have confirmed to CNN that they received a call at 10 past 8:00 local time, warning that a bomb had been placed in a house in Athens. Police were called to the scene; they arrived within 5 minutes.
They cordoned the area off and the bomb went off at 8:30 local time, which is probably about an hour and a half, two hours ago. There were no injuries from that. We'll have more details. If we do get them, we'll bring them straightaway to you.
When we come back, Lloyd's of London, which made a profit last year.
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QUEST (voice-over): The answer to today's "Currency Conundrum," what is written on the edge of the Cypriot 2-euro coin? The answer is 2 Euro. (Inaudible) several times, alternating between Greek and Turkish. It's a security feature to prevent it being -- the coins being counterfeit. And I think it's known as franking or there's a particular name for what they call it when you put those (inaudible).
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QUEST: And the world's oldest insurance market is back in the black, Lloyd's of London returned to profit in 2012. That's even taking into account superstorm Sandy, which Lloyd's described as one of the costliest natural disasters in history, $2 billion it cost Lloyd's after it hit the East Coast of America last autumn.
Despite this, they still made a profit of $4.2 billion over the course of the year, compare that with the loss of $800 million in the previous.
The chief exec, Richard Ward, the chief exec of Lloyd's of London, joined me. And I really needed to know superstorm Sandy, the most expensive single disaster, so why did it not be more of a problem for the results?
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RICHARD WARD, CEO, LLOYD'S OF LONDON: Sandy was the one major catastrophe in 2012. So it cost the Lloyd's market in terms of claims $2.2 billion. That's a pretty big major catastrophe. If you look back to 2011, Thai floods were over $2 billion; Japanese tsunami and the (inaudible) earthquake were less than $2 billion.
So superstorm Sandy is right up there in terms of costliest claims. But because we only had one of them in 2012, it had less of an impact on our results than what happened in 2011 where we had four or five of them.
QUEST: I realize it's a devil and the deep blue sea question, this, but which does Lloyd's prefer, lots of claims that aren't that much or one very big claim that's going to knock the socks off?
WARD: We did have a preference (inaudible).
QUEST: What you don't want is both.
WARD: Well, we do have both. Now let's keep that in perspective, 2012, the results, switching back to sterling, profit -- pretax profit, 2.8 billion pounds. Net incurred claims for 2012, 10 billion pounds.
QUEST: Ten billion pounds worth of claims?
WARD: Ten billion pounds of claims.
QUEST: Fifteen billion dollars (inaudible).
WARD: Yes. What we paid out in terms of major catastrophes was 1.8 billion of that 10. So we've got a core base of attritional claims that are many, many claims coming through the system, but --
QUEST: Most of your claims are $100 million here, a couple hundred million there.
WARD: Yes, yes, or less, I mean, they could be a few hundred thousand dollars. Going back to 2011, 2011 net incurred claims of the Lloyd's market, 13 billion pounds, major catastrophes, Thai floods, Australian floods, Christchurch earthquake, Japanese tsunami, 4.7 billion pounds.
So you can see, if you strip out the 4.7 from the 13 or the 1.8 from the 10, you get roughly about 8 billion pounds worth coming through the Lloyd's market every year in terms of what you described as these little claims. I mean, some quite major and some are quite minor.
QUEST: The underlying financial robustness of Lloyd's -- I know you get weary answering about this, but the market is strong.
WARD: Yes, it is. And I certainly don't get weary of it, because when you're buying a Lloyd's policy, you're buying a promise to pay. So as a client of the Lloyd's market, you want to know we are financially sound, financially robust, that when the claim comes through, we can deal with it.
So when I look at our central resources and net resources sitting at over 20 billion pounds, $30 billion, that's good news for the future policyholder of Lloyd's because they know we're financially sound.
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QUEST: That's the chief executive of Lloyd's of London, superstorm Sandy being a major influence on their results.
Jenny Harrison's at the World Weather Center.
Jenny, weather, we know, has a major effect on insurance companies. I'm not sure that this year's bad weather will have that effect. But it's certainly very grim out there.
JENNY HARRISON, CNN METEOROLOGIST: Well, will it have an effect on insurance?
It'll have a huge effect I'd imagine at some point, Richard, on food prices, certainly when it comes to the crops that haven't been able to be grown for the last 12 months in the fields across the U.K., certainly because the flooding and now, of course, we're dealing -- or the farmers are dealing, batting the snowy conditions in the U.K.
And the loss of their livestock, we're talking about the cattle, the calves, the lambs and the sheep. So I'm sure there will be some effect, eventually, from that. But, again, it's just all about the temperatures right now, widespread across Europe. So Wednesday, another day; temperatures well below the average.
We should be in double figures and we are just not so, feeling much more like January. And since the 10th of March, you can see across this huge swathe (sic) of Europe, temperatures well below the average, as much as 6 degrees below.
But for days on end, so 20 days now for Copenhagen and London, consecutive days, I might add, where we've had these temperatures well below the average. And for the next few days, it is the same sort of story.
So take it all the way through the Easter weekend. And that means the snow that is there is likely to stay. Now still across the U.K., a similar situation. The snow has been coming down pretty heavy again in the last few hours.
Remember, I was telling you about that situation, the farmers literally battling the elements, trying to get to the livestock that are buried under as much as 6 meters of snow. This is the situation on Wednesday. Now -- on Tuesday; I beg your pardon -- the RAF, the Chinook helicopter here, actually loading up with food in Northern Ireland.
Back over in Cumbria, this gives you an idea -- we have some very, very isolated farms, as you can see. And of course, all of this snow just coating the ground. And we have these huge snowdrifts. So the farmers are just desperately trying to get to, in particular, the sheep because the sheep are lambing.
We have already reports of dozens of lambs that are dead. In some cases the farmers get the inside. This is a Swaledale flock in Cumbria. And as I say, the farmers, of course, doing what they can. But the weather conditions are just not helping. Bit of a break in the next 48 hours.
Still, they're coming in from the east and still the snow keeps coming down, but really, Richard, the main theme across all of Europe is the fact that we've got these temperatures so below the average and will stay that way (inaudible) through the rest of the week and the weekend.
QUEST: Jenny Harrison with the cold temperatures. We thank you, Jenny. Keep us informed, please.
And we'll have a "Profitable Moment" after the break.
QUEST: Tonight's "Profitable Moment," in our show you heard the worrying outlook from Axel Baber. The rescue of Cyprus won't the last we hear from that country. It could well need more cash. When a man of Baber's stature speaks, we must take notice.
He's blunt, tells us that decisions are taken on political grounds, not economic ones. We know that. But that's why first Greece bailout failed and now we're still battling on after four years.
Of course, politicians answer to their people, but could only sign up to what electorates will allow. The dithering and the delay, though, have cost us so much more time and money. And as Baber reminded us, there's still a good way to go because it's not only Cyprus whose credibility is now on the line.
The European politicians, too, have got a deficit of democracy when it comes to dealing with this crisis.
And we'll see the human cost in Cyprus tomorrow, as the banks reopen and depositors decide to leave their cash where it is or as widely expected, even with the new capital controls, for the first time in the Eurozone, against the treaty itself, do those depositors try and get whatever they can and, indeed, head for the door?
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST (voice-over): The news headlines at the top of the hour:
Police in Athens say nobody's been injured after a bomb exploded in a house. The police sealed off the area after a tipoff was called to a local newspaper.
Cyprus is enforcing strict money controls on its banks as it braces for the reopening of the banks on Thursday after a 12-day shutdown. A 300 euro daily limit and a ban on cashing checks are among the temporary measures. It's the first time since capital controls have been imposed within the Eurozone.
We are now hearing from the family of a Pakistani schoolteacher who was shot and killed on Wednesday. Shahnaz Nazi's husband says there was no government security around the girls' school where his wife worked. The U.N. is circulating a petition demanding more security for students and teachers.
Protesters on opposing sides of the same-sex marriage debate are demonstrating outside the U.S. Supreme Court in Washington. The court's been hearing arguments in the case involving the federal Defense of Marriage Act. It's known as DOMA.
A majority of nine justices seem to question the constitutionality of the law. The law denies marriage benefits in the federal system to same- sex couples.
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QUEST: You are up to date with the stories we are following. Now Ali Velshi with tonight's edition of "AMANPOUR."