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QUEST MEANS BUSINESS
Exclusive Interview With Dominique Strauss-Kahn
Aired July 10, 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: Tonight, a crisis, a catastrophe, and no one fit to solve it. In an exclusive interview, Dominique Strauss-Kahn tells me Europe's leaders have failed.
(BEGIN VIDEO CLIP)
DOMINIQUE STRAUSS-KAHN, FORMER MANAGING DIRECTOR, IMF: Years after the beginning of the European crisis, we're still there with zero growth or close to zero growth, and it's going to go on for years.
(END VIDEO CLIP)
QUEST: And from crisis in Europe to his own personal crisis, how DSK is finally moving on.
Also tonight, talk of tapering. The latest Fed minutes are out just about now.
I'm Richard Quest. I mean business.
Tonight, Dominique Strauss-Kahn gives CNN his first English-language interview since his downfall as head of the IMF in 2011. It's an exclusive interview, and in three parts, in which we have divided, you will hear his frank views on everything from the European financial crisis, the eurozone crisis to his own political future and, of course, the arrest in New York two years ago.
This is a man whose reputation first preceded him and then engulfed him. And in the course of this program, it will be a balanced interview in which we will look at all aspects of the man's career and certainly his views on today's financial crisis.
Dominique Strauss-Kahn was the IMF managing director during the darkest days of the crisis. He was the architect of the first EU bailout for Greece in 2010, and as a former finance minister of France and an esteemed professor of economics, he's one of the most respected practical economics -- economists in the world.
Of course, the career unraveled in 2011 when he was charged with attempted rape, sexual assault, and imprisonment of a hotel maid. Within days of the allegations, he had resigned from the IMF. But then, the prosecution a few months later admitted the victim had credibility problems and had a history of lying, and those charges were all dismissed by the court.
Dominique Strauss-Kahn returned to Europe, where there have been several other allegations about his lifestyle. Of course, what cost it came to him?
The arrest in 2011 cost him a run at the French presidency. He now admits he is desperate to seek Europe and to help Europe fix its crisis.
Dominique Strauss-Kahn says if he was a man living in Greece today, he would probably be out protesting against austerity. He admits that Europe's debt crisis was mishandled on his watch. And so, we begin our interview with the economic situation, the eurozone crisis, and what went wrong in Europe.
STRAUSS-KAHN: Many things. First, something which has already disclosed by the IMF, which is that we -- when I say "we," I mean the IMF - - underestimate what we call the multipliers, which is basically the effect of austerity on growth.
So, the result was that what has been asked of the Greeks in terms of rebalancing their budget had more effect on growth than we expected. But that's not all the story.
What is really interesting is that there was a team called the Troika --
QUEST: Which the IMF now admits was a poorly-constructed --
QUEST: -- way of moving forward.
STRAUSS-KAHN: Exactly. Because -- maybe you remember before 2010, at the beginning of 2010, the Europeans didn't want at all to see the IMF come into Europe. They said never, you're the devil, we don't want you.
So, when we came in, we were a general partner. The other partners were the ECB -- the European Central Bank -- and the Commission. And were a general partner. And we argued for more growth. We were clearly the pro-growth people within this group. But with little success.
QUEST: Why has the eurozone crisis been such a failure to solve?
STRAUSS-KAHN: Because they failed to do what, in my view, they had to do. Restructure --
STRAUSS-KAHN: Yes, they. The Europeans. Including me, as a European, of course. Failing to restructure the debt, failing to -- the cleansing of the banking system. And failing also in redistributing wealth.
The story is that when you're facing such a disaster, you need to clean up, pay what you have lost, and go ahead.
QUEST: Are you prepared to say now that they have completely botched the eurozone crisis?
STRAUSS-KAHN: You're too hard. A little too hard. But I'm not that far from what you say. Frankly, everybody knows in the business side that when you have a loss, you have to take it and start again. What the Europeans tried to do was to buy time for political reasons. Not to admit the losses.
So they were unable -- still now they are unable to have a plan for the future. They're just trying to buy another six months and another six months. And that's a catastrophe because the cost today is much higher than the cost which would have been the cost two or three years ago.
QUEST: And when you see the way they put together the original Cyprus bailing in ordinary depositors?
STRAUSS-KAHN: Very good example. Cyprus is another disaster, as if history had given no lessons. How can you expect that the Cyprus economy, which is such a small economy, will start again when you're just squeezing all the companies, all the firms, keeping all their money out?
QUEST: So, let's be blunt about this. Is this a case of Germany --
STRAUSS-KAHN: Well --
QUEST: -- pushing austerity or the hard-liners -- you're a socialist. So, is it case of the hard-liners on the right pushing austerity to the absence of anything else?
STRAUSS-KAHN: No. It's not a question of Germany. You have pro- austerity and pro-growth in both countries, in France and Germany, and in other countries, too. The problem is that it's not -- the problem is not a question of austerity or not. It has been too much austerity, I agree with this. And if I were a Greek man, I probably would be demonstrating in the street as others.
But the question is not -- this is not the main question. The question is that more or less austerity, but the economists called the policy mix between fiscal policy and monetary policy is not the point.
The main point is competitiveness, and arguing that you need to have less deficit or more deficit, less debt or more debt, is an interesting problem, but it's not the main problem. The main problem is that Europe is not competitive anymore.
QUEST: So what has to happen to make Europe competitive?
STRAUSS-KAHN: Well, you have to work on competitiveness. The history is too long to be saved today. But countries like France, like the UK, like Germany also, have lived for a century or more on the fact that they keep the technology for themselves -- leave the rest of the world. That's over.
QUEST: But today's --
STRAUSS-KAHN: So, you have to rebuild the competitiveness.
QUEST: -- today's leaders are not up to the task.
STRAUSS-KAHN: Well, I think most of them don't really understand what globalization is. They have been educated, trained, they had their political life in one country and only one country, and they don't realize that Europe is not that big. It's a small part of the world. And the problem is to solve the European problem in the globalization, not against the globalization.
QUEST: They're not up to it. Come on! Come on, Dominique. If we -- we're talking here about a situation where four or five years -- nearly six years after the crisis began and Europe is still in recession, with high unemployment.
STRAUSS-KAHN: Well, if you -- if you want me to tell you that there is a crisis of leadership, I will tell you, there is. You know, some erratic saying, which is that an army of lions led by sheep will always be defeated by an army of sheep led by a lion. And that's exactly what we are: sheep.
QUEST: We were lions being led by sheep?
STRAUSS-KAHN: I'm afraid that --
QUEST: The Commission's not up to it.
STRAUSS-KAHN: Some -- you can't be that general. Some leaders in Europe are perfectly up-to-date and know what they'll have to do. But mostly, the European system is built in a way that no decision is made, no hard decision can be made.
QUEST: The euro is the classic example of exactly what you're talking about. It was a -- it's -- to continue your analogy, it is the horse built by a committee which becomes a camel.
STRAUSS-KAHN: You can say that. Look at the banking union. It's a bit technical, I don't want to elaborate too much on that.
QUEST: It'll never happen.
STRAUSS-KAHN: It's never going to happen for years. And we need it, absolutely. But the different elements of banking union are not on the table. Just because most countries don't want -- they say in declaration, yes, blah blah, OK, European Council will make the decision. But then, nothing happens in the field. And that's the point.
Most decisions which are made by the European leaders are broadcast as big success, but afterwards, nothing, nothing. And that's the point. Years after the beginning of the European crisis, we're still there with zero growth or close to zero growth, and it's going to go on for years in the same way just because the tough decisions are not really implemented.
QUEST: Are you frustrated that you are not there to be able to have an influence on this crisis?
STRAUSS-KAHN: Oh, it's my fault.
QUEST: We'll get into that in a second.
STRAUSS-KAHN: Well, I know that. No, I'm not frustrated. I'm just desperate to see my country and my continent -- because Europe is not only a money, a currency, or a market. Money is civilization. Europe is a civilization.
And to see this civilization just going around without being able to solve problems, which are small problems -- Greece is a small economy, 2 percent of the eurozone GDP. Cyprus is just ridiculous.
I met sometime an American CEO talking about Europe, and he said, how can it be confident with those guys? How can they be confident with CEOs which are unable to solve a problem of 2 percent of their turnover? That's exactly the point.
QUEST: Dominique Strauss-Kahn on the European economic crisis. After the break, what really happened in that New York hotel room.
(BEGIN VIDEO CLIP)
QUEST: Do you give any credence to the fact that you were set up?
STRAUSS-KAHN: Credence? Maybe. Proof? No.
(END VIDEO CLIP)
QUEST: Mistakes, regrets, and anger. The interview continues after the break.
QUEST: Dominique Strauss-Kahn says he felt he could do whatever he wanted in his private life. That illusion came crashing down over the weekend in May two years ago when he was charged with attempted rape and sexual assault.
The charges were dropped, but Strauss-Kahn admits it's still difficult to explain what happened on May the 14th.
QUEST: There's no easy way to ask any of these questions --
STRAUSS-KAHN: There's no easy way to answer.
QUEST: Fine. So, I'm just going to ask it straight out. What were you thinking that day in New York?
STRAUSS-KAHN: Frankly, I don't remember exactly. It depends if you're talking that day before the events --
QUEST: Before the events.
STRAUSS-KAHN: -- or after the events.
QUEST: Before the events, what led you to the events.
STRAUSS-KAHN: I wasn't thinking anything. It happened -- something happened, which is a private thing, and I still say what happens in a room is a private thing unless the prosecutors find something to tell you that you are going to be charged with something and they have proof of that.
And when prosecutors, after having charged you, tells, OK, finally, we don't have charge enough to charge you, then it means that it's a private thing and nobody has to say anything about it.
QUEST: So, what do you think was Ms. Diallo's motivation for making the accusation?
STRAUSS-KAHN: I don't know. We can imagine several things. I don't know, I don't want to have myself an accusation now that -- but many hypotheses have been put in the press. I have seen in the press that it could be for money, it could be directed by some secret services. I don't know. I don't know what was really the motivation.
The reality is that I have been charged for very, very difficult crimes, and that at the end of the day, the prosecutor, the district attorney in New York says OK, there is nothing anymore.
QUEST: Why did you settle the case against her? Why did you pay her money?
STRAUSS-KAHN: That's very simple. The US is a very special system. In my country, in most European countries, when on the penal side, people say there's nothing, then you cannot be sued on the civil side. In the US, you can.
So, the prosecutor may say we have nothing against you, but still you may have a civil trial. And I was ready to go to trial, but my lawyers told me, OK, it's going to take four years and it will cost you much more in legal fees than you have to pay even if you win, so you'd better pay her off.
QUEST: Paid her off.
STRAUSS-KAHN: And I decided to settle and go on with my life.
QUEST: Do you give any credence to the conspiracy theorists? That -- was it secret services, the missing BlackBerry, whatever it might be, all these things. Do you give any credence to the fact that you were set up?
STRAUSS-KAHN: Credence? Maybe. Proof? No. So, I'd better say nothing.
QUEST: So, you do give some credence?
QUEST: One of the most controversial aspects of this besides your behavior was, of course, the famous perp walk.
QUEST: You were brandished in front -- this made huge noise in France. How do you now view the perp walk?
STRAUSS-KAHN: I think it's a terrible thing, frankly, but only because it's difficult to live. Many things are difficult to live with. You have to do.
The problem is, that it's a moment where, in all European, American society, you're supposed to be innocent. You're supposed to be innocent until you're convicted. And the perp walk takes place at the moment where you're supposed to be innocent.
And so what happens, you're just shown to everybody as if you were a criminal at the moment where nobody knows if it's true or not. Maybe you're a criminal, maybe you're not, and it will be proved later on. And so, it's just unfair to put people in that way in front of the rest of the world when you just don't know what they have done.
QUEST: Did you feel that at the time?
STRAUSS-KAHN: Well, I was angry. Because at this moment, I didn't understand what was going on, I didn't understand why I was there. I was just understanding that something was going on that I didn't control.
QUEST: The problem with all the allegations about you, sir, whether it be the Sofitel incident or, indeed, the young lady in France or, indeed, the parties libertine soirees, as they're now known. The problem is that none of them -- underneath them all, there's an element of behavior that is not expected of men or women of high office.
STRAUSS-KAHN: I agree. I agree. So, I made this mistake to believe that you could have a public life, doing what you had to do in the public life -- and nobody ever said against me something in the public life -- and that you can have your private life. And my mistake was certainly to believe that you can have these two things together without any connection between.
I was wrong. It was wrong in the way you say because people are not expecting this kind of behavior from somebody having a public responsibility.
QUEST: Were you an accident waiting to happen?
STRAUSS-KAHN: No, I won't say -- I won't say that. I had in mind that I had my private life, that I could do what I want as long as nobody was hurt or some legal problem appeared, but without any kind of legal problem, I could do what I want as everybody can do what he wants, and that I would be judged on my public service just on what I do in the public.
Again, it was the wrong thing. I understand now that you cannot disentangle the two in that way.
QUEST: As one reads about you and the -- let's face it, there's mountains out there now. You must've read just -- I don't know whether you read much --
STRAUSS-KAHN: Not that much.
QUEST: Not much, right. But everyone says you have an -- you have a problem with women. Dominique Strauss-Kahn clearly had a problem with women in his attitude to them, the way he behaves towards them, the way he views them as sexual objects.
STRAUSS-KAHN: No. I don't think so. I don't think so. I don't think I have any kind of problem with women. I firmly have a problem with understanding that what is expected from a politician of the highest level is different from what can do Mr. Smith in the street.
QUEST: That's the price of being at the top?
STRAUSS-KAHN: Exactly. And I didn't want to pay this price, so finally, I paid it twice.
QUEST: You said that you had missed your rendez-vous with the French people, I believe was the --
QUEST: -- was the phrase. You were going to be a presidential candidate. Was it a case of au revoir or adieu? In other words, are you going to come back again? Everybody wants to know. It's really a basic question, this, isn't it? Do you have aspirations to be president of France?
STRAUSS-KAHN: No. No.
QUEST: Is that a politician's no, a never, maybe, or perhaps?
STRAUSS-KAHN: It's a no. I'm not working in the whole world -- around the world for governments, some in developed countries, some in the developed countries, developing countries. They ask me for advice, I'm happy to help.
Sometimes I make some money, and I need some money to live. Sometimes I don't make some money and I do it for free just because I want to help. And I like it. So, this -- problem of French politics is behind me.
QUEST: Politics may be behind him, finance most certainly is not. Next, DSK tells me how to fix Europe's banks.
(BEGIN VIDEO CLIP)
STRAUSS-KAHN: The Anglo-American approach is hypocritical. The Barnier approach is ineffective.
(END VIDEO CLIP)
QUEST: The third and final part of our exclusive interview after this short break.
QUEST: And so to the future. Dominique Strauss-Kahn says Europe could lead the world if it could only speak with one voice. Instead, he says, leaders are unable to make the tough decisions on banking and public debt. And I asked him if he had faith in Francois Hollande to solve the problems in France.
STRAUSS-KAHN: I think the situation is very difficult, and I think he's doing his best.
QUEST: If he can't solve that problems in a French environment, it has to be a European environment, it doesn't bode well, frankly, does it?
STRAUSS-KAHN: Yes. You need -- to solve the problem together, you need to be a team. The problem is that you don't have the European team.
QUEST: And you don't even have agreement, really, between France and Germany.
STRAUSS-KAHN: True. True. True, because in my view --
QUEST: And that's why --
STRAUSS-KAHN: In my view -- I don't want to be pretentious in saying that -- but they don't understand that they cannot solve their own problems alone. And that's true for America, that's true for Hollande, it's true for Italians, it's true for Cameron, it's true for all of them.
QUEST: Does it worry you that Hollande and Merkel do not get on that well? I mean, they might get on personally, but politically, they are not allies.
STRAUSS-KAHN: Yes, absolutely. I think the only way for Europe to overcome obstacles is to have great cooperation. And more than cooperation -- a great understanding between France and Germany. It happened in the past sometime, and that was the period where it worked well. It's not the case anymore, and that's certainly a problem.
QUEST: If we talk about the banks, never mind the sub-prime crisis that got us into all this mess, good old-fashioned greed. Bankers' greed. Bonuses. Time to do something about it. Are you more in the Anglo- American approach or the Michel Barnier European approach?
STRAUSS-KAHN: None of them. The Anglo-American approach is hypocritical. The Barnier approach is ineffective, even if Monsieur Barnier himself is a very good man trying to do his best. But it is an environment which makes things very difficult to really succeed.
The point is, it is just unacceptable for most of the people on Earth that some others will earn that much money and on top of that, earning this money will take risks that they won't support themselves, but the rest of the world will have to deal with.
So, of course, something has to be done. But it's not just capping the income or something like this. It's much more deep to change the way the financial institutions are working.
QUEST: In the same way that libor, they managed to -- defraud libor, they managed to fix libor for many years. Were you horrified by that?
STRAUSS-KAHN: Well, horrified is a bit too strong a word. But I'm not sure it's the right way to do things. Look. The banking system is -- in Europe is sick, very sick, much more than people say. It has to be really cleaned up before growth will come back.
And because most of the leaders are unable to make decisions, including the question of how much people, the traders and so on will make, how much money they will make.
But that's only a small part of the problem. If you don't solve the problem of the banks in Europe, you won't have growth anymore.
QUEST: We have two more areas to talk about. Free trade agreement between the EU and the US. It's just getting underway now. You --
STRAUSS-KAHN: Trade is good.
QUEST: Ah! Everyone says trade is good.
STRAUSS-KAHN: No, not everybody. But I say it.
QUEST: You put any economists in the room and everybody says free trade is good, and you won't --
STRAUSS-KAHN: That -- that's fantastic. Mostly you put two economists, they have two different opinions.
QUEST: But you know from the Uruguay Round, from the Doha Round --
STRAUSS-KAHN: No, the point is -- OK, let's go to the core of it. An agreement is a good thing. The problem is, this agreement so far is looking like something which is much more beneficial for the US than for the rest, and especially for Europe.
The US already has an agreement with the Pacific minus China. They want to have the same kind of agreement with Europe, and then they will be able to define the standards. And the biggest question in this story are standards.
If you are able to define the standards as yours, then you're dominating the world. And that's what the US wants to do, and I think the Europeans should not be that naive.
QUEST: Naive? The Europeans are going to get done over, here, aren't they? I mean, France might keep its cultural exception --
STRAUSS-KAHN: No, that cultural exception is a very interesting thing and I'm totally in favor of that, but that's a small thing.
STRAUSS-KAHN: That's a small part of the business. The real part is not there.
QUEST: Overall, the Europeans are going to get done over. The Americans are going to take over -- going to walk over the Europeans on this, aren't they?
STRAUSS-KAHN: We're going to see. We're going to see. I hope that the Europeans will be able to have a fair agreement with the US. And what I see today in the papers, and not only newspapers, but also documents which are circulated is that it's absolutely unfair and there's no reason why the Europeans will accept it. The only point is that they're divided.
United Europe will be able to resist. A divided Europe -- then we come back to what we said before -- will not be able to resist.
QUEST: And you know well as a politician of experience, divide and rule.
STRAUSS-KAHN: Exactly. But that's the reality of Europe. Europe could be one of the leaders of the world -- not the only one, one of the leaders -- if Europe was able to speak with one voice. It's absolutely not the case.
QUEST: Finally, what are you going to do next? All right, you've said your consultancy and there's various other countries and you don't want to be president, but you are a man steeped in public service. And you're not about to just pack up and head off.
STRAUSS-KAHN: No, I spent all my life trying to help my people in France to have a better life. It appears to me while I was working at IMF that I could do this at the global level. Again, I must be humble. I cannot change a lot of things, but I can help.
And when I'm working for a country like South Sudan, for instance, which is a new republic, 18 months old, that needs everything, and that I'm doing it totally free because I want to help them. I'm happy to see the government of South Sudan telling me, come to us and help us, we need you.
That's much more rewarding than any kind of election in any country. People looking at you and saying, "We need you."
QUEST: Which is the opposite of people looking at you and saying, "No, thank you."
STRAUSS-KAHN: Exactly. Exactly, but some people may have reasons not to like me, and I totally respect that, and they don't want to see me anymore. I can respect that.
The problem is, there are in the world, on Earth, a lot of people, right or wrong -- but I think they're right -- that wants me to help them. Why should I do that? And to do this, you don't need to be a politician. You just need to know what your advice is, and if people like it and if it succeeds, then they will ask you more and more. And that's exactly what I want to do.
QUEST: Dominique Strauss-Kahn --
STRAUSS-KAHN: Thank you.
QUEST: Thank you, sir.
QUEST: Dominique Strauss-Kahn speaking to me. And more, as always, on cnn.com, and I'd be interested to hear your views on that interview. We can tweet backwards and forwards to each other @RichardQuest with your views. After the break --
QUEST: -- the Fed minutes are out, and this is the reaction on the market. The minutes suggest that more members than most want to taper Fed stimulus. We'll have the details. QUEST MEANS BUSINESS.
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): In Egypt, prosecutors have issued arrest warrants for Muslim Brotherhood leaders notably including the spiritual chief, Mohamed Badie. They are accusing him of inciting the deadly clashes in Cairo on Monday.
Meanwhile the interim government says the ousted President Mohammed Morsy is in a safe place and that no charges have been filed against him.
The security chief of Pakistanis' president Asif Ali Zardari has been killed in a suspected suicide bomb attack. It happened in Karachi. A senior police officer says the bomber walked up to the security head's car and blew himself up. Two others were killed; 10 more were wounded in the attack.
Investigators aren't revealing any more details of the criminal act they say may have led to a deadly train derailment in Quebec. Provincial police say they're looking for evidence that would allow criminal charges to be filed. At least 15 people died as a result of the crash; 45 others are still missing.
The Boston bombing suspect Dzhokhar Tsarnaev is due to appear at a federal courthouse within the next hour. It'll be the first time the public has seen him since the April attacks. Tsarnaev will be required to enter a plea to more than 30 charges against him, which include using weapons of mass destruction to kill four people.
The head of the U.S. National Transportation Safety Board says the pilots flying the Asiana plane that crashed on Saturday weren't tested for alcohol or drug use after the crash. Such testing is standard procedure for U.S. carriers in the aftermath of such incidents, but it is not the rule for foreign airlines.
(END VIDEO CLIP)
QUEST: About half of the U.S. Federal Reserve's officials not only want to taper the central bank's stimulus program; they actually want to end it entirely this year. That's revealed in the minutes from the central bank's June meeting released a short time ago.
It states that those members thought it would be appropriate to end asset purchases late in the year. The market reaction, the Dow Jones -- you might have suspected it would be off sharper than that. It's down just 15 points at the moment.
Felicia Taylor is in New York.
What we get, Felicia, when we look at these minutes -- and it is only a cursory look I've had -- but Ben Bernanke in his press conference didn't really give the strength of views on tapering that now seems to be in the minutes.
FELICIA TAYLOR, CNN CORRESPONDENT: Well, exactly. I mean, there's still a sort of delicate balancing act that Ben Bernanke is doing and that's where the confusion comes for the marketplace, because there's this one -- there's one line that I think is really very significant and that is they should provide more clarity on asset purchases relatively soon.
So the market is interpreting that relatively soon date is coming up on September 18th, and that's when we're going to get an idea of when this tapering is going to begin. It's now clear that many of the Fed members believe that it should begin sooner rather than later. That is not something, though, that Ben Bernanke has actually said.
So when it comes to some of the traders that I've spoken to, some believe it's going to end rather soon; others don't think it's going to begin until 2014. You got to remember: this is something that is still very data dependent. It is still debating the economic strength.
If you talk to one trader, they'll say that labor number that we saw last week wasn't that strong at all. We're creating part-time jobs. That's not good enough. Tapering as some expect, though, will start in September because gradually it has to begin sometime soon. And as we now know, many of the Fed members do believe that it should start.
We will maybe -- maybe, I stress -- get some hints from Bernanke in just a couple of hours as he will be making a speech in Boston. So we could get some new hints from him. It's unlikely that he would make anything significant, though, because, again, it's not an official FOMC speech.
But again, we're still doing this delicate balancing act. There's no clear direction yet. And again, it is data dependent. He has been very, very clear about that. And the data just isn't there yet in terms of the economy, Richard.
QUEST: So really what the Fed governors are saying or those involved, I mean, they're stating the obvious to an extent. But there's clearly a more hawkish element there now.
TAYLOR: Oh, there's no question about it. That dovish sentiment that's we've seen for such a long time has definitely taken a twist. And with good reason. I mean, there's a point at which the Federal Reserve needs to step out of the marketplace. You know very well that they've been sort of testing the waters to see how the market's going to react.
At some point, it has to go back to economic fundamentals. And that time is getting sooner rather than later. We've been at this now for a number of years. The Federal Reserve has to be able to pull back.
And it is that very delicate balancing act that he's trying to do. And don't forget: I mean, some would say that he is a lame duck Federal Reserve president because basically he is stepping down in January. The last thing he wants to do is see in September everything fall apart in the last few months of his tenure. That's not what he wants to see happen.
So there are quite a few people out there that believe that nothing's going to happen in September because of that. He doesn't want to see the markets fall into, you know, a handbasket. You know the whole saying.
QUEST: So they say. Felicia Taylor who is in New York.
Stocks in Europe were mixed. Investors waited on the Fed. What does mixed mean? Well, that's what it means, two up, two down. And if you look at the movements, there weren't that great, either. A little bit there, a little bit over there, but not much to really get excited about.
Shares of the U.K. fashion retailer Burberry bucked the downward trend at nearly 5 percent after quarterly results beat expectations. In Paris, the CAC ended today slightly weaker and you can see the numbers for the other major markets.
Apple has today been found guilty of taking part in a price fixing conspiracy. A federal judge in the U.S. ruled that the tech giant plotted with publishers to push up the price of eBooks. Judge Denise Cote (ph) said Apple is not only a willing participant in the conspiracy, it was the ringleader. The company rejects this and is likely to appeal the ruling.
CNNMoney's David Goldman joins us now from New York.
David, whatever we hear, oh, words like conspiracy and the eBooks and Kindles and, come on, what's this really all about?
DAVID GOLDMAN, CNNMONEY CORRESPONDENT: Well, I'll tell you what this is really all about. It's that Apple bargained and they lost. They gambled and they lost. And all the other five eBook publishers that were involved in this, all settled. So the handwriting was on the wall. Apple wasn't going to win this case.
The judge said it at the outset of the case and that's exactly what happened. She said that Apple had engaged in conspiracy. All of the arguments that Apple had laid out, she didn't buy any of them. In fact, one of the great lines from her ruling was that one of Apple's main arguments was that, well, Amazon and Google were doing it, too. And she essentially said two wrongs don't make a right.
QUEST: But why did -- if all the others settled, what's your gut feeling for why Apple decided to fight this? I mean, I know that you always -- one's entitled to one's day in court and there's always the half chance that you're going to win.
But if I understand you right, David, they had no chance here.
GOLDMAN: Yes, that's right. I mean, Tim Cook, if you're going to believe Tim Cook, the CEO of Apple, he said I honestly believe that we did nothing wrong. And that's what Apple said in its statement today.
But you know, when you get down to the details of the court case, you know, Eddy Q (ph), one of Apple's main executives, more or less admitted that, you know, Apple was the ringleader here. But he just said that there was no notion that Apple had that there was going to be a conspiracy, that eBook prices would be -- would go up.
And the judge said, look, you had to know that all the other eBook publishers were going to talk to one another. So this might have been a little bit of Apple not wanting to settle just to clear its good name there. But again, (inaudible) lost that gamble for sure.
QUEST: (Inaudible). David, good to talk to you on that. And bearing in mind how significant eBooks now are and how many of us are now using them, interesting stuff. Thank you very much.
Now when we come back, the low-cost airline, which is attempting a bit of time travel, (inaudible) chief exec in Africa tells me he wants to bring African aviation back to the future, Ed Winter is after the break.
QUEST: The airline which wants to be Africa's version of easyJet has just added a new route. Fastjet has won the right to fly between Dar es Salaam in Tanzania, where it has been primarily based until now, and Johannesburg in South Africa. One route with huge promise.
The budget airline is part owned by Tselios Agiano (ph), the founder of easyJet and the model is very much the same. It has ambitions to become a truly pan-African carrier. It's not been easy getting the permissions, getting the authorities, getting the planes and getting the money.
Now I want you to have a look. The continent is rich in opportunity. This map shows the world's air routes, more than 58,000. Now the brightest, of course, the northeast of the United States, just look at Europe and of course, northeast (inaudible) Asia. You can see that those are the big, bright spots. And then you compare Africa. Virtually nothing.
You can see the main trading routes, of course, ahead of South Africa and the major cities. But the cross-continental action virtually nonexistent. It's difficult to run an airline here (inaudible) governments, high taxes, foreign competition. It results in losses and bankruptcies and unsafe flying in many cases.
Before he won the Joburg route, the Fastjet chief exec, Ed Winter, told me success in Africa requires a lot of patience.
ED WINTER, CEO, FASTJET: (Inaudible) is proving a bit more difficult than we thought it might have been. Africa now is a bit like Europe was in the '70s, '80s. Everything is controlled nationally with bilateral agreements between countries, a lot of protectionism, a lot of restrictions.
QUEST: So how are you going to beat them where they have defeated others before you?
WINTER: Here in Africa, we're dealing with eight individual countries. What we can do is (inaudible) pan-African airline, which is one company. That just won't work in unliberalized (ph) arenas such as this. So what we're doing is constructing individual companies but for the consumer it'll be one product.
QUEST: It's exactly a franchise.
WINTER: If you think about it --
QUEST: It's exactly a franchise. You're selling them the flag and the name.
WINTER: Most hotel chains don't actually own many hotels at all. You know if you go into a particular brand of hotel around the world, you know what standards you're going to get. Now we can do the same with aviation.
QUEST: That still doesn't address the problem of how those individual companies are going to solve the issues which have bedeviled African aviation.
WINTER: We've shown two things, I say, in a very small way in Tanzania. One is that we can operate within that infrastructure but also that the low-cost model works. Thirty-eight percent of our passengers so far in Tanzania will be first-time flyers.
QUEST (voice-over): It's not clear whether Fastjet can ever become the carrier it aims to be, having posted a $56 million loss for the 18 months to the end of last year. The auditors KPMG said they had, in their words, "significant doubts" that the airline would be able to continue trading. Fastjet have brushed aside the concerns, but are aware of the risks. For now, the airline carries on.
QUEST: You must have the temperament, the -- of a saint to be able to keep your cool during this process because it must be absolutely mind- bogglingly frustrating.
WINTER: In the first few weeks, I've had quite a lot of people (inaudible) office things would happen and they would say, oh, it's Africa. I've banned that phrase. I said, "We know it's Africa. That's where we're working. We know what the problems are. Let's just deal with them."
QUEST: Ed Winter talking about Fastjet.
Now to the weather forecast, Tom Sater's at the World Weather Center.
Some fascinating things happening, whether it's typhoons in Asia or the extremely pleasant weather that most of Europe seems to be enjoying.
TOM SATER, AMS METEOROLOGIST: Yes, it looks like it will continue that stretch in Europe. In fact, a little warmer than average, Richard. But our big story for our business travelers and anyone traveling, really, for that matter, is the tropical storm systems that we've been watching and the one that's about 1,200 kilometers east-southeast of Taiwan.
This has been such a rapidly developing tropical storm that in the near future -- in fact, possibly the next 12 hours -- this will have super typhoon status. That -- you know, it's already a Category 4 hurricane type strength. Look at the winds, 220 kph. Just has to reach 240 to get the super typhoon category.
Now as far as its trajectory, it is making its way toward Taiwan and of course that would be northern Taiwan, where we have Taipei. This is the 13th busiest international airport in the world, 13th busiest freight hub, if you will. And notice how it enhances the rainfall. And we have high terrain in Taiwan. It gets easily, you know, around 2,000 meters high in some of the topography here.
But in about 12 hours as mentioned, we're looking at super typhoon strength, 48 hours knocking on the door here to Taiwan. And then it's going to come very close to the city of Fuchou. Now right along the coastline, Fujian, Duchiyeng (ph) province both have orange alerts. We're already looking at sea heights within this system that are about, oh, almost 16 meters.
So again the system, 10-16. They're going to strengthen, I think, get closer to that as we move into the area. So a well-defined typhoon, watching this one closely. There is a tropical storm in the Caribbean but it's losing some strength, Richard, which is good news. But anyone flying -- anyone living in this area, we're going to watch this one closely.
QUEST: Tom, we thank you. Slightly short of the normal, but you gave us a good idea of what's happening in the weather and we'll obviously get more from you tomorrow. Many thanks, Tom Sater.
After the break, death and taxes, the two great certainties of life. Now one of them's been named the number one threat to global business and I'll have the other threat courtesy of Lloyd's in a moment.
QUEST: High taxation is the top threat to global business, according to Lloyd's of London, the insurance market. It's released its annual risk index; two years ago the risks from high taxes didn't even make the top 10. Now it's surged to number one for this year as governments look to collect more revenue to balance the books.
Interestingly, the loss of customers is ranked as second and cyber is third; material costs and excessive regulation thereafter.
I spoke to the Lloyd's chief exec Richard Ward and asked him, bearing in mind we hadn't even seen in the top 10 higher taxation, was he surprised?
RICHARD WARD, CEO, LLOYD'S OF LONDON: I am surprised in part but now really because when you look at all the discussion in the press, when you look at what the G8 were discussing in Northern Ireland, it was actually taxation. Governments are concerned about falling revenues. They are looking at taxation as a way of filling their coffers.
They are concerned about the big corporates such as the Googles, Amazons and Starbucks, not being seen to be paying their fair whack, whatever their fair whack is. And so it is on a business' agenda. And I don't think people necessarily are concerned about higher taxation. They're concerned about uncertainty (inaudible) taxation.
QUEST: There's not a lot they can do about it. I mean, they can certainly try and do other regimes. They can try and rearrange their tax affairs. But those are the very risks that governments are now stamping out.
WARD: Yes, they are. And I'm not saying that people are going to change their affairs to avoid taxation. I don't think that's the issue at all. What the business leaders are saying to us is that because of the profile that taxation has now, it is a risk that they need to consider at their board room, probably in part because of the reputational consequences for their tax affairs.
QUEST: And cyber risk, it's gone from 12 to 3. This is by far and away -- everything, every time I talk to CEOs now, the one thing that they say they're grappling with -- because they really haven't got an answer yet for this.
WARD: No, I mean, that's a tricky one. I mean, it's actually gone from 20 in 2009 to 12 in 2011 to 3 this year. In part, we've seen some very high profile attacks on the CIA, on Interpol, on Boeing. We've seen theft of customer records from Sony. We've seen passwords stolen from LinkedIn.
I think you -- you know, you pick up the newspaper every day now and there will be something about cyber risk. It's very much on the government's minds here in the U.K. They've considered it one of their key risks. And so I'm not surprised that businesses are having to think about it.
QUEST: Of your top five, higher taxation, loss of customers canceled, cyber risk, price of materials, excessive strict regulation, these are all global business risks. Which ones can I insure against?
WARD: Well, you certainly can insure against cyber risk because this is something that Lloyd's market actually does lead in. And it's been something we've been doing for well over 10 years. And as it goes up people's agenda, I'm sure we'll be doing more of it.
QUEST: But you won't sell me a policy against higher taxation?
WARD: No, Richard, I won't.
QUEST: Well, now at least I know. I'll have a "Profitable Moment" for you after this short break. QUEST MEANS BUSINESS, good evening.
QUEST: Tonight's "Profitable Moment": you have heard from Dominique Strauss-Kahn. Well, the personal stuff is interesting. Yet it is news on the economic crisis that makes fascinating listening. It's a series of warnings, catastrophic policies, disastrous bailouts. As European system incapable of making a decision and European banks are sick, he says, very sick.
Here is a man who seems to be free to speak his mind and happy to do so. It is warning about trade talks getting underway. It's also interesting. Warning the Europeans not to be naive, that the U.S., he says, wants to be in a position to set global standards and dominate world trade.
Why do we care about what DSK says? Because he had a seat at the top table for so many years and is regarded as one of the sharpest practical economists around. He admits he's paid a price for what he did and, frankly, it's most unlikely he will ever serve high office again.
The global economy lost access to a brilliant mind who might have helped bash heads together to solve this crisis sooner. And even if you can't stomach the man and his morals, well, tonight at least we got to listen to the message on economics.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The headlines at the top of the hour:
In Egypt, prosecutors have issued the arrest warrants for the Muslim Brotherhood leaders notably including the spiritual chief, Mohamed Badie. They are accused of inciting the deadly clashes in Cairo on Monday.
Meanwhile the interim government says the ousted President Mohammed Morsy is in a safe place and no charges have been filed against him.
The security chief of Pakistan's president Asif Ali Zardari has been killed in a suspected suicide bomb attack. It happened in Karachi. A senior police officer there says the bomber walked up to the security chief's car and blew himself up. Two others were killed; 10 more wounded.
The engineer of the runaway train that crashed into a small Quebec town has been suspended. He told investigators he had set 11 hand brakes on the train before it broke away. His employers are now cast doubts on the claim, at least 15 people died as a result; 45 others are missing.
And the Boston bombing suspect Dzhokhar Tsarnaev is due to appear at a federal courthouse within the 30 minutes. It'll be the first time the public has seen him since the April attacks. Tsarnaev will be required to enter a plea to more than 30 charges that have been leveled against him.
(END VIDEO CLIP)
QUEST: Those are the headlines. Now to New York and "AMANPOUR" is live.