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Quest Means Business

Britain's Tax Problem; International Tax Issues; Tax Avoiders; European Markets Up; Russian GDP Growth Only 1.2 Percent; Dow Lower; US Economy Inequality; Malaria Vaccine Advance; Dollar Up; Carlos Slim's KPN Offer; Kidnapping in Lebanon

Aired August 09, 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: Tax fugitives still on the run. Britain is forced to defend its record on catching the fraudsters.

It's Slim pickings. The world's richest man makes a move into Europe.

And Oprah Winfrey accuses a Swiss shop of snobbery after being told she wouldn't be able to afford a handbag.

I'm Richard Quest. It may be Friday, but I still mean business.

Good evening. Britain's controversial policy of publicly shaming its biggest alleged tax cheat, well, the policy is a year old today, and so far, only one of them has been caught. Undeterred by opposition criticism, it's a name and shame project that's been called a massive failure. Another ten mug shots have been added to the list.

So, here, according to HMRC, Her Majesty's Revenue and Customs, are the most wanted poster list. Among them are money launderers, company directors, and smugglers. They're accused of cheating the government and taxpayers -- or the UK taxpayers at least out of millions of pounds. Let's take a closer look at the list.

(RINGS BELL)

QUEST: HMRC has released this map showing where they are thought to be hiding, and as you can see, it spreads far and wide.

Taking a particular look at three of them, Michael George Voudouri, now he's pleaded guilty to money laundering related to VAT fraud, value added tax fraud. He never turned up for the sentencing. The crime cost the taxpayers $16 million in lost revenue. He's believed to be in northern Cyprus.

Anish Anand was the company director who didn't turn up to be sentenced for tax fraud that's said to have cost the taxpayers around $9 million. He's likely to be or said to be in the UK.

And Michael "Arthur" Fearon, charged with tax evasion on cigarettes in Ireland. Also wanted in connection with money laundering and driving up fences after a police chase across the border into Northern Ireland.

You get an idea of how the UK is moving forward to try and trap these so-called tax cheats, those are both sought and those who have pleaded guilty. Eurozone countries, they're also clamping down on tax evasion as one way to slash national deficits.

In Greece today, the country's Finance Ministry -- the Finance Ministry itself -- has been fined $200,000 after someone stole tax data and addresses relating to two thirds of the population. Athens has been trying to crack down on tax evasion by computerization to try and ensure it collects all the revenue it can.

Spain has a tax evasion scandal of its own, with the former People Party's treasurer Luis Barcenas facing trial for tax evasion, bribery, and other offenses.

And, of course, you will be well aware that the G20, the G8, in fact any group of summiteers who can possibly talk about the subject have all decided that stopping tax evasion, or at least appearing to make a lot of noise on the tax evasion issues is top priority.

Someone who can shed light on this most wanted list, Chas Roy- Chowdhury is global head of tax at the Association of Charge and Accountants, ACCA, and joins me now. We'll talk about the wider issue of tax in just a moment. First, the UK's tax cheat list. We'll, they've only got one. They brought out more names. Would you describe it as a total failure, or just a disappointing result?

CHAS ROY-CHOWDHURY, GLOBAL HEAD OF TAX, ACCA: I think there's been a lot of politics behind what's been announced today. One party's been saying it's a failure, the other party saying it's a step forward.

I think the reality is is that these people have been convicted, they've been given prison sentences, and then they've absconded. So, it's not really an HMRC failure or a political failure, it's actually a failure of the judicial system, which works in impartial way. These people have been able to get away even though they've committed crimes, they've been found guilty.

And so I think what we need to do is look at this as a transparency and not a tool that HMRC are using to try and track down these people. And it should --

QUEST: Right, but --

ROY-CHOWDHURY: -- be welcomed, it should be used in that light --

QUEST: There is, of course, a difference -- there is of course a difference between those who have pleaded guilty or didn't turn up for sentencing and generally putting a most wanted list out for those people. Where do you draw the line before you say these people are tax cheats?

ROY-CHOWDHURY: I think in this particular catch screen, the 30 or so that have been announced, 31, they're very clearly -- they've been found guilty but courts. They are tax cheats, they've cost millions of pounds in revenue.

But I think lower down, there may be a discrepancy -- because you were talking about the G20, the OECD work. We're talking about avoidance, which is difference from evasion. Evasion is totally unacceptable, it's illegal.

Avoidance is a difference ballgame, and I think there is sometimes a blurring, mainly by politicians, between avoidance and evasion, and we just need to be very careful we get the right -- put them in the right box.

And what we're talking about here is evasion and clamping down. And yes, further down the leak tab, if you like, there are much smaller fry which haven't been named and shamed and are being gone after by HMRC and other governments around the world.

QUEST: You see, on the issue of that, the UK chancellor, George Osbourne, described -- and the British prime minister -- have always talked -- frequently talked about aggressive avoidance, which they believe to be morally wrong. But you'll remember, more than on judge has said it's every man's duty to avoid paying tax. It's no man duty to evade paying it.

ROY-CHOWDHURY: I think there's a great sense where the politicians aren't letting the facts get in the way of a good headline, and clearly there is a lot of rhetoric, and there's no cliff edge between what's acceptable avoidance and what's aggressive avoidance.

And so, I think we need to take very great care where politicians are loosely talking about avoidance. Because clearly in the G8 and the G20 communiques that came out, they've been very careful.

They talk about evasion as being what they're after, and avoidance is what they're trying to sort out where companies largely are paying tax under the old regime. So, they have been very clear in that court, but in other areas they've been very loose in their talk.

QUEST: Finally, pull the strands together on this, because you have this list by HMRC. They've only managed to get one of them so far. They're making a great deal of noise about it. The US does the same. The -- it's politics. You alluded to it at the beginning, and what you're really saying is it stinks.

ROY-CHOWDHURY: I think what the situation is that HMRC have actually done their job. They got these people, they were found guilty, and then the absconded, so it's the judicial system.

If you have somebody who robs a bank, you wouldn't then let them out in the street so they can then disappear before they're sentenced and locked away. It just seems as though there's a kind of disconnect where tax evasion isn't given a high enough priority as it should do as a crime where people should be locked away when the commit it.

QUEST: Thanks you very much for joining us, Mr. Chowdhury joining us to put that into perspective.

ROY-CHOWDHURY: Thank you.

QUEST: The issue of tax avoidance versus evasion.

Now, London's FTSE led the way as far as European markets traded on the last day of the week, and it was a jolly green session. The jolly green giant. Well, maybe not giants, more smidgeons. FTSE was up, Xetra DAX was up.

Energy and commodity companies led the charge in the UK after exports were at a record in Q2. Encouragement from China, industrial output came in better than expected. In France, a surprise fall in IP, industrial production, down almost 1.5 percent compared to the previous month.

Staying on the question of economics, Russia may be in danger of falling into recession. GDP growth was much slower than expected in the last quarter, 1.2 percent compared to the same period. That's a year-on- year period last year, well below what analysts expected, which was around 2 percent. So, Russia's Q-on-Q growth has now slowed every quarter since the end of 2011.

To the markets that are open and doing business --

(RINGS BELL)

QUEST: -- as we come to the end of the week. A real breather having been taken. The Dow may have snapped a losing streak in previous sessions, but there's no question the sentiment hasn't changed. A succession of down sessions, which is continuing today, with the Dow off 71, nearly half a percent, 14,500.

When we come back, Barack Obama's economic road show continues in Washington. Jeffrey Sachs on the president's plan to fight inequality in America. And yet, at the same time, the US seems to be the economy that's growing the best.

(COMMERCIAL BREAK)

QUEST: President Obama is about to make an official breakthrough in his quest to help the middle class. He's due to sign a bill designed to keep interest rates down for students' loans, and both sides of Congress supported the bill.

The White House says it's part of the president's focus on tackling inequality. That theme's going to play into the news conference, which we're expecting in around 40 minutes from now. He'll also be talking about the NSA, the National Security Agency. We'll bring that speech to you when it happens.

Jeffrey Sachs is the director of Columbia University's Earth Institute. He joins me now. Jeffrey, I'm looking at the numbers, and yes there's a slowdown in the US economy sort of. The growth numbers are not as strong as they could have been. But it's by far and away still the better performer.

JEFFREY SACHS, DIRECTOR, EARTH INSTITUTE, COLUMBIA UNIVERSITY: Well, it depends about who in the economy one is thinking about. At the bottom, life is very tough. Unemployment is very high and chronically so. It's gotten a lot worse. Jobs did not come back for those with a high school degree or less. All of the employment increase has gone to those with a university degree or higher.

Inequality has remained very, very high. We really have two economies here. At the top, pretty good. And for the bottom half of the US, not so good. In fact, pretty difficult.

QUEST: With that in mind and bearing in mind, of course, unemployment is starting to come down, what needs to be done? Because Congress clearly -- clearly -- cannot agree on a way forward. Hence the sequestration that is now underway. We've still got the deficit limits coming along. So what do you want them to do?

SACHS: What I want them to do is not on the table at all. I want them to significantly increase taxes on the rich, who have just walked away with a complete bonanza. I want them to crack down on tax havens. I want them to tax the foreign incomes of companies that should be taxed but are given free rein, basically, to be transferred to tax-free havens.

In other words, I want the rich, who have done extraordinarily well, Richard, over the last 25 years to start paying their fair share.

QUEST: OK.

SACHS: But of course, that's completely outside of the strategy of both parties. A little bit for the Democrats. It's anathema to the Republican side --

(CROSSTALK)

QUEST: But are you --

SACHS: -- and by the way --

QUEST: Are you prepared -- I mean, you're right. We stand more chance of getting snow in summer than you do of getting some of those policies --

SACHS: You've got it.

QUEST: -- accepted. But are you, Jeffrey, prepared to accept there has to be entitlement reform and there has to be a reform of the social network on the other side of the equation?

SACHS: The most entitled people in our society are the Wall Street bosses who commit crimes and act with impunity. I would put as second on the list the big oil companies who wreck our climate, and so we don't even have a chance of snow in winter, Richard, much less a chance of snow in the summer.

The third most entitled people are the ones at the top of our health care industry, and we are now spending nearly 20 percent of our national income on health, about twice what every other normal country spends.

And so, the fact of the matter is the Americans in the middle class and certainly among the poor are living in a system that is really rigged for those at the top. And to start with the entitlements, so-called, of the poor is not the right place to start. I want to start with entitlements reform --

QUEST: Right. OK --

SACHS: -- of those at the very top.

QUEST: I need to --

SACHS: But why is it, for instance, that JPMorgan is about to plead guilty to yet another --

QUEST: OK --

SACHS: -- offense, but the CEO remains? To my mind, this is the kind of entitlement that we need to end.

QUEST: I need to quickly talk to you about the latest research on malaria, which --

SACHS: Great.

QUEST: -- is -- which of course is showing such promise, this idea of injecting very low strains of malaria to create an immunity. Are you -- is this it? Is this the one that might actually knock it on the head once and for all?

SACHS: This is an extraordinary thing. I actually happened to be on an unpaid scientific advisory committee of this very project. Can you imagine their actually using as the vaccine the parasite itself, but it's been rendered harmless and then it's injected.

QUEST: Right.

SACHS: It still has a long way to go, but this is a very exciting paper in "Science" magazine. It is a kind of breakthrough. The concept has been known for half a century, but this is the first time that an actual vaccine has been demonstrated to be effective. But mind you, that's on a very small number of people.

QUEST: All right.

SACHS: So, the next step of this is to really put it in trial.

QUEST: Jeffrey, good to talk to you, as always. Jeffrey Sachs, Professor Jeffrey Sachs joining me, making sense on the equality question - - or the inequality question, I suspect is how Jeffrey would prefer to do it. Have a good weekend, sir.

Now, tonight's Currency Conundrum. You may remember the story of Walter Samaszko, Jr. The 69-year-old lived quietly here, in Carson, Nevada, until his death last year. When cleaners arrived to clear out his modest house, they found boxes and boxes of gold bullion worth about $6 million. He didn't have a will, and no immediate family.

Our question is, who inherited the bullion? Remember, about $6 million worth. Was it a charity, a cousin, or a neighbor? Oh, I love that one. No will, no obviously relatives, who got the money?

As for tonight's currencies, the dollar is up against the pound and the euro, down against the yen. These are the rates --

(RINGS BELL)

QUEST: -- now for the break.

(COMMERCIAL BREAK)

QUEST: The Mexican billionaire Carlos Slim wants to buy full control of the Dutch telecom company KPN. Slim's America Movil launched a $9.6 billion bid for the 70 percent of the stake that he doesn't already own. Nick Parker is our correspondent in Mexico City and joins me now from there. Why does he want it? Hasn't he got enough telecoms?

NICK PARKER, CNN INTERNATIONAL CORRESPONDENT: He certainly does have a lot of telecoms, Richard. America Movil is one of the -- well, it's the largest telecoms firm in Latin America, a huge monolithic company with something like 320 million subscribers across the continent. An absolute giant of a company here, and a huge force on the Mexican stock exchange for sure.

Right now, its shares are actually trading down about 6 percent. Analysts from banking -- the bank, Scotia Bank, are pointing out that actually the overall deal, once America Movil assumes the debt, is probably going to be something like $22 billion. So, that certainly could trigger a downgrade in America Movil's own stock.

Regarding why America Movil is going for this, in a filing that they sent this morning, they're offering a premium of 35 percent on each share, which analysts say should be around about enough to tempt at least some of the KPN shareholders into selling that stock.

And they've also pointed out that they've been trying to diversify geographically for some time now. Last year, Carlos Slim originally bought that just under 30 percent of KPN stock --

QUEST: Right.

PARKER: -- in a bid to try and diversify his economy and to create some synergy. As he said to me, actually, during an interview I did with him last year.

(BEGIN VIDEO CLIP)

CARLOS SLIM, MEXICAN BILLIONAIRE: We think that we can have synergy both for us, not only looking like financial investment, but also like a commercial alliance with the companies. We think that it's very important, the presence they have in the market they are.

And we think that -- we think always in a vision of long play -- longterm, and we're looking very positive in the medium and longterm.

PARKER: In Europe, you see your prospect of growth in the medium is positive?

SLIM: Right. I think it's a problem that they are living, that they are going to be -- to correct and to have a different situation in a few years.

(END VIDEO CLIP)

PARKER: Richard, one thorny issue that analysts are talking about is that KPN last month agreed to spin off its E-Plus business to a bitter rival of America Movil, Telefonica. Certainly now, if this deal goes through, Carlos Slim will have more than -- at least more than 50 percent of the voting rights and could potentially block that deal. Richard?

QUEST: Now, look at what's happening in Mexico with telecoms at the moment, and for so long, of course, he has been Mr. Telecom, Mexico. He has been the backbone in that sense.

PARKER: Yes, absolutely. Ever since he won the monopoly, which it was at the time, he took over the state telecoms company in the 1990s, he's really been able to dominate, and his market share is huge. In fixed lines, about 80 percent. In wireless, it's 70 percent.

So, when the Mexican president, Enrique Pena Nieto, came to office, he set about doing one of his key landmark reforms, which tried to reform the telecoms industry and lower Carlos Slim's market share in a bid to try and inject greater competition and lower some of the cell phone rates that people have to pay here.

He managed to get that through. What he's done now is he's implementing a watchdog to try and ensure that market share doesn't get much above 50 percent. And just today, they were naming a few of the people to that watchdog. And he's also paved the way for foreign investment. So, we'll certainly have to see how that develops in the coming year, Richard.

QUEST: Nick Parker joining us from Mexico City this evening. After the break, two airline pilots kidnapped in Beirut by an armed gang. Other members of the crew managed to reach safety. You'll hear the latest from Lebanon after the break, QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

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

The US government is taking action to protect its employees in Pakistan in the wake of another security threat. It is pulling out all non-essential staff from the consulate in Lahore and sending them to Islamabad.

In the next half hour, President Barack Obama will outline plans for greater transparency in the United States surveillance programs. A White House official told CNN the plans will aim to restore public trust in government surveillance. We will, of course, bring you that news conference and the speech live when it happens.

Farmers in northwestern France are continuing their campaign to smash thousands of eggs. It's a protest over low prices and overproduction. The group has promised to smash 100,000 eggs in public every day until the government meets its demands. Poultry farmers are complaining that over production means they are not receiving enough money.

In Beirut, there is still no sign of the two airline pilots who were kidnapped at gunpoint. Lebanon state news agency says at least two vehicles intercepted a bus carrying Turkish Airlines workers in the early hours of Friday.

The Foreign Ministry says other members of the crew made it safely to their hotel and are now heading back home. From Beirut, our correspondent Mohammed Jamjoom is following events.

(BEGIN VIDEOTAPE)

MOHAMMED JAMJOOM, CNN INTERNATIONAL CORRESPONDENT: Heightened tensions in Lebanon after the abduction of two Turkish citizens earlier Friday morning. The kidnappings happened around 3:00 AM local time in Beirut. These were two pilots for Turkish Airways.

They had arrived to Beirut's Rafic Hariri Airport, and they were in their car with other crew members going down Cocodi Bridge, which is on a highway close to the airport here, as they were assailed by gunmen who stopped that bus that they were on, entered the bus, and kidnapped the two pilots, the pilot and the copilot.

Now, the Lebanese interior minister, Marwan Charbel, says that an investigation has been launched. He called Turkey's ambassador to Lebanon to discuss what had happened, to assure the Turks that an investigation would be carried out.

The concern here right now is that this is a result of the fallout over Syria's civil war, and many people here believe that this happened as a result of the kidnapping of Lebanese Shiite pilgrims that happened in Syria last year as those pilgrims were returning from Iran, going through Syria to come back into Lebanon.

Now, NNA, which is the state media agency here in Lebanon, issued a statement in which they said there is a group that has claimed responsibility for these kidnappings on Friday.

They say that the kidnappers have said that they want to make sure that these Lebanese Shiite pilgrims are returned from Syria before the captain and the copilot will be released here in Lebanon. Turkey has issues a travel warning for all its citizens, warning them against traveling to Lebanon.

Mohammed Jamjoom, CNN, Beirut.

(END VIDEOTAPE)

QUEST: There's been another international setback for the UK supermarket group Tesco. As it struggles to crack the market in China, now it's demanding or seeking help. After the break, I'll tell you why. (MUSIC PLAYING)

(COMMERCIAL BREAK)

(MUSIC PLAYING)

(BEGIN VIDEO CLIP)

QUEST (voice-over): The answer to tonight's "Currency Conundrum," who inherited Walter Samaszko Jr.'s gold bullion fortune? Was it the charity, the cousin or the neighbor?

It was the cousin. He did not have a will or any immediate family, so the bullion -- around $6 million dollars worth -- went to his only surviving cousin, a substitute teacher in California, who had to be tracked down, using old records inside the wealthy man's home.

(END VIDEO CLIP)

QUEST: Now talking of wealthy men, wealthy women, Oprah Winfrey is one of the richest women on Earth. And now she says a Swiss shop assistant refused to show her an expensive handbag. The billionaire television star says that's down to racism.

The shop manager says it was all a misunderstanding. Our correspondent is Diana Magnay, and she's in Zurich.

(BEGIN VIDEOTAPE)

DIANA MAGNAY, CNN CORRESPONDENT: Have you ever had the feeling when you walk into a shop that the shop assistant doesn't think you're good enough?

Well, I know that I have. But you don't expect that to happen to one of the richest and most famous women on Earth. That's what Oprah Winfrey said happened to her on a recent shopping trip in Zurich.

OPRAH WINFREY, ACTRESS: I go into a store -- which shall remain unnamed -- and I say to the woman, "Excuse me; may I see that bag right above your head?"

And she says to me, "No, it's too expensive."

And I said, "No, no, no, no, see, the black one, the one that's folded over the."

And she said, "No, no, no, you don't want this one. You want to see this one because that one will cost too much and you will not be able to afford that."

And I said, well, no, I really did want to see that one."

And she refused to get it. She refused to get it.

MAGNAY: The bag she was looking at was Tom Ford's Jennifer bag, named after Jennifer Aniston, who's a fan of the design, retailing in the store in question for 35,000 francs. That's $38,000, pretty pricey, you might say, but it is crocodile skin.

Oprah claims racism, but the store manager says that this was a 200 percent misunderstanding and had nothing to do with racism. Her shop assistant felt a little embarrassed about the price, she says, so she simply suggested alternatives in other leathers, which weren't quite as expensive.

The store manager says in her shop the customer is king, but when the Queen of Talk leaves unhappy, well, the world gets to know about it -- Diana Magnay, CNN, Berlin.

(END VIDEOTAPE)

QUEST: Now the Swiss store's agency has released a statement in response. And they basically say Switzerland tourism is very sorry, deeply sorry -- "deeply" is the word that they're using -- to learn about the experience that Ms. Winfrey had in Switzerland, apologized to her that her feelings were hurt.

(Inaudible) that again.

"We would like to assure Ms. Winfrey, like any visitor to Switzerland, she is welcome with open arms."

Open arms, and that'll be an open wallet.

Tesco appears to be abandoning a 10-year bid to crack the lucrative Chinese market alone. It's Britain's biggest retailer and it's in talks to merge the China operations with one of that country's biggest businesses. This year Tesco's already admitted defeat in its attempt to expand into the United States.

Is China the next? As Jim Boulden explains.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN CORRESPONDENT: -- China, but it's discussing merging its operations with state-run China Resources Enterprise, or CRE, to create what it calls China's leading multi-format retailer.

But Tesco says it'll only have a 20 percent stake in the new business if the deal is done. Tesco is a household name throughout Britain. Its expansion beyond food into clothing and electronics crammed into massive out of town stores made it popular and profitable for decades.

Under long-term former CEO Carey Leahy (ph), the brand expanded overseas to counter its biggest rivals, Walmart and French-based Carrefour. But when Philip Clark took the helm in March 2011, he began to unwind the Leahy (ph) legacy.

Tesco is now pulling out of its U.S. West Coast brand Fresh & Easy. The total cost to Tesco for its American misadventure: around $1.6 billion.

Of course like many other brands in Europe, Tesco saw massive potential overseas, but in April, the world's third biggest retailer wrote down its international operations to the tune of $3.5 billion. That included its failed U.S. operation. Now the moves in China meet the company's current strategy, concentrating on refreshing the brand here at home -- Jim Boulden, CNN, London.

(END VIDEOTAPE)

QUEST: An English Premier League club has split (inaudible) down the middle over plans to rename the team for branding reasons.

Hull City AFC says it's scrapping the second part of its name and will now be known locally as Hull City Tigers. The club's owners told the local newspaper that AFC was redundant (inaudible) was irrelevant and common.

So from now on, it will simply be known as Hull Tigers when it's marketed abroad. An official supporters' group shows 52 percent of fans are in favor of the change in the name; sports teams face all kinds of pressures to rebrand themselves.

In American football, "Slate" magazine said on Wednesday it will no longer refer to the Washington Redskins by their nickname because it's seen as racially insensitive to Native Americans. A Washington counsel has asked the team to rename itself.

Another dispute in the U.S. Capitol shows you can't win them all. The NBA's Washington Bullets changed their name in '97 because the owner was worried about gun crime. They became the Washington Wizards, only for civil rights groups to say that had connotations to the Ku Klux Klan.

After the break, it's Germany's answer to Hollywood. The world's oldest movie studio is still living and breathing success. We'll take a tour.

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(COMMERCIAL BREAK)

QUEST: Now Hollywood may have some of the world's biggest film studios, but not the oldest. That title belongs to Babelsberg in what used to be East Germany. Studio Babelsberg has everything it needed to produce world-class films, but financing regulations may be holding it back.

Isa Soares explains.

(BEGIN VIDEOTAPE)

ISA SOARES, CNN CORRESPONDENT (voice-over): It was under these studio lights that Marlene Dietrich shot to fame in "Blue Angel." It was here, too, that "Metropolis" was built. Its glory days, it seems, are far from over. Today, this hall, one of 16, continues to come to life, playing host to major productions such as "The Three Musketeers" and recently "Hansel and Gretel."

Outside, too, there's more than just bricks and mortar.

CHARLIE WOEBCKEN, PRESIDENT AND CEO, STUDIO BABELSBERG: This back lot was built originally in 1998 for a German film called "Sonnenallee," and it has then been expanded in several steps over different films.

SOARES: Such as?

WOEBCKEN: Such as "The Pianist," "Beyond the Sea," so the street served as part of Manhattan and also of Warsaw in World War II. And we also redressed it for "Inglourious Basterds," for example.

SOARES (voice-over): Redressing these streets requires craftsmanship and expertise, for which Babelsberg is renowned. Here, workers toil away at everything from tiling to carpentry, plastering to 3D designs. Then there are the rows upon rows of costumes and props.

(MUSIC PLAYING)

SOARES: This complex stretches over 39 acres. It houses more than a million props. Despite its size, though, it only has 80 permanent workers. During big productions, the numbers swell; up to 2,500 workers are brought in. They'll become the masters of the logistics. But they face far bigger challenges.

WOEBCKEN: We are basically not able to really attract huge films to come to Germany or to Babelsberg. This is due to the limitations that we have in our subsidy system and on the medium size films, they are quite often independently financed. And this is exactly the area where it still is difficult.

SOARES (voice-over): Set up in 2007, the German Federal Film Fund offers a total 70 million euros in grants a year to film producers. As part of the deal, at least 25 percent of the total production cost must be spent in Germany. But there's a 10 million euro cap on the loan, a hurdle for many big budget films.

Not so, says the minister of culture.

BERND NEUMANN, GERMANY'S MINISTER FOR CULTURE AND THE MEDIA (through translator): You have to bear in mind the primary aim is not to attract foreign productions but to provide support for German films, German stories and German actors, because we don't want to have only films starring Hollywood.

For this reason, we are spending such a lot of money, of course, we also want to attract international productions. But this is not our main goal. And since resources are limited, I can't really tell you whether we can go far beyond the 10 million euros that can be provided for a film.

SOARES (voice-over): And in an election year, this may be the only storyline possible -- Isa Soares, CNN, Potsdam, Germany.

(END VIDEOTAPE)

QUEST: Which is a very interesting strategy if you bear in mind the difference in the way, for example, the U.K. through its tax code or, indeed, Canada through its tax code uses it to attract those extremely high-priced and valuable overseas Hollywood movies.

Isa Soares reporting there.

Now, let's stay with movies. It is a Friday; the weekend is almost upon us, a high anticipated sci-fi thriller, the return of a teen hero and an animated high flyer all open in movie theaters this weekend.

Unusually for us on a Friday, but bearing in mind it's the summer and in the summer we all like to do maybe go see something different, this is what you can have a look at.

(BEGIN VIDEOTAPE)

(MUSIC PLAYING)

UNIDENTIFIED MALE (voice-over): Greek gods, fast fliers and a planet in peril, new at the movies this weekend.

UNIDENTIFIED MALE: I need to get to a (inaudible).

UNIDENTIFIED MALE (voice-over): A bold Matt Damon stars in the gritty sci-fi thriller, "Elysium," opening in more than a dozen countries, including Israel, Hong Kong and Sweden.

UNIDENTIFIED FEMALE: Tell me those aren't sharks.

UNIDENTIFIED MALE: Those aren't sharks.

UNIDENTIFIED MALE (voice-over): Mythology and magic mix in "Percy Jackson: Sea of Monsters," the family friendly fantasy plays in Mexico, the Philippines and a handful of other international markets.

UNIDENTIFIED MALE: Ah, for flying out loud.

MALVEAUX (voice-over): First it was "Cars," now Disney's "Planes" is flying into theaters, making its world debut in North America.

Also this week, "The Smurfs 2" expands globally to the UAE and across much of the Middle East, parts of Africa and Asia.

And "The Lone Ranger" was labeled a flop in the U.S., but now audiences in the U.K., France and Germany can see for themselves as the Western rides into 10 more countries worldwide. I'm Christian Zingo (ph) and that's your new movie minute.

(END VIDEOTAPE)

QUEST: Jenny Harrison at the World Weather Center, some very -- some -- I do beg your pardon -- Jenny will be with us in just a moment. Let's take a look at the markets and, ah, no, oh, you are there.

(CROSSTALK)

JENNY HARRISON, CNN METEOROLOGIST: You're all ahead of yourself these days, aren't you? Look at the time and look at it -- you know, you're (inaudible).

QUEST: You know me, Ms. Harrison, always ahead of meself and better to be there than behind.

HARRISON: Yes, indeed.

QUEST: So to speak.

HARRISON: You were saying something about the weather. I'm sorry; I thought I'd interrupted you. You were saying (inaudible)?

QUEST: Any interruption from you I consider to be a delight to the conversation.

HARRISON: Yes, I'm sure you do.

(CROSSTALK)

QUEST: Well, the weather, very peculiar, I think peculiar is the word I would use to describe it, peculiar.

HARRISON: Peculiar, OK. Well, let's talk about the peculiar weather where you are, up there in New York, because I'm afraid to say that it's not been too good, is it? We've had these very, very slow moving thunderstorms, particularly across more central regions in the United States. Look at this. This is since Monday. Over 250 millimeters. It has, of course, led to flooding. Some of it flash floods. So very dangerous as well.

And in the last 36 hours, 203 millimeters in Branson, Missouri, 137 millimeters in Hollister. One of our reporters is out there right now, just following that story because there is more rain to come. This is the last 12 hours. But look at this, Richard. It is working its way through Washington, New York, up into New England and that is pretty much the case over the next couple of days.

Now the rest of Friday afternoon, I have to warn you that there is some delays likely coming into and out of JFK, LaGuardia as well, because of thunderstorms. So we're seeing very, very slow moving storms. This is really why we've had the flooding, because the storms coming through have been moving so very, very slowly.

So it's the same story elsewhere. You can see Pittsburgh as well, Cleveland, we've got some heavy rain and thunderstorms. There's the low, working its way throughout the weekend. We've got these scattered storms across the southeast. And more of that heavy rain. So not surprisingly, particularly those areas already where we've picked 250 mm more flood warnings are in place over the next couple of days.

Widespread across the U.S., really, the rain, we've got some very heavy rain, more of it building in across the Southeast. As I say, that's where we'll see those scattered thunderstorms and then temperatures, 28 in New York for Saturday, 29 in Atlanta. And a hot 37 in Dallas.

Now let's move across to Europe because we've got more storms here. They are working their way gradually across more central and eastern areas, things beginning to quieten down a bit across the west.

So that leaves some pretty good news. And of course, temperatures have also come down in the last few days. And they'll continue to do that across central Europe, too, cooling back to average, so not cold, just back to where they should be. So feeling not like pleasant summer, not hot, unbearable summer, a few more warnings in place Friday into Saturday, where we could see more ferocious thunderstorms.

And then look at these temperatures, in particular, look at Warsaw, 27 this Friday. The average is 23 but this time yesterday all the high on Thursday, it was 37 degrees. That is what happens when these storms come through. So look at some of these temperatures over the next few days. We'll see Vienna still in the 20s, but you can see how much again the temperature has come down.

Similar story in Belgrade although it does really sort of stay in the low 30s. And I want to show this picture as well, Richard. I know you like the water. I think you've even done some surfing in your day as well.

This is actually all the surfers descending on Newquay, which is in Cornwall in England. This is for the annual Boardmasters Festival. It lasts for five days and surfers come, professional surfers, actually, from all around the globe to compete. And I have to say the weather looks pretty marvelous for that.

You need some pretty good winds, of course, but things have certainly calmed down. The rain continues to work its way westwards across central Europe, one or two showers out across the west, and then temperatures. London 23, 31 in Rome and a warm 36 in Madrid, Richard.

QUEST: Had you ever actually tried surfing?

HARRISON: I haven't actually ever tried surfing, no.

QUEST: I did it. I did it once off the coast of Australia many years ago. The surfboard was so big.

HARRISON: Is it? And heavy. Big and heavy.

QUEST: No, no, no, because it had one of these big surfboards. It was so big my grandmother could have surfed on it, and she was in her 80s at the time. It was vast. And I still could not get -- it is the most -- by the time you've paddled your way out and then you sort of caught the one wave that you might just be able to -- and then you heave yourself up. Well, you can imagine, really, with my lumbago.

HARRISON: Now I like to watch. I am in awe of those that can do it, particularly those professional surfers. It's incredible.

QUEST: (Inaudible) and someday I will be -- someday I will regale you with my stories of snowboarding, which is a similarly unpleasant and painful experience.

All right. Jenny, have a lovely weekend.

HARRISON: You, too.

QUEST: Jenny Harrison there.

We talked about many things under the course of this week's program.

One of the big issues we've talked about is the issue of Internet trolling and how indeed bullying on the Internet for -- all came to a head, of course, following the suicide of a young teenage girl in the U.K. @RichardQuest is where you and I can continue to discuss that over the weekend and any of the other issues that we've been talking about in the course of QUEST MEANS BUSINESS.

Back on the tweeting, I don't know why for some reason, best known to myself, I gave it -- anyway, a recap to the European markets. The London FTSE led the way. It was green arrows across the board.

Energy and commodity companies led the charge and that was after U.K. exports hit a record in Q2. Also some encouragement from China. Industrial output came in better than expected. The news not so bright in France, surprise fall in industrial production in June, down almost 1.5 percent compared to the previous month.

The New York Stock Exchange has just one hour and 10 minutes to trade. And I think that's where it's going to end the day, right in the heart of the dog days of summer. In fact, you've only got to be walking around New York and you see the tourists here, but nobody else seems to be.

So for a lot of company owners, going public is an appealing option. We're also seeing some big names doing the opposite. BlackBerry is reportedly thinking about trying to take itself private, according to Reuters sources chief executive Thorsten Heins, and bearing in mind what they've done is warming to the idea.

Bosses reportedly think the BlackBerry has a better shot of turning itself 'round without the pressure of having to please Wall Street. The share price is up almost 7 percent -- 7.5 percent pushing the $10 a share mark for the sale. It hasn't been that sort of level for some time.

So President Barack Obama is due to give a press conference. He's going to be reviewing the U.S. economy. And most crucially at the White House, he will also be talking about the NSA, the National Security Agency. Now we join CNN, our sister network, in the United States, around the world, around the clock, this is CNN.

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