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Quest Means Business

German Constitutional Court Backs ESM; European Commission President Outlines Banking Union; Future of Europe; European Markets Stronger After German Court Ruling; BAE Systems-EADS Merger Talks; Apple Unveils iPhone 5; EU's Banking Union Proposal; German Economist on ESM Decision, Banking Union; US Market Makes Gains; Euro at Peak, Dollar Down; Future of Germany

Aired September 12, 2012 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, HOST: Tonight, a German court ruling and relief across Europe.

Also, it could be the defense deal of the decade. BAE systems and EADS in talks.

And give me five: iPhone 5 that is. It's revealed. We have the details.

I'm Richard Quest, tonight live in Berlin where, of course, I mean business.

What an extraordinary day it has been in the business world. We could certainly tell summer is over and we are off to the races.

Tonight, we are live in the German capital, Berlin, because in this country, a court, the Constitutional Court, has backed the bailout fund that could save the eurozone.

Also, two defense giants in Europe, BAE Systems of the UK and EADS, owners of Airbus, have taken a giant step towards a merger. What will European politicians make of that?

And that iPhone 5 is being revealed as we speak. All in the course of a single Wednesday.

So, the road is now clear for the ESM, the permanent bailout fund being created by the eurozone members. Germany's highest court has given its blessing to the ESM, with surprisingly few strings attached.

And here in Berlin, the German chancellor, Angela Merkel, welcomed the ruling. She's been a champion of the ESM from the outset.

(BEGIN VIDEO CLIP)

ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): Germany is sending a strong signal to Europe and beyond: Germany is decidedly seizing its responsibility as largest economy.

(END VIDEO CLIP)

QUEST: So, Germany welcomes the bailout fund, but also in Europe today, Jose Manuel Barroso, the president of the European Commission, announced the proposals for the banking union. It's a real web of intrigue, because one relies on the other, and there, Germany is not quite so keen. Even so, President Barroso declared his support as part of the union for federalization.

(BEGIN VIDEO CLIP)

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: Let's not be afraid of the words. We will need to move towards a federation of nation states. This is what we need.

(APPLAUSE)

BARROSO: This is our political horizon. Creating this federation of nation states will ultimately require a new treaty.

(END VIDEO CLIP)

QUEST: It's a rump federation when you have 27 members, 17 more closely related than others through the eurozone. The Swedish finance minister, Anders Borg, joins me now, live from Stockholm. Minister Borg, we've a lot of ground to cover, so let's start with the ESM. A sigh of relief, even though you're not a eurozone member, that Germany's given the go-ahead and the thing moves ahead?

ANDERS BORG, SWEDISH FINANCE MINISTER: Most definitely, that was a relief for all of us. Uncertainty has been reduced and the euro countries can move ahead with ESM, so that was a step in the right direction, most definitely.

QUEST: On the question of banking union, Sweden has a banking system almost as large, relative, as the UK's. You must also fear that banking union, you don't want to be left outside if there's a core being regulated by the ECB.

BORG: Well, that's true, but we don't want to undermine either our ability to put tougher requirements, particularly on capital for our banking system. And there is also an obvious interest for us to safeguard our taxpayers' money. We do not want to be responsible for mistakes in other banking systems.

So this is the beginning of long negotiations, and we have some very, very clear red lines. So where this will end, I'm not certain today.

QUEST: Do you believe it can be started, banking union, by January the 1st, the date President Barroso -- in fact, he wants it all wrapped it up by the end of next year. That's unrealistic, isn't it?

BORG: Well, it's obviously a very ambitious timetable that Barroso has set out. There is some huge problem that has to be dealt with, so to my mind, it's quite difficult to see how a time schedule that is so tight could actually -- actually be hold -- working.

QUEST: Is it your gut feeling tonight that the eurozone is on more firm ground, both as a result of the proposals on banking union and on the fact that the ESM is now a certainty, even though the whole scheme is devilishly complicated?

BORG: I think we are moving in the right direction, particularly also with the messages that have come out of the ECB over the last few weeks. I think that has been very constructive. We need a push for our monetary policy to be able to get out of the -- the downturn.

I'm not certain whether we are really out of the woods yet. There are some major uncertainties about Spanish public finances and banking system. There are some great difficulties that we have to handle with the Greek program that seems to be basically off track. So, I think the next three to six months will be very, very difficult.

QUEST: Would you tonight urge the Spanish not to wait too long or too late before seeking bailout help?

BORG: Well, obviously that's a question that the Spanish should answer to. I think for Europe, it would be the best thing if they could move on very rapidly with restructuring their banking sector and putting their banks back in a business functioning mode.

If they can do it on their own, that's fine. If it is necessary for them to seek support, it is better that it happens in the shorter term than in the longer term, and particularly if we would see continued problems with Greece.

QUEST: Finally, minister, you alluded to these -- well, you've not alluded, you said directly -- these difficulties, and that really is the problem now, isn't it? Because no amount of cutting the pieces of this jigsaw is necessarily going to make it pull together as a single picture. The risks are still very real and very great. We can agree on that, can't we?

BORG: Most definitely. I think when the troika is finished with their report on Greece, it's quite likely that we are in deep problem. Whether they will go into default or whether they will have to leave the euro is still, I think, an open question.

There might be a miracle happening and the Greek government starts to deliver on their promises and their programs, but I think we still have quite some -- a huge amount of uncertainty related to Greece left.

QUEST: Anders Borg, joining me tonight from Stockholm. Minister, as always, good to have you on QUEST MEANS BUSINESS. Thank you for coming on the program.

Optimism. Well, the German court decision did give a really strong boost, along with the prospect of banking union. Bank shares surged across Europe in response to the German court ruling. Overall, the market gains were, perhaps, more modest.

Look at the numbers. The German DAX finished today nearly half a percent stronger. In France, the CAC was almost unchanged. The London FTSE bucked the trend. It was a touch weaker in London.

Borrowing costs in Spain and Italy fell back further, whilst Germany's clicked up. So all-in-all, perhaps there is now -- still some way to go, but they are starting towards -- move towards each other. Spanish ten- years down at 5.6 percent. They were over 7 percent before Draghi announced the OMT, the Outright Monetary Transaction bond purchase.

The euro's higher, around a four-month high against the dollar. We'll update the currencies for you a little later in the program.

The other big story: it happened just in the last couple of hours. Two titans of European industry are in merger talks tonight. The defense contractor BAE Systems of the UK, very strong in the United States, and EADS, the euro conglomerate that also owns the Airbus consortium, have confirmed they are looking at ways to merge their businesses.

CNN's Jim Boulden is in London for us tonight. Jim, when this story crossed the wires, I just looked and thought, golly gosh.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Exactly. Just the BAE Systems shares, we should show you that, because about 45 minutes before the close of the FTSE 100, BAE shares were very, very flat, just like the rest of the market.

Then, the word hit, and look at this. This is exactly what happened to the shares here. It was a remarkable afternoon. I'm sorry, I can't show you at the moment, but it zoomed up about 10 percent.

And because of that, BAE Systems did have to come out just as the markets closed to say that yes, they were in deep talks, Richard, with EADS, a breathtaking idea here.

The boards haven't voted on it yet, and of course we know regulators still have to look at it. The UK government says they will definitely protect the citizens of the UK when they look at this deal. But there are a lot of hoops for them to go through still until we get to the time when you do have, possibly, a huge, huge aerospace company created in Europe, Richard.

QUEST: OK, all right, but Jim, as I've been reading -- you've got -- as you were saying, the quotes from the British government, it's going to have to be looked at by the US authorities, there'll be political questions because -- we saw it just with the new CEO of the ADS and Airbus, how governments in Berlin and Paris respond. What, then -- what, then is really driving this transaction?

BOULDEN: Well, cutting costs, I think, mostly. You have defense budgets shrinking, possibly even in the US, and because of that, you have huge players, as you know, in the US, like Boeing, who does aerospace and also huge defense company and huge space company. A lot of people don't know that. They just think of it as commercial airplanes.

EADS is mostly commercial airplanes. BAE Systems helps with things like the A380, but a huge defense player. You combine them, and then you get somebody like Boeing, but in Europe, who can compete on all fronts.

I think it'll be interesting to see what the US Justice Department, the US Defense Department has to say about this. OK, EADS isn't a big player when it comes to military, but they may still look at it, and I do think some of the US companies might object to this, Richard.

QUEST: Jim Boulden, who is in London and will be following that and has got his work cut out for him for the next few months as that deal comes forward. Many thanks, Jim.

Coming up next, what we know so far: it's 18 percent thinner and 20 percent lighter than the last model. It has a 4G connection, which will let you download at up to 100 megabytes per second.

Coming up next, a new sheriff for eurozone banks. We'll look at the plans to give the ECB a broader role in the banking world.

(COMMERCIAL BREAK)

QUEST: The European Commission is plotting its next moves towards shuffling the euro bloc of banks closer together. Banking union, as it's known, is designed to free each eurozone state from the ball and chain of its struggling banks, separating sovereign debt and banking crises.

If the European Union's 27 members approve the plan, the ECB will be given ultimate authority over the eurozone banks. In effect, it will become a super regulator with the power to monitor, regulate, and ultimately, fine the eurozone banks.

The Commission president, Jose Manuel Barroso, says every eurozone bank will be included, regardless of size.

(BEGIN VIDEO CLIP)

BARROSO: The single supervisory mechanism proposed today will create the reinforced architecture with a core role for the European Central Bank, and the proper articulation of European banking authority, which will restore confidence in the supervision of the banks in the euro area. It will be a supervision for all euro area banks.

(END VIDEO CLIP)

QUEST: Now, Ansgar Belke is a professor of macroeconomics at Duisburg-Essen University and a member of the European Parliament's monetary experts panel. So, what a day it's been, you've got to admit. It's an extraordinary day. The Constitutional Court, banking union -- the pieces are starting to come together for the future of the eurozone.

ANSGAR BELKE, PROFESSOR OF MACROECONOMICS, UNIVERSITY OF DUISBURG- ESSEN: That's true. What we see is in our cap on Germany's participation in the ESM, which is now at 190 billion euros. But at the same time, the Bundestag, the German parliament, has been given quite a lot of rights to get a right in discussing these issues.

QUEST: Right. But it's -- you see, the interesting thing about it is, the ESM does now go ahead.

BELKE: Yes, it --

QUEST: And once it's out of the gate and running, those people over there won't have much say.

BELKE: They won't have much say because it's only the starter and the ECB. If there is agreement about helping countries via the ESM, it can really put out the bazooka.

QUEST: So -- but as I read the summary of the -- the English translation of the summary of the judgment, they also, the court, but the boot in to the idea of the ESM being used to finance government debt. They again and a gain, they reminded the governments that it was illegal.

BELKE: Yes, but it was not illegal, there. There is a prohibition of bailout of countries, but they don't say that. It's not a bailout. The no-bailout clause is not a prohibition of bailout, but there's no right to be bailed out, and this is a decisive difference.

QUEST: Are they not, effectively -- doesn't matter which way we cut this cake, they're doing exactly what the treaties didn't really want them to do. They are monetary financing of debt, they are bailing out governments, and they are mutualizing debt across the continent.

BELKE: This is exactly the German view on it, and hence Germany's very glad to see the ESM being active, because otherwise, if the ESM would have been stopped, the ECB would have ruled in without any German impact. We only have one governor inside, which is always overruled.

QUEST: Why do you -- why are Germans putting such faith in the ESM when, potentially, the reality is it could turn into just a printing machine for governments?

BELKE: Because they see the Bundestag in -- it has to agree --

QUEST: You believe -- you believe --

BELKE: -- each time, if the ESM is buying bonds from countries like Spain, which is probably the next country, they have to agree each time

QUEST: Let's talk about banking union. Germany stands nicely in a difficult position here, doesn't it? It wants banking union, because it'll make the whole thing work better, but it doesn't want every Landers Bank in the country under the lash of the ECB.

BELKE: Of course not, and we also see a conflict of interest on the side of the ECB. Would it really let fall a bank if otherwise the monetary transmission is damaged by this decision? It cannot let bank -- let a bank fall and that time, risk inflation or something like that.

QUEST: Are we safer tonight in Europe, financially, then we were last night?

BELKE: Really, we are on the one hand, we are safer, on the other hand, it does not come without cost. What we see is that we will see inflation in the long run.

QUEST: Oh! German inflation.

BELKE: Yes.

QUEST: Germans worried about inflation. Professor, good to see you.

BELKE: Yes.

QUEST: Take care. Do be careful --

BELKE: Bye-bye.

QUEST: -- if you would. It's dark and --

BELKE: Bye-bye.

QUEST: Good night. Thank you very much. Now, markets in the United States were boosted by the German court decision, but not for long. Investors are looking to the Federal Reserve meeting, which could announce new stimulus measures. The Dow is up just 12 points at the moment, just around a fifth or so of a percent.

Now, tonight's Currency Conundrum. A Deutsche mark coin minted during the second world war bore the marks and letters A and B. Euro coins minted in Germany today also bear the same marks.

What does the A and the B stand for? Is it code for the composition of the coin, initials of the first designers of the Deutsche mark, or codes for the location of where they are minted? We'll have the details on that for you later in the program.

The rates tonight: the euro raced to a four-month peak on the approval of the latest bailout fund. It's buying nearly $1.29. US currency is weaker against the pound and the yen.

This is QUEST MEANS BUSINESS, and we are live tonight in Berlin.

(COMMERCIAL BREAK)

QUEST: So, Angela Merkel says that the German court decision paves the way for safety and security for German taxpayers, although perhaps not everybody would agree. Fred Pleitgen, our Berlin correspondent, joins me now. Fred, the decision, you and I talked about last night, it was expected.

FRED PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Yes.

QUEST: And there were conditions.

PLEITGEN: As expected.

QUEST: What will the German people make of it?

PLEITGEN: I think the German people are going to be very happy. Look, one of the things that you have to understand is that the German people have seen their parliamentarians make big decisions under fire for a very long time.

What they've done is they've committed ridiculous amounts of German taxpayer money, under fire, always in a very short time, and the German Constitutional Court is a body that has the utmost respect of the German people.

So, what a lot of people will think is that we have this body that has now taken a look at this, aside from any sort of political pressures, and has signed off on it.

QUEST: Do you believe, no matter what the Constitutional Court says, that the Bundestag really has been given a say in this? And that in five years' time, it will be a real say, not just a fig leaf?

PLEITGEN: I think most probably it would be a fig leaf. It always depends on how far things get, how bad things get within the eurozone, and certainly, if things do get a lot worse, I do believe that a lot of the decisions are going to be made on the European level.

It'll be very hard for the German parliament to weigh in on those decisions and to stop any decisions, especially with the political pressure.

QUEST: So, it's really complicated now. We've got the ESM, which has been now effectively validated. We've got Draghi buying bonds under the OMT, which the Bundesbank didn't want --

PLEITGEN: Did not want him to do, exactly

QUEST: -- did not want to happen. We've got Spain and Italy deciding what to do. And into that maelstrom, where does Mrs. Mueller in Stuttgart or Wiesbaden or somewhere, where do they stand on it?

PLEITGEN: Well, I'm sure a lot of them are very confused by what's going on, I'm sure. But a lot of them just want to see that their taxpayer money is -- I wouldn't say "safe," but that at least it's not going to be a bottomless pit, that Germany's not going to, through some sort of legal back door, commit to something that is a never-ending pit of money where Germany's going to have to pour more and more into.

And certainly, the ESM decision by the Constitutional Court is something that many Germans will see, there is a cap on this, and at least there seems to be an end to this. But certainly, it's very complicated.

QUEST: And you and I had a very long and --

PLEITGEN: Yes.

QUEST: -- convoluted argument in the office, the sort of thing that perhaps is better it stayed in the office.

PLEITGEN: For a British and a German perspective, also, very different.

QUEST: Well, all right, yes. But on the question of how are they going to prevent the ESM from effectively becoming a bailout for all and sundry?

PLEITGEN: Yes.

QUEST: That's a problem.

PLEITGEN: It is. It is. It certainly is a problem, and it certainly is something that the Germans are very aware of. But the interesting thing was, also, that Angela Merkel --

QUEST: Oh, yes, Merkel.

PLEITGEN: -- today, in her speech in Parliament after the ESM decision came through, said that she quite welcomed the ECB's bond-buying scheme. And really, what's happened is, which I think is very interesting --

(CROSSTALK)

QUEST: How could she say that when --

PLEITGEN: -- she did say that.

QUEST: -- the Bundesbank didn't.

PLEITGEN: She did say that, and what you're seeing, I think, is a new strategy that's evolving between her and between Mario Draghi.

Where you've always had the Germans say we don't want to commit to much, we want to force these governments that are in trouble to do fundamental reforms, and Draghi is saying yes, that's exactly what you have to do, but at the same time, you have to have the financial firepower to solve those short-term problems. And now, she says, both of them are at least coming closer.

QUEST: And we didn't even have time to do banking union.

PLEITGEN: Next time.

QUEST: That we'll save for another day. Good to see you.

PLEITGEN: Thank you very much, sir.

QUEST: Thank you for allowing us to stand on your podium.

PLEITGEN: Any time.

QUEST: So to speak. Coming up next, live from Berlin, QUEST MEANS BUSINESS. What a busy day. I tell you, it's not often you have a day like this in the business world. We ask if Germany's highest court ruling has healed the cracks in the coalition government. We'll hear from a German MP next. QUEST MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first, and for that, Jonathan Mann is at the CNN Center.

(NEWS)

QUEST: Good evening from Berlin. We've heard from the economists. And we've heard from the markets. Now the politicians. Erwin Lotter is a German MP with the Free Democrats, part of the three-way coalition with Anglo Merkel's Christian Democrat and the Christian Social Union. The party that led the challenge. Erwin Lotter joins me now. Good evening, sir. Thank you.

ERWIN LOTTER, GERMAN MP: Good evening. You're welcome.

QUEST: So the constitutional court says basically go ahead. Provided you don't spend too much money, you can go ahead. You must welcome that?

LOTTER: OK, I did welcome it because it clearly says there is a limit of the budget. We have to get into the ESM, a budge of $190 billion. And the other point is it's a good day for parliamentarism, I think, because the quote clearly said the parliament must be informed by the European institutions. And that is good for the parliamentary system. Will German -- will ordinary Germans welcome this decision, because yes, it's got them off the hook for open ended liability, but it has got you into well and truly the sinking ship or the leaking ship.

OK, in Germany, you can hear the opinion why do we have to pay for all the other European countries? But that's not quite right, because we also have a benefit of the Euro. We are exportation, coordination. And this is a great, great advantage for us, the Euro system. And we want to keep this Euro system.

QUEST: Do you think, because we've got this conflict at the moment, haven't we, between the Bundesbank, which didn't want -- you could argue, to be buying bonds, that our view's going to be Spanish and Italian bonds probably before Christmas, do you see fractures between or at least disagreements, potential disagreements, between German positions still going on and other members of the union? Is Germany going to still become the stubborn?

LOTTER: No, Germany is a reliable partner in European community.

QUEST: Yes.

LOTTER: And the court clearly said, yes, we can engage, but we have to keep these restrictions, the budget limit, as I told you. And the parliamentary information, which is really great and the government, also the German government would be wise if it asked the parliament before making promises at summits.

QUEST: Well, there's -- you're not the only parliamentarian that pushes to be asked before.

LOTTER: I'm sure.

QUEST: Tying to Greece, because you're the vice president of the German Greek parliamentary committee and association. And do you now believe it is less likely that Greece will leave the Euro?

LOTTER: It is less likely, but Greece has certain structural problems. And Greece must solve those problems whether --

QUEST: We're going in circles on this. Greece says it soon what it can, but everyone else says you're not doing enough. Greece says it's doing what it can. It's in circles.

LOTTER: We need signs. We need really signs that say we'll tackle the problems they have. And they will have those problems, whether they stay in the Euro or they leave the Euro. And they have to solve their problems.

QUEST: They would say they are solving them and they need more time and probably more money.

LOTTER: We can talk about more time, but they need to start. And they show their willingness their will, with privatization. That's what is better going on now.

QUEST: So if we pull this together, tonight, do you believe that the Eurozone is just that little bit safer?

LOTTER: I think so, yes, I think so. And we're -- we showed the willingness that we want to stay together, that we want to keep the Euro, and we want to do everything to keep the Euro as safe money.

QUEST: And is it your belief, sir, that the Euro -- the Euro survives, 300 million people use it. But is it your belief that the Euro survives with all 17 members?

LOTTER: That's a difficult question. I hope so, but I mean, in case Greece will not fulfill the things they promised, then it will be hard. It will be really hard.

QUEST: And you'd be prepared to go down that road?

LOTTER: Yes, I think so.

QUEST: Sir, thank you very much indeed.

LOTTER: You're welcome.

QUEST: Appreciate you joining us.

LOTTER: I hope it wasn't too much dominating.

QUEST: No, it was a good day. You know, at least -- except maybe for the German taxpayer.

LOTTER: Yes, it was, it was.

QUEST: Good to see you, sir. Thank you. Watch your steps on the way out.

LOTTER: Bye bye.

QUEST: Many thanks for joining us. Quest Means Business, coming up in just a moment, everyone loves a good deal, a little something for nothing, a little small businesses are also looking for a benefit when it comes to making that travel arrangement, especially (inaudible).

(COMMERCIAL BREAK)

QUEST: Welcome back. Quest Means Business, the business traveler. Now you know my motto whenever traveling around the globe. It's really very simple. Never get on a plane or stay in a hotel or rent a car if you aren't earning some miles. There's always some extra miles to be picked up somewhere along the way.

So, for example, coming from London to Berlin today, 500 miles on the plane plus, of course, any bonus for being gold. And a couple of extra miles in the hotel. You can easily rack them up. And now, the online travel group Expedia has decided to widen and deepen the range of people that it's now trying to attract, particularly small businesses. No longer just the big corporates or the individuals, Expedia's chief exec told me why he thinks the next big thing is small and medium sized.

(BEGIN VIDEOTAPE)

DARA KHOSROWSHAI, CEO, EXPEDIA: I think this is a simple solution for small businesses who want just a little bit more. There are a couple of elements to the program that we think the important elements are one is it allows small businesses to consolidate their travel, see where their travelers are going, where the spend is. But I think that's a nice tool for small businesses to have. And also, when a small business is to make their travel dollars go a little further. If you book 10 room nights on Expedia using this program with Chase, Inc., you get $100 coupon off that the small business can use for its own travel, or it can be a SPIF for an employee, etcetera. So we think it's a nice program to add on to their travel spend.

QUEST: Online is certainly the mainstay of the leisure travel industry, but what about complex arrangements for corporate and small businesses?

KHOSROWSHAI: Well, I think online is now becoming mainstream. It's - - we've been around for 15 years. And you're right, all mine started as a targeted offering, but in the U.S., for example, over 50 percent of bookings are online. It allows consumers and small businesses incredible choice. There are over 150,000 hotels that we offer now. You get to combine air and hotel to save money. And it's becoming mainstream. And as it becomes mainstream, we're building out more tool sets for small businesses. We got Agencia (ph), our large corporate business efforts over there. So as it goes mainstream, we're covering more and more of the market.

QUEST: Now let's talk about the market for a moment. What are you saying, bearing in mind the slowdown in Europe and the United States and even across parts of Asia, is that now being reflected in your business?

KHOSROWSHAI: We're not seeing as much of a slowdown. Our business is actually healthy and, you know, the volumes continue to be quite good. And I think there are two factors there.

One is that we're seeing consumers put off large spend items, let's say buying new cars, etcetera, but they're not putting off their vacation. They're not putting off -- small businesses aren't putting off that business trip. They might try to save money.. And the Internet and our sites, whether it's Expedia or hotels.com, are great ways for these businesses to save money, but they're not putting off the purchase decision. Sometimes, they're changing some behavior. For example, less Europeans are coming to the U.S. They're traveling within Europe more. And we are a great tool for them to save money. So they tend to come to us more and more as they want to find more choice, as they want to get a personalized experience, or as they want to save money.

(END VIDEOTAPE)

QUEST: For Expedia, the Chief Executive of Expedia, talking to me earlier as we were saying never get on a plane. Stay in a hotel. Rent a car unless there's miles to be earned.

Now I would say tonight, the temperature here in Berlin, well, the wind's out at the west. The sky's in the north. The moon's over -- I'd said, Jenny Harrison, I'm guessing at about 14 to 15 degrees Celsius tonight.

(WEATHER REPORT)

QUEST: Jenny Harrison at the World Weather Center. I still think it's 14 degrees, but maybe you're right. Maybe it's just a bit warmer when you're starting to continue flights.

All right, what do I know about it? Jenny Harrison joining us from -- don't answer that, Ms.Harrison.

Coming up next, now I've got one here somewhere. I've got this planning right with there is a prop. The iPhone 4, miserable to know that by the end of the month, it'll be out of date. We'll be talking about the iPhone 5, and whether it's worth spending the extra money to buy the new one. Quest Means Business live in Berlin. Good evening.

(COMMERCIAL BREAK)

QUEST: The answer to tonight's currency conundrum, I knew I should have asked that (inaudible) this question, what do the mint marks on Germany's coins stand for? The answer is C, it is the code for where the coin has been minted. And that is A and B signify Berlin and Vienna. Why Vienna? Is it the German Deutsche?

Now historically, we're about to leave that to one side for the moment. OK, glitzy event in San Francisco. Apple has just unveiled the new iPhone 5. It's going to be called that. And it will be available in some markets by the end of September. It's being priced at $199. The entry level model is priced exactly as the same as the 4S, although I'm betting in certain markets, by the time next year (inaudible) converted and market conditions can cost a great deal more.

Apple says this is the best one yet.

(BEGIN CLIP)

UNIDENTIFIED MALE: It is an absolute jewel. It is the most beautiful product we have ever made, bar none.

(END VIDEO CLIP)

QUEST: The most beautiful product ever made bar none. Nice and a bit of hyperbole. The iPhone 5 is made from aluminum and glass. It's 18 percent thinner and 20 percent lighter than the last level. A faster 4G data connection, which would allow downloads up to 100 MB per second. Think of what that'll do to your roaming bill. The processor has been given an upgrade. Apple says it will now open up twice a quickly. The HD screen was rumored to beat it, isn't there. Here's a closer look. As you can see, looks very similar to the last one. The touch screen's a bit longer and squeezes in one extra rows of apps.

For Apple, of course, the iPhone is just simply crucial in terms of its business and its model. Victor Basta's the director of Magister Advisers, which advises on merges and acquisitions in the tech sector and joins me now from London.

Victor, we're not talking so much about the widgets. We're talking about the wherewithal of the business?

VICTOR BASTA, DIRECTOR, MAGISTER ADVISERS: Yes.

QUEST: For Apple, this incremental improvement or this -- these announcements is crucial to the hype and hyperbole.

BASTA: Well, what's interesting is that the value to Apple's business is increasingly moving towards a software and the applications. That doesn't mean that they're not going to sell a lot of iPhones, but what you're seeing is they have three platforms stabilizing. A Mac with Pro and the Air, coming together. The iPad is the second platform. And the iPhone and whichever version is the third. And you're going to see improvements, of course. And they have to be competitive. But if you look at the value to Apple, we're going to be spending a lot more money and a lot more time engaging with the applications that are coming down the pike, rather than just the value of the device itself.

So what's even more valuable for Apple is 500 million iTunes accounts, because for Apple, that means 700 million credit cards.

QUEST: But let -- right, let me just jump in here, because the core question that everybody's asking following the death of Steve Jobs is whether the new chieftain, if whether or not he has got what it takes. And is the evidence that the regime now running Apple, although they factor the same, is -- have they got what it takes without Steve Jobs? Or are we still living on his pipeline?

BASTA: So the answer, I think, is undoubtedly, yes, but they're innovating in a different way. They're innovating by going deeper and iCloud. And they're innovating by rolling out new applications and software. So the days of the unbelievable device innovation seem to be behind Apple. You know, the devices are stabilizing. This new iPhone is going to be fantastic, but its evolutionary. A smaller iPad will also be revolutionary. But 3D mapping and what you might see in the next two years is 3D more generally on the iPhone. Those things are revolutionary for the way you're going to use the product, even if the phone itself evolves slowly.

QUEST: Does Apple continue in the sense -- as it battles Android and Google, and of course, Samsung, and all the others in the patent warfare, is that really where this battle now moves forward? As everyone coalesces around similar and ecosystems, do you think?

BASTA: Well --

QUEST: The differentiating factor no longer exists?

BASTA: That's -- I don't think that's actually the case, because there are three sources of value now for Apple going forward. One is $500 million iTunes accounts, which means hundreds of millions of people that they have credit card data for.

Google doesn't' have credit card data for hundreds of millions of people.

The second is iCloud. They're going to do a lot of future processing for really graphics intents and applications in iCloud, which means you can use your devices for much more beautiful games, much more complicated games, for example, which they're stressing in this announcement.

The third is Apple's always been known for the user experience, but more and more, it's a visual user experience. So you can see how, for example, in future, they could put all of that together.

For example, you walk down the street. You photograph address. You press a button. It searches for that address online and returns two or three options. And you press another button every credit card and you buy it. Nobody else can deliver that than Apple.

QUEST: Victor, Victor, you're painting a picture that has my mind reeling. I'm not sure whether it's horror or delight. All right, well, many thanks for joining us --

BASTA: Thanks.

QUEST: -- from CNN London tonight. I'll have a profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: When anybody asks me why I like business news, well, I think of days like today. It started with the German constitutional court, not just any court, giving the green light to the ESM, the big bailout fund.

And then, we have new proposals banking union, 6000 banks across Europe, all with a single regulatory. That's something that we'll be looking at closely in the months ahead. And if that wasn't enough, just before we come non air, we here about BA Systems and EADS in merger talks. That will keep us busy for months into the future.

The landscape of Europe is changing on the corporate front, on the economic front, perhaps even on the political front. If anybody wants to know why business use is exciting, look no further than today, because that's Quest Means Business for tonight. I'm Richard Quest in Berlin. Wherever you're up to in the hour, I hope it's profitable. I'll be back in London tomorrow.

END