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QUEST MEANS BUSINESS
David Cameron Rejects Treaty Changes At The Brussels Summit; Italy's Debt Crisis; Interview with Fabrizio Sacchomanni; Russia's Warning; Tin Treasure; Inside "LazyTown"
Aired December 12, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN INTERNATIONAL ANCHOR: Standing by his decision David Cameron insists he was right to wield the veto.
The chips are down for Intel. A supply shortage wipes $1 billion off its sales forecast.
And no slouch; the man behind Lazy Town tells us how he turned a children's program on healthy eating and exercise into a global success.
I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS.
Hello to you.
Europe's Lone Ranger has returned home. David Cameron tells Britain parliament that his only objective in Brussels was to protect British interests. In a statement to his Lower House the British prime minister said his demands have been modest reasonable and relevant. When they weren't met he said he had to reject the EU's plans for treaty change. That stance made the only EU country to reject the deal made in Brussels on Friday. Prime Minister Cameron said he had no regrets.
(BEGIN VIDEO CLIP)
DAVID CAMERON, PRIME MINISTER OF BRITAIN: France and Germany said in their letter last week that the Eurozone should work on single market issues like financial regulation and competitiveness. That is why we required safeguards and I make no apology for it.
(AUDIENCE JEERS, SHOUTING)
Of course, I wish those safeguards had been accepted. But frankly, I have to tell the House, the choice was a treaty without proper safeguards or no treaty. And the right answer was no treaty.
It was not an easy thing to do, but it was the right thing to do.
(END VIDEO CLIP)
FOSTER: Well, the argument has largely come down for financial services. At the heart of Cameron's concerns are new regulations for the sector. Britain is Europe's financial hub. Mr. Cameron said the sector could be distorted by a new treaty; in particular, through 20 new pieces of regulations that are supposedly in the works. However, Mr. Cameron said this isn't about light tough regulation and that Britain was even willing to do more than Europe had planned.
(BEGIN VIDEO CLIP)
CAMERON: One of the things we wanted was to make sure that we could go further than European rules on regulating the banks. The Financial Services Authority report on RBS today demonstrates just how necessary that is.
(END VIDEO CLIP)
FOSTER: Well, that report Mr. Cameron mentioned makes the debate even more relevant. The U.K.'s banking watchdog, the Financial Services Authority has released its report into the failure of the Royal Bank of Scotland. It got a $70-billion bailout by the government in 2008. Interestingly, the FSA not only blames the big risks and the bad decisions made by RBS. It also blames itself for bad regulation and a lack of attention towards the banking problems.
Meanwhile, Standard Chartered Bank says Britain's banks might struggle to raise enough money next year. And that is just the start of it. The latest report says the U.K. is likely to be in recession going into 2012. And the GDP could fall more than 1 percent in the new year.
We'll hear more from Standard Chartered a little later on. But in the meanwhile, let's speak to Jim. He has been all over this European story.
And what conclusions did you reach after the ins and outs over the weekend?
JIM BOULDEN, CNN BUSINESS CORRESPONDENT: Well, they made a political decision on Friday. They did do some things to get some money into the IMF. They did some things to help get the stability fund up and running by the middle of next year. No bazooka. That is the word people have been using.
And ultimately, I don't know that Mr. Cameron has damaged Europe's ability to do what it needs to do. Because it still needs to do what it needs to do. And that is, of course, bring back confidence into the markets. To allow markets to buy the debt of places like Italy. So Cameron, I think, is a side story in all of that. I don't think you needed a treaty to do that.
But Mr. Sarkozy, of France, says he wants some of the details of this euro pact, this -- this not a treaty, but this idea that by the end of Christmas time, or by the end of the year, and then they have to hash it all out in the new year, before the next summit.
So, I can see why markets are pretty negative about this all today; especially, the euro falling against the dollar, because there is a lack of detail. It is not a criticism, but still we just don't know exactly what this compact is going to entail.
FOSTER: And they want to know what is going to happen in the next weeks, don't they?
BOULDEN: Yes, sure.
FOSTER: As opposed to, you know, the big decision.
BOULDEN: And what with you saying Britain is isolated, to be truthful, some of the countries that were sort of on Britain's side in the morning on Friday, and then sort of came back under the euro fold, still have to take things back home to their national governments. The way you saw Cameron do it today, back to their parliaments; and there could be other countries that have a bit of a wobble -- excuse me -- a bit of a wobble, as we go through all of this.
And so when you add all that up together, you can see that you have banks that need more money. You have a banking sector that maybe even doing worse than we thought. And still nothing coming out of the European Central Bank yet to sort of give markets the idea that the European leaders did enough.
FOSTER: And in terms of Britain, a very large economy in Europe, of course. How much economic damage could it have done itself by now being away from the decision-making process?
BOULDEN: That is a good question. I mean, I think we have to see in the fullness of time. I hate saying that, but it is true. Because we don't know the details of what they are going to do. Will there be financial transaction pacts all through Europe, but in the U.K.? Would companies then move to the U.K. because of that? Would national sales taxes be harmonized in other countries? Would you see the corporate tax rate being harmonized, which means a place like Ireland would have to raise it? Now that is speculation. But if they were to do that, would that then help some companies decide to come back to the U.K. that actually relocated to Ireland?
All of that is up in the air. So, we'll have to see. I mean you see the critics say Mr. Cameron has destroyed U.K. jobs. But truthfully, Europe is still Europe. It is still a single market. Nothing changed as far as the EU treaties. Nothing changes when it comes to trading between the U.K., Ireland, Germany, France. I mean, it is not like -- it's not like the U.K. is leaving the European Union, far from it.
FOSTER: The markets were very negative today. Is that purely down to the fact that they felt there was too much distraction in terms of politics over the weekend, not enough focus on economic policy and sorting out the immediate concerns of Italy, for example. >
BOULDEN: Sure, a lot of that is in there. But I really think European bank authorities announcements last week about banks need more money, which it didn't fall under the radar, but I don't know that it got as much focus as it would have if we didn't have a summit. And the fact that the banks, including banks in Germany, need to raise more funds and they are not allowed to do it by cutting off lending to small businesses and that is something Europe has said. We are not going to let you just build up your banks -- the amount of money in your banks, because you are going to stop lending, because then we'll have even a worse recession. And it does look like recession is coming, as Standard Chartered just said.
FOSTER: Just coming on to that; seamless movement through the program.
BOULDEN: There we go.
FOSTER: Thank you, Jim.
Standard Chartered is predicting the emergence of a two-speed global economy. It is global focus 2012 report. It says next year we'll see a fragile west with a recession in Europe and slow growth in the U.S. It also expects further downgrades on European southern debt. For the resilient East, Standard Chartered is predicting slower but robust growth in Asia, Africa and the Gulf. It says that long-term ratings of emerging markets should be supported by strong fundamentals. The report predicts a shift to emerging market currencies in the second quarter of next year.
Now Gerard Lyons is the chief economist at Standard Chartered. Earlier he told me why the European economic outlook is so much worse than for the rest of the world.
GERARD LYONS, CHIEF ECONOMIST, STANDARD CHARTERED: If one takes the outlook for Europe and the U.K., it depends on the interaction between the economic fundamentals, policy and confidence. The economic fundamentals are poor. The policy cupboard is almost bare. And confidence, unfortunately, has been shot to pieces in both the Eurozone and in the U.K., recently. And I think that will continue for some time.
FOSTER: In terms of what policymakers are doing in Europe, they are making it very clear they want to do something about this. Big policy decisions made, particularly over the weekend. Is that now helping in any way, in terms of the next year's predictions?
LYONS: If one looks at the euro area we have had political inaction feeding economic problems, feeding debt problems, feeding banking problems. And what I fear is that the policy that came out at the end of the last week will neither address the solution problem, and in terms of actually any implementation of it, I think it will actually make it worse, not better for those economies on the periphery.
FOSTER: And if the economies are shrinking they are in a less powerful position --
FOSTER: to sort the whole thing out, right?
LYONS: Yes, what we really have here tale of two worlds, but no part of the world is immune to what is happening in another region of the world. And unfortunately, as one looks into 2012, the problems in the euro area will continue to drag down all parts of the global economy.
But on the flipside, on the positive side, the policy response and likely economic reaction across much of Asia, lead by China, will help pull up those regions, and will in turn help the European and global situation in the second half of next year.
But it is very much a situation where Europe and the U.K. underperform and really underperform very badly through the first half of next year.
FOSTER: But Asia will be able to counterbalance that, right? Perhaps we are a bit too focused right now on Europe, in terms of global economics?
LYONS: Yes, well, if one takes say last year, 2010, the world economy boomed. And that was driven by two factors, the policy stimulus in the West, and by emerging economies. Last year emerging economies were one third of the world, drove two thirds of its growth. This year the world economy is still growing but at a slower pace. In 2010 the world grew about 4.4 percent this year it is growing just over 3 percent. Next year, 2012, the world economy, in our view, is going to grow at 2.2 percent. So while Europe is going to be in recession and the U.K. in recession. There is going to be stronger growth elsewhere. The U.S. interestingly enough will continue to grow albeit at a pretty subdued pace around 2 percent as well.
FOSTER: But what about China? Everyone keeps saying China is going to save the world economy. But actually there are a few risks there and that could suddenly, you know, it is slowing down a bit. It could suddenly escalate that slowdown. And that is probably the biggest threat to the world economy, right?
LYONS: Well, there are many issues facing the world economy. I would say the problem in the Eurozone is the biggest threat. But certainly the Chinese economy is very important. I think the Chinese economy is slowing. We would expect it to slow significantly further into the quarter of next year. And, indeed, that quarter the Chinese economy could be growing around 6 percent, which is a significant slow down by Chinese standards.
But just as the policy cupboard is pretty bare in Europe. In China the policy cupboard is pretty full. And the important thing to bear in mind is that the Chinese have ample room, particularly, on monetary policy to stimulate their economy. And I think they will do that.
FOSTER: Gerard Lyons, there.
Now the waters may have receded but Thailand's floods are still doing plenty of damage.
Intel says a supply shortage is likely to scrub out a serious amount of money. More when we return.
FOSTER: Intel says sales will fall $1 billion short of expectations in the fourth quarter. The world's largest chip maker is cutting its revenue forecast for the period to $13.7 billion. The news is one of the factors weighing on U.S. stocks. Maggie Lake is in New York with more -- Maggie.
MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: And, Max, this is particularly disappointing because Intel is the company just back in October that was reporting record revenues and in fact upping its guidance for the fourth quarter. The company holding a conference call today, with investors and analysts and very much blaming the downward revision in their revenue forecasts on the floods in Thailand.
This is a little confusing. This is overall S&P we're looking at, right now. Let's stick to Intel for the moment, first though.
And they are blaming those supply disruptions due to the flooding we saw in Thailand. They say it is all about that, the shortages. A lot of skepticism about that, though, Max. People think that maybe overall global weakness may be at work here as well. As sort of people pull back on the spending for PCs, given economic troubles we are seeing regionally, and also given the fact that tablets and some of the other products are more popular. So you know we are not clear exactly how much of it is only due to the floods and how much is it due to the broader. But certainly this is coming on the wave of what has been a pretty steady drumbeat developing of companies warning about the outlook.
Let's now go back to that S&P 500 earnings growth forecast. And you can see how much the pictures change. In July people are expecting fourth quarter earnings to increase by 17.6 percent. They brought it down to 15 percent in October. Now it has gone all the way down to 10 percent. That is a very big change in just a handful of months. People very concerned about what we are seeing in Europe, the extent of a slow down there, and what that is going to do to profits, but very concerned about Asia as well. We have been talking about signs of a slowdown in China and India. So all of these things coming together here, getting investors incredibly nervous as we sort of head into the next year.
As you can imagine, basic materials, a lot of those commodity companies, and financials, in particular are seeing a pretty sharp downward revisions. Things like health care and consumer staples holding up a bit better, but clearly investors on edge here, Max.
FOSTER: Yes, Maggie, you said before that what the U.S. economy really needs, what politicians want as well right now, is jobs growth. This isn't going to help with that, right?
LAKE: Yes, let's not just keep it to the U.S., let's talk about Europe, too. Unemployment in many of these countries, especially in a year where we have a lot of people heading to the polls, is a very, very big issue. And when you start to hear companies around the world, especially multinationals, talking about lowering their sales forecasts, profits under pressure, you know, Max, the first thing they do is cut costs. And the biggest cost is employment, is jobs. So if we start to see them reel back again and not only not hire but start to cut jobs. That will be extremely difficult from not only an economic perspective but from a political perspective as well.
FOSTER: OK, Maggie, thank you very much indeed. We are going to go down the road and speak to Karina Huber.
See how this is all playing out Karina, on the stock market there?
KARINA HUBER, CNN BUSINESS CORRESPONDENT: Yes, Max, we are seeing a really broad-based selloff today. So, U.S. markets are really following in the footsteps of what's happening in Europe. We see the major indices are down by about 2 percent. The Nasdaq and the S&P 500 have turned negative for the year.
Of course, what is happening is on Friday we saw that relief rally on the back of that summit among European leaders. But over the weekend investors have had time to really digest the information. Essentially what we are hearing is that even though they are optimistic that Europe has come up with some good long-term plans they haven't really tackled the problem in the short term. Haven't found a way to really keep those bond yields up, below that 7 percent; when we are talking about Italy, for example, so, disappointment there.
And so we are seeing the financials under a lot of pressure today. Materials stocks are also hurting, as well as energy. And as you were just talking about, Intel, it is the biggest loser among the Dow components. Right now it is down by 4.5 percent. It is dragging down the technology sector in general. Their competitor AMD is down by 4 percent. HP, Hewlett-Packard and Dell are also down by about 2 percent. So really it is a bloody day on Wall Street today, Max.
FOSTER: OK, Karina, thank you for that.
Next we are looking at what makes Ireland's capital a future city.
(BEGIN VIDEO CLIP)
BOULDEN: It may not look like a hub for digital media, but Dublin is drawing every more comparisons to Silicon Valley. "Future Cities" is next.
FOSTER: Dublin has been dubbed Europe's Silicon Valley. Ireland's ultra-low corporation tax has lured some of the world's largest tech companies to the capital, eBay and Facebook have their European headquarters there. Between them they are currently advertising around 120 jobs in the city. Twitter has announced it, too, will be opening its European base in the city.
Big names from abroad are one thing, now as Jim Boulden reports, Dublin is striving to be come a future city by nurturing its own high-tech talent.
BOULDEN (voice over): With its compact city center and row of landmarks along the River Lithe, Dublin lends itself to exploration by foot. Now, thanks to a ground breaking smart phone app, discovering the Irish capital has been made even easier.
(on camera): So, if I'm a tourist and I've downloaded this?
PAUL HENNESSY, GEOGUIDES: Yes?
BOULDEN: What is it I get to see?
HENNESSY: OK, what you are going to get to see with this application, is everything that there is to do in Dublin, but in a really unique way. So, for example, we are here, outside Stephens Wing (ph0 and we are looking for some entertainment. So, you fancy seeing some theater tonight.
BOULDEN: OK, sure.
HENNESSY: Excellent. OK, now I'll just launch your application. And I'm going to look for some theaters. And then, actually, we use something really unique, we call it augmented reality.
HENNESSY: And now what I'm seeing, this is part of the geo-spatial augmented reality. And it is telling me exactly where the theater is.
BOULDEN (voice over): Dublin was the first city in the world to have augmented reality. The apps creators are now exporting their technology to other cities across the globe.
HENNESSY: Shall we go see what's on?
BOULDEN (on camera): Yes, OK.
(voice over): It is no coincidence that Dublin is leading the way in this field. The Irish capital is a hub for new media and home to Internet giants like Google, Facebook, Twitter and eBay. AOL was amongst the first to set up shop here the mid-90s. Ireland's low corporation tax at 12.5 percent was one incentive, but no means the only draw.
AENGUS MCLEAN, SEARCH & ADVERTISING TECHNOLOGIES, AOL: There are a couple of real attractions to AOL. One is the fact that there is ready access to talent, not just in Ireland, but also from right across Europe.
BOULDEN (on camera): Much of the talent working in Dublin's new media comes from its oldest university, Trinity College.
(voice over): Inside Trinity's School of Computer Sciences and Statistics, students learn to program and animate. Despite Ireland's high unemployment rate they are unlikely to have trouble finding work. Faculty members say Trinity cannot produce enough IT graduates to fulfill the demand.
One company with a history of recruitment from Trinity is PopCap. The U.S. firm specializes in casual games and recently scored a killer hit with its plant versus zombies franchise. Riana McKeith joined PopCap as an artist in 2010. Looking back she is glad she choose a career in new media.
RIANA MCKEITH, POPCAP: It's amazing now that the opportunities that are here that weren't here when I started in the industry. When I went to college I really thought I was taking an unbelievable chance. By the time I left college there was suddenly a whole wealth of opportunities.
BOULDEN: Over the years Riana has watched the arrival of new media transform Dublin into a cosmopolitan city.
MCKEITH: We got an influx of so many different people and nationalities. And here in PopCap, I think, there is just under 100 people and we speak something like 17 different languages. All corners of the world are represented here.
BOULDEN: With multinationals like PopCap represented in Dublin the next step is for the city to spawn its own. The Digital Hub is helping to make this happen. This government-run, open office, is a hot bed of ideas.
For little money entrepreneurs can rent a cubicle for their team and collaborate with neighboring businesses. App developers, animators, and gaming companies sit next to one another, each working on the next big idea.
STEPHEN BRENNAN, THE DIGITAL HUB: The Digital Hub is a collection of all sorts of things, but I like to sometimes describe it as being, sort of orchestrated chaos. For essentially the process of inventing new Internet products is quite chaotic. And that is what we try to establish here. It is a new way of developing businesses for Ireland.
BOULDEN: With its Digital Hub, Dublin hopes to be well positioned to develop homegrown companies in the years to come. Dublin is switched on to the fact that new media is this city's greatest hope for a stable present and a prosperous future.
FOSTER: Well, on the day of another big strike, Italians are once again being asked to do their patriotic duty. So, should they down tools or pick up bonds? We'll speak to one of Italy's top central banker, next.
FOSTER: Well, Italy's long-term borrowing costs were up tonight, but when it went to the market earlier, it paid less for short-term debt than it did a moment ago. Once again, ordinary Italians are giving the -- were -- were given the chance to buy bonds without paying an extra charge. Demand for the 12-month bills was strong despite a national strike and the threat of a credit rating downgrade.
Keith Wade is chief economist at asset management company Schroders.
He told me that the failure of policymakers to act in Italy's debt is a major problem.
KEITH WADE, CHIEF ECONOMIST, SCHRODERS: We're very concerned because the level of debt in Italy is still at what we would consider to be unsustainable levels of 120 percent of GDP. And given the level of interest rates in the -- in Italy itself, that is unsustainable.
What's really concerned us, though, is that there doesn't seem to be any extra support coming forward from the Eurozone. We had hoped that the summit would see a bigger bailout fund, EFSF sort of in place up to a trillion euros.
So investors are still thinking well, this is -- the situation in Italy looks unsustainable, but there doesn't appear to be any extra support. So I think there could be problems.
And I -- I guess what is a real worry for investors is that we know that in the first quarter of next year, Italy has to roll over a lot of debt. And unless more support is put in place, I think they're going to have trouble doing that.
FOSTER: Because the bond markets started looking quite positive, didn't they, last week, for Italy going into the summit?
Coming out of it, I presume you're concerned that you'll heard about lots of politics and not enough economics.
WADE: Yes. I'd say that's right. I mean the summit focused very much, I think, on the future, creating a fiscal union, whereas I think the problems are a bit more immediate and a bit more acute and that you actually need to have something stronger in place.
Now, the ECB is extending liquidity to the banking system and it's buying bonds. But it doesn't really -- it isn't really doing it on the scale that's needed.
And I think certainly before February and March next year, when these rollovers come in, we're going to have to have a lot more support for the EFSF.
I mean if, for example, they could bring in the IMF or they could bring in China or Brazil, big external parties, then that might reassure investors.
But it seems, at the moment, they're focused very much on their -- the whole idea of trying to get a very strict fiscal discipline in place and at the same time, the ECB is still holding off from doing QE.
FOSTER: How long do you think Italy's got?
Because you do get the situation sometimes where the bond yields rise very quickly, ahead of the year.
Is there a potential for debt to become completely unsustainable for Italy?
WADE: I think -- I mean it can -- bond yields could rise quite a lot before the end of the year. And -- and -- and honestly, that would be worrying. But I think the real problem comes early next year, when they have to rollover this large amount of debt, because if they have to roll over that debt at interest rates of 6.5 or 7 percent, it's quite clear that that is unsustainable. And now we're talking quite large amounts of Italian debt being rolled over. And -- and I think the markets really, that's what they're going to focus on. We could probably see a bit of funding at these kind of yields for a little bit longer. But we're only talking about small amounts at the moment.
FOSTER: And is there anything the it -- the Italian government can do at this point or is this all about those European leaders stepping in, actually, anything the Italian government does is long-term and irrelevant short-term?
WADE: Well, it's doing the right things. It is actually making changes in -- in the spending and tax side. But, of course, the problem that Italy faces, which is really a problem across all the peripheral countries, is that their growth is very weak.
So as they tighten policy at the moment, the risk is that they just weaken their economy and that, of course, undoes some of the tightening measures.
So, you know, this is why I think the focus of the market is now kind of outside Italy, because I think domestically, there's not a lot more that they can do.
(END VIDEO TAPE)
FOSTER: Well, Italy still have this huge debt pile to deal with, of course.
And Nina dos Santos sat down with the Bank of Italy's deputy governor to find out more.
NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT: How long can Italy realistically finance itself on the open markets what kind of rates we've seen on 10-year yields?
FABRIZIO SACCHOMANNI, DIRECTOR GENERAL, BANK OF ITALY: Well, this is a question that hides the impression that there is a sort of a level of interest rates beyond which a country is shut off from -- from the market. So that is analytically wrong. And I think in -- in -- in history, Italy has always been able to finance its debt at the level of interest rates which were much higher than the current ones.
DOS SANTOS: But it had its own currency that it could devalue.
SACCHOMANNI: Yes, but you see the devaluation has always been a short-term solution, because it gives a sort of a -- a temporary boost to exports but then it reflects itself on -- on higher prices.
DOS SANTOS: Would you welcome more bond buying of Italian bonds by the ECB?
Because Mario Draghi has, in the last couple of weeks, said that they're not going to do it forever and it's not unlimited, this (INAUDIBLE).
SACCHOMANNI: Yes, but that was always understood. I don't think that the issue is -- is bond buying by the ECB more or less over any individual country.
I think the issue is whether, you know, the system has enough liquidity to restore its proper functioning.
DOS SANTOS: Let's also talk about the ratings agencies here.
If Italy gets another debt downgrade, that will make yields on Italian bonds spike even higher.
SACCHOMANNI: I mean a lot of assumptions are made about what's going to happen, you know, to -- to the European Union in the future, whether there will be a fiscal union, what there will be Eurobonds and so forth, you know.
I think the -- this is certainly an area where, you know, we are working to make progress. But I don't think it has any relevance for the current management of -- of the crisis we are in.
DOS SANTOS: What about the timing of these ratings decisions?
SACCHOMANNI: The timing of these ratings decisions is -- is a -- is something that we don't know. I mean we -- we -- we are as surprised as -- as most people about the timing of some of these decisions. I think it obviously reflects a -- an attitude which is more of a sort of, you know, of an -- of an analogies of private -- private institutions and -- than -- than government -- than -- than sovereign governments.
DOS SANTOS: Is there a risk with some of these rating changes coming at such acute times for the Eurozone, that we could see, to a certain extent, a self-fulfilling prophecy?
SACCHOMANNI: At some point, you know, market participants -- I mean investors, you know, final investors will take decisions that are disconnected from what the ratings agencies say, because if the ratings agencies continue to sort of project a worst case scenario and base their ratings only on the -- on what they themselves consider the likelihood of such worst case scenarios, then, of course, there's going to be a sort of a very -- a very negative trend.
(END VIDEO TAPE)
FOSTER: Well, coming up, a Russian awakening -- the middle class find their voice as thousands turn to the streets of Moscow and Vladimir Putin faces a new challenge from one of Russia's richest men.
FOSTER: Russia's prime minister, Vladimir Putin, is facing more pressure from opponents at home. The billionaire, Mikhail Prokhorov, says he'll run against Mr. Putin in next year's presidential elections.
Prokhorov is Russia's third richest man. He's worth around $18 billion and he owns the New Jersey Nets basketball team. He tried to challenge Mr. Putin's party in this month's elections, but failed. Prokhorov is targeting the country's fast growing middle class for support.
Tens of thousands of Russians took part in protests at the weekend over the recent parliamentary elections. They were demanding a new vote after allegations of fraud. Mr. Putin also had his show of support on Monday. Thousands joined a rally in Moscow, although in smaller numbers.
Change is also being pushed on the economic front. The Organization for Economic Cooperation and Development is calling for Russia to modernize its economy. The OECD found that Russia's poor business infrastructure is holding it back. In a report, it says the country is too dependent on oil revenue and needs to diversify. It is predicting growth of around 4 percent over the next two years, a rate the report says is too slow.
Geoff Barnard is the author of the report.
(BEGIN VIDEO CLIP)
GEOFF BARNARD, PRINCIPAL AUTHOR, OECD ECONOMIC SURVEY OF RUSSIA: We do think Russia could -- could be growing a good deal faster. You know, it's a -- it's a catch-up economy. And, again, yes, we -- windfall that given the low investment and there -- that's a great scope here to improve the organization of the economy and to make better use of the -- the considerable talents of the Russian people and the -- the considerable scientific expertise that exists here.
So, yes, we think that they -- they could do better than -- than the sort of 4 percent a year that they have been averaging.
(END VIDEO CLIP)
FOSTER: CNN's Phil Black is following the developments from Moscow for us.
He joins me now -- hi, Phil.
First of all, Prokhorov.
What do you know about him?
He seems to have come out of the blue in this, right?
PHIL BLACK, CNN CORRESPONDENT: Well, as you say, Max, he is a very wealthy businessman, said to be the third richest in the country, someone who's known great success in that area, but someone who's also dabbled in politics in the past. He was the leader of another political party until recently, known as the Right Cause. Well, he was ejected from that position as leader. And at the time, he blamed maneuvering within the Kremlin or shadowy figures within the Kremlin, for his demise there.
But now he has come back, saying he's not going to do things by halves, he's determined to do this.
Take a listen to him today announcing his candidacy.
(BEGIN VIDEO CLIP)
KHAIL PROKHOROV, RUSSIAN ENTREPRENEURSHIP (THROUGH TRANSLATOR): I am planning an open and transparent presidential campaign, which will create conditions for building a good political party from the bottom up. It needs to be from the bottom up and it will be a long-term thing.
(END VIDEO CLIP)
BLACK: So why is he doing this is what's got a lot of people here talking, Max.
As you say, he hopes to represent the middle class, much of which, or the big part of that crowd that we saw on the Saturday here rallying for political change were urban, middle class, educated people.
He says that he can represent them. And so there is a feeling that perhaps he's just trying to jump on that bandwagon and ride that wave of -- of unhappiness with the Kremlin at the moment.
But there's another theory here being voiced by some of the opposition leaders, and that is that his candic -- candidacy could, in fact, be a project that he's come up with or that he's agreed to with Vladimir Putin, who plans to run for the presidency next year, as well.
Opposition leaders here say, some of them, that no billionaire in this country would run for the presidency without Vladimir Putin's permission. The idea being that it is Putin's attempt to maintain the illusion of democracy, they say, by ensuring that he runs against another credible candidate, one that will draw attention away from the opposition movement, but one that Vladimir Putin can ultimately win on the election day itself - - Max.
FOSTER: Murky politics.
Phil, thank you very much, indeed, for joining us for that.
Now, tin may lead the way to a new boom for the old oil mining -- old -- old mining towns in southeastern Germany. Apologies.
A slew of international companies are drilling deep into Germany's Ore Mountains for the increasingly valuable raw commodity.
Frederik Pleitgen reports on the race to keep industries running at full stream.
FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): Drilling in Germany's Ore Mountains is no easy task in wintertime, but the company responsible, Deutsche Rohstoff AG, believes it might be onto one of the largest tin deposits in the world.
"We're going to send this drill cord to a lab," the chief geologist says, "and then trey and develop an efficient way to extract the tin."
Tin is used in electronics and other industrial production and, like many other raw materials, has seen growing demand in recent years, while known reserves have been depleted. That makes the deposit in Germany all the more interesting, says the CEO.
THOMAS GUTSCHLAG, CEO, DEUTSCHE ROHSTOFF AG: I think there could be a new wave of mine development here in the region. The region has a lot of undeveloped deposits that are well known. And we are not the only company that is active here in the region. There are a couple of Australian, Canadian, a U.S. company that is currently exploring here.
PLEITGEN: That could mean big economic transformation in a region that is dotted with old mineral mines almost all of which have been shut down decades ago.
(on camera): This area of Germany is very rich in minerals. But for many years, it was simply too expensive to extract them. But now that commodities are becoming more rare and minerals more expensive, areas like this one are becoming interesting again.
(voice-over): It's part of a worldwide scramble to secure a steady flow of raw materials to sustain economic growth. Germany has a massive industrial sector with a giant appetite for everything from steel to silicon.
But other countries, like India and China, are growing hungrier, as well, this commodity expert says.
"Until a few years ago, the global market provided everything we needed," he says. "But since about two years, we have seen both politically induced, as well as real shortages in raw materials."
The German government has responded, creating an agency for natural resources that informs and supports German companies on matters of securing raw materials. But tin might be one commodity they will have to worry less about, at least for a while. If the exploration drilling in the southeastern German mountains proves successful.
Fred Pleitgen, CNN, Muldenhammer, Germany.
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FOSTER: Well, he's an international TV sensation and your kids may know him as Sportacus. To you and I, he's just plain old Magnus Scheving. We're on our way to LazyTown, next.
FOSTER: Now, if you've got kids, you'll know teaching them to eat healthful can be a bit of a drag. Not so in LazyTown.
FOSTER: This is the crazy world of LazyTown, the kids program that's popular all over the world. That man you saw fencing with some fresh fruit and veggies is actually the show's creator, Magnus Scheving. Going by the name Sportacus, he's helped teach millions of kids how to keep fit and eat healthfully. And he's taken the message to more than 100 countries in more than a dozen languages.
That global reach is about to get bigger. The production company that Sportacus built has just been bought by CNN's parent company, Turner Broadcasting.
I asked Magnus Scheving why his healthy message has managed to transcend cultures.
MAGNUS SCHEVING, CREATOR, "LAZYTOWN": "LazyTown," actually, is one of the fastest shows -- TV show in history. It went to literally like 100 countries in nine months. And "LazyTown" is now in 500 million homes.
FOSTER: How many languages?
SCHEVING: And I would say 28 languages. And -- and wherever I go around the world, kids start to move. And it's fantastic. I was in my hotel in Chile. There was somebody cleaning my room who said, "Por favor Sportacus, can my kids see you?"
I said, fine. It's no problem. At 5:00 they called from the lobby and said Mr. Scheving, there's a major problem here in the lobby.
FOSTER: It was back flipping through the lobby.
SCHEVING: There are 120 kids in the lobby doing Moon Men. And -- and this is the impact. And we have worked now with governments around the world. I mean it came to life here in the U.K. and even Mr. Obama, etc. Etc. We have done mini marathons and etc. Etc.
So I think "LazyTown" works as a tool, definitely. And we know that's a fact. It's all -- almost 20 years now. And I'm going into a production to do 30 more episodes. And when you're starting to be nearly 50, it started to be more challenging.
FOSTER: You're nearly 50?
SCHEVING: Yes. And so it -- it's going to be a more and more challenge.
FOSTER: And we have to express interest here, because our parent company, Turner, has done a deal with you, right?
FOSTER: So for the first time, you've done a deal with another organization to make it even bigger. But you go into 100 countries already.
So what's your plan?
SCHEVING: My -- my plan is a little bit like this. You -- this is a start-up company. "LazyTown." And it was done by a mission. My mission was basically I wanted to move kids, move families and move the world. That was my mission.
And I wanted to make a business that everyone wins that would be nice.
And when I say that, if we increase sales of fruits and vegetables, their -- the farmers are happy, the retailers are happy and "LazyTown" is happy, parents are happy, kids are happy, the health minister is happy, everyone wins.
And -- but I needed like a big distribution to do this. You couldn't do it alone from your -- from your house, almost. It was impossible. And I tried to do it. I went to 50 countries. I jumped whatever. I tried to meet 20,000 kids a month. And so I needed a partner.
And when I realized that -- that Turner was a huge interest in this, I thought this is a perfect partner for me, because it's a little bit like when Ted Turner did Turner, there was like a family that he was (INAUDIBLE). He's anti-entrepreneur. And he built it up. So the plus of Turner is still a bit there.
And I think it will be fantastic for me to be associated with that.
FOSTER: I know you don't like talking about the money, but one of the -- one of the trappings of success...
FOSTER: -- is that you've made an awful lot of money from something that was just a small idea in your mind at one time.
So is this a moment to take stock and to realize that you've -- you've made it?
SCHEVING: It -- it's strange, because you -- because I know, of course, you want numbers. And -- and I have never been driven by numbers ever in my life. And I always believed that if you do something good and you do it well and you -- you -- you put your passion into it, the money is going to be there.
And I think in this case, "LazyTown" had a numerous amount of help for a lot of small investors who helped in "LazyTown" in Iceland when -- even when the Iceland collapsed. And they -- they -- they took a haircut on it and to help. so a lot of investors who invested in "LazyTown" did it because they wanted to do something good for the world. They knew it would be easier for us to sell "LazyTown" on chocolate or a fast food companies or what have you. That's there their margin is.
But I believe the future is somewhere else.
Who would believe that tobacco company, Itobak Afghan (ph), would come and say to a company, you are not allowed to smoke in New York?
This is going to happen with food gun. The food gun is going to be there. It's going to be pointed at the retailer and say what are you selling to kids?
What are you -- what are you actually doing?
And I think that's the future.
(END VIDEO TAPE)
FOSTER: What about the future of weather, though?
Let's go to Jenny Harrison -- actually, you've been looking at the storms, haven't you, here in the U.K.?
JENNY HARRISON, CNN METEOROLOGIST: Yes, I'll tell you what, Max, the future looks a little bit like a repeat of the last couple of weeks, that has to be said.
This is now week three of system after system just coming barreling across the Atlantic, very deep areas of low pressure that are going to continue to bring these really strong winds and also more in the way of rani and snow.
These are the current wind speeds.
Now, these are sustained winds. So Plymouth, 62 kilometers an hour. That means gusts easily in excess of perhaps 70, 80 kilometers an hour. Not as strong, the winds, across northern mainland Europe. But as the system gets closer, it will, of course, have an impact.
This is what's been going on. We've seen system after system, very, very strong. And this is a system which is currently coming through. Tuesday is actually going to be the day, the first day this week when we see the strongest storm and the highest winds.
Now, the reason we've had just so many systems across this particular region of Europe is because of the position of high pressure to the south, which has made these systems to the north and even deeper more intense area of low pressure each time. But, also, this is the jet stream. And obviously, the jet stream leaves very, very strong upper level winds that yes also been moving the systems very rapidly across the Atlantic.
But in particular, this is the direction it's been taking. And so right the way across the U.K., generally, the jet stream this time of year is further to the north. So these intense systems tend to swing by most areas of land.
But, of course, the impact, not only is it extremely dangerous out on the roads outdoors at all when these systems are coming through, because the winds are so very strong, but look at this. Just last Thursday, that one day, huge impact because of, obviously, what happened with the winds taking out power, blocking roads, people couldn't get to work. And $150 million over that one day. That was the actual financial impact for just that one day of those strong winds.
The last 12 hours, not only have the winds been picking up, the rain has been torrential out toward the wet, across the central and southern regions, and, of course, across the mountains, more snow, as well.
Then the system will eventually work its way across mainland Europe. Again, Germany has been seeing the worst of some of this weather for the latest couple of weeks. This is the area of low pressure coming through. The darker the color is where we have the stronger winds. And when you look at the U.K., you see those dark purple colors?
Well, that gives you an idea, as we get into the top end of the chart when it comes to the strength of these winds.
This is the same forecast, but actually just showing you some numbers as we go through the next 48 hours.
So I've just paused this at this particular point. This is about 1,800 hours GMT on Tuesday. And we've got winds, sustained winds getting on for 90 kilometers an hour. That easily means gusts of around 120 kilometers an hour.
And, in fact, what's going to happen, this is Tuesday. Then there's a lull on Wednesday and then Thursday there's another system coming through. At the moment, that's positioned further to the south. But these winds are cold, so look at these temperatures. Still way below freezing. Tuesday, all of these layers will be in place across all of the major airports. We're looking at an hour-and-a-half at many of these airports in the northwest and across the northern regions of mainland Europe. And still that rain and snow continue in the forecast. Unfortunately, the U.K. seeing the brunt of all these storms with that position right now of the jet stream -- Max.
FOSTER: Jenny, thank you so much for that.
Now, time for our Tweets from the Top from big players who've taken to social media.
First up, Anand Mahindra, vice chairman of Mahindra Group. And he's Tweeting: "With the plunge in Indian production, the economy is in a perfect storm. Time for India to live up to its reputation of responding to crises."
NYU economics professor, William Easterly, quips: "Economists have much more sophisticated lack of understanding than the guy on the street."
And finally, businessman and Panamanian president, Ricard Martinelli Tweets on Noriega's extradition: "The most sensible of -- thing that I've heard about Noriega's return to Panama is that he came to face justice, not the media."
And for the latest and best links to CNN.com headlines, do follow me, @maxfostercnn.
Now, in just a moment, we'll check on how markets are doing.
This is QUEST MEANS BUSINESS. Back in a moment.
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DAVID CAMERON, BRITAIN'S PRIME MINISTER: We were not asking for a U.K. opt-out, for special exemption or a generalized emergency break on financial services legislation. They were safeguards sought for the EU as a whole. We were simply asking for a level playing field, for open competition for financial services companies in all EU countries, with arrangements that would enable every EU member state to regulate its financial sector properly.
To those who are saying we were trying to go soft on the banks, nothing can be further from the truth.
(END VIDEO CLIP)
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ED MILIBAND, LEADER, LABOUR OPPOSITION: We will rue the day this prime minister left Britain alone, without allies, without influence. It is bad for business. It is bad for jobs. It is bad for Britain.
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FOSTER: British Prime Minister David Cameron and opposition leader Ed Milliband there on Britain's controversial decision to use the veto this weekend.
Let's take a -- a last look at the stock market numbers.
Here in equipment, all the major indices started the week deeply in the red, all linked, of course, to the euro. Investors worried that Friday's EU Summit deal won't be enough to solve the bloc's debt crisis.
And banking shares were especially hit hard. In London, shares in Lloyd's Banking Group fell more than 8.5 percent.
Frankfurt Commerzbank sunk nearly 8 percent, though.
And then Paris -- BNP Paribas dropped 5 percent.
Concerns over Europe are also hitting Wall Street. Financial shares are some of the worst performers there, too. Intel was the biggest drag on the Dow, though. That's after it cut its Q4 revenue forecast by up to a billion dollars.
That is QUEST MEANS BUSINESS. I'm Max Foster in London.
Thank you so much for watching. The news continues here on CNN.