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Bernanke Admits Central Bank is in "Process of Learning"; Romney Blames Obama for Unemployment Rates; Interview with Mashable Technology Editor Pete Pachal; European Commission Set to Announce New Plan for European Banks

Aired August 31, 2012 - 00:00:00   ET


MICHAEL HOLMES, CNN INTERNATIONAL ANCHOR: Hello, everyone, Michael Holmes at the CNN Center with the headlines for you this hour.

Firefighters in southern Spain continue to battle ferocious flames and hot, bone-dry weather as they try to contain that massive wildfire you see there, the blaze burning in the rugged hills above Spain's famed Costa del Sol. Some 4,000 residents have been evacuate so far.

Amateur video captured the moment of a magnitude 7.6 earthquake, hit today off the Philippines. Officials say one person died when the quake triggered a landslide. A tsunami warning was issued for much of the western Pacific but no large waves came ashore anywhere and the warnings were canceled.

South African authorities have changed 270 miners in the killings of 34 fellow workers, even though police are the ones who appeared to have fired the fatal shots. The workers were arrested after the deadly clashed and charged under an old common-law provision, apparently holding them responsible for provoking the police.

Syrian state television reporting that government forces have inflicted, quote, "big losses" on rebels in Homs, and they've raided what they call a terrorist den in Homs province. Shelling and clashes are also being reported in the nation's largest city, Aleppo.

U.S. Republican presidential hopeful Mitt Romney has arrived in the state of Louisiana, where he's going to be visiting areas affected by Hurricane Isaac. Mandatory evacuation orders have now been issued in areas where levees under pressure from all the flooding are. U.S. President Barack Obama is going to be visiting the region on Monday.

Those are the headlines. I'm Michael Holmes at the CNN Center. QUEST MEANS BUSINESS with Nina dos Santos (inaudible).

NINA DOS SANTOS, HOST: Tonight, learning by doing -- Ben Bernanke feels his way towards QE3. (Inaudible) include and the battle of the billionaires. It began with a tussle (inaudible). I'm Nina dos Santos and this is QUEST MEANS BUSINESS.


DOS SANTOS: Good evening.

Well, the Fed admits that it's feeling its way in the dark as it tries to fix the U.S. economy. In his long-awaited speech at Jackson Hole, Wyoming, the Federal Reserve chairman, Ben Bernanke, says that when it comes to stimulus measures, well, central bankers have, quote, "been in the process of learning by doing." That was his salient quote there.

Bernanke, it seems, is still prepared to continue pushing into this uncharted territory. He ended his speech by saying this, quote, "The Federal Reserve will provide additional policy accommodation as needed."

There was a volatile reaction on the markets. Felicia Taylor is in New York to tell us what markets stateside made as that crucial speech at Jackson Hole, Wyoming.

So, Felicia, it seems as though yet again from central bankers, we're getting this message to say, yes, we're ready, we have some firepower, but now is not the time to deploy it.

FELICIA TAYLOR, CNN FINANCIAL CORRESPONDENT: Exactly. I mean, that's because it's been somewhat of a mixed message in the economy of late with recent economic numbers, some pointing to some, you know, good news out there, but not necessarily on all fronts, mainly in housing and the job market, although we have seen some job creation.

It's not nearly enough in what is, you know, a very tepid economy to say that they're -- that the jobs market is getting better. And that's really the problem.

The Fed chief did back up what he's done so far in terms of the last two rounds of asset purchases, A, he pointed out once again, as you well know, it moved stocks higher; it improved the financial markets and it did do one of its other mandates, which is to create jobs, about 2 million jobs. The point though, that what the market was really looking for is when is he going to do in the future.

Will there be more quantitative easing down the road? He hinted at it, as you said, that they will use that policy accommodation as needed. It wasn't really more aggressive than what we've heard before, and not necessarily anything new.

So the market sort of reacted to it in a negative way, but then again, this is the end of the quarter for -- or the end of the month, rather, for most investors out there because we have a holiday shortened week next week. So this is the last day. There's a lot of short covering out there.

The market did come back a little bit, you know, basically getting a boost from the Federal Reserve chairman but not enough to make a real difference. The point, though, is we will be hearing from him in just a couple of weeks in September. That could be when he pulls the trigger, especially because this is such a sensitive time, just a couple of months before the election.

DOS SANTOS: Well, that was what I was about to come to. Obviously, you know, a lot of people wondering whether he might hold his fire until it's decided who's going to be the next President of the United States.

But when we talk about quantitative easing, a lot of people wonder whether this kind of money really (inaudible) due to the real economy. Yes, it might boost the markets in the short term -- that's what we saw in 2010. But really does it filter through the average person on Main Street?

TAYLOR: Not really. I mean, that is a crucial question, Nina, because for a lot of people that are out there watching this -- and here we are, debating once again, whether or not quantitative easing is a good thing, there are plenty of people out there that have said that he's already done enough. He's pulled that trigger one too many times in terms of what some people think.

It hasn't necessarily created enough jobs. It hasn't necessarily made companies in the United States feel comfortable enough to go back out into the economy and put money to work out there. So you ask a very important question.

Does it make a difference to the average person, the average consumer? Not necessarily; and some people would say that this type of stimulus action has actually raised the ire for inflation, which certainly isn't good news for anybody out there, especially those that are still without work.

DOS SANTOS: Yes, that's absolutely right. Turning on the money, printing presses, have a huge impact on the price that people pay, especially at a time when people are (inaudible) higher food price inflation and high prices at the petrol pump. The other thing I want to come to, though, Felicia, is what else you have for this toolbox, because it's looking suspiciously bare.


TAYLOR: Oh, I don't know if you'd like to hear you say that. But once again, I mean, he can go back out there and print money. I mean, that's probably the method that he would most likely use.

And I -- you know, I'm going to go out there on a limb and say that he might actually continue with Operation Twist, which wouldn't be necessarily the same thing as the asset purchases that he's done so far, and would continue and make some sort of announcement in September.

That is a crucial moment ahead of this election. It would bode well, certainly for the Democratic Party, to see that kind of stimulus and prove that Ben Bernanke really is willing to do something. So I think in September, all eyes really will be listening and hoping to hear that kind of stimulus coming. But he does have a few ways to go about it. I think he's going to extended Operation Twist a little further.

DOS SANTOS: All right. We might hold you to your word.

Felicia Taylor, there in New York, thanks so much for that.

Getting her crystal ball out, it sounds.

Right. Mitt Romney wants to change the government rather than a change of monetary policy in order to try and create jobs. This as he prepares to board his campaign jet for Louisiana. The Republican nominee blamed Mr. Obama's leadership for keeping unemployment high.


FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: He said that he would be measured in a different way than other people are typically measured. He would be measured by whether he created jobs or not. He hasn't. He said he would be measured by whether people have rising incomes or not. They don't.

Incomes are down in this country. He said he would be measured by whether people would take the risk to go out and start a business. We're at a 30- year low in new business startups.


DOS SANTOS: Well, next week, of course, it -- well, we'll come to that in a second. First of all, Mitt Romney called on some of Hollywood's star power to ram home that message on Thursday night. Clint Eastwood was the surprise guest at the Republican convention, calling the jobs picture, quote, "a national disgrace." And it wasn't only his choice of words that raised eyebrows, as Miguel Marquez now reports.





MIGUEL MARQUEZ, CNN CORRESPONDENT (voice-over): As a piece of political theater, not a bad start.

EASTWOOD: Save a little for Mitt.


MARQUEZ (voice-over): Quickly taking a partisan turn -- it is the RNC, after all.

EASTWOOD: I haven't cried that hard since I found out that there is 23 million unemployed people in this country.


MARQUEZ (voice-over): Well, as happens in Hollywood, some numbers may be fictionalized for dramatic effect. The actual number of unemployment, says the Bureau of Labor Statistics, is 12.8 million. And this is where the four-time Oscar winner went from fiction to experimental cinema.

EASTWOOD: I wondered about when the -- what? What do you want me to tell Romney? I can't tell him to do that. He can't tell him to do that to himself.


EASTWOOD: (Inaudible).

MARQUEZ (voice-over): Seemingly off-script, he rambled at an empty chair, signifying President Obama, rich metaphor or cheesy plot device? You decide.

EASTWOOD: How'd he handle it?

MARQUEZ (voice-over): Just when the audience seemed unsure whether to cheer or cringe, the actor turned mayor turned director switched scenes, giving them what they came for.

EASTWOOD: When somebody does not do the job, we got to let them go.


MARQUEZ (voice-over): Unforgiving and unsatisfied, this was a crowd hungry for (inaudible).

EASTWOOD: We don't have to be --


EASTWOOD: I don't say that word anymore.


MARQUEZ (voice-over): The audience turned writer-director demanding a line.

EASTWOOD: OK. You want to make my day, huh? All right.


MARQUEZ (voice-over): The lesson here is there is one. When (inaudible) your party, make sure they know it's your party. (Inaudible).

EASTWOOD: I'll start it, you finish it. Go ahead.


EASTWOOD: Thank you.

MARQUEZ (voice-over): Miguel Marquez, CNN, (Inaudible).


DOS SANTOS: (Inaudible) before next week, well, it's the Democrats' turn. Join Isha Sesay at the Democratic National Convention starting on Monday. CNN News Center will be live from Charlotte, North Carolina, with special reporting and analysis as we turn our focus to the Democrats' three-day event. This is your destination for complete coverage of the 2012 U.S. presidential election.

Coming up on QUEST MEANS BUSINESS, though, another enduring battle between two old rivals, (inaudible) still fighting out those (inaudible) wars. And Samsung finally has a victory to celebrate. We'll explain more (inaudible).




DOS SANTOS: Well, Samsung has scored a major victory against Apple in its international patent battles. Today, a court in Tokyo rules that Samsung's mobile gadgets don't infringe on an Apple patent related to (inaudible) computers.

Now as you can see here from this map, it's a clear victory for Samsung, which says the verdict recognizes the lawfulness of the company. So far, Apple, from its part, has declined to comment. But it must now pay the costs. So as I was just saying before, the Japan case is a definite win for Samsung at the moment.

But let's have a look at the rest of the battleground across the planet. It's much bigger case in the United States here, which went in favor of Apple. A jury recommended that Samsung pay about $1 billion in damages for violating different Apple patents.

Now some say it (inaudible) against that ruling. But a few days before that, what we also saw was a South Korean court here -- over here -- deciding that Apple and Samsung had infringed each other's patents. Samsung was subsequently ordered to pay $33,000 in damages; Apple, on the other hand, was handed a bill of $22,000 for that.

And the battle isn't over yet, because we've also got ongoing cases in places like France, also in Italy and also crucially in Australia as well. Now Pete Pachal is the technology editor for the news website Mashable, and he joins us now live from CNN New York to talk about the ongoing patent war.

And, Pete, this just goes on and on and on. How big are all of these kind of disputes, because a lot of -- also got to remember that these companies are very interconnected. Despite the fact that they may be suing each other on patents, for one part of their business, they still do business on other parts of their business.

PETE PACHAL, TECHNOLOGY EDITOR, MASHABLE: Yes, they definitely do a lot of business together. Samsung makes a lot of Apple's chips, for example, in their mobile devices, from their semiconductors division. So you know, that's a little bit far removed from the company proper. But it's, you know, probably sort of weighs a little bit into their thinking in some of those.

DOS SANTOS: What does this mean for consumers, though? These ongoing patent disputes, it doesn't matter where you are on the planet, these two still seem to be slogging it out in court.

PACHAL: I'm sorry?

DOS SANTOS: What does it mean for the consumer? These two seem to be slogging it out in various courtrooms, no matter where you are.

PACHAL: Yes. Yes, for consumers, it's going to be interesting. I mean, basically a lot of the -- in particular the landmark decision in the U.S. affects a lot of older Samsung products. So that would mean if Apple succeeds in actually banning them, which is still yet to be determined, that those will no -- simply no longer be available.

And those are the kind of products that consumers usually look for for a bargain. So you know, we'll see what happens with the current round of products.

I think we've already seen Samsung diverging its design philosophy, if you will, focusing on things like stylus, the styluses (sic) for some of their new products, I think part of this is an attempt to not be exactly the same as Apple in some functional aspects. And they're also starting to diversify by adopting other platforms for the mobile devices, like Microsoft Windows phone.

So I'm not sure if Apple's going to be able to continue its legal fight with Samsung with current generations of products. But I'm sure they're going to try.

DOS SANTOS: Will all this stifle innovations, though, if they keep slogging it out, as I was saying, in courtrooms everywhere around the world, it just sends the wrong signal, doesn't it?

PACHAL: For innovation? Well, it's interesting; a lot of -- people see it both ways. On the innovation front, you could say that this could -- these kind of decisions, like the one in the U.S., are going to protect us from having just tons of knockoffs. So you know, that is kind of a good thing, I think a lot of people would say.

But on the other side, you know, just -- it is definitely going to limit choice. I mean, you're going to be able to buy Samsung (inaudible) certainly. But they're not going to be able to do certain things you might expect because of the experience on the iPhone and what that's already established . So, you know, there's a case to be made in either side.

DOS SANTOS: OK, Pete Pachal from Mashable, thanks so much for joining us there from New York.

Well, some publishers are closing in on the books of an eBook price fixing case. Three of the top U.S. publishing houses, which are Hachette, HarperCollins and Simon & Schuster, have inked a $69 million deal with the U.S. Department of Justice. It settles claims that they colluded to fix eBook prices, which (inaudible) still face a lawsuit, a civil anti-trust lawsuit in New York.

And in the meantime, a case against Apple and publishers Penguin and Macmillan, who have so far refused to settle, is still pending in a federal court. And these three expect to defend themselves from price fixing allegations.

Now let's get between the sheets of the top five bestsellers on "The New York Times" combined print and eBook fiction list with the help of some of our trusty props here.

And let's have a look at how the ink and paper price compares with print, the version you can get on and on its Kindle device.

So starting out at number one, "Fifty Shades of Grey," that is of course famously by E.L. James and a paperback version -- this is actually a hardback copy -- but the paperback version would be priced at $9.57. However, on the Kindle (inaudible) quite a bit cheaper, $4.77 for that one.

The next two are also part of the "Fifty Shades of Grey" trilogy, so let's move to fourth place, "Gone Girl" by Gillian Flynn, hardback cover, that'll be $13.94. If you want to buy it on the Kindle, though, again, it's a little bit cheaper at $11.27.

And at number five, of course, we have this interesting edition, "The Inn at Rose Harbor" by Debbie Macomber, and that one retails at a bookstore at about $15.29 if you're looking for a hard cover; on your Kindle, it's a full more than $10 cheaper, $5.79.

So it really gives you an idea of exactly how much less or more they can also cost on this kind of a device, but obviously the benefit is that you don't have to weigh down your bag with all of these. But I can tell you, bringing them into studio weighed a ton.

Now we've looked to some of the major eBook publishers. Let's have a look at some of the hardware as well, because that's what I wanted to show you. Amazon's Kindle is the market leader, and it was really the first to bring e-readers into the mainstream.

Technology blogs say that the company's set to announce new version next month called the Kindle Paperwhite. Sony has its own line of e-readers as well. That's the PRS series that also has its own eBook shop as well for people who want to download directly to that device.

And then we have the (inaudible) Kobo. It has its Touch and WiFi eBook readers on international sale. The company has integrated Facebook into its core products as well to give people a bit more of a social reading experience as well.

And last but not least, well, U.S. bookshop heavyweight Barnes & Noble produces that famous device, the Nook. And so far, speaking of the Nook, it's only actually been available in the United States. But in October, it'll be making its European debut. The department store John Lewis is Barnes & Noble's premier launch partner.

Ed Connolly is the store's technology buying director, and he told me what makes the Nook stand out from the rest of the eBook crowd.


ED CONNOLLY, TECHNOLOGY BUYING DIRECTOR, JOHN LEWIS: The next generation of e-readers, very simple to use, has a touchscreen that's smaller and lighter, but the main thing about this is its glow light. So it has a unique light behind the screen so that you can read it in bed without disturbing your partner.

DOS SANTOS: So you don't have to have a light, a separate light. But many e-readers have that you have buy separately as part of a cover (inaudible).

CONNOLLY: That's right.

DOS SANTOS: That's a big advantage.

CONNOLLY: It's built in so it's behind the screen and gives a really consistent light behind all parts of the screen.

DOS SANTOS: Now you're going to be sort of the premiere retailer, the launch partner, if you like, for this in the United Kingdom. You also obviously sell all sorts of other e-readers as well. How is this going to complement the range that you've got here for customers?

CONNOLLY: Well, it'll sit alongside it. We are all about choice. This is the next generation of e-readers as we see it. And it's just an extension to the choice that we'll offer customers.

DOS SANTOS: Why sell something from Barnes & Noble here? Will that (inaudible) something that you'll have to explain a bit more about, because Amazon is well-known but Barnes & Noble isn't.

CONNOLLY: Yes, I think that's right. I think that's why Barnes & Noble wants to partner with us so that we can use our brand name to explain their product to our customer base.

DOS SANTOS: Does that mean you automatically like, for instance, Amazon, you have to buy it through their retail (inaudible). (Inaudible) for the average customer.

CONNOLLY: You can buy it from retail or direct from Barnes & Noble. Pricewise --

DOS SANTOS: And the book sonnet.

CONNOLLY: -- and the book sonnet. But that will be done through the Barnes & Noble website.

DOS SANTOS: Now I want to ask you about the sort of niche aspect of this product, because a few years ago, I remember when this launched, the Amazon Kindle. And it was a sort of -- (inaudible) a bit of cachet, didn't it? It was a sort of niche product and not everybody knew how to use one, and most people we speak to now, they've also got an e-reader. This is what this is launching into.

CONNOLLY: So a million and a half units a year for the U.K. market is roughly the size of this market. But if you think about the market penetration, it's still extremely low because it has laptops and even tablet computers.


DOS SANTOS: A "Currency Conundrum" for you out there now. How wide is the largest banknote ever made? Is it, A, 33.5 cm; is it 35.6 cm or 42.8 cm? We'll have the answer for you later on in the program.

Speaking of which, European currencies making some headway against the U.S. dollar this Friday on the back of what Ben Bernanke has been saying at Jackson Hole, Wyoming. We've seen the euro and the British (inaudible) Swiss franc all up to the tune of around about half of 1 percent (inaudible). (Inaudible) be back after the break.



DOS SANTOS: Two Russian tycoons, an epic legal battle and a big win for Chelsea Football Club owner, Roman Abramovich. He and his former friend, rival oligarch Boris Berezovsky, squared off in a London court. The feud, in fact, has kept the U.K. media buzzing since back in 2007, when the pair's bodyguards clashed in a London branch of Pernod (ph), the luxury goods firm.

That was when Berezovsky spotted Abramovich and managed to eventually serve him with a writ. Now CNN International Correspondent Matthew Chance takes us inside the biggest private legal battle in British history to see what this clash of the titans reveals about doing business in the post-Soviet Russia.


MATTHEW CHANCE, CNN CORRESPONDENT: Well, this really has been the battle of the big hitting oligarchs. But now this man, Roman Abramovich, one of the richest men in the world has won his long-running legal battle with exiled former Russian oligarch, this man, Boris Berezovsky.

What was the biggest private court case in British history, Berezovsky claimed $5 billion in damages from Abramovich, accusing the owner of Chelsea Football Club of being a gangster who intimidated him into selling his share of a Russian oil company at a knockdown price.

But the commercial court here in London found that Berezovsky was an inherently unreliable witness, throwing out his claim. Afterwards, the former Kremlin insider, in exile in Britain for more than 10 years, said he was shocked.

BORIS BEREZOVSKY, BILLIONAIRE: I offered him (inaudible) today. I am surprised completely and particular because (inaudible) took up a -- took responsibility to rewrite Russian history.

CHANCE: Well, not surprisingly, Abramovich had a very different reaction. His legal team issuing a statement saying that they were pleased that the judge rejected the allegations against Mr. Abramovich and described him as "truthful and frank."

Mr. Abramovich, it goes on, "is both pleased and grateful for the outcome." I'm sure he is. But neither man emerged from these proceedings untarnished.

The court accepted, for instance, that millions of dollars were paid to Berezovsky from Abramovich for political protection in Russia, confirming or shining a light into a corrupt and murky world of Russian business like never before -- Matthew Chance, CNN, London.


DOS SANTOS: Abramovich's Chelsea is one of the top spenders in the Premier League, and Europe's major football clubs have now less than four hours to change (inaudible) or else they'll have to wait until January. CNN's Amanda Davies takes a look at today's wheeling and dealing for top talent.


AMANDA DAVIES, CNN CORRESPONDENT: Transfer deadline day, this is what the last two months have been building towards across Europe. The final hours of the transfer window and the last chance for managers, players and agents to make their move, do their deals before it all slams shut until January. Of course, there's been those who've got in there early.

They're now sitting with their feet up, watching with the rest of us as the drama unfolds, perhaps the highest profile deal has seen Robin van Persie, last season's top scorer in the English Premier League move from Arsenal to Manchester United for $37 million. He's on the scoresheet already as well, isn't he.

But the biggest money move has seen $55 million paid by PSG for 19-year-old midfielder Lucas Moura. He's moving to Paris in January. Also on the move, that man, Luka Modric. He's completed his long-awaited switch from English Cup (inaudible) Real Madrid for a reported $50 million.

And Zlatan Ibrahimovic, he's become the most expensive player of all time in terms of transfer fees with his $24 million move from Milan to Paris Saint-Germain.

So what does that mean all in all? It means this: we have seen $602 million spent by English Premier League clubs in the window until today as a similar amount for the same window last year. But how will this year compare to previous windows overall?

There is definitely up there, 2011, last year, there were $768 million spent in total. But 2008, that was the biggest spending window so far with $792 million spent.


DOS SANTOS: Just ahead, the crisis-hit Eurozone wants to restore credibility to the banking system. And it's got a plan. Investec's chief economist weighs in on that and a (inaudible) to come for the ECB.


DOS SANTOS: Hello, welcome back. I'm Nina dos Santos. These are the main news headlines this hour.

Firefighters in southern Spain are battling ferocious flames and hot, bone- dry weather as they try to contain the massive wildfire. The blaze is currently burning in the rugged hills above Spain's famous Costa del Sol. Some 4,000 residents have been forced to leave as a result.

Syria state television network is reporting that government forces (inaudible) big losses on rebels in Homs, and they've raided what they call pro-terrorist den in Homs province. Shelling and clashes are also being reported in the nation's largest city, Aleppo.

Amateur video captured a moment when a 7.6 magnitude earthquake hit today off of the coast of the Philippines. Well, officials say that one person died when the quake triggered a landslide. A tsunami warning was issued for much of the western Pacific but no large waves came ashore anyway.

Thousands of passengers are left -- were left stranded after Lufthansa was hit by an 8-hour strike at Frankfurt Airport. Europe's largest airlines said that it had to cancel a majority of Friday's flights after unionized cabin crew walked off the job over pay and cost-cutting measures.

Manchester City is close to sealing their third major deal on European football's transfer deadline day. They've reportedly agreed to see around about $35 million for (inaudible) midfielder Javi Garcia. Now the club's already completed (inaudible) of Nikon (ph) from into the land (ph) and also Scott Sinclair from Swansea.

In less than two weeks the European Commission will unveil its plan for a blanket supervision authority for the banks in the Eurozone. And the proposal is based on three key principles. Let's have a look at them starting out with the first, which is the issue of single supervision here. What we're talking about here is the (inaudible) moment banks are watched by national regulators.

The commission has said -- wants them to be subject to common scrutiny. The second principle is one of credibility here. The European Central Bank would be granted a significant amount of responsibility to try and oversee the Eurozone's 6,000 banks.

That would be aimed largely at restoring confidence in the system, and also lastly but not leastly (sic), well, we're talking about an issue of broad coverage here. The system will need to bridge the gap between Eurozone members and E.U. members that remain outside of the monetary union.

Remember that the E.U. is 27 countries but there are only 17 of them that call the euro their currency. Now the commission's full proposal will be outlined on September the 12th. But the ECB has other, more pressing matters, some might say, on their plate before then.

It's also said to be working on a new bond-buying plan designed to lower borrowing costs to troubled nations like Spain and Italy. Investec's chief economist, Philip Shaw, told me that the pressure is on for the central bank president to deliver.


PHILLIP SHAW, CHIEF ECONOMIST, INVESTEC: The job is (inaudible) now he's going to have to walk the walk in a very big way. For him so the bond purchases are August governing council press conference. Well, one of the reasons why we've seen such a sharp market rally. So we've got to move on from there.

And absolutely, Draghi has now got to talk about the details of when the ECB can buy bonds, under which circumstances he'll be willing to do and of course the conditionality. So what markets are hoping for is an evolution of what Draghi began to speak of in early August and to hear some details.

DOS SANTOS: If we take a look at the option that Draghi may have of just saying let's go ahead and do this, it will be waiting too long. We won't have a single currency left to defend if we don't start buying some of these bonds. What is he going to buy? So how long are we talking about in terms of maturity to bonds? Which countries will he set a yield target? That could be dangerous.

SHAW: It could, yes, drawing lines in the sand in public just really give markets something to aim at. So, no, I'm sure that the ECB will know the countries that they have in mind that I think markets know as well.

Primarily what we're talking about is Spain and perhaps Italy as well. And it's been made clear so far that those countries will actually have to sign up. They'd have to request to join the scheme and that the conditionality where they'd actually have to follow at least a certain economic program in order to qualify.

Now in terms of yield targets, I'd be very surprised if the ECB didn't have an idea of when it wanted to intervene and what's an acceptable yield for a particular country and what's not. But it's not going to publicize those. So we'll have a large degree of transparency but it won't be 100 percent.

DOS SANTOS: The other thing we've got going on in tandem with all of this is a potential banking union. And now we see the president of the European Commission, Jose Manuel Barroso, actually put some meat on the bones, if you like, about what we could be seeing here. And it could be different to what the reality is today. A lot more controls.

SHAW: Yes, very much so, and the markets have taken this positively and but they're right to do so because it's not so much the fact that Europe needs one financial regulator.

It's really symbolic as to suggesting that there is going to be much closer degree of political cooperation within the euro area, and that's seen as a necessary precursor for a single currency to be a success in the medium to long term. So that is essentially good news. Again, as you said, we --

DOS SANTOS: What about the implementation, though? That's going to be rather difficult, isn't it?

SHAW: It is. The sole supervisor is expected to be the European Central Bank and they are a little bit busy with other matters at the moment.

DOS SANTOS: The big elephant in the room, of course, remains Spain, doesn't it? And yet again, we're now hearing that they may be creating their own bad bank, which some people said would have solved the problem a year ago; wouldn't have had them in the situation they're in today.

How does that change the banking perspective across Europe, if we're trying to sort of regulate to get everybody's house in order?

SHAW: Well, there's a lot to do, isn't there? Certainly what we're waiting for at the moment is a conclusion by two consultants on exactly how much the Spanish banks need in terms of bailout and then Spain will look at conditions and then that process will be ongoing.

But of course, what you have had with the Spanish banking bailout is a big discussion between the Spanish finance ministry and others and counterparts within Europe. So that degree of cross-border cooperation in terms of the financial services industry, is already going ahead to a certain degree.


DOS SANTOS: Philip Shaw there of Investec, speaking to me earlier.

Well, speaking of Spain, it's the most troubled bank. Bankia will be getting immediate financial aid after the company reported losses of some $5.5 billion for the first half of the year.

Spain has promised Bankia an ingestion of cash from its rescue fund and it coincides with the introduction of a new banking reform in Spain, namely the creation of a separate, quote, "bad" bank for toxic real estate assets. Spain's minister of the economy says there's nothing bad about it.


LUIS DE GUINDOS, Spanish MINISTER OF ECONOMY (through translator): We are setting up the general framework of what is badly called a "bad" bank, because as you will see, it is not a bank.

And also we don't think that its activities will be so bad. It is called an asset management company. Mechanisms will be developed to redistribute the costs arising from this intervention to minimize the impact it could have on the banks.


DOS SANTOS: Spain's banks reacted positively to this kind of news on Friday's European trading session, and that, in turn, sent the Madrid IBEX index, Madrid's 35 top leading stocks there, up by more than 3 percent.

We saw (inaudible) finishing up to 6 percent higher. BVVA was also up around about 51/2 percent on the day. It was a choppy trading day elsewhere though, as you can see, with no other index really finishing up over the course of the whole of the week in the green.

Meanwhile, we also saw the number of jobless people in the Eurozone topping 18 million people for the first time in history. That is yet another record, and it's another piece of bad news. The unemployment rate holding steady at about 11.3 percent, so into the double digits. That is not good news, either.

Speaking of Spain, we'll have the latest on those wildfires hitting the Costa del Sol with Jenny Harrison after this break.


DOS SANTOS: Time now for the answer to today's "Currency Conundrum." Earlier in the show, I asked, how wide is the largest banknote ever made?

The answer is B, 35.6 cm. It was actually issued to celebrate the centennial of Philippine independence back in 1998. It's worth 1,000 peso and has 21 security features, making it just that extra bit harder to counterfeit. Mind you, you'd probably need a big wallet to have one of those.

Time now for a look at the international weather picture. Let's go over to Jenny Harrison for the latest on those fires in Spain, Jenny.

JENNY HARRISON, CNN INTERNATIONAL METEOROLOGIST: Yes, Nina, of course, hundreds of firefighters are fighting these fires on the southern coast, of course, of Costa del Sol. Millions of tourists come here every year, and in fact hundreds of thousands of expats also live across this region, those coming down from northern Europe.

You can see (inaudible), it's a lovely part of Spain. There's a lovely town in particular, but these fires are well at bay into the mountains, close, of course, to the town, but very difficult for the firefighters to access. So that is why they've also got just over 30 planes and helicopters trying to fight these fires.

The mayor, actually wanted the towns just up the cost in (inaudible) said that the flames there were about 15 meters in height. The fire spread very, very quickly. The wind's coming in from the east; they're pushing the fires to the west, so closer to Marbella (ph). And one of the reasons only the winds but of course look at all this.

This is showing you the drought, extreme to severe across this area of Spain and because of that, the ground of course is literally a tinder box, just going so very quickly. Right now, the temperature in Marbella (ph), 23 degrees.

The winds at about sort of 15-20 kmh. Saturday we could have some stronger winds. But overall, the temperatures right now through Spain not as bad as they have been over the last few days.

Winds also, they're strong as you can see here through southern areas of France, but across southern Spain not too bad, just some gusty winds over the next couple of days. We might just see a few showers later on today, but for the most part, it will stay dry and those wind swill continue to come in from the east, Nina.

DOS SANTOS: Jenny Harrison, thanks so much for that, with the latest from the CNN Weather Center.

And that's it for this edition of QUEST MEANS BUSINESS. I'm Nina dos Santos in London. MARKETPLACE AFRICA continues on CNN next. But whatever you're doing (inaudible).



China is Africa's largest trading partner. They've pumped more than a billion dollars into the continent and built infrastructure projects, like this road development in Nairobi.

But China's often portrayed as pillaging the continent, giving very little in return. The Chinese government wants to change that story and their English news channel, CCTV, with a hub here in Nairobi, is trying to challenge that perception and create a more fertile business environment.


MCKENZIE: The clock counts down. It's the 8:00 pm newscast out of Nairobi. Kenyan show producers, technical directors and a well-known Kenyan anchor prepping to bring African news to the continent and the world.

But "Africa Live" is unusual. It's an African show produced by state-owned China Central Television, or CCTV, their flagship show in a big editorial push into Africa.

If you look at this map, CCTV has bureaus all over the world, like any major news organization. But for their first broadcast hub outside of Beijing, their headquarters, they chose Nairobi. The question is why.

JINGHOA LU, ANALYST, FRONTIER ADVISORY: The trade between China and the (inaudible) reach $166 billion U.S. So China really has a very significant show at this continent.

MCKENZIE: That show up is everywhere to see, infrastructure projects, mining operations, textile manufacturers and media. For years, China has quietly invested millions in technical upgrades of African state broadcasters and in training of African journalists. Now they're taking it a step further, poaching some of Kenya's best journalist talent, to tell the African story.

MCKENZIE: What is the mission of your show?

MARK MASAAI, ANCHOR, CCTV: The mission of our show is to change the narrative about Africa and of course, it goes without saying, to war. It's about hunger. We have all of that, yes, but tilt the scale and if you can, show the potential and the solution to these, and not just point out blatantly what the bad side to the problems, the crises.

MCKENZIE: Pang Xinhua says existing coverage is one-sided.

PANG XINHUA, MANAGING EDITOR, CCTV: We have the news of what is happening in Africa. We tell a positive story of African people.

UNIDENTIFIED FEMALE: Talk Africa: a new voice of the world.

MCKENZIE: But media analysts say that CCTV's expansion in Africa is a way for the Chinese government to change the narrative of China's involvement in the continent from one of exploitation to one of opportunity. And to make investment possibilities seem more attractive.

JINGHOA: There's no doubt that a Kenya office being set up shows a lot about China's interest to also spread its own voice around the world to maybe counter what the Western media has promoted about China.

MCKENZIE: But for that voice to be heard, CCTV's journalists know they need credibility.

You're an arm of the government, effectively.

PANG: Yes, CCTV is media by the Chinese government. But CCTV is media. We also have our own professionalism.

MCKENZIE: Pang says that there's no censorship from Beijing. He points to their editorial board, which is dominated by Kenyans, like most of the decisions on coverage.

JINGHOA: I still believe the state will play a large role in selecting what information will be shown on TV. It's -- it has been done in China for a long time.

MASAAI: It goes without saying you can't say anything that is damning to the central government --

MCKENZIE: The Chinese government?

MASAAI: Yes. Yes, of course.

MCKENZIE: Mark Masaai, one of CCTV's chief anchors, says that at his previous Kenyan employer, certain subjects were also off-limits. And CCTV's expansion is a pioneering project worth standing up to.

MASAAI: In a big to compete with the other big headers and big shots in the international sphere, they have to also go as far as the others are going. Of course, there are limits, yes. And I made amends with that.


MCKENZIE: That was a look at China's image of its efforts to make doing business in Africa a more attractive prospect.

Coming up, it burns as fuel, carries more people. It's a first for Africa.

Ethiopian Airlines is taking delivery of its Dreamliner. After the break, we speak to the company's CEO about what this means for the airlines.


MCKENZIE: These days, it's hard to find an airline that isn't in the red. But Ethiopian Airlines seems to be managing it. The company's one of the fastest growing airlines in the world, and they hope that by taking delivery of Africa's first Dreamliner, they will stay on that path.

Jill Dougherty sat down with the company's CEO.


JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, Mr. Jwane (ph), you just flew in on a Dreamliner. Congratulations.


DOUGHERTY: What do you think is the significance of this?

GEBREMARIAM: The Dreamliner, as you know, we have been saying a lot of things about the Dreamliner for many years now. So today we got the opportunity to experience what it looks like, what it can offer to customers and to airlines.

So I would say to customers there are a lot of new features as new technologies. (Inaudible) technologically advanced airplane. Of course, it's 50 percent (inaudible), much lighter and as a result of that, it is more fuel efficient. It is -- it consumes 20 percent less fuel than its category airplane today.

DOUGHERTY: So is that the business case for buying this, for purchasing this plane, because it is efficient, because it's -- uses less fuel, et cetera?

GEBREMARIAM: Yes, it is a business case for when we made that decision in 2005, we were among very few carriers (inaudible). And of course, it was a business case -- business decision at that time. It will be cheaper to operate. It will be more efficient and it can fly longer range in its category.

For the customer, also, it gives more comfort, more features and we are also in the strategy of operating a young (inaudible). Today, we have the youngest fleet in Africa with an average age of seven years.

DOUGHERTY: (Inaudible)?

GEBREMARIAM: Yes. Very young, yes.

DOUGHERTY: And now this plane has only operated, I understand, by two other companies.



GEBREMARIAM: We are the first airline in the world to take delivery of this airplane outside Japan.

DOUGHERTY: Now I understand you have a 15-year plan --


DOUGHERTY: -- with Ethiopian Airlines. And the target is to achieve $10 billion in revenue.


DOUGHERTY: What does that goal tell us about Africa's aviation industry?

GEBREMARIAM: Ethiopian Airlines, as you may know, have been -- has been leading the aviation sector in the continent of Africa. So this is going to change the way people travel in Africa and in the rest of the world.

So our goals is also (inaudible) with (inaudible) in Africa, (inaudible) Ethiopia. Ethiopia is now among the fastest growing economies in the world. Africa is growing, so we are growing together and by 2025, the milestone of the strategy plan is to operate 120 airplanes to more than 90 destinations, generating about $10 billion, carrying more than 18 million passengers, 720,000 tons of cargo.

DOUGHERTY: Now, what factors are challenging you? In other words, your ability? I understand, for example, there's a shortage of pilots. Is that correct?

And what other challenges that you face in Africa that other companies outside of Africa might not face?

GEBREMARIAM: We have many challenges, you are right. The first one I would say is infrastructure, airport infrastructure or additional infrastructure in the continent. It is not as well as developed as in the rest of the world, so much work is needed there.

And we're working with African governments to improve on that, where there is airport infrastructure or navigational services, air traffic controlling and so on. The second one, as you said, is (inaudible) from Africa to developed world and particularly the (inaudible). So it has been a problem for most African carriers; I think for all of us in Africa.

DOUGHERTY: Now your company is owned by the government?

GEBREMARIAM: Yes, it's (inaudible).

DOUGHERTY: All right. If and when, would it be privatized? Any time for that?

GEBREMARIAM: Well, as CEO, I'm (inaudible) manage the airlines. So it's up to the owner. But I don't see immediately to privatize it. The company's doing very well. It's leading, obviously, sector in the continent. It's the pride of the continent, the pride of the country. So privatization is not a burning issue right now. So it's not our focus.

DOUGHERTY: Is it subsidized by the government?


DOUGHERTY: So totally making money?

GEBREMARIAM: Yes. Totally making money, yes.

DOUGHERTY: Yes. You apparently are one of the few profitable airlines in Africa and even in the world. So what's your secret?

GEBREMARIAM: Many factors, but I think the biggest one would corporate governance, meaning it's government owned, but totally managed and operated as a private business. So the government has (inaudible) to oversee and keep strategy directions.

But not interfering the day-to-day operation of the airlines. We manage (inaudible) manage it fully on our own. So this is a big plus, a big success factor, the (inaudible) factors.


MCKENZIE: Before we go, we wanted to show you this, here (inaudible) farmer in Cape Town, South Africa, get the sheep to give him a call if they get into a pickle. There's been an increase in people stealing sheep. So the farmer has fitted a mobile phone to some of his sheep. When the sheep start running, the devices are programmed to ring the farmer, and he knows which one it's calling.

That's it for this week's show. You can see all of our stories online. Goodbye.