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QUEST MEANS BUSINESS
More Cracks Found in Wings of Airbus A380; Record Employment, AAA Rating Boost German Economy; German Growth Forecasts Cut But Expected to Rebound; Germany by the Numbers; How Germany Become European Economic Powerhouse; European Markets Rise; Apple Announces Textbook Launch; Angela Merkel Key in European Politics
Aired January 19, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Tonight, the chief executive of Airbus tells me there's no cracks in our safety procedures when it comes to the A380.
Here in Germany, there's strength in the economic numbers. We put that to the test.
And in New York, Maggie Lake is with us with an Apple for the teacher.
MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: That's right, Richard, and you know the Apple we're talking about is the maker of this little device right here. We're outside the Guggenheim Museum in New York City, where the company announced it plans to revolutionize yet another sector. This time, education. We'll have the story for you.
QUEST: I'm Richard Quest, tonight, live from Berlin, where yes, I mean business.
Good evening from Berlin. We're live in Germany tonight. Germany is home to a critical part of the A380, the super jumbo made by Airbus, which today, it was announced that further cracks had been found in the wings in the internal parts of Airbus's Prestige plane.
Now, Airbus is at pains to say that there is nothing safety-related to the -- the cracks, which are inside the wings. But even so, as Airbus chief executive Tom Enders told me earlier today, it's an embarrassment for the plane maker, which will now have to deal with the growing problems and worries.
(BEGIN VIDEO CLIP)
TOM ENDERS, CEO, AIRBUS: We found some minor cracks some weeks ago on Qantas aircraft, actually the one that had the problem with the engine, the engine exploded in November 2000 -- what was it, 2010?
And we've done some inspections and we found what were minor cracks in these, as we call them, rib feet.
Now, one thing is very important. Safety is absolute priority. We're doing what it takes to repair the situation. We're talking really about the attachments between the covers -- the down and up in the ribs.
QUEST: So, it's inside, as opposed to actually load-bearing on the aircraft?
ENDERS: Yes, exactly.
QUEST: How embarrassing is this, though, for you and for Airbus and for the -- for this particular plane, which is your flagship aircraft?
ENDERS: Richard, I cannot say I'm proud of it, and obviously, we're investigating how it could happen. We think we have a pretty good understanding, but this investigation is ongoing.
What we have developed already is a repair solution, and this is what we will apply on the various aircraft if and where it is necessary.
And by the way, I say I'm not proud of it, but unfortunately, this has happened on other aircraft, competitive aircraft, not to mention the competitor or the aircraft before. So, this is, to a certain extent, embarrassing, yes. But we will do everything to make sure that safety is not compromised and we repair damaged rib feet for the customers.
QUEST: Can you be assured that this is not a wider problem with other aircraft in the Airbus range?
ENDERS: Yes, absolutely, we can say that. For sure this is a specific situation. This is material, this is manufacturing process, a mixture of that, obviously. As I said, we have a pretty good understanding. We are already applying on the new aircraft that are in manufacturing corrections and we have a repair solution.
QUEST: That was Tom End -- I've lost IFB.
(OFF CAMERA REMARKS)
Now, there we have Tom Enders there from Airbus talking to me earlier, and you can hear more of Tom Enders later in the program.
We'll be featuring on "Marketplace Europe" where he'll talk about growth and explain why the eurozone crisis itself doesn't bother him. But the ripple effects on other markets could do. That's "Marketplace Europe," which is in 45 minutes or so from now.
Germany is the eurozone's last remaining economic powerhouse. That is a straightforward fact. It's fast becoming its de facto economic capital. Chancellor Angela Merkel will make the keynote speech next week at the start of the world economic forum in Davos.
Chancellor Merkel admitted that German growth might be a little less than lofty this year, but she can walk into Davos with her head held high. After all, unlike France, Germany has maintained its Triple-A rating from the ratings agency. It's one of the few Triple-A's still standing in the eurozone.
And despite the slowdown, it is enjoying record levels of employment. The number of people in work has topped 41 million for the first time in history. With negative bond yields on short-term debt, investors are prepared to pay for the privilege of lending it money.
Even so, Germany is not completely immune from the euro crisis. Yesterday, Berlin revised Germany's growth forecast downwards for 2012. It's now predicting just 0.7 percent growth down from 1 percent.
The German economy is expected to rebound in 2013, and if there is any momentum to be found in the eurozone, it is certainly to be found right here. As Diana Magnay now explains, when it comes to Europe's economy, the writing's on the wall right here in Germany.
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: If you've been to Berlin, you may recognize this. It's called the East Side Gallery, a long stretch of murals reflecting the freedoms won when the wall came down.
And today, we thought it might be a good way of giving a bit of pictorial illustration to Germany's economic data more than two decades after reunification.
First, growth, or lack of it. The German economy shrank in the last quarter, and some economists say it may shrink again because of all this euro gloom. And that would, of course, mean recession, technically defined as two consecutive quarters of negative growth.
Still, the 3 percent growth rate in 2011 was twice that of the US or the rest of the eurozone, which shows how resilient the economy has been.
Crucial to that is the unemployment rate, which some years ago, was one of Germany's biggest challenges. The seasonally adjusted jobless rate for December fell to 6.8 percent. That's its lowest since the wall came down.
Strong job creation, especially in the services sector, which contributes some 70 percent to the country's GDP.
There's still strong demand for German goods. Car sales up 6.1 percent in December, for example. Asia's still hungry for German engineering, even though demand from the eurozone, which is by far Germany's largest export market, is trailing off as Europe's spending power diminishes.
But mostly, it's the notoriously spendthrift German consumer who's driving demand by the dipping into their pockets, partly because so many are now in jobs, partly because interest rates are so low. Consumer spending growing 1.5 percent last year compared to 0.6 percent the year before.
And that's all keeping investors happy. The latest investor confidence survey for January rising the most since records began. Economists also putting that down to good numbers out of the US and to the decisive action taken by the ECB last month when it flooded the eurozone banking system with cheap loans.
Diana Magnay, CNN, Berlin.
QUEST: So, we need to put this into perspective. Joining me now is Jorg Rocholl from the European School of Management and Technology.
The question is this. At what point did Germany become the powerhouse economically of the continent?
JORG ROCHOLL, INTERIM PRESIDENT, EUROPEAN SCHOOL OF MANAGEMENT AND TECHNOLOGY: Well, there were many reforms a couple of years back, in particular in 2003, 2004. The so-called Agenda 2010 that changed many things. And many of these reforms we now can benefit from.
QUEST: At the time, we didn't realize just how significant those reforms were going to be, because obviously, we didn't see a crisis coming the likes of which we saw in 2008 and 09.
ROCHOLL: That's right. So, at that point, it didn't even become obvious how strong the recovery of the German economy was, an economy that was called the sick man of Europe still in the 90s and the early 2000s.
And now, obviously, there's a big change, a dramatic change, record low levels of unemployment, a very strong growth in the economy, despite all the risks looming in the eurozone.
QUEST: So, as we now move into this scenario for 2012, 2013, does -- it's an interesting question. Germany probably slipped into negative at the end of Q4, maybe Q1 as well. Are you -- do you think Germany will be in recession for much of 2012?
ROCHOLL: Currently, we see that there's, again, modest hope that the remaining of 2012 will be better than the start. At the same time, of course, there is a lot of risk coming from the debt crisis in the eurozone, even beyond. And so, as ever, we have to watch carefully what is going to happen.
QUEST: People here in Germany are feeling resentful at having to bail out the southern European countries. Are they justified in feeling resentful? Because Germany did benefit from many of the policies that led to the current crisis.
ROCHOLL: Right. And so, I think the key concern here is the moral hazard that comes with any rescue package. So the question, what is going to happen if Germany helps too early and maybe too generously?
I think in the end, and this is what we've seen over the last couple of months and years, Germany will help. I guess at the same time, they will try to get and implement as many things as possible for the time being.
QUEST: This moral hazard argument has been used time and again. Do you subscribe to the moral hazard view that if you teach these spendthrifts to go their own way, it'll all end in rack and ruin. Do you believe that?
ROCHOLL: It really depends on the country we look at. So, certainly it is true for Greece. I don't think it's true for Spain or Ireland, where we've seen record growth, where we haven't seen any budget deficit before the crisis, so therefore, there it was rather a question of private debt and the accumulation of risk there.
QUEST: How popular at the moment is Chancellor Merkel? She is seen as being the hard leader, the one that is driving people to rack and ruin in southern Europe. How's she seen here?
ROCHOLL: In Germany, she's quite popular, given that she keeps a firm stance on economic policy, even though, as you said, it's right that in Southern European countries, Germany is faced with criticism of not helping enough.
QUEST: Well, they we are. Many thanks to you for joining us, putting it into perspective. Jorg, one final thought. Are you surprised at how strong the German economy is today?
ROCHOLL: Actually, it is a positive surprise, indeed. So, I think many people would have said even two or three years back, the unemployment level should have been much higher. Indeed, it's not.
QUEST: Many thanks, indeed, for joining us. Appreciate it. Many thanks, indeed.
So, now let's put this into the context of the European markets and how they traded. Commerzbank here in Germany says it may not need a bailout from the German government. It says shares finished almost 15 percent higher today.
QUEST: That's -- remember, we did bring the bell with us. It pushed the DAX about 1 percent higher in line with the other major indices. Commerzbank says it's more than halfway to raising all the money it needs to keep its capital requirements.
Banking shares soared across the continent after a well-received bond sale in Italy and Spain. French banks in particular did well. Soc Gen up 13 percent, Credit Agricole up around 9 percent.
The old days when you used to take an apple for the teacher, now the Apple is in the teacher's classroom, and the teacher is looking forward to using the Apple. If I'm being a little Delphic, all will be explained after the break.
The bell still doesn't work, even here in Germany.
QUEST: Good evening from Berlin. A cold, wet, and windy evening, but a warm welcome to you from the German capital.
Apple, the computer company, is to enter the lucrative textbook market. You're right, I didn't say Notebook or laptop, I said textbook. It's a market and an industry worth billions of dollars.
It's the first major product launch for Apple, if you don't count the iPhone 4S, but it's the first major new area for Apple since the death of Steve Jobs last year.
Maggie Lake is in New York for us tonight. Maggie, first of all, what are they doing and why?
LAKE: Richard, forget about those textbooks, the expensive heavy ones that you and I used to lug around. It may be that all you need now is this, at least if Apple has its way.
They're here in New York, not the home state of California, for a reason, and that was to unveil a whole bunch of new initiatives aimed at replacing those old textbooks with new interactive digital books specifically for the iPad.
They did a demo, and these books do all sorts of things the old- fashioned books didn't do. They have movies embedded in them, they have 3D animation and graphics that pull up. You can customize them and highlight them. And I talked to at least one analyst inside the event who said this could be the beginning of a new era.
(BEGIN VIDEO CLIP)
LANCE ULANOFF, EDITOR IN CHIEF, MASHABLE: But here, what Apple has done is provided a very simple tool, a powerful tool, that looks really good and works well. I loved the preview on the iPad.
They've gotten together with some very important and powerful partners who are already delivering textbooks into the education marketplace, and they created a price point where, I think, the education system can get excited about it.
So, all those things together compromise a game-changer for the education textbook market.
(END VIDEO CLIP)
LAKE: Now, certainly there are big challenges. School budgets are tight, and some people a little bit worried about the durability of putting something like this, which is not cheap, in the hands of a first or second grader.
But a lot of people think that improvements are enough that they're going to do it. This is a $10 billion industry, Richard. There's only 3 percent digital penetration right now, so it's a massive market.
Not to mention, this is sort of an interesting thought. What about the halo effect of children who grow up in the Apple ecosystem. It's an interesting thought, very hard to quantify. Apple says it's absolutely dedicated to reforming education, it's going to stick with it. It is the early days, but certainly a big foray into this big, big area. Richard?
QUEST: You see, now, that is the interesting thing about it. And I'm not going to take a view one way or the other, Maggie, because every time I have said I can't see why Apple's doing something, they've always come out with a huge, rip-roaring success like, for example, the iPad.
LAKE: Exactly. Richard, I just want to point out, too, that educators, the people in the education system, Apple's had a very long relationship with educators, and teachers are some of the -- they have been some of the quickest, most avid adapters of the iPad.
So, if they can break through now, they've partnered with a major publisher, 90 percent of the people who make textbooks are onboard with Apple with this venture. If they can make it into the classrooms, this could be a massive change.
And the most important thing is to see the kids interact with it. This is a very different situation, and based on the demo inside, you could really see kids who play with smart phones, who are on video games, who are used to this sort of equipment, walking through the door right now in schools, and it's like walking back in time.
Now, this would catch up to where they are really in their real life. So, again, a very big market, and Apple has a proven track record at coming in and succeeding where the other people in the space already have not been able to do, Richard.
QUEST: Maggie Lake. Maggie Lake, who is in New York for us tonight. When we come back, we return to the economy of Germany and the question of what happens when Angela Merkel decides to create jobs.
QUEST: Welcome back to Berlin. Angela Merkel says she is still searching to find what more can be done to settle and solve the eurozone problems. Now, the ESFS has been downgraded, the question will be whether the German government has to stump up more money so that the fund can get back its Triple-A rating.
There have been calls for her to show greater solidarity with Europe. What is quite clear, Angela Merkel is probably now, the single most important politician in Europe, and so much of the continent's future economic success relies on the views that she has, as our correspondent in Berlin, Diana Magnay, now explains.
MAGNAY (voice-over): As the Michelin starred chefs get ready for another night in Berlin's hottest new pop-up dining experience, Pret a Diner, over by the bar, a face gazes heavenward with sacral serenity, seeking divine guidance, perhaps, on monetary matters.
Recognize the German chancellor? Her third eye, the same symbol you'll find on the US dollar bill, fitting as she's gracing the walls of Berlin's old mint.
Olivia Steele runs Pret a Diner and commissioned Portuguese street artist Vhils to create the project's signature piece in Berlin.
OLIVIA STEELE, CREATIVE DIRECTOR, PRET A DINER: Coming from Portugal, he's not very fond of her. We had this discussion, and he asked if he could do his interpretation of her, which was half Angela, half skull.
MAGNAY (on camera): And you said no.
STEELE: No. Not in Germany.
MAGNAY (voice-over): That's because whatever the feeling in Europe's south, many Germans not naturally predisposed to her party's social conservatism are giving Frau Merkel the thumbs up. Like curator Johann von Lanzenauer, also involved in the Pret a Diner concept.
JOHANN HAEHLING VON LANZENAUER, CIRCLE CULTURE GALLERY: I have a lot of respect for her work, and for her attitude, especially at first to be a woman, to go so far and with so much strength. I think she's a very sustainable politician, as she is like her research person from her former profession.
MAGNAY: So, who is the woman who's calling the shots in Europe, the stronger half of the Merkel-Sarkozy power duo, at least the one with most of the cash.
Her actual other half, chemistry professor Joachim Sauer, shows up rarely. She's said she likes to make him breakfast in the mornings in the modest home they chose over the chancellor's official residence.
Simple, unpretentious, and fiercely bright, say journalists who've traveled with Mrs. Merkel on foreign trips.
ANDREAS THEYSSEN, "FINANCIAL TIMES DEUTSCHLAND": She's thinking in long terms, that's the reason why she, in current affairs, she's very often keeping quiet. She doesn't say anything when everybody's expecting her to say something, but she first wants to see what could be the outcome of a process.
ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): Today, you can trust me to do everything in my power to strengthen the euro.
MAGNAY: And it seems that most Germans do. In the latest poll from German broadcaster ZDF, 66 percent of Germans felt she was doing a good job in the euro crisis, up from 45 percent in October last year.
UNIDENTIFIED MALE: Just one word to describe her qualities? Consequence.
UNIDENTIFIED MALE: Brilliant.
MAGNAY (on camera): Yes?
UNIDENTIFIED MALE: Yes.
MAGNAY (voice-over): "So, I would just like to say that Mrs. Merkel is OK," this woman stops to say.
THEYSSEN: She wants to give them the impression "I'm not -- like Helmut Kohl did, I'm not giving away money to Europe without any reason. I'm saving German money, but only when they are doing their job, then we give them our money."
MAGNAY: A committed European, but not at any price. Santa Angela to the Germans, perhaps. Maybe more like a punishing angel to the rest.
Diana Magnay, CNN, Berlin.
QUEST: Diana joins me now to talk about this and to put it into some wider perspective. The question not only of what Mrs. Merkel does outside Germany, but also what she does inside Germany. She was very unpopular at one stage.
MAGNAY: Well, exactly. I think the public, the electorate is always fickle, and last year, she was a lot less popular than she is now.
People haven't been particularly impressed by what she's doing domestically, and it really has been the euro crisis and her handling of it and people's feeling that she is defending Germany's interests and the German taxpayer against a Europe who doesn't feel good about her. She's working in their favor, basically.
QUEST: Is there nobody here who, though, puts the other point of view that suggests actually she might be driving the bus over the cliff.
MAGNAY: The kind of point of view that Standard and Poor's just put out there that her policies are exactly the root of the problem. Sure, there are.
QUEST: There's a lot of people out there who do say the austerity in German -- the austerity being imposed, more people -- on countries like Greece, is actually the wrong way to actually get the crisis solved.
MAGNAY: Which is why you're now seeing Angela Merkel and Nicolas Sarkozy at their last press conference start to talk about growth. But you do wonder whether they're just beginning to pay lip service to it, whether this is something that they -- it's new rhetoric, basically, all this growth talk.
QUEST: Toward me to what we might expect to hear her say when she opens -- the speech opens at the world economic forum on -- next Wednesday. She's going to be giving the keynote speech. She's got to set out an agenda of why the eurozone is not a lost cause.
MAGNAY: She's got to try and restore confidence from investors worldwide, say, "We do have the situation under control." So, she's going to be talking about this fiscal pact that they have to have sealed, essentially, after Daraa.
She's going to be talking about the fact that hopefully by that time they will have secured some kind of deal on Greece. Those are the two big factors that she's got to make sure that she's got nailed.
QUEST: If there was an election tomorrow, would she win?
MAGNAY: Right now, she'd be looking good, yes.
QUEST: Which is extraordinary, bearing in mind from where she came. Diana, many thanks, indeed, for joining us. Diana Magnay here in Berlin with me.
If you can hear the wind blowing, I assure you, it's very windy and rainy here in Berlin tonight, a bit like the economy in the rest of the eurozone. More QUEST MEANS BUSINESS after the break.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment, live from Berlin, but first, this is CNN. And on this network, the news always comes first. There are two major developments in the race for the U.S. presidency.
First the Texas governor, Rick Perry, has dropped out of the race and endorsed Newt Gingrich. And, second, there's been a big change in the Iowa caucus results. Instead of Mitt Romney winning, it appears Rick Santorum actually won by 34 votes.
New video into CNN shows that a rooftop sniper in the Syrian city of Houma, Syrian opposition group says at least 64 killed in violence there on Thursday. It says there are among 24 people who died nationwide. The month-long Arab League mission to Syria ended on Thursday. A senior Arab League Commission official said an extension looks likely.
Italy's navy says it will soon decide whether call off the search for survivors from the shipwreck off Giglio Island. About two dozen people are still missing. Meanwhile, authorities say they're carrying out tests on a hair sample from the ship's captain to see if he was intoxicated the night of the crash.
Afghanistan's president has ordered an investigation into a recent NATO bombing raid in the Kunar Province. Reports suggest that six civilians were killed, including four children. Hamid Karzai assigned a member of Afghanistan's parliament to lead the inquiry.
And Apple has revealed its latest product in the first big launch since the death of Steve Jobs. The technology giant is to enter the lucrative textbook market. It's developed new apps for the iPad and has partnered with publishers to develop digital textbooks for students.
QUEST: An historic moment for Ivory Coast. The words of the U.S. Secretary of State Hillary Clinton this week as she praised President Alassane Ouattara for the progress he's made towards peace. Ivory Coast, the world's biggest cocoa producer, is also on the brink of major reforms to its main industry. President Ouattara assured Ms. Clinton they would be in place by the end of the month.
On Friday, CNN's David McKenzie will take us deep into the industry of the cocoa production in the interior of Ivory Coast. It's part of our Freedom Project. You'll be well aware that we have championed the cause of what is happening in the cocoa industry and the use of child labor.
David's documentary documents quite clearly that, despite the promises and the best efforts, these abuses continue.
(BEGIN VIDEO CLIP)
DAVID MCKENZIE, CNN REPORTER (voice-over): Another day visiting the bush, we find farmer Ron Amusa (ph). He says he's heard the government promises before. Like many cocoa farmers, he survives just above the poverty line. He says he doesn't use child labor. His alternative: he relies only on himself, and at 70, he's a bitter man.
RON AMUSA, COCOA FARMER (through translator): I've already been here for 26 years. I've already been here for 26. You see there, my roof? If it rains, we will get water inside. You can go inside, and you'll see the water. If you have five acres, you want something for your child's future. I don't have anything. I'm telling you, I have nothing.
MCKENZIE (voice-over): The government sets the price for his cocoa. And until reforms are put in place, many farmers will use children to cut costs and increase profits.
UNIDENTIFIED MALE (through translator): The syndrome of child labor is the result of the production costs that the farmer must bear. He tries to minimize the production costs of his harvest by using, unfortunately, child labor, which our law now condemns. As long as he will benefit from it, he will do it.
AMUSA (through translator): If I die right now, what have I done for my children? Zero. Zero. They say they want to help us, but help doesn't get to us.
(END VIDEO CLIP)
QUEST: Now a preview of our CNN Freedom Project special presentation, "Chocolate's Slaves (sic)." It's on Friday night at 8 o'clock in London, 9 in Berlin, midnight in Abu Dhabi. And afterwards, the discussion immediately following in a special half-hour program with Becky Anderson and myself.
This is QUEST MEANS BUSINESS, coming to you live tonight from Berlin. Back in a moment.
QUEST: The Reichstag building here in Berlin, wonderful Norman Foster building. It is perishingly cold tonight. It has rained solidly all day. We've had a bit of a respite from the rain. (Inaudible) in a moment or three will tell us what we can expect in the 24 hours ahead.
Just around 20 kilometers south of where I am there is a small professional football club called Union Berlin. Now the problem for Union Berlin is a familiar one. It has a lack of investment. It needs money, and it needs it fast.
The solution, though, is less than conventional. It doesn't want to sell itself to some billionaire megalomaniac who will do with it what they will. So what's the answer instead? Fred Pleitgen reports.
(BEGIN VIDEO CLIP)
FREDERIK PLEITGEN, CNN REPORTER (voice-over): They call themselves "The Iron Ones," (speaking German), a second division club with a lot of history but very little cash and a problem. They want to refurbish their stadium, but getting money from a big financial investor would be considered selling out by much of the fan base.
"The folks here are quite hostile to the big business," says midfielder Michael Parensen. "There's just a huge bond here with the fans, who give so much to the club."
So the team decided to sell stadium shares but only to official club members, fans, current sponsors and players, like midfielder Torsten Matuschka.
"Because an Union man," he says, "I've been playing here for seven years and want to be a stadium owner and play in my stadium."
Union Berlin wants to construct extra stands to increase seating capacity. After the stock sale, its stadium will be co-owned by fans, who will then have a say in everything concerning the arena.
Well, Union Berlin has always been a blue-collar working man's club, where the fans are close to the players. So it shouldn't come as a surprise that the team would turn to its fans to get financial help trying to expand its stadium.
It's not the first time the notoriously cash-strapped club has asked supporters for help. In 2009, hundreds voluntarily went to work to renovate the dilapidated venue called the Alten Fursterei. And the stadium's name is a big issue, as fans fear a big financial investor might want to rename the place.
UNIDENTIFIED MALE: (Speaking German).
UNIDENTIFIED MALE: (Speaking German).
PLEITGEN: In a recent TV ad, the club mocked their own attempts to get funding from large corporations and companies' demands that come up with new names for the stadium. But team supporters are mostly from the eastern part of Berlin, in what used to be Communist-ruled territory.
But anyone who labels Union's community ownership approach socialist is dead wrong, the club's president insists.
"To us, it's all about co-ownership and co-determination," he says. "We want people to come into the stadium and have their say. If you call that social, I would say, yes. But it's not something socialist."
The fans' loyalty was on display at the club's recent annual meeting. Team management also announced the result of the stock sale. Almost half the team's members bought shares, raising almost 3 million euros, money, they say, will be used to improve their stadium while keeping it in the community -- Fred Pleitgen, CNN, Berlin.
(END VIDEO CLIP)
QUEST: Now, if you have been hearing strange noises throughout the course of the program from over here, it is the tarpaulin as it is being thrashing in the wind. Jenny Harrison is at the World Weather Center.
Jenny, it's pretty grim out there.
JENNY HARRISON, CNN METEOROLOGIST: Yes, it is. You're quite fortunate, Richard. I think you're literally in the middle of a bit of a dry spot there. I can see you're quite cold. You can see the breath coming out your mouth. But not as cold as it could be, and it is the wind, as you say, that's really making it feel cold, but also it is quite gusty now.
All this cloud has been spinning across for the last few hours. This is that lake system I've been talking about for the last couple of days. So with it it's bringing in the cold air, but also these very strong winds.
Now the actual temperature in Berlin right now is 5 C. It gets colder further in. It's actually -13 in Moscow this hour. But then, when you factor in that fairly blustery wind, it feels like just a degree above freezing in Berlin, but look at what it does to Moscow, -23 degrees C.
Meanwhile, across in London and Paris, it is quite mild. The snow has been coming in as well. You can see a lot of snow across there, the Highlands, through Scotland and (inaudible) also a very messy picture across in Germany, where you are, of course.
There you are, look in, Berlin. We've got some heavy rain, thunderstorms, also some snow. And as I say, the last few hours, we've just had a bit of a break. And a lot of this rain is sort of fairly light. It's just giving rise to a little bit of mist and sort of drizzly conditions.
But this is (inaudible) on its way eastwards. That is, of course, to the north and the east the same as snow, but also in the south of this system, the winds are on the increase. That means through the western and central Mediterranean.
This is the wind forecast for the next few days. You can see the colors beginning to really make an impact across the western regions of Italy. For example, this is the satellite for the last few hours. So as you can see, we've seen this cloud come in. The winds have been picking up. This is exactly what we were saying.
And through Friday, this is when we can see that rain coming in, as you said, through the weekend it's fine and dry. There's all the snow. Plenty more, Richard, in Switzerland. Not long now and you're heading out there (inaudible).
QUEST: Oh, oh, oh, many thanks, Jenny. We'll talk more about that next week. And that's QUEST MEANS BUSINESS from Berlin. I'm Richard Quest live in the German capital. Whatever you're up to in the hours ahead, hope it's profitable. Marketplace Europe live again from Berlin in a moment.
QUEST: Hello, welcome to MARKETPLACE EUROPE, live from Berlin. I'm Richard Quest in the German capital. Whatever the financial problem in Europe, it seems these days Berlin is the answer to the financial woes, whether it's the financial crisis in Greece or, indeed, the issues of the fiscal pact.
So, tonight, we're going to be looking at exactly what's been happening in Germany.
And we'll be meeting the chief executive of Airbus, John -- I beg your pardon -- the chief executive of Airbus, Mr. Enders, and also joined by Peter Levy, the managing director of IMG Fashion Worldwide, who's in town to run Berlin Fashion Week. I'll be asking him if the slump in European retail sales has affected the appetite for front row seats.
Now the aircraft manufacturer in Europe, Airbus, has just announced a stunning sale in August. It has trounced its competitor, Boeing, taking two-thirds of the orders between the two companies.
Airbus is facing some serious problems, not least of which, of course, here in the Eurozone, where it has its headquarters. I talked to Tom Enders, the chief executive of Airbus, and I wanted to know how badly affected Airbus would be by what's happening in Europe.
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Thomas Enders, CEO, Airbus: So far we have been -- we have not been very much impacted by this. That is due to the focus of business no longer being in Europe. Give you a number: we intend to deliver 16-17 percent of our production this year, the aircraft, in Europe. I think 11 percent, 12 percent of American. But bulk of the production goes to Asia Pacific and to the Middle East.
So what's happening -- what's happening in Europe is important for us, but what would be much more of a -- of a -- have much more of an impact on us is if the economies were breaking down in Asia.
QUEST: And the worry, of course, is the ripple effects of what happens when Europe does start to hit the slowdown in the U.S., and in Asia, and that will be a concern.
ENDERS: That is a concern. I mean, what we've seen last year already, where were -- some would say dark clouds about financing. I mean, most of the aircraft that are delivered need financing, very few airlines in the world who can pay them out of cash flow. And there were a couple of European banks that had difficulties last year.
Now we're taking that into account. We're looking more and more for additional new sources of financing, what could that be? Could be Asian banks, Japanese banks, Chinese banks, it's -- Canadian banks have some interest. We go to the capital markets directly. So all of these things belong to our, let's say, mitigation strategy.
QUEST: I know that you look years out and ahead in terms of the forecasts. But are you concerned for what happens in 2012?
ENDERS: Yes. I mean, we are. I can't say we are alarmed. We are concerned. We have -- we are working the situation very carefully. Obviously, the croak (ph) slows down, particularly in the emerging economies, where there's an impact on the -- on air travel. We know that that impact is rather direct.
Final thing, at least for the next six months or so, we usually have a lead time and find anything at about six months, seem to be secured. So in that respect, there's no -- I see no imminent danger.
QUEST: There is one problem, of course, and that is Europe, and whether or not how the euro trades against the dollar. You sell your planes in dollars. You manufacturer in euros. You have a -- you have a huge currency risk.
ENDERS: Yes, but right now we have a -- what I could call windfall profit. We have much better hedging conditions with the euro crisis, when we would have probably had without it. I mean, that seems to be a certain irony. I would say our dependency on the euro-dollar is still very critical. So with a rather strong dollar, which we have -- dealing with right now, that is good for our business.
QUEST: Turn to the business. That's sort of our plains role (ph), the meat and veg. You had a stunning year last year, 1,400-plus orders. There's no way 2012 can rival that.
ENDERS: Absolutely. And it doesn't have to. I mean, with an order backlog of more than 4,400 planes, that's unprecedented, not just for Airbus but for the entire industry. We have a good -- we have a good backlog. So, no, we are expecting maybe 600, 650 sales in 2012. And that would still be way above our annual production. In other words, we would add already to our huge order backlog.
QUEST: My final question, you would not be surprised by my final question, which is will you be the new chief executive of EADS? Will you be leading EADS by the end of the year?
ENDERS: I'll have to try some diplomacy earlier in the -- in the week, and I will tell you I would very much hope within a year's time, I still have a challenging job in the aeronautic industry, and that there are worse things that can happen to a guy like me than being (inaudible).
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QUEST: And the view still is that Tom Enders will become the chief executive of EADS. What's the politics between Berlin and Paris have finally been sorted out.
When we come back, high fashion is a fickle business here in Berlin. It's Fashion Week, and we're going to be talking about the industry and what it means for the retail sector. It's from Berlin, it's MARKETPLACE EUROPE.
QUEST: Welcome back to MARKETPLACE EUROPE. We are in Berlin. Unfortunately, we're not the only show in Berlin this week. No, Berlin Fashion Week is taking place, a chance for German designers and for the fashion houses to show their wares and to drum up support and business at this difficult time of the year.
As Juliet Mann now explains, the retail climate is not very good when it comes to trying to sell high-end clothes.
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JULIET MANN, CNN RERPOTER: London's Oxford Street, one of the busiest high streets in Europe, is always teeming with people. But are they just window shopping? Even with the allure of massive markdowns, not just here, but all around Europe, we're spending less. The euro-sapped Retail Sales Index fell 2.5 percent in the Eurozone on the year, and 1.3 percent in the European Union as a whole.
But the luxury end of the market has seemed more resilient. Take Burberry, which reported strong sales figures, thanks ,in large part, to the brand's popularity in Asia.
RICHARD PERKS, RETAIL DIRECTOR, MINTEL: The luxury market's unaffected, because the people who buy luxury in aggregate are actually growing because of the growth in the Far East. The high street, on the other hand, really is affected by the local economic conditions.
MANN (voice-over): The outlook in the retail sector has darkened after a raft of gloomy forecasts. There have been casualties. Analysts say that's why most U.K. High Street chains, even supermarket giant Tesco, are now in the process of closing stores in a strategy shift to doing more business online.
And while the luxury market is still growing, it's at a much slower pace than expected. The weakest market -- you guessed it -- Europe. Here, there are big spenders of a so-called traveling luxury consumers, who splash out in designers' flagship stores when they're passing through. But in the brutal world of retail, there's more pressure than ever to give homegrown consumers incentive to spend.
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QUEST: Now I'm joined by Peter Levy. He is the managing director of IMG Fashion Worldwide, the company responsible and behind Berlin Fashion Week.
And, Peter, look, we just hear in Juliet's report there the difficulties that are being experienced by retailers at the moment. What's your experience and how it's translating?
PETER LEVY, MANAGING DIRECTOR, IMG FASHION WORLDWIDE: I mean, I would say we've -- Mercedes-Benz Fashion Week, which IMG started in 2007, has really escalated in Berlin specifically, which has become Germany's fashion capital because Berlin is just a unique place with talent.
And I think what we do from a runway environment and the solutions we provide, it's all about creativity and something somebody doesn't already have, reinterpreted.
QUEST: OK. So where does Berlin then fit into the fashion show world? And I guess I'm not really asking just, you know, is it rivaling London, Paris and Milan, because it's obviously clearly got some way to go.
But where -- what its raison d'etre?
LEVY: Well, that's actually an excellent question, but it's each fashion week that we're involved in, because there are -- I don't know, I've always tried to number, somewhere between a gazillion and a trillion fashion weeks in the world -- has to have a reason for existing.
And Berlin, really as a -- as a capital, beyond fashion and creativity and curation, has over eight fashion schools. But it's really an emerging marketplace. And I would say not dissimilar to London in a way. It's a gateway market of fashion's future. And that's what it's providing. It isn't try to emulate another marketplace, but it's really creating wearable clothes in a modern way.
QUEST: Right, wearable clothes in a modern way. In that regard, does that give it a step up, wearable clothes in a modern way, on the others, because it's a translation of that into retail and sales, (inaudible). And that, for example, you know, because I don't know that much about fashion, but I do know that New York is what -- is the clothes that people go and buy and wear.
LEVY: I mean, I think what you find is people in New York wear clothes from Italy and all over the world when they actually consume at retail, which is not dissimilar (ph) to the retail marketplace here.
But I think what you've got in a gateway market, which is what I said, is it's really -- people that are interested in fashion, it's moving in a modern way, and it's part of that consideration set in a regional marketplace.
QUEST: (Inaudible), because I always have no -- are pinstripes back in for the likes of you and me?
LEVY: I think they'll look perfect on you, and you should continue to wear them.
QUEST: Pinstripes for me forever. Many thanks indeed, Peter, for joining us.
And that is MARKETPLACE EUROPE for tonight, live from Berlin. As always, whatever market you're in, I hope it's profitable. I'll see you next week.