Return to Transcripts main page
Quest Means Business
Doomsday Warning by Greek Central Bank; Greek PM Refuses More Austerity Measures; U.S. Fed Leaves Key Policy Rate Unchanged; Follow the Fed Dots; Management Shakeup at Microsoft; Hong Kong Virtual Reality Workout. Aired 4-5p ET
Aired June 17, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(MUSIC PLAYING)
RICHARD QUEST, CNN HOST (voice-over): Ringing the closing bell at the New York Stock Exchange. Let's have a nice firm gavel. You can stop
ringing now, sir. Now hit the gavel. That's the Indian finance minister, bringing trading to a close.
Good evening. It's Wednesday. It's the 17th of June. Tonight: an uncontrollable crisis. Those are the words of the Greek central bank,
ringing the alarm as protesters hit the streets in Athens.
There's a warning from Janet Yellen: Greece could rock the global markets.
And oh, what a carryon. Plans to make your hand luggage smaller are back -- are put back on the tarmac. We have the U.S. congressman who says
it was a very bad idea.
I'm Richard Quest at the CNN Center and I mean business.
(MUSIC PLAYING)
QUEST: Good evening. Tonight the Greek central bank is the first Greek institution to openly admit than an exit from the Eurozone is a stark
possibility. The bank is warning of an uncontrollable and painful crisis for Greece's economy if an agreement between Athens and its creditors can't
be reached.
If you take a look, we'll show you how the bank's doomsday scenario progresses on through. If there is no deal -- now there was -- this is the
thinking and this is way, remember, you heard this sort of thinking last night on the program from Mohamed El-Erian. This is how things go badly
wrong.
First, no deal and therefore Greece defaults on its debts. Next, after the default, Greece would probably have capital controls or some form
of currency controls and then you would have a Grexit, possibly certainly from the Eurozone and possibly from the European Union itself.
That second part of the European Union is somewhat uncertain. But from the Eurozone, almost a certainty. It would all lead to an
uncontrollable crisis, soaring inflation in Greece, there would obviously be a devaluation of the new currency and an exponential rise in
unemployment.
Now this is the -- it's not a forecast. It is a scenario that's put forward by the Greek central bank, no deal leads to default, leads to
Grexit and possibly out of the union as well and then ends up at an uncontrollable crisis.
The head of the Eurogroup says there is a very small chance of a deal being agreed on Thursday's finance ministers' meeting. Neither Greece nor
its creditors looks likely to compromise any further.
Now that's as the Austrian chancellor traveled to Athens. The chancellor was trying to broker the deal with the Greek prime minister.
Alexis Tsipras says he's not afraid to say no if the terms aren't right for Greece.
(BEGIN VIDEO CLIP)
ALEXIS TSIPRAS, GREEK PRIME MINISTER (through translator): I would like to ensure (sic) you that in case we have a decent agreement and a
viable solution, myself and the Greek government will take the responsibility for casting an inter negative (ph). But if an acceptable
agreement and a viable solution cannot be reached, then, again ,we will be the ones who will say the big no.
(END VIDEO CLIP)
QUEST: The big no, well, thousands of protesters who support the government's stance have gathered outside the Greek parliament. If you
want to see what it looks like, this was the scene earlier in Athens ,where organizers say it was a peaceful protest against austerity. The Greek
government itself could face a backlash from their supporters if they concede to anymore international creditor demands.
And that is the current problem because on the one hand, you have the negotiations with the troika and the European Union and the Eurozone. On
the other hand, you've got their own supporters saying don't do a deal; hold out to the bitter end.
CNN's Samuel Burke in London on what the options that Athens have.
(BEGIN VIDEOTAPE)
SAMUEL BURKE, CNN CORRESPONDENT (voice-over): After weeks of Greece closing doors and having some slammed in their face, the way out from this
years-long crisis has come down to just a few options.
Door number one: compromise. That's the door most people think they should open; that's looking less and less likely, though. The obstacles on
that path are still benefits for Greek pensioners and tax increases on electricity.
Door number two: default. This is the door Greece is getting closer and closer to. Without a deal, they can't pay the bills. And if they
can't pay the bills, the default is done.
ANNE RICHARDS, CIO, ABERDEEN ASSET MANAGEMENT: It will be pretty ugly. I think you've had a little taster in the last week or so when you
see how sharply bond yields in the periphery of Europe have moved up.
BURKE (voice-over): Door number three: default without an exit from the Eurozone. Even if Greece doesn't pay up, there's no rulebook for this
scenario. No country's ever left the Eurozone before. And no one's quite clear on who would make the actual call for a Grexit.
MICHAEL JACOBIDES, ASSOCIATE PROFESSOR, LONDON BUSINESS SCHOOL: What is very likely to happen is political turmoil after you can't access your
money, your ATMs are locked up, you don't have the possibility of running normally.
BURKE (voice-over): Door number four: a Grexit. If Greece runs out of money and Europe won't give it any it will have to print its own cash,
exiting the Eurozone.
BURKE: And number five, the revolving door. Change the payment, move the deadlines, muddle along and keep on going in this never-ending cycle --
Samuel Burke, CNN, London.
(END VIDEOTAPE)
QUEST: And that very much is the situation that the markets are dealing with. The uncertainty which is now weighing on stock markets,
particularly obviously in Greece. The markets fell again in Athens; the main index is down more than 17 percent over the past four sessions, gives
you an idea of the sense of crisis. And it won't be long before, of course, people start taking more money out of the banks there. And that
creates a currency and a capital crisis, too.
Across Europe, red was the color of the markets. Not huge losses in London or even maybe in Frankfurt, the largest losses in Paris, the CAC 40
down more than 1 percent.
So when the Eurogroup or rather the -- an Ecofin meet on Thursday what will they do? With no new proposals from Greece? The finance minister of
Finland says the ball is firmly in Greece's court. Greece has to come with proposals to get it done.
Alexander Stubb, the former prime minister of Finland, told me Greece's options are limited.
(BEGIN VIDEOTAPE)
ALEXANDER STUBB, FINANCE MINISTER, FINLAND: I think we basically have two options right now. One is some kind of an extension of the program.
But that, of course, is very conditional to the deal that was done on the 20th of February and that means structural change reform in Greece.
And the second option is I think more severe, and that's the discussion about default. And of course, time is running out because the
deadline for the extension of the program is the 30th of June.
QUEST: Everybody is now mentioning the word "default," even the Greek central bank says that default and exit is now a possibility.
Do you accept that?
STUBB: Well, I think there's a difference between default and exit. I don't think anyone is really seriously talking about exit. I think the
situation is such that Greece needs to do its deal. The ball is in their court. In order for them to get the 7.2 billion euros, it is conditional.
Now if that does not take place, then we have a serious risk of default. And I think we should all avoid that. The bad news is that that
will hit the Greek people the hardest; the good news is that I would argue that all the risk countries that would have been in the sphere of a domino
effect previously are now out of it.
So I don't think that the contagion risk for the rest of Europe is real anymore.
QUEST: When we look at the sort of comments we have, the Greeks describing the IMF as being "criminally responsible," describing the ECB as
causing "financial asphyxiation." And then you have the battle between Commission President Juncker and the Greek prime minister over exactly what
is in the terms.
Put it all together and you've basically got a slanging match.
STUBB: Well, it's pretty tough language, I do have to admit that. But of course the situation is very serious. The situation is serious in -
- on the Greek side; in other words, it has not been able to prove that it can mean the conditionality.
And of course for us on the creditors' side, the situation is serious as well, because we are worried that things are not going to work out. But
I think all of us are right now trying before the Eurogroup, which begins tomorrow, to try to find some kind of a deal. But it's not looking -- I'll
be very frank with you -- it is not looking very good at this particular moment.
QUEST: Whose responsibility is it to lead the way?
Who's got to put the deal on the table, the Greeks or the Europeans?
STUBB: Oh, definitely the Greeks. And you know, this all started very much as an uneven situation. You had some countries that were pushing
for austerity and then you had most countries quite reluctant about it.
But right now I would argue that we are in a 17-1 situation. All the 17 euro countries want Greece to stick to the deal that was done on the
20th of February and to the so-called ed memoir (ph), which was developed later on.
I think things were actually going quite well in Greece before the elections and a lot of the problems were started ever since.
Now one thing I do have to say is that we have to give credit to what the Greeks have already done. Remember that the GDP has come down by
approximately 30 percent, a little bit more. Wages have come down 30 percent. They have adjusted their economy by 10 percent.
So they've done already a lot. But more needs to done in order for the final bit of the second program, the 7.2 billion euros, to be issued.
And then I hope that Greece would be out in the clear.
QUEST: Are you prepared tonight to countenance default?
STUBB: I am trying to reject the default to the bitter end. I really think we need to find some kind of a solution to this. Why? Because it
would benefit the Greeks and it would benefit the Eurozone as a whole. But it is absolutely clear that the ball is in the Greek court, not in the 17
other euro countries.
(END VIDEOTAPE)
QUEST: Alexander Stubb of -- the finance minister of Finland, talking to me earlier.
The Fed says that the U.S. economy will grow barely 2 percent in 2015. Interest rates will rise probably this year. But Janet Yellen says all is
under control -- in a moment.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: The U.S. Federal Reserve has held interest rates steady in June. The rate, of course, you'll be aware, is near zero. The central
banks want to see further improvement in the economy before any rate hike. Now the Fed's statement suggests it could come as soon as this year;
perhaps even as September, if you look at the projections. Just about everybody at the 17, 15 of them say it will come in the first hike, will
come in 2015.
The Fed says the decision will be made on a meeting-by-meeting basis. And in terms of the growth forecast, and this is crucial, bearing in mind
the numbers that we saw in terms of growth GDP and wage growth, 2015 growth forecast is around now 2 percent. Growth forecast has been lowered
from nearly 3 percent down to 2 percent.
The Fed chairman, Janet Yellen, is warning the Greek crisis could hurt the United States and thereby the rest of the world.
(BEGIN VIDEO CLIP)
JANET YELLEN, U.S. FEDERAL RESERVE CHAIR: I do see the potential for disruptions that could affect the European outlook and global financial
markets.
I would say that the United States has very limited direct exposure to Greece, either through trade and financial -- or financial channels. But
to the extent that there are impacts on the euro area economy or on global financial markets, there would undoubtedly be spillovers to the United
States that would affect our outlook as well.
(END VIDEO CLIP)
QUEST: Put it into how the markets reacted and they did what they were higher when all was said and done, up 31 points again, just nearly
(INAUDIBLE) percent.
Richard Clarida is the Global Strategic Adviser of PIMCO. He joins me now from New York.
Richard, so Janet Yellen, I mean, I'm just looking at what she actually said, if -- here we go. She says no decision's been made by the
committee but the -- but certainly an increase this year is possible.
If we then look at the dots, the dot plot, everybody believes it's going to happen this year.
When do you think it will?
RICHARD CLARIDA, GLOBAL STRATEGIC ADVISER, PIMCO: Well, you know, I think there have been a lot of expectation going into the meeting today
that it could happen in September. But certainly Yellen did not give any indication that September is imminent. She says she's data dependent.
She's leaving all options on the table. So I do expect a hike this year. But certainly the odds of September appear to be lower than they did going
into the day.
QUEST: Now when you talk about being data dependent, if we look at the data, let's just ground this in the data. The weak first quarter
followed by other numbers that we've subsequently seen, sure that militates for caution, not haste.
CLARIDA: But, Richard, I think we understand that Q1 was really reflecting weather and the port strike. The data for Q2 is definitely
coming in surprising on the upside. And most of the downgrade to the Fed's forecast really just reflected the arithmetic of that weak Q1. The labor
market did in particular. It's been very strong.
QUEST: And yet, I remember her timing was fairly dreadful. Christine Lagarde saying to the Fed that the IMF believes it should be in 2016
because of the spillover effects.
Well, again, looking at the dot plot, everybody and their brother except two believes it should be this year.
CLARIDA: That's absolutely right. It was quite unusual to have an IMF official at that level be so specific about a year for a rate hike.
And I -- and of course that Chair Yellen got that question today and she was very respectful and deferential.
But, yes, I certainly believe we will get a hike this year. It won't be put off until 2016.
QUEST: Should it be this year? That -- I come -- I mean I heard what you just said about the first quarter. But bearing in mind the
possibility, Richard, that there is some intrinsic weakness there which a rate hike -- because, let's face it, as you know, the moment you've done
one hike, everybody says when's the next? When's the next? When's the next?
CLARIDA: That's absolutely true. I think on balance, given the way I see the data and the U.S. economy, I would be hiking this year. As the
chair indicated, after that first hike, financial conditions and monetary policy are going to be incredibly accommodative. And so I think that the
challenge for the Fed will be the communications part of this so that she does not trigger a selloff. Because as you said, the markets will price in
future hikes.
But yes on balance I think the Fed should be hiking this year.
QUEST: Hike before it's too late. Richard Clarida, always good to have you , sir. Thank you for making sense of it for us tonight.
Now Richard and I were talking about the so-called dot plot. This is the graph where most members of the Fed, they have to plot themselves on a
graph. You can see where they think it's going to be. And it's where they think the Fed funds and the rate will be higher. If you'll walk over with
me, I'll show you what I mean.
So you end up with this dot plot. This shows where they all think rates will be by the end of 2015. Then you've got 2016. So you get the
idea of how it will be only two thing -- rates will remain unchanged. The dots have become a source of absolute fascination. I mean, let's just take
next year.
There are some members of the FOMC who believe that by the end of next year, rates will be nearly 3 percent; whilst at the other extreme, one
member believes it'll be down to under half a percent. As they search for clues about the rates and the moving, we wanted to get to the bottom of
what the dots mean and how useful they are. And we realized following the Fed dots it all reminds and remembers of the old game of Twister.
You remember? You put one bit there, move over there, Clare Sebastian explains.
(BEGIN VIDEOTAPE)
(MUSIC PLAYING)
CLARE SEBASTIAN, CNN CORRESPONDENT (voice-over): In the game and for the Fed, every dot matters. Twister is governed by the spin of the dial,
telling each player which dot to stand on.
Left foot on green.
The Fed's dot plot is governed by the economic cycle, GDP, inflation, the strong dollar. That dictates where each member stands and where
interest rates should be in the coming year. And that's where their dot appears on the chart.
YELLEN: As expectations and the actual performance of the economy change, you should expect to see movements in the dots.
SEBASTIAN (voice-over): It's an evolving picture as the economy shifts, some Fed members may be willing to stretch a little further.
Left foot blue.
LORETTA J. MESTER, CLEVELAND FED CHAIR: If it turns out that incoming information shows that growth is regaining momentum, I'd be comfortable
with liftoff relatively soon.
SEBASTIAN (voice-over): Others are a little more cautious.
NARAYANA KOCHERLAKOTA, MINN. FED PRESIDENT: I think it's just a risk you're creating to the economy and to -- particularly to the pursuit of the
inflation target. But to the real economy as well by moving too early.
SEBASTIAN (voice-over): Of course, when predicting the Fed's next move, this is not the only game in town.
TED WEISBERG, FOUNDER AND PRESIDENT, SEAPORT SECURITIES: The matrix of the dots is important. But I put a lot more faith in what the bond
market is telling us.
SEBASTIAN: The Fed itself has warned that focusing too much on the dot plot could, well, tie you in knots. Simply looking at a player's
position on the board doesn't tell you for example how unstable or uncertain they might be feeling.
SEBASTIAN (voice-over): And as in Twister and in monetary policy, that could impact what happens next.
Right foot red.
Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
QUEST: It's all about the dots and hopefully they join up.
After the break, Microsoft is shaking it up. A major top executive is given the boot and he's the reason this executive, why Microsoft has Nokia.
So what went wrong? That's QUEST MEANS BUSINESS.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(MUSIC PLAYING)
QUEST: Microsoft has announced a major shakeup right at the top. The chief executive, Satya Nadella, has asked its three top executives -- and
they include Stephen Elop. Elop had a history of Microsoft and then he left to become chief exec of Nokia in 2010. He returned to Microsoft last
year when it merged with Nokia.
Alison Kosik joins me now from New York.
So three top execs have gone.
Why?
And then we'll talk about Elop.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Think of it this way, Richard. Microsoft kind of hitting the reset button, especially when you
look at how its struggling smartphone business is doing. You talked about Nokia spending over $7 billion on that purchase and what did it get? It
lost market share. It bled red ink. It had thousands of layoffs. In fact the biggest number of layoffs at Microsoft in its history.
Why did you see all these executives be shown the door today? Well, maybe Satya Nadella said it best today as he announced these layoffs. He
said this was done to align our capabilities and ultimately deliver better products and services our customers love at a more rapid pace.
Translation: we want to give the customers what they want. And when do we want to give it to them? As fast as we can -- Richard.
QUEST: OK. But Stephen Elop, he was at Microsoft. He left to join Nokia as the chief executive. While he's there, he sells Nokia's devices
division back to Microsoft, jumps ship with a lot of money and becomes -- goes back to Microsoft and now is booted out.
I'm just reading the statement. He says, "Stephen and I have agreed that now is the right time for him to retire from Microsoft."
I mean, pretty brutal.
KOSIK: Yes, look, Microsoft is a company that's really trying to remain relevant. It's still -- it's got the world's -- it's the world's
biggest software maker. You see its software on over 90 percent of the world's computers so it's kind of got that locked down, sort of, because
then you bring in Apple's iOS system and that's competition right there.
You've got Microsoft really trying to garner that smartphone business and remain relevant there. But it's kind of late to the game, isn't it.
And that's really what Microsoft is doing. It's trying to play catch-up. So you're seeing once again Microsoft hitting the reset button, something
that it's done many times in the past. I think I counted at least eight times in the past 15 years, Microsoft has announced all of these kinds of
restructurings. Nothing's really moved the needle too much as far as anything outside of its software. And as far as investors see it, they're
actually being positive because Satya Nadella is at the helm. They actually have -- they have confidence in him.
QUEST: Thank you very much, Alison Kosik at the -- in New York; I'm at the CNN Center, Alison's in New York.
Just help me remember where I am.
Microsoft is taking Minecraft to new dimensions. Microsoft's acquired the video game last year for $2.5 billion. Now it's demoed a futuristic
virtual reality version that will turn any flat surface into a hologram of the game. Expect cutting-edge technology that's going to transform the
industry and being applied to fitness.
Workouts go from jogging to the Alps to doing jumping jacks in outer space. David Molko tried it out.
(BEGIN VIDEOTAPE)
(MUSIC PLAYING)
DAVID MOLKO, CNN CORRESPONDENT (voice-over): There was Jane Fonda, Richard Simmons and who could forget Tae Bo, where spandex met martial
arts?
But now there's this. The star here, a 270-degree projection screen, the first of its kind inside a gym. You pedal across the galaxy and into
the city of the future, chasing virtual opponents, standing, banking and, yes, sweating all in an attempt to get our hearts pumping harder.
COLIN GRANT, CEO, PURE GROUP: What this technology's going to do is definitely open up exercise to maybe a younger crowd, we have a
gamification. It's making it more fun.
MOLKO (voice-over): It's called immersive fitness, an investment between Hong Kong-based Pure and New Zealand fitness giant Les Mills. They
experiment with a price tag that's steep at this virtual hill, $400,000 U.S.
Grant says he's confident pedaling and a projector will mean profits. Content is key, he says, and here it is limitless.
GRANT: We haven't even scratched the surface. They could add scent. They could add mist. The floor could move.
(MUSIC PLAYING)
MOLKO (voice-over): Across town, the ground is already shaking. But they have their doubts about group fitness going virtual.
ED HAYNES, FOUNDER, COASTAL FITNESS PERFORMANCE TRAINING: You know, is that developing love for exercise, health and fitness outside of that?
I don't know.
MOLKO (voice-over): Here the workout is raw and real.
And it's geared toward one thing: results.
UNIDENTIFIED MALE: It should be bang, under, yes? We've got to get more into that.
We really have to go like and strip every single movement down to its bare bones.
MOLKO (voice-over): He says that, along with one-on-one coaching, is as timeless approach to getting and staying fit. As for that screen...
UNIDENTIFIED MALE: I'll be interested to see if anyone is still doing that in five years' time.
MOLKO (voice-over): Back on our bikes, we face the final challenge.
Finally we reach the summit and ride out of the darkness and back to reality.
A satisfying finish, but will spinning in front of a screen be enough to spark the next fitness revolution?
UNIDENTIFIED FEMALE: That was fun.
MOLKO (voice-over): David Molko, CNN, Hong Kong.
(END VIDEOTAPE)
QUEST: Now the Greek people are paying the price for an inexperienced government. Now for the former European commissioner, president of the
commission, tells CNN, Jose Manuel Barroso is after the break.
(MUSIC PLAYING)
(COMMERCIAL BREAK)
[16:31:46] QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment when we'll hear an exclusive interview
with the Swiss attorney general on the investigation into FIFA.
And I'll be talking to the congressman who had tried to pass a law to stop cabin luggage or cabin bag OK when getting ever smaller.
Before all of that, this is CNN and on this network, the news always comes first.
Thousands of protestors have rallied against austerity outside the Greek Parliament today. That as the country lurches towards a potential
default with no deal on its debt in sight.
The Finnish Finance Minister told me on "Quest Means Business" the onus is on Greece to do the deal.
(BEGIN VIDEOCLIP)
ALEXANDER STUBB, FINNISH FINANCE MINISTER: Greece needs to do its deal. The ball is in their court. In order for them to get the 7.2
billion euros, it is conditional.
Now if that does not take place, then we have a serious risk of default and I think we should all avoid that.
(END VIDEOCLIP)
QUEST: Police in Georgia's capital have shot dead a white tiger that escaped from a zoo after severe flooding at the weekend. Officials say the
tiger killed a man in the city. The news says another tiger remains missing. It's unable to determine if the animal died in the flooding or is
still on the loose.
The British police say one of three sisters missing in the Middle East has made contact with relatives in the United Kingdom. They say the
information suggests the women and their nine children may have entered Syria. The extended family never returned home after a religious
pilgrimage to Saudi Arabia.
Police in the state of New York say they're expanding the search area for the hunt for the two escaped prisoners. Search teams have already
covered 4,000 hectares in search of the men who escaped on June the 6th.
Officials are trying to work out what the husband of a prison worker who alleged to have helped the inmates knows about the escape.
Pope Francis says the planet's being ruined. He was speaking ahead of a major announcement from the Vatican on climate change. An encyclical is
due to be published on Thursday which will lay out the Catholic Church's standpoint on the issue.
The Pope said it was man's duty to care for the planet.
(BEGIN VIDEOCLIP)
POPE FRANCIS, VIA INTERPRETER: Tomorrow as you are aware, the encyclical will published on the care of the common home which is creation.
This, our home, is being ruined and damaged and it's affecting all of us, especially the poor.
And so mine is an appeal to the responsibility on the basis of the tsk that God has entrusted to men in creation to cultivate and to guard the
garden where God has placed men.
(END VIDEOCLIP)
QUEST: More now on Greece, and the European Commission admitted that the rest of Europe is feeling nervous about the Greek situation. The
commission vice president says "now less favorable scenarios," in his words are on the table.
(BEGIN VIDEOCLIP)
VALDIS DOMBROVSKIS, EUROPEAN COMMISSION VICE PRESIDENT: Of course we understand that member states are understandably nervous because we are in
the middle of June.
[16:35:00] By end of the June current program expires and there are of course some discussions of less favorable scenarios. But that's definitely
not our aim and something which we are not focusing ourselves on.
(END VIDEOCLIP)
QUEST: The former European Commission President Jose Manuel Barroso has lashed out at the Greek government. He spoke to Christiane Amanpour
and told her the Greek people are now paying the price for a government out of its depth.
(BEGIN VIDEOCLIP)
JOSE MANUEL BARROSO, FORMER EUROPEAN COMMISSION PRESIDENT: I think of the government since the beginning, apart from showing complete lack of
experience, they have never been in the government, but in fact they are very strongly radicalized from an ideological point of view.
They are at the point that they believe that everything so far has been wrong in European Union and you're aware of it (ph) and that they are
right. And the other thing is that Ireland was successful at the so-called clean exit of the program, Portugal was successful also concluding with
success its program and Spain it also had a program for the banking sector was successful.
So the problem is not the program. Of course we can always adapt to programs, we can also always make it better. The problem is that the Greek
government has completely changed expectations. According to all the European and international organizations, you're expecting very strong
growth already for 2015 and 2016 (AUDIO GAP) 2016.
But of course when there is a reversal of expectations, I mean, people go and take money from the banks, investors will not invest and this is
extremely negative.
And at the end, it's the Greek people that is paying the price of, I'm sorry to say - and I'm measuring my words - lack of responsibility of the
Greek government that is more interested in showing that they are an ideology, that they are a government representing such an important country
as Greece.
(END VIDEOCLIP)
QUEST: That's Jose Manuel Barroso. Now, when we come back, it's a row against bags. Why a bag that is this size is now causing a real
furora. We'll explain how 'carry-on OK' became most definitely naught.
(COMMERCIAL BREAK)
QUEST: IATA, the International Air Transport Association, says it is holding off plans to establish guidelines on a standard carry-on luggage
size across all the airlines.
Now, this is exactly the size of the bag - we have measured it. This bag would accord to what IATA calls 'cabin bag OK.' It's about 20, so many
inches in different directions and it is exactly the size that should be for those airlines that agreed, guaranteed carry-on baggage.
Well this was all fair and good until some North America carriers raised concerns and said they weren't going to go onboard.
[16:40:06] Last week IATA proposed making the carry-on - remember it's a guideline, it's not a rule, it's not a standard , it's a guideline - 55 x
35 x 20 centimeters. And they said it would simplify the boarding process, it would ensure all travelers would have bags that would fit into the
overhead compartment which used a number of carry-ons, etcetera, that had to be carried on when fill up the top.
So, in the middle of all of this, join Steve Cohen, a member of the U.S. House of Representatives from Tennessee. He decided to launch a bill
called the "Carry-On Freedom Act" that would have prevented airlines from reducing the size of carry-on bags when they have to pay for them.
The congressman joins us now from Washington. Sir, firstly you must be pleased that IATA has suspended its 'carry-on OK,' 'carry-on bag OK.'
STEVE COHEN, U.S. HOUSE TRANSPORTATION SUBCOMMITTEE ON AVIATION: Indeed I am pleased. I'm always a consumer-oriented congressperson and
this is a victory for consumers.
QUEST: If you accept that the goal of this was not a revenue-raising exercise by IATA but was to ensure every passenger gets at least a carry-on
bag onboard, surely this isn't a success then.
COHEN: Well I don't know if that was the purpose or not. I appreciate them rescinding their suggestions. But the airlines have said a
lot of things about mergers and said they would help the consumer, that we'd have more service and there'd be more flights and everything would be
peachy keen, and it hasn't been.
So what the airline industry which is making more and more profits as gasoline is becoming cheaper and cheaper and prices are going up and up,
there's not been much given to the consumer. And the airline industry word has not held very well in this city because of what they said about mergers
that has not come true.
QUEST: Your view is that the airlines would use this as a way of, if you like, forcing passengers to take bigger bags or those bigger bags they
have, put them in the hold, thus costing them money. That's the gist of what you thought they were going to get up to.
COHEN: Oh, exactly. That's what I think would have happened with newer planes - they'd have built smaller compartments that would only fit
the new standard. The old standard wouldn't have fit and made $3.5 billion last year on checking bags.
You know, just until fairly recently and certainly when I was growing up and I can't even hardly remember when it started, you had no idea of
charging somebody for checking a bag. You got on the airplane, you took a grip and they took the grip with you. They never had any idea that they
would charge you for that. And they'll charge you for anything.
QUEST: Yes, but the airlines - I mean, I agree it's a bit of a difficult situation in the U.S. where the airlines are making money hand
over fist. IATA does say this was all about ensuring everybody gets a bag onboard and therefore frankly (AUDIO GAP) I suppose they would say your
bill in forcing them to do this has actually penalized many travelers.
COHEN: I don't see that - they could say that but I don't think it's true. They've already got limitations where you can only take on one
carry-on bag. And all they need to do is enforce the regulations they've got now. I think it's fair to say it will only take one carry-on bag, but
I don't think they should be charging people for baggage either.
They shouldn't find every way - before you know it there's going to be a little place where you can put a coin to go in the restroom. Don't put
it beyond them. I don't put it beyond them at all.
QUEST: No, and I agree with you, Congressman, I agree. Final question, sir, -- you'll be aware of this battle between the U.S. 3 - the
Big 3 - and the Gulf 3 in the Arabia. Do you hope the Transportation Department and the State Department does call to open negotiations again
with Qatar and the UAE.
COHEN: Well I know it's a battle but I don't think that even here in congress it's going to fall on those lines pro the Big 3er or pro the Gulf
airlines. I think we're going to try and do what's fair for the public.
QUEST: Congressman, thank you, sir, for talking to us and putting this into perspective. It's one of those issues that certainly has
everybody talking. I appreciate it.
COHEN: You're welcome. At least they don't take your frequent flyer points away when you take your bag on the plane.
QUEST: Not yet, Congressman.
COHEN: (LAUGHTER). That's right.
QUEST: Not yet.
(LAUGHTER)
QUEST: Thank you very much. But of course you are getting frequent flyer miles depending on how much you've paid.
United Airlines has (AUDIO GAP) announced it is to move out of Kennedy Airport in New York and will move all its West Coast trips - all it West
Coast flights - to New Jersey.
United failed to make a profit at Kennedy over the past few years. It will end service there in October.
This is what - so United has had - obviously its main is at Newark -- it's had operations at Kennedy, it's the so-called PS flights - the premium
service - that goes from there across. Now those flights will all move to Newark.
[16:45:07] Now, as for United, it's part of our look at how actually flying in America is much better than most people think. I went to
United's hub in Chicago to see the latest steps the company's taking.
(BEGIN VIDEOCLIP)
QUEST: United Airlines is based in Chicago. It merged with Continental Airlines in 2010 to create one of the world's largest carriers.
It was a troubled and difficult takeoff at best. Performance fell, costs rose, customer satisfaction dipped.
Now the airline is determined to put those faults right and succeed.
Male: Here's one of our great drivers.
Male 2: How are you doing there?
QUEST: Hello, hello. Where are you going to take me?
(LAUGHTER)
Male 2: Where do you want to go?
QUEST: All right.
United wants to be your chauffer from the ground up. Yes, this airline offers car service to its best passengers. This is the way to get
to the plane. If you're willing to pay the extra, they want to be the airline you invest in so they're doing some investing of themselves.
JIM COMPTON, CHIEF REVENUE OFFICER, UNITED AIRLINES: This is our new one.
QUEST: This is a new one.
COMPTON: Yes. It's the first club with our new kind of branding and appeal as - that -- we're expanding throughout the system.
QUEST: The chief revenue officer Jim Compton is responsible for everything United sells.
COMPTON: As the U.S. industries become much more stable and over the last few years to actually earn -- have earnings - has allowed us to do a
couple of things. We have new clubs coming online in San Francisco, we have new clubs in Boston and across the system we're investing, investing
in our terminals.
Take the Wi-Fi for example, we have well over 500 aircraft on now.
QUEST: How important is the U.S. domestic market for the airline?
COMPTON: It's a global network and not only is it important to participate in the U.S. market itself but the U.S. market connects through
many of our gateways out into the rest of the world.
The international's slightly more than 50 percent so the domestic's slightly less than 50 percent of our network.
QUEST: If I tweet about U.S. carriers, I know what I'm going to get. Why aren't they as good as the Asian carriers? If the Asian carriers can
do it, why can't the U.S. carriers?
COMPTON: Well I think the U.S. carriers can and I think we're in the process of doing it. Customers are going to see more and more at United -
a focus on reliability, a focus on product, a focus on listening to them and offering them things that they actually are willing to pay for.
(END VIDEOCLIP)
QUEST: United Airlines. Now, one little traveler has had a very busy day indeed. Meet Hobbs the Tiger. Yes, that's Hobbs. His owner is a six-
year-old boy called Owen and Owen lost Hobbs at Tampa International Airport. (RINGS). When staff found Hobbs, they decided he needed a spot
of sightseeing before he got returned.
So, Hobbs was given a tour of the tarmac from the air maintenance crew.
There's old Hobbs or young Hobbs on the tarmac. He even visited the air traffic control towers and then he rode in the airport's fire truck.
It was time for Hobbs to have some ice cream, and before Hobbs was returned, Hobbs and Owen were reunited with a picture book of his travels
in the airport at Tampa.
Who says airports don't have a sense of humor?
This isn't funny next. The Swiss attorney general says his investigation into FIFA is hugely complex as his office combs through nine
terabytes of seized data.
We'll hear his exclusive interview with CNN and what he has to say about the future of Sepp Blatter.
(COMMERCIAL BREAK)
[16:50:40] QUEST: FIFA's president Sepp Blatter may be questioned by investigators over the controversial awarding of the World Cup to Russia
and Qatar, and yet the Swiss authorities say he will never be extradited to the United States by them.
They're investigating more than 50 suspicious bank transactions involving FIFA. They're looking for the evidence of money laundering.
CNN's Alex Thomas spoke exclusively to the Swiss Attorney General Michael Lauber.
(BEGIN VIDEOCLIP)
MICHAEL LAUBER, SWISS ATTORNEY GENERAL: It's true that Sepp Blatter is a Swiss national and any of any nationality could be an object of a
Swiss penal investigation independently where it is, where he is, where she is. The thing is just perhaps there's a confusion that Switzerland as (ph)
the United States do not extradite people of their nationality.
ALEX THOMAS, CNN ANCHOR AND CORRESPONDENT: Does that mean Sepp Blatter can never be extradited from Switzerland?
LAUBER: He can never be extradited from Switzerland as long as he is in Switzerland as the U.S. never extradites U.S. persons from their own
territory.
THOMAS: How complex is this case?
LAUBER: This case is complex, it's huge.
THOMAS: Is it the biggest case you've ever seen?
LAUBER: It's one of the biggest cases I ever seen.
THOMAS: Would you appreciate if someone came to you privately offering information who's close to the case?
LAUBER: We have also the rules that we can get information from people who really are willing to give us real information. The thing is
that we have different rules, we are more strict than in the U.S. But if there is anybody out there who wants to give me information in helping me
with this case, we have our rules, they are known. And I'm welcoming any useful information for this case.
THOMAS: What is your message to those people that want to know the truth now?
LAUBER: I also want to know the truth. So let me do my work and if you anywhere out there think you have to do your own work in helping that
sport stays really sport and stays clean, that's fine. I would be behind you, but let me do my own work because judicial work is different from
other oving (ph) work and I think it's complementary.
(END VIDEOCLIP)
QUEST: The head of FIFA's own ethics committee says he's prepared to widen the investigation into wrongdoing should new evidence come to light.
Don Riddell is with me this evening. Good evening, sir.
DON RIDDELL, CNN "WORLD SPORT": Good evening, how are you?
QUEST: So where do we stand? He says that kind of how messy and miserable this is getting.
RIDDELL: Well I think it's getting more messy and more miserable for FIFA. I mean, we heard about this 53 suspicious banking relations which
they're now investing that is in addition to the 104 they were already looking into.
And you referenced earlier these 9 terabytes of data. That's the equivalent of 750 million pages in a Word document. So you get a sense of
just how much information or evidence the authorities now are going to be combing through.
And Sepp Blatter, I think from what we heard today, it's likely at the very least he's going to be questioned.
QUEST: And yet we know from Glazer (ph) and others we don't need all this stuff. Glazer (ph) and others and -
RIDDELL: Chuck Blazer.
QUEST: -- Chuck Blazer, Blazer - I beg your pardon, Chuck Blazer. And has already said they're all at it.
RIDDELL: Well and I think the other revelation we heard this week when the new court hearing was unsealed a couple of days ago, is that
Chuck Blazer was an informant for the last year and a half -
QUEST: Right.
RIDDELL: -- he was on the FIFA Executive Committee. So one can only imagine what kind of information the authorities now have. I think one
thing to note from today is just how long it's going to take to pour through all this stuff.
It's going to take potentially a very, very long time.
QUEST: But Russia launching its - I was going to say campaign -- but launching if you like the countdown to 2018 has shown some great pictures
of what they're going to be doing. They are still going hell-for-leather for it.
RIDDELL: Full steam ahead, yes.
QUEST: Full steam ahead.
RIDDELL: Qualifying games have already happened, the draw is going to be taking place next month in Moscow. With every passing day I guess,
harder and harder to take the tournament away from Russia in 2018 and -
QUEST: You can't, you can't.
RIDDELL: Well I don't think you can anyway. But I mean it was said today by the attorney general he would have no qualms if he found a smoking
gun taking this tournament away from Russia. But the longer you leave it, the harder it gets to do that. And this could take years.
QUEST: Is it your view that Qatar's 20 -
[16:55:03] RIDDELL/QUEST SIMULTANEOUSLY: -- 22
QUEST: -- is looking dodgy?
RIDDELL: It's looking more likely of the two that they could lose the World Cup. But even then, I still don't see how they can do it. When you
think of all the legal battles they would put up, how much money they've spent already in building the infrastructure to host that tournament.
It would get incredibly messy if FIFA were to say you can't have the tournament because of corruption. Because they could quite easily point
back and say, well we were only corrupt because of you guys. Because that's the system that you put in place.
QUEST: Don Riddell.
RIDDELL: All right, good to see you.
QUEST: Good to see you, sir. Thank you very much. We will have a "Profitable Moment" after the break. Don't touch the bell. (RINGS BELL).
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." So, according to IATA, they measured it this way, they measured it that way, and they measured it the
other way and they said there was cabin OK. The plan to have a guideline for bags that would be legitimately acceptable as cabin baggage.
That was before the U.S. carriers said they weren't having anything of it and the U.S. congressman threatened to legislate against charging extra
for in the hold.
I have to say I'm rather sympathetic to the whole cabin OK idea. If you have more and more passengers wanted to shove things into the overhead
compartment, well, eventually you have to have restrictions. Otherwise, not everybody gets the minimum onboard. Cabin OK was a perfect compromise
that ensured everybody would at least get one respectable bag on the aircraft instead of heaving a steamer trunk into the overhead compartment.
And that's "Quest Mean Business" for tonight. I'm Richard Quest at the CNN Center. I'll be back in New York tomorrow.
[17:00:00] And whatever you're up to in the hours ahead, (RINGS BELL) I hope it's profitable.
END
