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Quest Means Business

Latest Economic Data Shows Global Recovery Fragile; Weak Jobs Growth in US; US Stocks Retreat on Weak Jobs Figure; European Markets Dip; Jobs and US Presidential Election; New Greek Prime Minister Opens Debate on Crisis Policy; US Dollar Gains Ground; Wall Street Reacts to Jobs Data; Libor Investigation Could Lead to Criminal Charges; US Takes Action After Libor Scandal

Aired July 06, 2012 - 14:00   ET


NINA DOS SANTOS, HOST: Battleground jobs. The US unemployment figures deal a pre-election blow to Barack Obama.

It's a no vote from the markets. Stocks slump on the back of those weak jobs numbers.

And no quick fix. The UK launches its own criminal investigation into libor rigging.

I'm Nina Dos Santos in for Richard Quest, and this is QUEST MEANS BUSINESS.

Good evening. Tonight, stock markets are flashing red for danger as the latest economic readings we have suggest chronic problems with the recovery. We've got weak jobs numbers from the world's biggest economy, painfully high borrowing costs in the eurozone, and also global growth, which we're being warned is about to take something of a turn for the worse.

Let me run you through some of these figures, now, starting out with the big news of the day. What we're talking about here is the US jobs report. Now, it seems as though only 80,000 jobs were added for the United States over the month of June. That is lower than the 95,000 that economists were actually forecasting.

These figures show 5.4 million Americans are actually long-term unemployed, out of work, for about 26 weeks or more. Now, the median duration of that kind of unemployment is 39.9. So, it means as though they're out of work 39.9 weeks, so they've been out of work for quite a long time.

And add to this, another concern here is, of course, Spanish borrowing costs. Now, these kinds of yields, as you can see, they're dangerously high yet again, around about the 7 percent mark for the ten-year yield.

Now, this kind of jump comes on the back of -- after these interest rates came down for the eurozone, they came down for places like China, even despite the fact that the UK has launched its own kind of quantitative easing adding to its quantitative easing program. It hasn't really been enough.

Let me also remind you that the euro versus the US dollar is at a two-year low, as you can see, down nearly one percent yet again at $1.22.

And add to this, we've had another start warning coming from the lender of last resort, the International Monetary Fund. Christine Lagarde, the managing director, as you can see there, has said that its own growth forecasts of 3.5 percent will be, quote, "tilted to the downside."

She hasn't said exactly by how much it could move, but she has said that, just bear in mind, the fact that we're seeing more quantitative easing from central banks and more rate cuts is just synonymous of how fragile the economic recovery is. So, she's saying that people are extremely concerned about this. Take a listen.


CHRISTINE LAGARDE, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: We believe that more needs to be done in order to really complete the architectural job of the eurozone. A monetary union, a banking union, followed by a fiscal union.


DOS SANTOS: So, that's Christine Lagarde, the head of the International Monetary Fund. But of course, today's figures from the US jobs perspective won't just go to highlight how concerned everybody is about the jobs picture in the world's biggest economy.

Let's bring in Felicia Taylor, who joins me now, live from the New York Stock Exchange. So, Felicia, 80,000, worse than expected. Slightly better than the month before, but this is nowhere near what we need to be seeing for the world's biggest economy.

FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: That's exactly right. When you say slightly better than the month before, we're talking about just a few thousand. It's that double-digit as opposed to triple-digit number that is really worrisome to most people out there.

And you talked about the fact that there were so many long-term unemployed. That is significant, because the longer you're without a job, the more difficult it is to find it.

Let's take a look at where the trend has been since the beginning of the year. In January and February, we actually had pretty decent job growth, and that's what I mean by that triple-digit number, anywhere between 250 and 275, that's the kind of number we need to see on a consistent basis in order for that unemployment number of 8.2 percent to actually drop.

But then, things take a shift for the worse in March, and then from April through the month of June, you see that things have been actually anemic, is what the -- is how they describe it.

And now, we've got three months in a row, so that indicates a kind of a trend, and that's what's really of much concern, not only for the economists out there but for, obviously, the 12.7 million Americans that are out there trying to look for a job.

There were slight glimmers of hope out there. Average hourly earnings increased, the number of hours increased, the leisure and hospitality sectors also increased a little bit, and that means that there are people out there that are actually using their money for discretionary spending. That's good news, there's nothing wrong with that.

But -- and couple that with lower gas prices, and you can see that there's actually, for those who do have a job, that they're actually making a little bit of money and using it to put back into the economy.


TAYLOR: The question now, though, is: how dismal is the jobs picture? Is it bad enough for the Federal Reserve to put any kind of stimulus into the system? We spoke with somebody earlier who said there could be a chance before the end of the year.


JOHN SILVIA, CHIEF ECONOMIST, WELLS FARGO: The unemployment rate seems really sticky at 8.2 because it's pretty much been there for the last four months or so. So, you kind of get a sense that in economics and politics, what you get relative to what you expect to find your sense of happiness. And this is disappointing, because we're not getting what we had hoped for or expected.

It's more likely to be, perhaps, at the September meeting that the FOMC does decide to move with perhaps a quantitative easing.


TAYLOR: And obviously, that means that things are necessary or needed to have that kind of stimulus out there. The areas that didn't see any kind of hope were both construction and retail.

There's another 2.5 million people that have just basically given up looking, and that factors into the numbers as well, because it's been so frustrating and has taken so long. I know people that have taken maybe as much as 12 months to find a job. Nina?

DOS SANTOS: Gosh, that puts it into perspective, doesn't it? The other side of things is the underemployed. We're talking about people who aren't necessarily unemployed, but they're not in full-time work when they want to be in full-time work. I think that rate rose ever so slightly, and that just goes to show, there's a lot of people in part-time unemployment that can't find full-time jobs.

TAYLOR: There's two ways to look at that, actually, because you're absolutely right. Those underemployed or those people that are taking jobs that are actually a little bit less than their skill level.

That's a concern because it just means that they're not able to use the benefits of their education or their experience to get the jobs, because those higher-level jobs just don't exist because, obviously, they require more money on behalf of companies.

But if you take a look at the part-time jobs, ever so often, it does indicate that possibly companies down the road are going to begin to hire. It's a precursor of a good -- of some good news, possibly, down the road.

So, there's two ways to look at that angle. You're absolutely right. It's not necessarily good to see people only able to find part-time work, but sometimes it translates into a full-time job down the road. Nina?

DOS SANTOS: Let's hope so. Felicia Taylor, there, joining us live from New York. Many thanks for running us through exactly what all of that means.

Well, on Wall Street, all the three major indices are actually down by more than 1 percent, largely on the back of this dismal and disappointing economic report we heard earlier on the jobs front. Now, the Dow has lost nearly 1.5 percent, as you can see here, trading down about 173 points at a level of 12,722.

Now, what this means is that it's likely to have wiped out all of its gain over the past week. We'll have a little bit more information from the New York Stock Exchange when we check in with Alison Kosik later on in the store.

And let's flip over towards European markets because, as you'd imagine, they closed lower yet again. Those US jobs figures actually pushed stops even deeper into the red. Take a look at some of the losses in the eurozone. Particularly pronounced were the Frankfurt DAX and the CAC 40. Take a look at them, they're down nearly 2 percent.

Now, the benefit from last week's EU summit has almost been completely erased by yesterday's central bank action and also soaring Spanish borrowing costs. Add those difficult US jobs figures to the mix, and you can see why those markets ended on a decidedly downbeat note.

Now, Barack Obama is certainly feeling the heat. Jobs are the real battleground ahead of November's election, and there are only four months to go and four jobs reports to go before, indeed, we see that race taking place.

The president is currently touring the Rust Belt promoting himself as the defender of American manufacturing, and today he was making the best of a jobs report that basically the Republicans are calling proof of his policy failure.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Our mission is not just to get back to where we were before the crisis. We've got to deal with what's been happening over the last decade, last 15 years. Manufacturing leaving our shores. Incomes flatlining. All those things are what we've got to struggle and fight for.

MITT ROMNEY (R), US PRESIDENTIAL CANDIDATE: This is a time for America to choose whether they want more of the same. Whether unemployment above 8 percent month after month after month is satisfactory or not. It doesn't have to be this way. America can do better, and this kick in the gut has got to end.


DOS SANTOS: Our "swingometer" is a guide to just how many American jobs Barack Obama actually needs to keep his job as the president of the United States. And what I want to show you is that as the total goes up, the swingometer starts to get a little bit more blue, and that indicates that more jobs are being created and things are going in favor of the current president.

But as you can see, fewer jobs, well, that indicates it goes red, and that means Mitt Romney has an advantage here.

Let's home in on the figures that we saw for the month of June. Only 80,000 jobs were actually created for that month so, as you can see by the amount of red on the swingometer, that's good news for Mitt Romney.

It is better, as I was saying with Felicia Taylor before than the month before, but only slightly so. 77,000 jobs were created for the month of May, but what I want to show you is that this, at 80,000, the figure for June was actually well below what many an analyst was expecting. The market consensus was to something around about 95,000.

Now, the US economy's actually been doing slightly better than these kind of figures. You remember Felicia talking about the triple digits, here. The US has actually been adding around about 165,000 jobs per month on average so far this year.

But even in those kind of triple digits, analysts say still not good enough. This economy really needs to be adding around 200,000 new jobs every single month to show strong signs of growth.

Now, the US unemployment rate, despite today's figures coming in at 80,000, remain steady at 8.2 percent. That's not good news for the US president because no president since Franklin D. Roosevelt has actually been elected for a second term with an unemployment rate standing over 7.2 percent.

CNN's political editor Paul Steinhauser is in Washington, and he joins me now, live, to discuss the implications of all of this. So, first off, Paul, the US monthly jobs report is becoming supremely important to this election race. It's, if anything, something of a kind of referendum on the current leadership.

PAUL STEINHAUSER, CNN POLITICAL EDITOR: Oh, no doubt about it, Nina. I think it's by far the most important economic indicator in the campaign for the White House, and it's been that way for a while. Why? Because every poll taken of Americans indicates that the economy is the top concern to their vote, and what's the most important economic issue right now? Jobs, jobs, jobs.

We've got four more of these reports to come, with the last one, the October report, just coming a few days before the November 6th presidential election. That's why we spend so much time looking at these numbers and talking about their impact on the race for the White House.

And you saw today here in the United States, Mitt Romney holding a news conference out of the blue just 90 minutes after the release of the report because he wanted to talk about those job numbers and the job the president is doing creating jobs.

To Romney, this report, as dismal as it was, is actually good news for him and helpful to his campaign as he tries to argue the president is not doing a good job on the economy and jobs, Nina.

DOS SANTOS: But really, would anybody be able to ameliorate the kind of economic situation we're seeing in the United States? Even the International Monetary Fund has said the outlook at best is looking even bleaker by the day for the world economy, not just the US.

STEINHAUSER: And that is part of the president's argument, that he was dealt a very tough hand. When he took over, the United States was in a free fall, you could say, with unemployment skyrocketing and that his polices have at least brought things back to a more stable level and that he says we're heading in the right direction.

He was pointing today, in fact, looking at the unemployment report, he talked about an increase in manufacturing jobs, and he said that is a step in the right direction, but much more needs to be done.

Doesn't really matter, though. When you're the president, I guess as the old saying goes, the buck stops at your desk, so the president is blamed for tough times, and the president can take credit for good times. Nina?

DOS SANTOS: OK, Paul Steinhauser, thanks ever so much for joining us, there. That is CNN's political editor, Paul Steinhauser, in Washington.

You're watching QUEST MEANS BUSINESS. Coming up after this break, what -- doing what it does to revive the Greek economy. The country's new leader outlines the party's financial first day plan at the start of a three-day debate.


DOS SANTOS: Greece's new prime minister says that it's time to push through some tough, drastic economic reforms to save the country from financial ruin. His speech was short, but Antonis Samaras made it very clear, he'll do whatever it takes to keep Greece inside the euro.

Mr. Samaras admitted that parts of the economic program are currently off track and announced increased plans to sell state assets like, for instance, the country's railway company and also real estate holdings. The speech marks the start of a three-day debate for the newly-formed coalition of Greece, which will end in a vote of confidence.

And joining me now on the line is Dimitrios Tsomocos, who is an economic advisor to Antonis Samaras. He joins us now, live, on the telephone from Columbia. So, first of all, how bad are things?

DIMITRIOS TSOMOCOS, ECONOMIC ADVISOR TO PRIME MINISTER OF GREECE (via telephone): Well, let's see. The bright side of the economic situation: yes, even though the situation is not great, today the prime minister of Greece reconfirmed his pledges -- the election pledges who will see an honor of the contractual obligations for the country, satisfy the goals of the loan agreement, yet try to alter and modify some of the measures in the polity mix, so that to expedite the exit from the recession trough.

DOS SANTOS: How confident are you, Dimitrios, that that will actually work, though? Because what we've seen in the past is Greece has earmarked all sorts of assets for privatization, and frankly, only a tiny percentage of that has been accomplished.

TSOMOCOS: Well the prime minister -- really has made a statement in a loud and clear manner, he wants to expedite the structural reforms to accelerate the privatization program and the development of the public property so that unemployment overthrown and consequently replace austerity measures with broad measures.

DOS SANTOS: But let me ask you again, what is going to be different this time with your new government being in charge? What is it that you're going to be able to do to get those assets privatized when previous governments didn't manage to?

TSOMOCOS: Well, the main asset that this new government has is the political commitment and the pre-election pledge to expedite structural reforms, fiscal consolidation, and alter the terms of the memorandum to correct social injustice.

So, the credit warning and the credibility of the prime minister, the main asset of the government. And mind you, the party New Democracy has always been pro-market, pro-reform, and if you will, always willing to reduce the paternalistic relations between the state and the real economy.

DOS SANTOS: OK, Dimitrios Tsomocos, I'm afraid we're going to have to leave it there, but thanks ever so much for coming on QUEST MEANS BUSINESS to explain that point of view, there. Joining us live on the telephone from Colombia.

Now, time for a Currency Conundrum for you today. Here's a question for you: is this statement true, or is it false? During the second World War, the Nazis devised a plan to destabilize the British economy by flooding the country with forged bank notes. We'll have the answer to that interesting Currency Conundrum a bit later on in the show.

Now, the US dollar is gaining ground today, pushing the euro to its lowest level in two years. A lackluster US jobs report fields concerns about global slowdown potentials. The British pound, on the other hand, is also weaker, but the yen is yet again gaining ground.


DOS SANTOS: As we were telling you earlier on in the show, all of the major US indices are still lower following those weaker-than-expected figures when it comes to monthly unemployment figures for the United States.

Let's go over to Alison Kosik, who joins me now, live, from the New York Stock Exchange for the market reaction to this kind of news. So Alison, it's been a really downbeat day and, presumably, this is just the end of a really difficult week, even if it was a shorter one for the US market.

ALISON KOSIK, CNN CORRESPONDENT: It really is. But this is really what the market's been waiting for, and they expected bad news, investors did, but they didn't expect the miss on the expectations. And the bar for this report, Nina, was already low. The expectation was that 95,000 positions were going to be added to the economy in June.

So, when that 80,000 figure came in this morning, it showed that the number couldn't even live up to those lower expectations. So then, you look at the jobs picture. From April through June, it's actually coming out to be the weakest job quarter in two years.

So, it means for three months in a row now, job additions here in the US are below 100,000. So now it's safe to say that this is a trend. It's clearly not good enough to bring down the unemployment rate, which held steady at 8.2 percent.

What really needs to happen is there needs to be anywhere from 300,000 to 400,000 jobs added consistently month after month to really help the economy dig out from the recession that it's trying to come out of.

One analyst told me that this economic recovery shows that it's clearly stuck in quicksand at this point, especially since not much really changed from May to June.

You look at the unemployment rate, it held steady. The number of unemployed people out there, 12.7 million people, remained the same. The number of people in the labor pool remain the same. So, not such a huge surprise to see a sell-off on Wall Street. Nina?

DOS SANTOS: OK, Alison Kosik there with the market roundup. Thanks ever so much and have a great weekend.

Now, there's been a new investigation into the libor-fixing scandal, and this time it could lead to bankers actually going to prison. The UK's Serious Fraud Office says that it'll now launch its own inquiry into the matter, and that could mean criminal charges could follow if it finds anyone guilty of having fixed libor.

British lawmakers voted just on Thursday to hold a parliamentary inquiry into this matter, which has already seen several executives at Barclays resign. The bank's outgoing chairman, Marcus Aegis, will be testifying before MPs on Tuesday, and that'll be a day after the deputy governor of the Bank of England, Paul Tucker, does the same.

Barclays already faces dozens of lawsuits over libor in the United States, and that's after the record fine that was handed down to them by the Commodities Futures Trading Commission. Now, the commissioner Bart Chilton of the CFTC joins us live from Little Rock, Arkansas, to discuss this latest development.

Thanks ever so much, Bart, for coming on the show. Your first reactions to news that the Serious Fraud Office has launched a criminal probe?

BART CHILTON, US COMMODITY FUTURES TRADING COMMISSION: Well, I think we need to be looking at this stuff with a fine-tooth comb. If there is any illegal wrongdoing, certainly it needs to be prosecuted to the nth degree.

To me, this really requires that boards and executives take a cold, hard look at their corporate culture, and I hope the Barclays circumstance and the libor situation in general allows boards and the executives to do just that.

DOS SANTOS: Let me ask you this. You've obviously settled with Barclays for attempted market manipulation. But if it transpires from the kind of select committee hearings, the inquiries we're seeing in the UK and also this Serious Fraud Office inquiry, that they have manipulated the market, are you opening another probe into actual market manipulation?

CHILTON: Well, the -- going from attempted to manipulation is a difficult hurdle because, as you know, the libor rates are the mean of all of the banks, all of the 16 banks, and they throw out the lows and they throw out the highs, and it's just the middle, and proving that one bank made a move in the market that would manipulate is a difficult thing to prove.

But obviously, we're going to be looking at these things across the board and not just at Barclays, but at other institutions. I can't say whether or not we have an investigation or not, but it's a common question and something, certainly, that makes sense for us to be doing. And I can tell you, we're doing that.

DOS SANTOS: How angry does this make you?

CHILTON: Well, I'm more frustrated with this culture that's out there with the bankers. But look, they broke the law. They broke the law. It's a serious offense. And as you know, it could have impacted interest rates all across the planet for people that are -- have any sort of credit exposure whatsoever, whether or not it's a home mortgage, student loan, or a car loan.

So, this was a big deal, and I'm pleased that regulators on both sides of the Atlantic went after it, I'm pleased that we've caught it, and I'm pleased that we had this unprecedented and historic settlement.

But our job's not over. We need to keep a guy -- we need to keep an eye on these folks. We've learned, I think, since 2008 that you can't just think that the bankers will do what's expected. You have to know that they were more likely to do what is inspected. And that's why we have new financial regulatory reform rules out there --


CHILTON: -- and we're working on even more.

DOS SANTOS: Let me stop you there, because one of the issues with libor is that it was so complicated to price before that they tried to simplify the system, and it ended up being, perhaps as we've seen, a system that was easy to fix because it was in the hands of 15 traders. What would you like to see people do to avoid a potential pitfall like that? How should the rules be changed?

CHILTON: Well, first of all, in general, in all rules, I think transparency is the best disinfectant. The more we can see, the more eyes upon it, the better we will be.

Now, certainly there are business decisions and business information that we've got to be protective of, and we don't want to give away trade secrets among the banks. But the more transparency we can have, the better, and I think libor is certainly one example where more transparency will be better.

We're going to have a lot better view into what Barclays is doing, but I'm hopeful that other banks, again, will take a step back, look at themselves in the mirror, and realize that maybe their culture isn't what it should be, their corporate culture, that is.

DOS SANTOS: OK, Commissioner Bart Chilton from the CFTC joining us from Little Rock, Arkansas. Thanks ever so much for your time today.

Now, a milestone moment for Malaysia Airlines, with new planes coming and new strategies, as well. We're going to be hearing from its CEO in just a moment's time.


DOS SANTOS: Hello and welcome back, I'm Nina dos Santos at CNN London. And these are the main news headlines.

Andy Murray is the first British man to reach the Wimbledon men's final singles since 1938. Murray beat Jo-Wilfried Tsonga by three sets to one in a thrilling match on Center Court. He'll play Roger Federer in Sunday's final.

Federer beat the number one seed, Novak Djokovic, in four sets. Amanda Davies is at Wimbledon for us tonight. Presumably absorbing all of the atmosphere. Boy, it was a thrilling time, wasn't it, Amanda?

AMANDA DAVIES, CNN CORRESPONDENT: Oh, Nina, it's been an absolutely incredible atmosphere here today. It was pretty tense at one point, it has to be said.

But the last hour or so have really been quite incredible, because as you say, Andy Murray has done something that no other British man has done in 74 years, 11 different British men have tried to do during that time, and that is to book a place in the Wimbledon final, of course, their home grand slam final.

Andy Murray was the favorite going into the match against France's Jo- Wilfried Tsonga, but given the monkey on the back of all British tennis players who've got to this point in the past, people were by no means confident.

In fact, it's Andy Murray's fourth semifinal here. He'd lost the previous three to Andy Roddick and then twice to Rafael Nadal. Here he was against the French 5th seed, Jo-Wilfried Tsonga, a man who he had beaten five times in the past.

And Murray eased to two sets to love leading to the first set 6-3, second 6-4. But then had a little bit of a wobble, people suggesting maybe he realized what he was on the verge of doing. But Tsonga stepped up, basically, and took the third set six games to three.

So into the fourth it went. It was a very backwards-and-forwards fare. But in the end, Andy Murray took it, despite a late challenge on the call from Jo-Wilfried Tsonga on match point. Murray thought he'd won it, sent Tsonga challenged in the end. Murray was prove right and there he was, booked in the final on Sunday against Roger Federer.

As you said, it was an incredibly emotional moment. Andy Murray really didn't quite know what to do with himself. He looked to the skies, he looked to his family, his box with his girlfriend and his mom and dad and his new coach, Ivan Lendl.

And then he started crying because that is something that all British tennis players over the last few years have had to deal with and have never managed to overcome. But Andy Murray has done it and he will face Roger Federer here in the final on Sunday.

DOS SANTOS: And I'm sure you'll be there to (inaudible) the atmosphere yet again. It must be a really thrilling time. Thanks ever so much, Amanda Davies there, live at Wimbledon, bringing us the latest news there on Andy Murray's win against Jo-Wilfried Tsonga.

Now, in other news, the commander in Syria's elite Republican Guard has defected. The French foreign ministry says that former Brigadier General Manaf Tlas is traveling now to Paris. The general has been a close confidant to the President Bashar al-Assad and his departure is seen as a major blow to the regime.

U.S. Secretary of State Hillary Clinton say that now it's time for Syrians to abandon their dictator in the wake of the defection of General Tlas. Well, speaking of the Friends of Syria Conference in Paris today, Clinton said that the regime insiders are starting to vote with their feet.

Speaking of votes, recount results are in from the Mexican presidential race, and they confirmed the PRI candidate, Enrique Pena Nieto, is the winner with just over 38 percent of the vote. That's nearly 7 points better than his closest rival, Andres Manuel Lopez Obrador. The recount still needs to be (inaudible).

More than 800 people have been arrested by Chinese police on suspicion of trafficking children (ph). Authorities have freed 181 children this week alone after two major crackdowns on trafficking rings. More than 10,000 officers were involved in raids across several Chinese provinces.

Speaking of which, CNN is shining a spotlight on efforts to end modern-day slavery in whatever form it takes. Follow stories to right around the world and find out what you can do to end human trafficking on a special section of our website. It's all at


DOS SANTOS: Back to business news now, Malaysia Airlines first A-380 flight took off from Heathrow this week, making it the eighth airline now in history to fly the world's largest passenger jet. It's cause for celebration (ph) for this airline, which is just about new strategy to cope with massive financial losses and also a failed tryout with Air Asia. CNN's Ayesha Durgahee spoke to the CEO.


AHMAD JAUHARI YAHYA, CEO, MALAYSIA AIRLINES: This aircraft will be flown in groups that will have high volume. So we will start with London and I think we follow with Sydney and then we plan to deploy to Narita, Japan, and eventually to Beijing.

AYESHA DURGAHEE, CNN CORRESPONDENT: But do you think you will be able to stall (ph) the plane in terms of, you know, it's still (inaudible) challenging (inaudible).

YAHYA: That's basically a challenge for us, is filling up (ph) the plane. The plane will only make sense if we start to fill it up. (Inaudible)? That's going to be a real challenge for us, especially with the economic condition that's prevailing. But we feel we have an edge in terms of our service, and I hope people see the market appreciates there.

DURGAHEE: (Inaudible) punishing (ph) (inaudible)?

YAHYA: (Inaudible) has been -- we have been hit quite hard by the fuel costs. Last year we lost about $750 million. Hopefully we don't repeat it this year. The A-380 has become an icon of change, I think, for the airline.

DURGAHEE: What change are you going to be making in the running of the business?

YAHYA: We just have to basically be more efficient. We just have to be very prudent about where we fly. We just have to be more productive. We have to get the product right, the service level right and, more important, the fares (ph) right.

DURGAHEE: How much (inaudible) was it, the airline not to go through the (inaudible) with (inaudible)?

YAHYA: Well, the (inaudible) buyout was (inaudible) of trying to synergize the two airlines. But the -- it has caused a lot of distraction, I think, with both the public as well as the staff and the (inaudible) as well, right? So we decided to (inaudible) put an end to that and let the airline go in a separate ways (inaudible).

DURGAHEE: And do you think consolidation (inaudible)?

YAHYA: I think the joint ventures collaboration airlines, whatever you call it, actually is in a card -- on everybody's card, actually. Now these days, no one airline can do everything. And everyone has his own strength (inaudible) his own weakness. So let's try to work on each other's strength. I think that's on the card for every airline, including us.


DOS SANTOS: We'll have plenty more on the airline industry next week. Richard will be coming to you live from the Farnborough Air Show with some of the biggest names in the industry. That's on (inaudible) show on Monday here on CNN.

Now after the break, all of the latest weather. And we'll take a final check on the markets as well. Do stay tuned for that.



DOS SANTOS: And now welcome back. Time now for the answer to our "Currency Conundrum," earlier in the show we asked you whether this statement was true or false. During World War II, the Nazis planned to destabilize the British economy by flooding the country with fake banknotes. And the answer is it is actually true.

The plan was to drop counterfeit notes from planes over Britain and create a huge (inaudible) inflation. (Inaudible) the president at the concentration camp that they were never actually distributed because the Germans thought that they didn't have enough planes to do it. (Inaudible).

Now the Dow has been stuck in red all day, and basically it's down to the U.S. jobs report for this, the focus of blame here. Here's where we stand about an hour's before the close of trade in the market stateside. As you can see, we're down about 1.4 percent on the Dow Jones industrial average, 176 points, at a level of 12, 72 at the moment.

Now that drop looks like it's going to ruin the chance that the Dow had for finishing the week on a level field. But what we're talking about is the Dow is going to be erasing all of its weekly gains. And, indeed, it was actually shortened work, of course, because we had the Independence holiday in the United States on the 4th of July.

And barring a late rally, well, the Dow, it looks, will probably end the week down to the tune of around about 1 percent.

Now let's have a quick look at how the weather picture is faring. We know that Andy Murray managed to get through to the men's finals at Wimbledon barring the rain.


DOS SANTOS: There has been plenty of rain, Jenny.

HARRISON: I know. I mean, seriously, I know you're all so sick of it. It's all I hear all the time. But I really do feel for you, Nina. And I have to say it has been -- well, it's been record-breaking, this rain, of course, in the U.K. as well.

Now this is the situation in the last few hours, well, also the last couple of days, an area of low pressure just sitting there. And it's just been sitting and spinning and continuing to produce some very heavy amounts of rain. Thunderstorms across central areas, but look at this, June, it is really official.

And I'm sure if you're in the U.K., you think, yes, well, we kind of figured this really. Let's be honest. June, the wettest on record, and that's for over 100 years, 102 years. That's how far it goes back. And look at it, double the average, April's also the wettest month in history across the U.K. So that also means that April through June was the wettest three- month period. Now this is an outbreak (inaudible), you look at the entire country.

So you can see this sort of amount of rainfall we're talking about, over two times the average for Wales, Ireland, also England. And then in Scotland, even here where the rainfall wasn't as high, that was half as much as the average as well. And this is what we've been seeing for the last few couple of days really, it has to be said.

There's more on the way, more of that rain. And it has been very heavy at times, sort of plenty of warnings across the U.K. for the metal (ph) saying that there are real concerns for more flooding, the rivers are fit to burst in some areas as well, and it will continue through the weekend. Meanwhile across the southeast, temperatures still in the 30s, that high pressure area being squeezed a little bit.

But again we've got that dividing line with more thunderstorms in the forecast. And as for the temperatures on Friday, look at this, 37 in Belgrade, 10 degrees above average, the same in Budapest. And that is pretty much the theme there as well, Belgrade will stay warm again for the next few days. It'll feel a little bit better in Warsaw by that Monday, some scattered thunderstorms around there, but even so, it is above average.

As for Saturday and Sunday, of course, Saturday at Wimbledon, it is the women's singles final Sunday. It is a big match (inaudible) Sunday morning. I will be watching Andy Murray of course, but look at this, there's still a very high chance of rain, probably 70 percent, 60 percent on Sunday, (inaudible) of course, in Center Court, we have got the roof. But it's so much better without the roof, you can see the rain again continuing for the next couple of days.

It's really not going to move very far, that area of low pressure, just kind of anchored there. So I'm afraid more of the same across the U.K. and a very cloudy picture for the most part as well. And then temperatures kind of around the average in the northwest because of that area of low pressure.

But you can see across the southeast, that's where the really warm air is in place. So Saturday 31 in Bucharest, 33 in Rome, uh, not quite 70 degrees, I'm afraid in London, Nina, but 21, not far off. But hopefully you'll get a break from the rain showers at this point.

DOS SANTOS: Jenny, yes, well, the hint in your Twitter pages, but your profile picture has you with an umbrella, doesn't it?

HARRISON: Yes, there you go. (Inaudible) --


DOS SANTOS: Jenny Harrison, thanks ever so much for that. Now before we go, we just want to bring our viewers some pictures that (inaudible) celebrations (inaudible) Andy Murray's hometown in (inaudible), they're talking about (inaudible).

In just the last hour, we heard that he became the first British tennis player to reach a Wimbledon final (inaudible) back in 1938. And on that note, it's time to say goodbye. That's it for this edition of QUEST MEANS BUSINESS. MARKETPLACE AFRICA continues on CNN.




DAVID MCKENZIE, CNN CORRESPONDENT: Hello, I'm David McKenzie. Welcome to MARKETPLACE AFRICA. For this week, we're in the beautiful Lamu Island off the Kenyan coast. Not much has changed here for centuries, but now the Kenyan government wants to build a massive port nearby. They say it will revolutionize trade in Africa, but the local Lamuans aren't so sure.


MCKENZIE (voice-over): For centuries, dhows dominated the waters of Africa, their unique rigging sailing in the monsoon winds.

MCKENZIE: Well into the 1800s, dhows were the main form of transport between Arabia and East Africa. They brought goods and dates and gold from the Middle East to here. In return, they sent ivory and mangrove poles and, of course, slaves.


MCKENZIE: Aswif Omar's grandparents arrived from Yemen and (inaudible) dhows. They settled in Lamu as middlemen. Now Omar ferries tourists through Lamu's pristine (ph) mangroves.

ASWIF OMAR, DHOW OPERATOR: Tourists is the background (sic) of the economy of Lamu, especially this time of the year. It's something unique and special because back home, they used to go on a speedboat, big cars and big plane, lots of pollution. But if they come to a place like Lamu, they go on a dhow, sailing, no noise, no pollution.

(Speaking foreign language).

UNIDENTIFIED MALE: (Speaking foreign language).

MCKENZIE (voice-over): But Omar fears that the new port and oil pipeline will change that.


MCKENZIE (voice-over): In March, the leaders of Kenya, South Sudan and Ethiopia broke ground on an ambitious venture they are dubbing LPSSET (ph). The Lamu port, South Sudan, Ethiopia Transport corridor.

MCKENZIE: It's hard to imagine it right now, because all you can see is mangroves and bush. But this is going to be one of the biggest infrastructure projects that has ever been undertaken in Africa. They'll start with three berths in this port for international ships. That will move to 32 berths. And that's just the beginning.

MCKENZIE (voice-over): A rail and highway network north to Ethiopia, a rail network pushing west into South Sudan, an oil pipeline heading east, giving Juba (ph) an outlet for its oil well. They feel it's necessity after years of oil disputes and months of on-and-off fighting with their neighbor, Sudan. The ambitions seem almost limitless.

Dubai-like cities, highland (ph) resorts, with the price tag of $25 billion, some critics say it's fantasy. Despite promises of jobs, several Lamu groups are fighting against the government plan. A coalition of them are suing to ensure that proper environmental assessments are completed and that if the project goes ahead, Lamuans get a piece of the pie.

MOHAMMED ATHMAN, KENYA MARINE ENVIRONMENTAL ORG.: People say it will bring us millions of dollars in the country. (Inaudible) think of the port initially as a country (ph). But if we think of the port locally as Lamu people, it is a disaster.


MCKENZIE (voice-over): Omar says it will be a disaster for a small venture. Long neglected by the central government, he says the people of Lamu won't be able to take advantage of the port's benefits, only suffer from its costs.

OMAR: The port will bring some jobs, but especially just for few people who are in the government and who are very educated. But majority of Lamu people, they are not well educated. So there will be more effect than the benefit.

So if there -- there will be introduction of the big port and the big ships coming to Lamu. All this will disappear, just like any other places in the world where the port are introduced and now the places are in a mess.

MCKENZIE: Lamuans worry that they're going to lose this paradise, but the government of Kenya says it's pushing forward because it's just too important for the future of this country.

Up next, we're going to find out just how they (inaudible) pull off this massive project.


MCKENZIE: This is going to be a city (inaudible).

SILVESTER KASUKU, INFRASTRUCTURE ADVISER, OFFICE OF THE PM: Of course. This is going to be part of the Lamu city.





MCKENZIE: Here on Lamu Island, there are no cars allowed, so this is the only way to get goods back and forth. But that's all changing because just north of here, they're building this massive infrastructure project that's going to link South Sudan, Kenya and Ethiopia. But some say it was a price tag of $25 billion it's all a pipe dream.


MCKENZIE (voice-over): Silvester Kasuku is an infrastructure specialist with the prime minister's office. He's taking us to view the site for the Lamu port and pipeline.


MCKENZIE (voice-over): Right now, it's just bush, a dirt track. In less than five years, they hope it will be the main hub for East African trade.

MCKENZIE: So this is going to be a city where we're standing?

KASUKU: Of course. This is going to be part of the Lamu city.

MCKENZIE: It's hard to imagine when you look around and it's basically bush. Are you confident that in 5-10 years you'll see buildings all over here?

KASUKU: I do believe that everything begins from somewhere and that this is just the beginning. And the bush that the city is today is going to be a green city in the future.

MCKENZIE: The hugely ambitious project. Do you think you can pull it off? I mean, right now, you look at this and it's just mangroves.

KASUKU: Yes. This is -- I do believe that this is quite a huge and ambitious project. And I'm very sure -- and I do know that we are going to pull it off. But the sheer fact of (inaudible) that we have started is good sure enough, but we know where we are going. We know where we are beginning and we know where we are going.

But this is going to be where 200 meter corridor of a causeway into the port. And we are going to have (inaudible) at the end of the day with each boat (ph) having a key length of 400 meters. So you are talking about 400 meters (inaudible).

MCKENZIE: This is going to be bigger than Mombasa, Durbin (ph), Cape Town - -

KASUKU: Definitely.

MCKENZIE: -- biggest in Africa.

KASUKU: Definitely. We are looking at this being the key port of call in Africa.

MCKENZIE: You've got Kenya, South Sudan, Ethiopia, all involved in this project. Will you get the level of cooperation you need and the funding to do what is the road, a port, railway --

KASUKU: Railway, the refineries, pipelines, (inaudible) all that. This particular project also provides an opportunity for private sector from the international community. (Inaudible) to come and invest here.

One of the biggest (inaudible) today in the world is the opportunity to invest. The premise (inaudible) funding, opportunities are fast dwindling. This is one of the biggest opportunities that are (inaudible) entire continent, and we do believe it will attract private sector participation as well as friendly countries' support. And this is quite attractive.

MCKENZIE: Some people have called this a pipe dream, that it's all just a little too ambitious at this time.

KASUKU: I would say that without ambition, you can't achieve. And by the mere fact that we have an ambition and the ambition is in the plan and that there is a beginning point, that's already to begin a journey of a thousand miles. But we'll just need to begin with the first step. And we do know that.

We are not going just to develop this just overnight or just in one year alone. It is a long-term project. But at the end of it, we envisage to (inaudible) $5 billion. But we do know that there is a place to begin, and there is -- there are places to move to systematically as we continue implementing.

MCKENZIE: Some of the Lamuans say that they're not getting enough information about this project, that they've been written out of what could potentially be, you know, a major windfall for this region. Are they going to get benefits directly from this?

KASUKU: Whichever development is taking place here, we'll be able to benefit the people directly, first of all, by bringing in an aspect of new employment zones or new employment frameworks from the port itself to industries and the like. And the government is quite (inaudible) about this in that we have even put in place a framework to develop the capacity of the local people, to be able to take part in the port development.

We are not looking at it negatively. We are looking at it as a kind of a community call, you know, and a community way of accepting (ph) the lead for us to work together. And we are indeed organizing (ph) that, and that's why we are working together with the community.

MCKENZIE: Why is it so crucial right now for Kenya's future and the region's future to have such a large-scale development?

KASUKU: Of course, just like human beings, you begin from a small, you know, from a small being. And you grow. And Kenya (inaudible) come of age to realize and see its future, and to scope it appropriately.

This is basically what we have done. We have seen that. We have come of age to really know what our potentials are, what we need to do about our today and what we need to prepare for for our future.


MCKENZIE (voice-over): The government hasn't set a completion date, perhaps because of the threat of instability and the need for so much financing. For South Sudan and their Chinese backers, this infrastructure cannot be built soon enough. And despite the protests of the people of Lamu, it's clear too much is at stake to abandon plans. Even if this beautiful region will be forever changed.