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QUEST MEANS BUSINESS
Portugal's Government in Crisis; Britain's Budget; Remembering Elizabeth Taylor
Aired March 23, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Tonight, Portugal's government in crisis. The prime minister says he will resign if the austerity plan is not approved.
Britain's budget for business, tax cuts for companies in a bid to boost growth.
And as you heard in the headlines, the screen icon Dame Elizabeth Taylor has died in Los Angeles at the age of 79.
We have a busy hour together. I'm Richard Quest, and I mean business.
Tonight two European countries are facing up to a future of cuts and the painful political consequences that go with them. Hours after Britain set its 2011 budget a package of austerity measures is now facing the vote in Portugal's parliament. And it all takes place before a key summit in Brussels, one of Europe's most fragile economies facing political upheaval.
We will get to the British budget in a second, but at this very hour, well, Portugal's government is in trouble and is believed it could fall within the next couple of hours. The Prime Minister Jose Socrates is due to speak at 8:00 p.m. in Lisbon, just two hours from now, when he is expected-we can't confirm-but he is expected to stand down.
The pictures you are looking at now are from parliament in Lisbon, where lawmakers are deciding whether to approve Portugal's deepest spending cuts in more than three decades. The PM says he'll go if that plan is rejected. He calls it a program for stability and growth. Opponents say it is austerity and they'll throw it out.
Portugal's finance minister has pleaded for a vote in favor.
(BEGIN VIDEO CLIP)
FERNANDO TEIXEIRA DOS SANTOS, FINANCE MINISTER, PORTUGAL (through translator): These new measures, at this time, are of a pressing need. That is because the country has to show before its partners, before various institutions within the European community and before those who finance it, that it can meet the objectives that it proposed.
(END VIDEO CLIP)
QUEST: Now, showing exactly why it is unlikely that either the measures will be passed all together and will survive, the prime minister abandoned parliament shortly after that speech ended. If and when the vote happens in our time, we will bring it to you.
But you need to know why Portugal's prime minister believes the country needs to make those cuts. He has always said the country does not need a bailout. And yet borrowing costs area at levels that could force it to seek international support.
This is the gap. Take for example, Portugal, Ireland, and Greece. Now 13 percent is the very top level, of course, where we're seeing Greece at. If you look at Ireland in the middle, but Portugal is the unlucky number 7. Once borrowing costs on bonds get to 7 percent, it is a killer for the budget of the country involved. It is, in the language of the markets, it is unsustainable; 3, 4, 5, 6, 7, there you have Portugal, once again, just around the 7 percent. At that level it cannot sustain its mechanisms for borrowing. Not, indeed, without some form of international and European support.
As we move on toward the other country that was in the news today. In Britain it was, of course, the budget where austerity measures are hurting the U.K. Britain's growth forecast for the year has been cut to 1.7 percent. It is budget day. Jim Boulden explains how the finance minister is handling the economy.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT (voice over): With higher inflation, more borrowing, and slower economic growth than once predicted, you might be asking if Britain's conservative-led government is rethinking its tough five-year austerity program unveiled last year.
GEORGE OSBORNE, U.K. FINANCE MINISTER: We are able now to set off on the route from rescue to reform, and from reform to recovery.
BOULDEN: Not a chance says Finance Minister George Osborne, as he delivered the country's budget for the year, starting in April. So he did say the pain for households and taxpayers won't get any worse, for now anyway.
OSBORNE: Without stability governments have to keep coming back to their citizens for more, more taxes, and more spending cuts. In Britain we do not have to do that today.
BOULDEN: In fact, Osborne announced a tax cut for companies. And that is a wake up call for other governments. Britain will cut its corporate tax rate to 23 percent by 2014 to lure firms and jobs.
OSBORNE: 16 percent lower than America, 11 percent lower than France, 7 percent lower than Germany; the lowest corporation tax in the G7. Let it be heard clearly around the world, from Shanghai to Seattle, from Stuttgart to San Paolo, Britain is open for business.
BOULDEN: Though the move will cost billions of dollars of revenue in the short term, and not apply to the unpopular banking sector, business leaders applauded the move.
DIGBY JONES, AUTHOR, "FIXING BRITAIN": If I was a small business, big business, a business wanting to invest in this country, I think it is a budget for them.
BOULDEN: The opposition Labour Party says this budget, on top of the five-year plan to dramatically curb spending and raise taxes, it is just more pain for families and the economy.
ANGELA EAGLE, U.K. LABOUR PARTY: The problem is that we may have a pretty joyless, jobless recovery. And it is not an answer for this country if we manage to get technical growth back but we've still got millions of people unemployed. You can't get the deficit down with high levels of unemployment.
BOULDEN: Osborne says sticking to the austerity sets Britain apart from other countries. As he strives to bring down the country's highest peace-time budget deficit and a debt mountain that is worse than many other countries.
OSBORNE: This is our powerful monetary stimulus to our recovering economy. Stability, credibility, lower interest rates, that is what we have achieved.
BOULDEN (On camera): But as this budget is released, the economy is facing inflation at more than 4 percent and an economic growth rate revised down to just 1.7 percent for this year. The challenge for George Osborne is to keep his austerity program going without pushing the economy into a double-dip recession. Jim Boulden, CNN, London.
QUEST: Bob Parker is the senior advisor at Credit Suisse and joins me now.
We are not overstating are we? Look at it, Portugal, which we're waiting for the vote, the U.K. in austerity. Why would anybody want to invest in this continent?
BOB PARKER, SENIOR ADVISOR, CREDIT SUISSE ASSET MANAGEMENT: We've got very strong growth in Northern Europe; if you actually look at the zone of German, Netherlands, Austria, to some extent, France, and very importantly, very strong economic growth numbers in Scandinavia. And there are initial signs of actually a recovery in economic activity in Ireland and Spain.
QUEST: Let's start, though, with Portugal, which is the news tonight. I mean, are you still expecting it does have to get financial assistance?
PARKER: I think it is a very high probability that Portugal will have to go to the bailout fund, irrespective of whether this government falls or not. Now the austerity package, which is being-which is going through the Portuguese parliament at the moment, that actually was advised on by the European Union and the European Central Bank. If it doesn't pass I think it is inevitable they go to the bailout fund.
QUEST: It is inevitable if they can't get it?
PARKER: Yes, that is what the markets-
QUEST: And even if they do get it through, they still may have to, as Greece got a bail out package, Ireland got it's package and still needed funds.
PARKER: Yes, but I think the problem with Portugal is different from the problem-I mean, Ireland, where the problem was a real estate bubble bursting. And in Greece it was a problem with the public sector finances. Portugal has been a zero or near-zero growth economy for many years now. So it is a question of lack of revenue generation.
QUEST: Competitive-unwinding of the economy?
PARKER: Right. And they need to take, actually, not just budget action but structural action, which Spain has taken quite successfully.
QUEST: The U.K. budget today, I mean, some will say this was just a holding budget. It was not a terribly significant one. Do you believe that the chancellor has-he stuck to his guns on the austerity plans?
PARKER: I think he's got an alternative. You know the austerity plans in terms of reducing what was an exceptionally high budget deficit last year. There is a three- to four-year plan to eliminate that budget deficit. After you have announced it in 2010 you can't suddenly turn around in 2011 and say, actually I'm changing it radically.
QUEST: No, but you do see a lower growth number forecast at 1.7 percent. And that they say is largely, or partly, because of the higher oil price and commodity prices. Well, obviously there are a number of negative factors. You know, why have we got 4.5 percent inflation, in the U.K., and probably going higher short term.
PARKER: And there are a number of factors like oil prices, like food prices, and then still the impact of the devaluation of sterling, back at the end of 2008.
QUEST: Is it your anticipation, or your expectation that the U.K. economy in '11 muddles through.
PARKER: Well, that has always been our central case. And, you know, how do you define muddling through? And the answer is growth of plus or minus 1.5 percent. And today, you know, the government have come out with a revised forecast of 1.7 percent. So giving forecasting, that forecast, that revised forecast seems right.
QUEST: We need to widen our (UNINTELLIGIBLE) to the rest of the world, in a sense. Libya, the Middle East unrest, Japan, and an oil price that is stubbornly now above $110 on Brent?
QUEST: Of those factors, oil doesn't come down. When does that oil price start to do serious damage, Bob?
PARKER: There are two factors on oil. Number one, how high does the oil price go? And how long does it stay there. And if the oil price spikes up to $130, $140, just for a week or so, the economic impact is very low. If it stays at this level for the rest of the year, and actually now look likely as though it will, then actually one has to revise down, modestly, very slightly, your growth forecast for the rest of the year.
QUEST: But perhaps ex-Japan, you are not seeing any real sign of double dip in any major economy?
PARKER: I think the probability of that happening is very low. With one or two exceptions, like the housing market, the U.S. economy still is on track for 3 percent growth. Northern Europe, as I mentioned, still strong growth. Most emerging countries, again, the growth outlook is reasonably strong.
QUEST: We thank you as always.
PARKER: Thank you.
QUEST: Many thanks indeed.
Now the markets: In London the FTSE gained more than half of 1 percent after the-after the budget-I completely forgot who it was for a second there. It was the chancellor, of course, who presented the budget. It was such an exciting event.
All of the major markets finished up. Banking stocks struggled across the continent, not least in Portugal. If you are talking the PSI, that was down around 1 percent.
We are still awaiting the vote taking place in Lisbon. But when we come back, she dazzled, she delighted, and we were watching every step of the way. Elizabeth Taylor died this morning in Los Angeles. And we will remember a Hollywood star.
QUEST: Iconic, beautiful, controversial, after a light in the spotlight what else is there perhaps to say about Elizabeth Taylor? The acting legend who died today. Who will ever forget shots and pictures, photographs like these? They will be part of Hollywood's folklore for generations to come.
In her heyday Elizabeth Taylor attracted that kind of attention that was just about unheard of at the time. She help set the bar for big name actresses in the future. Her role in "Cleopatra" made her the first woman to make $1 million for a movie.
(BEGIN "CLEOPATRA" MOVIE CLIP)
ELIZABETH TAYLOR, ACTRESS: You come here running over with wine and self-pity. You conquered Caesar.
RICHARD BURTON, ACTOR: For so long now you have filled my life. I have a great noise that I hear everywhere in my heart. I want to be free of you, of wanting you, of being afraid.
TAYLOR: But Caesar will not permit it (ph).
(END MOVIE CLIP)
QUEST: Elizabeth Taylor and Richard Burton. And Ms. Taylor died in her sleep this morning in Los Angeles, after a six week hospital stay. She had been struggling recently with heart problems. And she was 79 years old.
As we look back on her life some well-known people are saying and Tweeting about Elizabeth Taylor's passing. And Elizabeth Taylor, herself incidentally, was very much somebody who liked to send out her own Tweets. "The Tweets From The Top".
The basketball legend Magic Johnson, who is HIV positive, Tweeted today. "Elizabeth, thank you for all your help in the battle for HIV and AIDS. You will be missed by the world."
The singer, George Michael, sent out a Tweet today, saying, "Elizabeth Taylor was the last of the Hollywood greats. A fantastically charming woman. I am proud to have known her, if only a little."
Someone who knew her a lot, was my former colleague from CNN, Larry King. He was a close friend of Elizabeth Taylor. And he Tweeted today, "Elizabeth Taylor was a great friend, a great star, and one gutsy woman. She was so special, you won't see the likes of her again."
A short while ago, Larry King joined me on the line, from Los Angeles, and I asked him what he remembered most about Elizabeth Taylor.
(BEGIN VIDEO CLIP)
LARRY KING, FMR. CNN ANCHOR: Richard, I will most remember her vitality, her gutsiness, her loyalty. There are so many-her talent, her beauty, her inner beauty as well as her outer beauty. Her willingness to stand up for a cause even when it wasn't popular. Her love of life, her incredible life that she led. No one, I can think of no one, who led a life approximating Elizabeth Taylor's.
QUEST: In those later years we often saw her as a troubled person, through illness, and the like. But privately, did that come across? Did she bear those scars well?
KING: She did. She never really complained-you know she was almost constantly had back pain. It is the same thing as John Kennedy, who never complained about his. I would say she was always in pain in the later part-maybe the last 25 years of her life. I never heard her say I'm not feeling well. I never heard her-you know, be-why is this happening to me?
As I said, Richard, everything that could happen to a person happened to her. Fame and sadness, loss and gain, talent and talent hurt by the- what has become a tabloid culture. She was the first paparazzi person.
QUEST: And on that, Larry, will we, do you think ever see the like of level of stardom, that huge global icon?
KING: Good question. No, Richard, that is gone. It almost can't happen because of the studio, there is no studio system today. Actors are all independent. They sign their own deals, work for whomever they work for. She was larger than life. There is no person larger than life, there is no talent bigger than hers. When Elizabeth Taylor was the screen, you went to the film. You went to the movies. And it all encompassed into one, you knew her private life, you knew her public life. You knew her loves, you knew her sadnesses, you knew her ups, you knew her downs. We'll never see the likes of that again.
And, Richard, you will never see eyes like that again. She had violet eyes, but not just violet eyes, beautiful violet eyes. I've never seen a color like that-anywhere.
QUEST: Larry King remembering Elizabeth Taylor, who died today.
Now, when we come back after this short break, "Future Cities".
(BEGIN VIDEO CLIP)
QUEST (On camera): Steps to modern Rome, when we come back, we visit buildings like clouds, and Swiss cheese, in a moment.
(END VIDEO CLIP)
QUEST: Think of Rome, especially in the spring, and what comes to mind? Ah, the Coliseum, the Trevi (ph) Fountain, and don't forget those Spanish steps. Perhaps you are not going to think about Rome's business district, the EUR. Well, in the future you could, because it is fast- emerging as a rival to the capital's ancient monuments. For this week's edition of "Future Cities" I forsake, or forsook, the famous parts of Rome and I went to see the EUR, and how it is hoping to reflect the modern face of Italy's capital.
QUEST (voice over): A city overflowing with antique charm. Rome's narrow medieval alleyways, sculpted churches, and cobbled piazzas, they've remained largely unchanged for centuries. What is a source of delight for archeologists is a hindrance to architects.
MASSIMILIANO FUKSAS, ARCHITECT: It is impossible for me to build something that is contemporary. Almost it is better, don't touch this (UNINTELLIGIBLE). It is quiet perfect. What is not perfect is the suburbs.
QUEST: So it is to the suburbs we head to see for ourselves. Five miles south of the historic center lies Rome's business district, known as the EUR. Conceived by Mussolini, this was to be an entirely new, futuristic city, rivaling the scale and splendor of ancient Rome. The outbreak of World War II meant it was never completed. Although, fragments of Mussolini's vision are still on display. This is an iconic example of fascist architecture. It is called the Square Coliseum.
(On camera): When it was built 70 years ago it was considered ultra- modern.
(voice over): Now, once again, the EUR is set to host Rome's most cutting edge buildings. The mayor hopes this new congress center and Rome's first high-rise building, both under construction, will bring business and tourists, out to the suburbs.
GIOVANNI ALEMANNO, MAYOR OF ROME (through translator): The EUR could be Rome's showcase. Only be creating new modern areas will people take an interest in going outside the city center, not just Piazzo Del Popolo, but Piazza De Nessia (ph), but also take an interest in going to places in the suburbs.
QUEST: The showpiece in the EUR Suburb will be "The Cloud". This new congress center is designed by Massimiliano Fuksas.
FUKSAS: You have a big hall for conventions. After you have a piazza, then you have "The Cloud". All around Greece, the glove box.
QUEST: "The Cloud" covers 30,000 square meters. It is a colossal building, designed to give Rome a new business edge.
FUKSAS: Now you start to understand the dimensions.
QUEST: Within these glass walls, a conference room will sit, suspended in mid-air, its unconventional shape will be covered in a layer of white textile, giving the building its futuristic look.
That is, as they say, it is a translucence, from inside you can keep the light, during the day, then you have a good balance for energy and then at night you see really, this object, this strange object inside. You can work here. You can meet a friend. So you say, we will see where, I the cloud.
QUEST: There is more modern construction in the EUR, in the shape of Rome's first high-rise building. It is called the "Euro Sky Tower" and will boast modern offices, and apartments, with a skyline view, something that is rare in Rome.
UNIDENTIFIED MALE: Then I see Rome, you know, the historical city is just one block away.
QUEST: Euro Sky's 28 stories will place it amongst the tallest buildings in Rome. Second only to the Vatican's famous dome. And that is the problem.
(On camera): There is an unwritten rule here in Rome that no building should be taller than 138 meters, because that is the height of St. Peter's Basilica. Even though Euro Sky's tower is slightly shorter, it has encountered resistance. It took five years for the construction plans to be approved. Official polls show that 40 percent of Romans are against skyscrapers.
LUCA PARNASI, CEO, PARSITALIA: For sure, you cannot build a high-rise building in Rome, everywhere. You cannot say, Rome can be New York, for example. Outside there are walls, why not? This is my view.
QUEST: The Tower is part of Rome's focus on future work/life balance. For the first time Romans will be able to work and play in the same complex. It has a symbolic purpose.
ALEMANNO: The skyscraper becomes a major modern emblem, like La Defance, in Paris, and a distinctive features. We, today, have suburbs that have little identity. We need something to attract and distinguish the suburbs.
QUEST: In the EUR district, The Cloud, and Eurosky Tower, will be completed in 2012. And they will propel Rome's outskirts to greater heights. The buildings will give the suburbs a distinctive look. One that is hoped will boost the economy outside the traditional historic center.
QUEST: Proving the point that even the world's oldest cities still have something new to offer up.
In a moment, we'll turn back to the day's economic news. It has been a big day for budgets and bust ups in Europe. Reaction to the U.K. budget, and potentially that vote in Portugal, after the break.
QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN. And on this network, the news always comes first.
A bomb blast in Central Jerusalem has killed at least one person. Dozens of people were wounded in the rush hour explosion. Police say it was a medium-sized explosive device that was left in a bag near the central bus station. No one has claimed responsibility. We are waiting to hear from the prime minister of Israel, Benjamin Netanyahu, who is due to be at the airport, flying through on a state visit to -- or official visit to Russia. We'll expect to hear from him. And when he speaks, we will bring that to you.
A U.S. admiral says coalition forces are putting pressure on Libyan forces that attacked civilians by targeting the troops' artillery and blocking supply lines. He also says in the past 24 hours, the international coalition has flown 175 sorties in Libya. The no-fly zone now spans the entire coastline.
Hong Kong and the U.S. are banning the import of certain foods from areas near the Fukushima nuclear plant in Japan. Tokyo's government is warning parents not to give tap water to children younger than 1-year-old. They say the water has levels of radioactive iodine that are twice the safe limit for infants.
Portuguese lawmakers are expected to vote down a proposal for austerity in trimming the national budget. The prime minister, Jose Socrates, has promised to resign if that happens. Now, Portugal's high debt and borrowing costs have fueled speculation that the country might need a bailout. And critics say the austerity plan would have unfairly hurt lower income citizens.
And these are live pictures coming to us from the parliament in Portugal, where they are questioning the minister before going to a vote. The prime minister is expected to address the Portuguese people about 90 minutes from now.
Portugal is not the only country with big economic news digesting tonight. In the U.K., the coalition government outlined its 2011 budget, which it said focused on competitiveness and growth. It all happens as the budget deficit has to be lowered from its peak of 11 percent, whilst growth is going to be just 1.7 percent in 2011.
Earlier, I spoke to the financial secretary to the U.K. treasury, Mark Hoban, M.P., and I asked him how competitive the country could be at a time of strict austerity.
MARK HOBAN, BRITISH FINANCIAL SECRETARY TO THE TREASURY: Well, what we sought to do is to recognize that in today's global economy, businesses, people and capital can move easily and can move freely. So it's important to make sure that the regimen we have in the U.K. around tax and regulation is competitive. That means that British companies want to stay here and that we can attract businesses into the U.K. from Europe, North America and from the Far East.
And we can do that at the same time as taxing the debt that we inherited from the Labour government. And it's important to do both...
HOBAN: -- too. And what we've been able to do, starting from when it came to office in May last year, is as we consolidate our fiscal position to -- to find measures which will help increase competitiveness. And that's why the chancellor announced today we're going to corporate -- cut the corporation tax rate by 2 percent this year, so our rate in 2014 will be just 3 percent, one of the lowest rates in Europe.
QUEST: Now, but at the same time, we see the other side of this, the revision of growth downwards to 1.7. We have inflation at more than 4 percent. And it doesn't really matter what the reasons are, but the effect is the same. This is a budget at a time of austerity.
HOBAN: Well, Richard, you know, you -- you see from your screen some of the challenges that are emerging in the world. We see uncertainty in North Africa and the Middle East. That's forced oil prices up. That and the increase in other commodity prices flow through to inflation and flow through to impact on growth.
And, you know, the Office for Budget Responsibility have set out, therefore, cuts that do show the economy is continuing to grow year-over- year, that we're going to create a million new jobs net and that's assigned the positive (INAUDIBLE) should have the right long-term benefits.
QUEST: We see tonight two sides of the European story. We have Portugal, which is verging on bailout. We have the U.K. with its budget, which the chancellor says is for growth.
Minister, I'm wondering, do you believe that as a -- as a continent, the European story, we are out of the problems yet?
HOBAN: Well, you know, I think that what we've done in the U.K. is set out a very clear path of tackling the deficit. It's a plan that's been endorsed by The European Commission, by the OECD, by the IMF. We've seen the benefit in that, in that we're enjoying a lower market rate of interest than Portugal, Spain, Greece. And it
shows that the actual take in the U.K. is working.
But clearly, there's a long way to go for Europe as a whole and that we do need to make sure that measures are put in place across Europe to both tackle deficits and also to ensure that econ -- the European economies grow.
You know, and I think that the action taken in the U.K. is being recognized internationally as the right course of action. And that's one of the reasons, I think, why The European Commission, only a few weeks ago, said that our growth rate will be higher than that of France, Italy, Spain. It will be above the average growth rate of the European Union as a whole.
But we have to take these tough measures to get the economy growing, to raise employment. And, you know, I think that the measures that the chancellor announced today will put the economy on the right track.
(END VIDEO TAPE)
QUEST: Mark Hoban, MP, the secretary to the treasury, talking to me earlier today.
Wall Street now. Geopolitical turmoil around the globe continues to come under the spotlight.
In New York, Alison Kosik is with us.
Looking at my screen, the Dow is up 45 points. I suppose hardly a rip roaring barn burner of a session, but better being in the green than the black if you're
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: You know what, we were -- we were in the red for most of the session, Richard. And literally maybe an hour ago, stocks turned around into the green. And I'll tell you why.
I was talking to some traders. It's got them scratching their heads. You know, they're -- they're saying, you know, there are 100 reasons why there should be a sell-off right now. Instead, the markets turned around. We've got low volume. They're saying that, really, few people are trading today, equities, that is.
But there's so much going on. We've got the Portugal debt crisis, which, actually, Wall Street sees as a non-event, at least for today. We've got the Mideast unrest, the unresolved nuclear issues in Japan. We've got a downbeat housing report that came out.
You know, Wall Street, at this point, is trying to prioritize and focus on what's important. And right now, what's important for Wall Street is the Mideast and oil. Oil just settled, NYMEX crude, at a little over $105, $105.79.
It's really oil that's got investors worried, Richard. Obviously, they're putting sort of targets -- I'm talking about investors are putting targets of where they should really start sweating on their brow. They say if oil gets to $110, $112, there are big worries of dipping back into a -- a recession, because, the fact is, people, they say, won't spend money, because they're going to be busy spending it at the gas station -- Richard.
QUEST: Interestingly, I was just being -- it's just been pointed out to me, Alison, gold settled at a fresh record of $1,438 -- $1,438. Now, look, whether it has an intraday high or not, it doesn't really matter.
The fact is that there are concerns, aren't there?
And gold is a good reflection of that.
KOSIK: It really is. I mean it's considered a safe haven investment. And that's really where we could see, you know, these investors running to...
KOSIK: -- especially since volume today here for equities is low. We're seeing them running to bonds, as well, as you know -- Richard.
QUEST: Alison Kosik, who is in New York.
And we are -- we're up. We'll stay up if you don't touch any buttons and we don't send the market into reverse.
There you are, both hands. Keep -- keep them where we can see you, as they used to say.
Now, it's not every day that the chief exec of one of the world's largest financial institutions takes the stand in a federal criminal trial. That's exactly what's happened in a New York courtroom on Wednesday.
The chief exec of Goldman Sachs -- this would be interesting, but he testified for the prosecution in the Galleon case. You'll remember, the Galleon case is where a hedge fund is -- manager is accused of using insider information.
Maggie Lake is following the testimony of Lloyd Blankfein.
Now, this is -- you -- you love this story, don't you?
I mean not just -- I mean the whole Galleon case, your coverage has been superb. But this has it into a different league.
MAGGIE LAKE, CNN BUSINESS CORRESPONDENT: And how can you not, Richard?
I mean this is straight out of a, you know, a miniseries. You're right. There are -- you can imagine, this is the last place Lloyd Blankfein wanted to be today is up on court. In fact, he snuck into the court through a back underground entrance, so we don't have any pictures of him going in. He doesn't want that all over the press.
But he was there testifying for the prosecution in this case, a very high profile witness -- one of the -- one of the sort of best known to date. And you see the court sketches right there.
They grilled him, the prosecution, for well over two hours, took a break, he's still up there on cross-exam now. And he made no bones about it, coming right out and saying that Gupta, which is a director of Goldman, a former director of Goldman, leaked information to Raj -- Raj Rajaratnam. He is the defendant in this case. He breached the confidentiality of the Goldman board.
And they really, the prosecution really is focusing in on three different instances in this. One of them dating back to -- to 2008, during the finding -- the height of the financial crisis. One of them was a board meeting when they discussed whether or not Goldman would be buying -- might buy commercial banks, might buy -- which was believed to be Wachovia, might by an insurance company, believed to be AIG. Another one when Warren vest -- Buffet made that very big investment and yet another instance in the fall of 2008, when Goldman was actually having financial trouble at a time that everyone thought that they were actually in better shape than they were.
So they got pretty specific. Again, the goal of this is linking -- making the bridge for these conversations that they have recorded, those very important wiretaps with real time events, having an outsider make that link, that this was, yes, indeed, inside information.
Of course the defense is going to try to tear that apart on cross- examination. But this is very damning, you would think -- legal experts at least think so -- for Raj Rajaratnam.
QUEST: Not -- not least for him, but, of course there's a -- Gupta has got to go. But there's also -- he -- he -- I mean that's still got to come before the courts, the other side of the alleged bit of information.
So this might not be the only time that (INAUDIBLE) friends of the courts.
LAKE: That's right. I mean, again, can you imagine that (INAUDIBLE) -- that's not the case.
But this is broad. This is a -- this is the case of Raj Rajaratnam. As you know, this insider trading is very broad, indeed. Gupta will have to have his day, whether it's in civil court or criminal court, that remains to be seen.
But, you know what's interesting, Richard, it's important that Blankfein, that they got Blankfein to testify, because unlike some of the other -- many of the other government witnesses who are implicated themselves, have pleaded guilty and cut a deal with the government, Blankfein has not been charged with anything. And that was important to bring in people who are considered reputable, who -- who were not going to be subject to the same sort of credibility issues...
LAKE: -- that the defense is going to go after on some of these other people.
So the prosecution very much wanting Blankfein to get up there, connect the dots for them in this case and link those wiretaps.
QUEST: Maggie, we need to just leave you there.
Maggie Lake, who is in New York.
The U.S. secretary of State, Hillary Clinton, is commenting on today's events in Jerusalem.
We need to listen in.
I do beg your pardon. I -- I did believe that -- I do believe that we had the U.S. secretary of State. Apparently we don't. And we'll bring you to it, what she said, when she said it in just a moment.
This is CNN.
QUEST: Now to the U.S. secretary of State, Hillary Clinton.
(BEGIN VIDEO CLIP)
HILLARY RODHAM CLINTON, SECRETARY OF STATE: -- is well positioned to lead in this area, because it is on the road to achieving democratic change. His majesty, King Mohammed VI, government has consistently allowed its citizens to express themselves openly and peacefully and it has been frank and forthcoming about the challenges ahead.
The king has long demonstrated his commitment to reform. And earlier this month, in an important address that captured widespread attention, he promised comprehensive reforms that would guarantee free parliamentary elections, including the election of a prime minister; create an independent judiciary and assure human rights for all of Morocco's stakeholders, including the Amizi (ph) community.
These ideas build on the king's earlier reforms, that included increased rights for women and children and universal access to a free education. We recognize the critical importance of the aspirations that his majesty has described and we urge a continuing and rapid implementation of his vision.
We also look forward with great optimism to further deepening our strong and strategic partnership, in working with Morocco on so many issues.
Let me close with an issue that I know is of great importance to Morocco and its neighbors, the Western Sahara. U.S. policy toward the Western Sahara has remained constant from administration to administration. We want to see a peaceful resolution. Starting with the Clinton administration and continuing through the Bush administration and up to the present, in the Obama administration, we have stated our belief that Morocco's autonomy plan is serious, realistic and credible -- a potential approach to satisfy the aspirations of the people in the Western Sahara to run their own affairs in peace and dignity. The United States strongly supports the role of Ambassador Christopher Ross and the United Nations in resolving this issue.
So again, Minister, I thank you very much for all of...
(END VIDEO CLIP)
QUEST: Morocco's prime minister with the U.S. secretary of State, Hillary Clinton, who, of course, is referring to events taking place in what's been a busy day. The bombing in Jerusalem, in which one person died. And we are still awaiting to hear from -- a translation from the Israeli prime minister, Benjamin Netanyahu. He's going to Russia, where he's going on a visit.
Russia has condemned the bombing, obviously, in the course of the day.
Other news now. And Japan has put a figure -- a rough figure, at best, to the cost of rebuilding the country after the deadly earthquake and the tsunami, now believed to be as much as $309 billion. It's the biggest estimate so far.
It's more than double the cost of the Kobe earthquake some 14 years ago, 15 years ago, and almost four times the amount of damage caused by Hurricane Katrina in Louisiana.
Earlier, the Japanese government urged residents in Tokyo not to hoard water. The capital's tap water was recently found to contain radioactive materials that exceeded the limit considered safe for infants.
Meanwhile, 11 days after Northeastern Japan has been rocked by the earthquake, many factories remain closed, either because of damage from the disaster or the subsequent power cuts and outages.
The car maker sector was particularly hard hit, although Nissan plans to resume full production on Wednesday.
CNN's Paula Hancocks talked with the automaker's chief exec about what's being done to get Nissan and Japan moving again.
PAULA HANCOCKS, CNN CORRESPONDENT (voice-over): A minute's silence for a Nissan employee once missing, now confirmed dead -- one of the thousands killed by Japan's March 11th earthquake and tsunami.
This is the automaker's crisis management center. Created two hours after the disasters, this is where decisions on how to rebuild are being made.
CARLOS GHOSN, CEO, NISSAN: Obviously, by doing this, we're establishing Nissan, but, in a certain way, by doing this, we are also reinforcing Japan. Japan today needs examples of companies standing up to the challenge, showing the way, reestablishing very fast the normal operation.
HANCOCKS: Around 30,000 people work for Nissan in Japan's five main car plants. Two of the factories were damaged. Chief executive Ghosn toured one of them Tuesday.
The other, in the city of Iwaki, is just 50 kilometers from the damaged Fukushima nuclear plant. Nissan has started scanning vehicles made in Japan for radioactive material to soothe public concerns.
GHOSN: People have some concerns. We consider that these concerns are overblown or unfounded. But it's not sufficient to say it. We've just got to prove it. And we're going to have some devices where every single car going to export is going to go through and we're going to show that there is absolutely no risk at all.
HANCOCKS (on camera): Nissan produced more than one million cars at its Japanese plants since 2009. At this point, the company doesn't know what the economic impact will be on its bottom line from these disasters, but it is hoping to have normal operations back by mid-April or May.
(voice-over): Flags fly at half mast at Nissan's headquarters out of respect for thousands who have died, among them, out of their own.
Paula Hancocks, CNN, Tokyo.
(END VIDEO TAPE)
QUEST: Now the weather in the devastated regions of Japan is continuing to prove challenging.
Pedram is at the World Weather Center and following the conditions -- Pedram, what exactly -- I mean are we talk -- is the real problem -- because I've seen snow flurries in places and water or whatever?
Or is it just cold temperatures or a combination of the lot?
PEDRAM JAVAHERI, CNN METEOROLOGIST: It really has to be the combination. We've seen a couple of rounds of rain showers the past few weeks, of course, since the quake. They've had a good accumulating of snowstorm there in the past week-and-a-half or so, as well.
And the temperatures have been very cold, too, because that flow is coming in right from the north and from the western areas, some of that Siberian cold air begins to spill right toward Sendai. And they've had those temperatures remaining a few degrees below average.
But right now, take a look at this. One storm system, that's exiting the picture. The skies actually should part a little bit here. We'll get you partly cloudy skies on Thursday afternoon. But right on the horizon, yet another storm system enters the picture. That's going to bring in the concern for the next round of showers. And, again, you can see it right here, Richard, that northwest flow right there giving them some of the cold temperatures left in place and also the snowstorm in the higher elevations. But that initial storm system will begin to depart.
And the winds for the immediate future are going to remain mainly offshore. They're not coming in right from the land over the ocean. So any potential radiation is also going to remain offshore over the next couple of days.
But follow this as we head on, say, from Thursday on into, say, Friday afternoon. The winds, that westerly component begins the shift. We then see more of an easterly component with some of the winds, where we can have some of the potential radioactive material once again pushed back from the Fukushima Daiichi power plant toward some of the population, possibly.
But here's the forecast for Thursday, pretty clear skies. The average is 10 for this time of year. It tries to get close to it, but we exchange that with some showers in the forecast for Friday and on into Saturday. And, again, the winds -- this is the time period right here. That's the concern, the winds could reverse and be more of an onshore component over the next couple of days.
And we'll be following that as the week progresses.
But quickly, we want to talk about the warm air mass left in place over Europe. Take a look at this -- a broad area of high pressure parked in place. Moderate temperatures from the southern reaches all the way out toward the north. And spring is certainly in the air. The high sits in place, well, it deflects the storm track. So we're looking at average temperatures here, a few degrees above average temperatures over the next couple of days, Richard, with mild afternoons on tap from London down toward Paris and cool nights, very much spring-like conditions out there the next few days -- Richard.
QUEST: Pedram, many thanks.
QUEST: At the World Weather Center.
Europe and the United States are tightening the grip on Moammar Gadhafi's assets. The U.S. has placed sanctions on 14 companies owned by the Libyan national oil company. And U.S. officials are trying to restrict Gadhafi's revenue streams during the Libyan conflict, in which oil plays a major part.
The European Union has also pledged more sanctions in line with the U.N.'s Security Council resolution.
The situation in Libya and elsewhere saw Brent crude hit two week highs. It's retreated slightly today. Its price point at the moment is .5 percent. But it remains comfortably above $115 a barrel.
Egypt offered us a reminder of how turbulent conditions are in the region. Seven weeks out of action, its stock exchange quickly ground to a halt just after reopening this morning, when shares plunged in the opening moments of trade.
Now, John Defterios, from "MARKETPLACE MIDDLE EAST," is with me.
JOHN DEFTERIOS, HOST, "MARKETPLACE MIDDLE EAST": Hello, Richard.
QUEST: Well, it wasn't a surprise, John.
DEFTERIOS: Not a surprise, but it was a pretty sharp drop right at the opening trade, down 5 percent. They reopened for a short time. And let's take a look at where it finished. It was down nearly 9 percent for the day. And if you take a tally on Egypt and the stock exchange, it's down 28 percent -- or nearly 28 percent for the year. It makes this the worst performing stock market. Not a surprise because of the volatility we've seen so far...
QUEST: Wait. Hang on. Hang on.
As I read it this morning, I mean very few people are offering to buy. There's quite a lot of sellers out there in the market...
DEFTERIOS: In fact, they had sell orders in for 46 companies and this is what had such a huge backlog.
DEFTERIOS: So that wasn't going to be turned around.
But in that time that they were closed, one third of the Egypt 30 stock companies were downgraded by global houses. So there's very little chance of it going on the up side. We'll see what happens, of course, as this flushes out over the next week.
If they were to carry it on, by the way, another couple of days, they would have been delisted from the global Emerging Markets Index. And that's why they needed to get out.
QUEST: Right. But substantially, though, the companies involved, are they doing business and continuing to make money?
Because if they are, then frankly, John, all you're talking about is a bit of nonsense in the market.
DEFTERIOS: No, the -- the economy is having a hard time getting back on its footing right now because of labor challenges. They're projecting growth in calendar year 2011 of some 5 percent right now. But I've spoken to a number of different businesspeople, some who had transactions on the sidelines and were hoping from foreign investment this year. And those things have been parked.
I think it's worth looking back, Richard, if we can, over the last 10 years, at the sort of money that's flowed into the greater Middle East and North Africa. Better than $500 billion, $528 billion between 2000 and 2009. But particularly in the last five years, $450 billion has flowed into the region overall, $50 billion of that into Egypt.
And now the biggest concern, if you're an international investor right now, do you decide to go back in, with Libya a coin toss, really?
DEFTERIOS: And we don't know if Bahrain is going to settle down or not.
QUEST: But is it a buying opportunity?
That's what everybody wants to know. When you've got a market down 30 percent...
DEFTERIOS: Well, that's interesting, because I find it fascinating that the Dow is still rallying in the face of a quick resolution. That's the hope right now. And I don't see the quick resolution...
DEFTERIOS: -- in Libya and some of the other markets in the region just yet.
QUEST: John Defterios...
QUEST: -- many thanks, indeed.
And we will end tonight with tonight's Profitable Moment -- two countries in Europe, one in the depths of the crisis, Portugal; the other on the slow road to recovery. In the next few days, they will both face the markets head-on. Portugal, of course, may be end up taking a bailout. Britain's government has slashed its spending, cut its deficit and is the poster child for the world of austerity.
Now, even if the worst case scenarios are no longer relevant and continent-wide double dips are unlikely, these are timely reminders that the financial crisis in Europe is not over. And worse, it always has the potential to suddenly burst out again.
And that is QUEST MEANS BUSINESS for tonight.
I'm Richard Quest in London.
Whatever you're up to in the hours ahead, I do hope it's profitable.
"WORLD REPORT" is next.