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QUEST MEANS BUSINESS
BP Bailout?; Economic Strategies Clash; British Royal Family Tightens Belts
Aired July 5, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, HOST, QUEST MEANS BUSINESS: Holding on for a hero, will BP find anyone to keep the predators at bay?
European cuts versus American stimulus, to economic strategies clash head on. We're ringside for the great economic debate.
And counting the cost of the queen, the British royal family tightens their belts.
I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello to you.
BP shares were in demand today after two months of relentless falls took them to their lowest level in 14 years. The company is said to be looking to hook a big investor to play the role of white knight and to help fend off any hostile takeover interests. The story seems to have gotten the markets interested. Jim joins me now with that.
What are the markets saying about this, or interpreting events?
JIM BOULDEN, CNN INT'L. CORRESPONDENT: Well, at one point the shares were up more than 5 percent today in the London stock exchange-based on these rumors. The idea, of course, it is interesting, this idea that either BP could ask one of the sovereign wealth funds in the Middle East or one of the sovereign wealth funds is thinking about investing into BP. But you can see here, when the day ended they were up 3.5 percent. So down a little bit off their highs, but of course, let's not put too much of a rosy gloss on this.
FOSTER: Not back to normal, is it?
BOULDEN: If you remember where we were back on April 20 when this took place, the shares are down nearly 50 percent, still; though we did see a little bit of a blip late last week as well.
What I was talking about are these sovereign funds. There is this idea that one of the sovereign wealth funds that are, of course, oil rich, whether it be Kuwait, Qatar, Abu Dhabi, maybe even Libya has been mentioned, might want to invest money into BP. Now, a lot of these already have deals with BP. Libya for one has a good deal. Now the theory here is that they may be a quiet investor. Maybe buy 5 or 10 percent of BP.
Existing shareholders aren't very happy about this idea. If it is even true, it is just speculation, because that would dilute their shares. So, it is not a simple solution for BP. And then there are people saying, well, they don't even need the money at the moment anyway.
FOSTER: It is probably preferable to a take over, though, right?
BOULDEN: Well, this is the point, is it? Would you see a company like Exxon or Shell attempt to take over BP? Well, this has been in the markets for a couple of weeks, and every analyst that you talk to says it is rubbish. There is no way any company is going to take on that liability. Of course, BP says it is going to sell some of its assets. Absolutely going to happen. So many of these sovereign wealth funds, or a Shell, Exxon, Petrobras, would come in and want to maybe buy some of the assets.
FOSTER: OK, well, one thing that-every one is speculating about are the careers of those at the top of the company, and people saying you can't have an event like this and keep the current leadership. So what have you learned about that?
BOULDEN: Well, they have gotten though the immediate crisis, haven't they? And they've had their issues, but the "Financial Times" has been reporting, and has others, that when BP finally succeeds in capping this leak, it is expected to get to work in cleaning up its reputation and it is said to be starting with changes at the top. Now, BP is expected, according to the FT to replace both its chairman and its CEO within weeks. Now who could it be?
Well, of course, number one for CEO would be Bob Dudley. He's currently the managing director for the Americas and Asia. And he was the former head of that very, very troubled Russian venture, TNK BP. Recently, of course, he took over the company's efforts to-against the spill last month. One thing going for him, of course, is he is a U.S. citizen, very well known in circles, political circles in the U.S. And he would be the leading candidate.
Now others could be another chap called Charles Chip Goodyear. Now, he is the former chief executive of BHP Billiton. Now, he could replace Carl-Heinrich Svanberg, possibly as the chairman. Of course, he has been accused of being somewhat out of touch. Goodyear is also an American.
Another who could replace the chairman is Paul Anderson, he is the former chief executive, as well, of BHP Billiton. And he joined the BP board this year. He is also an American.
We should also note, of course, today that BP said this spill has now cost it a little more than $3 billion. But we should of course say, so far.
FOSTER: Yes, it certainly could go higher. Thanks very much, Jim.
Well, the reality of this is that normally the beaches of the U.S. Gulf Coast are packed on the Fourth of July, for holidays, not this time though. Many Americans have changed their vacation plans because of this oil spill. As John Zarrella now reports, the list of victims of the spill include dozens of local businesses.
JOHN ZARRELLA, CNN CORRESPONDENT (on camera): We visited a few of the Gulf beaches for this Fourth of July weekend and one of the things that they all have in common, as you can see here, behind me, is that for the most part there weren't a whole lot of people on the beach.
UNIDENTIFIED MALE: I'll be in two chairs. We got a parking space right at the front of the parking lot. You couldn't do that. I would be across the street, down the road, by the bridge right now.
ZARRELLA: While the water looks pretty clean today, and it may well be, as the waves are moving in, they're beginning to expose a lot of the oil that has been buried. Look at this, one, two, three, four, five different chunks of oil sitting here that were buried.
This is Orange Beach, Alabama, if you didn't know it you'd think you were in Pensacola. Work crews out here trying to get up as much of the tar balls as they can. And, of course, the beach practically deserted. Not very many people on it at all.
Officials here in Gulf Shores say business is down at least 50 percent, maybe more. And it is certainly easy to tell by looking at the beach behind us here. In fact, one of the restaurants we were in this afternoon, half of the tables were empty. A normal Fourth of July weekend, that certainly wouldn't be the case. Plenty of room for everyone on this beach, including those kids over there playing soccer. They wouldn't have been any room for them to play soccer on this beach, a normal Fourth of July weekend. All up and down the Gulf Coast, at beaches that have been affected by the oil, people for the most part, stayed away. John Zarrella, CNN, Gulf Shores, Alabama.
FOSTER: Let's go back to that iconic image, then, of this whole crisis, the live pictures of the spill. As you can see, it is still coming out, it is still causing problems. This story just goes on and on. We'll keep you updated on whether or not that will ever be fixed. It doesn't feel like it sometimes, but I'm sure it be, at some point.
And Britain, right now, cuts are on the agenda for pretty much everyone-even if your head is on the coins. Well, have a look at the royal finances after this.
FOSTER: She may be royalty, but even the queen in these austere times has to keep an eye on costs. The royal finances are being squeezed as the nation undergoes a massive budget crisis, like many other around the world, of course. Accounts for the year, to the end of March, show Queen Elizabeth's expenditure was down by $5 million in the previous year, just under $58 million, a drop of 8 percent. To put it another way that is slightly less than $1 a year for each of Britain's 60 million people. Now, Buckingham Palace has most of the savings came from the queen's travel budget. She took fewer charter flights last year and handed back some money to the government after selling her old helicopter.
According to the palace, the queen's annual spending has fallen by 17 percent in real terms since 2001. She is still one of the wealthiest people in the U.K., of course, "The Sunday Times", which publishes an annual rich list ranks her at No. 245. It estimates she is worth $446 million.
Now, a familiar watcher of all royal affairs here at CNN, is Richard Fitzwilliams, he has been pouring over these figures.
Are you feeling sorry for the royal household right now?
RICHARD FITZWILLIAMS, ROYAL COMMENTATOR: I'm impressed by the way they are saving money. From stationary to uniforms to furnishings, there have been cuts. But most of the cuts went on the travel budget. And the fact, as well, as you mentioned, her helicopter was sold. There is a problem with the royal accounts. The queen in 2012 celebrates her diamond jubilee. She is funded by the taxpayer and she is drawing on an emergency fund, which has built up during the 1990s.
FOSTER: This is what we need to talk about. So, when we talk about the figures she's spending each year.
FOSTER: She is actually overspending, but there is a savings account.
FITZWILLIAMS: There is, indeed. This is the civil list. The civil list funds the offices of the queen and the Duke of Edinburgh. It was dating back to 1760, when George III swapped the crown lands, which bring in 220 million pounds, for the civil list which was last increased by John Major and is about 8 million. It is 14 million spending, this last year. And that is drawing down 6 million pounds a year. The actual-
FOSTER: So what you are saying is the reserves are being used to fund the current household?
FITZWILLIAMS: This is the point. The reserves for 35 million in the 1990s, they are now down to 13 million and the whole way of funding the monarchy is likely to be changed, come 2012.
FOSTER: It will have to be, won't it? Because if they run out of that reserve fund, the royal household is bankrupt.
FITZWILLIAMS: Absolutely. That cannot happen, because you must consider also, what value for money we get from it. For example, if you look at tourism, yes, I accept the point that people go through the royal palaces and see them anywhere, but in this case Britain's pomp and pageantry is unique in the world and we have the world's most high profile royal family. Also the voluntary sector, the queen and the duke of Edinburgh together are attached to about 1,400 organizations, charitable organizations that benefit so much, whether it be the prince's trust or whether it be the duke of Edinburgh's-
FOSTER: But there are people in real suffering in this country, and in this world, people are making massive cuts, and they still have the various trappings of luxury, of course.
FITZWILLIAMS: But the trappings are significant if you want this sort of monarchy. It depends whether you want the Scandinavian model, or whether you want something which has style and also where cost cutting is being done absolutely ruthlessly. Remember the queen, our oldest reigning monarch, at 84, did 358 engagements last year. It is absolutely remarkable record.
FOSTER: She's incredibly healthy, isn't she? Richard Fitzwilliams, thank you very much indeed.
Well, right now, the queen is on her travels, acting in her role as British head of state, and representative of the country abroad. At the moment she is in Canada. Tomorrow she heads to New York just illustrating the work that Richard has been talking about. We're going to catch up with the other Richard. Richard Quest, of course, who is following the queen.
And the question is, Richard, is she good value for money?
RICHARD QUEST, CNN INT'L. ANCHOR, QUEST MEANS BUSINESS: Well, I think if you just look at what her majesty is going to do, on Tuesday. She will have several engagements in Canada, before flying down to New York in the early afternoon. She will give an address to the United Nations. She will then-as well as having photographs taken and greeting the secretary- general-she will then visit ground zero. She will then hold a reception and she will meet families from some of the 67 families who have lost people, British families, that lost relatives in 9/11, before flying back to the United Kingdom.
Now, the woman is 84. She has been on a nine-day trip to Canada before the U.N. part of the trip. I think you get an idea, then, that this woman is more than just, if you like, the embodiment of luxury trinkets. She is the head of state of 16 realms, from Australia, Canada, New Zealand, the U.K., to various Caribbean countries. And head of the commonwealth of 54 countries.
So put it like that, Max, and you start to see that you are not just talking about Elizabeth, the woman, you are talking about the embodiment of the sovereign.
FOSTER: Always lots of support in all the surveys for the queen, herself, but less support for the rest of the family. But they also benefit from all of this. Is there still a discussion going that perhaps she should be the only one getting the money and not the rest of the families?
QUEST: The civil list has been dramatically pared back. For example, Charles gets his money from the duchy of Cornwall, the queen makes personal payments to other members of the royal family, out of her own pocket. So, the number of people who get money-and as Richard was saying a moment ago- the actual civil list has been frozen since the 1990s, when Sir John Major set it at 7.8 million.
The real issue for the palace, going forward, is going to be how they fund the renovations and the upkeep of the palaces, the rooms at Buckingham Palace and Windsor Castle, that are decades old and in need of repair. And there is no point in having a monarchy if it is all done threadbare, two tin cans and a piece of string. Now it is easy to say in times when government departments are cutting back by 40 percent and 30 percent, that the queen has to take her part, too. And what we saw last week with Charles' numbers, and what we have seen now with the Queen's is that they are doing that. Whether or not they can continue to make those sorts of savings will be the big issue.
But tomorrow, on Tuesday, here in New York, Max, the focus will be on the queen as head of state, of all these countries and the representative of more than 2 billion people and the views on the future of the United Nations.
FOSTER: And how is she going to handle that, do you think? Does she talk about politics? She doesn't want to get involved in politics, but it is inevitable, isn't it? When you are representing a country and you are representing all those other countries as well.
QUEST: She will talk about-I'm told, she will talk about leadership. She will talk about the challenges that the United Nations faces, and certainly the challenges since she last addressed them. And if you want to know her credentials for talking at the U.N., besides the fact she is the head. The only two facts you need to remember are she last spoke to the United Nations in 1957. And the first U.S. president that she met, on that occasion, was Dwight Eisenhower.
Now, if you think that she's met just about every U.S., there is one or two she didn't meet, in between, that gives you and understanding for why when the queen attends something like this. It is not just another head of state, it is not just another leader. This woman has quietly sat there, spoken to the people involved, heard the arguments, been involved for the best part of six-six decades.
FOSTER: Unbelievable. Richard, thank you so much. We'll hear lots more from you as you follow the queen on that trip. And her first prime minister, incidentally, was Winston Churchill. So she certainly has seen a lot of politics in her time.
Now, going underwater to improve live on the surface; Istanbul, is un- sinking (ph) one of the world's biggest transport projects. We'll show you how it will transform life in the city.
FOSTER: On QUEST MEANS BUSINESS we have been looking at how the urban environment is adapting to demands of societies of the future. Today we are looking at Istanbul, one of the oldest urban settlements on Earth, and a project that should make life easier for millions.
QUEST (voice over): Istanbul, the city that sits on two continents, and is divided by water. The Marmaray Tunnel is the first railway connection between the two sides of the city, linking Europe with Asia. Finally a quick and efficient crossing which will revolutionize the lives of 14 million people who live, work, and commute in this expanding city.
HUSEYIN BELKAYA, PROJECT MANAGER: Now, we are just linking two continents. It was linked by bridges before, but this is the first time it is linked through a rail tunnel.
QUEST: Huseyin Belkaya is in charge of this difficult project. It involves boring part of the tunnel through the rock and immersing the rest beneath the busy Bosphorus Strait.
BELKAYA: We are in the immersed tunnel. That is under the water, tunnel of the Marmaray Project, we are just now at nearly 42 meters under the water now. But the deepest part of this tunnel is 58 meters under the water level. So it is the world's deepest. Marmaray Tunnel is the deepest submerged tunnel in the world. Usually immersed tunnels are not this much water tight. They let some dripping, but here you see no dripping. So I am proud of it.
QUEST: He is right to be proud. When constructing this underwater tunnel, sections had to be built on land and towed out and then submerged. Joining at the bore tunnel with the immersed part involved revolutionary new techniques.
BELKAYA: This is cutting edge technology we are using here. The Marmaray Project will create, really, a difference in the daily life of Istanbul citizens; 65 percent of the population lives in Asian side, whereas the 73 percent of the jobs are on the European side.
So, every day, every morning, citizens of Istanbul go to the European side, to their jobs, and in the evening they come back to their residences.
QUEST: Digging this tunnel is certainly about Istanbul's future. And in doing so the city has discovered something of the past.
This is Yenikapi, where workers unearthed a fourth century port during construction of the Marmaray Tunnel. The Neolithic discoveries here have shown archeologists that Istanbul is 6,000 years older than previously thought. Oh, and it has also delayed the rail project.
RAHMI ASAI, ARCHAEOLOGIST, ISTANBUL MUSEUM (through translator): Naturally it has affected construction of Marmaray Project, but this is understandable. Everybody knows if you are in an archaeological excavation it takes times.
QUEST: Because of this excavation, the tunnel will be almost five years behind schedule when it opens in 2013. Three hundred people are working on this site everyday, sometimes around the clock. They are peeling back the layers of Istanbul's past.
ASAI (through translator): We are one and a half meters below sea- level. So we are kind of inside the sea now. It is a 6th century Byzantine boat, and most probably those which brought grain and food from Egypt to Constantinople.
QUEST: Back in the Marmaray Tunnel, the engineers are waiting patiently to finish what they started in 2004.
BELKAYA: In Istanbul, as an engineer, I have to help. OK, the project will be delayed some more and the people will be waiting in their bus stops, but when I take out my hard hat and become a citizen of Istanbul, I am proud of these discoveries.
We are now in Skudar (ph) Station, in 2013 it will be a busy platform. Now the ferries take the people from Skudar (ph) to Surkagi (ph) in 20 minutes. But in the year 2013, when the Marmaray system is in operation, it will take only four minutes to cross Istanbul City (ph).
QUEST: The end is in sight for this project, which will ease congestion on Istanbul's choked roads and ferry crossings. It will bring high speed rail, very soon, this ancient city will have a very modern addition that will see it well into the future.
FOSTER: Well, cut or spend, what would your call be? It is the economic debate of our time, and the decisions we make will affect the wealth of everyone of us. Find out where the key players stand in just a moment.
FOSTER: Welcome back. I'm Max Foster in London. More QUEST MEANS BUSINESS in just a moment, but first we are going to check the main headlines this hour.
FOSTER: Policymakers around the world are trying to strike a balance between spending and saving. No government wants to kill off a fragile recovery, but many need to rein in huge budget deficits, which have grown as politicians have tried to kick start their economies. This week on QUEST MEANS BUSINESS we take an in-depth look at the arguments and the key players on both sides of the argument.
The European Central Bank chief, Jean-Claude Trichet, he defends Europe's austerity drive. He says markets shouldn't fear a double dip. He says we are in a period where we have to manage very carefully all the budget.
"You may call it austerity, if you want. I call this rigorous fiscal policies," he says.
Europe is cutting very deep. Governments in Germany, Spain, Italy, and elsewhere are already slashing spending in a very big way. In the U.K., the Finance Minister George Osborne has asked the government departments to draw up plans to cut spending by an average of 25 percent, that is a quarter, the deepest cuts since World War II.
Now the Harvard professor, the very well-respected Kenneth Rogoff says the time is right to start saving money.
(BEGIN VIDEO CLIP)
KENNETH ROGOFF, PROFESSOR OF PUBLIC POLICY, HARVARD: We have to be reining in the budgets gradually. And some of the budgets are going to improve, just as the economy grows. But there's long-term unsustainability almost everywhere. And it's just a time bomb.
You can't move quickly. I wouldn't advocate that. But the idea that you just keep spending and spending until you're blue in the face just because maybe we'll have a Great Depression. I think that's crazy.
(END VIDEO CLIP)
FOSTER: Well, the US government is nervous about reducing government spending too much. It worries that pulling back could damage the economy. And Nobel Prize-winning economist there, Paul Krugman argues this is not the time to pull back.
(BEGIN VIDEO CLIP)
PAUL KRUGMAN, PROFESSOR OF ECONOMICS, PRINCETON: We do have a long run budget problem. So the starting point is to acknowledge that, that there is a problem. That if you ask about the state of US public finances 15 years from now, under current policy, it looks pretty grim. So something will have to be done.
The question is, what about now? And if we skimp on supporting the economy now, first of all, we deepen these problems. We make higher unemployment. We reduce the long run prospects. Secondly, we do amazingly little to improve our long run budget position.
(END VIDEO CLIP)
FOSTER: So we've heard from Harvard. We've heard from Princeton. At New York's Columbia University, professor of economics Joseph Stiglitz says the recovery is too fragile to continue without help.
(BEGIN VIDEO CLIP)
JOSEPH STIGLITZ, ECONOMICS PROFESSOR, COLUMBIA UNIVERSITY: It is premature to remove the support for fiscal policies, and it's almost surely premature to remove the support for the banking system.
We are not yet on the basis of a robust recovery. And particularly as the fiscal policies undermine the recovery, there is a serious risk of a double dip. And it is not a surprise to me that there is a high level of anxiety on the part of the banks.
(END VIDEO CLIP)
FOSTER: Well, that really is the great debate amongst economists all over the world. But not all countries in Europe are facing such a dilemma between spending and saving. Sweden has just raised its growth forecast for the year, up to a healthy 3.3 percent from two and a half percent. This is one of the countries in the region which is living pretty much within its means, keeping to limits on debts set by the EU.
I'm joined now on the live from Stockholm by Anders Borg. He is Sweden's finance minister. Congratulations to you. But is it bound to you, or the nature of your economy? How've you done it?
ANDERS BORG, FINANCE MINISTER, SWEDEN (via phone): Well, it's obviously a combination. What we're seeing is a growth rate of about three percent for this year and the coming years and we're expecting to be back at a balanced budget at the later part of next year.
So for us, this is basically partly due to that we are heavily export- oriented, and we're seeing a world economy recovering when it comes to capital goods. But we've also been able to have a very expansion of fiscal policy. We've gone from a surplus of four percent of GDP to a deficit of a percentage point.
So we've been very expansionary, but we started from a surplus. And we have a very strict disciplinary order for fiscal policy, which I think is a cornerstone to the credibility that we have for economic policy in Sweden.
FOSTER: When we're talking about countries like Germany and the United States, they'll see much bigger economies than Sweden. Does that make it easier for you to handle the economy? Because it is a bit more manageable. It's a bit more sensitive to what it is you're doing as a government.
BORG: Well, on one hand, you could argue that. But you could also argue that we're on our own. We are not the reserve currency. If we fail on credibility, we will have detrimental effects on our economy. So we've learned from our experience that we cannot move away from a very responsible fiscal policy, because we don't have any kind of the safeguards that the large global economy, like the US economy have.
So for us, we need to be credible, and we need to be very conservative to be able to have this kind of very open economy as we have.
FOSTER: And what do you make of the argument forming, even if it is behind closed doors, between Europe and America on how to deal with this. Because there certainly are people in America who look at Europe thinking, "You're going to derail this global recovery, which we're trying to keep going." What do you make of that argument?
BORG: I tend to disagree. If we don't have a credible fiscal policy in Europe, our household will start to fade, and the companies will not invest. So the best thing we can do to safeguard recovery is to clarify that we have long-term sustainability when it comes to public finances.
That's a complete difference with the US. The US household seems to expect and to accept this high deficit. That's not true for Europe. If we would see Germany and France running the same kind of deficit levels, you could see a much higher savings rate. There are huge differences between Europe and US in this respect.
FOSTER: Is there a split in ideology, or just a way of handling a crisis, whichever one's got?
BORG: I do think that the very conservative, very stringent framework that we have for fiscal policy in Sweden has helped us. What we're now basically seeing in the neighbor market is that the old Swedish model reinforced with more flexible labor market is actually defying gravity. We've come out of the crisis with a five percent GDP drop last year. And we're already seeing employment growth and unemployment coming down from the previous very, very high level.
So I think it would be fair to say that our economy seems to be defying gravity when it comes to the old economic laws.
FOSTER: Anders Borg, Sweden's finance minister. Thank you very much indeed for joining us.
All week, we're going to be looking at this great debate of economics right now, and the great debate of politics as well, international politics. We're going to be hearing from perspectives all over the world, and you're going to get a really good sense of how confused everyone is about how to handle this economic crisis.
Now US investors returning from a long holiday weekend on Tuesday better come back well-rested, as the weeks ahead offer something of a battle for investors. The major averages are at risk for falling into a bear market territory, according to some. Alison Kosik has more from New York.
Alison, how worried is everyone?
ALISON KOSIK, CNN CORRESPONDENT: Max, there is a great amount of worry going on about where our financial markets are headed. Yes, stocks are getting pretty close to bear market territory at the point they are at right now. And what the bear market territory is is that these markets drop 20 percent from their recent highs.
And for all of the major averages, recent highs were hit in April. For the Dow, we're down more than 13 percent from April. But you can go ahead and see now, the bigger drop is in the NASDAQ. It's fallen 17 percent.
The S&P 500 is down 16 percent, and you're especially feeling this if you've got a 401 K. It's the broadest measure of the three major averages, and many investors' mutual funds mirror the S&P 500.
So we've got a lot concern to the market. The European debt crisis set all these worries in motion. So did the housing market. And signs of improvement in the housing market just aren't there right now. Think about it. New home sales and pending home sales that we got recently fell by double digits last month.
The job market. We're at nine and a half percent unemployment. We did tick down a bit in the unemployment rate, but the growing number of discouraged workers have stopped looking, and that's why we saw the unemployment rate tick down.
And Max, the bottom line for this, for the US economy as a whole, the fear is that this recovery is really fizzling out. And that's why we're seeing stocks tumble as much as they are. Max?
FOSTER: What happens if those stocks do fall in this tumble? It become a cycle, it does become a bear market. What happens then?
KOSIK: What could happen is that could trigger another wave of selling. This is what's tied to this increasing talk of a double-dip recession that we've been talking so much about lately.
Think of it this way. The stock market is really a forward-looking indicator. It started rising well before the recovery began, and as far as a double dip issue goes, economists are really split on it right now. Some traders say a double dip is inevitable. Other economists say this is just an extended period of very slow growth that we're having.
Now, earnings could give the market a boost. We are getting second quarter earnings starting next week. The season kicks off next week, and if these companies show that they have profit growth, company after company, this could give the markets a boost. Because many traders are telling me that the market is actually oversold. Max?
FOSTER: OK, Alison, thank you very much indeed. Wait to see what happens on Tuesday, once watching those Wall Street figures for the week.
Now let's take a quick look at how European markets ended the day today. All the main indexes were in the red at the close. So that's how Asia's looking at the markets at the close.
Talk of austerity is continuing to worry investors. They're concerned about a new slow down around the world, possibly ending in the so-called "double dip" that Alison was talking about.
In India, fuel costs and tempers are rising at the same time. In just a few moments, we'll look at the people's reaction and the cost in economic terms.
FOSTER: Price of oil fell slightly today for the sixth day in a row, but trade is light this Monday with US markets taking their Independence Day holiday. The price of a barrel of light crude, light sweet crude closed below $72. Fears over the strength of the US and Chinese economies have been lacking investor confidence there.
Now empty trains, idle trucks, and planes grounded. Parts of India have been gripped by protests of increases in the price of petrol. It was all quiet at this train station in Mumbai. Many schools and business also stayed shut.
Opposition parties fall to the strikes after the government started to withdraw funding for fuel subsidies. They say rise in prices will hurt ordinary Indians.
A short time ago, I spoke to CNN's Mallika Kapur, who's in Mumbai. I asked her how the country's financial heart was coping with these strikes.
(BEGIN VIDEO CLIP)
MALLIKA KAPUR, CNN CORRESPONDENT: Mumbai came to standstill today. It really did. A city of 20 million people, and life really, really slowed down here today. The streets were deserted. Many shops had their shutters down. Most business were closed for the day. And schools and colleges were also shut.
Now one of the industries that has been really badly affected by the hike in fuel prices is the trucking industry. And today we saw thousands of trucks across Mumbai just parked on the sides of the roads. They refuse to do any business today.
I spoke with one trucker, and he said, "It is our moral duty to protest the price hike, because the price hike is sucking our blood."
Yesterday, the chief minister of Maharashtra state, of which Mumbai is the capital city, urged the public to indeed to show up to work today. He said, "I want you to come to work like any other day." That, of course, did not happen, and we did see most businesses in Bombay remain shut.
One business that stayed open today was the Bombay Stock Exchange, though it ended the session flat. Max?
FOSTER: And everyone from the trucker to the trader at the stock exchange, they're all losing money. But is there any idea how much this going to cost overall? It's got to be a big figure, right?
KAPUR: A big figure, but it is pretty hard to put a figure on this amount because it's different in different parts of India, because a strike affected various parts of India to different degrees. The Confederation of Indian Industries does have a figure, and it estimates India lost about $750 million because of the strike today.
The worst hit, though, Max, are the people at the very bottom end of the economic ladder. For example, daily wage laborers. And while we were out and about reporting the story today, we met a man, a daily wage laborer, who had traveled from the outskirts to the city center in Mumbai. He comes here every day looking for work. He earns about $3 a day. And that, for him, is very important, and he still made the effort to come, risking the journey. He came here because losing $3 for him was just too difficult a thought to digest. Max?
FOSTER: What knock-on effect could this have? Inflation is already very high. I know that there are people there talking about inflation getting even worse as a result of this.
KAPUR: That's right, inflation is very high in India. It's already above 10 percent. And the finance ministry itself admitted that inflation could rise by 0.9 percent. We could see inflation touch 11 percent next year.
This fuel price hike is bound to have a ripple effect on, say, the prices of food and raw materials. And there is huge concerns in India about inflation. Anybody you talk to in the streets of Mumbai or in the rural areas, they're only taking about one thing these days. Everybody is grumbling about the high cost of living, and inflation is a very serious concern for Indians at the moment.
(END VIDEO CLIP)
FOSTER: Mallika Kapur in India.
In the future, we may all be driving electric cars. If that happens, we won't have to worry about petrol prices anymore. But that doesn't mean we won't have to worry about other fuels. Some people in the US already finding out all about that, as Alison Kosik reports.
MARK FABLE, ELECTRIC CAR OWNER: The car's running.
KOSIK: Is the car running?
FABLE: It's running. That's it. No vibration.
KOSIK: I don't hear anything.
FABLE: You don't hear anything, but --
KOSIK: Silent on start up, they're soon to be at a dealer near you. Electric cars. Ad executive Mark Fable couldn't resist.
This is the Tesla Roadster. What possessed you to buy it?
FABLE: It's a hundred percent electric, there's no gas, there's no emissions. And, what a lot of people don't know, is it's incredibly fun to drive. It's extremely fast. The fastest car I've ever driven.
KOSIK: With a list price of over $100,000, the Tesla is beyond reach for most, but there will be other options. And if more drivers go from the pump to the plug, will power grids withstand the energy drain?
MALCOLM WOOLF, DIRECTOR, MARYLAND ENERTY ADMINISTRATION: They say that charging an electric vehicle is roughly equivalent to half a house. So, if you buy an electric vehicle, and your neighbors on both sides of you buy an electric vehicle, you could blow that transformer if all three of you decide to charge it in peak hours, when you're running your air conditioners.
KOSIK: And that's a real challenge. Listen to the chairman of one major utility at a recent electric car conference.
PETER DARBEE, CHAIRMAN, PACIFIC GAS & ELECTRIC: If three to five electric vehicles show up in one neighborhood, you're going to overwhelm the electric circuits, and that will lead to blackouts and other problems.
KOSIK: Now, PG&E does emphasize that it supports the electric car industry and sees it as an opportunity. So, how to address the overload issue?
TED CRAVER, EDISON INTERNATIONAL: We do believe that customers are going to primarily charge late at night, early in the morning. This is the best time to charge, and we will incent them to do that with lower rates.
KOSIK: But there's another speed bump for drivers.
So let's say I'm not driving a gas-powered vehicle, but instead, I'm driving an electric vehicle, and I'm running out of power. What am I going to do? I'm going to try to find somewhere to charge it.
So let's try to find one. Follow me.
Hi. I'm with CNN. I'm doing a story about electric vehicles, and just curious. You have somewhere I can charge an electric vehicle?
UNIDENTIFIED GAS STATION ATTENDANT: Nope.
UNIDENTIFIED GAS STATION ATTENDANT: Charging station? No.
KOSIK: It's called "range anxiety." And in a recent cars.com poll, 54 percent of consumers are afraid of running out of electricity on the road. According to the Department of Energy website, 27 states currently don't have any charging stations, and 22 have 10 or less. And Fable admits, road trips require a little extra planning.
FABLE: The big difference is, I'm not going to be able to anywhere I am refuel. I can't pull into a gas station. I need to have an electrical outlet, or a high-voltage charger in my garage.
So, when I start a day, I want to know that I have enough battery power to comfortably meet that range.
KOSIK: Enough battery power. The only cure for range anxiety. Alison Kosik, CNN, Old Tappan, New Jersey.
FOSTER: Now, we had a shock result for Wimbledon. There was no rain throughout the whole tournament. Jenny Harrison's at the Weather Center. The rains are coming, though, I gather? You've been warning.
JENNY HARRISON, CNN CORRESPONDENT: The rains are, maybe not to London, though, actually, Max. And yes, you're right, what a glorious two weeks it was. I'll talk a little bit more about Wimbledon in the coming hours ahead.
But first of all, let me talk about that rain that Max had just mentioned. First of all the rain in the southeast. This is continuing to ease off, that's good news, of course, in particular for Romania. But all the countries in that particular region.
And over the last couple of days, we have seen a low push to the north. It's been filching some slightly cooler air. But we've seen a line of thunderstorms working their way gradually across those central areas of Europe.
But once that low pushes out of the way, as usual, there's another one waiting in the wings. And here it comes. That heading in toward Man Island (ph) first of all, and again, the northwest of the UK.
But everywhere else across Europe, it's actually a fairly quiet picture. What it does mean is the only airport we can see some delays are going to be in Dublin as we go through Tuesday, later on, afternoon and the evening hours, as the low comes in so the winds are actually going to be picking up just a little bit. But don't expect any delays. Certainly not any lengthy ones due to the weather across the whole of Europe.
Temperature-wise, although it's a little bit cooler, it's not exactly cool. In fact, very nice out today. 25 in London, and the same across in Paris. But very warm in Madrid, 39 degrees Celsius for you.
And pretty warm across the east and the northeast of the U.S. You can see all the rain out across those central plains, down across the southeast. There's high pressure in control across this particular area. But it's just off the coast, so what it's doing is feeding in the warm, moist air. And that is making it feel even hotter. So the rain is going to stay around that area of high pressure.
Keeping an eye on what's going on in the Gulf of Mexico, there's another system potentially brewing off the coast of the Yucatan Peninsula. No real delays at any of the major airports, as you can see there, but as I say, the one thing to be aware of is the temperatures. Because it is going to be feeling particularly warm. In fact, we could see temperatures in DC, New York, around 100 degrees Fahrenheit over the next few days, Max.
FOSTER: Stand by, Jenny. Thank you very much indeed.
Do you have money woes? Well one enterprising business is promising sweet returns of the end roll (ph) kind. When we return.
FOSTER: Concerns about the global recovery have been weighing on markets recently. But a British luxury chocolate maker says it can sweeten returns for investors. CNN's Ayesha Durgahee takes a look at what could be the first chocolate bonds launched here in the UK.
AYESHA DURGAHEE, CNN CORRESPONDENT: From chocolate bonbons, buttons, to buns. A new way to unload financial burdens and bask in a better interest rate than your bank.
Hotel Chocolat wants to raise seven million dollars to open more stores. They also plan to build an eco factory in Saint Lucia, the Caribbean country where they get most of their cocoa beans. To pay for it, they want to borrow money from their customers.
ANGUS THIRLWELL, HOTEL CHOCOLAT: We obviously could go to our bank to raise funds for these building projects, but when we compare that scenario with this scenario, we just get so much more. We're getting a closer relationship with our very best customers. And on top of that, we're actually paying a return to them rather than to a bank.
DURGAHEE: Over a three-year period, members of Hotel Chocolat's Tasting Club can invest $2,800 for a gross annual return of 6.72 percent. Or $5,800 for a gross annual return of 7.29 percent. The interest, though, will be paid not in money, but in chocolate. Which works out at a $26 box of chocs every month.
We've got a tray of chocolate here alongside an 18 pound coin. If you had your choice, would you prefer the interest in chocolate, or money?
UNIDENTIFIED FEMALE SPEAKER: Definitely money. You can buy the chocolate with the money if you want to.
UNIDENTIFIED MALE SPEAKER. I'm rather a big fan of chocolate. It does sound like a very good return. Much better than what I'm getting at the moment in my bank account. It'd have to be the chocolate.
UNIDENTIFIED MALE SPEAKER: It's very intriguing, I must say, but interest in chocolate? I don't know. I prefer the money.
DURGAHEE: After that three-year period, investors have the option to renew the bond annually, or opt out and get their money back.
THIRLWELL: We've mostly been pored over by our advisors, who are authorized to give FSA approval to the chocolate bond. We're making this offer to our very, very best customers. And I'm totally convinced that the risk is at a reasonable level, considering the level of the chocolate bond.
DURGAHEE: This is the first chocolate bond to be launched in the UK, so it's uncertain how liquid this investment actually is.
ALEX BEVERIDGE, EDITOR, INVESTMENT WEEK: It's a lot of money. I don't know anybody who can afford to just sort of either lose it or not invest it wisely. And there's plenty of really good investment opportunities.
The bottom line is, you've got to ask, will you get your money back on this? Never mind will you get your chocolate. Will you get your money back? I'm not saying the company will go bust, but you're being asked to make a credit assessment of a company, and in return for that, you are going to get some chocolate.
DURGAHEE: Exposed to commodity prices, and the chocolate bond market being so new, some think this could be a risky investment, where the return may not be as sweet as it seems. Ayesha Durgahee, CNN, London.
FOSTER: We wait to see if works, and if people pick it up for their own businesses.
Right now, we're going to look at the real money business. The euro is slightly down for the day against the US dollar. Traders are on edge after Jean Claude Trichet expressed his support for government austerity measures in the Euro zone. The head of the European Central Bank says it's simply "rigorous fiscal policy, and there's nothing wrong with that."
In just a minute, what's up and what's down from Sydney to Switzerland. In the other markets we'll wrap up Monday's market action for you.
FOSTER: US markets are closed today because of the holiday there, but we have got time to look at the stock markets here in Europe and see how they ended. All the main indexes in the red at the close.
Talk of austerity continuing to worry investors. They're pretty concerned about a new slowdown around the world and possibly ending in the so-called "double dip." Shares of BP were one of the top gainers in London, bizarrely, after a major report said the company is looking for a white knight investor.
Financial shares in anything to do with mining and metals were under pressure because of fears over the state of the economy and the effect that that would have on demand in that industry.
Here's how things finished in Asia a little earlier on. Tokyo's Nikkei making up some ground after falling for nearly two weeks. It rose two thirds of the cent.
In China the Shanghai Composite fell to a 15-month low, with bank shares under pressure amid worries China's economy is heading for a slowdown, too. Prices were also hit by the prospect of billions of dollars of new shares coming onto that market. Bank of China said on Friday, they will sell up to $9 billion of stock in one go. I'm not sure if it's one go, but they're going to sell that much.
That is QUEST MEANS BUSINESS. I'm Max Foster in London. World One starts right now with Hala Gorani.