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Quest Means Business
Egypt in Crisis; US May Cut Off Egyptian Aid; Egypt's Economic Crisis; US-EU Spying Row; Dollar Up; Zynga Reboot; Bargain Buyback
Aired July 02, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Cairo counts down to a military deadline. Opponents and supporters of Egypt's president are gathering in their tens of thousands.
Don't spy on your friends. EU officials tell me they're furious at US surveillance.
And the carry-on crunch. EasyJet puts new limits on hand luggage. We show you size doesn't matter, it's weight that counts.
I'm Richard Quest. Tonight, as always, I mean business.
Good evening. Egypt's military will suspend the constitution, dissolve parliament, and a whole host of other actions, including creating an interim council if Mohamed Morsi fails to reach an agreement with the opposition. That is what Arab media and the Reuters news agency are reporting right now.
The deadline set by opposition protesters to Mr. Morsi's resignation has passed, and they're now threatening to march on the presidential palace. A second ultimatum, issued by the military, looms. The army says the president has until Wednesday evening to meet the demands of the people.
Reza Sayah is with me now, live from Cairo. I know it's noisy, Reza. I will speak up so that, hopefully, you can hear me. Core question: are there more people out tonight than last night and the night before?
(CROWD SHOUTING)
REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: His options seem to be decreasing and the excitement here outside the presidential palace is increasing. It's very loud out here, Richard, but we're going to do our best to describe to you this incredible scene, what's turning out to be a very large party out here in front of the presidential palace.
Tens of thousands of people out here, and they are excited because they sense that that palace behind is is soon not going to be President Morsi's palace anymore. They sense that they're close to reaching their goal of pushing President Morsi out of power.
I'm going to briefly step aside to show you what it looks like below us. Out front, you see the presidential palace, and in front, you see a sea of people going along the walls of the palace. Below us, there's people who want to get to the palace, but there's simply not enough room.
These are people, the opposition factions, who months ago called for President Morsi's ouster, and they sense their goal is near. And they started really feeling confident yesterday. That's when the armed forces came out and delivered an ultimatum to President Morsi and the opposition factions.
They gave them 48 hours to resolve this conflict and meet the demands of the people. Otherwise, they said, they would step in and put forth a road map to get Egypt out of this conflict, and they would supervise the road map.
Over the past 24 hours, little has changed. There's no indication that the opposition leaders have had any kind of significant meeting with President Morsi. And in fact, we've seen President Morsi, some of his ministers, some of his closest aids, his spokesmen, resign. So, it seems like the options for him are dwindling quickly.
There's still 24 hours left, Richard. Something, I suppose, could happen. But there's all sorts of signals that, remarkably, Egypt is inching towards part two of a revolution that started two and a half years go here.
All right. I'm going to try a question. You may not be able to hear me, in which case I -- please, do answer whatever you think. The army says it will dissolve parliament, suspend the constitution, appoint an interim council. Is that a coup in everything but name only? Do they still have in idea of transferring back to a democratic government, do you think?
SAYAH: Richard they've made clear that this is not going to be a coup. They've made clear that what the president and this government and this government and the opposition factions need to do is resolve this conflict and meet the demands of the people. And again, the demand is President Morsi's removal.
And what's excited these opposition factions, these protesters, is that there's now details, the ones you mentioned: getting rid of the constitution that's only months old, but that was so controversial. Dissolving parliament and putting in place a council that would take over leadership in what probably will be a transitional period.
So, it looks like, in many ways, Egypt is pressing the reset button on the 2011 revolution and starting all over again. And that raises a whole lot of questions moving forward.
QUEST: Right.
SAYAH: What the next transition is going to be like. It's a little too early to talk about that, but so many questions if, indeed, this happens tomorrow.
QUEST: OK. But we haven't really seen the full throttle, yet, of the pro-Morsi supporters. The man was elected. Now, at what point do you think the pro-Morsi, the Brotherhood, Muslim Brotherhood, what point do they decide to really fight back in a meaningful way, if they do at all?
SAYAH: That's another unknown. And for them, the clock is ticking. We can tell you, Richard, that over the past 24 hours, they've tried to mobilize, they've tried to put on demonstrations. They had a sit-in a short drive away from here for the past few days.
Today, with the clock ticking, they've called for more demonstrations. But make no mistake, on the streets when it comes to demonstrations, they are outnumbered. They are witnessing what we're seeing, that the opposition factions, the critics of President Morsi, they outnumber them.
But certainly, they, too, are running out of options. We have heard from some hard-line elements statements that they're willing to fight, take up arms, but it's important to point out -- and we've been to their protests -- overwhelmingly, their message is this was a democratically- elected president in a government. Instead of this conflict, let's sit down and negotiate and unite and reach a consensus.
The problem has been, the opposition leaders have repeatedly rejected that call. They describe that invitation as disingenuous. They continue to claim that this is a man, a president with an Islamist agenda.
And when you look at things right now the way they stand, the opposition leaders have very little to gain by sitting down and meeting with President Morsi because it seems -- and again, it's still too early -- it seems that the clock is ticking on him and he's running out of options.
QUEST: Reza Sayah, who is in Cairo for us tonight, doing sterling work in difficult, noisy circumstances. As we say goodbye to Reza, we'll just -- let's just pause and reflect just for a moment at the live pictures coming to us from Cairo.
Anti-Morsi protests are on the left of your screen -- well, you don't need me to explain it, you can see it. Pro-Morsi on the right. Whichever way we look at this and listen to this, obviously, the Egyptian capital at a standstill and in turmoil this evening. And just for five or six seconds, let's listen to the out pour of raw noise of the crowds.
(CROWDS SHOUTING)
QUEST: The United States says it may halt aid to Egypt if the military carries out a coup. The Obama administration's urging President Morsi to call an early election, stopped short of calling for his resignation. The US gives Egypt roughly $1.5 billion a year in aid. It's donated more than $28 billion to the country over the last 30, 40-odd years since 75.
In March, America released a further $250 million to the Egyptian government, calling it a good-faith effort. It promised more if President Morsi undertook economic and political reforms. Let's gauge the impact on all of this on Egypt's economy. Mohamed El-Erian joins us now, live from Newport Beach. He's the chief exec of PIMCO, the world's largest bond trader, a regular guest.
And you have, obviously, an interest in what's happening in Egypt at the moment. How do you gauge -- I mean, the economy's on its knees. The economy's a basket case. The economy is just about down and out and is going to need a dramatic restructuring. So, we're not really here talking just economics. We're talking economics and politics and structure and what comes next.
MOHAMED EL-ERIAN, CEO, PIMCO: Absolutely. The economy's one of the reasons why people feel that the -- President Morsi's regime has been a failure.
But there's also the issue of overreach. And most importantly, the incomplete revolution of two and a half years ago. And I think this notion that Reza put out there is absolutely correct, which is that there's an attempt by the nation to press a reset button.
And there's one very important, positive development, Richard. You are witnessing the empowerment of the people. You are witnessing the engagement of the young. For the first time in a very long time, for the last two and a half years, the average Egyptian feels that they can influence their destiny, and that is very positive for the future.
QUEST: But Mohamed, why did it go so wrong? You get rid of the previous administration. Mubarak gets halved off, loads of people get put in prison. Why did it go wrong?
EL-ERIAN: You know, a lot of us said be careful, it's not going to be as smooth as people think. The dismantling of the past happened in 18 days, and people's expectations went up high. But a revolution has to pivot. It has to pivot from dismantling the past to building a better future.
Egypt didn't have the credible leaders, it didn't have a Nelson Mandela, who could say credibly, let's forgive the past but not forget it. It didn't have the institutions. These are institutions that were co-opted for over 30 years by a very repressive regime. And it had a whole host of problems.
So, this pivot, this revolutionary pivot was always going to be tricky, and what you're seeing is the processes is working its way out in a very messy and volatile manner.
QUEST: Messy and volatile. And look, I'm going to go on a limb here -- and you'll forgive me, I've known you long enough -- as this thing plays out and the future becomes clear one way or the other, would you hope to play a role? Do you have aspirations to play a role somewhere in the country?
EL-ERIAN: Gosh, no. Richard, there are so many great people in Egypt that are much better placed than I am. I'm always there to receive a phone call, to give whatever views I can to try and bring the international perspective.
But this issue is something from within, and it's led by people -- I have been contacted by lots of the young movements, and I tell you, I am so impressed. These are people in their 30s that have incredible abilities and are taking control of the country's destiny. And I think longterm, that's really good. They don't need old people like me.
QUEST: Ah, but they may not need -- I'm not going to say old people like you. We're nearly the same -- probably the same age. They may not need old codgers like us, but they might need your advice. They might need your guidance. They might need your wisdom.
EL-ERIAN: So, I don't know if there's any wisdom or guidance, but I can certainly bring the external perspective, having witnessed these changes in South Africa and other. I think those of us who have witnessed it in various countries are very aware of the challenges. These pivots are very difficult.
We're also aware of the economic situation, and the economic situation is desperate. Unemployment is an issue, this notion of bread and justice is so important to the well-being of this country, as you have a portion of national reconciliation.
So, people like me are limited to bring in the external perspective, and there's some great people in Egypt. And that makes me hope for the long term. But the short term is going to be really bumpy.
QUEST: Mohamed, good to see you, as always. Thank you so much. You're putting it in perspective. We'll talk many more times about this, certainly, as the future moves on and we look over the options on the economic front. We appreciate your time tonight.
QUEST: Still to come, QUEST MEANS BUSINESS, a very busy night. So, from Cairo, new revelations about the US National Security Agency. European politicians are demanding answers, and a member of the parliament tells us everybody's angry.
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QUEST: It's been announced free trade talks between Europe and the United States will go ahead on Monday despite the row over who is spying on whom.
The European Commission says that for negotiations to succeed, there must be confidence, transparency, and clarity amongst the partners. All this as the French president, Francois Hollande, has threatened to call off the talks over allegations of US spying on EU diplomatic facilities in Washington.
Guy Verhofstadt leads the liberal and democrat lawmakers in the European parliament. So, the talks are going ahead, I asked him what he would like the European response to be.
(BEGIN VIDEOTAPE)
GUY VERHOFSTADT, MEMBER OF EUROPEAN PARLIAMENT: I am against this idea to block the start of the free trade agreement and the negotiations about this free trade agreement. That will be not in the interest of the European Union.
No, I'm proposing that we should hold a number of other talks with the US, talks about data protection, talks and negotiations we have for the moment on data transfer, until we know exactly first of all what is happening and until we have the clear indication from the Americans that they shall stop such practices.
QUEST: But if they say, as they seem to say, oh, come on, everybody's at it in some shape or form, we're merely intelligence-gathering. You do it, they do it, they do it, we do it. They've got a valid point, haven't they?
VERHOFSTADT: No, you do it with your enemies, not with your friends. If they do it with the Russians and the Chinese and they do it with the North Koreans and Iran, that's okay for me.
But you don't do it with your friends. You have to know, they are really listening to all the conversations inside the EU embassy in Washington, inside the EU delegation in the UN in New York, even in the buildings of the European Council. Could you imagine that Europeans do exactly the same, that there is somewhere --
QUEST: But --
VERHOFSTADT: -- I don't know what microphones in the Oval Office in Washington in the office of Obama?
QUEST: Right.
VERHOFSTADT: That should be never accepted by the Americans. Why should we accept this as Europeans?
QUEST: But if you feel so hot under the collar about it, why not hit as hard as you can, and that means the trade talks, and not on these other issues? Because the trade talks is the number one issue at the moment.
VERHOFSTADT: Yes, but the trade talks are in the advantage, as you say, in the interest from both sides, and certainly also for the European Union. So, I don't think -- I think it's a stupid idea from the European side to say, oh, now we're going to block the FTE negotiations. Then we have to block all the other fights.
And we have also to talk about another issue: is it really necessary in the future that the -- law of the United States is applicable directly on the territory of the European Union? That is, in my opinion, the question to tackle and not to block FTE negotiations.
QUEST: Fundamentally, are diplomats in Brussels and in Washington -- is it your gut feeling that they're all simply saying to each other, "Oh, let's brush this under the carpet"? Those members of parliament might be getting excited about it, but do you really fear that those in the rail politic are saying let's just brush this under the carpet?
VERHOFSTADT: Well, I can tell you there is, but the people are very angry, not only in the European parliament. Also, I spoke to a number of people of the European Commission. I have also spoke a number of leaders, political leaders in Europe, other political leaders, and everybody is very angry about this, and we want to have a clear, clear commitment by the Americans to stop it.
It's not done that in our embassies, it's not done. That in our delegates is not done. That in our EU buildings there are spy activities by the Americans.
(END VIDEOTAPE)
QUEST: Guy Verhofstadt and it's not done.
Tonight's Currency Conundrum for you. Malaysia Central Bank is to slow down production of its new bank notes. Why? Because of over supply in the economy? To help the environment? Or to encourage payments with coins? The answer is later in the program.
The dollar's up against the pound, the euro, and the yen. These are the rates.
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QUEST: This is the break.
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QUEST: Zynga has a new chief exec. The man who founded the social gaming firm will step aside, and in his place, the former Microsoft Xbox chief, Don Mattrick. Wall Street seemed to like the change. Zynga stock jumped up on the news.
In New York for us tonight, CNN's Alison Kosik. So, the man who founded it gone. Another example of a founder who's foundered in their own right.
ALISON KOSIK, CNN BUSINESS CORREPSONDENT: Exactly. And investors continue to cheer this move, Richard. You look at shares, they're rising again today, Zynga shares up more than 5 percent right now, after gaining ten percent yesterday.
As you said, CE"O and founder, Mark Pincus, stepping down as CEO after a year full of layoffs and more than a dozen games that shut down. You look at a blog post, where he said, "I've always said that if I could find someone who could do a better job as our CEO, I'd do all I could to recruit and bring that person in. I'm confident Don is that leader."
But come on, this isn't such a huge surprise. It's been pretty darn clear, Zynga has been in trouble for months. It laid off 18 percent of its staff last month, closed three offices. That, Richard, was after it already cut 5 percent of its workforce last October.
So, it was a struggle even before that, with shares down 67 percent since December of 2011, its IPO.
QUEST: All right.
KOSIK: The games only did so much, so --
(CROSSTALK)
QUEST: But it must still --
KOSIK: -- new CEO stepping in, Richard.
QUEST: -- it must still grate, if you've found something or you're the founder, and you get booted out the door or somebody takes it. It must still hurt.
KOSIK: Well, he is going to remain the biggest shareholder, so he's still going to have his fingers still dabbling in the way things operate there. So, you'll still see him around the office, I'm sure.
QUEST: Alison Kosik, who's in New York getting ready for July the 4th. Alison, many thanks for that.
QUEST: Bebo, a site millions thought they'd outgrown may also be making a comeback. The fonder, Michael Birch, has tweeted -- come over here. This is a fascinating story.
Now, Michael Birch tweeted, "We just bought Bebo back for $1 million. Can we actually reinvent it? Who knows? But it will be fun trying." All right.
But then, of course, you have to bear in mind, they sold Bebo to AOL in 2008 -- $850 million. In 2008, they sell it for $850 million. In 2013, they buy it back for $1 million. Other dates of importance: in 2010, Bebo shut down and sold on.
It was once considered indispensable, but Bebo loses out to more popular rivals like Twitter and Facebook. And in 2013, the Birches buy it back for a -- I was going to say a fraction of what they paid for it. This isn't a fraction of what they paid for it. This is -- this is a decimalization of what they paid for it. They're planning to relaunch the web space, but of course, it does all have overturns of MySpace 2011.
Let's talk about this. Hussein's with me. Hussein Kanji joins me. You sell it for $850 million. You buy it back for a million. Nice work if you can get it.
HUSSEIN KANJI, PARTNER, HORTON VENTURES: Absolutely. Not only that, they sold it for $850 million, but they pocketed $595 million. So, what's a million out of $595 million. Where's the punt, right?
QUEST: Right. So, what are they going to do with it?
KANJI: That's a big question. It's probably going to have to do something that's very mobile-centric. Almost everything in the future --
QUEST: No, but, what's its -- what's its space? You've got Facebook, you've got Twitter. MySpace is going to have another bash at doing everything. There's enough lifestyle, social media sites. What's its USP?
KANJI: I agree with you. I think it's basically -- its USP was to build something and sell to social networking site to a bigger, dumber company, which was, at the time, AOL.
QUEST: Hey, hey, that used to be part of this company.
(LAUGHTER)
QUEST: I'm saying nothing. What do you think they're going to do with it?
KANJI: I don't know. I think it's a small piece of money for Michael Birch, right? Given that me made $600 million just about in the acquisition. So, I think he's going to roll the dice. I think if he's smart, which he is, I think he's going to probably make it very mobile- centric.
Is it going to become another Snapshot? Is it going to become another Instagram? Who knows? It's really hard, right?
The problem is, the social networking space -- and this is a space that was really interesting in 2005 to 2009 -- it's now -- it's consolidated, right? We have a winner. In every single market where Facebook entered, once you got to a certain critical mass, it took over.
And even now, Facebook is under threat on the mobile side, because people don't want to use Facebook on a mobile phone. They want to use something like Snapshot or Instagram. So, it's a --
QUEST: Which, of course, got sold.
KANJI: Which -- yes, which also got sold. Well, Snapshot just raised a bunch of money, right, with an $800 million valuation? Brings back --
QUEST: But this consolidation means that the Facebooks and even the Googles, before it all sort of went wrong on their strategy, this idea of paying a billion for people like Instagram to bring them into the family.
Which, look, here's the problem for Birch and co. You may buy it for a million, but if you're not prepared to $100 million in, you ain't going to go to the party.
KANJI: No, no. I don't know if -- I'd push back on that, right? It doesn't take very much capital. You have to remember, even Instagram was three to four people, up to six or seven people by the time -- and when it got acquired, it was 13 people. It didn't take very much to build a billion-dollar company in Instagram. It didn't cost very much, either. It built a good app, started getting viral.
QUEST: If you've got a new and better mousetrap.
KANJI: Yes, if you have a new and better mousetrap. So now the question is what does Bebo take a 2008 technology, which they're probably going to throw away --
QUEST: Right.
KANJI: -- and what are they going to reinvent themselves into? They have 30 million users, right? So, are 30 million users worth a million dollars? Maybe. And if you remember, Classmates.com, I pulled up the stats a little bit earlier.
QUEST: Of course I do.
KANJI: 55 million users. Bebo is now smaller than Classmates.com, and I don't know if anybody uses Classmates.com.
QUEST: Friends reunited.
KANJI: Friends are reunited in the other ones.
QUEST: We could go down the list of great disasters that we've known and loved in the -- but it comes back to this idea of what you do with it, doesn't it? So you don't pour good money after the bad money that's already gone.
KANJI: Right. Well, this is first of all not a lot of money for Michael. So, it's a million bucks out of $600 million.
QUEST: Right.
KANJI: And it's not going to cost a lot of money to reinvent it.
QUEST: If they've got a good idea. I keep throwing this at you.
KANJI: If they have a -- I totally agree with you. If they have a good idea. I don't know if they have a good idea, but we're going to find out. You saw his tweet.
QUEST: Good to see you.
KANJI: You, too.
QUEST: Good to see you, many thanks, indeed. All right. Bebo, we're going to watch it. Have they got a good idea? A million bucks worth of an idea?
The suspense on Wall Street -- there's a Friday's job report. We've also got July the 4th coming along. Investors turn their attention. We'll talk the former Fed economist about what to expect. It's QUEST MEANS BUSINESS, excuse me, good evening.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Straight to Egypt and to Cairo. Egypt's military will suspend the constitution and dissolve parliament if President Mohammed Morsi fails to reach an agreement with the opposition, according to reports from Arab (ph) media and the Reuters news agency.
Mr. Morsi's opponents are threatening to march on the presidential palace after he ignored their deadline. These are live pictures. There are now protests from the pro- and the anti-Morsi brigades taking place in the city at this moment as the evening wears on, large, noisy protests.
The former U.S. security contractor, Edward Snowden, has withdrawn his request for asylum in Russia. After the Russian president warned Snowden would have to stop leaking information about the U.S. government if he wanted to stay. The asylum request had been made on Snowden's behalf in some 20 other countries.
Five suicide attackers have killed several people in Kabul outside a compound housing NATO suppliers. Militants detonated a truck bomb before attacking guards in a gunfight. Four guards and two civilians were killed along with all of the attackers. The Taliban have claimed responsibility.
Barack Obama's returning home from Tanzania after a week-long tour of Africa. Earlier today, the president laid a wreath for the victims of the 1998 U.S. embassy bombings in the Tanzanian city of Dar es Salaam. Mr. Obama also visited Senegal and South Africa as part of the trip.
The Catholic Church is on the verge of declaring Pope John Paul II a saint, a Vatican source has told CNN. The committee that considers candidates for sainthood voted on Tuesday to credit the late pope with a second miracle, according to the source. Pope Francis must sign on the decision before it comes official.
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QUEST: The Fourth of July is on Thurs, Independence Day in the United States. For Wall Street, the real fireworks will come on Friday at the release of the latest U.S. jobs report. Economists on average expecting a rate of about 155,000 jobs in June. The economy has been showing signs of strength.
So putting in perspective home prices in May jumped 12.2 percent, compared to last year, the biggest gain in seven years. The company that crunches the numbers, Core Logic (ph), says pent-up demand, low interest rates are all driving up prices and it expects the trend to continue through the summer months.
As for the market itself, modest gains are up before July the 4th, up nearly 70 points. Wall Street's open for half a day tomorrow; closed on Thursday. Oh, I do beg your pardon; I'm so sorry. I was so exuberant, exuberance got me. Down 70 points (inaudible) -- I was looking for a big of optimism.
Nathan Sheets joins us from New York, global head of international economics at Citigroup. Yes, look here, you see, Nathan, the mere thought of July the 4th, a few fireworks and I manage to get the market going in the wrong direction.
Are you optimistic going into the summer about what you're seeing in the underlying economic strength?
NATHAN SHEETS, GLOBAL HEAD OF INTERNATIONAL ECONOMICS, CITIGROUP: I think, on balance, the answer to that is yes, as you mentioned, the housing market is looking better. It has broad reaching implications for the U.S. economy through a lot of different channels. We're seeing better positions in terms of households and their balance sheets.
We're seeing some gradual improvements in credit availability. And then in addition, the U.S. corporate sector's in very strong shape. It's profitable; it has strong balance sheets and it's internationally competitive.
So I think that there are a lot of positives that are now coming together and hopefully we'll see a stronger pace of growth and stronger labor market over the next 3-6 months.
QUEST: And that, of course, is what Bill Dudley of the New York Fed has been saying only today, saying that basically he's looking forward to stronger growth in 2014.
So the question is this: has Ben Bernanke absolutely done the perfect thing? He's raised the tapering; he's got it out there. The market has had its bout of gout and indigestion and now when it happens it'll be yesterday's news.
SHEETS: This is very much Ben Bernanke's commitment to communication. He wants the markets to know what is in his mind as quickly and as completely as possible. And as you just articulated, he is considering tapering. He's not trying to keep that a secret. He wants the markets to know it. And it allows the markets to adjust incrementally to this new reality.
So I think that in some sense what Bernanke has done is he's front loaded. But I think he's also preempted an even more significant market reaction. So I think you're right.
QUEST: Do you have any idea whether this bizarre movement in gold, down and up and down -- does it make any sense whatsoever, other than the sheer technical fundamentals if the dollar is a bit stronger? But otherwise, it beggars belief.
SHEETS: I have to say that I've never been a big fan of gold, that I don't understand really the fundamentals of what drives that asset. And it makes me nervous. Now if you were to press me for an answer, I think that what I would say is that many people look at gold as a hedge against inflation. And looking around the world right now, it's true in the United States; it's true in Europe; it's true in the emerging markets, there just isn't much inflation to worry about. And as we've seen as the price of gold is correspondingly fallen.
QUEST: Now as you go up to a -- what I hope and trust is a lovely July 4th break with your family, what will be your biggest economic worrying concern at the moment?
SHEETS: So I think that the big question for the U.S. economy now is what's going on in the manufacturing sector. We've seen some soft industrial production data over the last month or two. The manufacturing (inaudible) has been soft for a while.
And is this just underlying question marks? Or is it something more deep about what's happening in the global economy and particularly about China? The Chinese economy has been a key driver of global manufacturing. As we see manufacturing soften, it leaves me worried that maybe the Chinese economy has downside risks.
QUEST: Wonderful to see you. Have a lovely break over July the 4th - - I keep saying Thanksgiving -- July the 4th, Independence Day. We thank you.
Nathan Sheets, joining us from New York, global head of international economics at Citigroup.
Now cabinet ministers across Europe are losing their jobs over budget disputes either being forced out or more often than not they seem to be resigning. Portugal's foreign minister, Paulo Portas quit on Tuesday. That's just 24 hours after we told you last night the finance minister was gone.
Portas was a critic of Portuguese governments' tough spending and austerity cuts. We're expecting a statement from the prime minister shortly.
Don't criticize the boss in France. The environment minister Delphine Batho was sacked by Francois Hollande. She'd described this year's budget as a bad one, her ministry. He prefers ministers to be punished for criticizing policy. Are the wheels coming off the wagon?
Meanwhile, the French unemployment rate is even worse than previously thought. The E.U. says there was an error in the data it released yesterday. In the figure for France -- extraordinary, this -- should have been half a percent higher at 10.9 percent.
That's the highest it's been in 15 years. Many of the country's most talented entrepreneurs, a sluggish French economy, isn't providing an incentive to stay. As our correspondent in Paris, Jim Bittermann explains.
(BEGIN VIDEOTAPE)
DIDIER DELMER, BUSINESS BOOSTER LIMITED: (Inaudible) today, in 2013, France exports its talents and imports the world's misery.
JIM BITTERMANN, CNN SR. INTL. CORRESPONDENT (voice-over): Didier Delmar has some justification for that opinion. A Frenchman living in London, he's made a business out of helping his fellow citizens who want to leave and resettle elsewhere.
DELMER: They come to us because France is a fiscal hell, OK? And the -- our firm (ph), Business Booster, they help French entrepreneurs relocate to business and tech-friendly London.
BITTERMANN (voice-over): And with, by some estimates, 300,000 French now living in London, some in Paris joke that London's becoming the fifth largest French city. But why pick up and leave your homeland? For some like Laurent Villerouge, it is the lack of venture capital and an overabundance of red tape.
Villerouge created a system that makes electricity out of the pressure of passing footsteps on sidewalks and can use it to power streetlights. He had a successful trial run in the city of Toulouse and in the years since, he's been trying unsuccessfully to find someone in France willing to become a partner in his project.
LAURENT VILLEROUGE, ENTREPRENEUR: Everybody but me, you have (inaudible) idea, fantastic idea but nobody want to put one door up in project.
BITTERMANN (voice-over): So now Villerouge is leaving, taking his idea to the U.S., where he says several energy companies are interested in developing it. But even more worrisome for some, perhaps, are people like Gilles Saraf, a product that finances free education in one of the best business schools, he found it impossible to get a job in his major, business negotiation.
So he's now learning how to make crepes because, after a thorough study, he's planning on taking his entrepreneurial spirit and brain power and moving to Lima, Peru, to open what he hopes will one day be a chain of creperies.
GILLES SARAF, BUSINESS SCHOOL GRADUATE (through translator): It's a shame that France can lose people who have the business spirit, want to create businesses, because France also needs entrepreneurs but, unfortunately, does not give them the right means to allow the entrepreneurs to stay here and conceptualize their business.
BITTERMANN (voice-over): Those in government seem unable to stem the outgoing tide. The minister in charge of small business recognizes that there are 60,000 French young people working America's Silicon Valley, for example. Taking a positive bent, she says she hopes that will give them some international experience.
FLEUR PELLERIN, FRENCH MINISTER OF SMALL BUSINESS AND DIGITAL TECHNOLOGY: It's a great asset for them. But I think we need to create the conditions for these people, these entrepreneurs, these people who (inaudible) to come back to France and to set their own business in France and (inaudible) in France.
BITTERMANN (voice-over): Two specific programs the minister pointed to are ones that would free up venture capital and remove bureaucratic requirements for business startups.
In the meantime, there is little patience among those who want to leave. According to one recent survey, a quarter of French young people now say they see their future outside the country.
And Didier Delmar's phone in London has not stopped ringing.
DELMER: (Inaudible). And all the brains are leaving. All the -- you have to ask me -- give me one reason why they should stay in France, because of the cuisine? You can cook anywhere in the world.
BITTERMANN (voice-over): Jim Bittermann, CNN, Paris.
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QUEST: Before we go to the break, let's just take a quick -- take you back to Cairo, very briefly.
This is a pro-Mohammed Morsi rally in favor of the president, which proves, of course, that it's not all one way. But as our correspondent, Reza Sayah, was telling us earlier, there are sizable numbers at the pro- Morsi rallies. But the numbers at the anti-Morsi rallies are simply much, much greater.
When we come back after the break, we'll be talking about having baggage. New rules of easyJet and why size might or might not matter.
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QUEST (voice-over): The answer to tonight's "Currency Conundrum," why is Malaysia's central bank slowing down the production of its new banknote? The answer is to help the environment. The central bank says it's easing off production of the polymer RM 1 and 5 banknotes because printing new bills is a waste of natural resources.
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QUEST: Welcome to the cabin and the departure lounge. The low-cost European carrier easyJet announced changes to its cabin baggage policy. Now what it means is that larger carryon cases are no longer guaranteed to go into the overhead compartment. If the plane gets full, well, then that might have to go into the hold.
However, if you have a slightly smaller case, this is guaranteed to go into the overhead compartment; they will find room.
But here's my take on all of this. Whether it's a little or a bigger one, it doesn't really matter because it's not the size of the bag that matters, oh, no. It is actually how much the airline will actually let you put in the bag that is of crucial importance.
So if you take, for example, what the airlines are all offering, easyJet says it -- and you've got different -- Germanwings and British Airways all have different limits. It seems to be we've got these -- it seems to be most airlines will allow you to take 8 kilos. That's 3 -- this is -- 6, 7, 8. Some airlines like Ryanair will let you take 10 kilos in the bag.
Then you get other airlines, like British Airways, which basically let you take 23 kilos in the bag.
And finally -- so now it's getting a bit heavy. (Inaudible) tell, try and get that into the overhead compartment. It's just sugar and things.
Now finally, you end up with those, like easyJet and Wizz Air. Let's say there's no weight limit, not at -- provided the bag's the right size -- we had to use these -- no weight limit to what you can actually put in the hold -- in the overhead, provided you can lift it in there yourself.
This has now got about, I don't know, 25 kilos into the bag. And I promise you, try and get that into the overhead compartment without -- you get the idea.
So it's not size; it's actually weight limit that's the crucial point about what you put in your bag.
The heat is still scorching in parts of the U.S. Southwest. Jennifer Delgado is at the CNN World Weather Center for us tonight.
JENNIFER DELGADO, AMS METEOROLOGIST: I think you worked yourself up over there, too, with a little bit of heat.
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QUEST: I've worked up a sweat.
DELGADO: You did, quite a sweat over there. OK. It's -- unpack your kilos.
All right. Let's talk about the weather across parts of the Southwest. The temperatures are slowly getting a little bit better, but they're still dangerously hot. Look at these numbers from yesterday alone, 52 degrees once again in Death Valley. We do know that the record 56.7 was set back in 1913. And then for Las Vegas, 44 degrees.
So we're getting closer to our average should be, but still dangerously hot out there. And that's why we still have a lot of these warnings in place. You can see for areas including Arizona, Nevada as well as into California and even up towards the Pacific Northwest, there are heat advisories because it's hot up in the north as well.
But look at these temperatures. As I said to you, the temperatures are getting a little bit closer to seasonal for this time of the year. We're going to drop back down into the lower 40s, still a touch above average, but certainly more bearable than what we saw when the temperatures were in the upper 40s. For Las Vegas, if you're heading out there, temps in the mid-40s.
Now we hop on over to Europe. And really the weather there has been rather quiet over the last couple of days, a ridge of high pressure over to the east, lifting up towards the north. That's going to bring quiet weather for areas including Russia.
But we do have a frontal system in place. And this is going to be bringing some rain through central parts of Europe, and that includes Germany, spreading all the way up to areas, including Norway as well as into Sweden.
And then on the western coast, this ridge of high pressure is allowing temperatures to really heat up across Spain as well as into Portugal but up towards areas including England the weather is actually going to cooperate.
The temperatures, as I said, warm in Madrid, 37 for the high. And then for Bucharest, we're talking into the upper 20s. And then generally just a lot of 20s out there, hard to find any 30s. But yes, there was a little bad spot across the weather today and across parts of England. We had some rain that disrupted play for Wimbledon.
But as we go through the next couple of days, Richard, here's the proof for you as we go Wednesday into Thursday into Friday.
We're going to see the sky brightening and the temperatures will respond by warming up as well and for the Tour de France -- and we're also talking about for the finish into Marseilles, temperatures are going to be nice. We're talking 26 degrees. And want to keep conditions dry, you have my word.
QUEST: Many thanks for that, Jennifer Delgado at the World Weather Center.
Coming up next on QUEST MEANS BUSINESS.
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UNIDENTIFIED MALE: (Speaking foreign language).
QUEST (voice-over): A moment out of control. Find out what it cost the billionaire Alexander Lebedev.
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QUEST: The Russian billionaire Alexander Lebedev has been sentenced to community service instead of jail time for punching a rival on television almost two years ago. You'll remember the pictures.
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UNIDENTIFIED MALE: (Speaking foreign language).
QUEST (voice-over): A Moscow court found the owner of the "London Evening Standard" newspaper guilty of assault. A more serious charge of hooliganism was dropped. Lebedev plans to appeal against the verdict.
CNN's Phil Black spoke to Lebedev about these charges back in September and asked if he felt any regret about losing control.
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ALEXANDER LEBEDEV, BILLIONAIRE: I might have overreacted. I mean, normally I'm a very quiet person and I was not looking for any violation of public order.
PHIL BLACK, CNN CORRESPONDENT: The charge itself was interesting, hooliganism, which we know was the same charge brought against the women from Pussy Riot; but in this case, the allegation is political hatred.
What do you make of that? You could get five years for this.
LEBEDEV: How could political hatred emerge from a completely cut-out and edited discussion about some murky subject of the world economic crisis, I mean, what enough is it? But, I mean, what political hatred? Why should be considered as hooliganism?
Same as the Pussy Riot case. It's clearly a political case. All motivation is political. Everything else is fabrication.
BLACK: Well, it's taken investigators one year to look at the tape, to interview the witnesses and to decide to proceed with this.
Why do you think they're doing this now?
LEBEDEV: Well, they've given me a year to think about my behavior and when pressing the charges, leaving this article, which is completely unsubstantiated, but carrying a possible heavy sentence in prison, they would give me time to think about possible emigration.
This is all very standard.
BLACK: You're not the first wealthy Russian businessman to find himself in this situation. And many of those that have come before you now live in other countries, some are still in prison. It's no secret there are said to be a law in this country which says wealthy businessmen should not get involved with politics, should not openly oppose the government.
Do you think that's true, that such a law exists?
LEBEDEV: Yes, it's a rule. It clearly exists. It just -- I thought that I'm not a politician. I'm just a publisher of a paper. I'm also a citizen who might, from time to time, voice concern about certain things.
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QUEST: That, of course, Alexander Lebedev, talking to our Phil Black last year.
"Profitable Moment" after the break.
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QUEST: Tonight's "Profitable Moment": a lot of noise and fuss is being spoken about these smaller bags allowed on cabins of planes. But fact is, as long as you and I all want to take a bag on board, well, the bags have to get smaller.
And what really matters is not how big the bag is, but how much you can put in it, what is the weight allowance? Because the fact is if all you're allowed to do is take 8 kilos or 9 kilos, well, you're wasting your time anyway. That's barely enough for a pair of underwear, socks and a clean shirt, though the truth is it's all about the weight when all's said and done.
And that's QUEST MEANS BUSINESS for this evening. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable.
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QUEST (voice-over): The headlines at the top of the hour: pro- and anti-Morsi protesters are massing in the Egyptian capital, Cairo. President Morsi's opponents are threatening to march on the presidential palace after he ignored their deadline to stand down.
This was the scene a short time ago in the Nasser City, where pro- Morsi rallies are being held. Media and Reuters news agency reporting the Egyptian military will suspend the constitution and dissolve parliament if they fail to reach an agreement with the opposition.
The former U.S. security contractor, Edward Snowden, has withdrawn his request for asylum in Russia after the Russian president warned that Snowden would have to stop leaking information about the U.S. government if he wanted to stay.
Barack Obama's returning home from Tanzania after a week-long tour of Africa. Earlier today, the U.S. president laid a wreath at the -- for the victims of the 1998 U.S. embassy bombings in Dar es Salaam.
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QUEST: Those are the news headlines for you this evening. Tonight, to New York, where, of course, "AMANPOUR" is live.
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