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Yellen: Case for Rate Rise Has Strengthened; Diversity Campaigners Meet with Fed Board; Trump: "I Will Solve" Poverty Problems; Trump: Clinton "Is Totally Bigoted"; Lochte Scores Endorsement from Cough Drop Maker; Kerry and Lavrov Hold Talks in Geneva; Kerry Discusses Cessation of Hostilities in Syria; Lavrov: Syria Talks "Not an Easy Task; Rescue Workers in Italy Race to Find Survivors; French Court: Mayors Cannot Ban Burkinis; Goulet: Burkini Row Reflects Identity Crisis. Aired 4-5p ET

Aired August 26, 2016 - 16:00:00   ET


[16:00:00] PAULA NEWTON, CNN ANCHOR: An early rally turned red. You can't blame Janet Yellen. I think you need to blame the hot summer weather here

in New York. It's Friday, August 26.

The test of strength, Janet Yellen hints the time to raise U.S. interest rates may finally be approaching.

Ryan Lochte finds forgiveness. We'll hear from the company that's actually backing him.

And pie in the sky no more. Dominos tests delivers by drone. Did we really need this for our civilization? I'm Paula Newton. This is QUEST


Good evening. Tonight it was one of her biggest speeches of the year, and Janet Yellen did not disappoint. The chair of the Federal Reserve says the

case is finally getting stronger for the Fed to raise interest rates. Speaking in Jackson Hole, Wyoming, Yellen says the economic situation over

the past few months could, could -- let's underscore that again -- could, be enough to persuade the Fed to finally tighten up.

Yellen has made it clear there won't be any rate rise until the U.S. economy shows it's actually strong enough and can take it. She admitted

the economic outlook still remains uncertain. In fact, there were more signs of a slowdown on Friday. This is an interesting number. The latest

GDP growth estimates for the second quarter, came in at 1.1 percent. Now that's lower than the first estimate.

But the success comes from the labor market. Now, despite a blip in May, the last two months have been the best of the year in terms of job

creation. Now, Yellen has signaled that if that momentum continues, we may see a rate rise soon. There will be three more chances for the Fed to

raise rates before the end of the year.

Anthony Chan is the chief economist at Chase. Again, Anthony, thank God you're here. Look at the tea leaves for us a little bit. I mean, we

highlighted GDP -- we'll get to that in a minute -- but as far as you're concerned, you're saying employment is the headline story here and the

reason the Fed will go through with it perhaps by the end of the year and raise rates.

ANTHONY CHAN, CHIEF ECONOMIST, CHASE: I think employment is very strong, you've got the unemployment rate below 5 percent, which is where the Fed

really says that that meets their mandate. And of course, we've created more than 14 million jobs from the bottom of the global financial crisis.

We definitely have checked all the boxes on unemployment and even wages are starting to show some signs of life. However, we know that economic growth

is slow. And one of the things that's very important. Strong employment but weak productivity growth gives you weak economic growth and that's why

the GDP numbers were so weak.

NEWTON: And the productivity has been a big headline in the past few months. People finally paying attention to it. I don't think anyone can

open that magic box and say what's going on. One thing that the Fed has more control over though is its inflation target. Where does all of that

go into the picture? Right now it's at 2 percent. They're not there yet.

CHAN: When you look at core PC, we're not there yet. And in face, Janet Yellen said, we're getting close, and will get there in a few years, which

says code for saying there's no immediate reason to hike as early as September. We can if the data supports it, but there's no immediate rush,

because on the price front it may be a few more years before the Federal Reserve is completely comfortable with where inflation is.

NEWTON: Some people are saying that the Fed has to do the heavy lifting and has had to do that because there just isn't anything on the fiscal

front to be looking forward to. How important is policy going to be going forward? And if I heard correctly, this is the strongest the Fed has come

out and said, look, we need help here, fiscal has to begin to do its job.

CHAN: This is not just a Federal Reserve issue. We hear the same thing from the Bank of England. We hear the same thing from the European Central

Bank. Monetary policy has used most of his bullets. So fiscal policy is needed. The good news is, on both sides of the aisle, they're talking

about more infrastructure expenditures next year, whether it's Hillary Clinton or whether it's Donald Trump. They're both saying -- singing from

the same hymn. They will increase infrastructure spending, irrespective of who gets elected. So that's actually a good sign.

NEWTON: I've been one of the people whose just been tracking what we might call central bank impotence over the last few years. And I feel their

strength has been weakened. Do you disagree with that? Do you think that the central banks around the world, the Fed this time though, is actually

showing they can steer these economies in the directions they need to go?

CHAN: I think hundreds of years of economic literature will tell you in fact that when you get interest rates at very low levels, the marginal

benefit from more stimulus is much less. But today, Janet Yellen spent a lot of time talking about an interesting Federal Reserve study suggesting

that monetary policy is still strong. In the study shows that if you have a 3 percent Fed funds rate as a base case, even though on average the

Federal Reserve during recession lowers interest rates by 5.5 percent, because of forward guidance and quantitative each, the Federal Reserve

still has ability to help. The problem is today the Fed funds rate is below 1 percent. Nowhere near 3 percent. That's the problem.

[16:05:00] NEWTON: They wish, they call it normalizing, right? I have to ask you, when you look at this going forward, and again, remembering that

we have a very important election campaign coming up in the United States, for the Fed, what could totally spoil this for them?

CHAN: What could spoil this for the Federal Reserve is you get a negative global shock. Right now we're basically celebrating that Brexit is turning

out to be not as bad as people thought, whether you look at the United Kingdom or Whether You Look at the Euro Area. In fact, today we got very

exciting data from the European area suggesting that the loan growth, whether you look at nonfinancial corporates or you look at household

lending, is actually growing OK. And even the money supplying the Euro area isn't doing so bad. So I think the Federal Reserve is in fact,

encouraged to act. It doesn't mean that they have to act in September, but certainly before the end of the year, a 25 basis point hike with an

unemployment rate below 5 percent is not at all unreasonable and is in fact expected.

NEWTON: Very, very quickly. September, live meeting. Do you think they will raise rates?

CHAN: I think all the meetings are going to be live. If you ask me which meeting has a higher probability, I'm going to go with December.

Anthony is saying December. Andy, thanks so much, really appreciate it. Always good for you to settle that score with us, especially when Janet

Yellen sometimes isn't as transparent as you have been. Thanks, we appreciate it.

U.S. markets have been all over the place since Yellen's speech. And of course, I Artie said I have a theory about this. She spoke at 10:00

eastern. I want you to see there around lunchtime, isn't that funny how volume and the market dipped there, down 53 points. We did see that drop

as the Fed chief started speaking. But that turned out to be a 100-point gain. And then the comments from Fed vice chair, Stanley Fischer, raised

the specter of a rate hike as soon as next month. He did that in an interview, and that rally petered out. Again, my theory is completely

different. The Dow finished the day with its second biggest loss the week.

A pressure group calling for the Fed to do more for America's poorest workers is locked in a dispute with one of the Fed members. Campaigners

from "Fed Up" group met with the Fed board in Jackson Hole on Thursday. They want the Fed to hold off on raising rates, saying it would hurt people

who still haven't feeling that recovery.

The head of the St. Louis Fed, James Bullard, called that argument kind of crazy, in his words. Now the campaigners want an apology. Now Fed Up says

interest rates should stay low until wages get better for ordinary workers. They want the Fed to devote more energy to low income households and

minorities, rather than those big banks. And wants more diverse faces on the Fed board itself. You have to note that almost all of the FOMC members

are white.

Ady Barkan is the director of the Fed Up campaign. He joins me via Skype from Jackson Hole. Great name, Fed Up, we know what you're all about. I

have to ask you though. You have gotten some attention from the board. I mean, they are talking to you, right?

ADY BARKAN, DIRECTOR, "FED UP": Yes, it's been great. They've been very open and receptive to engagement, and we think that's an important first

step. Thanks for having me on.

NEWTON: What do you think the Fed can do? If I look at this in terms of my academic background, I would say look, you're making very good points

but you're directing it to the wrong people, the Fed cannot fix this.

BARKAN: Well, I think that's wrong, with all due respect. First, the Fed needs to not make things worse. Neither Anthony, with all due respect, nor

Stanley Fischer, nor Aster George, nor James Bullard, nor anybody else, has put any good reasons on the table for why the Federal Reserve should raise

interest rates. So number one, do no harm. Number two, they have all sorts of tools, if they wanted to, forward guidance, nominal GDP targeting,

wage growth targeting. If they wanted to say we are fully committed to full employment for all communities and we're going to do what it takes to

get back onto --

NEWTON: OK, Ady, full employment may not happen even if the Fed does not lower interest rates. That's what I mean. Wouldn't you be happier to kind

of strike out with Congress in the new year and ask them to do something about it?

BARKAN: No doubt, and it's very important that we have fiscal side. And I agree with that conversation you just had with Anthony. But the point is

nobody has been paying attention to the progressive movement from the Federal Reserve for the past 20 years. And really, since Volcker, they've

all been inflation hawks with a laser focus on making sure that inflation never even approaches 2 percent. And they haven't cared about the fact

that we been above unemployment and there's been a massive disparity between worker productivity and worker wages for 40 years. That merits a

lot of attention. So I have to say it's kind of strange to be getting this critique from various voices saying, "Oh, you're focusing on the Fed,

they're not the only ones." Nobody has ever focused on the Fed. For starters we need to have a public conversation about how the Fed can foster

full employment.

NEWTON: On the point you do make, since they haven't been doing their jobs as politicians, why not focus on the Feds, because they are the ones who

have been activists on this, using those monetary policy weapons.

[16:10:00] BARKAN: And when we sat down with governors and presidents yesterday, we opened by saying the Fed has done more than Congress, more

than the states over the last eight years and it needs to be commented. But what they shouldn't do now is make things worse, declare victory when

so many people are still being left behind.

NEWTON: Where do you put your movement of Fed Up you? And I think that it will resonate with a lot of people who think that whether it was monetary

policy or whether it was the big banks, and they all pointed at the financial crisis in 2008. But at the end of the day it's still the

financial industry that benefitted, and that ordinary workers are really the last consideration for these people.

BARKAN: Benefitted from what, from loose monetary policy?

NEWTON: The point being that there needs to be a wholesale change, I think is what your movement is saying. But how do you take that further than the

Fed? Don't you think you need to take it further than the Fed?

BARKAN: And we do. We fight for 15. My organization and all of our allied organizations have been leading in the fight for 15 around the

country. We're fighting for good jobs programs, for childcare, so that women can go back into the workforce and don't have to spend all of their

income on childcare. For a wide range of racial justice, economic justice issues, to create a more equitable society, the Federal Reserve is the most

powerful economic policy-making body in the world, or at the very least in the country. And they deserve some attention as well.

NEWTON: What do you tell people dealing with their own central banks around the world and kind of feeling the exact same way you do right now?

BARKAN: I think one thing that our campaign has shown over the past couple of years is that when people pay attention to monetary policy, when people

engage with central bankers, we can have an impact. And I think, you know, the European Central Bank sometimes has done good things, other times under

the grip of Germany has been far too austere. I certainly know there are a lot of very powerful European social movements who have been pushing for

full employment and good jobs for all and I commend them for that.

NEWTON: Thanks for being here to explain what happened. It's a quite a headline that they met with you. Please come back and let us know if it

was just a photo op or if feel like you you're getting any kind of change.

BARKAN: We'll see what happens into September and December and with their governance decisions. We hope they'll appoint diverse candidates to all

the boards of directors around the country this year. And we hope to sitting down with Janet Yellen in the coming months. So we'd love to be

back and talk to you more, thanks for having me.

NEWTON: OK, Ady, thanks so much.

Donald Trump says he can fix poverty in minority communities. Trump tweeted earlier that Hillary Clinton will never be able to solve the

problems faced by black and Hispanic communities. He also doubled down on his claim that Clinton was a bigot. In an exclusive interview with CNN's

Anderson Cooper. Take a listen.


DONALD TRUMP, U.S. REPUBLICAN PRESIDENTIAL CANDIDATE: She's totally bigoted there's no question about it.

ANDERSON COOPER, CNN ANCHOR: But it does imply she has antipathy, she has hatred toward, in this case I guess you're talking about African-Americans.

TRUMP: I think she has been extremely, extremely bad for African- Americans. I think she's been extremely bad for Hispanics. You look at what's happened with her policies and the policies of President Obama and

others. Look at the poverty, look at the rise of poverty, look at the rise in violence.

COOPER: But hatred is at the core of that? Or dislike of African-American people?

TRUMP: Or maybe she's lazy.


NEWTON: CNN's political director, David Chalian joins me now from Washington, the long-suffering David Chalian. David, I don't know how

you're doing it through this campaign. You know, as one of our analysts said astutely said on the air, whether it was Donald Trump or Hillary

Clinton with all of the commentary, voters must feel like they've been hit over the head with a sledgehammer. And that is kind of what the week felt


DAVID CHALIAN, CNN POLITICAL DIRECTOR: Listen, and they're getting this from two candidates that the voters have already said they view more

unfavorably than favorably. I don't think anything that was happening this week is going to improve that for either candidate. This is why I think

you see Gary Johnson, the Libertarian, hovering around 10 percent. Jill Stein getting a little support with the Green Party. Because I do think

Americans are looking for some other alternatives. But you are right, we've got 74 days to go and this is where we believed that this campaign

was going, and now we're here, settling in for the final stretch of this fall campaign, in a pretty ugly battle. I mean, yesterday charges back and

forth of racist and bigot, you know, Trump hurling accusations towards Hillary Clinton, calling her a criminal for corruption. This is not an

uplifting campaign by any means.

NEWTON: David, you predicted we would get here. I'm not sure that we're going to get ourselves out of this hole. This is going to be the discourse

going forward. But if they haven't turned off every voter from coast to coast yet, do you think it is still the economy that after Labor Day, when

people settle back into their jobs and people settle back into school, that that is still going to be what resonates?

CHALIAN: I do. I think barring some big international event, a terror event which then could absolutely move terrorism and foreign policy to the


[16:15:00] Barring some unforeseen event like that, I do think it's going to be the economy. I do think it's going to be about how people feel about

their current economic situation and looking forward, if they believe the country is on track to improve that economic situation. I think that's

what presidential elections more often than not in the U.S. do come down to. But they're not really debating economic policy right now. They're in

a full mode to disqualify each other as unacceptable alternatives because of personal characteristics. Each campaign firmly believes that they are

on stronger political ground with the electorate when they are disqualifying the opponent. That's their strategy at the moment.

NEWTON: Yes, and that's pretty sad if that's what that means, to play to your strengths. David, you're always poring over the polls, ours and

others. The most recent ones say Clinton is ahead by let's say 6, 7 percent, just for arguments' sake. David, there are people around the

world want me to ask you right now, David, does this mean it's over?

CHALIAN: Oh, god, no, it does not. It really doesn't. I would not be surprised to see that margin narrow as we get into the fall. Listen,

Donald Trump had a really rough three weeks after the conventions were over. But you can see he's starting to stabilize and steady the ship a

little bit. I don't mean just that he's been more disciplined in reading from a teleprompter and sticking to message. The campaign is ramping up in

a way and deploying forces a little bit more than we've seen for around the country as well.

I would expect to see that gap narrow. I think we're far away from being able to call this over. That doesn't mean at today's snapshot, you're

right, advantage Hillary Clinton. She's got a 5 to 7 percent national lead. And if you look at the electoral map and the path to 270 electoral

votes, she's got far more options to get there than does Donald Trump. His path is pretty narrow. So it is still a tougher climb for Donald Trump at

this stage of the game. But I would not rule this election over at all, because there is real discontent throughout the country about the way

things are going in Washington and he is still running on this message of upending the status quo. He's the very embodiment of that. Hillary

Clinton will try to argue that's not the kind of change you want. But that doesn't mean that he doesn't have an energy and a disposition about sort of

busting open the way Washington normally works. That may be attractive to some people as they decide in the weeks ahead.

NEWTON: No doubt that message has resonated with a lot of voters. And I'm so glad though that you spelled that out for international viewers. This

is before Labor Day. Anything can still happen. David, thanks so much for staying with us on a Friday night. Please tell me you booked that vacation

for mid-November, please.

CHALIAN: I have, yes. Thank you, my pleasure.

NEWTON: Well deserved, David, thanks. We'll hear from you in the coming weeks. Appreciate it.

A woman's decision to wear a burkini has nothing to do with a town's mayor. That ruling from France's highest administrative court. But will the

mayors fall in line?


[16:20:09] NEWTON: It seems Ryan Lochte's legal troubles are just beginning. Brazilian police have charged the swimmer with falsely

reporting a crime. Lochte flew home from Rio de Janeiro before he could be questioned about the incident at a gas station that drew so much attention

throughout the Olympics.

It's not all bad news for Lochte. He has a new backer. Less than a week after his sponsors ran for the hills. Lochte tweeted out, "Thanks to all

the folks at Pine Brothers for your confidence in me. I look forward to making you proud." Pine brothers makes cough drops. The company said in a

statement, just as Pine Brothers is forgiving to your throat, the company asks the public for a little forgiveness for an American swimming legend.

Rider McDowell is the CEO of Pine Brothers and he joins me live from Monterey, California. I have to ask you the question everybody wants to

ask you. Why? Why would you pick up Ryan Lochte on the heels of this controversy?

RIDER MCDOWELL, CEO, PINE BROS.: I think it was precisely due to the way he was treated. I think I'm a big fan of this guy, and Phelps and I'm a

former swimmer. And, you know, I think really the culture is such that when people make mistakes, the corporate culture is quick to jettison these

guys. Media of course jumps on it. I think, you know, everyone makes mistakes. For the degree of the transgression, I thought it was overboard.

I thought he didn't deserve that kind of fallout.

NEWTON: I mean, some would say that it's a great publicity stunt for your company.

MCDOWELL: You could say that. You know, it certainly hasn't hurt us. But I think we really wanted to make a statement, and that statement is that

the corporate culture underestimates the forgiving nature of people, Americans in this case. I happen to know Ryan has done a lot of charity

work with cancer causes.

NEWTON: He has, that is true, absolutely.

MCDOWELL: My family, my oldest son has been badly, brain cancer or three years. It means a lot to this family, that McDowell family that owns pine

brothers. That was part of it.

NEWTON: People say to have a good ad campaign. People have to really remember what it's about. So they have to not fixate so much on Ryan

Lochte but the cough drop. If we just get down to the bare bones of it, why do you think that will resonate? So that when I'm in a store I will

say, "Oh, pine brothers." Ryan Lochte is actually telling me something about the product?

MCDOWELL: We've had Martha Stewart as a spokesperson before, after that we had the hip-hop artist, Waka Flocka. They wouldn't necessarily be part and

parcel of the cough drop thought. But I think it's in this case it's kind of a tongue-in-cheek message. Ryan's got a great sense of humor. The idea

of being forgiving on your throat and being forgiving as a company towards Mr. Lochte, you know, I think he's done his mea culpa. Our position was,

enough already, you know, let's move on and maybe be at the vanguard of a forgiving corporate culture.

NEWTON: Tell me the truth. Does he make you a little bit nervous? This isn't the first thing he's done. He hasn't done anything this serious

before, but even his mom says she has no idea what he's going to ever do.

MCDOWELL: Well, you know, if you look at this guy, he's led an exemplary life. When you're in the public eye to the degree that he is and has been,

it's hard not to screw up. Who hasn't trashed a bathroom when they've been loaded?

NEWTON: I'm not putting up my hand. I don't think it's normal behavior, sorry.

MCDOWELL: But it's frat boy behavior, and I don't think it warrants all this kind of attention, certainly not all this negative attention. He's

apologized, and, you know, this is life. People aren't always in the public eye.

NEWTON: It's been really interesting. I have to also say to you, I was in Brazil in the lead-up to the Olympics. They were so sensitive about people

putting down their country. Actually, sir, I'm not sorry, I'm going to have to leave it there, because we have some breaking news here at CNN.

But I thank you for your time and will continue to watch your campaign. Thank you.

Now we want to take you to some breaking news here. We want to go live to Geneva, Switzerland. Top diplomats from the U.S. and Russia, John Kerry,

and Sergei Lavrov have been holding talks there on the conflicts in Syria and Ukraine. Let's listen.

JOHN KERRY, U.S. SECRETARY OF STATE: .the surrender of Darayya after a brutal four years of the siege, and continues to take territory in the

Damascus suburbs, which I might add, runs counter to two iterations of a previously announced cessation of hostilities, which is what brings us here

today. That's why we're here, because of this.

[16:25:05] And I think everybody in the world was transfixed by the photograph of two young boys, one of whom died in that ambulance. The

image, for some reason, obviously caught everybody in a very special way. But it's an image that is probably repeated time and time again over any

given week in the course of the life of Aleppo or the life of Syria. And it needs to motivate all of us to get the job done. To provide for a real

cease-fire, and to meet the needs of the Syrian people. And that is why we came here today.

Terrorist groups, Daesh and al Qaeda, continue to menace the Syrian people. And we literally stand on the brink of the Syrian regime and opposition

parties going back to a state of all-out war. So needless to say, the situation is dramatically deteriorated since the brief oasis of calm that

followed the launch of the cessation of hostilities in February. And I'm grateful that Sergei Lavrov and I were able to work together, and with

other colleagues in the international community through the International Syria Support Group. We were able to cobble together the concept of the

cessation of hostilities.

It is fair to say that well into March of this year, Syrians had benefitted from a degree of calm that they had not experienced in years. For a period

of time, the cessation of hostilities held. And the cessation, even flawed, became something of real value to them. For a brief moment, a

brief instant, life changed in some communities. People sat in cafes. People went out and began to try to assume life again. But that was lost.

It was lost because of the lack of accountability and the inability to be able to deal with violations.

So as much as we have all seen a benefit to the humanitarian assistance that was delivered, some communities that hadn't seen humanitarian

assistance in years got it. More than a million people were able to be served with humanitarian assistance. And the cessation, even flawed, was

valuable. But as we have all seen now, violations eventually became the norm rather than the exception. And the regime continually pressed its

military objectives in key strategic locations and continued indiscriminate aerial bombardment of densely populated areas with barrel bombs and as we

now know from the U.N. report, also with chlorine.

Now, some, including my friend Sergei Lavrov from Russia to my left here, may dispute the narrative I just laid out, and attribute most of the regime

actions to al-Nusra. And there is obviously, illegitimate al-Nusra activity taking place. And we're all opposed to that, all of us.

Al-Nusra has any been part of the cessation. So in some cases, the fact that people are going after al-Nusra is accurate. But in other cases it's

clearly by virtue of the evidence of children and women and hospitals and other things, clearly not the case. Now, while we don't agree necessarily

on how we got to this precarious point, and it's OK to disagree. Neither of us will deny that most Syrians aren't even aware today that the

cessation of hostilities exists. For the most part on paper, if at all. And that cessation needs to be overhauled if it's going to achieve the

reduction in violence that the people of Syria want and deserve, and if it is going to open the window of opportunity for us to be able to get to the

table here in Geneva and have a real negotiation about the future, a political solution. Because we also agree that there is no military

solution to the challenge of Syria.

[16:30:09] So we came here to Geneva and we have continued to work, and I want to thank their team and our team. They have worked in good faith over

the course of the last few weeks, intensely, in order to try to avoid being lost in this cycle of violence.

Last month in Moscow, Sergey and I reached agreement after discussions with President Putin on a broad set of concrete steps that if implemented, they

would enable us to be able to achieve a meaningful, lasting cease-fire. At the time, both of us announced to you, to the public, that we have

significant technical details that we needed to work through. And our teams have spent the last few weeks intensely meeting in order to work

through those details.

It can only be said that the work was fair, the work was diligent, and the work was productive. Today, I can say that we achieved clarity on the path

forward. We have completed the vast majority of those technical discussions which were primarily focused on making this cessation real and

improving the level of humanitarian assistance. And thereby getting the parties to the table so we can have a serious negotiation about how to end

this war.

If the remaining details can be completed, we believe we will be able to address the two primary challenges to the cessation of hostilities. One,

the regime violations including the aerial bombardment of densely populated areas, and two, the increasing influence of the al-Nusra Front. Last month

in Moscow, we also said before we could move forward with any enhanced cooperation, we need a period of reduced violence to convince the people of

Syria and the opposition that the actions of the regime and its supporters will be consistent with the words put on paper.

In Moscow, I said these are words on paper, what will matter are the actions. That is as true today as it was then. We have a few narrow

issues to resolve. And in the next days, our experts will be meeting here in Geneva to conclude the few remaining technical issues, and to move

forward in order to take the steps necessary to build the confidence to overcome the deep mistrust that does exist on all sides.

For example, we do need to seek clear adherence to the cessation of hostilities by the regime. We also need to see the resumption, unimpeded

and sustained, of humanitarian access to all besieged and hard to reach areas including Aleppo, according to the U.N. plans and procedures. If we

are able to implement a full and lasting cessation of hostilities, then we absolutely will have won the opportunity to have a fundamental change in

the trajectory of this conflict.

As I have been saying from the beginning of this process, the conflict will not end without a political solution. That is why as soon as the narrow

issues remaining are resolved, and there is space and goodwill established for productive dialoguing, the U.N. special envoy Stefan de Mistura will

bring the parties back to the table to negotiate a political transition. That is our ultimate goal.

That is the only way that this horrendous war can come to an end. It's really the only viable path towards the peace, security, and normalcy that

the people of Syria desire and deserve. With that, I again thank Sergey for coming here to Geneva, for meeting with me today, for being extremely

patient while we conversed among ourselves and with Washington. And I appreciate that patience.

[16:35:00] We are close. But as I have said to you in other contexts before, we're not going to rush to an agreement until it satisfies fully

the needs of the Syrian people and the ability of the international community to address them in ways that can show real results. That's what

we're after. Thank you.


NEWTON: You've been listening to a press conference between John Kerry and Sergey Lavrov. They've been talking about a cessation of hostilities in

Syria. They admit they have not gone a long way so far. If I can quote John Kerry, he says the deep mistrust exists on all sides but promises we

have achieved clarity on the path forward.

I'm summarizing what he said here. Just for a little bit of background, it's been several weeks now that the United States and Russia has decided

they would try and sit down and see if they could get that cessation. We do have the translation for you now.

LAVROV (through translator): As John said, we've made a very important step forward compared to our progress in Moscow. The fact that we're not

circulating or distributing any documents today does not mean we have not gained headway to find a way forward with some of the principle agreements

and arrangements that we came to in Moscow. And that is achieving a stable cease-fire because we're seeing violations on both sides.

To necessity to finally distinguish and separate the opposition groups that have joined the cease-fire from ISIS, the al-Nusra Front and other

terrorist groups. Finally, address humanitarian issues as soon as possible, gain access for humanitarian shipments to areas that are in need

of such. We're not talking about Aleppo alone in this regard, even though Aleppo was at the center of our discussion.

We also discussed what was going on in Hasika, in Manbij and other parts of Syria. We also discussed the humanitarian situation in Iraq and Yemen,

where international observers also have been reporting about a very difficult and dire and extremely difficult humanitarian situation.

We departed from the premise that we must discuss human suffering, not as mere observers, not as journalists or people who seek to vent their

emotions, but we should rather discuss them as practical people, diplomats who have to find a solution jointly with military people and others. I

would like to reiterate that John's visit to Moscow on July 15th was very productive.

And some of our arrangements that were achieved during our meeting with him back in Moscow and his meeting with President Putin, they have gained some

practical content, some substance today. We need to specify and work out in more detail quite a few, actually just a few issues that still remain.

And our experts will continue that work and I am hoping that in the nearest future we would be able to present the results of our joint efforts to the

public here in Geneva.

It's not an easy task. I believe you've been hearing what's being said in various capitals of the world. But it is already an achievement that we

have been able to reduce areas of misunderstanding. We continue to reduce the levels of mutual mistrust between our two countries. Without

confidence, without mutual confidence, the tasks and objectives that we agreed upon during our personal contacts between President Putin and

President Obama, it would not be possible.

[16:40:00] And with each meeting, with each telephone conversation, we continue to build up and strengthen this mutual confidence. And I'm hoping

that you will see this, the feedback, that you will see the positive results of that fairly soon. And primarily the Syrians who have been

suffering from this conflict will see that and feel the impact of our efforts.

We have agreed that Russia will continue to work with the Syrian government and opposition groups that cooperate with us. The United States will

continue with their allies in Syria with the groups that they can influence and with regional partners. We'll jointly continue to eliminate obstacles

to imposing a lasting and universal cease-fire.

I would like to mention one more issue here, where opposition groups that cooperate with the United States and the U.S.-led coalition occupy the same

areas as Al Nusra groups, and not just occupy the same areas, but actually interact and cooperate with the al-Nusra Front, and sometimes take part in

its operations. Without separating the sane forces in Syria from terrorists, I just do not see an opportunity for achieving a lasting

cessation of hostilities in this country, that we all want to see.

And I'm happy to note that we are getting a better mutual understanding of this issue together with our American counterparts. We discussed a number

of specific steps. And we have practically agreed on all of them. We just need to dot a few more I's and our experts will continue to be looking at

in order to ensure access to humanitarian shipments to the Syrians in need, especially in Aleppo, both in western and eastern Aleppo.

NEWTON: You've been listening to a press conference in Geneva between John Kerry, Secretary of State, and Sergey Lavrov, the Foreign Minister of

Russia. They have been working for weeks now to try and get to a cessation of hostilities in Syria. They are the two main players in all of this.

I'll remind everyone that Russia is backing the Syrian regime, the U.S. does not. Both countries are trying to fight ISIS and what they say they

are trying to do now is also get some more humanitarian aid into those cities and regions of Syria that need it. They say that we have achieved

clarity on the path forward but admit two things.

One is that they still have a few more things to iron out before they come to a deal. And most importantly, that of course for the people on the

ground in Syria, this hardly seems like any kind of a cessation of hostilities and that they continue to suffer there on the ground.

Obviously this is a story we continue to cover here on CNN. And we will continue to cover those negotiations as they go on in Geneva and elsewhere.

Rescue efforts are continuing in Italy after Wednesday's lethal earthquake. But unfortunately, time is running out. We'll have the latest from that



[16:45:30] NEWTON: The rescue operation is near the end of its third day in Italy following Wednesday's devastating earthquake. The crucial 72-hour

window is unfortunately closing. Beyond this point, the likelihood of survival drops dramatically, 281 people have been killed. And aftershocks

are continuing in the town of Amitrice.

Now the first funeral was held on Friday, with a state funeral planned for Saturday. Italian Prime Minister Matteo Renzi will attend the service.

Atika Shubert joins us from the quake zone. Atika, I know that the aftershocks have continued, as unpleasant it looks in the piazza behind

you, I know Italians are doing everything they can to really rally against that 72-hour window, aren't they to make sure that miracles do happen in

those hills.

ATIKA SHUBERT, CNN SENIOR INTERNATIONAL CORRESPONDENT: Absolutely. We're in the town of Ascoli Piceno and this is where so many of those injured in

the earthquake have been brought to. This is where the main hospital is, 99 of those injured were brought here. I spoke to a psychiatrist who said

it's important for survivors to feel like their community has survived and is continuing.

In a weird way scenes like this of normal life is what the survivors need more of.


SHUBERT: A little girl plucked from the rubble alive, rescued 17 hours after the earthquake. Many of the victims here were children, enjoying

their summer holidays with their families. Four-year-old Georgia Rinaldi survived because her older sister Julia shielded her from the rubble,

sacrificing her own life for her baby sister.

This is the hospital where the little girl pulled out of the rubble was brought to for treatment, 99 of those injured in the earthquake were

brought here. This is where family members wait for word of their loved ones, still living the trauma of their ordeal. Here Georgia's father is

coming to terms with the loss of one daughter and the survival of the other.

He told doctors he was not yet ready to speak to media. But others talked to try and make sense of the destruction. Giuseppe Bagnato was lying in

bed with his wife, Dominica, when the earthquake struck. Now he is waiting for her to come out of a lengthy surgery.

GIUSEPPE BAGNATO, ITALY EARTHQUAKE SURVIVOR (through translator): For us it's the end, he told us. It's a house with so many memories, so much

life, but it's finished. We're scared. We won't be coming back. We saw death. We felt it. My wife --

SHUBERT: And then he breaks down in tears. He says we prayed, the Madonna wanted to save us. This 19-year-old Mattia Rendina was sleeping on the top

floor of his family's summer house, his mother in the room next door, when the house collapsed.

MATTIA RENDINA, EARTHQUAKE VICTIM: My first thought was my mother, my mother is here but I can't help her.

SHUBERT: He was buried in rubble. It took an hour for his uncle to find him and dig him out with his bare hands.

RENDINA: When I came out, I kissed him, because -- and I said to him that he was my life. But my thoughts are still on my mother, because she passed

away, she's gone.

NEWTON: He survived with hairline fractures to several vertebrae. His greatest pain is the loss of his mother.

RENDINA: I'm like this because my mother teaches me to be a person like this.

NEWTON: To be strong?

RENDINA: To be strong, yes.


NEWTON: Given new life, the survivors of Italy's devastating earthquake are healing, slowly. Paula, tomorrow we are expecting that state funeral

here in Ascoli Piceno. It's really a way for the entire community in the area to mourn the loss of so many people. And then the families will also

have their own private funerals. Many of the people that died here were on holiday, many of them residents of Rome. Families will have their own

private funerals with their own home towns later on, Paula.

[16:50:06] NEWTON: Unfortunately, with Italy's history on this, we know as those funerals are going on, the rescue workers will still be going through

the rubble to try and look through survivors. Our Atika Shubert in Italy, we appreciate it.

A woman's decision to wear a burkini has nothing to do with the town's mayor. That's the ruling from France's highest administrative court. But

will the mayors fall in line?


NEWTON: France's top administrative court has overturned the country's controversial burkini ban. More than 30 French towns had banned the full

length swim suit over what they came is respect for women's rights. Today's court ruling ends this yet it's unclear how the country's mayors

will respond. A French senator Nathalie Goulet says the debate has been, in her words, hysterical. Earlier I asked her what she meant by that.


NATHALIE GOULET, FRENCH SENATOR: It seems like our society including the politicians are like a runaway car. I mean something is falling apart in

our society. And we lost a compass. Nobody can have a reasonable discourse of speech about Islam. And it's really out of control. That's

why I use this word.

NEWTON: And when you say it's out of control, what bothers you about the discourse in France right now, the way everybody is talking about this and

the way it's seized the country?

GOULET: It's a kind of, let's say, misunderstanding or divorce between the French society and the Muslims. It's also linked to the attack on Nice and

the murder of this priest and the Bataclan, and all this full misunderstanding. You know France is not recognizing any communitarianism.

And then we under a kind of military secularism and it's difficult for the Muslims to express themselves, they feel a lot of discrimination. There is

a real misunderstanding. And this misunderstanding was so heavy this summer with this burkini story. Hopefully the supreme court decided firmly

this afternoon.

NEWTON: You said though quite clearly you think the fabric of French society is falling apart. What do you mean by that?

GOULET: I think this kind of event doesn't help social cohesion. There is no leader in the political arena who is able to raise their voice and just

say, game over, the Muslim have their place in French society, secularism is for the state.

[16:55:10] Secularism is not for swim baths. Secularism is not for the people. Secularism is for the state. And I think that now there is a big

misunderstanding and everybody is mixing everything, such as Saudi Arabia, Wahhabis, Salafism, and all of this is linked with the poor burkini, and

that's what you've witnessed for the past two or three weeks.

NEWTON: How much do you think it's hurting France's reputation?

GOULET: Very badly. Very badly, because, you know, it's difficult to understand, especially, you know, we have this unique secularism. And it's

very difficult to understand how it works. And even there is nobody to raise the rules, so it's not understandable for the people abroad. And

especially in America, because you are dealing with communitarianism, we don't. I think the image of France is badly hurt.


NEWTON: It has to be said despite that some polls show as many as 60 percent of the French actually support the burkini ban. I'm sure it's not

the last we'll hear on this issue. That's QUEST MEANS BUSINESS for this Friday evening. I'm Paula Newton in New York. The news continues here on