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QUEST MEANS BUSINESS
Concerns Over Syria Hitting Market; US Responses to Syria; Market Reaction to Syrian Crisis; German Finance Minister Wolfgang Schaeuble; Dollar Mixed; "London Whale" Arrest; Watching Wall Street; Germany's Economy; Peugeot Fightback; Botched Benjamins; Profitable Moment
Aired August 27, 2013 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: Tonight, that tougher stance on Syria is hitting the markets hard across the world.
Also, one month from general elections, and Germany's finance minister tells CNN Germany needs to be more competitive.
And back in motion. We hear tonight from the chief exec of Peugeot, who says it is gradually recovering from its cash crisis.
I'm Richard Quest. I mean business.
Good evening. The global rhetoric is rising, and the financial markets are deeply unsettled by the possibility of military action against Syria. Just look at how the Dow Jones Industrials is reacting at this hour. We're off 129 points at the moment.
And if you take a look -- grabbing the pen -- if you take a look at the way the day has traded, with this slight exception, it has down from the open all the way down throughout the course. We hit a low point just a short while ago, by about half hour ago, and it's recovered slightly.
But this 130 down, off nearly 1 percent, is where the market is, and it has pretty much been like that across the globe. Take a look at European shares as well, and you see a very, very worrying trend. Spain is down 2.9. Obviously, there are individual factors for the Spanish market involved there. But Frankfurt, Paris, and Milan, where there's political issues, that is off 2.3 percent.
So, these are amongst -- taken collectively, these are amongst some of the worst losses that we've seen for about five or six weeks. And although the markets are still up fro the year-to-date by some healthy amount, they are indicative of a trend that we've seen since the Syrian crisis has raised its head even more.
Oil and gold are also key barometers at the moment. Brent Crude is a gain of about 2 percent, 1 to 2 percent, just over slightly at the moment, heading towards 3 percent. Spot gold is up $17, that's about 1.8 percent at the moment. Obviously, any form of disruption to the global markets would create problems for oil and for gold.
Now, President Obama has said that he has not yet made a decision -- or at least that's the word from the White House -- to decide on military action within days. Let's bring in our senior political analyst, David Gergen, who joins me.
We start -- we'll do both the politics and the economics in a moment. Let's begin with the politics. Is it your feeling, from what you're hearing at the moment, David, as a former White House advisor, senior White House advisor, chief of staff, is it your feeling that a process has begun that will inexorably lead to some form of military response?
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Yes. Absolutely. Any administration that uses this kind of rhetoric, starts beating the drums the way this one has, has committed itself to take action. The only question now, I think, is how quickly they can get a coalition of the willing together and get things in place, military equipment in place, to take action.
What's been striking, Richard, is that over the last 48 hours, the rhetoric has indeed been rising, as you said. But at the same time, the size and scope of the action has diminished. One sensed in the beginning, before this sort of took shape, that this could be a pretty massive reaction. Right now, it appears it'll be very limited, very quick, not a long bombing campaign, but rather a use, perhaps, of cruise missiles to take out some facilities.
QUEST: All right.
GERGEN: Make the point, and get out.
QUEST: The politics of this in many ways are even more complex than previous actions, because not only has the president got the G20 coming up, let's face it, if you've just bombed -- Syria, and Russia has told you there could be catastrophic consequences and you've canceled your meetings with both the foreign minister and the president, help me understand the machinations of this complexity.
GERGEN: Well, the politics are very complex on three levels. As you say, the G20, the international reaction, especially the US-Russian relationship, which has gone through enormous strains here in the last few weeks. That's the reason the president canceled the meeting with Mr. Putin.
And this is going to bring them -- the Russians are going to vigorously, vociferously object to this, they're going to take the side that the -- make the argument that the evidence is not there, this was a United States that after all misled the world about the presence of weapons of mass destruction in Iraq, and here they go again. We're going to hear that kind of argument.
But at the same time, I think the administration is clearly going to press forward. There's a second level of politics back home for the president where there is widespread public resistance to getting involved in Syria, and that's why -- one of the reasons why I think this will brief.
Bu thirdly, the most complex part of this is what's going to happen in the Middle East? We just don't know. It's become so unpredictable there. This could really roil the waters again. Syria is a very, very important, pivotal country, as you well know.
QUEST: Now --
GERGEN: So, we'll have to wait and see.
QUEST: Now, nothing I say here in any shape or form should diminish the tremendous loss of life or suffering and pain as a result of this alleged chemical attack. We never on -- even on this business program, we never put dollars before bodies.
But I do need to put it into the context. We will see gold go up. We will see, damagingly, oil go up. And we will see markets become roiled as a result. Will the White House, will politics, play any role? Will they be looking at economics in any way in this?
GERGEN: I think the economics are pushing the same direction as the politics, and that is to make this limited, punishing, and get out. I don't think the -- the administration has no -- the American administration has no interest in putting any boots on the ground. That's been ruled out.
I really think they don't want to get into putting airplanes in the sky all the time, because there are a lot of anti-missile defenses there where the Syrians could possibly shoot things down. So, my sense is that the president is carefully calibrating what he is going to do.
I've been involved in decisions like this before in previous administrations, and when you see this unfolding with this kind of array of pressures to keep this limited, I think he's carefully calibrating how -- what can I do to make Assad pay a price? To make him -- to prevent him, to discourage him from doing -- using chemical weapons again without getting drawn into a bigger conflict? How can I get in, do it fast, and get out?
QUEST: And does he need the support, desirable though it is? Obviously the British will come onboard. Prime Minister Cameron's already basically -- the phrase "morally repugnant" has been used.
QUEST: Does he need the French as well? Does he -- nice to have, but not essential to have these allies with him?
GERGEN: I think it's important to have the French, because you want it to be more than an Anglo-US alliance. I think that the more allies he has in this, the more nations join up with this, the better, from the point of view of the coalition.
Because after all, they're not going to the United Nations with this, because of the Russian veto. They're going to put together -- it doesn't sound like it's going to be a big NATO operation, as we've seen in the past, but rather a coalition -- a smaller coalition of the willing.
So, I think he wants to put that together, but I want to emphasize again, the problem the president has, and why he has a dilemma on this, is because he drew a red line and said, if you use chemical weapons, it's so abhorrent, you cross that line, and you will be punished.
And if he doesn't take action now, he's going to find that his threat against Iran if they go nuclear will be dismissed by the Iranians. He has -- in effect, he's got to -- if they try to call his bluff, he's got to meet it.
GERGEN: And that's a big issue for him. But also, Richard, one of the other reasons why I think it's going to be limited is, there's a division within the American administration itself about doing this. There's a dovish group, which is actually composed of men, and the more hawkish group is composed of women.
But you've got your secretary of state John Kerry, the secretary of defense Chuck Hagel, as well as the chairman of the Joint Chiefs, who have all sent signals that they would really, really like not to do this, but they're willing to do something more limited.
Whereas his new ambassador to the United Nations, Samantha Power, and Susan Rice, who is now his national security advisor, are seen -- maybe this is wrong, we'll have to wait and see when we've got the entrails of this story -- but they're seen as the more hawkish members of the group.
QUEST: David? David, thank you for putting it into context in the wider and the narrow context.
QUEST: David Gergen, always good to have David's insight --
GERGEN: Thank you, Richard, it's good to be here.
QUEST: -- into what's happening. Now, stocks around the world, as Western powers contemplate action, have been under serious pressure. And in fact, if we put this into the perspective of the worrying-ness of economies that are currently and already fragile, I asked the chief economist, Valentijn van Nieuwenhuijzen at ING Investment Management, how unsettled investors are by what they are seeing.
VALENTIJN VAN NIEUWENHUIJZEN, CHIEF ECONOMIST, ING INVESTMENT MANAGEMENT: Well, today it's clearly the overriding factor in global markets. Oil prices are spiking higher, and on the back of that, uncertainty for the fallout in the region and for the fallout into a risk appetite in global markets is very dominant.
At the same time, remember what is happening in the real economy, especially in developed markets. Data are looking resilient and moving up, and overall the global recovery is on track. So, don't start panicking too much yet.
QUEST: From what we are hearing from governments, from Western governments, it's -- we are seemingly moving ever closer to some form of military activity, possibly. In that scenario, how worried are you that markets are robust enough to withstand it?
VAN NIEUWENHUIJZEN: I think if you actually get an airstrike over the next couple of days, obviously, markets will take a hit. So, if you're really focused on the short term, you need to be preparing for that.
QUEST: Is this a time for safety in markets?
VAN NIEUWENHUIJZEN: Well, I think if it is, it's only a reduction of willingness to take risk and not so much moving to defensive assets. Yes, it will have an impact temporarily, so be a bit cautious in the short term.
But remember that underlying, there is a recovery going on, and we have seen these types of periods of turmoil in markets and in the Middle East many times in the past, and very often they have proved to be very attractive entry points for risky assets.
QUEST: Is the price of oil the key to this? Because if there's a significant and sustained spike in the price of oil, then that will harm Western growth, which is already fragile at best.
VAN NIEUWENHUIJZEN: No, you're absolutely right. The dynamics in the oil prices are key for contagion throughout the region, but certainly through global markets and the impact on developed economies.
The question is, however, again, how sustainable the rise is. It's mainly an uncertainty premium that you're seeing now, and unless many production facilities in the Middle East or the Suez Chanel is sort of underfed, it seems difficult to see that production will collapse on the back of tension or airstrikes in Syria.
So, you need to see a lot of contagion into the broader region in the Middle East and fears for actual supply disruptions before you get a sustainable spike in oil prices. And I think we're not there yet.
QUEST: We will of course monitor and follow that as it continues. When we return, Germany's finance minister on the struggle to solve Europe's debt crisis. Wolfgang Schaeuble expects any more bailouts. He says no, and you'll hear why in a moment.
QUEST: The election in Germany is just around three weeks away, it's on September the 22nd. The finance minister, Wolfgang Schaeuble, has been out on the campaign trail and told German voters that fellow euro club member Greece will need another bailout. CNN's Nina Dos Santos spoke to Mr. Schaeuble in Berlin and asked him to explain what another Greek bailout looks like.
WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER: Now look. The problem in Greece is Greece is a very specific case. (inaudible) Greece's underlying analysis for the second Greek program expects that Greece will get debt sustainability not before 2022. And if programs are only for three years. Therefore, the extra programs will end in the end of 2014.
Therefore we decided already when we decided on the Greek program, that if Greece will fulfill all conditions, if Greece will have a prime or surplus. And then, if Greek would need additional assistance, we would consider, but we would consider it in the -- before the next program will end, not before.
That's what I said again, because there was a discussion which was dangerous in two regards. There was a discussion on a new haircut on Greece, and there will be no new --
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: That was what I was about to ask you. You categorically rule that out?
SCHAEUBLE: No, because we have -- when we made this decision late 2011, we announced it was a very singular decision and we will never repeat it. To regain confidence in markets in the eurozone as a whole.
And the other discussion was, of course, people were saying and complaining, oh government does not play by the rules before election. And to avoid this, I said what I know, what we have decided, it's nothing new, but now everybody knows what is going on.
DOS SANTOS: But the IMF reckons that Greece could have a shortfall of around about 11 billion euros, I believe, between 2014 and 2015. As you were saying, their program ends soon. Where are they going to find the money? Is that the kind of bailout we could be seeing as a third package?
SCHAEUBLE: I will not discuss or speculate at this time. What we have decided is that we will discuss it in the second half of 2014. Now is premature. If you see what has changed in Greece in the last couple of months, in the last 12 months, it would -- nobody knows what will happen in the coming 12 months.
In the last 12 months, Greece made tremendous progress. Greece's economy has recovered, Greek deficit has been brought down, Greece has done fully all what has been requested by the Troika, and therefore, Greece is on a good way.
DOS SANTOS: What about other countries across the eurozone? What are you expecting? Notably, Portugal, that's had its own wobble with austerity, it nearly cost that country its government. You said haircuts are a one-off, they've been applied once in Greece and won't happen again.
SCHAEUBLE: Never again. Never again.
DOS SANTOS: No haircuts for Portugal?
DOS SANTOS: Any further bailouts for the eurozone?
SCHAEUBLE: Look. Portugal has -- if you look at the figures of the second quarter, Portugal has the best growth rate of all member states in the eurozone, much better than expected. Portugal is doing very well in a difficult situation.
But as they headed, of course, into the second quarter, a difficult situation in their coalition. But they have overcome and the economic figures are well. Portugal is doing very well.
DOS SANTOS: Do you foresee any further bailouts coming across the eurozone?
SCHAEUBLE: No, I don't see it. I think we -- the problems are not solved, but we are in a much better shape than we used to be some years ago. You can see, if you look at the rates for sovereign debts, we are -- they are stable. Markets have confidence in the euro and the stability of the eurozone as a whole.
And economy is recovering in the whole eurozone, and the average deficit has been halved in all member states of the eurozone the last three years. And to say of them, as a major industrial states which have not such figures in their budget policy.
DOS SANTOS: Mind you, if you look back across the last three years of the eurozone crisis, yes, you've achieved closer fiscal cooperation, but some might argue that that's come politically at the expense of leaving the eurozone more divided than it's ever been in hits recent history.
SCHAEUBLE: I think we have made a lot of progress in help to get better conditions, better rules for a common fiscal policy if you have a common monetary policy with a common currency. You need a framework for your fiscal policy, because otherwise, you will get problems.
And of course, the pressure on competitiveness in all economies, for any economy, is huge. And that has been underestimated by some member states, and now they have learned. The decision for our common currency was to give the right incentives for all economies to increase competitiveness, because it's a globalized world.
Every European member state has to fight for competitiveness. Again and again, even Germany, if we would rely for some years, we would be weakened, and therefore it's ongoing. So, to change -- the speed of change in the globalized world is huge.
QUEST: Fascinating stuff. Wolfgang Schaeuble, Germany's finance minister. And you'll hear more from him in about 50 minutes on the views of what's driving German growth, especially as it heads towards an election.
Now, tonight's Currency Conundrum. Why was the US recently forced to burn $3 billion worth of $100 bills. Was it A, the bank notes were printed without new security features? B, they were designed incorrectly, or there was C, too much ink in the printing process? $3 billion worth of $100 bills. We'll have the answer later for you in the program.
As fort he currencies, not surprisingly in this scenario of worries, the dollar is stronger against the pound and weaker against the euro and the yen. Those are the rates --
QUEST: -- this is the break.
QUEST: A former JPMorgan senior banker arrested in Spain plans to resist extradition to the United States. The Spanish police have detained Javier Martin-Artajo over the bank's London Whale trading loss. US prosecutors charged him and a former colleague of conspiring to conceal more than $500 million in losses.
Our correspondent is Al Goodman, he is following the story in Madrid. So, they are accused of covering it up, basically. They're not accused of the losses. It's the cover-up that they are being accused of, and this chap is in Spain and doesn't want to go back to face the alleged music.
AL GOODMAN, CNN MADRID BUREAU CHIEF: That's part of it, Richard. Now, he lives in London, and he has come to Spain because, according to some analysts here, he thinks he'll have a better chance of resisting the extradition request from the United States by doing it here.
So, he came here, he was arrested this day by Spanish police when he went to a police station by previous agreement, turned himself in, immediately whisked over to the national court, which is about five minutes that way. He went into a closed-door hearing before a judge. He said the charges by the US against him are false, according to court officials. He said he doesn't want to be extradited.
The judge on the prosecutor's recommendation released him. No bond but he can't leave Spain and he has to report to court authorities twice a month. His passport was not taken away. Richard?
QUEST: Now, what is Spain's history -- this is an unfair question that I just sort of need to know about, so forgive me, Al, I'm just throwing this one at you. This idea of returning to your home where you might have a better chance of avoiding extradition, it's failed for many people in the UK who get put on a plane back to the US. What about in Spain? Are they minded to extradite to America?
GOODMAN: No, they're not, and the odds are with him, according to legal analysts right now, because Spain's basic legal policy has been not to send its citizens abroad. Basically, the legal tenet here is let's try him here if it's applicable except for cases of terrorism and a few other crimes. Economic crimes, like he's charged with, they basically are not extraditing.
If we go back about 20 years, Richard, and we look at a famous case of Jose Ignacio Lopez de Arriortua -- remember, he was the GM executive, the Spaniard who worked --
GOODMAN: -- for GM. He went to Volkswagen, charged -- and he was not extradited, despite the US wishes. Richard?
QUEST: Just very briefly in a word, is it likely, then, Spain would try him themselves even though the allegation relates to something that may have taken place in London?
GOODMAN: Way too early to tell. The United States has 40 days to formally present their extradition request and say what crimes there, and then Spain would have to look and see if they've got a comparable crimes here, Richard.
QUEST: Al Goodman putting it succinctly for us. As always, Al, good to see you from Madrid tonight.
Now, when we return, Germany's finance minister on the looming election. Minister Schaeuble delivers his verdict on the German economy and, of course, puts forward the argument that Angela Merkel should be returned to power. QUEST MEANS BUSINESS.
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.
The White House today said there is no doubt that chemical weapons were used in Syria and there's little doubt that the regime there is responsible. An intelligence report is due to be released this week -- excuse me -- amongst growing concerns and calls for action. President Obama's reviewing the options for a US response to last week's alleged attack.
Germany's finance minister, Wolfgang Schaeuble, has told CNN if Angela Merkel is reelected, the chancellor will continue to work for a stronger Europe. They don't want a German Europe, they want one in which every country does right by the rest.
More than 13 people have died in massive mudslides that buried homes in Mexico's Veracruz state. Tropical Storm Ferdinand slammed into the country's east coast late on Sunday, and it brought with it heavy rains and sustained winds before dissipating. Forecasters warn that there may yet be more mudslides.
Six people are dead and 20 more injured following a building collapse in Sao Paulo in Brazil. A Brazilian official says eight people are still missing in the wake of the accident. The building was under construction at the time and all the victims were working on the site.
A former JPMorgan executive arrested in Spain over the London Whale trading losses. He's planning to resist extradition to the United States. Javier Martin Artajo is charged with concealing massive losses related to the bank's complex derivatives bet that turned sour. The U.S. now has 40 days to formalize its extradition request.
(END VIDEO CLIP)
QUEST: The financial markets are worried as they give their reaction to Western powers contemplating action against the regime against Bashar al- Assad and in Syria. The Dow Jones industrials has fallen by more than 100 points. Alison Kosik is at the New York Stock Exchange and joins me.
Alison, the market is down; Europe, London, well, Frankfurt, Paris, Milan, they're all down more than 2 percent. Valentin Vanneyhosen (ph) earlier in the show says we can't -- we can pin this firmly on worries about Syria.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, you certain can. We've been watching stocks tank all day. We haven't seen the Dow get out of negative territory, which obviously is down 155 points. Almost all 30 companies that are traded on the Dow are in negative territory. It has everything to do with Syria.
So what we are seeing is investors moving into what's considered safe assets. So we're seeing gold prices, Treasuries, up right now. And this is kind of par for the course. Any time we have any type of geopolitical or war-related issues, it makes Wall Street very uneasy. And then you roll in the factor that the market was already nervous about when the Fed is going to pull back on its stimulus measures and then you factor in any type of unrest in the Mideast (sic). So it just really amps up the anxiety. And you want proof of the anxiety? You can see it in the numbers; the VIX index, which measures here on Wall Street, it's going up more than 12 percent, that as the Dow falls, Richard.
QUEST: Now interestingly, the bonds that you were talking about, we're seeing prices go -- yields are coming down. Now they're not completely unwinding the sort of gains and yields that we've seen in recent weeks. Bu that will be one of the things that people will be looking at.
KOSIK: Oh, definitely. And we've been watching interest rates as well since the Fed hinted that it's going to start tapering back on its stimulus. So this is kind of going the other way. But so this is going to be an interesting tug-of-war to watch, Richard.
QUEST: Just looking at the Dow again, and on that graph that you were showing, it strikes me, Alison, that the -- those losses are now -- if we look at the graph, those losses are extending and as we come towards the end of the closing day, you've got an hour and a half or so to trade, we could be in for a down leg.
KOSIK: Yes. It certainly is. The losses are kind of holding steady; they have accelerated just a bit, but they pretty much are holding steady. Interesting, though, we are seeing the Dow under 15,000 at 14,794, Richard.
QUEST: Alison Kosik in New York at the New York Stock Exchange, thank you for that.
The DAX was lower today, despite data showing that German business leaders are feeling upbeat about the economy.
Now the IFO business climate index of course doesn't take account of the latest developments in Syria. But it climbed to its highest level in 18 months. The economy is one of the main issues in the country's federal election on the 22nd of September.
Angela Merkel is seeking a third term and right by her side is Wolfgang Schauble, the finance minister. In a rare interview in English, he told CNN's Nina dos Santos Germany's economy is solid.
WOLFGANG SCHAEUBLE, GERMAN FINANCE MINISTER: If you look at the figures in Germany, we have a stable economy development and we have it -- nevertheless, we have a very difficult economic environment. It's a globalized world. (Inaudible) and look at (inaudible) Germany's we have some (inaudible). We used to have some problems in Europe. But German economy is stable and stable on behalf of internal demand. Consumers' demand has increased. (Inaudible) demand is the most motor (ph) of our German economy, actually. And even investment (inaudible) is fine. And therefore we, in all reports, by OECD, by IMF and by E.U. Commission, they report that Germany's fulfilling all conditions requested by international arrangement agreement, even taking regard on the problem of imbalances. And we have increased our labor cost. Spain has reduced its labor cost. And therefore the shift between those economies (inaudible).
NINA DOS SANTOS, CNN HOST: Well, this comes back to the issue of some stronger members in the Eurozone like, for instance, Germany, benefiting from a currency that would otherwise be (inaudible) completely differently if they didn't have weaker members of the Eurozone present, like for instance Spain. Many people in southern Europe would often say that German exporters benefit from the euro being lower than the deutsche mark would otherwise be.
SCHAEUBLE: Yes, but (inaudible). You always think the other one has much more advantages.
DOS SANTOS: Do you deny that trend, though, because it -- ?
SCHAEUBLE: I would like -- I would like to remind that the interest rates for southern European member states have been much higher before they joined the European -- the common European currency. Interest rate by 4 percent was actually for 10-year bonds for Italy. They never had before they saw in the Eurozone. And it's the same for Spain or Portugal. And even for Greece; Greece is below 10 percent actually. That's fine.
Therefore, everybody's advantages. And of course I (inaudible) telling us we are not -- we are not spend, basing our money for Greece. We are investing in our own future, but our own future depends only that everybody in Europe has success and has -- can be in a stable situation.
If Europe would be in a weak situation, every European state would suffer.
DOS SANTOS: How confident are you of a win for your current coalition, going forward in these elections?
And also what would it mean for Germany and for the international community which is keenly watching these German elections?
SCHAEUBLE: If Chancellor Merkel will be reelected, I'm confident that we will continue to work for a stronger Europe. That is our -- it's our general decision. We don't want a German Europe. But we want a strong Europe. What that means, every member state, including Germany, has to -- in ongoing, increase its competitiveness.
DOS SANTOS: But everybody's expecting there's a stronger Europe mean more money put forward by Germany?
SCHAEUBLE: A stronger Europe means that everyone has to do his duty and not to ask for more money by (inaudible). It's the wrong way to get a strong Europe. It's (inaudible) the wrong incentive because it's always easy to spend other people's money. That's a temptation for every human being.
QUEST: I think most people could agree with that. It's always easy to spend other people's money, Wolfgang Schauble talking to Nina dos Santos.
Now coming up after the break, we're on the production line at Peugeot in France, where hopes are high that a new model will reverse its cash crisis.
QUEST: Peugeot says it's still struggling to get out of last year's cash crisis. The carmaker believes its turnaround plan is working even though it's burning money and the European car market is shrinking. Peugeot's automotive division lost $680 million in the first half of the year. I spoke to the brand CEO Maxime Picat and asked him how bad things were.
MAXIME PICAT, PEUGEOT BRAND CEO, PEUGEOT CITROEN: I would like to remind you that we still lost some money and then some cash at the first semester. So we are still struggling to go out of the particular situation where we were last year.
But there are green shoots of recovery, because we are really on track of our -- aiming our target, of adding our cash bonditure (ph). And we think, as we say, that the financial result that we can do better than that.
So we are on the right way.
QUEST: So you're not really in a position of expansion yet, by any means?
PICAT: Inside Europe, we need to make this turnaround plan. We have decided to close our only factory next year. It was absolutely necessary and there was a difficult situation, but now things are going on and we need to get back to profitability in our European base.
QUEST: What is the ultimate answer for this European problem because it's not just unique to yourselves; we know that there's too much capacity. There needs to be further consolidation. But the issue really is where that comes from.
Or do you just have to wait for European growth to return?
PICAT: It would be very unlikely that we can, in a short term, get back to our global projection level of 2007, like the United States did. So I think the situation is really different; it's more structural. And as you know, countries from south of Europe, where the brand is very strong in terms of market share, (inaudible) crisis and (inaudible) will take time to reverse.
QUEST: Right. So finally, a chance for you to do my job as a television reporter, describe for me the cars behind you. Look at the cars behind you and tell me what it is we are seeing behind you in that picture.
PICAT: Behind you, you've got a line with the end of the previous 308 (ph). And the new 308 (ph) or so arriving. The new 308 (ph), as I said, there is a design quantity. But what you won't see on the television and you have to go to the dealership to see, its wonderful interior we did with the Peugeot I cockpit (ph), a real different experience of driving with intricate (ph) and simple way to drive. But for that, once again, you have to drive the car.
QUEST: Well, if he'll happily hand one over, then I'll have a go at it. It's the brand chief exec for Peugeot, who's still losing money.
Well, not as much as he was.
The weather forecast now. Jenny Harrison is at the World Weather Center.
I'm so used to saying at the World Weather Center, but actually.
JENNY HARRISON, CNN METEOROLOGIST: This is the new World Weather Center, too.
QUEST: You're here.
HARRISON: I am here. I like what you called it. You called it the CNN superscreen the other day. Like that.
QUEST: That's the superscreen over there, sorry. That's the superscreen.
HARRISON: Is it? Oh.
QUEST: That's the superscreen.
HARRISON: Super-sized screen over here then.
Anyway, (inaudible) weather, I will start talking, Richard, about weather conditions out in the U.S., in particular this. I want to start with this. This is just incredible. It's obviously an image from the sky. It's actually from the International Space Station. Look at this, all this flume, all these plumes are actually coming from this Rim fire out in California. This is an image from the ground. This, you can see, is actually from Groveland (ph) in California, which is the south side of this massive, massive fire, which has just grown incredibly in the last few days. And of course like so many of these fires, it is so hard to fight them. There's nearly 4,000 people, personnel fighting this from the skies, also from the ground.
Look how it has grown, 19th of August, the 22nd, obviously it began as that area in green, highlighted in red it shows you how it's grown over the number of days. This line in green here, this actually denotes the area between the start of Yosemite National Park.
So it really is beginning to encroach on this. You've got the towns out to the west and the south. This is where they're managing to fight the fire. Right now, it's only 20 percent contained and you can see already it is in Yosemite National Park, so huge concerns obviously because of the size of this fire and the speed at which it's actually growing.
Now it is 240 kilometers away from San Francisco. The reason this is so important is because of this, the Hechhechie (ph) Reservoir. This is the reservoir which is used for the drinking water, provides all the water for San Francisco; 725 square kilometers have burned so far. We've got two powerhouses well within this burn area and it's burning into Yosemite National Park.
Now there's also all sorts of impact because of this, obviously the water, the power supply are threatened by San Francisco, 2 kilometers of important reservoirs but 85 percent of the water of San Francisco is actually coming from this particular reservoir. Electricity is also impacted as well because of this and also the number of visitors that come to Yosemite -- it's a beautiful location -- and still this time of year it really is full of those visitors.
Now the winds are so critical in fighting these fires, tinder dry conditions, winds are pretty variable, predominantly coming in from the west. They're not as strong as they have been over the next 24-48 hours, maybe 23 kilometers an hour.
Conditions over the next couple of days, Yosemite maybe a chance of showers on Tuesday. But for the most part, it's going to be dry; it's going to be hot, very, very low humidity.
Now you can see elsewhere we have got some rain showers pushing through, the Northeast in particular, the mid-Atlantic we could see some rain there. As for temperatures, it's pretty hot and dry, 32 in Atlanta, 38 in Dallas, 23 across in San Francisco.
Now moving from there across the Atlantic into Portugal, again this time of year we've had fires burning pretty much in many parts of the world, as you might expect. But in fact, in Portugal, again, they have been fighting these particular fires. Here's one in Erraro (ph) in Portugal. Again, they've pretty much got this one under control, nowhere near as big as that one in California.
Elsewhere, it's been a case of some very strong storms across central regions of the Mediterranean, a band of rain showers coming through across the U.K., scattered thunderstorms across central areas of Europe and some pretty high totals as well into some central areas of the Mediterranean. That can just end on that. You can see these storms passing through; they're clearing to the southeast, 72 millimeters, 73 and 41 in Torino in Italy. No real travel problems, though, Richard, over the next 24 hours.
QUEST: Has it been a busier summer for you this year, Jenny? I can never really -- I mean, it started -- particularly with the European heat wave that was so strong at the beginning of the summer, in the spring and the summer.
But if you look back at the summer, has it been a busy one?
HARRISON: I wouldn't have said so, no. I think it's been a -- I think it's -- so far it's been very quiet, dare I say the Atlantic hurricane season.
QUEST: When does that start?
HARRISON: Well, it started back in June. It ends in November.
HARRISON: Well, you know, fingers crossed, touch wood, everything.
QUEST: When does it end?
HARRISON: November. So we've got a while to go yet. But, no, it's been a usual summer. Lots going on.
QUEST: Thank you.
Jenny Harrison, World Weather Center.
Now if you want to of course join us on our discussion and our debate, we always have a little chat. @RichardQuest is where you can continue to tweet and Twitter and we can talk when we're not actually on the television. (Inaudible).
When we come back, everyone has a comeback story, and this one involves gin. The spirit's experiencing a revival. We'll have a sordid story of a past of gin in a moment.
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QUEST (voice-over): Today's "Currency Conundrum," I asked why the U.S. recently burned $3 billion worth of $100 bills, the answer: some of the notes received too much ink, making them look less than crisp.
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QUEST: Didn't need to burn them. They just needed to hand them to me.
A spokeswoman from the Bureau of Engraving says less than 1 percent of $100 bills shipped were affected. The error could cost taxpayers $4 million to put right.
Eric McPike explains.
ERIN MCPIKE, CNN CORRESPONDENT (voice-over): Imagine having $3 billion in cash sitting in front of you, teasing you, that you couldn't use. That's what happened to the Federal Reserve this year because the country's money factory messed up.
One of America's most familiar exports, the $100 bill:
BEN BERNANKE, CHAIRMAN, U.S. FEDERAL RESERVE: We estimate that as many as two-thirds of all the $100 notes circulate outside the United States.
MCPIKE (voice-over): According to currency expert Ben Mazzotta:
BENJAMIN MAZZOTTA, CURRENCY EXPERT: It's certainly one of the most valuable bills to counterfeit.
MCPIKE (voice-over): The Mint was supposed to print a new design back in 2011. But they keep botching the bills.
The first batch ended up with a blank spot. And the second round, lifted by thieves on their way to the Federal Reserve.
Now excess ink.
MAZZOTTA: And ironically, it appears not to be any of those advanced security features themselves which are causing the problem. It's the way the paper that they're using for this generation of printing is responding to the weight of the printing press.
MCPIKE (voice-over): The error could cost taxpayers about $4 million because the current bill costs 7.8 cents to produce; compared to 12.6 cents for the new one.
MCPIKE: Look at this blue stripe that's woven into the center of the bill. It contains 100s and Liberty Bells that alternate when you move it. And down here is a copper inkwell that contains a green Liberty Bell. And that only shows up when you move it.
MAZZOTTA: If you're in the business of counterfeiting, every year that they don't release this is a year that you can pass your old-fashioned $100 bills that much easier.
MCPIKE (voice-over): The government says crisp new bills should be ready to change hands by October 8th. Then the arms race against counterfeiters begins again -- Erin McPike, CNN, Washington.
QUEST: Now it's coming up to 8:00 pm in London. And by the end of the night, Duke's Bar in Mayfair will have served more than 200 gin martinis, which is an achievement for a drink once dubbed "Mother's Ruin." These days gin is undergoing a renaissance, especially in London, as Jim Boulden (inaudible).
JIM BOULDEN, CNN CORRESPONDENT (voice-over): There's something bubbling in this converted garage in West London. And it's not just the juniper berries.
SAM GALSWORTHY, COFOUNDER, SIPSMITH: People are making it in vats. You can make it in stainless steel, in big batches, small batches.
BOULDEN (voice-over): Sam Galsworthy is one of the founders of what's believed to be London's first copper pot gin distillery to open in 200 years.
GALSWORTHY: Yes, this is about (inaudible) bringing back a craft in London that has died. And I went to the U.K., actually, but here in London, the heart of gin, really, and the home of gin.
BOULDEN (voice-over): Craft is key. This is just as much a revival on how to make gin as in how to drink it.
GALSWORTHY: It's really the way we make it and which is known as one shot. And that really means that we put just enough botanicals into the still so that when the spirit actually comes over, that is our gin. All we do is add --
GALSWORTHY: This is gin, the freshest gin you'll ever sip.
BOULDEN (voice-over): One shot was all it took. This year, with demand rising, Sipsmith made its biggest investment yet; the original still named Prudence got a sister, Patience.
GALSWORTHY: I think if you'd asked me three years ago if we'd need a second still doing 400 bottles a day, I would tell you that, you know, it would be a wonderful thing to happen. And it's quite extraordinary.
(Inaudible) out. (Inaudible) that licorice (inaudible).
BOULDEN (voice-over): Sipsmith slips neatly into a new and growing trend, gin sales in British restaurants, pubs and bars has grown 12 percent since 2011. That's according to one study. And with all this competition, businesses needed to get creative.
BOULDEN: We're here at Duke's Hotel in London's Mayfair. And this will give you a hint as to what they're doing.
This is where Ian Fleming, the creator of James Bond, apparently came up with the phrase, "shaken, not stirred," referring of course to Bond's favorite tipple, the martini.
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SEAN CONNERY, "JAMES BOND": Shaken, not stirred.
UNIDENTIFIED MALE: Shaken, not stirred.
ALESSANDRO PALAZZI, HEAD BARMAN, DUKE'S BAR: We put a quite large amount of frozen gin.
BOULDEN (voice-over): The head barman here runs martini master classes. When it comes to the method, he's a purist.
BOULDEN: So do some customers come in and ask for it to be shaken, not stirred?
PALAZZI: Absolutely. We refuse.
BOULDEN: You refuse. Excellent.
PALAZZI: Oh, yes. Oh, yes.
BOULDEN (voice-over): Despite Bond preferring the vodka martini, Alessandro says he sees something of a revolution.
PALAZZI: Here at Duke's Bar, we do about 300 martini a night. When I took over about eight years ago, 80 percent of the people (inaudible) gin. Now it's at least 70 gin, 30 vodka.
BOULDEN (voice-over): Younger, more knowledgeable customers and better marketing by distillers have all helped boost gin's appeal.
So sorry, Mr. Bond. You may be drinking alone tonight -- Jim Boulden, CNN, London.
QUEST: There was real lust in Jim's eyes as he looked at that drink on the other side of the bar.
I'll have a "Profitable Moment" after the break.
QUEST: Tonight's "Profitable Moment": earlier in the program, when I asked David Gergen whether he felt we were inexorably moving towards some form of military activity in Syria, his answer was a simple word, "Yes."
A process he believes has begun and one that will end up in some form of limited military activity. That may be true or it may not be. We'll find out as the week moves on. But already the markets have been giving their verdict on what's been happening.
Not least, of course, the price of gold. That fairly useless investment which comes into its own at times of trouble, a storehouse of value (inaudible) a couple of percent. And oil, even though Syria is negligible in the oil industry, as indeed is Egypt, any form of dislocation in the region, a point also made by David, is going to cause turmoil and worry. And oil is up 2-3 percent.
These are worrying times on all fronts, geographically, geopolitically, strategically and most certainly, economically. Growth in both the Eurozone and in the United States may have returned, but it is fragile at best and in this scenario, well, we all need to be careful about what happens next.
And that's QUEST MEANS BUSINESS for this edition. I'm Richard Quest at the CNN Center.
Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST (voice-over): The headlines: it's the top of the hour.
The White House today said there is no doubt that chemical weapons were used in Syria and there's little doubt that the regime is responsible. An intelligence report is due to be released this week amid growing concerns and calls for action.
President Obama is reviewing the options for a U.S. response to the alleged chemical attack.
Uncertainty over Syria has driven investors away from stocks. Financial markets around the world have taken a battering as investors speculate about the chance of military action. The Dow Jones industrials is currently down in New York.
The German finance minister, Wolfgang Schauble tells CNN if Angela Merkel's reelected, the chancellor will continue to work for a stronger Europe. They don't want a German Europe; they want one in which every country does right by the rest.
Six people are dead and 20 more injured following a building collapse in Sao Paulo, Brazil. A Brazilian official says eight people are still missing in the wake of the accident. The building was under construction at the time and all the victims were working on the site.
Lawyers for George Zimmerman have asked the state of Florida to reimburse at least $200,000 in expenses. Mr. Zimmerman's successfully argued self- defense over the death of Trayvon Martin and he was acquitted.
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QUEST: You're up to date with the news headlines. Now, "AMANPOUR."