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Quest Means Business
Crisis in Ukraine; Russian Economy Under Pressure; Dow Almost Hit Record High; Senate Panel Grills GM CEO; Seventh Day of Gains for European Markets; Chile Earthquake; Amazon's Box
Aired April 02, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Oh, it is so -- ever so close towards an all- time high on the Dow. We'll have to wait until the final numbers tick over. Hit the hammer as we close the trading day for Wednesday, April the 2nd.
The Russian government doesn't care about investors. Tonight, the view of an exiled economist on exactly what it means for Russia, Crimea, and the EU.
Also, major damage in Chile after an 8.2 magnitude earthquake.
And high hopes in high definition. Amazon enters the TV streaming device market.
When we look at the market and how it traded, it was close to a record.
I'm Richard Quest. I mean business.
Good evening. The Dow Jones Industrials just off a tad from the all- time high. The S&P has --
(RINGS BELL)
QUEST: -- closed at a record. We also had an intra-day record for the S&P. In about eight or nine minutes from now, we'll be talking to Alison Kosik at the New York Stock Exchange, and she'll wrap up the day for you and put it into context.
We start, though, tonight, we've heard some of the gravest warnings yet from both military and economic leaders on the crisis in Ukraine. With Russian troops gathered in their thousands at Ukraine's border, the head of the NATO says more sanctions will follow if those troops advance. Anders Fogh Rasmussen says further intervention from Russia would be "disastrous" for its relations with the West.
(BEGIN VIDEO CLIP)
ANDERS FOGH RASMUSSEN, SECRETARY-GENERAL, NATO: This is, really, a matter of grave concern. If Russia were to intervene further in Ukraine, I wouldn't hesitate to call it an historic mistake.
(END VIDEO CLIP)
QUEST: Meanwhile, in an interview with Christiane Amanpour, NATO's military chief said the situation could literally change overnight.
(BEGIN VIDEO CLIP)
PHILIP BREEDLOVE, GENERAL, NATO SUPREME ALLIED COMMANDER, EUROPE: It's my opinion that they could move within 12 hours of a go, so essentially, they could move right away if given the go.
(END VIDEO CLIP)
QUEST: Economists, politicians, and central bankers have all issued warnings today about the economic impact of the crisis. And if you join me at the super screen, you'll see exactly just what I mean. In Brussels, John Kerry says energy supplies should not be used to bring pressure to bear on another country.
In the meetings that took place, Gazprom announced big hikes in Ukraine's gas prices. Kerry said energy should not be used as an instrument of aggression.
(BEGIN VIDEO CLIP)
JOHN KERRY, US SECRETARY OF STATE: No nation should use energy to stymie a people's aspirations. It should not be used as a weapon.
(END VIDEO CLIP)
QUEST: Short and sweet, but energy shouldn't be used as a weapon. Now, from Europe across to the United States, in Washington, Christine Lagarde warned economic impacts of Ukraine and the crisis could spill over. She told an audience of students geopolitical problems worldwide could undermine what she already accepts is sub-par growth.
(BEGIN VIDEO CLIP)
CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: But there are many other countries around the world, and I'm sure that you studied those, and that you focused on some of them, which are nests of geopolitical tensions, which have economic consequences, which result into domestic instability in those countries and potential consequences outside as well.
(END VIDEO CLIP)
QUEST: From Washington to Brussels and so to Russia and to Moscow, where the central bank is putting off plans to cut interest rates despite the poor outlook for growth. Normally you would cut rates to stimulate growth. But rate cuts -- of course, the Bank of Russia governor says no rate cuts until June at the earliest.
Growth is to miss forecast and targets below one percent. But the bank needs to keep rates high not only to protect the ruble, but also to stem capital flight.
So, put all this together and put the whole picture into one, and Sergei Guriev is a Russian economist and former board member of Sberbank. He left Russia in fear for his freedom after he criticized the prison sentence given to Mikhail Khodorkovsky.
So I asked him where now were -- if you look at he bilateral trades between Russia and the EU and the US, where were the weaknesses in the Russia economy.
(BEGIN VIDEOTAPE)
SERGEI GURIEV, VISITING PROFESSOR OF ECONOMICS, SCIENCES PO: I think the economic situation was not good even before Crimea, but what has happened in Crimea and the threat of further sanctions scared a lot of investors.
And this is where the main weakness is, the capital outflow, the lack of investment, both of Russian importing. And that, of course, what slows down economic growth. And already now, the projection for the first half of 2014 is negative rate, which is something that Russia has not seen unless there was a global crisis. So, this is a completely new challenge.
QUEST: As the sanctions ratchet up, which hurts most? Sanctions -- obviously the people who are named, it might not hurt them at all. But then you have got the banks, the credit cards. How serious are the threats to the Russian banking system?
GURIEV: Well, this is a very important step US has undertaken. Because by naming a bank which is not the largest bank in Russia, the US has so far not hurt the Russian banking system dramatically. But it also indicated it can go for other banks as well. It created a precedent that made all the Russia banks nervous.
And if the US actually goes for bigger Russian banks, that may actually have a systemic effect. And of course, oil and gas embargo would be much more catastrophic for the Russian economy.
But sanctions like this, sanctions that have already happened with regard to the bank Rossiya, these sanctions, if they roll out to the bigger banks, may actually have a dramatic effect on Russian economy. And this is what makes everybody in the Russian financial system very nervous.
QUEST: Investors have always known that there was a risk premium to investing in Russia. There was always an element of uncertainty, a question of the maverick nature.
But now, investors found themselves in an impossible situation. They want to take part in the good gains and potential growth of a thriving emerging market, but the uncertainty and lack of predictability means you get your fingers burned.
GURIEV: Richard, you are completely right. If you go back, say, half a year, investors already priced in a huge country risk. If you look at the stock prices of Russian companies, they would trade at 40 or 50 percent discount to other emerging markets.
But now, it's a completely new universe. If you try to think about another country invading a neighbor and taking the part of its territory, this is something which has not happened since Saddam Hussein's annexation of Kuwait.
And that is some different level. It's not just an unpredictable emerging market. This is a completely new reality where investors completely don't understand what to expect. And for example, the sanctions on just one Russian bank are enough to scare away a lot of investors and sit down and think about whether they want to do business in a country which behaves in this way.
So, in that sense, I think, it's a new level of unpredictability. Whatever happens with the next rounds of sanctions, whatever happens with Crimea, the main damage to the Russian economy, unfortunately, has been done.
By moving into Crimea, Russian government showed that it really doesn't care about investors, it really doesn't care about predictability and rationality. And in that sense, it has shaken investors' confidence in the Russian economy.
(END VIDEOTAPE)
QUEST: Investors' confidence in Russia may have been affected, but if you take a look at how the Dow ended the session -- let me get the old pen out -- you'll see we were down at the beginning, but then we had a very strong session. Down a little bit over lunch.
And then it roared up -- it roared up to an all-time high, but wasn't able to sustain -- we didn't get an intra-day high. What we did, we went above the closing high -- complicated stuff -- but it wasn't able to sustain that when the closing bell rang. It should have been 76 for an all-time closing high. Alison Kosik is at the New York Stock Exchange, joins me now. What did you do wrong, Ms. Kosik?
(LAUGHTER)
QUEST: We were up there at 88, and then all of a sudden, in the last 10, 15 minutes, you pushed a button or something and it all turned off.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: It was a real nail-biter to the end. But you know what got investors to buy in today, to propel stocks higher? Hope. I think hope really was the factor today, even though April is historically a strong month for stocks.
It was optimism that the March jobs report that comes out on Friday, that optimism that it's going to be a better-than-expected report. Because the thinking now is that we're past that brutally cold weather that kind of slowed down the economy during that time. Because we've already seen indications of promise, including improvement in personal spending, consumer confidence --
QUEST: Right.
KOSIK: -- manufacturing, construction spending. So the hope is, the jobs report will look better, too. You're seeing that hope on the board today, Richard.
QUEST: And I learned for the first time that the average gain in April is something like 1.7 percent for the month, and April is actually the best, supposedly, the best month for stocks.
KOSIK: Who knew? April showers bring more dollars?
(LAUGHTER)
KOSIK: I don't know.
QUEST: Good one!
(LAUGHTER)
QUEST: Alison Kosik at the New York Stock Exchange. Just shows you - -
KOSIK: Sure.
QUEST: -- there's always a fact to be learned. Alison, thank you.
Now, General Motors shares ended the day at more than 1 percent. The chief executive, Mary Barra, spent another day answering questions about the company's records and listening to senators bash GM.
(BEGIN VIDEO CLIP)
SEN. ED MARKEY (D), MASSACHUSETTS: I am very troubled that you are not willing to commit to ending this culture of secrecy at General Motors.
MARY BARRA, CEO, GENERAL MOTORS: I didn't say that.
MARKEY: Yes, you have. OK. And I know this, because I have tried year after year for more than ten years to have legislation passed that would require the disclosure of all of this information, and it was the automobile industry that killed my legislation year after year.
(END VIDEO CLIP)
QUEST: I get the feeling, if you listen to that particular exchange, there was an element of point-scoring and point-settling going on.
The National Highway Traffic Safety Administration, the safety organization and regulator, is under fire as well. The Department of Transportation in the United States says it will look into whether the watchdog has done enough to investigate defects in cars built by GM and Toyota.
On the other side of the Atlantic, it was the seventh day of gains for European markets. Good gains in some, like, for example, in Zurich, up more than half a percent. Eking out gains for others, like the FTSE. Possibility of new stimulus from the ECB, we're going to find out that on Thursday.
There was also a drop in producer prices in the eurozone, which all is adding to this fear of deflation. You'll remember, we've already had eurozone inflation of just half of one percent, and it -- Europe and the eurozone is now well and truly into what Mario Draghi has called the danger zone.
In a moment, a powerful earthquake rocks South America. Hundreds of thousands of people are forced to leave homes in Chile. The details and the damage after the break.
(COMMERCIAL BREAK)
QUEST: At least six people have died after a violent earthquake struck South America. It was an 8.2 magnitude quake. It struck off the coast of Chile and it triggered landslides and a tsunami. More than 900,000 people have moved to safety. Look at these pictures. They really tell the story better than any words can.
According to the Chilean Office of National Emergency, all of these people have been evacuated. There were scenes of panic in Peru and elsewhere as the quake rattled shelves in shops.
And there have been widespread power outages, damage to roads, and aftershocks. About 300 prisoners took advantage of the chaos and escaped in the port city of Iquique, which also a small tsunami.
The epicenter of the quake was off the northern coast. Join me over in the super screen again and you'll see. So, this is where the epicenter took place. More than 2,500 homes suffered structural damages in this part of the country. The military have been dispatched to maintain public safety.
But if you take a look at the main economic areas, these are the main copper mining areas, and they escaped serious damage. However, production was disrupted when some workers were moved to safety. BHP Billiton, Glencore, and Anglo American have interests there. The jolt sent copper prices to a three-month high. It goes to show how vulnerable one of Chile's key industries is to Mother Nature.
Now, Rolando Santos of CNN Chile joins me now. Rolando, put into perspective -- obviously we know there have been more serious quakes, but with hindsight now, looking at this one, give us your perspective.
ROLANDO SANTOS, CNN CHILE SENIOR VICE PRESIDENT: Well, I think, and not minimizing in any way the six people who died, the reality is we got away relatively unscathed. I was here for the earthquake in 2010 where literally huge blocks were on fire and buildings all over, from Santiago all the way down to Concepcion, which is about five hours away from us, were destroyed.
This one pretty much stayed in the area. As you said, the copper mining industry virtually was not affected. And we've double-checked and triple-checked on that.
The other history that you should be aware of, that particular area of Chile, in 1877, there was an 8.2 magnitude earthquake that produced a tsunami wave that was 80 feet tall.
So, when you put all that into perspective, the reality is, there are buildings down, we don't know how many yet because they're still evaluating it. There were a few injuries that have been reported by the government, as I said, six deaths. But when you put all that into perspective, I think the country got away fairly easily --
QUEST: Right.
SANTOS: -- with what happened. The other thing, Richard, in talking about the production for that area, other than copper, there isn't very much that comes out of that particular region. And if the copper mines are telling us and the copper industry is telling us that they did OK, then pretty much from an impact -- economic impact, we did OK.
QUEST: On the issue -- there's always aftershocks. The aftershocks have been serious but not terrible.
SANTOS: Sure.
QUEST: What I want to understand now is, I know predicting earthquakes is just about impossible, but is there a feeling that there's another one waiting to hit?
SANTOS: There's always a feeling that another one is waiting to hit. There is more shaking, rattling, and rolling in this country than anywhere else that I've lived, and I've lived in California and other places.
Just to give you an idea, the big one was supposed to happen now because that region started shaking on March 16th, I believe, with a 7.6 earthquake. And so, there's always the threat of the big one, and no one seems to be able to really get a handle on it.
If you talk -- think about the big one, there was on in Santiago in 1960 that was a 9.5 that killed 5,000 people. Now, in theory, that was the big one. And yet, we've had others that don't quite come up to that particular level.
So, I'm not sure how you define a big one. I think yesterday's was a big one by sheer number, and I think that we got away without a lot of injury and damage just because --
QUEST: Right.
SANTOS: -- that's the way Mother Nature and things turn out.
QUEST: Now, to viewers who may not be as familiar with Santiago, with Chile, with the region, has there been a noticeable movement in construction to build for earthquakes in the future?
SANTOS: Absolutely.
QUEST: So that if one happens, God forbid, if one happens, we're not going to find a developing country where everything fall down like a pancake.
SANTOS: Absolutely. And that happened after the 1960 quake. Basically, one of the reasons that there wasn't more damage back in 2010 and there wasn't more damage to the major cities, the two major cities in this case, which is Iquique and Arica, is because they have a tremendously sophisticated system of construction for earthquake resistance. In fact, most people from around the world come here --
QUEST: Right.
SANTOS: -- because it really has been the testing ground for that kind of construction.
QUEST: Good to talk to you, Rolando. Thank you for joining us tonight from Chile. We appreciate it, from our sister station, CNN Chile.
Now, as if we don't have enough accessories for our TVs, Amazon is bringing out yet another one. We'll see what makes this one so special. We'll be after the break.
(COMMERCIAL BREAK)
QUEST: Amazon wants to take over your television. It's come up with this. It is called the Amazon Fire TV, and the idea is to stream shows over the web.
Now, there's nothing new in that basic concept. However, Amazon says it's looked at the shortcomings in rival systems and has overcome them.
(LAUGHTER)
QUEST: The rival systems that we have here, of course, is the Apple version, the Roku version, who was on this program recently, and the Google Chrome version. So, the -- well, anyway, the Chrome one.
(LAUGHTER)
QUEST: We have a variety of them. But now we have the Fire. Brian Stelter is the anchor of CNN's "Reliable Sources," he joins me now.
BRIAN STELTER, CNN ANCHOR, "RELIABLE SOURCES": Good to see you.
QUEST: The significance --
STELTER: Look at all these.
QUEST: The significance of Amazon is what?
STELTER: Well, Amazon says they've built a better mousetrap. They said they've read all the user reviews of these other products on Amazon.com, they figured out what aren't -- what customers don't like about them, and has made a better one.
We will see if people like this one better or not, but it does have some cook different features. It's got a voice recognition feature, so I can talk into my remote control, tell it what I want to watch --
(CROSSTALK)
QUEST: Oh, that's a gimmick! It's a gimmick! Gimmick, gimmick, gimmick!
STELTER: Ah! Well, it's maybe better than having to navigate the TV this way.
QUEST: Right.
STELTER: And they've also got a lot of games on this device, so it's a little bit like an Xbox or a PlayStation, or a Nintendo Wii. Not as powerful, but kind of --
(CROSSTALK)
QUEST: All right. We'll talk about the international distribution in a moment.
STELTER: Right.
QUEST: The leader is Roku at the moment, isn't it?
STELTER: Yes, right now, Roku was one of the first.
QUEST: Right.
STELTER: So they've had that advantage.
QUEST: Right. Two weeks ago, I asked the chief exec of Roku, Anthony Wood, I asked him if he was worried about the competition.
(BEGIN VIDEO CLIP)
ANTHONY WOOD, CEO, ROKU: Last Christmas, the Google Chromecast launched. Our sales were up, revenue was up 70 percent year-over-year. It's just a huge, growing business. It's the way people are going to watch TV in the future. And when these larger companies decide they want to try and enter the space, it increases -- it just shows how large the market is and how popular streaming has become.
(END VIDEO CLIP)
QUEST: So, it is the future, they are the leaders, these are the biggest internationally, I understand, if you look at geographical distribution, this is -- the Apple by far and away is --
STELTER: Yes, the Apple brand name helps with that. People trust it.
QUEST: Right, but it accesses via iTunes. Now, Amazon is only going to be available in the US to start with. I imagine you would expect this to be global before long.
STELTER: I would expect so as well. They need to be. They want to be, they need to be. They know they need to grow overseas.
All of these are trying to solve a problem we shouldn't have, which is we have a hard time right now connecting our internet connections to our television sets. Cable companies, satellite companies, haven't done a good job of doing that in our living rooms.
That's why all these devices have proliferated as a result. And Amazon knows it can be in this business also. But I wonder if these will become obsolete in the future if the cable and satellite guys get good at it.
QUEST: I was about to say, all they have to do -- all the cable companies, the Time-Warner cable, the companies --
STELTER: Yes, Comcast. Yes.
QUEST: Comcast. All they basically have to do is suddenly say we will now give you live streaming to your computer.
STELTER: Right and to make it easy to access Netflix and Hulu and all these other apps --
(CROSSTALK)
QUEST: Well, why wouldn't they do that?
STELTER: -- through their boxes. Well, they say they're working on it. These companies turned out to be very quick --
QUEST: Well, I want it, these people can do it, why -- now, come on. You're not going to --
STELTER: These incumbents tend to take longer. They need these disruptive forces in order to get encouraged to get it done. On the other hand, if these cable and satellite companies take too much time, both in the US and overseas, then these devices could replace them.
If I can get all the TV I want to watch through my Amazon box or my Google, then maybe I don't need my cable or satellite company, and that's the risk going forward.
QUEST: Finally, any time Amazon does anything, any competitor should be seriously worried, right or wrong?
STELTER: I think that's right. The Kindle has been a disruptive force in the book business. They have talked about so many other -- there are so many other categories where Amazon has come in and changed how people consume, both how they get packages shipped, how they read books, how they watch television perhaps. Amazon is one of the few companies --
QUEST: Right.
STELTER: -- that can really disrupt in a meaningful way.
QUEST: We'll have to put them all to the test --
(LAUGHTER)
QUEST: -- which means I shall take them back to my office. Good to see you, many thanks, indeed.
STELTER: Thank you.
QUEST: Coming up next on QUEST MEANS BUSINESS, we'll speak to the woman spearheading Coke's biggest marketing campaign in its history. We'll ask her about more challenging side of sponsoring a World Cup in Brazil. This is QUEST MEANS BUSINESS, good evening.
(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.
At least six people are dead after an earthquake off the coast of Chile. Almost a million people have been forced to leave their homes in the north of the country. Landslides and power cuts have been widely reported.
US secretary of state John Kerry has canceled a planned trip to the West Bank after the Palestinian Authority initiated steps to join up to 15 UN agencies. Palestinians have deferred this action for the past year to give US-brokered talks a chance. But Israel suspended the final expected release of Palestinian prisoners this past weekend, effectively halting any progress in the talks.
The Malaysian prime minister Najib Razak has arrived in Perth in Australia. Mr. Razak will visit air cruiser Pearce Air Base and get an update on the search for the missing Malaysia Flight 370. He's expected to meet the Australian prime minister, Tony Abbott, on Thursday. He'll then leave to go to Vietnam.
Turkey's highest court says a government order blocking access to Twitter is unconstitutional. The court ruled that a ban imposed last month violates freedom of expression and individual rights. It demanded that Twitter be restored. The social media site remains blocked in Turkey.
The French president's former partner, Segolene Royal, is returning to national politics. Royal has been appointed to the second-most senior position in the French cabinet, leading the Department for Ecology, Sustainable Development, and Energy. She served the same post in 1992 and 93.
The 2014 World Cup is just over two months away and Coca-Cola is beginning its latest marketing campaign and its biggest marketing campaign ever. The company's a long-time sponsor of the tournament, and for Brazil 2014, it's bringing the "One World One Game." It's a film that invites you to join what Coke is calling The World's Cup.
(BEGIN VIDEOCLIP)
(Male Speaking Spanish)
(Female Speaking Spanish)
(Male Speaking Spanish)
(END VIDEOCLIP)
QUEST: We're joined now by the senior vice president of Integrated Marketing Communication at Coca-Cola. She's Wendy Clark. She of course being in Atlanta headquarters of CNN as well headquarters of Coca-Cola, and so she's at the CNN Center. Good afternoon -- good evening to you, Wendy.
WENDY CLARK, SENIOR VP, INTEGRATED MARKETING, COCA-COLA: Good afternoon and good evening to you.
QUEST: OK, first question -- let's get to brass tacks. How much is this campaign costing? I'm just curious to know how much -- you don't have to give it to me to the last dollar, but tell me roughly are we tens of millions, hundreds of millions that Coke spends on the World's Cup.
CLARK: Your figures are correct. I would say tens and hundreds of millions would be correct. It's the single largest activation that we do, and it -- we -- has measurable impact to our business, so it's quite worth that investment.
QUEST: Everything I'd ever heard about sponsorship has always proven and shown that the amount you spend on the event, you have to spend as much again on the marketing and all the attending thing. So this is huge for you.
CLARK: This is huge for us, but it's usually important to our fans, to our core target -- millennials, their number one passion point is sports. And with that it's football. And so this is the beautiful game and it's our opportunity to really take the beautiful game and take it to those around the world who find it to be the most, you know, compelling, interesting sport and who will put their lives on hold for a month in June and July to watch.
QUEST: Well, yes, I've never understood how can branding something -- how can having Coca-Cola, how can doing all that -- how does it sell you one more drink?
CLARK: Well I mean I think that that's at the root -- that the roots of marketing is tapping into passion points of our consumers. Also, I think what we've done with this campaign by bringing to life these remote audiences and being able to show how football impacts communities around the world --
QUEST: Right.
CLARK: -- truly of a value space. I mean, that has an incredible, measurable impact --
QUEST: Right.
CLARK: -- millennials. They are picking companies and brands based on those brand's values, and we're bringing that (inaudible).
QUEST: Interesting, interesting, Wendy. You've used the word millennials twice.
CLARK: Yes.
QUEST: You haven't talked about old fogeys like me. Look -- there is a risk involved, isn't there? Hosting the World Cup in Brazil has its challenges. Let me go through some of them. On Saturday, a construction worker was killed in a fall at the Arena Corinthians in Sao Paulo, the seventh person to die in an accident during the building of the World Cup Stadium. There've been repeated protests over mounting public costs. Complaints range from the rise in bus prices to low living standards and the controversial clearing of the favelas. In the last week the Brazilian armies occupied one of the largest favelas in Rio for what they call an indefinite amount of time. Now, as a sponsor of an event, you walk this very narrow line. You have to recognize that something nasty could happen or there could be a less favorable element, but you have to maintain true to your sponsorship goal. How do you do that?
CLARK: Well, I think that here are two points that you're making there, and that the first point for us is that the world wants to hear this message of inclusion now more than ever. And what we are doing is inviting the uninvited. So this isn't for the elite, for the celebrities, the high profile -- this for everyone. This is for the seven billion people in the world and we're -- through our actions -- taking the trophy around the world to 90 countries, 92,000 miles that --
QUEST: Right.
CLARK: -- trophy will have traveled. We are demonstrating that it is a message of inclusion. We have been the longest-standing partner of FIFA since 1978, and we have seen the measurable impact FIFA makes in these host cities. The legacy that it leaves behind is a tremendously impactful and important, and that's what we're focused on.
QUEST: And, obviously the AP story morning -- the softening of the campaign if things turn nasty or if you suddenly have to change direction PDQ -- pretty darn quick.
CLARK: Well, I think what you're referencing is real time marketing, and real time marketing is absolutely critical. We launched this campaign last night. We've seen it taken up now in 77 countries. It started trending in 32 of those 77 countries. And that's what we're doing. We're listening to the real time conversation on our brands on this activation and that we listen to consumers' feedback and that we adjust accordingly.
QUEST: Good to see you, Wendy. Thank you very much. Good to see you, thank you for joining us tonight.
CLARK: Thank you.
QUEST: Now, how about this for a tale. Barcelona will have to go more than an entire year without buying new players after getting a 40- month transfer ban from FIFA. It's all to do with them supposedly breaking the rules and signing young footballers. Wells Force (ph) Lara Baldesarra is at the CNN Center and joins me. How -- explain to me, right -- they supposedly signed up young players that were underage. How on earth does a major club with a gazillion lawyers , legal counsel, contracts and nobody thinks to ask how old are you and can I see proof (RINGS BELL)?
LARA BALDESARRA, SPORTS ANCHOR AND CORRESPONDENT FOR CNN: Richard, I'm sorry I lost the end of your question there, but I will tell you this. It's really hard to defend Barcelona at this point. There's really no other way to say it. They absolutely knew that they were in breach of FIFA's rules, but at the same time, FIFA's rule -- it's meant to be in place to protect children, to protect these kids from being exploited. But bringing them to Barcelona and Barcelona's youth system -- La Masia is really saving these kids. It's giving these kids a better life. It's providing for them things that in a lot of cases they wouldn't have been able to get in the many countries that they come from, especially the underdeveloped and developing countries. At La Masia, the youth club, they're provided with education, they're provided with care, they're providing with training, they're provided with all of --
QUEST: All right.
BALDESARRA: -- tool base needs for a good life.
QUEST: So, but how does Barcelona justify legally or otherwise -- how did they come up with an excuse that basically said no -- I mean, it's mind-boggling that anybody can even think that if you're underage, you're underage, and that's the end of the debate.
BALDESARRA: Yes, certainly, but at the same time, these are underage players that you want to groom, that you want to protect. In Barcelona they've just recently -- just in the past few minutes -- they released a statement indicating a number of points -- 14 points to be exact -- in which they think that -- that they -- should be let off basically, and FIFA will end up deciding that when they hear their appeal. But amongst those points, they even say what I just said -- that these regulations that FIFA has are in place to protect kids, not to -- not necessary for La Masia and Barcelona's system which is something that FIFA's praised -- that everybody has praised. This is a system that everybody --
QUEST: Right.
BALDESARRA: -- wants to copy. It's a $10 million operating cost per year. So, at the end of the day, you know, maybe they went against the rules. Is this the ban that they should receive for it? Probably not, it seems a little harsh, but I think that it's about time that FIFA clears up some of these rules, especially when it comes to situations like this.
QUEST: All right, Lara, as many viewers on this program know, what I know about football can be written on a postage stamp, and you'd still have time to write the address. But instead tell me will a one-year ban have a seriously detrimental effect on Barcelona?
BALDESARRA: Crippling. It will be a crippling effect on Barcelona. This allows -- this means that for two transfer periods, they will not be allowed to improve their squad. And in football, you need to be able to improve y your squad year after year and constantly be working towards making it better. However, I will tell you one thing. It doesn't have a crippling effect on one player. Barcelona's number one keeper -- and just bear with me for a second. Victor Valdes, OK? This is a guy that wanted more money and he decided that he wasn't going to get it so he'd leave Barcelona at the end of the year. Well, now they're short a keeper. They're not going to be able to bring in another keeper in an upcoming transfer window.
QUEST: (LAUGHER).
BALDESARRA: So what does that mean for him? Little bit of this, I'd say, Richard.
QUEST: Ah, you've just got to know that moment to start your negotiation.
(LAUGHTER)
QUEST: Good one.
BALDESARRA: You certainly do.
QUEST: Where's management when you need them? All right, many thanks, Lara, good to see you. Thank you very much indeed. Ah, that's lovely. Right, now still to come, grounded in Germany and the west of the world, the Lufthansa pilot strike. Hundreds of thousands of people, hundreds of planes -- we'll tell you more (RINGS BELL) after the break.
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QUEST: And there is a sight you don't want to see as a business traveler -- canceled, cancel, canceled, canceled and onwards. This was the departure board at Frankfurt Airport earlier. Hundreds of canceled flights. Ninety percent of Lufthansa and German wings pilots are on strike. It's not just a one-dayer, it's a three-day strike. And that's the view from the airport. And this was the scene in the air an hour or so ago. This is obviously from fly radar 24 over in Germany here. And if you look and you can see -- obviously there is still traffic around -- (inaudible) around Frankfurt around here. But bearing in mind that is Lufthansa's main hub, one would have expected to see far more planes than that. Those were planes on the ground and of course other carriers. You'd expect it to be tightly packed -- after all, it's just coming up to half past 9 at night. And you compare that to London over there, you'll see just the amount of traffic to there. Jim Boulden is in Frankfurt. He went to explore how the walkouts effected one of the world's busiest airports.
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JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: This is terminal one here at Frankfurt International Airport. This is Lufthansa check-in. Normally it would be bustling with passengers checking in to flights, but of course because of the three-day strike, Lufthansa says more than 400,000 passengers are being inconvenienced because they've had to cancel 3,800 flights. There have been a smattering of flights going, some of them are with Star Alliance. So many people have booked hotels in the region. I can tell you it's very hard indeed to get a hotel room here in Frankfurt Airport.
But one thing I will say is that because of the few flights that have been taking off, I have seen a flight to Brussels, Doha and Jetta. During day one of the strike, hundreds of pilots have marched from the airport to here, Lufthansa's regional headquarters at Frankfurt Airport. The pilot's union and Lufthansa both tell me there are no talks currently planned to try to resolve the issue.
JOERG HANDWERG, LUFTHANSA PILOT'S UNION: We don't think that it's a good way for the whole German society to break down all the social security contracts we have here just to compete with China over their Gulf Airlines. We will never be able to compete with them because the differences in taxation and social security is so big that it's just impossible.
BARBARA SCHAEDLER, LUFTHANSA GROUP: I think we're well-prepared, information is running well, we've sent approximately 200,000 SMSs to our customers, and -- but -- it's nevertheless not a good day for Lufthansa. I really hope that we're going to negotiate in everything and negotiate with a space on compromises and good will, and I hope that we're going to see this from both sides soon.
BOULDEN: Now, Lufthansa vows that these check-in desks will be busy once again come Saturday when the airline planes to resume full operations. But unless both sides return to the bargaining table and strike a deal, it's likely that Lufthansa's pilots could strike once again. Jim Boulden, CNN Frankfurt Airport.
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QUEST: And that'll be two more days of misery for passengers flying Lufthansa and of course there are ripple effects right the way around the world if you bear in mind that the 17/18 gateways that Lufthansa has in the United States and those gateways in Asia. Jenny Harrison's at the World Weather Center this evening for us, as always doing sterling duty. Ms. Harrison.
JENNY HARRISON, WEATHER ANCHOR FOR CNN INTERNATIONAL: Oh, thank you very much, Mr. Quest. I have as usual some sort of mixed weather news. Not all good, not all bad. But let me start with the satellite in Europe, because it's been looking like this now for the last few days. And by that, I mean all of this weather piling in from the south and the southwest and really blanketing much of Western Europe. But not just the last few hours. In fact, let's go back to the beginning of the week because it has been that same patter with the systems coming in from the south and pushing not only the cloud and the rain, but also the Sahara dust across areas of western Europe, and in particular, into the U.K.
High pressure across central regions, they're preventing new systems from making much headway, and this is why we have got images like this. Believe it or not, down there and amongst all the smog, is London. It is getting to very dangerous levels right now across the U.K., and this breaks it down. You've maybe seen this already, but there's all the cloud, there's the system, and this -- all the red -- is the Sahara dust. So, it's lifted up by these very strong winds, carries in the clouds, and of course the clouds that are depositing the rain and within that rain, is the Sahara dust. So you've got the dust but also you've got local pollutants and also because of the direction of the winds, the U.K. in particular is getting a lot of that coming across from mainland Europe as well.
What's interesting with this is this is the current winds with the visibility. And what you can see here is examples that the winds have picked up in the last hour. Algiers, coming in from the southeast -- 52 kilometers an hour, and then you'll notice the turn -- everything then coming in from the east because that is the direction that the system is taking those winds, and of course continuing to bring with it all that debris from the shores as I say of Northern Africa. But so much so, that particularly on Wednesday in the U.K., in the county of Norfolk, it was at its very highest level there of a number ten. It does improve somewhat by Thursday, and then by Friday, it is a much better picture because all of the air has just been trapped by this high pressure.
So, very light winds, all of this dust, all these particles are in there, but the good news is, as I say, certainly by Friday a bit of change. High pressure shifting further eastwards, low pressure coming in to the west, more in a westerly direction. So what that will certainly do, not only bring the showers or continue to bring the showers, but this is it coming in, so the winds are coming in from a very different direction, so that really helps to clear out the air. On the other hand, it's also very warm still. Bit of this in Budapest -- a little bit cooler by Saturday at 19, but the average is 14. Twenty-three again Thursday and Friday. Also, Berlin above the average -- 21 on Thursday, the average there is 11 for this time of year. However, because of the cold air on the eastern side of that high, very cold into Moscow. Of course had the heavy snow in the last 24 hours, and the cold air will stay in place across Eastern Europe.
Central regions -- pretty much close to the average. A little bit cooler across the northwest, but that system pushing in from the west. Very unsettled for the most part, so when it comes to your temperatures on Thursday, another very warm day -- 21 in Paris, 19 in Rome and 21 also over there in Berlin. Richard.
QUEST: I think, Ms. Harrison, we have a second or two more to get into this. I think April showers, you know. It's April in case you hadn't noticed .
HARRISON: (LAUGHTER)
QUEST: Is that just a myth?
HARRISON: No it isn't, it's not a myth. You're right, it's April. It's not a myth that we're in April -- you're right it's the second day of it, yes, I know what you mean. April showers, yes, you want to talk about that, don't you? Yes, if the frequency of the systems coming in and the direction of the Jetstream. You know what, I'll treat you to an explanation on that tomorrow, shall I? How about that?
HARRISON: Oh, I should say we are lucky indeed. We will have Professor Harrison's treatise and a symposium on April showers on tomorrow night's program. Now, that's something to keep you looking and watching for. Jenny, nice indeed. Right, when we come back after the break, the euro. Now, the euro's a currency shared by 300 million people. There is an anthem that the whole continent in Europe knows and listens to. But the whole identity of Europe is being called into question on unity. We'll explain.
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ANDERS FOGH RASMUSSEN, NATO SECRETARY: Russia's aggression against Ukraine is the gravest threat to European security in a generation. And it challenges our vision of a Europe whole, free and at peace, a vision that we have built since the end of the Cold War.
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QUEST: The NATO secretary general speaking this week. Europe has rallied around Ukraine in recent weeks, providing billions of euros. It's also been united against Russia as a common enemy, creating sanctions of various types, one or the other. Now, despite this, one think tank says Europe -- or the EU -- still has a major problem uniting behind a common ground. We'll speak to the boss of the (Gold Mercury Organization) in a moment. Here's how his company sees the European problem. Firstly, believing the setup of Europe -- the EU -- is still too complicated and aloof. And that prevents citizens from really understanding, let alone becoming involved.
And then you've got the symbolism of the E.U. flag and the anthem and the euro. Gold Mercury says they've totally failed -- their words. "Totally failed to connect with citizens." And continued 'Euroskeptic' discourse, especially the ongoing narrative over Britain's -- the U.K.'s future in Europe and a referendum after the next election. Nicolas De Santis is an expert on global branding and advisor to the E.U. and joins me now from London. Well, I suppose, you know, the initial -- when I read your report and I saw the conclusions, my first thought was, tell me something I don't know. Europe works at one level but as a touch-feely, everybody loves it -- it's a shambles.
NICOLAS DE SANTIS, PRESIDENT AND SECRETARY GENERAL OF GOLD MERCURY INTERNATIONAL: That is correct. What's happened over the last 50 plus years is that Europe has been coming together, but most of the European project has been developed at the political level and the citizens have been involved in a lesser way. So, clearly today with the potential Scottish referendum, the Catalonia referendum and other regions of Europe perhaps trying to secede -- what we are proposing obviously is that the brand of Europe is not fairly well understood as we --
QUEST: Right, well --
DE SANTIS: -- as you mentioned, it's a complex thing to understand.
QUEST: Right, but Scotland isn't a particularly good example because Scotland is hoping very much to secede from the U.K., but would very much like to remain part of the E.U. So, Scotland is hoping to have its cake and eat it. But let's not get into the Scottish issue. What does Europe need to do? What does Europe or the E.U. need to do? Because the institutions are complicated, the management is Byzantine and the myth and the people believe it's a total waste of money.
DE SANTIS: Well, Europe is a great product but has not been sold very well. I mean, for us Europe is the European Union, is the result of the end of the first World War, the second World War. After the second World War, the European Union has managed to keep -- to keep peace in Europe. We've also managed to bring the Balkans that were at war in modern Europe into the European Union, we're bringing them in, it's unfinished business but at least we know the Balkans are coming in. So we're avoiding wars in Europe, which we recently have if you remember the Bosnian wars and the Balkan wars, and obviously we believe that a stronger Europe is a more powerful force and makes each --
QUEST: Nobody denies that.
DE SANTIS: -- individual nation in Europe more strong.
QUEST: Nobody denies that, but if you look -
DE SANTIS: Who denies that?
QUEST: Right. I said nobody denies it. But if you look at the shambolic way in which they did deal -they dealt -- with the economic crisis -- the meetings, the midnight summits, the long, tortured negotiations, Europe needs to understand surely that it is not working as efficiently as it could do.
DE SANTIS: Well, let me put it this way, if you look at the crisis and if we want to go and talk about the crisis and who created actually the crisis -- do not blame the euro, do not blame the European Union, blame another stakeholder that is a critical stakeholder in all the furj (ph) which is global banking. So if you want to talk about European issues, let's start talking about banks. So for me, the most important factor is imagine if we had not had a European Union capable of coming together to solve this crisis, we had to -- had to deal with independent nations -- we would've had a disaster.
QUEST: I don't -- we'll have to discuss --
DE SANTIS: Richard.
QUEST: -- we'll have to discuss that on another day. Because I'm not sure I agree with you on that, having watched the way and having covered it day by day. But we'll save that for another day, sir. I ask for your understanding that we are out of time. Thank you for joining us. Tweet me @richardquest on the question of is Europe -- does Europe have a -- an identity crisis or does it actually have a structural crisis? We'll have a "Profitable Moment" after the break.
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QUEST: Tonight's "Profitable Moment." I'd just been thinking about what our last guest has been talking about, and I'm not sure I can fully agree. The branding and the crisis that Europe may face with perception has a lot to do with the E.U.'s on responsibility. They are the authors of their own misfortune. Time and again, questions have been put to referenda, and when they didn't get the result they liked, they simply asked the question yet again. In terms of the economic crisis, while the U.S. moved forward with tarp and with a stimulus package, in Europe they negotiated to the nth degree until the middle of the night, and then everything promptly fell apart. Oh, yes, Europe is a collection of more than two dozen countries, but I was sick and tired during the whole crisis of hearing that's the European way. Let me tell you, if that's the European way, to give 12 percent unemployment and to take five or six years to solve a problem like this, frankly, I think they have more than a branding problem on their plate. And that, ladies and gentlemen, is "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) hope it's profitable. I'll see you tomorrow.
(END QUEST SHOW)
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