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QUEST MEANS BUSINESS
Greek TV ERT Off Air; Troubles for Greece; ERT Anchor Speaks Out; Greece's Market Downgrade; RBS Chief Resigns; French Air Traffic Strike; Dollar Down; Brazil Protests; Road to Brazil
Aired June 12, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: It's a case of cut to black. Greece's state TV shut down and the Greece market downgraded.
Talk about Paris paralysis. Thousands of flights canceled as air traffic controllers strike.
And call it a Messi affair. The world's best footballer is accused of evading tax.
I'm Richard Quest. We've got an hour together, and I mean business.
Good evening. Tonight, Greece has closed one station and loses another. The state broadcaster has been unceremoniously shut and Athens' status as a developed market was abruptly removed. There's shock and disbelief in Greece over the closure of ERT, the state national broadcaster.
This was the scene outside its headquarters today, employees and members of the public staging a peaceful protest. Unions say they will fight the decision to shut down the station. 2,600 workers will lose their jobs with immediate effect.
This was the moment when the news channel went black, as we say. That was it. Off it went. A government spokesman called the institution a "haven of public waste." The government plans to open a new, smaller broadcaster, which will be on air before the end of the summer.
Now, the storm of protest over the closure of ERT could plunge Greece back into a crisis, because it wasn't only this that happened today. There were a variety of events in Greece which all gave cause for concern.
First of all, the rift over the ERT threatens between Prime Minister Antonis Samaras and his coalition partners. Both PASOK and the Democratic Left oppose the shutdown of the national broadcaster.
(BEGIN VIDEO CLIP)
FOTIS KOUVELIS, LEADER, DEMOCRATIC LEFT PARTY (through translator): We are against the closure of ERT. It is unacceptable that the state radio and television broadcaster is being shut down. No reform can justify for a moment a closed state broadcaster.
(END VIDEO CLIP)
QUEST: So, not only was that, it hasn't been a good week. The government's privatization scheme is floundering badly. There were no buyers for the state gas company, DEPA. It means Greece is unlikely to meet privatization goals this year, and there'll have to be other savings to make up the shortfall in the budget.
And you'll remember, of course, the IMF in its report last week specifically talked about Greece's inability to meet privatization targets.
And if that wasn't bad enough, MSCI, the emerging market index, Greece has now been stripped of its developed market status -- bearing in mind most of the euro, the eurozone is developed, and now Greece stripped of that status. MSCI compiles the index which uses many investors as shares they should hold.
Greece is the first developed market to be downgraded. The first time in history that a country has been downgraded. Many countries, such as the UAE, get upgraded, but absolutely not downgraded.
So, now to the main part of the story, of course. ERT, the national broadcaster. We showed you a second ago how the -- the station went off air dramatically. Joining me now, Fanis Papathanasiou, the news anchor from the network. Fanis joins me now, and it's good to see you.
I'm assuming -- and let's get this out of the way straightaway -- I'm assuming tonight because of what happened yesterday, you are out of a job.
FANIS PAPATHANASIOU, ERT NEWS ANCHOR: Yes, I don't have a job. Yesterday I was on the air, though, and we left historic moments. Actually, I'm going to write my CV looking for my next job that yesterday I was on the air on the last moments when we sat down and the TVs all turned to black.
QUEST: Right, now, this is --
PAPATHANASIOU: So, as you say, today I don't have a job. We are here with a lot of people, Greek people, in ERT. We have a live concert, we have thousands of people gathering here to give us support, and we broadcast live continuous, business as usual, and let's see what is going to happen.
But what's strikes us the most out of this situation is the procedure, the way the government did it. Actually, they provoked us, actually. The spokesman yesterday said that we are actually the ones who were responsible for all these bad things.
PAPATHANASIOU: For all the inefficiency, all the -- overspending, all the corruption of ERT. You have to understand something, Richard. Here, there is a Greek way of doing TV, and the way the public TV works -- and I hope it's not going to be the case with the next TV, the public TV -- it is, let's say the PASOK government wins the election --
QUEST: Right, but --
PAPATHANASIOU: -- Mr. Papandreou, let's say. Mr. Papandreou and his cabinet appoint the board, appoint the news manager, appoints all the key players on the station, and then these are the managers --
QUEST: All right, let's --
PAPATHANASIOU: -- who are responsible for any --
QUEST: -- let me join in. Let me jump -- let me jump in here. Would you accept that -- I mean, whatever the way it's been done, but you would accept that there needed to be reform at ERT. They needed to become more efficient at ERT.
PAPATHANASIOU: We are the ones -- we are, Richard, we are the ones who said it first. It was oversized. But there were many ways to do the reconstruction. This reconstruction, it was done the wrong way.
QUEST: Right. Right.
PAPATHANASIOU: There are many ways to do the -- to manage their wrongdoings, but we are not responsible for this.
PAPATHANASIOU: The management is responsible. And let's say -- OK.
QUEST: Right. So, now let me ask you: do you believe that most of the people when the station is brought back after the summer, people like you, experienced, seasoned journalists who've covered this crisis, do you believe you will be brought back?
PAPATHANASIOU: Actually, I'm not that optimistic. I hope, and my hope is that the new ERT is not going to be the same. It's going to be -- work in a different way, work as an institution, clear, not too close to the government and not so -- it's going to be more independent.
But let's see. This is the challenge for the Greek government that formed the coalition for New Democracy, Socialist PASOK, and the Democratic Left. I think this is the challenge, and this is the -- should be the main issue that the three leaders could discuss, how this public TV and not only this, the other public --
QUEST: We will have to leave it there.
PAPATHANASIOU: -- companies would work better, could be reconstructed in an efficient way.
QUEST: Good to talk to you, Fanis. We'll talk more about this in the future. I hear your concert getting underway, now. Fanis joining me there from Athens tonight.
So, the issue, of course, not only with ERT. It was also the downgrading of Greece from a developed to an emerging market. The reason, of course, has been reflected in the markets themselves. Stocks in Athens have fallen more than 10 percent so far this week.
And if you look at it since the beginning of the crisis, the stock market is down the best part of 80 percent, and that was one of the reasons that was quoted.
I was joined by our old friend, good friend John Defterios from Global Exchange, our emerging markets editor, and I asked him, all in all, the emerging market status was a painful kick.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Indeed, it is a kick, Richard. The dubious honor of being downgraded from the developed market to an emerging market, the fact is, it's the first time it's ever happened in MSCI history.
And it comes at a delicate time for Greece right now, as you know. Prime Minister Samaras is trying to cut 15,000 jobs by the end of 2014. He has the Troika -- the International Monetary Fund, the European Central Bank, and the European Union -- down in Athens again, and they're going through the books with a fine-tooth comb.
And he made this bold move, perhaps it may backfire, to try to trip 2500 jobs from ERT, the state broadcaster. He's going to be facing strikes on Thursday as a result. So, a real strike against the bow for Greece. But not entirely surprising, because in June 2012, MSCI put them on the warning block saying they were going to review their status.
QUEST: But does it make much sense, bearing in mind that fundamentally it's a mainstream euro country -- it's not even one of those EU countries that's not in the eurozone -- for a eurozone country of this size and scale to be put in that position?
DEFTERIOS: It's actually an uncomfortable position, and it's quite ironic, because Greece did get the upgrade back in 2001 when it joined the euro, so the belief was then that this was going to -- a country reaching a period of stability, it was joining the eurozone, inflation would go away, they'd have the budget discipline.
We know how this has all played out over the last 10, 12 years for Greece, and it's been backfiring ever since. The reality is, Richard, the financial markets down better than 80 percent from its peak in October 2007, the banking sector is under pressure, the securities market makers are under pressure as well. They really could not sustain this level.
The other side of it, though, is perhaps coming out of the developed markets may benefit them. Being an emerging market player, they could get some of this hot money that's been floating into the Middle East, Southeast Asia, and Latin America if Prime Minster Samaras can get growth going again. But the big challenge is we're in the sixth year of recession.
QUEST: Now, just looking at the list, to put it in perspective: Greece, of course, is the only eurozone country that is classed as an emerging market under the MSCI index. Other EU members that will be in the index include the Czech Republic, Hungary, and Poland that would be considered as developed markets.
It came late this afternoon and it was a shock nonetheless: the chief executive of the Royal Bank of Scotland, RBS, is to resign. Stephen Hester shook the British banking world when he announced he'll be stepping down.
"The Daily Telegraph" newspaper put it succinctly. It said "he had the toughest job in UK banking. He was propelled into the position after the taxpayer-funded rescue and the crisis." Excuse me.
Hester in 2008, he took over after a $30 billion bailout, which effectively bailed in the UK government to be their major shareholder. The British public own RBS.
In January 2012, he gave up a $1.5 billion bonus. That was over the issue, of course, of an IT scandal or maybe mess up. In February of this year, it was fined -- the bank was fined $612 million over libor, and a little earlier, he had this to say.
(BEGIN VIDEO CLIP)
STEPHEN HESTER, OUTGOING CEO, RBS: I -- had a fantastic five years here, and during that time, I think we've accomplished a great deal. And I think that it is a sensible thing for the board to look forward to privatization. In fact, what we've accomplished allows that, and I can completely understand that a fresh face with the ability to commit many years into the future may be a good thing for privatization.
(END VIDEO CLIP)
QUEST: Stephen Hester talking earlier. The EU's plan to unite Europe's aerospace is dividing air traffic workers, and huge frustration at airports across France and travelers across the continent. When we come back, we'll have more.
QUEST: Now, French traffic controllers -- air traffic controllers -- are striking for a second day over plans for a single European air space put forward by the Commission. Hundreds of flights have been canceled. If you look at this, you can see the red areas are where there are the delays, the cancellations, the difficulties.
And of course, it's north-south traffic. Anything going over France is an issue. And of course, over here, you also see the spillover effects into the rest of the continent. About half the scheduled out of Charles de Gaulle are grounded, and the airport usually averages around 600 flights a day at this time of the year.
Now, this map shows that exactly the situation over how it has developed and really why it's developed. Because what we have over here is the split and breakup at the moment of European air travel. This is the current model, as it shows, and you're seeing an entire variety of different areas. You've got the UK, France. France is in several sections.
And what the European Commission wants to do is build bigger FAB, flight area blocks. They want to make them a lot larger.
Now, the current plan they say costs $6.6 billion a year and averages around 42 kilometers, about 26 miles for ever single flight that takes place. The reason is that people have to travel around, it's very time- consuming, and it's very cumbersome. Under the single sky plan, well, they say it will halve costs, triple air space, and reduce pollution.
The problem is, as you go towards single air space, well, then you end up with fewer air traffic controllers, larger blocks, and national authorities coming under threat. And that is the problem, as I heard from the head of the employment union representing air traffic controllers.
FRANCOIS BALLESTERO, POLITICAL SECRETARY, EUROPEAN TRANSPORT WORKERS' FEDERATION: Since the Commission announced the process of the single open sky ten years ago, we always participated with the process. We have signed different agreements with operators, Council, and we have cooperated actively with the Commission to improve the proposals.
Now, to date, we say that enough is enough because the Commission now wants really to liberalize this segment of the industry. And for us, there are dangers for the jobs and for the working conditions.
Let's say I would like to summarize my point of view, to say that the Commission follow the normal rule of the Commission today, which is so much contested by the citizens, is the fact that they want austerity, they want to cut public services, and they want to destroy the euro pension model. This we cannot accept as a trade union.
QUEST: If these outsourcing of meteorology and air information, if that can be provided to the same level of efficiency and accuracy but at a lower cost, what's the problem with that?
BALLESTERO: The problem is that this issue is not about cost. This issue is about public service and this danger is that you can't have a tradeoff between economic and safety issues.
QUEST: Is this a dispute over jobs and the social model that you're talking about -- which is important, of course -- and is there a safety element that the traveling public need to be worried about?
BALLESTERO: Safety is not the first priority of the Commission. The first priority is economic performance in order to reduce the costs. Under this non-ending process of cost at no moment can have a tradeoff with safety, and this is what we don't want to take as a risk.
QUEST: Do you believe that there will be more industrial action this summer?
BALLESTERO: No, during the summer? No, not coming from us, this is for sure, because now the proper zone of the Commission will go to what we call in the local jargon the first reading in the parliament, and then we will analyze after the ending of today what we will do in the future, but it will not be during the weekdays.
QUEST: That's Francois Ballestero from the European Transport Workers' Federation. And tomorrow's dispute has been canceled, so it's expected that flights will get back to normal pretty much over the next few hours. Now to tonight's --
QUEST: -- Currency Conundrum. Fiji is looking into changing its $1 and $2 coins, and the question is, why? They're too small? They're too similar in size? Or they're too easy to counterfeit? The answer later in the program.
The dollar is down against the pound, the euro, and the yen. Those are the rates, this is the break.
QUEST: Protesters clashed with Brazil -- with police in Brazil exactly a year before the country is due to host the World Cup, 365 days. So glad we got that right. Twenty-five people were arrested during demonstrations in Sao Paolo. Teargas was used as some protesters burned buses and damaged train stations demonstrating about an increase in public transport fares of about 10 cents.
Now, the demonstrations raised questions about the Brazilian infrastructure ahead of the tournament. Paula Newton is in Rio for us tonight. Once -- oh, well, we've gone from the beach. We've obviously -- you've obviously had enough of the beach and showing us the delights of Copa Cabana. But 365 days to go and demonstrations and worries.
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: Demonstrations and worries. And you know, Richard, what you just described, those riots in Sao Paulo, not unrelated to the World Cup. Why?
Because Brazilians are saying look, what do we get out of this World Cup? And many local officials, federal officials are saying, look, we're going to improve the infrastructure. But some are questioning why so much money should be put into these stadiums as opposed to the infrastructure.
I can tell you, Richard, I know we talked from the beach, but most people in Brazil are spending a lot of time getting to and from work, and they're spending a lot less time on those beaches, and that is what is so angering them. Put in the middle of that billions spent on stadiums here in Brazil and you have a lot of controversy still with one year set to go, as you explained.
But I want you to have a look at this, now. They are building -- 12 host cities, again, Richard -- and they are even building one in the middle of the Amazon. Take a look.
NEWTON (voice-over): It's one of South America's most unique cities, with the Amazon rain forest as its back yard. This is Manaus, Brazil, and in 2014, it will also be one of Brazil's 12 host cities for the FIFA World Cup.
Around the city, you can see this rendering of what the stadium will look like. But like many of Brazil's World Cup venues, in reality, it is still very much under construction.
MIGUEL CAPOBIANGO NETO, COORDINATOR, MANAUS WORLD CUP MANAGEMENT UNIT (through translator): We started the construction of the Arena Amazonia in June 2010. We started destroying the first stadium that was here before, and since then, we've been building this arena that will be the beauty of the World Cup. Right now, we're about 65 percent done, so we'll finish in December of this year.
NEWTON: There really is no option other than to be done by then, because having the Amazon as the backdrop is both a blessing and a curse. The rainy season will start in December, giving Manaus only six months to finish instead of a full year.
Now, to help save time, parts of the stadium, like the roof, are being built in other locations, from Portugal to Germany to southern Brazil, and then assembled in Manaus.
NETO (through translator): These logistics give us a big headache, so we need very good planning to have everything here at the right time.
NEWTON: Manaus's mayor, Arthur Virgilio, admits he, too, is a little worried, but knows too much is at stake for his city not to be ready, and that they can't just rely on the attraction of the Amazon.
ARTHUR VIRGILIO, MAYOR OF MANAUS: Nature is OK. Nature's OK. We have to do the part of man. I think it's -- God gave us his part, it's OK. We have to do ours now.
NEWTON: The stadium will take advantage of those nature resources so abundant here by implementing eco-friendly solutions into the design. They are also using material from the original smaller stadium that once stood on the very same spot. That's to cut down on the amount of waste.
NETO (through translator): When we thought about building this arena, we thought about sustainability, by saving the rain water, using sunlight, and using the wind.
NEWTON: In this city of nearly 2 million people, infrastructure, though, is also a question mark. But the city hopes scheduled improvement projects meant for the World Cup, like expanding the airport and improving electricity supplies, will continue to benefit Manaus long after 2014.
NEWTON: Now, in terms of this actual stadium being ready, we spoke -- CNN spoke with the secretary general today, he was here for that countdown event and also to kick off the Confederations Cup, which begins in Brazil on Saturday, and he said, look, there is no plan B. These stadiums will be ready, they absolutely have to be ready.
Richard, I'm here at Maracana Stadium, this is where the World Cup final will be held. I was here last week taking a look around. Things seemed fairly much in order, although there are still construction workers outside --
QUEST: All right.
NEWTON: -- and most people saying, look, most of the stadiums will be ready by December. And -- no, no, I'm going to leave you with something else now. Now, Richard, you know how loud I can be on any given day, but now, this is called a caxirola. And unfortunately, they tried to use it as a test match. I'm going to shake that for you again.
(CAXIOLA SHAKER RATTLING)
NEWTON: They tried to use it at a test match. Unfortunately for security reasons, it is now banned by FIFA. So still a lot of different wrinkles to work out in this country before it can host the World Cup. Go ahead, you were going to say something, I'm sure.
QUEST: I was only going to say one can always rely on Paula Newton to make more noise than most, even from the other side of the world. Paula Newton with -- whatever that thing's called. Just leave it behind.
Now, join us for a road trip through Brazil. We're examining the countries on the move in travel, culture, and sport, and with all the special coverage on world business today all this week.
The Barcelona star Lionel Messi and his father have been accused of committing a $5 million tax fraud. Messi, who's often been named as the greatest player in football today, has denied wrongdoing. Pedro Pinto is with me. What's this all about?
PEDRO PINTO, CNN SPORTS CORRESPONDENT: Well, it's a story that took everyone by surprise, not only in the football world, but in the sports world. Leo Messi has an incredibly clean image. And what we're hearing out of Spain and the local prosecutor's office in Barcelona is that both Leo Messi and his dad, Jorge, have been accused of defrauding the state of more than $5 million.
And apparently, both of them filed fraudulent returns during three years, and the money that they are apparently hiding from the government pertains to payments that were made regarding his image rights. So, this is not anything to do with the salary at FC Barcelona. That's why the club has not commented.
I'll tell you that the player and his camp did comment earlier today, releasing an official statement on Facebook, and we can show you a short excerpt of that, in which they said they were surprised about the news because they had never been aware of committing any infringement.
And they go on to say, "We have always fulfilled all our tax obligations following the advices of our tax consultants, who will take care of clarifying the situation." Just to give you an idea, the government now and the Treasury there is looking at transfers that were made from Spain into offshore accounts and were not declared.
QUEST: This is going to be very messy, isn't it, in the --
PINTO: I knew that was coming.
QUEST: You know what I mean. This is going to be a really messy tax question of whether an interpretation of an obscure part of the tax regulations.
PINTO: What happens is that Leo Messi is one of the highest-earning athletes --
PINTO: -- on the planet. In 2012, he made a total of $40 million. That is salary plus endorsements. This kind of investigation pertains to money that he earned off the pitch, so this is part of his endorsements deals, image rights, and that the government is now investigating.
They haven't been charged yet, but they have had flags up, according to this amount of money, $5 million, that they're trying to account for.
QUEST: We'll follow this closely as, indeed, I'm sure will you. Thank you.
QUEST: Pedro Pinto joining me.
Still ahead, QUEST MEANS BUSINESS as we wind our merry way through our nightly conversation on economics and business. Our next guests have very differing views about what's ahead for Europe. Ireland's finance minister says the recovery is on track. John Kay, the economist, is waiting for financial collapse.
QUEST: QUEST MEANS BUSINESS.
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. But this is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Only one member of the coalition leading protests against the Turkish government attended a meeting with the prime minister in Ankara today. Most declined to attend, saying the talks would be fruitless following a night of violent clashes in Istanbul.
Meanwhile, the Canadian Broadcasting Corporation, the CBC, is reporting that two of its correspondents were detained while covering the protests. The CBC says it has been in contact with them and the journalists are, in their words, "fine."
The man who leaked top secret details about a U.S. surveillance program says he's neither a traitor nor a hero. Edward Snowden is quoted in a new interview with the "South China Morning Post," speaking from a secret location in Hong Kong. Mr. Snowden said he's not there to hide from justice; he's there to reveal criminality.
The South African president, Jacob Zuma, had a positive update today on Nelson Mandela's condition. Mr. Zuma said the 94-year-old former president was responding better to treatment for a recurring lung infection. Earlier on Wednesday, children left hand-drawn get-well cards outside Mr. Mandela's Johannesburg home.
There's some relief for travelers in Europe, as French air traffic controllers have decided to end their strike early after two days off the job. The stoppage has caused significant flight cancellations and a backlog of passengers. The French strikers are protesting over European plans to streamline air traffic control and cut jobs.
(END VIDEO CLIP)
QUEST: And so to two very different views on the European economy, one from a minister, the other a top economist.
Ireland is often held up as the poster child of the bailed-out Eurozone nations. Unlike Greece, it's returned to growth after tremendous economic shock. I spoke to Ireland's finance minister, Michael Noonan, and asked him about the move to the next stage of the Irish recovery and the priority.
MICHAEL NOONAN, IRISH FINANCE MINISTER: Yes, we had a huge shock. GDP went down by 11 percent and 30 percent was wiped off the tax base. But we have recovered with the help of our European partners and the IMF, and our priority now is to exit the program. That, in effect, means to get full back at access at low interest rates.
And then we want to continue growing the economy. It started to grow in 2/11, and we want to turn that growth into job creation to reduce the high levels of unemployment.
So there's a lot going right for us. We're running a balance of payment surplus. We're in our third year of growth. But our -- the growth in our partner countries isn't as strong as we would wish for. Our model is export-led growth. So if our customers don't buy, we can't sell.
QUEST: The IMF recently brought out a report on Greece. You may well have seen it, as it evaluated the first bailout in 2010. It's a fairly disturbing report because it talks about the troika being neither ideal nor appropriate; it talks about arguments. It even goes as far as to say the Eurozone group was not -- was not really fit for crisis management.
Is that your experience of how the troika and the -- and the process proceeded, that, frankly, it was a dog's breakfast?
NOONAN: We have quite good relationship with the troika and, you know, we argue our case very strongly, both through the troika and with their senior management in the European Central Bank and so on.
But undoubtedly mistakes were made in Greece, but mistakes were made in Ireland as well. When I recapitalized the banks in March of 2011, I pushed very strongly with Claude Trichet (ph) to allow the bailin of senior bondholders. And I couldn't get the ECB to agree to that.
And now there's movement in Europe to move from bailouts to bailins as we go towards banking union.
So what couldn't be done then will be done in the future.
QUEST: Hindsight's wonderful, isn't it, Minister, from people who write reports. And with the advantage of that, do you believe that it -- that the ECB, the commission, they really messed it up, to a large extent, because they didn't let people do what should have been done, for example, bailins, bankruptcies and those sort of things?
NOONAN: Well, it was new ground for the European authorities and the IMF as well as it was for countries like Ireland. So obviously, mistakes were made on both sides.
But overall, I have a very positive view of the troika and I have a very positive view of the assistance we got from our European partners and the IMF. And the prescription has worked in Ireland, because, as I say, the economy is growing again. People are going back to work again. Unemployment is coming down and you know, we're within reach of full market access.
So not very many mistakes were made in Ireland. Of course, it's hard on ordinary people. The austerity programs cutting public expenditure and increasing taxes is very difficult on families. And they have stayed with us in Ireland and they're working hard. But they need to see the results in terms of we've been successful. And they're seeing them now.
(END VIDEO CLIP)
QUEST: That's the Irish finance minister with a realistic appraisal of what happened.
The economist, John Kay, says watching the Eurozone muddle is like watching a man wobble along the edge of a cliff. You know he'll fall one day. You just don't know when.
He told me earlier today the underlying causes are still there.
(BEGIN VIDEO CLIP)
JOHN KAY, ECONOMIST: They're a darn sight better than they were in the sense we're not facing imminent financial meltdown. So that's an improvement, sure. It's an improvement. But we've done nothing to address the underlying general causes in the global economy of financial crisis. And we have a specific crisis in the Eurozone, which burns on and on and on.
QUEST: Why does it burn on and on? Is it incompetence or is it simply a task that is so great it was always going to take a decade to put right?
KAY: Well, it was always a bridge too far, as it were. The project of having a monetary union between France and Germany was a pretty ambitious one. To add half a dozen other weak European economies to that mix was a big gamble and, overall, it's not a gamble that has succeeded.
QUEST: But if you accept, as you probably will, that it was a political project more than an economic project, then they will muddle through and see it through, come what may.
KAY: Well, it was a political project, that's right. And it's true that the European Union was built on the idea that if you have political will, economic integration would follow. And it's a gamble that mostly came off.
And that gave people a self-confidence to take a gamble that has proved to be a gamble too far, because simply the political, statement of political will is not enough to keep this system going.
QUEST: If we look for the next 12 months, should we be -- should we be worried that something nasty is about to happen? Or perhaps worse, that we're just going to muddle through in the euro fudge we've come to know?
KAY: We'll probably go on muddling through for the next 12 months in the euro fudge we've come to know. You know, I think of this as it's like watching a man walking along the edge of a cliff. You'll know -- you know he's going to fall off one day. But it probably isn't today or tomorrow or the day after.
This is a crisis that can be kept going for a very long time. And the mechanism that keeps it going is really the German taxpayer will (inaudible) the Northern European taxpayer generally, will not pay up in explicit fashion for what is going on in Southern Europe. But you're finding mechanisms that don't really have to be explained to him, or indeed to anyone, to enable this reality to take place.
But when the European Central Bank lends against lousy collateral, when there are balances, target balances that are called within the European clearing system, no one knows about these things. No one understands these mechanisms.
But what they mean in reality is that large transfers are being made from Germany to Greece and Spain.
QUEST: That's John Kay. There was no respite for European stocks today. Markets in London, Frankfurt and Paris were all lower, as indeed was in Athens. The situation in Greece caused cause for concern. The prime minister, Antonin Samaras, has just released a statement, of course, talking about the closure of ERT and he described the closure of ERT as "temporary."
The New York markets' big board and the Dow Jones is off 94 points. Remember, they had a very strong session and they had a very strong opening today. But at the moment, it's way down by the growing expectation that the Federal Reserve has reached its limits in terms of stimulus; the Fed meets in a week's time. And (inaudible) consolidation ahead for (inaudible).
When we return, the A350, it's Airbus' new baby, and they're preparing to fly it this week.
QUEST: Time for tonight's "Business Traveller" update; now the A350 Airbus, brand-new plane, is to make its maiden flight. That's the plan, Friday morning, Europe's newest passenger plane will take off from the Airbus headquarters in the southwest of France in Toulouse. It has been seven years in the making, costing around $11 billion, $12 billion, $13 billion, $14 billion, $15 billion.
We will find the final day, the final amount somehow. And it's expected to trigger some fierce competition at this weekend's air show.
So this is the A350. It is a medium- to long-range aircraft that is designed to compete head-to-head with Boeing's 787. It has a 25 percent lower operating cost than the A330-40 series. If you look closely at what, of course, it will be -- this is the 800; there will be the 900, there will be the 1000 still to come along.
A larger interior; it's got, of course, composite to reduce the weight of the aircraft and most interestingly of all they have been flying -- pardon the pun -- off the order shelf. Airbus has orders for more than 613 of these new aircraft, and they are sleek and smooth.
Talking of sleek and smooth as silk, Jenny Harrison at the World Weather Center.
Hey, that was good, Jenny, that was good. That was good.
JENNY HARRISON, CNN METEOROLOGIST: I know. Somebody stop me. I nearly fell over. It's because you've not seen me for a while, you see. You have to be nice.
Very nice to see you. Yes, sleek and smooth, very nice indeed. I'm going to start talking, unfortunately, about something completely different, and that, of course, is the continuing situation in Europe. I'm really referring to the state of the Elbe River and of course the Danube. The latest is that they're continuing to crest. We know they are. It's going to be several days yet.
Starting with the Danube, it's working its way south through what's now the crest. I'm talking about working its way through Serbia, through Belgrade, probably towards the weekend. And of course meanwhile through Germany, the Elbe working its way, the crest, through Wittenberg on towards Hamburg.
Again, it's likely to be the weekend. So eventually, the Elbe making its way out there into the North Sea and the Danube making its way into the Black Sea.
But in the process, still, we have got flooding across different portions, first of all, in Germany. Here you can see in Verster (ph), still, continuing to try and stem some of the areas, the floodwaters, with all those sandbags and many of the people as well trying to rescue some livestock there, as you can see.
So this is just an ongoing situation. It'll be two weeks this coming weekend, really, since the rains first arrived. And unfortunately, there's some pretty heavy rain coming through this next couple of days, a fairly slow-moving system as well. Finally, conditions pushing into Northern Europe and some lingering showers across the southeast.
Temperature wise, it'll be cooler in the northwest, that next front as it's moving through central Europe, temperatures generally in the mid- to high 20s.
Now I want to take you across to the West in the United States, in particular this. This is known as the Black Forest fire in Colorado. So far, 30 square kilometers have been burned, 5,000 homes have had to be evacuated.
Have a look at these pictures.
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HARRISON (voice-over): Quite terrifying images; they have lost so far several dozen homes. In fact, thousands of people, of course, as I said, have had to evacuate their homes (inaudible) many have been evacuated. And you can see some have been lost.
They're fighting it from the air and from the ground, a very difficult area to get to. Tinder dry conditions we've got here, all of these trees, of course, as you can see, even a prison has been forced to evacuate about 1,000 of its inmates.
(END VIDEO CLIP)
HARRISON: And I just want to quickly show you why things are so bad. It's the drought. This is it. Look at this, extreme to exceptional -- you can see it here. And unfortunately, we've got some dry conditions continuing. The northeast, a different situation entirely, some severe thunderstorms. So that's something else we're going to watch in the next 24 hours, Richard.
QUEST: Jenny Harrison at the World Weather Center --
HARRISON: -- I heard that --
QUEST: -- yes, yes --
QUEST: -- don't know my hidden talents, Ms. Harrison.
HARRISON: (Inaudible) that was one.
QUEST: Enough of that.
Coming up on QUEST MEANS BUSINESS, I'll be playing all the way from Spain (inaudible) meet the man who builds these wonderful guitars, the country's holding him back, after the break.
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QUEST (voice-over): The answer to tonight's "Currency Conundrum," I asked you -- excuse me -- why Fiji is looking to make changes to its $1 and $2 coins and the reason is they're too similar in size. The reserve bank is currently working out a solution and now you can tell them apart by touch. The $1 has grooves; the $2 is smooth.
Allow me to introduce you Rodriguez, the Spanish classical guitar. The celebrity owners include Elton John, Stevie Wonder and Ricky Martin. The company that makes them is over 150 years old. And that company is buckling under the weight of Spain's employment laws.
I'm joined by Manuel Rodriguez. He's the third generation to run the firm.
And joining us over there to play the thing -- get rid of the nice background music -- is Mack (ph).
MACK (PH): (Inaudible), Richard.
QUEST: Tell me a little bit about this, how long it takes to make this sort of guitar.
If this is quality, of course.
MANUEL RODRIGUEZ, GUITARRAS MANUEL RODRIGUEZ AND SONS: Of course. This is a high quality guitar, especially (inaudible) from my grandfather's collection. It takes about two months to build. It's about $10,000 retail price.
QUEST: But your problem in making these, of course, is that the economy in Spain is really in very difficult situation. You can't employ staff. It's too expensive.
RODRIGUEZ: I'll tell you an example. If I go to a Spanish bank, and I say I'm a guitar maker, and they say you can make money making guitars?
So I mean, I have to go international banks to support my company, because it's too expensive, the money in Spain, (inaudible) other banks.
QUEST: But that's the cost of borrowing the money.
QUEST: What about staff?
RODRIGUEZ: Well, staff, for example --
QUEST: (Inaudible) lose them.
RODRIGUEZ: Well, the thing is that we are only working 1,300 hours a year.
RODRIGUEZ: 1,352 hours a year.
QUEST: Not very productive.
RODRIGUEZ: No. That's the reason why. Too many holidays and we need to work more to get this economy out. And the only way to work is to export more worldwide. I export to 120 (ph) countries 90 percent. That's saving my company.
QUEST: Right. Something a bit -- come on, a bit more -- a bit more - -
QUEST: Now, as we look at these guitars, is this -- in an economy that is moribund in Europe, is there demand for these expensive guitars?
RODRIGUEZ: Well, it's challenging because people don't invest (inaudible) products as guitar. Guitar's like a beautiful wife. You have to -- the woman. You have to play it, embrace it and there's beauty. And that's not easy nowadays with iPhones and (inaudible).
QUEST: I have a feeling we just offended a large part of the audience. He said it, not me. And somebody would happily hit you over the head.
When I look at this guitar, this is obviously as it's -- the production line (inaudible).
QUEST: It's now being glued and held together.
RODRIGUEZ: Correct, correct.
This is how you do the binding. It's all handmade. And then you've got the backside. Also you've got the bridge. You've got the fingerboard. You know, what's having a very old woods (ph), this percent of ebony is 100 years old.
QUEST: And even with all the problems, you're still going to stay in business?
RODRIGUEZ: I have to. My grandfather, my father have done it. I have to do the same thing.
QUEST: Thank you for joining us.
Mack (ph) will play it out with something appropriate.
QUEST: There's a sad soundtrack to the Eurozone at the moment, especially in the sunny south (ph). We've talked about it so often on this program. In Greece, the cradle of Western civilization is now labeled an emerging market.
The only Eurozone country to be downgraded, the first country ever to be downgraded from developed to emerging market, not surprisingly for the proud Greeks it's a deep humiliation. And then the state broadcaster singled out the mood (ph) and it would be if it could get back on the air.
And in Spain, the home of flamenco, the great guitar makers are being silenced, strangled by the country's strict labor laws, a lack of competitiveness leaving them woefully out of tune with the global economy.
We've known this for so long, but the reality is the strings are cut by high costs. And putting it all together, when we look for an uplifting melody in Europe at the moment, well, there we find it's sorely lacking. This could become the Eurozone's ultimate saddest swan song, the future of melody is still some way off.
And that is 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 headlines at the top of the hour: live pictures for you this evening from Taksim Square in Istanbul, the site of ongoing protests against the Turkish government. Only one member of the coalition leading the demonstration has attended a meeting with the Prime Minister Erdogan. Most declined following a night of violent clashes.
And as you can see, some protesters seem to be gathering in the square once again.
The Canadian Broadcasting Corporation says two of its correspondents have been detained. The CBC says it has been in contact with them and, in their words, the journalists are "fine."
The man who leaked top secret details about a U.S. surveillance program says he's neither a traitor nor a hero. He's Edward Snowden and he is quoted in a new interview with the "South China Morning Post," speaking from a secret location in Hong Kong. He said he's not there to hide from justice; he's there to reveal criminality.
The South African president, Jacob Zuma, says Nelson Mandela's responding better to treatment for a recurring lung infection. Children left hand-drawn get-well cards outside Mr. Mandela's Johannesburg home.
French air traffic controllers have decided to end their three-day strike a day early. The stoppage has caused significant flight cancellations and backlog of passengers. It's expected flying will be pretty much back to normal across the continent on Thursday.
(END VIDEO CLIP)
QUEST: And you're up to date with the news headlines. Now live to New York and "AMANPOUR."