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Interview With Angela Merkel; Employment Summit in Rome; G8 Preview; Dow Down as IMF Cuts US Growth Forecast; European Markets Had Modest Gains; Dollar Continues Slide Against Yen; Protests in Brazil Cause Concerns for Future Events

Aired June 14, 2013 - 14:00   ET


RICHARD QUEST, HOST: Tonight, we speak to the most powerful woman in Europe. Angela Merkel tells me Europe has sinned in its quest to fight unemployment.

Also, a showdown on surveillance. The chancellor says she'll go straight to the US president with her concerns over PRISM.

And poor but sexy. How Berlin's uber-trending have turned this capital around.

I'm Richard Quest. Live in the German capital, it may be Friday, but of course, I still mean business.

Good evening. Tonight on this program, Angela Merkel, the German chancellor, tells me the young unemployed of Europe are suffering, and she says it's because of the sins of the past. She admits Europe has lost its competitiveness and that a joint budget and more consolidation is the only answer.

Her warnings come just three days before leaders meet for the G8 summit in Northern Ireland. Tonight, on this program, you're going to hear her candid views on this issues that affect us all. The chancellor on growth, unemployment, and the American surveillance using PRISM.


ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): While our ministers who are in contact with the American colleagues, the minister of justice, the minister of internal affairs, have already talked to their American counterparts, we would obviously wish for the greatest possible transparency on all of these issues.

I think it's very important to bring this about, and I'm going to discuss this in this sense with the president of the United States, Barack Obama. There's also a conversation today of minister of economics with internet companies. We would ask them to tell us what they know about this. So, we're going to be in very close contact on this.

QUEST: The G8 this weekend, the question of growth and how Europe can play its part, because at the moment the eurozone and the Union are not fully playing their role when you look at the growth from the other countries. So, what will you be telling them about how Europe is now about to step up to the plate, as the Americans say?

MERKEL (through translator): Well, Europe needs to do a lot of homework. I agree, we have lost competitiveness. We have for many years lived beyond our means. We have incurred debts time and again, and I think each and every country -- and the United Kingdom is doing that as well - needs to consolidate its budget.

It's important for Germany, too, because we have a very noticeable demographic change of the next few years to come. We have to be very careful to leave some kind of leeway, some kind of breathing space to future generations to find the necessary investment.

But at the same time, we have to pursue structural reforms, we have to agree what is actually conducive to growth. Competitiveness is conducive to growth, and in this very difficult situation, we will need to initiate special programs especially geared, for example, to youth unemployment. We have set aside a number of euros in the coming budget on this.

QUEST: You talk about youth unemployment. That is, of course, the biggest scourge, the biggest issue, the biggest problem facing the continent at the moment. They call it a lost generation. How can you tell that lost generation that the A, are not lost, and B, not to become disillusioned with this -- with what they are facing? It is not easy.

MERKEL (through translator): Quite true. Young people are paying a price for the sins of omission of the past, and they are really not the guilty part. So, it is our task to highlight a prospective to these young people.

And this can be done through different ways. On the one hand, countries that have jobs, for example, could also invite young people. We could give language courses to young people. We have a big single market in the European Union, but not a big single labor market.

When we had German unity, a lot of young people from the so-called old lender went to the new lender. This is not a solution for each and everyone, but Germany is an open place for young people.

Secondly, we need to do some benchmarking as to what programs have worked. Well, this is why we've invited on the 3rd of July to a labor market conference in order to exchange experience, and we need to know what is going to be the market of the future for us.

Where can we be competitive? What are the goods that we can produce that are competitive? And also how is the situation on global markets? We cannot only be invalid.

QUEST: It's not easy.

MERKEL (through translator): I always say if everything were easy, we don't need politicians. Politicians are always needed for the hard task of solving problems, and this is why we need to face those problems. This is why we're also fighting over the possible solution and the right way to go, but G8 is going to be a very good forum to also highlight the European perspective.


QUEST: Chancellor Merkel talking to me earlier. The issue of unemployment was very much on the minds of others in Europe today and for one good reason: the latest figures. They're a stark reminder of the jobs crisis in the continent.

The number of people employed in the 17-nation euro area fell by half a percent in the first three months of the year compared to the previous quarter, 145 million people are in work. Employment in the 27 EU also fell. To put it in perspective, it's the seventh quarter of decline. It was led by Greece, Portugal, Spain, and Italy. Those periphery countries still feeling the full force.

Labor and economy ministers from three of the worst-affected countries and Germany met in Rome. Barbie Nadeau is with us from the Italian capital tonight. Barbie, so you heard the chancellor there saying more must be done, the sins of the past.

But it's now up to those ministers and labor ministers to actually come up with any concrete new extra plans. Did anything come from their talks in Rome?

BARBIE NADEAU, CNN INTERNATIONAL CORRESPONDENT: Well, it was a very collegiate environment, but they never planned to come out with any sort of major decisions today. It was an opportunity for labor ministers and finance ministers to work together.

Enrico Letta, the president -- or the prime minister of Italy this morning made a very good point that Europe can no longer be just run by finance ministers. And this was an opportunity for them to work out some of the problems between these two -- the two ministries, obviously, are at odds most of the time. You can't create jobs without affecting the financial portfolio.

And so, it was an opportunity to share ideas and to talk, but they didn't ever anticipate having any great decisions made today, Richard.

QUEST: Well -- well, let me jump in there. Is there -- I mean, very much as the German chancellor was saying, but is there a sense of crisis by these ministers? They can get together and talk as much as they like, but the fact is, it's a case of talking while the continents burning on the jobs front.

NADEAU: That's absolutely right, especially here in Italy and in Greece. Greece, of course, wasn't present at the table. And in Spain. These are countries that are really suffering through this. They're suffering not only with job losses and underage -- or youth unemployment, but also with a brain drain.

Italians and Spanish especially are moving to Germany to look for jobs, and that is really taking a lot out of the economy here. People are feeling desperate. They feel that there's no hope, no reason to stay in Italy, German -- or Italy and Spain and Greece at this point. And that's a problem for these countries.

QUEST: Barbie in Rome for us tonight with that part of the story. We thank you for that. Joining me now here in Berlin is Marcel Fratzscher, who heads up one of Europe's leading economic research institutes. Good to see you, sir.


QUEST: Thank you for coming in.

FRATZSCHER: Hi, good evening.

QUEST: A lovely evening here in Berlin. The chancellor said to me that there still needs to be more consolidation. She still talks about consolidation, balancing the budget, so she says there can be leeway for investment in future times.

FRATZSCHER: Yes, to some extent it's true. Countries in crisis need more fiscal consolidation. Financial markets don't give them the space. But still, it will not be a solution to the short terms. So, we need to think of other solutions, how to address the crisis now, in order to get them out quickly.

QUEST: But even then, Mrs. Merkel talks about competitiveness. It's once again -- that's basically a posh way of saying internal devaluation.

FRATZSCHER: It's not just internal devaluation, because that kind of gives right to people who say we don't need the euro anymore. It's much more difficult.

We need structural reforms, we need to move people from sectors where they had worked, like in the construction sector in Spain, into sectors where they're really needed and where the country has a future. So, it's a lot more complicated than internal devaluation.

QUEST: Ultimately, when the chancellor says the sins of the past being visited on the -- on today's generation, and we also hear from Rome tonight that they're talking, is it your feeling that they're getting to grips with this employment question, or are they still fiddling around the edges?

FRATZSCHER: It's definitely important measures. We need to start addressing it, but we also should not be fooled. It will not be a quick fix. We will not solve it very quickly. We have unemployment rates about 20 percent, and the challenge is a lot bigger. So, we need to really think how we can get back in particular confidence in Europe.

QUEST: But it's difficult to say that when you have a country here where the unemployment rate is 5.4 percent, and I've just been talking to Barbie in Rome, and the unemployment rate there is in the 20s, and Spain's in 25 percent, and Greece's youth unemployment is 65 percent. The thing isn't working, literally and figuratively.

FRATZSCHER: Yes, but you need to get companies to hire people. How do you do that?

QUEST: How do you do that? Well, the chancellor says ---


QUEST: The chancellor says you do it by languages, encouraging people to come forward with new languages, teaching them new languages, bringing workers in from other countries. Is that realistic?

FRATZSCHER: In the very long run, it is. In the very long run, if you talk about ten years. But not if you talk one or two years. So, we have very little immigration from countries like Spain or Italy. So, in the short run, this will not be a quick fix.

QUEST: Let's just finally talk about OMT, Outright Monetary Transactions from the -- the ECB. There's so many initials and acronyms that it all starts to merge after a while. The German constitutional court is going to discuss and decided the legality as seen from Germany. What's your feelings?

FRATZSCHER: I'm a little bit pessimistic. I was participating in the hearings, and the German court very openly and very clearly mentioned that they are very concerned about the democratic legitimacy.

QUEST: Right. If they do -- if they do say that OMT is against the German constitution, it won't stop the ECB from doing it, but it'll create a very difficult conundrum for the Bundesbank to let them do it.

FRATZSCHER: Well, I'm not sure. The ECB might not want to do it, because if it is against the constitution, Germany may actually have to leave the euro.


FRATZSCHER: So the ECB may actually have to change its policy. So, I'm very much concerned about that ruling, and I think the consequences could be dire.

QUEST: So, unlike the ESM, where frankly they fudged it to make sure that it happened because the consequences were so grim, you think it could be the other way around on the OMT?

FRATZSCHER: I think we need to have the flexibility for the ECB. Only a flexible central bank --

QUEST: Right.

FRATZSCHER: -- that can use all the levers will be credible and will be effective to influence financial markets, and I think the ECB has been the greatest asset to the euro area crisis and the greatest source of stability.

QUEST: Good to see you. Thank you for joining us here --

FRATZSCHER: Thank you.

QUEST: -- and many thanks to you. Marcel joining me here in Berlin. OMTs, ECBs, ESMs, if you're regularly with us, you'll know what we're talking about, and of course, apologies for all the jargon, but these are important matters.

When we come back, the IMF wonders whether the US Congress is to blame for much of the problems in the US economy. QUEST MEANS BUSINESS, we're live in Berlin.


QUEST: As the clock ticks down to next week G8 summit in Northern Ireland, everyone agrees that the prospect of free trade and the talks about to begin between the EU and US offer huge, great promise and potential.

That is, unless France unravels the negotiations. It's an astonishing row over the protection of French culture. And as Jim Boulden now reports, it's one of the issues that will be a sticking point at the Group of 8.


JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): So, what does French language television have to do with trade talks and the G8 summit? Everything, apparently. In order for summit host British prime minister David Cameron to announce the launch of the historic free trade talks with the US, the groundwork is supposed to be laid at the G8.

The one big stumbling block is whether Europe can keep its limits on the amount of American TV that airs in countries like France, and can France continue to subsidize local film and television, which it sees as a cultural imperative. There are many hurdles to even beginning these formal free trade talks.

PHILIP BOOTH, CASS BUSINESS SCHOOL: I think the G8 will matter and will be important if you can get an agreement on free trade. I don't think many of the other issues that it will talk about matter that much.

BOULDEN: Also on the agenda, Mr. Cameron wants to make a splash with some sort of commitment to cracking down on offshore banking secrecy by revealing the ownership of shell companies, plus agreements to tackle tax avoidance by multinational companies.

But major deals are hard to come by in these meetings. The G8 has lost some of its shine to the larger G20 group, which has incorporated the likes of China, India, Brazil, South Africa, and South Korea.

BOULDEN (on camera): Another difference from previous meetings, the old G7 before Russia joined used to gather informally in big cities. It was here in 1991 that the UK hosted the G7 summit in the heart of London.

BOULDEN (voice-over): Demonstrations have occasionally descended into violence, and that means the meetings are being pushed to ever more remote areas. So, while London saw some minor disturbances from anti-G8 protesters in recent days, the leaders are gathering in a remote golf resort in Northern Ireland. Last time the UK hosted it at a golf resort in remote Scotland.

Over the years, the G8 summits have focused on the integration of Eastern Europe. Then, the financial crisis and economic turmoil. Now, it's about rebuilding confidence.

And of course, there's Syria and trying to continue to find relevance for these summits, if there is anything Mr. Cameron can claim credit for as host.

Jim Boulden, CNN, London.


QUEST: Now, the markets as how they traded on the last day of the week. Stocks are down more than 100 points in New York. The IMF has cut its growth forecast for the United States for next year. It's down from 3 percent to 2.7 percent.

The IMF left its protection for this year unchanged, just shy of 2 at 1.9 percent, so things are speeding up in the United States, but the risk remains on the downside.

The Fund says the deficit reduction this year has been excessively rapid and ill-designed. That's a reference to the sequester. It urged Washington to repeal the sweeping spending cuts, as we say, called the sequester.

European markets as they traded the week, modest gains, thin trading. Now, if the Fed, who meets next week on Tuesday and Wednesday -- it's a two-day meeting before the summer of the US Federal Reserve.

And so, tonight's Currency Conundrum. All euros bear an 11-digit serial number with a preface which identifies the country of origin. What is the preface for the German euro? I have no idea, and I don't even know why I would know this answer. But have I got one here? No, I haven't even got any euros. Is it X, G, or U? The answer for you later in the program.

The rates tonight: the dollar's set for its fourth straight session of losses against the yen, down against the currency by half a percent. It's up against the euro and the pound. Those are the rates, this is the break.


QUEST: From the country that hosted the World Cup extremely successfully to the country that is going to host it next year. All this week, we're focusing on Brazil as we count down just about one year, slightly less, just a few days.

Next time at this year, the country will be hosting the tournament, and tonight, unlike footballs and sporting prowess, the road to the World Cup and the road to Brazil is paved with rubber bullets.




QUEST: Protesters and riot police have clashed repeatedly in Sao Paulo. At least 100 people were injured on Thursday night. It all comes on the eve of the Confederations Cup, which kicks off this weekend in Brasilia and Rio.

The Confederations Cup is a preview, a prelude, a little soupcon, if you like, before the World Cup itself next year, which indeed itself will be an introduction to the Olympics in a few years' time.

CNN's Paula Newton has been in Rio all week and where the World Cup final will take place, and Paula joins me now. And at this point in the game, it's hard to judge, Paula, the seriousness of these riots in the wider picture of the next 12 months.

PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: Well, you'd have to think that officials are nervous. It doesn't matter if you're local officials here in Brazil or it's FIFA or even Olympic officials, Richard.

Even though these protests are technically unrelated to any of these events, these are serious issues here in Brazil, and we can see how police reacted to it and how there still seems to be no solution to the problems that they're talking about, especially infrastructure and issues like security.

I want to bring in now, Richard, Renata Neder from Amnesty International. Thanks so much for joining us. What -- in looking at the protests last night, what did you think about the way it was handled by police?

RENATA NEDER, AMNESTY INTERNATIONAL: We're really concerned about the increasing levels of police violence and the use of force used to repress the recent protesting in Sao Paulo and Rio de Janeiro, which resulted in over 200 people detained and several others injured, including journalists.

We really hope that the authorities and the protesters can engage in dialogue and come to a peaceful solution to the problems that have been going on recently.

NEWTON: Can you frame for us the issue for people in the streets, but also people watching from their homes in large cities in Brazil, why has a 7 or 8 percent increase in transit right now become such a flashpoint?

NEDER: Well, it's actually just the spark that started this whole movement. First you have to think that 20 cent increase might seem like a small amount of money, but actually for someone who uses public transportation on a daily basis, at the end of the month, it has an impact for a family who earns only a minimum wage, for example. So, it has an economic impact into the most poor families.

But apart from the economic impact, you have to look at the broader context of public transportation in those cities. Public transportation here is badly infrastructured. It's overcrowded, it's expensive, and it's not safe. Very recently, we had different episodes of accidents as well as violence, including violence against women.

NEWTON: In terms of how this is going to impact, we've got the pope here in July, we have the Confederations Cup here starting on Saturday. We've already had protests connected to that. The national team couldn't even take the road to go to the kickoff. They had to fly because they were afraid of these protests.

Do you see first off any kind of an end to these protests upcoming, and do you believe that officials can rule out that they will affect these games? Or do you think it could affect these events going forward?

NEDER: The issue is not about affecting these events, because they are exceptional events that after a week or two weeks, they're over. It's how the transportation affects the community on a daily basis and those issues on a daily basis.

We urge the authorities to avoid the use of force, the use of excessive force, and we urge both parts, the protesters and the authorities, to really engage in dialogue to come to a peaceful solution.

NEWTON: So that these events are not affected, obviously.


NEWTON: OK, thank you, Renata. Thank you so much for joining us. Appreciate it.

NEDER: Thank you.

NEWTON: And Richard, as you heard there, this will continue to be an issue, especially because we have not heard conciliatory comments from the government in terms of saying yes, we'll sit down, we'll look at this issue. Right now, the government standing firm and saying look, we need those increases, we need that money for improvements to infrastructure, and we do seem to be at a bit of an impasse. Richard?

QUEST: Paula Newton, who is in Rio for us tonight.

So, from Berlin, don't think the German capital is all about politics. To be sure, the Reichstag plays an important part as, indeed, does the federal government. But this place likes to think of itself as sexy.


QUEST: Good evening. This is QUEST MEANS BUSINESS. More in just a moment. But this is CNN, and on this network, the news always comes first.


QUEST (voice-over): The German Chancellor Angela Merkel will discuss America's eavesdropping program PRISM when she meets President Barack Obama next week. The leader of Europe's late -- largest economy told QUEST MEANS BUSINESS ministerial talks have already begun on the issue. And Ms. Merkel wants to hear from Internet companies about what they know.

MERKEL: We would obviously wish for the greatest possible transparency on all of these issues. I think it's very empty to bring this about. And I'm going to discuss this in this sense with the President of the United States.

QUEST (voice-over): The U.S. says it is clear Syria has used chemical weapons, including sarin gas, on its own people. The White House says that it crosses a red line. The Obama administration says the U.S. will increase its support for rebel forces. What that support means remains unclear.

Voting hours have been extended several times in Iran's presidential election. The government says it'll keep polls open until 11:00 pm local time to accommodate brisk voting. The last presidential race in 2009 was followed by allegations of fraud and sparked bloody protests.

The Turkish prime minister, Tayyip Erdogan, is striking a conciliatory note after two weeks of protests over a plan to build a shopping mall in an Istanbul park. Mr. Erdogan has suspended the project for now after meeting with leaders of the protest. He says he will also look into claims that police used excessive force with demonstrators. He asked them to leave the park.



QUEST: Many people come to the German capital because it is the seat of economic and political power, some say, for Europe. Others come here because it has been described by the mayor as poor but sexy. It's become the unofficial slogan of a city where startup on Internet, music and technology are abounding everywhere.


QUEST (voice-over): The mayor's phrase, "Berlin is poor but sexy," may not be the most flattering idea. But in some parts of the city, it's worn as a badge of pride.


QUEST (voice-over): Poor but sexy, ain't it a realistic yet optimistic panorama of a city that may be virtually unrecognizable from two decades ago. It still carries the scars of its past.

KLAUS WOWEREIT, MAYOR OF BERLIN (through translator): This description was intended to illustrate the economic difficulty Berlin still faces (inaudible) of the city during the Cold War, when the world's two superpowers were confronting each other.

QUEST (voice-over): Berlin's wartime hangover created a can-do, will- do atmosphere, notably visible in the minds of young entrepreneurs who set up shop.


QUEST: Now two tech entrepreneurs are with me now, Eric Wahlforss is the cofounder of SoundCloud. Simon Schaefer is the founder of The Factory.

Whenever I come here, I mean, look at me, boring man in a suit, in a dark suit as well. I mean, let's be honest about these things. Whenever I come here to Berlin, I always want to know why has this city managed to capture this cachet.

So, I mean, we love sound (ph). We love Berlin as the home for SoundCloud. So, you know, it's --


QUEST: But why is it --

WAHLFORSS: -- it's this wonderful like melting pot between arts and technology, you know, creativity, entrepreneurship like the whole city's like a startup, you know? So I came here, you know, I was really inspired by the music scene here and all of that. And so it's a really great place for us as a company to be.

SIMON SCHAEFER, FOUNDER, THE FACTORY: I can second that. It's not only a startup, it's a vast city that, you know, after the wall came down, we had a whole new city to play with.

QUEST: But how much of the history plays into that?

Why not Hamburg, Frankfurt, Munich?

SCHAEFER: Probably because those haven't been occupied by allied forces and they haven't been sort of tolerant in the way that Berlin has had to be for a lot of time. And I also think that in comparison to London, the vastness of the city and the underdevelopment of the city gives you a lot of room to grow.

QUEST: That's a problem. It's a plus and a benefit because it was all cheap -- and the one thing everybody ever says to you when you come to Berlin is you should have bought property here. It's going to become very expensive. And you're going to be priced out.

WAHLFORSS: It's going to take a long time, though, because everything is still very much on the construction. You know, we moved into near Rosenthaler Platz in Mitte. And life's in -- the whole street basically, you know, expanding from nothing, from pretty much a park and a playground to a full street.

QUEST: So you're not worried about finance companies, banks, multinationals taking over your precious arty type (ph) places.

SCHAEFER: Not so much. I believe that many years down the road, and if you look around we're not far from the right pack (ph) and still there's a lot of people that have been going on right around us. And what other city would it be possible to build 150,000 square feet campus in the heart of town?


QUEST: And let's just ask then about this. What works in Berlin and what doesn't in terms of what sort of startups work?

What's -- what are you attracting here?

WAHLFORSS: So we -- you know, what I think about SoundCloud, when I think about our culture and I think about Berlin as a location, I think, you know, we embody kind of the overall vibe that is in the city and it's a microcosm of that. So it's -- it is -- the music's in -- it's the Web and all of the new --

QUEST: It's the Web, it's the music scene, it -- not so much fashion, not so much those areas. You're looking doubtful. You're looking doubtful.

SCHAEFER: There's street fashion. Berlin is very known for that, yes. It's not so much the high fashion; it's more the street fashion.

QUEST: So where does Berlin finally -- where does it fit between London, Paris, the other -- Rome, the other great cities? As it finds its niche in the core collection?

SCHAEFER: One article recently written on Techran (ph) said that Berlin doesn't have that creative culture that yet claimed one sort of certain vertical and thus maybe technology could become that. And I think we're here to do, to prove that.

QUEST: Not just technology. You don't want chips. You want cool technology.

WAHLFORSS: I think new sort of technology driven media company like SoundCloud, we're the world's living audio platform. We have over 200 million people that we reach every single month, over 12 hours of audio uploaded every minute. And that kind of a company, I think, is a great place.

QUEST: All right. Good to see you. Good to see you. Thank you both for joining us.

And adding a cool element to a business program. We thank you.

Now when we come back, I think this is cool. All right, it speaks volumes about me. The A350 took to the sky for the first time. These two look absolutely horrified that I've said this (inaudible) in the same breath, QUEST MEANS BUSINESS. We're live in Berlin. We're back in a moment.





QUEST (voice-over): Now the answer to tonight's "Currency Conundrum," all euros bear an 11-digit serial number with a prefix which gives its country of origin. We asked you the prefix for the German euro. The answer is the German euros on the notes, they begin with a letter X.


QUEST: One piece of news to bring you tonight. The Greek prime minister apparently has offered to reinstate limited TV broadcasts.

Mr. Samaras suggested the creation of a temporary committee accepted by all parties to create the formation of a coalition government to approve a small number of employees so that BRT (ph) could start broadcasting again. That's the latest news. He said a draft bill for the creation had already been submitted and it could be voted on in almost next week.


QUEST (voice-over): Now the A350 has taken to the skies. It made its maiden flight from Toulouse earlier today. This is what the crew posted once they'd landed.

And they said, "Seven years in the making at an estimated cost of $15 billion. A lot is riding on the A350." Now Airbus is hoping it will help it to snap back (inaudible) against Boeing. The European manufacturer's already received 613 orders, compare that for nearly 900 for the rival, Boeing Dreamliner.


QUEST: Airbus is hoping -- excuse me -- that the 350 will do a fly- past at next week's Paris Air Show at Le Bourget. And that's, of course, where Boeing is set to launch its latest Dreamliner, according to reports.

By the way, if they do that fly-past, we will be there to give you the pictures and the details.

"The Wall Street Journal" says the U.S. company will name at least three customers for its 787-10 directly competing with Airbus whilst the new plane won't fly as far as the 350, it will be more economical on shorter routes.

We will be in Paris next week at the Air Show. We'll be speaking one- on-one with the heads of every major aviation player, from Airbus and Boeing, Bombardier and GE Aviation. Don't miss it. QUEST MEANS BUSINESS live from the Air Show next Monday and Tuesday.

And I promise you, if the 350 does its fly-past, you'll see it as well on this program.

Jenny Harrison's at the World Weather Center for us this evening.

The weather's beautiful today in Berlin. What's the outlook for Paris?

JENNY HARRISON, CNN METEOROLOGIST: Oh, the outlook for Paris, it's a very unsettled picture, Richard, across Europe, I have to tell you. Why don't I just give you the latest on the Elbe and the Danube? Now generally, through the Elbe, it continues to recede; the water levels, it's finally just having up very slowly into the North Sea. That, of course, is in and around Hamburg.

But you can see here, for example, in Boisenberg (ph), it is very slowly receding. The Danube bit of a different situation. It crested in Baho (ph) on Wednesday, coming down fairly rapidly there, but still to really finally crest in Belgrade this weekend. And then it will continue to work its way eventually out into the Black Sea. So taking a little bit longer.

Now you mentioned the forecast in Paris, well, we've seen another band of showers come through, one or two scattered thunderstorms, although it's been a little bit cooler across the northwest of Europe. So when this next system comes through, I'm afraid there's another one pushing in across the southwest.

(Inaudible) seeing some of the better weather, very nice across the Mediterranean, high pressure is in control as we continue through what is remaining of Friday into Saturday and Sunday. And then you can see this rain as we go in to the next couple of days, you can see that system clearing away from the U.K., but then, as I say, another one coming through.

Most of the rain actually should stay to the north of Paris. But we have got some showers elsewhere across the southeast as well, mostly dry. It's just a generally sort of unsettled picture with scattered showers from really to the west and to the east, very warm in Madrid on Saturday, a high of 35, cooler in Paris, 19 and 17 in London, Richard.

QUEST: Jenny Harrison at the World Weather Center, we will be in Paris on Monday and we'll look forward to that.

For the moment, that's QUEST MEANS BUSINESS for this Friday. I'm Richard Quest live in Berlin. As always, whatever you're up to in the hours ahead, I hope it's profitable. See you in Paris on Monday.




ROBYN CURNOW, CNN HOST: Hello, I'm Robyn Curnow. You're watching MARKETPLACE AFRICA. And now Africa's growth has been well documented. For this week's show, though, we're going to go to the top end to the luxury sector.

This is because 60 percent of the millionaires in Africa are based here in South Africa, which is really the only established market for luxury goods, which is why media queen Khanyi Dhlomo (ph) has decided this is the place for her new venture.

KHANYI DHLOMO (PH), CEO: There -- so what have we decided? Are we -- are we going more for the images?

UNIDENTIFIED FEMALE: Yes, I think just because of the caliber of image that we've got, I think --

DHLOMO (PH): (Inaudible) are quite copy heavy.


DHLOMO (PH): So it makes sense to give the reader a bit of a break with something that's a lot more visual but still powerful.

CURNOW (voice-over): This is Khanyi Dhlomo's (ph) domain.

DHLOMO (PH): I've been in media for many years. I've worked in radio. I've worked in television in South Africa. I've worked in magazines.

CURNOW (voice-over): As head of Ndala (ph) Media, she publishes the popular "Destiny" and "Destiny Man" magazines. Her newest venture: luxury goods.

UNIDENTIFIED FEMALE: Let's just talk through some of the brands we'll have.

CURNOW (voice-over): Around the boardroom table, Dhlomo (ph) and her team prepare for the opening of what will be a 700-square-meter high-end store set to open in Johannesburg this July.

DHLOMO (PH): The store's going to house more than 80 international luxury and contemporary brands in addition to some South African brands. So this has always been something that's been close to my heart. And I realized when I was living in Paris that there really wasn't a strong presentation of luxury and contemporary brands in South Africa.

WILFRID MOULIN, CEO, METROPOLITAIN (PH) COSMETICS: The South African market is very interesting, because they have been deprived of a lot of things during the apartheid years.

CURNOW (voice-over): Wilfrid Moulin has been distributing luxury cosmetics in South Africa since 1997.

MOULIN: The competition is -- compared to France or the U.S., is much, much more easier to manage. There isn't really a very aggressive will of the department stores to position luxury brands forward.


MOULIN: Luxury brands need a different environment to express their values and that's what we really focus on, creating the experience.

CURNOW (voice-over): And while the malls of Johannesburg may not stack up to New York's Fifth Avenue or Paris' Avenue Montaigne in shopping experience, Dhlomo (ph) says the consumer is there and ready.

DHLOMO (PH): South African markets certainly have that mature, well- established luxury consumer that you could compare to anywhere else in the world. And potentially a smaller market, but still a compelling one.

And I think what's very important (inaudible) with what's still a growing economy with a lot of upward mobility, there's an even bigger number of aspirational people who are buying the entry level brands, are buying the entry level products or the luxury brands, are buying the contemporary brands. And so it really calls for much more democratic approach to luxuries.

CURNOW (voice-over): A democratic approach to luxury, driven by a democratic South Africa.

DHLOMO (PH): For me, what's been enormously positive about the new South Africa is that it has given birth to this market. It did not exist before, certainly not in large numbers, and certainly did not have the capacity and the potential that it now has.

CURNOW (voice-over): (Inaudible) the rise of the luxury industry in China has been well documented, putting past $18 billion a year by the end of 2012, the consultant group Bain (ph) estimates luxury sales in Africa, the Middle East and Australia, are set to rise by 8 percent in 2014.

And in South Africa alone, sales are set to increase 20 percent by 2015, reaching more than 800 million U.S. dollars a year according to a recent Euromonitor (ph) study.

DHLOMO (PH): The event in Paris, they'd like some representation from us.

CURNOW (voice-over): But still, Dhlomo (ph) says that consumer spending in Africa hasn't yet translated to full buy-in from the global luxury brands.

DHLOMO (PH): They're interested in Africa. But their resources at the moment are focused on Asia. And I see that as a tremendous opportunity because in addition to the interest in Africa, there's still an element of -- it's not a market we know; and we need to partner with someone. We don't want to go there on our own. And I think that's a tremendous opportunity for (inaudible) luxury ventures.

I think it looks fantastic.

CURNOW (voice-over): From anticipating her readers' tastes, a media queen now ready to cater to Africa's luxury consumer.


CURNOW: From a new venture to an established brand, after the break, we speak about creating a uniquely African luxury experience.




CURNOW: Welcome back. Now businesswoman Swaady Martin Leke (ph) is not just the founder and CEO of her own luxury brand, she's also been named one of Africa's youngest power women by "Forbes" magazine.

Well, for this week's "Face Time" interview, she tells me about the future of luxury on the continent, how she looked to Africa's rich heritage. And her latest venture is based right here in Johannesburg's Pankhurst neighborhood.


SWAADY MARTIN LEKE (PH), CEO: So when you go all around the world, you see very distinctive luxury. So and Japanese luxury has its own identity. French luxury has its own identity. Italian or American, so in those markets where you actually have a vibrant luxury industry, you can see that over the years and even centuries they've been actually able to create an identity of luxury.

Paris is the most visited city in the world. And I think that's for a reason. And this is also the place where you have the longest tradition of luxury. And the luxury has been a key factor in actually preserving that history and that culture. And I believe that the same can be done in Africa.

And Africa has all this fine foundation of what is needed to create a real vibrant luxury industry. We have the craftsmanship. We have the heritage. We have a very rich culture that doesn't date this many years, but centuries, thousands of years and thousands of years of know-how and craftsmanship.

So here is this continent, where you have all the raw material. You have the know-how and also ancient know-how. But what is missing is that link to luxury. There are many definitions. I think there's some stuff that have to be consistent, which is quality of your product, the type of materials you're using, really that consistency. But in addition, I think, African luxury needs to have an African influence (ph).

Luxury is really something a dream (ph) and an aspiration and it's all about something that's beautiful. It's a little bit like art, really. And you might not be able to purchase art. But you can experience it. You can enjoy it.

And this is really also what we're trying to create, is something that's beautiful, beautiful products with a deep, deep African soul and essence.

And I'm not talking about something that's tribal or ethnic as people would call, but something that has a lot more meaning, and a meaning that might not be obvious, but a meaning that should discover like a treasure as you go into the story of the product, how it was made, what's the meaning (ph) of the material.

How actually there's designs where created in a really contemporary manner. And I think that's also very important. I think luxury, it's something that's very contemporary. It moves with art and it's very close with art.

So we're not talking about your old African statues or carving. We're talking about how do you create something, take your heritage but also apply very contemporary design and that has a global appeal. When I work with artisans, I always tell them I don't want you to create an ethnic product.

What we are going to create is something that's just beautiful and that could be in Barney's (ph) or Bloomingdale's or Le Bon Marche, not because it's the Africa ethnic tribal link (ph), but just because it's a beautiful product that where you're Japanese, American, African, you just find that beauty compelling.

If you look at most luxury brands, they have limited resources. But in terms of capital and sometimes in terms of capital, if they're family owned, but in terms of amount -- number of people working for those companies, if you look at markets like China, there -- it's just booming right now.

So I think as -- for any business, you're looking at the world and you're thinking what is my best bet today? Where is it that I'm going to grow?

I think global luxury companies and some of them are already on the continent, I think we'll see more and more of them. But I think there's still such a huge opportunity in Asia that most of the brands have not tapped into yet. And I think that's where the priority is right now. And which is great for us African brands, because we can then, one ,because we're still at, you know, the beginning stage.

We're still the baby steps as we create this African luxury where refine it, we get input from people. So we become stronger and also we become strong in our own market before we go and expand.

But this is going to evolve. I think now is the time and you need to start positioning yourself because Africa is getting richer. That's for sure.

Luxury for me is like art. You can like a Picasso and you can like a Dali. It's different. And I think luxury is really the expression of a creativity of the creator. And I'm quoting Vincent Bastion (ph) here, and I believe that all the luxury brands will have their own creativity, will tap into their own history and part of the African history. So there is room for more. And I hope there will be more.


CURNOW: From building a brand to building Africa, and the importance of infrastructure in stimulating growth, that's next week's show on MARKETPLACE AFRICA.