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QUEST MEANS BUSINESS
Eurozone in Recession; Leadership Battle in Australia, Greek Parliament Approves Terms of Debt Swap
Aired February 23, 2012 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HALA GORANI, CNN NEWS CORRESPONDENT: Hi there, I'm Hala Gorani in Washington and here are your headlines, this hour.
An activist inside the Syrian city of Homs paints a desperate picture of conditions, there. I spoke to him by phone just a short time ago. He says he's been hearing explosions since this morning in the direction of Baba Amr. He says that neighborhood has been completely sealed off by the military and there is no way to bring in food or water.
Video has surfaced from Homs showing an injured French journalist pleading for a cease-fire. Her name is Edith Bouvier, she says she was hurt in the same attack that killed American reporter Marie Colvin and French photographer, Remi Ochlik. She says her leg is broken and she needs surgery.
World leaders, Thursday, warned they will punish anyone who disrupts the fragile transitional government in Somalia. Leaders of dozens of countries and organizations met in London, today. Between a rise in militancy and the long-running draught, Somalia is considered one of the most troubled places on the planet.
Confusion and concern in Venezuela after President Hugo Chavez announced his cancer may have returned. He's going back to Cuba to have a lesion removed. It comes just seven months before the next presidential election. In October, Mr. Chavez said his cancer was cured.
That's a look at your headlines. I'm Hala Gorani in Washington. QUEST MEANS BUSINESS, live from London, starts now.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: Recession in the eurozone, the block's economic winter drags on.
Springtime in Sweden, the prime minister, tonight tells me it's got the best public finances in the E.U.
And a really heated battle in Australia. Gillard v. Rudd, a political battle.
I'm Richard Quest, I mean business.
Good evening. A double-dip, technical, call it what you will. The word is very simple. Recession has returned to Europe and it is official. The European Commission has cut its growth forecast in its interim report and says the eurozone is now in mild recession. Its prognosis makes grim reading.
The commission describes a loss of momentum that was stronger than anticipated. And worse, it uses the word "stagnated" to describe growth. Eight eurozone economies, eight, will shrink in 2012. And now, perhaps, right at the end of the report, the commission admits that if things don't go according to plan, or there's any deviation, there is there real, real risk of a deep, prolonged recession for which no country will be spared.
The commission's vice president Olli Rehn Is taking a more optimist view than this, though.
(BEGIN VIDEO CLIP)
OLLI REHN, EUROPEAN COMMISSION, VP: The mild recession can be short- lived and confidence can return more rapidly than expected on the very strict condition that steady and decisive progress is being made on these key policies in order to restore stability and then turn the corner from stabilization to boosting sustainable growth and (INAUDIBLE).
(END VIDEO CLIP)
QUEST: So, all this happens and this is the scenario you see for GDP growth. Is this a straightforward double-dip? The "W" shape? Well, let's draw it and perhaps we can see what I mean.
So, this was 2007 and 2009, obviously the worst points of the recession. And then the economy recovers a bit, but then starts heading down again and that is your double-dip recession which will eventually, in the fullness of time, come up.
Now, we always said there was a real risk of a double-dip. And although the United States has avoided it, Asia never really had the real risk, southeast Asia, especially -- the eurozone, as a result, not only of austerity, Greece, global threat, it squeezes. There's 1,001 reasons, but that is the double-dip that you can see.
Now, Bob Parker from Credit Suisse thinks it could be a long time before countries like Italy and Spain get moving, again. He's the senior advisor at Credit Suisse, and I asked him for his view on today's numbers.
BOB PARKER, CREDIT SUISSE: If we look at two of the large economies, Spain and Italy, it is, I think, fairly obvious that growth in those two economies will contract, this year, by more than one percent, and I think we're only going to get signs of recovery there are later in the year.
Now, one positive is that it looks as though Germany will avoid recession and, in fact, there, there are signs of the economy recovering.
QUEST: Driving this recession is what? Is it just the Greek crisis that created the uncertainty?
PARKER: A whole raft of factors. No clearly, the Greek crisis and the contagion onto the eurozone economies, is one factor.
QUEST: Right, and sorry to interrupt you. I mean, the United States isn't slowing down. The United States is speeding up. Europe does such a huge amount of trade with the United States; it's getting faster, southeast Asia getting faster. So, what is it the eurozone that's lead to this effectively double-dip?
PARKER: Well, if you look at the economies, which are not going into double-dip, like Germany, there, there is not a debt crisis. There is not a fiscal problem in Germany. Economies like Spain and Italy are going through this very painful restricting of their economies, cutting public expenditure and that will result in contraction of their economies, at least for the next six to nine months, if not longer.
QUEST: OK, enter this environment we get the -- we have to ECV, which frankly, is the only game in town, at the moment, in terms of getting rid of a credit crunch. And it is one of the major forces in terms of giving confidence to the market. We've got a LTRO three year money, next week.
PARKER: Correct. That actually raised a very interesting point, because if you look at the success in dealing with the eurozone problem, I would say it is 100 percent down to the action taken by the European Central Bank. If you look at the failure in dealing with the eurozone crisis, it's where's the bailout fund. The bailout fund has not been organized to deal with potential future debt problems. So, we once had very strong successful action by the ECB.
QUEST: We need to talk about asset allocation, at this point and where you want one, sort of, balances a portfolio. Very difficult, because you've got to have exposure to the U.S., since it's growing so fast. You still need that emerging market exposure, but you can't ignore Europe, either.
PARKER: In terms of where equity markets go, we actually think after the strong rally over the last two to three months, probably equity markets will consolidate until mid-year.
In terms of how we're positioned, we think equities are attractive whether it's to other asset classes like bonds. We have positions, first of all in North America and northern Europe in large cap global companies which pay high dividends or will pay higher dividends in the future. And then we have positions in a number emerging markets, most notably China, Brazil, Russia, Korea, and Turkey.
QUEST: Is risk on the table?
PARKER: It is. I would say, careful risk on the table.
QUEST: I do need to give you a health warning. Just because Credit Suisse believe that that's the way things are going and that's how they've done their asset allocations, that doesn't necessarily mean to say that is the way and, of course, as always, the whole lot can go down, as well as up. But frankly, if you haven't learnt that by now, well, I'm not sure what we've done over the last three years.
The European Commission, when it brought out its interim report. Cut Sweden's 2012 growth forecast in half. And there is nothing like the four percent growth that was predicted last year. Sweden is most definitely slowing down. It is an export-led economy.
I asked Sweden's prime minister, so bearing in mind all that he saw, if he was now worried about the Swedish showdown this year.
FREDRIK REINFELDT, SWEDISH PRIME MINISTER: Well, basically we are affected by the situation in Europe, but it's picking up in the world economy. So, for a trade-related country like Sweden I think that evens up part of it, so in this short interval we're looking at slowdown, but after that I would see signs of a better recovery, because a lot of the European economies are now starting to reform, so at the end this year, it could be better.
QUEST: You're not forecasting a neg -- at any stage, a negative quarter, or are you?
REINFELDT: Well, not as of now, no, but I mean, as of many other European countries, it's now coming down to zero growth in a short time span, but again, world economy is picking up quite well and this effects us, as well, of course, in a better direction.
QUEST: The unemployment numbers, the latest unemployment numbers announcing (ph) a very sharp rise. Is that a concern, because you're an exporting country, your markets are under threat and are slowing down, you've got rising unemployment. The perfect picture is starting to become spoiled.
REINFELDT: Well, we should remember that Sweden probably has the best public finances inside European Union and that, of course, gives us lower interest rates and better conditions for investments and also we have capacity that others are actually without. And again, you're right in that we are affected by the slowing down of the European economy, but I also see that part of my economy is picking up because U.S., Asia and other parts is going quite well.
QUEST: So, how would you sum it up? You've got unemployment at, now at over eight percent, you're got a slowing economy and how would you sum up what's happening at the moment, on what need to do, with respect?
REINFELDT: Well, they think is that I would say that it's -- the signs of recovery is now clearer. I was more pessimistic before Christmas because then I felt that we were actually more affected by the financial crisis (INAUDIBLE) ongoing and the lack of reforms in Europe.
The signs are now better and this, I think, I also felt that being out in the Swedish construction industry and they are signaling that they're actually see now maneuver for investments and the economy picking up. But, from, you know, a situation where it's slowed down first.
QUEST: The Swedish prime minister and we'll hear more from him, later in the program, especially on the views of Greece and the new fiscal compact for the European Union.
Europeans markets took a slight different direction. Just look at this and you'll get an idea of why.
It was a complicated debt for equities swap for Commerzbank which drags down lower by six percent. The bank was off six and that took a bit of a tumble, obviously for the Zetra (ph) DAX and that could be one of the main reasons why the German market did fall.
RBS was up more than five percent in London and that certainly gave a boost up. RBS, the old Royal Bank of Scotland, now more than 80 percent owned by the U.K. government, has lost more than $3 billion in 2011. It has a simmer bonus row, $600 million were given to investment bankers, but that is considerably less than last year and you'll be aware, of course, that the chief executive was forced to give up his bonus. It is majority owned. Stephen Hester, the CEO, says that the row has been damaging. Meanwhile, RBS' chairman says the company must be allowed to get on with its business.
Now, RBS, of course, raised into question whether the government was interfering too much and whether or not there was a witch hunt now against business by the U.K. government.
So, to day, David Cameron, the British prime minister, in speech to business leaders said there was dangerous rhetoric creeping in and he reminded everyone, in his view, business in good is good for society.
(BEGIN VIDEO CLIP)
DAVID CAMERON, BRITISH PRIME MINISTER: In recent months, we've heard some dangerous rhetoric creep into our national debate, that wealth creation is somehow antisocial, that people in business are somehow out for themselves. I think we have to fight this mood with everything that we've got.
(END VIDEO CLIP)
QUEST: The British prime minister, David Cameron.
To the U.S. and the North American market that is open. The Dow Jones up 33, we are still trying for 13,000. We saw it earlier this week, we've not seen it again, but there we are, 12,971.
In a moment, she's got the numbers within her party, but he's the public support. Australia's current and former prime minister are battling it out in a brutal leadership battle. The sort of thing you only get in Australia.
QUEST: After months of squabbling and snide comments, the former and the current prime minister of Australia are about to battle in a leadership bat -- ballot.
It's a fiery rivalry within Australia's Labor Party and it makes politics look more like a blood sport.
Kevin Rudd, well you will remember, he was ousted at PM by Julia Gillard and that only happened two years ago. Now, whole ratings dropped. Gillard's ratings are now below those of Rudd at its worst levels. So, Rudd has quit as foreign minister, is flying home from Washington and is widely expected to take part in leadership ballot on Monday.
He hasn't confirmed he will run. He's just saying that Gillard can't win the next election.
(BEGIN VIDEO CLIP)
KEVIN RUDD, FMR AUSTRALIAN PRIME MINSTER: I have not stated that I have made a decision to declare for the position of the leadership of the party, I've said very plain -- plainly that I need to consult more of the colleagues and it's appropriate to make that statement in Australia. But let me just say this, I do not believe, I do not believe that Prime Minister Gillard can lead the Australian Labor Party to success in the next election. That is a deep belief. I believe it's also a view shared wide across the Australian community.
(END VIDEO CLIP)
QUEST: It doesn't get more brutal that that when you're the foreign minister on a foreign trip to actually say the PM can't win an election.
Rudd is back in Australia in a few hours time.
A short time ago, I spoke to the leading Australian presenter, David Kosh, Kochie, and asked him, how many Labor MPs a likely to back Rudd?
(BEGIN VIDEO CLIP)
DAVID KOSH, AUSTRALIAN TELEVISION PRESENTER: The latest buzz is that he's a fairway short of getting a majority of his parliamentary colleagues, who are so vehemently sweet on him. He has supporters and then basically a whole bunch of colleagues who work with him to hate his guts, who never want to work with him ever again. It is that sort of friction there, at the moment.
QUEST: What would it take for Gillard's support amongst the MPs to collapse and to move across to him. I mean, in these matters, in these ways, it usually takes one or two seniors to be a stalking horse and say, no, we're going to move across. Is there any indication that her support could crack?
KOCH: The one big gamble for Gillard is the public. One of the extraordinary things, at the moment, is that there are 102 Labor members in the -- in parliament, so whoever wins the leadership needs 53 vote. So, I think that Kevin Rudd has somewhere between 30 and 35, at the moment, and he's plan for the future would be, if he loses the spill on Monday, just sit on the back bench and wait, because Julia Gillard's popularity rating is appalling. She is looking at being decimated in the next federal election in 18 months time.
QUEST: At what point do the Labor MPs decided to start voting for what they believe will be the electorate decision? In other words, stick with Gillard and you could be out of a job in 18 months time, go to Rudd and you've got a, perhaps, racing chance of staying in office.
KOCH: There is so much hatred towards Kevin Rudd that there is a good percentage of that caucus who would rather lose the next election than have Kevin Rudd at as the leader. It is simple as that.
I know it is extraordinary. We're in a country which has great political and economic stability, our finances are in good shape, we're just steaming ahead on the coat tails of China and Asia, and you would think there is something markedly wrong with the deterioration in our standard of living. It's quite the opposite.
We're going for a golden time, here in Australia. Not without some problems, of course, like every country, but we're blessed, going through a very fortunate time. And a lot of those Labor MPs would forego the glory of that and just not to work with Kevin Rudd every again. It is -- we've never seen anything like this in Australian political history, the anger of a lot of those parliamentarians.
(END VIDEO CLIP)
QUEST: Kochie in Sidney.
In our connected world, we leave digital footprint wherever we go. In a moment, Google's new way of keeping track of what we do online and it's shocking privacy advocates.
QUEST: Now, one thing I need to update you with, a step forward, some say, for the digital privacy battle. These six major companies have agreed to reveal what apps from their store up to. RIM, Amazon, Microsoft, Google, Apple, HP. They all have agreed to tell us what information they're collecting on the apps and what they intend to do about it.
This is a deal that has been negotiated and put together with the attorney general of California, the U.S. state of California.
So, if you want to know really what it's about, come over here and join me in the library, it's a digital library, today. This shows you, we know what the apps can do, but we often don't realize is how much information is being sent back to the companies.
For example, let's take Angry Birds, this is the sort of information that they send back. It allows - will modify/delete USB storage, it will allow to read phone state and identity and give full Internet access. This is what you agree to when you put up that.
Now this the one that I think has got people sort of really questioning, the FaceBook for androids privacy. This one, getting an idea of a single message center that FaceBook wants to control. You agree, you accept and download edit SMS or MMS, read SMS or MMS received.
So, what this is now doing under this deal with California, the agreement applies to California, and developers face fines of up to $5,000 per user if the guidelines aren't met. It will have impact internationally, because, of course, the stores are global.
I have to say, as we did this story, and looked at it today, one was quite astonished, in some cases maybe even a little bit horrified at the information that you willy-nilly hand over.
The sort of information that Jenny Harrison at the World Weather Center happily will hand over.
JENNY HARRISON, CNN METEOROLOGIST: Yes, I don't do anything in a willy-nilly fashion, Richard. No, not -- yeah.
And out in Singapore, usual weather conditions, out there. But I have to say whether in Europe has calmed down a little bit over the last few days. It's been about the temperatures, the concerns now are all about the winter, all that snow, all that ice that is across so many central and particular eastern regions. And that's about to change, as well, of course it does. Nothing every stays the same when it comes to the weather.
But the winds have been pretty strong, so when you cross into Scotland the last few hours, back up again, now, internationally 50 kilometers, now, it's been higher than that. And of course those are the same winds, not the gusts. It will stay windy across much of northern Europe.
So concerns here for Norway, for example, because of the risk of avalanche. And this is something not just confined to Norway, but also -- oh, and this doesn't seem quite right, there. Should have a lovely graphic there of -- yes, I should have had the Google, back up there, for you, but I'm afraid I couldn't get the Google graphic.
Anyway, so what have I got next. I thinking I've got the right scene here at which to talk -- I'm going to step out of shot and I'm actually going to bring up my weather graphics.
So, what I was saying about, is the concerns in...
QUEST: Allow me to just continue talking while you get your graphic sorted out. Don't worry.
It's a bit like the old days. It's a bit like the old days at the theatre, isn't it? You know, don't look too closely and you won't see the join. Yes, absolutely.
HARRISON: Notice I've got the graphic up now, for you. Honestly, I can multitask.
What I'm talking about is the strong winds and many countries in Europe have actually got these warning in place. This is a Avalanche.org, should you need to find out where the danger is in your neck of the woods. So, of course, there are many things that actually influence an impact the threat of avalanches, the winds, the terrain, all of that sort of thing.
So, as I was saying, you've got strong winds across the north, you've got more concerns going forward, particularly because of this thaw that has been taking place.
Now, once of the conditions actually calmed down a little bit, then we can actually begin to not worry quite as much as we have. So as I say, the winds have been strong, they will stay strong across much of northern Europe and extends across into central regions, but the snow has been petering out in the last few hours, mostly rain because of the mild air, that is why the thaw has come about so very quickly.
Right now, it's 12 Celsius in London, 10 in Paris. And then all the way south, there's temperatures will above freezing, Belgrade is actually one of the few that is not. But this is also going to change. That mild are, above average, has been across central regions, but the winds are changing again. They're coming in from the northwest and that means temperatures across central Europe, back down to the average.
There's that cold air again, but nothing like we have been seeing over the last month. So, no real concerns there, but look at the temperatures along the River Danube. Again, these temperatures well above average, so still concerns about the threat of a sudden thaw and obviously worse, widespread flooding would really mean across areas of Europe -- Richard.
QUEST: Jenny Harrison, cool off, have a nice, well-deserved cup of tea.
HARRISON: Something stronger, I think.
QUEST: All right, very nice, Jen.
We used to have a saying, during the old days, "Do not adjust your set, normal service resumed," or whatever. Anyway, when we come back, tough love from Sweden. The PM says, as sooner Greece swallows the bitter pills, the better.
QUEST: Hello, I'm Richard Quest, more QUEST MEANS BUSINESS in a moment, this is CNN news network, it's the news that will always come first.
Another day of explosions, gunfire and death in the Syrian city of Homs. The rebel-controlled neighborhood of Baba Amr has been under heavy bombardment for nearly three weeks, now. Activists say nationwide, at least 88 people died on Thursday, alone.
Videos surface from Homs and it shows and injured French journalist who's pleading for a cease-fire. Her name is Edith Bouvier and she says she was hurt in the same attack that killed the American correspondent Marie Colvin and the French photographer, Remi Ochlik. She says her leg is broken and she needs surgery.
World leaders on Thursday have warned they will punish anyone who disrupts the fragile transitional government in Somalia. Leaders of dozens of countries and organizations meeting in London, between a rise in militancy and the long-running draught, Somalia is considered one of the most troubled places on earth.
The Greek parliament has approved the terms of its debt swap which will shave 70 percent off the real value of private bonds. Now, the private investors and creditors will be receiving the formal offer, tomorrow.
Greece's government spokesman told me the deal is another step to (INAUDIBLE).
(END VIDEO CLIP)
PANTELIS KAPSIS, GREEK GOVERNMENT SPOKESMAN: Well, it's part of the prior actions that we have to do in order to get the loan and I think that we'll move to that direction. We are absolutely excited to fulfill all the requirements.
QUEST: And the collective action clauses that will be part of any final PSI and the limit and the threshold, sir?
KAPSIS: Well, we'll see what the participation will be and we'll decide.
QUEST: What growth policies do you now expect the incoming government of whatever persuasion, after the next election, will introduce? Because growth is what this is now all about.
KAPSIS: Yes, I think that a major stimulus to growth will be the end of uncertainty and that's critically important for Greece because we had the drain of deposits. But then we have to solve the problem of rigidities in the market and the liberalization of the professions and hitting bureaucracy, tax evasion, these are all issues that would allow us to grow at a much faster rate than before.
QUEST: Because those growth policies are going to have to counter the effects, the hampering effects of the austerity plans that the...
QUEST: The short-term cut on the minimum wage, the other competitiveness. So, is there a lot of fear, still, that that cannot be done, basically.
KAPSIS: Look, we've managed the highest fiscal consolidation; we have five years of recession. I think that the task in front of us is actually easier because we know what we have to do and we'll do it.
QUEST: Finally, I just want to dwell on an area, which we often don't get a chance to talk about with somebody like yourself. Talk to people outside of Greece and they say that the Greek people cannot make the cultural changes necessary to become more productive, more -- you know, I see you smile, now. But you've heard this, you've seen the article.
KAPSIS: They are -- begin all that hardship and they won't stop to that. Nobody in Greece wants to have all these measures taken to go in vain, all these austerity taken in vain, I mean, I think that there is a strong majority in favor of us doing everything that is required to stay within the eurozone and returned to growth.
(END VIDEO CLIP)
QUEST: Sweden's prime minister has admitted that there were discussions, at one stage, to let Greece go. Fredrik Reinfeldt warns the prospect is still a possibility. I asked him exactly how worried he was.
(BEGIN VIDEO CLIP)
REINFELDT: Well, we should be worried because we see, in fact, a risk for a meltdown of the Greek political system, as we know it. and of course, ordinary Greek people who are working, paying their taxes, feel that I haven't done t his and I think they need to address the inequality of the Greek society to be able to solve their problems.
QUEST: Did the eurozone push too hard when it adopted its new muscular strategy over the last few weeks?
REINFELDT: No, I think what the eurozone was trying to do is to say that countries that actually do the reforms they have promised and do them more quickly, tends to get confidence back from markets. We have seen this in northern part of Europe and we think this also goes for Greece. The problem is they have promised and promised again to do reforms, which they have not put in place.
But it think now, they have, with the relief they are getting, better space for maneuver. Another very important thing to say is that the risk for the domino effect into other countries has gone down since we see a lot of reforms in other sovereign European countries.
QUEST: Were you one of those people who basically said if Greece has to go, then let it go?
REINFELDT: Well, I think there has been discussions like that, because...
QUEST: Were you one of those people who has come into that reality?
REINFELDT: I think we should be very open that that could still be a reality, but now the package put in gives them, again, a time to maneuver, but if the reforms is not in place in Greece, if they can't get a primary surplus in their economy, on their own merits, then it will not function in the long-run.
QUEST: Your finance minister, Andres Borg, is always welcome on this program, what a -- he raised an interesting question with me, on this program, last week. It was at the end of the interview and we're taking about the sovereignty and the permanent monitors, and he just simply said (INAUDIBLE), this is something that obviously we are going to be watching in Sweden. Because you have been very concerned, Prime Minister, at infringements or intents of infringements of sovereignty.
REINFELDT: Absolutely, I mean, the thing is, it's interlinked and it's not -- it's a debt crisis, but it's also financial crisis too long going. So, of course, we are affected all through Europe (INAUDIBLE).
QUEST: But, you would never have allowed the sort of infringement into the Swedish economy, of permanent monitors, being basically told, escrow accounts, all these sort of things.
REINFELDT: Well, the thing is that in the mid-`90s and then Sweden was in deep trouble, we had discussion in our country that we were actually run by foreigners, so we said, if we want to be sovereign, we need to solve our own problems, get better hold on public finances. That's the way of actually making your own decisions.
QUEST: If we look at the last two weeks, or three months, beginning of the year, you and I can agree on, the rules have changed, haven't they? The eurozone will now, and the union, to some extent, it sent a letter to Belgium, it's taking a stronger attitude to Hungary tonight on the budget, it's doing permanent measures in Athens. How would you define this attack on sovereignty of individual national states?
REINFELDT: It's a tougher emphasis on -- and that goes also to the fiscal compact that's now decided. Get better order into your public finances, start to reform, do the reforms you have promised. I understand that if this is done, we will get a stronger Europe and so I will say we are supporting the pressure put on countries who have done too little to reform to reform and too little to get order, good order in their public finances. So, I would say that is basically what is now happening.
QUEST: But you don't see this as being an attack on national sovereignty?
REINFELDT: No, because at the end of the day, it's in the hands of the different nation states to do their job. They are trying to survive by borrowing money from other countries and that's not long-term sustainable.
(END VIDEO CLIP)
QUEST: It was a record year in 2011 for IMAX. The company installed nearly 500 theatres, that was 33 percent more than I 2010. Expansion driven by demand in China, Russia and North America. And that looks set to continue. IMAX has agreed to open 70 theatres in China. China's where it's all happening. Beijing's agreed to allow more Hollywood movies in IMAX and 3D.
Q4 was down because of varied technical reasons, but was in line with what was expected.
The chief exec of IMAX, Richard Gelfond, told me earlier that IMAX will continue to focus on emerging markets.
RICHARD GELFOND, IMAX CEO: I see a terrific year in terms of our strategic objectives, Richard. And what we're trying to do is build this worldwide network. And the network grew 33 percent last year. So think of an analogy to IMAX like a cable system, where you build out the system and every incremental subscriber you add, it throws the content through and you increase your profitability, dramatically. And last year, not only did we grow our network tremendously, but also we signed a lot of new theatres that are going to lead to more network growth, and I think you're going to create a recurring revenue machine.
Now, I think, obviously the machine works based on the fuel you put in and the fuel is the movies and in 2011, we didn't have the best movie slate in the world, 2012 I think we do have a very good movie slates, so I think we're well positioned.
QUEST: When I see that you are expanding, though, in other parts of the world, South America, into India and into emerging markets, I wonder, since IMAX is still relatively a new, even immature market, why are you going into these other area before you have fully tapped the mature market?
GELFOND: Well, I'll give you one statistic that'll put it in simplest terms. In 2008 we opened the "Dark Knight" in about 150 theatres in the world. Now in China alone, including our backlog (ph), we have 212 theatres, you know, just three years, three almost four years later. So the emerging markets are really ripe for our form of entertainment. It's - - there's more disposable income for the consumers, they're willing to spend it on entertainment and it's just the best growth are in the world.
With that said, it's going so well, we are refocusing our efforts in some of the existing markets including in Europe, where we just hired a very senior executive to run our European area, in lain America, in India. But we really are a worldwide brand and the performance is happening on a worldwide basis.
QUEST: The Oscars are upon us. Where is your -- are you taking a bet and are you -- do you have a view?
GELFOND: I think some things are more likely than others, for whatever it's worth and I don't know any better than anyone else. You know, I think that George Clooney has a good shot for best actor; I think Meryl Streep has a good shot for best actress. You know, my personal favorite for movies is "Midnight in Paris," which I think is a long shot. You know, I think "Hugo" was tremendous. I think the outside pick is "The Help," but I think most likely is "The Artist." So that gives you all my edging, Richard, I can't be wrong.
QUEST: Hedged away. And that's QUEST MEANS BUSINESS. I'm Richard Quest. Whatever you're up to in the hours ahead, hope it's profitable. MARKETPLACE EUROPE is next.
QUEST: The houses of parliament on the banks of the River Thames, this is MARKETPLACE EUROPE, I'm Richard Quest.
The River Thames is the backbone of the city and on this weeks' program, we'll meet some of the people and look at the industries that are the backbone of doing in business in Europe.
QUEST (voice-over): coming up, the E.U. justice commissioner, Viviane Reding talks Hungary's constitution and data protection.
And speaking of data, Scandinavia is vying to be a world leader for data storage. So, we visit one town who's convinced FaceBook to move their data to the frozen north.
QUEST: One of the of the far we see on our trip on the Thames is the temple, the simile and headquarters of England's legal profession. This week's "Face Time" interview is also concerned with questions of justice and the law. We're about to meet the European justice commissioner, Viviane Reding, who's brief extends to gender equality, data protection, to name but two.
I started talking to Commissioner Reding by asking about Hungary's new constitution and the controversy surrounding it and the action taken by the European Union.
VIVIANE REDING, E.U. JUSTICE COMMISSIONER: The commission is the guardian of the treaties and those treaties have been signed by 27 members states and the 27 member states are bound to put what is in the treaties into their national laws. And that is the reason why the commission, being very worried, having analyzed on very legal terms what is in the new Hungarian law, has launched a court procedure against the Hungarian government on three elements: the independence of the Central Bank, the independence of the judiciary, and the independence of the data protection authorities.
QUEST: Do you find it strangely disturbing, though, that in Europe, a country, a government, can put forward a raft of laws that, in the commission's view, are so contrary to basic principles of the treaty?
REDING: Yes, I am very worried about this and that is why the commission acted very swiftly. You must know that those laws are only out since one month, roughly, even not. But, I knew what was in the pipeline and I had warned the government already last year. Unfortunately, the warning was not taken serious and that's why we had to start a court procedure.
QUEST: Commissioner, and what do you consider to be the essential balance between the needs of the individual and the needs of the companies to collect data and to deal with data?
REDING: You put your finger on the right spot, because we always to have rights, which are conflicting. You have the right to information, you have the copyrights, you have the right of the companies to do business, and then you have right to privacy of the individual.
So, for us politicians, it is to keep a balance between those rights. What I did know was the new package on data protection is, first and foremost to open the market. You see we have a huge opportunity in Europe, a huge market 27 member states, 500 million people, and we have barriers in this market because everybody goes for his own rules, 27 conflicting rules, it costs a lot of money and as I said, stop it. We scratch the 27 rules, one continent, one rule, one regulator. That saves the companies 2.3 billion euros a year.
QUEST: Should the fundamental bias be toward the individual, then?
REDING: That is exactly what is inscribed in the European fundamental law. You see, we are probably the only constitution, if you want, worldwide, which inscribed the right to private data of the individual. So, the private data belonged to the individual and the individual can do with that property what the individual want.
QUEST: Are you feeling that heat of lobbying from companies against your proposals, yet?
REDING: Oh, there was a huge heat because they wanted, really, many of them, to prevent me from doing legislation. But you see, the political boss in Europe, that's me.
QUEST: And you've made it clear who's in charge.
QUEST: The justice commissioner, Viviane Reding.
Talking of justice, that's the Tower of London. They knew a thing or two about rough justice, over there. When we come back after the break, we turn our attention to data storage, the size and scale of an industry.
QUEST: Welcome back to MARKETPLACE EUROPE, on the great waterway of the River Thames. And look at the huge tower blocks of the bank that are now located at Canary Wharf at London's dockland. And think about the enormous amount of storage and data that goes into those buildings, so that the banks can do their global transactions. Data storage and IT, it's the hottest prophecy in business.
UNIDENTIFIED FEMALE, (voice-over): Now you see it, now you don't. The daily digital data we generate is endless. Phone contacts, e-mail, instant messages and all that sensitive personal stuff, like your wages. When not at your fingertips, like some conjures (ph) trick, it all seems to vanish into thin air.
The far less glamorous reality is that if you work in an office, it's probably stored on computer service like this one in the bowels of CNN's London Bureau.
PIERS LINNEY, OUTSOURCERY: The inflation, economy, dates with everything, a lot of your intellectual property, your business, your contacts, your suppliers, your (INAUDIBLE), if you go down, for whatever reason, then you have a business, it costs you money.
UNIDENTIFIED FEMALE: it's so noisy because of the fans and chiller systems needed to keep all this high-powered equipment cool. Team that with the growing stream of information that needs to be stored, from social networking to online photos to all the numbers from governments, industry and commerce. And data storage is moving out of town.
LINNEY: It's an absolute trend, an macro trend to move all this stuff, housed in people's buildings and into much larger purposeful data centers around the world, because it's just more efficient. So more than half of the power we use is cooling these things. So, if we live in a cold climate in the northern regions, then it lowers our cost and it increases our margin.
UNIDENTIFIED FEMALE: and the end users probably don't really mind where their records are stored, so long as they're secure and we can access them anytime, anyplace, as if by magic.
QUEST: So, that's how data storage works. CNN's Neil Curry has visited one small town Sweden which has convinced the giant, FaceBook, to move its data storage to this tiny town.
NEIL CURRY, CNN NEWS CORRESPONDENT (voice-over): Lulea is city of almost 50,000 souls, despite the cold there's little as four hours of daylight in winter; its streets are bustling with busy shoppers.
Look above street level and you see cranes circling and swooping, building a new future for the town. Across there are diggers dances through the dirt in what seems like the world's best choreographed construction site.
It's cold. Very cold. But that's the point. Naturally, cold air to cool a service along with cheap and plentiful electricity combine to make a marketable commodity.
MATZ ENGMAN, CEO OF THE LULEA BUSINESS AGENCY: We start to make a product of all this benefits and we take the flight over to the states and we knocked on FaceBook's door and two years after that knock, they are here.
CURRY: The finished building will be the size of three soccer pitches. Ironically, construction was helped by a relatively mild start to the winter. The mayor of Lulea says the project is brining an economic boom to the town and he wants other technology companies to follow FaceBook to create what he calls, the node pole of Europe.
KARL PETERSEN, MAYOR OF LULEA : We are very proud that's very important for us and of course, there will be a lot of job and I think a lot of visitors will came to Lulea and look to the city and ask why FaceBook coming to Lulea and that will be a very, very good future for us.
CURRY (on camera): The icebreakers of Lulea are preparing for action as the temperatures here plunge well below freezing, but amid the bleak arctic mid-winter, this northern pinnacle of Europe is preparing for a warmer business climate in the years ahead.
QUEST: Neil Curry in Sweden. And that's MARKETPLACE EUROPE for this week. I'm Richard Quest enjoying the fine weather on the River Thames, just gone under Tower Bridge. Whatever market you're in, I hope it's profitable. I'll see you next week.