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QUEST MEANS BUSINESS
IMF Economic Outlook; Three-Speed World
Aired April 16, 2013 - 14:17 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(SIMULCAST WITH CNN US)
RICHARD QUEST, HOST: You've been watching CNN's continuing coverage of the Boston terror attacks. I'm Richard Quest in London.
One other piece of news to bring you that's just been reported to CNN in the last few moments: a senior US official says there is no reporting indicating a foreign connection or any reaction from al Qaeda.
This is based on information circulated through senior levels of the administration -- the US administration in Washington some hours ago, and it could change. But he says that there's no known terrorist threats to Boston or the marathon, at least there was nothing that was known about.
And as at the moment, there seems to be -- or so intelligence community believe -- no foreign connection at the moment. But obviously, we'll bring you more information on the attack as we get it.
As we continue through this next hour, we'll look at Venezuela's election and protest, now, of the disputed election, and there are deaths involved in those protests. We will be in Caracas.
Also, on the economic front, the IMF is now lowering its forecast for global growth. The IMF's chief economist will tell us why after the break. Good evening.
QUEST: The International Monetary Fund has cut its forecast for global growth and says that the global economy's in for a bumpy recovery. Leaders cannot afford to relax. It's called the WEO, the World Economic Outlook, and its own words, it's all about risks and realities.
So, first of all, on the plus side, they say global prospects have improved again. Now, of course, the market rally has led to a recovery, the stock markets, equity markets, have risen, and people are feeling better. There's a boost in confidence.
The threat of the euro breakup has been averted and, of course, they talk about the sequester in the United States, the worst effects of the budget debacle in Washington.
But the realities, of course, are that spending cuts have come into place, austerity means there are still competitiveness issues in Europe as it tries to wring out the worst excesses in European economy. And global growth has been cut from 3.5 to 3.3 percent.
Bumpy and divergent, with only Germany and Japan having a more rosy outlook, and even rosy is a very relative phrase. Pretty much every country -- or region was downgraded.
So, the risks are many, at least 12, particularly adjustment fatigue in Europe. There's also slow economic reform on banking union within the EU, and there are distortions because of all the QE from central banks. These are the sort of macro prudential issues that are affecting the global economy at the moment, which is why they have downgraded growth globally.
One of the Fund's key themes at the moment is what Christine Lagarde describes as the new global three-speed economy.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: We are now seeing the emergence of what I will call a three-speed global economy. Those countries that are doing well, those countries that are on the mend, and those countries that have quite a bit of distance to travel.
(END VIDEO CLIP)
QUEST: Now, this phrase, "three-speed economy," is becoming de rigueur, everybody's using it, and this is what we're talking about. The fast-growing economies: obviously, the Chinas, the Indias, and you've got the very-fast growing economies, the emerging markets, the BRICS and the like.
The medium economies -- now, interesting, two sides of the Pacific, Japan over there, the United States growing quite quickly.
And then, of course, as if you need me to really make it clear, the slow-growing economies. And if we take the other two out, you can see the slow coaches are very firmly in the eurozone and the European Union. And that is how in that context, the IMF sees the world at the moment.
So, bearing in mind what you've just seen on fast, medium, and slow, the three-speed economy, Olivier Blanchard, the Fund's chief economist, joined me and says when it comes to that slow-growing eurozone, the eurozone can grow if it regains confidence and blooms.
OLIVIER BLANCHARD, CHIEF ECONOMIST, INTERNATIONAL MONETARY FUND: If you go down the column which has the revisions, they are nearly all negative. But the reasons are different.
If you look at the US, where there is a revision down of -- what? -- 0.2 percent, it's really coming from tighter fiscal policy, the sequester, right? Where if you look in Europe, it doesn't come from fiscal policy, it comes from private demand.
So, in a sense, although the two numbers come out roughly the same, it's not the same message. So, to me, the message of that WEO is more about the bifurcation, the three-speed, the separation between the US, which seems to have a recovery going, and Europe, which is not there yet. To me, that's the message.
QUEST: Where do you stand, Olivier, on this question of whether central banks are now being asked to do too much? We know that they have been the financial firemen over the crisis, but there is now a very real difference of opinion as to whether central bankers are being asked to exceed the legitimate remit.
BLANCHARD: We have to use all the tools we have, so there's no question, for example, that weak banks are also contributing to the weak performance. We have to work on banking -- the banking union in Europe is very important.
So -- but you're right. Looking around the world, the fiscal tool is basically not usable at this point. We have to have fiscal consolidation at some speed in most countries. And so, the tool which remains is monetary policy, has gone a long way.
Has it gone too far? I don't think it's too far. There are some risks associated with some of the decisions which have been taken, but my sense is the benefits far exceed the risks or the costs.
QUEST: And if you pull the strands together, as we now look forward, bearing in mind the numbers and the political difficulties and what's already in the pipeline in terms of monetary policy versus fiscal policy, why should we be optimistic?
BLANCHARD: Well, it's interesting. The reason to be optimistic is to look at what has happened in the US. For a while, the question was, where is goal to come from? Right? And what you see is nearly 100 flowers blooming.
People are becoming more optimistic. The fact that there was no housing construction means that we don't have enough houses, so housing is doing well. Monetary policy is aggressive, people believe that banks are improving.
So, when you turn the corner, things happen. And the question is, now can we make Europe turn the same corner? It may well be, if we are lucky, that two years from now the corner has been turned in Europe and all these flowers are blooming there as well, and we see what's coming --
QUEST: Oh, now -- I'm going to interrupt you. You don't believe that is going to happen, do you?
BLANCHARD: One of the things that strikes me in this crisis is the role of confidence. We have mechanical brakes, too. There are things you can't repair. You have to repair if you want goal.
But at this stage, a very large component of confidence, which is if you look in Europe, in particular, in core Europe or in periphery Europe, what you see is people don't have any hope. And so what they do is they don't spend. And firms don't invest. And banks don't lend. Right? And it just feeds on itself.
Now, if they had confidence, they would spend more, firms would invest more, banks would do more, and we could have growth. Even with the existing constraints on the banking system and the rest. So, it can happen, but the problem is, how do we make it happen?
QUEST: Olivier Blanchard, the chief economist of the IMF. You're watching a special edition of QUEST MEANS BUSINESS, as obviously we give large parts of coverage to the events in Boston. Good evening.
QUEST: Notwithstanding the events in Boston in Massachusetts, the stock markets in New York rallied today after a very sharp fall yesterday and, of course, there was a sharp fall in gold as well.
But today the markets put back on some of those gains, up 113 points at the moment, three-quarters of 1 percent is how the markets are trading, now 14,712. It's largely on the back, of course, of a straightforward bounce back from what they did yesterday.
We're going to have more on the tragedy in Boston and will update you on the events taking place there, what we know and what we don't.
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN and, as always, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): A senior U.S. official has said there is no immediate indication that the Boston terror attack has any foreign connection. The official also said there was no immediate reaction from Al Qaeda.
It's now known three people have died following the twin bomb attacks near the finish line at the marathon; 176 people at least were injured. And the search continues for the suspects and a motive for it.
(END VIDEO CLIP)
QUEST: Our Pentagon correspondent, Barbara Starr, has more information on what we've learned about the bombs used in the attack.
Barbara, we have much ground to cover. Let's just -- before we get to what you know, are you surprised by that comment about no reporting of any international organizations or -- explain to me or help me understand what it means or what they're telling us.
BARBARA STARR, CNN REPORTER: Right, Richard. This comes from a source that I spoke to a short time ago, a senior U.S. administration official, who said to me, quote, "There is no reporting indicating a foreign connection or any reaction from Al Qaeda," but, Richard, that is at this time. This is according to information circulated at the highest levels of the administration about six hours ago.
But let's be very clear. The investigation continues. This could change at any moment. This is a reading of the tea leaves as they exist now. Federal law enforcement here in the United States led by the FBI looking at everything, looking at every scrap of intelligence, everything that they have.
At the moment, they did not have a direct threat to Boston or to the marathon race. But that is not to say as they scour through cell phone intercepts, Internet postings, email transmissions, they won't find a new clue.
That is exactly why they're going through everything they have because there's basically two alternatives here: some kind of foreign threat from outside the United States, whether it was a foreigner who conducted the attack or someone inspired by someone outside the United States organization, or what we call in the U.S. a homegrown terrorist, domestic extremist.
Those are the two options they're looking at. So they're trying to go through everything, Richard, and sort it out.
QUEST: Well, I mean, they're looking at the bombs, obviously, and how they've been constructed, and they will no doubt learn huge amounts of literally forensic evidence from that.
But I do wonder -- and, of course, it makes absolutely no difference to the carnage and the awfulness of what has taken place.
But from an administrative point of view and from an administration point of view, is there a difference between whether it is homegrown terrorism, to use that dreadful phrase that we talk about, or international terrorism? What's the feeling in the event to come (ph)?
STARR: Well, look, and again, we want to be very sensitive as we discuss this to the people of Boston and the victims and those recovering in hospitals.
But if you had a foreign attack, an Al Qaeda attack on U.S. soil and it happened out of the blue, and there was nothing to indicate it was coming and the administration missed it completely, that would be one set of circumstances for the U.S. intelligence community and the Obama administration to have to explain to the American people all these years after all of the efforts in homeland defense.
If you have the sort of lone wolf -- you should pardon the expression -- domestic terrorist who went around and bought up a number of items, such as nails and ball bearings and backpacks and the kinds of items that are not regulated in any way, shape or form and basically wired it all together and put a clock timer on it and tragically set it off, I think most people agree you are never going to stop those kinds of people who want to do that sort of evil.
You hope you will, you hope that a policeman will spot them in a crowd. But that's very different. That's very tough business to find the lone wolf before they attack. An Al Qaeda plot carried out in the United States? Much more significant from the intelligence point of view, Richard.
QUEST: Barbara, good to talk to you. Thank you for that, Barbara Starr reporting from the Pentagon.
President Obama has promised to find those responsible for the marathon bombings and as you've heard, a senior official said there was immediate indication -- no immediate indication of a foreign connection or any reaction from Al Qaeda. The two bombs claimed three lives, including that of a young boy. The president said this a short time ago.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In the coming days we will pursue every effort to get to the bottom of what happened, and we will continue to remain vigilant.
I've directed my administration to take appropriate security measures to protect the American people, and this is a good time for all of us to remember that we all have a part to play in alerting authorities: if you see something suspicious, speak up.
(END VIDEO CLIP)
QUEST: President Obama.
Fifty-one of the more than 170 people injured in these attacks have now been discharged from hospitals in the Boston area.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The bombs went off near the finish line shortly before 3 o'clock on Monday. It was about four hours into the race. Seconds later, there was that second blast. You've probably seen the pictures and you've certainly heard the results.
CNN's John Berman now takes us through what happened.
(BEGIN VIDEO CLIP)
JOHN BERMAN, CNN CORRESPONDENT (voice-over): A picture-perfect third Monday in April, Patriots Day and the day of the 117th Boston Marathon. At 9:32 am, the elite women racers take off from Hopkinton on the 26.2-mile course on their way to Boston's Back Bay.
Almost two and a half hours later, the first elite runners start crossing the finish line, wave after wave of runners. Thousands of them follow.
Then, about 2:50 in the afternoon, it happens.
.an explosion near the finish line. 12 seconds later.
.another explosion, about a block up a crowded Boylston Street.
JEFF CURTIS, WITNESS: They were banged up bad, severe lacerations, amputees, a lot of shrapnel. You know, they were pretty big explosions. They were banged -- a lot of blood everywhere.
BERMAN (voice-over): Emergency teams and law enforcement scramble.
UNIDENTIFIED FEMALE: Get all units in the city to this team now, please.
BERMAN (voice-over): The investigation begins. Two hours late, Boston's police commissioner goes before the cameras.
ED DAVIS, POLICE COMMISSIONER, BOSTON POLICE DEPARTMENT: At 2:50 pm today, there were simultaneous explosions that occurred along the route of the Boston Marathon near the finish line.
BERMAN (voice-over): The governor urges the public to be cautious.
DEVAL PATRICK (D), GOVERNOR OF MASSACHUSETTS: We are asking that people stay out of crowds and calmly make their way home or, if they're visiting, back to their hotels.
BERMAN (voice-over): About an hour later, just after 6:00 pm, the president appears in the White House Briefing Room.
OBAMA: We're still in the investigation stage at this point. But I just want to reiterate, we will find out who did this and we will hold them accountable.
BERMAN (voice-over): And shortly before 9:00, the FBI.
RICK DESLAURIERS, FBI SPECIAL AGENT IN CHARGE: The FBI is taking the lead in this investigation. It is asserting federal jurisdiction. It will be an ongoing investigation. It is a criminal investigation that is -- has the potential -- is a potential terrorist investigation.
BERMAN (voice-over): And the Boston police commissioner sums up the sentiment of law enforcement.
DAVIS: This cowardly act will not be taken in stride. We will turn every rock over to find the people who are responsible for this.
BERMAN (voice-over): John Berman, CNN, Boston.
(END VIDEO CLIP)
QUEST: Now coming up next, election clashes in Venezuela.
(BEGIN VIDEO CLIP)
QUEST (voice-over): President-elect is named. We will look at what's behind the wave of violence. Good evening.
QUEST: Now a piece of news I need to bring you: American Airlines has announced that it is in a system-wide ground delay until about 4 or 5 o'clock Eastern. That's for another two or three hours. In other words, all flights on American Airlines -- I assume it must be worldwide -- are now in a ground delay. They're not moving.
Now the reason has nothing to do with the events in Boston, it appears. It's all to do with a complete and utter failure of their reservation system, their saver.
"We are now in a system-wide ground delay as we work to resolve this issue. We apologize. The issue is our ability to access our reservation system. And we apologize to (inaudible) customers for the confusion."
Now what this is all about, they've got a complete failure of their reservation system. Obviously, if you have such a failure, you can't check in passengers; you can't do baggage. You can't do anything.
And so clearly they've been working on this for several hours. But it is now obviously overwhelmed the airline. So American Airlines, one of the largest in the world, now at a full ground delay for the next few hours.
Four people have died in protests following Venezuela's presidential elections, according to the state-run news agency. Authorities say Nicolas Maduro was the official winner. His opponent demands a recount. Paula Newton in Caracas joins me now.
So, well, I suppose it was always going to be a long hope that you'd have an election, a victor, and everybody would go home satisfied with the results, bearing in mind the history. But even so, Paula, conflict, violence and dispute.
PAULA HANCOCKS, CNN CORRESPONDENT: Absolutely. And really no independent arbiter to go to now to figure out what is to be done about it. I want you to see really some of the protests that went on in the streets here last night.
Richard, that protest on the street is nearing what's going on in the institutions here in Venezuela. Basically the government is saying we want fair and square, even though it was less than 235,000 votes, less about a percentage and a half, the opposition is saying we're putting protesters on the street. We will not stand for this.
The electoral commission, which people here, the opposition accuses as being part of (inaudible) towards the government is saying we don't need a recount. We don't know what you're talking about.
The government is now really bringing down -- their words, not mine, Richard, "the iron fist." They are saying that all these protests are illegal. They're saying that they will prosecute these protesters to the fullest extent of the law. They say they have defeated a coup by right- wing opponents to bring down the governments.
And on and on it goes with this rhetoric, Richard. And in the meantime, this Venezuelan economy -- I don't have to tell you -- is on its knees, Richard.
QUEST: So here's the question: do the opponents -- it's an unfair question, maybe -- but do the opponents have a good case to answer? Do they actually -- when they say that this election was improper or whatever, are there grounds which will -- might, on an honest Tuesday, say they should be heard?
HANCOCKS: Well, it's hard to know. I can tell you that the Organization of American States, the U.S. government, the E.U., all are saying it is prudent to do a recount. It's the Venezuelan government, the electoral commission here, saying we don't need a recount. It's an automated system; it's absolutely fine.
The opposition is saying, even if we're wrong, what do you have to fear from a recount? And the government is saying, absolutely not; you guys are not recognizing legitimate democracy in Venezuela. We will not allow a recount.
The problem is, Richard, this is such a standoff. And let me say that no referee to go to in this country or outside of this country. And that means that in the streets you will continue to see these pitched battles, none of it good or Venezuela, a country that should be thriving.
I mean, they do have, some of them, highest proven oil reserves in the world. And here they are, dealing with record inflation and shortages of basic food.
QUEST: Paula Newton in Caracas, who will continue to follow events following the Venezuela election for us.
Now it's been a very busy day, as you can imagine. I need to update you with another story that's been coming our way.
Dozens of people have been killed by a major earthquake on the Iran- Pakistani border, according to sources. The 7.8 magnitude quake was felt across the Gulf region.
The U.S. Geological Survey says its center was in a remote system, Balochistan (ph) Province, where a state of emergency has been declared; 34 people are said to have been killed in Pakistan. Around 80 are injured; 12 were hurt on the Iranian side of the border. No deaths reported. The region has already been hit by one aftershock and more, of course, will be expected in the coming days.
It's the region's second earthquake in a week. There was, last Tuesday, a magnitude 6.3 quake killed 37 people. We need to know the circumstances of the weather in the region, because one thing we do know, Jenny Harrison is with us.
Jenny, one thing we know is it's often -- I mean, the earthquake itself is dreadful enough. But the appalling conditions and weather-wise can make that so much more unbearable in the hours and days and weeks after.
JENNY HARRISON, CNN METEOROLOGIST: Absolutely it really can, actually, Richard. We are heading into the fairly dry period actually across this region. It's that time of year where it is (inaudible) heading into the drier summer months.
I just want to show you first of all the plates that are actually (inaudible) in this area of the world, the Eurasian Plate is where the quake actually took place. It's moving about 37 mm to the north-northeast as we go throughout the year. That's how much it moves throughout any 12 months, 7.8 magnitude, the Arabian Plate to the south, the Indian Plate to the east.
And this, of course, is where the quake actually took place on the border there with Iran and Pakistan. So we have the towns, of course, very close, not easy to get to these locations. They are in a fairly mountainous area. That's one of the reasons that actually the shaking was not felt to be worse than it was.
There's a number of factors, of course, that come into play with any earthquake. One of them is the depth of the quake. And this one was particularly deep. So a 7.8 magnitude, that is a very strong earthquake. But when like this, it was 82 kilometers deep and deep inside solid rock like this, well, that all helped.
But you can see here, the color of this indicating very strong shaking that was felt in all of these locations, well, as I say, it would have been a lot worse had it been actually a shallower quake. And if we move on from there and show you the weather in the last few hours, you can see that actually it was relatively clear.
Now you mentioned that there was actually another aftershock. It was; it was actually very light. It was 4.1. And that was also deep. It was actually 65 kilometers deep. The other thing with both of these quakes is the time of day. The first one was at 14 minutes past three in the afternoon local time. And then the aftershock was at actually about 24 minutes past 6:00 in the evening.
So all of that perhaps would also have helped. Currently the temperature has dropped back down to 18 Celsius. In actual fact, the weather conditions are a little bit above average for this time of year. And (inaudible) over the next few days, we've got temperatures above the average. It'll be in the mid-30s over the next few days, clear, sunshine by day.
So if anything, probably a little bit too warm, particularly if there's problems getting water to the area and then in the overnight hours, it's actually going to be very mild. The second problem we have, of course, in this area, Richard, is that most of the structures just are not built to withstand earthquakes and certainly not to this magnitude.
And then the other problem is that in such a mountainous area we have to worry about landslides and any aftershocks of course, can weaken structures that have already been damaged by a quake of this magnitude. So we're at a high altitude, but at least the conditions over the next few days are dry, calm and clear. But as I say, we just need to monitor the situation in the hours and days ahead.
QUEST: Jenny, we thank you for that. Jenny Harrison, who will be doing that monitoring for us at the World Weather Center.
When we come back in just a moment, an act of terrorism and, of course the family tragedy. We'll be back in Boston with the youngest victim of the marathon bombing.
QUEST: The details are absolutely horrific, the violence was intense. And Martin Richard is one of three people killed. He's the 8-year-old boy who was there to watch his father run the marathon. His mother and his sister were also hit and they're both in hospital with serious injuries. His little sister, who's 6, has lost her leg.
CNN's Carol Costello reports.
(BEGIN VIDEO CLIP)
CAROL COSTELLO, CNN HOST (voice-over): Martin Richard is now sadly the face of this tragedy. He was just 8 years old, a much loved boy. This is Martin who, according to affiliate station WHDH, ran into the street to congratulate his dad, who was just about to cross the finish line. That moment of joy and triumph turned deadly for Martin.
MICHAEL MURPHY, BOMBING WITNESS: I thought I saw a child laying to the left, and my wife didn't see that, as she later told me. And I thought perhaps it was clothing or perhaps it was someone's limb, because there was a man there missing a limb. But it was surreal.
COSTELLO (voice-over): And nearly killed his mother and sister. Martin's 6-year-old sister lost her leg and their mother suffered a severe brain injury.
At their home in Dorchester, candles burn and the word "peace" is scrawled on the sidewalk outside of the house. Martin's relatives are grieving online, his cousin tweeting, "I love you, Martin. You'll be in my mind forever and ever."
And his aunt, "Martin, you were the sweetest, funniest boy. I'm going to miss you so much, but now you're an angel."
WHDH reports Martin's mother, Denise, is out of surgery. His little sister, who's in the first grade, is still in the hospital. We can only assume his dad, Bill Richard, is OK, at least physically. But we know he is much loved and active in the community.
"The Dorchester Reporter" says that Richard's family is, quote, "deeply involved in all facets of life in Dorchester, from Little League baseball and soccer to their church, St. Ann's Parish, in Neponset." -- Carol Costello, CNN, Atlanta.
(END VIDEO CLIP)
QUEST: This is CNN. Back in a moment.
QUEST: "The embodiment of evil": the words of a witness about the Boston Marathon bombings in which more than 170 people were injured in the attack, 17 critically hurt; of course, three died.
(BEGIN VIDEO CLIP)
QUEST (voice-over): And a crime scene the size of 12 blocks is now being searched for minute clues. No one has claimed responsibility for the attack, which happened about four hours and 9 minutes into the race.
That first blast was recorded on a runner's head camera. Initially some people thought it was a celebratory cannon going on, but of course, 20 seconds later, confusion turned to panic after another explosion.
Spectators ran for cover as smoke filled the streets near the finish line. One former Army captain said the blast reminded him of an improvised explosive device from Iraq. The victims were taken to hospital; doctors carried out at least 10 amputations. Those caught in the blast had suffered terrible injuries from shrapnel. The runners, their families and the spectators were left asking, "Why?"
And we will have an update on the current position and the latest news on this in just a moment. This is CNN around the world, around the clock.
(BEGIN VIDEO CLIP)
QUEST (voice-over): A senior U.S. official has said there is no immediate indication that the Boston terror attack has any foreign connection. The official also said there was no -- three people died following twin bomb attacks near the finish line; among them, an 8-year-old boy and a woman named as Krystle Campbell. At least 176 people were injured. The search continues for a suspect and a motive.
Barack Obama has described the attacks as heinous and a cowardly act. The president added the FBI is investigating the bomb blast as an act of terrorism. He said officials still don't know whether the attacks were the work of a terrorist group or malevolent individual.
Dozens of people have been killed by a major earthquake on the Iranian border with Pakistan, according to sources. It was a 7.8 magnitude quake felt across the Gulf region. Sources have told CNN at least 34 people are dead and more than 80 injured. There were no confirmed deaths in Iran. The region has already been hit by one aftershock; more are expected.
And the French budget minister who quit over a secret bank account has now resigned as an MP as well.
(END VIDEO CLIP)
QUEST: You're up to date with the news headlines. Now to New York and "AMANPOUR."