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Cyclone Leaves Communities Under Water in Mozambique; New Zealand Begins to Bury Victims of Mosque Attacks; Trump Travels with Two Contenders for Defense Secretary; Pompeo, Netanyahu Highlight Strong U.S.-Israeli Ties; Driver Accused of Setting Bus Full of Children on Fire in Italy; Theresa May to Speak on Brexit Soon; Labor MP Says Theresa May's Brexit Approach has "Failed Badly"; Dow Heads for Lower Finish, FedEx Warns of Slowdown; U.S. Fed Leaves Interest Rates Unchanged; German Companies Face Scandal; Trouble in Germany as Shares Close Lower; Opposition Mounts Against Commerzbank, Deutsche Bank Tie-Up. Aired 3-4p ET

Aired March 20, 2019 - 15:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: We are in the last hour of trade in New York and this is the way the market is looking, having been

down over the course of the entire day; up like a rocket it goes just at exactly two o'clock and now we are positive - comfortably positive, a gain

of some 12 points and this is what is moving the markets.

It is Brexit and Theresa May's under more pressure than ever before to get to a deal through Parliament. The E.U. will grant an extension, but only

if they can approve it. The Fed leaves rates alone. Further rate hikes seems unlikely this year, and that's why you saw the market go up so

sharply at two o'clock. And Google investors seemingly unnerved by a third anti-trust fine of nearly $2 billion.

Live from London on Wednesday, March the 20th, I'm Richard Quest. I mean business.

Good evening, tonight, Brexit developments are coming thick and fast here in London. Theresa May has asked the E.U. to delay Brexit until June the

30th. The President of the European Council, Donald Tusk says that might work if the British Parliament signs off on the exit agreement, it's the

only one on the table.

Now here's the crucial piece. Without an agreement, the U.K. is still going to crash out in nine days' time. Both sides are grappling with the

constraints and intense political pressures.


THERESA MAY, BRITISH PRIME MINISTER: As Prime Minister, I am not prepared to delay Brexit any further than the 30th of June.

DONALD TUSK, PRESIDENT, EUROPEAN COUNCIL: In the light of the consultations that I have conducted over the past days, I believe that

short extension will be possible, but it will be conditional on the positive votes on the withdrawal agreement in the House of Commons.


QUEST: There was also a three-hour debate in Westminster. The reality is tonight, the situation is much more tense, bordering on confused and

chaotic. Bianca is outside Houses of Parliament. So there is the prospect of an extension, a short extension only if Parliament votes for the deal,

which they've rejected twice. What happens now?

BIANCA NOBILO, CORRESPONDENT, CNN: The Prime Minister tries to bring that deal again for a third time with a couple of changes that she's agreed with

the E.U. that's mainly around issues that her and Juncker discussed in Strasbourg, which Donald Tusk said today he will be happy to try and come

to an agreement with, with the Prime Minister.

So she will try and bring that deal back for a third time to the House of Commons. But it failed historically by 230 votes the first time, then by

149 votes and yes, we've heard positive sounds from the DUP, from some Brexiteers who promised never to back that deal saying now, is the time

that they're going to support the Prime Minister, but will that be enough? She's definitely going to need to get Labour MPs on side as well. Yes --

QUEST: Before we get too ahead of ourselves, asking whether who will support it or not? How is she going to get the deal before the House

bearing in mind what Speaker Bercow has ruled that it has to be substantially different.

NOBILO: She addressed that very point today when she wrote formally to President Tusk to ask for the extension. I think the third or fourth

paragraph explain that very point saying that she wasn't able to bring the withdrawal agreement and her deal back to the House of Commons without

those changes.

So she asked the E.U. again, if they would be able to provide some supplementary documents in order to qualify to meet John Bercow, the

Speaker of the House of Commons' criteria for her to bring it back. So that's what we're expecting to hear. But lawmakers I've spoken to are

expecting the Prime Minister to give a statement outside Downing Street or inside Downing Street some point later this evening, but we'd expect her to

flesh that out and plot the path towards meaningful vote three.

QUEST: MV3 is likely to be when? Next Tuesday or Wednesday? That way she can go to -- I mean, when would it be?

NOBILO: Well, it's meant to be this Tuesday. I don't think anybody can really guess at this point. We might get an answer this evening from the

Prime Minister, but as you mentioned, we are only nine days off from the date that is enshrined ...


NOBILO: British law that Britain is leaving the E.U. so it needs to be soon. And if the E.U. is only granting that extension to the 30th of

June contingent upon Theresa May's deal passing then it has to be some time in the next week. But I'd expect that we get more details about that later


QUEST: Bianca, don't go too far away. We're going to need you when the Prime Minister speaks in just over an hour's time.

On "The Express," earlier I put into the Conservative MP, Andrew Percy it doesn't matter when the extension ends. The U.K. Parliament still has to

have the withdrawal agreement and the E.U. says there's nothing new on the table.


ANDREW PERCY, MEMBER OF PARLIAMENT OF THE UNITED KINGDOM, CONSERVATIVE PARTY: The problem we have in Parliament is we have two different groups

of people voting against the withdrawal agreement who both think they're going to get different destinations. One group thinks they're going to

stop Brexit, the other group thinking they're going to get a no-deal Brexit. Well, they can't both be right.

But you know, the end of the day, you're absolutely right. If we don't pass the withdrawal agreement, then we're not going to get this extension

and you know, the whole thing is back to where we were at the start of this week of not knowing where we end up.

QUEST: Are you hearing from your from your more extreme Brexiteers that they are starting to waver or whether to just hold their nose and vote for

the Prime Minister's deal?

PERCY: I think some of them have. I think, look, the fact that the House of Commons voted last week to prevent a no-deal exit means that some of

them are clearly fearful that they may not get Brexit altogether. There are, I'm afraid a hard core amongst them who will be irreconcilable to the

Prime Minister's deal on any terms, but similarly there are MPs on the opposition benches who are were remainders in the referendum campaign, who

represent very hot heavy leave voting constituencies who do want to bring this to a conclusion as well.

So I think if they understand that we're now reaching that point where it is going to be this or we potentially could end up with a no-deal, then

some of those could come on side. The problem with this whole debate is as soon as you get somebody at one end of the debate, you lose somebody at the

other. So -- but I do think people's opinions are changing somewhat whether it's enough remains to be seen.


QUEST: Joining me now, John Rentoul, the chief political commentator at "The Independent" newspaper. He is also at Westminster. Well, I think we

could all agree whatever one's political colors that it is an extraordinary mess. Which way, John, do you see out of it?

JOHN RENTOUL, CHIEF POLITICAL COMMENTATOR, THE INDEPENDENT: If I knew that I wouldn't -- I wouldn't be here. I'd be down the bookies. It's very

difficult. I mean, it's extraordinary to have the nation poised this close to a deadline without people knowing which way it's going to go.

You know, the Prime Minister seem to say something extraordinary today which is that if she doesn't get her deal through by the 30th of June,

she's going to let somebody else sorted out she said, you know, as Prime Minister she would not accept a delay to Brexit longer than the 30th of

June. I don't know who that was designed to frighten though, maybe it was designed to put pressure on Labour MPs who would be horrified by the

prospect of Boris Johnson succeeding her as Prime Minister.

QUEST: So let's go through this in quick fire. Brexiteers want Brexit. They now realize that could be slipping away from them if the U.K. doesn't

go for -- if the U.K. goes for a longer extension, so why would they not vote for the Prime Minister?

RENTOUL: Well because there's a hard core of conservative MPs, a larger number than I thought there were of Brexiteers against Brexit. They think

the Prime Minister's deal is so bad that it's better to stay in the E.U. and fight for what they call a clean Brexit, a true Brexit in the longer

run. I mean, it's quite an extraordinary puritanical position. I mean, they would rather be in the E.U. in pure and opposed to it than accept the

compromise of the Prime Minister's deal.

QUEST: Right. Now that small number could be enough to scupper her next week. Because if the DUP jump on board and all the other ERG jump on

board, then you're really left with, I mean, she has to take everybody and if there are some ideological stronger holdouts, then she's done for.

RENTOUL: Well, for every ideological stronghold out, she needs a Labour MP to come across from the opposition to support her. Now, there are about 30

or 40 Labour MPs who have said that they think Brexit ought to happen, but so far, they haven't done very much about it.

I mean, there's only been five of them have come over and supported the Prime Minister's deal on previous votes.


QUEST: John, do you think there may be a view in the country that somehow we think it's all going to be sorted out somehow at the last minute. You

know so that the people don't actually really believe hand at heart that you'd fall over the cliff because everybody thinks, "Well, don't worry at

the last minute, they'll sort it out."

RENTOUL: I'm not sure about that. I come across quite a lot of people who are very frightened about the prospect of, you know, disruptive chaotic no-

deal Brexit. I mean, you know there's talk of people stockpiling food and people are very worried about it. I mean, a lot of people think that their

jobs and their futures maybe at stake, and that's what I think is a bit irresponsible about the way the Parliament is handling it, but you know, I

don't particularly blame the Prime Minister because she has to manage an impossible situation. She's got a Parliament split three ways which

represents the British people who are split three ways.

QUEST: Good to see you, sir. Thank you. As this progresses, we look forward to talking to you more about understanding what's happening.

Tack on a few more billion dollars to Google's bill with the E.U. Competition Commissioner, Margrethe Vestager tells us, she is forcing

Google to change its ways and there's some shocking allegations of what's recorded on the black box from last year's Lion Air crash. The plane

should probably never been in the air bearing in mind what happened the previous day.


QUEST: The anti-trust hounds in Europe have come once again for Google, and this time the European Commission has ordered Google to pay nearly $2

billion -- $1.7 billion for abusing its dominant position in online advertising. This is the third time European authorities have levied

against Google in as many year.

Last year, the Commission charged Google for undercutting mobile phone market. In 2017, it said it hadn't fairly favored its own shopping

service. Google is waiting on an appeal in these cases. But what's the bill for all of this? It all stands at $9.3 billion dollars. So consider

this. The revenue was $137 billion last year. So it really is somewhat of a drop in the bucket. The fines amount to just 3% of revenue over the last

three years.

The European Commissioner for Competition is Margrethe Vestager.


QUEST: She spoke to Eric McLaughlin and the Commissioner said regardless of the fine, her office is succeeding in forcing Google to change its



MARGRETHE VESTAGER, EUROPEAN COMMISSIONER FOR COMPETITION: Google only stops when we sent the statement of objection to say, well, we find that

these clauses in your contracts, they're illegal.

So I think it shows that it has an effect. But of course, you're right to say that one of our obligations is to speed up because we're dealing with

fast moving markets.

ERIN MCLAUGHLIN, CORRESPONDENT, CNN: Is there an E.U. bias against big tech firms? I know this was asked in the press conference, but is there

that bias there that's been perceived by the media as well as others?

VESTAGER: Well, I think some of the European companies will also get big fines, they would wish for a bias. But there are no bias. If you see that

fines to the European truck companies, if you see the fines to the cartels that catalyze car parts, you would seems that our aim is pretty simple.

You're more than welcome to do business in Europe. But you have to follow our rules and not to engage in any illegal behavior.

MCLAUGHLIN: Is there a problem though, with us tech firms in general, given the lack of regulation in the United States?

VESTAGER: Well, I wouldn't say that as a general measure. I think that when you're in an Industrial Revolution, as we are right now, well, it

takes some time for society and democracy to gain speeds to say, well, this is the direction that we want to take. This is how we will regulate this

market as we have done, you know for a hundred years when first, we regulated the working hours, healthy work places, the children couldn't

work pesticides -- so all of that. It is the societal task in our democracy is to say, "Well, this is the direction we want you to go," also,

when we're in a technological revolution.

MCLAUGHLIN: Do you think the U.S. is doing enough?

VESTAGER: Well, as you can see, I'm quite busy in my day job here in Europe. So I make no judgment about my U.S. colleagues.

MCLAUGHLIN: And do you support moves to break up big tech companies?

VESTAGER: Well, for us here, that would be a measure of very, very last resort, because it is obviously quite the thing to do to say to a private

company, you have to divest part of your company, you have to make separate companies.

So what we doing here is to say, well, with the tools that we have, and actually we are also looking at new tools, we think that we can have

competitive markets also in the digital and this is our endeavor, because it is quite far reaching to begin breaking up companies.

MCLAUGHLIN: Yes, but are these companies too big? The companies like Amazon, Apple Google, they are just these massive companies that are worth

hundreds of billions of dollars.

VESTAGER: I don't think that that the size in itself that's the problem. First, of course, is the problem when we have illegal behavior, but second,

and this we think quite a lot about is access to data because they are giants, but they're also giants when it comes to holding data and you need

data to innovate. You need data to feed your algorithm, to feed your artificial intelligence.

So what we are concerned about is more, how do you get access to all that data that is being created right now, because if you cannot get access,

well, the number of competitors may dry out and the number of innovators may dry out as well.


QUEST: Jim Cridlin is here. He is Global Head of Innovation at Mindshare, a global media agency. This is sort of a technical stuff, but what I've

often found with the Commission is that they are actually our watchdog and guardians. They are the ones pointing out the problems where most of us

don't even see them.

JIM CRIDLIN, GLOBAL HEAD OF INNOVATION, MINDSHARE: Right. Exactly. And I think one of the things that E.U. regulators have gotten angry in the past

has been that they thought that people have said, they've been too hard on many of the tech companies. But I think what you're seeing is actually the

E.U. regulators are probably ahead of the curve, right?

If you look right now, across the world, whether that's in the U.S. where congressional representatives or senators, U.S. presidential candidates are

thinking about increased regulation, or even things like GDPR, other places are catching on.

QUEST: I guess the problem is, in the U.S., there is a much closer link between the regulators and the politicians who question them and then

therefore, here, the link to Margrethe Vestager and then the Commission is somewhat tangential it and it often seems supra national.

CRIDLIN: Yes, it is a little bit. You know, when you look at it in the U.S., many of these tech players, I mean, for example, Facebook has spent

billions of dollars building hospitals and schools and places like that inside the U.S. that clearly buys you a lot of goodwill that politicians

would look fondly upon.


QUEST: But also, those CEOs, get kebab'd in front of Congress. Now I know that there are hearings in front of the Commission, but they all seem a bit

remote and a bit irrelevant.

CRIDLIN: Yes. Well, you know, I think when you look at this fine and particularly from the E.U., right, 1.5 billion euros is a big number. Now,

if you are Google, like any fine is going to be -- it would seem like a lot of money. In the scheme of things, it's not my judgement, whether it's big

or small.

I think will be interesting now are the knock on effects we see. Number one, it opens up the possibility for additional lawsuits from those that

were affected. But I think what we're seeing at Mindshare across our clients are they are increasingly asking us questions like, "Are we over

invested in just a handful of digital players?" And every time there's a data breach, every time a brand finds its content running in, on or

alongside content that it doesn't want to be or there's a fine from a regulator, those concerns about are we over invested in too few players get


QUEST: Finally, briefly, do these fines even matter to Google?

CRIDLIN: I think they do. You know, every time there's an incident like this, we see a familiar pattern where advertisers might pull dollars from

investing until Google fixes the issue and let me tell you, every time that happens, a player like Google acts quickly to correct the problem and this

kind of thing adds on and on over time.

QUEST: Good to see, sir.

CRIDLIN: Likewise.

QUEST: I very much appreciate it. Thank you. Ten days after the horrific crash of a Boeing jet in Ethiopia, we're learning stunning new revelations

about the Lion Air flight that crashed off Indonesia last year, killing all 189 on board -- people on board.

Both tragedies involved the Boeing 737 MAX 8 model of the plane. CNN's Melissa Bell reports.


MELISSA BELL, CNN INTERNATIONAL CORRESPONDENT (voice-over): This was all that was left of Lion Air Flight 610, which crashed into the Java Sea last

October, debris picked through by the families of some of the 189 people who died on board.

At fault, according to a preliminary report, an automated safety system on the Boeing 737 MAX 8 triggered by a faulty reading from a single sensor.

Reuters reporting that a chilling recording of the cockpit in the last few minutes before the crash shows pilots desperately looking through a

handbook to try and figure out how to disable the system that was reportedly forcing the nose of the plane downwards.

That same plane, according to fresh reporting from Bloomberg, also encountering the very same problem the day before on a flight from Bali to

Jakarta, but saved by an extra pilot who happened to be hitching a lift in the cockpit. News made all the more important by the crash on March 10th

of Ethiopian Airlines Flight 302 that killed 156 people, a flight of the same type of Boeing and, according to preliminary data from the black

boxes, one that followed a similar trajectory to the doomed Lion Air flight.

Those black boxes now being looked into here at the BEA on the outskirts of Paris. Its former head spoke to CNN about the questions now facing Boeing.


JEAN-PAUL TROADEC, FORMER PRESIDENT, FRENCH AVIATION SAFETY AGENCY: The measures taken by Boeing after the first accident were not enough to avoid

the second accident.


BELL (on camera): `But the questions are not only for Boeing, with the Transportation Department now probing why the U.S. Federal Aviation

Administration authorized, certified a system that was based on the readings of a single sensor, with many questions now being asked about how

much of that certification process was handed directly to Boeing. Melissa Bell, CNN, Paris.


QUEST: We need to understand exactly what we're talking about. So have a look at this. The area of the plane that is relevant is this. This is the

little two tails at the back of a plane. It's a horizontal stabilizer. The whole of it. And moves in a very small area, just a matter of degrees

up or down. And depending on which way it moves, it trims the plane, nose up all those down and the pilots use that as a matter of for the center of

gravity and for easier control of the aircraft.

However, with the MAX, the way the engines are further forward and higher then, well that's where the problem happens because what invariably happens

with all of this is the way the -- when the plane sensed something was going wrong that part of the back of the aircraft pushed the nose down and

the pilots were unable to do it because what had happened of course, is this part was dominant. This part was pushing down the nose of the


Pilots are familiar with this concept. Les Abend for example is a former pilot. He joins me now from Jacksonville, Florida. Les, the concept of a

runaway stabilizer as it is known, is known to you and other pilots. Why then in this case, wouldn't they have naturally realized --


QUEST: -- hang on, the nose is being pushed down, we're not doing it. That's what's the problem?

LES ABEND, RETIRED 777 PILOT: Well, you ask a very good question. And because they didn't get that visceral clue of that trim wheel which,

Richard, you're very familiar with, of that of that trim wheel going around. So they thought it was another situation that they had to analyze.

So it was very counterintuitive to them that the airplane was wanting to head for the ground and in essence, what was happening the system that you

described, it was essentially the telling pilots that it was going to stall and every time they attempted to trim the airplane up, it would reset

itself and continue the nose down situation.

QUEST: Now, we know from the Lion Air, the previous day of the Lion Air flight, it was a jump seat rider pilot that recognized it, otherwise that

plane would have gone down as well. And why would -- I guess I'm trying to understand, we've now got three sets of pilots flying who did not

recognize, and the only one who did is this jump seat pilot. What do you make of that?

ABEND: Well, let's go back to the fact that Boeing didn't even put that in the manuals for these operators that had the system, basically the 737 with

this MCAS system that we've all been talking about. So it starts there.

These three flights, first of all, the first one that returned safely, that was up at altitude, so that did help the situation, you've got a pilot

sitting in the jump seat, something you're very familiar with that has a much broader view of what's happening. They didn't have a myopic focus and

once that plane got on the ground with that problem that was written up as a discrepancy, the mechanics went together and electronically pulled what

the faults were for the system and fixed it according to Boeing troubleshooting process.

So that airplane was going to be released until that problem was fixed. But apparently it was fixed, at least what we know about at this point in

time. There's no verification of that, of course. And now you've got the crew --

QUEST: If we pull the strands, though, together of what happened here. I mean, how does two brand new planes fall out the sky with other incidents,

and Boeing still tells us they committed to safety.

ABEND: You know what, I wish I had a real good answer for you. I'm very disappointed in Boeing, I've got to admit. This is not their M.O. They

are very forthright with their systems and this was modified in a sense, as you described earlier in the introduction because of the bigger engines and

the way the airplane reacts with these bigger engines.

So why Boeing did this? I don't know but the FAA approved it through the certification process.

QUEST: Les Abend, thank you for joining us. I appreciate it. Thank you.

ABEND: My pleasure.

QUEST: As we continue tonight, what Donald Tusk's speech tells us about where Brexit goes from here. We need to see it from the other side now.

The E.U. view. Erin McLaughlin is Brussels and will be with us after the break.


[15:30:00] RICHARD QUEST, HOST, QUEST MEANS BUSINESS: There's more QUEST MEANS BUSINESS in just a moment. But a thousand days ago, the people of

Britain voted to take back control, now the EU seems to be holding all the cards, Brussels side in just a moment.

And on the Fed's decision day, how much will a slowdown affect America's growing economy? As you and I continue tonight, this is CNN and on this

network, the facts always come first. Helicopter rescues are taking place across Mozambique in the wake of a cyclone Idai.

It is believed that hundreds of people have died, and some communities completely under water from flooding. Eight agencies are trying to get

food, medicine, and water to more than half a million people.

New Zealand has begun burying the victims of last week's shooting attack on two mosques. A father and son immigrants from Syria were the first to be

laid to rest. The police say they believe the gunman was on his way to attack a third mosque when the police rammed his car and brought the

attacks to an end.

President Trump is visiting the state of Ohio today with two possible contenders for the Secretary of Defense. Sources tell CNN he's inclined to

nominate the acting Defense Secretary Pat Shanahan for the job. However, another contender, the Army Secretary Mark Esper also joined the president

on Air Force One.

America's top diplomat is in Israel touting the Trump administration's strong ties with Prime Minister Benjamin Netanyahu. Soon after Mike

Pompeo landed in Tel Aviv, the White House announced President Trump himself would host Mr. Netanyahu in Washington next week, just days ahead

of Israel's elections.

A dramatic story near Milan in Italy. Authorities say a school bus driver set his bus on fire with more than 50 children inside. Police broke down

the windows and got all the children out unharmed. Local drivers say the driver who is from Senegal was protesting against migrant drowning.

Breaking developments are moving quickly here in London. We've learned that Theresa May is to make a statement in about half -- 45 minutes from

now. But as she does so, this is where we stand at the moment. It's been a thousand days since the Brexit vote. Nine days are left unless the U.K.

and the EU agree an extension.

The president of the European Council Donald Tusk says that an extension is possible if parliament signs off on the exit agreement with the EU that was

negotiated by Theresa May.

British lawmakers have rejected it twice. Keir Starmer is the Labor Party's Brexit spokesman, he says he's afraid the Prime Minister will use

any extension to keep pushing her deal.


KEIR STARMER, BRITISH LABOR MP: This is what I am most concerned about, that the Prime Minister still thinks that the failed strategy of the last

two years, namely my deal or no deal, a blink and approach no changes, no room for parliament, should just be pursued for another three month.



STARMER: But in other words, all she's going to do is use the three months in exactly the same way to bring back the deal over and over again, or as

many times as she can without breaching the rules of the house and to try to force it through.

[15:35:00] That -- I'll just finish this point, if I may. That is the strategy she's been pursuing throughout these negotiations, and it has

failed badly.


QUEST: So that is the situation Theresa May and indeed the United Kingdom finds themselves in. Donald Tusk says the PM must ram through a deal that

British lawmakers have rejected twice. Erin McLaughlin is in Brussels. Erin, we were talking earlier, is Donald Tusk -- is he helping or hindering

the Prime Minister by requiring that vote before an extension?

ERIN MCLAUGHLIN, CNN CORRESPONDENT: Well, I think that very much depends on who you ask, Richard. But what was clear that played out today here in

Brussels is he took the ball that Theresa May put into his court earlier this morning with that letter that she wrote requesting an extension until

June 30th.

Took the ball and slammed it back into the court of the United Kingdom, telling Theresa May, you can have a short extension that you want, but you

need to get this deal across the line, and you need to do it next week. Now, the question being, if she fails at that, as looks likely at this

point, what next?

And we're completely in the dark once again, Richard, in terms of what happens next. Keep in mind that March 29th exit date is enshrined in

British law. It will require an act of parliament that's currently not tabled --

QUEST: Right --

MCLAUGHLIN: To reverse it. So this could be --

QUEST: All right --

MCLAUGHLIN: Seen as playing into the hands of hard Brexiteers.

QUEST: All right. But if she doesn't get it through and the option of a short extension goes, what about the possibility of the long extension? A

year, two years for Britain to decide what it wants. Would Brussels rather that or a no-deal Brexit?

MCLAUGHLIN: Here's the thing about the long extension, Richard. Theresa May has to request it. And that's what they thought she was going to be

doing this morning. That is what the EU had expected, according to a diplomat I was talking to. That's what David Lidington from her cabinet

had imparted to diplomats here in Brussels to expect this morning. That did not happen.

Does she have the political clout, the political backing to be able to request --

QUEST: Right --

MCLAUGHLIN: A long extension? That is not evident at this point.

QUEST: So I am coming to Brussels tomorrow for the council meeting, looking forward to working with you and being with you then. How annoyed

are -- is this council? How difficult, how fractious is this council going to get?

MCLAUGHLIN: I think the EU leaders, EU officials here are frustrated time and time again, speaking to diplomats, they tell me they're sick of Brexit.

But the other critical thing I think we heard from Donald Tusk today was the tone. He's trying to take down the temperature, saying look, the EU

wants a solution, they want a way out of this. They want a constructive approach. They do not want to be blamed for this mess, Richard.

QUEST: Erin, see you tomorrow. We'll be with you tomorrow, thank you. As you and I continue tonight, after the break, the Federal Reserve decision

today, it looks like Jerome Powell is sticking to his patient plans. The rates and the growth forecast, we'll talk about it after the break.


QUEST: OK, you really do need to look at the Dow chart to understand what an unusual day. We're down very heavily throughout the course of the

session, triple-digit losses. And then, just after the Fed statement and the Fed decision, the market goes up and it remains up, and then at

roughly half an hour ago, for some reason, the market has dropped and we're now down 127.

When you and I started talking just about 41 minutes ago, the market was actually up, and it looked like it was going to end positive. But now it

seems to be somewhat different. So after spending much of the session in the red, the stocks that have been moving today, shares of FedEx have

tumbled 3 percent as the firm is warning of a global slowdown after it reported some pretty dismal earnings after the close last night.

And it comes as the U.S. Fed voted to keep interest rates on hold to maintain its more dovish outlook. Now, if we look within this, United

Health Group is quite a large component of the Dow, so is Goldman Sachs. Now, they are down heavily, 3.5 percent and 2.5 percent.

Those are at the positive end are not quite so big, except, of course, for Boeing. Now, the benchmark rate for the U.S. Fed stays in the range of 2

to 2.25 percent. Chairman Jay Powell also said the Fed is lowering its growth forecast and indicated no more rate increases are likely to come

this year.


JEROME POWELL, CHAIRMAN, FEDERAL RESERVE, UNITED STATES: We continue to expect that the American economy will grow at a solid pace in 2019,

although likely slower than the very strong pace of 2018. We believe that our current policy stance is appropriate.

Since last year, however, we have noted some developments at home and around the world that bear close attention. Given the overall favorable

conditions in our economy, my colleagues and I will be patient in assessing what if any changes in the stance of policy may be needed.


Lindsey Piegza is the chief economist at Stifel, joins me from Las Vegas, good to see you. So, what's happened today? Why -- I mean, we see the

market roar up, very quickly after 2:00, and then go back down again.

LINDSEY PIEGZA, CHIEF ECONOMIST, STIFEL: Well, there's a couple of things going on. As expected, the Fed opted to leave rates unchanged. And we

also saw from the famed dot plot, that the Fed doesn't intend to raise rates any additional times in 2019.

We also heard from the Fed chairman that the U.S. economy is on relatively sound footing. So initially, this seemed like the perfect combination for

the market. The Fed not taking any further action, the economy is steady. And what we do know is that historically, Feds have been willing to

continue to tighten until the weakness in the data is very clear, thus forcing us into rescission.

This time, it seemed like the Powell Fed was backing off preemptively, giving the economy still room to run. However, later on, the market

started to dig through some of the details of the report from the Fed as well as additional comments from the Fed chairman during the press


And what we saw was an additional downside risk. So growing concern within the Fed about the sustainability of the recovery going forward. Talking

about a reduction of global growth, which of course --

QUEST: Right --

PIEGZA: Then could translate into deflationary pressures here in the U.S.

QUEST: But the Fed has made it clear, I mean, they're using the word patience. This is the -- this is the new rubric to tell us they're not

going to do anything. They made it clear they're not going to raise rates further this year. And probably well into next year because -- but from

your perspective, just how weak is the U.S. economy?

[15:45:00] PIEGZA: Well, I think right now, the economy is still on steady footing. The problem is, going forward, a number of underlying

indicators suggest waning momentum, and the Fed outlined several of them. We're starting to see business investment lose ground. We're starting to

see a slower pace of spending.

Remember, we're a consumer-based economy, if the consumer isn't out there happy and healthy, we can't expect to maintain even this 2-ish percent

growth pace going forward. We also see housing showing signs of weakness.

So there's a number of different components that are pointing to downward momentum or this downward bias that the Fed pointed to, suggesting that

yes, we may see positive growth in 2019, but significantly slower than last year, and the big question mark is when we turn the page into 2020, are we

still able to maintain positive growth or is this where the recession risk starts to rapidly rise?

QUEST: Do you believe that a recession is likely?

PIEGZA: I do. I think when we turn the calendar into 2020, the risk of recession rises above 50 percent. We do expect momentum to slow noticeably

throughout the remaining nine months of the year with growth coming in closer to around 1.5 percent --

QUEST: Right --

PIEGZA: In the next year. So noticeably weaker than what the Fed is projecting around 2.1 percent.

QUEST: So what is driving this slowdown? I mean, we keep sort of hearing - - oh, global slowdown, developing countries, emerging markets, European -- obviously, we know the eurozone is in --

PIEGZA: Yes --

QUEST: Some trouble. But what's driving it? Why suddenly after several years for the U.S. of good growth, is there -- is there this concern?

PIEGZA: Well, remember, we were already starting to see this downward bias in 2018, even though the annual growth pace for the U.S. was 3 percent, we

saw the last nine months losing momentum. So second quarter at 4 percent, third quarter at 3 percent, the fourth quarter 2.5 percent.

So there was this downward trend in activity to begin with as we turn the corner into 2019. But to your point, I think one of the biggest concerns

from our standpoint is the consumer. The consumer had very much been reliant on temporary factors for the past several years, including drawing

down savings, ramping up credit to above pre-crisis levels --

QUEST: Right --

PIEGZA: As well as eating into that lingering wealth effect from earlier years of lower cost energy. We hadn't seen meaningful gains in wages.

Now, yes, we are starting to see more recently an uptick in earnings, but they're likely to prove very short-lived and are still very isolated

throughout pockets of the labor market as opposed to being broad-based across all sectors.

QUEST: Right --

PIEGZA: So if you're looking for a catalyst, I think the consumer is a good place to start.

QUEST: Look forward to talking to you again, and when you're in New York, we'll be having you and talking to face-to-face. Good to see you, thank

you Lindsey, thank you.

PIEGZA: Thanks very much for having me.

QUEST: As we -- as we continue tonight, a bad day for German companies. Their stock was sharpener after a herbicide scandal. BMW is issuing a

profits warning, and Deutsche Bank drops, no wonder the Dax was down 1.5 percent.


QUEST: European markets slumped, as fears over Brexit continue to grow. Just look at that, the Dax was hit particularly hard, tipping 1.6 percent.

There was more bad news out of Germany on Wednesday, it was a veritable potpourri of bad news.

Shares of Bayer; the owners of Monsanto plunged over 9 percent after it found that its weed killer contributed to a man's cancer. And the shares

of BMW closed down nearly 5 percent after the car maker issued a profits warning for this year. We need to understand why they issued a profit

warnings and what's happening with the German economy. Good to have John Defterios with us.

JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Thank you very much, it's amazing because I was looking back, the Dax has been the worst performing

European market over the last 14 months, down better than the 7 percent. So this is a couple of knocks across the chin here, coming from some blue

chips, Richard with Bayer and BMW, no doubt about it.

QUEST: OK, Germany is going to have a new leader. Angela Merkel is going to step down sooner rather than later as she's made that clear. But there

is a feeling the economy is not performing well.

DEFTERIOS: No, the last time we had a conversation about Europe, it was about the European Central Bank downgrade to 1.1 percent --

QUEST: Right --

DEFTERIOS: Then the council of experts in Germany came out with a figure 24 hours ago, that is 0.8 percent --


DEFTERIOS: Well, there's a couple factors here. I think we have to recognize it's something you've been covering the front half of the

program. That Brexit is starting to undermine overall European growth, but the other hidden factor and something I look at more carefully because I

being emerging markets editor, is that the exports to China from Germany are slowing down.

And this is something they relied upon --

QUEST: Right --

DEFTERIOS: And it's kind of a sleeper, but it's hitting the blue chips of Germany clearly.

QUEST: So when I was talking to my last guest, we were talking about global slowdown, and I'm trying to find the -- I can see the evidence of

it, but I can't find the reasons for it.

DEFTERIOS: Well, I mean, Richard, we're kind of ten years into a very tired cycle. But let's take a step back and look at some of the factors

behind Bayer for example, today. This was the largest merger in German history, a $63 billion. They inherited a nightmare when it comes to

Monsanto and the lawsuits.

They're trying to clean it up, but the fourth quarter loss, for example, while the slowdown was kicking in, in Germany, was $4.5 billion. It was

four times the expected amount, partially because of the lawsuit, but in addition because of the slowdown we see today.

QUEST: And that issues -- John, thank you. That issues on what's happening with Germany we can look at in more detail because shares in

Deutsche Bank closed down 3 percent on the Dax, opposition growing to a potential merger with Commerzbank.

The German Finance Minister Olaf Scholz is pushing for negotiations. The unions are against the deal. Stefan Mueller is the CEO of DGWA; the German

institute of asset allocation, he's against the merger and told Julia Chatterley, that Scholz must have a reason for sticking by the banks.


STEFAN MUELLER, CHIEF EXECUTIVE OFFICER, GERMAN INSTITUTE FOR ASSET ALLOCATION: My concern is that he really knows more than we all, and

because of that, the only reason why even a bank like Deutsche Bank, one of the former icons of German economy is following his -- let's call it advice

or whatever.

There must be something in the background that we all don't know that he thinks he has to push that merger with Commerzbank. You know that Germany

owns 15 percent of the Commerzbank, and it seems like this is the only partner that Deutsche Bank can merge with.

We still think that an European Bank, and large European bank from France or Switzerland which would be the better partner, but facing a lot of

issues in the future like the money laundering scandal and also some issues with this gentleman who actually lives in Penn Ave 1600 in Washington seem

to be two huge risks within Deutsche Bank for other partners in the future.

So they don't know what may happen with Deutsche Bank in the future. So they are not open for merger talks, so Commerzbank has to do it.

JULIA CHATTERLEY, CNN: So basically what you're saying is, these are two inherently weak banks at this moment, but this is a bailout, a rescue for

Deutsche Bank?

[15:55:00] MUELLER: I think so, yes. They don't merge because of -- I think some of the parts becomes a real good bank. I think that the real

risk is that without that, let's call it merger, and without that merger, Deutsche Bank is definitely too weak to come back to somehow strength that

the bank had in the past.

And the risk that somebody else takes it over and maybe slice it or the bank is running into huge issues is too high. I mean, the German economy

itself is large and strong, and we need a German bank that is representing our economy, our huge companies Steven Stein(ph), Lufthansa, Allianz, you

all know them in the world.

It can't be that especially the U.S. investment banks control our corporate business here. So we need a huge corporate bank, and Deutsche Bank alone

can't do that in the future any longer. And I think therefore Mr. Scholz is acting here now.


QUEST: Right, when we come back, we're awaiting the British Prime Minister Theresa May, who is going to make a statement in Downing Street sometime in

the next half hour. We're not sure what she's going to say, but bearing in mind the precarious situation for Brexit, we're expecting something


But then the last time she came into Downing Street, we thought that too. Anyway, stay with me on the other side of this break, we will have what

Theresa May says. This is CNN.