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Germany's Private Sector Output Drops; China Has Steep Decline in Exports; Spanish Yields Hit Record; US Stocks Plunge on Global Worries; Rio Plus 20 Summit

Aired June 21, 2012 - 14:00   ET


RICHARD QUEST, HOST: It's a real drag. German growth has been hit.

A case of foot in the Putin. Russia slams Europe's half measures.

And it's a funny old game. Will Germany be responsible for a Grexit? From Euro 2012, of course.

I'm Richard Quest. I mean business.

Good evening. A sovereign debt crisis, a banking crisis and, now, a renewed economic crisis. As governments scramble to rescue their banks, Europe's manufacturers are now showing serious signs of weakness, with fresh data showing even the world's strongest economies are not immune from the eurozone's problems. It makes sorry reading.

Join me over in the library and you'll see what I mean. Let's start with the German number. We had eurozone PMI, policy managers' index, these are the people who are the very heart of manufacturing, and the PMI number can be extrapolated into GDP numbers. Once you know the PMI, you get a very good idea of whether an economy is actually heading to growth or in recession.

And what we see this time with German PMI, the sharpest drop in business confidence in 15 years. It's the worst quarter of business activity across the eurozone in three years, which suggests since output is at a three-year low, the contraction is getting worse.

There was only one area, and that's France, where the PMI remained stable, which some will say could be reversed in the next few months. But the fact Germany PMI is down is serious.

And this also -- we got numbers from China. We know that China's manufacturing data is weak. And now, of course, it's saying it's suffering from the fact it's not sending as many exports to Europe.

China's PMI -- again, our old friend the PMI index -- at a seven-month low, according to HSBC, who are now saying it's almost certain that there'll be more stimulus either from the Chinese government or the Bank of China.

Into this maelstrom, Spanish bond yields. Now, there was an auction of Spanish bond yields of five-year bonds, and the rate went up to 6.1 percent, which is a euro era record for Spanish bonds. Last month, they only paid 5 percent for the same five-year bonds.

It was an auction nearly $3 billion. There was good cover, which of course will be welcomed and grateful. And indeed, in the secondary market, yields did come down somewhat.

But in the last couple of hours, the independent auditors have reported that what the needs for Spanish banks will be, and they say that they will need between $55 billion and $61 billion. So, slightly more than the IMF said, but a great deal less than the $100 billion that the Spanish government is seeking. Al Goodman is in Madrid for us tonight.

Mariano Rajoy is quoted as saying he accepts these independent numbers, and now bring on the aid. Bring it on quickly.

AL GOODMAN, CNN MADRID BUREAU CHIEF: Well, that's what he said. The Spanish prime minister is in Brazil on an official visit. He was at the G20 just a few days ago, he's still in Brazil. The Spanish economy minister is in Luxemburg at the euro group meeting. So it was left to a couple of deputies to come out and make the statement about the independent auditor reports.

The high end is 62 billion euros, and they pointed out that's far less than the 100 billion euros that Europe offered about ten days ago. Of course, the market uncertainty has been that Spain hasn't actually asked for it yet. Still hasn't asked for it, despite the prime minister's words.

The economy minister in Luxemburg says not going to ask for it today. That'll come in the next coming days. Richard?

QUEST: OK. So, we do have Spain paying more for new debt, but in the market, the secondary debt, the yields are now under 7 percent. So, Al, taking the fact that with the audit, the numbers involved, is there a feeling yet that if not out of the woods, to mix my metaphors completely, Spain is at least off the boil?

GOODMAN: Well, they may be heading that way, but I wouldn't say that they're getting near that point just yet.

Because analysts are saying that the main buyers for the debt this day, which had those high interest rates, the shorter-term notes, the 12- month and 18-month notes, which also had to pay very high interest rates just two days ago on Tuesday, that the main buyers were the Spanish entities, because international investors have pulled back because they're so nervous about this place.

So, that's why getting some aid into the banks, especially into the banks that are in the worst shape, which are the former savings banks, which had these high debts from the real estate loans, because the reports say this day that not all the banks are in trouble, just a certain group of them.

And so, that's why they want to get some money into those. The question is, how quickly they're going to ask and what are the conditions going to be from Europe for this money that's coming down for the bank rescue. Richard?

QUEST: The conditionality, you and I will talk about in great detail in the weeks ahead. Al Goodman, who is in Madrid for us tonight.

So, we put all this into the maelstrom. You've got the Spanish banking question, you've got the PMI numbers in Europe. Earlier, I was joined by Philip Shaw, the chief economist at Investec, and I asked him to describe the state of play in the eurozone tonight.


PHILIP SHAW, CHIEF ECONOMIST, INVESTEC: Well, fears over the Spanish banking system aren't as bad as thought. You've got a little bit more optimism in sovereign bond markets mainly because those stories coming out of G20 that the rescue facilities, the EFSF and the FSM might be able to buy Spanish bonds.

So, on the market side, there's a little bit more optimism or less pessimism, but on the economic side, basically the data is showing that the eurozone is back in recession.

QUEST: Right. So, if the -- if the banking side is a crisis, is the economic side developing into a crisis that needs to have more attention given to it?

SHAW: Well, I don't think we're at a crisis point yet on the economy. We're at a state where we don't really want to be.

QUEST: It's in recession.

SHAW: Oh, I --

QUEST: The eurozone's in recession.

SHAW: Absolutely. And it's very difficult to stimulate an economy when you've got no room on fiscal policy, and in fact your budgetary policy in many economies is being tightened, and you've not got much room on interest rates.

But there is some room. And we would expect the European Central Bank to cut its main refinancing rate at next month's meeting. So, that will help a little bit.

QUEST: The -- ultimately, will the easing of the sovereign debt crisis be what is necessary to boost confidence for economies? Is that the big overhang the debt poses?

SHAW: I thought that's a major problem, that that is a crisis, and that needs to be sorted out before the economies start growing. But it's not the only thing that needs to happen before you begin to get the European economies back on a recovery footing.

QUEST: So, what is the ECB waiting for? Forget the sovereign debt crisis at the moment. Just on straightforward economics, unemployment is at 10 percent, growth is virtually nil if not in recession, and nothing is looking terribly rosy. What are they waiting for?

SHAW: Well, on the economic front, the ECB would argue that it's waiting for the inflation prospects to improve somewhat, because inflation has been rather high. If anything, it's still a little bit above 2 percent.

But when you're looking at monetary policy, you can rarely just look at the economic situation. You also have to look at the political situation, and the ECB doesn't want to give the impression that it is the savior of last resort without governments having to do anything.

So, it's been holding its fire, I suspect partly so that the governments manage to increase the firewalls to encourage, if anything, the Greek population to vote for a more pro-European set of political parties.

QUEST: We'll leave it there for the moment, except for one final question. As a result of this scenario, are you going to sleep -- that you're seeing now, are you going to sleep easier tonight or not?

SHAW: I'll probably sleep a little bit easier, but I'm not quite sure if it's a full night's sleep yet.


QUEST: I think that's classically economic, sitting on the fence, on the one hand, on the other hand.

Mining and resources stock in the market were hit hard by the weak manufacturing data, which pushed major indices into the red. London off sharply, 1 percent. All the other markets on there, the least was the Zurich SMI.

Banking stocks also suffered a report that Moody's planning to downgrade a host of European and American banks. When and if we get that ratings announcement, we will bring it to your attention. So far, it is rumor in the market. And that's the markets.

Now, so to the New York market and how the Dow Jones -- you've been seeing on the screen throughout this program --


QUEST: -- the Dow is off nearly 200 points. Alison Kosik's in New York. We'll talk ratings downgrades in a second, we're just moving things. Every day, Alison, I almost feel like sort of Groundhog Day, as I just simply say, what's the reason today for 200 off?

ALISON KOSIK, CNN CORRESPONDENT: You know what it is? Pick your poison today. The selling has certainly picked up in the past hour or so, but this is more of a pile on the bad news to get the market to sell, here.

Think about it. Investors, Richard, they're already let down that the Fed didn't take more aggressive action other than extending Operation Twist. Then, we've got a bunch of weak economic reports, not just here, but overseas, too. The slowdown in manufacturing in China --

QUEST: Yes, yes.

KOSIK: What's happening in Spain. Look what's happening here: a slowdown in manufacturing -- retail manufacturing report here. Jobless claims, a great indicator of the jobs activity, they're only down slightly. They're still hanging out at that pretty high level.

And then, housing, existing home sales falling 1.5 percent in May. So, you pile on all this bad stuff, and what do you get? You get a lovely sell-off today, Richard.

QUEST: The market is seemingly -- and I hesitate -- we seem to be at a level, a support level, here, don't we? Between 190 -- 188 to 198.

KOSIK: Right.

QUEST: We're not moving much out of that range. So, my gut feeling - - and I want your experience and wisdom -- is that we stay in that range for the rest of the session.

KOSIK: Very well could be. You could see the market really fall off the cliff at this point. The news about Spain certainly pushed things over. A note from Goldman Sachs earlier today also pushed things over the edge --

QUEST: Oops.

KOSIK: -- and as I continue talking, I'm watching the Dow fall even more. So, this range, I never try to predict, I'll tell you that much. We could see it fall even further.

QUEST: I was just having a guess. All right, 200 off now on the Dow, 1.5 percent. Alison Kosik in New York. Look, Alison, don't touch any buttons. Don't do any damage --


QUEST: -- between now and the end of the session. No damage, but there's still the best part of two hours to go.

QUEST MEANS BUSINESS for you on this Thursday. Coming up in a moment, save the world and make a profit. It's the challenges on the road to a greener economy. The chief executive of Unilever tells us it's time for the corporate sector to step up, and we hear from the head of the WTO.


QUEST: The head of the World Trade Organization says the eurozone crisis is obstructing the road to a greener economy. Pascal Lamy is in Rio, one of 50,000 people in Brazil this week for the Rio Plus 20 summit.

The focus of the talks is sustainable growth. Finding a way to keep the cash flowing without squandering the planet's resources.


QUEST: World leaders have already agreed on a draft document. They'll sign it tomorrow. The critics say it's watered down and turns directives into mere aspirations. And among them, using more renewable energy, protecting forests, and reducing poverty.

Pascal Lamy agrees that there is a big gap between what is said at summits like G20 and Rio, and what is likely to be achieved afterwards. In the current climate, he says many countries are more focused on survival, and he told me his goal for the summit.


PASCAL LAMY, DIRECTOR-GENERAL, WORLD TRADE ORGANIZATION (via telephone): To demonstrate that trade opening works for greening the economy. When we worked to reduce tariffs on environmental goods and services, when we work for disciplines on fishery subsidies that deplete the oceans, the world trading system is a support of greening the economy and moving towards what they all agreed in Rio, which is that we have to make our world model more environmentally friendly.

An open trade -- and that's what was agreed in Rio.

QUEST: All right.

LAMY: Open trade can work for that.

QUEST: How concerned are you, Director-General, that as this crisis seems to be deepening and the eurozone's back in recession and the US is now slowing down, that your old nemesis protectionism becomes the tool du jour and people start once again looking for those protectionist policies?

LAMY: We are clearly worried. Recently, a number of countries have erred on the protectionist side.

We believe that it doesn't make sense, but true, there are worrying developments, not yet a sort of tsunami of protectionism, but a growing wave, which is why we had this discussion in the G20, which led to a determination, an agreement by G20 leaders to refrain to go protectionist at least until 2014, even if we know that this is not 100 percent followed up by concrete action.


QUEST: Pascal Lamy on a crackly phone line from Brazil. And I can tell you, getting through on those phone lines with so many people in Rio has been difficult to say the least.

The corporate sector's leading a green crusade of its own at the summit. At least one large corporation's claiming to raise the bar by setting itself a strong environmental mandate. CNN's Shasta Darlington spoke to Unilever's chief exec, Paul Polman.


PAUL POLMAN, CEO, UNILEVER: I think we're getting into a stage here that business is actually running ahead of many governments. We're dealing here with a compromise that often is a lower common denominator than we would be looking for.

SHASTA DARLINGTON, CNN INTERNATIONAL CORRESPONDENT: Now, Unilever has taken a leading role when we're talking about corporate sustainability and responsibility.

I believe your plan is to double profits in the next ten years, and at the same time, half -- cut in half the damage that will be caused to the environment? How is that going, and do you think that it's serving as a model for other companies?

POLMAN: Well, our goal is actually to double our turnover and to reduce our total footprint, so having actually a neutral growth. And that's absolutely needed. According to WWF, we live in a world where we already use 1.5 times the world's resources.

One of the things we will be working on here in Rio, where there is progress, is on a moratorium on illegal deforestation.

We've got again an industry, a coalition, called the Global Consumer Goods Forum together, where major retailers, the Carrefours and the Wal- Marts and major manufacturers like Unilever or like Pepsi have made a real commitment to not sell any soy, beef, pulp, paper, palm oil by 2020 from illegal deforestation.

DARLINGTON: Unilever has in some ways been able to continue its growth despite the crisis in the eurozone because of the growth in emerging economies. Now with emerging economies slowing down, what's your outlook?

POLMAN: Well, we still see, as far as Unilever's concerned, we've had a very good start to this year. We still see many opportunities to grow our business, introduce our brands, and make them available to more people than we do today.

The real concern for most people is Europe, where we need some courageous leadership to take the steps that we all know are needed and hopefully don't have to wait for too little, too late, which might become too expensive for all of us.

DARLINGTON: How do we tell the difference between what people are calling "greenwash" and real, committed policies to improve the world we live in while maintaining a profitable business?

POLMAN: There are many people watching us here to see if there's any heroic leadership to move forward on things.

And this is, I think, a unique opportunity for the business community to show that they can rise to the challenge, not only to the benefit of their business, which we all well understand, but to the benefit of our children and future generations to come. We just simply owe it to them.


QUEST: Unilever's Paul Polman. Now, tonight's Currency Conundrum. Last night, it was a blunder by the US Treasury. Now, three years ago, Britain's Royal Mint made a blunder of its own with a batch of 20 pence coins that had no date on them.

The question is, how much did dealers offer for these 20 pence coins, 10 pounds, 50 pounds, 200 pounds? We'll have the answer later for you in the program.

Now those -- now to the rates. The US dollar made gains across the board on the back of weak economic data from US, Europe, and China. Euro at $1.25. The yen weakened to its lowest level in almost a month. Those are the rates, this --


QUEST: -- is the break.


QUEST: Now, the match that defines Europe. It is Greece versus Germany. Right, there you have it. Now, if it was just on -- decided by debt to GDP or unemployment rates, no contest. Greece wouldn't have a hope.

But on Friday night, it has the chance to cut its German neighbors down to size at Euro 2012, because if you look at the statistics, that shows you a little bit more of how they do stand a sporting chance. Maybe not too much of a sporting chance.

Look at the yellow cards for Greece versus Germany, and one red card. Maybe that's an economic red card that they head. If it was up to economics, they'd be out on their ear. It's football, which is different, but when this match takes place, football and economics will come to head to head. Fred Pleitgen explains why this game is so much more than kicking a ball.



FRED PLEITGEN, CNN INTERNATIONAL CORRESPONDENT (voice-over): "We have to defeat Germany! We have to defeat Merkel!" Greek fans chanted after their team advanced in the Euro 2012 championship, showing that Friday's quarterfinal match against Germany will be about a lot more than just soccer.

"Finally, we can show the Germans that they may have the money, but we have the team," this fan says.

But the Greeks currently need Germany's money to keep their country from defaulting, even though many scoff at Chancellor Angela Merkel for perceived tough conditions attached to financial solidarity. Clemens Wergin of the Welt newspaper sees anti-German sentiment on the rise in Europe and questions whether it might be better of the Germans lose the soccer match.

CLEMENS WERGIN, DIE WELT: Of course, that's not he soccer fan in myself, but that's the foreign policy guy.

PLEITGEN: Germany is Europe's economic and political powerhouse, its economy virtually unscathed by the crisis. Berlin is setting the terms for Europe's bailout measures for troubled eurozone countries. And now, possibly soccer superiority. Wergin believes that could be too much.

WERGIN: If we appear too overpowering over Europe, then other countries will just team up against us and they'll try to counterbalance this kind of dominance. And I think a victory in the European soccer championship would probably drive home the idea that Germany's just too overpowering in Europe.


PLEITGEN: But the Germans have been waiting 16 years to win a major international soccer title and have big hopes for the tournament in Poland and Ukraine.

PLEITGEN (on camera): The public viewing fan zone in Berlin is ready to go, and hundreds of thousands are expected to come here for the decisive quarterfinal match. But while most Germans will tell you they believe that solidarity with Greece is a good idea, that solidarity doesn't extend to the football pitch.

PLEITGEN (voice-over): Fans certainly didn't see the benefits of their team losing.

UNIDENTIFIED FEMALE: No, definitely not.


PLEITGEN (on camera): Why?

UNIDENTIFIED FEMALE: Because Germany is a much better soccer team than Greece is. We're, like, third place in -- worldwide.

UNIDENTIFIED MALE: No, football -- I think it's a different thing to the financial thing. So, I think football -- soccer -- soccer and that I think is politic.

PLEITGEN (voice-over): Clearly a view many Greeks don't share. To fans in Athens, the Euro 2012 quarterfinal will be a big match with huge political implications.

Fred Pleitgen, CNN, Berlin.


QUEST: Now, I was being unduly optimistic, or mainly just -- maybe just foolish talking about the Dow.


QUEST: This is what it's doing at the moment, off now 221 points, down quite a large fall, and seems to be picking up a bit of speed. We'll keep an eye on that, 12,600 on the Dow.

When we come back in a moment, we'll find out what President Putin told investors at a forum in St. Petersburg about Russia's economic future and his plans and worries, in a moment.


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

Prosecutors in the trial of Anders Breivik have asked the court to declare Breivik insane in their closing arguments. The trial of the mass killer is wrapping up in Norway. Breivik admits to killing 77 people in a rampage last July and says an insanity ruling would be worse than death.

A court in Indonesia has sentenced a man to 20 years in prison for making the explosive used in the 2002 Bali terror bombing. Umar Patek was found guilty of premeditated murder, 200 people were killed in the attacks.

We're waiting to hear from Ecuador's embassy in London on whether or not Julian Assange will be granted asylum. Ecuadoran officials had said it would make the decision today. Assange is trying to avoid extradition to Sweden, where he's wanted for questioning on sexual assault allegations.

Greece has sworn in its new cabinet. The key post of Finance Minister has been given to Vassilios Rapanos, the chairman of the National Bank of Greece. The new government is expected to try to renegotiate the terms, or at least some of them, of the European Union bailout.

Air France is to cut more than 5,000 jobs, around 10 percent of its workforce. The job losses are part of an effort to slash costs and return the carrier to profit after posting major losses last year.


QUEST: Large-scale reform is Vladimir Putin's top priority, and that means privatization and diversification. The Russian president has been telling foreign investors in St. Petersburg it's all about convincing them to do business in Russia. Now Mr. Putin is back in the top job.

John Defterios is at the St. Petersburg Economic Forum. John is with me now.

Look, is it really half-past 10:00 at night? I know Summer Solstice is the longest day in the year, but even that's ridiculous.

JOHN DEFTERIOS, CNN CORRESPONDENT: Yes, it is clearly the white nights of St. Petersburg, the (inaudible) of the north indeed, Richard, and we were windblown for the first 24 hours on the ground here and it was quite rainy and blowing like the dickens. But it cleared up today. We have strong winds, but look at the light at 10:30 at night.

In fact, I think we're the only ones still working on the compound, because they went to Mr. Prokhorov's yacht to celebrate the first day of the St. Petersburg International Economic Forum, quite an extraordinary sight here in the north of Europe.

You all heard the saying in the past that the best defense is a good offense. I think that's the best way to describe the speech today by President Putin as he addressed business leaders and others in the audience, including, in fact, Richard, Henry Kissinger.

But Mr. Putin, in the first few minutes, was very interesting here at the St. Petersburg Forum, decided to put out his attacks very early in the game, and he did a rapid-fire attack against the European Union, suggesting because Russia exports so much to the European Union, that the dithering on the decisions regarding Greece, Spain and Italy and the collective action in terms of the banking sector and perhaps even the bond market is hurting Russia as we speak, and they need more leadership. Let's take a listen.


VLADIMIR PUTIN, PRESIDENT OF RUSSIA (through translator): As well as deficits and finances and budgets, we're also seeing a deficit in decisive action. We see how many important and obvious decisions are being postponed because of political, party and group contradictions as a result of the current political situation and political agendas.

Half measures are only making the situation worse. Risks are mounting in Europe, investors' trust in the financial stability of Europe's largest economies is waning. Europe's core countries are, unfortunately, unable to stop the slide into a new phase of recession.


DEFTERIOS: Pretty extraordinary comments there, Richard, and in very, very direct, he was kind of classic Putin, if you will, in the space of Putin 2.0, his second term in office, which will end in 2018. It's interesting; he tried to project outwards -- and when I say classic Putin, because he wants the comments to boomerang back in.

He's making some grand promises. He wants to try to create -- although it's a very lofty goal and he admitted that -- 25 million jobs by 2020, because he's facing the internal heat from the middle class right now, quite restless that he has not modernized his economy fast enough, Richard.

QUEST: All right. So he puts the boot into Europe. The question is, does he deal with any of the -- some say legitimate questions -- about Russia's own Wild West version of capitalism, whether it's Khodorkovsky, whether it's his moves on energy, BPT and PPB (ph), any of those other issues, did he deal with anything like that?

DEFTERIOS: No, he spent about 10 minutes talking about greater transparency and trying to eliminate fraud within the system. Again, this kind of rang hollow with the audience because they haven't seen a great change in the way he does business.

And in fact, there was a lot of rumors today about two potential takeovers for the TNKBP debacle, number one coming from Mikhail Fridman , who was the CEO of TNK, suggesting he was in London, trying to raise money with different investment bankers, and that we caught up with Igor Sechin, who's the new president of Rosneft and the former energy minister.

He didn't want to address the question, but later in the day there was also rumors in the halls here that he may be looking at a potential takeout of the BP stakes. So when it comes to the energy sector, of course, they move aggressively.

The other thing I think that stood out here this time around, Richard, we spoke to the CEO of Unilever speaking to Shasta Darlington, overwhelmingly whether it was a Russian banker or a number of the bankers that were here or the industrialists that were here today, they overwhelmingly said that Europe needs to be much more cohesive in its messaging and they need to move to the pan-European solution when it comes to insurance for the banking sector --

QUEST: All right, John --

DEFTERIOS: -- and don't be bashful about using the EFSF in the bond market as well.

QUEST: John Defterios, who, if he really rushes fast, could probably still make it to that yacht before the final -- before the final drink has been poured. John Defterios joining from --

DEFTERIOS: Take care.

QUEST: -- twilight St. Petersburg.

The markets, oof, grim, off 1.6 percent, 209 points down for the Dow.

We'll be back in a moment. Why one airline is taking a dim view of Boeing's Dreamliner's most talked-about feature, how the windows are not dark enough, in a moment.




QUEST (voice-over): Tonight's "Currency Conundrum" answer, three years ago the Royal Mint accidentally made a batch of coins, 20p coins, with no date. Earlier, how much did dealers offer for these coins?

The answer is B, the Mint Office private dealer offered 50 pounds for anyone who found one in hope of selling them, collectors even paid higher prices of between 50,000 to 100,000 of these (inaudible) coins in circulation.


QUEST: Now one of the most trumpeted features of Boeing's 787 Dreamliner is now being openly criticized by its launch partner, ANA or Nippon Airways. It is the famous larger, dimmable electronic windows.

The problem is -- shh! Careful of the passengers -- the airline says the windows don't allow the cabin to become dark enough on long haul flights, and it's now asked Boeing to come up with a solution so its passengers are more able to sleep.

They're even thinking of putting -- Heaven forbid -- screens and blinds. And we can see the windows in action now. Boeing's commercial vice president of marketing, Randy Tinseth, gave me a demonstration.



QUEST: I worry about these electronically dimmable things. They're all -- and I'll tell you why, not because -- the more electronics, the more there is to go wrong.

TINSETH: Yes, so I tell you, one of the things we've done is these have gone through extensive testing, both the switches to make sure they'll last, as well as the dimmable capability of this airplane. Now it takes about 90 second. It's a new technology. But I'll tell you, the one thing that you'll (inaudible) -- yes, there it goes.

One of the things I notice is that I flew on this airplane between Seattle and Beijing. It was about a 10-hour flight. And we were in this part of the cabin. The airplane was completely dark, but the cool thing is, you can still look out and enjoy the horizon, even when the airplane windows are completely dimmed.


QUEST: And that probably is the problem for those long haul flights, because you want to be able to dim the cabin completely rather than be able to still see the horizon.

Anyway, whatever the relationship between ANA and Boeing over this, all Boeing would say is that the discussions with airlines are proprietary and they have no comment. But if you are on a Dreamliner, it's very clever technology. It really is. But you do see screens, you'll know what all that is about.

So the weather forecast now. Will the weather be hot? Or will the weather be cold? We'll weather the weather, whatever the weather, whether we like it or not.

Jenny Harrison is at the --


QUEST: -- you know, I always enjoy that one, Jenny. I always enjoy the --


QUEST: I want to know from you at what point will you be able to give me a forecast for the Olympics?

HARRISON: You know, I had a feeling you were going to ask about the Olympics. Not this point, that is for certain. It is too far ahead. And you know that we don't like to leave anything longer than sort of a 5- to 7-day outlook. But we'll get to it as the days tick by.

We'll start to talk about what sort of averages we can expect, the average sort of rainfall. I'll have to warn you, of course, it could well be wet. It certainly is right now. In fact, the last few hours we've seen some really severe storms coming through on parts of France into the low countries, just look at this band of rain showers.

And within these thunderstorms there have been dozens of lightning strikes as well, some very heavy amounts of rain at times, and also some very large damaging hail. First of all, the hail, in Austria, 5.5 centimeters damage, so that is pretty big hail, certainly across parts of Europe in particular. And then rainfall, in just three hours, 81 millimeters.

So that's (inaudible) amount of rainfall coming down in a short space of time that can easily lead to some flash floods or certainly some localized flooding.

Now these strong storms, they will eventually peter out, so probably as we're going through Friday, at the worst, the storms would have died down. But that, I'm afraid, is still very much a wet picture across the north and the northwest of Europe. That low is going to just work its way slowly up towards Scandinavia.

And the other system which is bringing the storms right now across north central and eastern areas, that's also going to lose some of its power but continue to work its way eastwards. But remember, we've still got this very, very hot and dry air in place across the southeast. That's really the reason we've seen these strong thunderstorms.

They're coming along with the cooler air behind and of course the warmer air ahead, and that's where we're seeing the lines clash. And then as you go through Thursday and Friday, we will expect, as I say, more severe winds and possibly again some more of that large damaging hail. But it will eventually begin to ease off.

But the winds will stay fairly strong over the next 48 hours, working their way across the North Sea, towards Denmark. Coastal areas of Scandinavia and eventually sort of funneling up through the eastern end of the Baltic Sea. But when it comes to temperatures, this Thursday, (inaudible) again the mid- to high 30s, 36 in Rome, now 10 degrees above average.

So the list goes on, 34 in Bucharest and as I say, that dry, warm air being squeezed a bit by this system coming in from the northwest, the green indicating average temperatures across the next 48 hours. Right now, it is 20 Celsius in Warsaw, the match is just about to kick off. There have been some thunderstorms coming through in the last few hours. They've actually passed through now.

This is an image from yesterday, but I'd imagine it would have looked pretty similar this evening, with those thunderstorms in place. You can see the rain and the cloud clearing over the next 24 hours, and then we've got the rain patch there as they're pushing across into Ukraine. But for this evening, the roof, of course, is being used in the stadium.

Having said that, still a few showers, temperatures (inaudible) 21-23 and then on Friday, it's a mostly cloudy evening for the game, Germany against France in Gdansk, Richard.

QUEST: Jenny, we thank you for that. More tomorrow.

And that is QUEST MEANS BUSINESS for tonight. I'm Richard Quest. MARKETPLACE EUROPE is next. And whatever you're up to in the hours ahead, I hope it's profitable.




JULIET MANN, CNN HOST: Welcome to MARKETPLACE EUROPE in the Danish capital of Copenhagen. I'm Juliet Mann.

Necessity, they say, is the mother of invention, products transport and business systems are hatched from a creative desire to solve a problem to make our lives easier. In an increasingly competitive international market, the challenge for European inventors is to protect their valuable assets to stay ahead of the pack.


MANN (voice-over): Coming up, as Copenhagen plays host to the annual European Inventor Awards, I meet some of this year's contenders.

And the boss of one of Europe's leading recycling firms calls on the E.U. for a simpler, more flexible approach to regulations.

LARS PETERSEN, CEO, STENA RECYCLING: We're not able to sell to a customer some product if you say it might come in four months or it might come in two months. We don't know, depending on (inaudible).


MANN: European competitiveness depends on the ability of businesses to continue to innovate and inventions need protection. Sixty thousand patents were granted in Europe last year, but 60 percent of those were from companies outside Europe.

Sixteen inventors from nine countries have made it to the finals of the European Inventor Awards here in Copenhagen. I've been meeting some of the contenders.

This laser technology transformed the hearing loss industry, making hearing aids more discreet and better fitting for the clearest possible sound. The brains behind it, Danish family-run firm Widex, has been in the business since 1967. Widex is the world's sixth biggest manufacturer of hearing aids and holds more than 150 patents worldwide to up-to-the-minute ear science.

JAN TOPHOLM, CEO, WIDEX: To find new ways to improve the hearing aids is very important and that requires inventiveness. And when you invent something, then you should also patent it, because you need to protect it. You have to be inventive to find something that somebody else haven't thought of now. It is -- there's a lot of documentation also around.

So to have something new, you really have to make sure that it is new. You have -- you have much better access to the inventions already made through the Internet, for example. It's much easier to search and, of course, that is both an advantage and an obstacle, because you often get to know that somebody actually had that thought before, so you have to give it up.

MANN (voice-over): Patents help inventors protect their ideas from competitors and copycats. But there's a lot of red tape and it gets expensive outside local markets. Finalizing a harmonized European patent process is on the agenda at next week's E.U. summit.

BENOIT BATTISTELLI, PRESIDENT, EUROPEAN PATENT OFFICE: When you look at Europe, we don't have raw materials. We're not going to compete with labor cost. So what are we're (ph) advantage is innovation. And so we are trying to foster, to develop innovation. And for that patents is a very efficient tool.

One of our nominees that we have selected has found a way to recycle lithium in batteries. So, first, it is good for the environment; and secondly, you know, that there's a shortage of raw materials. So if we can reuse the one we're already using, it's also on a strategy point of view it's (inaudible).

MANN (voice-over): But despite having that good idea, it can be a frustrating process getting it put up to market.

DR. FAROUK TEDJAR, PRESIDENT, RECUPYL: You need money and the people don't trust before you have the facility. And you cannot have the facility without having money. And then it -- and the second point is the patent, because when you have a patent, then you are recognized worldwide. It for this that we are really recognizing the help of the French and European patent office.

PROFESSOR HUGO KATUS, HEIDELBERG UNIVERSITY: We developed a blood test for heart attack and set out to identify patients with chest pain that's having a severe heart problem. So it changed the entire field of cardiology.

You need to have a really bright idea, and you need to have cooperating partners which support you. And it must be important for your field. So it must change the way how for us, how medicine is being practiced.

MANN (voice-over): These awards go some way to recognizing where Europe's strengths lie, in turning inventions into economic assets, which at the end of the day, creates jobs.


MANN: Later in the program, we find out who's picked up the award.

And coming up after the break, making money out of rubbish. I speak to the boss of (inaudible).




MANN: Welcome back to MARKETPLACE EUROPE in Denmark. Copenhagen has set a target to become the first carbon-neutral capital in the world by 2025. In fact, 20 percent of Denmark's energy already comes from renewables, a big part of that from wind power. In an effort to be greener and cleaner, the Danes have become world leaders in waste management.

MANN (voice-over): (Inaudible) recycling is part of the Swedish Denimatel (ph) Group, which employs 3,200 people across Europe, handling 50 (ph) million tons of waste a year. At this plant near Copenhagen, they're recycling as much as possible to avoid dumping waste into landfills. Here, they can shred a car in one minute. This process means 80 percent of a vehicle can be recycled.


PETERSEN: It takes time to get this mindset that we have to recycle everything. But it's coming up and E.U. (inaudible) is actually (inaudible) across border, then comes the challenge because it's actually recently that -- first recently that the governments in the different countries have seen this here as a secondary resource.

And we're still fighting every day that when we are doing the export, that we have to seek for notification, and notification takes time and it goes out to three to four months before we get, to move a truck from one place in Europe to another place in Europe if it's not listed on the green list, which they have. So it's become better, but it's still an obstacle. And it's a huge obstacle for us in a certain extent.

MANN: Getting your waste reclassified as secondary resources takes time, and time is money.

PETERSEN: It is. And we're doing everything we can within the organization, different organizations, members of the scrap business in Europe, to try to process (inaudible) lobbying within the E.U. in order to get it on everything -- not everything, but as much as possible on the green list in order for us to export.

MANN: Well, talk me through then the main challenges that face your business doing recycling in Europe in these particularly tough economic times.

PETERSEN: Prices are going up and down and since many of the products we have in here, although someone would say it's waste, it's actually secondary product. And many of them are listed on the London (inaudible) exchange. So it's a commodity.

And commodities goes up and down, and that also means for us that we have to be as agile as possible in order to make sure that we don't either lose our money very quickly or are not gaining any money, because when prices go up, that also means that competition goes up and especially on some of the metals, which are having a very high value as these people are stealing and that actually costs us in the business quite some obstacles as well.

MANN: What would you like to see the government and the E.U. doing to make life easier?

PETERSEN: There's no doubt that we need flexibility and agility in order to utilize, you could say, the secondary resources best as possible - - as best as possible, because otherwise we will get told either that we are not able to do it because it takes too long time and you're not able to sell to a customer some product if you say it might come in four months or it might come in two months.

We don't know, depending on the notification. So we need them to be more, you could say, flexible and more fast in the way that they are doing the notifications that we need.

MANN: How frustrating is it for you when there are E.U. laws in place, when other countries don't follow the rules?

PETERSEN: Yes, that's a challenge, actually, because sometimes competitive wise, we are against other competitors in Europe and if you could say some rules are bent a little bit extra, although we are all under the same E.U., that is a challenge.

Southern part of Europe, actually, where the way that they are, you could say, bending the laws a little bit different in the Nordic countries and especially they -- if a law is a law, then the law has to be obeyed.

But there's no doubt from a prospective in the future that we have to be even more innovative than we already are today in order to get the resources out of the waste in order to be competitive.

From a recycling point of view, we still have to recycle. So that material will come in every day anyhow. Our product, so to speak, is quite stable. And will be quite stable also for the years to come because we all are generating waste and more people are coming here as well.

So that means that the waste will grow and that demand of recycling waste will become higher and higher, because otherwise where should the resources come from?


MANN: Back at the European Inventor Awards, we're about to find out who the winners are.

UNIDENTIFIED FEMALE: (Inaudible) to the European Inventor Award 2012.


MANN: That's it for this edition of MARKETPLACE EUROPE from this year's European Inventor Awards in Denmark. Do join us next week. Goodbye.