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Quest Means Business
Eurozone Banking Reforms; European Trust Issues; European Markets Down; Weak Earnings Hit US Stocks; Google Still Sliding; Protectionism in International Trade; Dollar Rising; Inside the "Financial Times"; Beirut Car Bombing
Aired October 19, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST: A step towards a banking union. France and Germany strike an uneasy compromise. We'll have reaction to the EU summit from the Swedish prime minister and the EU trade commissioner.
And from the editorial meetings to the news stands, we go behind the scenes at the "Financial Times."
I'm Max Foster. This is QUEST MEANS BUSINESS.
Banks across the eurozone will soon have a brand-new boss to deal with. EU leaders have agreed to create a huge new supervision power for the ECB, centralizing control over something like 6,000 lenders and opening the door for struggling banks to draw emergency cash directly from Europe's bailout fund.
We still don't know if that includes banks which are already in a lot of debt. As Nina Dos Santos explains, the EU plan is still a work in progress.
(BEGIN VIDEOTAPE)
NINA DOS SANTOS, CNN INTERNATIONAL CORRESONDENT (voice-over): After ten hours around the negotiating table, Europe's leaders finally reached a compromise agreement on setting up a watchdog to oversee banks operating within the single currency area.
HERMAN VAN ROMPUY, PRESIDENT, EUROPEAN COUNCIL: The urgent element now is setting up a single supervisory mechanism to prevent banking risks and cross-border contagion from emerging. And that's why the European Council calls tonight for swift progress.
DOS SANTOS: France had pressed for urgency on this matter, with its president, Francois Hollande, insisting that there was, quote, "no time to lose." The German chancellor, Angela Merkel, however, has continued to insist that quality should not be sacrificed for the sake of speed.
ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): This was about having a solid foundation. First, have the legal framework in place, then a supervisory mechanism up and running. And once this is actually functioning, then direct recapitalization ought to be put in place, so the right sequence is important.
DOS SANTOS (on camera): So, what would such a banking union actually look like? Well, there are currently some 6,000 banks operating within the eurozone, and by that, we're talking about an area that encompasses 323 million people in a spread over 17 countries.
The European Central Bank, which oversees monetary policy or interest rates across the eurozone, will be given the task of overseeing the financial health of this region's institutions, its financial institutions. All of this would be designed to prevent banking collapses in one country or another, undermining the finances of sovereign nations and, by token, the whole of the bloc.
DOS SANTOS (voice-over): But that, in turn, raises questions about whether the Central Bank really has the manpower or, indeed, the expertise. Also up for debate is whether to include non-eurozone banks with significant operations in eurozone countries.
GILLES MOEC, DEUTSCHE BANK: The schedule, the timetable for all this remains pretty vague. We know that we'll have the legal framework ready by the end of this year, but the operational framework itself, the implementation of that division would come at some point in 2013.
DOS SANTOS: But they still have other pretty big issues to discuss before the end of this year. While some progress has been made on the issue of Greece, Spain's solvency continues to worry many, especially the markets. And that means that Europe's politicians will have their work cut out if they're to establish a roadmap for the future when they next meet in December.
Nina Dos Santos, CNN, London.
(END VIDEOTAPE)
FOSTER: Sweden's prime minister says some southern European countries can no longer be trusted to look after their own banks. Fredrik Reinfeldt spoke to CNN's Andrew Stevens earlier today. He said the new banking union will be a major step forward.
(BEGIN VIDEOTAPE)
FREDRIK REINFELDT, PRIME MINISTER OF SWEDEN: We have huge problems in part of Southern Europe, and their national supervision is not trustworthy in the views of the markets. So, of course, this is a way to deal with the problem, and it's a huge step to come closer to the solution in part of the financial crisis.
It's, of course, a step to what you could call a banking union, but I think it's more actually the supervision we are solving now. Next year, we will also have to address the fact, how do you recapitalize? How do you deal with a bank in distress?
ANDREW STEVENS, CNN INTERNATIONAL CORRESPONDENT: OK. Would Sweden be prepared, then, to sign up to this supervision forum, given the fact that you don't have to because you are currently outside the eurozone?
REINFELDT: Yes, that's right. We -- and we don't have a problem with the trust link to our national supervision. But then again, the financial sector of Europe is very cross-border, and that's also true for Sweden. So, we are affected by the supervision that comes to our neighbors, to Finland, to Estonia.
So, we have said, to join, we have three very concrete things we want to have as part of the deal. We would like to see what do you do if you have a bank in distress? How do you recapitalize it and who will pay?
And we want assurances that it's not Swedish taxpayers and well-run Swedish banks that will have to cover other banks' losses in other states.
We want to have higher capital requirements when it comes to a Swedish financial sector. And if we are to join, we also want to have an influence.
STEVENS: So, when do you think there will be a full agreement on this? Because it does sound like there's a lot of daylight between these countries.
REINFELDT: Well, I think it also depends very much on how many of the European Union members actually end up in the single supervision. We understand it will be the 17 countries with the euro as a currency. But then, it might be up to 26. United Kingdom is foreseen to stand outside. But for the rest, it will be a discussion.
STEVENS: I just want to ask you about a comment made recently by your finance minister about Greece, and he saw a very real prospect of Greece exiting, leaving the eurozone within six months. Is that a view that you concur with?
REINFELDT: Well, I don't think we should speculate. As a fact, there was a statement taken on Greece this -- during our discussions saying that if they follow through on all their reforms they need and increase their competitiveness, that could be with the prospect that they could actually stay inside the eurozone.
So, it is very much now in the hands of the Greek government, the Greek people, to follow through a lot of the reforms they need.
(END VIDEOTAPE)
FOSTER: Well, stocks here in Europe ended the week on a low note. All of the region's major indices closed in the red. Banking shares showed some of the sharpest falls. Lloyds down 3.3 percent, Deutsche Bank down 3.67, Societe Generale 2.5, Credit Suisse down 3.1 percent. Even though all these indices fell today, they were up for the week as a whole.
Borrowing costs in Spain and Italy are slightly higher this Friday. In Spain, the yield on ten-year bonds has risen slightly from a seven-month low. Italy's ten-year yields are at their lowest since September last year.
Europe's losses are looking pale, though, in comparison to the numbers on Wall Street. Alison Kosik is at the New York Stock Exchange. Is this because of the earnings, Alison?
ALISON KOSIK, CNN CORRESPONDENT: It is. The bunch of earnings misses are sending the market tumbling. The Dow down almost 200 points right now. Two of the tech sector's biggest companies as well, Microsoft and Google, they reported results that fell short of expectations.
Plus, you throw in Dow components General Electric and McDonald's. General Electric reported revenue missing expectations, though it did post a solid rise in profit. And then, McDonald's. It had the opposite outcome of GE, with revenues topping forecasts, but profit falling short.
Global sales increased for McDonald's, but the fast food giant pointed to currency pressures for the problems in the quarter. CEO Don Thompson says that halfway through October, sales are currently trending negative.
We are seeing shares of McDonald's tumble more than 4 percent. It is the biggest loser on the Dow. General Electric shares are down more than 3 percent. Even a new reading in housing kind of added to the tone today, that sort of selling tone. Existing home sales falling more than expected, really not giving much reason for investors to buy into the market today. Max?
FOSTER: And in terms of the Google story that we were talking about yesterday, what was the bounce back like, if there was any, as the news digested? It was such a shock yesterday, wasn't it?
KOSIK: It really was to the market, and not so much just because the earnings came out surprisingly early, it was because the earnings were bad. And we did see the stock bounce back a little bit earlier today.
But Google now continues its slide from Thursday, Google shares falling more than 2 percent. That's after dropping 8 percent in yesterday's session, of course, following that premature earnings release. Google today is blaming financial printer RR Donnelley for that botched release, saying the filing agent submitted the draft documents to the SEC without authorization.
And here's what's interesting about this when you sit back and you look at what happened there. These earnings releases, Max, they're usually a well-oiled process. They're done four times a year, they happen at a set time, they're very routine.
And it's interesting how this happened, and market experts are pointing out and being very clear that the sell-off didn't have anything to do with the unexpected timing of the report and everything to do with the fact that the results just weren't good. Max?
FOSTER: Absolutely. Alison, thank you very much, indeed, for that. What a week on the markets.
Now, Europe's trade commissioner is with us next. Stay with us for his thoughts on the challenges of protectionism and leveling the playing field with China.
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FOSTER: One of China's top trade officials says developed economies are turning to trade protectionism as the economic crisis rolls on. Wang Jinzhen, vice-chairman of the China Council for the promotion of International Trade says a change in attitude could help get the United States and the European Union out of the crisis earlier.
Karel de Gucht is the European Trade Commissioner. He joins us now. Thank you so much for joining us. One example they're pointing to, the Chinese, are these solar panels. The US, for example, increasing tariffs from 18 percent to 250 percent. Protectionism, they say. And on the face of it, it does look like it.
KAREL DE GUCHT, EU TRADE COMMISSIONER: I don't think it's protectionism because there has also been lodged a complaint with the European Commission recently by the solar panel industry in Europe, which is much more important, by the way, than the US. You're talking about 21 billion euros of sales in 2011, so it's about the biggest case we ever got, you know?
And once such a complaint is lodged, we are bound to investigate this. So, we've started the investigation, and we will see within the period of nine months whether or not we have to impose duties.
FOSTER: And what about the telecoms giant Huawei Technologies, an example of protectionist measure being imposed on a Chinese company in the name of national security, they're saying. So, that's another example of how the West is discriminating against their products.
DE GUCHT: I think you have to distinguish between the security aspect and the possible problem of dumping or subsidiation. The security problem, it's under investigation also in Great Britain at this moment in time. Parliament decided to do so. The same happened in the United States.
They have been taken out of the market in Australia, Huawei, one of the two Chinese companies. So, there are serious questions about the security problem.
On the other hand, you have the -- let's say the dumping and the subsidiation. There, were are still considering whether or not to start a case, because that would be a case ex officio, which means that there is no complaint, but nevertheless, we could -- we haven't yet done so -- but we could take the decision to start such a case because of the very strategic importance of this industry for Europe.
You can hardly imagine this -- modern economy thriving in Europe without mobile networks. They are really crucial for all of the kind of networks and you don't -- shouldn't only think about television, you should, for example, also think about what other distribution or whatever.
FOSTER: Are Europe and the US grouping together on these issues more? Because we've also got this parallel story that the US and Europe are set to launch trade talks early next year to deepen the trading ties between the two continents.
DE GUCHT: Of course we have a lot of discussions with the United States, but for example, the solar case, these are complaints that have been lodged with the American administration and the European Commission quite separately one from another.
Something completely different, which is much more forward-looking, is the high-level working group on growth and jobs, which should lead to negotiations on the -- trade agreement, a deep and comprehensive one, between the United States and Europe, who have already by far the biggest trade relations in the world.
And yes, we are very hopeful that we can start those negotiations beginning next year. We are progressing very well with the report that Ron Kirk and myself are preparing.
FOSTER: And just on the EU summit, you would have been watching developments unfold with interest, I'm sure. This movement on banking union. Is it as dramatic as it looks?
DE GUCHT: I think it is dramatic because you -- in the banking union, you have the supervisory system, you would have the resolution, which means who's paying when something gets wrong. And then you have the mutualization of the -- the credit protection for ordinary people that have money with the banks.
So, this is the fourth pillar -- the first pillar, excuse me -- that in any case will cover the whole of the monetary union, but probably much more.
And in any case, it would also cover the activities of banks outside the monetary union or outside the system like, for example, British banks or United States banks as far as they have activities in the monetary -- European monetary zone through a subsidiary.
FOSTER: Well, is it your understanding that banks already in trouble will be able to claim from this facility?
DE GUCHT: I believe it will make quite a difference because when you look a little bit back to what happened with the banking sector in 2008, 2009, it's obvious that one of the main reasons that we got this crisis was lack of supervision in a number of member states and also the lack of communication between the member states.
That's certainly one of the big, let's say, sources of all the turmoil that we have been going through. So this is quite important that we do it, and we have to do it urgently because it's the only way to split, let's say, the problems with bank debts from sovereign debt.
There should be no -- we should have a Chinese Wall in between, and the only way to do so is by the supervisory system and a proper banking union.
FOSTER: So, some progress. Karel de Gucht, thank you very much, indeed, for joining us on the program.
Time for our Currency Conundrum. This one has a coffee flavor. Note the coffee beans on this coin minted in 2003. Where is it from? A, Brazil? B, East Timor? C, Vietnam? We'll have the answer for you later in the show.
The dollar is rising against the major currencies for a second day in a row. It's put on nearly a third of a percent against the euro. The single currency is slipping on Spanish bailout concerns. The pound is also sliding. The yen remains steady.
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FOSTER: Now, yesterday on QUEST MEANS BUSINESS, we showed you what goes into making the stories that grace these pink pages of the "Financial Times." Now, in part two of our behind the scenes look at the iconic publication, we see how those ideas end up in ink.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: We saw the euro first, 300 up, 0.1 percent, London 0.4 percent higher.
LIONEL BARBER, EDITOR, "FINACIAL TIMES": All our writers have to be able to distill information and put in context.
Throughout the evening, we have rolling editions of the newspaper. The crucial first edition deadline is around 8:00, and that's for the first American print edition, Asia, and Europe.
WARREN DUPUY, HEAD OF PRINT AND OPERATIONS DEVELOPMENT, "FINACIAL TIMES": Once the file was being prepared at the head office, they'll then release the print sites and the PDF at every single print source we have. So, section one and section two of tonight's newspaper.
TOM JOHNSON, MANAGING DIRECTOR, NEWSFAX: The last page arrives at 9:30 PM, and within 10 minutes, we're printing copies of the newspaper.
DUPUY: The actual process starts where the ink moves, the balance has to be correct. The actual printing press itself starts up, and then the impression. So, the images are transferred from the plates onto the paper.
JOHNSON: Each roll of paper will produce four pages of the "Financial Times." Unlike magazines, the cold set presses do not have drying facilities, so the paper that's used in printing newspapers is absorbent. The ink is specially formulated so that it dries quickly.
DUPUY: This is where the two sections become one paper. Going down to the next area, it will be opened up into a V, and the second section will be dropped into it.
JOHNSON: When the papers are printed, they have to be bundled together. This is done automatically. We can't afford delays. It's very important that the "Financial Times" goes out precisely on time as it fashionably can.
DUPUY: To achieve 100,000 copies -- over 100,000 copies a night in one print size in a short period and before most people wake up is a phenomenal achievement.
JOHN RIDDING, CEO, "FINACIAL TIMES": Print is a fantastic format. It has that serendipity factor when you open up a newspaper. There are many pundits out there who predict the end of newspapers and newsprint. I think that's wrong. Certainly wrong for us. I think newspapers will just adapt to their position in their broad portfolio.
(END VIDEOTAPE)
FOSTER: And actually, this is the copy of the FT that you saw printed there. Well, Newsfax, the company that printed it, went into administration in September. One of the "Financial Times's" subsidiaries has now taken over the running of Newsfax's Stratfor printing plant. You can read more about CNN's day with the FT and watch the whole thing again at cnn.com/business.
Next, Starbucks spills the beans on its UK tax bill.
(BEGIN VIDEO CLIP)
HOWARD SCHULTZ, CEO, STARBUCKS: We do pay taxes in the UK, a substantial amount, but we have not paid corporate income tax because we have not made a profit.
(END VIDEO CLIP)
FOSTER: We'll hear from the CEO after the break.
(COMMERCIAL BREAK)
FOSTER: Welcome back. I'm Max Foster, these are the main headlines this hour.
A car bomb in the Lebanese capital of Beirut has killed at least eight people and left dozens more wounded. It's not clear who's responsible for the blast. We do know one of the dead is a top Lebanese security official with enemies in Hezbollah and Syria.
There are now fears that violence will spread across the country. Officials say there have already been reports of gunfire in the Lebanese city of Tripoli. Mohammed Jamjoom joins us now from CNN Beirut. So, developments coming in quickly, but it seems this story about violence spreading is a big concern.
MOHAMMED JAMJOOM, CNN INTERNATIONAL CORRESPONDENT: It is a concern, and even today, when we were on the scene shortly after the blast, people were concerned about violence spreading throughout Lebanon as a reaction, especially if this were revealed at some point to be a political assassination.
And now, there's more and more concern that this man was specifically targeted because of his politics and because of who he was. So, that's the concern right now. At this hour, we know of clashes going on in Tripoli between an Alawite enclave there, members of an Alawite enclave, which backs the Syrian regime, and Sunnis in that area.
Also, we've heard of protestors out in the streets of neighborhoods of Beirut burning tires -- these would be Sunni neighborhoods -- doing so because they are upset that such a high, visible Sunni political figure such as Wissam al-Hassan was killed today.
When we were out at the scene today, Max, one of the things that people asked almost right away, and I'm talking about even mothers who were shielding their kids from the carnage that was around them, was whether or not anybody in the area knew if this was a politically-motivated assassination. That was the concern.
And the reason for that is because this reminded them of the wave of bombings that occurred in 2005 when former prime minister Rafic Hariri was killed. So, people today already on edge if it were to be revealed that it was a political figure here that was killed.
Now, we know one of the people killed in this blast, this general, who was the former head of security for the former prime minister here, who was assassinated in 2005, somebody very visibly anti-Syria. And this is just causing more and more concern as to what this will mean for a country as fragile as Lebanon and a city as fragile as Beirut. Max?
FOSTER: Just hearing that Hezbollah is strongly condemning the bombing that killed that Lebanese official.
What could we read into that?
JAMJOOM: Well, it's not a surprise. You know, let's talk for a second about 2005, former Prime Minister Rafiq al-Hariri, he was killed. Many figures here were convinced that Hezbollah and Syria were behind his assassination.
The man who was killed today in this bombing, Wissam al-Hassam, former chief of security for Rafiq al-Hariri, and somebody who really spearheaded the investigation into his killing. And through his investigation, was implicating Hezbollah and Syrian figures in the assassination of Rafiq al- Hariri.
Well, Hezbollah and Syrian officials maintained from day one that they had nothing to do with the assassination of Rafiq al-Hariri. Not a surprise that there would be this condemnation. All the political figures here in Lebanon condemning this at this hour.
Still, a lot more to find out about what exactly happened. Nobody in the Lebanese government has yet pointed fingers as to who they believe is behind this killing. And nobody has claimed responsibility at this hour, Max.
FOSTER: OK, Mohammed, thank you very much indeed for bringing us up to date from Beirut.
(BEGIN VIDEO CLIP)
FOSTER (voice-over): The leaders of the (inaudible) plan to set up a European banking union starting next year. Thousands of banks in the Eurozone will come under the authority of the European Central Bank. The deal paves the way for the ECB to give bailout money straight to the banks if required in the future.
Silvio Berlusconi has told an Italian court that he has never held sex parties at his villa. The former Italian prime minister is on trial, accused of paying a 17-year-old dancer for sex. Berlusconi denies the charge, saying there had never been, quote, "scenes of a sexual nature."
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FOSTER: Starbucks is expanding into India. Today CEO Howard Schultz was in Mumbai to open his company's first Indian coffee shop. Beside him, you can see the vice-chairman of Tata Global Beverages, R.K. Krishna Kumar.
Now Starbucks and Tata have gone into partnership to make the most of what is a fast-growing market. Ahead of the grand opening, Mallika Kapur took the opportunity to quiz Howard Schultz about the company's tax bill. Reuters claims the company hasn't paid any corporate tax in the U.K. in the last two years. Mallika began by asking about Starbucks' push into India.
(BEGIN VIDEO CLIP)
HOWARD SCHULTZ, CEO, STARBUCKS: We've always wanted to come here, and we always thought we would be successful. We determined early on this is a very complex market to do business. And we needed to find a partner.
We have many people who are interested in becoming our partner. But for one reason or another, we and I never felt we met the right people until we met Tata. And Mr. Krishna Kumar and Mr. Ratan Tata, when I met the two of them, it was love at first sight.
I mean, I knew first-hand that these people, who had such a deep respect for the human condition, who gave back to the communities they serve and protect, their people, these are the kind of people that I wanted to help represent Starbucks in this -- in this country.
MALLIKA KAPUR, CNN CORRESPONDENT: You know, in India, most people wake up in the morning and have that cup of chai, a cup of hot, sweet, milky tea. Is that going to be a challenge for you to get them to move towards coffee?
SCHULTZ: I don't think so. I think our own research, there's a tremendous amount of coffee that's being sold and served in this market. We will sell very high-quality tea and chai tea in our stores. But I suspect that we're going to do extremely well here.
KAPUR: Want to turn our attention to Europe for a minute, particularly the U.K., where Starbucks has been in the spotlight recently with allegations that the company hasn't paid its fair share of taxes. So there seems to be some confusion about whether Starbucks is profitable or loss-making in the U.K.
SCHULTZ: I'm glad you're asking me this question, because it gives me the honest opportunity to kind of clarify our view of the situation.
Europe is going through a very difficult time and, as a result of that, there's a lot of scrutiny in the marketplace of companies who should and pay their fair share of taxes.
So the first issue is we have paid about 160 million pounds of taxes, the back tax, over the last three years. The unfortunate issue within the U.K. is we're not a profitable business in that market. We have about 800 stores in that market, but we're not profitable. We do pay a royalty back to the core business.
And that royalty is consistent with all the other markets that exist within Starbucks. And whether you're profitable or not, the business must pay a royalty back to the company that are providing the services.
So within the U.K. press, there is a misunderstanding. How could you be paying a royalty if you're not profitable? And so we do pay a royalty, as does other markets that are in its formative stage or are not making a profit.
But we do pay taxes in U.K., a substantial amount. But we have not paid corporate income tax because we have not made a profit. That's a true story. And it's unfortunate that there's such sensationalism around it.
And as a result of that, people are misinformed and it puts us in a way a very difficult position. But the truth will come out and I plan, myself, to go to the U.K. at some point in the near future and hopefully meet with the -- with the people who can understand what the true story is.
(END VIDEO CLIP)
FOSTER: Well, let's get the answer to today's "Currency Conundrum" for you.
(BEGIN VIDEO CLIP)
FOSTER (voice-over): Where does this coin featuring coffee beans come from? The answer is B, East Timor. Coffee is East Timor's major export commodity and provides income for around a quarter of the population.
(END VIDEO CLIP)
FOSTER: Next, the U.K.'s finance minister and the question of class. (Inaudible) class and first class. The train trip and alleged tussle with a ticket (inaudible) lot of tweeting when we return.
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FOSTER: U.K.'s finance minister is the center of allegations that he tried to freeload on a train trip. En route to London, George Osborne reportedly settles himself in first class, despite only having a standard ticket. According to a journalist on board -- a hidden journalist, I suspect -- Mr. Osborne's aide then insisted on a free upgrade for the chancellor.
The ticket inspector refused, and Mr. Osborne is said to have forked out 160 pounds -- that's around $256 dollars -- to keep his seat. The journalist related the whole dispute on Twitter, where it's now trending highly. People aren't yet questioning about the journalist traveling in first class.
Richard has been having a far more relaxing train trip. From Chicago to San Francisco, he's in the U.S. taking the political pulse of the nation ahead of the presidential election.
He sends us this delightful snapshot today. He's obviously enjoying the sights there. You can follow Richard and his progress on Twitter: his handle @RichardQuest. And you can read his latest blog at CNN.com/business. He'll be hosting QUEST MEANS BUSINESS from Atlanta next week with an American theme, of course.
Jenny's there already, so get ready, Jenny.
JENNY HARRISON, CNN METEOROLOGIST: Oh, I'm ready. I tell you, he owes me a few dinners. I was just -- yes, we won't go into that right now.
(Inaudible) say, you're quite right, Max, and the reason we need to talk about Spain, as I was saying yesterday, that we're expecting to see some fairly heavy amount of rain push through. Well, that's exactly what's been happening and it's not done with yet. You see all this cloud streaming up across western Europe.
There's a couple of areas of low pressure but one is actually working its way up from the south. And it continues to produce some very heavy rains. Just in the last few hours western France, you can see there's some very huge amounts. But look at this, in Spain, in the northeast, Catalonia's the region worst affected, 145 millimeters in 10 hours.
Another location we've found, in just four hours, for about 150 millimeters of rain. This is what it has done. Have a look at these pictures, because as I say, the northeast of Spain, Catalonia in particular, has been very badly affected. Now as these storms came through, we also saw some very, very strong winds, of course, as well.
Now according to Reuters, at least one woman was killed (inaudible) on the beach in Catalonia. She was swept away by these massive waves. And also another man, a French man, is actually missing. He was out fishing at the time.
We've had some wind gusts in France, for example, that have been at about 120 kph. And all of this has been coming in (inaudible) one area of low pressure. So there's more of this on the way.
Another reason why we've seen so much flooding is because of this, the drought. The ground is so very, very dry that when you get these huge downpours in such a short space of time, the ground of course just can't cope with that. And that is why we see so much of the flooding.
But this is what's going to be happening throughout the weekend. This is the area of low pressure, which is just going to come through and produce even more heavy rain across, again, eastern Spain up into Catalonia and southern areas of France. It doesn't get to move very far because we've got high pressure across central and eastern regions.
So it's very nice, weather conditions there, but of course, blocking all of these system, some working their way eastwards, so instead, (inaudible) a bit of a standstill or, of course, they head up towards the north. So there are more warnings in place as we go into the first part of the weekend. For more of this heavy rain and of course it could well lead to flooding and the winds will stay strong as well.
Where we have high pressure, across central and eastern regions, throughout much of the central Mediterranean, the temperatures are very nice, some good sunshine and temperatures in fact are above the average. But you can see out towards the west, very different story.
We've got that rain continuing and of course pushing up towards the north. Be prepared for some delays, particularly in Barcelona. This is Saturday evening with that very heavy rain. So that certainly could delay you there. And then we've got some strong winds along the south coast of France, Marseilles. So again, we could see some delays there.
But 18 in Paris, 19 in Berlin under that nice sunshine and 14 in London. And let's just leave you with something a little bit more cheerful.
I think Max is going to enjoy this one. I'm sure he will. Max, meerkats, look, in the zoo, Leipzig Zoo in Germany, which of course is southeastern Germany, very nice, sunny, warm weather and these are, as you can see, it's a pumpkin. It's being filled with flour, worms and straw. (Inaudible) like that, Max. But, hey, the weather's nice so they're enjoying it. Halloween --
(CROSSTALK)
FOSTER: -- troll the world for animal stories every day, Jenny.
(Inaudible) hand is around today.
HARRISON: Came across that one there. But I thought you'd like that, Halloween coming up and you've got that little brood of children of yours. You need to take them out trick-or-treating.
FOSTER: Kind of weird, though. It's like a meerkat nose.
HARRISON: It does look funny, doesn't it?
(LAUGHTER)
FOSTER: Jenny, have a great weekend.
HARRISON: And, well, you, too.
FOSTER: Thank you very much. Get braced for Richard Quest.
HARRISON: Oh --
FOSTER: He's flying in.
HARRISON: We're all braced for him, yes.
(LAUGHTER)
FOSTER: That is QUEST MEANS BUSINESS. Richard's back in Atlanta next week. I'm Max Foster in London. MARKETPLACE AFRICA is next.
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ROBYN CURNOW, CNN HOST: Hello, you're watching MARKETPLACE AFRICA. I'm Robyn Curnow in Johannesburg. Now from mobile phone apps to mapping software, some entrepreneurs in Africa are trying to take advantage of a growing tech industry on the continent. But there are challenges.
Vladimir Duthiers now reports on how a group of young Nigerians are tackling these obstacles by breaking down traditional barriers to starting their own business.
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VLADIMIR DUTHIERS, CNN CORRESPONDENT (voice-over): The fastest way to get around the traffic-clogged streets of Lagos, Nigeria, is on a motorbike taxi, otherwise known as an okada. They're not the safest way to travel, but Hugo Obi has a fun way to do it that doesn't involve any risk.
He does it from the comfort of his office. His tech startup, Maliyo Games, develops apps like Okada Ride that can be played through websites like Facebook or on mobile devices, developed by Africans for a growing African market.
HUGO OBI, SOFTWARE DEVELOPER: We create casual browser games, essentially with localized narrative, localized sound, localized environment.
DUTHIERS (voice-over): Obi took a look at the success of the San Francisco-based Zynga Games, which developed a hugely popular games, Words with Friends, and FarmVille, which gets about 18 million people playing per month and saw an opportunity.
OBI: Nigeria is the largest country in the continent, the fastest- growing Internet users, fastest-growing mobile users and just the sheer nature of the Nigerian population or the Nigerian people is such a deadlocked consumer. And they're very keen on new trends, new content. So there is an immense opportunity. And you can already see that with loads of other, you know, young tech startups.
DUTHIERS (voice-over): Obi is not alone. He and others say more and more young people across Africa are choosing to become entrepreneurs because there simply aren't enough jobs to keep pace with the exploding population. It's estimated that 70 percent of Africa's young people are jobless, and 72 percent of them live on less than $2 a day.
In Nigeria, unemployment among the young has hit 17 percent in the cities, and 25 percent in rural areas. President Goodluck Jonathan has promised to focus on job growth in Africa's most populous country, and he's launched a program aimed at young entrepreneurs, calling it the Youth Enterprise with Innovation in Nigeria, or YEWIN.
OBI: We know a couple of people who have benefited from grants. They been offered many by foundations who are trying to encourage entrepreneurs, especially within the tech space. But still, you know, it's not significant in comparison to the actual cost that people have.
DUTHIERS (voice-over): And those costs are perhaps the biggest challenge to would-be business men and women. To keep costs down, he and his team work out of the Co-Creation Hub, a business incubator that provides a base of operations for Maliyo and several other startups.
OBI: In this space you have lots of developers working on independent projects. We're able to leverage and share knowledge and share expertise and share contacts and share experiences. We have to put our power supply (inaudible) our Internet supply. And we pay a flat rate over a 12 months' period. That has significantly reduced our operational costs.
DUTHIERS (voice-over): But many say cost-cutting and potential help from the government are not enough. So they're looking for other ways to build their businesses and finding it at the bank.
UNIDENTIFIED MALE: We can give short-term finance without collateral. You find that a young entrepreneur doesn't have collateral. So if you have a bid or a contract (inaudible) you from a corporate, we will finance that without -- with some certain conditions, obviously.
Also, if you want to buy in equipment, we will give you asset finance and we will now collateralize that with the asset (inaudible), with the asset which we are financing.
DUTHIERS (voice-over): As young entrepreneurs work on getting the cash flowing and their businesses running, networking is crucial, which is why they come here, to workshops like the Youth Alliance for Leadership and Development in Africa, or YALDA, where they can share ideas and solutions.
OBI: Where better to go to as a tech or as an entrepreneur than to go to a space where you can network and communicate with other people who have the same passion, the same desires, the same interests and essentially similar challenges.
DUTHIERS (voice-over): The workshop organizer says encouraging young entrepreneurs across Africa is the strongest weapon in the battle against youth unemployment.
KALAYA OKEREKE, YALDA CONFERENCE CHAIR: (Inaudible) about creating a network of not only youth, young students, young professionals, aspiring entrepreneurs, but connecting them, you know, with the more experienced professionals.
They're captains of industry, they're dignitaries. They're people that have that insight and knowledge that they can share with them to help them better achieve their goals. We can't wait around for government, for older generations to do everything for us. We need to be able to seek out those opportunities. And you kind of have to know where to go.
DUTHIERS (voice-over): Knowing that, these entrepreneurs say, can give you a better picture of where you're headed. And for Obi, all roads lead here, back to Maliyo Games, where he and his team are working hard at developing a new game application. But it's not easy.
OBI: It's very, very challenging, but the opportunity's immense. And you have to continue to be motivated. And that motivation has to come from inside. It has to be. You have to be, you know, you have to be persistent. You have to be hungry. You have to have a good vision and you have to share that vision passionately with as many people as possible.
DUTHIERS (voice-over): Hoping to build on the success of the company's previous releases.
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CURNOW: Thanks to Vladimir Duthiers there in Lagos.
Well, after the break, we're going to be going to Cape Town, and we're going to meet an entrepreneur who turned his passion for travel into a business venture.
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CURNOW: For this week's "Face Time" interview, we meet Mark Allewell. He's an entrepreneur and he's the CEO of Tourism Radio, a GPS device and mobile phone app that provides location-based audio tours for global tourists. We caught up with him in Cape Town.
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MARK ALLEWELL, CEO, TOURISM RADIO: So what it does is we've plugged the device in and we tune the device to a frequency on the radio, and we tune the radios to the (inaudible) frequency. So what it does is it plays through the frequency of the car, so you've got a nice sort of stereo sound.
And then it'll start playing the area information where you are. So for instance, at the moment, we're in the City Bowl of Cape Town, and it's going to tell us all about the City Bowl and the various sort of historical facts and more up-to-date facts.
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UNIDENTIFIED FEMALE: You are now approaching the Parliament Buildings, also known as the Houses of Parliament. These buildings are home to the Library of Parliament and are also where the president gives a state of the nation address.
ALLEWELL: It's like having 10 locals in the back of your car. And that's exactly what tourists are wanting. They're not just wanting the typical tours these days. They're wanting something which has a little bit of feeling, you know, something slightly different.
UNIDENTIFIED FEMALE: (Inaudible) 1888 and was named after Queen Victoria. (Inaudible) saying that you're now traveling on Victoria Road.
ALLEWELL: We work with, you know, lots of clients, advertisers, customers. We build up audio on a continual basis. And they do. They'll visit these little local areas that ordinarily they wouldn't have done.
CURNOW: And in terms of the technology behind this?
ALLEWELL: We built it up over time, a couple of years. Our first device was really big and it went under the bonnet of the vehicle. And in 2007, we launched a slightly smaller device. And now we're onto phones as well, iPhone, Android phones. So we have these guides as well that sit on the phones.
CURNOW: And what next, technology wise?
ALLEWELL. Yes. So what we've done is we've built this community called Humber (ph). And it's a mobile app as well. So we believe that obviously travel is a community. And we want people to share the guides within that community and add to the guides as well. So it's user- generated content; it's not just our content that we're building out. It's a lot of user-generated content as well.
UNIDENTIFIED FEMALE: You're now back in the City Bowl, which is the heart of Cape Town. Now when you hear (inaudible) Mountain, you'll see Devil's Peak on the left.
ALLEWELL: So we started in Cape Town and we've expanded to New Zealand, Namibia and we've also got a small office now in Spain. We've been launching into Europe.
CURNOW: And how does, you know, a small tech startup (inaudible) good idea go global? And how difficult has that been?
ALLEWELL: You know, we were incredibly lucky. We were on the Discovery Channel in 2006 and somebody saw us and obviously they had investment. The phoned us up and they said, can we come and look at your company? They spent six days down here doing due diligence. And at the end of the six days, they said, "We'd like to buy your company."
So they bought a portion of the company and that allowed us, through a lot of investment, to expand around the world. Ordinarily in starting a tech company in Cape Town, it's a lot more difficult. And we realized that we're really spoilt in terms of what happened to our company. But I think that a lot of good ideas in Cape Town have gone global.
And it's really just about, you know, getting your marketing done, getting onto TV, getting onto the blogs and there's a lot of interest in investors that want to come into Africa. Cape Town, you know, is a great place for entrepreneurs.
CURNOW: How does an entrepreneur start up in a place like this? I mean, it's not that easy, is it?
ALLEWELL: No, it's not that easy and I think the most important thing is to get your product out, to get it working properly and then go and look for other markets. In terms of what we did, we spent a year refining the product, testing it, making sure that it was working perfectly, started to build a name for ourselves.
And then luckily, what happened, happened. But ordinarily, what you should do is just build your product. You know what? People will come. People will see it and the investment will come.
A lot of Cape Town people, what they want to do is build something really quickly, go to Silicon Valley and try and shop it off. It's worked for one or two people over here. But it's more difficult than that. And I think, in terms of starting a tech company in Cape Town, the staffing is probably the most difficult thing.
CURNOW: Skills?
ALLEWELL: Skills, new skills. A lot of big companies are coming into Cape Town now, and they're sort of taking those resources. You'll find that the guys at UCT walk into great jobs. The young guys, you know, 22, 23 years old, that don't really have to worry about looking after jobs anymore, because people are coming to them.
So I would say, as a startup in Cape Town, that's probably the most difficult thing that we've encountered along the way.
CURNOW: Why is -- why aren't there more entrepreneurs?
ALLEWELL: They don't get out there and market themselves well enough. They sit in little offices and (inaudible) I've got these great ideas. But they're not really getting out there and marketing themselves.
You know, we can -- we can all throw our hands up in the air and say, listen, I didn't get funded; I didn't get this; I didn't get that. But as I mentioned earlier, it's -- if you're an entrepreneur, you make things -- you make things work.
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CURNOW: Tuning in there to Tourism Radio.
Well, that's it for me, Robyn Curnow, from a rather windy Johannesburg. Please do go online. We're at CNN.com/MarketplaceAfrica, then link to our Facebook and Twitter pages. Until next week, goodbye.
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