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Quest Means Business

Egypt in Turmoil; Egypt's Economy; New Bank of England Governor Takes Office; Carney's In-Box; Super Mark; Former BOE MPC Member on New Leadership; Portugal's Finance Minister Steps Down; Dollar Down; New York Cronut Craze

Aired July 01, 2013 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, HOST: There's an ultimatum in Egypt. The government is given 48 hours by the military to end the crisis.

An ultimatum to the US. France tells America stop eavesdropping or else derail trade talks.

And the ultimate in patisserie economics. We introduce you to the croissant-doughnut conglomeration, and customers are queuing around the block to get it.

I'm Richard Quest. It's the start of a new week, and I mean business.

Good evening. We begin with the developments in Egypt, where we've just learned that the country's president is meeting his prime minister and, crucially, the general who's both defense minister and head of the armed forces. He's attempting to bring an end to the turmoil in Egypt.

According to the president's official Facebook, the meeting began a short while ago, but over the past few hours, the military set a deadline for the government to make a deal with the people. It says if no consensus is reached, it will, in their words, "declare a road map." Now, it's not clear what that means.

A few hours ago, we saw military helicopters carrying flags over Tahrir Square, and there were cheers by the crowds below. Monday brought violent protests. Protesters ransacked the headquarters of the ruling party, demanding the president step down just a year and a day since Mohamed Morsi was sworn in.

Correspondent Reza Sayah joins us now. He is in Cairo, where we can see the protest and celebration fireworks behind you. Reza, the crowds say they want Morsi gone. The military say that the -- the government's got 48 hours to agree to the protesters' demands. Which demands are they talking about?

REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: It's not clear at this point. And Richard, it's important to stress that it's not clear what the next 48 hours are going to bring. However, there are strong signs that, remarkably, the 2011 Egyptian revolution is getting close to pushing the reset button and starting this democratic transition all over again, and that's because of the statement made by the head of the armed forces several hours ago.

In a nutshell, the head of the armed forces telling the government, the political factions, you have 48 hours to resolve this conflict and, quote, "meet the demands of the people," otherwise, and this is a quote, "we will put forth a road map to the future of this country and we will supervise its implementation, with the inclusion of all political factions and the youth." Here's a excerpt of what the military's statement was.

QUEST: Reza, as we look at live pictures from Cairo at Tahrir Square this evening, in a nutshell, what do the protesters want? Is it Morsi gone because of ineptitude and corruption? Is it because of an increasing -- Islamist view from the Brotherhood? What is it they want?

SAYAH: Here's what's important to point out: the opposition, the protesters we've seen over the past 24 hours are made up of a variety of factions who want a variety of things for the future of post-revolution Egypt.

However, they all want one thing immediately, seemingly, and that is the removal of Egyptian president Mohamed Morsi. They claim that President Morsi has hijacked the 2011 revolution and pushed aside their views. And their goal right now is to get him out of office.

And what's remarkable is the shifting of the teams and the alliances. A couple of years ago, in 2011, it was the Islamists teaming up with the liberals and the moderates to push out the Mubarak regime, the supporters of the military.

What you have now is the opposition -- the liberals, the moderates -- teaming up with supporters of the military, even supporters of the old Mubarak regime --

QUEST: All right, but --

SAYAH: -- and going against the Islamists and President Morsi.

QUEST: But here's the problem. As the economy goes into free fall -- there was an election, a bitter election, there was a constitutional procedure, which was resolved in a sort of messy way. You can't just keep kicking out elected governments just because suddenly things go wrong and you take to the streets. That would be Morsi's argument.

SAYAH: Exactly. You have restated President Morsi's argument and his Islamist supporters. They claim that they won the election democratically, fairly, and if you don't like him, let him finish out his term, and then democratically, we can have another election.

The problem is, the opposition says one year has been enough, and he's shown in that one year, according to the opposition, that he doesn't want to hear the opposing views and the liberals. Their concerns about the Islamist government down the road costing them their freedom and their liberties, and they're doing all they can, digging in, to push the Islamists and President Morsi aside.

QUEST: Reza, final question. You can say, "I don't know" or "I'm not answering you." It's an unfair question. Reza, will Morsi survive these protests? Politically.

SAYAH: It is becoming unlikelier and -- it is becoming unlikelier and unlikelier. And you have to look at his options. If he decides to stay put, not only is he going up against the opposition and these massive demonstrations, he'd be going up against the military after their statement.

The other option is reaching out to the opposition. That's unlikely, because the opposition has rejected his call to sit down. It would seem that the only viable option is to step aside or call for early elections. We'll see what happens in the next 48 hours, Richard.

QUEST: Reza Sayah, who is in Cairo for us tonight. And the pictures there, quite extraordinary, dramatic. And behind Reza, of course, you could see the fireworks.

And if you look at the -- as we're showing you now -- Tahrir Square, absolutely teeming. Anyone who's been there knows the size and scale of that place. And now, of course, teeming with people and more arriving all the time.

The protests in recent days being extremely violent at occasions with many sexual assaults and a few -- not more -- well, more than a few people having lost their lives in -- as the protesters have gone on the rampage. But that's the situation at the moment.

Now, Morsi's been in power for a year and a day. On several measures, Egypt's economy looks worse now than it did when he took power. Unemployment's soaring, along with food prices, and the public debt is out of control. Foreign tourism, investment, and the currency are all plummeting. And if you join me in the library, you will see exactly what I mean.

Let's start, of course, with the actual raw, basic economics and the potential of a lifeline, $4.8 billion IMF loan. They've been negotiating this loan for the best part of two years since Mubarak went. There's still no agreement on the terms, largely because the IMF is insisting some sort of sales tax, or at least a raise in taxes to help reduce deficit and, crucially, they want to see the phasing out of some food and fuel subsidies.

Much of the Egyptian economy is hidebound by subsidies, which cost 8 percent of GDP. Now, that is -- that 8 percent of GDP is three times more than they spend on education.

So, what are the subsidies? They're on fuel, particular on bread in Egypt, there's a very high subsidy on that, and other flour product. So subsidies -- fuel, bread, and the like -- very much a major economic sore in the country.

But of course, one of its largest industries, tourism. Now, this is the high point: 14.7 million. I remember the ministers telling me and the tourism execs telling me, delighted with that. They couldn't believer their luck when they got to nearly 15 million, generating $12 billion.

That, of course, is the first -- that's Mubarak -- goes down 9.8. Goes up again to 11.5, and now, of course, we're at 11.4.

What happens now? And remember, most of Egypt's tourism is down in -- it's down on the Red Sea. It's down in Sharm el-Sheikh, it's down in places like that. Not affected by this crisis in any shape, form, or description. But of course, in tourism, it's all about perception: 15 percent of hotel capacity in Cairo at the moment.

Coming up, QUEST MEANS BUSINESS, after the break: where he leads, they will follow. Mark Carney opens the door to a new era at the Bank of England, and we ask, has the bar been set too high for the governor?

(COMMERCIAL BREAK)

QUEST: The new governor of the Bank of England has already rewritten banking history, and he hasn't even lifted his governor's pen. He's the first foreigner at the helm in 2 -- in 300-year history, and it's the Canadian, of course, Mark Carney, who made his debut on Threadneedle Street.

By all accounts, a thrifty journey -- he was spotted taking the London Underground, the Tube, instead of his chauffeur-driven car. Let's see if he's still taking the subway in three weeks or four weeks' time.

The new day, the first day on the job, it's never easy, especially for a governor's to-do list. In Mark Carney's case, it is substantial. Join me at the super screen and we will delve into the governor's in-tray.

Now, what's he got to get to grips with? Well, first of all, the governor has to look at the economic growth question in the UK. And there, of course, whether there should be more quantitative easing, or even an extension in some shape or form.

What can he do to increase the recovery momentum, which just about gets going, and then sometimes seems to stall, and whether or not even with interest rates a quarter to a half percent, whether or not interest rates should be cut any further. There are some serious doubts about the efficacy of that.

Then, there's the question of policy. He has to manage the exit. The govern -- the Bank of England is holding more than 300 billion pounds worth -- 500 -- half a trillion dollars' worth of government bonds. They have to be sold off. So, it's the same exist strategy that Ben Bernanke has to think about.

He's got to decide forward guidance. The Fed has said 6.5 percent unemployment rate. Should the Bank of England be doing the same for its future policies?

And finally, manage inflation. Two percent inflation target, is that still a realistic target for the Bank of England?

Talking of banks, the governor has vast new powers, macro prudential is the phrase we use to describe what he can do. He's basically the regulator, now, for Britain's banking system. Some of those banks need more capital, and he needs to get them to encourage lending. We've already go the funding for lending scheme in the UK which, frankly, has been a bit of a damp squid.

The Bank of England itself. Mark Carney needs to choose his deputy governors. He needs to reform an aging, creaking structure that, frankly, is somewhat out-of-date, and he needs to change the culture. Less parlors, frock coats and bowing and scraping and more down-to-earth matters.

So, he's done all of this -- or a lot of it -- in Canada. He inherits the bank at one of the toughest times in the British economic history. Expectations are high. Many are hoping this man, Super Mark, will save the day.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: It's a bird! It's a plane! No, it's Super Mark!

(DRAMATIC MUSIC)

QUEST (voice-over): Central banker, superhero, potential savior of the British economy.

(DRAMATIC MUSIC)

QUEST: He hails from another world -- geographically and economically. And now, he must go where he's needed most.

MARK CARNEY, NEW GOVERNOR, BANK OF ENGLAND: I see this as a challenge, and it's -- I'm going to where the challenges are greatest.

QUEST: His resolve is steely. His path, though, fraught with dangers. A government intent on stringent cuts. The ongoing headache of the European crisis. And, of course, that primary mandate.

CARNEY: One of the issues in the United Kingdom is the speed with which inflation has returned to target. What's the optimal path of monetary policy in that environment?

QUEST: Finding the optimal path may require all his special powers: forward guidance is Super Mark's version of x-ray vision. And don't worry about superhuman speed. This mission is all about reaching escape velocity. Growth fast enough for recovery.

Even Super Mark must face his kryptonite: quantitative easing.

(SUSPENSEFUL MUSIC)

QUEST: Ending its grip will be painful, but sooner or later, he must find a way out --

(DRAMATIC MUSIC)

QUEST: -- if he has any chance of taking the British economy up, up, and away.

Richard Quest, CNN, London.

(END VIDEOTAPE)

QUEST: So, we know the challenges that Carney faces as he replaces Sir Mervyn King. Andrew Sentance is a former member of the bank's monetary policy committee and now senior economic advisor at PwC. Was Carney under pressure to lead early?

(BEGIN VIDEOTAPE)

ANDREW SENTANCE, SENIOR ECONOMIC ADVISOR, PWC: He will be seen to be leading, because he's going to be a new face and a new voice. Perhaps a new style of approach in the Bank of England.

But I think that all the hype around his arrival has perhaps built up expectations for something much more dramatic than is actually going to happen. I think if you look at what the economic data tells you, is that the UK doesn't need any more stimulus. Inflation is still above the target. And what we really need to do is just let this recovery come through.

QUEST: You say let this recovery come through. You and I have talked about this before. By its very nature of the systemic damage to the economy, it's slow, painfully slow coming through. But you're still sure it's going to come through.

SENTANCE: I think we have to adjust our horizons down about what sort of growth rate we can expect in the current environment. The UK economy's grown by less than 1.5 percent a year over this recovery on average. And that seems to be like the new normal growth rate.

And so, we shouldn't expect to see particularly strong growth. We obviously want to see some growth. And I think that's part of the challenge that Mark Carney has to grapple with. He has to accept that the economy will probably be slow-growing. Not because he hasn't pumped in enough money --

QUEST: But should he pump in more? Should he pump in more to get growth back to 2, 3 percent?

SENTANCE: In my view, we've done as much as we can with monetary policy. We've had interest rates at half a percent for over four years. We've pumped in 375 billion pounds. We've got a third of the government's debt sitting in the vaults of the Bank of England. If that's not enough stimulus, then I don't think you're going to do much more to get the economy going with those policies.

QUEST: We're here on the river. Is it likely the new governor's going to need one of these, or is it the governor that'll need the life belt or the economy?

SENTANCE: Well, I'm not expecting, actually, Mark Carney to change very much in the short term, because the economy's recovering, inflation's still above target. And all the expectation that this man is going to come in from Canada and change things dramatically are probably unrealistic.

I think his main task will be to orientate himself around the UK economy, to get his mind around a different economy from the one he's been managing for the last five years, and together with the rest of the monetary policy committee and the bank staff, to see -- to feel that he's got a grip on his job.

QUEST: So, really what you're saying, Andrew, is that never mind what Mr. Carney does over there at the bank, actually, it's what they do up the river at Westminster that perhaps is now more important.

SENTANCE: I think it's a period of stability, to be quite honest. We've -- we're having to get the deficit down. That's the job that Westminster and Whitehall have to focus on. We're trying to provide more support for business. And to get encouragement for smaller companies and investment and so on. And what we need is a relatively stable environment.

QUEST: He may be on the MPC one vote, but when it comes to running the bank, Mr. Governor is the boss. Would you -- we've already got our new chief operating officer. Would you expect to see more changes in the systems and structures?

SENTANCE3: I think there has to be change at the bank, because they've taken on so much extra responsibility. I think Mark Carney will need to delegate more to his deputy governors, for example.

I think we may also see a new communication style, with a younger bank governor who's more familiar with modern media, with the broadcast media, where Mervyn King was not very active with the broadcast media.

So, we'll notice differences in style and organization and approach. But in terms of the core policies of the Bank of England I'm not -- don't think Mark Carney is going to change very much there in the short term.

(END VIDEOTAPE)

QUEST: That's Andrew Sentance, former head of -- or former member of the MPC.

Portugal's finance minister is stepping down. Vitor Gaspar, the architect of the country's austerity plan, resigned on Monday. The government is under pressure to ease off its austerity drive. Portugal is struggling with radical budget reforms to unlock EU and IMF bailout loans.

Gaspar will be replaced by Portugal's treasury secretary, Maria Luis Albuquerque, as the new finance chief. She won't have an easy ride. Some of the challenges she'll face include what's expected to be a third year of recession, a jobless rate pushing towards 18 percent, and some tough criticism over austerity reforms and public protests.

Tonight's Currency Conundrum for you. The Croatian National Bank is bringing out special coins to celebrate the country's full membership of the EU. The currency's called a kuna. Our question for you is, what is a kuna? A weasel-like animal? A small dog? Or a feral fox? The answer later in the program.

The dollar is sliding against the euro and the pound on better-than- expected European manufacturing data. It's up against the yen. Those are the rates --

(RINGS BELL)

QUEST: -- and these are the breaks.

(COMMERCIAL BREAK)

QUEST: This morning at 6:00 AM, dozens of New Yorkers were queuing outside a Manhattan patisserie, as they have been doing so every morning for the past two months. They're waiting for the confectionery known as the cronut. Now, decadent, elusive, it's proving to be a very profitable combination.

(BEGIN VIDEOTAPE)

QUEST (voice-over): This is the tale of where the doughnut married the croissant and created the cronut, a fried pastry filled with cream that's literally selling lot hotcakes.

QUEST (on camera): Cronuts are not for the faint-hearted. Only the truly dedicated, who are prepared to stand outside and wait quite a long time -- how long have you been here?

UNIDENTIFIED MALE: An hour and a half.

QUEST: An hour and a half? You are barking mad.

(LAUGHTER)

QUEST: The line goes back further and further. Do you have any idea how long you're going to have to wait?

UNIDENTIFIED FEMALE: No, not at all, but we've come from Melbourne today, so we're hoping to get one.

QUEST: Why are you prepared to wait so long?

UNIDENTIFIED MALE: Because these things sound awesome.

QUEST (voice-over): Dominique Ansel is the pastry chef who created this confection. He wasn't out to start a trend. He just wanted to bake something new.

DOMINIQUE ANSEL, CRONUT CREATOR: It just like went viral right away.

QUEST: Why?

ANSEL: Just in one -- one blog. Because it's new, because it's fun, because it's unusual, because it's good

QUEST (voice-over): Besides being tasty --

UNIDENTIFIED MALE: Mm!

QUEST: -- the cronut is an example of pure economics. Only about 300 are made each day, and because customers are limited and can buy just two, demand overwhelms supply. So, a $5 cronut sells for $40 or more on the cronut black market.

QUEST (on camera): When you have a coveted cronut of your own, one feels compelled to share.

UNIDENTIFIED FEMALE: I am not ashamed to take half a cronut.

QUEST (voice-over): Painful as it was, I shared my cronut, too.

UNIDENTIFIED FEMALE: I can have it? Yes?

UNIDENTIFIED FEMALE: Go ahead.

QUEST: (on camera): Go on.

UNIDENTIFIED MALE: Thank you.

QUEST: Cronuts have gone, so has the queue. You can call this a New York fashion and fad or a trend. What you can't do is argue with success.

(END VIDEOTAPE)

QUEST: I promise you, the cronut ruined my diet. Ahead, it's QUEST MEANS BUSINESS, and we'll have France's president talking tough, and the EU vows to sweep out the bugs. What sort of bugs are we talking about? Little electronic ones that belong, apparently and allegedly to the United States. The row over the alleged spying ring, next on QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

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

At this hour, President Mohamed Morsi of Egypt is meeting the country's armed forces chief and the prime minister. This comes after the military gave the government leaders 48 hours to reach a consensus with the people. Protesters have been calling for the president to step down.

Edward Snowden, who leaked US intelligence secrets, has applies for asylum in Russia, according to the state news agency. A consular official says Snowden is getting help from WikiLeaks advisor Sarah Harrison. The same news agency also reports that the Russian government is denying the story.

The US is putting more resources into battling the blaze in the state of Arizona a day after the fire killed 19 members of an elite firefighting team. This was the nation's deadliest wildfire tragedy in 80 years.

Pakistan is mourning 47 people who were killed in two bomb blasts on Sunday. At least 90 people were injured, 17 died, in an attack on a military convoy near the northwestern city of Peshawar. The other 30 were killed by a suicide bombing in a Shiite Muslim district close to the city of Quetta.

Formula 1 bosses are playing down suggestions of a driver boycott at the British Grand Prix. It follows a series of tire explosions. Four cars suffered what were described as total catastrophic failures at Silverstone on Sunday.

(MUSIC PLAYING)

(END VIDEO CLIP)

QUEST: A spying row between the United States and Europe has taken a nasty turn. European Commission says it will sweep its offices for bugs following the revelations of alleged U.S. surveillance. The German news magazine "Der Spiegel" has claimed America's been spying on European leaders and diplomats. And the French President Francois Hollande warns the planned talks on a huge free trade deal might not start.

(BEGIN VIDEO CLIP)

FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): What will be the consequences? First, that this stops without any delay. I was going to say immediately. Then, that we cannot have any negotiations, transactions on any matter if we do not obtain these guarantees.

(END VIDEO CLIP)

QUEST: Barack Obama says once he has all the facts, he'll communicate with America's allies appropriately. He was speaking in Tanzania on Monday and the president's sought to play down the controversy.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Every intelligence service, not just ours, but every European intelligence service, every Asian intelligence service, wherever there's an intelligence service, here's one thing that they're going to be doing. They're going to be trying to understand the world better and what's going on in world capitals around the world.

From sources that aren't available through "The New York Times" or NBC News that they are seeking additional insight beyond what's available through open sources. They -- and if that weren't the case, then there would be no use for an intelligence service.

QUEST: (Inaudible) officials have said that if the bugging claims are true, it's reminiscent of the Cold War. If a post-transatlantic free trade deal could be on the line. CNN's Fred Pleitgen reports from the German capital, Berlin.

(BEGIN VIDEOTAPE)

FREDERIK PLEITGEN, CNN CORRESPONDENT: Some very strong reactions coming not only from European governments but from the European Union as well. So E.U. politicians came out and said that there was, quote, "barely a basis for trust that all of these things are, indeed, true." Some of them even questioning some (inaudible) agreements between the United States and the E.U. There were talks at the G8 summit about a possible transatlantic free trade agreement between the U.S. and the E.U.; there are some politicians who say how can we have an agreement like that if the two sides are spying on each other or if the United States is spying on European institutions? Of course, one of the things that the European officials are very angry about is that apparently the U.S. bugged European institutions at the U.N. in Washington, D.C. and in Belgium as well, monitoring the Internet and bugging the places for themselves. Now also some very strong reactions coming from the European countries, the strongest of which probably coming from the Germans, where the government spokesperson said earlier today that if these reports of massive wiretapping are true, this would be, quote, "absolutely unacceptable" and something that allies do not do to each other, certainly the Germans say that they want a full explanation. One of the things that's happening today is that there is going to be a phone conversation between the U.S. ambassador to Berlin. Philip Murphy and the German foreign ministry, so certainly some clarification there. The French government also taking a very strong stance, French President Francois Hollande coming out and saying that the U.S. needs to, quote, "stop spying immediately."

So some very strong reactions. The Europeans not so much angry at the scope of what's going on, but certainly at the scale, that there was so much that apparently was being listened to by the NSA -- Fred Pleitgen, CNN, Berlin.

(END VIDEOTAPE)

QUEST: So Tanzania's the final stop in President Obama's African visit. The country is one of the world's fastest growing economies and the U.S. is competing with China for trade there.

Nima Elbagir is in Tanzania, joins me now.

Good evening to you, Nima.

Look, the -- this battle with China, we saw it in the beginning of the trip; we heard about it in South Africa. But by the time you get to Tanzania, certainly the president is really going full throttle to put America back on the map.

NIMA ELBAGIR, CNN CORRESPONDENT: Absolutely, Richard, and we've seen it today with the announcement of not one but two new initiatives, one a trade Africa initiative that aims to raise U.S. exports from this region specifically by about 40 percent, another power Africa increasing the access of homes in -- on the continent, doubling the access, I should say, another 22 million homes on the grid, all of course, as you said, in the service of bridging that gap between China and the U.S. on this continent. But is it already too late? We meet just a few of the 8,000 Chinese businesses, Richard, that are already operating out of Tanzania. Take a look at this.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: (Inaudible).

ELBAGIR (voice-over): At the Tanzania China Promotion Center, they've started offering lessons in Mandarin. It's definitely hard going, but the class is keen to get the hang of it, keen to exploit any opportunities the Chinese investment flooding the country may bring.

UNIDENTIFIED MALE: I think it's a general feeling among Tanzanians that if we learn something from Chinese, particularly their language, maybe we might like life a little bit easier to do business with them especially.

ELBAGIR: Tanzania's strategic importance comes from its location here on the shores of the Indian Ocean, which makes it an outlet for many of its landlocked neighbors and also makes it an ideal jumping-off point for business looking to expand into a region that is seen to have huge untapped consumer growth potential.

ELBAGIR (voice-over): Tanzania itself has enormous potential with largely untapped agricultural and mineral resources, all good reasons why U.S. President Barack Obama is coming here to put forward the case for African consumers and their governments to look West rather than East. But is he already too late?

The popular perception of Chinese investment in Africa is that of large-scale infrastructure projects, roads, ports, football stadiums and the like. They do still do that but they also now offer a lot more.

According to the local arm of the China Africa Business Council, there are approximately 8,000 Chinese owned businesses operating in Tanzania, ranging all the way down to market kiosks. Across Africa, more and more Chinese citizens are flocking to seek their fortunes and they're bringing with them a competitive edge.

At a shop selling Chinese motorbikes, we meet the chairman of the local China Africa Business Council in fluent Tanzanian Swahili, he explains what he sees is the secret to their success.

HAO JIANGUO, TANZANIA CHINA AFRICA BUSINESS COUNCIL (through translator): Everyone knows that China is the factory of the world. All the big countries, including the United States, have their factories there. So I think the Chinese are succeeding because China is their home. So they're importing directly from China and they're able to sell them for a cheaper price.

ELBAGIR (voice-over): Effectively undercutting the competition. And more Chinese businesses, he says, are on their way.

HAO (through translator): Where there's an opportunity for business, the businessmen find it. Our motto is, "Follow the profit."

ELBAGIR (voice-over): In this second term tour of Africa, President Obama has gone on record, saying the U.S. isn't far behind China in Africa. The reality is three years ago China became the continent's largest individual trading partner, a ranking it's keen to maintain.

Earlier this year, just 10 days into his premiership, Chinese Premier Xi Jinping made Tanzania the first stop on his own three-nation Africa tour, signing 16 different trade, cultural and diplomatic accords in Tanzania alone.

Mr. Obama may be striking an optimistic note, but the U.S. clearly has quite a bit of catching up to do.

(END VIDEOTAPE)

ELBAGIR: All that being said, Richard, the president was met with an incredibly enthusiastic welcome, the warmest he's had this trip so far. Clearly all this talk of business and greater investment, that -- (inaudible) going to translate into greater opportunities on the ground and -- oh, sorry; go ahead, Richard.

QUEST: I just -- watching your fascinating report there, I just wondered, do the Tanzanians, do the Africans -- never mind the money that's being poured in. Do they express a preference as to who they would rather do business with?

ELBAGIR: I think that they are happy to welcome any and all comers to the table. You know, this competition can only be good for Africans. And the president made a very interesting point. You know, throughout this trip he's been talking about PEPFAR, the U.S. presidential emergency relief fund for HIV, all of the developments and the assists -- the development and the assistance that the U.S. has been pouring in here. But he made a point, which really rings true with a lot of Africans. He said, "We are doing this for us as much as we are doing this for you." Because if there's one thing the African consumer's very aware of right now it is their power, Richard. They know that they are a huge market. And they know that all these people that are coming calling, whether it's from China or from the U.S., that everybody is doing that because of their self- interest. So they are very educated; they're very aware and they're very welcoming for whoever's going to come in and spend their money.

QUEST: Nima, excellent reporting. Thank you for that report tonight on QUEST MEANS BUSINESS. Much appreciated.

Coming up next on QUEST MEANS BUSINESS, as we continue our nightly conversation on business and economics, Croatia is finally in the E.U. club and we'll take you to Zagreb.

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(COMMERCIAL BREAK)

(MUSIC PLAYING)

(BEGIN VIDEO CLIP)

QUEST (voice-over): Tonight's "Currency Conundrum" answer, what is the word "kuna," which is the Croatian currency, what does it mean? The answer is a weasel-like animal, more at a marten, to be precise. Croats used their furs as method of payment for many centuries ago. That will not work, paying with a krone -- well, a krone, maybe, but not a piece of fur. Won't work in Croatia as the country becomes the European Union's 28th member. It's the bloc's first addition since Bulgaria and then Romania joined in 2007. Now this is, of course, where Croatia is and you can see it's obviously bounded by other E.U. members, Hungary from the northeast and then Slovenia. Croatia's president played the "ode to Joy" to celebrate -- you know how that one goes. Croatia should feel right at home in the union, because like its partners or new partners, they all have high unemployment and most need money.

CNN's Nina dos Santos went to Zagreb and found some mixed views about joining this club.

(BEGIN VIDEOTAPE)

NINA DOS SANTOS, CNN HOST (voice-over): Croatia is ready and fired up for a new economic era.

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: Welcome to the European Union. (Speaking foreign language). Thank you.

DOS SANTOS (voice-over): Now an E.U. member, this former Balkan battleground hopes to be on the path to prosperity, though not everyone believes that journey will be easy.

UNIDENTIFIED MALE: I think we will have to become a developed our economy enough for such a big step.

UNIDENTIFIED MALE: I think it's a good thing because maybe come more jobs.

UNIDENTIFIED FEMALE: (Inaudible) community and the young can go abroad, studying.

DOS SANTOS (voice-over): Here in the Croatian capital, locals appear to have mixed opinions about what E.U. accession really means. On the one side, some say that it'll be good to boost trade, particularly in the tourism sector.

But on the other hand, a lot of people are opening questioning whether this country has come to the party 10 years too late.

DOS SANTOS (voice-over): Croatia is coming to E.U. at a time when the bloc is facing some of its biggest economic challenges. But the persistent debt crisis in the Eurozone and deep divisions between richer and poorer member states.

UNIDENTIFIED MALE: Croatia should be part of E.U. 10 years ago, definitely. (Inaudible) the times that were (inaudible).

UNIDENTIFIED MALE: And young people are also very pessimistic (inaudible).

UNIDENTIFIED MALE: I think it's not a good time to join the union, but we will see.

DOS SANTOS (voice-over): With 20 percent unemployment and more than four years of recession, many have had little reason for optimism. And now as this young nation on the Adriatic Sea takes its place in the E.U., there are some who take heart and hope better days lie ahead -- Nina dos Santos, CNN, Zagreb.

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QUEST: So to the markets and the markets in Europe started the second half of the year, had a bit of a rally. The euro was boosted by U.S. manufacturing report. It was also a report on Europe manufacturing, the U.K. had the best manufacturing numbers for two years. And that's why it's reflected in the FTSE up 1.5 percent.

Nokia shares were higher. It's taking control, full control of its profitable network, joint ventures from Zeeman's. And that was at a price lower than expected. Those are the markets.

Don't expect too much, he said before he looked, up 110, (inaudible) so far. But this is Monday and it's a short week in the U.S. because of Thanksgiving (sic). So expect difficulties on Thursday, Wednesday, Thursday, the markets will be closed, of course, for the Fourth. And as the week wears on, I would imagine that you may see some volatility but it's Independence Day, of course. What did I say? Did I say -- (inaudible). Of course, it's Independence Day, July the Fourth; Thanksgiving, of course, not till the autumn. Up 113 points, over 15,000, I'm guessing the week is going to be a little bit choppy particularly as July the Fourth trading slows things down.

After the break, nothing's too risque, please, for Facebook advertisers. Complaints from Marks & Spencer's (inaudible) the social network vows to keep their adverts away from controversial content. In a moment.

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QUEST: Facebook says it will stop advertisements appearing next to sexually graphic or violent content after public pressure from a number of companies to suspend campaigns. It began after a Sky advert promoting a Marks & Spencer's voucher was placed next to an advert for an adult web page. Both companies have put a halt to their advertising on Facebook along with Nissan and the British bank Nationwide. In response, Facebook announced that their new screening process would begin to help determine which pages will and will not feature advertisements.

The weapon in the southern United States, to say it is hot is a gross, well, understatement, dangerous is a stronger statement, downright lethal is perhaps the best way to describe it.

Jennifer Delgado is at the World Weather Center.

JENNIFER DELGADO, AMS METEOROLOGIST: Hi, there, Richard, you're right. It is just crazy hot across parts of the Southwest. Temperatures once again are going to soar in some of these locations into the upper 40s as well as into the lower 50s. Now look at some of these numbers from yesterday alone. In Death Valley, I'd say it's appropriately called Death Valley, temperature of 54 degrees. The all-time record there back in 1913 was 56.7. So we weren't very far off from that. For areas like Needles, California, as well as into Las Vegas, temperatures climbing into the upper 40s, 10 degrees above average, Richard. I remember last week, you were talking about how hot it was in parts of the northeast. This is nothing in comparison to what they're dealing with through parts of the Southwest. Now look at some of these warnings out there. Anywhere that you're seeing in a pink shading, that's our excessive heat warning. This is going to last, it looks like, through Tuesday and even in some of these locations, we are talking about this going even into Wednesday. And now the warm air is starting to spread more up towards the Pacific Northwest. But this big dome of high pressure is also going to send that heat from areas up towards north, including regions by Canada. But here's the forecast for temperature trend over the next several days. Look at this, Death Valley, you're still going to be in the lower 50s. Your average should be 45 degrees. And then Las Vegas, temperatures starting to get a little closer to where they should be. But still several degrees above average for this time of the year. So you're wondering what's happening there? Yes, we said this big ridge of high pressure but on the East Coast, what we're seeing is this dip and this stationary front. And this is going to be the fuel for some heavy rainfall. So this is going to be affecting, say, some of the fireworks they're going to be setting up for the Fourth of July, because you're going to have rain on the East Coast and it's dry; it's hot on the West Coast. So a lot of these are going to be canceled for the upcoming holiday.

Now across parts of Europe, we do have an area that we're watching for some severe storms. That's mainly going to be in areas far eastern Europe to the southeast, ridge of high pressure for areas like France as well as into Italy, but showers are returning to parts of the U.K., Richard, just in time to bring some rain for areas including London on Tuesday. We'll keep you dry, but on Wednesday into Thursday, it looks like the rain chance has returned. But temperatures return to more average. And of course that is going to have an effect for the people who are going to be attending Wimbledon. And then for the Tour de France, what's going to happen there? Beautiful weather there, thanks to that ridge. Temperatures in the lower to mid-20s. You can see some of those winds right around 10-15 kph. But the temperatures are going to be nice; no problems there at all, Richard. So enjoy this break from the heat because once you start to enjoy it, you know, something bad comes and happens and ruins it.

QUEST: You know, I've been bitten too many times, Jennifer.

DELGADO: You told (inaudible).

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QUEST: I still have an umbrella in my bag. I've got -- (inaudible).

DELGADO: (Inaudible) prepared.

QUEST: No, I'm cynical, skeptical, dubious, whatever you like.

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DELGADO: I'm just going to say 50-50 from now on. Then that'll make you (inaudible).

QUEST: Good. (Inaudible).

DELGADO: True weatherman style.

QUEST: Excellent. Thank you very much, on the one hand, on the other hand.

One story to bring you tonight, the Vatican has announced the resignation of its bank director and deputy director. It follows the arrest of a senior cleric with close ties to the bank, who was accused of plotting to smuggle $26 million from Italy to Switzerland. Now, of course, you'll be aware the Vatican Bank has a new president who was appointed by Pope Benedict before he left office. The new president will take over as the director of the bank. He will take over immediately in those key roles whilst they work out exactly what to do. A real cesspit of intrigue and questionable dubious dealings alleged at the Vatican Bank. The Vatican says the resignations are in the best interests of the bank and the Holy See.

I have a "Profitable Moment" on Mark Kearney and the first day on a new job after the break.

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QUEST: Tonight's "Profitable Moment," first of all, happy birthday, Canada. It is Canada Day. And today Canadian Mark Kearney was crowned governor of the Bank of England, probably making him into one of the most famous Canadians in Europe. Of course, we are all aware of the Canadian national anthem, "O Canada, we stand on guard for thee."

Well, the British are hoping Kearney will be standing on guard for the U.K. economy, and there's a lot to be done. His in tray is bulging. Kearney may be forgiven for wanting to board to that last flight back to Ottawa. Mr. Kearney could not have wished for a better first day in the job. He gains kudos for spurning a chauffeur in favor of the tube, the London Underground. There was good positive economic data on manufacturing and in a gorgeous summer day, Andy Murray is in the quarterfinals of Wimbledon. Oh, the nation will be with Kearney. I may jest, but he's experiencing some very high expectations, delivering of which could be unreasonable. So hold your horses. We shouldn't expect a miracle worker, a successful, steady recovery will be slow. If Kearney chanced to get his feet under the desk, we need to give Kearney time to make his mark.

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

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QUEST (voice-over): At this hour, President Mohammed Morsi of Egypt is meeting the country's Armed Forces chief and the prime minister. It comes after the military gave the government leaders 48 hours to reach a consensus with the people. Protesters have been calling for the president to step down.

Edward Snowden, who leaked U.S. intelligence secrets, has applied for asylum in Russia, according to the state news agency. The consular official says Snowden is getting help from WikiLeaks adviser Sarah (ph) Harrison. The same news agency reports that the Russian government is denying the very same story.

The U.S. is putting more resources into battling this blaze in the state of Arizona a day after the fire killed 19 members of an elite firefighting team. This was the nation's deadliest wildfire tragedy in 80 years.

The Vatican has announced the resignation of its bank's director and deputy director following the arrest of a senior cleric with close ties to the bank, who was accused of plotting to smuggle $26 million into Italy from Switzerland. The Vatican says the resignations are in the best interest of the institute and the Holy See.

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QUEST: You're up to date with the news headlines. Now to New York, and "AMANPOUR" is live.

END