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Germany Warns Greece; Athens in Lockdown; Publicis CEO Pushes Austerity; European Markets Up; US-EU Trade Talk Doubts; Us Markets Up; Focusing on 4G; Dollar Up Against Yen, Flat Against Pound, Euro; Make, Create, Innovate: Stronger Concrete for London's Deepest Tunnel

Aired July 18, 2013 - 14:00   ET


RICHARD QUEST, HOST: Schaeuble shuts down Athens. The Greek capital is is on lockdown for the visit of the German finance minister.

Trans-Atlantic trouble. Tonight, the head of the WTO tells this program his concerns on that EU-US trade deal.

And getting shirty. Newcastle's top striker says he won't wear his team's sponsor's logo.

I'm Richard Quest. I mean business.

Good evening. Germany's finance minister has warned Greece not to push its luck by asking for more help from its creditors. Wolfgang Schaeuble's motorcade rolled into a deserted capital city of Athens to unlock millions of dollars in loans for Greek firms. Join me over at the CNN super screen.

Schaeuble's message was clear and simple to the Greek people and the Greek government especially: no more write-downs. The country's remaining debts, he said, must be paid.


WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER: I would make one very serious remark. I would like to ask all of you not to continue in this time, this discussion, on a new haircut. It is not in your interest. We have agreed to the second program for Greece, and it was difficult to get it, I tell you.


QUEST: Blunt words from the minister. And while the streets of Athens were deserted, there was a ban on demonstrations so that Mr. Schaeuble could be ensured of safe passage to prevent any protests from getting out of hand.

Exactly the same thing happened during Chancellor Angela Merkel's visit to Athens last October, extraordinary scenes that were necessary, the authorities say, to ensure the security and safety.

But even so, there was plenty of visible opposition in the press. This is the front page of the "Pontiki" newspaper. It calls Schaeuble "the exterminator" running over sacked civil servants. It was a viewpoint summed up by Syriza's deputy.


PANAGIOTIS LAFAZANIS, DEPUTY, SYRIZA COALITION OF THE RADICAL LEFT (through translator): Who is Mr. Schaeuble that Greek citizens may not protest about his presence and his polices on Greece? What kind of regime is this? You seal off all of downtown Athens and even the airport ring road so that Mr. Schaeuble may not hear his subjects' cries.


QUEST: The official restrictions on protests were supposed to be lifted at 8:00 PM local time. Elinda is in Athens. We've had so many protests in Athens, it's perhaps hard to describe this as an attack against democracy. How realistic was this, that protesters would have tried to bring the city to a standstill?

ELINDA LABROPOULOU, CNN INTERNATIONAL CORRESPONDENT: It all went quite smoothly. There was lot of police around, protesters did apparently gather in one location, but they didn't go very far. There were a few problems as Mr. Schaeuble went along the way, but nothing major.

QUEST: All right.

LABROPOULOU: Most of what we saw was in parliament, some of the MPs that you suggested and also in the press. But for the rest, it was all fairly quiet. Mr. Schaeuble remains to many a persona non grata. He remains the architect of austerity, if you like, so he remains somebody who is not --

QUEST: Elinda, tell me -- tell me, why did Mr. Schaeuble bother going there? At best, it would be a controversial visit. At worst, it made a bad situation much more -- well, difficult for everyone concerned.

LABROPOULOU: Well, controversial, certainly, especially as it came the day after a bunch of austerity measures were just voted in. But at the same time, it was an endorsement to the government, it was a sign of support. He came with promises of growth. He seemed to show that he realizes this need for growth, which is what Greece has been pushing for all along.

And I think the perception of quite a few people in Greece is likely to change as a result of the visit and become possibly a little bit more positive. So, in that sense, I think it's been a positive visit all along.

QUEST: Elinda in Athens for us this evening. On the wider picture, going to the very heart of the issue in Europe at the moment, not just growth and austerity, but the pain being suffered by many of the countries, Maurice Levy says Europe must push ahead with austerity, consolidation.

His company is Publicis, and it saw net profits rise 15 percent in the first half of this year, thanks mainly to strong growth in North America, emerging markets, and digital advertising. Sales fell in Europe.

Maurice Levy joined me on the line from Paris, and he told me the continent must take its medicine no matter how bitter.


MAURICE LEVY, CEO, PUBLICIS: We need and what we are expecting from our leaders is to really focus on public spending and making sure that we are cutting public expenditures to make sure that we are generating healthy and productive growth, not something which is based on a redistribution and by increasing our debt level.

QUEST: Right. Could --

LEVY: This is what I'm personally expecting. It's a tough call, but that is what we should be doing, despite the fact that we will have an unemployment rate which will go up. And I have the feeling that this is the only way to solve on a long-term basis, and we have to swallow the bitter pill.

QUEST: So, you are looking for continued consolidation, basically the continuation of, to use the evil word, austerity even though that is having the short-term effect that we are seeing at the moment. You're saying there's no other way.

LEVY: This is my belief, and I believe that for now we are not yet in real austerity, because this austerity, if you look at the situation in France, it is based on raising taxes and I think this is not the best way to do it.

The best way to solve our endemic problem, which is not a recent problem, it is not a problem of the last five years, it's a problem of the last 30 years. We have increased continuously our spending, and we need to put a stop to this and to reduce our spending.

This is the only way to have a healthy situation, so when we will come back to a more balanced budget, then we will have growth which will come from something which is extremely healthy and which will help having a very good, competitiveness in our countries.

QUEST: You're --

LEVY: This, by the way, is what Spain is doing.

QUEST: To the critic who says, well, it's easy for him to say, he earns millions of euros a year, he can take a cutback, it won't make any difference to him. But to the poor or to the elderly or to the unemployed, they would say Mr. Levy, there's nowhere else to cut. How would you answer them?

LEVY: The key question is not to look at one individual but to took at the macro situation of the country and can we sustain such expenditures and can we sustain such a way of living where we are redistributing something that we have not, and we are redistributing at the expense of the future generations.

And this is something which I believe is wrong, and I'm just making the point. You are putting me the question, I'm answering the question in this way, because this is what I sincerely believe.


QUEST: Maurice Levy, talking to me earlier from Paris. European stocks, they built on yesterday's gains. There were better than expected US data, which boosted investor confidence.

Now, I want you to look at the markets themselves. The London Stock Exchange is at more than 7 percent on strong Q1 numbers. That's the -- by the way, that's not the index, that's the actual stock exchange itself.

Look at the FTSE. It had a nice, gentle rise up the course of they up over 2 points. If we look at the gains in the DAX in Frankfurt, you'll see a similar sort, 1 percent gain and again, a very satisfactory rise in the morning, which picks up steam once New York moves into the market.

Paris is up 1.5 percent. Publicis, who just heard from Maurice Levy, there, gained 3 percent in the Paris market.

As he prepares to clear his desk, the outgoing head of the World Trade Organization is now expressing concerns about the world's biggest trade deal that they're trying to put together. Why after the break. QUEST MEANS BUSINESS.


QUEST: The head of the World Trade Organization is preparing to leave office with doubts about the success of the trade talks between the US and the European Union. Pascal Lamy, who steps down at the end of next month, fears this deal could complicate a more global agreement.

On the line earlier, I put it to him, frankly, it's little surprise that the WTO had a reservation about this bilateral deal.


PASCAL LAMY, OUTGOING DIRECTOR-GENERAL, WORLD TRADE ORGANIZATION: As long as we do not have enough insurance that these various bilaterals possibly are convergent, there is a risk of scattering the playing field, which of course for expansion of trade in a non-discriminatory way, can be a problem.

I'm not saying it is a problem. I'm saying it could be a problem if nothing was done in order to ensure that they converge instead of diverge.

QUEST: But the problem, of course, was that it became impossible to get multilateral deals.

LAMY: That's a perception -- a possible perception. The reality is that what these mega bilateral deals are about are not so much anymore about reducing tariff protection, they are about reducing regulatory discrepancies that slow trade, whether trans-Atlantic or trans-Pacific.

QUEST: Dominique Strauss-Kahn in an interview with me last week said that his -- he warned the Europeans. He said don't be naive. The Americans want to dominate the global trade agenda. Does he have a point of which you would agree?

LAMY: There may be an element of this, of competition. Who is going to be the prime standard setter for food, for safety lighters, for car emissions, for banking regulation? I'm not against a bit of competition, as you know, but I think at the end of the day, if I'm an African, if I'm a Brazilian, if I'm a Russian, I will be worried that I have to deal with different regulatory regimes.

QUEST: As you look to the end of your term, how do you reflect on the Doha Round? You and I have talked about it, sir, so many times, I know it was always a priority for you to try and get a deal done. And -- I hesitate to use the word "failure," but -- because progress was made. But you didn't get a deal done. So, how do you reflect upon that?

LAMY: Well, Richard, I think you're right. We didn't get a deal done under the shape which was expected when it was launched ten years ago, which is a full-fledged agreement on 20 Publicis that would have been simultaneously agreed.

We live in the world of politics, even if they are the politics of trade, and it took a bit of time for ministers to agree that this Doha agenda could be negotiated bit by bit, piece by piece, instead of being negotiated as a bundled series of issues.

I think they took the right decision. It took a bit of time. And again, I think there is something in the making for the next minister conference of the WTO at the end of the year.


QUEST: That's Pascal Lamy, the outgoing director-general of the WTO, the World Trade Organization. He leaves office at the end of August.

So, US stocks are heading for a record as the earnings season continues to impress.


QUEST: That's the number, up 80-odd points, a gain of half a percent, 15,549. Another record -- I can't remember if it's the 26th, 27th, or 28th so far. So Morgan Stanley's profits were up 66 percent in Q2. Revenues were up, shares up as well. Interestingly, of course, it continues from what we've seen from other banks, notably, of course, Goldman Sachs and Chase.

On the economic front, the initial jobless claims also fell more than expected. The market is absolutely tearing away. Even in the summer, we're seeing some very strong gains, a record on the cards if it holds those gains for the next, oh, just hour and 40 minutes.

Ericsson shares were down more than 4 percent after its second quarter results failed to impress investors. Operating profits improved from a year ago. Now, the CEO, Hans Vestberg, told Jim Boulden that he's focusing on the rollout of the 4G network.


HANS VESTBERG, CEO, ERICSSON: When I look at a quarter, it was actually a step ahead from what we have said, and sort of continue on the path that we've been discussing of the last four to five quarters.

Then there were, as I said all the time, we're working to increase our profitability, but we also know why we're here with the investments are down in research and development, and the investments are down in market share.

So now it's just to execute on this, and that we saw in this quarter some early signs and gradual improvements based on our work that we have been undertaking.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: So, building out the 4G networks, the LTE networks, is what it's all about now for mobile data, super fast mobile data. Are there still a lot of network providers who haven't built out yet?

VESTBERG: There are three markets that are ahead. That's Korean, Japan, and the US. They have massively deployed 4G and LTE and have also a substantial amount of subscribers. The reset of the world is now starting rolling out and getting subscribers in. So, it's a quiet look.

The majority of all mobile broadband users on this planet, they are using 3G, and they will probably -- or not only probably, they will for the next three to four years be the biggest technology when it comes to mobile broadband will be 3G because of the devices and the cost for the ecosystem, including devices.

So, I think we're going to see LTE continue to develop, but we're also going to see 3D continue to develop.


QUEST: Hans Vestberg of Ericsson. Now, tonight's Currency Conundrum. Look at this. A rare 1793 bronze penny was sold at an auction yesterday well above the reserve price. You can see it's a bronze penny. What I want to know, which city was the coin minted? New York, Washington, Philadelphia? The answer later in the program.

The dollar is strongly up against the yen. It's put on more than one cent against the Japanese currency so far this session, flat against cable and the euro. Those are the rates --


QUEST: -- and this is the break.


QUEST: Right now, 80 meters down below London, engineers are digging the deepest tunnel the city has ever seen. It's the Lee Tunnel, which will replace a Victorian sewage network built more than 150 years ago and, I might add, still in use.

Now, this new tunnel is made of concrete. Well, perhaps I can hear you say, nothing exceptional about that. Except this is concrete that is stronger and more durable than any other that's been used. Nick Glass went deep underground to find out more.


NICK GLASS, CINN INTERNATIONAL CORRESPONDENT: This is the deepest tunnel ever built under London. We're some 230 feet below ground. And the tunnel, once finished, will run about four miles. They're using a special reinforced concrete to build it, using special tiny little fibers.

GLASS (voice-over): Belgian engineer Ann Lambrechts is responsible for revolutionizing concrete performance. The addition of steel fibers, crucially with hooks on the ends, increases concrete durability. The product has a brand name, Dramix.

ANN LAMBRECHTS, HEAD OF R&D, BUILDING PRODCUTS BEKAERT: I remember specifically that we've made the concept about flattening the hooks, et cetera, and it was the hook that we didn't intentionally design, but that came out of the process as well that was the hook that gave you the best performance.

GLASS: The ancient Romans first invented concrete, used famously for the dome of the Pantheon in Rome. But of course, it wasn't reinforced.

Reinforced concrete, using thousands of tiny steel fibers to bond or anchor the material, is more recent, 1975. And it's been evolving ever since.

LAMBRECHTS: The tiny little bend is crucial, and it's this tiny little bend that's crucial as well. And this bend is a double bend.

GLASS: We conducted our interview on the concrete testing lab, surrounded by sample blocks. Concrete is brittle. It cracks naturally. To last, it needs reinforcement.

In the Bekaert factory in Belgium, great wheels of wire unloop continuously, glinting in the half light, and are fed in rows down the assembly line. They wouldn't let us film how the wire is cut and shaped. They don't want their many competitors to see how they do it.

The fibers are about the size of a small paperclip, and the shape continues to evolve subtlety. More ridges, flattened ends. Compared with conventional reinforced concrete, the claim is steel fiber concrete is more durable, easier to use, and cheaper and safer.

LAMBRECHTS: This is a steel type of a concrete reinforcement. So, if this is a bundle of fibers, glued together with water soluble glue, the bundles are just added to the concrete mix, and through the mixing process, the water soluble glue will dissolve. And also through the action, the mechanical action, the friction --

GLASS (on camera): The mix.

LAMBRECHTS: -- of the aggregate -- the mix, right. So, these bundles split up into individual fibers and, as such, are homogeneously distributed everywhere in all directions.

GLASS (voice-over): And there you have it, a ten-minute recipe for another segment of tunnel wall. Out in the yard, they have hundreds of them, enough for a mile or more of tunnel.

GLASS (on camera): Each tunnel segment weights about five tons, and that's a weight of an African bull elephant. And in each of them, there are about 300,000 individual steel fibers.

GLASS (voice-over): It's hot down the tunnel, hotter as you approach the working end of it, a boring machine called Busy Lizzie is ring- building, eight segments to a ring. They're fast -- 20 minutes and they advance another few meters.

And it's not just used in tunnels. The headquarters of Chinese television in Beijing was partially built using Dramix, as was a writers' retreat in Switzerland, and the spectacular entrance to an oceanographic park in Valencia in Spain. Steel fiber concrete has give architects greater freedom of expression.

GLASS (on camera): Do you dream of concrete and strength?


LAMBRECHTS: Sometimes.



QUEST: I will never look at humble concrete in the same way again.

International outrage when we come back. Russia's jailed an outspoken critic of the Kremlin. Angry protesters are taking to the street over the conviction, and we're live in Moscow. QUEST MEANS BUSINESS.


QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.

The headmistress of the Indian school where poisoned lunches killed 23 students is on the run from the police. The authorities are searching for the principal and her husband for questioning. Doctors believe the children were poisoned by an insecticide commonly used on farms in the region.

The crowd of revelers celebrating Nelson Mandela's 95th birthday in Pretoria in South Africa.




QUEST: The former South African president has been in hospital since June with a recurring lung infection that brought him near to death. Doctors now say his health has been steadily improving.

British investigators are calling on their American counterparts that the emergency locator transmitters on 787 jets should be temporarily disconnected. It comes after last week's fire onboard an Ethiopian Airlines Dreamliner at London Heathrow. Investigators are also calling for a more thorough probe of the transmitter devices.

The president of -- football's world governing body has raised fears over Qatar's 2022 World Cup being held in the summer. FIFA's boss, Sepp Blatter, says the Qatari heat could be too much for the players. There are now suggestions the tournament could be switched from summer to winter.



QUEST: There has been swift condemnation after a Russian court jailed an outspoken critic of President Vladimir Putin. Alexei Navalny was sentenced to five years in prison on charges that he says are politically motivated.

Our correspondent Phil Black is in Moscow for us tonight.

Good evening, Phil.

Does anybody besides the prosecutor and the judge think that this man did what he's alleged to have done?

PHIL BLACK, CNN CORRESPONDENT: Well, certainly where I'm standing now, Richard, I'm surrounded by thousands of people who do not believe that he is -- that he did what he was accused of doing. Certainly -- this is central Moscow. Let's set the scene a little bit for you here.

I know you know this city. Just over there that's the Kremlin. And you can see this is where thousands of people have gathered to express their frustration at the sentence. Navalny's trial took place around 1,000 kilometers from Moscow. But its impact has been felt most keenly here in the Russian capital because this is where his support is strongest.

And so this is where several thousand people have gathered here tonight, to vent their frustration towards the Russian government at the conviction of Alexei Navalny and the fact that he has been sentenced to five years in jail. And it's been largely peaceful so far; there is a very big police presence here.

We're told around 40 people arrested or so. But certainly a lot of support, (inaudible) Navalny in the Russian capital tonight, Richard.

QUEST: Phil, why would the president -- why would the authorities bother with Navalny and going through all of this?

Putin has a fairly strong grip. I mean, not as great as it was, but his grip is still quite strong on the political and the security apparatus in Russia.

So why go to all this for Navalny?

BLACK: It's a good point, Richard. While Navalny has a lot of support here Moscow in the capital, perhaps St. Petersburg as well, a couple of the other cities, across the vast nation that is Russia, the provinces, the regions, the industrial heartlands and so forth, he is little known and has very little support. Certainly compared to here.

This demographic is the urbanized, educated, middle class that is online. And these are the people that Navalny speaks for, the people who are angry with the state of politics in this country and who are angry with what they believe is an intolerable level of corruption in Russian society.

And whereas they are not the majority, they are a very influential and increasingly wealthy and influential demographic. And it is because he resonates with these people, this is where he draws his support. This is where Alexei Navalny was becoming increasingly influential and so this is why his supporters believe the Kremlin has moved to cut out his legs from underneath him before he potentially became a bigger threat to the political status quo in this country, Richard.

QUEST: I know you may have difficulty hearing me, so forgive me.

Final question, Phil. Will President Putin or Medvedev or anybody in the Kremlin opposite there, will they be losing one second or worry or sleep over Navalny's imprisonment or these demonstrations?

BLACK: I don't think so; no, Richard, no. I think they are feeling pretty safe, pretty secure in their jobs at the moment. Go back a year or more ago, where we saw tens of thousands of people on the streets of Moscow, protesting. It's largely understood that that took the Kremlin, the upper echelons of the Russian government by surprise. But since then, we've seen a series of laws implemented, effectively a crackdown on that opposition --


QUEST: Right. Phil --

BLACK: -- of which this prosecution of Navalny is part of and so, no, they seem pretty safe, seem pretty secure, I think, Richard. Back to you.

QUEST: Just a quick final question. Let -- this is what we would call a dogleg turn.

Snowden: is he going to get his temporary asylum in the -- in Russia?

BLACK: I think that's pretty likely, because I don't think the Russian government has any other choice right now. They've said they're not going to send him back to the United States. He can't travel anywhere else. They're not going to leave him at the airport indefinitely. And they have stressed some degree of sympathy for him and his actions and so forth.

So I think that it looks pretty likely, although we don't know precisely when, Russia will at least grant him temporary asylum. But at the same time, they do not want him to agitate, do not want him to criticize the United States while he's here, because they also put considerable value and have some need on maintaining relatively good working relationship with the United States as well, Richard.

QUEST: Phil Black, who is in Moscow for us tonight, good to talk to you, Phil. Many thanks for that.

When we come back, a Muslim Premier League footballer is refusing to take to the pitch. He says his team's jersey conflicts with his religious beliefs.

So when sponsorship and mammon come head to head with religious beliefs. QUEST MEANS BUSINESS.





QUEST (voice-over): The answer to tonight's "Currency Conundrum," this rare 1792 penny, where -- it says Liberty on it -- where was it minted? The answer -- now look at the date of it -- the clue was in the date, 1792, Philadelphia. Congress set about building a national mint as Philadelphia was the nation's capital. That was where it was built. The coin sold for $140,000. That's 14 million times its face value.


QUEST: So a Muslim footballer here in the U.K. is refusing to play for his Premier League club because his team's sponsor is a controversial money lender. (Inaudible) say his religious objectives to wearing a sweater branded with the logo of Wonga, which is a controversial payday lender with very high rates of interest.

Amanda Davies has more on the story.

So let's get this clear. The player is saying my religious interests say I can't wear this name Wonga because they charge extortionate rates of interest and I'm against money lending in sharia.


QUEST: And you don't buy it?

DAVIES: Well, you would say players normally join a football club; they then become a property of that football club. So therefore, the club is able to say you are going to eat now; you are going to sleep now. Manchester United for example have rules about facial hair from their footballers.

This is a religious opposition to something he's been asked to do. So --


QUEST: But it's so skeptical about this. It's been dressed up.

DAVIES: Well, there are two ways of looking at this. The player himself, Papiss Cisse, says that sharia law states that individuals shouldn't benefit from lending money or from interest earned through lending money.

So that's why he doesn't want to have this logo on his (inaudible).


QUEST: (inaudible) problem with a previous sponsor.

DAVIES: No, the --


QUEST: -- a bit of sympathy for them, all right. (Inaudible) really behind this?

DAVIES: Well, the cynics are saying that maybe -- and I must stress maybe, because there are a lot of Muslims who've come out in support of Papiss Cisse in this argument.

But the cynics are saying, you know what, last season, he didn't have the best season on the pitch. Some of his Muslim teammates are wearing the kit happily. Maybe he's just angling for a move to another club. He said he's not going to go training to Portugal, so he's training on his own in the northeast.

QUEST: Extraordinary story.

DAVIES: (Inaudible).

QUEST: (Inaudible) start, deciding which shirt they're going to wear. I mean, Wonga, whatever one might think about them, is a controversial company, they are offering a legal product. It's not against the law in the U.K. to have a payday loan.

DAVIES: And I have to say, there are some examples in the past, Freddy Kanoute (ph) was at Sevilla. He was another Muslim player in 2006, they signed a deal with an online gambling firm, which he didn't like. So he was allowed to play with a plain shirt. (Inaudible) Cisse has said that he would play when they put a charity logo on his shirt.

QUEST: But Wonga won't allow that and (inaudible).

DAVIES: They paid a lot of money for that deal.

QUEST: Absolutely. Many thanks.

Now the weather forecast, Tom Sater's at the World Weather Center for us this evening.

I guess it's hot up there, hot over there, hot down there and it could be a bit warm all over.

TOM SATER, AMS METEOROLOGIST: Yes, absolutely. In fact, you hit 30- odd degrees again, 29.5. But Richard, I've got something to show you. Two days ago, we talked about the CFO of Coca-Cola blaming the poor quarter results on how cool it was, unseasonably cool.

Things are looking up. Found some video right in your back door there in London; take a look at this young guy coming up. Oh, it's hot. There he is. Oh, the shareholders are going to be happy when he comes out with the next quarter report. There you have it, temperatures warming up greatly.

Here we go, the satellite picture showing the cloudless skies. In fact, we do have a few thunderstorms. And they were falling in areas of France and on some of the cyclists in their 18th stage. But other than that, we do have a lot of sunshine.

It is now the sixth day in a row, Heathrow reporting 29.5 degrees. We toss it right to 30. Six days in a row, I think you may get another one in here. I really think Paris is looking to warm up, 27 degrees as you see the current numbers. Vienna's looking at about 30 in the days ahead. But here's the only relief in the form of rainfall. And, again, a few scattered showers on some of the cyclists.

Give me a quick little forecast for you. The rain helped in the mountain today. They had two 1,000-meter climbs. I believe they got another one tomorrow. Here's your numbers as we get into Friday, 30 again. It'll be day seven, a whole week's worth of 30-degree temperatures. There's Vienna as mentioned, as we look at the longer term, at least the next three days, hang in there.

I know; it gets annoying. You get groggy. You get a little grumpy at times and we're looking at temperatures in Paris to get in the low 30s, even Brussels will be flirting with 30 degrees by Sunday.

All right, up to the north, on the coast, 26 degrees. They don't see this that often, beautiful conditions for the open championship. Maybe a little warm for some considering the average high is 19 degrees. But they can do without the strong gusts of wind.

The U.S. is seeing the heat. These are advisories. These are excessive heat warnings, including metropolitan cities such as Philadelphia up toward Boston, warmest temperature so far this year being seen in the U.S. as well.

Try to keep cool, Richard.

QUEST: I will indeed, off to Portugal and then to Spain.

Tom, we thank you for that.

And that is QUEST MEANS BUSINESS. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable.




ISA SOARES, CNN CORRESPONDENT: From the River Thames in London, hello and a very warm welcome to MARKETPLACE EUROPE. I'm Isa Soares.

The sun is finally shining here and it seems the U.K. economy is getting a boost, too, growing 0.3 percent in the first three months of this year, avoiding that dreaded double dip recession.

And last week the IMF upgraded this country's growth forecast despite downgrading its outlook for the global economy. But bank lending to businesses continues to fall and the concern is that could hamper growth.


SOARES (voice-over): Coming up, a small business with an even smaller niche, rolling out potato vodka to customers across Europe.

And Max Foster speaks with the CEO of the sports group Head.

JOHAN ELIASCH, CEO, HEAD GROUP: I think Europe has to reinvent itself. That may be a painful process and take many years, but I think it will be back.


SOARES: Business lending here in the U.K. fell 4 percent in the first quarter of this year. This lack of liquidity puts many smaller businesses at risk and dampens the hopes for an export-led recovery. The CEO of Chase Distillery told me that British government needs to do more to get funding where it's needed most: its exporters.


SOARES: The making of Chase Vodka begins right here. These Rosetta (ph) potatoes don't have far to travel. In fact, they've only got to cross the field. That's roughly 250 meters. Once they're in there, they have to be washed. They have to be peeled and they have to be mashed. But to get one bottle of vodka right, you need 150 potatoes. That's a lot of spuds.


SOARES (voice-over): Inside the 10-day from the soily potato to the bottle begins. It's a local but expensive operation. But that matters little to its founder.

WILLIAM CHASE, FOUNDER, CHASE VODKA: Some days I think perhaps I'm a bit of a fool now, because we watch all kinds of companies when they grow and everybody outsources things. But I like the manufacturing side and I think if somebody can go to a business and see the stuff growing in the fields and see the fermenting and the people that work in there, they will have a passion. They're not just buying some cheap spirit and then distilling it up and making some stores. But it's actually seeing where it starts.

SOARES (voice-over): As I get a tour of the factory, it's easy to see. There are no shortcuts in this business. This distillation column alone has cost more than a million dollars.

JAMIE BAGGOTT, MASTER DISTILLER, CHASE VODKA: Each time they're distilled through the column, it's traveling through 42 bubble plates. And each of those is performing a mini-distillation. So as it distills, the spirit is become pure and you leave a little bit more impure behind. So the height of the column is very, very important for making and topping vodka.

SOARES (voice-over): The tireless process has already started to bear fruit. In its launch year, sales topped over $370,000. Five years on and sales are growing with the distillery turning out 5,000 bottles every week at more than triple the price of its lower-cost competition.

Not a bad profit margin.

CHASE: In the spirits market, you don't have one distillery till you might have four hands it goes through before it finally gets to the customer. And they all want a margin. And that's the hardest part.

So it sounds really good, but I think our hardest part of the Chase brand now is the cost of production. If we took a shortcut for white spirits and we just bought a neutral rain spirit, we could buy that for 30 pence a liter. And we would. We'd be making probably five pounds a bottle profit.

SOARES (voice-over): Despite the reportedly slim profit margins, this is a simple business with a humble product behind it.

UNIDENTIFIED MALE: So this is the mash vessel.

SOARES: All right. So they come all the way to the top.

UNIDENTIFIED MALE: Through the pipe.

SOARES: Through the pipe.

UNIDENTIFIED MALE: Drop down into here.

SOARES: Right.

UNIDENTIFIED MALE: Where we inject them with steam and (inaudible) potato.

SOARES (voice-over): But for the maverick farmer behind Chase, this business venture has been anything but conventional. In fact, it's been an eye-opener.

CHASE: I learned from the whole drinks industry that it's -- it is owned by the big guys. It is owned by Diageo, Pernod and the rest of the big guys. And they do have a lot of money in this industry, compared with anything else. And they do -- they do monopolize it. If you go into bars and you can see how much they're paid and promoted and supported by the big guys to support, to sell their products.

So the big guys won't just have one product; they'll have a whole portfolio.

SOARES (voice-over): This chairman knows he needs to compete with the big brands. So he's calling on the British government to step up and help small exporters.

CHASE: If you have a look at any other country that's doing well, the number one thing is exports. And I think if you think about your own commodities in the country, it's like circulating. There's nothing fresh.

But if we're exporting it, you're bringing fresh cash into the country. So I think the government's one priority should be to stimulate even small manufacturers, because all big things come from small things.

SOARES (voice-over): In this instance, they come straight from the ground.


SOARES: The Wimbledon championship is over and it really was a head- to-head final between Andy Murray and Novak Djokovic, both using Head tennis racquets.

Max Foster sits down with the CEO of Head right after this short break.




SOARES: Hello and welcome back to MARKETPLACE EUROPE. I'm Isa Soares in London.

Growth for a company like Head, the sports equipment maker, has been hampered by falling consumer demand across Europe. Its CEO says a year of bad weather has also had an impact.

Max Foster sat down with Johan Eliasch to find out where he sees growth potential in the months ahead.


MAX FOSTER, CNN CORRESPONDENT (voice-over): Listed on the Vienna stock exchange, Head Group is a global manufacturer of sports equipment. It's particularly well known for its tennis racquets and skis.

With just over 2,000 employees, the company's products are sold in over 85 countries. Its main market is Europe, followed by the United States.


ELIASCH: Growth today, I mean, first of all, Europe, I think is undergoing tough times. I don't see a lot of growth short term. The U.S. has much better possibilities. Where I see lots of growth potential is of course China. But tennis is very rapidly growing sport. And already a big market. Also South America, Brazil in particular. And there are lots of other emerging markets, Indonesia, where you have phenomenal growth rates, Russia is also developing.

FOSTER: In terms of Europe, as you say, it's under a huge amount of pressure. It's very difficult for premium brands, isn't it, because you've got this phenomenon in Europe, where discount stores are doing well and everyone is going to them.

So you can't avoid them. You have to be in them.

How do you be in a discount store and be a premium brand?

ELIASCH: It's tough. But the fact is, if you want to sell your product, you have to be there.

FOSTER: Is it about positioning in the store? So whatever store you're in, you're still premium within that context?

ELIASCH: Well, the brand is always going to be premium if it's -- the product is very good. And you have the right endorsements, et cetera. But I think that's a sign of the times. And we go through these cycles. And it's tough for the smaller specialty stores to survive.

FOSTER: How does it work when you have an endorsement? Because a player will insist on a particular type of racquet. Are they insisting on Head? Or are they considering different options?

ELIASCH: They are considering different options. But we are particularly strong in that area. So I think something like 35-40 percent of all the ATP players play Head. And we come from -- to performance racquets. That's how the company started up, to really be the best at what it does, to make the best products.

So we were always very popular with the pros in every sport camp we've been.

FOSTER: How important is technology because obviously the players want the latest technology, but you don't want to push things too far, for what a time, I wouldn't have thought, because they have to adjust all the time.

ELIASCH: No, you're absolutely right. And we have this new, very exciting thing (inaudible) you call graphene. It is the thinnest material on the planet and also the strongest. It's basically thin, thin atomic layers of carbon structures which are layered together. And it creates an ultra super strong material with phenomenal bending properties, modulus, et cetera.

Which enables us to shift the weight distribution in a racquet in such a way that it has very favorable properties.

FOSTER: In terms of the influences on your business, right now or generally, I mean, what's the big influence?

ELIASCH: Well, there are actually has more of an impact on what we do than the financial markets or the economy, the state of the economy. So we are -- we are dependent on weather. (Inaudible) particularly bad season weather wise, it doesn't matter how good the economy is and vice versa.

FOSTER: And so in terms of the future of your business, is it about emerging markets for you in China? Or are you looking to Europe, you know, in five years' time and then obviously watching the U.S. come back? Where is going to be your focus?

ELIASCH: Well, I hope Europe will come back and I'm sure it will. I think Europe has to reinvent itself. That may be a painful process and take many years. But I think it would be back. But obviously today, where you can get market growth is not going to be here and it's not to a major extent going to be the U.S. market either. It is going to be the emerging markets.


SOARES: That was the CEO of Head, bringing this week's edition of MARKETPLACE EUROPE to a close. From a glorious and sunny London, thank you for watching. We'll see you next week.