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Quest Means Business

A Runoff Election for Turkey; Turkish Stocks, Currency Fall amid Uncertainty; EU Regulators Approve Microsoft's $69 Billion Activision Deal; Argentina Raises Interest Rates To 97 Percent; WHO Warns Against Sugar Substitutes; Pro-Democracy Parties Win Big In Thai Elections. Aired 3-4p ET

Aired May 15, 2023 - 15:00   ET

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

[15:00:26]

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Look at the markets and how things are trading on Wall Street. There is not a huge

amount of emphasis. If you take a look at the markets, they are just down about, they are up about 14 to 15 points, been a bit all over the place,

over the course of the day. Same for the NASDAQ and the S&P 500.

The markets and the main events we're all watching. Turkey's presidential race is headed for a runoff, the ultra-nationalist candidate with just five

percent of the vote could help swing the final outcome, but which direction?

The EU approves Microsoft's beleaguered bid to take over Activision. Now the question is, what happens when the UK said no.

And soaring inflation leads Argentina to raise interest rates to 97 percent. And you thought you had a bad day.

Live from New York, Monday, May the 15th. Lovely to be back. I'm Richard Quest. And of course in New York, I mean business.

Good evening.

We begin tonight in Turkey where the country is heading to an historic runoff election. The President's main opponent is fighting to fight to the

end. Kemal Kilicdaroglu finished second place in Sunday's election. Opinion polls have given him a lead over the incumbent.

It is the first time that President Erdogan has been forced into a runoff. Look at the numbers. The President actually did considerably better than

had been expected, but he was short of 50 percent of the vote. It is the president's weakness showing in his 20 years in power.

Jomana Karadsheh is in Istanbul.

So as we try and understand, I think the core first of all issue is how and why did the president do better than everybody had thought? Was it just the

opposition wishful thinking?

JOMANA KARADSHEH, CNN INTERNATIONAL CORRESPONDENT: Well, I mean, this is the question, Richard, going into this polls here. We're predicting that

this could go into the second round, or that we were going to see a win for the opposition.

It had better ratings for Kemal Kilicdaroglu and you look at what happened. And look, the president really defied all expectations. And why is that?

Because you are talking about a really polarized country where people were not going to shift and go to the other side and vote for the opposition.

This is a country that is so divided, and you have two different visions for this Turkey. And the vision of President Erdogan is supported by nearly

half the electorate, as we saw from these numbers.

And, you know, critics would tell you President Erdogan does build on these divisions with divisive rhetoric, with these culture wars in this country

and this did seem to work in this case.

And at the same time, there are also questions about whether the opposition had the right candidate going into this election. There was a lot of

criticism, a lot of people who didn't believe the 74-year-old Kemal Kilicdaroglu was the right candidate for the right time for this moment,

when President Erdogan was at his weakest.

There was this feeling even amongst his own coalition, at one point that there should have been a different candidate running in this election. So

you know, you people would be looking now to the opposition, whether they lost that opportunity, if that promise changed, that they were promising

people and if they should be looking back at this and the lessons learned.

QUEST: Jomana, where will the opposition get the other nearly six percent - - five to six percent that they require? Where are they going to pick that up?

KARADSHEH: Well, I mean, that's the question, Richard. Are they going to be able to pick this up? Because right now, the feeling is that you know, you

have this united opposition more galvanized than ever. People who are turning out and voting for them yesterday were so enthusiastic. They really

believed in that promise of change, promise of democracy returning to Turkey, one of the main things that the opposition has been promising.

How are they going to get the rest of these votes? You've got this third candidate who has been eliminated right now, Sinan Ogan, and he got about

five percent of the vote, just over five percent.

What happens to that? That is going to be critical votes, and we don't know his supporters, who they are going to be voting for --

QUEST: Where would those votes naturally go?

[15:05:08]

KARADSHEH: Again, Richard, because if you look at the people who voted for Sinan Ogan, you've got a combination of disenfranchised nationalist, who

had a different vision for nationalism in this country.

They didn't believe that President Erdogan and his allies were going to do enough to realize that vision, and then you know, and they went for the

ultra-nationalist, Sinan Ogan, and then you've got on the other side, some of the protest votes, people who disagreed with the choice of Kemal

Kilicdaroglu as the opponent in this race, as the choice for the opposition.

And so the question is, what is going to happen? Are they going to follow whatever Sinan Ogan decides to do at the end of this, who he decides to

endorse in this race? And he said, he's not sure where he's going to go, what he's going to do.

Some would tell you, it is more likely towards the Erdogan camp in this case. You know, so we'll have to wait and see what happens in the next

couple of weeks. Ogan himself saying that he is going to be in consultations with four other members of his alliance -- Richard.

QUEST: I'm looking forward to talking to you more about this in the days and weeks ahead, certainly, as we head towards the runoff. Thank you,

Jomana, in Istanbul tonight.

The president has dominated the vote in rural areas. The popularity remains high amongst religious, working class voters living outside the big cities.

His opponent performed better in the more secular urban areas. Now, the attention turns to Sinan Ogan as we were just talking about, who came in

third place.

Becky Anderson now reports that the third place position and share could make him the kingmaker.

(BEGIN VIDEOTAPE)

BECKY ANDERSON, CNN INTERNATIONAL ANCHOR (voice over): Sinan Ogan's five- plus percent of the vote will be crucial to secure in the run off on May the 28th when the country will head to the polls for a second time in a

contest between Turkish president, Recep Tayyip Erdogan and the opposition leader, Kemal Kilicdaroglu.

Ogan is part of the right-wing Ancestral Alliance, which is staunchly conservative, anti-immigrant and anti-Kurdish.

He tells CNN that the alliance has not made a decision on whether to endorse either candidate, but he is making his demands clear.

SINAN OGAN, TURKISH ATA ALLIANCE PRESIDENTIAL CANDIDATE (through translator): What we're thinking is all the political parties should

exclude terror organizations. We don't have to give our support to either of the parties. There is no such rule.

When we first started this race, we thought we need to either win the government or we are going to be the kingmaker and we are at that status.

Political parties like HDP, we want those candidates not to rely on parties that have no distance between terrorist groups and we succeeded in that.

ANDERSON (voice over): Ogan is a former lawmaker for the ultra-nationalist, National Movement Party, which was allied with Erdogan's AK Parti for this

election. But he was expelled from the party back in 2017, when the leader backed Erdogan's referendum to transform Turkey from a parliamentary system

to an executive presidency.

In the lead up to this election, Kilicdaroglu secured the support of the HDP. That's a leftist, mostly Kurdish party that is currently in court over

its suspected ties to the PKK, a group that Turkey, the US, and EU have labeled a terror group.

The HDP denies any formal links to the group.

If he decides to throw his weight behind one of the candidates, Sinan Ogan expects those who voted for him to follow suit.

OGAN (through translator): Our electorate is very bonded with us. And of course, where we lead to, they will come with us. Our base electorate

wouldn't vote for those other candidates because Erdogan was the Islamist candidate and Kilicdaroglu was the leftist candidate, but who is voting for

us is Kemalists supporting Ataturk, and that's why we got their vote.

They consider us a younger leader, and we understand the world better today.

ANDERSON (voice over): Becky Anderson, CNN, Istanbul.

(END VIDEOTAPE)

QUEST: All of this uncertainty is weighing on Turkey's financial markets. The currency hit a new record low against the dollar and there's worse to

come many believe.

The stock market is also down. The benchmark closed six percent lower. The president's economic policies are often contrary to conventional economics,

believing the best way to fight inflation is by lowering interest rates, just as the rest of the world raises them.

Selva Demiralp is the economics professor at Koc University and a former economist for the Federal Reserve, joins me now from Istanbul.

I guess, to use that phrase that economists and market strategists use, if you look at the currency, the risk is on the downside now. Would you agree?

SELVA DEMIRALP, PROFESSOR OF ECONOMICS, KOC UNIVERSITY: I would, because as you mentioned, the government -- the incumbent government has a higher

chance to win the elections and they have a clear preference to maintain the existing policies, which is this unconventional low interest rate

policies.

[15:10:12]

And by definition, if you keep interest rates low, demand for your local currency is going to go down, which is going to put pressure on the

currency, which is what we are observing in Turkey right now.

QUEST: And of course, you import a huge amount of inflation and the lower rates -- I mean, there must be a logic to why the president and the

government follows this policy, which is agreeably completely contrary to what everybody else does.

DEMIRALP: The idea is to stimulate growth and Turkish economy has been running on steroids for quite some time now, because the decline in

productivity has been tried to be compensated with low interest rate policies.

And each time low interest rate policies led to overheating and inflation. Inflation itself slowed down the economy. And then we saw another round of

rate cuts. So, we got into this loop now and because more structural reforms have been postponed, the government doesn't have anything else, but

to rely on rate cuts, but it generates inflation, inflation itself puts further pressure on the currency and the desired stimulus in the end cannot

be achieved.

QUEST: So how much is Turkey the beneficiary of everybody else doing the hard work around them, all the other countries and the major economies

raising rates, squeezing out inflation, getting back to some sort of orthodox economics.

Although Turkey is on a frolic of its own, it does benefit from if you like, trading partners being more resilient.

DEMIRALP: I would say that, if the idea of rate cuts -- well, one reason for rate cuts is to keep Turkish lira or Turkish exports more competitive,

that is not really helping, because our exports are not really that price sensitive.

So unless our major trade partners, which is Europe grows faster, and their income is higher, our export -- demand for Turkish exports doesn't really

rely on the exchange rate that much. So I would say, for the rest of the world, this is going to be an interesting box that is going to go to

textbooks most likely about what happens when you deviate from conventional policy, what are the consequences.

And we're going to say that, when you do that, you are not really going to achieve the desired growth rate, but you're going to end up with more

inflation, because Turkish growth rate has been losing momentum, despite all of these rate cuts, but from our perspective, it is much more than

that.

From our perspective, it is a significant decline in our standards of living and depending on the capital controls that might need to be imposed,

it could actually change the pattern of life, because just imagine that, if you cannot really buy foreign currency, you cannot even turn that growth at

the extreme scenario.

QUEST: So when does the crunch moment happen? Because these unorthodox policies, including employing a family in government, these unorthodox

policies have been around for some time, and the country seems to muddle on, agreeably, as you say that the people are getting poorer, the standard

of living goes down.

But when does the crunch happen? When the people say, we're no longer going to buy the bonds, Turkey heads towards default or a bankruptcy.

DEMIRALP: I think the critical variable here is going to be the availability of foreign currency reserves, because that's the way the

government has been maintaining or controlling the exchange rate despite low interest rates.

So at that point, the two key variables are the government's ability to find foreign currency reserves, because we don't print dollars, we are not

the Federal Reserve. And so far, they have been borrowing from the rest of the world, at least from certain partners like the Saudi Arabia or United

Arab Emirates.

And when that doesn't work, or when that is exhausted, then it's going to be the ability to suppress demand for dollars, but then the implication is,

are you going to allow for a slowdown in economic growth? Because we have to import intermediate goods in order to export.

So by suppressing demand for dollars, you have to slow down or you have to let go of your growth targets. So if the government is willing to do that,

then they can maintain this current regime, unorthodox regime for a while and if they don't want to let go of the high-growth targets, then I'm

afraid the capital controls is going to be the only solution which will just turn Turkey into a more closed economy and like I said, for us who

live in Turkey, that would have very adverse consequences for our standards of living.

[15:15:18]

QUEST: Thank you very much. We'll talk more on this as we follow through.

DEMIRALP: My pleasure.

QUEST: Very grateful to have you on the program tonight. Thank you.

The European Union has given its blessings for the latest Activision with Microsoft. After the break, we'll discuss it.

(COMMERCIAL BREAK)

QUEST: EU regulators have given the greenlight for Microsoft to merge with Activision. The approval is a rare piece of good news for the deal, which

is worth at least $70 billion.

The US and the UK are both objecting on antitrust grounds. No one is celebrating, although Microsoft and Activision shares are higher, not

hugely as you can see.

The EU's approval was conditional on some concessions, and Microsoft won't get the deal through unless it wins legal challenges in the US and UK.

Buying Activision makes Microsoft the world's third largest game publisher.

Clare Duffy is in New York.

Now, the core question. Fine, the EU has approved, but as long as the UK says no, where does this deal go?

CLARE DUFFY, CNN BUSINESS WRITER: So this EU decision is really sort of a glimmer of hope for this deal, but this is still a far away from coming to

fruition.

Microsoft and Activision are facing legal opposition in both the US and the UK and it is in the process of appealing both of those decisions, but it

could come down to Microsoft having to make even bigger concessions than it already has.

It had already promised to make some of Activision 's biggest titles like "Call of Duty" and "World of Warcraft" available on rival platforms. But

the US and the UK are saying that's not enough.

And so it could come down to making even bigger concessions, like selling off big parts of Activision's business, which the company really doesn't

want to do.

So for now, it's in the process of having to try to go through this appeal and argue that these anti-competitive harms that the US and the UK say

exist, aren't real, aren't going to harm consumers or competition.

QUEST: This is fascinating, because I remember Brad Smith, Microsoft's president, when the UK rejected, said it is not really feasible to carve

out the UK from Activision, to do so would sort of destroy the core of Activision.

So unless they can do a deal with the UK, they are pretty much stymied.

[15:20:05]

DUFFY: It's true. I mean, Activision is one of the biggest, most popular game publishers in the world. And so to say, you know, we're going to try

to carve out the UK would be really challenging.

And I don't see how the deal could go forward, if that's the case. And I think what is really interesting about the situation is it really gives you

a sense of the challenge that big tech companies are facing in terms of understanding the regulatory landscape around the world.

I mean, you have two of the world's biggest antitrust regulators saying this is going to harm competition. This is a problem, this could harm

consumers. And then you have the EU regulators saying, this is okay, it can go ahead.

And so I think, we get a sense of just sort of how confusing and challenging it is for the tech companies to decide can they make these big

acquisition deals?

QUEST: You raise a very good point, which is, you know, we've seen before, perhaps in more controversial cases, we've seen an EU or a US go the

opposite way. But since they're all working on the same statistics, and they are all working on the same argument, isn't it a bit wrong that the UK

says one thing along with the US, and the EU says something completely opposite?

DUFFY: I mean, I think it is possible that this EU decision could give a little fire to Microsoft and Activision in fighting these battles in the US

and the UK. It could be able to point to that and say, well, look, they said, It's fine. The EU said it's fine.

And so I think it possibly does give them a little bit of an added boost in these legal battles, but yes, I mean, it is a sort of confusing situation

for these companies.

QUEST: Clare, always good to hear your perspective. Thank you.

DUFFY: Thank you.

QUEST: The EU is a little more optimistic about its economic prospects this year. It has upgraded GDP forecasts to one percent. That's up from 0.8 in

February.

It reflects the lower energy prices and stronger than expected job market. It forecasts inflation this year to average 6.7. It is not until next year

that it's at 3.1, which is still above of course, the two percent target that the ECB, unless you take in a symmetrical basis, but it's still above

the two percent target.

Bob Diamond, CEO of Atlas Merchant Capital, joins me. We'll talk banking in a minute, but I just need to do, sir, I mean, we're looking at better --

the Bank of England has taken recession out of its forecast. The EU is now, as you see, the head has now increased its growth. I mean, are we out of

the woods and off to the races?

BOB DIAMOND, CEO, ATLAS MERCHANT CAPITAL: Listen, I think the economy is doing fairly well, particularly in the US. And I think Europe follows that.

I think, you know, from an inflation that was raging and got above nine percent, it is now just under five percent.

My sense is that the Fed is going to pause here, Richard. They're, going to watch for a while, see what the data is like. And, you know, I think by the

end of the year, inflation will be down to between three and four percent, so I think we're in a period of maybe a longer economic correction, but

somewhat shallow.

QUEST: On banking, so let's talk banking. We've had two or three resolutions, their feeling is that they've -- you know, it is contained at

the moment even as rates go higher, which of course puts greater pressure. If their pausing that allows the banks breathing room to recapitalize or at

least sorted out. Are you optimistic?

DIAMOND: You know, I'm kind of balanced. I think we really need resolution around some kind of legislation on the deposit insurance level. I don't

think $250,000.00 is enough. I think there should be something more like $5 million.

I think this is incredibly, incredibly important, not just to individuals, but more importantly, to small businesses. And if you're a small business

in Des Moines, you're counting on your local or community or regional bank for all kinds of services around payroll, inventory financing. You know,

interestingly, it's an incredibly important part of our economic growth and job creation in the US and why we continue to outperform.

By having these community and regional banks, we actually have a deeper, more liquid capital market, and it really serves that sector very well.

QUEST: But the -- and I hear your argument, you know, $5 million, but let's say you go to $5 million, there has still got to be -- I mean, for deposit

insurance, not to be bailout everybody. At some point, you've got to say someone doesn't get made whole.

DIAMOND: Well, I'd say a couple of things. Right now, the Fed and the Treasury have basically implied that all deposits are safe, let's make it

explicit up to a certain level, which is more representative of the kinds of businesses and individuals that need that.

To some extent, banks have already become more closer to government, more like utilities since 2008, so I don't think this is breaking new ground.

We've already increased FDI insurance since 2008 once.

[15:25:10]

DIAMOND: And I think for legislation in this space, it's not really up to a small business in Des Moines, using that example, again, to do enough

research on the capital structure of their bank. That's up to the equity analysts.

And the equity investors are at risk, the unsecured creditors are at risk, the management teams are at risk, the brand and reputation is at risk. I

don't think the depositors up to a certain level should be bearing the brunt of that.

QUEST: Would you, if you were the CEO at Chase, would you have done the First Republic deal?

DIAMOND: Absolutely. I think it's a very good deal for JPMorgan. I think what you want to consider is this isn't a negative statement about

JPMorgan, it's a very, very strong bank, and it was a good deal for them.

But they are now 10 percent of the deposits in the US, and do we want to move to a system with three or four mega banks, where they just don't have

the business model? Because of the capital levels and the cost structure, do they have a business model to be the best at serving small businesses

around the country or specialist businesses around the country?

I'll go back to my first point, Richard. This is a great, great opportunity for the US to recognize that having not just a couple of mega banks, but

having thousands of regional and community banks. It's really about job creation and economic growth. And I think it serves a sector of our

business community very well.

QUEST: Oh, but hang on a second. You know, for those of us that went through, as you did, the savings and loan crisis, back in the 80s and 90s,

and then you had 13,000 or 20,000 banks which was considered to be --

DIAMOND: Fourteen thousand is the number, I remember, right? We have 4,000 today.

QUEST: Right, which was considered to be too many, what is the correct number of banks? I mean, I'm not asking for a number per se. But what is

it? If it's 4,000 or 2,000? When is too many too few?

DIAMOND: So my answer to that would be, let's look at the core issue here, which is we clearly have an issue around FDI insurance. And if we can come

to an agreement on a higher level of FDI insurance, not implied, but explicit, then let the market work.

And I think only then will you get people coming in with equity into the banking system writ large, into regional banks and community banks. And I

think whether there is consolidation and that moves to 2,000, or 3,000, or a thousand, we'll see with the market.

But I think first, before you see equity coming into the market, we need to have some kind of a policy response to what we've seen happen over the last

couple of months and that's simply stated, a higher level of FDI insurance.

QUEST: Bob, it is always good to see you. So grateful to be with us today. Thank you, sir.

DIAMOND: Good to see you, Richard.

QUEST: Thank you.

So to Thailand, the voters went to the polls in record numbers to choose a new government and there was a rebuke, a very strong one in the country's

ruling military leadership. Now, the question, how you affect the change, what does it all actually mean? In a moment.

(COMMERCIAL BREAK)

[15:31:27]

QUEST: Hello, I'm Richard Quest. A lot more QUEST MEANS BUSINESS. A progressive party's promising big changes after claiming victory in

Thailand's election.

And Argentina's Central Bank just raise interest rates to 97 percent. It's triple-digit inflation. The reality there we need to understand what does

it actually mean? It's a silly numbers. But we'll only do that after the news because as you well know, this is CNN and here the news always comes

first.

A 78-year-old American has been sentenced to life in prison by Chinese court. U.S. citizen who is also a resident of Hong Kong was convicted of

espionage according to the court. CNN's reach out to the state department for comment and we're waiting to learn more.

The World Health Organization's warning against using sugar substitutes for weight loss. It says a review of hundreds of studies, yeast alternative

sweeteners are not effective, and taking them for the long term could increase the risk of diabetes and heart disease.

Vice media has filed for Chapter 11 bankruptcy. The digital news outlets as the filing will help complete the sale to a group of creditors. Lenders

have agreed to pay $225 million and take on significant liabilities.

Thailand's main opposition party says they will form coalition after sweeping Sunday's national election. The voters turned out in record

numbers and delivered a strong rebuke to the military or hunter in power since 2014. Unofficial results put the youth focused Move Forward Party and

position to lead the country. CNN's Paula Hancock's reports.

(BEGIN VIDEOTAPE)

PAULA HANCOCKS, CNN CORRESPONDENT (voice-over): A street celebration in Bangkok as the progressive Move Forward Party claims victory in Thailand's

elections. The party that promised the most changes has won the most votes.

PITA LIMJAROENRAT, LEADER OF THE MOVE FORWARD PARTY: The people of Thailand have already spoken their wish. And I am ready to be the prime minister for

all whether you agree with me or you disagree with me.

HANCOCKS: The younger generation came out in force to vote saying they wanted a new future for their country.

THANATCHA BUAYAI, MOVE FORWARD SUPPORTER: Things like the new generation. And I am one of the new generation.

NAT SOONTORNARUN, MOVE FORWARD SUPPORTER: There are thing that Thailand you have, like good democracy.

HANCOCKS: Now comes the horse trading. PETA has asked her tie with the second highest votes to join his coalition. The party affiliated with

exiled former Prime Minister Thaksin Shinawatra was favorite to win. And his daughter says they will work with their fellow progressives.

PAETONGTARN SHINAWATRA (through translator): We have to accept the result with sportsmanship. When Move Forward has won is number one, we

congratulate them and we're cheering for democracy and for the nation to move forward.

HANCOCKS: Both parties ran on a ticket to reform the economy and keep the military out of politics. Move Forward went one step further pledging to

reform the once untouchable monarchy.

THITINAN PONGSUDHIRAK, POLITICAL ANALYST: They have tapped into a lot of sentiments that have been feeling I think that Thailand needs to change.

And that change has to do with the reform of the military, the monarchy getting rid of the draft amending the Article 112 Lese Majeste. That's what

Move Forward proposes.

HANCOCKS: A result seen as a strong rebuke to years of military-backed politics. Incumbent Prime Minister Prayut Chan-o-cha, former crew leader

and army chief said he would respect the people's decision after the polls closed.

[15:35:05]

PEERAPAN SALEERATTAWIPAK, UTN PARTY'S CHAIRPERSON (through translator): We have to accept the reality. It's not that we get what we want all the time.

Working in politics we need to accept the reality all the time that there is no certainty.

HANCOCKS: Despite two military coups in less than 20 years in Thailand, most political experts believe chances for another are low this time. But

the biggest party is not guaranteed to feel the next prime minister. Move Forward needs to secure the majority of 750 M.P. votes for Pita to become

prime minister. 250 of those are from a military elected senate who are unlikely to support a progressive candidate.

Celebrations may be underway, but so is the deal making to ensure the final government reflects the will of the voters.

Paula Hancocks, CNN Seoul.

QUEST: Joining me now, Joshua Kurlantzick is the senior fellow for Southeast Asia at the Council on Foreign Relations. Joshua, how difficult

will it be to actually get into power bearing in mind those seats that are essentially reserved for the military?

JOSHUA KURLANTZICK, SENIOR FELLOW FOR SOUTHEAST ASIA, COUNCIL ON FOREIGN RELATIONS: This is going to be challenging because the military controls

the senate, which is 250 unelected seats. And you have to win a majority of the lower house and the upper house. So, 500 Lower House seats, plus 250,

unelected Upper House seats loyal to the military to be Prime Minister.

Even if you have a sweeping victory like this, the military still could put together a coalition of smaller parties, military align parties, and

combine that with the unelected senators, and just squeak by and pick a prime minister. Now, I think that still remains a very strong possibility,

given Move Forward's pretty radical views. But if they do that, you're going to wind up with enormous popular protests. And if the history of

Thailand shows us anything, bloodshed as well.

QUEST: I mean, elsewhere, one would say that it is, you know, flying in the face of the will of the people. But the military has done that before. And

could -- and as you say, electorally could do it again. If Move Forward comes in, does manage to eke their way in, is the military in the prospect

of a coup that remote or, you know, or is it a case of don't push too far, we're watching what you do?

KURLANTZICK: Prospect of a coup is never remote in Thailand. They've had 18 or 19 coups or attempted coup since the end of the absolute monarchy in the

1930s. They have an established coup culture where the military believes that if things are chaotic, or if the military, the monarchies, interests

are being challenged that they step in. The current Armed Forces chief has said that a coup is -- that the military will not step in.

But that's about as believable as that's not believable.

QUEST: Right. So --

KURLANTZICK: They've said that many times before and then stepped right in. So, if they feel that a Move Forward-led coalition would be very strongly

contrary to the military and most importantly, the monarchy's interest, this monarch is not really a constitutional monarch. He's really pushing

towards more like absolute monarchy. A coup is definitely never out of question.

QUEST: Right. So --

(CROSSTALK)

KURLANTZICK: And Thailand has always sort of default option of a coup.

QUEST: Right. Well, one of the things of course, on the monarchy, the Lese Majeste, the very, very strict rules. That means even as I talk to you now,

one has to be certainly circumspect, since at some point, we may all end up going to Thailand or maybe to Thailand. But at some point, there is a view

that that needs to change. That a -- the monarchy needs to reflect more, the traditional constitutional monarchy, particularly in an environment

where the current -- where the incumbent is perhaps not as popular as predecessor as his father.

KURLANTZICK: Well, I think there was pressure to reduce the Lese Majeste law. Law 112, even under the previous very well-liked king. In fact, that

King said he was not above criticism himself, he said that. What's happened is 112 law, the Lese Majeste law has been expanded enormously to attack all

sorts of dissidents while at the same time you have a king who is not, frankly, well-liked by the populace.

He's not his father, and he has taken a series of steps to consolidate enormous political and economic power that is just not comparable with a

constitutional monarchy and things that his father in the past left to technocrats, he has taken on for himself.

[15:40:13]

And so, those things can bind with a terrible economy and poor COVID management by the supreme government, has led to just enormous anger,

particularly among young ties.

QUEST: So, as the -- as this continues and as we see the machinations, we'll be back to talk to you to help guide us through. I'm very grateful.

Thank you.

President Zelenskyy of Ukraine's praising Europe's leaders for their offers a fresh military aid and he wants them to unite and supply and care of yes,

fighter jets is back on the agenda. We'll be in Ukraine in a moment.

(COMMERCIAL BREAK)

QUEST: Breaking news. At least three people have been killed in a shooting in the U.S. state of New Mexico. The local police department says two

officers have been shot and injured. They were said to be in stable condition. The suspect was confronted and has been killed on the scene. I

don't know the -- his identity or the shooter's identity. And as this progresses and we get more details, we shall bring that to your attention.

Ukraine's President Zelenskyy is thanking European leaders for offering new military aid during a series of face-to-face meetings. The French president

has offered to send more armored vehicles and tanks. Germany's offered $3 billion in military aid as well. President Zelenskyy is still pushing for

Western fighter jets. With the British Prime Minister Rishi Sunak, he reiterated his call for a fighter jet coalition.

(BEGIN VIDEO CLIP)

VOLODYMR ZELENSKYY, PRESIDENT OF UKRAINE: Today we spoke about the jets were important topic for us, because we can't control the sky. We want to

create these jets coalition and I'm very positive with it. We spoke about it and I see that in the closest time you will hear some, I think were

important decisions but we have -- we have to work a little bit more on it.

(END VIDEO CLIP)

QUEST: Sam Kiley is with me from southeastern Ukraine. Good evening, Sam. How close are we do you think for some form of coalition to get at least

some jets to Ukraine?

SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: It's very difficult to tell but if we read the runes, the French are talking about a possible

training program for fighter pilots.

[15:45:04]

The Brits have confirmed in that meeting with President Zelenskyy and Rishi Sunak in Chequers today. They will be training fighter pilots. And

Ukrainian have said the only aircraft they really want now, they really focus their wish list down to the F-16. So at least they have some

homogeneity, I suppose if and when they ever get them. Poland has F-16. Other NATO partners, of course, have them. The biggest purveyor and owner

of them is the United States because that's where they're manufactured.

And so far, NATO partners have been reluctant to supply these weapons, because the consideration is that they'll give a strategic edge to Ukraine

that could provoke a nuclear reaction from Russia. On the one hand, on the other hand, it seems that President Zelenskyy once again has reinforced the

alliance behind him with his whistle-stop tour around Europe. And of course, he's got it already from the United States which now they are in

unison on this idea that he has been promulgating from the get go, which is that every Russian soldiers should be driven out of every inch of Ukraine's

soil.

That seems to be a consensus on that. Very little pressure indeed, on getting him to go to any kind of concession even if he were to be

successful in this next offensive, Richard.

QUEST: So, one other thing I just want to quickly touch on if we may, the Wagner Group. They're denying that they've given information to Ukraine or

to keep or whatever, but whatever the truth of that is, how important is the Wagner Group now? As the relationship between Wagner and Russia seems

to be deteriorating. Are they still the principal player for places struggles?

KILEY: Well, I think they could only really call them a significant stroke principled or main player in the battle for Bakhmut where they have thrown,

certainly, according to the Ukrainians, but even the Russians have met vast numbers of personnel into that fight. Many of them prisoners' conscripts,

we've seen them fighting elsewhere, not far from Bakhmut where they've been gunned down in almost industrial quantities, very poorly armed and led

causing a lot of friction between those mercenary groups.

A lot of them prisoners or former prisoners and the Russian military itself. The Ukrainian assessment, though, is regardless of the status of

Wagner, the Russians more broadly, no longer have the capability to launch a major offensive against Ukraine. They believe that they're well dug in

and that they're coherent perhaps, they're likely to be a formidable defensive force. But in the estimation of Ukrainian intelligence recently,

they don't believe they've got that offensive capability.

Part of that maybe because of the grinding down of Wagner. The counter argument is that Wagner has been very useful in absorbing a lot of

Ukrainians. Ukraine's violent energy in the defense of Bakhmut over the last year that might have been focused on -- if you like, the real Russian

army, Richard.

QUEST: Sam Kiley, good to have you with us. And we will watch closely Thank you.

Inflation in Argentina is a struggle it goes back decades. Central Bank now drastic. Best part of 100 percent. Well, oh God, the annual inflation rate

is 109. And now interest rates are at 97. This is weird because the economy still manages to somehow muddle along. In a moment.

(COMMERCIAL BREAK)

[15:51:09]

QUEST: The heads of Minneapolis, Atlanta and Chicago fed all spoke today. They agree inflation is still far too high. The President's also indicated

the Fed is pausing in its rate increases. The U.S. markets, if you take a look at the way we've done, I mean, it's virtually nothing and bouncing

around the zero point. Just up 20 odd points with Intel leading the way at the moment.

Goldman Sachs and JPMorgan are both up as well. Microsoft is little changed, even though the E.U. has approved Activision overall, but you've

got of course the question of the U.K. still refusing to get to go forward with that.

Argentina is taking emergency measures to tackle runaway inflation. Central bank raised its benchmark point by 600 basis points is now 97 percent. The

annual inflation rate reached 109 percent despite price controls and shoe rate rises. It's been 30 years since the country has suffered triple digit

inflation.

Patrick Gillespie is Bloomberg Buenos Aires Bureau Chief. Patrick is with me now. Patrick, look, the reality is and you and I discussed this when I

was in Buenos Aires last year. The reality is that this -- these numbers are almost meaningless, except it's cost more to people to buy -- to buy

things in the shops because 97 percent interest rates in the economy still continues.

PATRICK GILLESPIE, BLOOMBERG BUENOS AIRES BUREAU CHIEF: Richard, we're in a very delicate situation. Argentina is certainly facing the prospect or the

risk of potentially going into hyperinflation when prices are rising 50 percent month over month. We're still far from that. But prices are picking

up at a galloping pace right now. And you're right. Monetary policy tightening raising interest rates at such a, you know, time also as a

galloping pace isn't helping the economy. It isn't convincing people.

In fact, it's probably leading to more of a sense of desperation in the economy, a panic.

QUEST: So, so (INAUDIBLE) the Fed raises by three or four percent. And the economy slows down. Inflation comes down. Why is the inflation not

responding to these higher rate rises in Argentina?

GILLESPIE: Richard, Argentina isn't a very credit focused country that mortgages are almost non-existent in this country. People buy their homes

entirely in cash U.S. dollars. So, this is a very cash focused economy. People have most of their savings outside the banking system. So, a raising

interest rates while it does incentivize saving and pesos. We're in such a politically volatile moment right before a presidential election in

October.

Inflation is so high that people don't have confidence in the peso. Nobody wants to earn money in pesos nor saving pesos. So, raising interest rates

while in theory, it should encourage more savings in pesos, more demand for the -- for the currency. The country is so focused on dollar-rising right

now that monetary policy is not having its intended effect.

QUEST: So, dollarization on the dollar rising. I mean, it's far more complicated than we can get into in two minutes. However, it's not worked

in the past and it's unlikely to work in the future. The reality is, for inflation and Argentina to come down, there's going to have to be the most

massive recession.

GILLESPIE: We're expecting a steep recession this year. This would be Argentina's six recession in the past decade, Richard. And the reality is

that things have to get worse in terms of the economy before they're going to get better. The next government will likely have to do a severe sharp

what they call mega devaluation on the currency to fix a big gap between the official exchange rate and this alphabet soup of parallel exchange

rates.

So, we're looking at a very difficult situation this year and the next government that comes in at the end of the year in December is going to

have to do some shock therapy to get the economy back online.

[15:55:01]

QUEST: So, it's really -- I mean, if you pull the strands together, it's a very difficult situation and with an election next year, your -- as I read

your rightly, you're not expecting major changes.

GILLESPIE: Well, we're not expecting this situation to improve in the near term at all because you've got galloping inflation expectations, this

government -- the central bank is broke, it doesn't have any cash reserves left. And everyone's wondering what's going to happen with the election

later this year.

QUEST: Right.

GILLESPIE: So, no near-term improvement in Argentina.

QUEST: Patrick, I have you paid in dollars. Thank you for joining me from Buenos Aires tonight. Patrick Gillespie. We'll take a profitable moment

after the break. QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment. There is nothing more majestic than that moment when the people have spoken. And assuming that the election was

free and fair and that means both in the run up to and access to media and to the public and voting on the day, then we have two elections that are

fascinating that we'll be looking at. Of course, there is the Turkish election, which goes through a runoff and the Thailand election where the

opposition has won.

Now in most cases, of course, when the results in it's all over while the shouting. And even if the popular vote goes different to the results, which

is always a possibility in both parliamentary and presidential elections, like the U.K. and the U.S. Here in Thailand, you've got a really

interesting situation where yes, the opposition's won, but will they be able to take power? And if they don't take power, then what does that mean

for the spirit of democracy?

Which of course is a question to be asked anyway, in a country that's had so many military cues. And has for Turkey and Erdogan's 20 years, a run

off, where the opposition has to find five percent and the third party withdraws, for wherever that third party's five percent go. Again, it is

fascinating.

At the end of the day, when you look at these elections, and we all come to them with our own political views and conceptual views. I tend to put that

to one side, at least on Election Day itself. I tend to look at this process and feel the fact of a nation speaking. And now you just have to

hope on the honesty and the integrity of the politicians to actually give will to what the will of the people has said or maybe I'm just naA_ve.

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

bell is ringing. The numbers up (INAUDIBLE)

END