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Quest Means Business

Is Germany Out of Recession?; Manpower Chief Talks Jobs;

Aired September 08, 2009 - 14:00   ET


RICHARD QUEST, CNN INTERNATIONAL ANCHOR: The future is bright. Angela Merkel is more optimistic about the German economy. I'll explain this little baby later. The future is orange. Deutsche and France Telecom merge U.K. operations.

I'm Richard Quest in the German capital where I mean business.

Good evening from Berlin, where the latest economic numbers show that Europe's largest exporter is starting to power forward once again. This exporting nation is slowly gearing up again after the worst recession since World War II.

Factories are running. Ships are shipping. The output -- albeit slowly, the output is growing. First, final steps towards full-scale recovery seem to be under way. Just look at the details. The latest numbers, industrial production fell unexpectedly in July. That may be one side, but -- by dipping nearly 1 percent. But exports were up by more than 2 percent in the same period.

And factory orders also increased, boding well for the future. Germany's chancellor, Angela Merkel, says the German economy will shrink between 5 and 6 percent this year.

Now that might be bad news, but it's more optimistic than earlier forecasts. Angela Merkel is about to find out where voters think her handling of the economy has perhaps gone wrong or been to her credit. She faces the electorate in the polls later this month.

Business might be doing well, but the unemployment rate is still high by German standards. There are nearly 3.5 million Germans out of work at the moment. Put all of this into the melting pot of this capital, and you end up with an economy just starting to move.


QUEST (voice-over): Was there a recession in Germany? You wouldn't know it talking to most on the street.

UNIDENTIFIED MALE: It is better than ever before.

UNIDENTIFIED MALE: People are going to buy something, so I think nothing bad will happen.

QUEST: Last year things looked very different, as top German officials struggled in the middle of the night to save the German lender Hypo Real Estate from collapse, and divert a meltdown of international financial markets.

They also persuaded Germans to keep their money in the banks.

ANGELA MERKEL, GERMAN CHANCELLOR (through translator): I want to ensure German savers, your accounts are secure. This is a guarantee from the German government.

QUEST: In the following months, Germany's all-important exports plunged. And the country slid into the heaviest recession since World War II.

Despite this, crucially, the job market has only been moderated affected, thanks to a short labor program which involved workers cutting hours, employees getting paid less, and the taxpayer supplementing the rest.

MANFRED BIETENDORF, SMALL BUSINESS OWNER (through translator): It is great, because I can keep my skilled workers. They don't have to go through unemployment and having to find something new.

QUEST (on camera): So Germany becomes one of the first European countries to emerge from recession, which raises a further issue: As growth gets under way, sure but slow, will Germany also face a recovery without an increase in jobs?

(voice-over): Both the government and experts agree, unemployment will continue to rise for the better part of next year, even though there are signs of true recovery.

LARS HENDRICK ROELLER, ESMT BERLIN: Demands for German investment goods is coming back as the world economy is growing. And I do think that -- and most experts are predicting that we're going to see some significant growth by next year in the German economy again.

QUEST: So from a country seemingly on the road to recovery, in the end, some words of warning.

UNIDENTIFIED FEMALE: There are a lot people that just think that they can go on like they did before and didn't even learn anything about it. And I think they should continue learning it.

QUEST: But in this election year, what has the German government learned from the crisis, and how will it affect the outcome of the vote on September the 27th? I've come to Berlin to see for myself.


QUEST: And that is why we are here tonight. Germany, of course, has poured billions of euros, tens of billions of euros, into the economy by way of fiscal and monetary stimulus packages. I asked the Bundesbank president, Axel Weber, if Germany, as a result of all of this money, which could, of course, stoke inflation, whether there was an exit strategy.


AXEL WEBER, PRESIDENT, DEUTSCHE BUNDESBANK: We have made clear this is a time to discuss exit strategies, but it's not the time to implement them. Monetary policy has to be accommodative for some time. And fiscal policy stimulus has to stay in place.

But you're right, there is no need for adding on fiscal stimuli. We have to implement what has been promised, and that is on the way.


QUEST: Now, the numbers we are seeing within the German economy all paint a picture of things getting better. But another question for the Bundesbank president was whether or not growth could be sustained without government money.


WEBER: That is absolutely our judgment. Most of what we have seen has owed to three types of measures: conjunction (ph) programs, bank low interest rates, and also bank rescue programs. Most of it is borrowed from the future. It is a reduction in saving rates in some countries, so it's not yet sustainable.

QUEST: And the German economy, will it maintain the growth seen as it moves through the rest of the year? Or is there a danger of a fallback?

WEBER: The second quarter was very good. The third quarter, in our view, is even better. That's what every indicator suggestions. So I have a positive outlook for the rest of the year. We have to be prudent about the next year.


QUEST: Now I'm joined by Rajshri Jayaraman, and I'm sure I pronounced that wrong, so I do apologize.

RAJSHRI JAYARAMAN, ASSISTANT PROFESSOR, ESMT BERLIN: It's no problem. The Germans usually say "Yayaraman (ph)," so it's an improvement.

QUEST: Ah! So it's "Yayaraman," then, all right.


QUEST: Assistant professor at ESMT, to talk about this.

Now we saw numbers today, we've just heard from the Bundesbank president. The gist of what we're hearing is that things are getting better, but getting better faster than people had thought. Is that fair?

JAYARAMAN: I think that is fair. I think that the fact that GDP increased by 0.3 percent in the second quarter this year took a lot of people by surprise. And it's a pleasant surprise, naturally.

The question, of course, is to what extent this growth can be sustained?

QUEST: What is your feeling on that? Because if -- I mean, how has Germany managed -- we had always traditionally been told that you needed to have export growth in other economies. But Germany seems to be managing it without necessarily other economies growing.

JAYARAMAN: Well, that's I think not entirely accurate. What seems to be powering the current increase in exports we see is increased demand from Asian economies. And Germany is clearly benefiting from that a great deal.

And we have to remember that Germany growth is going to be predicated upon there being demand for their exports. It's an extremely export- dependent economy.

QUEST: Now you neatly took me into the point. Is export-led growth to Japan or Asia sufficient? It's necessary. But is it sufficient? Or do we have to wait for the U.S. and other E.U. countries to join in?

JAYARAMAN: It's necessary, but I would say not sufficient to the extent that about 12 percent of German's exports go towards Asian economies. So clearly that's not going to be enough to help the German economy grow.

QUEST: The way in which the German government has managed to avoid the worst effects of unemployment, and I'm thinking here now, of course, we've had policies on a variety of work programs, we've had part-time working, they seem to have done it better than other countries. Or is that just as seen from afar?

JAYARAMAN: Well, I think that -- no, I don't think that is seen from afar. I think the German government has done a tremendous job, particularly with their unemployment policy. They have the so-called Kurzarbeit program, which gives companies subsidies to retain their workers while having them work shorter hours.

Now there are 1.5 million German workers on this program, and this seems to have really dampened potential unemployment effects of the current crisis.

QUEST: So as we come to an end, let's just discuss whether or not you believe that, first, that second-quarter GDP number, was it a flash in the pan or -- I see, because that is the question, isn't it?

JAYARAMAN: This is the trillion-dollar question.

QUEST: That is the question!

JAYARAMAN: Absolutely.

QUEST: Absolutely. Was it a flash in the pan where we're going to see fallback in the next quarter? Or is there some sustainability?

JAYARAMAN: This is clearly the big question, whether or not this is a flash in the pan really depends on what shape the recovery takes. And economists are throwing around their favorite consonants, right?

Everyone is talking about an L-shaped recovery, or a.

QUEST: What do you think it's going to be?

JAYARAMAN: I think that we're looking at a very flat U.

QUEST: A flat U? All right. We'll leave it there. I'm not going to attempt to offend you again with your name, I shall simply say, Professor, many thanks, indeed, for joining us

JAYARAMAN: My pleasure.

QUEST: All right.

Now, as we carry on, let us look at the European markets and how they have traded today. The stock markets closed higher. It was the third consecutive day of gains. Mining stocks, a stellar ride.

Oil -- not oil, I'm getting the commodities all mixed up. Gold was over $1,000 an ounce. We'll talk more about that later in the program. Germany, the Xetra DAX added a third of 1 percent. The Commerzbank and Lufthansa among the day's best performers. Rumors of Lufthansa selling BMI.

In London, FTSE 100, a quarter of 1 percent, mines were stronger. In Paris, the CAC 40 closed the day up in a similar fashion.

You're up to date with the German economic numbers, and, of course, with the markets. Now let's get Fionnuala Sweeney at the CNN news desk in London for the news.


We begin with fresh violence in Afghanistan's capital as a suicide bomber targeted the military section of Kabul's airport. Two people were killed, six wounded in the blast. Elsewhere, four U.S. service members were killed in fighting in eastern Afghanistan.

The violence comes amid growing uncertainty over last month's presidential elections. Afghans' electoral complaints commission says it has found clear and convincing evidence of fraud. It's ordering a partial recount of ballots.

An explosion at an illegal Chinese coal mine cost 35 miners their lives. Officials say the blast in central China's Henan province also left 44 miners trapped. An initial investigation shows that the mine had been operating unlawfully at the time of the blast.

U.S. President Barack Obama urged the nation's schoolchildren to set goals, study hard, and write their own destiny. Mr. Obama delivered a much anticipated speech at a Washington-area school a short while ago. Critics feared the president would use his speech to push a partisan agenda. In the end, it was a pep talk that kept clear of politics. The White House says the speech was not altered as a result of the controversy.

Britain's Press Association reports security officials say that a huge bomb has been defused in Northern Ireland, and that it was intended to target police officers. The bomb contained about 270 kilograms of fertilizer. Authorities blamed dissident Republicans for the bomb.

Those are the headlines. Richard, back to you in Berlin.

QUEST: We thank you for that.

Just in case -- perhaps one of you are not familiar, I'm sure you are, the new Reichstag building, of course, designed by Norman Foster, over my shoulder, the symbol now of -- along with the Brandenburg Gate, as you saw in my report earlier.

But the Reichstag now, of course, the symbol of the German capital with its very distinctive roof, which, of course, as you can see -- well, you can't now, we will show you later in the program, people walking around the inside of the roof above the chamber, proving, of course, that the public are above their elected representatives.

In just a moment, Manpower, where are the jobs in what might be a jobless recovery? We'll have a report. We'll talk to the senior executive (INAUDIBLE) in just a moment.

This is QUEST MEANS BUSINESS. We're live tonight in Berlin.


QUEST: Welcome back, as we look at the road to recovery and the question of whether or not new jobs are one the horizon or are we destined to a jobless recovery. A glimmer of hope? According to Manpower, employers around the world are seeing improved recruitment plans for the first time in three years.

Employers in 17 of the 35 countries surveyed expect some positive hiring in the quarter ahead. Hiring plans are strongest in the emerging markets of India and Brazil. In Europe, the job market looks more sluggish despite early signs of recovery in France and Germany.

Eighty percent of employers on the continent expect to make no staff changes. In the U.S., job prospects remain weak, only 12 percent of employers expecting to add to their workforce in the fourth quarter.

Jeff Joerres is the chairman -- he's more than that, he is the chief executive and let's throw in the title of president while we're about it, of Manpower. He joins me now from Milwaukee, live.

Jeff, we're always delighted to have you on the program to put perspective into this. We've talked and you've heard us talk tonight about a jobless recovery in this recession. Is that what you're seeing?

JEFFREY JOERRES, CHMN., PRES. & CEO, MANPOWER: Well, you know, it's interesting, because if you really look at how recoveries happen, at the beginning, you almost have to have a jobless recovery because companies are kind of starting and stopping and aren't quite sure where their demand is.

And as they've gotten better and better at predicting their demand, they're able to hold off the hiring longer into the recovery. We saw that in 2001 and '02, and the first time "jobless recovery" term really came out was in the late '90s. I suspect a sophistication happening in today's world is going to prove that again.

That doesn't mean there aren't jobs out there, they're just going to be selective jobs.

QUEST: So when we see your survey saying that there is a resurgence in, if you like, hiring plans, we're a long way off from that turning into fruition. This is really about intentions.

JOERRES: It's intention, but it does have a good correlation, because when you ask the simple question, are you going to increase your staff or decrease your staff, you really get a very good read of what is going to be happening.

It doesn't go to the magnitude of the number, but it does go to what's going to be happening. So we're seeing now for the first time, we've been doing this study for over 40 years, is the first time we're seeing major European economies showing that they are more optimistic about their hiring intention coming out of cycle that is the U.S.

We've never seen that before. So I think we're in for some interesting times.

QUEST: Now you raise the European experience, but if you look at Germany, and you'll forgive me, but I've forgotten the German name for their employment strategy that basically kept people working, has that been seen to be a model of success?

JOERRES: Well, right now the German market, if you look at how they have targeted the stimulus package, how they have been able to have many companies, while reconstruct themselves, also maintain a fair level of employment, has allowed them not to have the big dip in the consumer spending. And as a result they're able to come out a little bit faster and sooner.

The question is, as you've been talking about this evening, is, is how long will it last? Will it be a W? Because you're coming out, but if you don't have it sustainable, it's going to come back down after the stimulus comes out.

QUEST: Isn't that the big problem? We know that unemployment -- well, there's nothing unique about what we're seeing in terms of unemployment in the midst of a recession with a long tail afterwards.

But what is unique is the level of stimulus that has being required to just keep the thing sustained and moving.

JOERRES: Yes. No doubt about it. What we've got is an adrenaline shot right now into the heart that is allowing companies to -- out of really necessity because they have the demand, to hire people or retain people or increase their working hours.

As soon as that adrenaline turns into normal body mechanics, the body has to take over. If it doesn't take over, it falls flat on its face. And there is not many adrenaline shots left ready.

QUEST: And just to reiterate, what you're saying -- of course, just to be clear since I am in Berlin tonight, the German position is looking more optimistic than at any time in recent months.

JOERRES: That's correct, and in fact, we came off of some good, robust German numbers, you know, probably -- what would it be? About eight quarters ago, and we've seen a slide down, now it's starting to come up and it's Germany, Italy, are really taking the European -- mainland European and driving it forward.

QUEST: Jeff, many thanks. Jeff joining us from Manpower, chief exec, chairman, and president of Manpower in Milwaukee. We thank you for joining us tonight.

Jeff talked about the theory, from what their survey is showing. What about whether that is actually being seen in practice? Our Berlin correspondent, Fred Pleitgen, now puts the theory to practice about what people are experiencing.


FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): The windows barred, the lights off, Brigitte Pongratz worked at this theater in Berlin for 15 years. Last year, it went bankrupt. It closed down.

BRIGITTE PONGRATZ, UNEMPLOYED (through translator): It makes me sad, I have so many memories of this place.

PLEITGEN: Memories she enshrined in her tiny apartment. Brigitte was a waitress, now at almost 60, she says her chances of ever finding a steady job again are almost nonexistent.

PONGRATZ: I would love a steady job, but at my age, it will never happen.

PLEITGEN: So Brigitte reads books like this one, called "Poor in Berlin: How to Survive on a Budget."

PONGRATZ: If you don't have financial reserve or a family that can help you, you can become poor very quickly.

PLEITGEN: Brigitte Pongratz says she has all but lost hope for a new beginning.

Thomas Brausse says new beginning looks like this: hot and greasy. His fast-food place is right around the corner from Frankfurt's banking towers, where he used to work, but also was an investment banker for a large brokerage. He was laid off last year.

"Yes, it's hard," he says. "It's something completely different," but it sure is a lot of fun. From suits and ties to ketchup and fries. Brausse used a substantial amount from his savings to buy an old bus he turned into his shop, fittingly name The Sausage Stock Exchange.

"It's a complete change," he says, "but it also feels like everything is more real, because now I have to fight for every cent."

He has to fight hard. Brausse's place isn't turning a profit yet. But being his own, he says, sure beats unemployment.

Fred Pleitgen, CNN, Berlin.


QUEST: Now, she used to race cars. She owns a large independent car dealership. And you don't call this an automobile, it's a motorcar. When we come back, we'll find out why this lady has some strong views on General Motors and Opel.

QUEST MEANS BUSINESS takes to the road. We're in Berlin. Oops -- I say, now this is motoring.



QUEST: Welcome back, QUEST MEANS BUSINESS. We're live here in -- welcome back, we're live here in Berlin.

I'm going to explain this 1911 Opel in just a moment. But today, of course, the people who have the power over the future of Opel are meeting in Germany. The board of General Motors is under pressure to decide what to do -- what is to happen with its German subsidiary.

It has just begun a two-day meeting. But there is no immediate sign of any relief for the thousands of German autoworkers who are waiting for GM to pick a buyer for Opel. Now let me remind you of what the options are. The options are Magna, backed by Russia's Sberbank; and RHJ International.

We've been waiting for a decision on Opel for many months now. You might feel it has gone on for actually longer. Just bear in mind, so all of this -- so all of it, General Motors has been into bankruptcy, out again, and the new GM is up and running.

So why is it proving so difficult to deal with Opel? Fred Pleitgen reports.


PLEITGEN (voice-over): Heidi Hetzer might look like she is just taking her 1911 Opel for a stroll, having fun. But don't be fooled, Heidi is really mad.

(on camera): Are you angry at General Motors?

HEIDI HETZER, CAR DEALER: Yes, yes. It has been a long time already that General Motors cannot -- doesn't make the right decision for Opel and Europe.

PLEITGEN (voice-over): Heidi Hetzer is one of Germany's first female rally drivers and owns one of Berlin's biggest Opel dealerships.

But the German GM subsidiary's future seems more uncertain that ever, as GM has repeatedly postponed selling the brand, a sale the German government is being asked to support with taxpayer money.

In the end, some experts fear Opel might go bankrupt.

"I think General Motors is willing to let Opel go bankrupt, or will want German taxpayer money," this expert says.

And Opel is not the only German car-maker affected by the crisis. Volkswagen and Porsche have just announced they will merge after a long battle between the two firms.

Daimler, the parent company of Mercedes, lost billions in the first half of this year, and has acquired fresh capital from Abu Dhabi. And BMW recently announced it is scrapping its Formula 1 team, trying to give its brand a greener image.

A "cash for clunkers" incentive by the German government has helped carmakers. But that has now ended and experts fear auto sales could fall off a cliff.

RAINER NITSCHE, ESMT BERLIN: Sure, there has certainly been some cannibalization. And I think that the future period will be very interesting to observe how much cannibalization of sales that would have happened anyway.

PLEITGEN: And Heidi Hetzer faces another problem, because Opel's future is in limbo, she says people are just plain scared to buy her cars.

HETZER: They don't know if the company will exist, who they get their parts, who they get their guarantee.

PLEITGEN: But even with all of the turmoil surrounding Opel, Heidi Hetzer's lust for living and driving fast is well and thriving.

Fred Pleitgen, CNN, Berlin.


QUEST: Heidi -- I was going to say, Heidi joins me now, but that would be a completely inappropriate phrase. I join Heidi in the 1911 Opel.

Heidi, how many cars do you sell -- Opels do you sell, do you think, every year, quite a few?

HETZER: A year? One thousand. It used to be 1,500. It came less and less within the last 10 years.

QUEST: Really? But you love Opel.

HETZER: I -- that's my life. I was born in an Opel.




QUEST: Let's not ask whether you were conceived in an Opel, we'll leave that to another subject.


QUEST: But let me ask you, General Motors and what they have done to Opel, are you angry about it?

HETZER: Well, everything was wonderful. For 75 years we have an Opel dealer, and my father said, little girl, you don't have to worry ever because you're working for the biggest private company in the world.

QUEST: General Motors.

HETZER: General Motors. And I think General Motors did the mistake about 20, 30 years ago as the Japanese cars came into the U.S., and they ignored them.

QUEST: Are you surprised it has taken so long for them to decide what to do with Opel?

HETZER: Well, first they were broke. They had no choice but to do. But now they have money again, and I think now they up-float again, and all of a sudden they know they need Opel for the technology.

QUEST: Right. GM needs Opel for technology, but.


QUEST: . what is your preference? What do you want Opel to do?

HETZER: It should not go on like it was. They are too arrogant. They cannot build.

QUEST: Who are?

HETZER: The Americans. GM, they don't know what cars we need. But they decide, over the ocean, that we need the cars they think. They should let the Opel manager -- like Mr. Forster, he knows.

If they give him the chance to do what he thinks is good for Europe, everything would be fine.

QUEST: OK. So much so good though. But who should buy Opel? Would you like to see it stay with GM, would you like to see Magna get it? Who do you want to take it?

HETZER: First I thought Magna, because to have a change, because with America, what said is they don't know what we need.

QUEST: Right.

HETZER: But now I changed my mind because I think it's not possible, because we at least have to build 3 million cars for the platform, otherwise it will be too expensive, we will not survive. So.

QUEST: Do you think -- do you think Angela Merkel handled it well? Do you think her government handled it well?

HETZER: Yes. It's a -- yes.

QUEST: Good. Now let's talk about.

HETZER: They did well.

QUEST: Let's talk about this. While we're talking about this car, we're going to show you some shots of this car. So this car is 1911. What is its name? What sort of car is it?

HETZER: It's a racing car, a private man had it built like the racing car at that time. So he just wanted a car, but then not as a racing car that you can step, that you have a trunk, that you -- but it has no lights.

So it's a very unique car. There is not another one out there.

QUEST: But -- and there is no gear -- it's a wonderful -- come and join me over here. Come and join me over here, because I know anybody who is used to cars, but look at all of the steering and the levers and the.

HETZER: Now look.


HETZER: . what is very unusual is you give speed right here.

QUEST: Right.

HETZER: With the hand. Not -- there is nothing with the foot.

QUEST: Right. So we speed with that.

HETZER: Squeeze it, yes.

QUEST: And that one does -- what does that one do?

HETZER: That is for the compression.

QUEST: Compression.

HETZER: And here is the shifting.

QUEST: Yes. How do you switch it on?



QUEST: Oof. I'm not pushing!

All right. QUEST MEANS BUSINESS is back in a moment. The German economy is on our agenda.

Keep going.

We'll be back in a moment. This is CNN, live in the German capital.

Drive on!


QUEST: Good evening.

I'm Richard Quest.


Tonight, we're coming to you live from Berlin. We're in the German capital because, of course, there's been economic numbers. Germany is one of those countries that is moving out of recession quite quickly and it's a good moment to try and take the temperature of the economy here.

Before we have any more coverage of Germany, let's go to Fionnuala Sweeney with some breaking news at the CNN News Desk.


This story just coming in to CNN.

The British military says it's investigating a suspected explosive device that was found at an air base in Wiltshire. That's where the bodies of military personnel killed on duty are brought back from war. No injuries have been reported. The police have closed down the area. And we'll bring you more information as it becomes available.

In Russia, a controversy that shows no sign of vanishing. It's about that cargo ship that mysteriously disappeared from the Baltic Sea last month for several weeks. The freighter, Artic Sea, was allegedly seized by pirates after leaving a Finnish port. Russia's foreign minister rejected speculation that the ship was possibly carrying missiles or other weapons. Sergey Lavrov says those rumors are an absolute lie.

A journalist convicted of public indecency in Sudan has been freed from jail. Lubna Hussein was sent to prison Monday after refusing to pay a $200 fine for wearing trousers. Under Islamic law, she had faced up to 40 lashes. It appears now the fine was paid without her knowledge by a Sudanese journalist organization. Her case had raised international criticism of Sudan.

Parts of northwestern Turkey are inundated. Torrential rains set off flash floods which killed at least six people. Three others were reported missing. Dozens of farm animals were also swept away. The rain began late on Monday, washed away one bridge and flooded hundreds of homes. Officials say many roads are impassable.

A global tribute to a legend -- top entertainers will perform a concert for Michael Jackson in Vienna, Natalie Cole, Mary J. Blige and Chris Brown among them. More names will be unveiled later this week in London and Berlin. Jackson's family and some 60,000 fans are expected at the concert on September 26th. It's to be held outside a 17th century palace.

And those are the headlines -- Richard, back to you in the German capital of Berlin.

QUEST: Thank you, Fionnuala.

And please, do come back to us the moment there are more details on that story that you told us at the top of the bulletin.

Fionnuala Sweeney, who will bring you up to date there.

Gold and the rally in the price of gold -- for the first time in six months, gold is now over $1,000 an ounce. It is -- it topped it on Tuesday. Gold futures hit the number -- a level not seen since March. A major reason cited in the price hike -- you can really take one of several reasons -- a weak dollar; gold is seen as immersed in momentum play at the moment; of course, worries about economies; even some people suggesting inflation as a result of monetary stimulus.

In recent trading, gold prices almost up $4 an ounce, just above $1,000.

Deutsche Telecom and France Telecom have announced that they are in talks. They want to combine their U.K. British operations. T-Mobile and Orange plan to create a 50-50 joint venture. The revenues will be able $13.5 billion. The new company -- it will have -- I mean this is a powerhouse in U.K. telecoms -- 28 million subscribers, 37 percent of the British market.

The chief execs of Orange U.K. and T-Mobile U.K. spoke about why they wanted to do it.


TOM ALEXANDER, CEO, ORANGE, UK: It's a really exciting announcement. We've announced a joint venture between Orange and T-Mobile in the U.K. to create the biggest mobile communications company in the U.K. market.



RICHARD MOAT, CEO, T-MOBILE UK: This is going to create an exciting new number one in the U.K. mobile industry and we will be able to compete even more effectively with existing larger players. But above all, we want to be able to offer greater vale to the U.K. consumer because of the fact that the economies of scale which we develop will enable us to offer a better deal.


QUEST: Jim Boulden joins me now to put some perspective -- now, Jim, when I first heard this story being rumored, I thought there was something wrong about this.

Why would T-Mobile and ogee want to merge in the UK?

Rival competitor -- I mean what was it all about?

JIM BOULDEN, CNN CORRESPONDENT: Well, you know, they are number three, number four in this market, which is started. There's no -- there's no way you can grow subscriber numbers in a market like the U.K. except for this kind of combination.

So this takes us from five mobile operators -- if this happens and regulators allow it -- to four mobile operators. And this is allows two companies which haven't been able to get to the top to get to the top in a dramatic way -- Richard.

QUEST: And, yes, I can see that it makes a certain sense.

But what I'm -- I wonder is don't -- why in the UK?

I mean why would -- they're arch rivals. One would have thought that they would have competed or bought them. And does this presage something more important or some other deal elsewhere in Europe?

BOULDEN: No. This is very specific to the UK. You know, Deutsche Telecom has more than a dozen of these mobile operators all around the world. The thing is, the U.K. is the one they saw the drop in subscriber numbers. One report says it's the only market Deutsche Telecom has seen drop in subscriber numbers for one of its mobile units. And they're -- and it just was never a -- a good business model here in the UK, a very started market.

So they were shopping this around. We know for a fact that they were talking to Vodafone, as well, which is the number two here in the UK, number one in the world. But that deal didn't happen.

02 is the number one here at the moment. That's owned by Telefonica out of Spain. So you see this is a very big market for -- for companies from around the world. But in itself, this market is started. And so Deutsche Telecom had to look for something to do with this. So this combination with Orange, which is owned by France Telecom, sees -- seems to be logical. They say they're going to have -- they're going to keep the two companies separate for a while -- the two names separate. But we know what they're going to do. They're going to close stores. They're going to cut employees and they're going to be able to combine their money and their investment to other -- upgrade their services. And that's key.

They won't have to have competing with ogee to upgrade their services, they can do it together. That's going to save a lot of money.

QUEST: All right. We thank you for that.

Jim Boulden in London with the story of the U.K. telecoms.

In just a moment, they're called the mittelstand. They are the medium sized companies in Germany. They are somewhat unique within Europe. But when we come back in just a moment, we'll talk more about it.


QUEST: It's known as the Norman Fahwahl (ph) as Norman Foster designed it, but that is the dome, of course, of the Reichstag.

Good evening.

QUEST MEANS BUSINESS tonight comes to you from the German capital.

We're in Berlin.

Eighty percent of Germany's output is generated by small and medium sized businesses. And unlike the large corporations and the uber banks, these small businesses have not received any government bailouts. That's pretty much the story elsewhere, as well.

The mittelstand is one example. For years, it's been the key to Germany's economic success. Now, it's learning to survive in a crisis.

Which raises the very real question whether the mittelstand can survive.

Fred Pleitgen again.


PLEITGEN (voice-over): Guess what?

The world's automakers are in a crisis. But the folks at Wirthwein near Berlin are working over time. They make car interiors. Wirthwein is a midsized company -- what Germans call the mittelstand, and they say they've found a way to beat the crisis.

ULF SAUERWALD, WIRTHWEIN NAUEN (through translator): "The mittelstand must become even more active and even more versatile," the manager says. "We have to react factor to our clients' wishes and to the economy as a whole."

PLEITGEN: Faster and more versatile is the name of the game for small and medium sized car suppliers in the area. They've pooled their resources and their strengths and formed a cooperative network to represent the companies. And that, they say, is helping them thrive in the crisis.

HARALD BLEIMEISTER, COOPERATIVE NETWORK AUTOMOTIVE (through translator): We help our members get with the car makers and with larger suppliers," the initiative's head says. "And we also help them with international fares and to get a foothold in new markets."

Germany's mittelstand has been hit exceptionally hard by the crisis. A study says up to 35,000 companies could go bankrupt this year. From caravan makers to toy train builders, many have descended into bankruptcy as the economic crisis continues.

DANIEL ZISKA, MITTELSTAND TAX CONSULTANT: The finance structure of these small and medium sized companies is different as in other parts of the world, especially the -- the equity base is quite low.

PLEITGEN: And international demand for German products has been pretty low, as well. But Ulf Sauerwald of Wirthwein says diversifying the company helped beat the downturn. The company makes parts for washing machines on top of their automotive components.

"Diversifying means concentration on several core fields," he says, "so you can jump from one business to the next in case of a crisis."

Even one as large as this financial downturn -- while so many German midsized firms are struggling, Wirthwein is having trouble keeping up with demand.


QUEST: Fred joins me now, our Berlin bureau chief -- Fred, first of all, some magnificent work on our behalf that your -- you've done.

But in the course of your investigations of the state of the German economy, do you believe that people think it's on the turn?

PLEITGEN: I think some people certainly do believe it's on the turn. I think a lot of people are -- are very insecure at this time. But one thing that I do have to say is that if you compare the crisis that's going on right now with the way Germans were feeling in, say, 2005 -- remember, back then, we had five million unemployed here, we had demos in the streets in Germany -- I think the reaction to this crisis has been fairly subtle. People haven't lost hope as much as they did then.

QUEST: Right.

Now, we've talked a lot about the economics of this, the big sort of, if you like, the -- I was going to say the elephant in the living room is the election that takes place at the end.

PLEITGEN: Absolutely. Absolutely. Yes.

QUEST: So, from my reading, the grand coalition -- obviously, Chancellor Merkel would like to avoid anything similar for her next term.

PLEITGEN: She certainly would and I think -- I think pretty much all parties want to avoid something similar happening again. I mean if you look at the -- the CDU was never really happy in the Grand Coalition. Their partner, the Social Democrats, have lost even more than they did. So it's certainly something that all -- everybody wants to avoid. Now we'll have to wait and see if -- if the voter wants that, as well. There's certainly is a more (INAUDIBLE)...

QUEST: That's -- that's clever.


QUEST: And do stop me if I'm taking you into dangerous territory here, does Chancellor Merkel have the support necessary to be the leading candidate or to win the election?

PLEITGEN: She certainly does. She certainly does. I think the way things are going right now for her, she is -- she's very happy with the way things are going. She...

QUEST: Right and...

PLEITGEN: -- she's way ahead in the race. She's way ahead on personal terms, also. You know, we elect parties but in terms of the man who's running against her, Frank-Walter Steinmeier, the foreign minister, she is well ahead of that...

QUEST: Right.

PLEITGEN: -- even in the face of the economic crisis, which is interesting. And she's never lost that support throughout the entire crisis going on.

QUEST: And she's not made any of the missteps of, if you like, disclosing the nasties in the economy who have joined her campaign, so far, at least, anyway. She's been fairly honest with what's happened.

PLEITGEN: She certainly has. She's been fairly honest. And I think one of the things -- if you look at the sentiment here in Germany, I think a lot of people still believe that this is a crisis that was not caused by Germany or caused by German policies.

QUEST: Right.

PLEITGEN: They believe it's something that was brought upon them.

QUEST: So now it's really a question of if she's the leading candidate and gets the (INAUDIBLE), who she -- pardon the phrase -- gets into bed with.

PLEITGEN: Exactly. Yes. And the way things are going right now, she's probably going to get into bed with the liberal democratic FDP Party, which is -- which is really more of a liberal coalition than we have now. Right now we have -- we have, you know, a very center-focused coalition. It will be a whole lot more leaning to the right, if you will, and probably a lot more -- in terms of business policy, it will be a lot more liberal than it is now.

QUEST: OK. I need -- I need to ask one final question, much to the anyc of producers.

And if she gets that coalition that she seeks, briefly, Fred, can she get the reforms that she promised originally, but couldn't get through because the grand coalition wouldn't allow it?

PLEITGEN: I think that it will be difficult. I mean, you're absolutely right, there haven't been too many reforms that she's actually brought through. A lot of the stuff that you're seeing work in Germany right now was actually done by the coalition that was in power before Angela Merkel stepped onto the scene and became chancellor.

So we'll have to wait and see. She certainly will have the majority to do that. And she will certainly have an easier partner to work with than she does now for what she wants to do.

QUEST: Fred, many thanks, indeed.

PLEITGEN: Thank you.

QUEST: And thank you for the (INAUDIBLE).

PLEITGEN: Thank you for having me.

QUEST: No, well, thank you for having us.

All right, now, look, if I really try very hard, I can put me best (INAUDIBLE) Saxons on and I can pretend I come from Liverpool. Well, actually, I do come from Liverpool, because that's where I was born and brought up. So when we -- any story you get about The Beatles is going to find a way into my heart. The announcement that all 14 of the albums are to be re-released, digitally remastered, giving rise to a new wave of Beatlemania and, thus, Beatle business, is certainly one that we had to have our Jim Boulden have a look at.


JIM BOULDEN, CNN CORRESPONDENT (voice-over): It was here, the Abbey Road studios in London, where most of The Beatles' songs were recorded.

(on camera): So this was the logical place for sound engineers to spend time over the past four-and-a-half years remastering the original Beatles catalog.


(voice-over): The goal -- have The Beatles sound as if they were recording with today's technology.

ALLAN ROUSE, EMI ABBEY ROAD STUDIOS: We had decided that we wanted to remove or improve the technical faults within the recordings that could have been bad edits, a drop out, vocal sibilance, vocal pops. We haven't taken out breaths or little coughs or sneaky chairs and Ringo's occasional squeaky bass drum pedals.

BOULDEN: The engineers worked from the master analogue tapes, not the CDs produced in the 1980s, knowing, of course, fans would be listening -- carefully listening.

SEAN MAGEE, EMI ABBEY ROAD STUDIOS: We transferred all the tapes within a very different combinations of machinery into the computer and then blind tested all the variations to see which one they preferred. And then after choosing that, everything was transferred track by track into processors, making sure that the tape heads were nice and clean and the tape speed was constantly monitored so the best possible transfer could happen.


BOULDEN: The song for a new video game, The Beatles: Rock Band, were also tweaked at Abbey Road. Giles Martin, the son of The Beatles' legendary producer, George Martin, worked on the project.

GILES MARTIN, MUSIC PRODUCER: The biggest problem for us was that a lot of The Beatles' stuff isn't recorded separately. They set them up on two tracks. So the Cavern club material, which is "Twist and Shout," "I Saw Her Standing There," (INAUDIBLE) is on two tracks. And all of the drums basically it ties together.

BOULDEN: Steve Turner has been writing about The Beatles for years and says these are big moves for The Beatles and the company they formed, Apple Corps.

STEVE TURNER, MUSIC WRITER: I think Apple look at ways of preserving the heritage and -- and also, you know, getting a fresh flow of income.


BOULDEN: Giles Martin says Paul and Ringo are very pleased with the Rock Band game.

But what do they think about the final re-masters the engineers haven't heard?

(on camera): And you haven't heard back and that's good news?

MARTIN: Basically, if the phone doesn't ring, I think, is probably -- it's good news, yes.


BOULDEN: (voice-over): And no word yet if these digital copies of the songs will also be available for downloading, as many fans want.

Jim Boulden, CNN, London.


QUEST: All right. To say that the weather in Berlin has been stunning today would be a gross understatement. Absolutely tremendous weather.

And Guillermo is at the World Weather Center -- and, hopefully, Guillermo, you've ordered up more of the same and similar.

GUILLERMO ARDUINO, CNN METEOROLOGIST: You are one lucky man. You'll get it. And you'll -- you'll get it for days now. You see, it's -- you're the factor, I think. The weather -- the nice weather follows you.

We have two high pressures in here and that is the reason why we have stable weather conditions.

Now, in this case, the low here into Turkey caused some problems and I'll talk throughout the night about this and throughout the day for our viewers, because the most impressive pattern that we have here is these two twin highs.

We are going to see just a tad of rain in London in the morning and then it will clear. The same in Amsterdam.

But look at this radar set. You see the next 48 hours, so those clouds move away and in (INAUDIBLE) here, no precipitation left. Some maybe in the north. No delays at the airports anywhere in Europe except -- except for the Turkey-Greece area that is very problematic. And we have reports of floods in the area. I'll a little bit a little bit more coming up in the International Desk.

This is the -- the local Istanbul and also Techergad (ph) in here. We got in one day what we see usually in a month.

More on Argentina, more on Mexico and everywhere else on CNN.

Stay tuned.


QUEST: Now, across Europe, the European Union has banned traditional or incandescent light bulbs -- the 100 watt bulb lighting the way forward a thing of the past. Here in Germany, they're not pleased, so much so they're stocking up.


PLEITGEN: (voice-over): They're searching for the light on a pilgrimage to illumination. The Germans are scouring the nation's hardware stores for light bulbs -- any old light bulb.

"We've already bought many," he says. "We want the ones with the really soft light."

But things aren't looking good. That's because old-fashioned energy- hungry bulbs are being phased out thanks to a European Union directive to save energy.

"The industry is happy. Not only are its old products selling fast, but there's a whole new market for its more eco-friendly lighting."

Though Thomas Edison, who invented the light bulb in 1879, might be turning in his grave. The trouble is the old bulbs turn only 5 percent of the energy they consume into light. The rest is lost. And so, by 2012, only these energy-saving fluorescent bulbs will be allowed. The manager of this hardware store tells me some Germans are just, well, incandescent.

"In the past days, we've seen some customers walk out of here with up to 150 bulbs," he says.

The raw data tells the same story. One survey says sales of conventional light bulbs are up more than 34 percent since the beginning of this year.

How about that for an economic stimulus, except that Eastern Europe's second largest maker of light bulbs says it's only the Germans who are clinging to the past.

CHRISTIAN SCHRAFT, OSRAM: While in most countries, sales of incandescent lamp goes down (INAUDIBLE), that is not the case in Germany and Austria, where these products see huge increases in sales compared to prior years.

PLEITGEN: One German psychologist says people may be hoarding the bulbs because they make for a cozy atmosphere at home, but eventually it will be lights out.

Frederik Pleitgen, CNN, Berlin.


QUEST: I couldn't leave you tonight without a Profitable Moment from Germany and certainly from within this magnificent motor car.

Tonight's Profitable Moment -- allow me to paraphrase Orwell. All European Union countries may be equal, but economically, some are clearly more equal than others.

The latest numbers from Germany prove my point. Factory orders are filling up. Exports are showing signs of life. And Chancellor Merkel now predicts that the economy won't contract as much as first thought.

Germany's reliance on exports was always thought to be its Achilles' heel -- tying the country's futures to others' recovery. What seems to be happening is the opposite of that, to Germany's benefit.

Germany is performing better than expected. A philosophy of protecting jobs and using stimulus cash seems to prove the point, that the German government's handling of this recession has been better than most.

And that is QUEST MEANS BUSINESS from Berlin for tonight.

I'm Richard Quest.

I thank you for your company. The International Desk is coming up next.

Whatever you're up to in the hours ahead, I hope it's profitable.

And I'll see you back in London tomorrow.

Now, which lever do I push and which way is Tegel Airport?

Wait, no. Woman. Wait. Wait.