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Quest Means Business
Europe in Recession; France's Third Recession in Four Years; European Markets Higher; US Stocks Extend Record Run; Eurozone Crisis; Bangladesh Safety Standards; American Companies Holding Out on Bangladesh Accord; Dollar Up; Google Shares Above $900
Aired May 15, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, HOST: Recession returns. It's a double-dip for the European Union.
Deadline day for clothes retailers. More companies sign up to improve factory standards and safety in Bangladesh.
And no more chances. Mario Balotelli strikes back against racism in an exclusive interview.
Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.
Good evening. Continental Europe is stuck in a long, cold economic winter these days. The latest statistics show that the EU as a whole slipped back into recession in a chilly first quarter of the year, while the eurozone continued its downward slide.
Let's have a look at the eurozone in particular, because what we found out was that the 17-nation bloc managed to endure around about a year and a half without any growth at all. Output across the eurozone shrank on a whole by around about 0.2 of 1 percent in the first quarter, that was still below many of economists' and analysts' expectations.
So, let's have a look at those countries that are inside a recession. These are the ones in red, here, as you can see. They include all sorts of countries, like for instance Portugal, Greece, and Italy as well as the likes of Cyprus.
And if we home in on the island of Cyprus, you may remember that that's the latest country across this region to receive a bailout. GDP in Cyprus fell by the most among these that were studied, 1.3 percent in the first quarter of the year. And of course, many people say it could get worse from here on.
Well, even those countries not in a recession seem unable these days to escape their economic freeze. The Eurozone's biggest economy, which is, of course, this one, Germany, did manage to grow, but only by 0.1 of 1 percent.
And that was largely thanks to an abnormally cold winter, many people said, was partly to blame for dampening the output, economically speaking, for the eurozone's biggest economy.
Well, when it comes to the second-biggest economy in the region, this one, France, it entered its third recession in four years, as you can see here, shrinking by 0.2 of 1 percent in the first quarter of the year.
France, remember, is also dealing with record unemployment, not for the eurozone, but record for France, as well as some pretty low business and consumer confidence figures as well. Let's go over to our very own Jim Bittermann, who joins us now, live from Paris to put all of this into perspective.
How are things being taken there, Jim? The sun's shining, but economically speaking, this isn't good news for the French president today.
JIM BITTERMANN, CNN SENIOR INTERNATIONAL CORRESPONDENT: I think it's pretty grim news, Nina. In fact, the timing couldn't have been worse. This is the first anniversary of Hollande's inauguration, was one year ago today that he took office.
And the other thing that was bad from a timing standpoint was that he had a previously-scheduled meeting up in Brussels with the European Union commissioners.
And they basically called him in to sort of ask him how he was handling the economy, if he could handle the economy, what he was doing, because they're given him an extra two years to hit that 3 percent GDP growth figure -- or rather, deficit spending figure -- and he, in fact, was up there explaining how he was going to do that.
Right now, it's running about 4.8 percent. The deficit is running about 4.8 percent of GDP. So, he had to explain how he's going to get that back down to 3 percent over the next two years. And at a news conference afterwards, he was asked, "So, the recession -- what is the cause of this recession? And he blamed austerity.
(BEGIN VIDEO CLIP)
FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): The first reason for it is an accumulation of austerity policies, which built up its effects and spread its effects to all member states. Then, there was a lack of liquidity for a number of countries in 2012, for businesses, and even banks in some cases. A third reason is the loss of confidence which took hold in the euro area.
(END VIDEO CLIP)
BITTERMANN: And he also assured the commissioners that, in fact, France needs Europe and wants to continue to be a part of Europe.
That assurance probably a little bit necessary because of a poll that came out yesterday that indicated that, in fact, the French are not appreciating Europe as much as they were just a year ago. In fact, the number of people who think Europe is necessary here has dropped from 60 percent to now 41 percent, just in the course of the last 12 months, Nina.
DOS SANTOS: OK, Jim Bittermann, there, in Paris this evening. Thanks for bringing us up-to-date with how the French are taking news that France, like a number of eurozone economies and, indeed, in the rest of the European Union, is in the midst of a recession.
Let's have a look at how the markets fared. They seemed to shrug off these dismal figures. Let's have a look at the major indices and how they fared on the day.
As you can see, green arrows across the board, despite flirting with some negative territory at one point during the day, notably for the eurozone markets, like the CAC 40 and also the Xetra DAX, closing in the green, and quite a bit.
But also, we had the Zurich SMI leading the gains, up much, much more than the others. That was largely thanks to a fall in the Swiss franc which, of course, gives a little bit of relief to big exporters over there in Switzerland, like the food company, Nestle, as well as the watch firm, Swatch.
As you can see, it's been in positive territory for much of today, notching up, a gain of 1.5 percent on the close.
Stocks in London also managed get a boost, although a bit of a more modest one, on the day. That was after the Bank of England decided to raise its forecast for UK growth. We'll have plenty more on that in just a moment's time, but as you can see, FTSE 100 ending the day up around about a tenth of one percent.
In the United States, stocks are still on the rise. This is despite weak manufacturing data, because what's really interesting is that that kind of weakness in the manufacturing landscape has actually raised expectations in the financial markets that the Federal Reserve will continue with its stimulus policies from here on. Both the Dow and the S&P 500 are yet again at all-time highs.
Paul Donovan is the managing director of global economics at UBS. He joins us now live in our London studio. Good to have you on the show, Paul.
PAUL DONOVAN, MANAGING DIRECTOR OF GLOBAL ECONOMICS, UBS: Good to be here.
DOS SANTOS: My first question to an economist like you is why is it we're seeing the markets rising on a day when, of course, all these economic figures are pretty dismal?
DONOVAN: Well, there's a difference between equities and the economy. Now, equity analysts think they're important. Equity analysts aren't important. Economists are important.
Equity analysts are looking at about 30 to 40 percent of the private sector of an economy, so they're not looking at the government, and they're not looking at the small businesses. And this recession, this problem, has been very much a problem of government spending and, in particular, of small businesses.
So, what we've got is actually OK fundamentals for the large companies that are listed on equity markets, but we've got absolutely dire fundamentals for the majority of the economy.
DOS SANTOS: That's a very, very interesting point, isn't it? And this is also something that, for instance, across the eurozone, the ECB is trying to tackle, perhaps even contemplating negative deposit rates for banks to prevent them from parking their cash at the ECB --
DONOVAN: Yes.
DOS SANTOS: -- and get it out there into the smaller economy.
DONOVAN: Yes. Unfortunately for the ECB, they don't have the sort of power that the Federal Reserve or the Bank of England has got. What we've got in Europe is a monetary union, which, let's be honest, doesn't work.
And the ECB lacks the power of lender of last resort, as regulator of the banking system. We don't have what is known now as a banking union. And so, the ECB is finding it very difficult to encourage banks in parts of the eurozone to go out lend.
The eurozone banking system is very, very weak, it doesn't have adequate capital, and they're saying that we don't care what you do with monetary policy, we can't afford to lend to anybody.
DOS SANTOS: But on the flip side, if you're looking at those kind of figures, are you saying, "I would still be cautious. I would keep my cash under the mattress," if you like.
DONOVAN: Exactly. Well, you start to get into a vicious cycle, of course, that the ECB can't encourage, can't change the perspective of the banks, encourage them to lend. Something like the Bank of England's funding for lending scheme would actually be very, very difficult to implement in the eurozone.
Where in the UK and the US, we're seeing the banking sector now starting to lend out into the economy and supporting a broader recovery, we're lacking that in the eurozone still.
DOS SANTOS: Paul, I'm really glad that you mentioned the Bank of England, because obviously, that's another institution that's been grabbing the headlines today. Sir Mervyn King said that he didn't want to put a dampener on the state of the health of the economic recover here in the UK. In fact, he said that we could be on the cusp of an economic recovery.
In presenting his final inflation report before he retires this moth, this is what Sir Mervyn had to say.
(BEGIN VIDEO CLIP)
MERVYN KING, GOVERNOR, BANK OF ENGLAND: Today's projections are for growth to be a little stronger and inflation a little weaker than we expected three months ago. That's the first time I've been able to say that since before the financial crisis. But this is no time to be complacent. We must press on to ensure a recovery and to bring down unemployment.
(END VIDEO CLIP)
So, that's Sir Mervyn King, there, going out on something of a high. Can he afford to signal the -- saying that we're seeing the signal of the green shoots of a recovery when he's no longer going to be in charge in a month or two's time.
DONOVAN: Well, he still has his reputation, of course, and he's an economist, so of course he will always be entirely honest about what his view is. I think that the UK is -- it's clearly in a different position to the eurozone. The banking system in the UK was a mess, it was recapitalized by the government earlier on, and it's now in a position where we are actually seeing lending.
The first funding for lending scheme went entirely into the mortgage market. Mortgage rates in the UK came crashing down. The second funding for lending scheme is being aimed at small businesses. I think there's a reasonable chance of some success there.
The UK has about a quarter of the value of its exports ending up in the United States, the US economy is not doing too badly, the consumer is spending there. Again, another positive. Of course, the fact that the eurozone takes about 45 percent of our exports is not great news, but the UK does have some positives going forward.
DOS SANTOS: Yes, hence one of the reasons why everybody's putting their money, perhaps, on that new trade agreement with the United States, as well, to help counter the downward trajectory.
DONOVAN: Indeed.
DOS SANOTS: Paul Donovan, thanks ever so much for joining us there from UBS.
DONOVAN: Thank you.
DOS SANTOS: Still to come here tonight, signing up for safety. Two dozen retailers have so far committed to an accord on Bangladesh, but not Wal-Mart. We'll tell you why America's largest retailer has decided it wants to go it alone. That's next.
(COMMERCIAL BREAK)
DOS SANTOS: Midnight in Central Europe, that's the deadline for companies to commit to a new safety pact for Bangladesh. Well, many of the big names have already decided to sign up to this five-year legally-binding deal to improve working conditions for garment workers in Bangladesh.
Let's just run you through some of the big brands that have actually opted in. So, we're talking about European retailers like, for instance, Zara, over here, as you can see, which is owned by the Spanish retailer Inditex. Also, the likes of Benetton over in Italy and Primark in the United Kingdom and Ireland, as well as, as you can see here, we have Carrefour of France.
There are also some notable American brands that have decided to opt in as well, such as, for instance, this one, Calvin Klein, and also Abercrombie and Fitch. But there are two companies that have decided to hold out, and they really do stand out among the crowd. Starting out with this one, Walmart has decided to go its own way.
The largest US retailer says that its own plan, which is slightly different, that it's put forward will get results more quickly. Walmart had decided as part of its own proposal that it's going to be listing all of the 279 factories that it does business with in Bangladesh. It'll publish a list of the factories that fail inspections. Walmart says that transparency is vital here.
Now, the other major US retailer that has so far refused to sign up to this accord is Gap. Gap says that it doesn't want disputes to be resolved in court, so it has a slightly different beef behind the argument, but as I was saying, those are the two that are so far holding out.
Well, the UNI Global Union is one of the groups behind the Bangladesh Fire and Building Safety Accord, which is the accord in question that we're talking about. This is the countdown's website, as you can see there, currently around about three hours and 44 minutes left for companies to sign this pact, so time, of course, is of the essence for the two or three that are holding out.
Philip Jennings is the group's general secretary, and he joins us now, live from Geneva. So, Philip, there's two notable ones that are holding out. What is the likelihood of other companies or those two to actually come and see eye-to-eye with you, something that you agree is going to be workable and will be viable?
PHILIP JENNINGS, GENERAL SECRETARY, UNI GLOBAL UNION: We started this process on Monday morning, and we didn't have the signatories that you have mentioned. Since Monday, we have now over 25 signatories, we have a critical mass of companies that source in Bangladesh that have signed up for this agreement. There may well be more news in the next three hours and 43 minutes.
I'm not surprised at Walmart. They want to have their own flag of convenience. They want to present themselves to the world as the judge and the jury of their own behavior. They don't pass the test of independent governance, independent inspection, or proper remedial measures.
DOS SANTOS: Well, this is --
(CROSSTALK)
JENNINGS: We appeal to Gap. You've got time. Gap, you've got three hours and 42 minutes to sign up for this accord. This is a moment where history is in the making, we want Gap to be part of this. I appeal to Glenn Murphy, the CEO, and to all the consumers that are loyal to Gap to enter this agreement.
DOS SANTOS: Well, this is the interesting bit. Gap says that it doesn't want disputes to be lodged in court and to go through the courts. How big a deal is that, really, or is that just an excuse?
JENNINGS: To me, it looks somewhat paper-thin, and they're getting into details and trying to find a detail which provides an obstacle for them as to not sign up. We have a system of governance in place. We have a system of independent inspection in place. We have a way of dealing with the issues as they emerge as social partners in a dialogue.
Going to court is the ultimate -- after a process of arbitration. We're going to try and resolve these issues on the basis of the reports that we receive. We talk about binding arbitration only when we need to do it.
We will have an inspector's report that will be placed before the parties with the remediation measure. We hope that this does not go to court. A court is a last resort, we'll go there if we have to, so Gap, come on.
As I said before, get the lawyers out of the room. We have a critical mass of companies have signed up. This is a life-changing decision. Stand up, step up, and sign this agreement.
DOS SANTOS: OK. So, let's have a look at exactly what you're going to be able to enforce here. A lot of people have said, well, the Bangladeshi government really isn't going to be as involved as it, perhaps, should be here, considering the fact that this is the lion's share of this country's economy.
And then, if we look at what you're putting on the table here, it doesn't address a whole host of other issues that are also issues for Bangladeshi garment workers.
JENNINGS: Wrong. This addresses the critical issues of factory safety in Bangladesh. It's addressing the critical issues to avoid the fires and the factory collapse that we have seen. We are prepared to work with the Bangladeshi government, to work with the UN agency, the International Labor Office, to have a proper independent inspector in place so all the facts are on the table.
Lives are at stake here. We can deal with issues of labor relations and union recognition as we go along. The heart of this matter is about improving factory safety in Bangladesh so that every consumer that goes into any store buying a product sourced in Bangladesh can have the confidence that this is being done under health and safety and fair and ethical conditions.
We hope that the project will grow with time to address the union recognition and collective bargaining, improving wage levels as well in an industry where the monthly wage is just 38 bucks. So, please, this is an excellent step forward. Let's not get lost in some of these details out there. We have a chance to improve a situation for millions of people. Let's take it.
DOS SANTOS: Indeed. And that was the bit I was getting to, is that this could be the start of an agreement that addresses a whole host of other issues, such as, for instance, wages, and other issues over there in Bangladesh and, indeed, elsewhere, where they have similar problems.
Phil Jennings, the group's general secretary, thank you so much for joining us there from the UNI Global Union, which is, as Phil Jennings was just saying, around about three hours and 40 minutes away from the deadline for that legally-binding five-year deal for the conditions when it comes to fire and safety and building safety regulations for workers in Bangladesh.
Well, let's get the view from the other side of the Atlantic. CNN's Maggie Lake is live for us in New York this hour. As you could probably hear, there, Maggie, Walmart and Gap really feeling the heat on this one, especially from the UNI Union.
MAGGIE LAKE, CNN INTERNATIONAL BUSINESS CORRESPONDENT: Yes, certainly. And I unfortunately, I did miss the beginning of what he was saying, Nina, but we do know that there has been a lot of pressure. I will tell you that we have consistently been reaching out to all of the retailers here for comment on this. They've declined to be interviewed.
You went over some of what Walmart says it's doing. I just want to return to that Gap point, because I think they've probably been the most honest about what's really holding things up here, and that is not just the legally-binding, but the idea that the court system here is set up so differently.
It's such a litigious society, everyone sues so easily that overzealous American lawyers are what they're telling the "New York Times," they think would use this as an opportunity -- we call them ambulance chasers -- to basically try to shake them down.
Would there be a tragedy in one of these remote places or in Bangladesh someplace, and they're concerned about how that would play out in the American court system, the exposure there.
But I put that to an expert here in the US who watches this, who's a little bit closer to these retailers, and frankly, our legally system, and asked him if that argument had merit. Have a listen to what he had to say.
(BEGIN VIDEO CLIP)
DARA O'ROURKE, LABOR POLICY PROFESSOR, UC BERKELEY: I think, really, blaming it on lawsuits or the potential for lawsuits is a smokescreen. Unless the Gap has seen some precedent, which I have not seen in US law, we have no examples that they've raised of lawsuits happening from agreements like this. I think this is really a diversion for them just to avoid a binding, enforceable agreement.
(END VIDEO CLIP)
LAKE: All right, so no legal precedent. Now, again, we'll continue to chase after the Gap and see if they have a specific response to that. But O'Rourke went on to say, listen, he does think US consumers care about this.
Yes, they want low-cost clothing, but they do want to see humane working conditions. They're not willing to get these clothes at absolutely any price. So, he does think that although it's difficult, the more transparency, the more awareness this is, it will motivate consumers, which may be the ultimate thing that pushes US retailers into some sort of agreement, if not onboard with this particular deal, Nina.
And he also acknowledges, because I asked him about corruption on the local level, some of these other local issues that make US multinational retailers very concerned about how to enforce this, and he said, yes, there are issues, but as very much with the union saying that this isn't a silver bullet, but it is a necessary first step to try to prevent something like this from happening. Nina?
DOS SANTOS: OK, Maggie Lake in New York, thanks for that.
Well, let's bring you a Currency Conundrum now, a special eurozone Currency Conundrum given, of course, the recessionary environment we're in these days, according to the latest figures. Let's find a reason to be cheerful about the single currency, shall we?
Before it was introduced, how much would a bank have charged you for moving the equivalent of 100 euros within what is now the eurozone? Was it A, 11 euros? B, 18 euros? Or C, 24 euros? I'll have the answer for you later on in the program.
Well, speaking of currencies, the dollar is up against both the euro and the Japanese yen. It's flat against the British pound in light of what Sir Mervyn King has had to say about a recovery coming around the corner for the British economy. We'll be back after this.
(COMMERCIAL BREAK)
DOS SANTOS: Welcome back. A new record for Google. Shares in this technology giant have now surpassed the $900 per piece mark, and that means for the first time, this firm's market value sits at above $300 billion. That's right, $300 billion in total.
It coincides with Google's annual developers' day at its headquarters in California. It's all been about music and maps so far. Google has managed to release a new streaming service to rival the likes of Spotify. It's also announced an update for that ubiquitous Google Maps app. For more, let's speak to CNN's Alison Kosik, who's live at the New York Stock Exchange.
So, Alison, this sounds awfully like Apple, doesn't it? Where it hits a really big mark and becomes one of the most valuable firms in the world.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: It does sound a lot like Apple, but the difference is is that you're seeing Google innovate, and you're not seeing Apple necessarily do that in the way that investors want to see.
It's amazing to see these shares of Google debuting at $85 a share ten years ago hitting $800 in February. Three months later, it's over $900 as of today. Many say, hey, $1,000 a share? That's not far away.
As you said, Google announced this new subscription-based streaming music service to compete with Spotify, Pandora, iTunes as well. More announcements are expected. A major upgrade to Maps and the possibility of new or updated SmartPhones and tablets.
Clearly, this is Google going after Apple in the SmartPhone space, the Android. Google's Android operating system, its market share has increased. It has almost 75 percent of the SmartPhone market at the expense of Apple while Apple's market share is less than 20 percent.
Google also going at Apple in the tablet space with the Chromebook and the Nexus. A lot of the rise recently has come at Apple's expense, in fact. We are watching shares of Apple fall another 4 percent today. They're down almost 20 percent year-to-date. You know what, Nina? Not a lot of stocks you can say that about.
DOS SANTOS: Yes, I know. Going in one direction and the other one going in the other.
KOSIK: Yes.
DOS SANTOS: We're also seeing live pictures here, Alison, of the developers' conference as it's going on there. Actually, just a moment ago, the pictures we were showing are viewers were referencing a phone, and you can see the new Google Maps that they're showing people how to use there on that screen.
Google is so much part of everybody's everyday lives. I was recently at a conference where one notable economist said Google has more users than Germany has people. It's a bigger micro-economy than even countries like Germany or the United States sometimes.
KOSIK: I can certainly see that, yes. Google definitely has its arms in just about almost everything that people use. Many people have said that Apple's products have sort of become ubiquitous with people as well, although it just looks like Apple sort of losing its panache at this point.
When you look at its -- you look into its earnings report, its latest earnings report for Apple, it's got a profit problem. Stock has plummeted 40 percent since September, investors are freaking out about the lack of hot new products.
I think this lack of innovation is really what's dragging down Apple. But of course, it's giving more room, it's giving more of a platform for Google to expand its reach.
DOS SANTOS: Yes, that's exactly what seems to be going on there in Southern California. Thanks so much for that. That's Alison Kosik, there, joining us live from the New York Stock Exchange. And as you could see before, we had the Google innovators' conference going on near San Francisco, which is obviously in Northern California rather than Southern California just a moment ago.
Straight ahead on QUEST MEANS BUSINESS, he was a gifted teenager who became an instant millionaire, and now the player known to his fans as Super Mario says that he's suffered enough racism.
(COMMERCIAL BREAK)
DOS SANTOS: Hello and welcome back. I'm Nina dos Santos. These are the news headlines on CNN this hour.
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DOS SANTOS (voice-over): France has entered its third recession in four years. The economy shrank by 0.2 of 1 percent in the first quarter of this year. The French President Francois Hollande says that austerity measures, a lack of liquidity and a loss of confidence are all to blame.
A Kremlin spokesman has called the arrest of a U.S. diplomat "regrettable." Russian police accused the U.S. embassy staffer Ryan Fogle of trying to recruit a Russian intelligence agent for the CIA. The spokesman adds the situation will not be an impediment to improved relationships with the United States.
Hundreds of thousands of people in Myanmar and Bangladesh are being asked to leave coastal areas while Cyclone Mahasen is experienced to make landfall on Thursday. And it could swamp coastal areas where vulnerable victims of religious violence are currently living in camps.
The British energy secretary is promising to punish any company found to have rigged the price of oil. Those comments come in the wake of the European Commission's raid on a group of oil firms. (Inaudible) told MPs that misbehaving oil executives will, quote, "face the full force of the law."
EDWARD DAVEY, BRITISH ENERGY SECRETARY: This government is deeply concerned by any allegation that prices to consumers could have been artificially or unnecessarily driven up. U.K. government and regulators will provide any assistance necessary to the European investigators, and we expect the companies concerned to fully comply with these investigations.
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(END VIDEO CLIP)
DOS SANTOS: The Italian football star Mario Balotelli has exclusively told CNN that he'll walk off the pitch the next time he suffers racial abuse. It's a dramatic change of tack here for the AC Milan striker who's ranked among the sport's highest and best and highest-paid players. He's also named by "Time" magazine as one of the world's most influential people these days.
In an interview with our very own Pedro Pinto, he's now directing that influence at changing behavior.
(BEGIN VIDEO CLIP)
MARIO BALOTELLI, AC MILAN STRIKER: I always said that if it happened in the stadium, I'd just go like nobody says nothing and I don't care. But this time I think I've changed my mind a little bit. And if it's going to happen one more time, I'm going to leave the pitch because it's so stupid.
PEDRO PINTO, CNN CORRESPONDENT: Did you talk to Prince about that, about leaving?
BALOTELLI: Yes, I spoke with Prince and I was about to leave the pitch here last Sunday, but they're going to think I want to leave because maybe we have some difficulty with the game and then we are going to win 3- 0.
And I said no, no, it's better we play and I will talk. That's it. But if it wasn't for this reason, then I going to leave the pitch Sunday.
PINTO: So just one question on Mancini: what was your reaction when you found out that he'd been sacked at Manchester City?
BALOTELLI: I'm not really surprised. But I know he's -- when I was with him, he was a great manager and we had, I think, one of the best team I have played with, best players. And I don't know why they didn't win. But obviously, there were some problems inside. I don't know. I'm here, so I don't know.
DOS SANTOS: We'll have more from Pedro's exclusive interview with the controversial Italian superstar this Friday on "WORLD SPORT," right here on CNN. Tune in for that.
(END VIDEO CLIP)
DOS SANTOS: (Inaudible) to come here on "WORLD BUSINESS" -- excuse me -- on QUEST MEANS BUSINESS, I should say, it's only 6 years old. But this Indian airline is (inaudible) the way towards success. Up next, why IndiGo is well and truly off the ground.
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(COMMERCIAL BREAK)
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DOS SANTOS: Deliveries, doctors and cockpit dramas, of course, there's never a dull moment in the aviation industry. First off, Boeing has resumed delivery of its 787 Dreamliners. That was after a four-month delay caused by two faulty battery incidents. Authorities approved Boeing's modifications as of last month.
Next, easyJet. The orange airline is now halved its first half losses. That was thanks to travelers trying to escape a miserable European winter, which has lasted for a couple months longer than usual. As now -- as of now, this company is targeting business flyers and it's offering fast-track security lanes to holders of flexible tickets to try and get that higher ticket consumer to buy its flights.
Now the airline that is offering frequent flyers miles to -- sorry, the airline that is offering frequent flyer miles to registered doctors if they agree to help out in an emergency -- this airline we're talking about is, of course, Turkish Airlines, as you can see there from the plane there giving you a clue.
It's inviting GPs to register in advance. But the reward is low, because it's actually only 5,000 miles, which probably won't get you very far on one of its flights.
And now let's turn our attention towards India, because Air India jet -- an Air India jet on a domestic flight had to make an emergency landing. That was after the captain was locked out of the cockpit when he decided to go to the toilet. The plane landed safely in Bhopal (ph). It turned out the cockpit door had actually jammed.
Well, speaking of India, it's been (inaudible) never invest in anything that actually flies. It's an industry widely described as an industry currently in the grips of chaos. Low-cost carrier IndiGo, though, it seems is bucking the trend and it looks so attractive that even Qatar Airlines is keen on an alliance with it. Richard Quest has been to India to find out more.
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RICHARD QUEST, CNN HOST (voice-over): Crippling taxes, inadequate infrastructure, sky high operational costs, but of course, rising fuel prices. Some of the problems that have thrown India's aviation industry into a state widely described as crisis, with the greatest blow coming last year, when the embattled airline Kingfisher finally grounded its planes.
Despite the dire state of Indian aviation, it remains one of the world's fastest growing markets and that is huge opportunities for foreign players, especially now foreign investors can own up to 49 percent of Indian carriers. Abu Dhabi-based Etihad became the first overseas airline to enter the market. Malaysian-based AirAsia is expected to follow later this year.
While the new business is heartening, experts remain skeptical that investment from foreign carriers will be enough to rescue the ailing industry.
QUEST: If the legacy carriers are in trouble, there's now a whole brand-new set of low-cost airlines that have revolutionized the industry and none more so than IndiGo, which is India's market leader and whose young chief executive never worked for an airline has stuck fast to the low-cost model and seems to be playing a different game.
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QUEST (voice-over): This is the world of IndiGo, the golden child of Indian aviation. Only 6 years old and already the country's biggest airline by market share.
ADITYA GHOSH, PRESIDENT, INDIGO: The airlines that we were competing against, low-cost airlines, they were synonymous with dirty planes, you know, bad schedules, high number of cancellations, just chaotic, disorganized. And our one big objective was to prove that low-cost is not low-quality. The fact that we were running an airline is incidental. What we set out to do was to build a great business.
QUEST (voice-over): For IndiGo, building a great business comes from simplicity.
GHOSH: Most customers, even the happy ones who love IndiGo, will tell me, you know, free food, a lounge, red carpets, whole bunch of things. And then the problem is they don't want to pay for it.
So the trick is, I think, to figure out what a customer wants versus what the customer really needs.
QUEST (voice-over): What the customer needs: consistently low fares, squeaky clean planes and a religious fervor for always being on time.
GHOSH: In India -- and I'm an Indian, so I can say it -- though maybe not you -- you know, being on time is not really everybody's priority. Meetings start on Indian stretchable time and then we -- here we were, these mavericks, who said, you know, on time is our thing.
QUEST: Why is India's aviation industry such a basket case?
GHOSH: Ego. That's the biggest reason. We're the largest airline in the country. We only fly to 33 destinations. Some of our competitors who fly less (sic) number of passengers than us fly to 70 different destinations, 75 different destinations in the country. And if their focus on business staying away from ego, being consistent, I think that is -- that is what is different about us.
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DOS SANTOS: That's Aditya Ghosh there, the founder and CEO of IndiGo, that airline in India.
Let's turn our attention towards the weather forecast for all you business travelers out there. Jenny Harrison is standing by at the CNN International Weather Center with more.
Jenny?
JENNY HARRISON, CNN METEOROLOGIST: Yes, no, well I don't want to be heading right now, Nina, that's to your neck of the woods in Europe across the west. It is wet, it is windy and in fact some pretty heavy amounts of rain have been coming down in the last few hours. You can see on the satellite, you see these little areas of cloud.
Well, some pretty fierce thunderstorms erupting. In fact right now some reports of hail in Germany, 2-3 centimeters in size. You can see those thunderstorms there.
And then just generally wet across France, the low countries, the U.K. and some very heavy rain has been working its way across western regions, Wales and the west in particular, so much so that we've shown you here some totals, 17 millimeters in South Wales in Pembrey. And in Shawbury and Shropshire, 38 millimeters of rain. That is a lot of rain to come down in a very short space of time.
And that low pressure system responsible, actually it going to kind of curl its way back down and come back down through the Bay of Biscayne, push into western France, northern areas of Spain and at the same time the low in the south is going to head up to central areas.
So staying unsettled, staying on the cool side. Meanwhile across Eastern Europe, it is very warm. And this will continue through the end of the week. Right now temperature are cooling off. It is that time of the day although it is still in double figures in Glasgow and London, 10 Celsius. But look at Moscow, 20 Celsius is your temperature still right now.
And of course it has been very, very warm again, in fact 28 was the high this Wednesday in Moscow. Normally it is 18 Celsius, Yusta in Russia, 34, the average is 24. So really gives you an idea just how much above average the temperatures have been.
And they're going to stay above average as we go into the first part of the weekend. Look at this in Warsaw. It'll stay in the mid- to high 20s; the average is 19 Celsius. And the overnight temperatures normally it's just 8 Celsius in Warsaw this time of year. But look at this, 15 and 17 overnight Saturday into Sunday. And a similar story for Kiev and also similar in Moscow as well. So just be prepared for that.
Meanwhile across the west, those areas of low pressure, that cooler air, more rain, more thunderstorms, even some snow to those higher elevations.
But because of those thunderstorms, more warnings in place across the central Med, northern sections of Africa, large damaging hail and some severe winds. And you can see that real split between the east and the west with that cooler and that warm air across the east.
Now talking warm air, some very warm air has been in place across the central regions of the United States, the Northern Plains in particular. Look at this, Sioux City in Iowa, 41 Celsius, the highest ever temperature recorded in May. The average is 22.
And on the 1st of May, get this, Nina, on the first of May they had between 1-3 centimeters of snow. And here we are, just several days later, 41 Celsius, their daytime high. It's cooling off, but my goodness, that is very warm indeed.
DOS SANTOS: (Inaudible) take a few of those degrees. It will be fine.
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DOS SANTOS: (Inaudible) winter, even though it's obviously spring, supposedly here, allegedly. Jenny Harrison, thanks ever so much for that from the CNN Weather Center.
Well, up next here on the show, decadence, diamonds and disaster in Cannes. And it's not just on the red carpet. This year's opening film is "The Great Gatsby." We'll hear from its director next.
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DOS SANTOS (voice-over): Time now to answer tonight's Eurozone "Currency Conundrum." Earlier in the show I asked you what was the average bank charge for moving the equivalent of 100 euros in the Eurozone before, of course, the euro came along? And the answer is C, the most expensive one on that chart, as you can see, 24 euros.
That was according to the E.U. Of course, nowadays, cross-border money transfers are treated simply as domestic ones because, of course, they are within the same monetary union.
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DOS SANTOS: Well, the Eurozone is now endured six straight quarters of recession. That's 18 months worth of economic decline. The figures once again were arrived at a debate on whether austerity is working or whether cuts are just too deep. Here's Jim Boulden with more.
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JIM BOULDEN, CNN CORRESPONDENT (voice-over): This is what austerity has wrought on the streets of Europe. In return for bailout money, countries from Ireland to Greece to Spain have been forced to swallow austerity.
Has it been enough? Has it been too much? The debate has left egg on the face of the coauthor of one of the most influential papers on the subject, Ken Rogoff of Harvard. He's argued for years that in countries with public debt more than 90 percent of GDP, growth starts to suffer.
Now others have since pointed out flaws in his calculations, a mistake Rogoff now acknowledges, but sticks to his original premise. Using historic data to predict future outcomes is the dilemma understood by Rogoff's peers.
PETER MORICI, UNIVERSITY OF MARYLAND: Professors rely too much on numbers. And as a consequence, they're backward looking because numbers come to us with a lag. I think the economics profession has got it wrong on Europe and that's one of the reasons that Europe is in the mess that it's in.
BOULDEN (voice-over): It may sound like a dry academic argument -- austerity versus stimulus -- but how this shakes out could have huge implications for European economies.
Just listen to the stark warnings of those in the stimulus or think caffeinated camp when it comes to helping Southern Europe.
MORICI: I'm worried that it's worse than Japan. Japan was at -- was flat. It really didn't shrink. Southern Europe is shrinking economically and its capital stock will become antiquated over the next 5-10 years. It -- they will cease to be advanced industrialized economies if the present policies continue.
BOULDEN: What are those policies? Well, think decaffeinated coffee or austerity. Cutting budgets, cutting government jobs, all in the name of shrinking government debts. A shot of austerity in theory makes governments more sustainable in the long run. And that is good for the economy.
BOULDEN (voice-over): A point the host of the recent G7 finance ministers' meeting continues to make.
GEORGE OSBORNE, CHANCELLOR OF THE EXCHEQUER: I think people will be surprised that there is more agreement than is commonly assumed between the countries.
BOULDEN (voice-over): Osborne says tough austerity without slash and burn.
OSBORNE: We have made a big effort in the U.K. to make sure our consolidation actually protects things like the science budget, actually ensures that we continue to get investment into our higher education.
BOULDEN (voice-over): Growth in Europe may have to wait until after the German election later this year and then see whether Europe's paymasters allow more caffeine in the moribund economies around it -- Jim Boulden, CNN, London.
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DOS SANTOS: France may have slipped into another recession, but it's business as usual on the French Riviera.
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DOS SANTOS (voice-over): This year's (inaudible) opens with "The Great Gatsby," the $105 million adaptation of F. Scott Fitzgerald's classic American novel. The film is (inaudible) showcase of 1920s decadence as well as a warning about its dangers. "The Great Gatsby" premiered in North America last week, taking in a whopping $51 million. That's (inaudible) and we can join CNN's Becky Anderson.
So Becky, you've been speaking with the director here. This is interesting. What we're seeing in Cannes is one of the most luxurious films being premiered. Of course on a day when France is back in recession.
BECKY ANDERSON, CNN HOST: It's interesting and quite ironic, isn't it? It is very, very wet here Nina, but that hasn't dampened the spirits of the stars as they hit the red carpet about an hour ago for the start of the most important movie event in the world.
And yes the opening of the 66th Cannes Film Festival is a cautionary tale about the vulgarity of a decadent life. (Inaudible) 3D, let me describe as bombastic adaptation of Fitzgerald's 1925 novel, of course, stars Leonardo DiCaprio with music by Jay Z and Beyonce, really upping the party stakes. Have a listen to what the director, Baz Luhrmann and one of the stars had to say a little earlier.
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BAZ LUHRMANN, DIRECTOR, "THE GREAT GATSBY": When he died, and I always thought this was quite unbelievable but true, he was so forgotten he was buying copies of his own book just so there was some sales. So by the way, last week, he sold more copies of "The Great Gatsby" than he did in his entire lifetime. But I will tell you one little story --
LEONARDO DICAPRIO, ACTOR: (Inaudible) a little film adaptation is doing quite well at the box office.
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ANDERSON: Leonardo butting in there somewhat. Nearly 1,000 films are being screened (inaudible) bought and sold here at the Cannes Film Festival and (inaudible) film work market on the sidelines, Nina. There are some 4,000 movies. Now distributors in Europe may be a bit thin on the ground. I mean, these are austere times, aren't they?
But there is money from the U.S. and there are new markets like China and India. In fact, I think I'm right in saying that China has taken over Japan as the second biggest movie market in the world.
So, yes, an interesting film for opening night at the Palm d'Or, of course, coming up at the end of this 12-day extravaganza. But when you look at the sort of decadence and you try and allude to is that vulgar and these are austere times, at least here in Europe, I don't think that was a particularly pointed decision by the organizers here, Nina.
DOS SANTOS: Unfortunate timing, but I've got to say I personally can't wait to see it, and I've been spending the best part of the last three years talking about this recession. Becky Anderson --
ANDERSON: Brilliant, let me tell you.
DOS SANTOS: -- Becky Anderson in Cannes, thanks ever so much for that this evening.
Well, QUEST MEANS BUSINESS will be back with a final check on the world's stock markets, which will also shrugging off the recession in just a moment's time.
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DOS SANTOS: Let's take a look at the U.S. markets now. They're faring at the moment in the last few hours or so trading. Well, despite an initial storm, markets are back on the rise at the moment, as you can see there, with the Dow Jones industrial average up just around about 0.08 of 1 percent, about 11 points.
This is after investors swallowed some sour economic news. There's been a decline in producer prices indices. That's a signal of weak -- and that signals weak inflation. But when we -- when it comes to the manufacturer reports that we had and also industrial production reports that we had stateside, they were also disappointing.
But the reason why the markets are taking this well is because what we have these weak economic statistics, they perhaps perceive that as a sign that the Fed won't turn off the money taps any time soon. Of course, we had gloomy news in the U.S. as well with that particular block as well as the broader E.U. being still in the grips of a recession.
The European markets closed up, as you can see there despite that kind of disappointing news, lifted largely by Wall Street. The carmaker Renault and also the banking company Credit Agricole, over there pushing up the CAC 40 in Paris.
Germany's Xetra DAX and the London FTSE 100, all making gains when it comes to the FTSE 100. That one gained in particular, thanks to the outgoing governor of the Bank of England, Sir Mervyn King, saying that recovery could be just around the corner for the U.K.
On that note, it's time to say goodbye. That's it for this edition of QUEST MEANS BUSINESS. I'm Nina dos Santos in London. Thanks for joining me. I'll be back with a recap of the headlines in a moment's time.
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DOS SANTOS (voice-over): These are the headlines on CNN this hour.
France has entered its third recession in four years. The economy shrank by 0.2 of 1 percent in the first quarter of this year. The French President Francois Hollande says that austerity measures, a lack of liquidity and also a loss of confidence are all to blame.
A Kremlin spokesman has called the arrest of a U.S. diplomat "regrettable." Russian police accused the U.S. embassy staffer called Ryan Fogle of trying to recruit a Russian intelligence agent for the CIA. The spokesman adds the situation, he hopes, will not be an impediment to improved relationships with the United States.
Hundreds of thousands of people in Myanmar and Bangladesh are being asked to leave coastal areas. Cyclone Mahasen is expected to make landfall on Thursday. And it could swamp coastal areas where vulnerable victims of religious violence are currently living in camps.
The British energy secretary is promising to punish any company found to have rigged the price of oil. Those comments come in the wake of the European Commission's raid on oil groups this week. (Inaudible) told MPs in London that misbehaving oil executives will face, quote, " the full force of the law."
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DOS SANTOS: That's a recap of the main stories that we're watching for you here on CNN. "AMANPOUR" is next after this.
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