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Quest Means Business
Fed Rate Hike Delay Triggers Global Sell-Off; US Fed Keeps Rates Unchanged Near Zero; Winners and Losers Going Forward; European Stocks Down; Croatia Closes Border Crossings; Border Controls Have Ripple Effects in Europe; Rugby World Cup Kicks Off in London
Aired September 18, 2015 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:59:55] (NEW YORK STOCK EXCHANGE CLOSING BELL)
RICHARD QUEST, HOST: Those of nervous disposition, do not look too closely. Absolutely awful day on the Dow Jones Industrials. It looks like
the close is going to be near the worst point of the day, if not the lowest.
(GAVEL POUNDS)
QUEST: That was a firm but wimpy gavel on Friday, it's September the 18th.
No liftoff for the Fed means a plunge for the US and global markets.
Think of it as third time's the charm. Greeks are heading to the polls again.
And religion and business mix in Cuba, of all places.
It may be a Friday, but I'm still Richard Quest and yes, I mean business.
Good evening. The US Fed does nothing, and the day after, the markets tank. The decision to delay raising interest rates has caused a massive
sell-off around the world. If you join me at the super screens, you'll see what I mean.
Before we get to the Dow, we will pause on the way. With the exception of Shanghai and Hong Kong, which were on a frolic of their own,
just look at the sort of losses that we saw: 3 percent in Germany, 2.5 in Paris, London down 1.3.
And then you come to the United States, where the Dow Jones Industrials, not quite the lowest. It was about 316 was the low point of
the day, but it is off 291 points, a loss of 1.75 percent.
And if you look at the Dow components, you see everybody's down. Apple is the cleanest dirty shirt in the laundry, but the big, big global
stock -- Caterpillar, Goldman, JPMorgan, the banks where hammered, the oil companies were hammered, anybody involved in the global economy, with the
exception of, seemingly Apple, took a hit.
Because as the chairman of the Fed, Janet Yellen put it, the outlook abroad appears to become more uncertain. It was her long, hour-long
briefing. She talked about China 16 times, and it's all left investors even more worried about the global gloom. So, in this scenario, Paul La
Monica is with us from CNN Money. Good to see you, sir.
PAUL LA MONICA, CNN MONEY DIGITAL CORRESPONDENT: Good to see you as well.
QUEST: What happened?
LA MONICA: It was not a pretty day, obviously, as you see from the board there. I think the key was that the Fed really acknowledged that it
is concerned about the global markets and not just the US economy. Delaying the rate hike yet again is a sign that they are seriously
concerned about China in particular. And I think that's spooking people today.
QUEST: Right, because by all that's normal in Economics 101, a decision not to raise rates means cheaper money and should have been a
benefit and boost for the market.
LA MONICA: It should, except for the banks. The bank stocks were among the bigger losers today. Because the banks, let's be honest, they
don't -- they're done with cheap money. They want rates to go up so their margins can actually get higher on all those loans that they want to be
making, so bank stocks really got killed today.
And I think when you look at other things, the ripple effects, commodity prices, they fell again, so oil stocks, they got hit.
QUEST: But it's all about global growth here, isn't it?
LA MONICA: It's all about global growth. The US, we know, is holding up relatively well. Job growth has been good but not great, and the US
economy is in much better shape than, obviously, Europe.
And it's at least going in a better direction than China, where everyone's talking about the possibility of a hard landing. So, I think
right now, it is just -- everyone outside of the US, that's where the fears are.
QUEST: Now, you've had the advantage over the rest of us today, you've been reading many brokers' notes, you've been seeing what people are
thinking. Where is the consensus for the next -- or for the hike? Is it October, is it December, or -- I even saw one survey today suggesting it's
now into 16?
LA MONICA: December is still what most people think because the Fed itself, according to those dot plots that they put in their statements
every couple of meetings, there's still the majority of people on the Fed calling for higher rates at the end of this year.
Probably not in October, because it's -- that's only a few weeks away, and there's no scheduled press conference. Everyone wants Janet Yellen to
explain the rate hike, that's why December makes sense.
QUEST: But --
LA MONICA: 2016 could still happen though. We're still worried about China in a few months, they could punt again.
QUEST: Good to see you, Paul.
LA MONICA: Thank you.
QUEST: Paul La Monica, thank you. Now, the Fed, as Paul was saying, has two more opportunities this year to raise rates. Janet Yellen says a
hike could come as soon as next month. The last time the Fed raised rates was in 2006. It was the last hike in a cycle that had begun two years
previously.
[16:05:03] That raising cycle or tightening cycle included 17 hikes. When the Fed raises rates this time, it's likely to be much more gradual.
The red line part of this shows the Fed's -- the red line shows the Fed's predictions. By the end of 2015, likely to be around half a percent. In
2016, 1.4. Only by the time you get to 2018 do you see 3.4 percent.
And when you talk about the dot plot, the highest on the dot plot from 18 and beyond was 4 percent which, incidentally, is more than 1 percent
less than the top of the last cycle.
John Lipsky joined me, the former deputy managing director of the IMF, and I asked John why he thought the Fed held off.
(BEGIN VIDEOTAPE)
JOHN LIPSKY, SENIOR FELLOW, JOHNS HOPKINS UNIVERSITY: There are several aspects that would concern them. One, the relatively weak growth
prospects in many countries that are trading partners of the US, and hence, their discussion about weakening exports, or uncertainty about the outlook
for export growth in the US.
But also what they didn't talk about was financial market turmoil abroad and the strengthening of the dollar and its potential impact, for
example, on the dollar.
QUEST: So, what are they waiting for, in your view, bearing in mind they've still said -- or they've said they hope to do it this year, and
there's two meetings left, what are they hoping that's going to happen in the next two months?
LIPSKY: Well, I suspect they are hoping for greater clarity on the growth outlook abroad. Also to make sure that this will continue to
produce solid job growth and demand growth in the US. And I don't know if they are going to wait for some acceleration in wage growth in the US.
Chairman Yellen has -- Chair Yellen has suggested that they won't necessarily wait that long. But -- so, let's just step back and say
greater clarity that the recent turmoil hasn't had a deleterious effect on the US outlook
QUEST: Right, but within that area, they've still -- I mean, do you think it is at all likely that they would shift into 2016? I realize
everything's data dependent, but they've nailed their colors to the mast on a rate rise this year. Would it be a loss of credibility to shift into
next year?
LIPSKY: No, I don't think so, because inevitably, they would describe such a delay as having been data dependent. So, it would be a response to
new developments that are not currently in evidence.
QUEST: Do you think it's likely they might, bearing in mind the data that you're seeing at the moment?
LIPSKY: It's certainly possible. I'd put it this way, Richard: It always seems to me that if you're making the kind of decision that's before
the Fed, namely, to change the direction of policy, that you need to have a clarity of vision about at least the next few steps.
Many people have said, well, they should just raise the rate and then sit there and see what happens. That doesn't strike me as a great way to
make such an important policy step as a first tightening. They need greater clarity on the next few steps for policy.
So, it wouldn't surprise me if the data turned out to be somewhat disappointing in the next few months that they could wait even into next
year.
(END VIDEOTAPE)
QUEST: John Lipsky, former of the IMF. Richard Clarida is here, good to see you, sir.
RICHARD CLARIDA, GLOBAL STRATEGIC ADVISOR, PIMCO: Good to see you, Richard.
QUEST: Now, Richard thinks there's no reason to think the Fed will raise rates in October or December, global strategic advisor at PIMCO.
First of all, before we get to the winners and the losers --
CLARIDA: Yes
QUEST: -- when do you think the rate rise happens?
CLARIDA: You know, I think it's probably a coin flip for December. The Fed doesn't have a lot of conviction, and I think they don't, so
probably flipping a coin on December, yes. Not October, but coin flip on December.
QUEST: And today's fall in the market is just perverse, all things considered.
CLARIDA: Well, what it tells you is the Fed is saying we didn't hike, that should be good for stocks --
(CROSSTALK)
QUEST: But it's not --
CLARIDA: -- but they're saying we didn't hike because we're worried about the global economy, and that overwhelmed the positive, yes.
QUEST: So, as we look now --
CLARIDA: Yes.
QUEST: -- for the next few months of stocks versus -- who's winning and who's losing? You talk me through this.
CLARIDA: Well, let me tell you, I'm going to be boring. I'm going to say the next few months, stocks are going to be flat. Flat.
QUEST: Flat?
CLARIDA: Flat. Dollar's going to be up.
QUEST: How can the dollar -- why would the dollar be up, bearing in mind interest rates aren't up yet?
CLARIDA: Yes. Because what's going to happen is the markets are going to focus on the QE in the rest of the world and the fact that the Fed
is going to hike sometime, and that's going to give us support to the dollar. Maybe not in the next day or two, but over the next several
months.
QUEST: So, we're beyond technicalities here.
CLARIDA: Yes.
QUEST: It's gut feeling of in terms of --
CLARIDA: It's -- yes --
QUEST: If QE's everywhere else --
[16:10:00] CLARIDA: Exactly. Yes.
QUEST: -- then the dollar --
CLARIDA: The dollar's going to be stronger.
QUEST: Bonds.
CLARIDA: Bonds -- I think bonds are basically flat.
QUEST: Oh, come on, how could they be flat?
CLARIDA: No, no, no --
QUEST: Surely they -- I mean, they're going to be like -- this is --
CLARIDA: But on average, they'll be right here, Richard, in the middle. Now, commodities, I think -- I'll surprise you -- I think
commodities are going up. I think commodities have probably bottomed out. Again, a lot of easing in the rest of the world, the Fed's going to take a
very slow pace.
I think the one vulnerable asset class is probably emerging markets. They've been hit, I think, up until now --
QUEST: Right, that -- let's -- hang on.
CLARIDA: Yes.
QUEST: So, commodities -- by commodities, you're talking general commodities.
CLARIDA: Yes.
QUEST: Oil -- the metals.
CLARIDA: Yes, sure.
QUEST: All -- with the exception of gold, maybe.
CLARIDA: Yes, yes.
QUEST: But surely if China's slowing down --
CLARIDA: Yes.
QUEST: -- you're deciding to say that they're a winner seems a bit odd.
CLARIDA: But here's what I think about China. I think China moves a little bit up here relative to expectations. The expectations have been so
beaten down. I think they did fumble some opportunities, but I do think you're going to see probably some stronger data, more monetary ease out of
China, and probably even a fiscal package.
QUEST: But the fundamental issues of China, the strategic and --
CLARIDA: Sure.
QUEST: -- systematic or systemic --
CLARIDA: Right. Yes.
QUEST: -- issues haven't changed.
CLARIDA: They haven't changed, but I think sentiment around China has gotten too negative, and I think a lot of this is about sentiment. So, I
think China will modestly surprise on the upside.
QUEST: All right, I'm going to through these once again with you --
CLARIDA: Yes.
QUEST: Because I'm not sure that I fully support your views on stocks.
CLARIDA: Well, that's what makes life interesting. I think, you know, on average, stocks flat, dollar up, on average bonds flat,
commodities up, EM down and China up.
QUEST: EM -- any particular EMs that you're thinking of?
CLARIDA: No, I'm thinking broadly here. I think --
QUEST: But you see, hang on, hang on, hang on. If commodities are up --
CLARIDA: Yes.
QUEST: -- your EMs should be there with commodities.
CLARIDA: Well, I think that that will be a positive. I think there's some other factors as well. So, I don't think a huge negative for EM, but
I think probably some more to come.
QUEST: All right, let's have a look at the Dow in -- if you could put the Dow into the big wall while we just continue finishing off here -- and
there it is. What happens to US equities over the next, say, six months in this scenario?
CLARIDA: Well, as I said, I think broadly for the rest of the year, equities are flat, because you've got two forces going in opposite
directions. I think the US data has been very solid. I think we would have had a hike yesterday based upon the US data. On the other hand, there
are these concerns about the global economy, and I think they'll probably cancel out.
QUEST: Right. So, there we are. Just zoom in there. Let's get a nice closeup so that we can refer back to it in six months' time.
CLARIDA: OK. I can't wait to come back on.
QUEST: You can -- thank you -- you can come back, and we will be able to see just how right or wrong you've proven --
CLARIDA: OK.
QUEST: -- to be.
CLARIDA: Very good. Thank you, Richard.
QUEST: Good to see you. Thank you very much, indeed.
CLARIDA: All right.
QUEST: As we continue on QUEST MEANS BUSINESS, the European stock markets, a quick look. That was absolutely awful, the Xetra DAX down some
3 percent, sharply off. All the major markets were down in Europe. It's the most -- that's the biggest loss in two weeks on those Fed concerns.
When we come back after this very short break, we're going to be talking about the refugee and the migrant crisis in Europe. What is the
answer? But more significantly, what are the failings of the Europeans' ability to solve this pressing problem? It's QUEST MEANS BUSINESS in New
York.
(COMMERCIAL BREAK)
[16:14:59] QUEST: And so to arguably the most serious crisis facing Europe at the moment. Tensions are flaring on the borders between Croatia
and Hungary. Croatia says it's now overwhelmed b the sheer number of desperate people attempting to come into the country.
The refugees and migrants are being loaded onto packed buses, where they're going to be transported to Hungary, a nation that's been
particularly unwelcoming to refugees. CNN's Ben Wedeman is at the border.
(BEGIN VIDEOTAPE)
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: We were in the morning on the Serbian -- Croatian border, where we saw thousands of people
who had crossed over, responding to the declaration by Croatia that it would welcome refugees and migrants, regardless of their religion or
origin, into the country.
But what happened is, within the space of just 48 hours, more than 15,000 of them flocking into the country, really overwhelming the ability
of the Croatian authorities to deal with them.
Now, late in the afternoon, Croatia declared it would be moving those refugees onto Hungary. And what we saw is bus after bus picking them up on
that border town and bringing them here to the Hungarian-Croatian border.
Now, what we've seen has been very unusual. We have seen Hungarian policemen escorting these refugees onto buses that bring them into Hungary.
There are about 20 buses just on the other side of the gate. Now, this is a dramatic change of position by Hungary.
Now, we've heard some rather strong words coming from Hungarian officials. The foreign minister describing the prime minister of Croatia's
dealing with this crisis as "pathetic." They say that within one day, the Croatian ability to deal with the refugees has been a "disaster."
So, we're not clear why they did it, but the opened their border here with Croatia. And we've seen bus after bus coming in, people getting off,
being -- now the question is, what happens when they get inside Hungary?
Now, there were some of those migrants and refugees who were hesitant to board the buses. In fact, for a while, they refused, because these were
Iraqis from Kurdistan. They were worried that they would be mistreated by the Hungarian police because, of course, they had seen what happened on the
Serbian-Hungarian border, where dozens were injured in clashes with the Hungarian police.
But it's gotten to the point, you speak to these people, they are really exhausted. They've been sleeping in the rough for days, many of
them have spent the little money they had. Many are showing signs of illness. For instance, today was a scorchingly hot day, people were
expiring from the heat.
I think they've gotten to the point where they're willing to go wherever they're taken just with the possibility of moving on to safer
ground. They don't know whether they're going to end up in Austria or where, but at this point, they have so few other options, they've decided
to get on those buses over there and go to Hungary.
(END VIDEOTAPE)
QUEST: Just to put this in perspective: Croatia has closed seven borders with Serbia. Hungary has built a razor fence. Germany has
tightened controls with Austria. Austria has placed troops at the border with Hungary. And Slovakia has police checks at the borders with Austria
and Hungary. And all this in a supposedly open, Schengen environment.
Jose Manuel Barroso is the former president of the European Commission, he joins me now from Princeton, New Jersey. Mr. President,
this is an absolute mess. And surely, you need to tell us more tonight than just Europe needs to speak with one voice, because it's singularly
failed to do so so far.
JOSE MANUEL BARROSO, FORMER PRESIDENT OF THE EUROPEAN COMMISSION: The reason why this is happening is because it's a national decision. As you
know, the refugee policy is a national prerogative, so there are no European decisions, there are no European institutions able to impose a
common approach.
In fact, what is failing is not Europe, it is some governments of Europe, to be precise, that are not, let's say, respecting some of the most
important values, European -- and not only European, I would say -- democratic, humanitarian values of all civilized people.
So, we're treating it a major crisis. It takes too many people to deal with this situation politically because on one side, we want --
Europeans want to receive these refugees. At the same time, there are strong resistance --
QUEST: Right.
BARROSO: -- coming from some sectors of society, including xenophobic forces, to this wave of refugees and migrants.
[16:20:01] QUEST: Right. So, we're talking, when you say about some European countries, you're talking about Hungary particularly.
BARROSO: Yes. Let's not forget that the former Communist countries - - and this is a paradox and an irony of history -- those Communist countries that were educated -- let's put it like that -- in the
internationalism positions --
QUEST: Oh --
BARROSO: -- in fact, they are very nationalistic in their approach. They have no experience of dealing with people from other cultures, from
other parts -- other religions --
QUEST: Right, but --
BARROSO: -- from other ethnicities. And that's what we are seeing today, that strong resistance coming from some capitals.
QUEST: But hang on. The European center, the Commission or the Council or the -- whatever European institution we want to talk about, they
are calling meetings that take place three weeks later. When they meet, there is no consensus on quotas.
The next summit isn't due to be held until next week. This is hardly a -- I think we can agree, Mr. Barroso, it's not a satisfactory solution.
So, who should lead?
BARROSO: The European Commission has proposed what seems to me a reasonable thing. In face of this emergency situation, the European
Commission has proposed burden-sharing among the member states. But as you are saying, Richard, you are completely right, there was no consensus.
Because in this case, the prerogative of the final decision is with the member states, with the governments. So, I hope that until the next
summit, there will be enough, let's say, efforts for --
QUEST: Right.
BARROSO: -- consensual approach, at least for the more emergency situation. Because let's be honest about this: this situation is going to
be with us for a long time. Europe is facing this crisis of refugees, but indeed, the real crisis is not in Europe, the real crisis is in the Middle
East or in north of Africa --
QUEST: Ah!
BARROSO: -- where the tragedy of civil war is there, and without a comprehensive solution for those countries, we will not have a solution for
this migrant and refugee problem.
QUEST: If Europe -- and I -- time is tight, and I'd like to get into why there's failures in these other countries, because basically what's
happened is the people in these countries have said you've failed, we're going to end up on your doorstep. But if Europe can't handle this crisis,
then I suggest to you, sir, Europe as an institution is not fit for purpose.
BARROSO: No. But Europe will do it. You know it's --
(CROSSTALK)
QUEST: It's not! It's not!
BARROSO: -- we spoke many times during the euro crisis, and I always told you that the euro was not going to crumble, that there will be --
eventually, there will be a solution. But indeed, you are right. It's difficult to come to a consensus. It will be incremental. It will be
probably muddling through. But Europe will find a solution.
But I'm not sure we can find a solution yet -- and this, by the way, it's not only for us Europeans, but I would say for the countries in the
region, and also, why not, for the United States -- is if we have a common approach to the situation in the Middle East.
Because this is the real problem. Without having a solution for Syria, and also for Iraq, and also Libya, we will not find some kind of
stability in the region, and we are going to live with this problem. And that is a major problem and challenge for Europe, because, you know, on one
side, we have to receive these people for humanitarian reasons.
But on the other side, let's be honest about it, there are extreme right, xenophobic, even racist movements in Europe that if the doors of
Europe are completely open, they will, in fact, create a bigger reaction.
That's why this policy requires great collaboration, great sense of responsibility, and that we have to distinguish between a short-term and
set for the more emergency situation, and a more comprehensive --
QUEST: Right.
BARROSO: -- approach to all the problems of the Middle East.
QUEST: And you, sir, when you're next in New York, please, come and join me on the set here at QUEST MEANS BUSINESS so we can talk more about
it. It's wonderful to see you, sir, looking so well.
BARROSO: I would be delighted. I would be delighted, Richard. Thank you.
QUEST: Jose Manuel Barroso, always good to have him on QUEST MEANS BUSINESS.
Forty-four days, twenty teams, and a $1.5 billion for Britain's GDP. The Rugby World Cup, and we'll be live at the first match of the
tournament.
(RINGS BELL)
(COMMERCIAL BREAK)
[16:25:54] QUEST: The Rugby World Cup is now underway in London, a 44-day event that could generate nearly $3.5 billion of spending across the
UK. The first game is Fiji versus England, it's now in its second half, and currently, England is winning. The score stands at 18 to 8.
"World Sport's" Christina Macfarlane is at Twickenham Stadium and joins us now to give us the mood and the moment.
(CROWD CHEERING)
QUEST: Hello? Go ahead, Christina.
(CROWD CHEERING)
QUEST: While we try and sort out what's clearly going on over there - - we'll sort out -- well, are we going to go? No? No. There we are. We'll be back with Christina in a moment.
This year's tournament is expected to be the biggest yet. Isa Soares has been --
(LAUGHTER)
QUEST: Well, it's live television, what can you expect? Isa Soares has the numbers.
(BEGIN VIDEOTAPE)
ISA SOARES, CNN INTERNATIONAL CORRESPONDENT: Six hundred and twenty players competing in 48 matches in 44 days. This is the Rugby World Cup.
(CROWD CHEERING)
SOARES (voice-over): Making sure everything goes to plan, 6,500 staff and volunteers, while 23 referees will be in charge on the pitch.
SOARES (on camera): During the tournament, 1,400 balls will be used. That is 8 per game, with hundreds of spares.
SOARES (voice-over): Two thousand five hundred members of the media from around the world will broadcast the tournament to a potential TV
audience of 4 billion.
SOARES (on camera): But this year, 2.5 million people will flock to 13 stadiums across the country, with millions more packing themselves into
fan zones to see the action firsthand.
SOARES (voice-over): The event is expected to contribute more than $3.4 billion to the UK economy, with fans spending nearly $50 million on
food and drink alone. On the menu, 2.5 million burgers and 1 million pies.
Being an autumn tournament, and depending on how cold it is, organizers look to sell up to 6 million cups of tea and coffee.
SOARES (on camera): Who could forget the 10 million bottles of beer from tournament partner Heineken?
SOARES (voice-over): Which all adds up to make this the biggest Rugby World Cup to date.
Isa Soares, CNN, Twickenham Stadium.
(END VIDEOTAPE)
QUEST: As the refugees flow into Greece looking for a better life, Greek voters, tired of years of austerity, they're heading back to the
polls this weekend. We're going to bring you an in-depth look at the country's third vote this year. It's QUEST MEANS BUSINESS in a moment.
[16:28:56] (COMMERCIAL BREAK)
[16:31:13] QUEST: Hello, I'm Richard Quest. There's more "Quest Means Business" in just a moment when U.S. businesses and religion touch town in
Cuba.
And a crisis to conscience -- the creator of best-selling app blocker has taken his act (ph) down.
Before all of that, this is CNN and on this network the news always comes first.
Hungary has seized a train that brought migrants from Croatia according to the head of Hungary's disaster unit. Reuters reporting that
Hungarian government spokesman saying Croatia's sending migrants across the border without consulting Budapest.
Migrants are packed onto buses and trains in Croatia after the country declared it cannot accommodate anymore people.
Cuba's preparing for the arrival of Pope Francis on Saturday. The Pope's expected to say papal mass in Revolution Square in Havana on Sunday.
The visit comes amid an historic thaw in relations between Communist Cuba and the United States.
Japan's Lower House of Parliament has just approved a highly controversial new military bill that will allow the country's military to
fight overseas and defend its allies. The law is the most dramatic shift in Japan's pacifist policies since the end of the Second World War
A U.S. official is telling CNN four Russian fighter jets have now arrived in Syria. They are believed to be at an airbase near Latakia, a
key government stronghold. President Vladimir Putin's acknowledged providing military support to Bashar al-Assad.
It's a move that's deeply concerning to Washington. Today the U.S. and Russia renewed high-level talks, discussing their role in Syria.
The U.S. Environmental Protection Agency has ordered Volkswagen to recall almost half a million diesel cars. The EPA says it contains
software that intentionally invades American emission requirements.
Federal regulators say the software on the cars turns up emission controls only when it detects the car is being tested.
Greece's political landscape could shift on Sunday when Greeks go to the polls and it's the third time this year.
(BEGIN VIDEOCLIP)
(Unknown male speaking in Greek).
(END VIDEOCLIP)
QUEST: This was Athens earlier where the embattled former Prime Minister Alexis Tsipras asked for a second chance. The polls show that the
race is too close to call.
The latest opinion numbers say it's neck and neck between the left wing Syriza Party which heads the current government and the new right New
Democracy.
Here's a look at what's at stake. (RINGS BELL). Implementing bailout reforms of course are extremely significant.
Those are the bailout reforms that were agreed with the European Union - the Eurozone partners - earlier this year. That also includes
recapitalizing the banks and exactly what happens there.
And eliminating capital controls. Restrictions, although they have been eased somewhat, many of those restrictions still remain in place and
longer term.
The fear of course is they take them away completely, then capital will simply escape from the country. Elinda Labropoukou joins us now via
Skype from Athens.
Too close to call, but the gist of this is for a man who won his referendum in - earlier - this year and won the election, Tsipras should be
in a stronger position now.
ELINDA LABROPOUKOU, JOURNALIST: Well absolutely. I mean, and I think this is what he expected when he called the elections just over a month
ago.
[16:35:00] But since then things have changed. New Democracy, the main opposition has really moved up.
And we have to remember that in these seven months that Syriza has been in power, Greece has been through a lot of changes. We've seen the
banks close, capital controls, all this seems to have actually taken a toll on Mr. Tsipras and his government.
But even so, the polls are so close at this point that it's really impossible to tell who will be the winner. What's important at this stage
also, Richard, is that Greece is in a very different position and it's a very different election to what we saw in January.
In January we were talking about, you know, Greece whether there was going to be another bailout, whether Greece is going stay in the Eurozone.
There were really big issues at stake.
Now the issues remain big but basically we know that Greece has a third bailout. And the question really here is who will be the best
person, the best party -
QUEST: Right.
LABROPOUKOU: -- to implement this. And this is mainly what voters will be choosing on Sunday.
QUEST: With your experience and I don't want to sort of invite you to necessarily deny the prerogative of the voter in Athens, but with your
experience is it likely we'll see the sort of upset we saw with the referendum.
When the polls clearly indicated one way, and the result was diametrically opposite.
LABROPOUKOU: I think what we're seeing is this - last month effectively since the election was called - is this big change and the big
rise in support for New Democracy, the main opposition.
So really I'm not in a position -
QUEST: Right.
LABROPOUKOU: -- to know how this going to go. But that in itself is a big surprise, not least of all for Mr. Tsipras.
QUEST: Now Tsipras' personal popularity - it swept him into office in earlier this year - the beginning of this year. It soared through the
referendum.
And even after that referendum, Elinda, you know, people said he put the "G" back in Greece. He made them walk tall.
So why is his popularity - personal popularity - not pulling this train further and faster?
LABROPOUKOU: Well, Mr. Tsipras - well first of all he's a new political figure. So all the Greek public has to go by is what he has down
or what he has achieved in the last seven months.
For some, you know, some people think that he's fought his ground, he fought for Greece, he went was far as Greece could have done in terms of
the bailout and got the best deal under the circumstances.
So these are return voters, they will support him in this election, and there are of course those who are looking at some of the numbers, what
has happened in the real economy, what has happened with the banks, what the impact has been of these seven months of this government who are really
the people whose support he will lose in this election.
QUEST: Elinda Labropoukou joining us from Athens where the results will be coming out of course after the weekend.
The business traveler market is notoriously difficult. And now Uber is setting up its next big challenge - to take over business travel as
well.
(COMMERCIAL BREAK)
[16:40:17] QUEST: Taxi! It's Friday evening - yes, you - Taxi! Friday evening in New York where in this city, black is the new yellow.
The iconic yellow cab is feeling the pinch from Uber.
Now there are more than 14,000 Uber (AUDIO GAP)s versus 13,000 medallions for yellow cabs. So Uber is now more Oo-biquitous - (LAUGHTER)
than the yellow cab.
All in all, there are 440,000 yellow cab rides a day and that accounts for about 30,000 Uber rides. So, put it in that perspective, Uber debuted
in New York in 2011. And of course having gone for the consumer, now it's going after the business traveler.
(BEGIN VIDEOCLIP)
QUEST: On the grungy streets of New York where taxis are still king, Uber's been threatening their share of the market. And now it's
challenging them even further. By taking on the lucrative business travel passenger.
As we walk through Uber's headquarters here in New York, it's clear. They run things a little differently.
EMIL MICHAEL, SENIOR VICE PRESIDENT OF BUSINESS, UBER: UberX in almost every city in the world is cheaper than a taxi.
QUEST: I'm not going to argue --
MICHAEL: (LAUGHTER)
QUEST: -- because I don't have the statistics and I know for a fact that you do have the statistics --
MICHAEL: Yes.
QUEST: -- just up your sleeve, ready to hit me over the head with it.
MICHAEL: (LAUGHTER). Well, I would never hit you over the head with statistics.
QUEST: The year-old Uber for business platform lets companies set up corporate accounts through which employees can expense rides directly from
the Uber app.
MICHAEL: What we provide is a beginning and end trip. You don't get that in a taxi receipt. I could essentially provide a more seamless
experience for their travelers by showing them sort of really intensive reporting about what their travelers are doing and where they're doing it.
You can have business rules, which means that you can only take an Uber during this time or for these purposes.
QUEST: The key here will be providing Uber experience combined with company policy of what they say is a competitive price point.
So you have to convince the corporate customer that actually allowing employees to use Uber is not going to give a free ticket to expenses --
higher expenses?
MICHAEL: That's right. So what we do is we go back and say, "What did you spend last month on ground transportation?"
Then we can plug in what our prices would have been during all times of the day and say, "Here's what it costs on Uber."
It's like we show them with data that we're going to be more affordable than their other options. And that's a big deal for them.
QUEST: What's going to be an even bigger issue is safety. The lack of regulations and serious accusations against Uber drivers might deter
some companies from signing up.
And how significant or important was it for Uber to crack the business market - the business travel market?
MICHAEL: It's important because if you think about the amount of spend on transportation that comes from corporations, whether it's a rental
car, a taxi or a black car, it's an enormous amount of opportunity for Uber and therefore that's why we decided to go in that business.
QUEST: But was there a reluctance by companies to dabble with Uber do you think?
MICHAEL: I think there is an education process, absolutely. We've got a long way to go. In New York there's a huge fleet of taxis, so I
wouldn't say we're there yet, but in other parts of the world, we're growing really fast for the business traveler.
(END VIDEOCLIP)
QUEST: Uber, it's time to say `peace out' to the ad blocking Peace app. Now, the Peace app or the ad app was the top-ranking app in Apple's
iTunes store and it's been pulled by its creator.
It blocked ads and trackers and was powered by Ghostery. It was the idea that mobile advertising has become a vital revenue generator.
Now this app - the whole purpose - it was $2.99 and the whole purpose of the app was to prevent and to block other apps with ads or other ads in
apps.
[16:45:03] Put it into perspective, software costs advertisers $22 billion a year. That's how much was at risk with this sort of concept.
Samuel Burke is here.
So, just tell me -
SAMUEL BURKE, CNN BUSINESS CORRESPONDENT: Yes.
QUEST: The app blocked - the app -
BURKE: Blocked ads.
QUEST: -- in other apps.
BURKE: In the web browser Safari and the reason why this is all happening right now is because for the first time, Apple was allowing these
ad blockers on the Safari browser on their tablets, on their phones, and you always -
QUEST: So it didn't block ads within their ads?
BURKE: Not an ad. So big publishers like the CNN app, like Facebook, like Twitter didn't have anything to worry about. The people who had
something to worry about were the small publishers.
You always say, `hope whatever you're up to, it's profitable,' and the people who really had to worry about their profits now were the smaller
publishers.
This app was only out a couple of days. You've heard of buyers' remorse, but the creator of that app Peace, had creator's remorse.
Let me just - can I show you what he said in his blog post?
QUEST: Please do, go ahead.
BURKE: He said he following on his blog post, "Achieving this much success with Peace just doesn't feel good. While ad blockers do benefit a
ton of people in major ways, they also hurt some, including many who don't deserve the hit."
And that's referring to those small publishers who were taking that big hit.
QUEST: Hang on a second, hang on. Then why did he invent this in the first place? And why did he not think it through before he did it?
BURKE: Well I'm not here to defend him, but -
QUEST: You are.
BURKE: -- I think the success surprised him. You said at the beginning of this segment that he was making $2.99 every time the app was
sold. Well that, according to one estimate, he made more than $100,000 in revenue in just two days.
And people started saying, `Hey, you're blocking other people from making money but you're making money off of this app. So I think the guilt
got to him and he had second thoughts about what he had done.
QUEST: Guilt or pressure?
BURKE: Guilt. Because he also has a website where he has ads, and those ads were being blocked on his website by his own ad-blocking appl.
I don't think it was pressure because there are other apps that do this. They are still in the app stores, so.
QUEST: So this is what - you know - in the nuclear industry - in the nuclear war industry, this is known as MAT - Mutually Assured Destruction.
And to some extent this is what he discovered.
BURKE: Well, luckily we're not talking about nuclear weapons, but some people think that the reason why Apple did this was their long-running
war with Google because of course Google makes tons of money from these ads in web browsers and now Apple has a way of letting these apps just say,
stop.
QUEST: All right. You're our technology correspondent. What do you make of this? Because at the end of the day, I applaud Apple for having
allowed it to go through - I mean it's not a (inaudible) to stop people from other people from making money.
If somebody comes up with -- over the phone and find the app, it should be on the - out in the store. What do you think about the app?
BURKE: Me personally?
QUEST: Yes - but as a technology person.
BURKE: Well, no, I agree with you - whatever you're up to I do hope it's profitable and I think it's sad that these people are being blocked.
Now, at the end of the day there are plenty of other apps that will go out and do this, so even though he's had this moment of conscience, it
doesn't matter - there are tons of other apps out there.
QUEST: Moment of conscience. Don't even think about it. You're not qualified. @RichardQuest is where you have some thoughts on what this is
all about and whether or not you would have your apps blocked. That's sounds rather painful.
Coming up next, Cuba is getting ready (RINGS BELL) with changes. Big business and a big love-in - a rock star religious leader and a famous
American brand - they're both going to come together in Cuban soil.
(COMMERCIAL BREAK)
[16:50:33] QUEST: Can't beat the music and tonight there's a milestone in Cuba as U.S. business takes advantage of renewed diplomatic
relations.
Verizon has become the first U.S. wireless company that's offering roaming in Cuba. Customers will be able to call, send texts and use data.
Verizon has agreed with a local telco to provide service and roaming facilities. Netflix has been offering service in Cuba since February,
betting on improved economic conditions.
Airbnb as you'll be well aware is offering rental deals in Cuba. Now, it launched in Cuba in April and it says there are more than 2,000
properties listed.
And Americans can now use American Express - `don't leave home without it.' And MasterCard - priceless. If I'm going to do one, I've got to do
them both - credit cards in Cuba.
As the business world makes inroads into the country, the Church is there as well. Pope Francis is due to arrive on the island on Saturday and
then goes on to the United States.
For His Holiness it is no holiday. There are lofty goals for this trip. Here's what he told a videoconference with students in New York and
Havana.
(BEGIN VIDEOCLIP)
POPE FRANCIS, BISHOP OF ROME, VIA INTERPRETER: I will do everything possible to build bridges, to remove barriers and to foster communication.
That communication can then bring about friendship. One of the most beautiful things is the bond of friendship, and that is what I would like
you to achieve.
(END VIDEOCLIP)
QUEST: The bond of friendship. There may be a touch of George Smiley to Pope Francis. CNN has learned that the Pontiff has been on a secret
mission of diplomacy - that he was highly involved in the shift and moving towards the change of policy between the United States and Cuba.
The country's cardinals revealing the Church played a key role in those secret negotiations. CNN's Patrick Oppmann has this exclusive report
from Havana.
(BEGIN VIDEOCLIP)
BARACK OBAMA, U.S. PRESIDENT: I want to thank His Holiness Pope Francis whose moral example shows us the importance of pursuing the world
as it should be.
PATRICK OPPMANN, CNN'S HAVANA-BASED CORRESPONDENT: On the day of the breakthrough in relations between Cuba and the United States, President
Raul Castro and Barack Obama both paid homage to Pope Francis for his role in the landmark agreement.
Not mentioned was this man, Cardinal Jaime Ortega, the Pope's eyes and ears in Havana who was at the center of parts of the secret diplomacy.
In an exclusive interview with CNN, Ortega revealed that the Pope's first meeting with President Obama, Francis lobbied to change U.S. policy
for Cuba.
Obama surprised the Pope by agreeing with him.
CARDINAL JAIME ORTEGA Y ALAMINO, ARCHBISHOP OF HAVANA, INTERPRETED BY OPPMANN: "The President's response was very clear," he says, "that these
measures were old, made before his birth and that he wished to changed them."
"This encouraged the Pope and he made the important argument that it would benefit the Cuban people who had suffered under these measures."
OPPMANN: The Cardinal said the church was not directly involved in the negotiations but acted as a back channel to keep lines of communication
open between the Cold War adversaries and push for an agreement.
One of those back channels, Ortega says, was how to arrange a prisoner swap between the two countries. Cuba wanted to exchange jail seat (ph)
department contractor Alan Gross for three of their captured intelligence agents. The United States wanted a better deal.
The Cardinal thought he knew how to break the deadlock. He had received a letter from a man he'd prayed with while ministering to inmates
in Cuban prison. His name was Rolando Sarraff, a Cuban intelligence official condemned to a lengthy prison sentence for spying for the CIA.
ORTEGA, INTERPRETED BY OPPMANN: "He wrote me a letter as someone who could be exchanged," Ortega says.
OPPMANN: He was something from the Pope's contribution. He wrote saying he could be traded. At secret meetings at the Vatican and in Canada
where sources involved with the negotiations say Cuba was represented by this man - Colonel Alexandro Castro, Raul Castro's son.
The prisoner swap was struck. After the trade, U.S. officials called Sarraff one of the most valuable spies Americans ever had in Cuba.
[16:55:04] Having helped broker ties with the U.S., long strained relations between the Church and state in Cuba are also improving.
ORTEGA, INTERPRETED BY OPPMANN: "The desire that Raul Castro expressed towards the U.S. was that we can live with our differences," he
says. "But in a civilized manner. That's the desire that the Church has also expressed to the government. The Church is not the enemy."
OPPMANN: A message of reconciliation and new beginnings that Pope Francis will bring with him when he arrives in Cuba.
Patrick Oppmann, CNN Havana.
(END VIDEOCLIP)
QUEST: Got one piece of news to bring you. Moody's has just downgraded France from AA to AA1. Now, that's not a huge difference, so
it's gone AA2 from AA1. Not a huge difference, but the reason is important. It says, "Moody's continuing weakness in France's medium-term
growth."
Moody's expects that weakness to continue and extend for the remainder of this decade.
"Profitable Moment" next.
(COMMERCIAL BREAK)
QUEST: Tonight's "Profitable Moment." Anyone who had hoped that the U.S. Fed was going to give some guidance, some stability, some sort of
normality - well that clearly has not been the case.
Just look at the 3 percent drop in the DAX and a nearly 2 percent drop in New York and you get an idea what we've got still to come over the next
few weeks.
Because that's going to be the nature of the financial markets until we get certainty. And there's one thing we don't have going into this
weekend - it's certainty.
And that's "Quest Means Business" for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, (RINGS BELL) I do hope
it's profitable. And let's make a date to get together on Monday.
END
